ML20073J716
| ML20073J716 | |
| Person / Time | |
|---|---|
| Site: | Beaver Valley, 05000000 |
| Issue date: | 02/17/1983 |
| From: | DUQUESNE LIGHT CO. |
| To: | |
| Shared Package | |
| ML20073J705 | List: |
| References | |
| NUDOCS 8304190381 | |
| Download: ML20073J716 (38) | |
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People Power 1982 was a year like few others in the history of Duquesne Light Company. The severe economic climate bf ought with it added chal-lenges that demanded the most dedicated and creative efforts by our employees. This annual report is dedicated to our employees-the real strength of the Company.
On the following pages, we spot-light five of the many Duquesne Light people whose dedication extends to community service as well. Employees pictured on the cover are (left to right):
Top row: Donna Chappel, Professional Recruiter; Stephanie Cummings, Remit-tance C;erk: William F. Gilfillan, Jr., vice President, Customer Services Division Middle Row: William Whitworth, Hot Stick Crew Leader; Robert O'Hara, Environ-mental Engineer; Karen Parkhill, Senior Clerk Bottom Row: Gary Brockman, Telephone Service Representative; Bob Scott, Resi-dential Representa*ive; Donald Lester.
Statistical Accountant Contents High!ights-1982 1 To Our Stockholders 2&3 Persoective of 1982 4-13 Company Report on Financial Statements 14 Opinion of Independent Certified a
-'~ :
Public Accountants 14 33 Financial Information 15-35 Wl Company Service Area Map 36 Common Stock Dividends 36 Form 10-K Off ar 36 (Ql Board of Directors inside back g' y$;g ,g'i "~;;j g fg .sg%dfi" Company Officers inside back ]*:2
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i CAPCO inside back .
The relocation of Duquesne Light's corporate headquarters was completed early in 1983 Because of the extremely _-
g competitive development situation in the ,,
_y"9 downtown area, Duquesne Light was able N$
to use its negotiating strength as a malor tenant to secure an attract;ve 20-year lease at One Oxford Centre
1 Financial and Operating Highlights-1982 Duquesne Light Company Percent 1982 1981 Change Fin:ncial Electric Operating Revenues (000) $746,462 $786,229 - 5.1 Income From Continuing Electric Operations (000) $117,197 3109,409 + 7.1 Net income (000) $116,882 S108,871 + 7.4 Earnings Per Share of Common Stock From Continuing
. Electric Operations $1.96 $2.07 - 5.3 l Dividends Per Share of Common Stock $1.90 $1.85 + 2.7 Shares of Common Stock Outstanding at Year End 53,276,525 45,302,520 + 17.6 l
Opsrcting Electric Plant (000) $ 3,024,554 $ 2,786,172 + 8.6 l MWH Sales 11,037,681 13,633,742 -19.0 l
Peak Load Megawatts 2,158 2,522 -14.4 Cost of Fuel Per Million BTU 167.9c 159.7c + 5.1 Average BTU Per KWH Output 10,853 10,931 -
.7 Annual System Output MWH . 11,662,379 14,323,618 -18.6 N
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M [g Company Vice Presidents (left to nght): Earl J. Woolever Nuclear Construction Division; George 1. Rifendifer, General Services Division, C r y Nuc e D vis on and Rog Bec Er nee in an Con uctio vis 1
l To Our Stockholders For the first time since 1958, of Heaver Valley Power Station Construction Reorganization Duquesne Light's revenues were Unit No.1. The nuclear unit was Early in the year, the Nuclear Con-1:ss than in the previous year: out of service for the first half of struction Division was established
$746,462,000 in 1982 compared to 1962 for refueling and for to focus attention on our largest
$786,229,000in 1981.The national mcdifications required by the construction project, Beaver Val-racession was magnified for us by Ncclear Regulatory Commission. ley Power Station Unit No. 2. The '
o sharp drop in demand by the For most of the balance of the decision to establish this division ar:a's major steel producers. year,it operated at or close to 100 was made because of the sizable porcent of its rated capacity. This investment the project represents Fighting the Recession nuclear unit generates power for and the desire to have personne,i The continuing recession presents assigned to tn,s i project full-time.
less than one-third the fuel cost of a challenge to your Company's This reassignment of respons,-i our coal stationh saving substan-management. Measures taken in bility preceded the reorganization tal operating expenses.
1982 to maintain the Company's of the Engineering and Construc- {
financial health during this difficult Cost Savings Program tion D,ivision. Proj,ect coordination '
period included cost savings pro- As in all good businesses, cost and cost controlin the E&C D,vi- i grams which benefit both our savings are an integralpart of our sion will be strengthened during stockholders and our customers. day-to-day operation. Tradition- 1983 through an expanded Project ally, each division and service Management Department.This Coal Profits department has been responsible On February 20,1981, the PennsyI- department will control and coor-foridentifying and implementing .,,
dinate the division's projects from vania Public Utility Commission j ways to cut costs, in 1982, we initi-(PUC) ruled that the Company,s inception to completion, including j Wa w,ck Mine should be taken out ated an experimental program that i functions such as scheduling, vers mst savigs eHorts W of rate base, so we considered coordination among departments every employee in the Company.
selling the mine. However, the and budgeting.
In the normal course of busi-PUC also noted that if the War- ness, Company employees imple-wick mineis efficient enough t ment many cost savings meas-produce coal for less than the ures throughout the year. The c.verage price of comparable purpose of the new Cost Savings ANNUAL SYSTEM PEAK LOAD P;nnsylvania coal, the Company *****
Programis toidentify, document rnly earn a reasonable return on and recordin a centralized place P its investment. Therefore,it makes in the Company all of these cost good economic sense for savings actions and, in turn, pro-Duquesne Light to retain owner-vide encouragement for further ship. Warwick Mine contributed ,
cost reduction. -
about $2.5 million to earnings in The program covers all Com-pany activities and includes capi- 1 The price we charge our cus-tomers for Warwick coalis subject tal as weH as operating and main- p tenance expenditures. Results are jjJ m to an annual PUC audit. formally reported on a semi- '
~
Nuclear Unit Returns to Service One developmentin our efforts to annual basis to the Chairman of the Board. In 1982, the results g f "
, offset the effects of the economic were gratifying: reductions during ! wwt _
downturn was the return to service the year of $4.7 million in operating expenses and $3.6 million in capi-m l GN p J.%g tal expenditures. g._ ew A
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1 Management's decision to reor- Inflation Moderates Another benefit for exempt l ganize the E&C Division was later On the brighter side of the coun- employees is the recent introduc-affirmed by a PUC mandated man- try's gloomy economy was a sig- tion of a flexible 40-hour work agement audit which arrived at nificant reduction in the inflation week schedule. This plan will per-essentially the same conclusions rato during 1982. The benefits of mit exempt employees some lati-in its recommendations. The PUC reduced inflation are quickly felt in tude to select their work hours l routinely orders such manage- a capital-intensive industry such while still meeting their job com-ment audits so that utilities may as ours in the prices we pay for mitments and responsibilities.
have the opportunity to evaluate equipment, vehicles and supplies.
ti'a opinions and recommenda-Duquesne Light People aons of an experienced third party Area Diversification Credit for ourlongstanding record As we mentioned above, sales of reliability belongs to our in conjunction with their continuing were depressed by the severe Duquesne Light employees. They s prove performanc gut drop ln demand by localindustry, are an outstanding group, both especially steel. However, the personally and professionally. in Offsstting a Loss with a Gain continuing diversification of the the following pages you will see Although not caused by the area's industrial base lessens the pictures of five Duquesne Light recession, the decision to dispose impact of this dramatic downturn. employees, and read about their of the major portion of the assets While stillworking to revitalize activities, both on and off the job.
of our unprofitable subsidiary, Alle- our current industrial base, local in a way, this may tell you more gheny County Steam Heating area development groups have about your Company than all the Company (described on page 4), been attracting service busi- facts and figures of this report.
resulted in a $9.9 million after-tax nesses and high-technology com-loss. However, we were able to panies in robotics, computers, substantially offset this loss with a microelectronics, instrume ntatio n
$9.6 million tax-free extraordinary and optics. Pittsburgh, an impor- ..
gain. tant corporate headquarters cen-
- Y The tax-free gain was made ter, ranks third among U.S. cities in i possible by taking advantage of an opportunity for a favorable total research and development expenditures.
/-
exchange of equity for debt. Spe-cifically, the Company exchanged Carry on the Tradition
,,A new beginning" is a catch-1,406,898 newly-issued shares of hrase that often is mentioned Common Stock for outstanding when a company relocates its .
First Mortgage Bonds of various headquarters. Not at Duquesne i series with a face value of S29,852,000. The exchange Light. Through our 100-plus years of o eration, we have earned an resulted ,n i an extraordinary gain of excellent reputation for providing ..
59,609,000.
reliable service to customers. We see our relocation to One Oxford Centre as a means to build upon l that already-strong foundation.
Scores of Duquesne Light employees worked long and hard -
to make our new headquarters a pleasant and efficient place to work. Early indications are that the John M. Arthur new surroundings will enable all of Chairman of the Board and President us to do our jobs even better.
February 17,1983 3
Perspective of 1982 I Financial Matters steelindustry harder than many rate increase that went into effect industries. Ltal sales were 19% in mid-1981, the tariff provision Rnvenues, Sales and Earn- lower. Commercial sales ran covering rates for large busi-ings-a Change in the Pattern against the recessionary tide and nesses and industry, and sales of During 1982, our industrial custom- increased 2%. Sales to residential power to other utilities. The 1981 ers used approximately 41% less customers were about the same. rate increase contributed to our electricity than in the previous. Revenues decreased $40 mil- 7% improved earnings from con- i year. Tho primary reason was the lion for the year, although the tinuing electric operations. I recession, which has hit the basic reduction was moderated by the Steam Heating Affects Earnings 3 .
, Losses connected with the opera- l
.. y- tion of our subsidiary, Allegheny
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M,$ g9 .g~ (ACSH), and the decision to dis-pose of the major portion of its h:hJ, 1
.l: 4, d g'd /gps MidM ~[U nQ assets reduced 1982 earnings by 21e per share. On August 30,1982 l
y M- , J , - --?(.i 41 - 'i1Q the Public Utility Commission j Ms . -y h. " . T -O T [WW 5 (PUC) entered an Order authoriz-a* , p t '$ [ "i$y.; _q 3
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_7 ing A ;SH to discontinue steam Q. ' i!
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p , i i .41 V ,. - 'ja p . , '; j& ; % - , her nc service effective May 31, y - e '- v,. y j 3..g. . : ' . :. 4. L i 1 4:'l.; -[m q @gng e .
. 1983 and to dispose of certain of
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ghj f*$ { A W .; Q T H !~j/_ }{ ;. 9 hu@nd$ {[t .J The estimated loss from discon-g y G tinued steam heating operations 4 t -
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- En :NW of $9,924,000, net of related tax benefits, was recognized in 1982 i
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the nine months ended Septem- l ber 30,1982 and estimated oper-E
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ating losses from October 1,1982 N .
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new steam-user group wiil take
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gain of S9,609,000 resulting from
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p an excharge on December 22, I .. q .p.f , 3 L ~g 1982 of 1,406,898 shares of the E - .h H q . > :.1 . o
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%.,. , e -. ; J - s' 7 - $3,041,000, and such losses would Pittsburgh currently is in the midst of Renaissance Il-a multi-billion dollar project have continued or increased in l involving public and private construction work in the greater downtown area. PPG Place future years.
(foreground) the 40-story future home of PPG Industnes, will dominate the city's new skylino, which will include six other skyscrapers by the mid-1980s.
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Construction and Financing
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Capital expenditures for Val , (' , i. '? ?* . i v.,.e'.* 1 Duquesne Light totalled $231 W~ ry q ,-
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.( ' g million in 1982. Major projects 2 . ,
W y' . included two large substations, a m ; -: '. i
. ve.[ district operations headquarters building, special buildings for q <$g W _c-/q1y' f:g:.
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D Units 1 and 2,in each of which the M' Q g;.l *; F;' x f'* .-( ;. T g'e .J. k Company has a 13.74% ownership
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[ =<i74 3 . . ' 4 ' [ yp interest. About 22% of the money yy , 5
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.'..~b- s c.,' i~ F ~ % ' U,? 5.m 3 1. On May 6,1982, Duquesne Construction of the downtown subway section of the Port Authonty of Allegheny County's Light issued $65,000,000 principa!
new Light Rail Transit Systern continues on schedule towards its projected Novernber amount of 16% % First Mortgage 1984 start-up date. The system will feature electrically-powered vehicles that will be Bonds, Series due May 1,2012. constructed in the Pittsburgh area. Net proceeas to the Company Rscsssion, Rates and were approximately S64.4 million. Cost Savings Program Payoff D5velopment In 1982, Duquesne Light estab- 4,5d0 000 ha es o o mon Duquesne Light was able to find a lished a cost savings program t Stock on August 10,1982. Net pro-small silver lining in the current !dentify and encourage cost sav-recession; it became possible for ceeds to Duquesne Light were ing ideas initiated within the Com-approximately S59.5 million. us to use only cur most efficient pany. Each department is respon-
- 3. The Company issued generating units. As the industrial sible for identifying, analyzing and 1,962,320 shares of Common consumption of electricity drop- documenting all cost savings Stock in 1982 pursuant to its Divi-ped, we were able to generate measures for its area. The 1982 electricity almost entirely with coal dend Reinvestment Plan. In addi-goal was a savings of $500,000 in tion,104,787 shares of Common and nuclear fuel and hold our operating costs. Documented costlier oil-fired generating equip- savings were S4.7 million in oper-ment in reserve. We were then ating expenses and $3.6 million 5-YEAR GROWTH KWH SALES l able to pass the savings along to in capital expenditures. goon our customers by reducing our of xws Energy Cost Rate. The savings for Dividend Reinvestment Plan 14 the average residential customer Growth MNM~1 pgl was approximately $1.50 per month for the last six months of The number of stockholders who applied their dividends to buy f7 l} , i p n.m.nns d 1
47 ,
- l. 4 4 e the year. more stock under the Company's N p '
i* Despite the recession, substan- dividend reinvestment plan, fIm j9 5-z--J 7 E'{" ' ' -- tial commercial construction con- instead of taking cash, grew 46% tinued in the Duquesne Light in 1982-from 23,300 to 34,066. C '
'*$ *canniereg*-
I d* service area. Large projects com-pleted or underway at year end For an explanation of the plan, which was recently amended, %,W% ,f & g [eQ included four high-rise office and for necessary forms, write 6-< buildings in downtown Pittsburgh Duquesne Light Stockholder Rela- y*' ", and two large suburban shopping tions Sectior). One Oxford Centre, q malls. Our Area Development 301 Grant Street, Pittsburgh, Department helped attract new Pennsylvania 15279. , business to Duquesne Light's two- @j county service area, adding about 0% _ _ _ 3,000 new jobs in the area. 1978 1979 1980 1981 1982 7
Stock were issued pursuant to the HIGH/ LOW COMMON STOCK Company's Employee Stock Own-18 crship Plan. Sales of Common , s ~' 2 9. i N E,NW"_w ~ 1sw Stock through these plans aggre. {. gated approximately $27.2 million. %e ? #2
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. %f" 1 The Rate increase Picture y : gg vg mggwey l In 1981 we applied for a S100 mil- p.,, , ~* _ _ - '~j .
lion (15%) rate increase. On June - - - - - l 29 of that year, we accepted an option offered by the Pennsylva-Q .---%- . C [ I nia Public Utility Commission W 11% E ' 11% w =11% i11 % .. L, (PUC) allowing us to put a $64.2 1st 2nd 3rd 4th 1st 2nd 3rd 4th million r8te increase into effect for The pnncipal trading market for the Company's Common Stock is the New York Stock service rendered on and after July Exchange. The stock is also listed on the Philadelphia Stock Exchange. 15,1961. On April 15, #982, the l PUC gave its final approval to the l increase. On April 30,1982, the Pennsylvania and the Nuclear Company filed a new rate sched- tions (INPO) reaffirmed that the Beaver Valley Unit No.1 is oper- Regulatory Commission. ute that would increase revenues ated in a safe manner by qualified l on an annual basis by $165 million' ersonnel. INPO is a nonprofit Oldest Nuclear Power Station which was subsequently reduced corporation created by the nuclear Retired , to approximately $155 million. On utility industry in 1979 to enhance President Eisenhower launched l January 28,1983, the PUC entered the safe operation of the nation's the peaceful use of nuclear ea order allowing a total annual nuclear power plants. energy when he switched the increase of $105.8 million. In February 1982, Beaver Valley Shippingport Atomic Power Sta-Power Station held the first full- tion into service in 1957. Duquesne scale drill to test its Emergency Light operated the plant under i i ll Nuclear Preparedness Plan. The station's government contract until October An evaluation made in June by the performance was rated a success 1,1982, when, having generated Institute of Nuclear Power Opera- by both the Commonwealth of 7 billion kilowatt-hours of electric- l ity with an excellent safety record, l
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Shippingport was shut down for j,,.. ...
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the last time. u
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' : of Energy will remove the fuel and l 7 7... f f , g ,. :
decommission the station. Some f
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employees will continue to work at the Shippingport station for the
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'*S.y.-[.+:V9' other Company locations including
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Beaver Valley Units Nos.1 and 2
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7 . . New Nuclear Construction
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p J ..: ._ .. w . . y. 2 ipf4- Division Formed in order to provide better control Light-Up Night returned November 8. after a 10-year absence. Corporations and busi- of the desi9n and construction nesses throughout the " Golden Tnangle" left lights on in ther buildings until midnight. providing photographers and the general public with a panoramic view of the city. Of Beaver Valley Unit No. 2, I Light-Up Night was initiated in 1957 as a means to help usher in the Chnstmas season. Duquesne Light created a new it was discontinued in 1973 due to the OPEC oil embargo. l l 8
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3 Harry Butler During the day, Harry Butler is a hot stick crew leader in the i Central-North District of the
.- Transmission and Distribution 3, Department. He's on a different
, sd$ -; type of " hot" crew during his off-
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' /p? Lois, serve as volunteers for the
. ;y West Deer Fire Company. Men
>e and women have been fighting fires side by side in West Deer since the mid-1970s. "The women
;4b4 y handle the same chores as the
;' '~
men do and many of them have the added advantage of being 3 able to respond to day *ime fire alarms when many of the men are workirig," Harry said. "At our fire company, everyone shoulders an equal amount of responsibility.' a *
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Nuclear Construction Division. IV Personnel, Inter- Company appreciata the dedica-The Division Vice President, Earl ti n nd guid n e pr vided by Woolever, had previously been nal OEerations and Mr. Schaffer during his many J Vice President-Engineering and Customer Relat, ions years of service. i Construction. He picked up the President Retires construction project at a little over Stanley G. Schaffer retired as :. - . . -e midpoint. Unit No. 2, expected to * .LL, go on line in 1986,is now approxi-President and as a Director of the MM+ N .~ ' mately 59% complete. Mr. Company effective February 1, :
"1Y.Y 1983. Mr. Schaffer served the : 6 .m Woolever's extensive nuclear J expenence goes back to the Company for nearly 42 yearsin various positions. From 1958 *% - * '
1 1 ! L2 beginning of Duquesne Light's nuclearinvolvement when he through 1966, he held various N ['s~ 7 supervisory positions in the Com- 1 -
~4 '
helped design the Shippingport pany's Power Stations Depart- t m Atomic Power Station.
~
ment. In 1966, he was elected .O l % . . _ , Vice President of Operations and .J 1. *- 1 1> '>- Ill Environment Director of the Company.This 24. ' . 1
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Meeting Clean Air Goals appointment was followedin PW5 ' " , .. June 1967 by h,s election as i f, A new electrostatic precipitator . l was retrofitted on a power plantin Executive Vice Pres,ident. in July 1968 he was clacted Pres,i dent of ( '- n .f g West Virginia; work isin progress " Duquesne Light. The employees, lf to replace another at a power Directors and Officers of the plant in Ohio. Both plants are > partly-owned by Duquesne Light; stanley G. schaffer our share of the costs totalled
$30 mimon. Management Audit As part of the Pennsylvania Public Acid Rain: Will Haste Make $335 ,
Utility Commission's (PUC) Man-Million Waste? / agement Audit Program, the PUC
's ? ..
Bills addressing " acid rain,, were y .q g 7 routinely orders management aud-considered by Congress during 1982. Although none progressed gg : f its of utilities. past committee stage,,if certa,in of
. = ; y. 7 .q.p* , - (;. .,.3 Duquesne Light Company's l ;4w.' g . .; ,
management audit was completed g.j l these bills were to be reintroduced , .f.s.; O . # V.. in the third quarter of 1982 by the and passed by Congress,it could l require coal-burning power plants, .y ..4* - . - 7:
+ $. ; 3 .?
. 3
' consulting firm of Temple, Barker
& Sloane, Inc. The 500 page aud!t especially those located in the . g( .
7 I report prepared by the consultant middle and eastern parts of the D ~ (- made many constructive recom-country, to m, stall
- scrubbers to Q; '.y <; 7. O- .
mendations, and the Company remove sulfur from the stack .A g %;, x . ..: has decided to implement most of gases. ;, ..
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them This could cost Duquesne Light N-j ; p y }. . ; ;' as much as $335 mill, ion, require an increase of 6% to 12% ,ni t Q.;j% ..J_yl7.+(;-
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Overall, the audit findings sup-port the position that Duquesne Light is effectively managed by customers' electric bills and Duquesne Light has long had a good rep-skilled and professiona; emp yoy-threaten thousands of coal and utation, both iocally and nationally, for its snvironmentalcontrolprograms. At ees who provide reliable electnC steelindustry j.obs in this region. Phillips power station. electrostatic service at reasonable rates. The l The Cornpany believes that " acid precipitators and flue gas scrubbers cor report gave our Company high rain legislation is premature at lect 99 percent of the fly ash before it can marks for its record of service reli- i this time, and that extensive scien- enter the station's stack. The accumu-ability (99.95%), sound financial I tific research must be completed lated fly ash, shown here, is mixed with ; scrubber sludge, stabilized. and then management, elfectiveness in before the nature, causes and i trucked to a site for proper disposal. it is coal buying, and the good per-effects of acid rain can really be interesting to note that in 1982, about 15 formance of many departments. understood. percent of each dollar received in revenue by the Company was expended for envi-ronmental control expenses. 10
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l ps .- e Clemente Runas On the job, Clemente "Clem" g s Runas is an equipment mainte- jijj3 ' nance repairman, first class in the - Substations and Shops Depart- i# ment Maintenance Shop. In his % ~
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l Deer Lakes Youth Organization. Clem's training for the Emergency Medical Technician certification ( dp y - 1 involved 82 hours of classroom $" work and 20 hours of actual hospi- ...,
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1 Data Processing Department er ,, 3 f . 7 - MT \~"W S~"?m. A n:w computer system with four ; . f ~.W '
'T N P N.f. q tim:s the capacity of the com-
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th3 Company's Woods Run Com-put:r Center. It gives the Data I p_ W** e <' Proc ssing Department the ability .~
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d:partments and other service , f- 2 d:partments of the Company. - Tha Data Processing Depart- .
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- a n:w computerized system that e ~
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rccords, stores and retrieves infor-m tion on overtime hours, vaca- -
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. . . -JW h mg tion time, and sick days for each -
.' .m' dep rtment in the Company. The syst:m greatlyimproves the Construction of Beaver Valley Power Station Unit No. 2 (right) e approximately 59%
complete. Duquesne Light owns 13.74 percent of Unit No. 2, which is scheduled to go on accuracy and timeliness of this
. line in 1986. Like Unit No.1 (left), Unit No. 2 is jointly owned by members of the Central information for better manage- Area Power Coordination (CAPCO) group but is being constructed and will be operated by m:nt control. Duquesne Light. For more information on CAPCO, see the inside back cover of this report.
A systems plan, covering the next three to five years, has been Helping Customers Reduce that identifies the best opportuni-d vcloped and is being imple. Their Electric Bills ties for savings. We also con-mented by the department. The The desire to save on energyis ducted energy conservation semi-plen identifies potential systems much more widespread than the nars for residential customers and proj: cts, resources and man- knowledge of how to do it cost- load management seminars for power requirements, establishes effectively. During 1982, Duquesne managers in business and indus-priorities and designs implementa. Light mailings offered residentt.I try. A Duquesne Light employee, tion programs. customers a home energy audit Jane Cricks, serves as a radio hostess. Her weekly 90-minute COST OF FOSSIL AND NUCLEAR FUEL Emplayees and Union Contracts Cenm PM question-and-answer show covers Experience is an important factor men btu a wide range of energy conserva-behind the management audit's 180 tion and homemaking topics. recognition of our employees' f'
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professionalism. The average ice .7~ New Headquarters Location Duquesnc Light supervisory > ' p The recent relocation of employee has 15 years experi- fg ~ 7~ 7/'* ' Duquesne Light's headquarters ence with the Company (yet is into 13 floors of One Oxford Cen-only 40 years old). b. [, tre provides long-term relief from Our union represented 88 ~ 'F three problemr serious over-employees are members of the b. ' crowding in the old headquarters, International Brotherhood of Elec-trical Workers, AFL-CIO or the ies W%[/ high maintenance costs and low g energy efficiency. (It would have UMWA. Our two-year contract with g oj/ 7 been too costly to renovate our the IBEW runs until October 1, t old headquarters.) Also, the new 1983. Our hourly coal mine employees are covered by the F;
#- }';. offices will give our employees a more productive, pleasant working industry-wide Bituminous Coal ? j/ environment. The downtown Wage Agreement, which runs until de : Ve Pittsburgh office space market September 30,1984. o - ,
was extremely competitive at the [y Duquesne Light had 4,960 time we were looking for space. employees at the end of 1982. p We were able to negotiate a very r favorable 20-year lease for our 1972 '73 '74 '75 '76 '77 '78 '79 '80 '81 '82 13 ;
C mpany R:p rtcn was approved et the 1982 Annut! Meeting of Steck-holders. Mr mnindion wIs mad 3 in acord nw Financial Statements with generally accepted auditing standards and The Company is responsible for the financial informa- included a review of the system of intemal accounting tion and representations contained in the financial controls and tests of transactions to the extent they statements and other sections of this Annual Report. considered necessary to provide reasonable assur-The Company believes that the financial statements ance that the financial statements are not misleading have been prepared in conformity with generally and do not contain material errors. accepted accountirig principles appropriate in the cir- The Board of Directors has an Audit Committee cumstances to reflect, in all material respects, the composed of four non-officer directors which met four substance of events and transactions that should be times in 1982. The Audit Committee has the following included and that the other information in the Annual duties and responsibilities: (1) recommend the inde-Report is consistent with those statements. In prepar- pendent public accountants; (2) review the planned ing the financial statements, the Company makes scope and results of their audit and other services to informed judgments and estimates based on currently be performed; (3) review the financial statements and available information of the effects of certain events the related report of the independent public account-and transactions. ants; (4) review with the officers, internal auditors and The Company maintains a system cf intemal the independent public accountants the adequacy of accounting controls designed to provide reasonable the Company's system of internal accounting control, assurance that the Company's assets are safe- including their recommendations with respect thereto; guarded and that transactions are executed and and (5) review the planned scope and results of the recorded in accordance with established procedures. internal audit function. The independent public There are limits inhercrd in any system of intemal con- accountants and internal auditors have full and free trol based on the recognition that the cost of such a access to the Audit Commdtee and meet with it, with system should not exceed the benefits to be derived. and without management being present, to discuss The system of internal accounting control is supported intemal accounting controls, auditing and financial by written policies and guidelines and is supplemented reporting matters. by a staff of internal auditors. The Company believes that the internal accounting control system provides reasonable assurance that its assets are safeguarded (, Qj _ M / and the financial information is reliable. The accompanying consolidated financial state- C. M. Atkinson John M. Arthur ments have been audited by Deloitte Haskins & Sells, Vice President Chairman of the Board and independent public accountants, whose appointment Fiscal President Opinion of Independent Certified Public Accountants DELOITTE HASKINS & SELLS Certified Public Accountants Two Gateway Center Pittsburgh, Pennsylvania 15222 TO THE DIRECTORS AND STOCKHOLDERS in our opinion, such consolidated financial state-OF DUQUESNE LIGHT COMPANY: ments present fairly the consolidated financial position of Duquesne Light Company at Decem-We have examined the consolidated balance ber 31,1982 and 1981 and the results of its opera-sheets of Duquesne Light Company as of tions and the changes in its financial position for December 31,1982 and 1981 and the related statements of consolidated income, retained each of the three years in the period ended December 31,1982, in conformity with generally earnings, capital surplus and changes in financial accepted accounting pnnciples applied on a position for each of the three years in the period consistent bas,s.i ended December 31,1982. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we con-Ag Q sidered necessary in the circumstances. February 17,1983 14
Duquesne Light Company Statement of Consolidated Income For the Three Years Ended December 31,1982 (Thousands of Dollars. Except Per Share Amounts) 1982 1981 1980 ELECTRIC OPERATING REVENUES .. . .... ........ . . $746,462 $786,229 $674,744 OPERATING EXPENSES: Fuel .. .............. . ... ... . . .............. . . 229,693 242,871 202,797 Purchased power (sales)-net . . .. . ..... .. . . .. ... (23,172) 16,189 18,524 Other operation . . . . . . . . . . . . . . ..... ... ... .. ... . 126,151 113,423 99,251 Maintenance (Note N) .... .... ... . .... ... .. . . .... 66,855 63,106 60,401 Depreciation . . . . . . . . . . . . . ........ .... ... . ....... ... 62,939 60,854 53,316 Taxes other than income taxes (Note N) . . . . . ... ... . . 57,476 57,694 47,637 income taxes (Note H) . . ... . ..... .. . ....... .. 71,213 72,263 60,654 Total Operating Expenses . . .. ... ... .. .. . ..... 591,155 626,400 542,580 OPERATING INCOME . . . . ...... ..... . ..... . .. .. 155,307 159,829 132,164 OTHER INCOME: Allowance for equity funds used during construction . . . . . . . . . .. 35,415 24,619 22,325 Income taxes-credit (Note H) .... .... ..... .. .... . ... 17,906 14,462 10,011 Otherincome and deductions-net . . . .... ..... .... . 8,913 3,467 4,424 Total Other Income . ... .. ... . .. . .... . 62,234 42,548 36,760 INCOME BEFORE INTEREST CHARGES . . . . . . . . . . . . .. . 217,541 202,377 168,924 INTEREST CHARGES: Interest on long-term debt . . .... . . .. ........... .. .. 111,726 97,404 80,558 Other interest . . . . . . . ....... . . . ......... .. .. . .. 3,471 6,957 4,267 Allowance for borrowed funds used during construction, net of income taxes . . . . . . . ... ... . .. (14,853) (11,393) (9,196) Total lnterest Charges . . . . . . ... . ... . . ...... . 100,344 92,968 75,629 INCOME FROM CONTINUING ELECTRIC OPERATIONS BEFORE EXTRAORDINARY GAIN . ... .. ... . .. .... .. 117,197 109,409 93,295 DISCONTINUED STEAM HEATING OPERATIONS (Note C): Loss from operations of discontinued steam heating subsidiary . (924) (538) (333) Loss on disposition of discontinued steam heating subsidiary . .. (9,000) _ INCOME BEFORE EXTRAORDINARY GAIN . . .. .... . . 107,273 108,871 92,962 EXTRAORDINARY GAIN ON EARLY EXTINGUISHMENT OF BONDS (Note D) . .. ...... . ..... . . .. . 9,609 - - NET INCOME . . . . . . . . . .. . . . . .. 116,882 108,871 92,962 DIVIDENDS ON PREFERRED AND PREFERENCE STOCK . .. . 22,701 22,976 23,353 EARNINGS FOR COMMON STOCK ... . . .. .. ... $ 94,181 $ 85,895 $ 69,609 AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (000) 48,236 41,764 38,267 EARNINGS PER SHARE OF COMMON STOCK: Income From Continuing Electric Operations . . . .. $ 1.96 $ 2.07 $ 1.83 Loss From Discontinued Steam Heating Operations (Note C) .. (.21) (.01) (.01) Extraordinary Gain (Note D) . .... .. . . . .20 - - Net income . . . . .. .. ... . ... . $ 1.95 $ 2.06 $ 1.82 DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $ 1.90 $ 1.85 $ 1.80 Tna accompanying Notes to Financial Statements are an integral part of these statements. 15
Duquesne Light Company Consolidated Balance Sheet December 31,1982 and 1981 (Thousands of Dvaars) _19_82 1981 ASSETS PROPERTY, PLANT AND EOUIPMENT: Electric plant: I n se rvice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,347,640 $2,202.613 Construction work in progress . . . . . . . . . . . . . . . . . . . ...... ....... . 675,621 582,734 Heid for future use .. . ... ... .... ..... . . ..... .... .... 1,293 825 Total electric plant . . . . . . ... ... . ......... . ...... ....... 3,024,554 2,786,172 Steam heating plant (Note C): In service . . . . . . ... ......... ..... ...... ................ . ..... - 23,371 Construction work in progress . ... . .. . .. .. ... .. .. ... . . - 210 Total property, plant and equipment . . . . . . . ... ...... ... .... .... . . 3,024,554 2,809,753 Less accumulated depreciation ... . .. ..... .... ... . . ........ . 504,680 477,009 Property, Plant and Equipment-Net . . . . . . ... . ... ...... .... 2,519,874 2.332,744 1 l l l OTHER PROPERTY AND INVESTMENTS: Nonutility property (at original cost less accumulated depreciation of 1
$308 and $278, respectively) . . ... ....... .. . . ..... . . .. 2,008 1,565 j Miscellaneous investments . . . . ... . . .... . .. .... . . . 8,489 275 Total Other Property and Investments . . .. . . ... . ... 10,497 1,840 1
CURRENT ASSETS: Cash and temporary cash investments (at cost which approximates market) 33,663 50,655 Accounts receivable: Customers (less reserve for uncollectible accounts of
$2,270 and $2,242, respectively) ... .. . .. . ... .... . . 60,177 71,089 Tax refund . . . . . . . . .. ....... ..... ..... ....... .... . 5,494 2,875 Other . . . ... . . ............. .. .. ... . ... ... ... 21,284 20,386 Materials and supplies (generally at average cost):
Coal. . .......... .. ... . .. . ....... .. . . ...... 69,194 53,111 Other operating and construction . .. . . .. ........ .. .. 33,964 30,767 Deferred income taxes . . . . . . . . . . . . .. . .. . .... 7,265 - Other current assets . . . . . .. .. .. . .. . 13,851 12,000 Total Current Assets . . . . .. . . ... . . .. . 244,892 240.883 DEFERRED DEBITS: Extraordinary property losses (Note B) .. . ... ..... 40,334 31,443 Deferred coal costs (Notes G and M) . . . . 18,338 15,669 ) Other deferred debits . .. . .. . .. .. 49,476 45,998 l Total Deferred Debita . . . . .. 108,148 93,110 Total . . ... . . $2,883,411 $2,668,577 The accompanying Notes to Financial Statements are an integral part of these statements. I l l 16
1982 1981 LIABILITIES CAPITAllZATION (Note E): Common Stock (authorized-60,000,000 shares; outstanding-53,276,525 and 45,302,520 shares, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 53,277 $ 45,303 Capital surpl us . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 649,376 550,244 R etained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168,784 167,149
- Total Common Stockholders' Equity . . . . . . . . . . . . . . . . . . . . ... ... 871,437 762,696 Non-redeemable Preferred and Preference Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 156,137 156,137 Redeemable Preferred and Preference Stock, less sinking fund and purchase requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,829 143,924 First mortgage bonds (less sinking fund requirements and current maturities) 1,006,637 983,870 Other long-term debt (less current maturities) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199,934 176,682 Unamortized debt discount and premium-net ..... ................ ...... (9,488) (9,453)
Total Capitalization .......... ..... ........................ ... 2,365,486 2,213,856 CURRENT LIABILITIES: Long. term debt maturing within one year . . . . . . . . . . . . . . . . . . . ... .... 12,500 14,000 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............ . ..... 98,399 80,010 Accrued income taxes (Note H) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,931 4,427 Other accrued taxes . . . . . . . . . . . . . . . . ..... .. . .... . .... 13,658 18,381 Energy cost rate refunds ......... .. .......... .. . ... ...... . 9,974 - Accrued interest . . . . . . . . . . . . . . . . ... ... . . .. .. . .. ... .. 27,497 24,342 Dividends declared . . . . . . . . . . . . . ...... ....... . . . .... .. . .. 30,302 27,232 Sinking fund and purchase requirements (Note E) .. .. . .. . . .. . 10,987 9,733 Reserve for loss on discontinued steam heating operations (Note C) . . . . .. 2,698 - Total Current Uabilities . . . . . . . . . . . . ..... .. . ..... . .. . 210,946 178,125 DEFERRED CREDITS: Investment tax credits . . . . . . . . . .. ... .. .. ..... .. . . 126,447 109,866 Accumulated deferred income taxes . . .... ... . . . . 172,600 158,463 Other deferred credits . . . . . . . ..... . .. ..... .. 7,932 8.267 Total Deferred Credits . . . . . . . . . .. .... .. .... .. . 306,979 276,596 COMMITMENTS AND CONTINGENT LIABILITIES (Notes G. I, L and M) . .. Total .. . ..... . .. . . .. $2,883,411 52,668.577 17
Duquesne Light Company Statement of Changes in Consolidated Financial Position For the Three Years Ended December 31,1982 (Thousands of Dollars) 1982 1981 1980 SOURCE OF FUNDS. Continuing electric operations: Income from continuing electric operations before extraordinary gain $117,197 $109,409 $ 93,295 Items not affecting working capital: Depreciation . . . . . . ... .. .. . . ...... .... .. ... .. 66,303 63,560 56,156 Investment tax credit deferred-net . . . . . . . . . . . . . . . . . . . . . . 17,335 11,524 16,021 Income taxes deferred-net (noncurrent portion) . . . . . . . . . . 18,466 38,040 17,550 Allowance for equity and borrowed funds used during construction ... ......... .. ... .. .. .. . .. .... (50,268) (36,012) (31,521) Total........ ... ....... . . ..... ...... . . . 169,033 186,521 151,501 Discontinued steam heating operations . . . ......... ... .. .. (9,924) (538) (333) Items not affecting working capital (including depreciation: 1982, $595; 1981, $610; 1980, $581) ..... . ..... (349) 690 576 Total From Operations (excluding extraordinary gain) . . . . . 158,760 186,673 151,744 Extraordinary gain on early extinguishment of bonds . . . . . . . . . . . . . . 9,609 - - Sale of bonds . . . . . ...... .... .. . ... ..... . . 65,000 80,000 110,000 issuance of Common Stock . .. . . .... . .. . .... . 107,369 61,332 65,309 i Nuclear fuel obligations . . . . . . . . . . . . . . . . . . . . . .. ... .. .. 24,221 - - 1 1 Increase (decrease) in notes payable . .... .. ... .
- (35,000) 24,000 Construction costs reimbursed by trustees from proceeds of pollution control financings .. ... . .... .. ... ... .
- 50,000 3,223 Decrease in working capital (exclusive of current maturities of long term debt) (a) . . . . . . . . .. ....... . . 30,312 - -
Total Source of Funds . .. ... ...... ... ... . $395,271 $343,005 $354,276 APPLICATION OF FUNDS: Construction expenditures (net of allowance for equity and borrowed funds used during construction) .. . ... ... . $231,022 $178,942 $209,778 Dividends on capital stock ...... . .. ... .. . . ... 115,247 100,268 93,188 Reduction of first mortgage bonds ....... .. . ... .... 43,852 - 12,000 Sinking fund and purchase requirements .. .. .. . .. ... 2,691 4,461 3,740 Deferred coal costs . . . . . . . . .. ... . . .. . 2,669 15,355 314 Other-net . .. .. . .. ..... . .. . . .. (210) 15,679 7,202 Increase in working capital (exclusive of current maturities of long-term debt and notes payable) (a) . ... ........
- 28,300 28,054 To al Application of Funds .. ... . . .. $395,271 $343,005 $354,276 (a) The components of working capital (exclusive of current maturities of long-term debt and notes payable) were as follows: ;
Current assets: , Cash and temporary cash investments . . .. . $ 33,663 $ 50,655 $ 3,550 ! Accounts receivable . . . . . . . .. . 86,955 94,350 84,816 i Materials and supplies and other current assets 117,009 95,878 111,892 Deferred income taxes ... . . . . 7,265 - - l Total... . . .. .. . . 244,892 240,883 200,258 I Current liabilities: l Accounts payable and accrued interest . .. . 125,896 104,352 87,297 Accrued taxes .. . .. .. . . 18,589 22,808 30,023 Energy cost rate refunds ... . . . . 9,974 - - Dividends declared .. . . . . 30,302 27,232 23,889 Sinking fund and purchase requirements . . . 10,987 9,733 10,591 i Reserve for loss on discontinued steam heating operations 2,698 - - Total... . . . 198,446 164,125 151,800 Working capital at close of year . . 46,446 76,758 48,458 Working capital at beginning of year . . 76,758 48,458 20,404 Increase (decrease) in working capital (exclusive of current maturities of long. term debt and notes payable) . $(30,312) $ 28.300 .$ 28,054 The accompanying Notes to Financial Statements are an integral part of these statements. i 18 1
- l. _. _ . _ .- - -
- Duquesne Light Company Statement of Consolidated Retained Earnings For the Three Years Ended December 31,1982 (Thousands of Dollars) 1982 1981 1980 BALANCE AT BEGINNING OF YEAR . . . . . . . . . . . . . . . . ... $167,149 $158,546 $158,772 NET INCOME FOR THE YEAR . . . . . . . . . . . . . . . . . . . . ....... 116,882 108,871 92,962 Total..... ...... ........ . ............ . .. .. 284,031 267,417 251,734 DEDUCT:
Cash Dividends De::lared: Preferred Stock: 4% Series . . . . . . . . . . . . .... ... .... ... ..... . 1,100 1,100 1,100 3.75% Series .. . .............. .. ... . .... . . .. 281 281 281
- 4.15% Series . . . . ....... ..... ......... .... . .. . 291 291 291 4.20% Series . . . . . . . . . . . . . . . . .... ... .. . .. 210 210 210 4.10% Ser'as . . . . . . . . . . .. . .. .... ... .. .. .. 246 246 246
$2.10 Series . . . . . . . . . . . . . . . . . . . . ..... .. ......... . 336 336 336
$8.64 Series . . ... ......... .. ........ ... .. . 2,271 2,323 2.375
$7.20 Series . ..... ...... . ........... . . . 2,520 2,520 2,520
$8.375 Series . . .. .. . ....... . ..... . ...... 2,512 2,512 2,512 Preference Stock:
$7.50 Series ..... . .. .... . .. .... . 2,038 2,119 2,195
$2.75 Series ...... . . . . ... . .... .. .... . . 1,035 1,177 1,426
$2.315 Series . .... . . ..... ... ..... ..... ....... 2,778 2,778 2,778
$2.10 Serisa . . . . . . . . . . . . . . ...... .. ... . . . ... 2,520 2,520 2,520
$9.125 Series . . . . .. .... . .. .. .... ... . 4,563 4,563 4,563 Common Stock (Per Share: 1982-$1.90; 1981-$1.85; 1980-$1.80) 92,546 77,292 69.835 Total cash dividends . . ....... . .. . . ... 115,247 100,268 93,188 BALANCE AT CLOSE OF YEAR . .. .. ... .. . . $168,784 $167,149 $158,546 Statement of Consolidated Capital Surplus For the Three Years Ended December 31,1982 (Thousands of Dollars) 1982 1981 1980 BALANCE AT BEGINNING OF YEAR .. . . .. . $550,244 $494,228 $433,984 Premium on common stock issued . . . . .. . . .. 99,395 56,196 60,693 Expense of issuing capital stock (debit) . . . .. (263) (180) (449)
BALANCE AT CLOSE OF YEAR . . .. ... $649,376 $550,244 $494,228 The accompanying Notes to Financial Statements are an integral part of these statements. l 19
Nota ta Fin nci:1 pany provides for decontamination end dismantiing . costs for the Beaver Villey No.1 nucleir generating Statements unit in accordance witn tne p,ovisions or tne o,ders o, the Commission. The Company is allowed to recover A.
SUMMARY
OF ACCOUNTING POLICIES: annual decommissioning annuity payments to provide for the decommissioning of the nuclear related com-Consolidation Ponents. Such costs are currently estimated to be The consolidated financial statements include the approximately $30,000,000. The Company deposits Company and its wholly-owned steam heating certain revenues in a trust fund which has been estab-subsidiary. See Note C conceming disposition of the lished to pay for such costs. At December 31,1982, subsidiary.
$1,199,000 was included in the Decommissioning Trust Property, Plant and Equipment Fund, which represents the aggregate value of reve-The properties of the Company are carried at original nue deposits and interest earned on investments cost and, with minor exceptions, are subject to a first made by the trustee. Provisions for depreciation and mortgage lien. All maintenance and repairs and depletion of other Company property and the steam replacements of minor units of property are charged heating subsidiary's property are made on various to income. Replacements of retirement units of prop- bases such as tons of coal mined for coal properties.
erty and betterments are charged to property. In con- g .y. nection with retirements, reserves era charged with Deferred income taxes are provided principally for dif-the carrying value. plus dismantling charges,less sal-ferences between depreciation for income tax pur-vage, of property retired. See Note C concerning dis-p ses and depreciation for accounting purposes to position of the subsidiary's properties. the extent permitted by the Pennsylvania Public Utility Revenues Commission for rate-making purposes, and for fuel Customer meters are read monthly or bimonthly and and extraordinary property losses deferred for bilis are rendered on a monthly basis. Revenues are accounting purposes but deducted currently for recorded when billed. income tax purposes. In compliance with regulatory accounting, income taxes are allocated between oper-Allowance for Funds Used During Construction ating expenses and other income principally with in accordance with the uniform system of accounts respect to interest charges related to construction prescribed by regulatory authorities, an allowance for work in progress. Investment tax credits are deferred funds used during construction ( AFC) is included in and amortized over the lives of the related facilities. construction work in progress and credited to other income for AFC attributable to equity funds and to Deferred Fuel Costs interest charges for AFC attributable to borrowed The Company defers the difference between actual funds, net of income taxes. AFC is a non-cash item fuel costs and base fuel costs until the period in which and is computed using a composite rate, which is such costs are billed to its customers through its applied to the balance of construction work in prog- energy cost rate. The energy cost rate is based on ress and assumes that funds used for construction are projected costs, with provisions for subsequent provided by borrowings and by preferred, preference adjustments to actual cost. Any overcollections of end common stock equity. The rate, compounded revenues are refunded to customers. semi-annually, was 8.5%,7.6% and 7.4% in 1982,1981 Nuclear Fuel Costs and 1980, respectively. This accounting procedure The Company's share of nuclear fuel costs under non-results in the inclusion in property, plant and equip- , capitalized financing lease agreements is charged to ment of amounts considered by regulatory authorities fuel expense based on the quantity of electric energy as appropriate costs for the purpose of establishing generated and reflects a zero net salvage value for rates for utility charges to customers. the leased nuclear fuel. In 1982 the Company capital-Depreciation ized acquisitions of nuclear material through a trust The Company provides for depreciation of electric arrangement that is intended to finance a portion of plant, exclusive of coal properties, on a straight-line the Company's requirements for nuclear fuel. A new basis determined in a manner consistent with applica. accounting pronouncement issued by the Financial ble Pennsylvania law and with methods applied by the Accounting Standards Board late in 1982 and becom-Pennsylvania Public Utility Commission in the determi. ing effective in 1984 will result in future capitalization nation of depreciation in rate proceedings. The Com- of the Company's nuclear fuelleases. 20
cmount, net of incom3 tax:s, from its customers over I The' Nuclear Waste Policy Act cf 1982 provides for the administr: tion by the United Stit:s Department of a t:n-ynr period beginning on J;nu ry 29,1983. Energy (DOE) of a nuclear waste disposal fund and The Commission did not allow any retum on the cn intarim storage fund. The funds will be used to unamortized costs of either of the property losses. dispose of high-level radioactive waste and spent nuclear fuel from nuclear power reactors. Disposal C. DISCONTINUED STEAM HEATING costs will be bome by the owners and generators of CPERATIONS: such fuel and waste. Beginning on April 7,1983 the On August 30,1982 the Pennsylvania Public Utility Company will be required to provide for a fee of one Commission entered an order approving the applica-mill per killowatt hour on electricity generated and sold tion by the Company's steam heating subsidiary, Alle-by its nuclear power plants in addition to a one-time gheny County Steam Heating Company, to discon-fee for nuclear fuel used prior to April 7,1983. The tinue steam service to the public effective May 31,
- c. mount of the one-time fee and other related matters 1983 and to transfer to Pittsburgh Allegheny County tre the subjects of proposed DOE regulations and the Thermal. Ltd. (PACT) a major portion of the subsidi-method of providing for such fees has not yet been ary's assets for nominal consideration. The order determined. Although no provision for such costs has became final on September 30,1982. The transfer of been made at December 31,1982, management the assets is expected to become effective on May 31, believes that such costs should be recoverable from 1983. In addition, a lease to PACT of a steam generat-its customers. ing plant for nominal consideration became effective on January 3,1983 after completion by the subsidiary Debt Discount, Premium and Expense of certain demolition work at the plant.
Debt discount or premium and related expenses are The provision for loss on the disposition of the sub-amortized over the lives of the issues to which they sidiary's assets is estimated to be approximately pertain. $9,000,000 (net of income tax benefit of approximately
$8,712,000) and the loss from operations is approxi-C. EXTRAORDINARY PROPERTY LOSSES: mately $924,000 (net of income tax benefit of approxi-In January 1980, the Company and the other CAPCO mately $1,028,000) for the nine months ended Sep-companies cancelled the construction of four nuclear tember 30,1982. The provision for loss on disposition g:nerating units. The Company's share of the accu- includes estimated operating losses for the subsidiary mulated costs applicable to these units was of $1,100,000 (net of income tax benefit of approxi-
$34,528,000 as of December 31,1982.The Company mately $970,000) for the period October 1,1982 his received approval from the Federal Energy Regu- through May 31,1983. The 1981 and 1980 operating litory Commission (FERC) and the Pennsylvania results have been reclassified to present separately Public Utility Commission (Commission) to amortize the results of discontinued steam heating operations and recover from its customers these accumulated from continuing electric operations.
costs over a 10-year period beginning on January 29 At December 31,1982 assets and habilities included 1983. A petition for reconsideration and modification in the consolidated balance sheet applicable to the has been filed by the Pennsylvania Consumer Advo- discontinued steam heating subsidiary were not mate-cite to the portion of the Commission's January 28, rial. Revenues from discontinued steam heating oper-1983 rate order allowing such recovery. ations for 1982,1981 and 1980 were approximately On Octobor 1,1982 the Shippingport Atomic Power $8,845,000, $10,996,000 and $15,071,000, respectively. Station was removed from commercial operation after notice from the United States Department of Energy D. EARLY EXTINGUISHMENT OF BONDS: that it was planning to terminate operation of the light In December 1982, the Company exchanged 1,406,898 water breeder reactor core at the station as of that shares of Common Stock for approximately date. The Company has requested approval from $29,852,000 principal amount of outstanding First FERC to record the undepreciated cost of the station Mortgage Bonds which were owned by an investment es an extraordinary property loss and to amortize such banking firm. The exchange resulted in a nontaxable loss over a ten-year period beginning on the date that extraordinary gain of approximately $9,609,000, or S.20 rates providing for the recovery of such costs first per share, which is the difference between the become effective. Consistent with this request, the exchange value of the Common Stock and the net Company reclassified the net amount to extraordinary carrying amount of the bonds. property losses. The Company has received approval from the Commission to amortize and recover this 21 _ -. . . - ~ .-. .. - - .. - -. _ _ -
p E CAPITALIZATION: Capital Stock: December 31,1982 December 31,1981 Shares Shares Outstanding Amount Outstanding Amount Common Stock-$1 par value (1) , . . .. 53,276,525 S 53,276,525 45,302,520 $ d5,302,520 Capital Surplus: Premium on Common Stock . . . . $655,993,654 $556,598,987 Capital stock expense (debit) . . (7,065,026) (6,607.112) Other . . . .. . 447,147 252.261 Tctalcapitalsurplus , .. . 3649,375,775 $550,244,136 Non-redeemable Preferred and Preference Stock: Preferred Stock-$50 par value (cumulatue) (1) 4% Series (2) .. . . 549,969 $ 27,498,450 549,969 $ 27,498,450 3.75% Series (2) ., . . .. .. .. . 150,000 7,500,000 150,000 7,500,000 4.15% Series (2) . .. 140,000 7,000,000 140,000 7,000,000 420% Series (2) . . .. . . 100,000 5,000,000 100,000 5,000,000 4.10% Series (2) . . 120,000 6,000,000 120,000 6,000,000
$2.10 Series (2) . .
160,000 8,000,000 160,000 8,000,000
$7.20 Series (3) .. . . . . . . 350,000 17,500,000 350,000 17,500,000 Preference Stock-$1 par value (cumulative) (1)
$2.315 Series (4) . .. . . 1,200,000 1,200,000 1,200,000 1,200,000
$2.10 Series (4) . . 1,200,000 1,200,000 1,200,000 1,200,000 80,898,450 80,898,450 Premium on Non-redeemable Preferred and Preference Stock . 75,238,760 75.238,760 Non-redeemable Preferred and Preference Stock . . $156,137,210 $156,137,210 involuntaryliquidation value , . .. $155,998,450 $155,998,450 Redeemable Preferred ar'd Preference Stock:
Preferred Stock-$50 par value (cumulat,ve) (1) 58.64 Series (3) . . . 262,872 S 13,143,600 268,872 f 13,443,600
$8.375 Series (3) . . 300,000 15,000,000 300,000 15,000,000 Preference Stock-51 par value (cumulative) (1) 268,920 268,920 280,120 280,120
$7.50 Series (3) . . .
365,020 365,020 385,100 385,100
$2.75 Series (4) 500,000 500,000 500,000 500,000
$9.125 Series (3) 29,277,540 29,608,820 Premium on Redeemable. Preferred and Preference Stock . M3,027,160 114,917,880 Purchase and Sinking Fund Requirements . (1,475,500) (602,500)
Redeemable Preferred and Preference Stock . $140429,200 $143,924,200 involuntaryliquidationvalue , $140,823,200 $143,924,200 (1) Authorized shares: Common Stock--60,00C,000; Preferred Stock-4,000,000; and Preference Stock-8,000,000. (2) $50 per share involuntary liquidation value. (3) $100 par share involuntary liquidation value. (4) $25 per share involuntary liquidation value. i t I The following summary indicates the changes in the number of shares of Common Stock outstanding during l l 1982,1981 and 1980: Year Ended December 31, 1982 1981 1980 Common Stock: Shares outstanding at be6 ling of year 45,302,520 40,166,083 35,550,000
- lssuances
Common Stock sales . 4,500,000 4,100,000 4,000,000 l 446,172 l Dividend Reinvestment Plan . 1,962,320 902,977 Employee Stock Ownership Plan . 104,787 133,460 169,911 f 1,406,898 - Exchanged for outstanding First Mortgage Boods - Sharas outstanding at end of year . 53,276,525 45,302,520 40,166,083 23
4 The number of shares reserved ct December 31, . shara. The Company may on a non-cumulativa basis l
.1982 for issuance under the Dividend Remvestment ~ ritira En additional 55,000 shares in each such yrir.
, Plan and the Employee Stock Ownership Plan are 'The shares of $9.125 Preference Stock are subject to . [
888,531 and 591,842, respectively. In January 1983, an . a cumulative sinking fund beginning with the year 1984 - c additional 3,000,000 shares were registered for the : and continuing through 1997 inclusive which will retire - j Dnndend Remvestment Plan. . 33,300 shares on January 1 in each year at $100 per.
- The outstandmg Preference Stock of the Company - share. The Company may, on a non-cumulative basis, l is callable on not less than thirty days' notice at the , retire an additional 33,300 shares in each such year,~
. ; following redemption prices plus accrued dnndends: provided that the Company may not redeem through
- " $7.50-redeemable at $112 through April 1,1983; $105 the exercise of this option more than an aggregate of
'. through April 1,1986; $103 through Apri' 1,1989; and ~ 150,000 shares. The Preference Stock is entitled to
- $101 thereafter; $2.75-not redeemable prior to , _q uartsrly cumulative dividends except that no _.
EAugust 1,1984 through certain refundiing operations, . dividends may be paid if dnndends on any senes of the ,' ctherwise redeemable at $27.75 through July 31,1984; - . Preferred Stock are accumulated and unpaid. In the .
' $26.50 through July 31,1989; and $25.25 thereafter; . . event that six quarterly dividenas on any series of .
j . $2.315-redeemable at $26.60 through March 31,1986; Preference Stock are in default, the holders of the i $25.90 through March 31,1991; and $25.25 thereafter; - Preference Stock are entitled to elect two directors l
- $2.10-redeemable at $26.40 through March 31,1987; until all dividends in arrears have been paid.
? $25.70 through March 31,1992; and $25.00 thereafter; The shares of $8.64 Preferred Stock are entitled to a
. $9.125-not redeemable prior to January 1,1989 . non-cumulative purchase fund under which the Com-through certain refunding operations, otherwise pany offers to purchase annually up to 6,000 shares at redeemable at $100 plus the applicable redemption not more than $100 per share. The shares of $8.375
- premium decreasing from $7.20 in 1983 to $.48 in 1998. Preferred Stock are subject to a cumulative sinking 4
. The outstanding Preferred Stock of the Company is fund beginning with the year 1984 which will retire callable on not less than thirty days' notice at the foi-' 12,000 shares on April 1 in each year at.$100 per
- lowing redemption prices'plus accrued dividends: share. The Company may on a non-cumulative basis t 4%--$51.50; 3.75%-851.00; 4.15%-$51.73; 4.20%- retire an additional 12,000 shares in each such year.
$51.71; 4.10%--851.75; $2.10-$51.84; $8.64- . .
- The Preferred Stock is entitled to quarterly cumulative -
E redeemable at $107 through September 30,1984; $104 dividends. In the event that four quarterly dividends
~
. through September 30,1989; and $101 thereafter; on any series of Preferred Stock are in default, the ~ , l $7.20-redeemable at $102.50 through March 31,1987; holders of the Preferred Stock are entitled to elect a - 1 cnd $101 thereafter; $8.375-not redeemable prior to majority of the Board of Directors until all dividends in i
- April 1,1983 through certain refunding operations, oth- . arrears and current dividends have been paid.
crwise redeemable at $112 through March 31,~1988,' . . The combined aggregate sinking fund and manda- , and thereafter at $100 plus the applicable redemption tory purchase requirements for the next five years as I prrmium decreasing from $5.03 in 1988 to $.34 in 2003, of December 31,1982 are as follows: Redeemable Preferred and Preference Stock ' Year Ending Sinking Fund and Mandatory Th3 shares of $7.50 Preference Stock are entitled to December 31, Purchase Requirements
- a non-cumulative purchase fund under which the '
; Company offers to purchase annually at $100 per. 1983 $2 775 500 share up to 4% of the number of shares on,ginally 7 805'000 ' l issued. The shares of $2.75 Preference Stock are sub- M85 7,805,E ject to a cumulative sinking fund which will retire 1986 7,805,E 55,000 shares by August 1 in each year at $25 per_ 1987 7,805, @
- The following summary indicates the changes in the number of shares of Redeemable and Non-redeemable Preferred and Preference Stock outstanding during 1982,1981 and 1980:
Year Ended December 31, 1982 1981 1980 Pr .ference Stocki Shares outstanding at beginning of year .. . .. . . 3,565,220 3.678,650 3,751,360
- Purchases and redemptions-$2.75 Series . ... (20,080) (103,750) (61,150)
-$7.50 Series . . . (11,200) (9.680) (11,560)
Shares outstanding at end of year . . .. , .. . . . 3,533,940 3.565.220 3,678,650 Prsferred Stock: Shares outstanding at beginning of year . . . 2,138,841 2,144,841 2,150,841 Purchases-$8.64 Series . . . . . . .. (6,000) (6.000) (6,000) Shares outstanding at end of year . . . 2,132,841 2,138,841 2,144,841 23
. First Mortgage Bonds (amount authorized is unlimited by indenture): December 31c 1982 1981 Series due September t,1982 (3% %) .. . . .. . .. . . . .. . . S - $ 14,000,000 Series due September 1,1983 (3%%) . .. .. . ....... . ... . ... ... 12,000,000 12,000,000 Series due July 1,1984 (3%%) . . . . ... . .. .. . .. .... .. . 16,000,000 16,000,000 Series due Apni t,1986 (3%%) . . . .. .. . . .. .. ... .. .. .. 20,000,000 20.000,000 Series due April 1.1988 (3%%) .. ... .. .. ... .. . .... ... . 15,000,000 15,000,000
~ Series due March 1.1989 (4% %) . . . . . . . .... .. . ... .. .. . . .. 10,000,000 10,000,000 Series due February 1.1996 (5%%) ... . . . .. ... . . ....... ... 22,000,000 25,000,000 Series due February 1,1997 (5%%) . . . .. . .. . .. . ... . .. . .. . . 24,600,000 25,000,000 Series due Februa f 1,1998 (6%%) .. .. . .. .. ... . ... . 34,700,000 35,000,000 Series due January 1,1999 (7%) . . . . . . . . .. . . ... .. .. . . .. ... . . 30,000,000 30,000,000 Series due July 1,1999 (7%%) . . . ... . ... .. .... .. .. . . .. 28,947,000 30.000,000 Series due March i,2000 (8%%) . . . . . .. .. ... ... . ... .. 30,000,000 30,000,000 Series due March 1,2001 (7%%) .. . . .... . .... . . .. . 35,000,000 35,000,000 Series due December 1,2001 (7%%) . . . .. . ... .. . . .. 26,461,000 35,000,000 Series due June 1,2002 (7%%) . . . . .. .. . . ... . 28,470,000 35,000,000 Series due January 1,2003 (7% %) . ... ... .. .. . . . . . . .. 32,670,000 40,000,000 Series due July 1,2003 (7%'4) . . . . . . . . .. . . .. .. . . . .. 35,000,000 35,000,000 Series due April i,2004 (8%%) . . .. .. .. .. . .... . . ... 44,100,000 45,000,000 Series due March 1,2005 (9%%) . . . . .. . . . .. . . .... . ' 50,000,000 50,000,000 Series due June 1,2006 (9%) .. .. .. ... .. . ....... 80,000,000 80,000,000
, Series due Apnl 1,2007 (8%%) . .. . . .. . .. . 97.400,000 100,000.000 Series due Fetxuary 1,2009 (10%%) . . ..... . . .. 100,000,000 100.000,000 Series due January 1,2010 (12% %) . . . . . .... . .... .. . . ... . .. . 60,000,000 60,000,000 Series due September 1.2010 (14%%) . . . . ..... . 50,000,000 50.000,000 Series due June 1,2011 (16%) . . . .. .. ... .. 80,000,000 80,000,000 Series due May 1.2012 (16% %) . . .. . .... . . . .. . .. 65,000,000 - 1,028,148,000 1.007,000,000 Total. .. . .. . . . . . . .. .. . . . ... .. .. Less: Current maturities-Series due September 1,1992 (3% %) . .. . . . .. . ..
- 14,000,000 Current maturities-Series due September 1,1983 (3%*4) . ... . .. . 12,000,000 -
9,511,400 9,130,000 Current sinking fund requirements .. . . .
$1,006,636,520 $ 983,870,000 First Mortgage Bonds (less sinking fund requirements and current maturities) . . .
Other Long-Term Debt: Pollution Control Obhgations: Serial Matunty Average or Mandatory December 31, Date of interest Redemption Final Rate Beginning Matunty 1982 1981 Issuance
$ 24,000,000 September 21.1972 . 5.49 % 1983 2002 $ 24,000,000 1984 2003 12,000,000 12,000,000 June 21,1973 . . . 5.685 %
5.755 % 1984 2003 16,000,000 16,000,000 October 25,1973 . 7.97 % 1989 2004 14,000,000 14,000,000 August 13,1974 . . . 7.50 % 1993 2005 17,000,003 17,000,000 April 2,1975 .. . 8.40 % 1991 2005 18,000,000 18,000 000 October 29.1975 . . . 15,000,000 6.90 % 1994 2011 15,000,000 September 29.1976 . 2002 2011 50,000.000 50,000,000 March 24,1981. . 12.00 % 166,000,000 166,000.000 Total. . . . 500,000 - Less: Current maturities . . 165,500,000 166,000,000 Po lution Control Obligations (less current maturities) . 24,221,187 - Nuclear Fuel Obligations . 10,213,000 10,682,000 5*4 Sinking Fund Debentures (authorized $20,000,000) due March 1,2010
$199,934,187 $176,682,000 Total Other Long. Term Debt . .
The pollution control obligations arise from arrange- The nuclear fuel obligations result from a trust ments between the Company and two local industrial arrangement providing a financing vehicle for the pro-development authorities whereby the construction of curement of a portion of the Company's requirements certain pollution control facilities has been financed for nuclear fuel. Interest amounts applicable to the through the sale of bonds by those authorities, and trust are capitalized and included in construction work the Company is obligated to pay to the authorities in progress, at rates ranging from 1%% to 1%% over amounts equal to the principal of and interest on the the trustee's commercial paper rate. Trust obligations authorities' bonds relating to such facilities. will be paid by the Company as the related nuclear fuelis withdrawn from the trust. 24
l Sinking fund requirements End maturities for the . ments may be satisfied b' y the etrtification of property
. next fiv3 y:ars for long t:rm debt outstanding, exclu- Edditions at 166%% of the Bonds required to be sive of the nuclear fuel obligations, as of December. redeemed, and the pollution control obligations. The 31,1982 are as follows: remaining sinking fund requirement relates to the 5%
. Year Ending Sinking Fund - Sinking Fund Debentures. At December 31,1982, sink-December 31, . Requirements Maturities ing fund requirements for the 5% Debentures had 1983 480 500
' ; fund requirement had been partially satisfied in the 1964 $10,161[480 10,326 ' 1G
$12l700[000000 4
-1985- 10 539,480 700 000
~
20,700'000 ' "U ' 1986 10'551'480 1980 were $125,004,000, $111,331,000 and $91,091,000,' . 1987, -10,576,480- 800,000
. respectively, of which $60,075,000, $42,982,000 and $37,788,000, respectively, were capitalized or The sinking fund requirements.in each year relate
- deferred, including allowance for funds used during
! primarily to the First Mortgage Bonds, which require-construction. ?. I F. SHORT-TERM BORROWING - prevailing market price of similar coal rather than the
- - ARRANGEMENTS
- actual cost of Quarto coal. At December 31,1982 the i At December 31,1982 the Company had lines of credit unrecovered cost of Quarto coal reflected in the Com-4 with two banks totaling $15,000,000, all of which was pany's records was approximately $18,338,000, includ-unused. The range of interest rates under these lines ing $1,486,000 applicable to Quarto coal in inventory.
of credit are from prime rate less one half of one per- As required by the interim Order, the Company is ,
. c:nt to the prime rate. There are no commitment fees deferring the excess of the actual cost of Quarto coal or compensating balances associated with these lines over the cost allowed to be recovered through its of credit. In addition, the Company has a $60,000,000 energy cost rate until recovery of the actual cost is revolving credit agreement available to December 15, permitted by the Commission. If recovery of such ,- 1986, all of which was unused at December 31,1982. excess is disallowed, the amount deferred would be Borrowings outstanding at December 15,1986 may be charged to income in the year of disallowance. There-
, converted to term notes payable in six equal semi- after, any excess of actual cost over the amount per-i annuat installments commencing June 15,1987 and mitted to be recovered would be charged to income ! concluding December 15,1989. Interest rates fluctuate on a current basis. The deferrais and methods of during the revolving and term periods, depending on ultimately recovering such deferrals were the subject tha period of borrowings, at percentages in excess of of discussions between representatives of the Com-prime, Euro-Rate or CD rates. During the revolving pany and the Commission staff. Such discussions period there is a commitment fee of %% per annum resulted in the filing with the Commission of a Stipula-on the average unborrowed commitment. There is no tion Agreement, which sets forth a method intended to commitment fee during the term period. permit the eventual recovery of the accumulated During the years ended December 31,1982,1981 deferrals of the excess of Quarto coal costs over rrar-End 1980 the maximum amount of short-term ket price. The administrative law judge assigned to the borrowings outstanding was $37,000,000, $80,140,000 investigation entered an order, subject to review by and $63,500,000, the average daily short-term the Commission, approving the Stipulation Agree-borrowings outstanding were $1,559,000, $28,341,000 ment. On November 19,1982 the Commission End $23,408,000 and the weighted average daily inter- remanded the Stipulation Agreement to the adminis-cst rate applicable to such short-term borrowings was trative law judge for hearings. Management of the 15.39%,17.50% and 12.47%, respectively. Company believes that the deferred costs were pru-dently incurred and that the eventual outcome of the O. DEFERRED COAL COSTS: Commission's investigation will not have a material The Company and the other CAPCO companies have effect on the Company's financial position or results of
- mIde long-term coal supply arrangements with operations. The CAPCO companies are continuing to Quarto Mining Company (Quarto), an unaffiliated evaluate the economics of the Quarto arrangements 4 company, to supply coal for the Bruce Mansfield Units. and are cons;dering various means for reducing pro-duction costs. See Note M to the financial statements.
In December 1980 the Pennsylvania Public Utility
! Commission (Commission) instituted an investigation
- into the reasonableness of the cost of coal supplied by Quarto. By Interim Order entered January 12,1981 l the Commission directed that, pending conclusion of 4
tha investigation or further order of the Commission, the Company limit its recovery of the cost of Quarto coil through its energy cost rate to approximately the j 25
H. INCOME TAXES Total income taxes in 1982,1981 'end 1980 wera comprised of the following components: 1982 1981 1980 Included in operating expenses: Currently payable: Federal . . .. .. .. ... .. .... .. . . . .. . $25,257 $20,519 - $12,990 State .. . . . . . .. .. . . . .. ... . 12,004 13,680 5.335 Income taxes deferred-net-Federal .. .. . . .. . . . .. . .. . .. . . ... 13,907 ' 26,080 17.063 State . . . .. .. . . .. . . . .. ... . . . (220)' (1,057) 7,581 Investment tax credit deferred-net . . .. . . . . . 19,493 13.041 17.685 Total . . .. .. . .. .. ... . ... .. . .. 71,213 72.263 60,654 Included in other income (income taxes--credit): Currently payable: Federal . . . .. . . . . . .. . .. (14,267) (11.523) (7.977) l State . . . .. . ... (3,639) (2.939) (2,034) Totalincome tax expense .. ... .. . .. . .. . .. _S53,307 $57,801 $50,643 Taxes currently payable-federal and state . . .. ... . $29,045 $19,737 $ 8,314
. Taxes deferred-net . . .. .. .. . . . .. . 13,760 25,023 24,644 '
investment tax credit deferred-net . ... . ..... . ..... 19,493 13.041 17,685 Totalincome tax expense . . . . . .. . 853,307 $57,801 $50,643 Total income tax expense is exclusive of income taxes applicable to discontinued steam heating operations. See Note C to the financial statements. Sources of income taxes deferred and the tax effects were: Excess of tax over book depreciation . . . . . . . $14,490 $12,672 $18,249 Fuel costs expensed on tax return and deferred on books (3,552) (3.062) 5,526 Investment tax credit carryforward recognized against income taxes deferrad-net .. . , . .. . .
- 16,932 (13.844)
Extraordinary property losses expensed on tax retum and deferred on books . . .. . .. . .. 3,019 81 13,894 Other. . . . . (ISS) (1,600) 819 Totalincome taxes deferred-net . . . . $13,769 $25,023 $24,644 Total income taxes from continuing electric operations were less than the amount computed by applying the statutory federalincome tax rate of 46% to income from continuing electric operations before income taxes. The reasons for this difference in each year were as follows: Computed federal income tax on continuing electric operations at statutory rate . 578,432 $76.917 $66,211
- increase (decrease) in taxes resulting from
Allowance for funds used during construction . .. . (23,123) (16,565) (14,500) l 22 Excess of tax over book depreciation . . . . 1,131 (577) State income taxes, net of federalincome tax benefit .. . 4,766 5,229 5.876 l Amortization of deferred investment tax credits (4,251) (3,663) (3,090) Other net . . . . . (3,648) (3,540) (3,876) Totalincome tax expense $53,307 $57,801 $50,643 I i
- l. PRIOR YEARS' INCOME TAXES:
The Company's income tax returns are settled certain other issues of relatively minor importance for through 1970 with the exception of the percentage 1971 through 1979. The Company expects that an ear-depletion issue discussed below. Income tax retums lier court decision in favor of the Company concerning ' for 1971 through 1979 have been examined. and the percentage depletion for the years 1956 through 1961 1980 and 1981 returns are being examined. The Inter- will serve as the basis for setJement of the icsue for nal Revenue Service assessed deficiencies regarding the years 1962 through 1979. Management of the the Company's computation of percentage depletion Company believes that the settlement of federal and
; on coal mined for 1956 through 1961 and proposed state taxes will not significantly affect the Company's similar deficiencies for 1962 through 1979. as well as financial position or results of operations.
26 __ __ __ _ . , . _ _ _ , . ,- _ . _ . _ ____. _ _. ~- ._
1 J EMPLOYEE BENEFITS: December 31, The Company has trusteed r tircment plais to pro- 1sel 1980 1979 vide pensions for all employees, except coal mine (Thousands of Dollars) employees who are covered under a plan adminis- ^$"c r u$aE"planb nefits tered by the United Mine Workers of America. Infor- vested . . . . . . s151,756 $135,345 $126,308 Nonvested 11,566 10,750 10.562 mation concerning the plan covering coal mine . . cmployees is not determinable and is not included in Total. . . . s163,322 $146,095 $136,870 ths data below. Pension costs are funded as accrued Net assets available for end include amortization of prior service costs over 30 benefits (at market value) s111,013 $107,798 $ 91,167 years. Pension costs charged to expense or construc-The Company is liable under the Federal Coal Mine tion for the years ended December 31,1982,1981 and Health and Safety Act, as amended, and s. imi.lar state 1980 were $12,313,000, $10,083,000 and $9,392,000, .
. laws for the payment of benefits to coal mine r:spectively. The increase in pension costs in 1982 employees disabled by black lung and to their survi-end 1981 is due principally to a plan amendment effec-vors and dependents. The estimated costs of provid-tiva May 1,1981, increasing pension payments to Ing such benefits, including amortization of pnor serv-cmployees retired prior to October 1,1979. The .
ice costs over the remaining estimated life of the tccumulated plan benefits and net assets available Warwick mine, are actuarially determined and accrued for benefits for the trusteed plans are presented as of on the basis of mine payroll costs and are deposited th3 December 31 benefit information dates. The with a trustee. Such costs were $1,417,000, $1,524,000 tssumed rate of return used in determining the - and $1,494,000 for the years ended December 31, tctuarial present value of accumulated plan benefits 1982,1981 and 1980, respectively. At July 31,1982 (the w:.s 5% for each year. date of the latest actuarial valuation), the unfunded prior service cost for these disability benefits was approximately $23,670,000. K. JOINTLY-OWNED GENERATING UNITS: Tha Company, together with other electric utilities, primarily the CAPCO companies, has an ownership interest in certain jointly-owned units. Information regarding the Company's share of such jointly-owned units as of Decem-ber 31,1982 is as follows (thousands of dollars): Company's interest Utility Plant Accumulated Construction Work Percentage Unit in Service Depreciation in Progress Ownership Megawatts Fort Martin No.1 $ 45,833 $ 13,185 $ 187 50.0 276 CAPCO Units: Eastlake No. 5 . 49,900 9,861 582 31.2 198 Sammis No. 7 41,577 10,579 21,570 31.2 187 Bruce Mansfield No.1 . 72,115 13,042 261 29.3 228 Bruce Mansfield No. 2 . 20,200 2,960 502 8.0 62 Bruce Mansfield No. 3 , 70,956 4,952 455 13.74 110 Bruce Mansfield Common and Shared Facihties . 57,% 9 10,809 3,301 Beaver Valley No.1 . 321,333 41,576 15,522 47.5 385 Beaver Val'ey No. 2 18 - 186,437 13.74 114 Beaver Valley Common Facilities . 43,847 3,999 35,366 Parry No.1. - - 181,722 13.74 165 Perry No. 2 . - - 163,664 13.74 165 Total . $723,754 $110.963 5609,569 Under terms of the arrangements with the other expenses (fuel, maintenance and other operation owners of such jointly-owned units, the Company is expenses) of the jointly-owned units is included in the required to provide its own share of financing the cost corresponding operating expenses in the Statement of such units. The Company's share of the direct of Consolidated Income. L LEASES: three CAPCO generating units. Rental payments are R:ntal payments in 1982,1981 and 1980 amounted to made monthly during the terms of the leases based
$17,679,000, $16,389,000 and $10,388,000, respectively, on the amount of nuclear fuelleased and the amount of which $15,393,000, $14,169,000 and $4,778,000 were of nuclear fuel burned. The nuclear fuelleases may be charged to operating expenses. The Company has an terminated by the lessees or lessors with notice as undivided interest in nuclear fuel lease agreements for defined in the agreements or by casualty or certain 27 i
7 s other contingencies, includmg default by the lessees tion of two mines from which the coalis supphed. At in certain c'tuations involvmg a termination, the Dec:mber 31,1982 the Company had guaranteed the lessees may be required to purchase the leased obligations of Quarto with respect to approximately . nuclear fuel at the higher of fair market value or - $57,209,000 of indebtedness and had guaranteed unamortized cost. At December 31,1982, the Com- lease obligations relating to approximately $28,999,000 pany's share of the lessor's unamortized cost of the . of capital equipment for the rmnes. The Company leased nuclear fuel was $106,968,000 and the Com- _ expects that by 1984 it will have made further substan-pany expects to lease an additional $41,016,000 of tial guarantees with respect to additional indebted-nuclear fuel under current leasing arrangements. The ness and leased capital equipment, the amount of l L Company finalized a nuclear fuel trust arrangement in which will depend on the actual costs of further devel-1982 which will provide an attemative method of opment of the two mmes. In general,it is contem-financing nuclear fuel. _
~ plated that the purchase pnces to be paid for the coal .
The Company has certain buildings ur' der lease, to be received under the foregostig arrangements will
, including its new corporate headquarters, s:sbject to include amounts sufficient to service the obligations i . renewal options and in certain cas.es purchase so guaranteed.
j options. _ Under the terms of the coal supply contracts, which s _ At December 31,1982 minimum rental payments, - continue until December 31,1999 with options to l based principally on estimated usage of nuclear fuel extend for ten additional ye_a rs, the CAPCO compa- ! under lease and building rentals were as follows: nies must reimburse Quarto for their share of the ,
- . (Thousands of Dollan) costs of operating the Quarto mines, including those
} 1983 .. .. ... . . . . . . . . . . . . . . S 29.474 Costs associated with mine Construction, whether or -
- - 1984 ..... ..... .. ...... ... . 30,743 not they receive coal from Quarto. The Company's l l 7. ~ . . [ . . . ." "T 2 total payment under these contracts amounted to 1987 ....... ... ..... . . .. 19,646 $24,292,000 and $28,603,000 for the years ended b 1988-1992 ... 80,229 December 31,1982 and 1981, respectively.
After 1M. ...... ... ... 9 . The Company's estimate of future obligations for
- 3. fixed costs associated with the Quarto coal supply ,
anangemeMs are:
- The Company accounts for all of its leases (exclusive
, of the nuclear fuel trust arrangement described 1983. .m . .m . . S 9,228,M above) as operating leases in accoroance with the g manner in which the Company's rates have been $"...,,*.,;*;..;...*,.;.....';'... 1986~ . . . 8,608,000 , established by the Pennsylvania Public Utility Com. 1987..... .. . . . . .. .. .. 8,401,000 Aner 1987 . . . .- .m m. 86.245 M mission. If the noncapitalized financing leases were ! capitalized as of December 31,1982 and 1981, prop- The current price of Quarto coal to the CAPCO
- ~ erty, plant and equipment. net would have been companies is based principally on the actual current increased by $117,538,000 ar.d $64.978,000, respec- production costs plus amortization of certain produc-tively, with related increases in current liabilities and tion expenses which were not included in the price of 4
long-term debt of $12,154,000 and $105,820,000, coal to the CAPCO companies during the develop- _respectively, in 1982 and $4,722,000 and $60,644,000, ment period, which ended on May 31,1980. The cur- , j respectively, in 1981. The impact on net income of rent price of Quarto coal exceeds the current prevail-capitalizing such leases in each year would not be ing market price of coal. See Note G to the financial material. statements. M. COMMITMENTS AND CONTINGENT LIABILITIES: Beaver Valley Replacement Power
~ Construction in connection with a February 20,1981 rate order, The Company's current estimate of construction the Pennsylvania Public Utility Commission found expenditures, exclusive of nuclear fuel and allowance that the Company had not proven that the costs of for funds used during construction, during the period replacement power during a 1979 outage of Beaver 1983 through 1987 amounts to approximately $974 mil- Valley Unit No.1 were prudently incurred.
. lion, principally related to CAPCO generating units. On November 19,1982 the Commission adopted an order nisi which ordered refunds of $12.5 million over a 1 Quarto Mining Company (Quarto) two-year period. The Company expects to appeal this The Company and the other CAPCO companies order if it becomes final. The Company and outside i have made long-term coal supply arrangements with counsel do not agree with the Commission's order, 1 Quarto, an unaffiliated company, to supply coal for the and no provision has been recorded by the Company Bruce Mansfield Units. As part of these arrangements for any such refunds. While the Company is unable to
, the individual CAPCO companies are severally, and predict what action the Commission or an appellate j' not jointly, guaranteeing their proportionate shares of court may ultimately take and although the amount of Ouarto's debt and lease obligations incurred in con- such refunds could be substantial, management of the i nection with the development, equipping and opera- Company believes that the replacement power costs 28
--_.e---.-,-.. - . . . . - . . - ,_ m-,_--
were prudently incurred cnd that the eventual out- mentcf NEIL's obligations. l come of thb matter will not hava a material effect on The Pric:-Anderson Amendments 13 the Atomic the Company's financial position or results of Energy Act limit liability to third parties to $560 million ! operations. for each nuclear incident. Coverage of the first $160 million of such liability is provided through ANI and Nuclear insurance Mutual Atomic Energy Liability Underwriters The Company has coverage with American Nuclear ("MAELU"). The next $400 million is provided by ret-Insurers ("ANI") and Mutual Atomic Energy Liability roactive assessments of up to a limit of $5 million per Underwriters ("MAELU") to provide primary property operating nuclear reactor per incident, but not more insurance coverage for Beaver Valley Power Station than $10 million per operating reactor in any calendar
. Units Nos.1 and 2 in the amount of $500 million. The year. Based on its present ownership interest in one Company's interests in Perry Nuclear Power Plant operating nuclear reactor, the Company's maximum Units Nos.1 and 2 are also covered under policies potential assessment under these provisions would be issued by ANI and MAELU which are administered by $2.4 million per incident but not more than $4.8 million The Cleveland Electric Illuminating Company, the per calendar year.
CAPCO company which is constructing those units. The Company is a member of Nuclear Electric Rate Matters insurance Limited ("NEIL"), a mutualinsurer estab- Effective July 15,1981 the Company increased its lished by the utility industry to provide Decontamina- rates by about $64.2 million annually in accordance tion Liability and Excess Property Insurance in excess with an option order of the Pennsylvania Public Utility of $500 million for members' nuclear generating facili- Commission. On April 15,1982 the Commissica ties. NEIL presently provides such excess coverage in adopted its final order in the rate procee&g which tha amount of $345 million plus 14% of the amount of determined that the option rate increase of $64.2 mil-the loss in excess of $500 million up to $1 billion. lion annually was just and reasanable. The final order Under this policy the Company is subject to a retro- has been appealed to the Pennsylvania Common-spective premium assessment of approximately $2.8 wealth Court by the Pennsylvania Consumer Advocate million per year for a period of seven years in the and certain other complainants. Management believes cv nt of accidents at nuclear plants of member com- that the ultimate resolution of this rate matter will not pinies if losses exceed premiums, reserves and other have a material adverse effect on the Company's NEIL resources. financial position or results of operations. Damages in excess of the primary $500 million On April 30,1982 the Company filed with the Penn-coverage are also covered by an excess property sylvania Public Utility Commission a new rate sched-insurance policy issued by ANI and MAELU which ule affecting all classes of customers and estimated to pr:sently provides $68 million of coverage. The increase annual revenues based on projected levels ANI/MAELU ar'd NEIL policies provide quota sharing of business at December 31,1982 by approximately coverage for losses in excess of $500 million up to $165 million (subsequently reduced to approximately
$1 billion. $155 million). On January 28,1983 the Commission in addition, NEIL also provides insurance coverage entered a final order allowing an increase of $105.8 for the extra expense of replacement power during million beginning on January 29,1983.
prolonged accidental outages of nuclear plants. Cov-crage is provided for the Company's interest in Beaver Other Valley Power Station Unit No.1 and, after a deductible The Company is involved in various other legal pro-period of 26 weeks, weekly payments of up to ceedings. In the opinion of management of the Com-
$1,187,500 are provided for one year and up to pany such legal proceedings will not have a material
$593,750 for an additional year. If losses exceed effect on the financial position or results of operations cccumulated funds available to NEIL, the Company of the Company.
could be assessed approximately $3,400,000 for pay-N. SUPPLEMENTARY INCOME STATEMENT INFORMATION: Year Ended December 31, taxes other than income taxes represents amounts 1982 1981 1980 charged to coal inventories. The inventory accounts Maintenance $78,431 $ 30 71,697 al
*[ncorn a es Charges for depreciation and amortization of intan-Gross receipts . 3~ , .J6 34,930 30,012 gible assets, royalties and advertising costs have not tYe p taisto'ck' been shown as the individual amounts do not exceed 3
1% of totalrevenues. Under the system of accounting followed by the The above amounts are exclusive of discontinued Company, a portion of maintenance expenses and of steam heating operations. 29
e Ce OUARTERLY FINANCIAL INFORMATION (Unaudited): The following is a summary of selected quarterly financial data (in thousands of dollars, except per share amounts): 1982 Quarter Ended 1981 Ouarter Ended March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31 Electric Operating Revenues (a) . . 5207,398 3186,628 3181,720 8170,716 $185,787 $184,928 $215,250 $200.264 Operating income (a) .. . .... 41,662 38,400 40,223 34,942 36,212 35,117 45,535 42,966 Income from Continuing Electric Operations Before Extraordinary Gain . . . . . . . . . . . . . . ... ... 32,296 28,900 30,845 25,086 23,717 21,599 32,655 31,440 Discontinued Steam Heating Operations (b) . .. .. ...... .. 371 (484) (9,811) - 823 (619) (618) (124) Extraordinary Gain (c) .... ... - - - 9,809 - - - - Net income . . . . . .. . .. 32,867 28,506 21,034 34,675 24,540 20,980 32,037 31,3*6 Eamings Per Share: Income from Continuing Electric Operations Before Extraordinary Gain . . , ...... ., . .. S.58 S.51 S.51 S.37 $.44 S.39 $.66 S.57 Discontinued Steam Heating Operations (b) .. .. .. . .01 (.01) (.20) -
.02 (.01) (.02) -
Extraordinary Gain (c) .. . - - -
.19 - - - -
Net income . . . . .... . .59 .50 .31 .56 .46 .38 .64 .57 (a) Certain amounts previously reported as Operating Revenues and Operating income for 1981 and the first two quarters of 1982 have been reclassified to set forth separately the /esults of the steam heating subsidiary as discontinued steam heating operations. (b) See Note C to the financial statements for a discussion of discontinued steam heating operations. (c) See Note D to the financial statements for a discussion of the extraordinary gain from early extinguishment of bonds. P. SUPPLEMENTARY INFORMATION TO DISCLOSE the effects that general inflation (constant dollar) and THE EFFECTS OF CHANGING PRICES (Unaudited): changes in specific prices (current cost) have had on The following supplementary information is supplied in the Company's results of operations. The data pro-accordance with the requirements of the Statement of vided are not intended as a substitute for earnings Financial Accounting Standards No. 33, Financial reported on a historical basis, but offer some perspec-Reporting and Changing Prices. This Statement tive of the approximate effects of inflation rather than requires adjustments to historical costs to estimate a precise measurement of these effects. STATEMENT OF INCOME ADJUSTED FOR CHANGING PRICES For The Year Ended December 31,1982 Conventional Constant Dollar Current Cost (Thousandsof Dollars) Historical Average Average Cost 1982 Dollars 1982 Dollars Electric operating revenues . . $746,462 $746,462 $746,462 Fuel . . . . 229,693 229,693 229,693 Purchased power (sales). -net . .. . (23,172) (23,172) (23,172) , Other operation and maintenance expenses . 192,006 193,006 193,006 ) Depreciation expense . . . . 62.939 143,093 157,314 ; Taxes other than income taxes 57,476 57,476 57,476 ; l I Income taxes . 71,213 71,213 71.213 l Other income and deductions-net . (62.234) (62.234) (62,234) Interest charges . 100.344 100,344 100,344 l . . 625,265 709,419 723,640 l Income from continuing electric operations (exduding reduction of property, plant and equipment to net recoverable cost) $117,197 $ 37,043' $ 22,822 I increase in specific prices (current cost) of property, plant and equipment held during the year" $259,022 Reduction of property, plant and equipment to net recoverable cost $(13.991) (68.120) Effect of increase in general prico level . (190,672) Excess of increase in general price level over increase in specific prices after reduction of property, plant and equipment to net recoverable cost . 230 Gain from decline in purchasing power of net amounts owed 62,109 62,109 Net .
$ 48,118 $ 62,339
- Including the reduction of property, plant and equipment to net recoverable cost, the net income on a constant dollar basis would have been
$23,052.
*
- At December 31,1982, current cost of property, plant and equipment, net of accumulated depreciation, was 55,252,097, while histoncal cost or net cost recoverable through depreciation was 52,521,882.
30 l _ .l
l FIVE YEAR COMPARISON OF SELECTED SUPPLEMENTARY FINANCIAL DATA ADJUSTED FOR EFFECTS OF CHANGING PRICES (In Thousands, Except Per Share Amounts) Year Ended December 31, 1981 1980 1979 1978
~-1982 - -- - -
Average 1982 dollars: Electric operating revenues . . . . .. .. . ..... . . 3746,462 $834,430 $790,391 $812,865 $831,951 Historical cost information adjusted for general inflation: Income from continuing electric operations (1) (exchading reduc-tion of property, plant and equipment to net recoverable cost) 37,043 38,306 40,718 43,474 Income per shara from continuing electric operations (1) (after dividend requirements on preferred and preference stock) . .. 3.30 $.33 S.35 $ .37 Net assets at year-end at net recoverable cost . . ........ . 861,602 783,287 775,267 790,097 Cc. rent cost information: Income from continuing electric operations (1) (excluding reduc-tion of property, plant and equipment to net recoverable cost) 22,822 22.695 22,497 20,777 Loss por share from continuing electric operations (1) (after divi-dend requirements on preferred and preference stock) .
$(.04) $(.13) $(.33)
Excess of increase in general price level over increase in specific prices after reduction of property, plant and equipment to net recoverable cost . . , . . ..... ..... .. .. . 230 116,736 228.030 230,381 Net assets at year.end at net recoverable cost .. .. . 861,602 783,287 775.267 790,097 Ger:eralinformation: Gain from decline in purchasing power of net amounts owed .., 62,109 143,392 200 ?34 230,052 Cash dividends declared per share of common stock . ..,, ,. $ 1.90 $ 1.96 3 2.11 $ 2.35 $ 2.55 Market price per share of common stock at year-end . . $14.75 $14.06 $14.79 $18.11 . $21.82 Average consumer price index . ... . . . 289.1 272.4 246.8 217.5 195.4 Historical basis: Electric operating revenues . .... . .. ..... . . ... $746,462 $786,229 $674,744 $611,547 $562,308 Cash dividends declared per share of common stocir . . . $ 1.90 $ 1.85 $ 1.80 $ 1.76 $ 1.72 Market pnce per share at year-end . . .. $14.75 $13.25 $12.63 $13.63 $14.75 Proven and probable coal reserves at beginning of year (tons) .. 26,300 20,100 29,900 30,650 31,650 Tons of coal mined . . . . . .. . . . 942 680 875 928 699 Average cost per ton of mined coal . . .. .. 331.62 $35.10 $31.14 $28.71 $30.72 (1) Amounts for 1982 are before extraordinary gain. Amounts for 1979 are before cumulative effect of accounting change. Constant dollar amounts represent historical costs recovery of the cost of service in its rates. Therefore, any stited in terms of equal purchasing power, as measured excess of the value of plant under constant dollars or by the Consumer Price Index for all Urban Consumers. current cost must be reduced to the net recoverable Current cost amounts reflect the changes in specific cost, which is historical cost. The amount of this excess prices of plant from the date the plant was acquired to that accumulated as a result of inflation in the current the present and differ from constant dollar amounts to year must be reduced to net recoverable cost. the extent that specific prices have increased more or The Company, by holding awets such as receivables, 1:ss rapidly than pricesin general. prepayments and inventory, suffers a loss of purchasing The current cost of property, plant and equipment, power during periods of inflation because the amount of which includes land, land rights, intangible plant, property cash received in the future for these items will purchase h Id for future use, construction work in progress and less. Conversely, by owing monetary liabilities, primarily nuclear fuelin process, represents the estimated cost of long-term debt, the Company benefits because the , replacing existing plant assets and was primarily deter- payment in the future will be made with nominal dollars mined by indexing surviving plant by the Handy-Whitman having less purchasing power. The Company has signifi-Index of Public Utility Construction Costs. The current cant amounts of long-term debt outstanding which will be cost of coal properties was determined by indexing coal paid back in dollars having less purchasing power and, r: serves and machinery and equipment by the Marshall- therefore, for purposos of these calculations, has a net Stevens Mining and Milling Index. The current year's pro- gain from holding monetary liabilities in excess of vision for depreciation and depletion on the constant dol- monetary assets. lar end current cost amounts of property, plant and equip- The regulatory process limits the amount of deprecia-m;nt was determined by applying the Company's depre- tion expense included in the Company's revenue allow-ciition and depletion rates to the indexed plant amounts. ance and limits utility plant in rate base to original cost. Fuel inventories, the cost of fuel used in generation Such amounts produce cash flows which are inadequate and purchased power have not been restated from their to replace such property in the future or preserve the pur-historical cost in nominal dollars. Rate regulation limits chasing power of common equity capital previously th3 recovery of fuel and purchased power costs through invested. While this effect is partially mitigated by the the operation of adjustment clauses or adjustments in benefit derived from holding long-term debt, the Com-basic rate schedules to actual costs. For this reason fuel pany has a net purchasing power loss which is experi-inv:ntories are effectively monetary assets. enced by the common shareholder and can only be over-As prescribed in Statement 33, income taxes were not come by adaquate rate relief. However, the Company adjusted. expects that it will be able to establish rates which will The regulatory process limits the Company to the recover the increased costs of new plant. 31
g . . Duquesne Ught Company Selected Financial Dzta cnd St:.tistical Summary (Thousands of Dollars, Except Per Share Arnounts) 1982 1981 1980 1979 1978 1972
SUMMARY
RESULTS OF OPERATIONS Residential revenues . . . . . . . . . . .. .... 238,496 223.146 196,400 176,744 167,338 72,490 Commercial revenues . . . . . . . . . 263,374 243,501 209,871 185,880 173,940 67,952 Industrial revenues . ... ..... .. 225,292 300,066 250,295 232,389 205,149 68,392 Street lighting and other revenues . . ...... 13,240 12,383 11,052 10,370 9,942 4,389 Miscellaneous revenues , . . . .... . .. . 6,060 7,133 7.126 6,164 5,939 1,939 Total electric revenues .,. . . .. 746,462 786,229 674,744 611,547 562,308 215,162 Operation and maintenance expenses . . 399,527 435,589 380,973 351,731 328,955 98,757 Depreciation . . .. . . ... .. ... 62,939 60,854 53,316 47,885 45,104 20,726 Taxes other than income taxes . . . .. 57,476 57,694 47.637 46,956 41,471 17,073 Income taxes . . .. .. .. . . . . . 53,307 57,801 50,643 41,592 37,802 16,666 Interest charges, net of allowance for borrowed funds used during construction 100,344 92,968 75,629 65,414 60,613 26,586 Other income, principally allowance for equity funds used during construction . . . . . . . .. 44,328 28,086 26,749 21,587 17,868 10,109 income from continuing electric operations before extraordinary gain .. . .. 117,197 109,409 93,295 79,556 66,231 45,463 Loss (income) from discontinued steam heating operations . . . . . . .. 9,924 538 333 1,194 508 (530) Income before extraordinary gain . . .. .. 107,273 108,871 92,962 78,362 65,723 45,993 Extraordinarygain . .. . ... .. .. 9,609 - - - - - Net income . . . . . . . .. 116,882 108,871 92,962 82,207t 65,723 45,993 Dividends on Preferred and Preference Stock 22,701 22.976 23,353 23,721 18,915 7,014 Earnings for Common Stock ... . 94,181 85,895 69,609 58,486 46,808 38,979 Average number of common shares outstanding . . . . .. . . . . ... 48,236 41,764 33,267 32.239 31,464 16,691 Eamings per share of Common Stock: income from continuing electric operations . 1.96 2.07 1.83 1.73 1.50 2.30 Net income . . . . . . . .. ... .. 1.95 2.06 1.82 1 Sit 1.49 2.34 Dividends declared on Common Stock . 1.90 1.85 1.80 1.76 1.72 1.66 tincludes cumulative effect to January 1,1979 of the chango in billing practice, net of income taxes, of $3,845 or $.12 per share. PLANT Property, plant and equipment . . . .. 3,024,554 2,809,753 2,604,333 2,380,805 2,201,805 1,255,726 Accumulated depreciation . . 504,680 477,009 424,653 386,479 ,49,668 247,162 i Net property, plant and equipment . . 2,519,874 2,332,744 2,179,680 1,994,326 1,852,137 1,008,564 1 2,068,753 1,082,412 I TOTAL ASSETS . . .. . . . 2.883,411 2,668,577 2,447,163 2,222,537 CAPITAllZATION Common Stock . . .. . . 53,277 45,303 40,166 35,550 31,750 18,150 Capital surplus .. 649,376 550,244 494,228 433,984 387,185 174,955 Retained ea nings . . . .. . 168,784 167,149 158,546 158,772 158,035 117,332 Non-redeemable Preferred and Preference Stock . . .. . . 156,137 156,137 156,137 156,137 156,137 96,134 Redeemable Preferred and Preference Stock . . 140,829 143,924 146,867 149,998 154,572 29,985 First mortgage bonds (less sinking fund i requirements and current matunties) . 1,006,637 983,870 918,230 808,830 721,710 503,910 Other long-term debt (less current maturities) 199,934 176,682 126,981 127,436 128,358 38,765 Unamortized debt discount and premium--net . . . . . . (9,488) (9,453) (7,161) (5,770) (4,977) - Total capitalization . . 2,365,486 2,213,856 2,033,994 1,804,937 1,732.770 979,231 RESIDENTIAL SERVICES l Average use per customer (kilowatt-hours) . 5,668 5.698 5,770 5,629 5.765 5,297 f Average revenue per kilowatt-hour . . 8.361t 7.806t 6.828t 6.363t 5.924t 2.928t SALES OF ELECTRICITY . l (millions of kilowatt-hours) Residential . . 2,853 2,858 2,876 2,778 2,825 2,475 Commercial. , 4,163 4,069 4,024 3,870 3,786 3,460 Industrial 3,902 6,582 6,272 6,546 5,908 5,445
. . l Street lighting and other . . 120 125 129 131 130 111 Total. . 11,038 13,634 13,301 13,325 12,649 11,491 32
1981 1980 1979 1978 1_98 193 ENERGY SUPPLY AND PRODUCTION DATA Energy supply (millions of kilowatt-hours) Generated in system plants . . . . . . . . . 12,352 13,914 13.485 13,884 12.252 12,136 Purchased and net interchange . . . . . . . . . . (689) 410 541 125 1.089 150 Losses and company use . . . ... . . ... (625) (690) (725) (684) (692) (795) Total.. .... .................. .. 11,038 13,634 13,301 13,325 12.649 11,491 Generating capability (thousands of kilowatts) 3,144 3,177 3,179 3,294 3,289 2,453 Peak load (thousands of kilowatts) . . . . .... 2,158 2,522 2,474 2,296 2,379 2,075 Cost of fuel per million BT U . . . . . . . . . . . . 167.865t 159.660t 149.768t 131.779t 125.349t 36.844t BTU per kilowatt-hour generated . . . . . . . . . . 10,853 10,931 10,811 10,924 11,031 10.647 Average production cost per kilowatt-hour .... 2.575t 2.354t 2.202t 1.913t 1.919t 0.522t NUMBER OF ELECTRIC CUSTOMERS-At End of Year Residential . . . . . .. ..... . . . .. . . 503,987 503,044 500,466 496,005 491,698 468,425 Commercial. . .. .. .. ... ... 49,320 48.859 48,308 47.978 47,681 45,717 Industrial . . . . . . . . . . . . . . . .. 1,999 2,016 2,005 1,975 1,932 1,727 Street lighting and other .. . .. . 1,647 1,713 1,725 1,746 1,747 1,794 Total. ..... .. .. .. . . 556,953 555,632 552,504 547,704 543.058 517.663 Management's Discussion the case of the CAPCO construction program, the g 7 gg ability of each of the CAPCO companies to finance its capital requirements. Financial Condition and Results of Operations Financing The Company anticipates that funds required for Capital Resources and Liquidity planned construction expenditures in the next several years will be provided principally from the issuance of Construction additional equity and debt securiNs and m part from Construction expenditures during 1982, exclusive of cash becoming available from operations. The Com-cllowance for funds used during construction, were pany issued $65 million of 16% % First Mortgage approximately $231 mil! ion. These expenditures were Bonds on May 6,1982. Funds provided to the Com-primarily for the construction of three CAPCO gener- pany under its Dividend Reinvestment Plan in 1982 gting units in addition to improving and expanding pro- amounted to approximately $25.7 million and an addi-duction, transmission and distribution systems, pollu- tional $7.4 million was reinvested on January 1,1983. tion control equipment and s0me of the Company's On August 10,1982 the Company issued and sold 4.5 nuclear fuel requirements. Additional nuclear fuelis million shares of Common Stock. Net proceeds from being leased. the sale of the Common Stock were approximately The Company currently estimates that it will spend, $59.5 million. Portions of the net proceeds from these cxclusive of nuclear fuel and allowance for funds used issues were used to pay short-term indebtedness and during construction, approximately $214, $234, $208, the balance was applied to construction expenditures.
$174 and $144 million for each of the years 1983 In addition, the Company intends to file a registration through 1987, respectively. These estimates include statement in March 1983 for the sale of up to $60 mil-cn aggregate of approximately $298 million for the i on First Mortgage Bonds. The exact timing and three jointly-owned generating units being coastructed amount of this sale will depend on market conditions.
under the CAPCO arrangements, including related The Company currently estimates that approximately tr:nsmission facilities. See Note K to the financial 65% of the funds required for its 1983 construction statements. program will come from outside financing. The amount which the Company must spend for its In addition to the funds required for the construction construction program is regularly under review and is program, $14 million of long-term debt matured in subject to changes influenced by business and eco- 1982, and $12.5 million will be required for maturities of nomic conditions and other factors, such as escala-long-term debt in 1983. tion of labor, material and equipment costs, rate of interim financing will be through bank borrowings construction progress, the development of environ- and sales of commercial paper. In addition, the Com-mental and nuclear safety regulations, service reliabil- pany has available a revolving credit agreement with ity cnd system efficiencies. In addition, this review two banks which allows the Company to borrow up to must also take into account difficulties in obtaining an aggregate of $60 million through 1986 and to con-rits increases sufficient to generate adequate eam- vert the revolving loans to term loans for an additional ings, possible changes in load growth trends and, in 33
~
three years. See Note F to the financial s;atements. undepreciated cost from its customers over a ten-year Variable mark;t and general economic conditions may period. See Nota B to the finincial st;tements. affect the Company's selection of financing alterna. No return was allowed on either of the property loss tives and adversely affect its ability to raise capital. In amounts. order to maintain eamings adequate to finance con- i struction expenditures and refunding requirements, Deferred Coal Costs the Company requires rate increases sufficient to off- By Interim Order entered January 12,1981 the Com-set increased costs c.nd provide a fair rate of return. mission directed that the Company limit its recovery of The Restated Articles of the Company require that the cost of Quarto coal through its energy cost rate to for the issuance of Preferred Stock, earnings (after approximately the prevailing market price of similar income taxes) available for interest charges be at coal rather than the actual cost of Quarto coal. The least 1.5 timos the sum of interest charges on all Company is deferring the excess of the actual cost of indebtedness and Preferred Stock dividend require- Quarto coal over the cost allowed to be recovered ments. This restriction currently precludes the Com- through its energy cost rate until recovery of the pany from issdng Preferred Stock. There is no similar actual cost is permitted by the Commission. If recov-restriction upon the issuance of the Company's ery of such excess is disallowed, the amount deferred Preference or Common Stock. would be charged to income in the year of disallow-ance. See Note G to the financial statements. Rate Matters Effective July 15,1981 the Company increased its Beaver Vailey Replacement Power rates by $64.2 million annually in accordance with an In connection with a February 20,1981 rate order, option order of the Pennsylvania Public Utility Com - the Commission found that the Company had not mission. The final order which approved this amount proven that the costs of replacement power during a has been appealed to the Pennsylvania Common- 1979 outage of Beaver Valley Unit No.1 were pru-wealth Court by the Pennsylvania Consumer Advocate dently incurred. Further hearings in the Beaver Valley - and certain other complainants. refund proceedings have been held, and on Novem-On April 30,1982 the Company filed with the Com- ber 19,1982 the Commission adopted an order nisi mission a new rate schedule affecting all classes of which ordered refunds of $12.5 million over a two-yoar customers and estimated to increase annual revenues period. The Company expects to appeal this order if it based on projected levels of business at December becomes final. See Note M to the financial 31,1982 by approximately $165 million (subsequently statements. reduced to approximately $155 million). The Com-mission's final order allowed an increase of $105.8 mil- Allegheny County Steam Heating Company lion beginning on January 29,1983. This rate filing On Auoust 30,1982 the Commission entered an used a future test year which should help reduce reg- order which became final on September 30,1982 ufatory lag and improve liquidity. approving the discontinuance of steam service by the Effective May 1,1981 the Company's energy cost Company's steam heating subsidiary effective May 31, rate was changed from a historical cost basis to a 1983 and the transfer of a major portion of the assets projected cost basis, with provisions for subsequent of the subsidiary to Pittsburgh Allegheny County Ther- ' adjustments to actual cost. This change reduced the l mal, Ltd. for nominal considemtion. See Note C to the t,me lag in the recovery of energy costs through reve- I f nancial statements. Since the subsidiary has been nues that existed in the previous net energy clause los ng money over the past few years, the disposition l and significantly reduced deferred fuel costs. Any I overcollections of revenues are refunded t i e h WW's financial condition and ' results of operations. customers. , Extraordinary Property Losses Under provisions of the Economic Recovery Tax Act In 1980 the CAPCO companies cancelled the con-of 1981 eligible , individuals who are participants in the < struction of four nuclear generating units. In January Company's Dividend Reinvestment Plan may elect to 1983, the Commission approved the recovery of the exclude from current income for federal income tax , accumulated costs from the Company's customers. Purposes for each tax year from 1982 through 1985 the See Note B to the financial statements. fair market values of Common Stock received by rea- i On Octobcr 1,1982 the Shippingport Atomic Power son oheimestment of dividends to the extent the Station was removed from commercial operation after aggregate fa,r i market value of such shares does not J notice from the United States Department of Energy exceed 0750 ($1,500 for spouses who file a joint that it was planning to terminate operation of the light retum). This provision has provided incentive for water breeder reactor core at the station as of that stockholders to reinvest dividends and thereby ease date. The Company has received approval from the the cash requirements of the Company. Commission to amortize and to recover the net The Company has generated en each year funds ' 34
from operations sufficient 13 meet its oper; ting marily to increased generation. higher fuel costs and . expenses, pay dividends cnd financs a portion of its increases in deferred energy cxpenses. Purchased capital needs. The demands and commitments power expense decreased in 1981 compared to 1980 detailed in Note M to the financial statements and due primarily to increased sales of power to other those noted above are not expected to material!y utilities, the availability of Mansfield Unit No. 3 as cffect the Company's ability to finance its operations noted above and the above-average performance of orits construction program. Beaver Valley Unit No.1. These increases in available generation were partially offset by the ctrike of the Results of Operations United Mine Workers of America in the second quarter a Operating revenues from continuing electric opera. of 1981. Other operation expenses increased in 1981 tions increased (decreased) in the years 1980 through compared to 1980 due to expenses at Mansfield Unit 1982 over the respective preceding years, for the fol- No. 3, the effects of inflation and increased general lowing reasons: and administrative expenses. 1982 1981 1980 Taxes other than income taxes increased in 1981 (Moons of Donars) primanly due to increased Pennsylvania gross receipts General rate increases . . . . . S 43.0 $ 65.6 $34.3 taxes, which vary in direct relationship to revenues, Electrical consumption . . . . . (62.3) 10.5 5.5 and as a result of increased capital stock tax expense. Energy clause revenues . . . (19.0) 33.9 20.0 Fluctuations in income taxes are due primarily to State tax adjustment changes in taxable income. See Noie H to the finan-(nd other . . . . . . . . . . . . . . (1.5) 1.5 3.4 cial statements. The effective income tax rate for the year ended December 31,1982 was 31 % and was
$(39.8) $111.5 $63.2 35% for both 1981 and 1980.
The above comparisons do not include revenues The increases in allowance for equity and borrowed from discontinued operations of the Company's steam funds used during construction (AFC) were primarily helting subsidiary. See Note C to the financial state- due to the increased cost of construction and ments. increases in the AFC rate from 7.4% in 1980 to 7.6% in The operating revenues of the Company are based 1981 and to 8.5% in 1982. Return on investment in on rates authorized by the Pennsylvania Public Utility Warwick mine (which is permitted to be recovered Commission. These rates are designed to recover the through the energy cost rate to the extent that the Company's operating expenses, plus a rate of return actual cost per ton is less than the prevailing market on the insostment in utility rate base. The Company price of similar Pennsylvania coal) and increased Liso has an energy cost rate which allows it to recover interest income resulting from increases in cash avail-the difference between actual fuel costs and fuel able for temporary investments were primarily respon-costs included in base rates. Any overcollections of sible for the increase in other income and deductions-revenues are refunded to customers. net in 1982 compared to 1981. Interest expense for Sales of electricity decreased by approximately each of the years 1982,1981 and 1980 was higher due 19% for the year 1982 compared to 1981 due primarily to increased total borrowings and higher average to the severe economic recession in the Company's interest rates. The weighted average interest on all service area. Almost all of the decrease pertains to debt for 1982 was 9.6%, compared with 8.8% in 1981 salis to industrial customers, particularly the steel and 7.8% in 1980. The increases in total borrowings industry, which decreased by approximately 41 %. The were due to the issuance of additional debt to finance economic recession is expected to continue to the Company's capital expenditures. adversely affect sales through the first quarter of 1983 The adverse effect of the discontinued steam heat-End beyond. ing operations is reflected in the Statement of Consoli. The decreases in opemtion (fuel, purchased power dated income. See Note C to the financial statements. End other operation) and maintenance expenses in A non-taxable extraordinary gain of approximately 1982 compared to 1981 were due to substantial reduc- $9.6 million, or $.20 per share, in December 1982 tions in fuel and purchased power expenses. The sig- resulted from the exchange with an investment bank-nificant reductions in kilowatt-hour sales to industrial ing firm of newly issued common shares for certain customers resulted in a surplus capacity situation. First Mortgage Bonds having market values substan-This available capacity and the requirements of neigh- tially lower than the face value of the bonds. See Note boring utilities resulted in substantial net sales of D to the financial statements. power. Other operation expense increased in 1982 Earnings per share of Common Stock for 1982,1981 compared to 1981 due to a scheduled outage for and 1980 were adversely affected by increases in the refueling and modification work at Beaver Valley Unit average number of shares outstanding, which reduced No.1 &nd increased customer, general and adminis- earnings per share by $.31, S.18 and S.34, respectively. tritive expenses. In September 1980, the CAPCO The Company has prepared information on the companies placed Mansfield Unit No. 3 in commercial effects of inflation and changing prices in accordance operation which increased operation, maintenance with the Financial Accounting Standards Board's end depreciation expenses in 1981. Additionally, fuel Statement No. 33. Such information is in Note P to the expense increased in 1981 compared to 1980 due pri- financial statements. 35
Eusiness of the Common Stock Dividends Company The Company has paid cash junior to the Preferred Stock (col-div:dends on its Common Stock in lectively referred to as " junior Duquesne Light Companyis each year since 1913 and on a stock payments"). engaged principallyin the produc. tion, transmission, distribution and regular quarterly basis (January 1, No dividends or distributions April 1, July 1 and October 1) in may be made on the Common sale of electric energy. The Com. each year beginning in 1953 after Stock if dividends or sinking or pany serves an area of approxi. becoming publicly owned. Quar- purchase fund obligations on the mately 800 square miles in Alle. terly dividends related to the four Preferred Stock or Preference gheny and Beaver Counties. This c.rca, which includes the City of quarters of 1980 and the first two Stock are accumulated and quarters of 1981 were paid at the unpaid. Furthermore, the aggre-Pittsburgh,is located in South. w: stern Pennsylvania and has a rate of 45d per share. Commenc- gate amount of junior stock ing October 1,1981 the quarterly payments which may be made in population of about 1,430,000. dividend rate was increased to any 12-month period are in gen-Allegheny County Steam Heat. ing Company, a wholly-owned 47%g per share and was erallimited to (1) 50% of consoli-increased to 50d per share com- dated net income for any period of subsidiary of Duquesne Light Company, provides steam heating mencing April 1,1983. Future 12 consecutive calendar months dividends will depend upon future within the 15 preceding monthsif servicein the principal business section of the City of Pittsburgh. earnings, the cash position of the the effect of such payments would Company, construct,on i require- be to reduce the ratio of common (See Note C to the financial state. ments, rate regulation and other stock equity to total capitalization ments for details regarding the relevant factors. The Company to less than 20% ^r (2) 75% of discontinuance of steam service and the disposition of certain expects that dividends will con- such conso!idated netincome if assets of the Steam Heating tinue to be paid in the future. tho effact would be to reduce such Company.) Dividends may be paid on the ratio to 20% or more butless than Common Stock to the extent per- 25%. No portion of retained earn-
. The executive offices of mitted by law and as declared by ings at December 31,1982 was Duquesne Ught Company the Board of Directors, subject to restricted by virtue of this provi-are located at the provisions of the Company's sion. The approximate number of One Oxford Centre Restated Articles which restrict holders of Common Stock as of 301 Grant Street the payment of cash dividends or the February 25,1983 record date Pittsburgh, Pennsylvania 15279. other distrit:utions on, or the pur- for the 1983 Annual Meeting was chase of,its capital stock ranking 138,000.
Duquesne Light Company is an Equal Opportunity Employer. Federal income Tax Status of Common Stock Dividends The Company estimates that portions of the Common Stock dividends Service Area paid in 1982 represent a return of capital and are not taxable as dividend income as follows: Payment Taxable As Not Taxable As
'/ Dates Dividend income Dividend income Jan.1 86.56 % 13.44 %
2 -- A H-3
~
f S f" Apr.1 July 1 74.13 % 74.13 % 25.87 25.87 % 4A Oct.1 74.13 % 25.87 % C ~ b: These estimates are subject to audit by the Internal Revenue Service. y^__ - Form 10-K Offer If you are a holder or beneficial with the Securities and Exchange owner of any class of the Com- Commission for the year 1982 (in- l i pany's stock as of February 25, cluding a list of exhibits). All e - 1983, the record date for the 1983 requests must be made in writing
~
to the Secretary, Duquesne Light j A h
) .-
Annual Meeting, the Company will send you, upon request and at no Company, One Oxford Centre, ' l Daw caa* S= *= charge, a copy of the Company's 301 Grant Street, Pittsburgh, Annual Report on Form 10-K filed Pennsylvania 15279. 36
Br:rd of Directors Company Officers CAPCO John M. Arthur t John M. Arthur
- In 1967, Duquesne Light joined Croirmin of the Board and Pressent Chairman of the Board and President with four other electric utilities to Stanley G. Schaffer* form the Central Area Power President Coordination (CAPCO) group.
c $id t i of theCompany Charles M. Atkinson Prior to 1980, ten generating H:nry G. Allyn, Jr *t Vice President-Fiscal units Were Committed under the R Mired President and Chief Executive Officer' Roger D. Beck CAPCO arrangements, which pro-The Pittsburgh and Lake Erie Railroad Vice President-Engineenng & Construction yjded forjoint ownership interests John J. Carey based on individual requirements. Dorcen E. Boyce*$ Vice President--Nuclear Duquesne Light shares in nine of Director, The Buhl Foundation these units. To date, seven are in Clifford N. Dunn Vice President-operations service; three will be placed in John H. Demmler t Pirtner. Reed smith shaw & McClay William F. Gilfillan, Jr. service, one each in 1984,1986 Attorneys-at-Law Vice President-Customer services and 1988. Sigo Falk. George 1. Rifendifer Since 1980 each CAPCO com-Vice President-Goneral services pany has been responsible for Assoccte Director, Health systems Agency of southwestern Pennsylvania Earl J. Wooiever establishing its own level of Vice President-Nuclear Construction reserve and its own generating H " capacity needs beyond the jointly-
, n Che xecutive officer of James O. Ellenberger Controller owned units still under construc-Cyclops Corporation Ronald G. Males tion. Duquesne Light is now G. Christian Lantzsch*t Treasurer developing a program to meetits ar nd Tre s re of ei r aion future capacity requirements.
[homas Welfer, Jr. Richard J. Ciora Duquesne Light Company Eric W. Springer t Assistant Treasurer Beaver Valley #1 Beaver Valley #2 PIrtner, Horty, springer and Mattem aNcNN,000 KW ac 3 000 KW A omys-aRaw Lawrence P. Galie D.L Ownership: 13.74% D.L. Ownership:47.5 % Assistant Treasurer
- Mirnber of Audit Comrnittee j t Member of Compensation Committee A si a t s ea ans e f fans eld 2
% M;mber of Nominating Committee Coal-1976 Coal-1977
, stanley G. Schaffer retired as President and P
as a Diractor of the Company effective Feb- hapa L eh e h'i 8 ruary 1,1983. At the January 18 Board of D.L share: 228,540 KW D.L share: 62,400 KW Directors meeting. John M. Arthur was appointed to the position of Pres; dent effec. Mansfield #3 tive February 1,1983, in addstion to his present al- 98 responsibility as Chairman- D.L Ownership: 13.74 % D.L. share: 109,920 KW hlo n mpany 1972-1982 Dimensions Annual Meeting of jams 7 M:gazine Stockholders 8*gg740.000 xw in mid-year 1983, the Company The annual meeting of stockhold- D$a"rE*1d$'KD plins to publish Duquesne Light ers will be held at 10 A.M., Pitts- The Cleveland Electric Dimensions containing in-depth burgh time, on Tuesday, April 26, Illuminating Company inform tion concerning the Com- 1983 in the second floor ballroom Perry # 1 Perry #2 of the Hyatt Hotel at Chatham Nuclear-1984 Nuclear-1988 p ny. Dimensions willinclude an ' 11-ynr statistical review and a Center, Pittsburgh, Pennsylvania. $*E*fne'r's$'p': 4. [ ner's p': 4 D.L share: 165,567 KW D.L share: 165,567 KW discussion of some of the impor-tint issues affecting Duquesne Transfer Agents E8Stl8** #5 Light Company. For a copy of SU ES o* ** Dimensions write: and Re9istrars D.L Ownersnip: 3i.2% RL Sham 198.120 KW Duquesne Light Company Common, Preference and d " P" Public Information Department Preferred Stock [a'is-Besse f Ono Oxford Centre Pittsburgh National Bank, Nuclear-1977 301 Grant Street Pittsburgh gagag9g, 8 g KW Pittsburgh, Pennsylvania 15279 Chemical Bank, New York D.L share: o !}}