ML20076E714
| ML20076E714 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 07/27/1983 |
| From: | Jeffery Griffin, Meredith L CENTRAL VERMONT PUBLIC SERVICE CORP. |
| To: | |
| Shared Package | |
| ML20076E650 | List: |
| References | |
| NUDOCS 8308240648 | |
| Download: ML20076E714 (36) | |
Text
._ .__ _ ___ . .
CENTRAL VERMONT PUBLIC SERVICE CORPORATION 1982 Annual Report qu w~ _m m. m w p,.a w. nc e.w u. m ,,
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Profile CENTRAL VERMONT Central Vermont Public Service Corporation is the PUBLIC SERVICE CORPORATION largest c!cctric utility in Vermont. W.e supply electricity - Gros e street )
l'"d'"d' V*""' "5 ~U to more than half of all Vermonters " " ' '
'N""' #"
We serve them from a general office in Rutland and ' " " " " " ' ' " ' ' " " " ' " ' ' ."T"*"'"*
13 district offices located throughout the service territory. We proside electricity to some New ifampshire residents as well, through our subsidiary, Connecticut Valley Electric Company, Inc.
Our customers are industrious, ingenious and well prepared to weather economic ailments that befall much of the rest of the country. At the end of 1982 the Vermont unemployment rate was two-thirds that of the rest of the nation. The recession-resistant economy of Vermont relies on a healthy mixture of high-tech and other manufacturing, agriculture and tourism. Our five largest retail customers account for about four percent of sales.
We supply c!cctricity to a state with a skilled and conscientious labor force that benefits from good management and a positive business climate. We enjoy an environment of unmatched natural beauty and abundant natural resources. Yet we are close to major population centers as well as the source of potential QUEBEC future hydroelectric power, adjacent Canada, f M OTTAWA g BANGOR e
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PORTLAND cv o CENTRAL VERMONT PUBL:
CONCORD SERVICE CORP SYRACUSE BUFFALO CONNECTICUT VALLEY ALBANY . ELECTRIC CO INC BOSTON
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SCRANTON '
HARTFORD I
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NEW YORK .h PHILADELPHIA o
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our cover: Slist settles outside a serene t'ermont sugarhouse % y in anturnn (fmnt): stearn -
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in the spring . -k u, ATLANTIC CITY m WASHIN ON
Highlights 1982 1981 Change 1
i Financial (dollars in thousands)
Revenues S133,663 5117,339 + 13.9 Net Income S 16,210 S 13,866 + 16.9 Net Income for Common Stock $ 13,807 S 11,370 + 21.4 Construction Expenditures S 33,338 5 21,145 + 57.7 Net Utility Plant 5181,059 S149,197 + 21.4 Total Capitalization $ 209,769 S188,862 + 11.1 Average Shares of Common Stock Outstanding 3,641,083 3,042,263 + 19.7 Debt / Percent of Total Capitalization 43.2 % 47.3 % - 8.7 Return on Common Equity (Average) 16.1 % 16.4 % - 1.8 Per Share of Common Stock Net Income 5 3.79 5 3.74 + 1.3 Dividends Paid S 2.15% S 1.97 + 9.4 Book Value (Year-End) 523.75 S23.70 + .2 Operating Retail Electric Sales (AlWII) 1,796,353 1,790,117 + 3 System Peak Demand (KW) 391,700 394,500 -
.7 System 1.oad Factor 60.7 % 59.9 % + 1.3 Degree Days (Rutland, Vermont) 7,810 7,800 + .1 Customers 115,354 114,475 + .8 Employees 585 583 + 3 Contents PAGE 2 Letter to Shareholders 18 Nianagement's Discussion i Energy Alanagement and Conservation 32 IIistorical Statistics 10 1982 Power Supply 31 Officers and Executive Staff 1I Future Power Supply 35 Directors 12 Earnings and Return to Investors 36 Shareholder Information 17 Financial Statements Annual 5!ceting unside nack corrr)
Letter to Shareholders In 1982 we topped our record earnings December 20, ahead of schedule. Power from the performance of 1981. Earnings reached a 1.5 megawatt facility located on the Waits River new high. Annual dividends paid was flowing into our lines in time to meet peak increased 18% cents per share. The winter demands. Ontario and New Brunswick market value of our common stock hit a p wcr opportunities are being explored. The 10-year high. We made significant J seph C. McNeil woodchip plant in Burlington was ahead of schedule. It is expected to be progress toward obtaining important new completed early in 198L We will receive 10 power sources, megawatts from this 50 megawatt facility.
Our record earnings of $3.79 per share resulted primarily from the outstanding performance of our power supply, especially the Vermont Yankee Current Power Year Nuclear Power plant which produced nearly half Also during 1982 we received a favorable of all the electricity we delivered, and a rate decision from the Vermont Public Service Board increase of 12.4 percent in Vermont retail rates. (PSB) on our proposed Current Power Year (CPY)
Vermont Yankee enjoyed its best year ever in mechanism, which will let us recover purchased 1982, with a capacity factor of 93.3 percent. That power costs on a more timely basis, protect us operating record made Vermont Yankee the against the effects of unforeseen power cost number one nuclear plant of its type in the world increases, increase financial stability for the and number three of all types of nuclear plants. company and present the customer with more Another important factor was our continuing orderly and predictable rate changes. With the emphasis on cost control and productivity. We Current Power Year in effect, we will forecast and supplied 25 percent more electricity to 8 percent submit to the PSB rates which reflect our estimated more customers than we did 10 years ago. Yet we power costs for the ensuing year. At the end of did it with 12 percent fewer employees. cach year a reconciliation will be made. If we The dividend rate reached 52.26 annually, up overestimate the power costs the difference will be 6.6 percent, as we continued our policy of credited with interest. If we underestimate, the increasing dividends regularly when financially difference will be included in the next year's feasible. forecast and power bills. Our power costs During the year a landmark agreement was normally represent about 60 percent of our year's reached by the New England Power Pool total operating costs.
(NEPOOL) and Ilydro Quebec to make 700 megawatts available annually from the vast hydroelectric resources of Quebec to Vermont and The Partnership With Our Customers New England. Long-term firm power contracts are Increasing the efficiency of our existing electric now being negotiated with Hydro Quebec. Your system and power sources is the primary motive company, through its subsidiary, the Vermont behind our "CV & YOU: Partners in Energy Electric Power Company, Inc. (VELCO), has an Conservation" program. If we can utilize the active role in these negotiations. existing system rather than build new and VELCO, on behalf of the company and NEPOOL, expensive plants and capacity for present and has requested regulatory approval to construct a future customers, we can turn in a better financial 450 kilovolt direct current transmission line that performance and save our customers money, too.
would connect Quebec with Vermont and New Everybody benefits.
England. We expect a favorable decision in early Our water heater insulation jacket effort, part of 1983. The line should be ready for operation in CV & YOU, saved more than six million kilowatt 1986. hours on an annual basis by the end of the year, In the first phase of the project Central Vermont and it's a saving that will continue in the future.
will get 31 megawatts. With the completion of the Six million kilowatt hours will power 750 homes second phase in 1990 we expect an additional 56 cach year.
megawatts. This important new energy source, in Operation Peak Alert, a voluntary customer addition to our being a part of the New England conservation program to help keep down the peak Power Pool, will help offset any reductions that demand for electricity during the cold winter may develop when existing Vermont contracts months, is gaining much more participation. In its with The Power Authority of the State of New fourth year, it has gained awareness by 87 percent York (PASNY) expire in 1985. Meanwhile, we are of our customers.
working closely with Vermont state officials as Some of our customers have begun small they attempt to renegotiate the PASNY contracts as generation projects and are selling electricity to the favorably as possible after 1985. Smith Station in company. These projects include hydro, windmills.
Bradford, Vermont, our first major hydro project a methane generator at a municipal landfill and an in 30 years, began commercial operation on innovative methane generator that uses cow 2
manure. Although these projects produced a little minimizing costs, yet recognizing needs to less than one percent of our total power needs in serve customers.
1982, more of them are emerging as we move into IV To meet load growth goals.
1983 V To establish good communications and good relationships with our shareho:dcr3, our customers and all other external groups.
The Future VI To maintain good managementlemployee it will take tireless attention to managing the relations and an efficient and dedicated work company in the most cost-effective manner to force.
repeat the outstanding performances of recent VII To continue to conduct all facets of the
) cars. This we are dedicated to give. In 1982 we company's business in accordance with high established a Alethods improvement Program to moral and ethical standards and in observance analyze and evaluate internal procedures and of all applicable laws and regulations.
practices. We recogni/c that corporate As we look ahead, we want to thank our performance depends substantially on the efforts of customers, our employees, and our shareholders of our employees and they are by far the company's long standing, and also the many who acquired most powerful, fundamental corporate resource. shares for the first time in 1982, for continued The objective of the Slethods Improvemem support of the company.
Program is to assist our employees in developing i more effective and efficient work techniques.
We also took steps to strengthen our 3 ,
management team. Richard W. Stallary, our / # o J./
executis c vice president, took on new responsibilities in external affairs and rates. We i douglas NH:RmI'lH appointed Robert E. Schill, our long-time vice Chairman president of finance and corporate planning, to the new position of vice president of strategic corporate planning. Darrow R. Alcl. cod was c!ccted vice president of engineering and division . y j ,
administration. Wesley W. von Schack joined CV ]
1 as vice president-finance and chief financial officer.
Important changes in our future power supply, JANu's li. GRHTIN l
projected growth rates, capital costs and the President and Chief 15ccutive OHicer l characteristics of our service territory have led us to undertake major new strategies for managing our company in the future. At the same time we shall continue to cope with the impact of innation.
We expect we will maintain profitability in the
> cars to come primarily by managing our company -
in the most cost effective manner possible, by j continuing to increase productivity and manage our growth rate. liffective energy management and g conservation and reduction of growth in both peak y demand and energy consumption will reduce the need for expensive capital additions. '-
As we face these changes and challenges, we are developing a strategic plan to guide us in the I future. The 1.ong-Range Policy Study Committee of the lloard of Directors has also been active in assisting management in establishing policies for ""
current and future operations. The overall goals are:
I To provide a supply of electric power with its transmission and distribution which is l adequate, reliable and safe at the lowest 50 1 possible cost to our customers.
$ 5 11 To improve continually the financial posture f. fun,gh,s .tiere, lith fanics E cri//in of the company to benefit both shareholders and customers.
Ill To continue our efforts for cost control, 3
1 Energy Management and Conservation l
In 1982 we combined economical While management took the initiative to '
- power sources with a variety of limit both categories of growth it was only energy inanagement and conservation with the perception and understanding of our strategies. Our customers welcomed customers that we were able to make these efforts and we worxed together important strides in these efforts during the profitably to provide reliable service year.
at reasonable cost. It is an indisputable fact that since 197i 1
Management has succeeded in making our Vermonters have exhibited an aversion to fuel l customers more aware of the benefits of oil that is unmatched in the nation. A higher reducing the pace of growth of electricity use percentage of Vermonters heat their homes and reducing the requirement for expensive with wood than residents of any other state.
peaking power. We are studying a consistent The State Energy Office reports that forty-six set of programs which, if carried out, could percent use wood as their primary source of result in: heat. Another 10 percent use at least l 1. Annual capacity growth not to exceed supplementary wood heat. During the winter 4
1.5 percent. of 1981-1982 Vermont residents burned
- 2. Annual energy growth not to exceed more than half a million cords of wood.
1.8 percent. Kerosene and coal are making comchacks.
l l lioh anel Gerry Weeks take atit antage <>f our tinte-of clay rate p>r elet tric heat 1 hey use fou er-cost electricity claring toffpeak hours arut supplement their heat u ith a u urrut st<>r e sluring peak brours
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"Whenever i open this headgate and the : G trater starts prtxtucing electricity, I recall f- g~ % d
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all the trork anyfather, <mrfinnity and VC' ' >
tmr partner put in to renovate this old t
- hydro station. It gives me a lot of Y,
- satisfaction to supply the C1' system trith a I; renetrable energy source. " - Jeffrey i
Wallin, co-owner of the Comtu Falls >; '
station on the Illack River in Springfield, h Vermont, a 2OO-kilowatt project. >
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This 210 kihmatt uind snathine staruls autride finie ,
1:<poinux Sinuntain in Slanchnter. %'ermont, on the profserty of the Carthusian Foundatism in America. '. '
It operatedfor 2,000 hours0 days <br />0 hours <br />0 weeks <br />0 months <br /> in 1932, its first year. It u as put art kne by the Carthusians artd prit ate investors In produce elettricityfor l'onndation fracilities. Aurplus is sold in CV.
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E l Yk . : E! Our customers combine the wood and yil$fL .
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other alternative fuels with our time of-day J and storage electric heat rates. These efforts ,
I coupled with the exceptional operating J l record of Vermont Yankee, helped us cut our company consumption of oil-fired generation
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- hd of total system output.
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s We polled our customers at mid-year with a bill insert questionnaire and learned that our i "
favorability rating remained well above both
{. New lingland and national averages. Nearly three quarters of our customers were
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- f. convinced, even in the face of rising
{ !. . electricity prices, that we are doing our best
! [ to provide reliable service at the lowest possible cost. They indicated support of such V
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._ long-term programs as 3easonal and time of-day rates and of course they demonstrated
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this support, along with a willingness to attempt new efforts. These efforts included insulation of water heaters management of
, m.' %g ',, : . : , demand on a local, community basis and L i,._ . ,_ ' 2 Mig control of peak load.
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liarohl Coughlin (left). t,perator of settral .tict)onahl's l'antify Restaurants. clisplays spet ial placental to prennote elet tricity consert ation designeel by Ct' and printeel and distrthuted by . tin 1)onald's u bileJat k .tinore. Ct'spetial projects onanager. Inokls u ater heater insulation jat kel. Il erkly drau ings in the restaarants pronnoted the jackets <end e onwrtation throughout the sertice territory.
l In 1982 the company and our customers effort is the concept of conservation without l hecame partners. We established "CV & YOI: deprivation. The heater sits in a cool j Partners in Energy Conservation ' as our basement, its thermostat maintaining a theme. Its overall objective is to assist our temperature which is reduced constantly by I
customers in electrical energy conservation. standing tank energy loss. In this situation the During the year, acknowledgement of the R-10 jacket cuts the loss in half. Annually, it merits of the program came from our saves cach heater 700 kilowart hours.
customers, members of state government, and Depending on his water heater rate, it saves the media. cach owner 520 to 550 per year.
We launched that cooperative venture at in the short span of May to December 1932 our May annual meeting. Its three facets are a total of 9,000 customers bought these these; jackets at 510 cach, and reduced energy I. Sale of low-cost, high-insulation-value consumption by more than six million fiberglass water heater jackets. kilowatt hours annually.
- 2. Community Demand Management as a Our overall objective is to jacket every one of the 56,000 electric water heaters in the pilot program.
- 3. A renewed and expanded commitment system. Our 1983 goal is to jacket 12,000 of to our peak demand control program, them to bring the total insulated to 21.000 by Operation Peak Alert. the end of the year.
l While considering the painless aspect of Fundamental to the water heater insulation such conservation it is we'l to note that i
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"I installed a CV trater heater insulation jacket because I kmnr it trill save me money and electricity that otheru ise trould simply be trasted by standing tank loss. ' ;
- Rutland Town customer Tom Neuffer, who, with his daughter, Jennifer, is shown below installing the jacket. l N i I
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( annual average residential kilowatt-hour consumption in Vermont is 15 percent greater 3 than the rest of New England and that much s of the difference is made up by electric water
( heaters.
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St. Johnsbury, Vermont, homt of Colt M E '
industries' Fairbanks Weighing Division, is located in the northeast region of the state. It is one of the coldest communities in the state and a heavy user of electricity. During the year the prestigious Fairbanks .\luseum there, known as well for its meteorology and educational programs as for its exhibits of antiquity, became one of our partners in energy conservation by helping us launch our l
4 first community demand management project.
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Each day during the three coldest months
, p. j of the winter season, December. January and i
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1 February, museum professionals reported the St. Johnsbury consumption of electricity.
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YEARLY PEAK DEMAND 1971-1982 CVPS AND REMAINDER OF STATE 600 c-
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I~ CyNT ALVERMONT 350 .
.. ! J 300
, ARA 01 EMBARGO l
250 71 72 73 74 75 78 77 78 79 80 81 82 83 84 85 E PRIOR TO WINTER RATES CV WINTER RATES IN EFFECT -
wy Fairbanks meteorologists combined 7
t .% J megawatt levels with weather statistics on f daily radio programs as well as in regular
. gig newspaper columns. Meanwhile, other 'l v * . >;; museum staff members and company energy <
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W conservation specialists met periodically in f i
- xj workshop sessions with residents to analyze l community electricity consumption and wap i g "i"g% to keep it under control. 3 b / Our mid-year survey revealed that 8,
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j perc mt of our customers knew about j v Operation Peak Alert, a system-wide capacity control effort that shaved the system peak in ;
^ the previous winter season. Ilut we knew
,,7 i? , awareness alone wasn't enough. Increased i f)A participation in the face of growing
- < consumption would be imperative if we ,
, , N. expected to repeat the '81 '82 performance. >
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in early December we mailed each of our j;jd 100.000 residential customers a specially designed " Peak Alert Calendar" with a QQ;; , j -y '
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x Ma;k fireen, a meteoroh> gist se ish the
', l'airbanks Museton in st.Johnsbury, i ? vermont, promotes energy management by
- brennicastin;( community eletincal demartd \
y b let vis along n ith the tctnter day's forecast y };}j me the bucal ytulio statism as part of the f \_
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i Commuruly Dernetnd Managernent program 8
'Ultr onethane gas generating operation ' - J '~
I helps solve a manure hinulling problem. It -
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provides barn hedding for my lloisteins l.. f ' .
at:d it brings in cashfann the sale of '
elec tricity.1 hat's diaring peak periods. .., , $ ' ,
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leben CV needs it the most. '- Dairyman y%
George Foster of 3fiddlebury, Vermont, .
1 with circulators that pump hot water to ..
g* s O. 4f the manure digester to maintain optin;um ,
U' temperature for methane gas production. '
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n.a detailed explanation of the need to avoid a b :. .
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new peak in the ensuing "scason" of ..-
December, January and February. It asked customers to identify appliances they would k@ e
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resolve not to use when our system load
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would appreach a peak and we would notify /i.
radio and television stations throurhout the state to air recorded announcements that a
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Peak Alert was in effect. 'h a- '
l As the year drew to a close we pained r 1mispaw w - ~
i scveral partners in energy conservation from ,
the ranks of community organizations and _
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husinesses. Members of i-!! clubs promoted -
and sold water heater jackets. Mcdonald's restaurants throughout the service territory printed and distributed placemat/ tray liners k we designed with 3pecial messages that l
helped further the objectives of our energy management and conservation programs. Such
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" partnerships" continued into the new year and inspired others to join us both as individuals and as groups.
in addition to these independent efforts to l
conserve ciectricity, we were the primary support of the Residential Conservation Corporation, a statewide organization that performs home heat loss audits and recommend, corrective measures.
i Colutnunity Breakfasts in 1982 we continued the tradition of . - - - -
informing our customers of our activities through a series of breakfast meetings with husiness and community leaders throughout '
our service area. .~~
President Griffin stimulated our customers l g by identifying the challenging issues facing Qig -7 4 J_ ,
the company and our customers, lie then 9 drew upon a series of charts and graphs that C/; #
effectively communicated the company's #
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position on major issues including rate s x
increases, winter / summer rate design and A/ ..
nuclear power. TV Our president's direct approach to the issues was well received and there is ample . s .' o , " Tuesd 'g ',
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C\ idel1Ce that CustomCr% arc hChind our prestalestf jenties IL (art][itt stu's sinarls tro IHustrate his effort % to hold thCir Co%t% d oW11. breakfast meetutg talk u tth vint*nuntil featlers ,
P
1982 Power Supply
'g gig A fannable powemupply nilx widt little dependence on oil played a key role p
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in the outstanding perforinance by our g cornpany during 1982. In addition to e a .. t .; LD nuclear, hydro, coal and oil, Canadian
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15'S our power source diversity and we E E E N N COAI' received sinall but growing announts of generstion froin custoiner-owned hydro, E, E f .
windinills and biotnass operations.
Oil We cut our dependence on oil. fired electricity in half, from to percent in 1981 to only 5 percent of
'"l 'rem "ced' i" i982. Power produced rrom 23'S oil came from our own turbines, directly from HWHO other generating stations in New lingland and through N!!PliN, the operating arm of the New I!ngland Power Pool (NI! POOL.).
Coal e e Fifteen percent of 1982 generation was produced by coal. That was one percent more than the preceding S car. Seven percent of the power came
- e *
- e from the Merrimack plant in New Ilampshire.
Ontario flydro delivered the rest.
e o e e e Ilydro 4 Our percentage of hydro power fell in 1982 to e e M e e 23 percent from the 30 percent produced in 1981, largely as a result of lower river flows for our Vermont hydro stations. While the spring run of f
- *
- 8 season was excellent, the summer was quite dry and autumn was almost arid. The Power Authority
, , , , , of the State of New York provided about 70 percent of the hydro while our own facilities 57'S generaied ine rest. Our newest addition. smiih Station at liradford, Vermoni began commercial e o e e e N t'CLl?A R operation on the Waits River D ccmher 20. It is
! rated at 1.5 megawatts.
Nuclear e e hhh Nuclear power plants in New lingland produced 5~ percent of our total system output in 1982.
Vermont Yankee produced 49 percent alone, with e e o e e lesser amounts provided by Maine Yankee,
' Connecticut Yankee and Yankee Atomic in Mawachusetts. Vermont Yankee, of which CV is a e Io, e e e 35 percent owner, marked its loth Scar of operation in 1982 by turning in its best running record ever. Operating at 93.3 percent of capacity, e e e e e it was the year's best. performing boiling water reactor in the world.
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Future Power Supply The sirengdi io support ihe < cnir.d vernu>ni acaricai -
sptem comes from many sources, and underlying al1 of them is the New 1 ngland Pow er Pool agreement, w hich awures us that as long as there is power available within our region we will not run out. The future holds a multitude of opportunitics, and the brightest of them are coming from north of the border, in adjacent Canad.t.
Ontario. Quchec and New lirunswick all have ele tricity to sell. The transmiwion line from Quchec will let us tap the most promising source fur the future, but the desclopment of in-state hydro is not without significance, UNGAVA There is every indication that overall a BAY gg gg,gg 3g ,pggg, gg ggg he available user the long term despite the uncertainty of the future HUDSON p; ,
j allocation of power from the St.
BAY I_ ,I. [,awrence and Niagara power d
.l I projects by The Power Authority _
of the State of New York.
4 With energy management g and conservation programs JAWS BAY HYORO - "E ** '
UN 4 us up, and with our strategic proximity to CHURCHILL . 4 CanJdJ, our challenge FALLS
- WSKRAT is not u here to find I. FALLS O clectricity but io derclop the most i
GULL ISLAND '. 4 cconomical future source mix.
4 Q U -E B. E C o f Y :
+
m Q
PRINCE EDWARo NEW ISLAND BRUNSWK K MAINE LAE ONTARIO of 1:UTUltE POWEll sol'ItCES Cost in Thousands y*
N.H. Actual Estimated J Date thru Future gg Unit Name on-line MW 1982 Costs Total East Barnet 1984 22 $ 993 $ 4 449 $ 5 442 j (H yd"c)
Joseph C McNed 1984 10 0 5.869 8.131 14 000
. , (Wood)
D Frog Hollow 1986 1.8 238 4 958 5,196
? (H ydro)
Seabrook #1 & #2 1984,87 36 6 41 815 45.247 87.062 (Nuclear)
M>i! stone #3 1986 19 9 30.681 35.580 66.261 (N acie v)
Hydro Quebec 1986 -
Po,.er Contracts for Energy (H , dm> Bani rng Non Firm Purcnases Beg nn ng in 1986
{j 11 l
Earnings and Return to Investors 1 Earnings in 1982 reached a record common equity was 14.5 percent for the period
$3 79 per share, up from $3.74 in 1981, 1974 through 1980.
despite a 20 percent increase in the l Your directors increased the dividend rate on average number of shares of common common stock by 6.6 percent, to an annual level stock outstanding. For the second of $2.26 per share, up from $2.12, maintaining consecutive year we earned the return on their policy of increasing dividends regularly when j common stock equity of 16 percent financially feasible. In 1982 the dividend payout ,
allowed by the Vermont Public Service represented 57 percent of carnings. During the i Hoard. We have now earned our allowed past five years our dividends have kept pace with return on common stock equity in three inflation.
of the past five years. The allowed return on Revenues and Sales DIVIDENDS PER COMMON SHARE Both revenues and sales increased to a so , , ,
record levels in 1982. Revenues reflected
,,, ,, _ , , rate increases to both retail and 3 i s. wholesale customers as well as a three-j i so - ue m - tenths of one percent increase in retail
- ,,_ kilowatt hour sales. A Vermont retail rate j increase of 12.4 percent effective May I so - as well as a higher than usual level of sales to other New England utilities were im is78 im mo w 'm 'm g;ua' the major reasons for increased revenues, as shown in the table below. For 1983, we look forward to another year of EARNINGS PER COMMON SHARE modest, orderly sales growth in the range 4m 3. ,, 2 7. - of about two percent, excluding off-system sales.
e
"' The 1982 sales pattern reflected very cold
$3 **7 2 74 y n, i200-8
(^ too -
SUMMARY
OF REVENUES AND SALES (dollars are in thousmds) 1982 1981 1980 1979 1978 1977 1977 1978 1979 198o 1981 1982 Revenues:
Operating revenues $133,663 $117.339 $90.735 $78.185 $75,019 $69.121 Growth in retail RETURN ON AVERAGE sales 394 2.549 3.259 1.012 3.930 667 OWONEQ W locreased retast rates 9,049 18.382 7.010 1.325 1.886 4.701
'88 la.1 1e Increased wholesais 14 7 and other revenues 14 13.2 - (sales and rate 12 . increases. 6,881 5.673 2.281 829 82 199
$ 12 - _ including o+f-system j os sa!es*)
{t' 'O - Net increase over prior year 5 16,324 $ 26 604 $12.550 $ 3.166 $ 5 898 $ 5.567
, 2 e-l Sales:
i e- Total MWH(000)
Sales 2,333 2.112 1.913 1,826 1.776 1.680 4- MWH(000)(excl a:1 o'f-system sates') 1,972 1.952 1.890 1.799 1,770 1.654 2- KWH growth (excl o'f-system %) 1.0% 33% 51% 16% 7.0% 11%
1977 1978 1979 1980 1981 1982 *0!f System Sales illClude penod1C Sales to Other utdtttes and to NEPOOL.
I2
weather during the early months and very warm Rate Case Activity weather during the latter part of the year. During 1982 we continued to pursue an Residential sales and commercial sales increased by aggressis e policy of seeking expeditious rate relief.
1.8 percent and 5.3 percent, respectively, in line We are subject to the jurisdiction of three with our long term forecast. Industrial sales regulatory bodies. Retail revenues in Vermont, overall, however, declined by 2.5 percent which account for approximately 80 percent of reflecting the national economic slowdown. The operating revenues, are subject to the jurisdiction Vermont economy remained more buoyant of the Vermont Public Service Board (PSB). New throughout the year than that of the rest of the llampshire retail revenues, representing nation. Unemployment in the state remained at 2 approximately 6 percent of total revenues, are level of about two-thirds of the national rate. subject to the jurisdiction of the New flampshire The diversified sources of sales and revenue Public Utilities Commission (NilPUC). The balance from retail customers by classification for 1982 of our regulated revenues are subject to the were: jurisdiction of the Federal Energy Regulatory Commis.sion (FERC). All three of these bodies
$(000) % MWH % approved rate increases for our business in 1982.
Residentia! 51,662 45.5 799.624 44.5 In addition to the previously mentioned PSB Commercial 14,165 12.5 189,674 10.6 order authorizing a $12 million increase on an industnal 39,424 34.8 699,055 38.9 annual basis, the PSB approved, for a two-year Pubhc Authonty 8.202 7.2 108.000 6.0 trial period, a Current Power Year mechanism TOTAL RETAIL 113,453 100.0 1,796.353 100.0 (CPY). This will allow us to recover on a more Our system peaks in winter. Year-to-year timely basis, beginning in 1983, our purchased fluctuations in growth are affected by weather power capacity and total energy costs. The CPY variations as well as business cycles and trends. should provide both improved financial stability The present long range forecast indicates that over f r the company and rate stability for our customers. Although the CPY has been appealed by the next to years on the basis of present conditions and company programs we will the Department of Public Service to the Vermont experience average annual growth in energy sales Supreme Court, we are very hopeful that the PSB of 2. 6 percent and in capacity of 2.1 percent.
order authorizing the CP) will be upheld.
Alan >gement is developing a set of programs which The NIIPCC approved an increase in the retail are intended to decrease our long-term energy rates of Connecticut Valley Electric Company, our growth to 1.8 percent and capacity growth to 1.5 wholly owned subsidiary, of $1.7 million on an annual basis. The FERC approved a settlement P##"I' reached with wholesale customers, granting us an annual increase of $355,000, effective June 1,1982.
RATE INCREASES (Dollars in Thousands)
Requested Approved Filed Amount Percent Effective Amount Percent VERMONT
- 4230 6/18/77
$ 9.882 18.7 % 5 6.347 11.96 %
11/30/79 5.281 82% 1/1/80 5.281 82%
- 4460 3/21/80 4.328 62% 4/23/80 2.324 3.3%
- 44% 9/4/80 3.450 46% 10/6/80 3.450 46%
- 4504 11/26/80 18.031 22 8 % 1/1/81 15.105 19 62 %
- 4634 12/23/81 21,686 (1) 22.6 % 5/1/82 (temp.) 12.000 12 5 %
10/1/82 (final) 11.891 12.37 %
NEW HAMPSHIRE DR-78-72 5!8/78 272 5.0% 9/26/78 272 5.0%
DR 80-92 4/14/80 219 3.7% 6/2/80 163 2.7%
I uodate 1/1/81 44 .7%
DR 80-178 8/7/8C 514 7.5% 9/30/80 514 7.5%
DR 82-67 2/25/82 1,259 13 7 % 4/1/82 1,170 12.8 %
DR-83 55 12/28/82 90 1.04 2/1/83 84 10%
FEDERAL ENERGY REGULATORY COMMISSION (FERC)
ER80-422 5/30/80 931 13 4 % 8/2/80 786 11.3 %
ER81649 7/31/81 122 1.8% 1/1/82 1.259 (1)(2) 17.3 %
ER81-660 8/5/81 784 37.6 % 10!5,81 633 30.4 %
ER82-411 3/30/82 422 19 3 % 6/1/82 355 16 2 %
12/14/82 90 1.1% 4/1/83 90 1i%
(1) Revsed fmng based on brecast 1962 costs (2) SAect to adpstment on May 1983 based on 1982 Actual Es enses 13
.~ __- - . _ _ - . _ _ _ _ _ , _ - _ _ _ . - - . . _ . _ _ . . __ _ _ . _ .-
Operating Expenses years. Although our hydroelectric output was less than nornial for the year (excellent in the spring Purchased powcr costs were 56 percent ,
but poor in the fall). nuclear facilities at our of operating expenses in 1982, the largest disposal provided 57 percent of total system share of total operating costs. These costs needs. Led by the Vermont Yankee record are summarized in the table below: performance, they operated at extremely high levels during the entire year.
1982 1981 1980 1979 1978 Costs in areas other than purchased power also (dollars in thousands) continued to increase. We are working to offset Capacity $35,817 $30,62S 522.873 518.682 517.563 these increased costs by instituting productivity Energy 29,027 29.551 24.791 15.988 1.t743 improvement programs and cost control Purchased techniques. Computer technology is being applied Power $64,844 560.237 547.664 534.870 $32.306 increasingly, in such operations as the transfer of
% Operating bank funds and the on-line customer file access in Costs 56 % 58 % 59 % 51 % 50 % cach of our division offices. Economic evaluation of virtually all capital expenditures is being l Capacity costs continued to increase, but at a expanded. During the year we delivered more slower rate than in the past several years. Energy electricity to more customers with fewer l costs also rose less dramatically than in prior employees than ever before. i l
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Capital RegtnirementS the year from to percent to 16 percent in 1982.
In April a public sale of 750,000 shares Shares purchased with reinvested dividends have of our common stock raised $12.4 million been offered at a five percent discount since the of new common equity. The most recent beginning of 1983. We expect this source of prior public sale of this type was in 1976. capital to continue to grow nd provide a larger This financing not only improved our share of our new comnmn equity nuds over the next few years.
common stock equity ratio in accordance At the end of 1982 common equity represented with our long-term objectives but also 15 percent of capitalization; preferre'd equitv provided the company with sufficient represented 12 percent and long-term debt made cash to avoid short-term borrowings as up 43 percent. Our interest coverage ratio also interest rates peaked. remained at a satisfactory level of four times Through our Dividend Reinvestment and funded debt requirements.
Common Stock Purchase Plan (DRP) and the ' lax Our long term financial goals include (1)
Reduction Act Stock Ownership Plan (TRASOP), maintaining a long-term debt ratio of no more than we sold an additional 100,000 shares of common 15 percent; (2) maintaining coverage ratios of at stock, raising $ 1.8 million. The Dividend least 3.5 times interest on funded debt; and (3)
Reinvestment Plan became more important as financing as required to climinate all short-term shareholder participation steadily increased during debt et least once a year.
i i
l 1
CAPITAUZATION RATIOS i
_ AND TOTAL CAPITAUZATION ($) $209e 200 818 \
190 -
j 170 -
S169 4 160 -
s1s 150 -
5144 6 140 - s135 e TIMES (X) FUNDED DEET 2 130 - INTEREST EARNED 8120 -
?
(Before Federt and State income Tan) 15 110 --
_ 14 % 5.0X
{100 E 90 - # "*
2X 4 2X 5 80 -
4 0X 3.8X 14 %
70 -
17 %
60 3 0x 3 0X
$0 -
40 -
20x 30 -
20 -
1.0X l
10 -
197? 1978 1979 1980 1981 1982 1977 1978 1979 1980 1981 1982 l B Common Equity
- ~ Preferred Equity Eom 15
s f
Construction Program [
Our 1982 construction program totaled $30 l million excluding Allowance for Funds During l Construction (AFDC). A 1.5 megawatt hydroelectric facility in Ilradford, Vermont, was f ; g ~~
completed on schedule and within budget. a met -
Substantial progress was made on the 50-megawatt _.
- ~
] g Joseph C. 31cNeil wood-fueled generating facility in
!!urlington, Vermont. We own 20 percent of the 8
51cNeil unit, which is scheduled for operation in early 1984 and currently is on schedule and under budget.
r Our present construction program will peak in my 1983. It will decline thereafter as our planneu ,.
L generation projects go on line over the next five l
years. The program is directed heavily toward -
I generation projects, including the East flarnet facility (hydro). the SicNeil plant (wood), and the ,
.\lillstone and Seabrook nuclear projects (see page 11). ,
b '
ESTIMATED CONSTRUCTION EXPENDITURES -
(Excluding AFDC) ,
(milhons) 3 Year 1983 1984 1985 1986 1987 -
Tota!s $35.5 $29.0 $26 0 $22.0 $17.0 .
At present we plan to spend approximately $130 million on construction over the next fise years ,
and we expect to finance approximately half of .-
that amount with internally generated funds.
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Top: \Velder at n'ork inside . tic. veil tromkhip plant in Burlington. Vermont. l Bottorn: l* bolo shou s progress at end of f 9M.?. l 16
. .- .- _ . . - . . -- - . . . = -
I FINANCIAL STATEMENTS i
, Contents PAGE 18 Selected Financial Data l Slanagement's Discussion 20 Consolidated Statement of Income and Retained Earnings 21 Consolidated Italance Sheet '
22 Consolidated Statement of Changes in Financial Position 23 Notes to Consolidated Financial Statements I
i i
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I 17
r Selected Financial Data r,ioriar,in as,-sa-s,,x,,pr amount,oc,,nare, 1982 1981 1980 1979 1978 1977 For the year:
Operating revenues S133,663 $117,339 $ 90,735 $ 78,185 $ 75,019 $ 69,121 Net income S 16,210 $ 13.866 $ 8,902 $ 9,767 $ 10,368 $ 9,170 Return on average common stock equity 16.1 % 16.40/o 10.50/o 12.9 % 14.70/o 13.3 %
Net income per share of common stock S3.79 $3.74 $2.29 $2.74 $2.92 $2.47 Cash dividends per share of common siock S2.15% $1.97 $1.86 $1.69 $1.44 $1.36 Total funds from operations S 24,944 $ 25,654 $ 17,874 $ 16,857 $ 14,029 $ 11,140 Dividends declared S 9,953 $ 8,480 $ 7,619 $ 6,705 $ 6,099 $ 6.006 Construction and plant expenditures S 33,338 $ 21.145 $ 15,573 $ 13.065 $ 13,961 $ 10,766 Total funds from operations less dividends, as a percent of construction expenditures 45.0 % 81.20/o 65.90/o 77.70/o 56.80/o 4 7.70/o At end of year:
Construction work in progress S 83,753 $ 56,446 5 48,572 $ 36,759 $ 28,583 $ 21,874 S101.177 $100.657 $ 87,730 $ 72.858 $ 68,863 $ 64.734 L e m nbN 4nns Total capitalization 5209,769 $188,862 $169,433 $152,466 $144,573 $135,523 Total assets $251,012 $233,834 $211,195 $180,514 $166,557 $155,509 Management's Discussion and Analysis of Financial Condition and Results of Operations The Company's operating results for the years 1977 stockholders. This growth in revenue results principally through 1982 reDect continuing inflationary pressure on from recent Vermont retail rate increases of 12.37%
costs, a pattern of moderate growth and the effect of effective May 1, 1982, 19.62 % effective January 1, several rate increases. Significant retail rate increases in 1981, and several increases in 1980 aggregating 16.1%.
the last three years have increased revenues. Although Retail rate adjustments have also been achieved in New the Company's net income and return on common llampshire, and rate adjustments to our wholesale stock equity declined in 1979 and 1980, they customers have been received from the FERC.
rebounded strongly in 1981 and 1982. Contributing to 3 g ; g ;, ,
the 1981 and 1982 results were several rate increases as affected by cold weather patterns since many of our well as the excellent operating experience of the g ,gg ,f ,
g 39g ,
\ ermont T,ankee nuclear plant. were also affected by the economic slowdown experienced throughout the nation. Over the past six Operating Revenues I'* "' **'#*
- '"C'#**' "I""***E'""""'
Since the mid-1970s the growth in KWil sales has rate of 2.5%, reflecting contmued energy conservation been modest. The following table shows the percent *"#8'*""I* E*#"I'""E#*"N" I "" # '"** *#"'
increase in retail sales and the sources of increased forecast indicates an average annual growth in energy operating revenues for each of the last six years (dollars sales of 2.4% and an average annual growth in capacity m thousands): requirements of 2.1% over the next to years.
1982 1981 1980 1979 1978 1977 Growth in retail Operating Expenses KWH sales ?% 2.5% 4.1% 1.4% 5.9% 1.0% Costs of purchased power are classified as costs for Revenue growth from:
capacity available to the Company and costs for energy Growth in retail received. These two components of our purchased KWH sales S 354 $ 2,549 $ 3.259 $1,012 $3,930 $ 667 power costs for the last six years were as follows increased retail (dollars in thousands):
rates 9,049 18,382 7.010 1,325 1,886 4,701 1982 1981 1980 1979 1978 1977 increased wholesale and other revenues 6.881 5.673 2,281 829 82 199 Purchased
$35,817 $30.686 $22,873 $18.882 $17,563 $18,404 Capacity Energy 29.027 29,551 24.791 15,988 14,743 10.979 Net increase over prior year S16,324 $26.604 $12,550 $3.166 $5.898 $5.567 Total 5641834 $60.237 $47.664 $34.870 $32.306 $29.383 In each of the last three years, substantial increases Capacity costs have accelerated dramatically in the j in operating revenues have been necessary to recover last three years, after remaining relatively constant for 1 spiraling purchased power and other operating expenses several years. Energy costs are directly related to the and to provide an adequate return on investment to escalating prices for oil, nuclear fuel and coal and more ;
l 18 l l
l
importantly to the proportion of the Company's contains additional information on the Company's purchased energy that comes from each of these fuel short-term borrowing arrangements, available lines of sources, with oil being significantly more expensive credit and commercial paper financing.
than nuclear fuel. Energy costs, which had increased steadily for many years, leveled off in 1982 principally Construction Program and Financing because of the outstanding oper1 ting performance of the Vermont Yankee nuclear plant during the year. The . h Company is participating, as a joint-owner, Company was able to bu) 46% more units of energy with other electric utilities in the planning and from this plant in 1982 than the prior year because the construction of several generatmg umts. The Company plant had no scheduled shutdown for refueling in 1982 is obligated to provide funds in future years to finance these projects as described in Note 9 to the and no major unscheduled outages during the year.
The units of energy purchased by the Company Consolidated Financial Statements. These joint-grew by 2.8%, 6.9%,1.5%, 6.4 %, 7.3% and 12.5% for ownersy projects constitute more than half of the the years 1977 through 1982, respectively. Vermont Company s construction program during the next few Yankee's performance during 1982 contributed to the years. The program also includes additional funds for major increase in the units of energy purchased in 1982. constructmn of other generation, transmission, Note 9 to the Consolidated Financial Statements distribution and general facilities withm the Company's contains a summary of the Company's energy sources service territory. These plans, in the aggregate, continue for the last six years. During 1982 the Company to represent a large undertaking relative to the received a larger than normal portion of its energy from Company's present size.
nuclear generating companies, because of the absence of I-unds generated from operations (net income a refueling shutdown for the Vermont Yankee plant, adjusted for non-cash charges and credits to income),
less dividends declared, resulted m internally generated and a lower nnreinn
' ~
from miscellaneous sources' funds of $5,134,000, 57,930,000, $10,152,000, principally oil feed pl' ants.
The Company's hydroelectric generation declined $ 10,255,000, $ 17,171,000 and 514,991,000 for the in 1982 after being higher than normal in 1981. Energv years 1977 through 1982, respectively. Th,si represented from this source is considerably less expensive than th'e 48%, 57%, 78%,66%,81% and 45% of construction alternative, which is to purchase energy. In 1980, due and plant expenditures m, each of the years 1977 to reduced rainfall, the Company experienced the thmugh 1982, respectively.
lowest amount of hydro generation in 16 years. In order to provide funds for the Company,s Slaintenance expenses rose in 1981 and 1982 due continuing construction program and other business to higher maintenance expenditures for the Company's purposes, additional funds must be obtamed by issuing hydroelectric production facilities and for transmission long-term debt and equity securitics, as necessary. To and distribution lines. Other operation expenses grew in rcomplish these financings, the Company must receive virtually every major category in 1981 and 1982. In adequate and timely rate increases. Short-term addition, other operation expenses include 5829,000 in borrowings, used to provide funds for the mterim 1982 to amortize over a 10-year period the canceled period, generally are paid when long-term debt or Pilgrim #2 nuclear generating unit. As described more equity securities are issued.
fully in Note 3 to the Consolidated Financial Statements, an additional $2,999,000 of expense related to this Allowance for Funds During Construction.
abandoned project was charged against Other Income in Allowance for funds used during construction the Statement of income for 1982. (AFDC) is the cost, during the period of construction, of funds used to finance construction projects. The allowance for equity funds and borrowed funds used Cost of Money during construction has continued to grow in recent Interest expense on long term debt has increased years due to the continuing increase in the Company's steadily in recent years as a result of issuance of First construction work in progress for future nuclear Stortgage Ilonds at higher interest rates as follows: generating plants, particularly the Seabrook and Series Interest Rate Amount Date of Issue Stillstone units. The AFDC rates used by the Company Y 5 8.000,000 October 19 8 r nged from 9.32% in 1977 to 12.05% in 1982.
9%%
Y 9%% 5 2,000,000 January 1979 z 10%% 5 4,250,000 september 1979 Inflation and Changing Prices 2 10%% 510,750,000 January 1980 InHation continues to have a significant impact on AA 15%% $ 15,000,000 June 1981 virtually every aspect of our business, including purchased power, other operating expenses, con-On April 27,1982, the Company sold 750,000 struction expenditures and cost of money. lleginning in shares of new common stock with net proceeds to the 1983, the Company will be able to recover increases in Company of about S 12,200,000. This sale resulted in a purchased power costs on a more timely basis through 24% increase in the number of shares outstanding. The the Current Power Year (CPY) mechanism approved by proceeds were used to repay short-term debt the Vermont Public Service lloard. This will reduce the outstanding and the balance was invested until needed effects of unforeseen power cost increases and enhance to finance planned construction. The average short-term the financial stability of the Company.
borrowings during 1982 decreased sharply compared Note 1I to the Consolidated Financial Statements with 1981, leading to a significant reduction in other contains certain information about the effects of interest expense. Other interest expense increased in changing prices on the historical financial information 1981 due to a larger amount of average short-term of the Company. The information is considered to be borrowings and higher average short-term interest rates, experimental and provides only an approximation of Note 6 to the Consolidated Financial Statements the effects of inHation on the Company's operations.
19
A Consolidated Statement of Income and Retained Earnings (dollars in thousands except amounts per share)
Year Erded December 31 19_82 1981 1980 1979 1978 1977 OPERATING REVENUES S133,6_63 $117,339 $90,735 $78.185 $75,019 $69,121 OPERATING EXPENSES Operation Purchased power 64,844 60,237 47,664 34,870 32,306 29,383 Production and transmission 7,795 7,577 6,507 5,797 5.235 4,940 Other operation 16,700 13,672 11,937 10,965 10,891 10,163 Maintenance 6,900 5.863 4.380 4,200 3,654 3,281 Depreciation 4,147 3,805 3,664 3,466 3,148 3,048 Other taxes, principally property taxes 5,085 4,764 4,347 4,288 3,994 2.899 10,699 7.369 2.712 4,250 4,861 4,457 Taxes on income (Note 7)
Total operating expenses 116,260 103 287 81,211 67,836 64,089 59,171 OPERATING INCOME 17,403 14,052 9,524 10,349 10,930 9,950 OTHER INCOME AND DEDUCTIONS Equity in eamings of companies not consolidated 2,541 2,669 2.219 2,327 2,314 2,268 Allowance for equity funds during construction 3,577 2,577 2,495 1,684 1,173 742 Other income (expenses), net (1,478) 1,391 394 184 189 331 Taxes on income (Note 7) 705 (799) (329) (310) (299) (282) f0TAL OPERATING AND OTHER INCOME _ 22,748 19,890 14,303 14,234 14,307 13,009 INTEREST EXPENSE Interest on long-term debt 8,950 7,612 6,376 5,066 4,284 4,150 Other interest 386 1,441 729 879 402 60 Allowance for borrowed funds during construction (2,798) (3,029) (1,704) (1,478) (747) (371)
Net interest expense 6,538 6,024 5,401 4,467 3,939 3,839 NET INCOME 16,210 13,866 8,902 9,767 10,368 9,170 RETAINED EARNINGS, JANUARY 1 29,149 23,763 22,480 19,418 15,149 11,985 45,359 37,629 31,382 29,185 25,517 21,155 CASH DIVIDENDS DECLARED Preferred stock 2,403 2,496 2,098 1,772 1,954 2,136 Common stock 7,550 5.984 5,521 4.933 4,145 3,870 Total dividends 9,953 8,480 7.619 6,705 6.099 6,006 RETAINED EARNINGS, DECEMBER 31 S 35,406 $ 29,149 $23,763 $22,480 $19,418 $15.149 Average shares of common stock outstanding 3,641,083 3,042,263 2,972,066 2.921,527 2,881.111 2,848,759 NET INCOME PER SHARE OF COMMON STOCK S3.79 $3.74 $2.29 $2.74 $2.92 $2.47 DIVIDENDS PER SHARE OF COMMON STOCK S2.150 $1.97 $1.86 $1.69 $1,44 $1.36 See accompanyrng notes to consotrdated financial statements 20 L-
- Consolidated Balance Sheet hinflars in themsands) l December 31 1982 1981 ASSETS UTILITY PLANT, at original cost $136,826 $129,359 Less accumulated depreciation 39,520 36,608 1 97,306 92,751
, Construction work in progress 83,753 56.446 Net utility plant 181,059 149,197 INVESTMENTS IN AFFILIATES, at equity (Note 2) 24,839 24.835 NONUTILITY PROPERTY, less accumulated depreciation 4,118 3,986 CURRENT ASSETS Cash 1,112 940 Accounts receivable, less allowance for uncollectible accounts 12,385 15,768 Unbilled revenue 12,393 13,232 Matenals and supplies, at average cost 1,757 2,037 i Prepayments 1,662 1,766 Other current assets 535 490
'; Total current assets 29,844 34,233 TERMINATED PROJECTS (Note 3) 5,296 8,763 OTHER DEFERRED CHARGES 5,856 12,820
$251,012 $233.834 CAPITAllZATION AND LIABILITIES CAPITALIZATION Common stock, $6 par value, authorized 5,000,000 shares;
, outstanding 3,932,482 shares and 3,080,511 shares, respectively (Note 4) S 23,595 $ 18,483 Other paid-in capital (Note 4) 34,405 25,361 Retained earnings (Note 4) 35,406 29,149 Total common stock equity 93,406 72,993 i
Preferred and preference stock (Note 4) 15,186 15,212 Preferred stock with sinking fund requirements (Note 4) 10,630 11,300 Long-term debt (Note 5) 90,547 89,357 Total capitalization 209,769 188,862 CURRENT LIABILITIES Notes payable-banks 4,400 1,000 Commercial paper - 6,800
[
Accounts payable 3,873 5,954 Accounts payable-affiliates 4,505
~
5,410 Accrued interest 1,103 1,149 Accrued income taxes 4,672 1,159 Other current liabilities 2,463 1.831 Total current liabilities 21,921 22,398 DEFERRED INCOME TAXES 10,731 16,931 DEFERRED INVESTMENT TAX CREDITS 8,256 5,209 DEFERRED CREDITS AND MISCELLANEOUS RESERVES 335 434 COMMITMENTS AND CONTINGENCIES (Note 0)
S251,012 $233.834 See accompanying notes to consohdated hnancial statements.
- 21
_ _ . _ _ _ . . . . , ~ - .._ -.._.__ _... _-_._ .._.__ ,_ _._,__ __. _ .
Consolidated Statement of Changes in Financial Position (dollars in themsands)
Year Ended December 31 1982 1981 1980 1979 1978 1977 SOURCE OF FUNDS Funds from operations Net income $16,210 $13,866 $ 8,902 $ 9,767 $10,368 $ 9,170 Principal non-cash charges (credits) to income Depreciation 4,147 3,805 3,664 3,466 3,148 3,048 Deferred income taxes and investment tax credits (3,153) 9,074 7,436 3,137 (1,439) 2,080 Allowance for equity funds during construction (3,577) (2,577) (2,495) (1,684) (1,173) (742)
Dividends received more (less) than equity income (264) (329) 141 50 369 401 Amortization of deferred power costs 3,000 5,058 2,441 1,376 835 623 Amortization of terminated projects 4,214 264 105 105 105 105 Other, net 4,367 (3.507) (2,320) 640 1,816 (3,545)
TeB! fund 9 from operations 24,944 25,654 17,874 16,857 14,029 11,140 Funds from outside sources Long-term debt 2,793 15,862 10,750 6,250 8,000 300 Preferred stock - - 8,000 - - -
Common stock 14,195 1,100 847 724 535 429 Change in short-term debt (3,400) (4,500) (1,200) 6,900 1,300 5,300 Total funds from outside sources 13,588 12,462 18,397 13,874 9,835 6,029 Total funds provided S38,532 $38,116 $36,271 $30,731 $23,864 $17,169 USE OF FUNDS Construction and plant expenditures $33,338 $21,145 $15,573 $13,065 $13,961 $10,766 Dividends declared 9,953 8,480 7,619 6,705 6,099 6,006 Investments in affiliates (260) (63) 90 172 (240) (50)
Retirement of long term debt 1,603 2,265 2,538 915 2,531 2,146 Retirement of preferred stock 670 670 1,340 1,340 1,340 1,340 Net increase (decrease) in other working capital items (7,312) 6,307 2,289 5,849 (622) (4,441)
Other, net 540 (688) 6,822 2,685 795 1,402 Total funds used $38,532 $38,116 $36.271 $30,731 $23,864 $17,169 CHANGES IN CTHER WORKING CAPITAL ITEMS Accounts receivable S (1,074) $ 1,644 $ 4,005 $ 230 $ 643 $ (494)
Refundable income taxes (2,309) (2,993) 5,302 746 - -
Unbilled revenue (839) 6,182 637 290 1,691 (13)
Cash and other current assets (167) 118 (95) 654 (1,004) (43)
Accounts payable 1,176 2,316 (7,146) (801) 343 (807)
Accrued income taxes (3,513) (557) (392) 4,718 (2,424) (2,241)
Other current liabilities (586) (403) (22) 12 129 (843) j Net increase (decrease) in other working capital iterns S(7,312) $ 6,307 $ 2,289 $ 5,849 $ (622) $ (4,441) 1 See accompannng notes to consohdated knancial statements.
22
Notes to Consolidated Financial Statements Not: 1 - Summary of significant accounting policies:
Consolidation: The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.
The Company follows the equity method of accounting for its investments in affiliates. See Note 2.
Regulation: The Company is subject to regulation by the Vermont Public Service lloard (PSB), the Federal Energy Regulatory Commission (FERC) and, to a lesser extent, the public utilities commissions in other New England states where the Company does business, with respect to rates charged for service, accounting and other matters. The
, Company's accounting policies generally reflect the rate-making and regulatory policies of these authorities.
Revenues: Estimated unbilled revenues are recorded at the end of accounting periods.
Through 1978 the Company's tariffs included fuel adjustment clauses under which fuel and the energy portion of purchased power costs were billed to customers. As of January 1,1979 the fuel adjustment clause applicable to the majority of retail customers was terminated.
Jia/ntenance: Maintenance and repairs are charged to maintenance expense and include replacements of less than retirement units. Replacements of retirement units and betterments are charged to utility plant, and the book cost of units retired plus the cost of removal thereof, less salvage, are charged to accumulated provision for depreciation.
Depreciation: The Company uses the straight-line method of depreciation. Total depreciation expense was between 3.32% and 3.63% of the cost of depreciable utility plant for the years 1977 through 1982.
Income Taxes: The tax effect of timing differences between pre-tax income in the financial statements and income subject to tax are accounted for in accordance with the rate-making policies of the PSB. See Note 7. Beginning in 1978, investment tax credits realized are deferred and amortized to income over the lives of the related properties. Prior to 1978, the Company followed the flow-through method of accounting for investment tax credits when realized.
Allottancefor Funds During Construction: Allowance for funds used during construction (AFDC) is the cost, during the period of construction, of funds used to finance construction projects. The Company capitalizes AFDC as a part of the cost of major utility plant projects except to the extent that costs applicable to such construction work in progress have been included in rate base in connection with rate-making proceedings. The AFDC rates used by the Company were 9.32 %, 10.27 %,
11.13%,11.15%,11.89% and 12.05% for the years 1977 through 1982.
Deferred Charges: Certain costs are deferred and amortized in accordance with rate-making policies of regulatory authorities. See Note 3. During regular Vermont Yankee refueling shutdowns the increased costs attributable to replacement energy purchased from NEPOOL are dcferred and amortized to expense over the estimated period until the next regularly scheduled refueling shutdown.
Costs associated with unscheduled Vermont Yankee shutdowns in 1973 and 1980 were deferred. As approved by the PSB, these deferred costs, which totaled 53,371,000 and 53,833,000, are being amortized to expense over a 10-year period commencing January 1,1974 and a 5-year period commencing January 1,1981, respectively.
N;te 2 - Investments in affiliates: The Company accounts for investments in the following companies by the equity method (dollars in thousands):
December 31 Ownership 1982 1981 Nuclear generating companies:
Vermont Yankee Nuclear Power Corporation 31.3 % S18.207 $18.215 Maine Yankee Atomic Power Company 2.0% 1,336 1,337 Connecticut Yankee Atomic Power Company 2.0% 1,439 1,441 Yankee Atomic Electric Company 3.5% 744 732 21,726 21,725 Other affiliate:
Vermont Electnc Power Company. Inc. 58.4 % 3.113 3.110 S24,839 $24.835 23
r I
Each sponsor of the nuclear generating companies is obligated to pay an amount equal to its entitlement percentage of fuel, operating expenses, and cost of capital and i is entitled to a similar share of the power output of the plants. The Company is obligated to provide its entitlement percentage of the capital requirements of Vermont Yankee and Slaine Yankee and has a similar, but limited, obligation to Connecticut Yankee. See Note 9 for the percentages of total power output received from these companies.
Siimmarized financial information for Vermont Yankee Nuclear Power Corporation is as follows (dollars in thousands):
December 31 1982 1981 Eamings Operating revenues $106,256 $ 88.171 Net income applicable to common stock $ 5,739 $ 5.823 Company's equity in net income S 1,794 $ 1,822 Investment Total assets, pnncipally utihty plant $232,759 $242,552 Less:
Preferred stock 14,907 16,065 Long term debt 72,688 84,335 Other habihties and deferred credits 86,263 83.426 Net assets S 58,901 $ 58.726 Company's equity in net assets S 18,207 $ 18.215 Vermont Yankee has entered into a financial arrangement with a bank to borrow ,
up to 510,000,000 of which $10,500,000 was outstanding at December 31,1982.The Company has guaranteed its proportionate share of obligations under this arrangement.
Vermont Electric Power Company Inc. (Velco) owns and oper.ites a transmission system in Vermont ovcr which bulk power is delivered to all electrie utilities in the state. Velco entered into a Power Transmission Contract with the State of Vermont and under its terms bills all costs, including amortization of its debt and a fixed return on equity, to the State and others using the system. This contract has enabled Velco to finance its facilities primarily through the sale of first mortgage bonds. Velco operates pursuant to the terms of the State contract and an Operating Agreement with the Company and two other major distribution companics in Vermont. Although the Company owns 58.-l% of Velco's outstanding common stock, the Operating Agreement effectively restricts the Company's control and therefore Velco's I'mancial statements have not been consolidated. Summarized financial information for Velco is as follows (dollars in thousands):
December 31 1982 1981 Earnings Transmission revenues $11,303 $10.781 Operating expenses ~ 6,949 6.590 Operating income 4,354 4.191 Other income 236 407 Total operating and other income 4,590 4,598 Net interest expense d183 4.196 Net income S 407 $ 402 Company's equity in net income S 231 $ 229 investment Net utihty plant $51,048 $48.998 Current assets 11,330 13.261 Other assets 276 891 Total awets 62,654 63.150 Less:
First mortgage bonds 39,272 41.210 Current habihtms 17,691 16 560 Other habikties 363 57 Net assets S 5,328 $ 5.323 Company's equity in net assets b,II3 $ 3.110 21
Not; 3 - Terminited projectn The PSB order granting the 1982 rate increase, among other things, permits the recovery of costs of certain abandoned projects, l including the Pilgrim #2 nuclear generating unit. The company has a 1.78% joint-ownership interest in the proposed Pilgrim #2 generating unit which was canceled by the lead sponsor in October 1981, The PSB has allowed the recovery of the 58,290,000 of incurred costs over a ten-year period beginning January 1,1982, without a return on the unrecovered costs during the recovery period. In 1982
$829,000 related to this project has been amortized to operating expenses. The PSB decision requires the shareholders to absorb some of the cost of this canceled project.
Accordingly, after one year of amortization the investment is recorded at the discounted present value of $4,462,000 at December 31,1982, and $2,999,000 has been charged against Other income in the Statement of Income for 1982.
Note 4 - Capital stock: Cumulative preferred and preference stock outstanding was as follows (dollars in thousands):
December 31 1982 1981 Preferred stock, $100 par value, authorized 500,000 shares Outstanding:
4.15 % Series; 37,856 shares S 3,786 $ 3.786 4.65 % Senes: 10,000 shares 1,000 1,000 4.75 % Senes; 17,682 shares 1,7f 8 1,768 5.375% Series; 15,000 shares 1,500 1,500 12.75 % Series; 80,000 shares 8,000 8.000 13.50 % Series; 26,300 shares (1981 - 33,000 shares) 2,630 3,300 Preferred stock. $25 par value, authorized 1,000,000 shares Outstanding: 9.00% Senes: 280,000 shares 7,000 7,000 Second preferred stock, $50 par value, authonzed 7,993 shares Outstanding: 5.44% Convertible Senes A; 2,646 shares (1981 - 3,154 shares) . 132 158 Preference stock, $1 par value, authorized 1,000,000 shares Outstanding - none - -
Total cumulative preferred and preference stock S25,816 $26.512 The second preferred stock currently is convertible into common stock at $17.75 per share. As of December 31, 1982, 7,453 shares of common stock were reserved for conversion. In 1982,508 shares of second preferred stock were converted into 1,412 shares of common stock.
The 13.50% series preferred stock is redeemable at par through a mandatory sinking fund in the amount of 5670,000 per annum and, at its option, the Company may redeem at par an additional non-cumulative 5670,000 per annum.
Commencing in 1986 the 12.75% series preferred stock is redeemable at par through a mandatory sinking fund in the amount of $1,600,000 per annum and, at its option, the Company may redeem at par an additional 51,600,000 per annum, not to exceed $2,400,000.
Changes in other paid-in capital were as follows (dollars in thousands):
Year Ended December 31 1982 1981 1980 Convers'on of second preferred stock to common stock $ 17 $ 17 $ 15 Excess of proceeds over par value from saies of common stock (850.559 shares in 1982, 75,000 shares in 1981 and 56,662 shares in 1980) 9,091 650 507 Amortization of capital stock expense related to the 13.50% and 12.75% senes preferred stock 169 38 78 Preferred and common stock issuance expenses (233) (23) (113) 59,044 $682 $487 The indentures relating to long-term debt and the Articles of Association contain certain restrictions on the payment of cash dividends on common stock. I'nder the most restrictive of such provisions, approximately $28,000,000 of retained earnings was not subject to dividend restriction at December 31,1982.
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Note 5 - Long-tzrm debt: A summary of long-term debt follows (dollars in thousands):
December 31 1982 1981" First Mortgage Bonds 5 % Senes L, due 1987 $ 876 $ 881 5%% Senes M, due 1995 4,530 4,555 6%% Series N, due 1996 4,600 4,625 7%% Series O, due 1992 1,850 1,860 8%% Senes P. due 1999 3,000 3,000 10 % Senes O, due 1999 2,000 2,000 8%% Series R, due 2001 3,000 3,000 8%% Senes S, due 2003 5,000 5,000 11%% Series T, due 1990 4,875 5,250 3%% Series W, due 1982 - 775 3%% Senes X, due 1984 3,103 3.123 9%% Series Y, due 2003 10,000 10,000 10%% Senes Z, due 2004 15,000 15,000 15%% Series AA, due 1996 15,000 15,000 Debentures 4%% due 1987 3,060 3.150 7 %, due 1993 8,000 8,200 10%%, due 1995 2,940 3,010 Vermont Industrial Development Authority Bonds 12%%, due 2011 3,655 862 Other _
58 66 Totallong-term debt $90,547 $89,357 Ilased on issues outstanding at December 31,1982, the aggregate amount of long-term debt maturities and sinking fund requirements (exclusive of the amount that may be satisfied by property additions) are approximately $828,000, S-i,391,000, 51,912,000, 51,9no,000 and $6,861,000 for the years 1983 through 1987, respectively.
Substantially all property and plant is subject to tiens under the First Mortgage llonds.
Vermont Industrial Development Authority llonds are redeemable at the option of the bondholders in 1981, Note 6 - Short-term debt: The Company uses bank loans and issues commercial paper to finance temporarily its construction program and for other corporate purposes. As of December 31, 1982 the Company had annual bank lines of credit, which are normally renewed, expiring at various times in 1983, to support its bank loans and commercial paper, with varying compensating balance requirements. These range generally from maintenance of average compensating balances equal to 5% to 10% of credit lines available plus, in the case of bank loans, additional balances equal to zero to 7%% of outstanding borrowings.
The following summarizes comparable information for 1980 through 1982 relative to bank lines of credit, outstanding short term debt and interest rates (dollars in thousands):
1982 1981 1980 Total lines of credit at year-end S23,600 $22.100 $26,600 Unused knes of credit at year-end 19,200 14,300 14,300 Average interest rate at year-end Notes payable - banks 10,75 % 14.00 % 21.50 %
Commercial paper -
13.23 % 20.03 %
Total short-term borrowings 10,75 % 13.33 % 20.22 %
Average interest rate for the year Notes payable - banks 14.00 % 17.37 % 15.80 %
Commercial paper 14.30 % 17.14 % 15.26 %
Total short-term borrowings 14,20 % 17.18 % 15.49 %
Average amount outstanding during the year Notes payable - banks S 594 $ 1,358 $ 1,577 Commercial paper S 1,238 $ 6,904 $ 2,218 Total short-term borrowings S 1,832 $ 8,262 5 3,795 Max, mum amount outstanding at any month-end Notes payable - banks S 3,400 $ 5,700 $ 3,800 Commercial paper S 6,900 $17,000 $10,700 Total short-term borrowings S 9,500 $19,900 $12,300 26
e Net: 7 - Incem: texus The components of income tax expense are as follows (dollars in thousands):
Year Ended December 31 1982 1981 1980 1979 1978 1977 Tcxes on operating income: :
Federal - current S 9,772 $ (1,806) $ (4,302) $ 435 $ 5.345 $ 1,904 !
Federal - deferred (3,994) 6,524 5,387 1,231 (1,967) 1,882 '
investrr.ent credit adj. 3,340 1,586 1,228 1,895 820 -
State - current 2,268 1 (481) 491 971 442 State - deferred - (687) 1,064 880 198 (308) 229 10,699 7.369 2,712 4,250 4.861 4,457 r Taxes on other income:
. Federal - current 686 652 230 203 242 269 Federa! - deferred (1,306) 14 (3) 1 (21) (27) investment credit adj. 7 30 65 71 40 -
State - current 122 100 38 35 41 44 State - deferred (214) 3 (1) -
(3) (4) 1 (705) 799 329 310 299 282 Total income taxes S 9,994 $ 8.168 $ 3.041 5 4.560 $ 5,160 $ 4,739 Major items which resulted in deferred income tax expense were allowance for borrowed funds during construction ($1,236,000 in 1979, 5818,000 in 1980,
- $1.503,000 in 1981 and $1,393,000 in 1982), deferred power costs ($2,946,000 in 1980, 51,164,000 reversing in 1981 and $1,494,000 reversing in 1982), unbilled sevenue (5255,000 in 1977, 52,035,000 in 1980, 54,200,000 in 1981 and $4,863,000 3
reversing in 1982), retroactive revenue ($1,915,000 in 1977 which reversed in 1978) and termination of generating projects ($2,773,000 in 1981 and $1,679,000 reversing in 1982).
The principal reasons for the differences between the total income tax expense and the amount calculated by applying the Federal income tax rate to income before tax are as follows (dollars in thousands):
Year Ended December 31 1982 1981 1980 1979 1978 1977 income before income tax $26,204 $22,034 $11,943 $14.327 $15,528 $13,909 Federal statutory rate 46% 46 % 46 % 46 % 48 % 48 %
Computed " expected" tax expense $12,054 $10,135 $ 5.494 $ 6,590 $ 7,453 $ 6.676 increases (reductions) in taxes resulting from:
Allowance for equity funds during construction (1,645) (1,186) (1,148) (774) (563) (356) ,
Dividend received credit gs94) (951) (901) (934) (954) (925)
Additional depreciation for tax purposes (375) (533) (597) (530) (514) (401)
State income taxes net of Federal tax benefit 804 631 235 391 365 369 investment tax credits (135) (111) (81) (55) (30) (418)
Other ,
285 183 39 (128) (597) (206)
Total income taxes S 9,994 $ 8.168 $ 3.041 5 4,560 $ 5.160 $ 4.739 Note 8 - Pension plan: The Company has a non-contributory trusteed pension plan
- covering all regular employees and follows the consistent practice of currently funding all costs accrued. Total pension costs amounted to $985,000, $1,046,000, 5908,000,
. 51,038,000, 51,125,000 and $ 1,301,000 for the years 1977 through 1982, including amortization of the unfunded actuarial liability over a thirty-year period beginning I
january 1,1976. A comparison of accumulated plan benefits and plan net assets is
. presented below (dollars in thousands):
January 1 1982 1981 Actuanal present value of accumulated plan benefits Vested $8,369 $7,056 Nonvested 667 660
$9,GI6 $7,716 Net assets available for benefits S8.342 $7.560 The assumed rate of return used in determining the actuarial present value of l accumulated plan benefits was 6.5% for 1981 and 1982.
{
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Nott 9 - Commitments cad cortingencien The Company purchases hydroelectric i power generated by the Power Authority of the State of New York (PASNY), under '
long-term contracts which expire June 30,1985 and also purchases power from a coal-fired generating plant located in Merrimack, New Ilampshire under a life of the unit contract. The percentages of the Company's total power output from all sources were as follows:
Year Ended December 31 Source of Energy 1982 1981 1980 1979 1978 1977 Nuclear generating companies 57 % 45% 39 % 41 % 38 % 42 %
PASNY - hydro 16 18 19 22 22 25 Memmack - coal 7 8 11 11 8 11 Company-owned hydro 7 9 7 9 8 9 Miscellaneous 13 20 24 17 24 13 100 % 100 % 100 % 100 % 100 % 100 %
The Company's ownership interest and its share of amounts invested at year-end in the jointly-owned generating facilities in which it is participating are as follows (dollars in thousands):
December 31 Ownership 1982 1981 Plant in service:
Wyman #4 1.77690 % $ 3,214 $ 3.219 Under construction:
Seabrook #1 and #2 1.59096 % $41,815 $29.453 Millstone #3 1.73030 % 30,681 21,801 Joseph C. McNeil 20.00000 % 5,869 -
$78,365 $51,254 Wyman #4, an oil-fired generating plant, commenced commercial operation in December 1978. The Company's share of operating expenses is included in the corresponding operating accounts on the Statement of Income.
For the four joint ownership units to be constructed, the Company is obligated to provide funds in future years estimated to total $89,000,000 (including AFDC and present commitments for nuclear fuel) to be required approximately as follows: 1983, 536.000,N)o; 1984, 526,000,000; 1985, S 17,000,000; 1986, 58,000,000; and 1987, S2,000,000.
The Company is subject, like other electric utilities, to evolving standards administered by Federal, state and local authorities relating to the quality of the environment. These standards affect the siting of generating facilities, air and water quality, nuclear plant licensing and safety and other environmental factors. While these standards have had some impact upon the Company's past operations as a distribution company, the Company anticipates that they will continue to have a significant impact upon the capital costs and construction schedules of the new generating facilities in which the Company is participating.
Minimum rental commitments of the Company under non-cancelable leases as of December 31,1982 are not material. Total rental expense entering into the determination of net income, consisting principally of vehicle and equipment rentals, was approximately 51,119,000, S 1,229,000, S 1,370,000, S 1,571,000, S 1,733,000 and
$ 1,924,000, respectively, for the years 1977 through 1982.
Note 10 - Unaudited quarterly financial information: The following quarterly financial information is unaudited and in the opinion of management includes all adjustments (consisting only of normal recurring accruals) necessary to a fair statement 28
l of results of operations for such periods. Variations between quarters reflect the seasonal nature of the Company's business (dollars in thousands except amounts per share):
Quarter Ended March June September December 1982 Oparating revenues $37.321 $29.834 $32,844 $33.664 Oparating income $ 5.273 $ 3.402 $ 4,428 $ 4.300 Net income $ 5,154 $ 3.043 $ 4,913 $ 3.100 Not income per share of common stock $1.47 $.67 $1.11 $.64 1981 Operating revenues $30.937 $25.920 $28,260 $32.222 Oparating iacome $ 3.990 $ 3,187 $ 3.867 $ 3.008 Net income $ 3.615 $ 2.989 $ 4.167 $ 3.095 54at income per chare of common stock $.99 $.78 $1.16 $.81 Note 1I - Unaudited information concerning the effects of inflation: The following information is supplied for the purpose of providing certain information about the effects of inflation, It should be viewed as an estimate of the approximate effect of changing prices, rather than as a precise measure. A statement of income adjusted for general inflation (constant dollar), as measured by the Consumer Price Index for All Urban Consumers (CPI-U), and a statement of income adjusted for changes in specific prices (current cost) as measured by the llandy-Whitman index of Public l'tility Construction Costs follows (dollars in thousands):
Year Ended December 31,1982 Conventional Adjusted for Adjusted Historical General for Changes in Cost inflation Specific Prices Operating revenues $133.663 $133.663 $133.663 Operating expenses Oparation and maintenance 96.329 96.329 96.329 Depreciation 4,147 10.107 11.615 Other taxes, pnncipally property taxes 5,085 5.085 5.085 Taxes on income 10.699 10.699 10.699 Total operating expenses 116,260 122.220 123.728 Operating income 17,403 11,443 9.935 Other income and deductions, net 5.345 5,345 5.345 Interest expense, net (6.538) (6.538) (6.538)
Net income (excluding reduction to not recoverable cost) $ 16.210 $ 10.250* $ 8.742' Gain from decline in purchasing power of net amounts owed S 4.032 $ 4.032 (Reduction) gain to net recoverable cost (111) 1.397
$_ 3.921 $ 5.429 increase in specific prices (current cost) of property, plant and equipment held during year" $ 24,101 Effect of increase in general pnce level (11,129)
Excess of increase in specific prices over increase in general pnce level $ 12.972
- Including the (reduction) gain to net recoverable cost, net income would have been $10.139
- *At December 31.1982, the current cost of utihty plant net of accumula!ed deprecation was estimated to be approximately $324.883 as compared with the net utikty plant recoverable through depreciation of $181.059 In preparing the above data, historical costs of only property, plant and equipment, comprising existing plant in service, plant held for future use and construction work in progress, and the related depreciation were adjusted. The resulting adjusted data for property, plant and equipment are not indicative of the current value of existing property, plant and equipment nor of the Company's future capital requirements. The actual replacerc.cnt of existing property, plant and equipment will take place over many years and not necessarily in the same manner as the presently existing assets.
29
_ ~ , .,. ..
r Accumulated provisions for depreciation under both methods described above ,
were determined by calculating the ratio of historical accumulated depreciation to i I
historical depreciable property by year of acquisition and applying the resultant ratio to estimated constant dollar and current cost of property, plant and equipment. The current year's provision for depreciation on the constant dollar and current cost amounts was determined by applying the Company's depreciation rate to the restated depreciable plant base at the beginning of the year.
The effects of inflation are not recognized for income tax or rate-making purposes.
Under the rate-making prescribed by the regulatory commissions to which the Company is subject, only the historical cost of property, plant and equipment is recoverable in revenues as depreciation. Therefore, the excess of the cost of plant stated in terms of constant dollars oc current cost over the historical cost of plant is not presently recoverable in rates as depreciation and is reDected as a reduction to net recoverable cost. While the rate-making process gives no recognition to the current cost of replacing property, plant and equipment, based on past practices, the Company believes it will be allowed to earn on the increased cost of its net investment when replacement of facilitics actually occurs.
During a period of inflation, holders of monetary assets suffer a loss of general purchasing power while holders of monetary liabilities experience a gain. The gain from the decline in purchasing power of net amounts owed is primarily attributable to the substantial amount of debt which has been used to finance property, plant and equipment. Since the depreciation of the utility plant is limited to the recovery of historical costs, the Company does not have the opportunity to realize gain on debt and is limited to recovery only of the embedded cost of debt capital. Therefore to have the Statement of Income adjusted for Changing Prices properly reficct the j economics of rate regulation, the gain from the decline in purchasing power of net amounts owed should be offset by the reduction of net property, plant and equipment.
A six-year comparison of selected supplementary financial data adjusted for the effects of changing prices stated in average 1982 dollars fClows (dollars in thousands except amounts per share):
Year Ended December 31 1982 1981 1980 1979 1978 1977 Operat;ng revenues $133,663 $124.533 $106.286 $103.971 $110,993 $110.099 H,istorical cost information adjusted for general inflation Net income (excluding reduction to net recoverable cost) $ 10,250 $ 9,108 $ 5,101 -$ 8.186 Net income per share of common stock (excluding reduction to net recoverable cost) $2.16 $2.12 $ 89 $1.99 Net assets at year end at net recoverable cost $107,367 ' $ 90,586 $ 91,410 $100,108 Current cost information Net income (excluding reduction to net recoverable cost) $ 8,742 5 7,709 $ 3,570 $ 6,193 Net income per share of common stock (excluding reduction to net recoverable cost) $1.74 $1.67 $.37 - $1.32 Increase (decrease) in general price level over increase (decrease) in specific prices 3(12,972) $ 17,554 $ 11,804 $ 13,178 Net assets at year-end at net recoverable cost $107,367 $ 90.586 $ 91,410 $100,108 General information Gain from dechne in purchasing power of net amounts owed S 4,032 $ 9.153 $ 12,052 $ 12.757 Cash dividends declared per common share $2.1$% $2.09 $2.18 $2.25 $2.13 $2.17 Market price per common share at year-end $21.75 $18.57 $16.84 $20 94 $21.27 $23 89 Average consumer pnce index 289.1 272.4 246.8 217.4 195.4 181.5 40
Responsibility for Financial Statements Responsibility for the integrity and objectivity of the financial information presented in this Annual Report rests with the management of Central Vermont Public Service Corporation. The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, applying certain estimates and judgments as required.
The Company maintains an accounting system and related controls directed towards the safeguarding of assets and the reliability of financial information. An integral part of such controls is an internal audit program designed to monitor compliance with the Company's policies and procedures.
Peat, Marwick, Mitchell & Co., independent certified public accountants, are retained to examine the Company's consolidated financial statements. Their accompanying report is based on examinations condutted in accordance with generally accepted auditing standards, including a review of internal accounting controls and tests of accounting procedures and records.
The Audit Committee of the lloard of Directors is composed solely of outside directors, and is responsible for recommending to the 130ard of Directors the selection of the independent accounting firm to be retained for the coming year. The Audit Committee meets periodically and privately with the inde pendent accountants, with our. internal auditors, as well as with Company management, to review accounting, auditing, internal accounting controls and financial reporting matters.
TilFODORE W. MILLSPAl'GII Treasurer and Chief Accounting Officer WESLEY W. von SCllACK Vice President-Finance and Chief Financial Officer Report of Independent Certified Public Accountants 7he Stockholders emd Board of' Directors Central Vermont Public Service Corporation:
We have examined the consolidated balance sheet of Central Vermont Public Service Corporation and its wholly-owned subsidiaries as of December 31,1982 and 1981 and the related consolidated statements of income and retained earnings and changes in financial position for each of the years in the six-year period 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 considered necessary in the circumstances.
In our opinion, the aforementioned financial statements present fairly the consolidated financial position of Central Vermont Public Service Corporation and its wholly-owned subsidiaries at December 31,1982 and 1981, and the results of their operations and the changes in their financial position for each of the years in the six-year period ended December 31,1982, in conformity with generally accepted accounting principles applied on a consistent basis.
iloston, Massachusetts February 17, 1983 PEAT, MARWICK, MITCIIELL & CO.
l 31
Historical Statistics 1982 1981 1980 1979 1978 1977 COMMON STOCK DATA:
Earnings per average common share $ 3.79 $ 3.74 $ 2.29 $ 2.74 $ 2.92 $ 2.47 Dividends paid per share $ 2.15% $ 1.97 $ 1.86 $ 1.69 $ 1,44 $ 1.36 Book value per share (year end) $23.75 $23.70 $22.12 $21.84 $20.84 $19.38 MARKET PRICE RANGE PER SHARE High 22 % 17% 16% 18 15% 16%
12% 12 % 14 % 14 14 %
Low 15 %
14 % 15 % 14 % 15 Year end 21 % 17 %
Price earnings ratio 5.7 4.7 6.3 5.7 4.9 6.1 Market price as a percent of book value (year end) 92 % 74 % 65 % 72 % 69 % 77 %
D6iJend payout ratio 55.99t 52.7 % 81.2 % 61.7 % 49.3 % 55.1 %
15,097 14,030 14,491 14,666 14,921 15,308 Common shareholders Average number of common shares )
outstanding 3,641,083 3,042,263 2,972,066 2,921,527 2,881,111 2,848,759 Total common shares outstanding 3,932,482 3,080,511 3,004,176 2,946,324 2,898,983 2,862,993 Return on average common equity 16.1 % 16.4 % 10.5 % 12.9 % 14.7 % 13.3 %
CAPITAllZATION DATA (000's):
Common stock equity $ 93,406 $ 72,993 $ 66,467 $ 64,350 $ 60,425 $ 55,486 15,186 15,212 15,236 15,258 15,285 15,303 Non-redeemable preferred 10,630 11,300 11,970 5.310 6,650 7,990 Redeemable preferred 90,547 89,357 75,760 67,548 62,213 56,744 Long-term debt Total capitalization $209,769 $188,862 $169,433 $152,466 $144,573 $135,523 CAPITALIZATION RATIOS Common stock equity 44.5 % 38.0 % 39.2 % 42.2 % 41.8 % 40.9 %
Non-redeemable preferred 7.2% 8.1 % 9.0% 10.0 % 10.6 % 11.3 %
Redeemable preferred 5.1 % 6.0 % 7.1 % 3.5% 4.6 % 5.9%
Long-term debt 43.2 % 47.3 % 44.7 % 44.3 % 43.0 % 41.9 %
FINANCIAL DATA:
Times interest earned:
3.8x 3.4x 2.7x 3.4x 4.3x 4.3x Before income taxes 2.7x 2.5x 2.3x 2.6x 3.2x 3.2x After income taxes Times interest earned and preferred dividend earned: '
2.2x 2.0x 1.7x 2.0x 2.3x 2.1x After income taxes Embedded cost of long-term debt 9.73 % 9.67 % 8.39 % 7.95 % 7.75 % 7.39 %
(year end)
Embedded cost of preferred stock 9.22 % 9.32 % 9.71 % 8.73 % 9.08 % 9.40 %
(year end) 32
1982 1981 1980 1979 1978 1977 OPERATING DATA:
ELECTRIC REVENUES (000's)
Residential S 51,662 $ 49,310 $40,657 $36,462 $35,648 $33,189 Commercial and industrial 53,589 47,413 36,449 30,859 29.427 26,498 Other electric utilities 18,231 11,371 5,947 3,629 2,952 2,879 Other 10,181 9,245 7,682 7,235 6,992 6.555 TOTAL S133,663 $117,339 $90,735 $78,185 $75,019 $69,121 ELECTRIC SALES MWH Residential 799,624 785,725 754,241 724,041 716,915 698,901 Commercial and industrial 888,729 897,356 885,248 848,646 830,225 759,222 i Other electric utilities 536,214 322,225 166,329 148,389 121.127 118.052 Other 108,000 107,036 106,757 105.052 107,293 104,041 TOTAL 2,332,567 2,112,342 1,912,575 1,826,128 1,775,560 1,680.216 CUSTOMERS (end of year)
Residential 102,303 101,377 98,910 96,966 95,016 93,190 Commercial and industrial 10,908 10,902 10,624 10,562 10,485 10,285 Other electric utilities 13 13 14 10 10 12 Other 2,130 2,183 2,172 2,442 2,466 2,474 TOTAL 115,354 114,475 111,720 109,980 107,977 105,961 Average KWP use per residential customer 7,880 7,866 7,704 7,541 7,624 7,577 Average revenue per residential customer $509.17 $493.68 $415.26 $379.76 $379.10 $359.81 Average revenue per KWH (cents)
Residential 6.46 6.28 5.39 5.04 4.97 4.75 Comrrercial 7.47 7.41 6.31 5.41 5.85 5.58 Industrial 5.64 4.75 2.58 3.07 2.99 2.95 SOURCES OF ENERGY BY PERCENTAGE Hydro 22.9 % 29.7 % 28.5 % 31.4 % 31.0 % 35.2 %
Nuclear 56.8 % 45.4 % 39.0 % 40.6 % 38.0 % 41.4 %
Coal 15.9 % 14.6 % 10.7 % 11.2 % 8.0 % 10.9 %
Oil 4.4% 10.3 % 21.8 % 16.8 % 23.0 % 12.5 %
System capability (MW) (peak) 448 477 450 415 407 407 i Reserve margin (peak) 15 % 21 % 23 % 11 % 15 % 16 %
l Syt*cm peak (MW) 392 395 365 373 353 350 Load factor 60.7 % 59.9 % 62.9 % 58.8 % 61.2 % 57.9 %
Number of employees 585 583 574 577 571 612 1
33
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Officers and Executive Staff _
MN JAMts E. GRIF FIN RICllARD W. MALLARY l> resident and Executit e l' ice l' resident
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\calcel. from left. 11r l'alon. .\lf. firolsten.11r. GraflIn, .11r. \lerceltth. .\fr. l^centon, l)r. Ilutner.
staneling. Ji un lejl. .11r Ilas kell.11r .11 lls.11r. It intnrore, \lr srnsth,11r. k'eyser. tir. filass Board of Directors Holn rt P. Illiss, Jr., (59) /19'.4/ Presistcot linh IHio. I td , 5t. Alb.m*.
Vermont (Insur.mte Industry Cansultants)( e)
Allen O. Eaton, ('2) /1960/ Partner. Mcwrs. Ropes & Gra) (l.aw )crs).
Il<nton, Mawathusetts (1) Li)
Jasnes E. Griffin, (55) /19'2/ President and Chief 1:secutisc Officer, l
Central Vermont Public Scrsice Coiporatien { I) L4)( e)
I.uther F. Ilackett, ( 69) /19~9/ President, llat kett, V.iline &
l MacDonald, Inc. Iturlington. Vermont (Insurance) (2)
Hobert T. lloiden, (~6) /1959/ President and Treasurcr, I airdale I arms, Inc., llennington, Vermont (Dairy Products) (I)
Frances C. IIntner, (6i) /1980/1:conomics Consultant, l'rantes liutner Awociates. and Research l'ellow. Princeton Research I'orum, l Princeton, New Jersc} (2)
F. Hay Keyser, Jr., (55) /1980/ Chairman Key ser, Crowley, llanse, AbcIl and l'at ey, Inc. (l.aw3 cts). Rutland, Vermont ( e)
L. Douglas Meredith, (~~) /195.4/ Chairman. lormer President of the Company. South flurlington. Vermont (1)
Gordon P. Mills, (16) /1980! President, l{l!V-Weidmann Industries.
Inc, St. Johnsbury, Vermont (Manuf acturer of Ilc(tric Transformer Insulation) (2)
Preston 1.ccte Smith, (52i /19'"/ President and Chicf Exec utive Of fi(cr, Sherburne Corporation, Killington, Vermont t%ki llusinew)
(1) L4)
IIolines 11. Whitmore (~5) /196.4/ Retired. Past President, Jones &
j lamson, Division of Waterbury I'arrel, a Textron Company.
Sprmgficid. Vermont (Manufacturer of Machine Tools) C4)
Fred W. Yeadon, Jr., (58) /19'il President and Chief I secutisc Officer, l'irst Vermont llank and Trust Company. Ilrattleboro.
Vermont (I) L4) ( a )
(I) Mcmber of laccutisc Committcc (2) Member of Audit Committer L4) Member of Compensation Committee
( e) Member of Nominating Committec
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I Shareholder Information i
Shareholders Dividend Reinvestment Plan Our 17,600 sharcholders reside in every state Advantages and several foreign countries. The greatest As of the beginning of 1983, you may reinvest concentration of sharchalders resides in New dividends in additional shares of CV common '
England, New York, California and Florida. A total stock at a five percent discount from the current of 1,950 Vermont residents own about 350,000 mariset price through our Dividend Reinvestment shares, or H.5 percent of the total outstanding Plan. You may s:ill make cash investments with or shares of all classes of stock. without reinvestment of dividends, of up to The average common sharcho! ding is 54.000 per quarter at current market prices. There approximately 260 shares. More than 90 percent of are no brokerage or service charges.
shw "Lb- .m n 4 i iam ni of thi hhra outstanding in accounts of less than 500 shares each. Dividend Tax Deferral About 69 percent of common shares are held m.
the names of individual, joint accounts, and .gur plan also aHows the exclusion of reinvested dividends from current poss income for federal individual fiduciary accounts. Assuming that joint income tax purposes up to an annual hmit of accounts are evenly split between men and 1,500 p . 50 on a single return). This provision of women, approximatelv 55 percent of our the Ronomic Recovery 'l,ax Act of 1981 shareholders are wom'en and 45 percent men. An ontinue thnmgh 1985. If you hold such shares at additional 28 percent of common shares are held least one ye.n before you scH, you an taxed at the in the name of nominees, w ho for the most part. imig-term capiol gains rate. If you wish to represent individual investors. The remaining three particip.ite and take advantage of these significant percent are held by pension funds, charitabic ,oenefits, mail the card attached ta this Annual organizations, insurance companics, banks and other institutions.
P"" I"'
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Distribution of Common Shareholdings Record Date December 31,1982 Company Information Shareholder Accounts Shares Central Vermont common stock is traded on the Number % of Total Shares Number % of Total New York Stock Exchange. Our symbol is CV.
5.20s 3ia 1 99 176.263 6.5 8,523 56.5 100-699 1.53',682 39.1 The company welcomes inquiries from 962 6.i 500-999 5 5.iS5 ti6 shareholders, members of the financial community, 60- 2.- 1000 + over I .6 4 3.102 11.8 customers, the general public and employees. Our 15.09- 100.0 3.932, sH2 100.0 phone number is H02 '73-2'l1.
NEW EQUITY RAISED FROM Common Stock Prices and Ulvidends Ol/IDEND REINVESTMENT AND COMMON STOCK PURCHASE PLAN Dividends 19H1 Iligh I.o w Per Share t as ist Quarter Ii% 13% .s8 M*ons of Donars 2nd Quarter 16% 12 ?, .48 4rd Quarter i s'; 12's 18 g 1i .53 ith Quarter 1*% J
.s3 si 8'
1982 _
5 43 ist Quarter 1 - 5, 15% .53 2nd Quarter l* 5; 16% 53 3rd Quarter 19'; 16% .53 ith Quarter 2 2 ',
19 .56 %
1976 1971 1978 1979 1960 1961 1854 36 l
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Annual Meeting The Annual .\lecting of .
Shareholders is scheduled h>r Tuesday, .\tay 3,1983, in Itutland, Vermont. Notiet of the meeting, together with proxy statement and proxy, will he mailed to holders of common stock in early April 1983 Transfer Agent and Registrar The First National llank of Ilosion, lloston, .\lassachusetts 02102, for Common Stock and all series of Preferred Stock.
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