ML20081F111

Penn Power Annual Rept 1990

ML20081F111
Person / Time
Site:	Beaver Valley
Issue date:	12/31/1990
From:	Rogers J PENNSYLVANIA POWER CO.
To:
Shared Package
ML20081F108	List: ML20081F103 ML20081F111 ML20081F157 ML20081F163 ML20081F167 ML20081F172
References
NUDOCS 9106060324
Download: ML20081F111 (23)

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m .< ..; . ; ; 9 m; .. : , .; y ; _ ; 7,.

,*. ' t & c,( , . p.3. .% ~ .7 A.

.._ . - .-.... - ~ . _ -_ - . - -_ - -. - -. -

f

' S THE COMPANY '

7 Irnne hania nmer Conupaly (Irnn Potter er  ?

t f

t lilC (Olllfan1) flOt i 's Q a cic(!!Ic.\cttitctollCUl11 I.I5,000 lutl0lllCl\ ill ticslern Irllll}\liallia.

t The Cornpany Jurnishn elect ic \ctsite in iF1  ;

I conov . tics a\ ucil a\ sulal alcas and ahd sclh ,

, hTXMWY'\T7?DS I 5h

><p t

i Youngstown

• I i

i L .

• Pittsburgh i

a clatric energy at whokale toJhc inuni<ipalitics The Colupany's setsice arca has an estiinated population of 360,000. The Compan,1; nidt head.

Contsnts ljuallCt1 in New Ca\lle, Irnttilbunia, l\ Q n holly 1 16nandal flighlight6 2 Menage to Stuttholden 4 Operanang Statissbes owned Subsidjary of Ohip lWison Cornpany Qdisonf 5 .Viccted Iinancial 1)ata 6 Management's Dancuankn and Analpts  !

8 Statenwnts of income 9 flalance sheets -

10 5tatementi of Cal.italtration 11 Statements of P,etained I arnings 11 Statements of Cag, ital sta k and other Paid-in Capital l 12 Staiements of Cash ihms 13 Statements of Taxes I

14 Notes to financial Statementi 20 IWgori of frulelwndent Pubhc.Atountants 21 threcion and OfTaers .

_ - - . - . . _ - - . - - ~ . - . - - - _

i

• FIN ANCI AL HIGHLIGHTS b.: the kari i n, int lin emki 31 1990 tws t hann-ain n.h..ny  !

Kihmatt flour Sales 4.527.9 4.617.2 -

1.9"ii Operating kewnues 5101.5 5102.0 - (L2%  ;

Operating 1 xpenses and 'lawi 235.5 228 4 4 1.1 %

Operating inc ome 66.0 716 - 10.1%

Alkmance for l units lised  !

During Corotruction 1.9 4.2 - 54.f% i interest I spense 44.1 44.9 -

1.8%

Net income 25.5 11.7 - 26.4%

l'arnings on Comnmn sto(L i 5.5 24 0 - 1(2%.

Dnidends on Capital Sto(L 5 37.6 5 18.3 -

1.9%

Capital I spendatures:

Construt uon of lacilities 5 2 7.N $ 28.9 Nuclear i ucl 6.N 7.N Capital l cases 1.9 _

.8

'Iotal 5 16.6 5 17,5 - 2.;%

internally Generated Cash 5 40.1 5 16.9 I 17.1 %

1 xternal Iinancing:

New linanc ing 5 54.4 5 ;6.7 kedemptions and Repastnents l i .9 40.0 Net 1. sternal iInandng 5 22.9 5 16.7 + 11.9% ,

Return on Ascrage Common l' quits 5.7% H.6%

Sales to Net income Peak Load Other Utilities .

($ rninonst imew^8tW ' (1 min onsi d4 7 700 3D 9 k gg \ \ i m

N m ,c ,

N Q\ .,

en s

N 's

\

w b ""

as

\ 15 5 N

I 86 87 88 SS 9n 88 87 88 88 90 $6 87 $8 89 90 1

_ _ , - - , ._, _ _ ~~. --

. , - , _ . . . _ _ ~ _, ,

MESSAGE TO STOCHHOLDERS . o Lihn ait hout ules to retad a pott ntal diuthmam e of u. sin L usnnHeH ant reated lavt pral, denpur akMK latell aItb a fuit bane of

( om ceni about the elle,** of a power f rom tury timt 1 ~lhe nanonal ret enion on our het ai potential thsallowam e stems f rom uunomy. We annopate adshnonal + lenniyhania Publit litihty sales growth with new ou nerdup Conmun.bn (PPilO du luon, and L spanded opetanons at ano of uhnh we hase appealed to the our largni mdustrial customen, hupreme Court of Pennuyhania.

hales to 4 ommuual ( ustomern Business E spansion were up a healthy 18 penent in Continues 1990, marking the lif th ionsecuthe $haron Steel, our largnt year of rnord ulco to this marLet indust rial ( ustorner. emerged f rom ,

wgment. Residential *, ales were oil bankruptty in Dn auher 1990 UA portent due to mild weathei. under a new owner, Castle Harlan, wha h reduted heating and air Plan $ for a major t apital impnnement o,nthrionmg Sain to industnal program nm lude 4<hhng a steel (uuomern une dow n 0.8 peu ent t asting operanon.

an a re> ult of bMel kleeI produdIon. In albbtlun, tbe ldled llah0K k leuer uln opportuninen to & Wik os steel manuf at tunng f acihty castern utihiin. (omhined with in Koppel was pun hawd by the N$

nuld weather, L auwd a 10.7 penent (;toup, whw h renamed the tx thty drop in of f intem ulo. 'I hn, led to Koppel Steel. 'I he plant re.- ned a 1.9 pen eni du hne it. total pimhu tion in lehruary 1991. We Ldowart hour salce I sen so, of f- expu t Koppel Steel to kuime our spiem ulci pniduted more than neuend largnt customer.

$26 nulhon in rnenue. Owrall, new buoncues and Peek tuntomer demand for our cApan% ions in 1990 khoubl ptodut e produo wt another revard On nearly $13 million in new rnenue July 9, customers pmhed demand for us annually and add 6% jobs to to a new peak of 700 meganaitt This our enununitin.

wauhe fourth year m a row of recon) We are worLing to help attract t uuomer demand, reproenting a new builneu. Our ruinomie 28 per.ent itu reaw oser the period. dnelopment rate oliers sasings to Operating rnenues in 19 mere new and estiitng customers that oil shghtly. to $ 101 A milhon, while meet trtieria relaicd to im reawd net inunne dropped $9.1 nulhon, employment and electituty use, to $2U milhon,'lhat drop redeets 'len c ustomers took achantage of a $10 million, after tax int ne ihn tm entne raic in 1990, heinging ntabh>hed to take into aaount the total to 61 since the pn gram 2

_ _ _ _. . - . . _ _ _ . _ __ _ .. _ _ _ _.. _ _ __.-.m.._ - _ _ _ _ _ _ .

s

\

l itarted in 19% These customers are We imL other steps in 1990 that conirol equipment. We are studying imrsting some $240 milhon in new reduced operation and maintenante a range of comphance strategies to facihties, adding nearly 2,600 jobs. expenses by $8 2 muhonc We also mtet the law's requirements at our and annually producing $2 M milkon made redut tions in our 1991 capital other plantt in new electric resenue. budget and hmited departmental We are aho deseloping an WeNe aho introduced a process. 'budgett equitable demand-si le management heating rate ter manufacturca and Employces Achieve Sersice program, in conjun alun with the an induncial development rate fi'r And Safety Marks N, that u di enc onage cunomen

, companies that need large amounts Our customers continue to ghe  !"

C"""" " '""D D' P*ETd'"

~

ot electricity for a short period us high marks for the senice we should help delay the need to build

. of!bne provide. More than nine of ten new gennatingrapacity whde main-customers surseyed gase us famrable taining resenues for tb Compant dinoaDemont Audit We are con 0 dent that ne base ratings for the value and rehability of electric senice and the respon, Se resources - AHled ernployees, A management ambt of Penn quahty customer service and a sound shenen of our empimees.

Power, conducted for the PPUC, was completed in June 1990. The audit, I dN h ph marketplace-to achlese continued service witii strict attention to safettsuccess in the 1990s.

. part of the PPUC's regular res new On October 4, employees achiesed

- of Penm)hania utihties, concluded a rewrd two mdhon consecuthe

' that we are a well managed com, any boun of work without a lostaime

-with good corporate planning. While most of the audit's reommendations accident. M,e also recched the d< -t4b b"* b-Pennsvhania flectric Asmelation's required only minoi modi 0 cations, Clwoma of the liaani

~ award for hest results in .ccident

- the audit did (ecommend a detailed presention.

study of staf0ng needs at the Bruc e Environment And  %

L Ahnsfield Plant' "d Conservation Headlina ' * ' '

hat study of the plant's organi- The 1990s lames L. Markle ution and staf0ng needs by an Environmental protection and Pres A nt

. Independent consulting group began' energy conservation are tuo of the

-- in July 1990. As a result, we~ challenges we face in the 1990s.

reorganlied the plant and reduced Last year, Congress adopted the m rawe Pennylunia its staff by 216 positions it. new Clean Air Act. Because of our Man h 1.1991

February 1991.These changes are . past investments in emironmental

~

expected to uhlmately reduce plant protection, we are positioned better operating expenses by about than many other electric companies

$8 rnillion annually. Penn Power - m thisiegion to meet the require-operates the plant and shares owner- ments of the new law. Nearly half ship with Ohio Edhon and three of our generating capacity will not other electric wmpanies. need additional sulfur dioxide 3

OPERATING STATISTICS Anne.nokn ofin, 1990 1989 1988 19 8 ? 19k6 w,. -

Resenue from Ilettric hales (lliousands)-

hemiential $ 99.979 $ 101,794 5 91,573 $ 74,615 $ 75,751 Commert ial S N,64 6 57 004 50,648 40,209 40 772 Industrial N N,407 90,121 86,225 69,958 75,92)

Other N,2 69 J.6 40 8.145 6,611 6.982 Suhtot al . 255,301 257,961 216.591 191,191 199,428 Sales to tltihiles 26,71 N 27,545 10,890 18.120 15,455

'lotal $ 2 N 2,O l 9 $ 28 5,506 $ 267,481 $ 209,5 ) I $214,881 Resenue from Ilectric hates (lvrten )

I',esidential 15.5 % 15.7 % 34.2% 35 6 % 15. 3% ,

Commercial 20.N 20 0 18.9 19.2 19.0 industrial 31.1 11.7 32.1 il 4 25.1

()ther 2,9 1.0 lI l.2 3.2 Suhtotal 90.5 90 4 88.5 91.4 92.8 hales to lltihties 9, *n 9.6 11.5 8,6 7.2

' Intal 100.0% 1(xMr4 1001r% ItHuy% IO(Ur%

kilowatt.llour Sales (Milhony Residential 1,019 1,024 1,008 961 922 Commercial 732 ti98 668 628 597 Industrial 1,795 1,809 1,878 1,747 1,668 Other 135 1 17 116 127 122 Subtotal 3,6F I 3,668 1,690 1,461 3.109 Sales to litihties d47 4 19 1,132 719 684 Total 4,5 2 N 4,617 5,022 4,182 1.993 Customers Sersed at December 31:

Residenttal i19,530 1I8,285 116,988 115,791 I I 4,646 Commercial 14,94 N 14,7I8 14h22 14 ?61 13,921 Industnal 257 264 264 '73 278 Oiher l16 114 149 142 135 Total I 3 4.N 51 111,18l 132,02i i10,469 128,982 Residential Customer Averages:

Annuai kWh ilsed N,5 N 5 8,717 8,676 8,157 8,091 Price per kWh (Cento 9.N9 8.75 7 91 7.77 8.49 Kilowatt llours Generated (Milhons) 4,525 4.040 4.447 4,197 1,967 Peak t.oad (Megawatts) 700 681 666 611 547 Cost of I uel per Nii; hon isTil $ I .2 7 $ 1,26 $ 1.2 7 $ 1,21 $1.30 Generatmg Capabihty:

Coal 74.6 % 74.6 % 74.6% 74.6 % 80,2%

Od 2.N 2.8 2.8 2.8 3.0 Nuclear 22.6 22.6 22.6 22.6 16 8

'lotal 100.0% l(MUYN lO(Ur% 100.0'% 1(Huy%

Sources of I.lectric Generation:

Coal 6N.4% 76.6% 71.8 % 75.0% 78.7%

Nuclear 31.6 23.4 28.2 25.0 21.3 Total 100.0% 100Mk 100.0 % 10(u N IO(Ur%

Number of1:mployees at December Ii 1,6 5 N 1,674 l,716 1,725 1,774 4

SE1.,ECTED,FINANCI AL DATA n nmim,m n,m 0..nr n, 1990 rws e ,u plc em,

.___m., _ , . _

(! b.NJi n 40' ( b bi.44 44dk)

, L .- - - - .. - .-

Operaung lncorne o) 65.992 713xM 67,054 4;391 i t .15 4 Net inoime f y pi) 25.519 11.r.60 17.9#.0 17.594 4 4.7 to

~_

$N'"."Wl"?'""11"" YY? 00 - - . _ - . - ?'??--  ??' -  ???? ---__- -]'Y I L_ _- ?!? -

Cash thodernh on nimenon stos L 27,676 27.676 27.676 27.676 2 5.9l # 8

'lotal Auus at th ember 11 $ 1.091,090 $ 1.06; A 74 11.014.0 0 $ 9 79.N

• MI $96;.661 Caldla\ildlion:

Conunon stod hohler's i quny 5 262.059 5 274.1;M i 17 7.M 19 5178.510 $179.67 2 Prrietred Stos L -

Not huhjrt t to Mandaiory Redernpinon 41.405 41M0; 41.90; 41.90; 41.90; Sulics in Mandatorv kedempiion I N,7 2 2 ;9,662 bilo2 6M 142 69.162 long:Ist m ikbt 111,146 411.471 401.111 422J66M 408.59h Tot al Capit alvation  % 771,N12 5 7 h 7,19s 5 787.957 5811,225 $799.517 Capitalintion Itathn:

Common him L holder's ! quu3 1 l.9 % 14 M'N 1; P'i> 14. P4 lur6 Preferred Mot k-Not sub i ett to Mandaiory Redemption 5.4 sI ;i (2 ;2 hulqcc r to Mandaiory Redemption 5.0 76 h. I k4 M.7 l ong lerin Ikht 55.7 51 1 it 1 52.1 51

'lotal G intalvation i00.0% itHitr% I i n) 05%  ! ou ON I bo t ri .

e w __ a p) I' fill Int'hbleil a $ iib M N ONin t'* trl55 dar to thr uth e nait) tre oirty a tt {n) I'8M 7 Int hida t ah $ 1 l,f Hid)lN M! b.arge resultirag I,om . $uptefar Ceauf't i ert. m pun ha.cd power t osts resulimg m a ilnJMio tN N.ifedothon of f anu h ama dei Dio i s ont etumg the fruarry of 4 um Amt Wh d m operanng un onir, nri mi om.. amt t4ounp on mennu.n sto. k w uh planord noilr.a unin wtai 1. wen troum.ced m 1%u. ,rmumg m .

4 $ 7. lini 1M wi rdm oi.n m s.ci m. ome ad r.it n.np on i omnu n si. k i

6

MANAGEMENT'S DISCUSSION AND ANALYSIS ,

OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations $ I 5,0(K),000 of i 1.5% preferred stock 'l his refinancing Kilowatt hott, sales to retail customers were relatively will reduce interest expense and pnferred st<x k dnidend -

unchanged in 1990, with an increase in sales to com. tequirements by more than $900,000 annually. Interest mercial customers of 4.8% offset by decreases in sales on nuclear fuel obligations decreased in 1990 primarily to industrial and residential customers of 0.8% and as a result of reduced aserage imentory levels of nuclear 0.5% respecthely. Iloweser, total kilowatt hour sales fuel in process. Other interest expense has increased were down 1.9% in 1990 compared with 1989 due to sinte 1988 as a result of rising short. term borrowing a 10.7% drop in sales to other utilities. Resenues lesels, associated with the Company's phase.in plan discussed The linancial Accounting Standards Board (IASil) below under " Capital Resources and liquiday" has issued Statement of linancial Au ounting Standards System Electric resuhed in the increase in operating resenues for (Sl AS) Nu 96 " Accounting for income Taxes l' whith Cal:s Revenues 1989 compared with 1988, the Company must adopt by 1992.The I ASilis currently

• "" I uel and net purchased power costs increased in considering extending the sequired adoption date to a 1990 compared with 1989 as a result of a rcsene 199L Adoption of this statement ti not expected to provided in 1990 for approximately $16,174,000 hase a material effect on net income. In Dec ember 1990,

($9,994,000 after taxes) relating to purchased power the IASilissued SI AS Nu 106,"I mployers' Accounting m costs deferred in prior years (see Note 1 to the for Postretirement llenents Other Than Pensions." This financial Statements). The decrease in fuel and net new standard, which must be adopted no later than

• s purchased power expen>c in 1989 was primarily due 1991, will require the Company to change the method m to reduced fuel prices compared with 1988. of accounting for postemployment benefits, resulting Total other operation and maintenance expenses in a substantial increase in the annual expense charged

• d" were down in 1990 as a result of an increased level of to income for such benents. The Company expects to

m. g,J [ expenses in 1989 due to lleaser Valley Unit I costs seek regulatory approval to deler the increased annual f %g it f

• [ff billed to the Company in 1989 attributable to prior years, and one less nuclear retuchng outage in 1990 expense resuhing from the new standard for future collection from customers. If approval is granted, the 3 y p S[' compared with 1989, increases in other operation and Company would not expect a material effect to net

,;4 maintenance expenses in 1989 compared with 1988 income as a result of adopting SI AS Nu 106. Both of M " were due to costs incurred during the 1989 refuehng these accounting standards are more fully described in 3 outages at the Company's nuclear geacrating units and Note I to the Financial Statements.

~

outages at seseral other Company generating units. The elecinc utihty industry is subject to intlationary -

C

, , , ,, General taxes incteased in 1990 principally due to pressures similar to those experienced by all other

, Residente recognizing the liabihty for gross receipts taxes on industries. lo the extent that the Company incurs y revenue accrued since the inception of the Company's additional costs or recches benents resulting from the O cmes Phase in planc elTects ofinflation, it is anticipated that those effects OWW The increase in other inwme in 1989 resulted from will ultimately be reflected in the Company's rates, ed hees interest earned on resenue accrued in connection with dapital Resources and Liquidity the Compan 's phase-in plan (see Note 2 to the financial Despite lower earnings in 1990, net cash prmided Statements). In December 1990, the C.ompany issued from operations was higher compared with 1989, pri-

$50,000,000 of 9% lirst mortgage bonds which mature marily due to the Company's increase in electric rates in six years. The pniceeds were used, mostly in Januan '

in May 1990.1.he rate increase, designed to produce 1991, to retire $29,000,000 of Orst mortgage bonds additional annual cash resenue of.approximately -

having a weighted aserage interest rate of 12.81% and

$ 28,000,000, was the third step in the C.o,npany 's phase in plan.

The Company had approximately $46,000,000 of ca_h and temporary imestments at December' II,1990.

Notes payable of $ 17,000,000 at the end of 1990 were horrowed under $63,600,000 of bank hnes of credit.

6

Aho asadable at the end of the year were bant lat ihties on t h tobei 6,1990 an agreement la tween the aggregating $50AHHUHM) ulut h may be bornmed for Company and its largest < ustomer, Shanm Stect up to sescral days at the bank's (h4 renon. Corporanon, was appuned by the usurt pleuthng mer Capual requirements in 19uo for the Companyi Sharon Siceli Chapter I I bankrupt (y pnn cribogt (omtim non programs (apitalleases and nuclear f uel Sharon Sice2 has aerced to pas appnaimately $7,MHUHH) were appnninutely 5 D,fMHUHM). The 1991-19% ( on- w ha h u as act umulated under the Company's phase-m strut tion program and capital lease requirements are plan, mer a the year period begmning m Ma.1991.

currently estimated to be approumately $187dHHUNH) linder :he onginal phase-m pis ., shanm Steel wouhl (excludmg nuclear fuelb of whnh appnaimately hase paid the au umulated amount :n tb Company

$ 12dHiOJHN) applies to 1991.1he Company has mer a two year period begmning in May 19'Hl. t )n addalonal(ash requirements of approximately I)c(ember 28, lirHL Shanm Secci emerged Inim bank- 3 gg

$1;8.000JHM) for the 1991 IPi; peruni to meet ruptcy and assumed the obbganon under the attober sei .

matunties ot; anal smLmg lund requirements tor, long- 1990 agreement. 'l he Company's l>cc ember ll,1+H) term debt (culudmg nudear f uel) and prefened uns L; Balante Sheet mdudes the uansfer of amounts ret en- g of that anmunt appanunately $66JHHUHH) apphes to able f rom Sharon Steel from other deterred ( harges 1911 (indmhng $42,44KJHH) of pretened siot k and ( An rued Customer hesenues) to other lmestments ,,

long term debt opnonally redeemed in January 1911 and re(enables.

with the pro (ceds f rom the sale ot first mortgage lumds The Clean Air A(i Amemhnents of l'No ( Act) in dl% uncil uthier "hesults ut ()peralloth"). presellt t hallenges and <qiptiltunities to (be ColnpJn)

Imestments for adihtional nudear tuel during the that are being analped. The A< t reqmres sigmtit ant l'NI.1995 period are esnmated to be approximately redut uom of sulf ur dmside and (nides of mtrogen

$28JH)oJHH), of ulm h approximately $ ljHHh000 f rom the Companyi(oal tired generatmg umts, apphes to 1931.1)unng the same penods, the Company's Comphant e optiom milude, but are not hmaed to, in-nu lear fuelimestments are expected to be reduced by stalhng addinonal pollution control eqmpment, burmng approximately 5 51,000.000 and $ 12,000,000, Irw pollutmg fuel, pur( hasmg emisuon allow ant es f rom respectisely, as the nudear f uel ts consumed. others and rennng facihties lhe Company has not yet C Based upon carnings for IWO and after gning eilect determined the uhimate t ost of (omphant e, to the optional redemption of first mortgage bonds in As dncuned m Note 6 to the linancial Statements, "

7 e e; january 1991, the Company would be permitted, under the Company has imested neaily $56,000,000 in Perry

% ', [

its first mortgage mdenture, to issue appmximatch timt 2, a nudear generatmg unit w hme comtruc tion .- - - ~

$ 107.000,000 prmcipal amount of first mortgage was suspended in 1985. Opnons under ( onsideration

' E u a7 es se so bonds auummg an interest rate of 10% 'Ihe Company mdude, but are not n sessanly restncted to. resumpnon weu does not ( urrently meet the requirements in its t harter of construtnon, contin,cd suspension or termiianon. rw, for the issuanc e of adthnonal preterred stott. If construction were to iesume dunng the 199 199; g ,

The Compam will be implementing the final penod, the Companyi c qutal expenditures would be g,,, ,.,,,

increase of its four year phase-in plan in May t wl, higher than the amount Int hned abme for that pern d. '*"'e designed to int rease (ash resenues for the tollow mg Il terminanon were to < cour, the Company wouhl hase twehe months by appnulmately 511,000,000, how- to w nie ott the ditterem e between as imestment in eser, there will be no material eftect to ner meome Perry linit 2 and the estimated present salue of resenue since the Company recogni/cs revenue under the to be t ollec ted f rom its cmtomers.

phase-in plan as if the full resenue lesel had been pia (ed mio ettet t in 1988. In May 1990, the Company began recmering amounts preuously ret ogmeed as accrued resenues. Linder the phase in plan, amounts deferred in prior years for future adlecnon are scheduled to be (ollected by May 1992, at w hich time the Company's elet tnt rates u di be decreased by appnaimately $44,000.000 on an annual basis, absent other regulator) at tion.

1

STATEMENTS OF INCOME h nn.3n.nis n,m c ,pany lor the h ars i nded twtmber il 1990 Pix 4 Pikk

_ . _ _ _. m_ _

i on is,m ,n<hi 5101,465 5102.018 52 7h,164 Operating Resenues (Note 2) operating hpenses and lases:

Ope ration -

luel and net pun based power 85.147 64,26l 7 4,66K 5 4,4 N0 62,819 51,410 Other operation expenr.

i 19,N 2 7 112,0%0 128.048

'lotal operation 29,014 18,870 21,745 Maintenant e 29.101 28,161 28,469 l'rouston for depretiation and amortt/ation 21,6 N 1 19,464 I H,621 General taxes Deterred l'erry L nit I (osts '9 (6,i14) 13,N 4 N I4,644 20,509 Income tases _

215,473 228,4;0 2 I I,110 lotal opt rating t spenses and taws 65,992 71,5 bh 67,054 Operating inc ome 1,722 2,261 761 Other Income and Dedu(tions -~_ _ _ . _ _ . _

67,714 7 5,b 49 67,H l 7 lotal ino>me Net interest:

17,50N 18,216 18,4 17 Interest on long term debt 1,765 1,161 2,6 10 Interest on nuclear luel obligations Deferred l'erry linit 1 interest - - (9,651)

Allow an(c lor borrow ed f unds used during ionstrut tion (1,8 N9) (1,725) (2.855)

Other interest espense 4,8 I i 1,i17 1,296 42,195 41,184 29,857 Net interest 25,519 14,660 17,960 Net income 9,982 10,671 0,967 Preferred Sto(L Disidend Requirements f.arnings on Common Stot L 5 I5,517 5 21,987 $ A991 J , all:':iE:ll:iB The aisiitnparwing Notes to finaniial Siaienwnis air an integral put i,t erww st.iicnwrits l,

8

BALANCE SHEETS n h.mi m a n.m <..n. rim kt IIrt t rnkerr $1 1990 lWI m, y,., ir.n.mr a.ssee . r r waarry. cam--*mtgw.uwrw2xummcas mzam- x:mm:me ww r-r=<-ene,msnm x zz.uu litilit) 1*lant: M 3%

in arrh e, at onginal tmt 51,09 5,9 N 6 51,067,117 less .% runyulatnl prouen tot depet sanon 117,h99 2ML645 7 7 H,0N 7 164,672 Conuru(non work in progrou-Ilntos plant (Noir t ) 66,570 71,109 Nut irar f uel 25,621 _

18,7;9 90,i91 oope,8 86N,2 hu N 7 4,7 40 Other i roperty azul Imrstruents !I,906 4.0;0 Current Assets, Cash and i ash njunalenti N,N I 4 h hh4 Noin en rhable f rom patent t ompany (Noir ;) 17,Ot H1 Au ounts to a n ahir -

Customen tiew at rumulated ) in nions at 5MM t ,000 and $767,000, tr*pn t n eh, ~

for usu olinuhle ati ount9 20,92I I N.062 Parent i ompans I N,219 l(897 Other 15,117 12.601 Curtrmly rn enahir as t rurd ( uuomer inenon (Note 2) 14,774 10,h6 4 Materuls and supphew at astrage t ost-I url N,21N 7,1-10 Other 11,044 9,7 15 I !"P ^2 '.".""' ' _ . . . _ _ _ _ _ _ . - . . _ . - _ _ _ . . . _ . - . - _ . _ _

I'9 I9 I 'hh" 15 5,6 N9 M ;,O l4 Delerreal Charges:

Deterred luri t osis 1,014 21,1;l

.N t rued ( ustumer rnenun (Note 2) I N,b l u 4'i,990 lieferred li rry llrut I s osts 21,1 h0 21,180 Uther 10,INI 9.429 51,215 lc ! ,MO

$ 1,091,090 51,0 6 ;74 a _ . , _ _ _ _ - - .

.c.-- _ _ _ _ _ _ . - . , .

C-\NI\ tit \00% nD tI\tuilitt s Capitalitation (%rr Statements of t'apitah/ation)

Common stax kholder's t quity 5 262,059 5 2 7 4,1 ;h Preterred uni k -

Not subi nt to mandaron redempnon 41,905 41,90;

%uhi ert to mandaton redetupuun IN,7 2 2 ;9,662 ,

Iong term debt -

Awocuted compamos 29,641 15,196 Uther - , _ . - . - . . . - _ . . - . - . . . . . _ .- - . . .

401,501 176.277 771,N12 787,198 Current liabilities:

Ct.rrently paychle preterred uni k and long term del >t -

<\woi taird t ompames 12,516 l 1,192 Other 65.905 27,761 Notes payable (Notr ;)--

llanb 17,000 28.t a H)

Parerit company - l 1,000 Ai t uunt s pay able --

Awoaatrd a ompamn N,5 5 5 10,14i Uther 2 N,19 N 12,12X Airrued tasrs 14,757 n,i12 Aurued mierest 9,N19 9,267

( It.her _

._ .. s _ ._ . _ . . - . . . . . _ . _ . _ ._ _ _ _ . . . -

__. -- .._- _i __1,O H N _ . . . . _ . . _ _ . . .

10,2_09 I N9,N lH I W.; 14 Delerreal Credits:

.% s umulated delerred its ome t.nn N1,157 86.812 Au umulated deterrs d msrument tas i reihn i1,096 10.10 ;

( h. h..e r.-

10.,967 .

10.5 %

I27,420 12 7.h 12 Commitinents, Guaranters ami Contingent ics (%en i and bi 51,()91,t994) $ l ,(18#;.;74 m _ . _ _ _ _ = - . _ _ = .

7,..,._m_m., .__y. _ _ _ ._ .. .

t l,,* .4,. 4 (If Dltrllis ID( h' # 3,' %hkl 10.Ah, Ld st114.'115,It ? ', ,A f , J H Ui f t p h, ghM1 ed if a g, k uda th i N,v e j g 9

1 l

l

E ,. . . . . , , - . - - -

STATEMENTS OF CAPITALIZ ATION h+neio.ni n, o n.nt.m N liviember 11 1990 l*8 on ihomn4 Common htot klmldet'A I quityt Comnuin sim k, $ 10 par salue,63(HUNM) shates authorUed 6,290jM10 sharen outstamhng 5 l NN,700 5188.700 Other patd m (apital IN9 201 Retained varmngs (Note 44) 71,170 85,257 bial (omnmn stodbolderi etjuity 262,059 274,158 Number ut Shares Opuonal knlenipoon Pnu

])uistan.hng g , 9 ,e 1990 1989 l'er Share (in thousands)

Preferred Mo(k (%te 4b)

Cumulathe, $1(M) par salue Authorued- 1,2t N)jMM) shares Not Subi c(t to Mandatory kedemption:

141,049 141,049 5102.98-10; 00 $ 14.614 14.105 14,105 4.24 %-4.64%

7.64%-h (Krk l l 83MM) l l 83MM) 10236 101.27 12,144 l l .h00 l l,800 8.4 k%-9.16% 160j KM) 160AM)0 10108 10438 16,612 16,000 i6f M H) lotal not subjet t to mandatory redemption 419.049 419.049 $41,170 41,905 41,905 Subjett to Mandatory Redemption (Noir 41):.

8.24%-10.50% 155,000 160jKM) $ 104.12 106 8 5 $ 16,412 15,500 16,000 11,00N-1130% 267,616 105,616 102.75-10 (l) 27,"90 26,762 10,562 150.k00 167,200 109.10 111.46 16,718 15,0NO 16,720 11.00 % I5.00%

Redemption within one year (l N,6 2 0) (l,620) htal subject to mandaton redemption 571,416 612 Mi6 $6 I .010 1N,7 2 2 59,662 tong 4crm Delit (Noir 4d).

Iirst mortgage bonds-9,16% weighted aserage interest rate, due 1990 through 199; 59,91N 65,116 9.18% weighted aserage interest rate, due 1996 through 2000 121,4 i L 72,74I 8.21% weighted aserage interest rate, due 2001 through 2005 40,9 5 N 42 006 9.28% weighted aserage interest rate, due 2(MMi through 2010 44,870 44,870 9.74% weighted aserage mierest rate, due 201I through 2015 4,N 70 4.870 9.74% weighted aserage mierest rate, due 2016 through 2019 1,929 1,929 Ltal first mortgage bemds 275,976 211,712 Secured notes and obhgation-10.16% weighted aserage interest rate, due 1990 through 1995 61,N60 62,115 7.69% weighted aserage interest rate, due 1996 through 204M) 10,591 10390 10,04% weighted aserage interest rate, due 2001 through 200; 16,7 i N 16,718 7,24% weighted aserage interest rate, duc 2006 through 2010 9,460 9,4t 0 9.79% weighted aserage interest rate, duc 201I through Juli 12,I50 12,150 8.10% weighted aserage interest rate, due 2016 through 2020 15,500 10,100 heal secured notes and obhgation 166,279 I6i,il1 Other ohhgations-Nudear fuel 40,615 46,645 9,2 4 N 8,082 Capital leases (Note 3)

Ltal other obhgations 49,863 54,727 Net unamortved <huount on debt (1,171) (986)

Iong term debt due withm one year (59,NO1) (17,111) htal lung-term dcht 411,146 411 A71

$ 787,19k Total Capitalisation $771,Ny ne au ompanpng wes to hnano.a sammeno ne ,in integol pan ot ihm u unneno 10

STATEMENTS OF RETAINED EARMINGS trim @oua nei ( om,an, l lor the h an i nded thiciulwr 11 1990 1%9 1% s (in ih.,in iiuiq Balance at twginning of year  ? h 5,2 5 7 $ 88,410 $ 84.548 Net income 25,519 14,660 17.460 110,776 121,540 127,% 8 Cash dnidends on s ommon = tot k 27,676 27,676 27,676 Cash daidends on preferred sto< L 9,910 10,6;7 10.9;2 17,606 18, i 1 I t h,628 lblant e at end ul 1 ear (Note 4a)  % 71,170 $ 85,2;7 $ 88.410 STATEMENTS OF CAPITAL STOCK AND OTHER PAID IN CAPITAL Ilclt'f It'tl hl,K k Not Nubp t t lo Stdlettto

(~oturuun hiot k \landators Re'le nipt io n \latulatory Krdetuptuin

( It het Ntiftdwt Iaf Iatd ln Number far N u nthe r l'at of Sharn \ alue Capital (d shares \ aloc ofSharn Value it h,lan m ih,,m.ind9 Balante. ]anuar) I,1988 6,240jKM) $ 188,700 $212 414,049 $41,'M); 64 ),616 $h9,162 Sinking i und Redemptions-8.24% Series (;jhM)) (;(H I) l l .00% Series (4 JH)O) (400)

I;.OON Series ( !) (b 4001 (t:40) lblant e, lle(emler 11,14kk 6.240JMH) 188.7L10 209 414.044 41,40; 678,2 t h b7,8 2 2 Sinking i und Redemptions-8.2 4% Series (;,000) (;OO) l 1 JMP% Series (4,000) (400) 1130% Series (6) ( lOj n Ki) (1j H K))

15.00% Series (2) (6.400) (640)

Balan( c, lict embe r 11,1959 6,240,000 188,700 201 419.044 41,40; 612,816 61.282 Smking i und Redempnons--

8.24% Scrict (;,000) (;O0) l 11.Otr% Series (8 J Hid) (8003 l 1,;O% Series (b) ( lOj k H)) ( l.Ot H I)

I ljMF% Series (4) ( I Oj k H)) (1 J K K))

I LOON Senes (2) (6, it H)) (640)

Balant e, liet ember ll,1940 6,240j M M) $ 188,700 $184 414,044 $ 41,40i 571,4 l b $ ;7,142

,-_,w w I bt' at t 11Hig)Jns t!1g Ni,tce t<> 1 inans. tal Ntait meist s are an iritegral part tit ilti se< stattriscist e l

i i

11

STATEMENTS OF CASH FLOWS renn@wn.rbeaEram f or the icars I nded I)es emi,cr 11 1990 1989 1988 ile ibwamt,i Cash flows from Operating At thities:

Not income $ 2 5,519 514,660 517,960 Adjustments to reconcile net income to nel (ash from operating actn atics:

twpreuation and amortuation 41.172 17.519 40,132 Deleried intome tases, net (3,4NS) 21.041 18,119 Imestment tas < redits, net 2,691 (1,17l) (748) ebrued revenue, net (2,6N9) (32,976) (11,177)

Allowant e for equity l'unds used durmg (onstruction -

(428) (185)

Deferred fuel costs, nel 20,979 (3,086) (13,248)

Deferred Perry tinit I costs -

29 (15,985)

Accounts tecenable - (7.2 N 2) (1,825) (813)

Materials and supplies (2,207) (;211 4,261 Accounts payable (N,5 N N) 7,433 (4,587)

Other 9,556 ( 3,99q 8.913 Net cash prosided from oper..:Ing actnittas 77,666 55,218 42,842 Cash flows from l'inancing A(thities:

New linancing-1ong term debt 54,442 19,685 26,548 Notes payable, not -

17JM)0 4,0(K)

Redemptions and Repayments-Preferred stock 3,940 4,540 1,540 l or.g term debt 21,963 35,411 17,296 Notes payable, net 4,000 - -

Unidend payments-Common stock 27,676 27,676 27.676 Prrferred stos.k 9,910 10.657 10,952 Net cash used for financing acinities 15,067 21,621 26,916 Cash f lows from insecting At thitles:

Property adihtions 25,123 27,6;9 21,170 Punhase of tmestments 17,621 9 12 687 Sale of imestments (14) -

(1,311)

Other (61) 812 (472)

Net cash used for imesting acthiries 62,649 29,401 20,254 Net increase (decrease)in ush and cash equnalents (50) 4,194 (4,328)

Cash and cash equhalents at begmning of year N,864 4,670 8,998 Cash and cash equhalents at end of year 5 H,N I 4 $ 8,864 5 4,670 Supplemental Cash I' lows information:

Cash paid during the year-Interest (net of amounts opitaheed) $ 40,610 541,004 518,495 income tases 1 I ,4 2 N 1,260 2,767

& auumpan.,mg Nmn in hnandal Mawmenu are an muyral pan of ihne uenwnn 12

STATEMENTS OF TAXES n mi, ma n,* o ( ... wm lor the Tran I nded Iku mtw 11 1990 Ime s lw k suma,-v.m w.ww .=.- m cm= m m.w._n . amau_ a.:a.nza (ItL d !L, bu',4fid )

General Ines:

State grou rempti 511,642 510.017 5 93Hil hat ant' i, rsonal progn sty 6,17i  ;.8 14 6,004 5 tate opnal sit d 1,967 1,7 ; i 1,42i Nu t.il wt unty and unrinpim ment 1,712 1.h t i 1,54; Other 191 226 147 Ltat yenetal tnes  % 21,6N I $ 19,4 h4  % I h.621

.um==. w m = m u: n m =

Prmision for In(ome la5cs:

Curtrntly payable -

lederal $ 1 1,91 1 5 1.0$0 $ 1392 Statc 1,054 (l27) 16,967 1.080 1,46;

. . ~ - . - . ~ - - - . _ _ - - _ . - _ _ . - _ _ - _ . . , _ . _ - . - . . . _ . - - - - _ . - . . - . _

l k4cned. net (we in low)-

lederal (2,011) 18312 I;.hus State (1,454) 2311 2,421 21,041 18,119

, - _ _. _. ..(lcl H S) -- - -

Imeument in iinhts, net ut amortuanon 2,691 (1,171) - (748i

'Iotal prousion Ior int ome turs %16,171 500,952 521,0 in

==

Income statement Clawilk ation of Prmision for income lnes:

Operating int ome $ 1 1,N I N 519,644 520 309 Other income 2,125 1,108 ;27

-._, - . . - . . - . . - - -- .- . - . . -~

btal prouunn for im ome ines -- 516. I 7.I UO,9;2 $ 21,016

_ _ - .u = = .m =:e m o _.-_ ---===.3 Sourt ra ol' Deterrett in(ome lases:

l u ru of in oser book depret sanon, art 5 6,958 57.0;8 5 7,24; lidlerence between in and book rnenue, net (1.216) ILol; 8,9 17 Allowan(r for borrowed funds uwd dunng ionstruttion -

680 ' 024 Deferred furi t osts (H,171) n .202  ;,16l

[kierred l'rtry limt i i osts -

(II)  ;,071 Amorttiation of drierred internt on leawd nutlear luci (1,064) (1,12 ;) (1,1;o)

Property tan (1,675) 89 (;41)

Alternante mimmum in iredit delerral (5,771) (1 till (4,M62)

Operating ton c arrytorw ant 7,105 2,244 (1,729)

Pension t ous I,14 I (46) (178)

Other.nte (1,2HI).__ 178 _(4;9)

Net drirrred income ines  % (1,4NS) $ 21,04 ) 518.119

__m_ .. ...m._ .

- mmm.,

Iterondliation of letteral inc ome 'In i spense at Statutory Itate to fotal Prmision for Int ome Ines:

thiok income before prouuon for int ome tnn $ 41,69 2 5;; 612 5 ;h,996

_.m .._ .

Iederal income tu espenw at uaiutory rate $ 14,17 5 $ 18.908 $ 20,0;9 Int reaws (redue tium) m tan roulting f rom:

State me ome enn. net ol'iederal int ome in lienefit 1,056 1,6;7 1314 Amortitahon al imntinent in t rrdit (1,947) (1,;12) (1,690)

I uvu of book user en deprn iation, not 2,280 1,9 lu 1,181 Other, net 609 (10) (18i

~lotal pimiston for nu ome ines $ 16,171 $ 20,9 5 2 5 21.01h w:_.===a -- -

1,'

,%L t aif11lM PlylM( b.1f,*3 l(2 ;fMlb iJk klJI,'lhrllli df,' AV) jf dg'{I .l! l#.4 fl E d {!),' g, 114!, f 4L, l41) 13

NOTES TO FINANCI AL STATEMENTS . .

i

1. Summary of Significant Accounting Policies: 516,174,000 reserse to rnogniec the potential unpairment of I he Company, a w holly <m ned subsidiary of Ohio I dnon thn anet. ~lhn rescrse redut eil net inuune by 59 "+l,000 in Company (1 thmn), follows the au ounting poht ies and practa es the tourth quarter at 1940.

prescobed by the Penn9hania Pubbt lltihty Comnuwbon litility Plant and Depreciation-tlohty plant reneus (PPtlC) and the lederal 1 nergs Regulatory Comnuwinn (1i KC) the ongmal unt of (unstruc tion, in(luthng pay roll and ietated Resenues-The Compann retail t ustomen are metered unts sut h as taxes penuom and other innge benefits admm-on a cycle basit Kewnue h reuignved for elcunc scru(e istratne and general c osts and alltmance for f unds uwd during based on meters read through the end of the month. Rt lett nt e omstrut tion ( Al til)C) is made to Note 2 with respet t to the CompanyN pohry ot 't he Company pnnides her depreoation on a straight-Ime ret ognumg resenues in tonnet non with a rate phase-in plan. bam at sarious rates mer the estunated Ines of property Rn cisables trom t ustomers include sales to residennal, included in plant m senis e. The annual (omposite rate for conunertial and industnal customen los ated in the Company's eleu rit plant was 2M% dunng the three ytan ended senice area and sales to wholesale customers. These is no 1)n ember 11,1990 't he Company reuignites estimated f uture material (oncentration of in enables at 1)nember ll,1940, detomnuwionmg costs apphcable to us <m nership imerest m with respect to any particular segment of the Company's two nu(lear generating umts as a component of deprniation customers expcnse. t he Company's share of the future obligation to Resenues f rom Sharon Steel Corporation, the Company's deuimminion these umts in current dollars n approximately largest customer, anuiunted to approximately 528,155,000, S39,000,000, based on estimates used in the ( ompany's latest

$29,11;,000 and $27,862.000 in l'No,19S9 and 19S8, rate tihng Amounts retosered hom customers are msested m respectively, representing 9 4"u,9.7"o and 10AT% respn tisely, external duomminionmg trust f unds. If the actual costs of of the Company's total operatmg rnenues. On Apnl 17,1987, dn ommissiomng the umts eu ced the atrumulated amounts Sharon Steel fded a Pention under Chapter il of the lederal reunered inim customen, whn h base been imested m the llankruptcy Code; a emerged from bankruptcy on 1)n ember 28. trust tunds, the Company expetis that ditterent e to aho be 1990 under new ownership. reunerable trom its customen.

I uel Costs-The Company reuners fuel and net purchawd Common Ownership of Generating f acilities-The power costs not otherwise recmered through base rates from Company and other CAPCO companies imn, as tenants in as customers through an annual"Inthred" energs ont rate uimmon, sanous power generatmg fatihnes. I ach of the (1 CR) The 1CR, whith includes adi ustment for any mer or uimpanies is obbgated to pay a share of the umstruuion (osts under collection from customers, is recalculated each year. of any tomtly ou ned tatihty in the same proportion as us Au ordingly, the Company defers the ditieren(c between actual ow nenhip interest T he Company's ponton of operating energs costs and the amounts currendy reunered from ns expenses aswiated with jointly ow ned tacihties a ms tuded in c ustomers. the u>rrespondmg operating expenses on the Statements of On January 22,1988, the PPtlC einered an order Inu>me p.ee thw union below with respect to the deferral of instituting an unestigation into the justness and reasonableness Perry tinn I costs). The amounts reticued on the llalant e Sheet of the Company's proposed LCR.1he proposed 1CR mduded, under unhty plant at 1)etember 11,1990, mdude the follow ing:

among other things, the months of the costs ot purchasing unu  % ua u - nmn ( gms 12 megawatts of Perry L. Inn I capacny f rom Cineland Iin tnt nm nemon u w,a m om ,enme

""""*""'" '"'""" "4* """"" h"'""'" '""""

illuminating Company (Cl 4 as prmided in a 1980 agreement among the Central Area Power Coonhnation Group (CAPC( h ii n hanN u H sanmm #7 5Wm i i1300 5 200 20 80%

tompames. The remainir.g i 1 months of the CL I purthase were to be reflected in a subsequent i CR tThng. On April 28, lirut e Man &ld

1. L #2d"d " *"'" U 2"" *"

• 1988, the PPtlC disallowed all nr.ts att ributable to this purcha3e "'

• d" \ ^M # 1 2 "' *" ^" 2 "" '"""

to the extent that such costs exceed the Compami aserage energs costs. In 1989, the Commonweahh Court of Pennsyhama P('""h"d

2n.

atiltmed this dnision; howner, the Supreme Court ut i aon loo. uio n ,wo L uio

.000  ;.2 h Pennsyhania subsequently agreed to hear an appeal of the rerry n2 - --

Commonweahh Court's decision. Oral argument has been set ia pyx y so 99, s s,uon for March 5,1991 and a decision is not expected beh>re late

"#"""#"""4'"P"""""'""O*"'"#'"*"""

1991 or early 1992. It is antiuPated that whatner the outunne me im m before the Pennsylvania Supreme Court, the matter w di be Nuclear i uel-Ol 5 l uel, Incorporated (01 S 1 uel), a appealed into the federal court suiem. Due to the omtinmng w holly ow ned subshhary of I dison, is the sole lessor for the untertainty regardmg this mattek the Compam pnnided a Company % nuc lear fuel requirements. Minimum lease pay ments during the next the yean are estimated to be as followC 1991 512.28 Hioo 1%2 l l .2 2 2.000 twI 7,203.000 1 n' t t  ; 122,iWWi im; 1. W/ 9 io l

14

. +

The Company amorti/es the ont of nutlear fuel based on M A$ No. 96 untd 1991 lloweser, if the Company had adopted the rate 01 ( onsumption. T he Company's electric rates intlude the standard as of De(ember ll, lWo, total aucts wouhl hase amounts for the future dnp<nal of spent nutlear fuel based increased by approximately $200,OtHUMIO with no material upon the formula used to oimpute payments to the 1.inited ellet t to net inwme.

$tates Department of I nergs. lletirement llenclitsdl he Company \ trusteed, non-Allowaner for i unds thed During Construction- (ontributory delined benefit pension plan unen almost all AlllDC reptesents financing (mts capitah/cd to wnstruction tull-time employees. llpon retirennent, employees ic(ene a work in progrew (CWlP) duimg the wnstrm tion period.1 he monthly penuon based on kngth of senite and wmpensa-borrowed f unds portion retic (ts (apitah/ed intetest pay ments tion. The Company uses the proiet ted unit credit nu tlui for and the equity funds portion represents the noncash capital. tundmg purposes and was not required to make pendon wn-itation of imputed equity wsts, AlllDC saries au onhng to tributions durmg the three yeon ended December 11, two.

(hanges in the lesel of CWIP and in the c ost of capital.1 he The folkmmg sets torth the funded status of the plan and AlllDC rates (culudmg nutlear f uel interest) were 8.9%, amounts rewgni/ed on the Italante Sheets:

10.9% and 10AN in 1990,1989 and 1988, respet tnely. ytw,% n e rin t ,.n

• ==="

Ca >italvation rates for interest on nuclear fuel were 8A% on ih,wn.N 10.1% and 8.;% in 1990,1989 aml 19M, respe(tisely  % tuanal preu ni ulue of beneht othganons income laxew Details of the total pnniuon for inwme W benes ssu u suim taxes are sh<m n on the Statements of Taxes. 'Ihe deterred %nscued benenn no x,2 inwmc taxes result in>m timing ddferences in the recognition w umulawd brnent obhganon is4.124 s s 1,o%

of.resenues and expenses for tax and accounting purposes. I"# 2 5 "" '"" 4 The Compam expects that deferred taxes which hase not been A tuar.a1 pitu ni ulue or pnycard provided will be collet ted from its customers wlien the takes k nrht obhganon 72,s ! I 67.2s2 become payable, based upon the estabbshed rate making tian anen in emsua pnneuM practices of the PPl.lc and the H RC. As of December 11, s.n o obaganon mm gi,s u 1990, the cumulatise net mcome tax timmg <htterences for unrcu,gnved net g.un p.s203 g a,a so) which deferred inwmc taxes hase not been prosided were tinrecognved poor senu e toc tsk2 1.824 approslmately $ 10(MMM),0(M). linirt ognved net tranunon auct (12JilM) (i t.691) 1hc Company defers imestment tax (rechts (lTC) utth/ed Na prnen ma ih.dani s Ws 5aum and amorts/es these credits to in(ume mer the estimeed life of the related property 'lhe lax Reform Act of 1986 repealed 'Ihe assets of the plan consnt primarily of wmmon stm ks the ITC cffectise lanuary 1,1986, cuept for (criam transition timted states gmernment bonds and wrporate bonut Net property As of De(ember 11,1990, approximately $;,000,000 pennon wsts for the three years ended Det ember 11,1940 of unused llc was asailable to offset future federal inwme were computed as folkms:

taxes payable, of whith approximately 51,000,000 expires at p,,o m m the end of 2001 with the remainder exIsirmbi at the end of on % # io 200L The Company aho has approxtmately $15.;00,000 of scrwe tourbenenn carnra alternatise minimum tat credits asailable to ofhet future dunng the prom! $ 2.Ho 5 L61i $ L480 federalincome taxes payable; such credits may be carried inten u on pneted benent ohhganon 1871 s,90s sasa forw ard indeqnitch knurn on plan assets t uo 0 7a92) g i .999

~1 he I-inancial Auounting $tandards lioard (1:Ahll) inued No deterral umortvanon) O s,m> 8,1 u t s2i

~

$tatement of Iinancial A(oounting htandards (SI %) Nu 96, Nei penuon i nst 5 t 1,wo) 5 161 5 490

=-

"Accountmg for Inwme Taxes" whk h, among other thmgx requires a (hange in the method used by enterprises to auount The assumed dismunt rate used in determining the at tu-for deferred income taxes. l.Inder this standard, deferred arial present salue of the projected benefit obhgation was 9%

income tas habihties must be recognued at the statutory m each year. The assumed rate cf increase in future compensa-income tax rates in effect when the liabihues are expected tion lewh used to measure this obhgation was ;% in 1940 and to be paid. The standard also requires recognition of a deterred 1989, and 7N in 1988.1he assumed expected long-term rates tax hability for tas benetits that hase ptermusly been tkmed of return on plan awets were 11% in 1990 and 10% in 1989 through to the Company's customers and an assumed deferred and 1988.

tax liability apphcable to the equity wmponent of AlllDC, for which no income tax timing difference exists under the prior income tax auounting standard. Since the Company expects that the adihtlonal deferred tas liabibties will be ( ollet ted from its customen w hen the taxes bewme payable, an aoet will lw rewgnued w hen the Company adopts Si b No. 96 for that probable future resenue. The Company is not reqmred to adopt 15

NOTES conunued t he Company prmides a nummum amount of nonum- I dnor 'o the Company t )ther mterest expense inc luttes inbutory hic insurante to reured emphiyres m ad<htion to 5 2 IOhJO and $ 2,01 hotki relating to loans f rom i dnon during optional i ont ributory insuranc e, llealth ( are benents, w hich 1990 and 1989, respet tacly include (ertam employee deductibles and uipayments, are also supplemental Cash i hms information- All temporary asadable to rented employees their dependents and, under ( ash imesonents purt based suth an initial matunty of three (crtain drcumstant es, their sunnors. Ihr Company pays mombs or icw are reported as ( ash equnalents on the Balant e insuran(c premiums to (oser a portnin of these benetas in Sheets 'l he Company c onh temporary ( ash imeu ments at excess of set hmits; all amounts up to the hnuts are paid by the cmt, w hu h approximates Acir market salue. Nont ash hnanting Company I spenses assouated with heahh care and hte msur- and imestmg attisuies mcluded opitalleases ot 58,714,000, ance benetits for retirees amounted to $1,0 MJMio,5526JKH) 58,997JMM) and $4,5; hood for the years l'No,1989 and 19s8, and 56hhjux) m twt 1989 and 1988. iespet tisely. resputisely Nont ash imestmg attnines aho mtlude allowan(c 1he i Ahlt recently ieued SI AS No.106, "I mployers' ior equm tumb used dunng uinuru tion.

Acuiuntmg for Postretirement lienefits ()ther Than Pensions l' 2. Rate Phase-In Plan:

w hic h mochties the c urrent an epted method to be used by .t he 1,i, lit. granted the Company a base rate increase, clin tise enterpnses to au ount for other postemploy ment beneh,tt May 4,1958, designed to produ(e approumately flu _,100,000 linder the new standard, the t.empam wdi be required to

< of athhttonal annual operau.ng resenuet .Ihe inacase is bemg recognize the expected cost of prmiding pmtemploy ment phased in (ner sescral years, suc h that all anklunts delerred benetits to employees and their benen,u, anes and uncred dunng the phasedn penod w di be fulh reunered bs the end -

dependents f rom the time employees are hired untd they of the fourth year. llnder thn phase-m plan, the (. -ompam s -

become chgible to receise thme benetitt .I.he t.ompany expects rates were imtially mercased to produce approumatch -

to adopt the new standard prospectisely in 199 L liased on 524JHxuMK1 in a&htional cash resenue: the second year current plan demographics,it is estimated that annual post- increase of approximately 528 Axxt000 was implemented in employment benet,it expen4tw udl in(rease by approximatch -

1959. .T he (htlerent e between resenues auually bdled and 515,00A000. Ihe t.ompam expects to seek regulaton appnnal sesenues that would base been bdled absent the phasean plan to deter the increased annual expense resulung f rom the new was retogmeed as a&htional atcrued resenue for tinant tal standant for future < ollection from customers it apprmal is reporting purposes I he c.ompam began reunermg resenues - -

granted, the t,ompany would not expect a matenal adscrse preuoush det,eired in Mas 1990, when rates were increased ef fect to net intome as a result of adoptmg M AS N,o.106.

approumately $28.000,000 on an annual basis.

Deferred Perrs tinit I Costs-Ihe L.omIiam was Au umulated resenues and associated internt aa rued authorized by the PPLIC to deter Perry llmt 1 operation and -

f,or f uture (ollecnon in connectmn with the phase-in plan maintenance costs (net of energs savings trom the unith amounted to appmumately 551,154.000 as of I)e< ember ll, depret tation expense, property -: axes and interest expense 1990 Au rued customer rnenues rn enable w ohin twehe begmning with its N.osember 18,198e , commerc ial operatuin months base been rniasu.hsed on the 1989 Balante Sheet to date untd May 4,1988, when terry limt i operating unts contorm to the 1990 presentanon.

were recognized in the C,ompam,s eleuric rates,

- As :hst ussed in N,ote I abme, sharon Steel Corporation Tramactions with Alliliated Compam,es-Operating liled a l,etition under (,hapter i l of the lederal llankruptn -

rnenues for 1990,1989 and 1988 include 51 L727,000, L.ode on April l i,195 e . he llankruptcv (.ourt on Ot tober 6, -

$11,108.000 and 55,816,000, respectneh, attnbutable to 1990 apprmed a repaurent plan whereby $haron Steel agreed trarnactions uith i.dnon. Such resenues resulted primanh- t.rota to pay the (,ompam arprou. match $_i,800,000, includmg Edison s purtbase of. capacity trom the t,ompam,s ou nership mterest, mer a t,ne , ear pen.o d begmning in May 1991, As a interest in Beaser \, alley limt I and Sammis Umt 7. N. et .

result. unng 1990 this amount u s transferred f rom accrued purchased and interc hanged power retin ts charges ot.56.n _ JMxh cuvmcr re enues to other imeuments and rnenablev 510.091,000 and 59,809.000, due to the Company's net inter <

3, Leases:

change power transactions with I dison dunng 1990,1989 amt 1988, espectisely. I uel expense for 1990 and 1989 inclub i he Company leases c ertain n ansmisuon fauhnes, computer

$15,890,000 and $5,66 L000, respectisely, for nucimr tuel equipment, ollI(e spac e and other property and equipment leased to the Company by 0151uel. Other operation espemes under canc elable and nom ancelable leases. Consistent with for 1990,1989 and 1988 molude 56,202.000,56,619,000 the regulatory treatment, rental payments for capital and and 5 5,87 LOOO, respectnely, primardy attnhutable to trany operatmg leases are (harged to operanng expenses on the Statements ot Income. Sut h ( osts for the three years ended mission kne rentah and data processmg senit es rendered by 1)n embe r 11,1990, are summarized as folkms:

n.n nsi em

~

{ 73 ! M1,5 selN' h!

\m< >f tl/af u m of (ajntal irau s $ 5,l 24 $ 2,l O 3 $137h Imeres on i agmal leau s I,VH I,Un I , iM

( ycoong icases IMO 1,294 1,177 loul n-mal su,na nn $ 1.1 x 2 $ 4 Mo  % I2n 16

9 4

~lhe f uture nummum leaw pay ments as of Det ember 11. Amounts s}nmn abine for 1991 im lude 515.000JMHD of 1990, are: 11.;o% $enes li and 5400,000 ot i I (xr% $enes preferred

( pou upm.w sna k opuonath redeemed in January 1991, I- Imo (d) I ong.lerni Debt- I he mangage .md its supplenu nis, on osmmx. whk h senne all of the Cornpann thst nuntgage tunnh, wne pry g 2,.y 4 $ m as doeti hrst niortgage hens on substantially all property anni 1992 2 241 17i f ram hhes other than spet theally cu opted property, on ned b) peu 23 09 i4o the Company.

} (y) ) l ,yt in( }g7 15astd ein (Ile anunint (d bands auNientit ated Ivy (be pra i .no ni trustee thiough De(ember 11, l'FH), the Company's annual wn thi n ,mer 14.919 2Am smking and improsement tun I iequirement for all bomh

' total nununum Icau p.n nu nn 2 ( 101 i Lu4 inued under die inongage atnounn to $1 J20JHn Hic r _m Company espeen to satnly dus tc<[uirement in 1991 by I m uion onn 4.sx i (crobing unhmded puipeny .uldalons at Mif. 2/Pu of the Nrt nummum Ir.ne pnnwna Jo.4 t h h41uired anuiunt.

Interest pirnon 11.I70 Sinking lund requirrinents for t ertain wrics of first hewni ulur of not nununum umngage um an m,u u ng ong tenn % WImhng leaw pa3menn 9.218 t alutal le.ncs) for the next the years are.

I m i urreni pornon- . - - . 1.0 u --- -- ~ . - - - ---

. . _ . . . - - . ~ . - - - .

pp,g ggg pgg Non urrent punon $ M 214 pg , p 19, i 12 9 93nu>

4. Capitalisation: Pru uoLono (a) Hetained I'arningwlinder the Company % ( hattet, een ata,ssjuni the Compan6 retamed earnings unrestrit ted for payment of(ash dnniends on the Compann < ommon sto(L were Amounts show n abose for 1991 im iude 5 2 7.04 8,000 of

$49.157JHio at Det ember 11,1990. thst mongage bonds opoonally redeemed m lanuary 1991, (b) Preferred $tod- t he Compann 11% and 1 % l he weighted awrage uiten,t rates show n on the State.

series of preferred sto(L hase restnetions prnentmg early menn of Caintahzanon relate to longerni debt outstandmg ai redemption through new muant es of securities hasing miciest D" ember 11,19% 'Ihe Company N obhganons to repas or dhidend rates leu than the disidend rates of the series (crtam pollution (omrol rnenue bonds are secured by senes being redeemed. M1 other preferred stot k may be redeemed in of firo mongage botuh and. m sorne iaws by suNmbnaic whole, or in part, with at least 10 days but not more than 60 hens on the relaird pollunon (ont rol tat ihnet dap nout e. The opnonal tedempnon prkrs show n on the 5. Short Torrn Financing Arrangonnento Statement, of Capitahiation w di dechne to esentual mmimun" the Company has knes of (reibt with banks that proude for per share acconhng to the Charter proviuons that estabinh borrow mgs of up to %5.000JH60 under wlous inn n g noe each seriet opnons Short-term borrowings may be made under these hnes (c) Preferred Stod Subject to Mandator) of creda on the Compann unweund notet 'li anure the Redemption- Annual sinking fund proustons for the asadahhts of thne hnes the Compam is reqmred to pas Company % preferred stos k are as tollows: c onunanient lees duu q ins , lid on 1/2% ()t thcE total

% %n nu v..mr knes, $ 5,000,000 expire in Dn en6 e 1991 and may be 824% s.ono lirt en,her i oi (am rkd by die banh ,u any ume il uma. d; the remainmg i 1 ot N IJHN) Januan i Op hnes of( redit are noneancelahle and exye i . May 1941.

I s ot s L200 luh li oi 'l he Company aho has a ( red:t agreement uith i daon i i s0% 1 ;Jioo Juh 15 m w hereby either (ompany c an borrow tunds f rom the other by lIoo%  ; 000 July i N nsuing utoct uitd notes at the presading pnme or smular s om unum Apnt i 20 m mterest rate Undet the tenns of thn agreemeia the maximum ol kennnirno of dm o m 5 hm bqun Preferred shares are retired at $100 per shaic plus a(crued dnidernh. 't he Company's sinking f und requnements for the next the years are.

,D ,

Pell L 2 20,0i H )

194 i L210 000 PW6 n2 20 000 Vrn L .2 20.000 l 17

NOTES continued , ,

borrow mg is hmited only by the asadabihty of tunds howner. Based on $n tion ;20 of the Pennsyhania Puh% linhty the Company's honowing under thn agreement is cunemly Code, the Company behon n uiuld reuner its imntment m knuted by the PPtlC to a total ot $;0.00tVHH) I nher Perry Umt 2 unh respett to as PPUC junuhttional(ustomers it a det ision were made to terminate the titut. 't he Company's

< ompany tan terminate the agreement uith sn months noin c.

6. Commitments, Guarantees and Contingencies: " P"" d "" I "' "' "' " "" h" " ""'d at that tiene by the dihen nw bducen the (ou of Peny una 2 and the prmnt Construction Program-The Companyi current budget salue of nwenue to be cohued fnnn retad junsdicoonal forecast reflects expendnures o1 approumatch $187,0(HunH (ustornas apph(abk to the Uiut for property addittom and improvements from 1991 through 'Ihe iiIW has rnbed its pohcy w nh n *pect to rnmermg 199;, of whk h approximately $ 12,000,(KH) is apphcahic to the (osts of terminated (onurut tion pnyet ts As a result, it j yg g ,

Peny Una 2 wen innunainh the Coinpany wouW be rniuired The CAPCO companies are continutng to rnicw the to wtue ou onehah of ns insesonent apphade to in iI K status ut Perry tinit 2. Currently, no signdh ant work is being I""'dwtional(uaoinen d and to the extent that the 11 K performed on the tintt and the Compam does not tapnahu toised poh9 n appkabk Unda sua i kuinuantn, the AlllDC. lintd reuew of the status of Pcrn linit 2 has been nunaining tosa, plus a nqurn on the unainonind uncunu nt, completed, there will be no defined sched'ule lor us com- wouM be recosned inon in 11 RC junwhctional customers.

pletion: the construction ntimate for the 1991-199; period Guarantees 4he Company tognha w nh the othe does not indude any amounts appik able to Perry linn 2 if CAKO (onipanin, has snaal guarantn, of(enain debt and construttion of the linit were to be resumed Possible alterna. leaw obhganons in (onnn tion wuh a (nal supph (onnact tises being rniewed with respnt to tinn 2 mclude indetinite for the lirme Manstield Plani. As of Da ember 31, l'FH), the suspension c6 construuton on the linit, resumpoon af work Coinpany's aan of the guarantn uas $l83WHun 1he on the tinit and termination of the linit. In acwrdance unh pn(e under the coal supply wntract, whnh indudo certain the CAPCO arrangements, none of these alternatnn mas be rnininuun pay enu, has been doennined to be sufhcient to implemented without the apprmal of ea(h of the CAPCO sansty the debt and Icase obligations. T he Company's total c ompanies, p y nwnn unda the coal supph connaa amounad to Duquesne Light Compam's (Duqunne) claimed "de tauo" II LS "J"% bI I M'Joo and $11 U E000 dunng 1990, abandonment, for rate making purposes, of its 1134% internt 1984 and 1988, nwpansely llnder the mal supply mntraa, in Perry linit 2 was anepted by the PPilC in a 1987 rate dw Coinpann tutum innumuin paunenn am:

order and Duqunne was allowed reunery of as msestment m -

Perry Unit 2 mer a ten year penod. Duquesne has adsised the poi s "' 90 u n i i,PtlC that a wtil not agree to the resumption et wnstruction em ' m.uou of Perry linit 2. Duquesne's decuton was independently made em Lemmi and does not represent a decision on the part of the Company gg, to abandon Unit 2 tor rate making or any other pur, asn. m uWm flowner, any future decamn on the status of Perry una 2 will gg g inyp, hase to take into account Duquesne's pmition and ways will 1:mironmental Matters 4arious federal, state and local ha$e to be found to accommodate this position if conuruction on the Unit is to resume. authorities regulate the Company wah regard to air and water As of December 11,1990, the Company had imested quahty and other emironmental matters. The Company has approximately $5;.600,000 apphcable to Perry timt 2. Delay ntimated additional capital expenditures for emironmental in the completion of Perry Unit 2 can be expected to increase mmphante of approximately $14,000,000, w hish is induded in the comtrutnon torecau under "Constrm tion Pnigram" its total cost by amounts whwh are not presently determinable, If a decision were made to terminate linit 2 tertain msts for 1991 through 199;. Addnional amounts may be required which are currently anigned to Umt 2 uould be reassigned, due to the Clean Air Ac t Amendments dncussed behm.

On Nmember 15,1990, the President of the United States where appmpnate, to Unit 1. Ilowner, cancellation charges payable to contractors and other costs o1 termmation couhl be signed the Clean Air Act Amendments of 1990 (Act). The Act incurred. Pendmg completion of the C APCU rniew, the requires significant reduuions of sulfur dioxide ($O ) and 2

Company is unable to preda t whether the construction on oxides ut nitrogen from the Company's ,oal-fired generating Unit 2 will continue i.r. if continued, on what basis such units by 199; and addnional emission reductions by 2000, continuation will proceed. Comphance optium include, but are not hmited to, installing addmonal pollution mntrol equipment, burning less nolluting fuel, purchasing eminion allowances f rom others, and retiring f acihties 't he Company is reqmred to submit comphan(e plans to the I mironmental Protn tmn Agency (1 PA) indicating how as f acihnes a di mmply u nlun 27 months of enactment.

Ihese mmphan(e plans muu be musistent unh regulations that the I PA is to promulgate withm 18 months. In addinon, the 1 PA is required to perform studin, the first of wha h is 18

due within three years of the potential haraoh to pubbe i hangn to ( ntam pun tuons I mal regulanons are espn ted to I heakh antiopatnl to ou ur as a sesuk of the emnuun hy be twurd in mni linal. t he ( ompam n unable to pinhet cleurir unhties of(crtam potentially haranlom air pollutants the requorments of the final regulanom and the ont of

~lhe i PA is to subnut the resuhs of these stmhes to Congiew t omphatu c-together with in ommendations for f urthei cont rol icquue- Wnh respnt to the emnonmental matters dest nhed mentt 't he Company h naluatmg the At t and the satmus alune, the Company espn is that any resolung adshtional t omphan e opfluns asailable and has not yet deterhunul the a apital ( Osts w hn h tuas he requited, .n well as any rujulted ultimate ont of tompham e. im rease in operatmg t osts would ulumately he in metal in Aptd 1988, wseral uates the Prmim e of ()ntano and imm its ( uuomert moral enuronmental giou}n peutioned the 1 PA to (ondut t a 7. Summary of Quarterly Financial Data (Unauthted):

rulemaking under Se tion 11; of the Clean Air At t. $ct tion t he folkmmg sununariers < ertain operaung snults hs quatter IUi is that portion of the Clean Air A t uhk h addrenn g g,g g g pollution at nm miernational houndancs. lhe petitioners (laim that the I.PA has alreaih detenmned that soon es m  % , %g, g,y, " 7,"m" '"llj," 9 "ll$'l'" ""',' [ "-

midwestern staics i ontt bute to air pollution w hu h they allege -

h endangering puhh4 health and welf are m Canada, t he i PT h bemg asked to ofth ially confirm this deternunatmn, I he '9""""R """' " #" "* C#' I*

< qwranny i spi nn 1 PA has informed the petitionen that u don not penenti) andIE N-h w unn Rim R'u hase sutlinent information to au on the Iiconont ~l bt < >pnanng ino.me pwo p a io 20.0 0, n.no n

(,ompany b unable to plethu the out(ome of thn prm ceding- <nin in,onw and During the past sevetal years, the 11.5. Court of Appeah nyam non, 375 giu nyo 4 o, for the Dktrki of Cohnnhta rnerwd sneral Ogmth ani .se inu n.u pt t2s to ss2 io,sys ioy;o portions of the l PA's regulations on the methods uwd hs the g g w ,,. g ]~~ '{ygg $ yggg ,

ghjd j 4 ggf,;

i PA to detettume the amount of sta( k height (rnht for -- - = = = = ~ ' = - - -

estahintung mihs hloal soun e emhston hnots for M h. Poroons Ianunc d m of the latnt 1 PA regulatium were inetwd and remanded hs YI " " ("

( ommon % L s n.ksi 5 7,o i 1 5 7.7u 1 s in m 2>

the (,ourt in january 19Mh as a roult (d appeals hy the m- _. anum.m m = = urm=2= wns e - w r.mm w.m m m Company, Ednon and others Aher the ! PA promulgato new regulattom m confornuty wuh the final Court det mon in ihn gn, , y,, gg "'l 1 "' '"ll,j" M"l[ '" ""ljl "-

matter, Penn9hania and Ohio mmt then iniew their eminion - - - === - ==w - e ~ -

hmits to en%1re conIormance With the new I PA regulati<mt

• • ~*

Suc h reuen (ouhl roult m more sirmgent emtuton hmits for P"'""K "'""' "U" ""'" * * ' I '"'

( ywraung I qwnm some exhung plants and im reawd (apital unts and operating gg gg , m gggy syg expenws,'Ihe Company n i urrently unable to prnhs t ihe '-- - ~--

- c - - - -

opoanng ino,mc nun to h i s A>u  : iw outt ome of thew Iiro(ecdinbN orbn in< ome and in June 1987, the ! PA announced regulatiom ( ovenng p g m nong pq gi i57 g3 jy small particulate matter emnnons from utlhty hmtert wi inmeq o.g s 7 i o,2m t op s i n.u; Although the Cianpany has an ow ner' dup internt in a gener, sg s ;,_ ysi7 Tgg i {goi ~ j~ Gs, ating unit in one of the two enunties in Ohio w here i PA ==> +----

Computer ImMichng predKts that eu cuiw unall particula!c I m nmp ""

eminiom w di he found, the Company h unable to preda t j '"i"[" i d j;2 i d *. I \"2 .

I D

the ultimate citect of thew regulations.

On lebruary N,1990, the Penn9hama Depanment of 1 mironmental Knouren inued propowd regulatium deahne with the storage, treatment, transportation and dnposal of residual waste sut h as coal ash and x rubber sludge. The proposed regulations impow suhstannal aihhnonal requur-ments relating to pernuttmg. ground aater monitonng.

leachate (olin tion systems, c losure, hahihty imurant e and operating matters.1 hew requiremenn ionhl rnuh m the dosing of or substanually mt re.ned operaung com at exhung Company etet 't he Company has subnutted detaded (om-ments on the propowd regulanons objecimg to and propoung is

.. - ~ , - . -. . . - .- .- .. . . - - . -. -- _ - - -

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS .

'lo the lloard of I)irectors of in our opinion, the linancial statements n terred Pennsyhania hmer Company: to abme present f airly, in all material respects the f) natal position of Penmyhania hmer Company as of December 11, We base audited the a(companying balance sheets and state- 19'H1 and 1989, and the results of its operation, and its (ash ments of capitaivation of Pennsyhania hmer Company (a ihms for eath of the three years in the period ended h nnsyhania corporation and w holly <m ned subsidiary of Ohio 1)c( ember 11,1990, in confornury suth generally auepted 1.dium Company) as of Det ember 31,1990 and 1984, and the au ounting principles.

related statements of income, retained earnings, capital stot L 'lhe status of Perry Unit 2 is currently being rniewed by and other paid-in (apnal, cash ihms and tases for cath of the the CAPCO companies. As dncuued in Note 6 to the financial i three years in the period ended December ll,1990. These statements powible abernatises being comidered include l financial statements are the responsibihty of the Compan)'s indefinite suspemion, r esumption of work and termination of I management. Our respan ibility is to expmu an opimon on the Umt. lietause the Company is unable to predict the results !

these financial statements based on our audits. of the rolew,it cannot mm predict if tonstruction of Perry We conducted our audits in accordant e with generally tinit 2 will be terminated and,if terminated, to what extent accepted auditing standards. 'lhose standards re(juire that we the Companis imestment will be reemerable.

plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material 1

misstatement. An audit includes examining, on a test basit  !

eviden(c supporting the amounts and disclosures in the financial statements. An audit also includes awening the f- g ,

a(counting principles usetl and significant estimatn made by . bullhk i ,

management, as well as naluating the metall financial Arthur Andersen & Cu j

. statement presentation. We behne that our audits prmide a New brk, N1 reasonable basis for our opinion. Iebruary 5,1991 20

. Directors Officers

11. l'eter llurg justin 1. Rogers, Jr, hemor Yn e Prnident Chairman ol the lioard of the Cornpami parent.

Ohio I dnun Compam. '

I^'"C'I'M*'kIC P'""I'"'

Ak ion. ( >luo Itobert ll. Cat-Ison }^"" N* I dE N heured, tornieth t on ultant \ " " I ' "" I" "' ' * ' " ')

""d""#'"II""""

and Prnident aEl Chiet I m utne ( >tlic er of William I; llecher tinnersal-Rundle Corporanon. a y, y p,,,gy n, plumbing listure manulas turer.

New Castic, Penny hama lloliert l'. Wushinske James it. I dgerly Vu e Presplent. M retary Angeline Comparone and General Coun,el %ntant b retary of the Company.

New ( astle, l'enn9h ania I rancis A. lanone

~

Assniant licasurer James I;. Markle Prnident of the Compam. Clarenc e ll. Dutituan New Castle, Penn9h arna' ^"htant 'In asurer Joseph J. Now ak Division Manager i secutne Vk e Preudent. James it. Topper Operations Cplops Men er County Industrin. Inc , a manufacturer of steel Mr Rqcts n prnidi nt of produ(ts, Pittsburgh* the pan.nt t ompan3 1he Penn9hania pongal emphment ut all llohert l'. Itamtall oper ona en a wuh the

( ompany Prnutent of Il4 ACO. a -

manufatture. of alununum windows and doors, Warrendale, Penn9h ania Hogistrur for William I; Itecher Preterred Stoch:

Vice Prnident of the Company. Iirst Senei a llank anil New Castle. Pennsyhania 't rust Company Washington Centre justir. T. Itogers Jr. ,,, g p3ggg Chamnan on the ibant of the Company, Transfer Agent for and Prnident of us parent, Preferred Stock:

Ohio Idnon Compam. '

Ak ron. Ohio ()tlite of the (,ompam -

New Ca3tle. PA 1610 b0891 Douglas W. hhappat I sci utne Vice Preside nt Principal Of fices:

of the Companyi parent. I 1. Washington Street t )hio i dnon Company, yg Ak ron. Oluo New Castle. PA 16101 Oh41 Director Emeritus et i 2) 652-;; 11 G. l.co winger Pennwhanu Power Company n an equal opportunny employer nu.a - ,1 n a e. r 21

O PENN POWER 1 E. Washington Street, F.O. Box 891 Bulk Rate M Ne av""' New Castle, PA 16103-0891 U.S. Postage (412) 652 5531 PAID New Castle. PA Permit No.158 Annual Report 1990

__ _ _ - __ _ _ _ _ . _ _ _ _ _ _ _ _ _ _ _ _ _ _