ML20081F163
| ML20081F163 | |
| Person / Time | |
|---|---|
| Site: | Beaver Valley |
| Issue date: | 12/31/1990 |
| From: | Farling R, Miller R CENTERIOR ENERGY |
| To: | |
| Shared Package | |
| ML20081F108 | List: |
| References | |
| NUDOCS 9106070080 | |
| Download: ML20081F163 (40) | |
Text
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ev i ebnuty 1,19'10.The timd late unreau ha afne
" ef fn.tn e on li bruary 1, lW1.
Centenor 1:ncro Corporalmn was fonnedin Atini . l'erry Utnt I set a icuiid for notlear n ators of its type 19% upon the al/sliation of Ihc Clocland filretric during a second fuel t y le a ben it seathed :32 dass of Illummating Cornparn and '1 he 'lolcdo Fdnon (ontmuous generation pnoi to starting a icfuchng and Company. With aucts of nearIr 512 bilhon, m.nntenant e outage on September ' The unit retuined Centerior 1:ncigy n one of the largest clct tne utshty to sertu e on January 4, IW1.
spterns in the nation. The Centerior operating 8 l$e.h er \a lley billt 2 collipleted 354 bys of Utnsecutn e comparnes serve .3.6 milhon people in a combsned (ijletatioillli juli. llle Illlit statted a tefuehng alhi servire art u of 4,.300 scluarc rniles in h,orthctrl Ohio C,entenor I:ncrgy is an equalop'portunstr Inalnte!UIRe outage oli.,b.epicinhef 4 aild w.n l).KI ill sersit e of) Nos ernbe! ., .
empIoyer.
' ISeept for a two da> intenuption.through und-l'ebruary lWl the Daus liesse Nuclear l'ower Station has nu, continuousiv sint e ieturning to sen a e on Julv ;
from a refochng and m untenant e outage.
CON'i ENTS ,
l.ettet to Sharc Ow nets , / As this Annuallbtort um in I"b"d N""' ' "d' "" d " d' Mnance & Admuustration: alhet were at uar u ah Iraq.
llehudding Our Strenc,th . . 4 Thu conMct l'ower Generation: Our l'ower llase 6 $ "['.',"{', .
Customet Operations: The Competitise Edge h valonplown of -m =
Management's Statement of C"d'""' I ? """ -
and affa ted thc lon llesponsihiht) for l'inatnial Statements .12 of inans of our sh.nc :
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lleport of Independent l'ublic Attountants .12 \
and then fana hrt Suininar) of Significant Accountma l'obties .13 'Ihosc urunon ihn war Management's Financial Analysis, hd'r our thanh for then pru cls n iontol'unon and h, nancial Statements and Notes .15 nu, p,,nen f a, a ,afe ,yn,,n thecutises of Centerior Energy Corporation and Centenor Service Company . .33 hnancial and Stathtical iteriew . .34 iloard of Directors. .36 Sharc Ow ner Infonnation . . .37 bjf t$f d fII% bf1)t l("1I el j .P {
I INANCIAl, SuststAin' i
hh 1990 1959 Change Earnings Per Share of Common Stock . $ 1.90 $ 1.90 -
Divu. % Declared Per Share of Conimon Stock . $ 1.60 $ 1.60 -
Ikok Vak Per Share of Common Stock at Year 1.nd . $ 20.30 $ 19.99 1.6 Closing Common Stoc k Price at Year End .. $ 18 $ 20% (12.7)
Common Stock Sharc Ow ners at Year i nd . . . 183,723 194,016 (5.3)
Common Stock Shares Outstandmg at Year End ((00) .. . . . 138,401 139,792 (1.0)
Operating itevenues (000) . . . . $2,367,675 $2,302,436 2.8 Operating Expenses (000) . . ,,. .. . . $1,863,099 $1,870,505 (0.4)
Net income (000) . . .. 5 264,459 $ 266,8% (0.9)
Return on Average Common Stock Eqmty . . 9.4% 9.6% (2.1)
Kikmatt-hour Sales (Millions of Kilowatt hours)
Residential . , . . . ... . . . . . 6,666 6.b06 (2.1)
Commercial . . . . . 6,848 6,830 0.3 Industrial . . , . . 12,168 12,520 (2.S)
Other . . . . . . . . . 1,107 1,425 (22.3) 1btal . . . . . . . 26,769 27,581 (2.9)
Emplo3ees at Year End . . . . . . 8,517 9,062 (6.0)
QUARTERIX RANCE OF LOMMON S~ lock PiuCES
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4 4 0 0 ne een'N ne f uds d )ea! o (xt(ht\orld k hdl}ne rdtes !No!c colnht tItNe ln the 01cdo Vdhson drea, for us as we worled to pln e the Company in a stionger thus mitigating local interest in mum (ipahtation of position to ,n hies e long-term enham ement of electiie sen a c. We ate developing demand side y our im estment. management programs to help customeis of Cleve A management audit completed in 1990 helped land I;lectric and lbledo lihson attain greater us athieve a maior restnn tunng and dow usiting of (ont ol over energy usage and (osts and,in turn, our organi/ation and a system wide wusolidation af ford us bette use of custing f,nihties.
of out operatlorB. We took a long, hard look at 'I he cunent ret ession has had some impat t on ounches thmugh this audit, w ith the goal of the Northern Ohio economy w hith hmits our bewming a more cost-ef fet tise organization, npet tations for sales and revenue gains in the better attuned to wmpete suuessfulb in the short term. Iloweser, this recession bears little esolving energy mallet. resemblatne t.)the far more severe feceuion of the knpmvement of om financialpoxitioniemains the e,uly 1950s w hith caused many fat tory (losings, prnnary fm us of out energies. We still are rewvenng, severe unemployment and other economic hardships as are many utihties, from a demanding noticar throughout the nation's industrial heartland. That construt tion pmgram tarried out during scars of ret ession prompted many localindustries to stream.
soaring inflation in the latter part of the 1970s and line operations and bewme more efficient. The much of the 1950s. We made progreu toward end result is a much stronger industrial base in fmancialimprovement in 1990 and the dividend Northem Ohio today.1.arge capital investments remained secure. In lu90, as in 1959, the <piahty of by our busineu and industiial emtomers demonstrate camings remained well above that of several prior their continuing confidence in the region we sene.
years w hen nuncash accounting credits were higher. The text of this Report paralleh the three sectors We are deditated to impmving the value of of our restructured corporate organi/ation- Finance your iinestment. We expet t inflation to put upward & Administration, Power Generation and Cmtomer pressures on olerating expenses duting the next Operatiom. All three set tot s are finnly conunitted to ses eral years. l .owever, w e inust keep our electricity ongoing cost wntrol, quahty semte ia customers prices reasonable in today's increasingly competitise and improved return for imestors.
energy market. To achieve satisfactor y earnings per share under t hese conditions, w e have made cost Sim erel),
watrol our top priority.
The management audit helped us identify the
- potential for no aily 5100 million in annual s.n ings /
in expenses. We al'cady have implemented many of the recommendations and npect to have +nost of
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the rest in place this vear. We are firmly ee.nmitted Richard A. Niiller, to realit..ag-and uhimately exceeding-the full Chainnan savings go.d.
Our innlear and coal tired units performed .
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wellin 1990. About 44% of our generation in 1991 p- _g7 r,
,s npmica io wme fmm nuacar energg hich has a lower fuel cost than coal fired generation. The j
Clean Air Act of 1990 wntains much of the flexi~
bility we long had urged, thus permit ting us to meet Rohen L FWim p,g.g the new emission stand uds prescribed for coal fired units with minimalimpact on elet tric rates.
We are determined to meet (hanging customer needs and to maintain high quality serva e -md to do so at lower wst. We are working to male our February lb,1991 3
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RATE INCitEASE EFFECTIVE As discussed later in this lleport, we did not apply the 2.74% rate inercase to many residential and ;
On February 1,1991, we implemented the last of '
three annual tale increases authorized in the rate sinall emuniercial customers in the 'Ibledo Edimn agreement negotiated with customer lepresentatives service area. Additionally, these same residential customers will have their rates reduced 4% by year and approved by The Public Utilities Commission of Ohio (PUCO)in January 19Sv. The rate ineicases end. Nedo Edimn's rates generally are higher than were part of a 10 year phase in plan designed to those of Cleveland Electric and those available ,
provide us the oppmtunity to earn a fair return on from the competition \\e concluded that a rate our allowable invest ment in two nuclear units. Unit I reduction was appropriate to levelize rates through-of our Perry Nuclear Power Plant and Unit 2 of the out the Centerior Energy spier, consistent with lleaver Valley Power Station. otn efforts to operate increasingly as one company, As a result of the agreement, Cleseland Elet tric and to retain and inercase our sales and load.
and 'Ibledo Edimn had general rate increases of 9%
effective February 1,1989 and 7% ef fective Tile FINANCIAL.Cil Al.l.ENGE February 1,1990. The 1991 increase was nominally The 1989 rate agreement and the resulting ra e set at 6%, subject to adjustment based on the ineicases helped imprme our cash flow and the outcome of a comprehensive management audit quality of earnings. As a consequence,the agreement ,
completed in 1990, put us on more solid footing with the investment We agreed to share equally with customers and community.
share owners the savings expected to result from The agreement includes a complex set of pro- "
the audit. Consequently, the rate increase effective visions regarding recovery of deferrals and carrying February 1,1991 was reduced to 4.35 % for Cleseland charges that will tend to constrain our reported .
Electric customers and 2.74% for 'lbledo Edison earnings through much of this decade. Competitive customers. This reduction from the nominal 6% pressures limiting rate increases and inflationary amount reflects half of the projected audit-related pressures on costs make it all the more ( hallenging savings, nearly $50 rnillion. The rate impact is dif- to achieve satisfactory earnings.
ferent for customers of(mr two operating companies We intend to meet that challenge. Aiding our because much of the sas ings will be achieved in areas efforts are about 5100 million in cost savings expected such as nuclear operations in which 'Ibledo Edison to be realized from the management audit. Customers stands to achieve greater savings rel@e to its size. aircady have been guaranteed their half of the sav.
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ings through the reduc tion in the 1991 rate increase, w hic h we are conentiv using has senalized us by Share ow ners will benefit as the remaining sa.ings requiring a greater depreciation e urge than we are <
hel ) to offset increases in costs and rate redintions alkmed to collect from customers. Straightline in t 1e 'lbledo Edhon sen ice area. We are committed depreciation for malcar units is more traditionalin to ac hieving the full cost reduc tion and to realizing the utihty industiy, and we behese it is now additional sasings through ongoing cost watrol. appropriate for us. If we are not allowed to use the acwunting treatment sought in this request,199)
AUDIT INIPl.EN1ENTATION PROGitES$1NG earnings wuuld be reduced by as much as 555 The management audit resulted in some 325 separate milhon, or 42 (ents per sh.uc, dependmg on the recommendations, many of u hich aheady are in performame of the units.
effeet. Most of the remaining recommendations Appnmalof the other request wonld allow us to are to be implemented in 1991. defer depreciation on new facilities in sen ice but The audit called for reducing our number of riot yet in rate base and to record carrying charges employee positions by nearly 800 froin the early on this mvestment. Assets placed in service after 19b9 bne of about 9,200. Most of this reduction 17e bruary 1988 currently carn no return and will was accomplkhed through attrition and through not untd the l'UCO allows them in rate base. This early retirement and voluntary severance progimas request,if granted, would give us an " LOU" for completed in 1990. Additionally, we are eliminating future cash recovery in cu hange for our de'aying about 1,200, or 50%, of our contractor positions. rate increase requests. If we are not allowed to use We have wnsolidated our operating units, Cles eland this proposed act ounting t reatment, earnings would Elec tric and 'Ibledo Edkon, and Ceoterior Servic e be reduced by up to S36 million. or 26 eents a share, Company into a single, tightly knit organization. in 1991, and esen more in subsequent years.
This allowed us to reduce the number of top liefinancing ac tivitics also are wntnbuting to managernent positions from b5 to 62. cost redut tions and earnings. In 1990, we We dosed four service centers after detennining refinarsed $167 nullion of high. cost debt and this would not negathcly impact customer serviec. preferred stock for a net annual savings of more We centralized our materiah management system than $3h nulhon in interest costs and prefened for greater cost control. We are working to simplify dividends. Additionally, under a forwaul refunding operating proc edures and centrali/c responsibilities agreement, w e will reduce repor ted interest in every area of the Company, expense some 53 milhon a > car m 1991 and 1992.
Corporate management audits and restructurings l'otential refinamings in 1991 through mandatmy are not unusual in today's demanding business and optional rederuption provisions reptesent dimate. Ilut ours was exceptionally comprehensive, about 55 million in savings a year.
Our audit induded participation from (ustomer representatives and other intervening parties rather than remaining completely under inanagement control, as is customary for corporate audits.
Integral to the audit process was our insktence that audit recommendations do nothing to lessen EN1Hl DDED CosiS the reliabiht y of our sen ice or compromise the safety '
OfIONGTFM\1ULHf of our employees or the public These conditions A N D I' E l W F D S I O G are being met. Our employees continue their tradi- he tionally solid job performance and dedication to n' o customer service despite tight cost controh and a reduced workforce. They are making the audit m-implementation wail.
STENIN11NG EARNINGS EROSION e-Earnings are being eroded by two fac tors, one of %
w hich relates to depreciation of nudear plant and the other to accounting for facihties placed in sen ice o-since IIebruary }938. 'IU stern thk erosion eare .
requesting two accountinF; orders from th s'UCO. , .
Approval of the first request would enable us to d O-accrue depreciation on a straight line basis and in an amount which inore closely abgns with the O 4, o-ta v amount recovered in rates llecause of the good - umm performance of our nudcar units over the last several years, the units.of prodoction method
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.. POWElt BASE Murrav R. Ihiciman, hecutiw %ce Pmident PIANT PERIORM ANCE OU'INI ANDING All three nuclear units received favorable reports Our nuticar capabilities, c ombined with our fossil in the rigorous Systematic Assessment of Licensee strength, gh e us adequate generating capacity to Performance evaluations carried out by the Nudeer meet current demand and expected modest load itegulatory Commission. We are pleased with the growth through most of this decade. perfonnance of our units in 1990, but we are not Perry Unit I,in w hich we have a 51% ownership, nitisfied. We continue making every effoit to ensure achievella 97% availability ratingover the 13 month the best operating practices and highest achievable period preceding a refueling and mainten.mee degree of safety, outage w hich started September 7,1990. Perry 'l he perfonnance of our coal units in 1990 also was resumed operations on January 4,1991 and ha's run imp:essive. They achieved a combined asailahdity well since. rating above 50% Unit 9 at the Avon Lake Plant, a The Davis llesse Nucicar Power Station, owned 5h0.000 kilowatt imit, achieved a 170 day continuous 100% by us, undernent a refuehng and maintenance run, the longest in it s 20 year history. The llay Shoie outage ' starting lanuary 29,1990. During this Station continued it s t raditionally st rong performance.
outage,we completed thelast of the series of exten. The 215,000 Lilowatt Unit 4 topped its 1989 site upgrades started in 1955. The plant returned efficiency performance which had ranted it among to seniec on July 3,1990 ar. has since generated the top 20 coal fired units in the nation.
electricity continuously, eu ept for a twAday inter. In 1990, control of all generating units operated ruption, for a 9b.7% availabihty record, by Cleveland Electric and 'lbledo Edison was con-Beaser \' alley Unit 2,in w h'ich we have a 44% solidated in a single facility, the Centerior System interest,achiesed a 93% availability rating during Operations Center. This consolidation translates the 13-month period preceding a iefueling and into optimum efficiencies and cost savings in the maintenance outage w hich started September 4, econmnie dispatch of electric power. The cornoli-1990. During that period, the unit completed a dation also facilitates power transactions with other record breaking 354 dav continuous nm. Beaver utilities. In 1990, such t ransactions added about Vallev 2 was back in sedice on November 22,1990 $25 million in excess revenues over costs. We are and lias continued its good performance. working to do as well, or better,in 1991.
6
CINTuluolt 5. %~nd awr to use naturc\ resourmili.
ENviltoNAIEN'IAI. PoldcY cic!alv %<<k uan $U 'wle U'atcHah aUd reJuce uaste. Ih -products of electnc cnerp
$s blllsHrr15 ofe*1crgY conYenion and Utki:a NdU'I '" 0"d U$d UI'"I 0'l hU"d/Vd b0Y'IY ts.n. wiluding the kencratinn transmision and dntwed ol,icsinmsdh.
wd use ofcIs ciruitv, ha.c some i"It sct on (I, wnsork cwperatircinvith customen, wlth i envirorUnen' Centiriot Ericrk'f Works to (opyppgypygy gy,yjn gnj u glh hg gj, gjagg gggj IGt ils sll Ward'l ip .%{ nattUal resouT(es f(jcygfgythyrgfj($fugygh;((gp-jgyppy(yggl lI sos.:tv3 need *nt a .sliable sutvIr of needs on a scicntific basis and to derclop ba!.
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relall .t. not itupat t m the air. ' ' u ater, e{ficicncr u ah u hir h uc tmoduce electric tile 'and and their mL 'ntams pouer and u Hh which our cmtornen un'it in
- 5. & maintain vorpor , monu nnyprogrann their homes, bminesses and factories, thus ute Ihat ue med out own standar$r unoderating the envuonmentalimpact of al. . Ihow ofilglbalory a . Cd y Emf lo)ces E E l*YI NIU UV$lUU*WV50lUIIIIVU$U'UCIb
.uc encouragcO to brirlg s ,rorf mc*tlal UUb MOUTUUUUUU UNdOUbOAN concerns to it'attagernent's attention. When MH & mnM Wigy.
CnvironuncrltalIrleidinth occur, ut trWW Q Kg gypjygg th( g($(gggh gygj j(,(fopy;(ggg quickly .o tale remedialactum. of generating tech nologies and enctRv<lficient
- 4. Environmental consideratmns are an mienn a luch inorniw s nh *nced safckceping integral part of all of our planning and of the enconntent u hile .naintaining our dCcolUrl making. UN WIU WU? U II C' ENVIRONAlEN'IAIAONIAlll All:NT scrubbers at onc or nune generating units. Scrubben Centerior takes pride in its histonc conumtment to are Luge.seale (hemical treatment fac ilities that the environment. We imt.dled pollution cont mi deanse sulfur <hoxide from plant stad emiuions.
devices at our power plants as cady as the 19:Os, We estimate that ac hieving the required sulfur lonh before sut h de ices were nundated hv the dioxide reductions could cost $400.$700 million in gosemment. In the past two decades, we h'ase capital spending mer the nest 103 ears. This opital spent approximately $1 billion on emimnmental cost could he re(mered through a one-time rate impimement. A signifie.mt portion of customer increase in the range of 24 in the late 1990s and hill payments today represents a c ontribution to a another after 2000 for a totalincrease of 7 5%
deane't em iromnent. Octall, these im teases, spread over a lu > car 1.atelast year,Congreu passed the Clean Air Act period would average leu than 1% a year.
- of 1990. For more than a > car before enac tment of the legislation, w e had been entoring possible stral- ;w egies to further wdoce sulfur dioxide emissiom at %R,m ,, 4 oo our coal fired power plants at the lowest possible m, ,
< ost. We aie famrably pmitioned to meet the new j cmission standards with minimalimpact on the i rates we charge customers, l lletween 1977 and 19S9, we reduced sulfur dioxide -
l eminiom by 50%, from about 600,000 tons a year ._
l to 300,000 tons a year. The new legislation requires -
a further cut of tho,000 tons by the year 2000. l
~1h at hieve that redut tion, we are preparing a l halanced strategy that includes seseral pouibilities, l i
such as increased use oflow sulfur coal and repower.
ing of some units with dean coal tet knologies ni -
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COh1PETrrlVE EDGE Lyman C. Phillips, hecutin %ce President TIIE CON 1 PETITION supply. We expect municipal systems to lose much We value our customers and take very seriously our of their competitive advantage as wholesale power responsibility to provide them reliable electric service supplies dwindle and the price c?imbs.
at reasonable cost. We are always working to improve in the meantime, we are wokmg with customers our relations with customers and increase their and municipalities to become more competitise in satisfaction. As we work to make our electric rates Northwest Ohio.
more competitive, we also are helping customers achieve better energy value. RXi'E REDUCTION NEGOrlNFIONS We compete with natural gas suppliers, other elec. In 1990,we began negotiating ordinances with tric utilities and independent power producers. Our individual municipalities in the Tbledo Edison most serious competitive concern today is the risk of service area. Under these municipal ordinances, new municipal systems taking away our customers. lbledo Edison is retained as sole electricity supplier Interest in mimicipalization is pacticularly strong in for a five-year period, in return, residential and small the Toledo Edison service area in Northwest Ohio. commercial customers in those municipalit. avoided Toledo Edison's electric rates at this time are the 2 74% rate increase that went into effect on significantly higher than those in surrcunding com. February 1,1991. Additionally,residentialcustomers munities served by other power sources. ;ncluding receive a 3% rate reduction on hlarch 1,1991 and a municipal utilities, hiost of these municipal systems 1% redaction on September 1,1991.
impo:t lower cost power currently available in the Further, residential and small commercial cus-wholesale market and distribute it to their customers, tomers in those municipalities are assured of no rate hlunicipal systems have a further price advantage increases before 1996 unless high inflat on or because they pay no federal, state or local taxes. emergency conditions necessitate a rate adjustment.
The supply oflower cost power is expected to As an added incentive, we are making economic diminish as compliance with the Clean Air Act of assistance funds available to these municipalities. The 1990 reduces available capacity and as the growing level of assistance is tailored to meet individual demand for electricity reduces available exce>s community needs to promote economic development.
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At this writing, we base achieved sole supplier DialAND SIDE N1ANAG131ENT contracts with all of the 48 incorporated municipal- In 19b9, the PUCO issued guidehnes for Integrated ities served culusisely by 'Ibledo Edison except for Resource Planning, requinng elec t ric utihties through-the largest, the t'ity of 'lbledo. out the state to investigate both supply-side and On january 31,1991, we announced our intent to demand side measures in planning the most cost-seek PUCO approval to toll b u k the 2.74% rate effective means to meet futme electricity needs, increase for al' residential and small commercial The traditional supply . side response to gmwth customers in the City of 'Ibledo and the rest of in elec tricity consumption is to build new power
'Ibledo Edison's service area and to apply the pLmts. In contrast, demand-side measures are additional 4% tale reduction to these residential designed to encourage customers to conserve and customers by year end. This action would extend to sluft some of their energy consumption from our rate-reduction benefit', throughout the 'foledo high use to low-use periods. This uould slow peak Edison service area, thus ensuring that 'Ibledo area demand growth and delay the need for new facilities.
customers are treated uniforml F- We launched several successful demand side l We estimate that, with the entire 'Ibledo Edison management programs in 1990. We anticipate setsice area participating, these rate reductions spending about $$5 million through the year 2090 would reduce out annual revenues by about $17 for further initiatives.
million, which represents 0.75% of 1990 revenues. Demand-side management programs permit We hae concluded that it is in our share owners' customers to achieve greater control over their best long-term interests to accept this modest electricitv usage and realize price advantages. Utihties reduction in revenues in order to maintain our and their inveistors,in turn, benefit from the more
'Ibledo Edison customer base- efficient and cost effectise use of existing in t he Cleveland Electric service area, Cles cland generation and transmission facilities. We estimate Public Power (CPP) continues its $50 million the demand. side programs we base planned for expansion into the eastern part of Cles eland. CPP's the 1990s will enable us to defer for several years kilowatt hour sales equal about 2.5% of Cent"rior's. capital outlay s of up to $1 billion for new facilities.
The expansion, as now planned, could take away As we attempt to change customer usage patterns, about 20,000 of ont customeis, primarily residential we are focused on three applications--valley users, oser the nest several years. This could reduce filling, encouraging new off peak load such as revenues by about $10 million although there would be partully offsetting reductions in operation expenses and taxes. We bas e retained large commer-cial and industrial custor ers in Cleveland despite CPP's es.pansion efforts, r imarily because or our higher level of reliability. In January 1991, we announced plans for a new, $2S million substation complex to provide service needed for downtown Cleveland business expansion, further evidence of our AnimE Rn nil Pluct: PEll commitment to service reliability and economic K\VII C( AW\lil:lFlWI1:11 development. C( INSI Wil PldCl INDI X*
!n November 1990, Cleveland voters approved a
- N **H""* "
charter amendment allowing transfer of tax monies
- l to support municipal utihty departments, including m l CPP. Such transfers in years past, without legal i authorization, led to our taxpayers' law suit against _
l the City of Cleveland and a court decision in 1900 l ordering the City to make repayment with interest to -
l its general fund. The City has submitted a 10 year c. _
i payment plan totaling $47 million, but the payment ~
I issue is still under appeal by both parties. ,. l 1
la __ _ . _
, s % , m 41 O ~ , ~m m . .,
t \ir a b .- t r !I b 4L f f '- b N hI kt" f
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9
sceurity lighting; strategic consen'afion, exemplified more information about their electricity usage to by high efficiency industrial motors and energy. help them practice wise energy management. The )
efficient lighting; and peak shaving, which inchides redesigned bill will become available to'Ibledo Edison ;
various energy management systems such as cooling customers this soring. Customer surveys and a variety -
and heating storage systems. of targeted customer communications aie additional
- Our goalis to reduce system peak b) 300,000 means through which we are determining and kilowatts from what it otherwise would be by the responding to customer needs.
acar 2000. Correspondingly, we hope to increase off peak sales by 400 million kilowatt hours by the ECONOMIC OUTI.OOK IN NORrlIERN 01110 year 2000. That would give u> a modest sales increase- Our projections for the next several years indicate while delaying the need for new generating capacity annual kilowatt hour sales growth will average about that easily could cost 10 times our demand side 2% Achieving this iucrease assumes normaiweather mvestment. and depends on the economy and other factors.
Through the rest of this decade, we expect more TlIE CUrlOMER CONNECTION moderate sales increases, averaging about 1.5% a year.
In 1990, we launched a system wide Total Quality our diversified industrial base includes steel, process to help us better identify and meet customer au t os, pla stics, chemicals, polymers, glass, pet roleum needs. The Total Quality concept will instill contin. refining and other manufacturing. We have felt uous improvement as a prime component of our the nationwide declinein auto and steel production, corporate culture. This valuable tool has been applied but many of the other industries we serve continue successfully at many top corporations in the nation. to do well. Several industrial expansions are planned The Total Quality approach represents a more or in the works, which will help offset the sales losses focused effort than our past emphasis on quality anticipated from other industrial customers.
work'. A major component will be emphasis on in the Cleveland Electric area, L:FV Steel's new better communications, especially from employees continuous annealing line and an electric metallurgy to management. Our service crews, plant operators, station should be operational in the first half of customer representatives and other people on the 1991. This means 45,000 kilowatts in new loa'l and
- line know best what needs to be done to improve $S million in additional revenue a year, helping to customer service and male operations safer and more offset sonie kilowatt hoursales losses from the
- cost effective. We are listening to our employees. tempomry shutdown of Ulvs electric are furnaces.
Our three Consumer Advisory Rmels established In the auto sector, Ford Motor,in a iomt venture in 1989 meet regularly and keep us attuned to a with Nissan, will compic,te the addition of a new broad range of customer views. Members include van production facility in 1992 at its plant west of-senior citizens, business people, industrial workers, Cleveland, for an additional 17,000 kilowatts and $5 homemakers and teachers. Also providing perspec. million in annual revenue.
tive is the additionalinput from the Cleveland in the Toledo Edison area, our economic develop.
Electric and Toledo Edison management advisory ment electric rates established late in 1989 have councils, composed of business and community helped encourage 34 industrial customers of various leaders. We are listening to our custamers. sizes to make $61 million of capital investment, retain Through a Centerior program, customers con- or create 1,400 jobs and add 18,000 kilowatts of new tributed $175,000 in 1990 to assist low income load. Chrysler has signed labor agreements pemutting customers with bill payments, appliance repair and its Jeep Assembly Plant, the largest employer inL weatherization. We matched that amount. In Toledo, to remain viable at least through 1996. The addition, we made further contributions, including firm pLns to move its Jeep Wrangler YJ production one. time grants, which raised our total donation to from Canada to lbledo starting in 1992. Manville -
more than $600,000. These customer assistance Corporation has invested $65 million in new fiber.
programs have raised community awareness of glass manufacturing equipment which will become
- Cleveland Electrie and Toledo Edison as caring operationalin the first half of 199L General corporate citizens, and we are gratified by the Motors is spending $225 million to update its 1Iydra.
outstanding level of contributions from customers. Matic transmission production line i.n Toledo.
A redesigned, comprehensive billing statement is
- now providing Cleveland Electric customers with 10
In the Cleveland Electric conunercial sector, retail those of neighboring utilities, thus strengthening and office expansions have contributed to solid our competitise position, sales gum th in t he past several ycars, and mot e gma t h We ate responsible to the mote than lSO,000 is on the horizon. As the downtow n Cleveland build- sh.ne ou ners w ho make it possible foi u s to produce ing boom continued in 1990, major new all-electric and deliver elettiie seg ice. We aie pledged to customers included the complet ed 'inwer City Center, increasing Ihe value of share owner uneiment and the adjacent Ritz-Cadton llotel and the Western enhancing the financialintegritv of the company.
Reserve lloilding. In total, we began serving some The management audit and the corporate 2 A million square feet of new, all electric office restrutturing have gisen us new vigor. We believe space in Cleveland and its suburbs in 1990. these measures, coupled with our 'Ibtal Quality Commercial sales grow th has not been as uni. conunitment, give us a sohd foundatmn for meeting fonnly strong in the 'Ibledo Edison area. Portside, the challenges of today and of the years to come.
the large shopping and dining complex on 1bledo's riverfmnt, was closed in 1990. Efforts are under way to revive the complex, possibly as a museum of science and indust ry. Planned conunercial expansions include the Franklin Park Niall, another of the city's prime shopping sites. In addition, flutlington Air Express' new inteniational cargo center is due for completion this year at 'Ibledo Express Airport, underscoringlbledo's reputation as a tramportation W IL\1IlER I h l\1 h W hub in the .\lidwest. lck< n1 Noust si?
In the residential sector, the moderate weather n. ,.
(nevaihng in both the sununer and winter led to a
&% decline in kilowatt. hour sales in 1990. Assummg I" normal temperatures in 1991, sales are expected to
~
n+ o-om o rebound. Use of electric heating and coding in new os < mm- y home construction is on the rise,largely through our marketing efforts. In the 'lbledo Edison area, for example, some 40% of new multi-family dwellings in 1990 were all electnc. In the Cleveland Electric area, the add on heat / cool pump represented M% n of all cooling units in new home comtruction, a big ~
gain over the 9% market share of 1989. m,. _
OUR CORPORNI'E CONIN11TA1ENTS We serve more than one million customers and we ~E -
W - ' " " '
value cach one of them. We are dedicated to pro-viding them uith high quality and icliable energy senices while maintaining responsible stewardship of the envinanmeni. y_
( anao"m We count on our S,;00 cmployees to help us carry u-n om out this ruission. As always, they are this compauv's most itnpotiant resource. Aided by their commit!
ment to cost control, we expect to keep future pnee *'"
increases below the rate of inflation and below M mm vu,,,w 3
MANAGEMENT'S STATEMENT OF RESPONSIBILITY FOR FINANCIAL STATEMENTS The management of Centenor Energy Corporation is responsibdities The Board is also responsible for responsible fur the consolidated financial statements in making changes in management or independent this Annual Report. The statements were prepared in accountants if needed accordance with generally accepted accounting The Board has appointed an Audzt Committee, pnnciples Under these principles, some of the comprised entirely of outside directors, which met recorded amounts are based on estimates which are, in three times in 1930 The Committee recommends turn, based on an analysis at the best information annually to the Board the firm of independent available. accountants to be retained for the ensuing year and We maintain a system of internal accounting reviews the audit approach used by the accountants controls which is desigt.ed to assure that the financial plus the results of their aud;ts it also oversees the records are substantially complete and accurate The adequ. cy and effectweness of our internal accounting controls also are designed to heip protect the assets controls and ensures that our accounhng system and their related records We try to ensure that the produces financial statements which present fairly our costs of our control procedures do not exceed their financial position.
benefits Our internal audit program monitors the internal (L( 4*t "
accounting controls. This program gives us the I opportunity to assess the adequacy and effectiveness EHMmm of existing controls and to identify and institute Executive %ce President and changes where needed in addit on, an examinahon of Chief financial Othcer our financial statements is conducted by Arthur q Andersen & Co , independent accountants, whose /
report appears below.
Our Board of Directors is responsible for k-PAut G Busuy
~
determining whether management and the Controller and independent accountants are carrying out their Chief Accountmg Othcer REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ARTHUR ANDERSEN To the Share Owners and Board of Directors of Centerior Energy Corporation; g
s We havu audited the accompanytng consolidated in our opinion, the financial statements referred to balance sheet and conschdated statement of above present f airly, in all matenal respects, the cumulative preferred and preference stock of Centenor financial position of Centenor Energy Corporation and Energy Corporation (an Ohio corporahon) and. subsidianes as of December 31,1990 and 1989, and subsiaianes as of December 31,1990 and 1989, and the results of their operations and their cash flows for the related conschdated statements of income, each of the three years in the penod ended December retained eamings and cash flows for each of the three 31, 1990, in conformity with generally accepted years in the penod ended December 31,1990.These accounting pnnciples financial statements are the responsibihty of the As discussed further in the Summary of Significant Company's management. Our responsibihty is to Accounting Pohcies and Notes 7 and 12 a change express an opinion on these financial statements based was made in the methods of accouniing for income on our audits taxes and unbilled revenues in 1988, retroactive to We conducted our audits in accordance with January 1.1988 generally accepted audit ng standards. Those As discussed further in Note 3(c), the future of standards require that we plan and perform the audit to Perry Unit 2 is undecided Construct on has been obtain reasonable assurance about whether the suspended since July 1985 Vanous options are being financial statements are free of matenal misstatement considered, includ;ng resuming construction or An audit includes examining, on a test basis, evidence canceling the unit Management can give no supporting the amounts and disclosures in the financial assurance when, if ever, Perry Unit 2 will go in service statements An audit also includes assessing the or whether the Company's investment in that unit and accounting pnnciples used and significant estimates a return thereon will ultimately be recovered made by management, as well as evaluating the overa!!
financial statement presentation We beheve that our audits provide a reasonable basis for our opinion Cleveland, Ohio February 12,1991 Arthur Anderson & Co.
12
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES GENERAL nuclear fuel disposal costs are being recovered through the base rates Centenor Energy Corporabon (Centenor Energy) is a The Operating Companies defer the differences holding company with two electnc utilities as between actual fuel costs and estimated fuel costs subsidianes, lho Cleveland Elecinc illuminating cunently being recovered from customers throu F the Company (Cleveland Electnc) and The Toledo Edison fuel factor lhis matches fuel expenses with fuer Company (Toledo Edison). lhe consohdated financial related revenues statements also include the accounts of Centenor Energy's other wholly owned subsidiary, Centono' PRE-PHASE-IN DEFERRALS OF OPERATING Service Company (Service Company), and Cleveland EXPENSES AND CARRYING CHARGES Elecinc's who13 owned subsidianes The Service Company provides, at cost, management, financial, The PUCO authorized the Operating Companies to administrative, engineenng, legal and other services to record, as deferred charges, operating cipenses Centenor Energy, Cleveland Electnc and Toledo (including lease payments, depreciation and taxes)
Edison. Cleveland Electric and Toledo Edison and interest carrying charges for Beaver Valley Power (Operating Companies) operate as separate Stahon Unit 2 (Beaver Valley Unit 2) from its companies, each serving the customers in its service commercial in service date in November 1987 through area The first mortgage bonds, other debt obhgations December 1988. Af ter the PUCO determined that Perry and preferred stock of the Operating Companies Nuclear Power Plant Unit 1 (Perry Unit 1) was continue to be outstanding secunties of the issuing considered "used and useful" in May 1987 for utihty, All significant intercompny items have been regulatory purposes, the PUCO authonzed the eliminated in conschdation. Operating Companies to defer operahng expenses Centerior Energy and the Operating Companies (including depreciation and taxes) for Perry Unit 1 follow the Uniform System of Accounts prescribed by from June 1987 through December 1987, when these the Federal Energy Regulatory Commission (FERC) costs began to be recovered in rates The PUCO also and adopted by The Pubhc Utihties Commission of Ohio authonzed the deferral of interest and equity carrying (PUCO). The Set Ace Company follows the Uniform charges, exclusive of those associated with operating System of Accounts for Mutual Service Companies expenses, for Perry Urnt 1 from June 1987 through prescribed by the Securities and Exchange December 1987 and the dcterral of only interest Commission (SEC) under the Pubhc Utikty Holding carrying charges f rom January 1988 'hrough December Company Act of 1935. 1988. The amounts deferred for Perry Unit 1 pursuant The Operating Companies are members of the to these PUCO accounting orders were included in Central Area Power Coordination Group (CAPCO). property, plant, and equipment through the Other members include Duquesne Ught Company commercial in service date in November 1987.
(Duquesne), Ohio Edisen Company (Ohio Edison) Subsequent to that date, amounts deferred for Perry and Pennsylvania Power Company (Pennsylvania Unit 1 were recorded as deferred charges Power) The members have constructed and operate Amortizahon of these Beaver Valley Unit 2 and Perry generation and transmission facihties for the use of the Unit I deferrals (called pre-phase-in deferrals) began CAPCO companies. in January 1989 in accordance with the January 1989 PUCO rate orders discussed in Nate 6 The m rtizations will conhnue over the hves of the related REVENUES property.
Customers are billed on a monthly cycle basts for their energy consumption based on rate schedules or PHASE-IN DEFERRALS OF OPERATING contracts authonzed by the PUCO or on ordinances EXPENSES AND CARRYING CHARGES with individual municipahties Effect ve January 1, As discussed in Note 6, the January 1989 PUCO rate 1988, the Operating Uompanies changed their method orders for the Operating Companies included of accounting to accrue the Oshmated amount of appr ved rate phase in plans for their investments in unbilled revenues (as defined in Note 12) at the end Perry Unit 1 and Beaver Valley Unit 2 On January 1, of each month. 1989, the Operahng Companies began recording the A fuel factor is added to the base rates for elecinc deferrals of operating expenses and interest and service. This factor is designed to recover from equity carrying charges on deferred rate based customers the costs of fuel and most purchased investment pursuant to the phase-in plans These power. It is reviewed semiannually in a heanng before deferrals (called phase-in deferrals) will be recovered the PUCO. by December 31,1998 FUEL EXPENSE DEPRECIATION AND AMORTIZATION The cost of property, plant and equipment, except for !
The cost of fossil fuelis charged to fuel expense based on inventory usage. The cost of nuclear fuel, including the nuclear generahng units, is depreciated over their an interest component, is charged to fuel expense eshmated useful hves on a straight kne basis. The based on the rate of consumption. Estimated future annual straight line depreciation provision expressed 13
as a percent of average depreciable utility plant in accounted for as deferred credits The amortizatiot of service was 3 3% in 1990 and 3 8% in 1989 and 1988 these investment tax credits is reported as a reduction
- The 1990 rate declined because of a change in of depreciation expense under the liability method.
depreciation rates attributable to longer i i mated See Note 7.
hvos for fossil-fueled electric generahng tiits The ,
PUCO approved this change in depreciation rates DEFERRED GAIN AND LOSS FROM effective Jariuary 1,1990 which reduced depreciation SALES OF UTILITY PLANT expense for 1990 by $16,000,000 and increased eamings per share $ 08- The Operating Companies entered into sale and Depreciation expense for the nuclear units is based leaseback transactions in 1987 for the coal-fired Bruce on the units of production method In 1990, the Mansfield Generating Plant (Mansfield Plant) and Nuclear Regulatory Commission (NRC) approved a Beaver Valley Unit 2 as discussed in Note 2. Thesc
. six year extension of the operating license for the transactions resulted in a net gain for the sale of Davis Besse Nuclear Power Station (Davis Besse) Mansfield Plant and a not loss for the sale of Beaver The PUCO approved a change in the units of- Valley Unit 2, both of which were deferred The production _ depreciation rate for Davis-Besse_ effective Operating Companies are amortizing the applicable January 1,1990 which recognized the life extension. deferred gain and loss over the terms of leases under This change reduced depreciation expense for 1990 by sale and leaseback agreements, The amortizations
$9,790.000 and increased earnings per share $ 04 along with the lease expense amounts are recorded as Effective July 1988, the Operating Companies other operation and maintenance expense began the extemal funding of future decommissioning costs for their operating nuclear units pursuant to a PUCO order. Cash contnbutions are made to the funds INTEREST CHARGES on a straight line basis over the remaining licensing Debt interest reported in the income Statement does penod for each unit. Amounts currently in rates are not include interest on nuclear fuel obhgations. Interest based on past estimates of decommissioning costs for on nuclear fuel obligations for fuel under construction the Operating Companies of $122,000,000 in 1986 is capitalized See Note 5.
dollars for Davis-Besse and $72,000,000 and Losses and gains realized upon the reacquisition or 263,000,000 in 1987 dollars for Perry Unit 1 and redemption of long-term debt are deferred. consistent Beaver Valley . Unit 2, respectively. Actual with the regulatory rate treatment. Such losses and decommissioning costs are expected to exceed these gains are either amortized over the remainder of the estimates it is expected that increases in the cost original life of the debt issue retired or amortszed over estimates will be recoverable in rates resulting from the hfe of the new debt issue when the proceeds of a future rate proceedings The current level of expense new issue are used for the debt redemption The being funded and recovered from customers over the amortizations are included in debt interest expense.
remaining hcensing periods of the units is approximately $8,000.000 annually. The present funding requirements for Beaver Valley Unit 2 also PROPERTY, PLANT AND EQUIPMENT satisfy a similar commitment made as part of the sale Property, plant and equipment are stated at original-and leaseback transachon discussed in Note 2' cost less any amounts ordered by the PUCO to be wntten off. Included in the cost of construction are .
FEDERAL INCOME TAXES items such as related payroll taxes, pensions, fringe benefits, management and general overheads and The financial statenients reflect the liabihty method of allowance for funds used during construction-accounting for income taxes as a result of adopting a ( AFUDC). AFUDC represents the estimated new standard for accounting for income taxes in 1988. composite debt and equity cost of funds used to The liability method requires that our deferred tax finance construction. This noncath allowance is liabilities be adjusted for subsequent tax rate changes credited to income, except for certain AFUDC for Perry and that we record deferred taxes for all temporary Nuclear Power Plant Unit 2 (Perry Unit 2), See Note differences between the book and tax bases of assets 3(c). The gross AFUDC rates averaged 10 8% in and habih.ies. A portion of these temporary differences 1990,11.2% in 1989 and 11,4% in 1988.
relate toiming differences that the PUCO used to Maintenance and repairs are charged to expense as reduce pnor -years' tax expense for ratemaking incurred. Certain maintenance and repair expenses for purposes whereby no deferred taxes were recorded. Perry Unit 1 and Beaver Valley Unit 2 are being Since the PUCO practice permits recovery of such deferred pursuant to ine PUCO accounting orders taxes from customers when they become payablef the discussed above The cost of replacing plant and net amount due from customers has been recorded as equipment is charged to the utility plant accounts. The
- a regulatory asset in deferred charges cost of property retired plus removal costs, af ter
- For certain property, the Operating Companies deducting any salvage value, is charged to the received investment tax credits which have been accumulated provision for depreciation.
14 l
.__ l
e nmgs by as much as 0 001 or i 42 pm MdNAGEMENT'S FINANCIAL ANALYSIS share. in 1991. and mare or less in subsequent years.
RESULTS OF OPERATIONS depending on the performance of the units Inatulily to l
Overview obtain aphoval of the second request would reduce The January 1989 PUCO rate orders which provided for eamings by as much as $36 000 000 or $. 26 per three rate increases for the Operating Companies as share in 1991, and even more in subsequent years discussed in Note 6 were designed to enable us to The Operating Companies have agreed to use their begin recovenng in rates the cost of, and eam a f a'r best efforts. such as these two requests for return on, our allowed investment in Beaver Valley Unit accounting orders to avoid rate increases in the years 2 and Perry Unit 1 'ihe rate orders improved revenues immed,ately following 1991 E ventua!!y. rate increases and cash flow in 1989 and 1990 and are expected to will be necessary to recognize the cost of our new continue to improve them in 1991 However, as capital investment and the effect of inflation discussed more fully in the fourth and fif th paragraphs Annual sales growth is e>pected to average about of Note 6 the phase in plans were not designed to 2% for the next several years contingent on future improve earnings signihcantly because gains in economic events Recogneing the hmitahons imposed revenues from the higher rates and assumed sales by these sales projections and compe'itive constraints.
growth are initiahy ottset by a corresponding reduction we Adl utihze our tiest efforts to minimize future rate in the deferral of nuclear plant operahng expenses and increases through maamizing our cost reduchon and carrying charges and are subsequently offset by the qual.ty of service efforts and emplanng other innovallve amorteation of such cost deterrals and carrying ophons We will concentiate our efforts on retaining chargea customers and ading new ones through innovative Despite the positive effect the new rates have on marketing and service initiatives revenues and cash flow and the relatively neutral impact they have on earnings we f ace a number of 1990 vs.1989 other factors which will exert a negative influence on Factors contnhuting to the 2 8% increase in 1990 earnings in 1991 and beyond These include inflation operating ievenues are as follows the econom.c recession and competitive forces The g, m gp g ,, gQ latter, coupled with a desire to encourage economic gyg ggg growth. has prompted the Operating Compan.es in syes y,ume an, m (sao00 0003 recent years to enter into contracts having reduced ses to omo E amn au Penn sue-, a2 000 000) rates with certain large customers Competitive forces 5 cs ooo ooo
=~ -
have also prompted Toledo Edison to offer a rate reduction package to residential and small commercial The maior factor accounting for the increase in customers as discussed in the eighth ano ninth operatmg revenues was related to the January 1989 pan graphs of No e 6 Two other factors are having a rate orders for the Operating Comparues The PUCO negatrse influence on earnings. First, the Operating approwed annua! rate increases for the Operahng Companies m currently recording depreciation on Companies of 9% effective in February 1989 and 7%
nuclear units at a higher level than that which is effective in February 1990 The associated revenue reflected in rates because of the good performance of increase in 1990 was partia!!y ottset by reduced the units over the last several years Second. with revenues resulting from a 2 9% decrease in total respect to f acihties placed in service af ter February kilowatt-hour sales Industnal sales decreased 2 8%
1988 and not included in rate base, the Operating because of the recession beginning in 1990 Companies are currently requeed to record interest Residential sales decreased 21% as seasonal charges and depreciation as current expenses even temperatures were more moderate in companson to though such items are not yet ref!ected in rates the poor yeaFs temperatures. resulung ir, reduced We are taking several steps to counter the adverse customer heating and cochng related demand effects of the f actors discussed above We are Commercial sales increased 0 3% as increased implementing the nianagement audit demand from new Nbcicctric office and retail space recommendahons discussed in the sixth paragraph of was offset by the ettects of mdd weather Otner sales Note 6 which are expected to reduce operating activity decreased 22 3% pomanly as a result of expenses by about $100.000,000 annuaHy. We have Toledo Edison s municipal utihty customers satisfying already shared 50% of the expected savings with a greater portion of their power needs from other customers by reducing the 1991 rate increases sources The increase in revenues was also parnally granted under the 1989 rate orders However. offset by the toss of revenues related to the May 1989 continuing cost reduction efforts wdi be necessary to expirahon of Cleveland Electnc's agreement to sell a help offset the effect of inflation A!so. the Operahng porhon of its share of Perry Unit 1 capacity to Ohio Companies are seeking PUCO approval to accrue Ed son and Pennsylvania Power nuclear plant dopreciation at a level whrch is more Operahng expenses decreased 0 4% in 1990 closely abgned with the amount currently being Depreciation and amorteat on expense decreased recovered in rates by switching to the straight-kne primanly because of lower depreciation rates used in method We also wdl seek approsal to accrue post in- 1990 tot nonnuclear property and Davis-Besse service interest carrying charges and defer attnbutable to longer estimated hves and because of !
deprec:at on charges for f acihties that are in service longer nuclear generahng unit refuehng and but not yet recognized in rates inabihty to obtain maintenance eutages in 1990 than in 1989 Federal approval of the first accounting request would reduce income tares decreased pnmanly because of a 15
I
. . j
< . i decrease in pretax operating income. These decreases Commeicial sales increased 3 9% as a result of i in operating expenses were partially offset by an continuing growth fiom new office buildings and retail I increase in taxes, other than federal income taxes, outlota Industnal sales decreased 21% principally resulting frsm t igher property and gross receipts beause of a 7% reduction in sales to large steel and taxes, and t y lower nuclear operating expense automotive customers Sales to other industrial deferrals for Perry Unit 1 and Beaver Valley Unit 2 rustomers inc< cased 0 5% The decrease in revenues pursuant to the January 1989 PUCO rate orders. from sales to Ohio Edison and Pennsylvania Power was Credits for carrying charges recorded in the result of the May 1989 expiration of Cleveland nonoperating income decreased in 1990 because a Electne's agreement to sell a portion of its share of greater share of our investments and leasehold Perry Unit 1 capacity.
interests in Perry Unit 1 and Beaver Valley Unit 2 were Operating expenses increased 8 4% in 1989 Lower recovered in rates The decrease in the federalincome deferrals of nuclear operating expense for Perry Unit 1 tax provision related to nonoperating income was the and Beaver Valley Unit 2 resulted in a $122,000,000 result of a decrease in pretax nonoperating income and increase in expense Fuel and purchased power federal income tax adjustments of $37,522,000 e, pense increased largely because of the matching of associated with previously deferred investment tax expense with higher fuel cost recovery revenues credits relating to the 1988 write-off of nuclear plant. discussed in the preceding paragraph Improved Other income and deductions, net, decreased pomarily nuclear unit availability enabled the Operating because of less interest income in 1990. Companies to sell power to other utilities. The excess 1989 vs 1988 f revenues over cost is treated as a reduction in purchased power expense which cushioned the Factors contributing to the 13% increa;e in 1989 increase in fuel and purchased power expense for the operating revenues are as follows- year Depreciation expense increased. reflective of the Change in Operating Revenues (LINeNo) increased generation from our nuclear units since Base Hates and Mecellaneom . 5173 nEMO the? depreciation is recorded based on units-of-Derened CW1P Revenues . . . ... .. . 88 000 000 production.
Sales to Ohio Edrson and Pennsylvania Power . (52.000.000) Nonoperating income credits for AFUDC and Nes uIe a'nd M 7 "I carrying charges decreased in 1989 as a result of 5265 000.000
~ -
placing investment in rate base pursuant to the rate orders Interest expense and preferred and preference The January 1989 rate orders for the Operating dividend requirements decreased in 1989 because of Companies were pnmanly responsible for two major retirements and refinancings by the Operating factors impacting the increase in revenues The PUCO Companies granted both companies 9% rate increases effective in February 1989. The increase in revenues attnbutable EFFECT OF INFLATION to deferred construction werk in progress (CWIP) revenues in 1989 resulted from the reduction in the Although the rate of inflation has cased in recent years, amount of deferred credits for the mirror CWIP refund we are still affected by even modest inflation since the obligations to customers, l~uel cost recovery revenues regulatory process introduces a time lag during which increased in 1989 because of a significant rise in the increased costs of our labor, materials and services are fuel cost recovery factors compared to 1988 The not reflected in rates and fully recovered. Moreover, lower 1988 factors recogrued a areater amount of regulation allows only the recovery of historical costs refunds to our customers ordered by the PUCO for of plant assets through depreciation even though the certain replacement fuel and purcha:ed power cost: costs to replace these assets would substantially collected from customers dunng a 1985-1986 Davis- exceed their histoncal costs in an inflationary economy.
Besse outage. Total kilowatt-hour sales decreased Changes in fuol costs do not affect our results of 1.8% in 1989. The comparatively moderate summer operations since thc3e costs are deferred until weather in 1989 lowereo sales because of reduced air _ reflected in the fuel cost recovery factor included in conditioning usage, Residential sales decreased 1.6% customers' bills RETAINED EARNINGS CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES For the years ended December 31.
1990 1989 1988 (thcusands or dolWs)
Balance at Beginning of Year . , $ 613,774 $ 571.882 $ 908.611 Additions Net income (loss) . . 264,459 266.886 (73,960)
Deductions Common stock dividends . ... ... (222,482) (224,947) (259.022)
Other, pr:marily premtred stock r ;domption expenses of subsidianes . (915) (47) (3,747)
Net increase (Decrease) 41 062 41.892 (336.729)
Balance at End of Year . _$ 654,836 $ 613,774 $ 571,882 The accompanying notes and summary of significant accounting policies are an integral part of this statement.
16
4 4 lNCOME STATEMENT CENTE RIOR f NE RGY COnPORAllON AND SUBSIDIAR!f S For the years ended December 31, 1990 1989 _ 1988 (thousands of dollaf s. except pet f hare arnoonts)
Operating Revenues , ., $2,367,675 $2,302.436 $2,037_ 560 Operating Expenses Fuel and purchased power . ,
412,531 413.816 391,401 Other operation and maintenance , .
862,738 860,138 865.632 Depreciahon and amortization . . . 251,640 280.918 264,824 Taxes, other than federalincome taxes . 283,425 259,871 268,550 Phase-in deferred operating expenses . . (50,940) (74,555) -
Pre phase in deferred operating expenses. 7,629 7.932 (188,209)-
Federal income taxes , . . ... 96,076 122,385 123,697 1,8631099 1,870,505 1,725.895 Operating income . . ,, , , , . 504,576 431,931 311.665 Nonoperating income .
I Allowance for equity funds iised dunng construction. 7,883 16.930 13,504 Other income and deductions, net ,
(11) 14,212 45.308 Wnte-off of nuclear costs. . .. . .,
(534,355)
Phase in carrying charges , . . . . 205,085 299,159 -
Pre phase-in carrying charges . . .. .
372.155 Federalincome taxes - credit (expense) . (12,948) (73,177) 131,254 200,009 257,124 27,866 income Before Interest Charges 704,585 689,055 339,531 Interest Charges Debt interest . , , , . 384,278 369,481 378,292 Allowance for t'orrowed funds used during construction. (5,993) (12,929) (6,137) '
378,285 _ 356,552- 372,155 Income (Loss) After Interest Charges . . . 326,300 332,503 (32,624)
Preferred and preference dividend requirements o' subsidiaries , , , ,, ,,. 61,841 65.617 69.489 income (Loss) Before Cumulative Effect of an Accounting Change . . . . , . 264,459 266,886 (102,113)
.. Cumulative Effect on Prior Years (to December 31,1987) of an Accounting Change for Unbilled Revenues (Net of Income Taxes of $18,729,000) - - 28,153 Net income (Loss) . .. , . _ $_ 264_,459
$ 266J86 $ (73.960)
' Average Number of Common Shares Outstanding (thousands), . . , ,, 138,885 140,468 140.778 Earnings (Loss) Per Common Share Before cumulative effect of an accounting change. $ 1.90 $ 1.90 $ ( .73 )
Cumulative effect of an accounting change. .
.20 Total- . . .
{ 1.90 L 1.90 $___153)
Dividends Declared Per Ccmmon Share . $_160 $ _1.60 $ 1.84 The accompanying notes and summary of cignificant accounting policies are an integral part of this statement 17
MANAGEMENT's FINANCIAL ANALYSIS CAPITAL RESOURCES AND LIQUIDITY additional secunties under optional redemption We continue to need cash for an ongoing program of provisions See Notes 10(d) and (e) for information constructing new f acilities and modif ying' exis' ting concerning limitations on the issuance of preferred and f acilities to meet anticipated demand for electnc prefemnce stock and debt service, to comply with governmental regulations and Our capital requirements wm increase af ter 1994 as to improve the environment Cash is also needed for a result of the C!ean Air Act of 1990 (Clean Air Act) mandatory retirement of securities Over the three. Our future capit al spend ng will depend on the year period of 1988 1990, these construction and implementahon strategy we choose to achieve rnandatory retirement needs totaled approximately compliance with the new law Our preliminary CSI' mates f or capital expenottures to comply with the o
$ 1,210.000,000 in addition. we esercised vanous options to redeem and purchase approumatelj Clean Air Act are in the range of $400.000,000 to
$720.000,000 of our secunties $700,000.000 See Note 3(b)
Dunng the 1988-1990 penod Cleveland Electnc We capect to be able to ra,se cash as needed The availability of capital to meet our external hnancing
] and Toledo Edison issued $356.430,000 and
$ 174,100,000, respectively, of first mortgage bonds. needs, however, depends upon such factors as and obtained $56.000,000 and $ 15,000,000, hnanc al market condmons and our credit rahngs respectively, of term bank loans in 1989 and 1990. Current secunties rahngs for the Operating Companies Cleveland Electnc also issued $550.000,000 of am as foHous secured medium term notes The Operating Sy;,(d ["g Companies utilized their short term borrowing Cor por awn se w e artangements (explained in Note 11 ) which resulted in Cleveund Dettne Cleveland Electnc and Toledo Edison having nru morme Nnm ana- aw
$87,110,000 and $23.200,000, respectively, of ererened stoo um baa2 commercial paper outstand.ng at December 31,1990 wm %n Proceeds from these financings were used to pay our ,i.st nioripge bonds eBa- Baa3 construction program costs, to rapay portions of Unsecured notes BB+ Bal short-term debt incurred to hnance the construction ereverred sixk . sm N2 program, to retire, redeem and purchase outstanding securities, and for general corporate purposes The Operahng Companies were granted rate We believe mat the rate orders coupled with increases effective in 1989,1990 and 1991 pursuant to sinngent cost control, have given us a reasonable January 1989 PUCO rate orders See Note 6 for a opportunity to achieve financial results which should discussion of those rate orders which provide for permit Centenor Energy to continue the current specihc levels of rate increases through 1991. quarterly common stock dividene or $ 40 per share Although the rate orders required us to wnte off certain Nevertheless. dividend action by our Board of Directors assets in 1988 which lowered our earnings base, our will continue to be decided on a quarter to-quarter current cash flow was not impaired Internally basis af ter the evaluation of financial resuits, potential generated cash increased in 1989 and 1990 from the earning capacity and cash flow A wnte-off of our _
1988 level as a result of the rate increases investment in Perry Unit 2, as discussed in Note 3(c),
Estimated cash requirements for our construct on would not reduce our reta:ned eamings suthciently to program for 1991-1993 are $605,000,000 for impair our ability to declare dividends and would not Cleveland Electnc and $235.000,000 for Toledo affect our cash flow Ed con in addition, Cleveland Electnc and Toledo The Tax Reform Act of 1986 (1986 Tax Act)
Edison will require $515.000,000 and $297,000,000, provided for a 34% income tax rate in 1988 and respecbvely, for the mandatm redemphon of debt and thereaf ter, the repeal of the investment tax credit.
preferred stock dunng this p. d C!eveland Electnc scheduled reductions in investment tax credit '
expects to finance extemally aoout 33% of its 1991 carryforwards, less favorable depreciation rates, a new construction and mandatory redemption requirements a!temative minimum tax ( AMT) and other items of approximately $267,000,000. About 75% of Toledo These changes had no significant cash flow impact in Edison's requirements of approximately $177,000,000 1988 because we had a net operating loss for tax in 1991 will be hnanced externally. We expect to purposes However, the changes resulted in increased finance extemaHy about 60% of our 1992 and 1993 tax paymenta and a reduct on in cash flow dunng requirements if economica!, we may also redeem 1989 and 1990 because we were subject to the AMT 18 l
l
CkSH FLOWS cmrnion Em nGY COnPORAh0N AND SUBSiDIAnlES For the years ended December 31, 199C 1989 1988 (th0uSaf'd5 Of dollaf 5)
Cash Flows from Operating Activities (1)
Net income (Loss) . $ 264,459 ~ ~5 266.886 $ (73,960)
Adjustments to Reconcile Net income (Loss) to Cash from Operating Activities 251,640 280,918 264,824 Depreciation and arrortization Defened federal income taxes 142,190 181,240 (37,422)
Investment tax credits, net . (34,287) 1,179 (3.687)
Wnte off of nuclear costs, - - 534,355 (60,792) (74,792) 23,842 Detened and unbilled revenues .
Deferred fuel (11,843) 25.086 (54,601)
Carrying charges capitalized. (20.,085) 5 (299,159) (372,155) 84,150 102, t 20 77,196 Leased nuclear fuel amortization .
Deferred operating expenses, not (43,311) (66,623) (188,209)
Allowance for equity funds used dunng constraction. (7,883) (16,930) (13,504)
Amortization of reserve for Davis Besse refund obligations to customers .
- (24,817) (41,118)
Pension settlement gain. (40,966) - -
Cumu'aave ettect of an accounting change. - -
(28,153)
(26,445) (13,486) 5,384 C Wges in amounts due from customers and others, not .
(29,015) (3,029) 10,283 aos in inventones.
h, jos in accounts payable 63,610 (10,732) 73,765 Changes in working capital affecting operations. (24,913) 17,120 17.058 Other norcash items _ (10,772) (10,319) (8.510)
Total Adjustments . 46,278 _ 87,776 259,348 Net Cash from Operating Activities , 310,737 354,662 185,388 Cash Flows from Financing Activities (2)
Bank loans, commercial paper and other short-term debt 109,888 29 (36,555)
Debt issues:
First mortgage bonds . 167.300 123.800 239,430 Secured medium term notes , 337,500 212,500 -
Term bank loans . 31,000 40,000 -
- 740 1,539 Common stock issues ,
Reacquired common stock (25,601) (19,804) -
Matunties, redemptions and sinking funds , (395,287) (370,747) (384,178)
Nuclear fuel lease and trust obligations (99,076) (86.589) (77,196)
Common stock dividends paid . , (222,482) (224,947) (259,022) f1622) 1,176 Premiums, discounts and expenses .
1360)
Net Cash from Financing Acovities (104,118) j327,640) _(514.806)
Cash Flows from investing Activities (2)
Cash applied to construction (237,436) (223,881) (313,157)
Interest capitalized as allowance for borrowed funds used dunng construction . .
(5,993) (12,9E9 ) (6,137)
- - 374,085 Cash withdrawn from sale and leaseback and other trusts Other cash applied . (13,055) -(17,866) (/.351)
Net Cash from Investing Activities . J256,484) (254,676) 47,440 Net Change in Cash and Temporary Cash investments. (49,865) _(227,654) (281,978)
Cash and Temporary Cash investments at Beginning of Year. 103,143 330,797 612,775 Cash and Temporary Cash investments at End of Year _$_ 53,278 $ 103.143 $ 330,797 (1) Interest paid was $375.000,000, $367,000.000 and $373,000,000 in 1990,1989 and 1988, respectively.
Income taxes paid were $21,185,000, $9,058,000 and $76.534,000 in 1990,1989 and 1988, respectively.
(2) Increases in nuclear fod o.id nuclear fuellease and trust obl:gations in the Balance Sheet resulting from the noncash candkations under nuc! car fuel agreements are excluded from this statement.
The accompanying notes and summary of significant accounting policies are an integral part of this statement.
19
BALANCE SHEET December 31 __
1990 1989 onousaods of cnnars)
ASSETS PROPERTY, PLANT AND EQUtPMENT Utility plant in service. $ 8,648,888 $ 8,411,116 Less: accumutated depreciation and amortization 2,056,244 1.831,767 6,592,644 0.579.349 Construction work in progress 268,386 288,225 Perry Unit 2 ,
865,149 869.048 7,726,179 7.736.622 Nuclear fuel, net of amortization. 522,872 544.375 Other property, less accumulated depreciation . 45,452 47,317 8,294,303 8.328,314 CURRENT ASSETS Cash and temporary cash investments, 53,278 103,143 Amounts due from customers and others, net ?42,761 216,316 Unbilled revenues . b?.866 78.718 Materials and suppbas, at average cost . 108,r 58 83.322 Fossil fuel inventory, at average cost 52,57B 48,999 Taxes applicable to succeeding years 218,444 207.635 Other . 9,922 14,819
66,607 752.952 DEFERRED CHARGES Amounts due from customers for future federal income taxes . 1,165,904 1,201,278 ,
Unamortized loss from Beaver Valley Unit 2 sale . 110,623 122.911 Unamortized loss on reacquired debt . 60,564 75,988 Carrying charges and operating expenses, pre phase in 634,595 641.236 Carrying charges and operating exp(.nses, phase in . 629,744 373,714 Other. 202,835 170.154 2,833,325 2.585,281 Total Assets . $11,894,235 $ 11.666.547 The accompanying notes and summary of significant accounting pohcies are an integral part of this statement 20
C'.NTEROR ENE RGY CORPOHATION AND SUBSDARIE S December 31, 1990 1989 (thousands of dollms)
CAPITALIZATION AND LIABILITIES CAPITAllZATION Common shares without par value (stated value of $189 460.000 and $191,710.000 for 1990 and 1989, respectively) 180,000.000 author;:ed. 138.401.000 (excluding 2.511,000 shares in Treasury) and 139.792.000 (eicluding 1,120,000 shares in Treasury) outstanding in 1990 and 1989. respectively $ 2,155,197 $ 2,180,798 Retained eamings . 654_,836 613.774 Common stock equity 2,810,033 2.794,572 Preferred stock With mandatory receniption provisions , 237,490 281,352 Without mandatory redemption provisions . 427,334 427,334 Long term debt 3,729,237 3.533.656 7,204,094 7.036.914 OTHER NONCURRENT LIABILITIES Refund obligations to cuetomers
- 23,779 Other, pnmanly nuclear fuel lease obligations . 508,694 557.789 508,694 581.568 CURRENT LIABILITIES Current portion of long-term debt and preferred stock 214,138 217,706 Current portion of lease obligations . 114,943 101.057 Notes payable to banks and others. 110,094 206 Accounts payable . 311,713 248,103 Accrued taxes . , 323,716 329.440 Accrued interest 84,778 84.232 Dividends declared . 13,972 13,893 Accrued payroll and vacations . 2 8,5:55 27.692 Current portion of refund obligations to customers 23,888 58,752 Other. 7,386 _
22.072 1,233,183 1.103.153 DEFERRED CREDITS Unamorteed investment tax credits 336,126 381,925 Accumulated deferred federal income taxes 1,730,954 1,622.458 Reserve for Perry Unit 2 allowance for funds used donng construction . 212,693 212,693 Unamortized gain from Bruce Mansfield Plant sale. 626,493 655,573 Other . .
41,988 72.263
_ 2,948,264 2.944.912 Total Capitalization and liabikties $11,89425 $11_666.547 21 j
-- - - - ~. - _- -.
-STATEMENT OF CUMULATIVE PREFERRED CENiERIOR ENERGY CORPORATION AND SUBSDiAR ES
- AND PREFERENCE STOCK 1990 Shares Current December 31, Outstanding Call Pnce 1990 1989 CLEVELAND ELECTRIC *"5"*' ' "d' O Without par value, 4,000,000 preferred shares authorized, and without par value, 3,000,000 preference shares authorized, none outstanding Preferred,' subject to mandatory redemption-
$ 7.35 Senes C ,
180.000 $ 101.00 $ 18,000 $ 19.000 88.00 Series E , 30,000 1,034.43 30,000 33,000 75.00 Series F. 2,394 1,000 00 2,384 2,384 80.00 Senes G , - - -
800 145 00 Series H ,.
14,244 145 00 Senes i 13,779 -
13,779 17,717 113.50 Series K , 10,000 -
10,000 10,000 Adjustable Series M . . 500.000 103 00 49,000 49,000 9.125 Series N , 750,000 106.08 73,968 73,968 197,131 220,113 Less: Current maturities 25,969 7.751 171,162 212,362 Preferred, not subject to mandatory redemption:
$ 7.40 Series A , 500,000 101.00 50,000 50,000 7.50 Series B , . . 450,000 102.26 45,071 45,071 Adjustable Series L. , ,, 500,000 103.00 48,950 48,950 Remarketed Series P , . ,, 750 100,000 00 73,313 73,313 TOLEDO EDISON
$100 par value, 3,000,000 preferred shares authon2ed; $25 par value, 12,000,000 preferred shares authorized and $25 par value, 5,000,000 preference shares authorized, none outstanding Preferred, subject to mandatory redemption:
$100 par $11.00, , , 34,825 101.00 3,483 4,480 9.375 , , .. , ,.. 150,100 103.95 15,010 16,675 25 par 2 = 81. . 2,000,000 26.87 50,000 50,000 68,493 71.156 Less: Current matunties 2,165 2.165 66,328 68,990 Preferred, not subject to mandatory redemption:
$100 par $ 4.25. . .. 160,000 104.625 16,000 16,000 4.56. . . 50,000 101.00 5,000 5,000 4.25. 100.000. 102.00 10,000 10,000 8.32, , , 100,000 102.46 10,000 10,000 7.76. 150.000 102.437 15,000 15,000 7.80, 150,000 101.65 15,000 15,000 10 00. , , 190,000 101.00 19,000 19,000 25 par 2,21. . . 1,000.000 25.90 25,000 25,000-2.365 , , , 1,400,000 28 45 35,000 35,000 Series A Adjustable 1,200,000 25.75 30,000 30.000 Senos B Adjustable 1,200,000 -
_ 30,000 30,000 CENTERIOR ENERGY Without par value, 5,000,000 preferred l
- shares authorized. .
Total Preferred Stock, with Mandatory Redemption Provisions . $237,490 $281.352 Total Preferred Stock, without Mandatory Redemption Provisions . $427,334 $427.334 )
The accompanying notes and summary of significant accounting policies are an integral part of this statement. l l
22
NOTES TO THE FINANCIAL STATEMENTS (1) PROPiATY OWNED WITH OTHER UTILITIES AND INVESTORS The Operabnq Cnmpanies own, as tenants in common with other utihties and those investors who are owner-participants in vanous sale and leawback transactions (lessors), certain generating units as listed below. Each owner owns an unavided share in the entue unit Each owner has the right to a percentage of the generating capatAty of each unit equal to its ownership share Each utihty owner is obhgated to pay for only its respectwe share al the construct on and operahng costs Each i essor has leased its capacity nghts to a ubhty which is obhgated to pay for such t enor s share of the construchon and operating costs The Operating Companies' share of the operating expense of these generahng un:ts is included in the income Shtement Property, plant and equipment at Decen tier 31.1990 include ; the toltomng f acithes owned by the Operat ng Companies as tenants in common with Other utthttOS afid lessors t$ nef ir t ( M ot o
$Np DlIll con 51f dCllOn Seroce sNp Mega Power m Wod Ac cuNuhted Date Share waHg f.ouy e f,er a e in Ptogreu (ivpt eaaion Wrerahng Umt in 9 y e i.Nusands of dolWs) beneca Pumped Naqe 1970 M 00% 30b t y1r o 1 $8344 $ 554 $ 19 527
[a st aim Unit i 1972 68 HJ 411 Coai 164$89 1 699 -
Peny und 1 and Conanon i auim 1987 51 02 609 hutiear 2 524 249 10 902 257825 Deur Va' icy Und 2 and Common IM7 2b 12 214 %W 1.360 451 8 797 139 075 i aaM es (We 2 )
Com,tsut tion Supnde d (Note 3 (c ) )
Unc er tain 5! 02 bib Nmeae -
865 149 -
Perry Unit 2
$4nd7633 $88 7 1_01, $416 427 Depreciahon for Eastiake Unit 5 has been accumulated with depreciable property for all generat ng units rather than by specific generating units Ohio E dison and Pennsylvania Power purchased 80 megawatts of Cleveland Electnc's capacity entitlement in Perry Unit 1 from November 1987 through May 1989 Revenues from this transachon were $31,831,000 and 184.068 000 in 1989 and 1988, respechvely (2) UTILITY PLANT SALE AND LEASEBACK TRANSACTIONS As a result of sale and teaseback transacnons $70 300.000 in 1988 was recorded in a deferred completed in 1987 the Operating Companies are co charge account pursuant to PUCO accounhng orders lessees of 18 26% (150 megawatts) of Beaver VaHey This deferred amount is being amortized to expense Unit 2 and 6 5% (51 rnegawatts), 45 9% (358 over the hfe of the lease beginning in 1989 Additional megawatts) and 44 38% (355 megawatts) of Units 1, rental expense amounts, which were not deferred but 2 and 3 of the Mansheld Plant, respechvely, au for were charged to expense in 1988. were not signihcant terms of about 29% years The Operating Companies are responsible under Futum renimum lease payments under these these leases for paying all taxes, insurance premiums, operahng leases at December 31 1990 are operabon and maintenance costs and a!! other similar summan2ed as follows costs for their interests in the units sold and leased back The Operating Companies may incur addihonal year Amount costr in connection with capital improvements to the nm. % v **O units The Operahng Companies have ophons to buy 1991 1 170 000 the interests back at the end of the leases for the fair
}h market value at that time or t a renew the leases Ioaa 174 000 Addihonal lease provisions p . fe other purchase 1995 17.t o00 ophons along with conditions for mandatory t oryeae 4.171 000 termination of the leases (and possible repurchase of ku F unn unimum the leasehold interests) for events of default. These
- t. case Papee 150 4000 events of default include noncomphance with several hnancial covenants affecting Centenor Energy and the Semiannual lease payments conform with the payment Operahng Companies contained in an agreement schedule for each tease relat ng to a letter of credit issued in connection with Renta' capense is accrued on a straignt-kne basis the sale and leabeback of Beaver Valley Unct 2, as over the terms of the leases lhe amounts recorded as amended in 1989 See Note 10(e) rental expense for the Mantheid Plant leases were Toledo Edison is selkng 150 megawatts of its
$ 114,564.000 in both 1990 and 1989 and Reaver Vancy Unit 2 leased capacity coutlement to
$ t 11.105.000 in 1988 Penta! expense for the Beaser Cleveland Electnc This sate commenced in November Valiey Urut 2 team was $72.27E000 in both 1990 and 1988 and we anticipate that it ul! conhnue at least 1989 Rental expense for Beaver Vauey Unit 2 of untd 1998 23
(3) CONSTRUCTION AND CONTINGENCIES (d) SUPERFUND SITES The Comprehensive Environmental Response, (a) CONSTRUCTION PROGRAM Compensation and Liability Act of 1980 as amended The ostimated cost of our construction program for the (Superfund) estabhshed programs addressing the 1991 1993 period is $900,000.000, including AFUDC cleanup of hazardous waste disposal sites, emergency of $60,000,000 and excluding nuclear fuel preparedness and other issues. The Operating Companies are aware of their potentialinvolvement in (b) CLEAN AIR LEGISLATION the cleanup of nine hazardous waste sites We believe The Clean Air Act will require, among other things, that the ultimate outcome of these matters will not have significant reductions in the emission of sulfur dioxide a material adverse effect on our financial condition or and nitrogen oxides by fossil fueled electric results of operations.
generating units. The Clean Air Act will require that sulfur dioxide emissions be reduced in two phases over (4) NUCLEAR OPERATIONS AND a ten year period. Our preliminary analysis indicates CONTINGENCIES that comphance with the Clean Air Act may require additional aggregate capital expenditures in the range (a) OPERATING NUCLEAR UNITS of $400,000,000 to $700,000,000 by the Operatin9 Our interests in nuclear units n.ay be impacted by Companies and is expected to result in higher fuel activities or events beyond our control Operating and operation and maintenance expenses nuclear generating units have experienced unplanned The aggregate rate increases needed to fund outages or extensions of scheduled outages because compliance with the first of the two phases could be in of equipment problems or new regulatory the range of 2% to 4% by the year 1999. Total requirements. A major accident at a nuclear facility compliance costs of the Clean Air Act for both phases anywhere in the world could cause the NRC to limit or could result in aggregate rate increases in the range prohibit the operation, construction oi incensing of any of 7% to 8% by the year 2004. Capital expenditures will nuclear unit. If one of our nuclear units is taken out of be incurred after 1994. The financial impact is service for an extended period of time for any reason, expected to be substantially greater on Cleveland including an accident at such unit or any other nuclear Electnc than on Toledo Edison. A more specific facility, we cannot predict whether regulatory compliance cost estimate will become available when authontres would impose unfavorable rate treatment our compliance strategy is further developed. such as taking our affected unit out of rate base. An We believe that Ohio law would permit the recovery extended outage of one of our nuclear units coupled of compliance costs from customers in rates- with unfavorable rate treatment could have a material adverse effect on our financial position and results of (c) PERRY UNIT 2 operations.
Perry Unit 2, including ito t. hare o, the cum,non facilities, is over 50% complete, Construction of Perry (b) NUCLEAR INSURANCE Unit 2 was suspended in 1985 by the CAPCO The Price-Anderson Act limits the liability of the owners compies pending future consideration of vanous of a nucleai power plant to the amount provided by
. options, including resumption of full construction with a private insurance and an industry assessment plan. In revised estimated cost and completion date or the event of a nuclear incident at any unit in the canceliation. No option may be implemented without United' States resulting in losses in excess of the level the approval of each of the CAPCO companies of private insurance (currently $200,000,000), our Duquesne, a 13.74% owner of Perry Unit 2, has maximum potential assessment under that plan advised the Pennsylvania Public Utility Commission (assuming the other CAPCO companies were to that it will not agree to resumption of construction of contribute their proportionate share of any Perry Unit 2. The NRC construction permit for Perry assessment) would be $129,257,000 (plus any Unit 2 expires in November 1991. Cleveland Electnc, inflation adjustment) per incident, but is limited to the company responsible for the construction of Perry $19,540,000 per year for each nuclear incident.
Unit 2,' plans to apply for an extension of the The CAPCO companies have insurance coverage construction permit prior to the expiration date Under for damage'to property at Davis-Besse, Perry and NRC regulations, this action will cause the Beaver Valley (including leased fuel and clean up construction permit to' remain in effect while the costs). Coverage amounted to $2.325,000,000 for application is pending. each site as of January 1,1991. Damage to property if Perry Unit 2 were to be canceled, then our net could exceed the insurance coverage by a substantial investment in Perry Unit 2 (less any tax saving) would amount. If it does, our share of such excess amount have to be wntten off. We estimate that such a write- could have a material adverse effect on our financial off, based on our investment in this unit as of condition and results of operations.
- December 31, 1990; would have been about We also have insurance covcrage for the
$441,000,000, after taxes. See Notes 10(d) and (e) incremental cost of any replacement power purchased for a discussion of other potential consequences of (over the costs which would have been incurred had such a write off. the units been operating) after the occurrence of Beginning in July 1985, Perry Unit 2 AFUDC was certain types of accidents at our nuclear units. The credited to a deferred income account until January 1, amounts of the coverage are 100% of the estimated 1988, when the practice was discontinued incremental coct per week dunng the 52 week penod 24
starting 21 weeks af ter an accident,6/% of such Cleveland Electnc and $50,700,000 and $44,300,000, estimate per week for the next 52 weeks and 33% of respectively, for Toledo Ed: son in 1991, the estimated such estimate per week for the next 52 weeks The annualized revenue increases resulting from the cost and duration of replacement power could orders, as adjusted, are $71,400,000 for Cleveland l substantially exceed the insurance coverage Electnc and $18.600,000 for Toledo Edison before I
giving effect to the rate reduction proposals discussed below.
(5) NUCLEAR FUEL The January 1989 rate orders provided for the The Operating Companies have inventones for nuclear permanent exclusion from rate base of a portion of tne fuel which should provide an adequate supply into the Operating Companies' combined investment in Perry mid 1990s Substantial additional nuclear f uel must Unit 1 and Beaver Vallay Unit 2 which resulted in a be obtained to supply fuel for the remaining useful hves write-off of $454,000,000 ($300,000,000 after tar) in of Davis-Besse, Perry Unit 1 and Beaver Valley Unit 2. 1988 Since the orders effectrely climinated the More nuclear fuel would be required if Perry Unit 2 pose i of the Operating Companies recovenng were completed thei aining investment in four nuclear construction in 1989, existing nuclear fuel financing proi canceled in 1980 and recovering certain arrangements for the Operating Companies were deft i expenses for Davis Besse, additional wnte-refinanced through leases from a special-purpose offs .aag $80,000,000 ($49,000 000 af ter tax) corporation, The total amount of financing cunently were recorded in 1988, bnnging the total write off of available under these lease arrangements is nuclear costs as a consequence of the orders to
$609,000,000 ($309,000,003 from intermediate-term $534,000,000 ($349,000,000 af ter tax).
notes and $300,000,000 from bank credit The phasean pans under the January 1989 rate arrangements), although financing in an amount up to orders were designed so that tha three rate increases,
$900,000,000 is permitted The intermedtate-term coupled with then projected sales growth, would notes mature in the period 1993 1997. Beginning in provide revenues sufficient to recover all operating 1991, the bank credit arrangements are cancelabic on expenses and provide a fair rate of return on the two years' notice by the lenders As of December -31. Operating Companies' allowed investments in Perry 1990, $547,000,000 of nuclear fuel was financed Unit 1 and Beaver Valley Unit 2 for ten years beginning The Opcrating Companies severa!!y lease their January 1,1989. In the early years of the plans, the respective portions of the nuclear fuel and are revenues were expected to be less than that required obbgated to pay for the fue! as it is consumed in a to recover operating expenses and provide a fair reactor. The lease rates are based on vanous retum on investment Therefore, the amounts of intermediate term note rates, bank rates and operating expenses and return on investment net commercial paper rates currently recovered are deferred and capitalized as Tre amounts financed include nuclear fuel in the deferred charges Since the unrecovered investment Davis-besse, Perry Unit 1 and Beaver Valley Unit 2 will decline over the penod of the phase-in plans reactors with remaining lease payments of because of depreciation and federal income tax
$127,000,000, $46,000,000 and $59,000.000, benefits that result from the use of accelerated tax respechvely, as of December 31,1990. The nuclear depreciation, the amount of revenues required to fuel amounts financed and capitahzed also included provide a fair retum also dechnes Beginning in the interest charges incurred by the lessors amounting to sixth year, the revenue levels authorized pursuant to
$33,000,000 in 1990, $44,000,000 in 1989 and the phase-in plans were designed to De sufficient to
$41,000,000 in 1988 The cstimated future lease recover that period's operating expenses, a fair return amortization payments based on projected on the unrecovered investments, and amortization of consumption are $112,000,000 in tNth 1991 and deferred operating expenses and carrying charges 1992, $116,000,000 in 1993, $110,000,000 in 1994 recorded dunng the earker years of the plans All and $99,000,000 in 1995, As these payments are phase-in deferrals af ter December 31,1988 relating to mace, the amount of credit available to the lessor these two units will be recovered by December 31, becomes available to finance additional nuclear fuel, 1998. Pursuant to such phase-in plans, the Operating assum ng the lessor's intermediate term notes and Companies deferred the following bank credit arrangements continue to be outstanding 1990 1989 (thousan@i of fjollar$)
Deterreo Operahng Expenses $ 50 940 (6) REGULATORY MATTERS $_7_4 555 Carry r g Charges On January 31,1989, the PUCO issued orders which provided for three annual rate increases for the Eqmty 132 303 187.445 Operating Companies of approximately 9% 7% and 1205.085 $299159 6% effcctive with bills rendered on and after February 1,1989,1990 and 1991, respectively. The bh increase effective February 1,1991 has been reduced Under the January 1989 ran orders, the amount of to 4.35% for Cleveland Electnc and 2 74% for Toledo deferred operating expenses mi carrying charges Edison as discussed below scheduled to be recorded in 1991 through 1993 total !
The annuabzed revenue increases in 1989 and $104 000,000, $84,000.000 and $24,000,000, i 1990 associated with the rate orders were respectively The phase-in plans were designed so that
$120,700,000 and $105.700,000, respectively. for fluctuations in sales should not affect the level of 25
earnings. The orders accornplish this by allowing the package to all incorporated communities in Toledo l Operating Companies to seek PUCO approval to Edison's service area which are sLved exclusively by adjust cost deferrals if actual revenues are higher or Toledo Edison on a retail bas!s. The package calls for lower than amounts projected in the orders. The orders the ehmination of the 2.74% rate increase effective also provide for the adjustment of deferra!s to reflect February 1, 1991 for all residential and small 50% of the net after tax savings in 1989 and 1990 commercial customers, a reduction in residential rates identified by the management audit and approved by of 3% on March 1,1991 and a further residennal rate the PUCO as discussed in the following paragraphs. No reduction of 1% on September 1,1991. Communities change was made in the cost deferrals for 1989 The accepting the package must agree to keep Toicdo Operating Companies deferred an additional Edison as their sole suppher of electncity for a period of
$10,169.000 of carrying charges in 1990 and will five years The package aiso permus Toledo Edison to request PUCO approval of the deterral adjust rates in those communities on February 1, in connection with the 1989 orders, the Operating 1994 and February 1,1995 if inflation exceeds Companics and the Service Company have specified levels or under emergency conditions All undergone a management audit to assure that ehgible communities in Toledo Edison's service area, operation and maintenance expense savings are except the City of Toledo, have accepted the rate maumized The audit was conducted under the reduction packagc.
direction of an Audit Advisory Panel (Audit Panel) Toledo Edison plans to request PUCO approval to comprised of representatives of Centerior Energy, the reduce rates to the same levels for the same customer Ohio Office of Consumers' Counsel and the Industnal categories in the City of Toledo and the rest of its Energy Consumers in Apnl 1990, the Audit Panel service area l' all areas now served by Toledo Edison announced that it had identified potential annual roccive the benefits of the lower rates, annuakzed savings in operating expenses in the amount of revenues will be reduced by about $17,000,000 The
$98.160,000 from 1989 body levels The amount of revenue reductions will not adversely affect the phase-potential savings attnbutable to Cleveland Electric is in plans as the decrease ir, revenues will be mitigated 55% ($53.988.000) and the amount attnbutable to by the cost reductions discussed above.
Toledo Edison is 45% ($44,172,000). The Operating The Operating Companies have entered into an Companies expect to begin reakzing most of the agreement with other members of the Audit Panelin savings identified by the audit by the end of 1991. which the Operating Companies have agreed to use Fifty percent of the savings identified by the Audit their best efforts to avoid rate increases in the years Panel were used to reduce the 6% rate increase immediately following 1991 scheduled to go into effect on February 1,1991 for The 1989 orders also set nuclear performance each of the Operating Companies As discussed - standards through 1998. _Beginning in 1991, the previously. Cleveland Electnc rate 3 increased 4.35% Operating Companies could be required to refund and Toledo Edison rates increased 2.74% under this incremontal replacement power costs if the standards provision as approved by the PUCO in January 1991. ar not met, The Operating Companies do not beheve The rate impact is d.fferent for the two companies any refund will be required for 1991. Fossil-fueled because much of the savings will be achieved in areas power plant performance may not be raised as an jssue such as nuclear operations in which Toledo Edison in any rate proceeding before February 1994 as long stands to achieve greater savings relative to its size. as the Operating Companies achieve a system-wide in a move to become more competitive in Northwest availabikty factor of at -least 65% annually. This Ohio, Toledo Edison has proposed a rate reduction standard was exceeded in 1989 and 1990.
(7) FEDERAL INCOME TAX Federalincome tax, computed by multiplying the income before taxes and preferred and preference dividend requirements of subsidianes by the statutory rates. is reconciled to the amount of federalincome tax recorded on the books as follows:
For the years ended December 31 1990 1989 1988 (inousands of dollars)
Book income Before Federal incor <e Tax . $435;324 $528.065 $ 6.701 Tam on Booit income at Statutory Rate. $ 148.010 $179142 5- 2.278 Increase tDecrease) in Tat Accelerated depreciation. 6.287 ~ 10.415 6.829 investment tax credits on disallowed nuclear plant . (3' 522) -
Orgezat.on cost,. . - -
5 617
- Taxes, other than federal income taxes . (12.116) (107) 2.090 Other items . . 4 365 5112 (5642)
Toial Federal income Tax Expense . $109 024 $195.562 $ 11_172 26
Federalincome tax expense is recorded in the income Statement as follows f or the yeart, endea December 31, 1990 1989_ 1988 (thousanos of dollar $}
Operating f umses
.. Cunent 1a5 Provision . ... . . $ 42 685 1 51,869 5 79.520 Changes in Accumulated Delened f ederal locome 'Ias Acce6erated depreciabon and amortaabon . 41 777 44 144 26,168 Attornative rmnimum tax croit. ('4 340) (12 874) -
Sale and leasebad transactions and amort.abori . B 617 4 346 13.588 Proretty tan expense. (14 891) -
(12.127)
Defened CWlP revenues . 20 4P6 22 731 (8 453)
Deferred fuel costs . 742 (4.384) 10.227 System deve!opment costs. 651 555 9.157 Davis lame replacement power -
9.191 15 291 Federal n ome tai return ad ustments !
(19.621) neacqured delat costs 1355 ( t .250 ) 3.774 Detened operating exrnses . 2 A S4 1.021 14 913 Net operahng ioss carrytor*atd . - - (2,545)
Other items . 13889 5 254 (B.508) investment Tai Credits . 2 651 1.780 (3 687)
Total Charged to Operabng E=penses . 96 076 122 385 123 697 Nonoperabng incorne Cunent im Prwsion. . . . . .
(42.256) (39 341) (46,432)
Changes in Accumulated DeNoea Federalincome Tan Davis Besse repiacenicet power . - -
5.724 Wnte off of nuclear ccse . (22.143) -
(188.920)
AFUDC n1 carrying charges. 74 447 114 300 133 637 Tases. other than federal income taves .
5.520 Not operahng loss canyforwa<d . - -
(36 831)
Other items , ?900 (l 782) (3 952)
Totai Ewpense (Credet) to Non operahng income 12 948 73 177 (131.254)
Federal tr,cntne Tai included in Cumulative Lifect of an Accounting Chang, for UnNied nevenues . - -
18 729 Total r ederat income Tax E xpense . {0g024 119M62 $ _1,1 172 in 1988, a change was made in accounting for income taxes from the deferred to the liability method This change did not impact net income as the additional deferred taxes recorded were off set by a regulatory asset on the Balance Sheet.
Federal income tax expense adjustments in 1990, associated with previously deferred investment tu credits relating to trie 1988 write-off of nuclear plant investments, decreased the net tax provision related to nenoperating income by $37,522,000 and increased camings per share by $.27.
The favorable resolution of an issue conceming the appropriate year to recognize a property tax deduction resulted in an edjustment which reduced federalincome tax expense in 1990 by $14,011,000 ($10,375.000 in the fourth quarter) and increased earnings per share by $.10 ($ 07 in the fourth quarter).
For tar purposes, not operating loss (NOL) carryforwards of approximately $74,627,000, $71,532,000 and
$327,852,000 were generated in 1990,1989 and 1988, respectively The NOL carryforwards are available to reduce future taxable income and will expire in 2003 through 2005. The 34% tax eftect of the NOLs generated in 1990
($25,373.000) and 1989 ($24,321,000) is included in the above table as a reduction to deferred federal income tax relating to accelerated depreciation and amortization The 34% tax e'fect of the NOL generated in 1988
($111,470,000) is included in the above table as reductions to deferred iederalincome tax relating to accelerated depreciation and amortization ($72,094,000) and to deferred federal income tax charged to opera'ing expenses
($2,545.000) and to nonoperating income ($36,831,000). Future utilgation of these tax NOL carryforwards would result in recording the related deferred taxes.
Approximately $31,665.000 of unused general business tax credits are available to reduce future tax obligations.
The unused credits expire in varying amounts in 2001 through 2005. tJtilization of these unused credits is limited by provisions of the 1986 Tax Act and the level of future taxable income to wh.ch such credits may be applied The 1986 Tax Act provides for an AMT credit to be used to reduce the regular tax ta the AMT level should the regular tax exceed the AMT. AMT credits of $24,340,000 and $12.874.000 were ger,erated in 1990 and 1989, respectively.
27
(8) RETIREM2NT INCOME PLANS AND OTHER The settlement (discount) rate assumphon w s POSTRETIREMENT BENEFilS 8 5% for December 31,1990 and 8% for December 31 1989. The long-term rate of annual compensahon We sponsor noncontnbuting pension plans which cover increase assumption was 5% for both December 31.
all employee groups The amount of retirement 1990 and December 3 t ,1989 The long term rate of benehts generally depends upon the length of service return on plan assets assumphon was 8% in 1990 and Under certain circumstances, benehts can begin as 1989.
carly as age 55. The plans also provide certain death. Plan assets consist pomarily of investments in medical and disabihty benef ts Our funding pohey is to common stock. bonds. guaranteed investment comply with the Employee Rehrement locome contracts, cash equivalent secunties and reat estate Secunty Act of 1974 guidehnes The cost of postretirement medical benefits Dunng 1990, we offered our s ond Voluntary Early amounted to $6500.000 in 1990, $5,000.000 in 1989 Rehroment Opportunity Program (VEROP) Operating and $3,800,000 in 1988 Consistent with current L cupenses for 1990 included $15 000.000 of pension ratemaking practices, these costs are recorded when a plan accruals to cover enhanced VEROP benehts paid plus an addihonal $28,000.000 of pension costs for in December 1990, a new accounting standard for VEROP benehts being paid to retirees from corporate postretirement benehts other than pensions was funds The $28,000,000 is not included in the pension issued This standard requires employers to accrue cata r ported below Operahng expensec tor 1990 also the expected cost of such benehts dunng the included a credit of $41.000,000 resulting from a employees' years of service The standard also settlement of pension obhgations through lump sum requhes the recording of a cumulahve transihon payments to a substantiat number of VEROP retirees obhgation adjustment which can be recognized Net pension and VEROP costs (credits) for 1988 immediately, subject to certain hmitations, or amorbred through 1990 were compnsed of the following over the longer of 20 years or the average remaining components- service penod of achve employees expected to receive 1990 1989 1988 benehts We are required to adopt the new standard no later than 1993 Although we have not completed an (miihons of dollars)
Pension Costs (credas) analysis to determine the effect of adopting the new service cosi tar tenchin ea n. d standard, we do not expect adoption to have a danng the penud $ 15 $ 14 $ 12 matenal adverse effect on our financial condition or interest cost on praected tenefit resu'ts of operations because of expected future abi gabon . 37 35 33 regulatory treatment Any habikhes recorded pursuant Actual return on plan assets. (H) (73) (76) to the standard may be essentially ottset by reguiatory Net amortcanon and detenal tS?) 13 19 assels to reflect anticipated future revenues associated Net pens,on aedtn (H) (11) (12) with recovery through rates Vi ROP cost , 15 -
6 (9) GUARANTEES Settien ent gain (4I) - -
Under two long term coal purchase arrangements, Net emots . $(34)
- = $ft1)
=- 1 (6)
Cleveland Electnc has guaranteed certain loan and -
lease obhgations of two mining companies Toledo The following table presents a reconcihahon of the Edison is also a party to one of these guarantee funded status of the plans at December 31,1990 and arrangements This arrangement requires payments to 1989 the mining company for any actual out of pocket idle December 31 mine expenses (as advance payments for coal) when 1990 1989 the mines are idle for reasons beyond the control of (milhons of dollars) the mining company At December 31,1990, the Actuanal present v ,ue of tieneht pnnCipal amount of the mining conipanies' loan and obhgabons lease obhgations guaranteed by the Operahng vestod tenen s. $ 330 $ 328 Companies was $109.000.000 Nonvested tenehts 24 28 Accumulated teneht cragaion . 354 356 Ettect of future compensabon leveis . 72 117 Tota! protected tenett ot% gabon 426 473 Plan assets at fair market ulue. 653 761 Surplus of plan assrA over protected benef,t ottgatnan 227 288 Unrecogneed net gain due ta vwanc tmlween a%niphons and egenence (HS) (163)
Unrecognet j por servK e cost 13 8 Trans. ton asset at January 1,1987 tnng amortved over 19 years. (1261 11_41,)
Net prepad (accrued; penson cost inciuded in cmer detened charges (creats) on the Baunce Sheet i 26 $]8)
-+-,e. -.-,n. --
28
(10) CAPITALIZATION outstanding options held by employees veere as IUU *S (a) CAPITAL STOCK TRANSACTIONS 1978 gey tmpioyee S '" U ' P *" "'""
Shares sold, retired and purchased for treasury donng the three years ended December 31,1990 are listed in Optons Outstaeng at the following table. Decenem 31 1990 1989 1988 Shafes 168 655 215.187 314 693 (thousands of Shares)
Opbm Pnces , $14 09 to 414 09 to $14 09 to Commm Stock
$20 73 $20 73 $20 73 Empbyee Savings Plan . - - 7 Empbyee Purchase Pian. -
36 82 1978 Kee c' mployee Stock (c) EQUITY DISTRIBUTION RESTRICTIONS Ophon Fian . -
17 27 A ecember 31,1990, consolidated retained camings Totat Common Stock Sales -
53 116 (1,082) were comprised almost entirely of the undistnbuted Treasury Shares (1,391) (2) retained earnings of the Operating Companies Net Change . ,( 1,391) QO29) _ 1_14 Substantially all of their retained earnings were Cumulahve Pretened and available for the declaration of dividends on their Preference Siock of Subsdanes respective preferred and common shares All of their Subject to Mandatory common shares are held by Centerior Energy.
Reempt*" Any financing by an Operating Company of any of C rd Ekctnc Retirements its nonutility affikates requires PUCO authonzation unless the financing is made in connection with
$ 7 35 Senes C (10) (10) (10) transactions in the ordinary course of the companies 88 00 Senes E (3) (3) (3) 75 00 Senes F . -
(1) (14) pubhc utihties business operahons in which one 80 00 Senes G . (1) (2) (5) company acts on behalf of another.
145 00 Sunes H . (14) (4) (4) 145 00 Senes i . (4) (4) (4) (d) CUMULATIVE PREFERRED AND Preference PREFERENCE STOCK
$ 77.50 Senes 1 -
(6) (7)
Toiedo Ed. son Rebrements Amounts to be paid for preferred stock which must be Pretened redeemed during the next five years are $28,000,000
$100 par $1100 (10) (5) (5) in 1991, $18,000,000 in 1992 and $43,000,000 in 9 375. (17) (17) (17) each year 1993 through 1995.
Total _ (59) (52) (69) The annual mandatory redemption provisions are as Cumulative Preferred Stock of Annual Mandatory Subsdanes Not Subject to Redemphon Provisons Mandatory Redempton Shares Begin Pnce n'ng Toledo Edison Retirements
$25 par 3 47. - -
(1.200)
Total . - -
gj0g) Pretened 3 #3 o Shares of common stock required for the Employee gg 9g (f,S , f *3[go is Savings Plan and the Employee Purchase Plan are 75 00 Senes F . 2.384* 1985 1,000 being acquired in the open market 145 00 Senes I . 1.969 1986 1.000 Centenor Energy began a program in 1989 to 113 50 Senes K 10.000 1991" i.000 purchase up to 3,000,000 shares of its common stock Adiustatie Senes M . 100.000 1991 100 at prevaihng prices in the open market in the period 9125 Senes N 150 000 1993 100 between March 28,1989 and March 31,1991. As of Toledo Edison December 31, 1990, 2,510,000 shares had been Prefe"ed
$100 par $1100. 5.000 1979 100 purchased at a total cost of $46,198.000. Such shares are being held as treasury shares. 25 par 8 4 00 3
'"*P'***"'S'**'"'"9S"*'**' '* '*d*"* d M"h ' ' ' 99 '
(b) COMMON SHARES RESERVED FOR ISSUE * ' Ali outstanding shares to be redeemed June 1,1991 Common shares reserved for issue under the Employee Savings Plan and the Employee Purchase Plan were The annualized cumulative preferred dividend 3,176,727 and 21,448 shares, respectively, at requirement as of December 31,1990 is $60,000,000.
December 31,1990. The preferred dividend rates on Cleveland Electnc's Stock options to purchase unissued shares of Senes L and M and Toledo Edison's Series A and B common stock under the 1971 Key Employee Stock fluctuate based on prevaihng interest rates, with the Option Plan were granted at ar, exercise poce of 100% dividend rates for these issues averaging 8.38%,
of the fair market value at the date of the grant. No 7.71%, 9 06% and 9.84%, respectively, in 1990. The additional options may be granted The exercise pnces dividend rate on Cleveland Electnc's Remarketed of option shares purchased during the three years Senes P averaged 8 01% in 1990 ended December 31,1990 ranged from $14 09 to Under its articles of incorporation Toledo Edison
$17 41 per share. Shares and price ranges of cannot issue preferred stock unless certain earnings 29
coverage requirements are met Based on camings for 1992 $317.000.000 in 1993. $63,000.000 in 1994 the 12 months ended December 31,1990. Toledo and $292,000.000 in 1995 Edison could issue at December 31, 1990 in 1989 and 1990. Cleveland Electnc issued apptwmately $7.500.000 of additional preferred stock $550.000.000 aggregate poncipal amount of secured at ar assumed dividend rate of 11% If Perry Unit 2 medium term notes with vanous matunties rangmg had 3000 canceled and wotten cit as of December 31 from 1993 to 1999 and annual interest rates rang;ng 1993, Toledo Edison would not have been permitted to from 8 95% to 9 8% The n ites are secured by first issac any additional preferred stock See Note 3(c) mortgage bonds The issuance of additonal preferred stock in the future Dunng 1990. Cleveland Electne arranged to refunJ Ndi depend on earninos for any 12 consecutive in 1992 $78,700,000 poncipal amount of its First months of the 15 months preceding the date of Mortgage Bonds,13% Senes due 2012. which are issuance, the interest on alllong term debt outstanding colMeral secunty for poliuhon control refunding bonds and the dividends on all preferred stock issues ssued by a pubbc authonty lhe authonty's bonds wdl outstanding be refunded at the same time To effect the refund of There are no restnctions on Cleveland Electoc's its bonds. the authonty entered into a contract with two abihty to issue preferred or preference stock or lotedo institutions to dehver in 1992 $78.700.000 aggregate Edison's abihty to issue preference stock pnncipal amount of its tax exempt pollution control With respect to dividend and hquidation oghts bonds due December 1. 2013 with an interest rate of each Operating Company's preferred stock is poo'r to 8% at a pnce of 97 496% for an effective interest cost its preference stock and common stock, and each of 8 25% The authonty s bonds will be secured by Operating Company's preference stock is pnor to its $78,700.000 poncipal amount of Cleveland Electnc s common stock First Mortgage Bonds 8% Senes due 2013 B The pmceeds wdl be used to redeem the authonty's (e) LONG TERM DEBT AND OTHER utstanding bonds and refund the 13% Senos First BORROWING ARRANGEMENTS Mortgage Bonds in July 1992. The PUCO authonzed Long term debt, less current matunties, for the Cleveland Electoc to record interest expense equal to Operating Companies was as follows a blend of the higher ratc on the outstanding bonds Ac tual with the lower rate on the new bonds for an interest Decemte 31 year of wius Ee^e'sNaYo 1990 N9- expense reduction of $1.000 000 in 1990 and appr umately $0.000.000 totat in 1991 and 1992
~ ~
onousanus of wars)
First mortgage bonds The mortgages of Cleveland Electnc and Toledo 1991 8 375% $ -
$ 35.000 Edison constitute direct first hens on substantially all 1991 15 00 -
70 000 property owned and franchises held by them Excluded 1991 13 75 -
4 334 f am the hens, among other things, are cash.
1992 15 25 20 000 20.000 secur ties, accounts receivable, fuel, supphes and, in 4 4 1
the case of Toledo Edison autornative equipment
]58 1993 3 875 30 000 30,000 Additional first mortgage bonds may be issued by 1993 8 53 50.000 50.000 Cleveland Electnc under its mortgage on the basis of 1993 13 75 4,334 4.334 bondable property additions, cash or substitution for 1994 4 375 25,000 25 000 refundable first mortgage bonds. The issuance of 1994 13 75 4,334 4 331 additiocal first mortgage bonds by Cleveland Electnc 1995 10 125 -
36 800 on the Lasis of property additions is hmited by two 1995 11 25 60.000 60 000 provisions of its mortgage. One relates to the amount 43 4 of bondable property avadable and the other to camings coverage of interest on the bonds Unaer the 1995 7 00 15 15 1995 7 00 15 15 more restoctive of these provisions (currently, the 1996 2000 9 35 219.798 219,798 amount of bondable property avadable), Cleveland 2001-2005 9 08 194,135 194.135 Electnc would have been permitted to issue 2006 2010 9 08 323 650 323.650 approvimately $369,000.000 of bonds based upon 2011-2015 9 38 448,435 533.435 available bondable property at December 31,1990 2016 2020 8 92 760.180 591880 Cleveland Electnc also would have been permitted to 2021-2023 8 09 322.100 322 100 issue approximately $159.000 000 of bonds based 2.511.384 2 575 218 upon refundable bonds at December 31,1990 If Perry Term bank toans due Unit 2 had been canceled and wntten off as of 1902 1996 8 71 127 900 130.000 December 31,1990. Cleveland Electric would have Notes due 1992 1999. 9 70 769.430 474.215 been permitted to issue approumately $20,000.000 of Debentures due 1997. 11 25 125,000 125 000 bonds based upon avadable bondable property and c "
f[" g"g 5 9 69 190.860 221 250 appamaMy $ 8 000,000 of bonds based upon Other - net -
4 663 7973 refundable bonds at December 31.1990 Total Long Term The issuance of additional first mortgage bonds by Jebt . $3.729 237 $3 533.656 Toledo Edison also is hmited by provisions in its mortgage simdar to those in Cleveland Electnc's Long-term debt matures donng the next f!ve years mortgage Under the more restnctive of these as follows: $186.000.000 in 1991, $220,000.000 in provisions (currently, the camings coverage test),
30
. . . . .. .. I
Toledo Edison would have been permitted to issue Short-term borrowing capacity authonzed by the approximately $177,000.000 of bonds based upon PUCO is $300,000.000 for Cleveland Electnc and avadable bondable property at December 31,1990 $150.000,000 for Totedo Edison The Operating Tolede Edison also would have been permitted to issuo Companies have been authonzed by the PUCO to approximately $50,000.000 of bonds based up m borrow from each other en a short term basis refundable bonds at December 31,1990 if Perry Unit Most borrowing arrangements under the Operating 2 had been canceled and written off as of December Companies'short term bank lines of credit require a 31,1990, the amount of bonds which could have been fee of 0 25% per year to be paid on any unused portion issued by Toledo Edison would not have changed of the lines of credit for those banks without fee Certain unsecured loan agreements of Toledo requirements. the average dady cash balance in the Edison contain covenants relating to capitahzation bank accounts satisfied informal compensating rabos, camings coverage ratios and hmitations on batance arrangements secured financing other than through brst mortgage At December 31.1990. Cleveland Electoc and bonds or certain other transactions An agreement Toledo Edison had $87,t 10 000 and $23 200.000, relating to a letter of credit issued in connection with respectively, of Commercial paper outstanding The the sale and leaseback of Beaver Valley Unit 2 (as commercial paper was backed by at least an equal amended in 1989) .:untains several financial covenants amount of unused bank lines of cred t for both Ofecting Centem t Energy and the Operating Operating Companies Conpmies Among these are covenants relating to The fee for the Service Company's lines of credit is earnings coverage ratios and capitahzation ratios 0 25% per year to be paid on any unused porbon of its Centenor Energy and the Operating Companies are in lines of credit comphance with these covenant provisions We No formal short term borrowing arrangements have beheve Centenor Energy and the Operating been estabbshed for Centenor Energy.
Companies will continue to meet these covenants in the event of a wnte-off of the Operating Companies investments in Perry Unit 2, bamng unforeseen (12) CHANGE IN ACCOUNTING FOR UNBILLED circumstancos REVENUES (11) SHORT-TERM BORROWING Poor to 1988, revenues were recorded in the ARRANGEMENTS accounting penod dunng which meters were read.
Utihty service rendered af ter monthly meter reading Our bank credit arrangements at December 31,1990 dates through the end of a calendar month (unb:lled were as follows, Serece revenues) became a part of operating revenues in the Ciewland Toimb fiectoc Edaon Company Totai following month In January 1988, we adopted a change in accounting for revenues in order to accrue (inousanch of dailars) the estimated amount of unbilled revenues at the end eank t mes er Credit $15E000 575 550 58,000 $235350 of each month The adoption of this accounting method increased There were no borrowings under these bank credit 1988 net income $3,581.000 (net of $1.845,000 of arrangements at December 31.1990 An additional income taxes) and earnings per share $ 03 before the
$5,000.000 bne of credd is avadable to the Service cumulative effect on penods poor to January 1,1988.
Company under a $30.000.000 Cleveland Electnc kne The cumulative ettect of the change on the periods of credit, if unused by Cleveland Electnc The pnor to January 1.1988 was $28,153.000 (net of
$5,000.000 kne of credit is included in the Cleveland $ 18,729,000 of income taxes), or $ 20 per shart and Electnc total was included in 1988 not income 31
(13) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a tabulation of the unaudited quarterly results of operations for the two years ended December 31, 1990.
Quarters Ended March 31. June 30. Sept = 30 Dec.31 (thousands of dollars, except per share amounts) 1990 Operating Revenues. , , $560.594 $577,505 $673,015 $556.561 Operating income . ,. . , $116,208 $ 86.782 $171,723 $129,863 Net income . . . . . , $ 50,509 $ 54,921 $ 99,749 $ 59,280 Average Common Shares (thousands) 139,486 138,980 138,610 138,441 Earnings Per Common Share . . . .. $ .36 $ 40 $ .72 $ .43 Dividends Paid Per Common Share. . , $ ,40 $ 40 $ .40 $ .40 1989 Operating Revenues , , .
$555,230 $577,303 $637,619 $532,284 Operating locome . ,, . . $112,968 $129,708 $152,796 $ 36,459 Net income . . . . .. , , ,, . $ 67,690 $ 77.807 $108,857 $ 12,532 Average C";mmon Shares (thousands) . . . . ,, 140.829 140,752 140,391 139,990 Eamings Pei Common Share , $ .48 $ .55 $ .78 $ 09 Dividends Pa.d Per Common Share ,, , , . , ,, $ .40 $ .40 $ .40 $ .40 Er.ings for the quarter ended June 30,1990 were increased as a result of federalincome tax expense adjustments associated with deferred investment tax credits relating to the 1988 wnte.ott of nucicar plant investments. See Note 7. Tbc adjustments increased quarterly ea'nings by $36,298,000, or $.26 per share.
Earnings for the quarter ended December 31,1990 were increased as a result of year end adjustments of
$25,790,000 to reduce depreciation expense for the year (see Summary of Significant Accounting Policies),
$10,169,000 to increase phase in carrying charges (see Note 6) and $10,375,000 to reduce federalincome tax expense (see Note 7). The total of these adjustments increased quarterly earnings by $35,000,000, or $.25 per share.
32
Ex'ECUTIVES OF CENTERIOR ENERGY CORPORATION AND CENTERIOR SERVICE COMPANY CENTERIOR ENERGY CORPORATION Chairman and Executive Vice President . . Lyman C. Phillips Chief Executive Officer. . Richard A. Miller Vice President-Legal &
President e _' Corporate Affairs Fred J. Lange, Jr, Chief Operating Officer . . Robert J. Farling Controller . .
. Paul G. Busby Executive Vice President . Murray R. Edelman Treasurer . Gary M. Hawkinson Executive Vice President Edgar H. Maugans Secretary . E. Lyle Pepin CENTERIOR SERVICE COMPANY Chairman and Vice President-System Chief Executive Officer . Richard A. Miller Engineering & Control Alvin Kaplan President and Vice President-Legal &
Chief Operating Officer . . Robert J. Farling Corporate Affairs Fred J. Lange, Jr.
Executive Vice President- Vice President-Power Generation . Murray R. Edelman Human Resources &
Executive Vice President- Strategic Planning . John S. Levicki Finance & Vice President-Nuclear-Perry. Michael D. Lyster Administration . . Edgar H. Maugans Vice President-Executive Vice President- Transmission &
Customer Operations Distribution Operations. David L. Monseau (and Chairman & CEO Vice President-Marketing . . Thomas M. Oulnn of Toledo Edison and Vice President (and President President & CEO of of Toledo Edison) Donald H. Saunders Cleveland Electric) . Lyman C. Phillips Vice President-Nuclear-Vice President- Davis-Beue Donald C. Shelton Fossil Operations Richard P. Crouse Controller . Paul G. Busby Vice President- Treasurer Gary M. Hawkinson Transmission and Secretary . . E. Lyle Pepin Distribution Engineering &
Services . Gary J. Greben Vice President-Customer Service &
Community Affairs . Jacquita K. Hauserman 33
FINANCIAL AND STATISTICAL REVIEW Operating Revenues (thousands of dollars)
Steam lotal Total Total Heanng Operating Year Rendentwil Commered industnal Other Retaif Wholesale flectuc & Gas Revenues 1990. $719 078 6668 910 $779 391 $189 754 $2 357133 $ 10 542 $2 367 675 $ - $2 367 675 1989. 685 735 616 902 746 534 204 769 2 253 940 48 496 2 302 436 --
2 302 436 1988. . 637 329 537 861 675 584 84 524 1 935 298 102 262 2 037 560 -
2 037 500 1987. 629 663 531 682 689 959 36 272 1 687 576 24 409 1 911 985 13 371 1 925 356 IE86 . 599 445 516 614 675 082 79 716 1 871 457 11 381 1 882 838 12 953 1 895 791 1980. 394 872 301 513 461 624 53 633 1 211 642 36 966 1 248 608 22 047 1 270 655 Operating Expenses (thousands of dollars)
Other fuel & Operahon Depreciatiori Taies. Phase en & federal luial Purthased & 6 Other Than Pre phase in income Operating Year Power Maintenance Amorteation FIT Deferred Net Tag E stenses 1990. $412 531 $862 738 $251640 $283 425 5 (43 311) $ 96 0;8 $1863 099 1989. 413 810 860 138 280 918 259 871 (66 623) 122 385 1 870 505 1988. 391 401 865 632 264 824 268 550 (188 209) 123 607 1 725 895 1987, 470 466 642 594 214 421 207 521 (87 623) 105 912 1 553 291 1986. 522 281 550 874 141 009 194 925 -
138 181 1 547 270 1980. 490 659 280 722 90 621 112 832 -
64 950 1 039 784 income (Loss) (thousands of dollars)
Federal income Other income income (Loss) income & T aies- Before After Operating AruDC- Duducions, carrying Credil interest Debt AFUDC- Interest year income fourv Nei charges (E xpensei charges interesi Detit cna gu 1990. 5504 576 8 7 883 $ (11) $205 085 $(12 948) $704 585 $384 278 $ (5 993) $326 300 1989. 431 931 16 930 14 212 299 155 (73 177) 689 055 369 481 (12 929) 332 503 1988. , . 311 665 13 504 (489 047)(a) 372 155 131 254 339 531 378 292 (6 137) (32 624) 1987. 372 065 299 308 (57 821) 39 599 121 122 774 273 435 042 (137 257) 476 485 1986, 348 521 308 405 (8 108) 116 422 765 240 406 465 476 920 (118 145) 1980. 230 871 69 316 8 484- -
27 180 335 851 183 489 (40 199) 192 561 s
income (Loss) (thousands of dollars) Common Stock (dollars per share & %)
Mcome (Loss)
Before Fieturn on Preferrett & Cumulative Cumulatnre Average Average Preference Ettect of an Effect of an Net Stwes Common
$tock Accounting Accounting income Outstanding (c) Eamings Stoca Dmdends Ekx*
Year Dmdends Change CharKje(b) (LOSS) ( thousanas ) (Loss)(c) E4pty Declared (c) Value(c)
- 1990. $61841 $ 264 459 $ - $264 459 138 885 5 1.90 9.4% $1.60 $20.30 1989. 65 617 266 886 -
266 886 140 468 1 90 96 1 60 1999
, 1988. 69 489 (102 113) 28 153 (73 960) 140 778 (0 53) (2 5) 1.84 19 68 l 1987. 86 135 390 353 -
390 353 138 395 2 82 12 8 2.56 22 10 1986. 85 027 391 893 -
391 893 128 927 3 04 13 7 2 49 22.13 1980. 45 732 146 829 -
146 829 67 185 2.19 11 2 1.92 19 37 l
- t. NOTE- 1980 data is the result of combning and restating Cleveland Electnc and Toledo Edison data (a) Inchides wnte ott of nuclear costs irt the amount of $534,355.000 in 1988 (b) in 1988, the Operat:ng Companies adopted a change in the method of accounting for unbited revenues
(. (c) Outstanding shares for the periods pnor to Apnl 29,1986 reflect the Cleveland Electnc 1.11 for one cichange ratio and the Toledo Edison one for-ore exchange ratio for Centenor Energy shares l
l 34 l
i
_ . _ . _ . __ _ _ _ . _ . <_ . . _ . _ . _ _ _ . _ . _~ _ . _ _ . _ . - . _ _ . _ _ _ _ . _ _ _ .
Cl NILHtOR E NLHGy CORPO4Af TON AND SUnd1 DIARIES Electric Sales (millions of KWH) Electric Customers (year end) flesidential tjsage Averagtt Averr ,
Awfag twe flove,*ic levksirJi e WH i or Pee f%,
Ytaf flowiential Coimwaal inebstraat Wholes 4N! Ot'W Iolal HOWtenbM CGmm64aal & Otter TutW Cust;wwr - FWH Cosimm 1990. 6 666 6 848 12 168 148 959 26 789 918 965 94 522 12 906 1 026 391 7079 10,824 $765.93 1999. 6 806 6 830 12 5?O 429 996 27 581 914 020 93 833 12 763 1 020 616 7 295 10 08 737 58 1988. 6 920 6 577 12 793 863 946 28 099 909 182 92 13? 12 305 1 013 619 7 462 9 21 690 06 1987. 6 659 6 350 11 985 399 949 26 342 903 365 90 148 12 240 1 005 753 7 217 9 46 68543 1986. 6527 6 239 11 409 242 909 25 326 898 583 87 947 12 012 998 542 7 108 9 18 654 99 1980. 6 434 5 431 11 227 1 630 826 25 548 882 987 83 602 11 460 978 049 7 111 6 16 437 98 ,
Load (MW & %) Energy (millions of KWH) Fuel Osnaw [ ffriency .
Capauty Nc?
at Tithe Peak Capitaly (twj *Pd W " ' Pur@awd Itri Cr4t DIU Pef Year cePeak itai Megen I actor . _ _ _I ouil Nat. Mar 'olal Power T o'ai Per KWH EWil 1990 6 437 5 261 18.3% 63.0% 21 114 9 481 30 595 (1 926) 28 669 1.524 10 354
.1989- 644 5 389 .62 63 3 20 174 12 122 32 296 (2 785) 29 511 1 47 10 435 1988. 5 525(d) 5 673 (2 7) 60 8 21 576 7 805 29 381 920 30 301 1 59 10 410 1987. 5955 5 173 13 1 63 6 20 894 6 907 27 801 601 PH 4G2 1 53 10 466 1986_ 5199(d) 5 021 34 63 0 22 739 24 22 763 4 552 2/ 315 1 79 10 292 I
1980, 6113 4 635 24 2 64 3 20 015 2 114 22 129 5246 27 375 16G 10 519 investment (thousands of dollars)
Constu tion Work in total Uhhty Acaamulated Pu*y tm NtK leaf Pro (sty. Ut*ty 5%nt hi Depreaatum & Nel & Perry f ueW and Plant and Plant t otal Year Nwvre Artuvte/atre 1%nt Urut ? Other f qmprinini A<kian.ms Assets 1990, $8 648 888 $2 056 244 $6 592 644 $1133 535 $568124 $8 294 303 $ 251312 $11694 235 1989. 8 411 116- 1 831 767 6 57D 349 1 157 273 591 692 8 328 314 230 797 11 666 547 1988, 8 143 673 1 569 304 6 574 360 1 ?22 732 643 087 8 440 188 343 143 11 573 098 19874 8 388 114 1 324 446 7 063 668 - 1 007 707 656 350 8 727 725 947 921 11349 B36 1986. 4 639 E42 1 367 662 3 271 880 5 237 782 652 564 9 162 226 1 133 748 - 10 Oli 932 1980. 3 602 029 778 488 ? 823 541 1 331 323 89 683(e) 4 244 547 633 999 4 827 944 Capitalization (thousands of dollars & %)
Preternxt & Protererxn Pretened stoca, winnia Stor.k, mth Mandatury M.Whtory Redemphon year common stock itoiy Hwiempi.na emmors Promes t ong Tem Deta ipte 1990. 32 810 033 39% $237 490 3% $427 334 6% $3 729 237. 52% $7 204 094 1989. 2 794 572 40 281 352 4 427 334 6 3 533 656 50 7 036 914 1988. ? 771 744 39 303 781 4 427 334 6 3 551 614 51 7 054 473 1987. 3 109 060 41 343 985 4 4:7 334 6 3 718 249 49 7 628 628 1986. 2 991 341 39 487 814 7 404 021 5 3 792 402- 49 7 675 578 1980. 1 385 229 36 327 000 8 245 071 6 '1 925 934 50 3 883 234 (d) Capaaty data refWct estended generahng unit outages for renovahon and improvements (e) Flestated fcer effects of f apitahzahon of nuclear fuellese and financing arrangements pursuant to Statement of financial Accounting Standards 71 35
BOAnD OF DIRECIORS I
Richard R Anderson, President and Chief Executive Robert M. Ginn, Executive in Residence et Jot l
Officer of The Andersons Management Carroll University. Also Chairman Emeritu. l Corporation, a grain, farm supply and of the Company and retired Chairman and retailing firm. Chief Exec.Jtive Officer of the Compt.ny. l Albert C. Bersticker, President and Chief Operating RSv H. Holdt, Retired Chairman of White Officer of Ferro Corporation, a producer of Consolidated Industries, Inc., a manufacturer l
specialty chemical materials for manuf actured 0: Otcducts for the home, principally major products. ar pliances, and machinery and equipmont Leigh Carter, Retired President and Chief Operating for industry.
l Officer of The BFGoodrich Company, a George H. Kaull, Crtairman and Chief Executive producer of chemical 3, plastics and aero- Officer of Premix, Inc., a developer, manu-space products. Chairman of Tremco, f acturer and fabricator of thermoset reinforced Incorporated, a manufat Jrer of specialty composite natorials.
chemical products and a wholly owned .91 chard A. Miller, Chairman and Chief Executive subsidiary of The BFGoodrich Company. Officer of the Company and Centerior Thomas A.Commes. President and Chief Operating Service Company.
Officer of Tht Sherwin Williams Company, a Frank E. Moster,Vice Chairman of BP America Inc.,
manufacturer of paints and paintin0 supplies, a producer anc ,afiner of pettoleum products.
Wayne R. Embry, Executive Vice President and Sister Mary Marthe Reinhard, SND, Director of General Manager of the Cleveland Cavaliers, Development for the Sisters of Notre Dame a professional basketball team. Chairman of of Cleveland, Ohio. Former President of Michael Alan Lewis Company, a fabricator Notre Dame College of Ohio.
P Robert C. Savage, President of Savage & Associates, c ras e aut rnot ve indus Inc., an insurance, financial planning and Robert J. Farling, President and Chief Operating estate planning firm.
Officer of the Company and Centerior Paul M. Smart, Retired Vice Chairman of the Service Company. '
Company and The Toledo Edison Company.
William J. Williams. Chairman and Chief Executive Officer of Huntington National Bank.
COMMITTEES OF THE BOARD Uspital Human Audit Eoenditu',a Executive Fhance Resources Nominating Nuclear
' T.A. Commet. G. KNil, R.A. Millor, R A. Miller, W.J. Williams, F.E. Mosier, R.R Anderson, Chairman Cnalrman Chalfman Chairman Chairman Chairman Chairman L Carter A.C. Bersticker R.M. Ginn R.R Anderson L. Carter R.R Anderson A.C. Bersticker Sr. M.M Reinhard R.J. Farling R.H. Holdt T. A, Commes R.H. Holdt A.C. Bersticker R.J. Farling W.J. Williams R. M. Ginn WJ. Williams R.J. Farling G.H. Kaull L. Carter - R.M. Ginn n.A. Miller R.H. Holdt F E. Mosier T.A. Commes R.H. Holdt F.E. Mosier R.C Savage W.R. Embry R. A. Miller Sr. M.M. Reinharo PM. Smart R.M. Ginn St. M.M. Reinhard R.H. Holdt G.H. Kaull R.A. Miller Sr. M.M. Reinhard R.C. Savage RM. Smart W.J. Williams 36 l- _ _ _ _ _ _ _ . _ _ _ _ . _ . _ _ _ _ _ _ . _ _ _ _ _ _ ._, ._ .- - _ _
SliARE OWNER INFORMATION l
DIVIDEND REINVESTMENT AND STOCK D ."SASE REGISTRAR PLAN ANDINDIVIDUAL RETIREMENT AC,900NT Ameritrust Company National Association (CXelRA) Corporate Trust Division The Company has a Dividend Reinvestment RO. Box 6477 and Stock Purchase Plan which provides Cleveland. Ohio 44101 share owners of record and customers of the Company's subsidiaries a convenient means of purchasing shares of Company common Ali comrnunications about an existing CX*lRA stock by investing a part or all of their should be directed to the Custodian at the quarterly dividends as well as making cash address or telephone numbers lis'ed below:
ir: vestments, in addition, individuals may Ameritrust Company National Association establish an individual retirement account Corporate Trust Division (IRA) which investa in Company common R O. Box 6477 stock through the Plan. Information relating Clevelend, Ohio 44101 to the Plan and the CX*lRA may be obtained in Cleveland area 737 5742 or 737 5744 from Share Owner Services at the Company Elsewhere in Ohio SHARE OWNER SERVICES 1800 362 0697, Extension 5742 Communications regarding stock transfer Outside Ohio requirements, lost certificates, dividends arid 1800 3211355. Extensim 5742 changes of address should be directed t INDEPENDENT ACCOUNTANTS Sharo Owner Services at the Company. To reach Sharo Owner Services by phone, call: Arthu And rs n C In Clevaland area 642 6900 or 447 2400 Cleveland, Ohio 44114 Outside Cleveland area 1 800-433 7794 g Please have your account number ready Listed on the New York, Midwest and Pacific when calling. Stock Exchanges. Opticns are traded on
- INVESTOR RELATIONS The Pacific Stock Exchange. New York Stock inquiries from security analysts and institutunal Exchange symbol-CX. Newspaper investors should be directed to Terrence R. abbreviation-CentEn or CentrEngy.
Moran, Manager Investor Relations, at the ANNUAL MEETING Company's mail address or by telephone at The annual meeting of the share ownbrs of (216)447 2882. the Company will be held April 23,1991.
TRANSFER AGENT Owners of common s'ock as of February 26, Centerior Energy Corporation 1991, the record date for the meeting, will be Share Owner Services eligible to vote on matters brought up for RO. Box 94661 share owners' consideration.
Cieveland, Ohio 44101 4661 FORM 10 K Stock transfers may be presented at The Company will furnish to share owners, PNC Trust Company of New York without charge, a copy of its most recent 40 Broad Street, Fifth Floor annual report to the Securities and New York, N.Y.10004 Excnange Commission (Form 10 K) and, EXECUTIVE OFFICES upon payment of a reasonable fee, a copy of each exhibit to Form 10 K. Requests should Centerior Energy Corporation ,
be directed to the Secretary of the Company.
6200 Oak Tree Boulevard l Independence, Ohio AUDIO CASSETTES AVAILABLE Telephor.e:(216)447 3100 Share owners with impaired vision may obtain FAX: (216)447 3240 audio cassettes of the Company's Ouarterly MAIL ADDRESS Reports and Annual Report. To obtain a cassette, sin, ply write or call Share Owner Centerior Energy Corporation l P.O. Bo: 94661 Services. There ,si no charge for this service.
l Cleveland, Ohio 441014661 i
37
Centerior Energy Corporation P.O. Ilox 9466) g$lf,s$
Cleveland,011441014661 l' AID Cl.I'\T1. w n,otilo I'l R\f f l No. <w l
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