ML20082B420
| ML20082B420 | |
| Person / Time | |
|---|---|
| Site: | Beaver Valley, Perry |
| Issue date: | 03/31/1995 |
| From: | Clayton D DUQUESNE LIGHT CO. |
| To: | Office of Nuclear Reactor Regulation |
| References | |
| NUDOCS 9504050144 | |
| Download: ML20082B420 (70) | |
Text
,
one oxforo centre Duquesne LichtCompany
?;fgSynm, (4 2) 393 4230 DONALD J. CLAYToN Treasurer March 31,1995 U. S Nuclear Regulatory Commission 2120 L Street NW
^
Washington, DC 20555 Attn.: Director of Nuclear Reactor Regulation RE:
Docket No. 50-440 - Perry Nuclear Power Plant Unit No.1 Docket No. 50-334 - Beaver Valley Power Station Unit No.1 Docket No. 50412 - Beaver Valley Power Station Unit No. 2 Gentlemen:
In accordance with NRC Regulation 10 CFR Section 140.21, regarding the Price-Anderson Act retrospective premium system guarantee requirements, you will find enclosed:
1, A copy of Duquesne Light Company's consolidated financial statements for the twelve month period ended December 31,1994;
- 2. An intemal cash flow projection, including actual 1994 data and projections for 1995.
This statement indicates that $7.498 million, our portion of the $30 million rettospective premiums for the three subject units, would be available for the paymsat of such premiums in 1995. Duquesne Light Company has a 47.5%
ownership in Beaver Valley Unit No.1, a 13.74% ownership in Perry Unit No.1 and a 13.74% leasehold interest in Beaver Valley Unit No. 2.
Pursuant to Commission rules, Duquesne Light Company has elected to utilize its financial statement as its guarantee of payment of deferred premiums. We are providing these statements to meet our reporting requirements for both Beaver Valley Unit 1 and Unit 2 and Perry Unit 1 at this bme.
Sincerely, hk
/
/
DEllVERING 0VALITY cc.
R. Duckworth - BV ENERGY n-cron_
9504050144 950331
'f j PDR ADOCK 05000334 I
4.
Source and Application of Funds (In Millions of Dollars)
Actual Forecast 1994 1995 Capital Requirements Construction Expenditures (Excluding AFUDC)(1)
$94
$80 Capital Additions Projected to be Leased (Principally nuclear fuel) 37 35 Maturities and sinking Funds 1
10 Total
$132
$165 Sources of Capital Internal Sources (2)
Deferred Taxes (24)
(17)
Investment Tax Credit (5)
(5)
Phase-in Plan Deferred Revenues 29 0
Other Non-cash Operating Expenses 156
.11 2 Total Internal Sources (Excluding Retained Earnings)
$156
$155 (1) Total AFUDC for 1995 is projected to be $2 million.
(2) Changes in retained earnings have not been reflected.
p...,............
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[ CONFORMED]
.p UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 l.
FORM 10-K 1
L
[X]
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [ Fee Required] for the fiscal year ended December 31,1994 or
[]
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of1934 [No Fee Required] for the transition period from to Commission Registrant; State ofIncorporation I.R.S. Employer File Number Addresst and Telechone Number Identification No.
1 956 DUQUESNE1.lGHT COMPANY 25-0451600 (A Pennsylvania Corporation)
One Oxford Centre 301 Grant Street 1
Pittsburgh, Pennsylvania 15279 Telephone (412) 393 6000 l
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or i
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No DQE is the holder of all shares of outstanding common stock ($1 par value) of Duquesne Light Company censisting of 10 shares as of February 16,1995.
1
[]
Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained, to die best of the registrant's knowledge,in definitive proxy or information statements incorporated by reference in Part 111 of this Form 10-K or any amendment to this Form 10-K.
Securities regit: red pursurnt to Section 12(b) of the Act:
l Name of each exchange Re.Intrant Tide of =rk el===
on which re-intend Duquesne Light Preferred Stock (par value $50)
New York Stock Exchange Company l
l Inveuntary Series Ij uidatm. V. Ire q
3.75 %
$50 per share 4.00 %
$50 per share 4.10 %
$50 per share 4.15%
$50 per share 4.20%
$50 per share
$2.10
$50 per share 1
$7.20
$100 per share Sinking Fund Debentures, due March 1,2010 (5%) New York Stock Exchange DOCUMENTS INCORPORATED BY REFERENCE Part of Form 10-K Into Which Document Description Is Incorocrated l
DQE Annual Report to Shareholders Parts I and 11
{
for the year ended December 31,1994 i
Proxy Statement for DQE Annual Part 111 Meeting of Shareholders to be held on April 19,1995 I
I L
1
1 TABE OF CONTENTS i
fags East ~
PARTI PARTII ITEM 1. BUSINESS 1
ITEM 5. MARKET FOR REGISTRANT'S
- Gtneral 1
COMMON EQUITY AND RELATED Service Territory -
1 SHAREHOLDER MATTERS 17
' Regulation 1
Seasonality 2
Results of Operations 2
frEM 6. SELECTED FINANCIAL DATA 17 Sales of Electricity to Customers 2
ITEM 7. MANAGEMENT'S DISCUSSION AND Phase-in Deferrals 3
ANALYSIS OF FINANCIAL CONDITION Sales to 0:her Utilities 3
AND RESULTS OF OPERATIONS 17 Operating Expenses 3
ITEM 8. CONSOLIDATED FINANCIAL Other income and Deductions 4
STATEMENTS AND SUPPLEMENTARY Construction 5
DATA 17 Capital Resources and Liquidity 5
ITEM 9. CHANGFSIN AND DISAGREEMENTS Financing 5
WITH ACCOUNTANTS ON Short-Term Borrowings 5
ACCOUNTING AND FINANCIAL Interest Charges 5
DISCIDSURE 17 Sales ofAccounts Receivable 6
Nuclear Fuel Leasing 6
Rate Matters 6
PARTIII Energy Cost Rate Adjustment Clause (ECR) 6 Deferred Rate Synchronization Costs 7
ITEM 10. DIRECTORS AND EXECUTIVE Generating Units 7
OFFICERS OF THE REGISTRANT 17 Joint Interests 7
ITEM 11. EXECUTIVE COMPENSATION 18 Beaver Valley Power Station 8
ITEM 12. SECURITY OWNERSHIP OF CERTAIN Perry Unit 1 8
BENEFICIAL OWNERS AND Properry Held for Future Use 8
MANAGEMENT 18 Employees 8
ITEM 13. CERTAIN RELATIONSHIPS AND Electric Utility Operations 9
RELATED TRANSACTIONS 18 Fossil Fuel 9
Nuclear Fuel 10 Nuclear Decommissioning 11 PARTIV Environmental Matters 11 Outlook 12 ITEM 14. EXHIBITS, FINANCIAL STATEMEhT Competition 12 SCHEDULES AND REPORTS ON Transmission Access 13 FORM 8-K 18 Retirement Plan Measurement Assumptions 13 SCHEDULE VIII 35 Executive Officers of the Registrant 14 SCHEDULEX 36 ITEM 2. PROPERTIES 15 ITEM 3. LEGAL PROCEEDINGS 16 SIGNATURES 37 Westinghouse Lawsuit 16 Rate-Related and Environmental Litigation 16 INDEPENDENT AUDITORS' REPORT 38 ITEM 4. SUBMISSION OF MATTERS TO A FINANCIAL STATEMENTS 40 to 62 VOTE OF SECURTIY HOLDERS 16 SELECTED FINANCIAL DATA 63
PARTI
' ITEM 1. BUSINESS.
General Duquesne Light Company (Duquesne) is a wholly owned subsidiary of DQE, an energy services hold-ing company formed in 1989. Duquesne is engaged in the production, transmission, distribution and sale of electric energy.' Duquesne was formed under the laws of Pennsylvania by the consolidation and merger in 1912 of three constituent compan! s.
Service Territory Duquesne provides electric service to customers in Allegheny County, including the City of Pittsburgh, and Beaver County. This represents a service territory of approximately 800 square miles. The population of the area served by Duquesne, based on 1990 census data, is approximately 1,510,000, ofwhom 370,000 reside in the City of Pittsburgh. In addition to serving approximately 580,000 customers within this service area, Duquesne also sells electricity to other utilities beyond its service territory.
P Regulation Duquesne's operations are subject to regulation by the Pennsylvania Public Utility Commission (PUC).
Duquesne is also subject to regulation by the Federal Energy Regulatory Commission (FERC) under the
[ederal[ouYr Act in respect o[ rates [or interstate sales, transmission of electric power, accountil g and other matters.
Duquesne is subject to regulation by the Nuclear Regulatory Commission (NPC) under the Atomic Energy Act of1S54, as amended, with respect to the operation ofits jointly ow n.illeased nuclear power plants, Beaver Valley Unit 1, Beaver Valley Unit 2 and Perry Unir 1.
Duquesne is subject to the accounting and reporting requirements of the Securities and Exchange Commission. As a result, Duquesne's consolidated fmancial statements contain regulatory assets and liabilities in accordance with Statement ofFinancial Accounting Standards No. 71, Accounting For the Efects ofCertain Types ofRegulation (SFAS No. 71)and reflect the effects of the ratemaking process. In accordance with SFAS No. 71, Duquesne's financial statements reflect regulatory assets and costs based on current cost-based raremaking regulations. The regulatory assets represent probable future revenue to Duquesne because provi-sions for these costs are currently included, or are expected to be included, in charges to utility customers through the ratemaking process.
Duquesne's operations currently satisfy the SFASNo. 71 criteria. However, Duquesne's operations, or a portion thereof, could cease to meet these criteria for various reasons, includirig a change in PUC or FERC regulations. In such an event, Duquesne would be required to write-off any regulatory assets or liabilities for those operations that no longer meet the SFAS No. 71 requirements.
l i
I l
I l
1 l
Seasonality i
Sales of electricity to ultimate customers by Duouesne tend to increase during the warmer summer and cooler winter seasons because ofgreater customer use of electricity for cooling'and heating.
QUARTERLY KILOWATT HOUR SALES Millione 4,000 M'
,, 'c,l'
,ci 3,000 i
i m
g
. F,
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/
i
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R 2,000 1
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+
i; f
. Id 1.000
. V b.
1992 1993 1994 0First Werter OSecond CnJarter DThird Werter0 Fourth C1;arter I
The overall level of business activity in Duquesne's service territory and weather conditions are crpect-ed to continue to be the primary factors affecting sales of electricity to ultimate customers in the near term.
Duquesne's electric sales may also be affected in the long-term by increased competition in the electric utility industry. (See " Competition" discussion on page 12.)
Results of Operations 1994 ENERGY SALES BY CLASS OF CUSTOMERS (Excluding Sales to Other Utilities) m.m.
->m.
u..
COMMEnct al.7%
COMMERCis 30 2%
Qt.
ow en HOUST,h4 27.02 MDUSTRl4 34 2%
DUQUE9sE AL ELECTast UTIUTIE$
12.122.000 eraan se
- e. te.en gweis me i
Sala ofEletricity to Customers Cuiromer operating revenues result from Duquesne's sales of electricity to ultimate customers and are based on rates authorized by the PUC. These rates are cost-based and are designed to recover Duquesne's energy and other operating expenses and investment in utility assets and to provide a return on the invest-ment. In 1994, sales to Duquesne's 20 largest customers accounted for 14.6 percent of customer revenues.
Sales to USX Corporation, Duquesne's largest customer, accounted for 3.8 percent of total 1994 customer revenues. Total kilowatt-hour (KWH) sales to ultimate customers in 1994 increased 2.3 percent in 2
s.MA l;.
1 compar:on with KWH sales to ulumare customers m 1993. Commercial and industrial KWH sales
' increased 1.3 percrnt and 6.9 percent, respectively, benefiting from the improving economy and a slight growth in the numbers of customers. Industrial sales volume also increased as a result of Duquesne's marker-ing efforts and fewer customer production facility outages. Compared to 1994 and 1992, the significantly hotter summer in 1993 resulted ir higher residential KWH sales volume.
E Phase-in Deferrnis Phase-in deferred revenues represent the deferral and subsequent recovery of revenues resulting from a $232 million rate increase granted in early 1988. The PUC required Duquesne to phase this increase in during a six-year period, which ended in April 1994.
Sales to Other Utilities i
Short-term power sales to other utilities in 1994,1993 and 1992 were 3,212,110 KWH,2,820,920 KWH and 4,059,989 KWH, respectively. Fluctuations in electricity sales to other utilities are related to J
Duquesne's customer energy requirements, the energy market and transmission conditions and the availability of Duquesne's generating stations. Short-term sales to other utilities are regulated by FERC and are made at marker rates. Revenues from sales to other utilities were $58.3 million, $50.7 million and $72.4 million in 1994,1993 and 1992, respectively. Because of reduced generating station availability, Duquesne had fewer off-system sales in 1993 than in 1994 or 1992. Future levels of off-system sales of electricity will be affected by the outcome of Duquesne's FERC filings requesting firm transmission access. (See
- Transmission Access" discussion on page i
13.)
f Generally, Duquesne is permitted to recover (to the extent that such amounts are not included in base rates) fuel and other energy costs from its customers through an energy cost rate adjustment clause (ECR),
subject to PUC review. This revenue adjustment includes a credit to Duquesne's customers for profits'from short-term sales to other utilities. The credit to Duquesne's customers for profits from short-term sales to other utilities was $16.6 million in 1994, $12.1 million in 1993 and $19.1 million in 1992. (See " Energy Cost Rate Adjustment Clause" discussion on page 6.)
Operating Expenses Fuel and purchased power expense fluctuations result from changes in the cost of fuel, the mix between coal and nuclear generation, the total KWHs sold and generating station availability. Because of the ECR, changes in fuel and purchased power cost normally do not impact earnings.
Components of Change in Fuel and Purchased Power Expense fsom the Prior Year 1994 1993 (Amounts in Millions of Dollars)
[
Average unit cost of fuel
$(3.4)
$ (1.8)
Generation mix (5.5) 9.1 Generation volume 7.4(
13.4)
Purchased power 7.7 4.6 Term / Energy Espense
$ 6.2
$ (1.5)
The average unit cost of coal declined slightly in 1994, after remaining relatively constant during 1993 Meanwhile, the average unit cost of nuclear fuel has declined continually during the past three years.
Generation mix impacts fuel expense as Duquesne's nuclear fuel cost per KWH is less than its fossil fuel cost per KWH. During 1993, compared to 1994 and 1992, Duquesne had more scheduled nuclear station refu-cling outages, resulting in less nuclear generation and more fuel expense.
3 e-r r--
Generation volume during 1994 increased 3.4 percent compared to 1993 due to fewer generating sta-tion outages. During 1993, generation decreased 5.6 percent from 1992.
Purchased power volume increased in 1994 compared to 1993 because of the timing of generating sta-tion outages. Purchased power volume increased in 1993 compared to 1992 primarily due to the performance of the Perry plant. (See ' Perry Unit 1" on page 8.)
Maintenanuexpense fluctuations primarily result from the timing ofscheduled generating station out-ages, the timing ofscheduled transmission and distribution line maintenance and the effect of storms on over-head lines and transformers. Incremental maintenance expense incurred for scheduled refueling outages at Duquesne's nuclear units is deferred for amortization over the period (generally 18 months) between scheduled j
outages. During 1994 and 1993, amortization ofdeferred nuclear refueling outage expense increased, reflecting the higher costs of more recent refueling outages. Offsetting this increase in 1994 was a decrease in transmission and distribution line maintenance expense. Also increasing maintenance expense in 1993 was Duquesne's change, as ofJanuary 1,1993, in its method of accounting for maintenance costs during major fossil generating station outages. Prior to 1993, maintenance costs incurred for scheduled major outages at fossil generating stations were charged to expense as the costs were incurred. Under the new accounting policy, Duquesne accrues, over the period between outages, anticipated expenses for scheduled major fossil station outages. (Maintenance costs incurred for non-major scheduled outages and for forced outages continue to be charged to expense as the costs are incurred.) This method was adopted to match more accurately the maintenance costs with the revenue pro-duced during the periods between scheduled major fossil generating station outages.
Depuciation andamortization expense includes, in addition to depreciation of plant and equipment, nuclear decommissioning accruals, amortization of regulatory tax receivables and amortization of an extraordi-nary property loss. Depreciation andamorrization expense increased $6.4 million in 1994, compared to the prior year due to increases in depreciable property and nuclear decommissioning expense. The 1993 increase results from amortization of regulatory tax receivables which began January 1,1993, concurrent with the adoption of Statement ofFinancial Accounting Standards No.109 (SFAS No.109). During 1994, Duquesne completed an extensive review ofits depreciation rates and submitted an informational filing to the PUC. As a result of this study, beginning in 1995 Duquesne's composite depreciation rate increased from 3.0 percent to 3.5 percent. It is anticipated that annual depreciation expense will increase by approximately $25 million in 1995 compared to the 1994 level. Duquesne is not currendy seeking a rate increase to recover these additional costs.
During 1994, the statutory Pennsylvania income tax rate was reduced from 12.25 percent to 9.99 per-cent; this reduction is to be phased in over four years. This change resulted in a net decrease of $87.2 million in deferred tax liabilities and a corresponding reduction recorded as a tu rate adjustment - rrgulatory tax receivable.
Tms other than income taes were lower in 1993 compared to 1994 and 1992, primarily as a result of a favorable resolution of certain property tax assessments. In 1993, Duquesne recorded, on the basis of these revised assessments, the expected refunds for overpayments in prior years.
OtherIncome andDeductions Consistent with the conclusion of Duquesne's revenue phase-in plan, otherincome decreased in 1994,in comparison with that for 1993 and 1992, as a result of a decrease in carrying charges on deferud rewnues.
Income taes related to otherincomeincreased $12.5 million in 1994, in comparison with those for 1993, because in 1993 Duquesne obtained a favorable settlement (related to Duquesne's 1988 tax return and the con-solidated 1989 tax return) with the Internal Revenue Service.
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l Construction During 1994, Duquesne spent approximately $94.3 million for construction. Duquesne expended these amounts to improve and/or expand its production, transmission and distribution systems. Construction pro-l grams of Duquesne focus on the need to serve new customers, to provide for the replacement of utility property i
and to modify facilities consistent with the most current environmental and safety regulations. Duquesne esti-mates that it will spend approximately $80 million for construction annually in 1995,1996 and 1997. These amounts exclude AFC, nuclear fuel, expenditures for possible early replacement ofsteam generators at the Beaver Valley Power Station and expenditures for the refurbishment of the cold-rcserved units. (See Notes F and L to Duquesne's consolidated financial statements.) Duquesne currently has no plans for construction of new base load generating plants and expects that funds generated from operations will continue to be sufficient to finance a large part ofits capital needs.
Capital Resources and Liquidity Financing Duquesne plans to meet its current obligations and debt maturities through 1999 with funds generat-ed from operations and through new financings. At December 31,1994, Duquesne was in compliance with all ofits debt covenants.
During 1993, Duquesne refinanced $734.2 million oflong-term debt. In 1994, Duquesne contin-ued to reduce its cost of capital by refinancing and retiring securities.
During 1994, all of the outstanding shares of $2.10 and $7.50 preference stock were redeemed for approximately $37.7 million. Duquesne also retired $2.2 million of $7.20 preferred stock. In May 1994, Duquesne filed a shelf registration statement for the issuance of up to $150 million of Duquesne Capital LP.
Cumulative Monthly Income Preferred Securities. These preferred securities have not been issued.
During 1994, Duquesne also issued $114.1 million ofits pollution control obligations to replace a like amount of higher cost pollution control obligations. The new pollution control obligations bear variable interest rates and mature October 1,2029.
Short-Term Borrowings Duquesne has an extendible revolving credit agreement with a group of banks totaling $150 million.
The current expiration date of this credit arrangement is October 6,1995. Interest rates can,in accordance with the option selected at the time of each borrowing, be based on prime, Eurodollar or certificate of deposit rates. Commitment fees are based on the unborrowed amount of the commitments. The arrangement con-tains a two-year repayment period for any amounts outstanding at the expiration of the revolving credit peri-od.
During 1994 and 1993, the maximum short-term bank and commercial paper borrowings outstand-ing were $25.6 million and $27 rnilliom the average daily short-term borrowings outstanding were $1.9 mil-lion and $1.6 million; and the weighted average daily interest rates applied to such borrowings were 5.23 percent and 3.42 percent, respectively. At December 31,1994, there were no short-term borrowings. Short-term borrowings at December 31,1993, were $11.0 million.
Internt Chargn Duquesne achieved a $9.1 million reduction in internt chargnin 1994 through refinancing first mortgage bonds and certain tax exempt pollution control notes. Duquesne also retired $39.9 million ofpre-ferred and preference stock during 1994. Interest expense and dividends on preferred and preference stock 5
declined to $108 million in 1994 from $121 million in 1993 and $135 million in 1992, Interest expemeis expected to continue to decline in 1995.
Sale ofAnounts Receivable i
Duquesne and an unaffiliated corporation have an agreement that entitles Duquesne to sell and the cor-poration to purchase, on an ongoing basis, up to $50 million of accounts receivable. Duquesne had no receiv-ables sold at December 31,1994. The accounts receivable sales agreement, which expires in June 1995, is one of many sources of funds available to Duquesne. Upon expiration of this facility, Duquesne expects to extend the agreement or to replace the facility with a similar one.
Nuclear FuelLeasing Duquesne finances its acquisitions of nuclear fuel through a leasing arrangement under which it may fmance up to $75 million of nuclear fuel. As of December 31.1994, the amor ; of nuclear fuel financed by Duquesne under this arrangement totaled approximately $52 million. Duquesne plans to continueleasing nuclear fuel to fulfill its requirements at least through September 1996, the remaining term of the leasing arrangement.
Rate Matters Electric rates chuged by Duquesne to its customers are regulated by the PUC. Electric rates charged to the Borough of Pitcairn and to other electric utilities are regulated by the FERC. These rates are designed to recover Duquesne's operating expenses, investment in utility assets, and a return on those investments. Sales to other utilities are made at market rates. (See Note F to Duquesne's consolidated financial statements for additional discussion of rate-related matters.) At this time, Duquesne has no pending base rate case and has no immediate plans to fde a base rate case.
Energy Cost Rate Adjustment Clause (ECR)
Through the ECR, Duquesne recovers (to the extent that such amounts arc not included in base rates) nucleu fuel, fossil fuel and purchased power expenses and, also through the ECR, passes to its customers the profits from short-term power sales to other utilities (collectively, ECR energy costs). Nucleu fuel expense is recorded on the basis of the quantity ofelectric energy generated and includes such costs as the fee, imposed by the United States Department of Energy (DOE), for future disposal and ultim.te storage and disposition of spent nuclear fuel. Fossil fuel expense includes the costs of coal and fuel oil used in the generation of electricity.
On Duquesne's statement of consolidated income, these energy cost recovery revenues are included as a component of operating revenues. For ECR purposes, Duquesne defers fuel and other energy expenses for recov-ery, or refunding, in subsequent years. The deferrals reflect the difference between the amount that Duquesne is currently collecting from customers and its actual ECR energy costs. The PUC annually reviews Duquesne's ECR energy costs for the fiscal year April through Much, compares them to previously projected ECR energy costs and adjusts the ECR for over-or under-recoveries and for two PUC-established coal cost standards. (See Notes A and F to Duquesne's consolidated financial statements.)
l Over-or under-recoveries from customers are recorded as payable to, or receivable from, customers. At December 31,1994, $5.9 million was receivable from customers and shown as otherarrent assers. At December 31,1993, $10.1 million was payable to customers and shown as deferred energy costs.
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DeferredReteSynchroniurion Costs
-1 In 1987, the PUC approved Duquesne's petition to defer initial operating and other costs of Perry Unit 1 and Beaver Valley _ Unit 2. Duquesne deferred the costs incurred from November 17,1987, when the units went into commercial operation, until March 25,1988,' when a rate order was issued. In its order, the PUC postponed ruling on whether these costs would be recoverable from ratepayers. At December 31,1994,
- these costs totaled $51.1 million, net of deferred fuel savings related to the two units. Duquesne is not earn-ing a return on the deferred costs. Duquesne believes that these costs are recoverable. In 1990, the PUC per-mitted another Pennsylvania utility to recover such costs.
l I
' Gemeenting Units i
I joint Interestr 1
Duquesne has various contracts with The Potomac Edison Company, Monongahela Power Company, i
Ohio Edison Company. Pennsylvania Power Company The Cleveland Electric illuminating Company (CEI) and The Toledo Edison Company including provisions for coordinated maintenance responsibilities, limits and qualified mutual back up in the event of outages and certain capacity and energy transactions.
Duquesne has an interest in the following nuclear plants jointly with the following companies:
Benwr V II-r Perry Unit I hh2 hhl Duquesne
- 47.50 %
- 13.74% (1) 13.74 %
3 Ohio Edison Company 35.00 %
41.88 %
30.00 %
Pennsylvania Power Company 17.50 % 5.24 %
CEI 24.47 %
- 31.11 %
Toledo Edison Company 19.91 %
19.91 %
- Denotes Operator (1) In 1987, Duquesne sold and leased back its 13.74 percent interest in Beaver Valley Unit 2. the sale was exclusive of transmission and common facilities. He total sales price of 5537.9 million was the appraised value of Duquesne's inscrest in the propeny.
Duquesne subsequently leased back its inscrest in the unit for a term of 29.5 years. He lease provides for semiannual paymenu and is accounted for as an operating lease. Duquesne is responsible under the terms of the lease for all costs ofits interest in the unit. (See Note C to Duquesne's consolidated financial statements.)
Duquesne has an interest in the following fossil plants jointly with the following companies:
i Sommis Bruce M---lid Eastlake Ft. Martin Unit 7 Unit 1 Unit 2 hh3 Unit 5 Unit 1 Duquesne 31.20 %
29.30 %
8.00 %
13.74 %
31.20 %
50.00 %
Ohio Edison Company
- 48.00 %
60.00 %
39.30 %
35.60 % '
Pennsylvania Power Company 20.80 %
- 4.20%
- 6.80%
- 6.28%
-0
-0 CEI 6.50 %
28.60 %
24.47 %
- 68.80 % i Toledo Edison Company 17.30 %
19.91 %
-0 Potornac Edison Company 25.00 %
Monongahela Power Company
- 25.00 %
j
- Denotes Operator Under the agreements g werning the operation of these jointly owned generating units, the day-to-day i
operating authority is assigned to a specific company. CEI has such authority for Perry Unit 1 and Eastlake Unit 5, Ohio Edison Company has authority for Sammis Unit 7, Pennsylvania Power Company has authority for Bruce Mansfield Units 1,2 and 3 and Monongahela Power Company operates Ft. Martin Unit 1.
)
7 l
1 Duquesne monitors activities in connection with all of these units. Duquesne has day-to-day operating authority for Beaver Valley UnPs 1 and 2. All the companics with a joint interest in these units are kept fully informed of developments at these generating units.
Beaver Valley Pouer Star.m In 1994, the Beaver Valley Power Station achieved the highest combined (Units 1 and 2) capacity factor j
(87.7%) in the history of the station. Capacity factor is a key production measure. It is the ratio of the power actually generated by a facility to the facility's rated capacity during that period of time. It is also a key indicator of how well the stations are operated based on their design capabilities.
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Perry Unir 1 Duquesne ha. a 13.74 percent ownership interest in Peny Unit 1, a nuclear generating unit located in i
Ohio and operated by CEl. During 1993, Perry Unit I had an equivalent availability factor of 39 percent. This performance resulted from several outages. As a result of the length of these outages, the PUC imposed a penalty for increased incremental replacement power costs. The 1994 equivalent availability factor was 44 percent. This performance resulted from an extended outage (190 days) for refueling and maintenance. From the end of the outage in August 1994, through the balance of 1994, Perry operated at full capacity except for shon durations of reduced power for testing and minor on-line maintenance activities.
CEl previously submitted to the Nuclear Regulatory Commission an action plan, called the Perry Course of Action (PCA), designed by CEI to " correct identified management, technical, and programmatic defi-ciencies" at the plant over roughly a three-year period, and to " correct the downward trending performance" of Perry. CEI management represents to Duquesne that the PCA is on schedule and will be an effective program to ensure that Perry is in conformance with industry standards for boiling water reactors. Based on actual costs and estimates obtained from CEl, the total costs to bring the plant into compliance, including the costs associated with implementing the PCA, are more than the cost originally projected by CEl. Duquesne cannot predict the ultimate cost, timing or effectiveness of the PCA, and is continuing to closely monitor the situation.
Propeny Heldfor Future Use In 1986, the PUC approved Duquesne's request to remove the Phillips and most of the Brunot Island (BI) power stations from service and place them in cold reserve. Duquesne expects to recover its net investment in these plants through future electricity sales. Phillips and BI represent licensed, certified, clean sources of elec-tricity that will be necessary to meet expanding opportunities in the power markets. Duquesne believes that anticipated growth in peak demand for electricity within its service territory will require additional peaking gen-eration. Duquesne looks to Bl to meet this need. The Phillips power plant is an imponant component in Duquesne's strategy to identify and serve opportunities for providing bulk power service. With recent legislation promoting wider transmission access to bulk power markets and with the opportunity to package a sale of power from Phillips with the suppon of Duquesne's system, the Phillips plant could be made a highly reliable, cost-competitive alternative for most purchasers in summary, Duquesne believes its investment in these cold-reserved plants will be necessary in order to meet future business needs. If business opportunities do not develop as expected, Duquesne will consider the sale of these assets. In the event that market demand, transmission access or rate recovery do not suppcrt the utilization or sale of the plants, Duquesne may '.iave to write off pan or all of their costs. At December 31,1994, Duquesne's net investment in the Phillips and BI power plants was
$93.0 million and 542.0 million, respectively.
Employees At December 31,1994, Duquesne had 3,754 employees, including 1.231 employees at the Duquesne-
)
operated Beaver Valley Power Station. The International Brotherhood of Electrical Workers represents 2,262 of Duquesne's employees. The current collective bargaining agreement expires September 30,1998.
1 8
Electric Utnity Operations Approximately 73 percent of the electric energy generated by Duquesne's system during 1994 was pro-duced by its coal-fired generating capacity and approximately 27 percent by its nuclear generating capacity.
Duquesne normally experiences its peak loads in the summer. The 1994 customer system peak, the highest system peak in Duquesne's history, of 2,535 megawatts occurred on June 16,1994.
Duquesne's fossil plants operated at 85 percent availability in 1994 and 83 percent in 1993 Duquesne's nuclear plants operated at 75 percent availability in 1994 compared to 63 percent in 1993. The timing of scheduled maintenance and refueling outages, as well as the duration of forced outages, affect avail-ability of power plants.
The North American Electric Reliability Council, of which Duquesne is a member, uses capacity mar-gin to report generating capability as compared to demand. Capacity margin is expressed as capacity less demand divided by capacity. Although Duquesne also uses criteria other than capacity margin for determin-ing the need for installation of additional generating capability, Duquesne's capacity margin in 1994 was 9.4 percent based on installed non-cold-reserved generating capacity and internal peak load, including 93 megawatts ofinterruptible load. Duquesne has ties with regional utilities which provide the capability to import in excess of 4,000 megawatts of capacity to supplement Duquesne's generation, as required.
Additional information relating to Duquesne's electric operations is set forth on page 44 of DQE's Annual Report to Shareholders for the year ended December 31,1994. The information is incorporated here by reference.
Fossil Fuel Duquesne believes that sufficient coal for its coal-fired generating units will be available from various sources to satisfy its requirements for the foreseeable future. During 1994, approximately 2.6 million tons of coal were consumed at Duquesne's two wholly owned coal-fired stations - Cheswick and Elrama.
Duquesne owns Warwick Mine, an underground mine located on the Monongahela River approxi-mately 83 river miles from Pittsburgh. Warwick Mine has been excluded from rate base since 1981.
Duquesne temporarily idled the mine in June 1988 due to excess coal inventories. In 1990, Duquesne restart-ed the mine by an agreement under which an unaffiliated company operates the mine until March 2000 and sells the coal produced. Production began in late 1990. The mine produced 1.1 million tons of coal in 1994.
Warwick Mine coal reserves include both high and low sulfur coah the sulfur content averages in the mid-range at 1.7 percent - 1.9 percent. More than 60 percent of the coal mined at Warwick Mine currently is used by Duquesne. Duquesne receives a royalty on any sales of coal to the open market. The Warwick Mine currently supplies len than one-fifth of the coal used in the production of electricity at the plants owned or jointly owned by Duquesne. Duquesne estimates that, at December 31,1994, its economically recoverable coal reserves at Warwick Mine were 10.4 million cons. Costs at Warwick Mine and Duquesne's investment in the mine are expected to be recovered through the cost of coal in the ECR, Recovery is subject to the system-wide coal cost standard. Duquesne also has an opportunity to earn a return on its investment in the mine through the cost of coal during the period of the system-wide coal cost standard, including extensions. At December 31,1994, Duquesne's net investment in the mine was $18.9 million. The estimated current liability, including final site retlamation, mine water treatment and certain labor liabilities for mine closing is $33.0 million and Duquesne has recorded a liability in the consolidated balance sheet of approximately $12.8 million toward these costs. (See Note F of Duquesne's consolidated financial statements for a discussion of Duquesne's investment in Warwick Mine costs.)
During 1994,56 percent of Duquesne's coal supplies were provided by contracts, with the remainder satisfied through purchases on the spot market. Duquesne had four long-term contracts in effect at December 31,1994, which, in combination with spot market purchases, are expected to furnish an adequate future coal supply. Duquesne does not anticipate any difficulty in replacing or renewing these contracts as they expire in 9
future yens ranging from 1995 through 2002. At December 31,1994, Duquesne's wholly owned and jointly owned generating units had on hand an average coal supply of 51 days.
The PUC has established two market price coal cost standards. One applies only to coal delivered at the Mansfield plant. The other, the system-wide coal cost standard, applies to coal delivered to the remainder 1
of Duquesne's system. Both standards are updated monthly to reflect prevailing market prices of similar coal during the month. The PUC has directed Duquesne to defer recovery of the delivered cost ofcoal to the j
extent that such cost exceeds generally prevailing market prices for similar coal, as determined by the PUC.
The PUC allows deferred amounts to be recovered from customers when the delivered costs of coal fall below such PUC-determined prevailing market prices.
The system-wide coal cost standard may be extended by Duquesne through March 2000. The unre-covered cost of Mansfield coal was 57.3 million and the unrecovered cost of the remainder of the system-wide coal was $3.4 million at December 31,1994. Duquesne estimates that all deferred coal costs will be recov-cred. Duquesne's average cost per ton of coal consumed, including the cost of delivery, during the past three years at generating units which it operates or in which it has an ownership interest was as follows: 1994-539.12; 1993-540.08 and 1992-$40.44. (See Note F to Duquesne's consolidated financial statements for a discussion of the coal cost standards.) The cost of coal, which falls within the market price limitations dis-cussed in Note A of Duquesne's consolidated financial statements,is recovered from Duquesne's customers through the ECR discussed previously in " Rate Matters" on page 6.
Nuclear Fuel The cycle of production and utilization of nuclear fuel consists of(1) mining and milling of uranium ore and processing the ore into uranium concentrates, (2) conversion of uranium concentrates to uranium hexafluoride, (3) enrichment of the uranium hexafluoride, (4) fabrication of fuel assemblies, (5) utilization of the nuclear fuelin the generating station reactor and (6) storing and disposal of spent fuel.
Adequate supplies of uranium and conversion services are under contract for Duquesne's requirements for its jointly owned / leased nuclear units through 1997. Enrichment services are supplied under a 1984 l
United States Enrichment Corporation Utility Services Contract entered into for a period of 30 years by the companies for their joint interests in Perry Unit I and Beaver Valley Units 1 and 2. Under the terms of this contract Duquesne is committed to 100 percent ofits enrichment needs through 1998 and 70 percent in 1999. Fuel fabrication contracts are in place to supply reload requirements for the next two cycles for Beaver Valley Unit 1, the next two cycles for Beaver Valley Unit 2 and the next twenty cycles of Perry Unit 1.
Duquesne will be required to make arrangements for uranium supply and related services as existing commit-ments expire.
For joint interests in generating units (See " Generating Units" discussion on page 7.), each company is responsible for financing its proportionate share of the costs of nuclear fuel for each nuclear unit in which it has an ownership interest. Duquesne has entered into a lease arrangement for the acquisition of nuclear fuel pursuant to which Duquesne is permitted to finance up to $75 million. As of December 31,1994, the cost of Duquesne's nuclear fuel financed was $52 million. Duquesne's nuclear fuel costs, which are amortized to reflect fuel consumed, are charged to fuel expense and are recovered through rates. Duquesne estimates that, over the next three years, the amortiution of nuclear fuel consumed will exceed the expenditures for new fuel by approximately $13 million. The actual nuclear fuel costs to be financed and amortized during the period 1995 through 1997 will be influenced by such factors as changes in interest rates, lengths of the respective fuel cycles and changes in nuclear material cost and services, the prices and availability of which are not known at
{
this time. Such costs may also be influenced by other events not presently foreseen.
Duquesne's nuclear fuel costs related to Beaver Valley Unit 1, Beaver Valley Unit 2 and Perry Unit I under the lease arrangement are charged to fuel expense based on the quantity of energy generated. Nuclear fuel costs for these units averaged.903,.918 and.975 cents per KWH in 1994,1993 and 1992, inclusive of charges associated with spent fuel, respectively. Duquesne is recovering from its customers the costs associated with the ultimate disposal of spent fuel.
10
Nuclear Decomrnissioning The PUC ruled that recovery of the decommissioning costs for Beaver Valley Unit I could begin in 1977, and that recovery for Beaver Valley Unit 2 and Perry Unit I could begin in 1988. Duquesne expects to decommission Beaver Valley Unit 2 and Perry Unit i following the end of their operating lives, a date that cut-rently coincides with the expiration ofeach plant's operating license. Upon expiration of the Beaver Valley Unit 1 operating license, the unit will be placed in safe storage until the expiration of the Beaver Valley Unit 2 operat-ing license, at which time the units may be decommissioned together.
i Based upon site specific studies fmalized in 1992 for Beaver Valley Unit 2, and in 1994 for Beaver Valley Unit I and Perry Unit 1, Duquesne's share of the total estimated decommissioning costs, including removal and decontamination costs, currently being used to determine Duquesne's cost ofservice, are $122 million for Beaver Valley Unit 1, $35 million for Beaver Valley Unit 2, and $67 million for Perry Unit 1.
In conjunction with an August 18,1994 PUC Accounting Order, Duquesne has increased the annual contribution to its decommissioning trusts by $2 million to bring the total annual funding to approximately $4 million per year. Duquesne plans to continue making periodic reevaluations of estimated decommissioning costs, to provide additional funding from time to time, and to seek regulatory approval for recognition of these increased funding levels.
Environmental Matters The Compwhensiw EnvironmentalResponse Compensation and Liability Act ofl980(Superfund) and the SuperfundAmendments andReauthorization Act of1986 established a variety ofinformational and environmental action programs. The United States Environmental Protection Agency (EPA) has informed Duquesne ofits involvement or potential involvement in three hazardous waste sites. If Duquesne is ultimately determined to be a responsible party with respect to these sites, it could be liable for all or a portion of the cleanup costs. However, in each case, other solvent, potentially responsible parties that may bear all or part of any liability are also involved. In addition, Duquesne believes that available defenses, along with other factors (including overall lim-iced involvement and low estimated remediation costs for one site) will limit any potential liability that Duquesne may have for cleanup costs. Duquesne believes that it is adequately reserved for all known liabilities and costs and, accordingly, that these matters will not have a materially adverse effect on its fmancial position or results of operations.
in 1990, Congress approved amendments to the Clean Air Act Among other innovations, this legisla-tion established the Emission Allowance Trading System. These allowances are issued by the EPA to fossil-fired stations with generating capability of more than 25 megawatts that were in existence as of the passage of the 1990 amendments. Allowances are part of a market-based approach to SO2 reduction. Emission allowances can also be obtained through purchases on the open market or directly from other sources. Excess allowances may be banked for future use or sold on the open market to other parties for their use in offsetting emissions.
The legislation requires significant additional reductions of SO2 and oxides of nitrogen (NOX) by the year 2000. Duquesne continues to work with the operators ofits jointly owned stations to implement cost-effec-tive compliance strategies to meet these requirements. NOX reductions under 77tle IVofthe Clean Air Act were required at the Cheswick station and the work to achieve the reductions was completed in 1993. The ozone attainment provisions of 77tle /ofthe Clean Air Actamendments also required NOX reductions by 1995 at Duquesne's EJrama plant and at the jointly owned Mansfield plant. Duquesne will achieve such reductions with low NOX burner technology. Duquesne has 662 megawatts of nuclear capacity currently,1,187 megawatts of scrubbed capacity, including 300 megawatts at the currently cold-reserved Phillips plant, as well as 757 megawatts ofcapacity that meets the 1995 standards of the Clean Air Act amendments through the use oflow sulfur coal. Through the year 2000, Duquesne is planning a combination ofcompliance methods that include fuel switching; increased use of, and improvements in, scrubbed capacity; flue gas conditioning: low NOX burn-er technology; and the purchase ofemission alhwvanccs. Duquesne currently estimates that additional capital costs to comply with Clean Air Act requirements through the year 2000 will be approximately $20 million. This estimate is subject to the finalization of federal and state regulations.
11 o
Duquesne is closely monitoring other potential air quality programs and air emission control require-ments that could be imposed in the future, including additional NOX control requirements that could be imposed on fmsil fuel plants by the Ozone Transport Commission and promulgation by the EPA of more strin-gent ambient air quality and emission standards for S02 Particulates and other components ofcoal cumbustion gases. As these potential programs are in various stages of discussion and consideration,it is impossible to make reasonable estimates of the potential costs and impacts, if any.
In 1992, the Pennsylvania Department of Environmental Resources (DER) issued Residual Waste Management Regulations governing the generation and management of non-hazardous waste. Duquesne is cur-rently conducting tests and developing compliance strategies. Capital compliance costs for these DER regula-tions are estimated, on the basis ofinformation currently available, at $5 million in 1995. The expected additional capital cost of compliance for these DER regulations through 2000 is estimated, based on current information, to be approximately $25 million; this estimate is subject to the results of continuing ground water assessments and DER final approval of compliance plans.
Under the Nuclear hre lblicy Act ofl982, which establishes a policy for handling and disposing of spent nuclear fuel and requires the establishment of a final repository to accept spent fuel, contracts for jointly owned nuclear plants have been entered into with the United States Department of Energy (DOE) for perma-nent disposal ofspent nuclear fuel and high-level radioactive waste. The DOE has indicated that the repository will not be available for acceptance ofspent fuel before 2010. During 1994, Duquesne increased the storage capacity at Beaver Valley Unit 1 by equipping the spent fuel pool with high density fuel storage racks. On-site spent fuel storage capacities at Beaver Valley Unit 1, Beaver Valley Unit 2 and Perry are now expected to be suffi-cient until 2017,2011, and 2009, respectively.
Nuclear reactor licensees in the United States are assessed annually for the decontamination and decom-missioning of DOE enrichment facilities. Assessments are based on the amount of uranium enrichment services purchased by a utility prior to enactment of the Nationa/ Energy Poliry Act ofl992 (energy act) and are to be paid by such utilities over a 15-year period. At December 31,1994, Duquesne's liability for contributions is approxi-mately $9.9 million. Contributions, when made, are recovered through the ECR.
Duquesne is involved in various environmental matters. Duquesne believes that such matters, in total, will not have a materially adverse effect on its financial position or results of operations.
Outlook Competition Regulatory developments in the electric utility induitry are placing increasing competitive pressures on electric utilities. The electric utility industry is expected to continue to undergo significant changes for the remainder of the decade. These changes most likely will include increasing competition in the generation and sale of electricity, increasing energy flows resulting from open transmission access and non-regulated generation and transmission projects outside the traditional service areas. Duquesne,like the industry in general, is continu-ing ta assess the impact of these competitive forces on its future operations.
The NationalEnergy Policy Act ofl992 (energy act) was designed, among other things, to foster compe-tition. Among ather provisions, the energy act amends the Public Utility Holding Company Act ofl935(1935 act) and the Federallbur Act. Amendments to the 1935 act create a new class ofindependent power producers known as Exempt Wholesale Generators (EWGs), which are exempt from the corporate structure regulations of the 1935 act. EWGs, which may include independent power producers as well as affiliates of electric utilities, do not require Securities and Exchange Commission approval or regulation. In addition, brokers and marketers, without owning or operating any generation or transmission facilities, are being permitted to enter into the business of buying and selling electric capacity and energy.
Amendments to the federallbwr Aa create the potential for utilities and other power producers to gain increased access to transmission systems of other utilities in order to facilitate sales to other utilities. The amend-ments permit the FERC to order utilities to transmit power over their lines for use by other suppliers and to 12
1 enluge or construct additional transmission capacity to provide these services. Duquesne is currently pursuing expanded transmission access under these amendments. (See discussion in
- Transmission Access" below.)
'ne PUC is currently conducting an investigation into electric power competition. Duquesne has been advocating increased transmission access to the wholesa!e power market as the necessary first step toward enabling our customers to benefit from competition.
Emerging competition, federal deregulation of wholesale energy sales, and prospective retail access initia-tives require Duquesne to reexamine its approach to doing business. Growth in energy sales, competitive rate pres-i sures, and Duquesne's commitment to provide reliable, quality service to its customers influence short-and l
long-term corparate goals. Duquesne's current business plan recognizes the need to encourage economic growth and stability in the service territory and surrounding region. Duquesne's efforts continue to focus on achievement of business growth through the application of marketing and economic development programs to achieve energy-efficient growth in its sales of utility services. Duquesne's rates for energy intensive industrial and commercial customers are competitively priced and its rate structure allows some flexibility in setting rates to attract new business, in addition, Duquesne sponsors programs to help customers manage their electricity consumptiin and control their costs.
Although management believes Duquesne's system is well positioned, as a clean, low cost producer of elec-tricity, to compete both within and outside ofits service territory, efforts continue to further reduce costs and increase effectiveness and productivity. Management will aggressively address these factors to position Duquesne to overcome the challenges they may create and take advantage of the opportunities increased competition will bring.
Transmission Access in March 1994, Duquesne submitted, pursuant to the FederalPawer Aa, a " good faith" request for trans-mission service with the Allegheny Power System (APS) and Pennsylvania-New Jersey-Maryland Interconnection Association (PJM Companies). The request is based on 20-year firm service with flexible delivery points for 300 megawatts of transfer capability over the transmission network that extends from Western Penns>ivania to the East Coast. Because of a lack of progress on pricing and other issues, on August 5, and September 16,1994, Duquesne filed with the FERC applications for transmission service from the PJM Companies and APS, respectively. The applications are authorized under Section 211 of the Federallbur Act,which requires electric utilities to provide firm wholesale transmission service.
Retirement Plan Measurement Assumptions Duquesne increased the discount rate used to determine the projected benefit obligation on Duquesne's retirement plans at December 31,1994, to 8.0 percent. The assumed change in future compensation levels was also increased to reflect current market and economic conditions.
The effects of these changes on Duquesne's retirement plan obligations are reflected in the amounts shown in Note N to Duquesne's consolidated financial statements. The resulting decrease in related expenses for subsequent years is not expected to be material.
13
~
Information relating to the business of Duquesne and additional information relating to Duquesne is i
set forth on pages 10 to 46 of DQE's Annual Report to Shareholders for the year ended December 31,1994.
- The information is incorporated here by reference.
Executive OfEcers of the Registrant Set forth below are the names, ages as ofMarch 1,1995, positions and brief accounts of the business experience during the past five years of the executive oEcers of Duquesne.
N-Aar Oh Wesley W. von Schack 50 Chairman of the Board since September 1987 and Chief Executive OEcer since January 1986.
President from January 1986 to February 1995.
David D. Marshall 42 President and Chief Operating OEcer since February 1995. Executive Vice President from February 1992 to February 1995, Assistant to the President from October 1990 toJanuary 1992 and Vice President-Corporate Development from August 1987 to October 1990.
Gary L Schwass 49 Senior Vice President since February 1995 and Chief Financial OEcer since July 1989. Vice President-Finance from May 1988 to February 1995 and Vice President and Treasurer from August 1987 to May 1988.
Dianna L. Green 48 Senior Vice President - Administration since February 1995. Vice President-Administrative Services from August 1988 to February 1995.
James E. Cross (a) 48 Senior Vice President - Nuclear since February 1995.
Roger D. Beck 58 Vice President - Marketing and Customer Services since August 1986.
Gary R. Brandenberger 57 Vice President - Power Supply since August 1986.
William J. DeLeo 44 Vice President - Corporate Performance and Information Services since January 1991. Vice President-Corporate Planning and Management Information Services from April 1989 to December 1990.
Donald J. Clayton 40 Treasurer since January 1995. Assistant Treasurer from July 1989 to January 1995.
Raymond H. Panza 44 Controller and Principal Accounting OEcer since July 1990.
(a)
Mr. Cross was Vice President Nuclear from September 1994 to February 1995 and served Portland General Electric as Vice President, Thermal Operations and Chief Nuclear Officer from May 1993 i
to September 1994; Vice President and Chief Nuclear OEcer fmm December 1991 to May 1993:
and Vice President. Nuclear from May 1990 to December 1991.
14 s+--v 1
.m
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ITEM 2. PROPFETIES.
.o Duquesne's propenies consist of electric generating stations, transmission and distribution facilities and supplemental propenies and appurtenances, comprising as a whole an integrated electric utility system,locat-t ed substantially in Allegheny and Beaver counties in southwestern Pennsylvania.
Duquesne owns all or a ponion of the following generating units except Beaver Valley 2, which is leased.
Duquesne's Shase of Net Demonstrated Net Plant Output Capability Year Ended l
December 31,1994 December 31,1994 Name and Location Typs (Meenwatts)
(Meenwart-hours)
Cheswick Coal 570 3,928,002 Springdale, Pa.
Fort Martin No.1 (1)
Coal 276 1,496,483 Maidsville, W.Va.
Elrama Coal 487 2,258,805 Elrama, Pa.
Sammis No. 7 (1)
Coal 187 1,227,241 Stratton, Ohio Eastlake No. 5 (1)
Coal 186 928,056 Eastlake, Ohio Beaver Valley No.1 (1)
Nuclear 385 2,627,465 Shippingport, Pa.
Beaver Valley No. 2 (1)
Nuclear 113 979,667 Shippingport, Pa.
Perry No.1 (1)
Nuclear 164 631,823 North Perry, Ohio Bruce Mans 6 eld No.1 (1)
Coal 228 696,143 Shippingpon, Pa.
Bruce Mansfield No. 2 (1)
Coal 62 242,239 Shippingpon, Pa.
Bruce Mansfield No. 3 (1)
Coal 110 439,577 Shippingport, Pa.
Brunot Island Oil
__E 2.467 Brunot Island, Pa.
Total 2,834 15.457.968 Cold-reserved units:
Brunot Island Oil 240 Phillips Coal 300 Total
.1324 l
(1)
Amounts represent Duquesne's share of the unit which is owned by Duquesne in common with one or more other electric utilities (or, in the case of Beaver Valley Unit 2, leased by Duquesne).
Duquesne owns 24 transmission substations (including interests in common in the step-up transform-1 ers at Fort Manin No.1; Sammis No. 7; Eastlake No. 5; Bruce Mansfield No.1: Beaver Valley Unit 1; Beaver Valley Unit 2; Perry Unit 1; Bruce Mansfield No. 2; and Bruce Mansfield No. 3) and 570 distribution substa-tions. Duquesne has 714 circuit-miles of transmission lines, comprised of 345,000,138,000 and 69,000 volt lines. Street lighting and distribution circuits of 23.000 volts and less include approximately 50,000 miles of lines and cable.
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Duquesne owns the Warwick Mine, including 4,849 acres owned in fee of unmined coal lands and mining rights, located on the Monongahela River in Greene County, Pennsylvania, approximately 83 river miles from Pittsburgh. (See item 1. " Fossil Fuel" discussion on page 9.)
Substantially all of Duquesne*s properties are subject to a first mortgage lien of the Trust indenture dated as of August 1,1947 securing Duquesne's first mortgage bonds. In May 1992, Duquesne began issuing secured debt under a new First Collateral Trust Indenture. This new indenture will ultimately replace Duquesne's First Mortgage Bond indenture.
ITEM 3. LEGAL PROCEEDINGS.
Westinghouse Lawsuit Beaver Valley Unit I and Unit 2 are joint!v owned / leased generating units. Duquesne's percentage interests held in Beaver Valley Unit I and in Beaver Vallef Jnit 2 are 47.5 percent and 13.74 percent, respectively. The l
remainder of Beaver Valley Unit 1 is owned by Ohio Edison Company and by Pennsylvania Power Company.
l The remaining interest in Beaver Valley Unit 2 is held by Ohio Edison Company, The Cleveland Electric
!Uuminating Company (CEI) and The Toledo Edison Company. Duquesne operates both units on behalfof the i
joint owners ofinterests.
In 1991, the aforementioned owners of joint interests in Beaver Valley Unit I and Unit 2 fded suit against Westinghouse Electric Corporation (Westinghouse) in the United States District Court for the Western District of Pennsylvania. The suit alleges that six steam generators supplied by Westinghouse for the two units contain serious defects - in particular defects causing tube corrosion and cracking. To date, twelve additional lawsuits have been brought by other utility companies around the country against Westinghouse for similar problems 1
with Westinghouse steam generators.
j The condition of the Beaver Valley Unit I and Unit 2 steam generators is being monitored closely.
Duquesne's steam generator maintenance costs have increased as a result of these defects and are likely to contin-ue increasing. Replacement of the Beaver Valley Unit I steam generator defective components may occur as early as 1997. Based on the experience of other utilities with similar units that have replaced steam generators, replacement cost per unit is estimated to be approximately $125 million.
A jury trial began September 12,1994, in Federal District Court in Western Pennsylvania. Pennsylvania Power Company, Ohio Edison Company, CEl, Toledo Edison Company and Duquesne were joined in the liti-gation against Westinghouse. On October 24,1994, the Court dismissed four of the five claims against Westinghouse, leaving only the fraud claim. On December 6,1994, the jury rendered a verdict in favor of Westinghouse on the fraud count. On January 5,1995, the owners of joint interesu in the Beaver Valley plants appealed the decision to the United States Court of Appeals for the Third Circuit. Duquesne cannot predict the fmal outcome of this litigation; however, Duquesne does not believe that resolution will have a materially adverse effect on Duquesne's fmancial position or results of operations.
Rate-Related and Environmental Litigation Proceedings involving Duquesne's rates are reported in item 1. " Rate Matters." Proceedings involving environmental matters are reported in item 1. " Environmental Matters."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
16
PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND REIATED SHARE-HOLDER MATFERS.
Effective July 7,1989, Duquesne Light Company became a wholly owned subsidiary of DQE, the holding company formed as part of a shareholder-approved restructuring. As a result of the restructuring, DQE common stock replaced all outstanding shares of Duquesne Light Company common stock, except for ten shares which DQE holds. As such, this item is not applicable to Duquesne Light Company because all its common equity is held solely by DQE. During 1994, Duquesne declare, arterly dividends on its common stock totaling $144 million for the year.
ITEM 6. SELECTED FINANCIAL DATA.
Selected fmancial data for Duquesne Light Company for each year of the six-year period ended December 31,1994 are set forth on page 63. The financial data is incorporated here by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDI-TION AND RESULTS OF OPERATIONS.
Management's discussion and analysis of financial condition and results of operations are set forth in Item 1. BUSINESS and on pages 11 through 19 of the DQE Annual Report to Shareholders for the year ended December 31,1994. The discussion and analysis are incorporated here by reference.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Consolidated Balance Sheet of Duquesne Light Company and its Subsidiary as of December 31, 1994 and 1993, and the related Statements of Consolidated Income. Retained Earnings and Cash Flows for each of the three years in the period ended December 31,1994 together with the Independent Auditors' Report dared January 31,1995 are set forth here on pages 38 to 62. The fmancial statements and report are incorporated here by reference. Quarterly financial information is included on page 62 in Note O to Duquesne's consolidated financial statements and is incorporated here by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information relating to the Directors of Duquesne Light Company is set forth under the captions
" Proposal No.1. Election of Directors". " Nominees for Directors" and " Standing Directors" in the DQE definitive Prory Statement, filed with the Securities and Exchange Commission in connection with its Annua!
Meeting of Stockholders to be held on April 19,1995. The Proxy Statement is incorporated here by refer-ence. All Directors of DQE are also Directors of Duquesne Light Company. Information relating to the exec-utive officers of the Registrant is set forth in Part I of this Report under the caption " Executive Officers of the Registrant."
17
ITEM 11. EXECUTIVE COMPENSATION.
The information relating to executive compensation is set forth in Exhibit 99.1, filed as part of this Report. The information is incorporated here by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
DQE is the beneficial owner and holder of all shares of outstanding Common Stock, $1 par value, of Duquesne Light, consisting of to shares as of February 16,1995. Information relating to the ownership of equity securities of DQE and Duquesne Light by directors and executive officers of Duquesne Light is set forth in Exhibit 99.1, filed as part of this Report. The information is incorporated here by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8.K.
(a)(1) The following financial statements are included on pages 38 to 62.
Independent Auditors' Report.
Statement of Consolidated Income for the Three Years Ended December 31,1994.
Consolidated Balance Sheet, December 31,1994 and 1993.
Statement of Consolidated Cash Flows for the Three Years Ended December 31,1994.
Statement of Consolidated Retained Earnings for the Three Years Ended December 31,1994.
Notes to Consolidated Financial Statements.
(a)(2) The following financial statement schedules and the related Independent Auditors' Report (See page 38.) are filed here as a part of this Report:
Schedules for the Three Years Ended December 31.1994:
Vill-Valuation and Qualifying Accounts.
X - Supplementary income Statement Information.
The remaining schedules are omitted because of the absence of the conditions under which they are required or because the information called for is shown in the financial statements or notes to the financial statements.
(a)(3) Exhibits relating to Duquesne Light Company filed as a part of this Report are set forth in the Duquesne Light Company Exhibit List on pages 20 to 34, incorporated here by reference. Documents other than those designated as being filed here are incorporated here by reference. Documents incorporated by ref-crence to a DQE Annual Report on Form 10-K, a Quarterly Report on Form 10-Q or a Current Report on Form 8-K are at Securities and Exchange Commission File No.1-956.
18
i; y
Y',-
~
'l b
(b) Reports on Form 8-K filed during the twelve months ended December 31,1994:
j
~ ~(1) ' Augmt 16,19%- Thefollowing ewns war wporrek Item 5.
Appointment ofJames E. Cross as Vice President of the Nuclear Group, Senior Vice President and Chief Nucleu Officer of Duquesne's Nuclear Power.
Division.
l No financial statemente were filed with this report.
(2) September 6,19%- Thefollowing ewns was wported.
Item 5.
An update of the Westinghouse Lawsuit.
No financial r.atements were filed with this report..
(3) Nowmberl!9,1994-Thefollowing ennt war wported item 5 Contract between Duquesne and IBEW ratified.
December 6,1994 - Thefollowing ennt was reported I
Item 5.
An update of the Westinghouse Lawsuit.
No financial statements were filed with this report.
(c) Executive Compensation Plans and Arrangements Deferred Compensation Plan for the Directors Exhibit 10.1 to the Form 10-K '
of Duquesne Light Company, as amended to date.
Annual Report of DQE for the.
3 year ended December 31,1992.
incentive Compensation Program for Certain Exhibit 10.2 to the Form 10-K I
Executive Officers of Duquesne Light Company, Annual Report of DQE for the j
as amended to date, year ended December 31,1992.
Description of Duquesne Light Company Pension
' Exhibit 10.3 to the Form 10-K
[
Service Supplement Program.
Annual Report of DQE for the year ended December 31,1992.
Duquesne Light Company Outside Directors' Exhibit 10,59 to the Form 10-K Retirement Plan, as amended to date.
Annual Report of Duquesne Light Company for the year ended December 31,1990.
Employment Agreement dated as of December 15, Exhibit 10.5 to the Form 10-K.
1992 between DQE, Duquesne Light Company and Annual Report of DQE for the i
Wesley W. von Schack.
year ended December 31,1992, i
Duquesne Light /DQE Charitable Giving Program.
Exhibit 10.6 to the Form 10-K l
Annual Report of DQE for the i
year ended December 31,1992.
Duquesne Light Company Performance Incentive Exhibit 10.7 to the Form 10-K Program.
Annual Report of DQE for the year ended December 31,1994, incorporated here by reference.
19
7 Exhibic'.
Method of A
D-riaria-Filia; First Amendment dated as of October 25,1994 Exhibit 10.8 to the Form 10-K to Employment Agreement dated as of Annual Report of DQE for the "
December 15,1992 between DQE, Duquesne :
year ended December 31,1994, Light Company and Wesley W. von Schack.
incorporated here by reference.
I Employment Agreement dated as of August 30, Exhibit 10.9 to the Form 10-K 1994 between DQE, Duquesne Light Company Annual Report of DQE for the and David D. Marshall.
year ended December 31,1994, incorporated here by reference.
Employment Agreement dated as of August 30, Exhibit 10.10 to the Form 10-K.
1994 between DQE, Duquesne Light Company Annual Report of DQE for the and Gary L. Schwass.
year ended December 31,1994, incorporated here by reference.
Employment Agreement dated as of August 30, Duquesne Light Company 1994 between Duquesne Light Company and Exhibit 10.68 to the Form 10-K Dianna L Green.
Annual Report of DQE for the year ended December 31,1994, incorporated here by reference.
DUQUESNE LIGHT COMPANY EXHIBITS Exhibit
- Method of A
Descrintion Filiar 3.1 Restated Articles of Duquesne Ught Company, as Exhibit 3.1 to the Form 10-K amended through December 19,1991 and as currently Annual Report of Duquesne in effect.
Ught Company for the year ended December 31,1991.
- 3.2 By-Laws of Duquesne Ught Company, as amended Exhibit 3.2 to the Form 10.K through December 19,1991 and as currently in effect.
Annual Report of Duquesne
~
Ught Company for the year ended December 31,1991.
4.1 Trust Indenture dated as of August 1,1947, securing Exhibit 4.3 to Registration Duquesne Ught Company's First Mortgage Bonds.
Statement (Form S-1)
No. 2-11326.
4.2 Supplemental Trust Indentures supplementing the Trust Indenture -
First through Tenth and an amendment to the Fifth.
Exhibits 4.4 through 4.13 to Registration Statement (Form S-1) No. 2-11326.
Eleventh.
Exhibit 4.3 to Registration Statement (Form S-1)
No. 2-12309.
20 i
i) j I
Exhibit '
Method of
-]
1 rwn:,:aa F:lla.
l Twelfth.
Exhibit 2.2 to Registranon c
Statement (Form S-7)
No. 2-63467.
Thirteenth.
Exhibit 4.5 to Registration Statement (Form S-1) -
i No. 2-13360.
Fourteenth and Fifteenth.'
Exhibits 4.6 and 4.7 to Registration Statement (Form S.
- 1) No. 2-13596.
Sixteenth.
Exhibit 4.8 to Registration Statement (Form S 1)
No. 2-14704.
Seventeenth and Eighteenth.
Exhibits 4.4 and 4.5 to Registration Statement (Form S-
- 1) No. 2-16033.
Nineteenth through Twenty-Third.
Exhibit 2.2 to Registratbn Statement (Form S-7)
No.2 63467.
Twenty Fourth.
Exhibit 2.2 to Registration Scarement (Form S-9)
No. 2-24412.
Twenty-Fifth.
Exhibit 2.2 to Registration Statement (Form S 7)
No.2 63467.
Twuty-Sixth.
Exhibit 2.2 to Registration Statement (Form S 9)
No. 2-25887.
Twenty-Seventh.
Exhibit 2.2 to Registration Statement (Form S-7)
No. 2-63467.
Twenty Eighth.
Exhibit 2.2 to Registration Statement (Form S-9)
No. 2-28042.
L Twenty-Ninth.
Exhibit 2.2 to Registration Statement (Form S-7)
No. 2-63467.
Thirtieth.
Exhibit 2.2 to Registration Statement (Form S-9)
No.2 30927.
21 4
0 t'ft.
y
- Ex.hibit -
Method of 1
No:artaa Fill 7 J
Thirty-First and Thirty Second.
Exhibit 2.2 to Registration Statement (Form S-7)
No. 2-63467.
Thirty-Third.
Exhibit 2.4 to Registration Statement (Form S 7)
No. 2-36333.
Thirty Fourth and Thirty-Fifth.
Exhibit 2.2 to Registration Statement (Form S-7)
No. 2-63467.
Thirty-Sixth.
Exhibit 2.4 to Registration Statement (Form S-7)
No. 2-39375.
Thirty-Seventh.
Exhibit 2.2 to Registration
~
Statement (Form S-7)
No. 2-63467.
Thirty-Eighth.
Exhibit 2.4 to Registration Statement (Form S-7)
No. 2-42154.
Thirty-Ninth through Forry Fifth.
. Exhibit 2.2 to Registration Statement (Form S-7)
No. 2-63467.
Forty-Sixth.
Exhibit 2.3 to Registration -
Statement (Form S-7)
No. 2-52874.
Forty-Seventh through Forty. Ninth.
Exhibit 2.2 to Registration Statement (Form S-7)
No. 2-63467.
Fiftieth.
Exhibit 2.3 to Registration Statement (Form S-7)
No. 2-58483.
Fifty First through Fifty-Third.
Exhibit 2.2 to Registration Statement (Form S-7)
No. 2-63467.
Fifty-Fourtn and Fifty-Fifth.
Exhibit 2.2 to Registration Statement (Form S 16)
No. 2-66258, i
1 Fifty-Sixth.
Exhibit 2.2 to Registration Statement (Form S 16)
No. 2-68959.
J 22
4.
.b k
.:._f-
[
.a Eskibit -
- Method of 2 7
A tw,I t..
Fn t..
~
Fifty-Seventh; Exhibit 4.1 to Registration -
Statement (Form S-16)
No.~ 2-72522.
L Fifty Eighth and Fifty-Ninth.
Exhibit 4.1 to Registration Statement (Form S-16)-
No. 2 76768.
Exhibit 4.1 to Registration Sixtieth and Sixty-First.
. Statement (Form S-3):
No. 2-82139.
Sixty-Second and Sixty-Third.
Exhibit 4.1 to Registration -
3 Statement (Form S-3)
No. 2-87452.
Sixty-Fourth.
Exhibit 4.1 to Registration Statement (Form S-3)
No. 2-89719.
Sixty-Fifth through Sixty-Ninth.
Exhibit 4.1 to Registration Statement (Form S-3)
No. 33-1509.
Seventieth through Seventy-Seventh.
Exhibit 4.1 to Registration Statement (Form S-3)
No. 33 32026.
Seventy-Eighth through Eightieth.
Exhibit 4.1 to Registration
' Statement (Form S-3) i No. 33-46990.
Eighty-First.
Exhibit 4.2 to Registration' Statement (Form S-3)
No. 33-46990
.i.
Eighty Second.
Exhibit 4.1 to Registration Statement (Form S-3)
No. 33-52782.
Eighty-Third and Eighty Fourth.
Exhibit 4.1 to Registration j
Statement (Form S 3)
No. 33 63602.
Eighty Fifth through Eighty-Eighth.
Exhibit 4.2 to the Form 10-K Annual Report of Duquesne Ught Company for the year ended December 31,1993.
Eighty-Ninth and Ninetieth Filed here.
4.3 Indenture dated March 1,1960, relating to Duquesne hhibit 4.3 to the Form 10 K Ught Company's 5% Sinking Fund Debentures.
Annual Report of DQE for the year ended December 31,1989, 23 W
1-4 Eskibit Me: Lod of
.Ee Deauintion Fala.
4.4 Indenture dated as of Noumber 1,1989 relating to the Exhibit 4.4 to the Form 10-K issuance of Duquesne Ught Company's unsecuted Annual Report of DQE for the notes.
year ended December 31,1989.
4.5 Indenture of Mortgage and Deed ofTrust dated as o!
Exhibit 4.3 to Registration April 1,1992, securing Duquesne Ught Company's Statement (Form S 3)
First Collateral Trust Bonds.
No. 355270 :
4.6 Supplemental Indentures supplementing the said Indenture of Mortgage and Deed of Trust -
Supplemental Indenture No.1.
Exhibit 4.4 to Registration Statement (Form S-3)
No. 3552782.
Supplemental Indenture No. 2 through Supplemental Exhibit 4.4 to Registration indenture No. 4.
Statement (Form S-3)
No. 33-63602.
Supplemental Indenture No. 5 through Supplemental Exhibit 4.6 to the Form 10-K Indenture No. 7.
Annual Report of Duquesne Ught Company for the year endea December 31,1993.
SupplementalIndenture No. 8 and Supplemental Filed here.
Indenture No. 9.
Agreements relating tojointly Owned Genenering Unirs:
10.1 Administration Agreement dated as of September 14.
Exhibit 5.8 to Registration 1967.
Statement (Form S-7)
No. 2-43106.
s o.2 Transmission Facilities Agreement dated as of September Exhibit 5.9 to Registration 14,1957.
Statement (Form S-7)
No. 2-43106.
10.3 Operating Agreement dated as of September 21,1972 Exhibit 5.1 to Registration for Eastlake Unit No. 5.
Statement (Form S-7)
No. 2-48164.
10.4 Memorandum of Agreement dated as ofJuly 1,1982 re Exhibit 10.14 to the Form 10-K realk) cation of rights and liabilities of the companies Annual Report of Duquesne under uranium supply contracts.
Ught Compar.y for the year etided December 31,1987, 10.5 Operating Agreement dated August 5.1982 as of Exhibit 10.17 to the Form 10-K September 1,1971 for Sammis Unit No. 7.
Annual Report of Duquesne Ught Company for the year ended December 31,1988.
24
Eskibit Method of 1
Damiae tan Fil:--
.10.6 '
Memorandom of Understanding dated as of March 31.
- Exhibit 10.19 to the Form 10-K 1985 re implementation ofcompany-by company Annual Report of DQE for the management of uranium inventory and delivery.
year ended December 31,1989. -
10.7 Restated Operating Agreement for Beaver Valley Unit Exhibit 10.23 to the Form 10-K Nos. I and 2 dated September 15,1987.
Annual Report of Duquesne Ught Company for the year ended December 31,1987.
10.8 Operating Agreement for Perrv Unit No.1 dated Exhibit 10.24 to the Form 10-K March 10,1987.
Annual Report oi Duquesne l
Ught Company for the year ended December 31,1987.
10.9-Operating Agreement for Bruce Mansfield Units Nos.1, Exhibit 10.25 to the Form 10.K 2 and 3 dated September 15,1987 as ofJune 1.1976.
Annual Report of Duquesne Ught Company for the year ended ended December 31,1987.
10.10 Basic Operating Agreement, as amended January 1.
Exhibit 10.10 to the Form 10-K 1993.
Annual Report of Duquesne Ught Company for the year ended December 31,1993.
10.11 Amendment No. I dated December 23.1993 to Exhibit 10.11 to the Form 10-K Transmission Facilities Agreement (as ofJanuary 1.
Annual Report of Duquesne Ught 1993).
Company for the year ended December 31,1993.
10.12 Microwave Sharing Agreement (as amended Exhibic 10.12 to the Form 10 K January 1,1993) dated December 23.1993 Annual Report of Duquesne Ught Company for the year ended December 31,1993.
10.13 Agreement (as of September 1,1980) dated Exhibit 10.13 to the Form 10-K December 23.1993 for termination or construction Annual Report of Duquesne Ught of certain agreements.
Company for the year ended December 31,1993.
10.14 Fort Martin Construction and Operating Agreement Exhibit 10.14 to the Form 10-K dated April 30.1965.
Annual Report of Duquesne Ught Company for the year ended December 31,1993.
10.15 Fort Martin Transmission Agreement dated Exhibit 10.15 to the Form 10-K March 15,1967.
Annual Report of Duquesne Ught Company for the year ended December 31,1993.
10.16 Amendment ofJanuary 1,1988 to Fort Martin Exhibit 10.16 to the Form 10-K Transmission Agreement.
Annual Report of Duquesne Ught Company for the yeu ended December 31,1993.
I 25
Exhibit Method of l
No.
Description Fmog j
Agreemenu relating to the Sale and Lea >&ad ofBeaver Valley Uni No. 2:
10.17 Order of the Pennsylvania Public Utility Commission Exhibit 28.2 to the Form 10-Q dated September 25,1987 regarding the application Quarterly Report of Duquesne of the Duquesne Ught Company under Section 1102(a)(3)
Ught Company for the quarter of the Public Utility Code for approval in connection with ended September 30,1987.
the sale and leaseback ofits interest in Beaver Valley Unit No. 2.
10.18 Order of the Pennsylvania Public Utility Commission Exhibit 10.28 to the Form 10-K dated October 15,1992 regarding the Securities Annual Report of Duquesne Certificate of Duquesne Ught Company for the Ught Company for the year assumption of contingent obligations under ended December 31,1992.
financing agreements in connection with the refunding of Collateraliud lease Bonds.
x10.19 Facility Izase dated as of September 15,1987 between Exhibit (4)(c) to Registration The First National Bank of Boston, as Owner Trustee Statement (Form S-3) under a Trust Agreement dated as of September 15,1987 No. 33-18144.
with the limited partnership Owner Participant named therein, lessor, and Duquesne Ught Company, lessee.
yl0.20 Facility lease dated as of September 15,1987 between Exhibit (4)(d) to Registration The First National Bank of Boston, as Owner Trustee Statement (Form S-3) under a Trust Agreement dated as of September 15.
No. 33-18144.
1987, with the corporate Owner Participant named therein, lessor, and Duquesne Ught Company, lessee.
x10.21 Amendment No. I dated as of December 1,1987 to Exhibit 10.30 to the Form 10-K Facility lease dated as of September 15,1987 between Annual Report of Duquesne The First National Bank of Boston, as Owner Trustee Ught Company for the year under a Trust Agreement dated as of September 15, ended December 31,1987.
1987 with the limited partnership Owner Participant named therein, lessor, and Duquesne Ught Company, lessee.
yl0.22 Amendment No. I dated as of December 1,1987 to Exhibit 10.31 to the Form 10-K Facility lease dated as of September 15,1987 between Annual Report of Duquesne The First National Bank of Boston, as owner Trustee Ught Company for the year under a Trust Agreement dated as of September 15, ended December 31,1987.
1987 with the corporate Owner Participant named therein, lessor, and Duquesne Ught Company, lessee.
x10.23 Amendment No. 2 dated as of November 15,1992 to Exhibis 10.33 to the Form 10 K Facility lease dated as of Septembt r 15,1987 between Annual Report of Duquesne The First National Bank of Boston, as Owner Trustee Ught Company for the year under a Trust Agreement dated as of September 15.
ended December 31,1992, 1987 with the limited partnership owner Participant named therein, lessor, and Duquesne Ught Company, lessee.
26
Eskibit Method of 1
D-taetaa Fill--
y10.24 Amendment No. 2 dated as of November 15,1992 to Exhibit 10.34 to the Form 10-K Facility lease dated as of September 15,1987 between Annual Report of Duquesne The First National Bank of Boston, as Owner Trustec Ught Company for the year under a Trust Agreement dated as of September 15, ended December 31,1992.
1987 with the corporate Owner Participant named therein, tenor, and Duquesne Ught Company, lessee.
I x10.25 Amendment No. 3 dated as of October 13,1994 to Filed here.
Facility lease dated as of September 15,1987 between The First National Bank of Boston, as Owner Trustee under a Trust Agreement dated as of September 15,1987 with the limited partnership Owner Participant named therein, tenor, and Duquesne Ught Company, lessee.
y10.26 Amendment No. 3 dated as of October 13,1994 to Filed here.
Facility lease dated as of September 15,1987 between The First National Bank of Boston, as owner Trustee under a Trust Agreement dated as of September 15,1987 with the corporate Owner Participant named therrin, t
lessor, and Duquesne Ught Company, lessee.
t x10.27 Participation Agreement dated as of September 15.
Exhibit (28)(a) to Registration 1987 among the limited partnership Owner Statement (Form S-3)
Participant named therein, the Original loan No. 33-18144.
Participants listed in Schedule 1 theiero, as Original
+
loan Participants. DQU Funding Corporation, as Funding Corp, The First National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee and Duquesne Ught Company, as lessee.
y10.28 Participation Agreement dated as of September 15, Exhibit (28)(b) to Registration 1987 among the corporate Owner Participant named Statement (Form S-3) r therein, the Original loan Participants listed in No. 33-18144, Schedule 1 thereto, as Original loan Participanu, DQU Funding Corporation, as Funding Corp, The First National Bank of Boston, as Owner Trustee, Irving Trust Company, as indenture Trustee and Duquesne Ught Company, as Lessee.
x10.29 Amendment No. I dated as of December 1,1987 to Exhibit 10.34 to the Form 10-K Participation Agreement dated as of September 15, Annual Report of Duquesne 1987 among the limited partnership Owner Participant Ught Company for the year named therein, the Original loan Participants listed ended December 31,1987.
therein, as Original loan Participants, DQU Funding Corporation, as Funding Corp, The First
+
National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trusree and Duquesne j
Ught Company, as lessee.
t I
27
~
Exhibic.
Method of p _.*
1 DescrInela-Fit!7 yl0.30
= Amendment No. I dated as of December 1,1987 to Exhibit 10.35 to the Form 10 K '
Participation Agreement dated as of September 15, Annual Report of Duquesne 1987 among the corporate Owner Puticipant named Ught Company for the year -
therein, the Original loan Participants listed therein, ended December bl.1987.
as Original loan Participants, DQU Funding Corporation, as Funding Corp, The First National Bank of Boston, as Owner Trustee, Irving Trust Company, as Indenture Trustee and Duquesne Ught Company, as lessee.
x10.31 Amendment No 2 dated as of March 1,1988 to Exhibit (28)(c)(3) to Participation Agreement dated as of September 15, Registration Statement 1987 among the limited partnership Owner Participant (Form S-3) No. 33-54648.
named therein, DQU Funding Corporation, as Funding Corp, The First National Bank of Boston, as Owner Trustee. Irving Trust Company, as Indenture Trustee and Duquesne Ught Company, as lessee.
yl0.32 Amendment No. 2 dated as of March 1,1988 to Exhibit (28)(c)(4) to Participation Agreement dated as of September 15, Registration Statement 1987 among the corporate Owner Participant named (Form S-3) No. 33-54648.
therein, DQU Funding Corporation, as Funding Corp, The First National Bank of Boston, as Owner 'Frustee, Irving Trust Company, as Indenture Trustee and Duquesne Ught Company, as 1.essee.
x10.33 Amendment No. 3 dated as of November 15,1992 to Exhibit 10.41 to the Form 10-K Participation Agreement dated as of September 15, Annual Report of Duquesne 1987 among the limited partnership Owner Participant Ught Company for the year named therein DQU Funding Corporation, as Funding ended December 31,1992.
Corp, DQU 11 Funding Corporation, as New Funding Corp, The First National Bank of Boston, as owner Trustee, The Bank of New York, as Indenture Trustee and Duquesne Ught Company, as Irssee.
yl0.34 Amendment No. 3 dated as of November 15,1992 to Exhibit 10.42 to the Form 10-K Participation Agreement dated as of September 15, Annual Report of Duquesne 1987 among the corporate Owner Participant named Ught Company for the year therein. DQU Funding Corporation, as Funding Corp, ended December 31,1992.
DQU 11 Funding Corporation, as New Funding Corp, The First National Bank of Boston, as owner Trustee, The Bank of New York, as indenture Trustee and Duquesne Ught Company, as Irssee.
x10.35 Amendment No. 4 dated as of October 13,1994 to Filed here.
Participation Agreement dated as of September 15,1987 among the limited partnership Owner Participant named therein, DQU Funding Corporation, as Funding Corp, DQU 11 Funding Corporation, as New Funding Corp.
The First National Bank of Boston, as owner Trustee, The Bank of New York, as Indenture Trustee and Duquesne Ught Company, as lessee.
28
I Exhibit Method of No.
Ducrindan Filine y10.36 Amendment No. 4 dated as of October 13,1994 to Filed here.
Participation Agreement dated as of September 15,1987 among the corperate Owner Participant named therein, DQU Fundin:, Corporation, as Funding Corp, DQU !!
Funding Corr oration, as New Funding; Corp, Tne First National Bank of Boston, as Owner Trustee The Bank of New York, n Indenture Trustee and Duquesne Ught Company, as lence, z10.37 Ground Lease and Easement Agreement dated as of Exhibit (28)(c) to Registration September 15,1987 between Duquesne Ught Company, Statement (Form S-3)
Ground lessor and Grantor, and The First National Bank No. 33-18144.
of Boston, as Owner Trustee under a Trust Agreement dated as of September 15,1987 with the hmited partnership Owner Participant named therein, Tenant and Grantee.
zl0.38 Assignment, Assumption and Further Agreement dated as Exhibit (28)(f) to Registration of September 15,1987 among The First National Bank or Statement (Form S-3)
Boston, as owner Trustee under a Trust Agreement dated No. 33-18144.
as of September 15,1987 with the limited partnership Owner Participant named therein, The Cleveland Electric illuminating Company, Duquesne Ught Company, Ohio Edison Company, Pennsylvania lbwer Company and The s
Toledo Edison Company.
zl0.39 Additional Support Agreement dated as of September 15, Exhibit (28)(g) to Registration 1987 between The First National Bank of Boston, as Statement (Form S-3)
Owner Trustee under a Trust Agreement dated as of No. 33-18144.
September 15,1987 with the limited partnership Owner Participant named therein,2nd Duquesne Ught Company.
z10.40 Indenrure Bill of Sale, instrument of Transfer and Exhibit (28)(h) to Registration Severance Agreement dated as of October 2,1987 Statement (Form S-3) between Duquesne Ught Company, Seller, and The No. 33-18144.
First National Bank of Boston, as Owner Trustee under a Trust Agreement dated as of September 15,1987 with the limited parmership Owner Participant named therein.
Buyer.
zlo.41 Tax Indemnification Agreement dated as of September 15.
Exhibit 28.1 to the Form 8-K 1987 between the Owner Participant named therein and Current Report of Duquesne Duquesne Ught Company, as lessee.
Ught Company dated November 20,1987.
zl0.42 Amendment No. I dated as of November 15,1992 to Exhibit 10.48 to the Form 10-K Tax Indemnification Agreement dated as of September 15, Annual Report of Duquesne 1987 between the Owner Participant named therein and Ught Company for the year Duquesne Ught Company, as lessee.
ended December 31,1992.
zl0.43 Amendment No. 2 dated as of October 13,1994 to Tax Filed here.
Indemnification Agreement dated as of September 15, 1987 between the Owner Participant named therein and Duquesne Ught Company, as lessee.
29 I
,i
~
Qh g,;
i M
L
..' Eskibit Method of.~
~'
A ru
- .,t..,
pin _
210.'44 Estension letter dated December 8,1992 from Exhibit.10.49 to the Form 10-K 4
Duquesne Ught Company, each Owner Participant The Annual Report of Duquesne f
First National Bank of Boston, the lease Indenture Ught Company for the year Trustee. DQU Funding Corporation and DQU II ended December 31,1992.
M Funding Corporation addressed to the New Collateral Trust Trustee extending their respective representations J
. and warranties and ccuenants set forth in each of the Participation Agreements.
x10.45 Trust Indenture, Mortgage, Security Agreement and -
Exhibit (4)(g) to Registration Assignment of Facility lease dated as of September 15, Statement (Form S-3)
(
1987 between The First National Bank of Boston, as No. 33-18144.-
Owner Trustee under a Trust Agreement dated as of September 15,1987 with the limited partnership Owner Participant named therein, and Irving Trust Company, as Indenture Trustee.
y10.46 Trust Indenture, Mortgage, Security Agreement and -
Exhibit (4)(h) to Registration Assignment of Facility lease dated as of September 15.
Statement (Form S 3) 1987 between The First National Bank of Boston, as No. 33-18144.
Owner Trustee under a Trust Agreement dated as of September 15,1987 with the corporate Owner Participant named therein, and Irving Trust Company, as Indenture Trustee.
x10.47 SupplementalIndenture No. I dated as of December 1,
- Exhibit 10.45 to the Form 10-K.
1987 to Trust Indenture, Mortgage, Security Agreement Annual Report of Duquesne and Assignment of Facility lease dated as of September 15, Ught Company for the year 1987 between The First National Bank of Boston, as Owner ended December 31,1987.
Trustee under a Trust Agreement dated as of September 15, 1987 with the limited partnership Owner Participant j
named therein, and Irving Trust Company, as Indenture Trustec.
y10.48 Supplemental Indenture No.1 dated as of December 1.
Exhibit 10.46 to the Form 10-K 1987 to Trust Indenture, Mortgage, Security Agreement Annual Report of Duquesne and Assignment of Facility trase dated as of September 15, Ught Company for the year 1987 between The First National Bank of Boston, as ended December 31,1987.-
Owner Trustee under a Trust Agreement dated as of J
September 15,1987 with the corporate Owner Participant named therein, and Irving Trust Company, as Indenture Trustee.
x10.49 Supplemental Indenture No. 2 dated as of November 15.
Exhibit 10.54 to the Form 10-K 1992 to Trust Indenture, Mortgage, Security Agreement Annual Report of Duquesne and Assignment of Facility lease dated as of September 15, Ught Company for the year 1987 between The First National Bank of Boston, as ended December 31,1992..
Owner Trustee under a Trust Agreement dated as of 2
3-September 15,1987 with the limited partnership Owner Participant named therein, and The Bank of New York, j
as Indenture Trustee.
i '
30
...,i..
n.
l
=
Eahibic Method of A
rumi,..
pris7 yl0.50 Supplemental Indenture No. 2 dated as of November 15, Exhibis 10.55 to the Form 10.K 1992 to Trust Indenture, Mortgage, Security Agreement Annual Report of Duquesne and Assignment of Facility lease dated as of September 15, Ught Company for the year 1987 between The Fint National Bank of Boston, as ended December 31,1992.
Owner Trustee under a Trust Agreement dated as of September 15,1987 with the corporate Owner Participant named therein, and The Bank of New York, as Indenture Trustee.
10.51 Reimbursement Agreement dated as of October 1,1994 Filed here.
among Duquesne Ught Company, Swiss Bank Corporation, New York Branch, as LOC Bank, Union Bank, as Adtninistrating Bank, Swiss Bank i
Corporation, New York Branch, as Administrating Bank and The Participating Banks Named Therein.
10.52 L i.teral Trust Indenture dated as of November 15.
Exhibis 10.58 to the Form 10-K 1992 among DQU 11 Funding Corporation, Duquesne Annual Report of Duquesne Ught Company and The Bank of New York, as Trustee.
Ught Company for the year ended December 31,1992.
10.53 First Supplemental Indenture dated as of November 15.
Exhibit 10.59 to the Form 10-K 1992 to Collateral Trust indenture dated as of Annual Report of Duquesne November 15,1992 among DQU 11 Funding Corporation, Ught Company for the year Duquesne Ught Company and The Bank of New York, as ended December ?,1992.
Trustee.
x10.54 Refmancing Agreement dated as of November 15,1992 Exhibit 10.60 to the Form 10.K among the limited partnership Owner Participant Annual Report of Duquesne named therein, as Owner Participant, DQU Funding Ught Company for the yen Corporation, as Funding Corp DQU 11 Funding ended December 31,1992.
Corporation, as New Funding Corp, The First National Bank of Boston, as Owner Trustee, The Bank of New York, as Indenture Trustee. The Bank of New York, as Collateral Trust Trustee. The Bank of New York, as New Collateral Trust Trustee, and Duquesne Ught Company, as lessee.
y10.55 Refmancing Agreement dated as of November 15,1992 Exhibit 10.61 to the Form'10-K among the corporate Owner Participant named Annual Report of Duquesne therein, as Owner Participant, DQU Funding Ught Company for the year Corporation, as Funding Corp. DQU 11 Funding ended December 31,1992.
Corporation, as New Funding Corp, The First National Bank of Boston, as Owner Trustee. The Bank of New York, as Indenture Trustee, The Bank of New York, as Collateral Trust Trustee. The Bank of New York, as New Collateral Trust Trustee, and Duquesne Ught Company, as 1xssee.
31
Exhibit Method of e
A D.mineian Fu t. -
x10.56 Addendum dated December 8,1992 to Refinancing Exhibit 10.62 to the Form 10-K Agreement dated as of November 15,1992 among the Annual Report of Duquesne limited partnership Owner Participant named therein, Ught Company for the yeu as Owner Participant, DQU Funding Corporation, as ended December 31,1992.
Funding Corp, DQU 11 Funding Corporation, as New Funding Corp, The First National Bank of Boston, as Owner Trustee. The Bank of New York, as Indenture Trustee, The Bank of New York, as Collateral Trust 1
Trustee, The Bank of New York, as New Collateral Trust Trustee, and Duquesne Ught Company, as lessee.
y10.57 Addendum dated December 8,1992 to Refinancing Exhibit 10.63 to the Form 10-K Agreement dated as of November 15,1992 among the Annual Report of Duquesne corporate Owner Participant named then in, as Ught Company for the yen Owner Panicipant, DQU Funding Corporation, as -
ended December 31,1992.
Funding Corp, DQU 11 Funding Corporation, as New Funding Corp, The First National Bank of Boston, as Owner Trustee. The Bank of New York, as Indenture Trustee, The Bank of New York, as Collateral Trust Trustee, The Bank of New York, as New Collateral Trust Trustee, and Duquesne Ught Company, as lessee.
Other Agrrements
- 10.58 Deferred Compensation Plan for the Directors of Exhibit 10.1 to the Form 10-K Duquesne Ught Company, as amended to date.
Annual Report of DQE for the year ended December 31,1992.
- 10.59 incentive Compensation Program for Certain Executive Exhibit 10.2 to the Form 10-K Officers of Duquesne Ught Company, as amended to Annual Report of DQE for the date.
year ended December 31,1992.
i
- 10.60 Description of Duquesne Ught Company Itnsion Exhibit 10.3 to the Form 10-K Service Supplement Program.
Annual Report of DQE for the year ended December 31,1992.
- 10.61 Duquesne Ught Company Outside Directors' Exhibit 10.59 to the Form 10 K Retirement Plan, as amended to date.
Annual, Report of Duquesne Light Company for the year l
ended December 31,1990.
- 10.62 Employment Agreement dated as of December 15, Exhibit 10.5 to the Form 10-K 1992 between DQE, Duquesne Ught Company and Annual Report of DQE for the Wesley W. von Schack.
year ended December 31,1992.
- 10.63 Duquesne Ught/DQE Charitable Giving Program.
Exhibit 10.6 to the Form lo-K Annual Report of DQE for the year ended December 31,1992.
32
Exhibit Method of 1
Descrintion Filing
- 10.64 Duquesne Ught Company Ikrformance incentive Exhibit 10.7 to the Form 10 K P ogram.
Annual Report of DQE for the year ended December 31,1994, incorporated here by reference.
- 10.65 First Amendment dated as of October 25,1994 to Exhibit 10.8 to the Forrn 10-K Employment Agreement dated as of December 15.
Annual Report of DQE for the 1992 between DQE, Duquesne Ught Company and year ended December 31,1994, Wesley W. von Schack.
incorporated here by reference.
- 10.66 Employment Agreement dated as of August 30,1994 Exhibit 10.9 to the Form 10 K between DQE, Duquesne Ught Company and Annual Report of DQE for the David D. Marshall.
year ended December 31,1994, incorporated here by reference.
- 10.67 Employment Agreement dated as of August 30.1994 Exhibit 10.10 to the Form 10 K between DQE, Duquesne Ught Company and Annual Report of DQE for the Gary L Schwass.
year ended December 31,1994, incorporated here by reference.
- 10.68 Employment Agreement dated as of August 30,1994 Duquesne Ught Company between Duquesne Ught Company and Dianna L Exhibit 10.68 to the Form 10-K Green.
Annual Report of DQE for the year ended December 31,' 199?,
incorporated here by reference.
12.1 Calculation of Ratio of Earnings to Fixed Charges.
Filed here.
21.1 Subsidiaries of registrant:
Duquesne has no significant subsidiaries.
23.1 Independent Auditors' Consent.
Filed here.
27.1 Supplemental Data Schedule.
Filed here.
99.1 Executive Compensation of Duquesne Ught Company Filed here.
Executive Omcers for 1994 and Security Ownership of Duquesne Ught Company Directors and Executive Omccrs as of February 16,1995.
99.2 DQE Annual Report to Shareholders for year ended Filed here.
I December 31,1994. The Report, except those portions specifically incorporated by reference here, is furnished for the information of the Securities and Exchange Commission and is not to be deemed " filed
- for any purpose under the Securities Exchange Act of 1934 or otherwise.
l l
l l
An additional document, substantially identical in all material respects to this Exhibit, has been entered into relating x
to one additional limited partnership Owner Participant. Although the additional document may differ in some respects (such as name of the Owner Participant, dollar amounts and percentages), there are no material details in which the document differs from this Exhibir.
l 33 1
- y Additional documents, substantially identical in all material respecu to this Exhibit, have been entered into relating to four additional corporate Owner Participants. Although the additional documena may differ in some respects (such as names of the Owner Participants, dollar amounts and percentages), there are no material details in which the documents differ from this Exhibit.
Additional documents, substantially identical in all material respecu to this Exhibit, have been entered into relating z
to six additional Owner Participants. Although the additional documents may differ in some respeca (such as names of the Owner Participants, dollar amounts ar.d percentages), there are no material details in which the docu-ments differ from this Exhibit.
I This document is required to be filed as an exhibit to this form under Item 14(c).
Copies of the exhibits listed above will be furnished, upon request, to holders or beneficial owners of any class of DQE's stock as of February 16,1995, subject to payment in advance of the cost of reproducing the exhibits requested.
1 i
e f
I
.t 34
l i
SCHEDULE VIII j
i SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS For the Years Ended December 31,1994,1993 and 1992 (Thousands of Dollars)
Cal--A Col -- B Column C Column D ColunutE Col -- F pa s.i_ _ -
Balance at Charyd to Charyd to bl==r, Beginning Costs and Other at End D.=ceintion ofYear h a---
Accounts Deductions ofYear Ye:r Ended December 31.1994 Reserve Deducted from the Asset to which it applies:
Allowance for uncollectible accounts
$13.282
$11.890
$3.837 (A) $13.988 (B)
$15.021 Year Ended December 31,1993 Reserve Deducted from the Asset to which it applies:
Allowance for uncollectible accounts
$7.707
$ 17.093
$2.925 (A) 114.443(B)
$13.282 Year Ended December 31.1992 Reserve Deducted from the Asset to which it applies:
Allowance for uncollectible accounts
$30.898
$ 10.900
$2.101 (A) $36.192(B)
} 7.707 Ecs:(A) Recovery of accounts previously written off.
(B) Accounts receivable written off.
35 i
I
e SCHEDULEX SCHEDUG X - SUPPLEMENTARY INCOME STATEMENT INFORMATION For the Years Ended December 31,1994,1993 and 1992 (Thousands of Dollars)
Colu== A Column B
(%.wed to Cc-e and hawa==-
Description 1221 ~
1921
~ 1922
' Maintenance
$79,488
$80,292(A)
$79,146 Amortization of extraordinary property losses 15,469 15,501 16,444 Taxes other than payroll and income taxes:
Gross receipts 35,852 34,650 34,498 Property 28,438 14.284(B) 31.120 Capital Stock 12,201 12,132 9,051
' Eder the system of accounting followed by Duquesne, a portion of maintenance expenses and of taxes other than payroll and income taxes represents amounts charged to coal inventories. The inventory accounts are relieved and operation expense charged as the coal is used.
- (A)
Duquesne changed, as of January 1,1993, its method of accounting for maintenance costs during scheduled major fossil station outages. Prior to that time, maintenance costs incurred for scheduled major outages at fossil stations were charged to expense as these costs were incurred. Under the new accounting policy, Duquesne accrues, over the periods between outages, anticipated expenses for scheduled major fossil station outages. (Maintenance costs incurred for non-major scheduled outages and for forced outages will continue to be charged to expense as such costs are incurred.) This new method was adopted to match more accurately the maintenance costs and the revenue produced during the periods between scheduled major fossil station outages. The cumulative effect of 55.4 million (net ofincome taxes of $3.9 million) of the change on prior years is reflected on the Statement of Consolidated Ineome for 1993 as Accountingfor maintenance costs - net.
(B)
The 1993 decrease reflects a favorable resolution of properry tax assessments. In 1993, Duquesne recorded on the basis of this revised assessment, the expected refunds of these overpayments related to prior years.
l i
i 36
1 SIGNATURES j
1 Pursuant to the requirements ofsection 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DUQUESNE LIGHT COMPANY (Registrant)
Date: March 28,1995 By: /s/ Wesley W. von Schack (Signature)
Wesley W. von Schack Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Ilds Dass
/s/ Wesley W. von Schack Chairman of the Board, Chief Executive March 28,1995 Wesley W. von Schack 0$cer and Director
/s/ Gary L Schwass Senior Vice President and Chief Financial March 28,1995 Gary L. Schwass Officer
/s/ Raymond H. Panu Controller and Principal March 28,1995 Raymond H. Panza Accounting Officer
/s/ Daniel Bere Director March 28,1995 Daniel Berg
/s/ Doreen E. Boyce Director March 28,1995 Doreen E. Boyce
/s/ Robert P Bozzone Director March 28,1995 Robert P. Bozzone
/s/ Sico F21k Director March 28,1995 Sigo Falk
/s/ William H. Knoell Director March 28,1995 William H. Knoell
/s/ G. Christian Lantuch Director March 28,1995 l
G. Christian Lantzsch
/s/ Robert Mehrabian Director March 28,1995 Robert Mehrabian Director March 28,1995 Thomas J. Murrin
/s/ Robert B. Pease Director March 28,1995 Robert B. Pease
/s/ Eric W. Sorincer Director March 28,1995 Eric W. Springer 37
.=
4 INDEPENDENT AUDITORS' REPORT i
F t'
To the Directors and Stockholder of Duquesne Light Company:
We have audited the accompanying consolidated balance sheets of Duquesne Light Company and its subsidiary as of December 31,1994 and 1993, and the related consolidated statements ofincome, retained earn-ings, and cash flows for each of the three years in the period ended December 31,1994. Our audits also includ-ed the financial statement schedules listed in Item 14. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includcs examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
in our opinion, such consolidated financial statements present fairly, in all material respecs, the finan-cial position of Duquesne Light Company and its subsidiary as of December 31,1994 and 1993, and the results of their operations and their cash flows for each of the three years in the perioa ended December 31,1994 in confortnity with generally accepted accounting principles. Also, in our opinion, such financial statement sched-i ules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.
l As discussed in Note A to the consolidated financial statements, effective January 1,1993, the Company
[
changed its method of accounting for income taxes to conform with Statement of Financial Accounting Standards No.109, and the Company changed its method of accounting for maintenance costs during sched-uled major fossil station outages.
/s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Pittsburgh, Pennsylvania January 31,1995 l
38
1 GIDSSARY OF TERMS Following are explanations of certain fmancial and operating terms used in our report and unique in our busi-ness.
Allowance for Funds Used Durine Construction Nuclear Deco==:==:cata. Costs (AFC)
Decommissioning costs are expenses to be incurred in AFC is an amount recorded on the books of a utility connection with the entombment, decontamination, during the period of construction of utility assets. The dismandement, removal and disposal of the structures, amount represents the estimated cost of both debt and systems and components of a nuclear power plant that equity used to finance the construction.
has permanently ceased the production ofelectric Construction Work In Progress (CWIP)
This amount represents utility assets in the process of Peak Demand construction but not yet placed in service. The Peak demand is the amount of electricity required dur-amount is shown on the consolidated balance sheet as ing periods of highest usage. Peak periods fluctuate by a component of property, plant and equipment.
season and generally occur in the morning hours in Deferred Enerry Costs In conjunction with the Energy Cost Rate Adjustment Pennwiv=nia Public Utility Commission (PUC)
Clause, the Company records deferred energy costs to The Pennsylvania governmental body that regulates all offset difTerences between actual energy costs and the utilities (electric, gas, telephone, water, etc.), which is level of energy costs currently recovered from electric made up of five members nominated by the governor utility customers.
and confirmed by the senate.
Dsmand Reculatory Asset The amount ofelectricity delivered to consumers at any Costs that the Company would otherwise have charged instant or averaged over a period of time.
to expense which are capitalized or deferred because these costs are currendy being recovered or because it is Enerry Cost Rate Ad_iustment Clause (ECR) probable that the PUC and FERC will allow recovery of The Company recovers through the ECR, to the extent these costs through the raremaking process.
that such amounts are not included in base rates, the cost of nuclear fuel, fossil fuel and purchased power Retail Access costs and passes to its customers the profits from short-The ability of end-use consumers to individually con-term power sales to other utilities.
tract for electrical energy from competing generation Equivalent Availability Factor The percent of generating capacity available for service Scrubbed Canacity whether operated or not.
Fossil fuel fired generating capacity equipped with sul-Federal Enerry Reculatory Commission (FERC)
FERC is an independent five-member commission within the U.S. Department of Energy. Among its many responsibilities, FERC sets rates and charges for the wholesale transportation and sale of natural gas and electricity, and the licensing of hydroelectric power projects.
Kilowatt (KW)
A kilowatt is a unit of power or capacity. A kihnvatt hour (KWH) is a unit of energy or kilowatts times the length of time the kilowatts are used. For example, a 100-watt bulb has a demand of.1 KW and,if burned continuously, will consume 1 KWH in ten hours. One thousand KWs is a megawatt (MW). One thousand i
KWHs is a megawatt hour (MWH).
39
DUQUESNE LIGHTCOMPANY (Thousands of Dolbs)
STATErfENT OF CONSOIIDATEDINCOME Year Fnded December 31.
1994 1993 1992 Operatins Revenuce Sales of Electricity:
Customers
$1,121,412
$1,192381 51,155.132 Phase-in deferrals (28,810)
(100,315)
(98201)
Utilities 58,295 50.669 72,440 Total Sales of Ejectricity 1,150,897 1,142,735 1,129371 Other 29.387 35,044 31,909 TomalOpmansigReiwssm 1,180,284 1,177,779 1,161,280 Operadng Expenses:
Fuel 222,190 223,699 229,757 Purchased power 21,715 14,032 9,474 Other operating 279,050 297,510 279,228 Maintenance 79,488 80,292 79,146 Depreciation and amortization 156,519 150,125 127,924 Taxes other than income taxes 86,982 72,160 85368 Income taxes 7,246 94,075
%,253 Tax rate adjustment regulatory tax receivable 87,200 TotalOpenersgEspmm 940,390 931,893 907,150 Operadng Income 239,894 245,886 254,130 Other Income and (Deductions):
Allowance for equity funds used during construction 1,295 869 2,598 long-term power sale write-off (15,225)
Carrying diarges on deferred revenues 30 1,801 15,145 income taxes 6.549 19.033 (11,746)
Other - net 735 2,563 12,496 TotalOcherbuoneandfDeductmu) 8,609 9.041 18,493 Income Before Interest Charges 248,503 254,927 272,623 Intesest Chargesi j
Interest on long-term debt 101,027 108,479 123,402 Other interest 1,095 2387 1,749 Allowance for borrowed funds used during construction (1,068)
(726)
(2,296)
Totalbserst Gwyr 101,054 110,140 122,855 income Before Cumulative Effect on Prior Years of Changes in Acrounting Principles 147,449 144,787 149,768 Adoption ofSFAS 109 -Income Taxes 8,000 Accounting for maintenance cxuts - net (5,425)
Nc Income 147,449 147362 149,768 Dividends on Preferred and Preference Stock 6,046 9,188 9,411 Eerningsfer Cammen Stock 5141,403
$138,174
$140357 See Notes to Consohdated bnancia] Statements.
40
p
]
1 DUQUESNE LIGHT COMPANY (Thousands of Dollars)
CONSOllDATED RAIANCE SHEET As of Dea mlvr M.
i ASSETS 1994 1993 I
Property, Plant and Equipawan Dectric plant in service 54,196,690 54,102.979 I
Corutruction work in progreu 43,763 62,664 Property held under capitalleases 161,775 177,800 Properry held for future use 216,738 216,863 Toast 4,618,966 4,560,306 Ins accumulated depreciation and amortization (1,550,447)
(1,436.358)
_ Aspeep Montased; ;-
- -Nw 3,068,519 3.123,948 Odwr Property and Investannes:
Investment in DQE Common Stock 43,057 29,998 Other pmpeny and investmenu 31,212 28,801 Current Assets:
I Cash and temporary cash invesmwnu (at cost which approximates market) 15,904 Remivables:
Electric customer accounts receivable 96,157 107.342 Other utility remivables 26,008 28,807 Other receivabics 25,171 25,156 i
las: Alkmance for uncollectible accounu (15,021) 0 3,282)
Receivables less allowance for uncollectible accounu 132,315 148,023.
less: Receivables sold (9,000)
Team /ReeriswMes 132,315 139,023 Materials and supplies (generauy at average cost):
Coal 30,484 26,793 Operating and construction 58,262 64.885 Other current asseu 15,795 8,866 TeselCamestAsas 252,760 239,567 Other Non-airment Assets:
Extraordmary property loss 22,394 35,781 Unamortized debt costs 103,454 104,076 Beaver Valley Unit 2 sale / leaseback premium 33,414 34,903 Defened rate synchroniution costs 51,149 51,149 28,621 Phase-in plan deferrals Regulatory Tax Receivable 428,043 569,555 Defened employee aists 31,012 32,408 Other regulatory assets 41,297 -
52,912 Odwr Non<urrent 43,556 56,384 I
Tens /OsberNew<smos Asen 754,319 965,789 TeenIAare
$4,149,867 54,388,103 See Notes to Consolidated Financial Statements.
41
l DUQUESNE LIGHT COMPANY..
(Thousands cf Dollars)
CONSOllDA17.D RAIANCE SHEET
- As of December 31.
CAPITAllZAT10N ANDIJABIIIITES 1994 1993 Cap n I==e*
i
==
Common stock (authorized - 90,000,000 shara, issued and ountanding - 10 shares)
Capital surplu 823,193 805,755 Retained carmngs 292.319 294,916 Tenetsemansa mcW&ar's mymuy 1.115,512 1,100,671 Non-redeemable preferred stock 90,340 121,906 Redeemable preference stock 8.392 Non-rede:mable preference stock 29,857 29,956 Total prefened and preference stock before deferred ESOP benefit (involuntary liquidation values of $120,060 and $160,117 excred par by $43,882 and $81.585, respectively) 120,197 160,254 Defernd employee stock ownership plan (ESOP) benefit (24,852)
(27,126)
Total prefened and preference stock 95,345 133,128 Senior secured debt (excluding Ibilution Control Notes) 950,400 999,400 Other long-term deb 423,020 422,524 Unamortized debt discount and premium - net (4,490)
(5,219)
Total long-term debt 1,368,930 1,416,705 TantC; ' "-
2,579,787 2,650,504 Obligations Under Capitalleases 41,106 55.733 Curant liabilitism Noces payable 10,991 Current maturities and sinking fund requirements 85,691 45,741 Accounts payable 88,585 112,401 Accrued taxes 47,444 49,345 Accrued interest 11,382 14.185 Dividends declared 35,469 36,436 Deferred energy costs 10,108 TasalCamntlam&s&as 268,571 279,207 Non-asteen Liabilities:
Investment tax credits unamortized 123,591 129,574 Defened income taxes-net 991,149 1,145,782 Other 145,663 127.303 TeamfNne-arrentlinha&as 1,260,403 1,402,659 Commitments and Contingendes Tees /C7- :msdIlahs&na
$4,149,867
$4,388,103 See Notes to Consolidated Financial Statements.
42
DUQUESNE13GHT COMPANY (Thousands cf Dollars)
STATEMENT OF CONSOllDATED CASH FLOWS hr Fnded December 31.
1994 1993 1992 1
Cash Nws F om Operating Activities:
Net inmme 5147,449 5147,362 5149,768 Prindpal non cash charges (aedits) to net income:
Depreciation and amortization 156ai19 150,125 127,924 Capital lease and nuclear fuel amortization 36,940 32,428 49,001 Defened ineme taxes and investment tax credits - net (29,705)
(44,420)
(10,89Q Allowance for equity funds used during mnstruaion (1,295)
(869)
(2,598) l'hase-in plan newnues and related carrying charges 28,621 99375 83,056 Changes in working capital other than cash (36,884)
(%,799) 55,193 Other-net 49,499 19,505 7,166 Nw CesIhsesdadfvos OpmsangAmnian 351,144 306.707 458,614 Cash Hows Used By Investing Anivities Construction expenditures (94,315)
(100,628)
(112,409)
(18,47Q Purchase of DQE mmmon stock Allowance for bonuwed funds used during construction (1,068)
(726)
(2,296)
Other - ne (2,172)
-(12,317)
(7,877)
Nrr Cam 6 GadhykonsesegAcmen (97,555)
(113,671)
(141.058)
Cash Nws Uend In bancing Anivities:
Sale ofbonds 114,110 740,500 312,925 l
Increase (deocase)in notes payable (10,990) 10,990 Dividends on capital stock (151,059)
(154,204)
(151,404)
Reductions oflong-term obligations:
Preferred and preference stock (39,958)
(187)
(24,158) long-term debt (114,835)
(735,048)
(394,951)
Other obligations (33,522)
(27,751)
(43,686)
Premium on reacquired debt (5,033)
(31,702)
(18,127)
Contribution fmm parent company 45,000 (36,371)
Beaver Valley Unit 2 sale / leaseback premium Other-net 3,602 (1,790)
(3,797)
Na Cash GefAs RosancasgAnissia (237,685)
(199,192)
(314,569)
Net increase (deocase) in cash and temporary cash innstments 15,904 (6,156) 2,987 6.156 3,169 Cash and temporary cash investments at beginning of year Cash and temporary cash inetments an end ofyear 5 15,904 5
5 6,156 SUPPLEMENTAL CASil FLOW INFORMATION Cash paid during the 3=ar fore Interest (net of amount capitalized) 5102,944 5124,692 5126,014 Income taxes
$111,614 5133,303 5112,859 Non< ash inwsting and fmancing activities:
Capitallease obligations recorded 5 16,909 5 11,811 5 17,089 Contribution of DQE mmmon stock (mm parent company 5 19,531 5
5 l
See Notes to Consolidated Financial Statements.
43
9 DUQUESNE IJOHT COMPANY (Thousands of Dollars)
STATEMENT OF CONSOLIDATED RETAINED EARNINGS Year Ended Decernher 31.
1994 1993 1992 Belana, January 1
$294,916 5300,742
$301,385 Net Income for the Ye:r 147,449 147.362 149,768 Total 442,365 448,104 451,153 i
Cash dividends declared:
i Prefened stock 4,592 4,740 4,906 Preferena stock (net of tax benefit of ESOP dividend) 1,454 4,448 4,505
)
Common stock 144,000 144,000 141,000 1
Total Cash Dividends Dedared 150,046 153,188 150,411 l
Belana, Decembee 31 5292,319
$294,916
$300,742 See Notes to Consolidated Financial Statements.
t 44
A; Sununaryof NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1 Sigallicant Accounting Consolidation and Reclassifications Policies The consolidated fmancial statements include the accounts of Duquesne Light Company (Duquesne) and its wholly owned subsidiary. All material intercompany balances and trans.
actions have been eliminated in the prepuation of the consolidated fmancial statements.
The 1993 and 1992 financial statements have been reclassified to conform with accounting presentations adopted during 1994.
Basis of Accounting Duquesne is subject to the accounting and reponing requirements of the Securities and Exchange Commission (SEC). In addition, Duquesne's utility operations are subject to the regu-lation of the Pennsylvania Public Utility Commission (PUC) and the Federal Energy Regulatory Commission (FERC). As a result, the consolidated financial statements contain regulatory -
assets and Ilabilitles in accordance with Statement ofRnancialAccountingStandants No. 71, Axountingfor the Efeca ofCertain Types ofPquiation (SFASNo. 71)and ref1cct the efTects of the raremaking process. Such effects concem mainly the time at which vuious items enter into the determination of ner incomein accordance with the principle of matching costs and rev-enues. (See Note E)
Revenues Meters ue read monthly and customers are billed on the same basis. Revenues ne recorded in the accounting periods for which they are billed, with the exception of energy cost recovery rev-enues. (See following section on " Energy Cost Rate Adjustment Clause.") Deferred revenues ue associated with Duquesne's 1987 rate case. (See Note E)
Energy Cost Rate Adjustment Clause (ECR)
Through the ECR, Duquesne recovers (to the extent that such amounts ue not included in base rates) nuclear fuel, fossil fuel and purchased power expenses and, also through the ECR, passes to its customers the profits from shon-term power sales to other utilities (col'ectively, ECR energy costs). Nuclear fuel expense is recorded on the basis of the quantity of electric energy generated and includes such costs as the fee, imposed by the United States Department of Energy (DOE), for future disposal and ultimate storage and disposition of spent nuclear fuel. Fossil fuel expense includes the costs of coal, natural gas and fuel oil used in the generation ofelectricity.
On Duquesne's Statement of Consolidated Income, these energy cost recovery revenues ne included as a component of operating,rvenues. For ECR purposes, Duquesne defers fuel and other energy expenses for recovery, or refunding, in subsequent years. The deferrals reflect the difference between the amount that Duquesne is currently collecting from customers and its actual ECR energy costs. The PUC annually reviews Duquesne's ECR energy costs for the fiscal year April through March, compares them to previously projected ECR energy costs and adjusts the ECR for over-or under-recoveries and for two PUC-established coal cost standuds.
(See Note E)
Over-or under-recoveries from customers are recorded in Duquesne*s Consolidated Balance Sheet as payable to, or receivable from, customers. At December 31,1994,55.9 million was receivable from cunaners and shown as other currrnt assets. At December 31,1993, $10.1 mil-lion was payable to customers and shown as deferredenergy costs.
Maintenance incremental maintenance expense incurred for refueling outages at Duquesne's nuclear units is deferred for amortization over the period (generally eighteen months) between scheduled out.
ages. Duquesne changed, as ofJanuary 1,1993, its method of accounting for maintenance costs during scheduled major fossil generating station outages. Prior to that time, maintenance costs incurred for scheduled major outages at fossil generating stations were chuged to expense as these costs were incurred. Under the new accounting policy, Duquesne accrues, over the 45
penods between outages, anticipated expenses for scheduled major fossil generating station out-ages. (Maintenance costs incurred for non-major scheduled outages and for forced outages con-tinue to be charged to expense as such costs are incurred.) This method was adopted to match more accurately the maintenance costs and the revenue produced during the periods between scheduled major fossil generating station outages.
The cumulative effect (approximately $5.4 million, net ofincome taxes of approximately $3.9 million) of the change on prior years was included in netincomein 1993. The effect of the change in 1993 was to reduce income, before the cumulative effect of changes in accounting principles, by approximately $2.4 million and to reduce netincome, after the cumulative effect of changes in accounting principles, by approximately $7.8 million.
Depreciation and Amortization Depuciation ofproperty, plant andequipment including plant-related intangibles, is recorded on a straight-line basis over the estimated useful lives of properties. Amortization ofother intangi-bles is recorded on a straight-line basis over a five-year period. Depreciation and amortization of other properties are calculated on various bases.
Duquesne records decommissioning costs under the category of depuciation andemortization expense and accrues a liability, equal to that amount, for nuclear decommissioning expense. Such nuclear decommissioning funds are deposited in external, segregated trust accounts. The funds are invested in a portfolio consisting of municipal bonds, certificates of deposit, and U.S. gov-ernment securities. Trust fund earnings increase the fund balance and the recorded liability. The market value of the aggregate trust fund balances at December 31,1994, totaled $19.2 million.
On Duquesne's consolidated balance sheet, the decommissioning trusts have been reflected in otherproperty andinuntmena, and the related Ilability has been recorded as other nonarwnt lia-bilitin. (See " Nuclear Decommissioning" discussion in Note L)
Income Taxes On Januaty 1,1993, Duquesne adopted Statement ofFinancialAccountin: Standards No.109, Accountingfor income Taxn (SFAS No.109). Implementation of SFAS No.109 involved a change in accounting principle. The cumulative $8 million effect on prior years was reported in 1993 as an increase in net income.
SFAS No.109 requires that the liability method be used in computing deferred taxes on all dif-ferences between book and tax bases of assets. These book tax differences occur when events and transactions recognized for financial reporting purposes are not recognized in the same period for tax purposes. SFAS No.109 also requires that a deferred tax liability or asset be adjusted in the period c,f enactment for the effect of changes in tax laws or rates. During 1994 the statutory Pennsylvania income tax rate was reduced from 12.25 percent to 9.99 percent; this reduction is to be phased in over four years. This resulted in a net decrease of 587.2 million in deferred tax liabilities and a corresponding reduction in the regulatory receivable.
Duquesne recognizes a regulatory asset for the deferred tax liabilities that are expected to be recovered from customers through rates. (See Notes F and K.)
With respect to the fmancial statement presentation of SFAS No.109, Duque:rv. reflects the amortization of the regulatory tax receivable resulting from reversals ofdeferred taxes as defmci-ation andamortization expense. Changes in the regulatory tax receivable as a result of a change in tax rates are reflected in the statement of consolidated income on the tax rate adjustment -
regulatory tax receivable line. Reversals of accumulateddefnndincome tarn are included in income tax expense.
When applied to reduce Duquesne's income tax liability, investment tax credits related to utility property generally were deferred. Such credits are subsequently reflected, over the lives of the related assets, as reductions to tax expense.
i 46
~
I Property, Plant and Equipment The asset values of Duquesne~s propernes we stated at ongmal construcuon cost, which includes related payroll taxes, pensions, and other fringe benefits, as wc!! as administrative and
['
general costs. Also included in original construction cost is an allowance for funds used during construction (AFC),which represents the estimated cost ofdebt and equity funds used to fmance construction. The amount of AFC that is capitalized will vary according to changes in the cost of capital and in the level of construction work in progress (CWIP). On a current basis, o
Duquesne does not realize cash from the allowance for funds used during construction.
Duquesne does realize cash, during the service life of the plant, through increased revenues reflecting a higher rate base (upon which a retum is earned) and increased depreciation. The AFC rates applied to CWIP were 9.0 percent in 1994,9.6 percent in 1993, and 10.3 percer4r in 1992.
Additions to, and replacemen;s of, property units are charged to plant accounts. Maintenance, repairs and replacement of minor items of property are recorded as expenses when they ue incurred. The costs of properties that are retired (plus removal cosu and less any salvage value) we chuged to the accumulated provision for depreciation.
Substantially all of Duquesne's properties ue subject to first mortgage liens, and to junior liens.
Temporary Cash Investments Temporary cash investments are short-term, highly liquid investments with original maturities of three or fewer months. They are stated at muket, which approximates cost. Duquesne con.
siders temporary cash investmenu to be cash equivalents.
Duquesne's net investment in property, plant and e9uipment at December 31,1994 and 1993, B. Pro $rty, Plant was 53,068,519 and $3,123,948, respectively. Duquesne's total investment in property plant and guipment andequipmentand the related axumulateddepreciation balances for the following maior classes of property at December 31,1994 and 1993 are as follows:
PP&E and Related Accumulated Depreciation at December 31, TotalInvestment In PP&E Accumulated Depreciation (Amounnin Thousank ofDollan) 1221 1921 1221 1993 Production
$2,325,586 52,297,599
$801,203
$743,477 Transmission 294,882 294,390 105,258 98,675 Distribution 1,110.954 1,070,685 323,980 301,041 Properry Held for Future Use 216,738 216,863 93,283 94.365 Property Held Under Capital Leases 161,775 177,800 91,376 84,717 SFAS 109 150,000 150,000 9,828 3,032 Other 359.031 352,969 125,519 111,051 Total 54,618,966 54.560,306 51,550,447 51,436,358 t
47
l In addition to its wholly owned generating units, Duquesne, together with other electric util-4 ities, has an ownership or leasehold interest in certain jointly owned units. Duquesne is required to pay its share of the construction and operating, costs of the units. Duquesne's share of the operating expenses of the units is included in the statement of consohdated i
income.
Generating Units at December 31,1994 Net Percentage Utility Fuel Unit Intenst Megawatts Plant Souste (Millionr ofDollan)
Cheswick 100.0 570
$ 120.8 Coal Elrama (a) 100.0 487 97.3 Coal Fr. Manin 1 50.0 276 38.2 Coal Easdake 5 31.2 186 44.6 Coal Sammis 7 31.2 187 54.4 Coal Bruce Mans 6 eld 1 (a) 29.3 228 69.1 Coal Bruce Mansfield 2 (a) 8.0 62 18.0 Coal Bruce Mansfield 3 (a) 13.74 110 48.9 Coal Beaver %il 1(b) 47.5 385 253.5 Nuclear Beaver %ll 2 (c)(d) 13.74 113 14.1 Nuclear Beaver Vall Common Facilities 165.6 Perry 1 (e) 13.74 164 591.7 Nuclear Brunot Island 100.0 66 7.5 Fuel Oil Total 2,834 1,524.4 Cold-reserved units:
Brunot Island 100.0 240 44.9 Fuel Oil Phillips (a) 100.0 300 78.6 Coal Total Generating Units 3,374
$1,647.9 (a) The unit is equipped with flue gas desulfurization equipment.
(b) The NRC has Cranted a license to operate through January 2016.
(c) On October 2.1987 the Company sold and leased back as 13.74 percent interest in BeaverValley Unit 2; the sale was exclusive of transmission and comrnon facilities. Amounts shown represent facilities not sold and subsequent leasehold improvemenu.
(d) The NRC has granied a license to operate through May 2027.
(c) The NRC has granted a license to operate through March 2026.
Duquesne has a 13.74 percent ownership interest in Perry Unit 1, a nuclear generating unit located in Ohio and operated by The Cleveland Electric illuminating Company (CEI).
During 1993, the unit had an equivalent availability factor of 39 percent. This performance resulted from several outages. As a result of the length of these outages, the PUC imposed a penalty for incremental replacement power costs. The 1994 equivalent availability factor was 44 percent. This performance resulted from an extended outage (190 days) for refueling and maintenance. From the end of th outage in August 1994 through the balance of1994, Perry operated at full capacity except for short durations of reduced power for testing and minor on-line maintenance activities.
In November 1993, CEI submitted to the Nuclear Regulatory Commission an action plan, called the Perry Course of Action (PCA), designed by CEI to " correct identified management, technical, and programmatic deficiencies" at the plant over roughly a three-year period, and to
" correct the downward trending performance" of Perry. CEI management represents to Duquesne that the PCA is on schedule and will be an effective program to insure that Perry is in conformance with industry standards for boiling water reactors. Based on actual costs and estimates obtained from CEI through January 1995, the total costs to bring the plant into com-pliance, including the costs associated with implementing the PCA, are more than the costs originally projected by CEl. Duquesne cannot predict the ultimate cost, timing or effectiveness of the PCA, and is continuing to closely monitor the situation.
C. Leases Duquesne leases nuclear fuel, a portion of a nuclear generating plant, certain office buildings, computer equipment and other property and equipment.
48
~
Capital Leases at December 31 1994 1993 (Amounain Thousands ofDollars)
Nuclear fuel
$139,763
$136,755 Electric plant 22,012 41,045 Total 161,775 177,800 Less accumulated amortization (91,376)
(84,717) 1%p.,ij Held Under Capital Leases - Net (a)
$ 70,399
$ 93,083 (a) includes 33,20I in 1994 and 33.492 in 1993 o(capitalleases with asociacal obligations setired.
In 1987. Duquesne sold its 13.74 percent interest in Beaver Valley Unit 2; the sale was exclu-sive of transmission and common facilities. The total sales price of $537.9 million was the appraised value of Duquesne's interest in the 3ropeny. Duquesne leased back its interest in the unit for a term of 29.5 years. The lease provic es for semiannual payments and is accounted for as an operating fease. Duquesne is responsible under the terms of the lease for all costs ofits interest in the unit. In December 1992, Duquesne participated in the refinancing ofcollateral-ized lease bonds to take advantage oflower interest rates and reduce the annuallease payments.
The bonds were originally issued in 1987 for the purpose ofpartially fmancing the lease of Beaver Valley Unit 2. In accordance with the Beaver Valley Unit 2 lease agreement, Duquesne paid the premiums of approximately $36.4 million as a supplemental deferred rent payment to the lessors. This amount was deferred and is being amortized over the remaining lease term. At December 31,1994, the deferred balance was approximately $33.4 million.
Leased nuclear fuel is amortized as the fuel is burned.The amortization of all other leased prop-erty is based on rental payments made. Payments for capital and operating leases are charged to operating expenses on the statement of consolidated income.
Summary of Rental Payments 1994 1993 1992 (Amountsin Thousands ofDollars)
Operatingleases
$56,437
$57,398
$ 64,986 l
Amortization of capitalleases 33,5 %
28,758 43,119 j
interest on capital leases 4,996 5,382 7,880 i
TotalRentalPaymenrs
$95,029
$91,538
$115,985 Future minimum lease payments for capital leases are related principally to the estimated use of -
nuclear fuel fmanced through leasing arrangements and building leases. Minimum payments l
for operating leases are related principally to Beaver Valley Unit 2 and certain of the corporate offices.
1 49
+
' Future Minimum i== Payments j
Operating Leases Capital L. cases Year Ended December 31, (Amountsin Thousands ofDollars) 1995 54,552
$ $0,781 1996 54,S32 15,305 1997 54,418 12,622 1998 54,293 6,078 1999 54,287 3,733 2000 and thereafter 948,143 23,736 TotalMinimum Lasselleyments
$1,220,225 92,255 Less amount representing interest (25,065)
Present value of minimum lease payments for capital leases
$ 67,190 (a)
(a) Includes current obligations of $26.1 million at December 31,1994.
Future payments due to Duquesne, as of December 31,1994, under subleases of certain corpo-rate office space are approximately $1.2 rnillion in 1995, $3.8 million in 1996 and $30 million thereafter.
D. Other Property At December 31,1994 and 1993, the fair market value of Duquesne's investment in DQE an3 Investments common stock was $43.1 million and $34.0 million, respectively. At December 31,1994 and 1993, the cost of Duquesne's investment in DQE common stock was $45.9 million and $30.0 million, respectively.
Duquesne's other investments are primarily in assets of a nuc! car decommissioning trust and marketable securities. In accordance with Statement ofFinancial Accounting Standards No.115.
Accountingfor Certain Investmenn in Debt and Equity Securities (SFAS No.115), these invest-ments are classified as available-for-sale and are stated at market value. The amounts of unreal-ized holding gains at December 31,1994 are not material E. Receivablem Duquesne and an unaffiliated corporation have an agreement that entitles Duquesne to sell and the corporation to purchase, on an ongoing basis, up to 550 million of accounts receivable.
Duquesne had no receivables sold at December 31,1994. The accounts receivable sales agree-ment, which expires in June 1995, is one of many sources of funds available to Duquesne.
Upon expiration of this facility, Duquesne expects to extend the agreement or to replace the facility with a similar one.
E Rate Matters 1987 Rate Case in March 1988, the PUC adopted a rate order that increased Duquesne's revenues by $232 mil-lion annually. This rate increue was phased-in fmm April 1988 through April 1994.
Deficiencies in current revenues which resulted from the phase-in plan were included in the statement of consolidated income as phase-in defnrals. Phase-in deferrals were recorded on the balance sheet as a regulatory asset. As customers were billed for deficiencies related to prior peri-ods, this regulatory asset was reduced.
At this time, Duquesne has no pending base rate case and has no immediate plans to file a base rate Case.
50
.h
&<3
. Deferiod kate Synchrenhation Costs in the 1987 Rate Case, the PUC approved Duquesne's petition to defer initial operating and other costs of Perry Unit 1 and Beaver Valley Unit 2. Duquesne deferred the costs incurred from November 17,1987, when the units went into commercial operation, until March 25, 1988, when a rate order was issned. h: its order, the PUC deferred ruling on whether these costs.
would be recoverable from ra'tepayers. Duquesne is not earning a retum on the deferred costs.
x Duquesne believes that these deferred costs are recoverable. In 1990, the PUC permitted anoth-er Pennsylvania utility to recover such costs.
s Extemordinary Property 14ss Duquesne abandoned its interest in the partially-constructed Perry Unit 2 in 1986 and subsc--
quently disposed ofits interest in 1992. In the 1987 Rate Case, the PUC approved recovery, over a 10-year period, of Duquesne's original $155 million investment in Perry Unit 2.
Duquesne is not earning a retum on the as yet unrecovered ponion (approximately $23.9 mil-tion at December 31,1994) ofits investment in the unit.
Deferred Coal Costs s
The PUC has established two market price coal cost standuds for Duquesne's interests in mines that supply coal to its generating stations. One applies only to coal delivered at the Mansfield plant. The other, the system-wide coal cost standard, applies to coal delivered to the remainder of Duquesne's system. Both standards are updated monthly to reflect prevailing market prices for similar coal. The PUC has directed Duquesne to defer recovery of the delivered cost of coal to the extent that such cost exceeds generally prevailing maket prices, as determined by the.
PUC, for similu coal. The PUC allows deferred amounts to be recovered from customers when the delivered costs ofcoal fall below such PUC-determined prevailing maket prices.
In 1990, the PUC approved a joint petition for settlement that clarified certain aspects of the system-wide coal cost standard and gave Duquesne options to extend the standard through March 2000. In December 1991, Duquesne exercised the first of two options that extended the standud through March 1996. The unrecovered cost of coal used at Mansfield amounted to
$7.3 million and $7.4 million and the unrecovered cost of coal used throughout the system amounted to $3.4 million and $8.8 million at December 31,1994 and 1993, respectively.'
Duquesne believes that all deferred coal costs will be recovered.
Warwick Mine Costs The 1990 joint petition for settlement (see preceding section on deferred coal costs) also recognized costs at Duquesne's Warwick Mine, which had been on standby since 1988, and allowed for recovery of such costs, including the costs of ultimately closing the mine. In 1990,
~Duquesne entered into an agreement under which an unaffdiated company will operate the mine until March 2000 and sell the coal produced. Production began in late 1990. The mine reached a full production rate in culy 1991. The Warwick Mine coal reserves include both high and low sulfur coah Duquesne's contract is for medium to high sulfur (1.3 percent-2.5 percent) coal. More than 60 percent of the coal mined at Warwick currently is used by Duquesne.
Duquesne receives a royalty on sales of Warwick coal in the open market. In the past ycar, the-Warwick Mine supplied slightly less than one-fifth of the cow used in the production of elec-tricity at Duquesne's wholly owned and jointly owned plants.
Costs at the Warwick Mine and Duquesne's invntment in the mine are expected ' o be recov-t ered through the cost of coal in the ECR. Recce ; is subject to the system-wide coal cost stan.
dud. Duquesne also has an opportunity to earn a retum on its investment in the mine through the cost of coal during the period of the system-wide coal cost standard, including extensions.
e At December 31,1994, Duquesne's net investment in the mine was $18.9 million. The estimat-ed liability, including final site reclamation, mine water treatment and certain labor liabilities, for mine closing is $33 million and Duquesne has recorded a liability in the consolidated bal-ance sheet of appmximately $12.8 million towud these costs.
51
Property Held for Future Use In 1986. the PUC approved Duquesne's request to remove the Phillips and most of the Brunot Ir!and (BI) power stations from service and place them in cold reserve. Duquesne expects to recover its net investment in these plants through future electricity sales. Phillips and BI repre-sent licensed, cenified, clean sources of electricity that will be necessary to meet expanding opponunities in the bulk power mukets. Duquesne believes that anticipated growth in peak load demand for electricity within its service territory will require additional peaking genera-tion. Duquesne looks to B1 to meet this need. The Phillips power plant is an important compo.
nent in Duquesnis strategy to identify and serve opponunities for providing bulk power service.
With recent legislation promoting wider transmission access to bulk power markets and with the opponunity to p:.ekage a sale of power from Phillips with the suppon of Daquesne's 9 tem, the Phillips plant could be made a highly reliable, cost-competitive alternative for most aurchasers. In summary, the Company believes its investment in these cold-reserved plants will
>e necessary in order to meet future business needs. If business opponunities do not develop as expected, Duquesne will consider the sale of these assets. In the event that market demand, transmissi,n access or rate recovery do not support the utilization or sale of the plants, Duquesne may have to write cff part or all of their costs. At December 31,1994, the Company's net investment in Phillips and B1 was $93.0 million and $42.0 million, respectively.
G. Common Stock Common Stock and Capital Surplu.
and Capital In July 1989, Duquesne became a wholly owned subsidiary of DQE, the holding company S"'P us formed as pan of a shareholder-approved restructuring. As a result of the restructuring, DQE common stock replaced all outstanding shares of Duquesne common stock, except for ten shares which DQE holds.
DQE or its predecessor, Duquesne, has continuously paid dividends on common stock since 1953. Dividends may be paid on DQE common stock to the extent permitted by law and as declared by its board of directors. However, in Duquesnis ResratedArtides ofincorporation, provisions relating to pirferredandpreferrnce stock may restrict the payment of Duquesnis com-mon dividends. No dividends or distributions may be made on Duquesne's common stock if Duquesne has not paid dividends or sinking fund obligations on its preferred or preference stock. Funher, the aggregate amount of Duquesne's common stock dividend payments or distri-butions may not exceed cenain percentages of net income if the ratio of common stockholders rguity to total capitalization is less than specified percentages. As all of Duquesnis common stock is owned by DQE, to the extent that Duquesne cannot pay common dividends, DQE may not be able to pay dividends to its common stockholders. No part of the rrtained earnings of Duquesne was restricted at December 31,1994.
Capital Surplus 1994 1993 1992 Year Ended December 31, (Amounnin Thousands ofDollan) 5 5
Capital Surplus Premium on common stock 823,886 807,593 808,707 Capital stock expense (693)
' (1,838)
(1,840)
TotalCapitalSurplus
$823,193
$805,755 5806,867 H. Preferred and Holders of Duquesnis preferred stock are entitled to cumulative quanerly dividends. If four Preference Stock quanerly dividends on any series of preferred stock are in arrears, holders of the preferred stock are entitled to elect a majority of Duquesnis board of directors un.il all dividends have been paid. At December 31,1994. Duquesne had made all preferred stock dividend payments.
Holders of Duquesnis preference stock are entitled to receive cumulative quarterly dividends if dividends on all series of preferred stock are paid. Ifsix quanerly dividends on any series of preference stock are in arrears, holders of the preference stock are entitled to elect two of Duquesne's directors until all dividends have been paid. At December 31,1994, the Company had made all dividend payments.
52 1
Outstanding prrferredendpnferrner stock is generally callable, on notice of not less than thirty days, at stated prices plus accrued dividends. On Januny 14,1994, Duquesne called for redemption all ofits outstanding sharcs of $2.10 and $7.50 preference stock. None of the remaining preferred or preference stock issues has maustory purchase requirements.
Preferred and Pnference Stock at December 31 (SharrsandAmountiin Musandr) 1994 1993 1992 gg p,;
Per Share Shues Amount Shues Amount Shues Amount Preferred Stock Series: (a) 3.75% (b)(c)
$ 51.00 148 5 7,407 148$ 7,407 148$ 7,407 4.00% (b)(c) 51.50 550 27,486 550 27,486 550 27,486 4.10% (b)(c) 51.75 120 6,012 120 6,012 120 6.012 4.15% (b) (c) 51.73 132 6,643 132 6,643 132 6,643 4.20% (b) (c) 51.71 100 5,021 100 5,021 100 5,021
$2.10 (b) (c) 51.84 159 8,039 159 8,039 159 8,039
$7.20 (c) (d) 101.00 298 29,732 319 31,915 319 31,915 TotalPhrfemdStock 1,507 90,340 1,528 92.523 1,528 92,523 Preference Stock Series: (f)
$2.10 (c) (g) 1,175 29,383 1,175 29,383
$7.50 (d) (e) 84 8,392 86 8,579 Plan Series A (c) (h) 37.46 841 29,857 844 29,956 845 29,995 Tota /Pirference Stock 841 29,857 2,103 67,731 2,106 67,957 i
Deferred ESOP benefit (24,852)
(27,126)
(28,471)
IotalPrrfemd and P>rferrnet Stock 5 95,345
$133,128
$132,009 (a) Preferred stocle 4.000.000 authorind shares; $50 par nlue: (e) Redeemable cumulative (f) Preference stock: 8,000.000 authorind shares; (b) 550 per share involuntary liquidation value
$1 par nlue; cumulative (c) Non redeemable (g) 525 per share involuntary liquidation value (d) 5100 per share involuntary liquidation nlue (h) 535.50 per share involuntary hquidation nlue In December 1991. Duquesne established an Employee Stock Ownership Plan (ESOP) to pro.
vide matching contributions for a 401(k) Retirement Savings Plan for Management Employees.
(See Note N.) Duquesne issued and sold 845,070 shares ofprrference stock, plan series A to the trustee of the ESOP. As consideration for the stock, Duquesne received a note valued at $30 million from the trustee. The preference stock has an annual dividend rate of $2.80 per shue, and each share of the preference stock is exchangeable for one shue of DQE common stock. At December 31,1994, $24.9 million of preference stock issued in connection with the establish-ment of the ESOP had been offset, for financial statement purposes, by the recognition of a deferred ESOP benefit. Dividends on the preference stock and cash contributions from Duquesne are used to repay the ESOP note. Duquesne made cash contributions of approxi.
mately $2.3 million for 1994, $2.1 million for 1993, and $4.9 million for 1992. These cash contributions were the difference between the ESOP debt service and the amount ofdividends on ESOP shues (appmximately $2.4 million in 1994, $2.3 million in 1993 and $2.5 million in 1992). As shares of preference stock are alk>cated to the accounts of participants in the ESOP, Duquesne recognizes compensation expense, and the amount of the deferred compensation benefit is amortized. Duquesne recognized compensation expense related to the 401(k) plan of
$1.8 million in 1994, $1.7 million in 1993, and $1.5 million in 1992.
53
L bar
- hem Debt During 1992, Duquesne began issuing secured debt under a new first collateral trust indenture.
4 This indenture will ultimately replace Duquesne's 1947 first mongage bond indenture. First collateral trust bonds totaling $695 million with an average interest rate of 6.58 percent were issued in 1993 The pollution control notes arise from the sale of bonds by public authorities for the purposes of financing construction of pollution control facilities at Duquesne's plants or refunding previ-ously issued bonds.
Duquesne is obligated to pay the principal and interest on the bonds. For cenain of the pollu-tion control notes, there is an annual commitment fee for an irrevocable letter of credit.
Under certain circumstances, the letter of credit is available for the payment ofinterest on, or redemption of, a ponion of the notes. In late 1994, pollution control notes totaling $114.1 mil-lion with an average interest rate of 10.34 percent were refinanced at lower adjustable interest rates.
bag-Term Debt at December 31 Principal Outstanding interest (Amounnin Musands ofDoHars)
Rate Maturity 1994 1993 First collateral trust bonds (a) 175 8.75% 1996-2025
$ 950,400 $ 950,400 First mongage bonds (b) 8.25%
1995 49,000 Pollution control notes (c)
(d) 2003-2030 417,051 416,266 Sinking fund debentures (c) 5%
2010 5,817 6,042 Miscellaneous 152 216 Less unamortized debt discount and premium - net (4,490)
(5,219)
TotalLong-Term Debt
$1,368,930 $1,416,705 (a) Exdudes 59.6 million eclared to sinking fund requirements on the undedyiag first mortssge bonds.
(b) Excludes $49.0 million related to a currens maturity on June I,1995.
(c) Exdudes 50.9 million related to sinking fund requirements on the underlying fim mortgage bonds.
(d) %c pollution control notes have adjuscable interest raies. He intercs: rates at year-end averaged 4.3% in 1994 and 2.6% in 1993.
(c) As ofJanuary 1%5, the sinking fund requirement for 1995 had been mer and the aquirements for 1996 had been partially satisfied.
At December 31,1994, sinking fund requirements and maturities oflong-term debt outstanding for the next five years were: $10.5 million and $49.1 million in 1995; $11.0 million and
$50.1 million in 1996; $10.7 million and $50.0 million in 1997; $9.9 million and $75.0 mil-lion in 1998; and $9.9 million and $75.0 million in 1999.
Sinking fund requirements relate primarily to the first mongage bonds and may be satisfied by cash or the cenification of property additions equal to 166-2/3 percent of the bonds required to be redeemed. During 1994, annual sinking fund requirements of $.5 million were satisfied by cash and $10.9 million by :enification of property additions.
Total interest costs incurred were $110.7 million in 1994, $118.1 million in 1993 and $133.9 million in 1992. Of these amounts, $2.0 million in 1994, $2.0 million in 1993 and $4.7 million in 1992 were capitalized as AFC. Debt discount or premium and related issuance expenses are amortized over the lives of the applicable issues, in 1992. Duquesne was involved in the issuance of $419.0 million of collateralized lease bonds, which were originally issued by an unaffiliated corporation for the purpose ofpanially financ-ing the lease of Beaver Valley Unit 2. Duquesne is also associated with a letter of credit securing the lessors' equity interest in the unit and certain tax benefits. During 1994, Duquesne's Beaver Valley Unit 2 lease arrangement was amended to reflect an increase in federal income tax rates.
At the same time, the associated letter of credit securing the lessor's equity interest in the unit was increased from $188 million to $194 million and the term of the letter of credit was 54
r 1_
t W.
extended to 1999. If ceitain specified events occur, the letter oferedit could be drawn down by the owners, the leases could wrminate and the bonds would become direct obligations of t
- Duquesne, At December 31,1994 and 1993, Duquesne was in compliance with all ofits debt covenants.
At December 31,1994, the fair value of Duquesne's long-term debt, including current maturi-ties and sinking fund requirements, estimated on the basis of quoted market prices for the same or similar issues or current rates offered to Duquesne for debt of the same remaining maturities, wu $1,344.7 million. The principal amount included in Duquesne's balance sheet is $1,433.0 million.
J. Short-Tem Duquesne has an extendible revolving credit agreement with a group of banks totaling $150 Borrowing tad million. The current expiration date of this credit arrangement is October 6,1995. Interest
- Revolving Credit rates can, in accordance with the option selected at the time of each borrowing, be based on Arrangements prime, Eurodollar or certificate of deposit rates. Commnment fees are bued on the unbor-
. rowed amount of the commitments. The arrangeraent contains a two-year repayment period for any amounts outstanding at the expiration ofihe revolving credit period.
During 1994 and 1993, the maximum short term bank and commercial paper borrowings outstanding were $25.6 million and $27 million: the average daily short-term borrowings outstanding were $1.9 million and $1.6 million; and the weighted average daily interest rates applied to such borrowings were 5.23 percent and 3.42 percent, respectively. At December 31,1994, there were no short-term borrowings. Short term borrowings at December 31, 1993, were $11.0 million.
K. Income Taxes Since DQE's formation in 1989, Duquesne has filed consolidated federal income tax returns with its parent and other companies in the affiliated gmup. Duquesne's federal income tax retums have
. been audited by the Internal Revenue Service and closed for the tax years through 1989.
Returns filed for the tax years 1990 to date remain subject to IRS review. Duquesne does not believe that fmal serttement of the federal income tax returns for these years will have a materially -
adverse effect on its fmancial position or results of operations. The effects of the 1993 adoption of SFAS No.109 are discussed in Note A. Implementation of the standard involved a change in accounting principle. The cumulative effect of $8 million on prior years was reported in 1993 as an increase in ner income. The SFAS No.109 impact on 1993 income before cumulative effect of changes in accounting principles is immaterial.
Deferred Tax Liabilities 1994 1993 (Amountsin Thousandr ofDollars)
At December 31, deferred tax assets (liabilities) were:
Investment tax credits unamortized 43,257 3 45,351 Cain on sale /leaschack of13eaver Valley Unit 2 64,124 67,119 Other 63,058 57,690 Deferred tax assets 170,439 170,160 Property depreciation (780,726)
(855,560)
Regulatory asset (149,815)
(199,344) i Loss on reacquired debt unamortized (38,066)
(40,933)
Other (192,981)
(220,105)-
)
Deferred tax liabilities (i,161,588) (1,315,942)
Ner Defernd Tar Liabilitics
$ (991,149) $(1,145,782) 4 55
s Income Taxes 1994 1993 1992 (Amounain Thousandr ofDollan)
Included in operating expenses:
Currently payable:
Federal.
$90,335. $100,521 $ 80,850 State 33,071 37,718 27,797 Deferred - net:
Federal (15,787)
(29,758)
(3,208)
State (7,797)
(9,007)
(3,750)
Investment tax credits deferred - net (5,376)
(5,399)
(5,436) i TesalIncludedin OpmstingErpensar
$94,446 94,075
%,253 included in other income and deductions:
Currently payable:
Federal
$ (6,139)
(17,557) 7,265 i
State 335
. (1,220) 2,983-l Deferred - net:
Federal -
(99) 251 1,654 4
State (39) 100 377 Investment tax credits (607)
(607)
-(533)
TotalIncludedin OtherIncome andDeductions (6,549)
(19,033) 11,746 i
TosalIncome Tar Erpense
$87,897 $ 75,042 $107,999 7
Total income taxes differ from the amount computed by applying the statutory federal income tax rate to income before income taxes and before the cumulative effect of changes in account-ing principles.
Income Tax Expense Reconciliation 1
1994 1993 1992 (Amountsin ThousandrofDollan)
Computed federal income tax at statutory rate
$ 82,371 $ 76,940 $ 87,641 Increase (decrease) in taxes resulting from:
Tax audit setdement (15,000)'
Excess of book over tax depreciation 1,737 906 3,830 i
State income taxes, net of federal income tax benefit 16,621 17,934 18,089 Amortization ofdeferred investment tax credits (5,983)
(6,006)
(5.969)
Revenue requirement adjustment to regulatory taxes (12,178) l Other - het 5,329 268 4,408 i
TotalIncome Tar Erpense
$ 87,897 $ 75,042 5107,999 Sources of Deferred Tax Expense 1992 (Amountsin Thousands ofDollan)
Sources ofincome taxes deferred and the related tax effects were:
Excess of tax depreciation 5 16,611 Deferred revenues recorded /(recovered) for book purposes (30,702)
Allowance for uncollectible accounts 9,760 Fuel costs (10,820)
Loss on early retirement of debt 20,999 Other - net (10,775)
TotalDeferredIncome Tax (Benept)
$ (4,927) 56
=
L. Commutments and Construcdon Condagencies Duquesne estimates that it will spend approximately $80 million annually on construction dur-
. ing 1995,1996 and 1997. These amounts exclude AFC, nuclear fuel, expenditures for possible early replacement of steam generators at the Beaver Valley Station (See " Nuclear Litigation" dis-cussion on page 59.) and expenditures for the refurbishment of the cold-reserved units. (See
" Property Held For Future Use" discussion on page 53.)
Nuclear-Related Mattees Duquesne operates two nuclear units and bu an ownership interest in a third.The operation of a nuclear facility involves special risks, potential liabilitics and specific regulatory and safety requirements. Specific information about risk management and potential liabilities is discussed below.
Nudenr Decommissieming. The PUC ruled that recovery of the decommissioning costs for Beaver Valley Unit I could begin in 1977, and that recovery for Beaver Valley Unit 2 and Perry Unit I could begin in 1988. Duquesne expects to decommission Beaver Valley Unit 2 and Perry Unit 1 following the end of their operating lives, a date that currently coincides with the expiration of each plant's operating license. Upon expiration of the Beaver Valley Unit 1 operat-ing license, the unit will be placed in safe storage until the expiration of the Beaver Valley Unit 2 operating license, at which time the units may be decommissioned together.
Based upon site specific studies finalind in 1992 for Beaver Valley Unit 2, and in 1994 for Beaver Valley Unit 1 and Perry Unit 1, Duquesne's share of the total estimated decommission-ing costs, including removal and decontamination costs, currently being used to determine Duquesne's cost of service, are $122 million for Beaver Valley Unit 1, $35 million for Beaver Valley Unic 2, and $67 million for Perry Unit 1.
In conjunction with an August 18,1994 PUC Accounting Order, Duquesne has increased the annual contribution to its decommissioning trusts by approximately $2 million to bring the total annual funding to approximately $4 million per year. Duquesne plans to continue making periodic reevaluations of estimated decommissioning costs, to provide additional funding from time to time, and to seek regulatory approval for recognition of these increased funding levels.
NadearIssunence. All of the companies with an interest in the Beaver Valley Ptwer Station maintain the maximum available nuclear insurance for the $5.9 billion total investment in Beaver Valley Units 1 and 2. The insurance program provides $2.8 billion for property damage, decommissioning, and decontamination liabilities. Similar property insurance is held by the joint owners of the Perry plant for their $5.5 billion total investment in Perry Unit 1.
Duquesne would be responsible for its share of any damages in excess ofinsurance coverage. In addition, if the property damage reserves of Nuclear Electric insurance Lirnitec' Atill), an industry mutual, are inadequate to cover claims arising from an incident at anv audStates l
nuclear site covered by that insurer. Duquesne could be assessed retrospective premiums total-l ing a maximum of $6.5 million.
The Price-Anderson Amendments to the Atomic Energy Act limit public liability from a single incident at a nuclear plant to $8.9 billion. Duquesne has purchased $200 million ofinsurance, the maximum amount available, which provides the first level of financial protection.
Additional protection of $8.3 billion would be provided by an assessment of up to $75.5 million per incident on each nuclear unit in the United States. Duquesne's maximum total assessment,
$56.6 million, which is based upon its ownership or leasehold interests in three nuclear generat-ing stations, would be limited to a maximum of $7.5 million per incident per year. A further surcharge of 5 percent could be levied if the total amount of public claims exceeded the funds provided under the assessment program. Additionally, a state premium tax (typically 3 percent) i would be charged on the assessment and surcharge. Finally, the United States Congress could impose other revenue-raising measures on the nuclear industry if funds prove insufficient to pay claims.
57 l
-)
4
?
- t 1
x-Duquesne carries extra expense insurance coverage includes the meremental ca : of any L
replacement power purchased (in addition to costs that would have been incurred had the umts =
3
- been operating) and other incidental expense after the occurrence of censin types of accidents.
- at its'nucleu units. The amounts of the coverage are 100 percent of the acimated extra expense per week during the 52-week period staning 21 weeks'after an accident and 80 percut of such estimate per week for the following 104 weeks. The amount and duration of actual extra expense could substantially exceed insurance coverage.
Lj Nudear Lisipstien. In 1991, Pennsylvania Ibwer Company, Ohio Edison Company,1 Cleveland Electric Illuminating Company. Toledo Edison Company and Duquesne were joined in the litigation against Westinghouse Electric Corporation (Westinghouse) in che United States District Coun for the Western District of knsylvania. In the suit, the owners allege that six steam generators supplied by Westinghouse for Beaver Valley Units 1 and 2 contain serious
. design defects - in particulu defects causing tube cormsion and cracking. -
Steam generator maintenance costs have increased as a result of thae defects and are likely to l
continue increasing. The condition of the steam generators is being monitored closely.
Replacement of the Beaver Valley Unit I steam generator defective components may occur as early as 1997. Based upon other utilities with similar units who have replaced steam generators, replacement cost per unit is estimated to be approximately $125 million.To date, twelve addi--
j tional lawsuits have been brought by other utility companies around the country against
-Westinghouse for similar problems with Westinghouse steam generators.
A jury trial began September 12,1994 it' >cderal District Court in Western knsylvania. On October 24,1994, the Coun dismissed four of the five claims against Westinghouse, leaving.
only the fraud claim. On December 6,1994, the jury rendered a verdict in favor of Westinghouse on the fraud count. On January 5,1995, the owners of the Beaver Valley plant appealed the decision to the United States Coun ofAppeals for the Third Circuit. Duquesne cannot predict the outcome of this litigation; however, the Company does not believe that reso-lution will have a materially adverse effect on its financia! position or results ofoperations. The Company's percentage interests (ownership and leasehold) in Beaver Valley Unit I and in -
Beaver Valley Unit 2 are 47.5 percent and 13.74 percent, respectively. The remainder of Beaver i
Valley Unit 1 is owned by Ohio Edison Company and Pennsylvania Power Company.
The remaining interest in Beaver Valley Unit 2 is held by Ohio Edison Company, Cleveland j
Electric illuminating Company and Toledo Edison Company. Duquesne operates both units
{
on behalfof these owners.
SpentNudearFudDisposal Under the Nuclear Waste Iblicy Act of1982, which establish- -
es a policy for handling and disposing of spent nuclear fuel and requires the establishment of a i
final repository to accept spent fuel, contracts for jointly owned nuclear plants have been entered into with the DOE for permanent disposal ofspent nuclear fuel and high-level radio-active waste. The DOE has indicated that the repository will not be available for acceptance of spent fuel before 2010. Existing on-site spent fuel storage capacities at Beaver Valley Unit 1, 1
Beaver Valley Unit 2 and Perry are expected to be sufficient until 2017,2011, and 2009 -
i respectively. During 1994. Duquesne increased the storage capacity at Beaver Valley Unit 1 by j
equipping the spent fuel pool with high density fuel storage racks.
Urwnium Enrichnsent Decontamination andDreensasinioningFund. Nuclear reactor a
licensees in the United States are assessed annually for the decontamination and decommission-ing of DOE enrichment facilities. Assessments ue based on the amount of uranium a utility had processed for enrichment prior to enactment of the National Energy Policy Act of1992 (energy act) and are to be paid by such utilities over a 15-year period. At December 31,1994, Duquesne's liability for contributions is approximately $9.9 million. Contributions, when made, are recovered through the ECR.
Guarantees Duquesne and the other co-owners have guaranteed certain debt and lease obligations related to a coal supply contract for the Bruce Mansfield plant. At December 31,1994, Duquesne's share of these guarantees was $30.3 million. The prices paid for the coal by the companies under this 58 i
O contract are expected to be sufficient to meet debt and lease obligations to be satisfied in the j
year 2000. (See Note E) The minimum future payments to be made by Duquesne solely in relation to these obligations are 56.6 million in 1995, $6.2 million in 1996, $5.9 million in 1
1997, $5.6 million in 1998, $5.3 million in 1999, and $4.2 million in 2000. Duquesne's total payments for coal purchased under the contract were $23.3 million in 1994, $26.5 million in 1993, and $25.2 million in 1992.
Residual Waste Management Regulations in 1992, the Pennsylvania Department of Environmental Resources (DER) issued Residual Waste Management Regulations governing the generation and management of non-hazardous waste. Duquesne is currently conducting tests and developing compliance strategies. Capital compliance costs are estimated, on the basis ofinformation currendy available, at $5 million in 1995. The expected additional capital cczt of compliance through 2000 is estimated, based on current information, to be approximately $25 million: this estimate is subject to the results of continuing ground water assessments and DER final approval of compliance plans.
Other Duquesne is involved in various other legal proceedings and environmental matters. Duquesne believes that such proceedings and matters, in total, will not have a materially adverse effect on its fmancial position or results ofoperations.
M. Changes in Changes in Working Capital Other Than Cash Working 1994 1993 1992 Capital (Amountsin 17musands ofDolbun)
Accounts Receivable
$ 6,708 $(87,671) $64.571 Materials and supplies 2,932 13,635 (4,151)
Other cunent assets (6,929) 3,636 7,131 Accounts payable (23,816)
(6,022)
(8,573)
Other current liabilities (15,779)
(20,377)
(3,785)
Total
$(36,884) $(96,799) $55,193 N. Employee Retirement Plans Benefits Duquesne m intains retirement plans to provide pensions for all full-time employees. Upon retirement, an employee receives a monthly pension based on his or her length of service and compensation. The cost of funding the pension plan is determined by the unit credit actuarial cost method. Duquesne's policy is to record this cost as an expense and to fund the pension plans by an amount that is at least equal to the minimum funding requirements of the Employee Retirement income Security Act (ERISA) but not to exceed the maximum tax deductible amount for the year. Pension costs charged to expense or construction were $8.9 million for 1994, $9.8 million for 1993 and $11.4 million for 1992.
1 l
59 1
Funded Status of the Retirement Plans and Amounts Recognised on the Consolidated Balance Sheet at December 31 1994 1993 (Amounain Thousands ofDollan)
Actuarial present value of benefits rendered to date:
Vested benefits
$314,933 $321,240 Non vcsted benefits 17,282 16,826 Accumulated benefit obligations based on compensation to date 332,215.338,075 Additional benefits based on estimated future salary levels 59,318 74,718 Projected benefit obligation 391.533 412,793 Fair market value ofplan assets 412,724 434384 Projected benefit obligation under plan assets
$ 21,191 $ 21,591 Unrecognized net gain
$ 95,691 $ 80,411 Unrecognized prior service cost (30,365)
(21,449)
Unrecognized net transition liability (17,477)
(19,289)
Net pension liability per balance sheet (26,658)
(18,082)
Total
$ 21,191 $ 21,591 Assumed rate of return on plan assets 8.00 %
8.00 %
Discount rate used to determine projected benefit obligation 8.00%
7.00 %
Assumed change in compensation levels 5.50 %
5.25%
Pension assets consist primarily ofcommon stocks, United States obligations and corporate debt securities.
Components of Net Pension Cost 1994 1993 1992 (Amounnin Thousands ofDollan)
Service cost (Benefits earned during the yeu)
$ 12,482 $ 11,657 $ 11,397 Interest on projected benefit obligation 28,221 27,423 26,390 Return on plan assets 1,967 (41,725)- (26,736)
Net amortization and deferrals (33,783) 12,454 325 i
Net Pension Cost
$ 8,887 $ 9,809 $ 11,376 Retirement Savings Plan and Other Benefit Options Duquesne sponsors sepuate 401(k) retirement plans for its union-represented, International Brotherhood of Electrical Workers (lBEW), employees and its management employees.
The 401(k) Retirement Savings Plan for Management Employees provides that Duquesne will match employee contributions to a 401(k) account up to a maximum of 6 percent of his or her eligible salary. Duquesne match consists of a 5.25 base match per eligible contribution dollu and an additional 5.25 incentive match per cligible contribution dolla, if Board-approved tu-gets are achieved. The 1994 incentive target was accomplished. Duquesne is funding its match-ing contributions to the 401(k) Retirement Savings Plan for Management Employees with payments to an ESOP established in December 1991. (See Note H.)
The 401(k) Retirement Savings Plan for IBEW Represented Employees provides that beginning in 1995, the Company will match employee contributions to a 401(k) account up to a ma s i.
mum of 4 percent of his or her eligible salary. Duquesne match consists of a $.25 ba-match per eligible contribution dollar and an additional $.25 incentive match per eligible contribution dollar, if certain Non-Occupational lliness and injury targets are met.
60
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~
DQE's shareholders have approved a long-term incentive plan through which Duquesne may grant management employees options to purchase, during the yens 1987 through 2003, up to a total of five million shares of DQE common stock at prices equal to the fair market value of such stock on the dates the options were granted. At December 31,1994, approximately 2.3 million of these shares were available for future grants.
As of December 31,1994,1993 and 1992, respectively, active grants totaled 1,412,000; 1,175,000; and 848,000 shares. Exercise prices of these options ranged from $12.3125 to
$34.625 at December 31,1994 and December 31,1993 and from $12.3125 to $28.75 at December 31,1992. Expiration dates of these grants ranged from 1997 to 2004 at December 31,1994; from 1997 to 2003 at December 31,1993; and from 1997 to 2002 at December 31, 1992. As of December 31,1994,1993 and 1992, respectively, stock appreciation rights (SARs) had been granted in connection with 793,000; 795,000; and 623,000 of the options outstand-ing. During 1994,836,000 SARs were exercised; 226,000 options were exercised at prices rang-ing from $12.3125 to $28.375; and 187,000 options lapsed. During 1993,748,000 SARs were exercised; 151,000 options were exercised at prices ranging from $12.3125 to $28.375; and 152,000 options lapsed. During 1992,108,000 SARs were exercised; 50,000 options were exercised at prices ranging from $12.3125 to $26.375; and 59,000 options lapsed. Of the active grants at December 31,1994,1993 and 1992, respectively,612,000; 578,000; and 232,000 were not exercisable.
Other Postretirement Benefits in addition to pension benefits, Duquesne provides certain health cue benefits and life insur-ance for some retired employees. Substantially all of Duquesne's full-time employees may, upon attaining the age of 55 and meeting certain service requirements, become eligible for the same benefits available to re: ired employees. Participating retirees make contributions, which ne adjusted annually, to the health care plan, ne life insurance plan is non-contributory. Company-provided health care benefits terminate when covered individuals become eligible for Medicue benefits or reach age 65, whichever comes first. Duquesne funds actual expenditures for obliga-tions under the plans on a " pay-as-you-go basis." Duquesne has the right to modify or termi-nate the plans.
As of January 1,1993, Duquesne adopted Statement ofFinancialAccounting Standardr No.106, Employers'Anountingfur lbstrrtirement Benepts Other Than Pensions, which requires the actuari-ally determined costs of the aforementioned postretirement benefits to be accrued over the peri-od from the date of hire until the date the employee becomes fully eligible for benefits.
Duquesne has adopted the new standard prospectively and has elected to amortize the transi-tion liability over 20 years.
Components of Postretirement Cost 1994 1993 (Amountsin Thousands ofDollan)
Service cost (Benefits carned duri ig the pecad)
$1,631
$1,779 Interest cost on accumulated benefit obligation 2,294 2,497 Amortization of the transition obligation over twenty years 1,700 1,700 TotalPostretirement Cost
$5,625
$5,976 The accumulated postretirement benefit obligation comprise _ the present value of the estimated future benefits payable to current retirees and a pro rata portion ofestimated benefits payable to active employees after retirement.
61
Funded Status of Postretirement Plan and Amounts Recognized on the Consolidated Balance Sheet at December 31 1994 1993 (Amounnin Musandr ofDollars)
Actuarial present value of benefits:
Retirees
$ 6,292 $ 4,830 Fully eligible active plan participants 3,074 3,482 Other active plan participants 20,543 24,170 Accumulated postretirement benefn obligation 29,909 32,482 Fair market value of plan assets Accumulated benefit obligation in excess of plan assets
$(29,909) $(32,482)
Unrecognized net gain (loss)
$ 9,481 $
(122)
Unrecognized prior service cost 4383 Unrecognized net transition liability (30,598)
(32,296)
Postretirement liability per balance sheet (8,792)
(4,447)
Total
$(29,909) $(32,482)
Discount rate used to determine projected benefit obligation 8.00 %
7.00 %
Health care cost trend rates:
For year beginningJanuary 1 8.60 %
10.50 %
Ultimate rate 6.50 %
5.50 %
Year ultimate rate is reached 1999 1999 Effect of a one percent increase in health care cost trend rates:
On accumulated projected benefit obligation 5 3,137 $ 4,000 On aggregate of annual service and interest costs 465 600 O. Quarterly Summary of Selected Quarterly Financial Data (thousands of dollars)
Financial
[The quarterly data reflect seasonal weather variations in the Company's service territory.]
1994 First Quarter Second Quarter Third Quarter Fourth Quarter di d rating Revenues
$295,868 5281,670 5324,428
$278,318 rating income 61,094 53,983 73,556 51,261 income 35,492 30,557 44,876 36,524 1993 (a)(b)
Operating Revenues
$283,713
$280,596
$327,769 5285,701 Operatmg income 58.537 60,618 66339 60,392 Income Before Cumulative Effect on Prior Years of Changes in Accounting Principles 32,788 34,570 48,478 28,951 Net income 35,363 34,570 48,478 28,951 (a) Fourth quaner 1993 results included the effecu of a $15.2 millinn charge for the write-offof Duquesne's investment in an abandoned transmission line project and a $14.6 million reduction of taxes other than income as a result of a favorable resolution of car assessments.
1 (b) Restated to conform with presentations adopted during 1994.
62
O SEIICED FINANCIALDATA f
Amounts in Thousands of Dollars 1994 1993 1992 1991 1990 1989 INCOME STATEMENT ITEMS Total operating revenues
$1,180,284 $1,177,779 $1,161,280 $1,199,650 $1,131,005 $1,118,583 Operatingincome
$ 239,894 5 245,886 5 254,130 $ 265,672 $ 266,402 $ 269,506 I
Net income
$ 147,449 $ 147,362 $ 149,768 $ 143,133 $ 135,456 $ 129,437 l
Earnings for common stock
$ 141,403 $ 138,174 5 140357 $ 132,332 $ 121,410 $ 112,644 BALANCE SHEET ITEMS Property, plant and equipment-net
$3,068,519 $3,123,948 $3,018,641 $3,037,454 $3,042,920 $3,056,367 Total assets
$4,149,867 $4,388,103 $3,718,092 $3,802,626 $3,794,313 $3,822,656 Capitalization:
Common stockholder's equity
$1,115,512 $1,100,671 51,107,609 $1,064,104 $1,035,059 $1,033,826 Non-redeemable preferred and preference srock 95,345 124,736 123,430 121,906 151,346 154,030 Redeemable preferred and preference stock 8,392 8,579 15.437 37,747 65,961 Long-term debt
.,368,930 1,416,705 1,413,001 1,420,726 1,501,295 1,540,329 Total capitalization
$2,579,787 $2,650,504 $2,652,619 $2,622,173 $2,725,447 $2,794,146 63
.i
.J Duquesne Ught Company and Subsidiary Calculation of Ratio of Earnings to Fixed Charges (Thousands of Dollars)
Year Ended December 31, 1994 1993 1992 1991 1990 FIXED CilARGES:
Interest on long-term debt
$94,646
$102.938
$119,179
$127,606
$135,850 Other interest 1,095 2,387 1.749
-1,773 4.939 Amortiration of debt discount, premium and y
expense-net 6,381 5,541 4,223-3,892 4.039 lbrtion oflease payments representing an interest factor 44.839 45.925 60.721 64.189 64.5H6
'Ibral Fixed Charges
$146361
$156.791
$185.872
$197.46Q
$209.414 EARNINGS:
Income from continuing operations
$147,449
$144,787
$149,768
$143.133
$135,456 income taxes 87,897 75,042 107.999 101,073 84,478 Fixed charges as above 146.961 156.791 185.872 197.460 209.414
~lbtal Earnings
$382.307
$376.620
$443.639
$441.666
' $429.348 IIATIO OF EARNINGS TO FIXED CitARGES 2.69 2.40 2,12 224 2&5 Duquesne's share of the fixed charges of an unaffiliated coal supplier, which amounted to approximately $3.7 million for the year ended December 31, 1994, has been excluded from the ratio.
Q-w G
C
DUQUESNE IJGHT COMPANY EXHIBIT 23.1 i
INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 33-52782,33-63602,33-53563 and 33-53563-01 of Duquesne Light Company on Form S-3 ofour report dated January 31,1995, appearing in the Annual Report on Form 10-K of Duquesne Light Company for the year ended December 31,1994.
/s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Pittsburgh, Pennsylvania March 28,1995 i
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