Text

Ohio Edison Annual Rept,1983
	ML20091A224
Person / Time
Site:	Beaver Valley, Perry, Vermont Yankee, Crystal River, 05000000, Zimmer
Issue date:	12/31/1983
From:	Rogers J; OHIO EDISON CO.
To:	;
Shared Package
ML20091A217	List: ML20091A214; ML20091A224; ML20091A242; ML20091A255;
References
	NUDOCS 8405290310
	Download: ML20091A224 (44)
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~ OHIOEDISON The Energy Makers i

ANNUAL REPORT 1983

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Financial Highlights i ror the hs Ended Decerrtwar 31 1983 1982 Change (in indhon$ except for hhdret afWhJnh)

Kilowatt Hour Sales 24,345.4 24.025 5 +1.3%

Operating Revenues $1,515.9 $1.429 6 +60%

Fuel Expense 420.3 432.7 -29%

i Operating income 302.8 269 6 + 12 3 %

Allowance for Funds Used Dunng Construction, Net 203.7 160 3 + 2 7.1 %

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Interest and OthelCharges 319 8 310.4 +30%

income before Extraordinary item 272.4 19: 6 + 39.3 %

Net locome '

272.4 215 7 + 26 3 %

Earnings on Comri3oTStock 227.8 181 5 + 25 5%

Earnings Per Common Share:

Before Extraordinary item $2.22 $ 1.89 + 17.5 %

Earninos on Common Stock 2.22 2 13 +42%

D,vidends fur Common Share' $ 1.80 $1.76 +23%

Dividends on Capital Stoc k $230.8 $1858 + 24 2%

Construction Expenditures:

Construction of Fac Lties $690.8 $6499 Nuclear Fuci 55.0 124 3

$745.8 $774 2 -3.7%

intgrnallygenpf atpd Funds _204.4 136 4 + 49 9%

Not Financinq Activities 483.4 683 5 - 29 3 %

Return on Average Common Eouity 14.2'a 13 5 %

ine e.4 , e 4. u. 4 = se c.ti,n o 4u se n a nn.o.r . n in.4, ,4 4,.,.ne.m unn n nes W d entasundEMI htemsediAus - OnduAus Giul8eghi ' lehiedal .

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President's Message Many things camo together to Aggressivo cost cutting measures Mj x mako 1983 a successful year for helped to reduco operation and y % the Company But one of the most maintenanco expenses by $19.7 milhon from the previous year...and,

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> important doesn't appear in our financial statements: I'm referring to importantly,it was done without i @

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-D the stockholders' continuing support of our of forts to move the Company sacnt;cing the overallperformanco of generating plants or the reliabikty I forward. of service to customers

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With that in mind, f hope you will Several system improvement l'

share with employees the satisfac- programs wero completed dunng tion of being an important part of the year, which will further enhance onc cf our better years. operating performarco. For example, m dem computer apphcations in Eamings were up 4 2 percent over the new System Dispatching Offico 1982 to $2 22 per share of common and in customer accounting offices stock, despito a larger number of o maMng N gensabon aN sha19s outstanding and an extra- Hansmission of pows a seu A ordinary gain of 24 cents per sharo to Customers more offlCient, reduc-ing annual operating costs by moro An improved economy, sales to than $1 milhon.

Other utikties and rate adjustments And, wo are encouraged by combined to push annual revenues rogress made in the strengthening up G 0 percent to $15 bilhon.

of our financial position, including Kilowatt hour sa!cs to retail and improved cash flow and growing wholesafo customers wero up 3.7 retained earnings, which should percent, led by significant increases ,

in sales to industnal customers, for our stockholders' investment.

particularly in the automotivo and stooiindustries Concentrated Efforts What is being accomphshed can be 1he Board of Directors, recognizing attnbuted to concentrated efforts in that tnero has been measurablo four maje meat preyress in performanco which snould havo long range benefits.

Reducing the need forincreased increased the quarterty dividend to rates to the extent possiblo by corb 46 cents per share, offective with trolling costs. Achievements in this

'ho first Quarter of 1984. area are illustrated by lower costs fm coal maintenana and plant 1983'ile.cmplishments For tha inird consecutivo year, we oma ons fm M wcro highly successfulin selkng

Ensuhng steady progross /n out bulk pOhcr to other utshties~ Constructton program and seetng ioptesenting $7G 2 milhon of toits timely and most economical ieveues in 1983. A portion of thoso completion. Segun in 1980, our rever.ues resulted from two major $600 milhon air quahty control hogerm sales contracts that program is on schedulo for com-siiou!d add a total of over $553 pletion in 1984, mii' ion of predictable revenuo int Whilo we ourselves are not build-

"0 ing a nuclear plant, our partnership in three generating units under con-struction requires activo participa-tion in these projects. Intensive, hands on project management by

3 the companies building these Although there is increasing recog- M units, especially in the area of nition in Washington that the 'ticid quality control, has avoided the rain" question must be addressed, kindsof regulatoryandlicensing thorois alsogrowing understanding difficulties that have drawn atten- that further scientific study should tion to other utilities in the past year. precedo costly legislation. /bsent All companies participating in s, N hpany and cuses these projects sharo a total com- cM W faM M enoms m mitment to maintaining the highest n

standards of quality and cafety.

The Duquesno Ught Company, Our Outlook which already has considerablo A number of favorablo economic nuclear plant operating conditions should provido the exponence,is making steady opportunity to further improvo progress towards completion of financialperformanco: a modest tho Beaver Valley unit 2 in 1986. inflation rate, stable fuel prices, Although unit 1 at the Fbrry lower borrowing costs and, as the Nuclear Plant has been rosched- economy gains momentum, an uled for completion in lato 1985, increaso in the demand for The Cleveland Electric lauminating electricity.

Company's management of Although past accomplishments and construction at the Plant has the prospects of a bottor business consistently earned high marks for climato fuel out optimism for the quality controlin major revirvs by future, wo will never loso sight of the the Nuclear Regulatory challenges that yet faco tho electric mmission.

1 u'ility industry. They requiro that wo o Explanng now and diffemnt ways act in the best Interest of customers for customers to uso electncity as and stockholders. And we will.

a cost ellect/w attornatim to other Tho Ohio Edison System is an energy sources. In 1983, a number of proposals were mado to the gg regulatory commissions for their ,

approv:1 to help customers reduco

, g energy costs, either by r,hif ting tho

,, q uso of clectricity to off peak penods or through incentives to capand operations or increaso loc;l employment. , g g /(

(Ursuading regulators and ( ( (..

legislators to deal withlong term Justin I Rogers, Jr.

problems with long term solutions, President inste.nlof shotf term 'tjuick fites" of quostivnablo benefit. This M*'C0 W attitudo is particularly important in the " acid rain" debato, whero como ato urging that billions of dollars in facilities be added to power plants.

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%- # Yedn ReWew y . ..C' . - _ Earnings and Revenues improve in 1983 [' S$ Wm # . s Earmnas on common stock in 1983 9 -hyNh , a qj increasod 25 5 percent f rom 1982 Q ~ ~

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M g ---< _ -I f to $2J 7 S mHhon As a result. earn jj M N 'ngs per tare grew from $213 in L:, E ' '~" 982 to 52 / in 1983. aespite an I L 7 g straordtnary gain of 24 cents per 'M ^ 4d5 a nare in 1982 and a 17 2 mdhon u-7 e ~ C-- increaw m tne average nomoer of ,p i , i -_ shares outstanding Totai revenues O b.y di( % j 'ncreased 6 0 percent over 1982 to ,8 ( , 9 5 DHhon s f, " ' O Revenues benefitod f rom the partial % C ~

J , ettects of new retail rates approved J?ji{Q Q y

4 [ e. oy The Pubhc Utihties Commission gy - of Oh:o iPUCOi ate in the year. i ~yqg% . 34 - %g pM,f*;" y y which should add $94 5 muhon to gag?N*e,' q *m*- . }{, + , j annuN revenuec

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a" f#dh w But because the overaH Cost of providing electncrty continued to OQ gnQ. WL -.,.- as~ s g.w

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, gg'4 past have not kept pace with cost M tf y q{[.y:L '%n -A . ' gew;4, 7,%.Q[ ~ - r m a .a 'ncreases. the Comparues have reauested new retall rates. If - - ~ w#~ granted in full. the new rates would g'd$g , ^~ increase annual revenues by $127

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g rag lf muhon for Ohio Edison and $19 9 NM[gjf%y mdhon for Penn Power gg_7 ;+ , %gg. Tf any%g~'" N ( j$gDI;#e y) y Sales and local Economy Stronger Tota l kilowatt-hour sales reflected .;gy wa++ M p M f~ g gpnW;gg % g( g.y ; / ( [ improvements in the local economy -a - ,; U ..Q Sales increased 8 8 percent to $ ^g;;. m - g~.y.ger ngq s tw; n my,p q =Q .ndustnal customers and 2 0 Q-. ; a . %J%[' ' '" ' i.; . . ' eg Dercent to Commercial Customers s i from last year with automotive af d % steel industnes showing a strong . J3_ .x

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%.. i 3 , , turnaround However. residentral , pi *i ^

s les remained relative lp flat and

, r;n ..; ww ' - sales to wholesale munic! pal l y de+s - W ,g. [ i customers decreased f l / is gpso For the past several yeart tne / Companies have been aggressively ) pursuing saies of bulk power to + Wet . '. other utikties Our success in this h[ y highly competitive area continued my in 1983 when we negotiated two .U_.., @y W E .m (-c - .m m ea.Ss f4 long-term sales arrangements that ,. -@nwv an. eyrwgz; meg @% should increase revenues by more m - - a , than $553 mdhon over the terms of a v; m~ e; 9 m $"..@:/F iY ~N ~ w*.&~3,e the arrangements The Companies [' #[ g'> ' in May began providing up to 150 [sJ megawatts to Potomac Electnc @h k ' "* 'j. - Power Company for a minimum , [sisug - ' tem of five years And in July, the s jc;v e ? .. -- Compan:es began supplying up w ~~ Y; a , s- %'s L5( ---r-- VW . 9fdp ] pR q &s,s g h4 s. n m , , .l. Sh h . / 6 4 to 200 megawatts for a ten-year my . megawatt-hours-equalhng the Employees contmue penod to General Public Utikties TI:s ?g second highest peak load in Corporation our history to provide customers s with electnc service Ohio Edmor, capped off the year by , i Marketing Programs Accelerated thJ is 99.98 percent winning two contracts. eacn to seli m;' ' q Tne Onio Edison System serves a ,e 200 nmgawatts for 12-week penods. region of the country where the for r estimated combined total of - @$ economy, and electnc sales have 11 Mhon Although relatively ' traditionally been dependent on the smrt term. these and all sales of <_ Steel and automotive industnes bulk power not only boost the Com- a . These industnes. of course, will panies revenues. but make more remain important. but future growth efficient use of our power plants in the economy will come more from and help hold down the cost of . nontraditional soulCes inciuding serving our own customers C . small manufactunng. research and-Ohio Edison entered into an agree. development and service-onented i rnent with its who!esale municipa businesses In addition, estimated sales of 943 customers, pending approval by the nu! bon kilowatt-hours annually could Recognizing the economic pres-Federal Energy Regulatory Commis- sures on customers and the spirit result from new or expanding com. son to provide power over of cooperation needed to riurture Research and mercial and industnal projects that a tive year penod beginning October growth. Ohio Ed son and Penn development were in progress throughout the " Powei are seeking regulatory f acil t'es such as System in 1983 Company will continue to supply approval of incentives for business these customers. who had been Near-record peak demand loads expansion through innovative rates l Technical Center. expected to purchase more were set dunng the summer months For example, one of our economic have become a elecincity from other bu!k power when high temperatures and humid- development plans proposed to the source of renewed supphers Upon approval. the ity increased the use of air condi- regulatory commissions would growth in the local agreement would also finahze three tioning On July 21. the hourly provide special pncing for a five-economy- rate cases before the FERC- System peak loao reached 4.148 year penod to new or existing indus-7 Ina! customers that Duild new ~ h} - . k [f f b ;}- facihties or expand existing facihties ,'. M k [ .' ~ ' i . 4 P E h [N $.[hf M.5 f.?. .[.Q $. ' -g and increase employment. @g. g [ W ' .f.y," ' g,-' f 'Y c' 5 5. hY Other marketing efforts are armed 7h ' . - 4.y ];i./m /W 1. . G'g.. .gG y g%. 9 g'fl.( .,. 7 - .y P. M - ./ l at helping local companies improve their efficiency and lower their over- ).N < hT. ' 'h [

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" l[Y.1 .Y~;. all energy costs Through Energy 'i 3,2 M [ ' h .[.. .c.5, ('.'j?1* . Teamwork Conferences. our em- < :. f77 . g. ; k. s c., ,,,;,;;;.- . . . - ,.i1 .,. ployees contacted more than 550 gh a . .s h(f;.h. 4 ' } ,.. - ' % 27 og. ][; y, -(} C ' l Y ' .<n

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., . ; ';-) ~r 1:( large businesses dunng the year to develop plans for energy manage- '{(g 1.7 f. . .g ., j.' ; y .y . - ,S . yL.!;;( _ . .g^ (.., ~.. N - f . . . C ;i i t ;-7 \ .. ment and operating etficiency In [5:.{1O 7 ; * ,; . # [V : ' }% !~ . I f..[ t s , 'c F 9 I ~k. addition, greater errphasis is being .4 3.4 i '. s.W j.. < .. (; . - .g g p . . s, . . . X . , j T -~ .. ' # i k b_ placed on how electncity can eco-(.~ hbd f. . . j$ ~"' f, h i. .c y - nomically replace fossil fuels and 7 ' g ;,. . . ' . ~' , - f.+ Z ~ "~*'~4 . g .Q.. : reduce the customer's total energy }J 34$f * ;sp.(~4?1 '- ' ^ .J,,... ~ f . ^ ..:- V v ., t M v .% . ; . . j. .g. J . 9 , *i ; ,w - . "i'.-".,.]* 4 r. se ? .e ; .. - . use and costs. .1 . k N' . yM.

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c.N e .,. .g 3 . - y .y,?- ..;4t One method of lowenng energy . 4 (c. g ... . c + ,. .. .. : st ... + .x ,w ,?, wr ,

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.i'. f.. ) Wee dt ,.- - ,7 . .. / $ c ... .. ,.s /.'- _': 7 3.p . + , _.g g, g [' l '. , . ., , .' c ./ . 7, - 9 , ,g afn,*s g + . N y? - ~ ~ ss ,, ,, ,, ,.?l?,. _ .. ,. . a . ^ [. n ,mR gy ,, , ) a9 5h I b g , p 3n % n; % )3 -)y, 4rgq ~ e& 939 ~ i l l l 9 also enables us to make better use medical or financial difficulties, the Availability has been excellent at the of our power plants. Since the load Companies offer numerous helpful Beaver Valley Power Station unit 1 I management program began in programs, such as budget payments the only operating nuclear plant 1977,213 megawatts have been ar d third-party notification. In addition, currently supplying the System. moved to off-peak hours. customers are informed of govern- Except during a scheduled shut-mental or social service agencies down r maintenance, testing and The Companies also help residential that provide financial assistance for refuelii g, the 810-mecawatt unit customers to better manage their home weathenzation and for paying achieved a 94.5 percent operating electric use and energy costs. A w nter heating expenses. This infor- availability for 1983. and it reduced new plan to encourage more use of mation, along with topics on electric our dependence on more expensive electncity, yet lower overall custo-use and energy issues, is also avail- coal-fueled generation by 10.2 per-mer costs, was approved by the able through a wide range of litera- cent for the year. The Companies PUCO in January 1984. It will pro-ture, films, gr,up presentations and own 52.5 percent of the unit, which vide lower rates for qualifying cus-student education programs. is operated by the Duquesne Light tomers with electric water heating Company. the other owner. or electnc add-on home heating Farnings Continue to Benefit from systems In return, their service Plant Reliaoility Additanal work done dunng the coula be interrupted to stabilize Our ability to increase earnings scheduled shutdown will enable the peak loads, but with minimal or no depends not only on efforts to main- unit to operate for longer periods effect on the customer's lifestyle tain sales growth, but on the per- between refuelings The modifica-f rm nce of our employees and tions. which included use of more Custorners Favorable on Service and Cost the most effective utilization of our highly enriched uranium fuel were The Companies continued their long gener ng f cMes. To sustain the partially completed dunng the shut-history of providing dependable high reliability of these facilities, the down, and will be completed at the service, vath the average residentia customer expenencing an average Companies have intensive employee next scheduled refueling in 1984. training and preventive maintenance reliability of 99.98 percent since programs. which significantly reduce Operations Keep Pace with 1980. In a December random the !!kelit'ood of equipment malfunc- Computer Technology survey of 500 Ohio Edison cus-tions and costly generating unit Modern.ization and the use of high tomers 96 percent rated their breakdowns. tectroing' y r'ays an ever ncrea:ing service favorably, and 91 percent rated the cost of tneir electric s .- - . - . ' - - .~ + . . A new fustomer service as an average to above [cU l' S, I h. . OkJ N~'- inforrnation System jOgM average value. ; . ii, d. L

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~ w r.+h has improved our Ongoing surveys are useful in deter- - . r s o[ ? ..g @.Qg ability to quickly Q [ Q .:^My' %. *]; mining and meeting customer needs. % 4 y c S - ?./t sy' k respond +9 custorne-For example. a quarterly survey of (i % ,1 ' J M. 't , ; p # % .., ; ? E , J7 't 7 \ ,* inqui~s with rnore customers who contacted the Com- )@ . fs' ~A'i .(.[. , jf (- detailed infor nation. { "p v .4 j ({5,.}g panies for service or information j . helps pinpoint where and how serv- " - .: , : y-ice can be improved Some feed-g*i' . .~ ~ ,s p "' 4 (h ? ", gg% , pgMr. }f; a/ 4 (.. ; ;,l^ back is more direct, as through our ya j , . . g; . ,

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> QMR . nine Consumer Advisory Panels '. i ,4 - y .', s rf kn MW% where representatives of consumer f l. 7J 'l ] h , . ; . [f y / f ' y/ _ groups meet regularly with our e+ g f - ;. . . t j employees to discuss topics of ;g( ,, , , ,, ., 43 ] 4} g,, l Interest to both the Companies kwi-2 97

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and customers. wp S, ;g ' '? y ~> - , .S I ~- '. . - ' , :- A tanov . *N 1 l For customers requinng sg 3cial &:vg Qfg p..)i ' C y q "% j .s .' ; ]~ . _ l assistance, especially in times of . '~ Bf . - " . yg ' w% % ' . og ~ ^ " f,f ...)' l ,W ( . A' g .a< . V E' y _;- .,. ':l'

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%g Dh{ (' ' . F Q.-L i *Ch - o . h 77.7 j-im role in our etforts to improve perform- [ .. J [e # ; U M ~ = = ., ' 'i ; k Contracts secured in ance. Our new System Dispatching f . ; J .' g,, hhhht *-

ayh 1983 helped reduce Office has greatly improved effi- ;

--?.;e ' ~ g P average coal costs to ciency in economically balancing 'i;.".- . ....., I. p g g ';; '. a 74.4 n 3 s '*$t 1 plant generation to meet customer *- E'y .a - jted ( .. load, coordinating scheduled out- [ ;.Mh ' ^ .I ' . ~b M' ~ ~ i [ ages of generating and transmission *i ~ . . ' Y Dw ~ facihties and arranging for the inter- . [$n change of power with other utthfies . ,y 37 A g f ain A {i p } 4 pi WEW

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A sophisticated system of four . . , advanced computers provides .n t A, (. J. -P ~ improved secunty. faster response I' t t to load changes and greater overall ([ [- [ ;.',' .' , yf g ~. l efficiency , s g.:^..:.;.. _~*: N. ',- 'J sg -'x., : :s% ' y;., v .p $'$ [ Customer service was improved 'l * . , /;, , , dunng the year with completion " ' 7 / .g*. P . ,*gr.M.t 'l, , 3;. 5 of a new computenzed Customer $ 7 -.i - Information System It enables -- employees to respond to inquines Because of the increased complex-outckly with more complete and ity of meeting requirements by the accurate information Customers Nuclear Regulatory Commission can request a review of their monthly (NRC) for all nuclear generating 5 bill and obtain other helpful 'nforma. pl nts under construction. CEI tion about their service or accounts announced that unit 1 is now scheduled for completion in late Computer processing is also used 1985 The completion date for unit 2 in purchasing and receiving coal will be reviewed at the time unit 1 is suppnes New computer systems are completed With the reschedul;ng _ 2 monitonng dehvenes inventones and the add:tiondi work. Our portion - consumptio and qua ity of coa' 1 of the Plant's costs rose from $1.3 - reterved at our power piant, Th^ bilhon to $18 bilhon An of the ._ :nfonnation helps us obtain the companies that share in the .- 1 most economical supphes of coai ownership of tre Plant are com-mitted to makirg it one of the molt m& - ' New Projects Build for the Future _ eUicient and safest in the country. . --- ; .s Ohio Edisen and Penn Power are .n - the final stages of a otant construc- Despite the delay, the Quakty of p tion program initiated in the 1970s construction and quick resolution of [ 1 Three generating units. In which we problems at the Perry Plant were have partial ownership remain to officially recognized dunng the year. be ccmpleted In November, NRC inspectors found - that project management was ag- { Two of those units aie at the 2.410-gressive in finding and resolving h rnegawatt Perry Nuclear Plant The Companies will own 35 24 percent. construction problems. Also. during ubhc hearings, the NRC's Atomic or 850 megawatts, of total genera-

Safety and Licensing Board sup- [

tion from both units being built by ed the intep of @ahty as- ' - The Cleveland Electnc liluminating ' surance and other construction % - P""Y procedures at the Plant. Unit 1 is 91.3 percent complete, while unit 2 ( 7-is 43.2 percent complete.

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[f[~ {. .. . k$ ^ ., % $'# g_ m h ht N &e" $$Nh .x ^ .- ;7 e r .. n a; G. , ,g,, $ ?!? m g@A 2s - n - o .aa gwg mlphH$b?$);glc[MN$j:%;c,,.k up kW %yfQ I 5 /NE khDjrue"' f ~ ,y4 ,y'. ,Ryh,_:y.l&})~y fAQ lig. m R;?ngjfh_lfyn, y , c a' ?p . e %M? W( )P?N.'* Nff, . . ;f3 - " waw a i s ,. R m = as_ ; pg;. ^ ,p V* \g , n Y 1 y, . - E q. e . . ,[:G;)y},, \ 4 & ., i g e Y y vw .me' .4 . by T L. ] .g f k , . ;g ? t 13 The third unit is under construction N by the Duquesne Light Company at the Beaver Valley Power Station Unit 2. scheduled for commercial operation in 1986, was 78.1 percent complete on December 31 During the year. major portions of con-struction were completed, and the Atomic Safety and Licensing Board held public hearings as part of the licensing process Ohio Edison will own 41.88 percent of the 833-megawatt unit. With the completion of these proj-ects in the 1980s, the System should not requirr 3dditional capacity until . well into the 1990s. But the growth in load over the next 20 years is # estimated to be equivalent to a c 1.5 percent annual increase, and E" the Companies will plan accordingly e.. x and continually assess the eco-(f " nomical options in both conventional _,[,y and alternative energy technologies. .r c ~ y~o In support of one of the emerging q r- - - ' m; $@ technclogies, we are participating in .7 9 +s( 7 DMf' .. a $155 million cooperative coal-9 gasif cation project Et lilinois Powe's Wood RNet Stat'o. i It ;s the fye [$ g cour.try's largest operatirig demon-93 stration facility of its type and M!l > hpf Wh;jp p%g y determ:ne if high sulfur coM such HH f o js$ys f.fgd as that mined in Ohio, can be

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v3 ap+ econom:cally converted ic ' c;ean- , y" burning gaseous fuel Th:ougt. 'he .Jb.h ' end of 198' the faci! sty nas success- ' M ' fully met its test objectises , e i \\,

I ? Other System construction includes

.( g * > gg ' ou' $600 million program to meet existing federal requirements for air j \ ' 4 quality. Through 1983, the Compa- ^ t t ~' ,' % b.~ u i nies have installed facilities to better 7 MM'@/h >jQ , * ' remove dust from the emissions of QMU ten generating units. As the pro- ~ $"'UAk ' Ag , gram successfully approaches its f g% December 1984 completion, the g r-g t; - -'s; _ , ' - 4* J %g-ff)l Y Oi }yy %5i :j 3 x ' , j v h - Q e .truw&, , _ . . gg;y-a $4 ." , .m _ _ E E - r 14 - M only remaining construction is at ' approved method to recover those _ g two units of the W H Sammis costs Beginning in August 1982. i Plant a PUCO-approved recovery For 1983. approximately $C91 - 9 5 ' million was spent on construction of - that had accumulated. In August new plants. environmental facdities I 1983. however. the new commis-g and other System improvements P sioners ordered the Company to E During the year. $421 milhon in cease using that recovery method, capital financing was used to fund which was later approved by the = these System improvements - Ohio Supreme Court. while they Regulatory and legislative issues reexamined it L Address Major Concerns ~ To adaress the concerns of tho On January 11.1983. a new law that Commtssion and to resume took effect in Ohio Changed the recovery of previously deferred structure and organization of costs. the Company reached an the PUCO Among other provisions. acreement with the PUCO staff tnat y it increased th number of commis-recommended to the Commission a L- stoners from 3 to 5 and created sMy M mem me rese a 12-member nominating councd to tive recovery method Approved by > I - select individuals for appointment I the PUCO in January 1984. the new to the Commission ov the state s = method provides the Company a em reasonable opportunity to again - One of the most significant rulings recover past and present costs for 7 by the new Comm!ssion concerns coal delivered from the Quarto 7 our recove!y of certain costs mines A similar settiement was i of coal dehverea +o the Bruce proposed to the Pennsylvania Pubhc { - Mansdeic Plam frcrn the Qua to Mining Can:pary Pr.or to Augus r Utihty Comm.snon. anj s c urcer.th/ unoer rewew by the CommiFS'Cn '; 1981 Ohic Ed'E ?n sa ; wur e1 to A 1 adm n atratwe ian judge for the ,q uefer a Dor'icn O' i st ,ue. ccsts Cornmission recommended thai the s64 related to Cuart coal w:th no settlement be apptoveo ?- -,o-

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(OnbruC' On prog'e'5 ,. s'+. JI Ifle beJVfl VdEfY k, ,e se, s,,,_m , W Q, 7 . D~e , , > s ~ r ' ,\. gy 9; .Ik" e, K Y . ~h ,, . s ?! / A -~ ! ^ 4, . s y B L: [ p t ., ., , c, ,, , ,. , ,, ,- ,. . , , ,.y; - 15 M_ Research facilities at our power plants are

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'liU d being used to find YA i'N new cost effettive ways of complying with environmental requirements. b , , t - ,1 ; 6 mrd:a Using sophisticated f f ,' - g sg.: 0 control room simulators. empicyees ,, hne tune then - . w <r opef ating skills and practice emergency Q pro (edures resulting . in greater eff iciency . at our generating plants. [ ', ~~ y 4,; 3\ c f %&s . ~ , L 1 . n ji Another major utility issue is the in supporting or conducting both 6 - allowance of CWIP, or construction local and regional studies and are J work in progress, in electric rates. carrying on research with experi-3' Current Ohio law allows utilities to mental equipment to find ways of include a portion of construction reducing the cost of sulfur dioxide costs in the rate base. Although control. state legislation to severely restrict g p g this allowance has been introduced, p gg none hasbecomelaw;andthe PUCO To the benefit of customers and in September allowed the Company g to collect $24.5 million in financing results, including cost reductions costs for the Perry Nucl ear Plant and higher productivity, resulted unit 1. Also, the Federal Energy from the efforts of 7,702 employees Regulatory Commission in July ruled in the Ohio Edison System. that electric utilities could include an allowance to cover some financ- A wide range of skills and manage-

ing costs in rate cases involving ment training programs have been a wholesale customers, but federal strong foundation for the System's legislative proposals call for a return improved productivity. The Compa-to more restrictive measures. The nies continue to expand this class-i s Companies have opposed such room and " hands-on" training. In g '( -

efforts to eliminata or restrict 1983, we took major steps to study and improve the of fectiveness of // j' l . j j allowances for CWIP because the result would be higher overall con- training, and to help employees to struction costs to the Companies better apply these tools to everyday /g j and their customers. situations. { [ 3 [ " Acid rain" is a na'.ional issue with Indvidual etforts are recoonized by I ; ' % great potential :mpact en the Com- rewarding employees who suggest i" panies and the area economy. Cub @ specific ways of improving pioduc-N rently, somo Vgislative propesals tivity, either thrcugh efficiency or Q'4 } h. ig ; oetore Congress could force es to spend more tnan $i billion Aer thJ safety With cash incentives. the Emp!oyee Suggestion System has I[ @ I next seseral years to reduce sdfor dioxide emiss ons by instal!in9 raved the Companies morn than $106.000 since the program began ,'Ag. / f scrubbers, even though tr.ere are no assurances of cubetantial envi-in 198t. . ronmertal improvement. Instead, employees also make responsible 4 g the Companies urge that the scientific community be given the contnbutions to the community 6 X- ,N necessary time to bettet identify exarrple, Company and employee \[%k contributions to United Way in 1983 ND, and understend the problem, and totaled more than $375,000. And %p# $ % then determine the most effective h 1 ' b and economically sensible solutions. employees spend countless hours in a broad range of community # services, which include providing i The Companies have already made substantial contributions to the food or other goods to the poor and handicapped, teaching life-saving g( x \ reduction and understanding of sulfur dioxide emissions, which are techniques and volunteering in local fire departments. \ thought by some to be a major cause of acid deposition. By \ . installing expensive air cleaning facilities, buying more costly low-sulfur coal and other measures, we have reduced sulfur dioxide emis- , sions by 30 percent since 1975. I We have also spent about $1 million 1 # l ,a Management's Discussion and Analysis of a Results of Operations and Financial Condition Results of Operations Plant in 1983 compared to 1982. Maintenance on those R:sults of operations for 1983 reflect improving economic units in 1982, plus maintenance performed during a conditions taking place in the Companies' service area. refueling outage of Beaver Valley Unit No.1 during that increased kilowatt hour sales to the Companies' year, were primarily responsible for the increase in 1982 commercial and industrial customers of 2.0% and 8.8%, maintenance costs compared to 1981. r:spectively, were significant to the Company achieving in addition to reduced maintenance costs in 1983, the incr:ases of 39.3%,26.3% and 25.5% in income before improved generating unit availability allowed the extraordinary items, net income and earnings on common stock, respectively. This s'rong performance increased Companies to reduce their requirements for power urchased and interchanged with other utilities by 10.6% 1983 eamings per share of common stock by 4.2%' from 1982, despite an overall increase in kilowatt-hour desp,te i a significant increase in the number of shares of sales from the Companies' system. The significant common stock outstanding in 1983 and the inclusion in increase in purchased and interchanged power during 1982 earnings of an extraordinary non-cash gain. The rate 1982 compared to 1981 resulted primarily from power of return on average common equity was 14.2% in 1983 urchases which were made in 1982 in order to sell short-compared to 13.5% in 1982 and 14.6% in 1981. Excluding term power to other utilities. th3 cffect of extraordinary income in 1982 and 1981, and thn settlemmt of a claimed Pennsylvania tax liability in Additional financing assoc' ited with the Companies' 1981, the rate of retum on average common equity was continuing construction programs in 1983 and 1982 12.3% in 1982 and 12.9% in 1981. necessarily resulted in higher interest costs and preferred increased operating revenues, which served as the basis and preference stock dividends. However, it is important to for the 1983 earnings improvement, resulted from the note that the Companies' extemal finecing requirements in 1983 were below 1982's level and the costs of financing were eff ct of base rate increases and increased kilowatt-hour salts to customers, partially offset by reduced sales to also at a lower bel As Mompanss' ansMon oth:r utilities and reduced fuel component rates in 1983 projects proceed and until the projects are placed in service nd included in rate base, the total allowance for funds used compared to 1982. The reduced fuel rates charged to customers were made possible primarily due to lower during construction (AFUDC) will continue to increase in pricts paid for coal in 1983, evidenced by the reportea order to capitalize the appropnate financing costs which are decr ease in fuei exper.sc. Operating revenues m 1982 not mently recovered through rates. A significant factor, increased from 1981 due to nc' eased base rates, and however, is that AFUDC represented 89.4% of 1983 eamings increased fuel component rates. There is a direct correla- on amm n sM, a &ke kom M b N W tion between the fuel rates charged to the Companies, giving effect to the extraordinary income recorced in tnat year. customers and the increase in fuel expente reported Information with respect to the estimated effects of inflation in 1932. epon the Companias i:, g ven in Note 10. Results of operahons we e fwthe improved in 1983 by Capital Resources and Liquidity operating efficiencies achieved and substantially reduced The Companies' 1983 construction program (excrudug maintenance costs. The Companies' generating units were nuclear fuel) required approximately $691,000.000 which, in available for operation a greater percentage of the time in addition to approximately $204,000,000 of funds generated 1983 compared to 1982. This increased availability results intemally, was funded through extemal financings. Over the in I:ss unscheduled maintenance and naturally leads to last five years, the cost of the Companies' construction reduced maintenance expense. This was most noteworthy program was approximately $2,900,000,000, of which at Mansfield Unit No.1 and several units at the Sammis approximately $570,000,000 was available from internally generated funds, aprwoximately $2,700,000,000 is currently forecast to be spent from 1984 through 1988. The issuance of additional common stock and other securities will be necessary to fund a significant portion of this new construction. Also during this five-year period, the Companies l l l Management Report a g.. 4 . will have additional cash requirements of approximately The consolidated financial statements were prepared by $638,000,000 to meet debt maturities and sinking fund the management of Ohio Edison Company, who takes requir ments for debt and preferred and preference stock. responsibility for their integrity and objectivity. The statements were prepared in conformity with generally At December 31,1983, the Companies had available , accepted accounting pnnciples and are consistent with approximately $113,000,000 of temporary cash investments other financial information appearing elsewhere in this and approximately $98,500,000 of funds held in escrow from report. Arthur Andersen & Co., independent publ_c i previous pollution control financings. The Companies also accountants, have expressed an opinion on the Company's have $235,000,000 of short-term bank lines of credit financial statements, as shown on page 37. available to them for interim financing purposes, none of ! which had been drawn down at December 31,1983. The The Company's internal auditors, who are responsible to Companies' current financing plans for 1984 include an the Audit Committee of the Board of Directors, review the l i estimated 8,000,000 shares of common stock to be issued results and performance of operating units within the through the Dividend Reinvestment and Stock Purchase Company for adequacy, effectiveness and reliability of Plan, and issuances of up to: 10,000,000 additional shares of accounting and reporting systems, as well as managerial common stock through public offerings; $85,000,000 of and operating controls. preferred and preference stock; $65,000,000 of pollution The Audit Comm.ttee i consists of four non-employee control notes; and $170,000,000 of other long-term debt. The directors whose duties include: consideration of the Companies also expect to invest approximately $88,000,000 adequacy of the internal controls of the Company ar4 the for additional nuclear fuel in 1984 through the incurrence of objectivity of financial reporting; inquiry into the number, additional long term obligations. extent, adequacy and validity of regular and special audits Based upon eamings as of December 31,1983, the conducted by independent public accountants and the Company would be permitted, under its First Mortgage internal auditors; the recommendation of independent Indenture, to issue on the basis of property additions, at least accountants to conduct the normal annual audit and $545,000,000 princioal amount of first mortgage bonds special purpose audits as may be required; and reporting assuming an Mterast rste oi 13%; or, under its Articles of to the Board of Directors the Committee's findings and any incorporation, to issue approximately $339,000,000 of recommendation for changes in scope, methods, or preferred stcck at an assumed dividend rate of 13%; or to procedures of the auditing functions. The Audit Committee issue some lesser combination of both. The Company is ab!e held three meetings during 1983. to issue $335,000,000 principal amount of first mortgaga boads against previously retired bonds without the need to meet carnings coverage reouirements. M in September 1983, the Company was granted a base rate up / increase by the PUCO which recognized in rate base / approximately $126,000,000 of the Company's investment in % we, pm %% Perry Unit No.1, a nuclear unit currently under construction. Chief FinanciaI0fficer A January 1984 PUCO order concerning the Company's electric fuel component rate will allow the opportunity for recovery of current and deferred Quarto coal costs, as discussed in Note 7. These are favorable developments which should have a positive effect upon the Company's ability to generate cash internally. The Companies currently have rate cases pending before the PUCO and the PPUC which, if granted in full, are designed to incr:ase annual revenues by approximately $127,200,000 and $19,900,000, respectively. Orders are anticipated from th1 PPUC by the second quarter of 1984 and by the third quarter of 1984 from the PUCO. I j Oheo Edison a Selected Financial Data l 1983 1982 1981 1980 1979 i (in thousands, except per share amounts) l Operating Revenues $1,515,852 $1,429,626 $1,279,649 $1,080,869 $ 994.585 Operating income 302,751 269,640 252,381 169,383 163,744 Income Before Extraordinary items 272,400 195,571 183,020 135,150 134,807 N:t income 272,400 215,729 197,062 135,150 134,807 Earnings on Common Stock 227,843 181,496 163,892 101,403 105,120 Eamings per Share of Common Stock (based on weighted average number of shares outstanding during the year) Before Extraordinary items 2,22 1.89 2.10 1.52 1.80 Earnings on Common Stock 2.22 2,13 2.30 1.52 1.80 Dividends Declared per Share of Common Stock 1,80 1,76 1.76 1.76 1.76 Total Assets at December 31 5,905,142 5,247,138 4,460,274 3,979.965 3,446,454 Preferred and Preference Stock Subject to ) Mandatory Redemption 158,112 152,560 151,141 156,450 150.850 l Longterm Debt 2,131,404 2,005,436 1,759,771 1,594.384 1,410,782 I Construction Energy Trust and Nuclear Fuel Obligations 719,364 656,655 447,484 265,000 - Common Stock Data The Company's Common Stock is listed on the New Wrk and Midwest Stock Exchanges and is traded on other registered exchanges. Price Range of Common Stock 1983 1982 First Quarter Hich-tow 15-7/8 13-7/8 13-1/8 11 3/8 , Second Quarter High-low 16 1/3 14 3/8 14 1/8 12 3/8 1hird Quarter High-i.ow 14 3'8 12-1/4 15-1/4 _ 14 Fourth Quarter High-tow 16 11 7/8 1 5-115 13-1/4 Warly H,gh low 16-1/8 11-7/8 15-1/8 11 3/8 Prices aie as quoted on the New trk Stock Ert.hange Compnsite Transactions Classification of Helders of Common Sicck as Of December 31,1983 Holders of Record Shares Held Number % Number % Individuals 181,290 88.8 53,987,585 49.8 Fiduciaries 19.012 9.3 4,462,051 4.1 Brchers 61 - 1,032.383 1.0 Nominees 556 0.3 46,397.417 42.8 Banks and FinancialInstitutions 31 - 53,345 - Insurance Companies & Other Corporations 1,562 0.8 1,556,028 1.4 Charitable, Religious & Educational Institutions 495 0.3 349,174 0.3 Pensions, Profit Sharing & Other Investment Trusts 1.094 0.5 622,071 0.6 Total 204,101 100.0 108,460,054 100.0 As of January 31,1984, there were 203,789 holders Quarterly dividends of 45e and 44c per share were paid on the of 108,758,161 shares of the Company's Common Stock. Company's Common Stock during 1983 and 1982, respectively. Information regarding retained earnings available for payment of cash dividends is given in Note 4b. I Ohio Edison Consolidated Statements of income n fc7 the Wars Ended December 31 1983 1982 1981 (in thousands, except per share amounts) Operating Revenues $1,515.852 $1,429,626 $1,279.649 Operating Expenses and Taxes: Oparation-Fuel 420,336 432,749 413,698 Purchased and interchanged power, net 50,026 52,607 29,321 Other operation expenses 234,526 221,129 195,075 Total operation 704,888 706,485 638,094 Maintenance 121,544 139,615 124,213 Provision for depreciation 115,514 103,206 95,830 Amortization of terminated construction project costs (Note 2) 9,058 1,866 3,995 Ceneral taxes 126,818 114.569 84,316 Income taxes 135,279 94.245 80,820 Total operating expenses and taxes 1,213,101 1,159,986 1,027,268 Operating income 302,751 269,640 252,381 Other income and Deductions: Allowance for equity funds used dunng construction 121,814 84,210 60,421 Miscellaneous, net 20,812 16,871 17.021 Income taxes-credit 64,923 59,166 53,360 Total other income and deductions 207,549 160.247 130,802 TotalIncome 510,300 429,887 383,183 Net Interest and Other Charges: Interest on long-term debt 233,626 211,765 166,378 Interest on long-term ob!igations 73,177 80,092 69,183 Allowance for borrowed funds used during construction, r,et cf deferred inccrne taxes (81,901) (76,086) (67,381) Other interest expense 5,7C2 12,4G 26,37E Subsio!ary's pref arred stock div der,d requiramen,s 7,296 6,098 5 605 Net it'terest and u.her charges 237,900 2'34,316 200,163 I~ncome Before Extrao tlinary items 272,400 195,571 183,020 l Extraordinary items (Note 8): Gr .n oa re?cqt 'sition of tHt mortgage bonds, net of rettted inccme taxes - - 14,042 Gain en exchange of common stock for first mortgage bonds - /0,158 - Net income 272,400 215,723 197,062 Preferred and Preference Stock Dividend Requirements 44,557 34,233 33,170 Earnings on Common Stock $ 227,843 $ 181,496 $ 163,892 Weighted Average Number of Shares of Common Stock Outstanding 102,414 85.241 71,180 Earnings Per Share of Common Stock (based on weighted average number of shares outstanding during the year): Before extraordinary items (after preferred and preference stock dividend requirements) $2.22 $1.89 $2.10 Extraordinary items - .24 .20 Earnings on common stock $2.22 $2.13 $2.30 Dividends Declared Per Share of Common Stock $1.80 $1.76 $1.76 The accornpanying Notes to Consolidated Financial statements are an integral part of these statements. Ohio Edison n Consolidated Balance Sheets At December 31 1983 1982 Assets (in thousands) Utility Plant: In service, at original cost $3,632,165 $3,417,669 Less-Accumulated provision for depreciation 1,043,679 953,541 2,588,486 2,464,128 Construction work in progress 2,351,089 1,902,310 Nuclear fuelin process 211,327 156,295 5,150,902 4,522,733 Other Property and Investments 63,614 69,626 Current Assets-Cash 2,781 2,812 I Temporary cash investments, at cost, which approximates market value 112,993 61,500 l Rectivables- 1 Customers riess acct nulated provisions of $1,541,000 and $1,844,000, respectively, for uncollectible accounts) 132,968 116,054 Other 19,416 24,855 Mat: rials and supplies, at average cost-Fuel 69,047 92,684 Other 45,657 44,466 Prepayment 3 and other 41,184 35,966 424,046 378,337 Deferred Charges: Deferred Quarto coal costs (Note 7) 67,254 71,346 Property taxes 52,575 50,527 Unamortized costs of terminated construction projects (Note 2) 94,747 103,835 Other 52,004 50,734 266,580 276,442 45,905,142 $5.247,133 Capitalization awi Liabilities CapitalkatN1 rSee Consalioated Sta*4mer's cf Capi'alization): Ccmnon stockr oloers' equity $1,711,974 $1,488,371 Preferred stock-Not subject to mardatory redernption 312.335 262.335 Subject to mandatory redemption 60,000 64,000 Prefere:1ce stock-- Not sucject to mardatory recemption 50,000 50,000 Subject to rnandatory redemo'in, 50,641 55,165 I Preierred stock cf consoFoa:ed subsidk,ry-- i Not subject to n.andatory redemption 41,905 41,905 i Subject to mandatory reoemption 47,471 33,395 j Long-terra debt 2,131,404 2,005,436 4,405,730 4,000,607 tong-Term Obligations (Note 5): t Construction energy trust 500,000 500,000 Nuclear fuel 219,364 156,655 719,364 656,655 Current Liabilities: Curr nt maturities of long-term debt, preferred and preference stock 79,594 22,383 Notes payable to banks (Note 6) - - Accounts payable 154,727 133,776 Accrued taxes 52,564 51,115 Accrued interest 67,891 57,736 Other 44,102 26,390 398,878 291,400 Deferred Credits: Accumulated deferred income taxes 158,437 152,890 Accumulated deferred investment tax credits 107,390 53,727 Property taxes 52,575 50,527 Energy costs recovered in advance 33,335 14,418 Othir 29,433 26,914 381,170 298,476 Commitments, Guarantees and Contingences (Notes 2,3 and 7) $5,905,142 $5.247,138 The recompanying Notes to Consolidated Financial statements are an integral part of these balance sheets. Ono Edson Consolidated Statements of Capitalization n-At December 31 1983 1982 Common Stockholders

Equity- (In thousands)

Common stock, $9 par value, cuthorized 125,000.000 shares-108.460,054 and 96,081.844 shares outstaneng. respectively (Note 4a) $ 976.140 $ 864.737 Other paxiin captal 494,520 423.195 Retoined earnings (Note 4b) 241.314 200.439 Total common stockholders equity 1,711,974 1,488.371 Optonal Redempton Price Nurmer of Shares Outstanding Aggregate 1983 1982 Nr Share (in Thousands) Preferred Stock (Note 4c)- Cumulative. $100 par value-Authorized 6,000.000 shares Not Subject to Mandatory Redempton: 3.90 % -724 % 973.350 973.350 $103.38-108 00 $102,034 97,335 97.335 7.36 % -8 20 % 800.000 800.000 $104 68-107.40 8c,968 80,000 80.000 864%-912% 850.000 850.000 $106 48-106.84 90.670 85,000 85.000 Total not subject to mandatory redempton 2.623.350 2.623.350 $277,672 262,335 262.335 Subject to Mandatory Redempton (Note 4d): 10 48 % -10.76 % 615.000 659.630 $107.86-11187 $ 67.537 61.500 65.963 Redempton within one year (1,500) (1,963) Total sub,iact to mandatory redempton 60.000 64.000 Cumulative. $25 par value-Authorized 4.000.000 shares Mot Subsect to Mandatory Redemption. $3 50 Seres 2.000.000 - $28.75 $ 57,500 50,000 - Preference Stock (Note 4c): Cumulative, no par valve- Authonzed 8.000,000 shares Not Subject to Mandatory Redempton: $3 92 Senes 2.000.000 2.000.000 $31.42 $ 62.840 50.000 50.000 Subject to Mandatory Redempton (Note de): $95 00-$102 50 Series 27,000 27.0C0 $1.095 00-1,102 50 $ 29.7U0 27,000 27,000 $180 Senes 1,622.546 1462.181 $16 03 26 001 24,541 28,165 Redempton wi*hin one year (900) - Total subject to mandatory redexipton 1.649.546 1.869.181 $ 55.701 50.641 55,165 Preferred Stock of Consondated Subsidiary (Note ec). Cunutaave. $100 par va'ye- Authonzed 950.000 shares Not St.blect to Mandatory Redempton. 4 24%-916% 419.049 419.049 510?.98-10712 3 44,1?3 41,905 41.905 Sut,ec" to Maadatury Rederrction (hore Adr 8 24 % -15 00 % 479.708 338.951 5 t03 29-114.81 $ $2.05C 47,971 33.895 RNeer.;4on uitnm orie year (500) I'00) Total sublect to mandatory redempton 47,471 33.395 Lon8-Term Debt (Note 4f): First mortgage bonds: Oho Edson Company-8 60% weghted average interest rate, due 1984-1988 153,693 153.6S3 14 59% weighted average interest rate due1989-1993 240,864 223,364 10 88% weighted average interest rate, due 1994-1998 95,215 77,715 8.57% weighted average interest rate. dJe 1999-2003 242,156 2a2.156 10 50% weighted average interest rate, due 2004-2010 424,310 424.310 1,156,238 1,121 238 Nnnsytvania Power Company-10.27% weighted average interest rate, due 1984-2008 259.000 239.000 Total first mortgage bonds 1,415,238 1.360.238 Secured notes and obhgations: Cho Edson Company-8 29% weighted average interest rate, due 1984-2014 281,439 230.914 Amount held by Trustee (985) - 280,454 230,914 Ohm Edison Fina9ce N V-17.38% weighted average interest rate, due 1987-1988 150,000 150,000 Fbnnsyrvania Fbwer Company-9 00% weighted average interest rate, due 1984-2007 67.661 68.106 Amount held by Trustee (2,572) (5,327) 65,089 62,779 Total secured nntes and obhgatons 495,543 443.693 Urcecured notes of Oho E@ son Company,11.06% weighted average interest rate, due 1984-2014 402,000 302.000 Amount held by Trustee (93,555) (69.026) Total unsecured notes of Orwo Edison Company 308,445 232.974 Net unamortized escount en debt (11,128) (11.549) t.ong term debt due within one year (76.694) (19.920) Total long-term debt 2,131,404 2,005.436 Total Capitahrabon 54,405,730 $4.000.607 We accompanying Notes to Conschdated Financial Statements are an integral part of these statements. oh Edison a Consolidated Statements of Retained Eamings For the Wars Ended December 31 1983 1982 1981 (in thousands) Balance at beginning of period $200,439 $171,191 $133,592 Net income 272,400 215,729 197,062 472,839 386,920 330.654 ! Deduct: Preferred and preference stock dividends 45,468 34,488 33,160 l Commort stock dividends 185,309 151,289 126,030 l Capital stock issuance expense 748 704 273 l 231,525 186.481 159.463 I Balance at end of period (Note 4b) $241,314 $200,439 $171,191 I Consolidated Statements of Capital Stock and Other Paid-in Capital Preferred and Preference Stock Not Subject to Subject to Common Stock Mandatory Redemption _ Mandatory Redemption Number Par Other Paid- Number Par or Number Par or of Shares Value in Capital of Shares Stated Value of Shares Stated Value (Dollars in thousands) Balance. January 1,1981 68,526.172 5616.736 $317.1% 3.069.049 $306.905 3.039,000 $158,450 Sale of Common Stock 7,000.000 63.000 21,875 - - - - Dividend Reinvestment Phn 3.122,631 28.103 7,751 - - - - Conversion of $1.80 Preference i Stock 26,900 242 147 - - (26.900) (407) l Preferred Stock Sinking Fund Redemptions-10.48% Series - - 585 - - (27.240) (2.724) 10 76% Series - - 361 - - (20.000) (2.000) 11.00% Se,ew - - 63 - - (4.010) (402) Other Preferred Stock Redemptons-3 90% Series - - 271 (3,790) (379) - - 4A0% Series - - 251 (3,720) (3 72) - - 4 44% Se.ies - - 8% (13 440) t1.344) - - 4.56% Series - - 386 i5,700) 1570) - Balance. December 31,19M 78.675.703 708,081 349 772 3,042,399 204,240 2,960.844 152,917 Sa'e of Common Stock 10.000.000 90,000 42.000 - - - - Dividend Reinvestment P:an 4.644,622 41,802 17,647 - - - - Exchange of Common Stock for First Mortgage Bonds 2.650.600 23,855 9.463 - - - - Conversion of $1.80 Preference Stock 110.919 999 610 - - (110,919) (1.678) Sale of $3.92 Senes of , Preference Stock - - 2.940 2,000,000 50.000 - - l Sale of 15% Series of Preferred Stock - - - - - 80,000 8,000 j Preferred Stock Sinking Fund Redemptiorv-8.24% Series - - - - - (5,000) (500) 10.48% Series - - 284 - - (13,130) (1,313) 10.76% Senes - - 435 - - (20,000) (2,000) 11.00% Senes - - 44 - - (4.033) (403) Dalance. December 31,1982 96.081,844 864.737 423.195 5,042,399 354.240 2,887,762 155,023 Sale of Common Stock 5,000.000 45,000 33,350 - - - - Dividend Reinvestment Plan 7,138,575 64,247 33.056 - - - - Conversion of $1.80 Preference Stock 239.635 2,156 1,332 - - (239,635) (3,624) Sale of $3.50 Series of Class A Preferred Stock - - 3,140 2.000,000 50.000 - - Sale of 11.5% Preferred Stock - - - - - 150,000 15,000 Pr ferred Stock Sinking Fund Redemptions-8.24% Series - - - - - (5,000) (500) 10.48% Senes - - 270 - - (24,630) (2,463) 10.76% Series - - 160 - - (20.000) (2,000) 11.00*/. Series - - 17 - - (4,243) (424) Balance. December 31.1983 108,460.054 $976,140 $494.520 7,042.399 $404.240 2,744.254 $161.012 The accompanymg Notes to Consoin.tated Fmancial Statements are an otegeal part of these statements. Ohio Edisce Cons 0lidated Statements Of S0urces Of Funds for Pr0perty Additions a For the Wars Ended December 31 1983 1982 1981 Internally generated funds- (in thousands) l Income before extraordinary items $272,400 $195,571 $183,020 l Principal non-cash items-Depreciation and amortization-l Charged to provision for depreciation 115,514 103,206 95,830 Charged to other accounts 2,564 1,953 1,318 Amortization of terminated construction project costs 9,058 1,866 3,995 Deferred income taxes, net 80,814 91,832 99,179 Investment tax credits, net 53,670 7,312 (772) Allowance for equity funds used during construction (121,814) (84,210) (60,421) Deferred fuel and energy costs, net 23,009 4,609 (49,393) 435,215 322,139 272,756 LEss-Dividends on common stock 185,300 151,289 126,030 Dividends on preferred and preference stock 45,46b 34,488 33,160 Net funds from operations 204,438 136,362 113,566 Income from extraordinary items - 20,158 14,042 Non-cash items-Gain on reacquisition of first mortgage bonds - - (26,276) Gain on exchange of common stock for first mortgago bonds - (20,158) - 204,438 136,362 101,332 Financing activities-Common stock 175,653 224,767 120,729 Preferred stock 68,140 8,000 - Preference stock - 52,940 - First mortgage bonds 55,000 105,000 95,000 Secured notes, net 71,770 84,173 94,920 Unsecured long-term notes, nel 125,471 106,660 24,314 Construction energy trust and nucl ear fuel obligatic ns 62,709 209.171 182,484 Redemption of long-term debt and preferred stock (75,307) (43,295) (202,336) Notes payable to bar,ks - (74,400) 32,918 Sam of tax b90efits - 10,480 37,531 483,436 683,496 335,560 N et change in current assets and current liabilities excluding notes payable to banks and current maturities of hng-term deot, preferred and oreference stack-Tempora y cash investments (51,493) (57,200) (4,300) ibceivables (11,475) (9,063) 2.715 Materials &nd supplies 22,446 (12,045) 3,149 Accounts payable 20,% 1 (8,942) 39,193 Accrued taxes 1,449 4,041 (12.085) Accrued interest 10,155 17,754 285 Miscellaneous, net 12,525 (7,148) 112 4,558 (72,603) 29,069 Other, net-Construction funds held in escrow, including accrued interest 6,454 711 39,847 Allowance for equity funds used during construction 121,814 84,210 60,421 Sale of utility property - 13.568 - D:ferred income taxes on allowance for bonowed funds used during construction (76,982) (67,127) (59,530) Miscellaneous, net 2,080 (4,384) 11.345 53,366 26.978 52,083 Total Sources of Funds for Property Additions $745,798 $774,233 $568,044 Property Additions-Elictric plant $689,646 $648,633 $546,996 Nuclear fuel 55,032 124,292 18,945 ___Nonutility property 1,120 1,308 2,103 $745,798 $774,233 $568,044 The tcccrrpanymg Notes to Consondated Financial statements are an integral part of these statements. 3 ohio f dmon a Consnlidated Statements of Taxes For the ears Ended December 31 1983 1982 1981 = 'k General Taxes: (in thousards) State gross receipts (i) $ 65,495 $ 56,808 $ 34,144 Real and personal property 47,099 45,028 39,193 Social secunty and unemployment 10,097 8,990 8,010 Miscellaneous 4,127 3,743 2.969 Total general taxes $126,818 $114,569 $ 84,316 Provision for Income Taxes: Currently payable-Federal 5 10,119 $ 324 $ 80 State 2,507 2,532 678 228 206 59 + ~ Foreign 12,854 3,062 817 Deferred, net (see below)- Federal 75.947 88,666 96.218 4,867 3,166 2,961 7 State 80,814 91,832 99,179 Investment tax credits, net of amortization 53,670 7,312 (772) = Total provision for income taxes $147,338 $102,206 $ 99,224 Income Statement Classification of Provision for income Taxes- . , 7 Operating expenses $135,279 $ 94.245 $ 80,820 l- Other income (64,923) (59,166) (53,360) Alicwance for borrowed funds used during construction 76,982 67,127 59.530 L Extraordinary items - - 12,234 Total provision for income taxes $147,338 $102.206 $ 95,224 .j ] b Sources of Deferred Tax Expense: ' ( Allowance for borrowed funds used dunng construction, l - which is credited to plant ! 76,982 $ 67,127 $ 59.530 Excess of tax over book deoteciation, net 23,081 17.387 13,669 - ; Deferred fuel and energy costs, net (10,202) 7,000 12,306 J

" Pensions end taves chargeo to utility plant, nel 4,15.4 2,675 -

b Cost of terminated construction projc',ts net (3,258) 384 5,197 - g Deferred interest on leased noclear fuel, net (3,16t,) p,840) 9,56/ .- Other, net (6,777) 99 (1.092) .. Total deferred tax expense, net S 80,814 $ 91,832 $ 99,179 Reconciliation of Federal Income Tax Expense at ~ i Statutory Rate to Total Provision for income Taxes: l~ _ Book income before provision for income taxes $419,738 $317,935 $296,286 L Federal income tax expense at statutory rate $193,079 $146,250 $136,292 L increases (reductions)in taxes resulting from: Aliowance for equity funds used during construction, " (56,034) (38,737) (27,794) which does not constitute taxable income Dif ference between tax and book depreciation 9,115 4,026 (2,422) #' Gain on exchange of common stock for first mortgage bonds, which does not constitute taxable income - (9,273) - Other, nel 1,178 (60) (6,852) Total provision for income taxes $147,338 $102.206 $ 99.224 (i) Amount for 1981 includes a credit of $14,352,000 resulting from a December 1981 settlement applicable to Pennsylvania Excise Tax on Gross - Receipts accrued in poor years. 6 - The accornpanying Notes to Co,solidated Financial statements are an integral part of these statements k-E. rm u -- --i------------ .__ Notes to Consolidated Financial Statements ' n g,' , 1 Summary of Significant Accounting Policies: Utility Plant and Depreciation-The consolidated financial statements include Ohio Edison Utility plant reflects the original cost of conctruction, includ-Company (Company) and its wholly owned subsidiaries, ing payroll and related costs such as taxes, pensions and Pennsylvania Power Company (Penn Pbwer) and Ohio Edison other fringe benefits, administrative and general costs and Finance N.V. All significant intercompany transactions have allowance for funds used during construction (see AFUDC). been eliminated. The Company and Penn Power (Companies) The Companies provide for depreciation on a straight line follow the accounting policies and practices presenbed by basis at various rates over the estimated lives of property The Public Utilities Commission of Ohio (PUCO), the included in plant in service. The annual composite rates for Pennsylvania Public Utility Commission (PPUC) and the electric plant were 3.4% in 1983 and 3.3% in 1982 and 1981. Federal Energy Regulatory Commission (FERC). The Company's depreciation rates include provisions for the Revenues- estimated decommissioning costs for its only nuclear The Companies' residential and commercial customers are generating unit in service. Penn Power provides for the cost metered on a cycle basis. Revenue is recognized for electric of decommissioning radioactive components only, in service based on meters read through the end of the month. accordance with a PPUC rate order. Deferred Fueland Energy Costs- Common Ownership of Generating Facilities-The Company recovers fuel related costs from its retail The Companies and other Central Area Power Coordination customers through an electric fuel component (EFC). The Group (CAPCO) companies own, as tenants in common, EFC is an estimated fixed rate per kilowatt-hour included on various power generating facilities. Each of the companies is customer bills for a six-month period and is based upon fuel- obligated to pay a share of the construction costs of any related costs for the preceding six-month period. Any over or jointly owned facility in the same proportion as its ownership under collection resulting from the operation of the EFC is interest. The Companies' portions of operating expenses included as an adjustment to the EFC rate in a subsequent associated with these jointly owned facilities are included in six-month period. Accordingly, the Company defers the the corresponding operating expenses on the Consolidated difference between actual fuel related costs incurred and the Statements of income. The amounta reflected on the amounts currently recovered Itom its customers. Consolidated Balerce Sheet under utility plant at December 31,1933, nclude tt e following: Penn Fbwer recovers fuel and energy costs frora its retail customers through an annual "levelized" energy cost rate uwyem ION Y"" D"> (ECP). The ECR, which includes adjustment for any over or c-en ua a ia smo omec ma e,wm moot under collect.on from customers, is recalculated each year. m=w Accordingtv, Penn Fbwer defers the difference benveen C""j,,, ,*$$ ',*$$ '% $$2 actual energy costs and the amounts currersly recovered ma ww eno mi azs 2 3s su sm, from its customers. ['Z,'[" Z _ j[ Z Reference is made to Note 7 with respect to accounting for Ba' m3m3 sma s m in the cost of coal received from Quarto Mining Company ma*m a==a 'acau am*am te sea = wey ez (Quarto). All nuclear fuel in process relates to the CAPCO units but is not segregated among them. Nuclear Fuel-The Companies amortize the cost of nuclear fuel based on the rate of consumption. The Companies also make pro-vision for future nuclear fuel disposal costs associated with the fuel. o Notes to Consolidated Financial Statements-(Continued) - - Allowance for Funds Used During Construction (AFUDC)- Company's Consolidated Balance Sheets and are being AFUDC, a non-cash item charged to utility plant under amortized over the life of the related property. The remaining construction during the construction period, unless $4,657,000 and $24.856,000, respectively, were recorded as oth rwise included in rate base, represents the net cost of reductions to utility plant in service and serve to reduce the borrowed funds and equity funds used for construction total provision for depreciation over the life of the property. purposes. The Company also charges AFUDC to certain The Companies defer investment tax credits utilized and projects which are completed but not yet included in rate base, in accordance with a PUCO order. AFUDC varies aMe mese Mim m ime e me esth Me of the related property. At December 31,1983, approximately according to changes in the level of utility plant under $63,000,000 of unused investment tax credits were available construction and in the cost of capital. The Companies to offset future Federal income taxes payable. These credits compute AFUDC utilizing a net of tax rate, which is expire at the end of the following years: consistent with the rate treatment. The AFUDC rate related to assets financed only through the incurrence of long term 1995 $18.000,000 obligations (see Note 5) is based on actual interest accrued 1996 5,000,000 l on the obligations during the period. The annual rates used 1997 19,000,000 l by the Company for all other construction projects were 1998 21.000,000 l 10.90%,10.32% and 9.84% during 1983,1982 and 1981, $63,000'000 respectively. Penn Power's rates applicable to such projects . were 9.25% in 1983 and 1982, and 8.50% in 1981. Income Taxes- The Companies' trusteed, noncontributory pension plans Details of the total provision for income taxes are shown on cover almost all full-time employees. Upon retirement, the Consolidated Statements of Taxes. The deferred income employees receive a monthly pension based on length of taxes result from timing differences in the recognition of service and compensation. Pension costs for 1983,1982 and revenues and exoenses for tax and accountirig purposes. 1981, were $16,904,000, $15,448,000 and $15,311,000. respectively. Of those amounts, S11,913,000, $10,350,000, The Companies allocate the income tax benefit. result:cg from and $9,237,000, respectively, were charged to ope.ating interest expense related to utility plant under construction, to expenses; the t:alances were charged primarily to income taxes-credit included under other income and conshction. Sud costs Mclude me amo@abon of deductions on the Consolidated Statements of Income. unfunded past service costs on an actuaria' basis over For income tax purposes, the Companies claim liberalized approximate!y 40 years in 1983 and 30 years in 1982 and depreciation and, consistent with the rate treatment, 1981. The Companies funa pension costs accrued. A ger cra'ly 'oilow ' normalization" accounting. The Compenies companson of accumulated plan benefits ard plaq net expect that deferred taxes which have not been provided will assets from the two latest actuarial reoorts is as follows: be col!ected from their customers when the taxes become payable, based upon the established rate making practices of At June 30, 1983 1982 the PUCO, the PPUC and the FERC. Actuarial present value of * "" D*"#'* The Company received $10,480,000 in 1982 and $37,531,000 y",'","[ $176,732.000 $157.014,000 in 1981 resulting from the sales of tax benefits applicable to Nonvested 16.939.000 12.862.000 property placed in service during those years in accordance $193.67 * .000 $169.876.000 with provisions of the Economic Recovery Tax Act of 1981. Of Net assets available for benefits $314.323.000 5224.641.000 I the total, $5,823,000 and $12,675,000, respectively, were Assumed rate of return for actuarial recoraed as additional deferred investment tax credits on the present value of accumulated plan benefits 8% 8% l l The above total actuarial present value of accumulated plan l benefits reflects pension benefits applicable to eligible employees based upon present salary levels and past years of service accumulated through the valuation date. This is 29 y . . . the generally accepted reporting procedure currently set reason to believe that the FERC will not act favorably upon forth by the Financial Accounting Standards Board. The their requests. The PPUC has indicated that it will allow Penn Companies' annual contributions to the plans, however, Power to begin recovering its share of the costs allocable to l consider estimated e' nate salary increases due to inflation PPUC jurisdictional customers over a ten year period I nd other factors ai,,J the estimated total service expected beginning with the effective date of new rates resulting from to be accumulated by employees. This is a widely recognized its pending rate increase request. funding technique and is consistent with the recommenda-3 tion of the Companies' actuary. In addition, the actuary The Companies lease nuclear fuel, certain transmission recommended, and the Companies utilized, a discount rate facilities, computer equipment, office space and other of 7% for funding purposes. Differences between funding roperty and equipment under cancelable and noncancelable bases and reporting requirements can have a significant leases. Total rent expenses included on the Consolidated effect on the compansons above. Statements of Income were $34,778,000, $20,766,000 and 2 Terminated Construction Projects- $20,731,000 in 1983,1982 and 1981, respectively. The future in January 1980, the Companies and all other CAPCO minimum rental commitments as of December 31,1983, for companies terminated plans to construct four nuclear generat- all noncancelable leases recorded as operating leases are: ing units. Costs, including settlement of all asserted claims $ 26,696,000 1984 r;sulting from termination, unrecovered by the Company and 24,038,000 1985 Penn Power as of December 31,1983, applicable to these 21,902,000 1986 units amounted to approximately $78,747,000 and 19,325,000 1987 $16,000,000, respectively. 16,177,000 1988 The PUCO had authorized recovery of the applicable portion Years thereafter 398,522,000 of th) Company's then known share of the construction costs from its PUCO jurisdictional custorrers over a ten-year if all noncapitalized financing leases had been capitalized, pericd beginning in February 1981. However, due to a July the effect on total assets and liabilities would not have been 1981 Ohio Supreme Coud decision which overtumad a material. PUCO order including a simila. alluwance to another Ohio 4 Capitalization: utiiRy, the PUCO subsequently disallowed .he Company's (a) Commor, Stock-recovery of those costs, as service-related costs, effective Through the Dividend Reinvestment and Stock Purchase August 1,1981. Plan, hoiders of common, preferred and preference stock On NCNember 3,1982, the PUCO decided in the Company's can acquire additional new shares of the Company's then perding rate case to allow a rate of retur7 above that common stock by automatically reinvesting all or a portion which it otherwise would have allowed were it not for the July of their dividende and by making optional cash payments. 1981 Ohio Supreme Court decision. Based on that order, the Purchases made with reinvested cash dividends on Company resumed amortization of the costs of the termi- common stock are made at a price equal to 95% of the nated units applicable to PUCO jurisdictional customers over average of the high and low market prices on the investment a ten-year period. A similar adjustment was included in the dates, and purchases made with optional cash payments Company's September 1983 PUCO rate order. are made at a price equal to 97% of such average. Pur-The Companies are currently seeking approval from tne chases of common stock made with reinvested cash FERC to recover these costs from FERC jurisdictional customers to the extent they are allocable to those customers. The Companies are currently collectina interim rates from FERC jurisdictional customers which bre intended to provide for recovery over a ten-year period and, accordingly, those costs applicable to FERC jurisdictional customers ara being amortized over that period. The Companies believe that the construction costs were prudently incurred and have no ~ r Notes to Consolidated Financial Statements-(Ceatinued) W" l . L j dividends on prefrured and preference stock are made at $100 per share plus accrued dividends. Penn Power's e price equalic< 100% of the average market price. At 10.50% Series includes a provision for mandatory redemp-December 31,1983, the Company had S,B93,219 shares tion of the entire series on April 1,2040, at $100 per share r::s;rved for issuance under this plan and 1,622,546 . Wares plus accrued dividends. of common stock reservec for postible converdon of the The sinking fund requirements for the next five years are: $1.80 Preference Stock. (b) Retained Earnings- 1984 $2,000,000 Under the Company's indenture. tne Company's 1985 4,871,000 consolidated retained earnings enrestricted for payment of 1986 4,900.000 cash dividends on the Compaq/'s common otockivere 1987 4,900,000 $169,267,000 at December 31,1083. Under Penn Power's 1988 5,220,000 Charter, $33,773,000 of retained earnings at December 31, 1983, were unrestncted for payment of cash diviends to (e) Preference Stock Subject to Mandatory Redemption-the Ccmpany. The $102.50 Series and $95.00 Series each include pro-visions for a mandatory sinking fund to retire a minimum of (c) P,eterred and Preference Stock-900 and 1,800 shares, respectively, on July 1, in each year At the Companies' option, all preferred and preference beginning in 1984 and 1985, respectively, at $1,000 per stock may be redeemed in whoie, or in part, at any time share plus accrued dividends. The $1.80 Series includes a upon not less than 30 nor mom than 60 days notice, unless provision for a mandatory sinking fund to retire a minimum otherwise nnted. Redemotion of all preferred and preference of 100,000 shares on October 1, in each year beginning in stock issued within the past live years is subject to certain 1985, at $15.125 per share plus accrued dividends. restrictions regarding refuriding cperations. The optional rcdernption prices shown on the Consolidated Statements The annual sinking fund requirements are $900,000 for of Capitalization will decline to eventual minimums per 1984, and $4,213,000 for 1985 through 1988. share according to the Charter provisions (Pat establish The $1.80 Series is convertible at any time into common ead senes. stock at a price of $15.125 per shaic. Holders receive one (d) Preferrea Stock Subj&ct to Mandatory Redemption - share of common stock for each share of $1.80 Preference The Corr pany's 10.48% Series and 10.76% Series each Stock converted, subject to adjustment under certain include pf ovisions for a mandatory sinking fund to retPe a condit ons, minimum of 20.000 shares every year on December 1, and (f) Long-Term Debt-January 1, respectively, at $100 per share plus accrued The mortgages and their supplements, which secure all of dividt.nds. Penn Power's 8.24% Series and 11% Series the Companies' first mortgage bonds, serve as direct first each includ's provisions for a manrjatory sinking fond te mortgage liens on substantially all property and franchises, r@re a minimum of 5,000 shares and 4,000 shares, other than specifically excepted property, owned by the respectively, every year on December 3, and January 1, respective Companies. resprtively, at $100 per chare plus accrued dividends. Penn Power's 15% Series and 11.50% Series each include Based on the amount of bonds authenticated by the prov!sions for a mandatory sinkino fund to retire a rninimum Trustees through December 31,1983, the Companies' of 3,200 shares and 15,000 shares, respoctively, on July 15, annual sinking and improvement fund requirements amount of each year beginning in 1988 arid 1989, respectively, ct to $23,182,000. The Company expects to deposit funds in 1584 which will be withdrawn upon the surrender for can-cellation of a like principal amount of bonds, which are specifically authenticated for such purposes against unfunded property additions or against previously retired = f 31 bonds. This method can result in minor increases in the The Company has transferred its interest in Beaver Valley amount of the annual sinking fund reqJirements. Penn Unit No. 2 (exclusive of common facilities and transmission Power expects to satisfy its requirements in 1984 by facilities) to OEET, where the assets are used to secure certifying unfunded property additions of 166-2/3% of the OEET borrowings. All OEET obligations will be assumed by required amount. the Company when they become due, but not later than December 31,1986. At the Company's option, all obligations As of December 31,1983, the Companies' sinking and outstandng unh N $400,000,000 Mng M improvement fund requirements and maturing long term nangemen m y comM e a fogar m loan debt for the next five years are: to the Company. 1984 $ 99,876,000 The Company accrues interest applicable to OEET which 1985 76,325,000 is subsequently capitalized, net of income tax effect. In-198G 59,260,000 terest on borrowings under the $400,000,000 line of credit 1987 184,260,000 includes a commitment fee of 1/2% on the unused portion 1988 194,862.000 of this line. No direct borrowings have been or are expected to be made against the $100,000,000 line of credit, but Th; w:ighted average interest rates shown on the OEET has issued and has outstanding commercial paper Consolidated Statements of Capitalization relate to long- supported by this facility. To the extent that borrowings are 1:rm debt outstanding at December 31,1983- less than the $100,000,000 available under this line of Total secured and unsecured notes outstanding at credit, the Company must pay a commitment fee of 1/2%. D:ccmber 31,1983, and December 31,1982, exclude Under the standby support, an irrevocable bank letter of $97,112,000 and $74,353,000, respectively, of pollution credit has been issued upon which OEET pays a fee of control notes, the proceeds of which were then in escrow 1/8% of the amount of commercial paper notes outstand-pending their disbursement for construction of certain ing. The effective average annualinterest rates on OEET pollution control facilities. Penn Power's obligation to borrowings were 10.7%,14.8% and 18.7% dunng 1983, r pay certain pollution control revenue bonds is secured 1982 and 1981, respectively. by a series of Penn Power first mortgage bonds. The Nuclear Fuel Financing-pollut;on control revenue bonds to which the unsecured in December 1981, Ohio Edison Fuel Corporation and not:s relate are entitled to the benefit of irrevocable bank Pennsylvania Power Fuel Corporation (corporations in 1 tt:rs of credit of $214,156,000. To the extent that which the Companies have no ownership interest) were drawings are made under those letters of credit to pay created to provide funds for the procurement of nuclear principal of, or interest on, the pollution control revenue fuel. The fuel corporations will lease the fuel to the bonds, the Cornpany is entitled to a credit on the notes. Companies under separate fuel leases which require lease Tn: Company pays an annual fee of 1/2%-7/8% of the payments sufficient to permit the fuel corporations to repay amounts of the letters of credit to the issuing banks the obligations. Under ordinary circumstances, the lease and is obligated to reimburse the banks for any payments will be made at such time and in such amounts drawings thereunder, as will coincide with the burnup of the nuclear fuel. 5 longterm Obligations: Financing ori behalf of the Companies of up to Ohio Edison Energy Trust (OEET)- $303.000,000 is currently available through the fuel OEET, which finances part of the Company's investment in corporations, either through revolving credit arrangements Beaver Valley Unit No. 2, has two lines of revolving credit or the issuance of commercial paper, which is supported available to it for $400,000,000 and $100,000,000. The by bank letters of credit, or a combination of both. latt:r credit also serves as a Flandby facility in Connection with OEET commercial paper sales; total borrowings under that credit and commercial paper outstanding may not cxceed $100,000.000 at any t,me. n Notes to Consolidated Financial Statements-(Continue Jma in November 1982, the Companies also began participating "floa ' are expected to be maintained at an average of in arrangements wherein the Central Area Energy Trust appr ximately $5,800,000 and are not subject to any (CAET) finances the acquisition of nuclear material that contractual restriction against withdrawal. The Companies l will ultimately be used to fuel various CAPCO generating are required to pay commitment fees that vary from a flat units. As part of these arrangements, the Companies rate of 3/8% to a variable rate of 5% of the applicable have entered into purchase agreements whereby the prime interest rate to assure the ave; lability of $80,000,000 Companies are unconditionally obligated to purchase of the lines of credit. I their share of the nuclear material that has been financed g 7 through CAET in not 'ess than two por more than three years from the date of the agreement, unless the nuclear , M s dd ged material reaches the point of fabncation, at which time the tures of approximately $2,700,000,000 for property additions purchase commitment will then be due. Financing of up to $137,000,000 is available to CAET on behalf of the and improvements from 19841988, of which approximately $766,000,000 is applicable to 1984. In addition, the Companies, subject to certain limitations. Companies expect to invest approximately $352,000,000 The Companies accrue interest applicable to the nuclear for nuclear fuel during the 1984-1988 period, of which fuel obligations which is st.tsequently capitalized, net of approximately $88,000,000 is applicable to 1984. The major income tax effect. No direct borrowings have been or are portion of the Companies' construction activities during this expected to be made against the lines of credit available to five-year period relates to the CAPCO companies' program the fuel corporations; the fuel corporations have issued for the joint development of power generation and and have outstanding commercial paper supported by the transmission facilities. lines of credit. To the extent that borrowings are less than the $303,000,000 available under these credit lines, th fuel corporations must pay commitment fees of 1/8% to The o p n e together with the other CAPCO companies, 1/2% on the available portions of the lines of credit. They g also pay fees of 5/8% to 7/8% for the letters of credit on severally, and not j.oin . tly, guarantee the.ir proport.ionate the aggregate amount of outstanding commercial paper. shares of Quarto's debt and lease obligations incurred Interest rates on CAET purchase commitments vary from 11/8% to 1-1/2% over the interest rate applicable to while developing and equipping the mines. As of December 31,1983, the Companies' share of the guarantee was certain dealer placed commercial paper. The effective $225,598,001 average annual interest rates applicable to nuclear fuel obligations were 10.6%,12.6% and 13.9% during 1983, Under the terms of the coal supply contract, which expires 1982 and 1981, respectively. December 31,1999, the Companies must reimburse Quarto f r their shares of the costs of operating the Quarto mines, 6 Notes Payable to Banks and Lines of Credit: including those costs associated with mine construction, The Companies have lines of credit with domestic banks whether or not they receive coal from Quarto. These pay-that provide for borrowings of up to $235,000,000 at rates ments will permit Quarto, over the life of the contract, to that vary from prime up to 105% of the prevailing prime meet the debt and lease obligations it incurred while interest rates. Short term borrowings may be made under developing and equipping the mines. The Companies' total these lines of credit on the Companies' unsecured notes. p yments under this contract, including amounts related All of the current lines expire December 31,1984; however, to mine construction costs, amounted to $92,644,000, all unused lines may be cancelled by the banks. $80,709,000 and $94,379,000 during 1983,1982 and 1981, The Companies maintain cash balances on deposit with respectively. Under the coal supply contract, the Com-banks to provide operating funds, to assure availability of panies' future minimum payments related solely to mine ! $124,000,000 of the lines of credit and for other banking construction costs are: arrangements. Such compensating balances, net of 1984 $ 26,082,000 1985 25,463,000 1986 24,846,000 1987 24,228,000 1988 23,610,000 Years thereafter 232,688,000 1 1 1 i s I I 33 Based on studies conceming the economics of the Quarto 110% of such prevailing market price. The PUCO order proj ct and the various alternatives available to provide the states that the Company must recover previously deferred long-t rm fuel requirements of the Bruce Mansfield Plant, costs (amounting to approximately $57,375,000 at December chang:s were made in 1981 in the mode of operation of 31,1983) under this method at the rate of at least one-sixth tha Quarto mines which have the effect of reducing the per year. Any previously deferred costs not so recovered annual tonnage production of these mines. Additional coal during each year would not be recoverable under ordinary requirtments for the Bruce Mansfield Plant are currently circumstances. In addition, any current costs of Quarto , being procured in the open market and the Companies are coal not recoverable under the 125% limitation can no pras;ntly continuing to evaluate the alternatives for making longer be deferred under ordinary circumstances. Although additional arrangements to fulfill, together with the use of unable to predict the ultimate leval of recovery, based upon coal from the Quarto project, the long term fuel current and projected operation of the Quarto mines, and requirtments of the Bruce Mansfield Plant.These changes market prices, the Company believes that this method are part of a fuel procurement strategy designed to reduce provides a sufficient basis to recover the deferred costs the weighted average price of coal used at the Bruce and future costs of Quarto coal under the jurisdiction of Mansfield Plant. The Companies will continue to monitor the PUCO. the Ouarto project and conduct such additional studies On February 10,1984, an Administrative Law Judge for the of the economics of the project as are deemed warranted PPUC issued his Initial Decision in the proceedings relating by the, circumstances. o d me wst of Omo M Re Initial Under the terms of the coa l supply contract, the price of Decision would allow Penn Power to recover in its ECR the Quarto coal is based on, among other things, the actual current cost of Ouarto coal and the costs which were production costs plus amortization of certain production deferred in prior years (amounting to approximately expenses which were not included in the price of that coal $9,879,000 at December 31,1983) to the extent that the prior to May 31,1980, when the development period ended. actual cost of all coal burned at tne Bruce Mansfield Plant Following the end of the development period, the Company is less than the generally prevailing delivered market price for comparable coal. Penn Power may continue to defer was ordered by the PUCO, and Penn Power was ordered by the PPUC, to defer recovery of the cost of Quarto coal in costs which are in excess of the amount allowed to be recovered on a current basis. The Initial Decision will excess of generally prevailing market prices, pending ecome hnal, unless it is appealed to the PPUC or the further proceedings. As a result of those orders, the Companies began deferring a portion of the cost of Quarto PPUC elects to review the Decision. Although unable to coal, rather than including such costs in their respective predict the final resolution of this matter, management believes that its ultimate disposition will not have a maten,al EFC and ECR. adverse effect upon the Company's consolidated results of Thereaf ter, the PUCO allowed the Company to implement operations. a recovery formula with respect to Quarto coal costs that An issue has been raised in the Companies' inost recent resulted in the recovery of current Quarto coal costs plus a portion of its previously deferred costs. However, that rate cases before the FERC concerning the amount of the cost of Quarto coal that may be included in the recovery mechanism was suspended by the PUCO on Companies' charges for electric service to their wholesale August 1,1983, pending further review. On January 31, customers. In the case involving the Company, an 1984, following the Comoany's semiannual fuel hearing, agreement between the Company and its wholesale the PUCO approved a method, effective January 1,1984 which provides an opportunity for recovery of the current customers has been filed with the FERC which provides for cost of Quarto coal plus costs which were deferred in prior recovery of the cost of Quarto coal pursuant to the method used by the PUCO. The FERC has not yet acted upon the years. The PUCO order allows the Company to recover in its EFC the current cost of Quarto coal up to 125% of the agmement prevailing comparable delivered market price. Previously deferred costs may also be recovered to the extent that the actual cost of all coal burned at the Bruce Mansfield Plant, including the recoverable cost of Quarto coal, is less than lu Notes to Consolidated Financial Statements-(Continued) ~ ~ .( ~. .- mt c Environmental Matters--- power plants and other sources located in several states, Various Federal, state and local authorities regulate the including Ohio and Pennsylvania. The Company is unable Companies with regard to air and water quality and other to predict whether the proposed bills will be enacted and, environmental matters. The Companies estimate that if so, to what extent, if any, the SO, emission limits at the compliance requires capital expenditures of approximately Companies' plants would be af fected. Substantial changes $508,000,000 for projects remaining to be completed. Of in the SO2 emission limits could result in the need for this amount, approximately $322,000,000 was spent prior changes in coal supply, significant capital investments in to 1984, and $186,000,000 is included in the construction flue gas desulfurization equipment or the closing of some estimate given above under " Construction Program" for coal fired generating capacity to assure compliance. If 1984 through 1988. If Penn Power is required to install off- flue gas desulfurization equipment were to be installed stream cooling in connection with the operation of the on all of their generating units to achieve compliance, a New Castle Plant, costs (based on a 1980 study) estimated circumstance that may be physically impossible because between $13,800,000 and $31,500,000, depending on the of space limitations at certain of their plants, the Companies required thermal limitations, would be incurred. In addition, estimate that the capital costs associated with such instal-annual operating costs would increase substantially. Penn lation could exceed $1,000,000,000. The Companies expect Power expects that the impact of any such capital and that any such capital costs, as well as any increased operating expenditures would eventually be reflected in its operating costs associated with such equipment, would rate schedules. ultimately be recovered from their customers. On December 19,1980, the Commonwealth of On October 11,1983, the U.S. Court of Appeals for the Pennsylvania petitioned the Federal Environmental District of Columbia reversed several significant portions of Protection Agency (EPA) to make findings under Section the EPA's regulations on the methods used by the EPA to 126 of the Clean Air Act. Section 126 provides a remedy for determine the amount of stack height credit for establishing a downwind state that can show adverse impact because individual source emission limitations. The EPA is currently air pollution in an upwind state causes nonattainment of air considering changes to its stack height regulations to quality standards in the downwind state. Pennsylvania's conform them to the court's decision. Such changes could petition complains of excessive particulate and sulfur result in more stringent emission limitations for existing dioxide (SO2 ) emissions from a number of sources in Ohio plants and increased capital costs and operating ex-and other states, including potentially all of the Companies' penses. The utility industry is seeking review of the Ohio plants. The states of New York and Maine have filed decision before the U.S. Supreme Court. The Company is similar petitions which have subsequently been consoli- unable to predict the ultimate outcome of this proceeding. dated with the Pennsylvania petition. In January 1984, a The Pennsylvania Department of Environmental Resources number of states, together with various environmental Pm h M R ihs b e W a organizations, sent the EPA a notice of their intent to sue Consent Agreement with Penn Power in an effort to the EPA for failing to render a timely decision on the substantially reduce alleged opacity v.iolations at the New pending Section 126 petitions. The notice also asserts that Castle Plant. Such Consent Agreement may ultimately the EPA has a mandatory duty to order cutbacks in SO, include capital expenditures and changes in operations at emissions in Ohio and other states under Section 115 of the plant as well as an undeterminable penalty payment. the Clean Air Act, which deals with international air Management is unable to predict the terms of the Consent pollution. These proceedings could ultimately result !n the Agreement but anticipates that any capital costs and revision of the particulate and SO, emission limitations for increased operating expenses would ultimately be these plants, to make them more stringent. The Company recovered from Penn Power's customers and that any is unable to predict the outcome of these proceedings. penalty payment would not be material to the Company s As a part of the reauthorization of the Clean Air Act, consolidated results of operations. legislation has been introduced in Congress to address the Other legal Actions and Complaints-so-called " acid rain problem." Various bills introduced thus in 1977, the Boroughs of Ellwood City and Grove City, far would require reductions in SO, emissions from utility Pennsylvania, filed a complaint against Penn Power, alleging that Penn Power, individually and in conspiracy with the Company and other CAPCO companies, has 35 : violated Sections 1 and 2 of the Sherman Act and 9 Summary of Quarterly Financial Data: l Sections 4 and 16 of the Clayton Act by restraining and The following summarizes certain consolidated operating monopolizing trade and commerce in alleged markets for results for the four quarters of 1983 and 1982. clectric power. Damages of $7,000,000 (to be trebled) June September December March and injunctions against the alleged unlawful acts were Three Months Ended 31.1983 30.1983 30.1983 31.1983 originally sought. In February 1984, the Boroughs revised (in thousands, except per share amounts) th;ir claimed damages up to $9,743,000. In 1979, the Operating Revenues $378.157 $364.478 $386.400 $386.817 Court granted summary judgment in favor of Penn Power Operating Expenses as to certain allegations of the complaint. In February and Taxes 302.104 296.956 308.288 305.753 1983, Penn Power filed a Motion for Summary Judgment on Operating Income 76,053 67.522 78.112 81.064 the claims not dismissed by the Court's 1979 Order. Also in Other income and February 1983, the Boroughs asked the Court to allow Deductions 4/.530 50.060 54.668 55.291 them to amend their complaint. In August 1983, the Court "[U er arge 59.472 57.578 60.017 60.833 granted Penn Power summary judgment on the Boroughs' Net income $ 64.111 5 60.004 5 72.763 $ 75.522 conspiracy claims, denied summary judgment on " price squieze" and Robinson-Patman Act claims, and denied the Earnings on Common Stock $ 54.091 $ 48,708 $ 61.117 $ 63.927 Boroughs' request to amend their complaint. Trial is Weighted Average Number anticipated to begin in the second quarter of 1984. of shares of Common stocWutstanding % 841 M 244 M5M2 107.261 Management is unable to predict the ultimate outcome of this action. Earnings per share of Common stock $ 56 $.49 $.58 $ 60 The PPUC is investigating an outage of Beaver Valley Unit No.1 which occurred during the period March-August 1979. The outage had been ordered by the Nuclear March June september December Three Months Ended 31,1982 30,1982 30,1982 31.1982 Regulatory Commission to analyze possible seismic deficiencies of safety-related piping and pipe supports in (In thousands, except per share amounts) the Unit. The PPUC has ordered that the operating Operating Revenues $361.190 $328,834 $374.328 $365.274 a ng Expenses company of the Unit make refunds to that company's es 286.837 258.311 315.272 299.566 customers based upon that company's expenditures for purchased replacement power during the outage. The $,'*(9 "ne and ' ' PPUC is currently investigating Penn Power's liability, if Deductions 35.819 30.505 50.212 43,711 any, for the outage and whether refunds are due to Penn Net Interest and Power's customers for purchased replacement power Other Charges 56.335 58.937 59.820 59.224 expenses incurred during the outage which were included income Before in its energy clause. If Penn Power is required at some Extraordinary item 53.837 42.091 49.448 50,195 Extrao@nay Hem - 20J 58 - - future time to make such a refund,it is not expected that the amount would be material to the Company's consoli. Net income $ 53.837 $ 62.249 $ 49.448 $ 50.195 dated results of operations. Earnings on Common stock $ 45.644 $ 54.095 5 41.326 $ 40.431 **'9" * * * *9'""*

8 ExtraordinaII income-of Shares of Common During 1982, the Company exchanged 2,650,600 shares of stock Outstanding 79.131 81.122 88.021 92.688 its common stock for $53,432,000 principal amount of its Earnings per Share outstanding first mortgage bonds which were subsequently of Common stock:

retired. The exchange resulted in a non-taxable gain of Before Extraordinary item $20,158,000, which is included as an extraordinary item (after preferred and preference stock dividend on the 1982 Consolidated Statement of income. During 1981, the Company purchased and subsequently retired $"a[dIna 1 tem $65,821,000 principal amount of its outstanding first mort-Earnings on Common stock $.58 $.67 $.47 $.44 gage bonds for cash. This resulted in a gain of $26,276,000, which is included as an extraordinary item, net of related income taxes of $12.234,000, on the 1981 Consolidated Statement of Income. x Notes to Consolidated Financial Statements-(Continued) 10 Supplementary Financial Data-Financial Reporting and formation to disclose the estimated effects of inflation and Changing Price $ (Unaudited): changes in prices on property, plant and equipment. This Statement of Financial Accounting Standards No. 33, data is presented in accordance with SFAS No. 33; however, " Financial Reportino and Changing Prices"(SFAS No. 33), it is not intended as a substitute for earnings reported on a provides for the preparation of supplementary financial in- historical cost basis. Mjusted for Mjusted Change in Results of Operations Adjusted for the Effects of for General Specific Prices Changing Pnces for the War Ended December 31,1983 Inflation (Current Cost) (Thousands of average 1983 dollars) Income from continuing operations $227,843 $227.843 Inflationay Effects on Common Equity: Capital Investments Effects-Increase in specific prices (current cost) of property held during the year (i) - 443,524 Change in general price level on property held during the year - (336,848) Reduction to net recoverable cost (52,921) (123,622) Mditional provision for depreciation (127,538) (163.513) (180,459) (180,459) Mvantage from the decrease in purchasing power of net monetary liabilities 120,422 120.422 Net erosion of common stockholders

equity (60,037) (60,037) income from continuing operations adlusted for changing prices di) $167,806 $167,806 (i) At Decemoer 31,1983, net property, pf ant and equipment, adjusted for changes in specific prices (current cost) was $9,524,525,000, wnile historical cost (net recoverable cost) was $5.157,196,000.

(ii) Income from continuing operations, adjusted for general inflation and adjusted for change in specific prices (current cost) would be $100,305,000 and $64.330,000, respectively, if only the amount reportable as additional provision for depreciation was includad in the adjustment. Companson of supplementary Financial Data For the Years Ended December 31 1983 1982 1981 1980 1979 Operating Revenues-Historical $1,515,852 $1,429.626 $1,279,649 $1,080,869 $ 994,585 Mjusted to average 1983 dollars $1,515.852 $1,475.615 $1,401,789 $1,306,853 $1,365,153 Income (Loss) from Continuing Operations-Historical $ 227,843 $ 161,338 $ 149,850 $ 101,403 $ 105,120 Mjusted for changing prices (average 1983 dollars) $ 167,806 $ 115,172 $ 58,785 $ (27,098) $ (8.294) Income (Loss) from Continuing Operations per Common Share-Histancal $2.22 $1.89 $2.10 $1.52 $1.80 Adjusted for changing prices (average 1983 dollars) $1.64 $1.35 $ .83 $ (.40) $ (.14) Return frorn Continuing Operations on Average Common Equity-Historical 14.2 % 12.3 % 13.5 % 9.7% 11.2 % Adjusted for changing prices 10.5 % 8.3% 4.8 % (2.1)% (0.6)% Effective income Tax Rate-Historical 35.1 % 32.1 % 33.5 % 28.3 % 21.9 % Adjusted for changing prices 41.0 % 38.1 % 49.6 % 82.5 % 61.5 % Excess of ine ease in the Specific Level of Prices on Property, Plant and Equipment Over Gerteral Price Changes (average 1983 dollars) $ 106.676 $ 344,737 $ (40,337) $ (202,722) $ (115,228) Advantage Resulting from the Decrease in Purchasing Power of Net Monetary Liabilities (average 1983 donars) $ 120,422 $ 110,243 $ 235,821 $ 306,178 $ 339,387 Year End Common Stockholders' Equity-Historical $1,711,974 $1,488,371 $1,229.044 $1,067,524 $ 970,110 Adjusted for changing prices (average 1983 dollars) $1,682,449 $1.519,188 $1,303,752 $1,226.489 $1,261,648 Cash Dividends Declared per Common Share-Historical $1.80 $1.76 $1,76 $1.76 $1.76 j Adjusted to average 1983 douars $1.79 $1.82 $1.92 $2.11 $2.41 Year End Market Price per Common Share-Historical $12.25 $14.00 $11.625 $11.875 $13.375 Adjusted to average 1983 dollars $12.04 $14.29 $12.32 $13.72 $17.36 Average Consumer Price Index 298.4 289.1 272.4 246.8 217.4 l Auditors' Report n [ Th7 increase in specific prices of property held during the To the Stockholders and Board of Directors of Ohio Edison l year attempts to measure increasing asset values which Company: approximate dollars that would have to be spent today t We have examined the consolidated balance sheets and acquire property, plant and equipment identical to assets consolidated statements of capitalization of Ohio Edison currently owned. The Companies use the Handy-Whitman [ Company (an Ohio corporation) and its subsidiary l Index of Public Utility Construction Costs and the Bureau of , , , companies as of December 31,1983, and 1982, and the labor and Statistics engineenng indices to calculate the cur-consolidated statements of income, retained earnings, r:nt cost of those assets. The indices are applied to actual l capital stock and other paid-in capital, sources of funds ! dollars spent on large construction projects according to the for property additions and taxes for each of the three years . year of expenditure. For all other plant facilities, the current in the period ended December 31,1983. Our examinations cost is determlned based upon the year the facilities were were made in accordance with generally accepted auditing placed in service. standards and, accordingly, included such tests of the Changes in the valuation of assets adjusted for general infla- accounting records and such other auditing procedures as tion are computed by using the average Consumer Price we considered necessary in the circumstances. Index for All Urban Consumers for the calendar year, accord-In our opinion, the financial statements referred to above ing to the guidelines set forth in SFAS No. 33. resent fairly the financial position of Ohio Edison 1 As shown on the results of operations adjusted for the effects Company and its subsidiary companies as of December of changing prices, the erosion of common stockholders

31,1983, and 1982, and the results of its operations and equity is identical either adjusted for general inflation or ad- the sources of funds for property additions for each of the justed for specific price changes. This results from the effect three years in the period ended December 31,1983, in of regulation in setting the Companies' electric rates. Since conformity with generally accepted accounting principles those rates are based upon historical costs of utility plant, applied on a consistent basis.

th3 inflation-adjusted results of operations must recognize this limitation; this is accomplished by the reduction to net recoverable cost shown on the summary. p Additional depreciation expense adjusted for general inflation and for the change in specific prices was determined using ARTHUR ANDERSEN & CO-the same rates and methods used for computing the histor- New York, N.Y. ical cost provision for depreciation. No inflation adjustment February 14,1984 has been reflected for income taxes, in conformity with the reporting requirements of SFAS No. 33. During periods of inflation, the Companies' net monetary liabilities (principally long-term debt and preferred stock) will , be repaid with dollars having less purchasing power than 4 dollars had when the original liability was incurred. This economic benefit is portrayed on the summary as the advan- } tage from the decrease in purchasing power of net monetary liabilities, which serves as an offset to the inflationary effects of replacing the Companies' property, plant and equipment. 1 1 4 ,w - -e.. - - , -. - e.- - - - , . + + - - - . - , . , -~ --a --~ , o Consolidated Financial Statistics 1983 1982 1981 1980 1979 1978 1973 General FinancialInformation (Dollars in thousands, except per share amounts) Total Operating Revenues $1,515,852 $1.429.626 $1.279.649 $1.080.869 $ 994.585 5 862.956 $ 385.806 Operating income $ 302.751 $ 269.640 $ 252.381 $ 169.383 $ 163.744 $ 123.945 $ 89,664 Earnings on Common Stock $ 227.843 $ 181.496 $ 163.892 $ 101.403 $ 105.120 $ 61.259 $ 58.697 Ratio of Earnings on Common Stock to Operating Revenues 15.0T. 12.7 % 12.8 % 9.4 % 10.6 % 7.1% 15.2 % Times interest Earned Before income Tax 2.31 x 2.02 x 2.11 x 2.05 x 2.31 x 1.67 x 3.02 x Net Utikty Plant at December 31 $5.150,902 $4.522.733 $3.867.757 $3.435.267 $3.012.197 $2.717.820 $1.357.017 Property Additions S 745.798 $ 774.233 $ 568.044 $ 515.020 $ 476.746 $ 395.162 $ 227.700 Capitahzation at December 31: Common Stockholders

Equity $1,711,974 $1.488.371 $1.229.044 $1.067.524 $ 970.110 $ 851.686 $ 438.182 Preferred and Preference Stock Not Subject to Mand' tory Redemption 404,240 354.240 304.240 306.905 306.905 306.905 160,905 Pr9ferred and Prefeence Stock Subject to Mandatory Redemption 158,112 152.560 151.141 156.450 150.850 98.000 -

Longterm Debt 2,131,404 2.005.436 1,759.771 1.594.384 1.410.782 1.343.195 711.678 Total Capitahzation $4.405,730 $4.000.607 $3.444.196 $3.125.263 $2.838.647 $2.599.786 $1.310.765 Capitahzation Ratios at December 31: Common Stockholders' Equity 38.9 T. 37.2 % 35.7 % 34.2 % 34.2 % 32.7 % 33.4 % Preferred and Preference Stock Not Subject to Mandatory Redemption 9.1 8.9 8.8 98 10.8 11.8 12.3 Preferred and Preference Stock Subject to Mandatory Redemption 3.6 3.8 44 5.0 5.3 3.8 - Longterm Debt 48.4 50.1 51.1 51.0 49.7 51.7 54.3 Total Capitalizat:on 100.0T. 100 0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Longterm Obhgations at December 31 $ 719,364 5 656.655 $ 447.484 5 265.000 - - - Cost of Preferred & Preference Stock Outstandirig at December 31 9.63 T. 9.17 % 8.37 % 8.38 % 8.36 % 7.99 % 5 91 % Cost of tJongTerm Debt Outstanding at Decerrt ar 31 10.82T. 10 69 % 990% 9.16 % 8.13 % 7.71 % 6.26 % Common Stock Data Eamings per Average Common Share $2.22 $2.13 $2.30 $1.52 $1.80 $1.19 $2.14 Return on Average Common Equity 14.2T. 13 5 % 14 6 % 97% 11.2 % 7.1 % 14.7 % Dividends Paid Fbr Share $1.80 $1.76 $1.76 $1.76 $1.76 $1.76 $1.58 % l Common Stock Dividend Payout Ratio 81T. 83 % 77 % 116 % 98 % 148 % 74 % Common Stock Dividend Yield at December 31 14.7T. 12 6 % 15.1 % 14.8 % 13.2 % 11.8 % 7.8% Pnce/ Earnings Ratio at December 31 5.5 66 5.1 7.8 7.4 12.5 9.5 Shares of Common Stock Outstanding at December 31 (000) 108,460 96.082 78.676 68.526 59.622 52.120 28,695 Book Value per Common Share at December 31 $15.78 $15.49 $15 62 $15.58 $16 27 $16.34 $15 27 Market Pnce per Common Share l at December 31 $12.25 $14 00 $11.625 $11.875 $13.375 $14 875 $20.25 Ratio of Market Pnce to Book Value per Share at December 31 78T. 90 % 74 % 76 % 82 % 91 % 133 % I Consolidated Operating Statistics n 1983 1982 1981 1980 1979 1978 1973 Revenue Frorn Electric Sales (thousands): R:sidential $ 540,167 $ 497.941 $ 442,267 $ 398.832 $360,273 $314,867 $141,473 Commercial 385,277 356.325 308,599 268,788 240.458 205,901 99,428 Industrial 421,736 383,535 381,162 330,717 315.185 258,767 115,320 ) Other 69,278 67,828 53,993 50,420 42,607 46,471 17,064 Subtotal 1,416,458 1,305,629 1,186,021 1,048,757 958,523 826,006 373.285 Sales to Utilitiu 76,220 101.088 73,966 12,381 10,185 9.346 3,300 Total $1,492,678 $1,407,317 $1,259.987 $1,061.138 $968,708 $835.352 $376,585 Revenue From Electnc Sales-%: Residential 36.2 % 35.4 % 35.1 % 37.6 % 37.2 % 37.7 % 37.6 % Commercial 25.8 25.3 24.5 25.3 24.8 24.6 26.4 Industrial 28.3 27.3 30.2 31.2 32.5 31.0 30.6 Other 4.6 4.8 4.3 4.7 4.4 5.6 4.5 Subtotal 94.9 92.8 94.1 98.8 98.9 98.9 99.1 Sales to Utilities 5.1 7.2 59 1.2 1.1 1.1 0.9 Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Kilowatt-Hour Sales (millions): Residential 6,735 6,733 6,747 6,801 6,650 6,501 5,390 Commercial 5.096 4,996 4,917 4,812 4,693 4,470 4.036 Industnal 8,386 7,708 9.352 8,909 9,830 9.600 9.863 Other 1,211 1,227 1,181 1,370 1,346 1,309 1.073 Subtotal 21,428 20,664 22,197 21,892 22,519 21.880 20,362 Sales to Utilities 2,917 3,361 2,465 502 441 429 311 Total 24,345 24.025 24,662 22,394 22.960 22,309 20.673 Customers Served at December 31: Residential 878,949 873.877 872,303 867,447 861,196 848.268 786,744 ! 90,072 89,706 Commercial 89.231 88,505 87,425 86,410 81,777 Industrial 1,003 1,048 1,068 1,059 1,161 1,160 1,128 Other 736 724 711 704 693 689 579 Total 970,760 965,355 963.313 957,715 950,475 936.527 870,228 Average Annual Pesidential KWH Usage 7,695 7,723 7,760 7.870 7,780 7.724 6,935 Average Residential Pnce Fbr KWH 8.02c 7.40c 6.56e 5.86c 5.42c 4.84c 2.62c Cost of Coal Fbr Million BTU $1.62 $1.75 $181 $1.50 $1.26 $1.16 $.40 l Generating Capability at December 31 (megawatts): Coal 4,858 4.858 4,907 4,899 4,861 4.861 3,939 Oil 164 354 354 364 423 423 327 Nuclear 425 425 425 425 425 420 - Total 5,447 5.637 5.686 5.688 5,709 5.704 4.266 Sources of Electnc Generation: Coal 89.8 % 93.8 % 89.9 % 98.7 % 93.9 % 90.4 % 99 2'4 Oil - 0.1 0.2 06 2.0 3.5 0.8 Nuclear 10.2 6.1 9.9 0.7 4.1 6.1 - Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Na> Load-Megawatts 4,148 4,073 4.148 4,210 4,105 4,038 3,810 Number of Employees at December 31 7,702 7,885 7,669 7,503 7.157 6,765 6.073 x l c Stockholder Information i j Stockholder Profile identification number, or supply a Annual Meeting of Stockholders At the end of 1983,204,000 stock- number if missing. For new Stockholders are cordially invited holders owned 108.5 million shares accounts opened af ter Janua'y 1, to attend the 1984 Annual Meeting of Ohio Edison common stock. 1984, stockholders must prc/ide on Thursday, April 26, at 10 a.m., Approximately 31 percent of those their taxpayer identification local time, in the Company's stockholders are women,9.5 per- number, plus certification that the General Office auditorium in cent are men and 33 percent are number is correct and the IRS has Akron, Ohio. Those unable to or joint holders. The remaining 11 not identified them as taxpayers choosing not to attend can vote on percent are trusts, corporations, whose dividends should be subject the items of business presented at institutions, brokers and other to withholding. the meeting by filling out and investment groups. retuming the proxy card that is Stockholders who fail to provide mailed to each stockholder approx-NeG <5 percent of common the necessary information will be imately 30 days prior to the stockholders own 300 shares or subject to certain IRS penalties *** 9' less. They live in all 50 states and and a 20 percent withholding tax many foreign countries. on dividends. For additional infor- Additional Information mation on these new requirements, Information and assistance on Cominon Stock Dividends and Taxability contact the IRS or your tax advisor. individual holdings, dividend pay-in the first quarter of 1983, the Company's Board of Directors ments, Mend Westment w Dividend Reinvestment increased the quarterly dividend on in 1983,14,000 stockholders ansW w mgWahn d sg common stock. Dividends of 45 can M WaM, W w Mng M o enrolled in the Company s Dividend cents per share were declared by Edison Company, Stockholder Reinvestment and Stock Purchase the Board for each quarter of 1983- " Plan, raising the total number of participants to 66,753, or 30 o [08 in For the year,46 percent of common (216)384 5509. stek dividands were designated percent of all stockholders. By rein-as a retum of capital, and therefore vesung 557 miiiion in dividends and Ohio Edisor Company common nontaxable for federalincome tax making optional cash payments of stock is listed on the New York and purposes, unless the stock was $40 million, they acquired more Midwest stock exchanges and sold. Preferred and preference than 7 million shares of common traded on other registered ex- 1 stock dividends paid during 1983 stock during the year. changes under the "OEC" ticker + were 100 percent taxable. These symbol. Newspapers generally The Economic Recovery Tax Act of figures are subject to final deter- use N symW wok in 1981 provides that through 1985, mination by the Intemal Revenue hsMgs. most participants in qualified divi-Service (IRS) and stockholders will dend reinvestment plans such as A copy of our 1983 Annual Report benotifiedof anysignificantchange. Ohio Edison's may exclude from to the Securities and Exchange their yearly income up to $750 per Commission, Form 10-K, will be Dividend Withholding During the summer, Congress year ($1,500 on a joint return)of provided without charge to stock-repealed a law that would have taxable dividends reinvested. We holders upon request. To receive a required the Companies to with, anticipate that a portion of common copy, please write to Gregory F. hold 10 percent of most dividend stock dividends paid during the LaFlame, Secretary, Ohio Edison payments for tax purposes. But we next few years will be designated Company,76 South Main Street, as a retum of capital. Participants Akron, Ohio 44308. are required to comply with backup withholding measures. should consult their own tax For information and assistance on advisors to determine the proper According to federalincome tax the transfer or registration of all treatment of common stock divi-law, each common, preferred and classes of Company stock' contact- ' dends on their federal tax return. preference stockholder must Transfer Agent: provide the Company with a tax. Additionalinformation about the Transfer Agent payer identification number, which Plan, and a Prospectus, can be , Ohio Edison Company is either a social security number obtained by contacting Ohio 76 South Main Street or employer identification number. Edison s Stockholder Services. Akron, Ohio 44308 Beginning December 30,1983, E forms were mailed enabling stock-holders to certify their taxpayer Bn io National Bank PM Akron, Ohio 44308 . .m. .n [:.&i:% . , .Y; [v .. ^ q g - kh r \:', . 't gessde seems caan j . eMdes ammens . *O . 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s. *N HIGHLIGHTS Return on Average Common Equity Income from operations Allowance for equity funds Net income. Sales fletail customers Wholesale customers System Performance Nuclear generation , Employees . Earnings per Common Share i ~ 3257 ,7 s v .- . a [ __- 2.75 i y -- - 2 25 < i t.sc t _ L _ __ _ . _ _ _ _ _ '79 'H 1 TO OUR SHAREOWNERS: gap .. d It is a pleasure to report a sig. Shareowners and customers , alike are benefiting from the { cost reduction and control efforts. l And an upturn occurred in kil ~ j watt hour sales due to the improv- The price per kilowatt-hour of common share, by your board of 1983 1982 Change Earnings Per Common Share $3.50 $3.18 + 32c Dividends Declared Per Common Share 2.40 2.38 + 8c (current quarterly rate is 63c - equivalent to $2.52 per year) . 14.5 % 13. 3"c Financial Results (millions of dollars) 03 57 + 11% used during construction .. 65 49 + 33% . 128 106 + 21"r Operating Results (millions of kilowatt hours) . . . 6811 6523 + 4% 320 395 - 10% , 2383 1569 + 5 2"o Fossil generation . . . 4683 5300 - 12% , , 2405 2458 - 2% Dividends Declared per Common Share Dollars' Share Dollars / Share 3.75 2.00 , ~i - + - g_go . - - - i " ~~ ~ , - - - - - - - a w -) E_. - L _ '83 '73 '78 'H3 AllOUT TOLEDO EDISON The Toledo Edison Company is a public utility estimated population of 750,000, the company also whose primary activities are the generation, provides relatively small amounts of natural gas transmission, distribution and sale of electric and steam heating Hervices. Toledo Edison is energy in 1bledo and northwestern Ohio. Servic- owned by over 190,000 shareholders in all 50 ing approximately 2,f;00 square miles with an states and worldwide. ~ Jolm it Wdli ms n Wend >H A. J huson nificant earnings gain, especially [."$ ome g o meer in the second half of 1983. that as further evidence of a direct fuel adjustment period. This came correlation between industrial elec- at a time when it could be most l results of our successful, on going tric consumption and the economic beneficial- right before the winter health of the community, heating season. 'Ibtal 1983 kilowatt-hour sales Of particular significance in j ing economy and a return to more rose 3 percent. This was the first this commission decision was the s normal weather patterns. overall sales increase in the last partial allowance of carrying four years. Sales to municipal cus- charges on Construction Work in 4 tomers decreased as a result of Progress (CWIP) for the Perry No. t electricity to our customers was their increased purchases of power generating addition project as part l reduced significantly. Our power fmm other government entities. of the basic price increase. The first j gene:ation facilities, particularly Residential and commercial Perry Unit is now over 90 percent nuclear, set new records for pro- kilowatt-hour sales showed only a complete. Work on a second unit, j duction and officiency. slight annual increase. The first about 40 percent complete,is being The dividend rate was in. half of the year saw exceptionally minimized pending completion of cron=ed two cents, to 03 cents per mild temperatures and low sales. the first unit and future evaluation i However, the weather returned to of capacity tim!ng needs. Your directors in December.This was the more normal patterns in the sum. company has a 20 percent owner-l 01st increase declared in the last 23 mer and fall, with December tem. ship share in the two units, which l years. The new rate is equivalent to peratures being very cold. are being built by Cleveland Elec-l $2.52 on an annualized basis.1983 We decreased our prices to tric Illuminating Company on l also was the cand consecutive year customers during the year. Most of aH f en al Ama Powe

of dividend payments. this is attributable to a 50 percent Coordination Omup (CAPCO). We Earnings rose to $3.50 per decrease in the " fuel charge,, por- also have about a 20 percent owner-common share from the $3.18 cf the tion of our customers bills in ship sharein the Beaver Valley Unit j previous ycar, a 10 percent increase. August. This reflected our lower No. 2, now about 80 percent com-fuel costs over the prior six month plete and under the construction i

Irading the way to a 9 percent supervision of Duquesne Light increase in industrial kilowatt- period. It resulted primarily from the low cost generation of the Company. hour sales were the substantial gains registered by automotive- Davis Besse Nuclear Station, along Our Davis-Besse station set a related customers. Their power use with continued efficient produc. new record for annual pmduction was up IH percent for the year. tion fmm our coal-fired Bay Shore in 1983. The nuclear unit pmvided The improving economy also Station' over 5.2 billion kilowatt hours, a six-year high. In 1983 the unit means employment in our eight. Also in August, the Public county servicc area has been on the Utilities Commission of Oh! rated in the upper one third for production of all of the nuclear rise. By late 1983, total employment approved a partially offsetting units in the country. Of the com-was at its highest level in four increase in our base prices. The pany's total electricity output, 3t years. commission appmved a 5 percent, or $23 million, annual increase in percent was from the nuclear sta-locally, two major automotive- tion. With the consequent lowering related employers are operating at retail electric rates' ofcosts and prices, it is not difficult pre recessionary levels. They've The net effect of the two dect- to point out to customers the advan-invested in retooling their existing sions was that our average total tages of nucler.r generation. We northwest Ohio plants and have prico per kilowatt-hour decreased look forward to continued efficient

called back laid off workers. We see about to percent for the six month service in 1984.

l 1 l \ I C:cl fircd units previd:d directors. The board also elected generating units under construc-chout 66 percent of company Lyman C. Phillips vice president, tion, and were directed to charge generated powerin 1983, a depend- corporate planning and adminis- off the investment only against able complement to our nuclear tration. IIe has the added respon- shareowners, the resultant write-generating source. sibilities of administration of off could exceed the balance in its Personnel, procurement, indus- Earnings Reinvested Account and We'll continue fine-tuning the probably result in a consequent trial security, transportation, procedures and equipment at our suspension of dividend payments. generating stations to keep their building and office services, and Even a forced suspension in con-business analysis and planning. as performance at peak efficiency. we11 as corporate planning struction of a unit could result in a Our coal-fired units, in particular, reduction in the accrual for Allow-have been the recipients of many activities. Frank W. Keith, vice president, ance for Funds Used During Con-modifications in recent years, most administration, retired after 36 struction credits and a possible of which are designed te minimize reduction or termination of divi-any harmful environmental meritorious years with the company, dend payments. Either of these impact. events could, in turn, preclude a 1983 was a gratifying year. Improving air quality is the Nmpany from selling additional Our earnings were up while cus. equity and debt securities. This, reason we have already made sub- tomer prices were down. And we stantial envimnmental equipment continued monitoring and evaluat-then, could result in a company investments at our Acme and Bay being unable to obtain funds suffi-ing the CAPCO generating unit , cient to finance its share of the con-Shore Stations in 'Ibledo. We have projects still under construction. also changed to higher-cost, low struction costs of other units, Shareowners can be assured that unless the company was able to sulfur coal sources for our boilers. the same scrutiny and thought that Your management team believes btam the necessary financing by went into our past year's successes ther means. Therefore, politicians the company probably should be will be applied to all of our future minimally affected and, in fact, and regulators need to be made efforts' very aware of the serious conse-will be less affected than most But we entered 1984 with what other utilities in this part of the quences of any actions to " protect country by proposed acid rain could best be termed cautious opti- customers" that would affect util-legislation. mism. For even the most prudent ty construction and financing decisions and the highest quality programs and, ultimately, ade-Cost control programs work are no guarantee against quacy and reliability of customer lawered costs in 1983. For in- adversity. In the last few months service, as well as bills, stance, our operating expenses for we have seen how capricious use of the year showed only a slight regulatory standards can make a We at 'Ibledo Edision are not increaae and maintenance mockery of the carefully balanced wavering in any ofour convictions, expenses actually decreased by 16 relationship between utilities, But as one of the most heavily percent. We achieved this by care- shareowners and customers. regulated of American industries, fully evaluating even the most "" # " * " # Providing future capacity "I " " "" # ""' routine pmjects for ways to reduce involves risks, particularly finan-expenses. s n snt an n ask cial risks these days. New capacity au Cost-control continues to be additions have become needlessly escareQw@ au the repercussions of their actions truly an all-around effort. All of expensive. The regulatory process , our employees deserve a great deal has created many uncertainties, rs c ut I tie of credit for making the cost- driven up construction costs and reduction pmgram work. Partially contributed to lowered bond rat-thmugh their hard work and sac- ings and higher financing costs. Cordially, rifices, including wage freezes, we Yet new capacity is vital for new were able to experience an jobs and businesses. Since this yf impmved financial condition com- capacity benefits society as a /. r%4+t - pared to the previous year, whole, it stands to reason that elec-tric customers, who benefit from Management was strength-oned and re-aligned in 1083. the power supply, should share the John P. Williamson Donald G. Nicholson was elected risk. But there are those who Chnun and Chief ExecutiveOfneer senior vice president, finance. IIe believe that the investment risk should fallonly on the shoulders of continues to direct the extensive utility " companies" and their financing of our construction pro- sharmwners. This is patently , gram and has the additional responsibilities for accounting and unfair and a real threat to our nation's ability to power its treasury activities. Paul M. Smart joined the company as senior vice economic future. president, with prime responsibil. For example, if a regulated company such as ours were h"udent and Chief 0peraung Omcer

ity for corporate development. IIe l was recently elected to theixxtrd of required to cancel any of its

BOARD OF DIRECTORS INSPECTS GENERATING PROJECT o , =. - . W m - _ , . e . / , -p M - j-7 } .. M , n. - ~ l -h~ ' A N*l-$.,,,

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/ pf4'A{ f I ~" l The tour provided an opportunity p . f / for first-hand inspection of con- . d ' fi struction quality and progress. - 4 Most of the tinte and effort on this <Y project is involved with the first - i e > y ' ln J , unit, which is over 90 percent corn- A , # - l plete. Work on the second unit, k ~ ! about 40 percent complete, is being , e- g ininiinized pending cornpletion of g . the first unit and future evaluation v. .,# J' .- S,,,_,-

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. {h: .[h' [ . - NRAjj The cornpany's board and senior -E EA-s t2 Q ^:R~ As ; m .'f"t ~~ ' -g'alig. " "~4 . - I ruanagernent will continue to closely anonitor developinents and progress at Perry during 1984. Construction Expenditures Declining Meanwhile, work at a third CAPCO Nhilions of Dollars 9 of Net Plant generating project. Heaver Valley 5on ~-- 25- e No. 2 in southwestern Pennsylva- ! i ~ ~ ~ ~ ~ ~ - ~ ~ ~ ~ ~ ~ - - - ~ ~ ~ ~ ~~ - ' ~ ~ ~ - nia. is about 80 percent cornplete and on schedule. _ _ _ _ _ _ _ ___ _ . _ _ ._ _ + 4 ~ * - - - - - b .b _____ i l ino-. - - - - 3- L L L .. l l' !. ! E '79 'H2 'H5 '88 '79 'H2 'H5 '88 3 BALANCED COAL / NUCLEAR ENERGY MIX WORKS FOR NORTHWEST OHIO I 4 %' V ^ I l hg i l g . .mshh,; . ,- e ,-r-- r uv- 2 . ; e ; y4 ~ -- [ll Ts - c y .- r, ", Q ... - A. . ~ f * [?: , , { 9 , , ,, _, ,,-4 y < i J1 j ' - ~ _ my ' VQ, s l s 7 97 A balance of coal and nuclear generating capacity i / helped lower energy prices for customers in our service area last year. / 4 The Davis-Besse Nuclear Power Station (above) ' ~ l f had its best operrting year everin 1983 and generated 5.2 billion kilowatt-hours.The low cost ofits nuclear fuel, being unloaded (left) upon arrival at the station, enabled w . 'l us to initiate about a 50 percent reduction in the fuel l 4\ charges , which make up about 25 percent of a custom-s er's bill. I L , i Coal fired generating stations of the company pro- ! vide efficient, reliable electricity generation. These v .g include Bruce Mansfield station (opposite page. top) in , Pennsylvania and Acme and Bay Shore stations in Toledo. Coal was the fuel source for 4.7 billion kilowatt-hours ( generated by Toledo Edison in 1983. i #9 ' We will continue examining operations at these facilities to keep costs to a minimum. As an example, last 4 3.{- g year a maintenance outage schedule for a unit at Bay

u Shore Station (opposite page, bottom) was revised to ,

! ;4, reduce overtime work. The result was a cost reduction of i about $40,000. Maintenance and operating costs for the total system were reduced $4 million in 1983 thanks to ; the cost-reduction program. Our Bay Shore units have ranked in the top tenof the entire nation's coal-fired stations for efficiency for many years. Bay Shore No. I had a 91 percent capacity factor from 1955, when it came on-line, through 1983. 4 , e e L _ __. I { s I . I

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l .Y w I 4 .t $ 1 , i i . ,u.w '1 w,. r:ll .. . 9 i - 2 ., . . +, , asham . .., L yjyyy22 gig s h,.,.*e ~ ,m v . - ,_ m .3 .. g a g1E w i O l l l ECONOMIC ACTIVITY ON THE UPSWING i l w fj M l 4 6 *'* ~^ ,. e, i / ' _ __ _ . 7;s 'q l 4 l m . , , . l \ Northwest Ohio has been experieneing Toledo'slargestemployer, American Motors-Jeep j renewed business investment. Construction activity (below right), reinvested substantially in production l (below left)in downtown Toledo willlead to new office facilities and recently returned to full employment for j space and hotel and convention facilities. It will also the first time in four years. j bring added tax revenue and jobs. Portside Market-1 place (top), along the Maumee Iliver, is scheduled to ) open in May 1984. Its many restaurants and shops y ,,q.. ., 7 g _ will help bring in commercial business and diversify the economy. Toledo Edison's 12 year-old headquar- ,8 y!] . l' - 4l4 ff , Qq ters is centered in this redevelopment area. i, . . _ _ _ __ _ .i e e e.< ' , . , . Mgi ' ,- + r..' _ j hff(..[i,f-l .., .4 7,4 g i ,; - -; l / _ ( ** ~ L [ k. f. Nft%g,h?b"jn ~' m)m.,. . w; .A'.g ; . [q tf (.. . . : ,, . m .. .v ? luj Wf. .: O l l Financial Analycia tric utilities. Sales of power under these contracts Results of Operations declined in 1983 because many neighboring utilitics had more of their own low-cost generation available. d Earnings per common share were $3.50 in 1983,10 percent higher than last year. The result- Operation and maintenance expenses were ing return on average shareowner's investment of 14.5 reduced reflecting an intense cost reduction pro-percent is the highest return achieved since 1975. gram during 1983. A well planned and efficiently executed maintenance schedule helped to minimize 'Ibtal revenues increased m. 1983 due to higher the costs associated with the Davis-Besse Nuclear kilowatt-hour sales to our retail electric customers Power Station refueling and maintenance outage, and the full year effect of our June 1982 price which started in late July 1983. The outage schedule increase. Sales to electric wholesale customers included inspection and testing of various compo-dechned m 1983 as our municipal customers nents, routine major maintenance and government purchased a portion of their electric needs from required changes. The station returned to service in other suppliers. early October. The Public Utilities Commission of Ohio Depreciation expense increased, due mainly to granted us an annual 1: crease of $23 million in . the increased production from the Davis-Besse unit our retail electric rates in August 1983. Approxi- and the resultant unit-of-production depreciation mately $12 million of the rate increase was due to the provision. An increase in depreciable plant assets melusion of $63 million of Construction Work In also contributed to the increase. Progress (CWIP)in our rate base. The CWIP included in rate base was primarily due to the Perry Nuclear State and local taxes increased due to a higher Unit. In addition, the PUCO allowed us to continue temporary state excise tax rate on increased reve-to amortize over ten years our share of the costs of nues and to higher property taxes resulting from increases in plant assets. In May 1983, the Ohio the four nuclear generating units cancelled by the. public utility tax was temporarily increased from Central Area Power Coordination Group (CAPCO)in 1980 (see Note 6). 4.75 percent to 5.28 percent. The effects of this tem-porary increase expire in April 1984. We are barred We requested a 50 percent reduction in the W sm fmm coMng Ws Mcmase fmm our fu:1 component of our electric rates and received ustomers. The one-time cost to us is $2.5 million, of PUCO approval in August 1983. This reduction was which $1.7 million was charged to expense in 1983. attributed largely to the good operating perfor. The increase in federal income taxes resulted from " '"#"D8' mance of our Davis-Besse Nuclear Unit combined with continued efficient production from our coal-fired Bay Shore Station. The net result of this, com- Allowance for Debt and Equity Funds Used Dur-bined with the rate increase described above, was a ing Construction (collectively known as AFUDC) reduction of our rates by approximately 10 percent. increased substantially due to a higher CWIP base The next revision of the fuel component will be in and higher average AFUDC rates. Through AFUDC, < February 1984. we capitalized a substantial amount of the financing costs associated with our continuing construction We filed a price increase request in November program, including a return on equity funds used. 1983 with tile PUCO for a $61 million increase in retail electric rates. Continuing high financing costs 1 ng term financings in 1983 resulted in associated with our construction pmgram make increased interest and preferred stock ditidend pay- ; these added revenues necessary. The PUCO will ments, as well as more common shares outstanding. probably rule on this matter in the summer of 1984. These financings, which were necessary to fund our construction program, also affected our earnings. Total kilowatt hour sales increased by 3.1 per-cent over 1982. Industrial sales showed a healthy 70.5 percent of 1983 common stock dividends increase indicating that our service area is recover- are not taxable as current income for federal income

ing from the recession. Irading the way in the tax purposes and will be considered a return of Indu: trial category were increases in sales to motor capital instead-vehicle manufacturezs, petroleum refineries and

! foundries. The increase in industrial sales was due Note 11 explains the effect of inflation on our ! to a surge in manufacturing output. Favorable peradons. i weather conditions also contributed to the increase. Liquidity and Capital Resources Fuel and net purchased power decreased in lor 3. Orcater use of low-cost nuclear fuel resulted in We are engaged in a major nuclear construction , e decrease in fuel expense. This was partially offset program that has been, and will continue to be, mod-l by a decline in short term power sales to other elec- ified as necessary for changing economic conditions, t 7 l m a nf Construction expenditures totaled $294 million for industry will probably increase our external financ-1983. Most of this was due to the continuing construc- ing costs and may result in increased levels of short-tion on three CAPCO nuclear generating units: Perry term debt. A reversal of our 1981 extraordinary gain No.1, Perry No. 2, and Beaver Valley No. 2. (See Note 2 (see Note 1) shotdd not affect our ability to issue for additional discussion regarding Perry No. 2.) first mortgage bonds. However, this charge could J These units are currently planned to be in commercial reduce the amount of preferred stock issuable dur- I service between 1985 and 1988. However, an on-going ing the subsequent twelve month period. review of the construction schedule of Perry No. 2 continues by the inembers of the CAPCO group. Our The amount of cash that is provided from inter- ) ownership share m each of these units is just under nal operations depends primarily upon the level of j 20 percent (see Note 5). electricity sales, the timing and amount of rate increases and our ability to reduce or contain cash expenses. Although our net income has increased in Public and private security markets continue to 1983, a substantial portion of that increase is be a major source of our financing. Long-term exter- attributable to AFUDC, a non-cash income credit. We nal financings provided $231 million in 1983. Of expect this condition to continue until the generat-this, we ueed about $161 million to fund the con- ing units under construction are completed and struction pmgram, $43 million to pay off the short- included in our rate base. term debt that existed at the start of 1983, about $14 million to invest in short-term investments at year end and the balance to pay off maturing long-term Our 1984 construction expenditures are obligations. estimated to be $328 million. Most of this will be invested in the three CAPCO units discussed above. Funding of our construction program in the Net proceeds from long-term debt, preferred and future is dependent on obtaining external financing common stock issues are expected to provide about at reasonable terms and the amotmt of carh provided $211 million in external financing for the construc-from internal operations. Our ability to obtain exter- tion pmgram. In addition, we will need $21 million nal financing and the cost of such funds depends for long-term debt maturities and preferred stock upon financial market conditions, earnings suffi- sinking fund requirements in 1984. cient to maintain debt and preferred stock coverage ratios, and changes in our construction program In 1984, nuclear fuel acquisition and related and credit ratings, among other factors. Rating costs will require an estimated $31 million. Tids esti-agencies lowered our security ratings in 1983, mak- mate excludes financing costs. Nuclear fuel financ-ing the cost of raising new capital more expensive. ing arrangements are in place covering these Recent adverse developments in the nuclear power expenditures (see Note 8). AUDITORS' REPORT 'Ib The Shareewners and Board of Directors of The 'Ibledo Edison Company We have examined the balance sheets and state- In our opinion, subject to the effect on the finan-ments of capitalization of The 'Ibledo Edison Company cial statements of such adjustments, if any, as might (an Ohio corporation) as of December 31,1983 and have been required had the outcome of the uncer-1982, and the related statements of results of opera- tainty discussed in the preceding paragraph been tions, earnings reinvested and source of ftmds known, the financial statements referred to above pre-invested in plant and facilities for each of the three sent fairly the financial position of The 'Ibledo Edison years in the period ended December 31,1983. Our Company as of December 31,1983 and 1982, and the examinations were made in accordance with generally results of its operations and the source of funds accepted auditing standards and, accordingly, invested in plant and facilities for each of the three included such tests of the accounting records and years in the period ended December 31,1983, all in Cuch other auditing proceduren as we considered nec- conformity with generally accepted accounting prin-essary in the circumstances. ciples applied on a consistent basis. As discussed further in Note 1, the PUCO has ordered that the extraordinary gain on an exchange of common stock for bonds recognized in 1981 be reversed and amortized over twenty years. The Com- Arthur Andersen & Co. pany has appealed this decision and cannot predict 'Ibledo, Ohio, the outcome of this matter. January 30,1984. 8 Results of Operati:ns For the years ended December 31, (thousands of dollars) 1983 1982 1981 REVENUES AND OTHER INCOME Electricity sales to retail customers 478 547 452 687 413 436 Electricity sales to wholesale customers . 16 824 20 508 21 417 Gas and steam heating sales 9 245 8 530 7 431 Other income . . . . . . . . 1 617 1 017 8 852 506 233 482 742 451 130 EXPENSES Fuel and net purchased power . . 125 075 127 658 122 442 Operating and administrative . 77 632 75 834 63 976 Maintenance of equipment and facilities . 32 734 38 839 31 908 Depreciation and amortization . . 51 138 43 838 43 427 Stato and local taxes 45 210 41 260 36 699 Debt interest . . . 108 612 94 713 86 310 Allowance for debt funds used during construction . . (30 443) (22 505) (15 491) 410 858 399 637 369 271 Income Before Federal Income Taxes 95 375 83 105 81 865 Federal income taxes . 32 016 26 277 31 226 Income From Operations 62 759 56 828 50 639 Allowance for equity funds used during construction 65 585 48 706 32 498 N:t Income . .. . . . . 128 344 105 534 83 137 Preferred stock dividends . 30 129 26 221 23 542 Earnings Before Extraordinary Item . 98 215 '70 313 59 595 Extraordinary gain (exchange of common stock for bonds) - - 10 807 EARNINOS ON COMMON STOCK . 98 215 79 313 70 402 Av; rage Number of Common Shares Outstanding (thousands) 28 040 24 017 21 507 EARNINGS PER COMMON SHARE Before extraordinary gain . . . . $3.50 $3.18 $2.77 After extraordinary gain . . . . $3.50 $3.18 $3.27 RETURN ON AVERAOE COMMON EQUITY (before extraordinary gain) . . . . 14.5% 13.3% 11.6% The notes on pages 13 through 18 are an integral part of this statement. . 9 l Balance Sheet 1 necemher 31 1 (thousands of dollars) 1983 1982 Property, Plant and Equipment Plant in service . . .. . .. 1 358 467 1 306 677 Less accumulated pmvision for depreciation . . . 324 826 285 453 1 033 641 1 021 224 Construction work in pmgress . . .. 1 118 802 878 535 Nuclear fuel in service, at amortized cost .. 22 904 18 390 2 175 347 1 918 149 Current Assets Cash and temporary cash investments . 16 005 1 639 Accounts receivable - net . .. 51 225 44 550 Fossil fuel, at average cost . . . 25 145 36 818 Materials and supplies, at average cost . . 11 457 10 680 Prepaid taxes . . . . . . . . 16 495 14 330 Special deposits and other . .. . . . 15 396 9126 135 723 117 143 Other Assets Pmperty taxes - subsequent years . . . . . 20 984 20 947 Deferred charges - cancelled generating projects . . .. 38 074 42 902 Quarto coal costs . . . 11 678 11 618 Miscellaneous . . . . . . 19 972 14 064 90 708 80 531 'Ibtal Assets . . . 2 401 778 2 124 823 CAPITALIZATION AND LIABILITIES Common shareowners' equity . .. . . . 715 584 617 127 Cumulative preferred stock . ... . . ... 200 000 170 000 Cumulative preferred stock with mandatory redemption provisions 94 002 95 027 Long-term debt . . . .. .. 984 976 875 859 1 994 562 1 758 013 Nuclear Fuel Obligations Nuclear fuel trust . . . . . . . .. 41 513 34 780 Nuclear fuellease . . . . .... . 14 715 10 309 56 228 45 089 Current Liabilities Short-term notes payable . . . . 43 000 Iong-term obligations due within one year . . .... 29 508 13 184 Accounts payable . . . . . . ... 44 152 31 354 Accrued taxes ..... . . .. ... ..... 48 665 46 231 Accrued interest . .. . .... .. .. 23 489 20 556 Dividends declared . . . . .. . ... . .. 26 505 22 798 Accrued expenses and other . . ........ 8 003 7 979 181 222 185 102 Accumulated Provisions and Other Deferred federalincome taxes Accelerated depreciation and amortization ..... ... . 77 426 66 488 Cancelled generating projects . . .. . .. ... . 14 905 16 714 Pmperty taxes and other . . . ... ... ........ 21 570 14 755 Investment tax credits . . . . . ...... ........ 40 104 30 963 Deferred credits and other . . . ... . . .... .. . 15 701 7 699 169 766 136 610 'Ibtal Capitalisation and Liabilities . . . . ....... 2 401 778 2 124 823 The notes on pages 13 through ts are an integral part of this statement 10 - COpitalization December 31 -(thousands of dollars) 1983 1982 Common Shareowners' Equity Common stock $5 par value, (in thousands) 40,000 shares authorized. (Outstanding shares - 29,669 and 26,223). .... ... .. . 148 343 131 116 - Premium on capital stock . . .. . .. . . . 379 766 325 540 Earnings reinvested in the business . . .... . .. .... 187 475 160 471 715 584 617 127 Cumulative Preferred Stock Annual 1983 Current Dividend Shares Outstanding Redemption ! Rate (thousands) Price Not subject to mandatory redemption. $100 par value $ 4.25 $ 4.56 310 $101-$105 . . . 31 000 31 000 $ 7.76 - $10.00 590 $103 - $106 .. . 59 000 50 000 Not subject to mandatory redemption. $25 par value $ 4.28 800 $ 32 . .. . . 20 000 20 000 2.21 1 000 27 .. . ... 25 000 25 000 2.37 1 400 29 . . .. 35 000 35 000 3.47 1 200 31 . . ... 30 000 - 200 000 170 000 Subject to mandatory redemption provisions. $100 par value $11.00 60 $111 . . ... 6 002 7 027 9.38 250 107 . . .. 25 000 25 000 13.25 130 111 . ... 13 000 13 000 12.65 200 113 . . ..... 20 000 20 000 14.80 300 115 . . ... 30 000 30 (X)O 94 002 95 027 Long Term Debt First Mortgage Bonds, excluding current maturities Maturities Interest Rates 1984 3%% .. . .... . . . ... . 14 000 1985 9.35% . . . . ..... . ... . . . 50 000 50 000 1986 3%%. ... .... ... .. ... 15 000 15 000 1988 4% . .. .. . . . . .... 15 000 15 000 1990 -1993 13%- 16%% . . .. ........ .... 265 000 105 000 ( 1997 -2000 6% - 10% . ... ... . . . . ... ... 66 378 66378 2002 -2006 7 % - 0.65% . . . . . . . . . . ... .... 111 725 111 725 l 2008 -2013 9% -15% . .. . ... .... .. . .. 246 000 186 000 Discount in pmcess of amortization . . . ..... ..... .. (727) (544) 769 276 653 450 Other Long 'Ibrm Debt, excluding current maturities Notes. 8.75%, due 1985 - 1997 .. . .............. DO800 103 400 'Ibrm bank loan, average interest rate 10.08%, due 1987 1989 .... 50 000 SO 000 Pollution control notes 5.71 - 7%%, due 1985 - 2009 . . . . ..... 37 400 37 500 Pollution control loan agreement,0.93 - 10%, due 1990 - 2010 . . . . . 31 500 31 500 984 976 875 859 'Ibtal Capitalisation. . . . ........ . ... . . . . 1 994 562 1 758 013 The notes on pages 13 through 18 kre an integral part of this statement. 11 i L___ ~ Earnings Reinve-ted For the years ended December 31. (thousands of dollars) 1983 1982 1981 Balance, at the beginning of year . . . . . 100 471 142 220 122 7.3 Add - Net Income . . . . . . . 128 344 105 534 83 137 Extraordinary gain . . 10 807 Deduct - Preferred stock dividends declared . 30 803 20 700 24 222 Common stock dividends declared . . . 70 537 00 517 50 245 Earnings Reinvested During The Year . 27 004 18 251 to 477 Balance, at the end of year . . 187 475 100 471 142 220 Source of Funds Invested in Plant and Facilities For the years ended Ikeember 31. (thousands of dollars) 1983 1982 1981 Provided From Internal Sources Net income . 128 344 105 534 83 137 Principal non-cash items: Depreciation and amortization . . 51 138 43 838 43 427 Deferred fedetal income taxes . . . 18 523 13 380 13 205 Investment tax credits - net . . . O201 13 303 0 400 'Ibtal allowance for lunds used during construction . . (90 028) (71 211) (47 080) Other - net . . . . . . . . . 1818 1834 1 400 Funds provided from operations 112 000 loti 708 102 730 Dividcuds . . . . . . . (101 d40) (ti7 28J, (74 40's) Ileinvested funds provided from operations . . 11 050 10485 28 200 Net change in current assets and liabilities, and other accounts 20034 (0 008) 3 000 'Ibtal allowance for funds used during construction . 90 028 71 211 47080 Provided from internal sources . . . . 134 318 80008 70 807 Provided From External Financing Sale of Securities: Common stock . . . . . . 71 453 48 700 51 700 Preferred stock . . . . . . . . . . 30 000 20 000 30 000 First mortgage bonds , , . . . . . 130 000 120 000 70 000 Conversion of short-term debt to a term bank loan . . - - 50 000 Net change in short term borrowings . . , . . . (43 000) 20 500 (60 500) Net change in temporary cash investments . . . . . (14 178) 2 533 4 482 Iledemption oflong-term debt and preferred stock . . . . . (7 025) (40 473) (15 840) Net change in nuclear fuel obligations . . . . . . , . . 13 304 44 838 (2 707) Provided from external financing . . . . . 180 014 210 008 121 051 Totct Sources Of Funds . . . . . . . . . . . . . . 314 332 200700 200 018 Construction Expenditures . . . . . . . . . . . . . . 204 010 248 515 200 018 Increase in Capitallred Nuclear Fuel . . . . . . . . . 20 322 48 281 - INVESTED IN PLANT AND FACILITIES . . . . . . . . . . 314 332 200 700 200 018 -- r- - - - m . _.____, l The mtee on pages 13 through IH are an integral part of themn statements 12 Suumary of Significant Accounting Policies General Depreciation and IWalutenance Our accounting records are maintained in accord- The company provides for the depreciation of the ance with the Uniform System of Accounts as pre- original cost of pmperties, except for the Davis Besso scribed by The Federal Energy Hegulatory Commission Nuclear Ibwer Station, over their estimated useful lives (FERC) and adopted by The Publio Utilities Commission on a straight line basis. Depreciation expense on the of Ohio (PUCO). Davis-Besso Nuclear Ibwer Station is based on the unit-of production method. This includes a provision for our , Revenues sharo of the total estimatal decommissioning costs of j Customers are billed on a monthly cycle basis, $53 million. The straight line provisions for deprecia- < based on rates authorimd by the PUCO that are applied tion averaged 3.0 percent in 1983,3.5 percent in 1982 to clectricity consumption. The larger industrial and and 3A percent in 1981. wholesale customers are billed on a month end meter-reading basis. Maintenance expenso includes repairs of property and renewal of minor items. Costs of replacements and Frl those renewal items that are units of property are The compiuty collects estimated fuel costs over sub- charFed to the utility plant accounts. For retired prop-smiuent six month timo periods through a fuel recov. erty, wa take its cost plus removal cost, net of salvage, cry rate. The rato is based on actual and partially and charge it to accumulated provision for depreciation. projected costs and generation. The PUCO reviews and ) epproves the pmjected rate and historical performance. Taxes i The difference between actual and estimatai fuel The company provides for deferred federal income charges aro deferred until they are applied to the cur. taxes as required on the differences between straight-tomer's bill. This enables us to better match fuel lino depreciation and tax depreciation amounts for

expenses with fuel adjusted revenues. pmperty additions since December 31,1973. For tax

; The company charges the cost of nuclear fuel to pups, an inmspsu am dm!W as tMy amr, fu:1 expenso based on the rate of consumption. In addi- #* # " " * * " " '"Eu""*d I # real property."Other depreciation timing differences tion, the estimated nuclear fuel disposal costs are am mn n ra s in tM par mat they aUect taus , included in fuel expense. The company contracted with paya Hem such taws can im mmwn'd in the Department of Energy (DOE) for permacent dis- "" ", posal of spent nuclear fuel. For fuel used tmfcro 1983, $u"jt d " "P " i ns' we owo the DOE $8.0 million, which will be paid on or citer June 1985. Wo have already collected $4.0 million For certain pmporty, the company receives invest-fmm our customers and have requested additional re e- rnent tax credits that are deferred and added to income nues of $4.3 million in our current PUCO rato caso. For over the life of that property. Unreallzmi investment tax , fu:1 used af ter April 1983, we are currently collecting credits from 1930 to 1983 total $33.1 million. We will the fee from our customers and paying the DOh. record them as they are used in futuro years. Hetirement Income Plan Property, Plant and Equipment ' Our retirinnent incomo plan is non contributory I'mporty, plant and equipment is stated at original and covers all employee gmups. The company funds cor,t. Includut in the costs of construction are such each year's cost and amortlwa unfunded past service items as related payroll taxes, penslons, fringo tenefits, costs over a 30 year period. Ihnsion cost is based on management and general overheads and allowanco estimatal salary levels and mervice ytars of employees for debt and couity funds used during construction at their retirement. 'Ibtal pension costs were: $4.3 mil- MFUDCL AFilDC mpresents the estimatal composito lion in 10M3: $4.4 million in 1982; and $3.7 million in debt interest and equity costs of capital funds used to 1981. Experienco gains and losses are amortized over finance construction. Theno costs are charged to pmp. 15 yeam. erty, plant and mluipment and crmlital to incomo as l The actuarial prenont vnlue of total vested and AFU DC on the llenults of Operations statement. Our l nonvestml plan Imnorits is basmi on salary levels and AFUDC rates, net of. tax, ranged from 10 percent to years of employees' service as of January 1 for each 10% percent in 10H3. 0% percent to 10% percent in 10H2, year. Theso wero: $42 million and $6 million in 1983; ami H% percent to H W Imrcent in 10Hl. and $30 million and $6 million in 1982. The weightml tverage assummi rate of return usmi in determining these values was H percent for both IDH3 and 1DHg, Meelassificptions Market value of net assets available for benefits Certain reclassifications have imem mado in the amountal to $75 million as of January 1,1983 and ShM prior years' amounts to make them comparable with million as of January 1,19H2, 1983 claasifications. 13 Notes to Financial Statements December 31,1983 (1) Possible Charge Against Earnings As part of the June 1982 and August 1983 rate case In November 1981, wo exchanged D40.293 shares of decisions, the PUCO prescribed an accounting method common stock for $25.0 million of outstanding bonds different from the one used for this gain. The PUCO owned by an investment banking firm. The stock's required that this gain be treated as a dorm red credit exchange value was $10.025 per share. This exchange and amortized over 20 years. We opposed this decision i provided a non taxable extraordinary gain of $10.8 mil- and have it on appeal to the Ohio Supreme Court. lion. This is the difference between the value of the stock traded and the principal amount of the bonds redeemed An unfavorable decisica would result in a reversal of plus their accrued interest, the extraordinary gain. This would involve an extraordi-i . nary charge against current earnings of $9.5 million, or l 32 cents per share, based on the number of common shares outstanding at December 31,1983. (a) Petition on Perry No. 2 Construction if the construction of Ibrry No. 2 is not completed and we are not provided a means to recover our invest-In September 198't, the Ohio Ofrice of Consumers' ment in the unit, we could be required to immediately Counsel (OCC) and several other parties filed a petition write off that investment including any cancellation with the PUCO and the Ibwer Siting Board of Ohio (the charges agidnat current earnings. Our investment in board) asking that the PUCO and the board investigate Ibrry No. 2 approximated $203 million at December 31 the need for the 1.205 megawatt Ibrry No. 2. The pett- 1983. Our net of. tax write off at December 31.1983 tion also asked the PUCO and the board to order the Ohio would be $135 million, which would reduce Earnings CAPCO companies to stop construction of I%rry No. 2 Heinvested from $187 million to $52 million. This reduc and prevent them from accruing further AFUDC on that tion in Earnings Heinvested would have to be replaced unit. Finally, the petition asked the PUCO and the board with additional common equity funds. The amount of l not to approve the issuance of securities to finance cancellation chargea and other costs payable if work on further construction of Ibrry No. 2. The petition alleges Ibrry No. 2 were to be stopped is not presently determin-l that the completion of Ibrry No. 2 will result in an able, but could be substantial. AFUDC related to Ibrry i unreasonable level of excess capacity and that the remit- No. 2. which accrues in increasing amounts, was $10 ing atem charged to customers would be excessivv. militon m 198J. Any terminat;on of the accrual of such AFUDC before Ibrry No. 2 is included in rate base would reduce earnings by the amount of AFUDC that would otherwise have twen accrued. (3) Federal Income 'hr Detalle 8upplementary information regarding federal income i taxes is set forth in the following tables: l (thousands of dollarn) _ (thousands of dollars) Fbr the yenre endal Iwemt=*r aI, 1983 1982 1981 For tha yearn ended thumter 31, 1993 1987 1981 l FEDEHAI4 INCOME TAX EXPENSE FEDEHAI,1NCOME TAX EXPENSE l WASCOMPUTED AH FOI!DWH DETAllR AHE AS FOt.!DWS. l Thz at statutory rates on Currently payabW . . . . . . . 2 441 1930 7477 I pro. tax income . . . . . . . . . . . 74042 60 633 57578 investment tax cmitts - "'I I"g'["g$",$,I",t Defermt .. .. ........... 13127 14334 10 119 Allowante for funds used Amortimt . . . . . . .. .... . (1 439) (940) (653) i I during runstruction . . . . . . (42270) (32 521) (22075) Prior year adjust ment . . . . . . (65) (2857) 233 Extraordinary gain fmm Deferral taxes - etchangeof common Accelerated depreciation (not) 11 179 11806 12377 stock for innds ... ..... - - (4 971) g g g ^ " ,$MI",""" Defermt fuel coats . . . . . . . . 3 276 1886 2435 depreciation differences . . 3 286 428 2375 Other pmvisions . . . . . . . . . . . 5906 (350) 356 Miscellaneous . . . . . . . . . . . . (2442) (2263) (1681) .Ibtal federal '!btal federalincome tax income tax espensa .. . 32616 26277 31226 expensa . .. 32616 26 277 31726 , 14 m (C) Cuarto Coal Arrangements b. Coal Cost Deferral e, Coal Supply Contracts At present, the average cost of Quarto coal is higher The CAPCO companies have made long-term than other coal currently available. Prior to July 30, arrangements with Quarto Mining Company (Quarto) 1982, the PUCO had ordered us not to charge customers to supply coal to the Mansfield units. The CAPCO com- more than market prices. We deferred the difference panies each have agreed to guarantee their respective between market price and actual cost. Beginning on chares of Quarto's debt and lease commitments incurred July 30,1982, the PUCO permitted us to recover addi-to develop and equip the mines. As of December 31,1983, tional Quarto coa! costs plus a portion of cost deferrals our share of the guarantees was $27.8 million. Our share under a revised market price formula. We had recovered of these commitments incurred prior to 1983 is 6 39 per- $3.0 million of deferred Quarto coal costs in rates cent. Our share of commitments incurred after Decem- through July 1983. In August 1983, the PUCO order.d ber 31,1982 will increase in steps from 6.89 percent to us to discontinue recovery of Quarto coal costs in excess 12.4 percent in 1986. of market price, pending further consideration of this matter. Accordingly, we resumed the deferral of the dif-Our coal supply contract with Quarto expires ference between market price and actual cost. December 31,1999. Under its terms, the pricing pmvi-sions reflect Quarto's production costs and deferred A January 1984 PUCO order permits us to recover mine development charges. Our total purchases under specified Quarto coal costs plus a portion of cost defer-these contracts amounted to $14.5 million in 1983, $12.4 rals within a specified six-year period using a "new million in 1982 and $15.5 million in 1981. market price" formula. In the event that we do not recover a* least one-sixth of our deferred fuel costs of Under these arrangements, we expect our mininc n 811.7 milli n as of December 31,1983 in any of the next vearly payments for fixed charges on debt and lease six years beginning in 1984, the amount of previous cost deferrals not so recovered in that year shall be written commitments to decline irom $6.6 million in 1983 to $5.8 million in 1988. off to expense. The "new market price" formula also pro-vides for the recovery of current Quarto coal costs to the extent that such costs do not exceed 125 pe cent of market price. Quarto coal costs in excess of 125 percent of mrcket price must be written off to expense. We believe current and deferred costs will be recoverable within the periods specified by the PUCO. (7) CAPCO Power Pooling Arrangements The company has entered witit four other utilities based on our ownership share, is currently estimated at into a power-pooling arrangement (known as CAPCO), completion to be $1.8 billion. in the interest of reliability and economy. This involves substantial commitments for generation and transmis- We provide our cwn financing for this investment. sion facilities. " Expenses" in Results of Operr.tions includes our share of direct expenses for operation of three CAPCO units CAPCO is currently building three nuclear gencr- presently in service. ating units. We are obligated to pay for our shar e of each of these units under construction and related nuclear The following represents our ownership in each of fuel inventory. Our total investment in the three units, the CAPCO units at December 31,1983: Actual or Ownership Ownership Plant Accumulated Generating Unit (Scheduled) Share Construction Megawatts Fuel In-Service Depreciation Work in Pmgress (thousands of dollars) Davis-Besse No. I 1977 48.62 % 428 Nuclear 429300 52700 Mamfield No. 2 1977 21 200 17.30% 135 Coal 69 900 11 700 Man: field No. 3 1980 800 19.91 % 159 Coal 128400 14900 800 Under Construction: , Perry No.1 (1985)*!" 1991'# 240 Nuclear Beaver Valley No. 2 462 400" l (1986) 19.91% 166 Nuclear 15700* Perry No. 2 381 900 (1988)"* 19.91% ~240 Nuclear - - 203 000

Common facilities with Beaver Valley No.1

** Includes common facilities for Perry No.1 and Perry No. 2

Currently, construction at the Perry site is being concentrated to complete basic constrsction of Perry No.1 in 1985 and to minimize expenditures on Perry No. 2 pending future rescheduling.

15 l 1: (!) Previously Cancelled Generating Projects amortization on our books at.d allowed a specific addi-In January 1980, the company, along with the other tional risk factor as additional return on common equity CAPCO companies, cancelled the construction of four in our rates. This treatment was affirmed by the Ohio nuclear generating units. All cancellation costs related Supreme Court. to these units have now been paid. In our August 1983 rate order, the PUCO again pro-In April 1981, the PUCO approved rate recovery vided incremental revenues to recover these costs f of these costs over a ten-year period as an operating through the method used to calculate the allowed rate of expense. Since April 1981, we have been amortizing these return on common equity. The PUCO reaffirmed the con- ! costs to expense over that ten-year period. tinued amortization of these costs over a ten-year period ending in 1991. In June 1982, the PUCO disallowed recovery of these costs as an operating expense, based upon a 1981 Ohio The amortization of these costs amounted to $4.9 Supreme Court decision. This disallowance has been million in 1983, $4.7 million in 1982 and $3.3 million in appealed to the Ohio Supreme Court and the decision is 1981 and is classified in depreciation and amortization still pending. The PUCO did allow continued ten-year on the Results of Operations statements. (7) Capitalization c. Cumulative Preferred Stock With Mandatory

a. Capital Stock Transactions Redemption For the years ended The company held 10,335 shares at December 31, Dacember 31. 1983 1982 1981 1983, and 4,730 shares at December 31,1982 of the

$11.00 series as treasury stock. CAPITAL S'IOCK SII ARES SOLD (RETIRED): Common stock The sinking fund requiremerits for the various Public sales 2500 000 2 200 000 2053707 series of Cumulative Preferred Stock are: Exchange of common d*"d stock for bonds . - - 946 293 Nuh hh hhhm Shareowner Dividend $ 11.00 5 000 1979 Reinvestment and Stock Purchase Plan . 945 474 574 680 300 201 9.38 16650 1985 'Ibtal common shares 3 445 474 2774 680 3300 201 14.80 12 000 1987 Cumulative preferred stock Public sales, $25 par $4.28 series , 800 000 - The shares of the above series may be purchased at $3.47 series 1200000 - - the sinking fund redemption price of $100 per share plus Cumulative preferred stock accrued and unpaid dividends. Future sinking fund with mandatory redemption redemption requirements are: $500,000 in 1984; Public sales, $100 par $2,165,000 in 1985; $3,831,000 in 1986 and $5,031,000 $14.80 series - - 300 000 in 1987 and 1988. Retirement, $100 par d. Long-Term Debt $11.o0 series (5000) (5 000) (5 000) The annual interest requirement on long-term debt (thousands of dollars) outstanding at December 31,1983 is $109.2 million for PREMIUM ON CAPITAL S'IOCK: an average interest rate of 11.13 percent. This includes Balance, beginning of year 325 540 290713 255 508 amortization of debt discount and expense but excludes Premium, net of expense - - interest on the nuclear fuel obligations. Common stock . 52502- 33783 35569 Preferred stock i724 1 044 (364) Sinking fund redemption requirements and sched-Balance, end of year 379 766 325540 290713 uled maturities for long-term debt, cxcluding nuclear fuel leases, through 1988 are as follows: Sinking Fund

b. Cumulative Preferred Stock Redemption Scheduled We are authorized to issue 3,000,000 shares of $100 Requirements Maturities par and 8,000,000 shares of $25 par Cumulative Pre- (thousands of dollars) f;rred Stock under car amended articles of incorpora- 1984 3 600 20700 tion. The annual dividend requirement on Cumulative 1985 3600 56700 Preferred Stock outstanding at December 31,1983 is 1986 3 450 21700

$31.2 million for an average dividend rate of 10.61 1987 3 450 23 367 percent. 1988 3 300 38 367 16 In addition, the first mortgage bond indenture pro- The mortgage securing first mortgage bonds issued vides for a required annual payment after certain cred- by us constitutes a direct first mortgage lien on substan-ite, as defined, to the Trustees as a Maintenance and tially all property and franchises owned by us. This does Heplacement Fund. We have been satisfying the require- not include expressly excepted property, such as cash m nts under the indenture by pledging more property and securities, accounts receivable, fuel, supplies and additions which might have otherwise been used as the automotive equipment. basis for the issuance of additional bonds. (;) Nuclear Fuel Financings In November 1982, the CAPCO companies created In September 1983, we capitalized our share of the Davis-the Central Area Energy Trust (the trust). The trust will Besse No.1 fuellease related to the portion of the oversee the financing of procurement, conversion and nuclear fuel loaded into the reactor. This is in accord-enrichment stages of nuclear fuel for the CAPCO units. ance with the provisions of PUCO orders. Total commit-Each company's role in the trust is independent of its ments under the lease arrangements were $123.2 million ownership share of any CAPCO unit. Also, each com- at December 31,1983. pany's rights and requirements in connection with the trust are separate and distinct from the other com-Financing under these agreements, including the panies. As of December 31,1983, we have an obligation of $41.5 million to the trust. This includes $4.7 million trust, of up to $298 million is available. We expect our in capitalized interest incurred through December 31, nuclear fuel leasing arrangements to be adequate through 1985. Estimated paymen 1983. The 1983 interest was calculated at an average rate of 10.6 percent. includmg mterest, are: $12.1 milh,ts based on in 1984; on$33.0 burn-up, mil-lion in 1985; $42.0 million in 1986; $45.4 million in In addition, the company has lease arrangements for 1987; and $69.4 million in 1988. nuclear fuel to be loaded into the CAPCO nuclear units. (2) Short-Term Borrowing Arrangements We had $96.1 million in unused credit lines at whereby banks expect us to maintain average deposits December 31,1983 with various banks and pay commit- equal to 5 percent to 20 percent of the line of credit, ment fees for about two-thirds of those lines. The rest are depending on the borrowed amount. The deposits provide based on. informal compensating balance arrangements, operating balances for us and are not legally restricted. (15) Selected Quarterly Data (Unaudited) The following quarterly results reflect all adjust-ments (that are of a normal recurring nature) to ensure a fair statement of results for such periods: (thousands of dollars) (dollars per common share) Earnings Market Price *

Three months Hevenues and Income before Net on Common Dividends ended Other Income Income'lhres Income Stock Earnings Paid High Iow 19_8L March al 129 457 20403 28 845 22031 84 41 22W June 30 20 126722 19 259 28 536 20 903 .78 September 30

.61 22 % 20K 131 978 35167 40 064 32218 1.10 61 21 % 19 December 31 118 076 20 546 30899 23063 .78 .61" 21 % 17% ! 1082 March 31 124738 23 841 25 650 19 683 .84 .59 17% - ib% June 30 112217 15983 24 078 17387 September 30 126914 27757 .72 .59 .184 16h 32 108 25359 .98 .59 19 % 16 December 31 - 118873 15 524 23698 16 884 .65 .59 21 % 18 %

The Common Stock is listed on the New York Stock Exchange. The price quotations am twm The Wall Street Journal The number of common stock shareholders as of December 31,1983 and 1982 were 87781 and 86.710, mspectively.

** The dividend decland in December 1983 and paid in January 1984 was increased to 83 cents per share. 17 l (11) Effects of Changing Prices (Unaudited) The following financial information shows the During a period of inflation, issuers of debt experi-cffects on our company of general inflation (Constant ence an economic gain. This is especially important for Dollar Accounting) and changes in prices of specific us due to the substantial amounts of debt issued to assets, namely property, plant and equipment (Current finance our construction program. This gain is shown Cost Accounting). in the following statement under the caption " Gain from decline in purchasing power of net amounts owed" Constant dollar amounts represent historical dollars etated in terms of dollars of equal purchasing power, as The comparative Constant Dollar and Current Cost measured by the Consumer Price Index for All Urban values of allitems on the income statement, except depre-Consumers (CPI). Current cost amounts reflect the ciation, represent the amounts recorded in the historical ' changes in specific prices of plant from the date the plant cost income statement. Income taxes are not adjusted i was acquired to the present. The current cost of plant because current tax laws do not allow for the inflation ) estimates the probable cost of replacing existing plant effect on capital investment. We have calculated deprecia-assets and was determined by indexing the surviving tion provisions, for the current year, on the Constant plant by the Handy-Whitman Index of Public Utility Dollar and Current Cost amounts of property, plant and Construction Costs. equipment. We figured this by applying the ratio of the provision for depreciation over the average property, Because our rates are regulated, we cannot recover plant and equipment on the Historical Cost basis, to the through revenues any more than the original cost of indexed plant values. plant assets, even though the cost to replace such assets will substantially exceed the original cost. In 1983, the The following table shows the net effect of inflation added cost, due to inflation, of replacing our plant assets on common stock equity in 1983: is shown in the following statement under the caption: Cur nt Co tant " Inflation effect during 1983 on capital investment." Accounting Accounting Inflation effect during 1983 on capital investment: (millions of dollars) Increase in specific prices to current costs . - 171 Effect of change in general price level . - (147) Reduction to net recoverable cost . (52) (72) Additional provision for depreciation . (28) (32) (80) (80) Gain from decline in purchasing power of net amounts owed (primarily debt) 54 54 Tbtal effect of innation on common stock equity. [26) (26) The table below presents selected operating and reportable as an additional provision for depreciation financial data for the past five years adjusted for infla- were deducted from the reported amount of such income. tion as measured by the CPI. Earnings on common stock We revised the 1982 data to reflect actualindices. and earnings per share are shown as if only the amount (millions of dollars except per share amounts) 1983 1982 1981 1980 1979 General Innation (constant dollars) Operating Revenues . . . . . . 505 497 485 486 501 Earnings on Common Stock 70 53 34 36 29 Earnings per Common Share ... . 2.52 2.14 1.59 1.89 1.70 Dividends Declared per Common Share . . . . 2.46 2.46 2.52 2.66 3.02 Market Price per Common Share (year-end) . 18.00 21.84 17.82 18.69 23.18 Specific Prices (current cost) Earnings on Common Stock 66 49 28 32 23 Earnings per Common Share . . . . . . . . . . . 2.37 1.96 1.30 1.66 1.39 Increase in General Price level Over (Under) Increase in Specific Prices (24) (42) 5 84 77 Net Plant . 3951 3 555 3177 2804 2 390 General Information Gain Fmm Decline in Purchasing Power of Net Amounts Owed . . . . . . . . . 54 45 93 113 102 Net Aasets at Net Recoverable Cost 702 610 532 457 408 Consumer Price Index - Annual Average 298.5 289.1 272.4 246.8 217.4 - Year End 304.1 292.4 281.5 258.4 229.6 18 Finanil Revhw-Rev:nues and Other Income (thousands of dollars) idtal Gas & Revenues 1btal 1btal Steam Other & Other War Residential Commerual Industrial Other Retail Wholesale Electric Heatmg income income 1983 161 275 105 482 169 672 42 118 478 547 16 824 495 371 9 245 1 617 506 233 -1982 153 662 101 789 158 930 38 306 452 687 20 508 473 195 8 530 1 017 482 742 1981 138 781 93 863 151 539 32 253 413 436 21 417 434 853 7 431 8 852 451 136 ( 1980 126 085 80 836 137 860 28 458 373 239 21 647 394 886 6 982 879 402 747 1979 113 464 72 354 128 931 25 119 339 868 18 839 358 707 6 414 1 017 366 138 , 1973 40 696 27 300 43 632 10 426 122 144 4 271 126 415 2 732 227 129 374 l Expenses (thousands of dollars) Fuel & Net Depreciation Federal Purchased & State & Debt AFUDC- Expenses Incorne Income Year Ibwer Operation Mamtenance Amortization In;al hxes Interest Debt Before FIT Before FIT hxes 1983 125 975 77 632 32 734 51 138 45 210 108 612 (30 443) 410 858 95 375 32 6?.1 1982 127 658 75 834 38 839 43 838 41 260 94 713 (22 505) 399 637 83 105 26 277 1981 122 442 63 976 31 908 43 427 36 699 86 310 (15 491) 369 271 81 865 31 220 1980 155 771 55 842 29 319 26 002 31 202 70 866 (15 148) 353 854 48 893 10 158 1979 146 869 44 691 21 137 29 117 29 760 52 584 ( 9 991) 314 167 51 971 16 888 1973 42 507 22 098 7 471 12 318 11 822 14 126 -

110 342 19 032 5 746 Income (thousands of dollars) Common Stock (dollars per share and %)

Return Income Preferred Earnings Average on From AFUDC- Net Stock on Shares Average Dividends Market Price Book War Operations Eqwty Income Dividends Common Outstandmg Earnings Eqmty Declared High low Year End Value 1983 62 759 65 585 128 344 30 129 98 215 28 040 3.50 14.5 2.46 22.50 17.50 18.00 24.12 1982 56 828 48 706 105 534 26 221 79 313 24 917 3.18 13.3 2.38 21.13 15.75 21.00 23.53 l 1981 50 639 32 498 83 137 23 542 59 595" 21 507 2.77" 11.6 " 2.30 18.38 15.00 16.50 23.46 1980 38 735 28 443 67 178 18 021 49 157 19 226 2.56 10.5 2.20 20.75 15.00 15.88 23.77 1979 35 083 23 512 58 595 13 894 44 701 16 848 2.65 10.7 2.20 23.38 17.38 17.50 24.15 i l 1 1973 13 286 10 282* 23 568 3 911 19 657 6 282 3.13 14.3 1.94 30.88 23.13 26.88 22.20 l l I 'In 1973. allowance for debt furds was included in allowance for equity funds. "In 1981, excludes extraordinary gain from exchange of common stock for bonds (after gain earnings on common - $7o.402; earnings , per thare - $3.27; return on average common equity - 13.5 percent). l 19 J l F Staticti al Revisw Electric Sales (millions of kilowatt-hours) Electric Customers (end of year) Residential Usage Annual Price Annual KWII Ivr Revenue Industrial I4r KWII I4r War Resulential Commercial Industrial Wholesale Other 1btal Residential Commercial & Other 1btal Customer ECents) Customer 1983 1 915 1 341 3 127 320 428 7 131 242 959 23 694 3 864 270 517 7 900 8.44 665 1982 1 911 1 325 2 873 395 414 6 918 241 492 23 495 3 815 268 802 7 906 8.04 636 1981 1 919 1 294 3 080 449 409 7 151 241 663 23 573 3 844 269 080 7 966 7.23 576 1980 1 971 1 282 3 165 560 410 7 388 240 142 23 532 3 818 267 492 8 232 6.40 527 1979 1 934 1 256 3 559 559 401 7 709 238 353 23 636 3 695 265 684 8 166 5.87 479 1973 1 552 1 085 3 249 356 349 6 591 218 105 21 399 4 119 243 623 7 187 2.62 188 l l l Load (megawatts) Energy (millions of kilowatt-hours) Fuel I Net Purchased Capability load Reserve & Net Fuel Cost Efficiency at Time 1%ak Factor Factor Generated Interchanged Ivr KWil BTUI%r War off%ak Ioad (80 (H Fossil Nuclear 1btal Ibwer Ibtal (Centsi KWII 1983 1 777 1 325 66 34 4 683 2 383 7 066 593 7 659 1.67 10 337 1982 1 700 1 355 62 32 5 306 1 569 6 875 510 7 385 1.80 10 220 1981 1 773 1 315 66 35 5 349 2 142 7 491 157 7 648 1.68 10 274 1980 1 760 1 310 68 34 5 529 1 031 6 560 1 352 7 912 1.65 10 246 1979 1 825 1 395 67 31 5 349 1 535 6 884 1 348 8 232 1.33 10 262 1973 1 358 1 246 64 9 5 376 - 5 376 1 670 7 046 .52 9 880 Investment (thousands of dollars) Amumulated Constructx>n Annual Plant in f% visions For Net Work in Nuclear Fuel 1btal Construction 1btal War Servre Drpreciation Plant Progress In Service Plant Expenditures Assets 1983 1 358 467 324 826 1 033 641 1 118 802 22 904 2 175 347 294 010 2 401 778 1982 130P 677 285 453 1 021 224 878 535 18 390 1 918 149 248 515 2 124 823 1981 1 261 174 252 310 1 008 861 656 999 10 951 1 676 814 20G 918 1 869 967 1980 1 208 001 220 629 987 372 518 746 17 644 1 523 762 234 827 1 701 655 1979 979 809 201 895 777 914 519 464 11 786 1 309 164 239 010 1 467 512 1973 407 195 108 467 208 728 192 133 - 490 861 119 524 540 896 Capitalization (thousands of dollars) Cumulauve Preferred Common Cumulatave with Iong-Shareowners Preferred ILlandatory 1brm War Equity % Stock % Bedemptmn % Debt % lbtal 1983 715 584 36 200 000 10 94 002 5 984 976 49 1 994 562 1982 617 127 35 170 000 10 95 027 5 875 859 50 1 758 013 1981 550 176 35 150 000 10 95 500 6 762 584 49 1 558 260 1980 478 993 34 150 000 11 66 500 5 708 295 50 1 403 788 1979 432 554 35 150 000 12 34 000 3 611 137 50 1 227 691 1973 145 665 31 71 000 15 - - 259 164 54 475 829 20 Borrd cf Dirsst:ra Offic2ra Richard P. Anderson (O) John P. Williamson Stock Transfer Agents Partner and General Manager Chairman and The 'Ibledo Trust Company The Andersons Chief Executive Officer 'Ibledo, Ohio 43603 SamuIl G. Carson (EXN'XS) Wendell A. Johnson Morgan Guaranty Trust Chairman President and Chief Company of New York 'Ibledo Trust Company and Operating Officer New York, N.Y.10015 'Ibledo 'IYustcor poration, Inc. Anthony A, Bosch, Jr. Stock Registrars Richard P. Crouse Vice President, Customer Services Ohio Citizens Bank Vice President, Nuclear Medo, Ohio 43603 i Richard P. Crouse Morgan Guaranty Trust Vice President, Nuclear l Robert 11. Davies (C* XOXS) Company of New York 1 Senior Vice President John R. Dyer New York, N.Y.10015 Owens-Illinois Inc. Vice President, Public Relations Chozter Devenow (AXC) Mortgage Trustee Donald G. Nicholson The Chase Manhattan Bank, N. A. # *I Senior Vice President, Finance New York, N.Y. tow! l l Sheller-Globe Corporation Lyman C. Phillips Auditors w Vice President, Corporate Planning Arthur Andersen & Co. I. rson (C) and Administration 300 Madison Avenue Chairman, President and .Ibledo, Ohio 43604 Chief Executive lowell E. Roe Dinner Bell Foods, Inc. Vice President, Energy Supply Exchange Listings Stanley W. Gustafson (Deceased) Paul M. Smart Co.mmon President, Dana Corporation Senior Vice President, New York Stock Exchange (TED) Midwest Stock Exchange Wendell A. Johnson (E) " " * ""*I P**" *"d President and Chief General Counsel Unlisted Trading Privileges Operating Officer Stratman Cooke Boston Stock Exchange Secretary Cincinnati Stock Exchange Isabel F. Martin ( A) Philadelphia, Baltimore and Consultant Donald II. Saunders Weasunt Washington Stock Exchange 'Ibledo Area United Way Paul G. Busby Preferred - $25 par value - 8.84%, Donald G. Nicholson $2.365, $4.28, $3.47 series Senior Vice President, Finance Contmller l New York Stock Exchange i IIenry A. Page, Jr. (EXN) Director of Development Pmferred - $100 par value - 4 %% 8.32%,7.76% and 10% series The Medical College of Ohi at W ed American Stock Exchange Executive Offices Lyman C. Phillips 300 Madison Avenue Bonds Vice President, Corporate 'Ibledo, Ohio 43652 7%% - Due 2002,9%% - Due 2008 Planning and Administration Phone (419) 259-5000 8% - Due 2003,9.65% - Due 2006 Paul M. Smart Dividend Disbursing and Seni r Vice Pmsident 9% - Due 2000,11% - Due 2009 Corporate Development and Reinvestment Agent The 'Ibledo 'IYust Company 9.35% - Due 1985. General Counsel ,1bledo, Ohio 43603 New York Stock Exchange Willard I. Webb, III (A* XEXS) Chairman and Chief ~ W ~ Executive Officer ^ Ohio Citizens Bank Director Changes - John P. Williamson (E*XS*) Chairman and Chief Chester Devenow, chairman and chief executive offi-Executive Officer cer, Sheller-Globe Corporation, was elected to the board of directors in August,1983. Sheller-Globe, a 'Ibledo- - Robart O. Wingerter (NXO'XS) - . based company, is a major manufacturer of parts and Chairman, Executive Committee : assemblies for cars, trucks and off-highway equipment. Libtmy Owens-Ford Company Mr. Devenow is a graduate of New York University. Key to Directors' Committees . lie replaces Marvin S. Kobacker, who was elected f - director emeritus after 14 years of distinguished board (A) Audit Committee - service. . i l (C) Compensation Committee (E) Executive Committee - (N) Nominating Committee Paul M. Smart, senior vice president, corporate devel. (O) Operations Committee -~1 i - opment, was elected to the board of directors in January i 1984; (S) Strategic Planning ,; ' A former senior partner'with Fuller & IIenry, with denotes committee chairman ]' l specialization in 'Ibledo Edison regulatory matters, Mr. i Smart continues as the company's general counsel, with Directors Emeriti added responsibilities for marketing, rates, area devel-2 opment, and meearch and development. l Floyd M. Canter - IIe replaced board member Stanley W. Gustafson, William S. Carlson e who died shortly before year's end. We will miss Mr. Gua-Virgil A. Gladieux . tafson's talent, energy and keen advice. Marvin S. Kobacker - - - -- ~ -

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. M ,. },', y &. . .u ' ke' . ;M-. - .m . 3,y 1 -. .. y .,_ 3 , , . 4., ...,hf,,: ; . 4--g. > g ,.- . _s-1.-s .. , g - - ll . . 4. g.,~. J., . .. - ~, . .%- .%.M, ~:- ~c- ,.c .% .-~?f.+. .. - $-& L%.w-+4 9, L . . . . . 'l 1 To Our Stockholders Duquesne Light's revenues and net We can reasonably expect that income were both higherin 1983 recovery and new growth will create than in the previous year. While as many as 30,000 new jobs in our heavy industry remained depressed, area next year. However, this other areas of business advanced. growth will not make up for our load losses quickly. The expected sources Our changing market of the growth, such as office build-Traditionally a mainstay of ings and advanced technology Duquesne Light s business, the steel industries, do not use electricity in industry m this area operated at an the same quantities as steel mills. It even lower level than m, 1982, with may well be three or four years contmumg high unemployment before we see a summer peak load among local steelworkers. We expect equal to that of 1981. this area's steel industry, and its con-sumption of electricity, to recover Long-term investment slowly over the next three years, but considerations not to the level of 1981. Almost cer- Recognizing these limitations on' our tainly, a part of the decrease in growth prospects, Duquesne Light is steelmaking demand for electricity currently engaged in a strategic will be permanent; some of the older planning process to help establish steelmaking facilities, no longer cost- operating goals. The aim is to deter-competitive, probably will never mine the lowest level of revenue that reopen. will provide a reasonable level of Fortunately for our community earnings for stockholders, and to and for Duquesne Light, the trend of determine the lowest level of > economic development in this area investment that will maintain and over the past two decades has been improve service to the 559,000 one of diversification. This trend has customers who depend on us for helped to reduce the effects of the electricity. decline of the area's heavy industrial Since generating units under con-base and the loss of steel-related struction are scheduled to give jobs. Duquesne Light an additional 445 This transition is still in progress. megawatts of capacity during this The Pittsburgh area ranks fifth in decade, we do not presently foresee the U.S. as a center of research and a need for further generating capac-development and continues to ity until about the year 2000.This develop as a corporate and financial should reduce our dependence on center. Additionally, advanced tech- capital financing and thus improve nology is a growing segment of this our ability to hold the line on costs. new makeup oflocal business and Cost reduction measures industry. Employment also is Cost reduction, always a major man-increasing in service-oriented agement g 1, is urgent at this time; industries such as banking, transpor-n t only for the sake of earnings, tation, health care and retail sales. but also to remain competitive. Serv-These economic strengths account ing a m j r northeastern metropoh-for the fact that our commercial and tan area, as Duquesne Light does, is residential sales were strong last costlier than serving less densely - year, considering the recession. populated areas. Loss of business to neighboring utilities or the move-ment of corporations to the- " Sunbelt" could cost us some larger -2 l customers and have the eventual Our service area effect of raising costs for our other The recession was harder on our , customers. We have no higher priori- service area than on most parts of ties than controlling costs with the the country. Local unemployment aim of keeping our rates competitive. persists at a level well above the One means is our continuing national average, with only gradual Company-wide cost reduction pro- relief in sight. In this situation, our gram, which again produced large long-term area development pro-l savings. During the year, negotia- gram is of particular interest. In the " ~ l tion of a new two-year union con- past 12 months, more than 3,000 jobs ' ' tract resulted in productivity have been added or retained as a ' improvements and fringe benefit result of this Duquesne Light effort. j modifications. In addition, a new This area faces a difficult come- ' reorganization plan, which will be back. But people here are a hardy implemented in 1984, will reduce breed. They have weathered worse I costs by making our operation leaner storms. e and more cost-effective. Our towns Management reorganization An underlying strength of our 1910 20 so 40 so so vo 83 93 i The reorganization plan consolidates larger community is the great diver- Annuaisystem reak roaa all operating divisions and depart- sity among the many smaller com-ments under the direction of five munities within it. To illustrate this, l Group Vice Presidents. It should we feature in this report photos of reduce total stalling by about 100 five of the towns we serve. I cannot positions. The reduction in number call them typical, because they are of employees will be brought about all so different. Perhaps this very largely through a new voluntary variety is a clue as to why, hard early retirement program. times or not, this region displays such vitality. Community involvement Although many challenges lie In 1983, we recognized a growing . ahead, I am optimistic about the problem of people facing a hardship future of our service area. Duquesne because of mability to pay the Light's Management and Board of i

increasing cost of heat and light. To Directors acknowledge and appreci-help alleviate this problem, we pro-ate the support of the many stock-vided strong planning and financial holders, employees and customers and fund-raising support to a new who contributed to the Company's

mdependent agency, the Dollar progress in the past and will help to Energy F und, which provides

. meet the challenges of the future. ! assistance when government help is inadequate. jg . l Duquesne Light employees - 7 pledged a total of $333,600 to the John M. Arthur United Way of Southwestern Penn-Chairman of the Board and . sylvama. Additionally, our employ- President ' ees donated $T>S,100 in 1983 to a l Salvation Army food bank for unem-ployed workers. Approximately GT6 FebruaryIT), 1984 , of our 4,900 employees signed pay- - i roll deduction cards to contribute $1 . each pay to the food bank. 3 Perspective of 1983 I. FINANCIAL MATTERS Cost reduction JUR TOWNS Revenue-earnings improvement L st year Duquesne Light expanded Duquesne Light's revenues rose .ts cost-reduction program to cover from $746 million in 1982 to $800 mil. the efTorts of every employee in the lion in 1983. Rate increases were pri. Company. One purpose was to EWICKLEY marily responsible for the higher encourage employees to find new revenues. Earnings per share from ways to save the Company money. continuing electric operations were This program appears to be working. $2.20 in 1983 compared to $1.06 in Identified savings rose from $8.3 mil-19g9~ lion in 1982 to $14.4 million in 1983. Sales: A year of ups and downs Looking ahead for savings, Duquesne Light has been using 1853 h Total kilowatt-hour sales for 1983 sophisticated computer programa for were slightly lower than last year's strategic load planning. The task is level, and the summer peak load e complex and technical. The goal is to increased about 8'k. Improved com- determine how to fulfill the Com- Only 15 miles from the hus-mercial and residential sales played " "" pany's load requirements at the 'l",,a pi sburgh " s t e pe c a part in improving our fmancial per- jowest cost to our customers while serenity and charm of formance for the year. maintaining an adequate level of sewickley. c Total industrial sales dropped T6 earnings for our stockholders. by cen$ur"y$id caks aYd compared to 1982. Sales to steelmak- Other major cost reduction maples. stand c.tately ers, our largest single market, fell measures are described on the h m s,buijt g , , first ,b9 ,, by cap-even lower than last year. However, following pages under " Manage- later by captains of there was growth in other segments ment reorganization" and "New ir.dustry, of the market, especially oflice park early retirement plan." herefanEa'pEmenIs.*and projects west of Pittsburgh, fast- a shopping district. food restaurants, hospital expan. Saving on dividend reinvestment sewickley is a living. During the last quarter of the year, breathing iown-not a sions and of11ce buildings in down. ,,, g , _ town Pittsburgh, where large-scale the Company began to admimster the residential streets you the Dividend Reinvestment Plan have the feeling that you l development continues. have st d back n t i in-house. This will reduce processing l costs by approximately $150,000 a somewhat unique. But. the vear. sense of charm and gra- ~ The new system will also enable $"*,7llj',7,$ii," $,',5y us to supply more complete answers of our other towns. to stockholders' inquiries. The plan is i open to all holders of Common, Pref-erence and Preferred Stock. The hLi OMhS$.m - number of stockholders taking advantage of the plan now stands at l hggQf 44,000. For information on benefits Ni f and how to participate, write U2bdd Duquesne Light, c/o Dividend Rein-1979 1980 1981 1982 1933 vestment, Box 68, Pittsburgh, Pa. KWII Sales-5 Years 15230-0068. 4'

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& f _. , g c. y,), ~ _ fkW.m '=y g - 4 }, Q ; .r;;)@ '3.fV f.x.y ,._ _ _.?+- . , .;; g_ : [p, g y* g Q Construction and financing issued $20.5 million of tax exempt )UR VILLAGES Work continued at the nuclear Bea- pollution control revenue bonds to ver Valley Power Station Unit No. 2 finance the Company's share of and at the nuclear Perry Plant Units the costs for certain pollution con-Nos. I and 2. Duquesne Light has a trol facilities at the coal-fired ENNSBURY 13.74% ownership interest in each of Sammis plant. Net proceeds to the VILLAGE these units. Other major construc- Company were approximately ~ . c~ tion projects included a new Western 819.8 million. District Headquarters building and a 4. On December 6,1983 the Com-simulator / training building at pany issued $50 million of 13% Beaver Valley Power Station. First Mortgage Bonds, Series due L :.

Our total capital expenditures for December 1,2013. Net proceeds the year came to $224 millian. About to the Company were approxi- .... ..

~~267 of this was generated internally. matelv $49.3 million. The balance was raised by outside I~~

~~5. The Company issued 2,524,407 Ei ,,, c,",',", N ',*,"x'i,I,7.~~

~~financing. This included: shares of Common Stock in 1983 fully grown. it was built in~~

~~1. On April 14,1983 the Company pursuant to its Dividend Rein- 'h S x $ $ "'~~

d , n ent to in-issued $60 million principal vestment Plan. Issuances of Com- houses. mostly two-amount of 12M First Mortgage mon Stock through this plan bedroom. When the town-Bonds, Series due April 1,2013. aggregated approximately $39 "",$' En m u ns, the ne Net 3roceeds to the Company million. In addition, 143,727 shares owners (average age 31) sat were approximately $59.3 million. of Common Stock were issued j',',$d',d[,*Y , ,,"",',","l,',

2. On August 2,1983 the Company pursuant to the Company's municipality. They issued a issued 2,475,000 shares of Com- Employee Stock Ownership Plan. Declaration of secession, performed the necessary mon Stock. Net proceeds to the legai symnastics, and Farewell, steam heat

. Company were approximately launched their own unique On May 31,1983, foHow,m g the plan local government. $39'4 million' Now the Borough takes

~~d. On November 1,1983 the Ohio Air announced in 1982, Duquesne~~

. care of roads, enforces Quality Development Authority Light,s long-unprofitable subsidiary, laws and provides fire pro. Allegheny County Steam Heatmg tection:the Condominium Company (ACSH) terminated steam C',""*'jl,8k',*[, g, , *' ;D service to the public. The estimated includes water, sewage, loss from discontinued steam heat _ and heating-all units of l .z ; i; ing operations was recognized in U",'fe*,'j,*['Jhcais 1982. The major portion of the steam includes use of the pool and l . f c = ^ distribution system which ACSH had **""""Y**"'*' work on the homes, trim-

operated was transferred to, and is ming shrubs and mowing S being operated by, a newly-formed lawns. The 870 people who

. live in Pennsbury Village y- ' - cooperative of steam users. know it is never going to ~ expand. They also know Rates that living there is never ~ On January 28,1983 the Pennsvlva- going to be much trouble. nia Public Utility Commission (PUC) , , $t ,","cCr' eta'n"a"# entered a final order covering the few acres. But, as we said earner, our suvice area is .^ . 7 Company's request for a $165 million indeed diverse. ~ . (subsequently reduced to $155 mil- \ ' lion) increase in annual rates which l ! r- , was filed on April 30,1982. The order ( . l l 1973 '74 '75 '76 '77 '78 '79 '80 '81 '82 '83

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allowed $105.8 million or 64% of the Beaver Valley Unit No. 2 is on )UR BORSUGHS l rate increase originally requested. schedule i On April 29,1983 the Company Construction of Beaver Valley Unit I filed a new rate schedule with the No. 2 proceeded on schedule; at year PUC estimated to increase annual end, this nuclear plant was 78% com- OMESTEAD revenues by approximately 5.6% or pleted. The Nuclear Regulatory $49.9 million per year. This was the Commission and the Institute of r- -- lowest general rate increase request Nuclear Power Operations audited by the Company since 1971. On Sep- the engineering and construction tember 16,1983, the PUC approved a work, and both reported acceptable settlement of the rate proceeding performance. Barring unforeseeable , which provided for an increase of delays, the operating license should , $21 million, or 42% of the amount be granted by the time the unit is requested. The early settlement of ready for its initial core loading near this request allowed the Company to the end of 1985. begin collecting the increase about Our other community pro-IIL ENT7IRONMENT files show you the diver-4 % months earlier than the normal " " decision date. For the second year running, various sit erv# N " area H imesf[a On July 22,1983 the PUC members of Congress proposed leg- offers a more traditional islation to "do something" about the and onent mes stereotyped approved the Company's request to ,,_ ,_ ,, lower its Energy Cost Rate for serv. acid rain problem. If some of the mill town. ice rendered on and after August 1, most stringent proposals are The names of similar decreasing electric bills for the aver _ adopted, Duquesne Light could be styl mig ownspp gma# ,ddo$"k' age residential customer by about required to spend as much as $335 Duquesne. Munhall. million for flue gas scrubbers and an Monessen. For many years. '59' '" additional $100 million a year for fe's 'IIIs n th se own II. NUCLEAR operation and maintenance of these roared 'round the clock. Heaver Valley Unit No.1 is a devices. Customers' bills could {l,","'hr ed )$$"va"$y reliable performer increase as much as 6% to 12%, and of reasons.the boom ended Beaver Vallev Unit No. I was shut this area's already depressed steel in the Seventies and early down for refueling and modifications and coal industries would be badly $iI'f rnaces ha e been on June 11,1983 and was returned to hurt. Duquesne Light has proposed goins cold. b*d IIs service as scheduled on September an alternative. It calls for acceler- ,,",",,, (8 ",P , jy,'(',h e , 24,1983. During the outage,33 ated research (the causes of acid rain butin Homestead. Aliquippa, design modifications were made to are not scientifically established); an Braddock and the rest, the plant,21 of which were required emission ceiling for sulfur dioxide; $'(e r't h s passed. by the Nuclear Regulatory innovative alternative methods of Homestead has endured hard' $ hefo e Commission. neutralizing acidity in lakes and h p n ,9 [, ,] a From the beginning of the year streams; and a trade-off policy Until the answer is in, peo-until June 11, this nuclear unit oper- between types of chemical com_ pie here are doing what he '"'" '"" ated at an availability factor of 96%. pounds that may lead to airborne lng ,ca"'. cut On an annual basis, taking into acids. The plan would reduce the account the shutdown period, its emissions that are blamed for availability factor was 68%. causing acid rain, yet cushion the In February 1983, the Emergency human and cost impacts. Preparedness Plan for Unit No.1 l was tested in a full-scale, all-day i drill. Federal agencies determined that public health and safety can be I adequately protected in the event of l a nuclear emergency. ls 5 y.. -- C. 3) e *- $f 5 i t I l ' ._ ' >wi.-4~ t e -- 1 4' +$*i * ' ' " ' N f," , .!;!y ; ; is l7 I' '" [ E m *am8 - -w -~w'?wu '. m - f ; T i ^^ j;! . j y; = c: _. P in e w m;LiAU2 g - M ' { lh 6 sa - < - . i l - IV. INTERNAL OPERATIONS 100 positions will be eliminated, 1UR CITIES i' AND PERSONNEL including some 20 managerial Management reorganization positions. Duquesne Light's overall organiza- New early retirement plan ! tional structure has not sigmficantly ONROEVILLE The reduction in personnel called for changed for about 17 years. Early m by the reorganization will be accom-1983, the Board of Directors retamed plished largely by attrition and by a T0i the consultmg firm of Rooz, Allen & new limited early retirement pro- .D I Hanulton, Inc. to examine the organ- ) gram which was entirely voluntarv. ~ F 6 L I

izational structure of the Company When the option was offered in late p Pa and make recommendations for 1983,450 employees were eligible; improvement. In November, the '

323 chose early retirement. The WroeVIii'~ Board of Directors adopted a new option was terminated in Januarv ' plan of organization. 1984. Under the new organizatwn, oper-New two-year union contract lon ations are directed by five Group [',88ylg,s ,, ,egap ,, , l \ ice Presidents. They are Charles M. Duquesne Light and the Interna' and Sixties:the developers ! Atkinson, Finance and Accounting; tional Brotherhood of Electrical dug up farms and planted h Roger D. Beck, Administrative Ser- Workers signed a new contract ,]8;,8",',',$,,5',',",* , ,r' "' vices; ClitTord N. Dunn, Power Sup- effective October 1,1983. It provides settled into the quiet rou-ply; John J. Carey, Nuclear; and for a 6% increase in wages and a tine of a typical bedroom William F. Gilfillan, Jr., Customer small improvement in fringe benefits * "'"""broeville hen was Services. In addition, Walter T. each year of the two-year pact. Most just in the making, a shop-Wardzinski is Vice President of important in these times is a provi- (",yl,"','[,j",",C7,b',ser , ,eded i Isegal and Corporate Communica- sion that wi~ help reduce costs by was built. it was a catalyst: i tions. All report to John M. Arthur, increasing tue work week of certain now Monroeville has about 4 one store for every 60 res-Chairman of the Board and Presi- clerical workers from 378.!: to 40 idents. and shoppers drive l l dent. For a complete list of Company hours at no additional increase in miles to get here Four j ofIicers, see the inside back cover of wages. This change results in a stan- yl,*,",',Porat(o"s,c cent rs.' l this report. dard 40-hour work week for all Com- That tilted the population The purpose of the new reorgani- pany employees. mix: there's a high pert.ent-i

i age of PhD's, and you hear j zation is to provide more efh. .cient accents from Sweden. Eng-

'82 management audit produces '83 land. France, plungary, 1 management and to reduce costs. It j will make our organization leaner by g\ a r$1'rIaSo eNts hea - e the PUC-mandated manage _ 1 reducing the number of departments quarters here, and an . ment audit of 1982 by Temple' en,repreneur put up an i and increasing the responsibilities of . Barker and Sloane, Inc. found exhibit hall that drew over existing managers. A total of about half a million buyers and conventioneers last year. Monroeville is only 14 miles from downtown Pittsburgh and even closer l to three major universities. ' , ! It, and other communities, l are starting to sprout build-ings with company names ; that don't have any vowels. Advanced-tech is taking root around here. 1982 1983 Iligh low Common Stock The principal tmding marketfor the Company's Common Stock is the Nete York Stock &cha nge. The stock is also lis:ed on the Philadelphia Stock &cha nge. 'f % .s%) g, *s .,.e ? \' R .s g '*i . ., ,_ .. eg., , h / y. * .n .u . 's eng + .' : ..'%~.,.* g 't T . .' . . - ~t<h%4... y;4 .... . ~ 6 N I *j * ].s:., q ,;. ^1 *i' . *S.4 - [. 'k + .? ? , g .y . ,"' $ ' [? + ., ' y; _ J'., ~ .~ .y x,... p '*p s., a p y '_i : . _ . z t. W. - ; s. x x i44 . ;- ~- .~.} . w 3._ e n e ,, i 4 ) '. -Ny,A , . .. , 'Q . 54

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.( ' . . *f p' ; j. ,.# , . s e '. ., - e. , ~ - . A s' , *, ' q , 1 Duquesne Light's operations to be Duquesne Light has worked with )UR TOWNSF >S generally acceptable,it also made various community groups for over some specific recommendations to two years to establish an energy further improve our operations. We assistance fund. In 1983, we helped have been implementing certain of found the Dollar Energy Fund, an ENTER TOWNSHIP these recommendations. One visible independent, non-profit agency result in 1983 was a wider use of which was formed to meet the spe- - computerized information systems. cific problem of inability to pay. - g Benefits included increased clerical Duquesne Light supported the Dol- - . c se' , 6~ productivity, improved customer lar Energy Fund with start-up, pro- - MR P ' service and enhanced management motion and administration funds. We control. mailed more than a million of the Fund's appeals along with our regu-E m ns . . lar monthly bills. In addition, we will Early in the year, the Transmission , provide up to $50,000 in matching and Distribution Department moved credits for the accounts of eligible Drive along the main north-its Western District headquarters t Duquesne Light customers receiving south road, first cut when a new buildmg m Center Township " assistance from the Dollar Energy 'an$ y*o*u's'e"e o'n"e sYde$ This completed a multi-year consoh:- Center Township-a be(. Fund. While only in existence for a dation of Western District opera- " *"" ' little over three months, the Fund commu et r$Ibu abo tions. There are seven sections and . had received $55,970 in cash contri- minutes on the exprestr approximately 200 employees at this way. lt's a chore. but butions from customers by year end, seaver County taxes are l location. The consolidation of three facilities has reduced costs and has Conservation @,Th$ "p'e* opie $en# t on h made it more convenient for several Besides conducting energy audits at the colleges-a t.ommunity below cost for residential customers, d a enn ate departments to work together. [,*P**[ach h,pp g ,, Duquesne Light conducted a series very large mall, and their Most important awards of 1983 of free lunchtime energy conserva- friendly neighbors. We take pride in a good safety tion presentations for the public at y,",7,*,thsidr . o, er s f record, and special pride m, awards our new headquarters in downtown Center Township-the like these received in 1983: Pittsburgh. We also sponsored a load countryside. 8etter than From the Pennsylvania Electric *" management seminar for commer- $'ar'e "n$1[s sYr$n'a' Association, an award for the best cial, industrial and governmental failow. water and woods, accident-prevention record in the hills-places quite wild-customers- *"' Commonwealth's electric utility anna ciln th town-mdustry. More j,obs ship is more than a 10-From the Pennsylvania Electric For the 25th year, Duquesne Light minute walk from where '"f Association, an award for meritori- operated a full-time Area Develop- Y"{de opb Sdes*' Nit' ous results in the prevention of ment Department that works to have them in Center Town-expand the local economy and ship and in other parts of disabling shocks and burns. , , From the Edison Electric Insti- expand employment opportunities m tute, the Injury Frequency Reduc- our service area. The department tion Award certificate, for having staff worked with 180 prospective reduced injury rates 25% in a sin- employers during the year. Their gle year. efforts included finding land or buildings, locating financing, expe-V. COMMUNITY CONCERNS diting permits and providing studies Inability to pay on markets and labor skills. Our With heavy industry in our area still staff secured 52 commitments to in deep recession, the number of our expand or relocate in our service l l customers unable to pay for electric area. The result was 2,960 jobs service has grown noticeably. added or retained. ,12 P ' *% * ) . }y(,I"(( N'e $ c .t t. *t 9' Y ?. WE 'c*.tN[r 4:! 7, C .7.- [ M I ", J -N . ai9: 1O "f,: ,{[ ftfjk-h j. ; i ( ,: N -N s' new w w -: '+ '! .a l.\ I'c-l 'l ig-j M.".f2:l;l;l_,M ' ' ' '. 1 ll, "o :;m%GlfM : i Vi$N}$fl?}-- llllll6Y;b:;;', . !"' ~ M .:. n@[;%F:* :T* : L:' ' % 1 s . jiy [; ](Sf:' ,g' ~ - s ; ., . ; r-yi :w ~ ,~, , - ~. ^ -Q % _;'w

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' , J; .kw -- ., 3:, ~ - ': p$NIV> _y.. , . } r* - '! ^$n t,,, : n . \} ~ s p __ Me g . t Company Report on Financial Statements The Company is responsible for the financial informa- ance with generally accepted auditing standards and tion and representations contained in the financial included a review of the system of internal accounting statements and other sections of this Annual Report. controls and tests of transactions to the extent they The Company believes that the financial statements considered necessary to provide reasonable assurance have been prepared in conformity with generally that the financial statements are not misleading and do accepted accounting principles appropriate in the cir- not contain material errors. cumstances to reflect, in all material respects, the sub- The Board of Directors has an Audit Committee stance of events and transactions that should be composed of four non-officer directors which met four included and that the other information in the Annual times in 1983. The Audit Committee has the following Report is consistent with those statements. In prepar- duties and responsibilities: (1) recommand the indepen-ing the financial statements, the Company makes dent public accountants; (2) review the planned scope informed judgments and estimates based on currently and results of their audit and other services to be per-available information of the effects of certain events formed;(3) review the financial statements and the and transactions. related report of the independent public accountants; The Company maintains a system ofinternal (4) review with the officers, internal auditors and the accounting controls designed to provide reasonable independent public accountants the adequacy of the assurance that the Company's assets are safeguarded Company's system of internal accounting control, and that transactions are executed and recorded in including their recommendations with respect thereto; accordance with established procedures. There are lim- and (5) review the planned scope and results of the its inherent in any system of internal control based on internal audit function. The independent certified pub-the recognition that the cost of such a system should lic accountants and internal auditors have full and free not exceed the benefits to be derived. The system of access to the Audit Committee and meet with it, with internal accounting control is supported by written pol- and without management being present, to discuss icies and guidelines and is supplemented by a staff of internal accounting controls, auditing and financial internal auditors. The Company believes that the inter- reporting matters. nal accounting control system provides reasonable assurance that its assets are safeguarded and the financial information is reliable. C,h, @-M [ The accompanying consolidated financial statements C. M. Atkinson John M. Arthur have been audited by Deloitte Haskins & Sells,inde. Vice President- Chairman of the Board pendent certified public accountants, whose appoint. Finance and and President ment was approved at the 1983 Annual Meeting of Accounting Group Stockhoklers. Their examination was made in accord-Opinion ofIndependent Certified Public Accountants DELOITTE HASKINS & SELLS tests of the accounting records and such other auditing Certified Public Accountants procedures as we considered necessary in the Two Gateway Center circumstances. Pittsburgh, Pennsylvania 15222 In our opinion, such consolidated financial state-ments present fairly the consolidated financial position TO THE DIRECTORS AND STOCKHOLDERS f Duquesne Light Company at December 31,1983 and OF DUQUESNE LIGHT COMPANY: 1982 and the results of its operations and the changes We have examined the consolidated balance sheets of in its financial position for each of the three years in Duquesne Light Company as of December 31,1983 the period ended December 31,1983, in conformity and 1982 and the related statements of consolidated with generally accepted accounting principles applied income, retained earnings, capital surplus and changes on a consistent basis. in financial position for each of the three years in the period ended December 31,1983. Our examinations were made in accordance with generally accepted [ auditing standards and, accordingly, included such February 15,1984 14 Duquesne Light Company Statement of Consolidated Income ' For the Three Years Ended December 31,1983 (Thousands of Dollars, Except Per Share Amounts) 1983 1982 1981 ELECTRIC OPERATING REVENUES $800,345 $746,462 $786,229 OPERATING EXPENSES: Fuel 192,512 229,693 242,871 Purchased power (sales)-net (7,330) (23,172) 16,189 Other operation 136,188 126,151 113,423 Maintenance (Note N) 65,016 66,855 63,106 Depreciation 73,682 62,939 60,854 Taxes other than income taxes (Note N) 60,651 57,476 57,694 Income taxes (Note H) 92.954 71,213 72,263 Total Operating Expenses 613,673 591,155 626,400 OPERATING INCOME 186,672 155,307 159,829 , OTHER INCOME: Allowance for equity funds used during construction 50,709 35,415 24,619 Ineome taxes-<redit (Note H) 16,760 17,906 14,462_ Other income and deductions-net 246 8,913 3,467 Total Other Income 67.715 62,234 42,548 INCOME BEFORE INTEREST CHARGES 254,387 217,541 202,377 INTEREST CHARGES: Interest on long-term debt 118,813 111,726 97,404 Other interest 5,736 3,471 6,957 Allowance for borrowed funds used during construction, net of income taxes (15,388) (14,853) (11,393) Total Interest Charges 109.161 100,344 92,968 INCOME FROM CONTINUING ELECTRIC OPERATIONS BEFORE EXTRAORDINARY GAIN 145,226 117,197 109,409 DISCONTINUED STEAM HEATING OPERATIONS (Note C): Ioss from operations of discontinued steam heating subsidiary - (924) (538)_ Ioss on disposition of discontinued steam heating subsidiary - (9,000) - INCOME BEFORE EXTRAORDINARY GAIN 145,226 107,273 108,871 EXTRAORDINARY GAIN ON EARLY EXTINGUISHMENT OF BONDS (Note D) - 9,609 - NET INCOME 145,226 116,882 108,871 DIVIDENDS ON PREFERRED AND PREFERENCE STOCK 22,411 22,701 22,976 EARNINGS FOR COMMON STOCK $122,815 $ 94,181 $ 85,895 i AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (000) 55,883 48,236 41,764 EARNINGS PER SHARE OF COMMON STOCK: Income from continuing electric operations $2.20 $1.96 $2.07 Ioss from discontinued steam heating operations (Note C) - (.21) (.01) Extraordinary gain (Note D) - .20 - ) Net income $2.20 $1.95 $2.06 DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $2.00 $1.90 $1.85 The accompanying Notes to Financial Statements are an integral part of these statements. 15}}

ML20091A224

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