Text

Duquesne Light Co Annual Rept,1983
	ML20091A242
Person / Time
Site:	Beaver Valley, Perry, Vermont Yankee, Crystal River, 05000000, Zimmer
Issue date:	12/31/1983
From:	Arthur J; DUQUESNE LIGHT CO.
To:	;
Shared Package
ML20091A217	List: ML20091A214; ML20091A224; ML20091A242; ML20091A255;
References
	NUDOCS 8405290320
	Download: ML20091A242 (39)
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To Our Stockholders Duquesne Light's revenues and net We can reasonably expect that income were both higher in 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 loa, losses quickly. The expected sources Our changing market of the growth, such as oflice build-Traditionally a mainstay of ings and advanced technolog'y Duquesne Light's business, the steel industries, do not use electricity in mdustry 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. %e 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 om tainly, a part of the decrease in growth prospects, Duquesne Light i 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 tha 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 559,009 one of diversification.This trend has customer.; 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 of local business and Cost reduction measures industry. Employment also is increasing in service-oriented Cost reduction, always a major nmn-industries such as banking, transpor-agement g 1, is urgent t this time; tation, health care and retail sales. n t only for the sake of earnings, These economic strengths account but also to remain competitive. Serv-for the fact that our commercial and ing a maj r n rtheastern metropoh; residential sales were strong last bn area, as Duquesne Light does, is year, considering the recession. e stlier than serving less densely populated areas. Loss of business to neighboring utilities or the move-ment of corporations to the " Sunbelt" could cost us some larger 2

e customers and have the eventual Our service area q %[ Qy effect of raismg costs for our other The recession was harder on our y-- customers. We have no higher priori-service area than on most parts of synegy,.,, s ties than controlling costs with the the country. Local unemployment &%@ggy aim of keeping our rates competitive. persists at a level well above the emu' One means is our continuing national average, with only gradual . #9sm? Company-wide cost reduction pro-relief in sight. In this situation, our j{;hhh gram, which again produced large long-term area development pro-savings. During the year, negotia-gram is of particular interest. In the Qgr~ tion of a new two-year union con-past 12 months, more than 3,000 jobs -W, tract resulted in productivity have been added or retained as a gy improvements and fringe benefit result of this Duquesne Light effort. M 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 costs by making our operation leaner storms. and more cost-effective. Our towns Management reorganization An underlying strength of our isio 20 30 40 s0 s0 70 83 93 The reorganization plan consolidates larger community is the great diver-Annuai system Peak load all operating divisions and depart-sity among the many smaller com-ments under the direction of five munities within it. To illustrate this, Group Vice Presidents. It should we feature in this report photos of reduce total stafling 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 !argely through a new voluntary variety is a clue as to why, hard early retirement program, times or not, this region displays such vitalitv. Community involvement In 1983, vie reoognized a growing Although many challenges lie ahead, I am optimistic about the probh m of people facing a hardship because ofinability to pay the future of our service area. Duquesne Light's Management and Board of increasing cost of heat and light. T help alleviate this problem, we pro-Directors acknowledge and appreci-vided strong plannmg and financial ate the support of the many stock-and fund-raismg support to a new holders, employees and customers mdependent agency, the Dollar who contributed to the Company's Energy Fund, which provides progress in the past and will help to meet the challenges of the future. assistance when government help is inadequate. y l Duquesne Light employees 7 l pledged a total of $333,600 to the John M. Arthur United Way of Southwestern Penn-Chairman of the Board and sylvania. Additionally, our employ-President ces donated $58,100 in 1983 to a Salvation Army food bank for unem-ployed workers. Approximately 65% February 15,1984 of our 4,900 employees signed pay-roll deduction cards to contribute $1 each pay to the food bank. 1 3

Perspe6tive of 1983 I. FINANCIAL MATTERS Cost reduction )UR TOWNS Revenue-earnings improvement Last 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 m 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

ys to save the Company money.

continuing electric operations were This program appears to be working. $2.20 in 1983 compared to $1.96 in Identified savings rose from $8.3 mil-1989 li n in 1982 to $14.4 million in 1983. Looking ahead for savings, E. Sales: A year of ups and downs Duquesne Light has been using 1853 ^ Total kilowatt-hour sales for 1983 sophisticated computer programs for were slightly lower than last year's strategic load planning. The task is level, and the summer peak load complex and tecunical. The goal is to .w increased about 83. 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 ,,* 7,,b u pi, ch s t e pe c a part in improving our financial per-lowest cost to our customars while serenity and charm of formance for the year. maintaining an adequate level of sewickley. Total industrial sales dropped 59 earnings for our stockholders. by century $id oaks nnd compared to 1982. Sales to steelmak-Other major cost reduction mapies. stand stately ers, our largest single market, fell measures are described on the h m shul fi st by c p-g t, ,b o,, l even lower than last year. However, following pages under " Manage-inter by captains of there was growth in other segments ment reorganization" and "New industry. of the market, especially office park early retirement plan." herefa'na"a* pert 5:en$s.* projects west of Pittsburgh, fast-a snoppir.e district. food restaurar.ts, hospital cxpan. Saving w dividend reinvestment sewicktay is a siv:ng. sions and office buihlings in down. I)uring the last quarter of the year, hr*ething l w -n 1 a, ,us gut as y town Pittsburgh, where large-scale the Company began to admmister the residential streets you development continues. the Dividend Reinvestment Phn have the reeling that you in house. This will reduce processing havest p 0 back n t costs by approximately $150,000 a

amewhat ur.ique. aut, the sense of charr.1 and gra-Ve

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d v The new system will also enable clodsness it represents is also alive and weis in many ka tm us to supply more complete answers of our other towns. l to stockholders

inquiries. The plan is open to all holders of Common, Pref-erence and Preferred Stock. The

-(----- number of stockholders taking advantage of the plan now stands at i e n,w i ' s l ) ^ j.. n j; 44,000. For information on benefits 1 and how to participate, write o% %d. c.a. 1 Duquesne Light, c/o Dividend Rein-1979 1980 1981 1982 1983 vestment, Box 68, Pittsburgh, Pa. KWII Sales-5 Years 15230-0068. 4

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l e l Construction and financing issued $20.5 million of tax exempt )UR V .LAGES 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-dred ENNSBURY 13.74% ownership interest in each of Sammis plant. Net proceeds to the VILLAGE these units. Other major construe-Company were approximately tion projects included a new Western $19.8 milhon. District Headquarters building and a

4. On December 6,1983 the Com-

',f simulator / training building at pany issued $50 million of 13% I Beaver Valley Power Station. First Mortgage Bonds, Series due f Our total capital expenditures for December 1,2013. Net proceeds the year came to $224 million. About to the Company were approxi-g,yg.g 26% of this was generated internally. mately $49.3 million. The balance was raised by outside

5. The Company issued 2,524,407 viii.,,c..into sistene, 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-

'hl,,5 x s$&"tosn-9 ent issued $60 million principal vestment Plan. Issuances of Com-houses. mostly two-amount of 12%9 First Mortgage mon Stock through this plan bedroom. when the tcwn. Bonds, Series due April 1,2013. aggregated approximately $39 cl0l'n"n uns.th n(( Net proceeds to the Company million. In addition,143,727 shares owners Inverage age 3il were approximately $59.3 million. of Common Stock were issued l'l,$ dj,8 '"',y g re n tl, p t 1

2. On August 2,1983 the Company pursuant to the Company's municipality. They issueti a issued 2,475,000 shares of Com-Employee Stock Ownership Plan.

Declaration of secessicn. mon Stock. Net proceeds to the fl,dy',"'nnfjicl l*j"Y d F,arewell, steam heat Company were approximately launched their own unique $39.1 miilion' On May 31,1983, following the plan ex as goveran. era.

3. On November 1,1983 the Ohio Air ann unced in 1982, Duquesne g,',he 8/g'p['s Quality Development Authority Light s long-unprofitable subsi<h,ary, inws and provides fire pro.

Allegheny County Steam Heatmg taction:the condominium Company (ACSH) terminated steam %,""y*l[i,,j,,,y, '"k' C' N,,w ;M service to the public. The estimated inr.iudes water. sewage. "~ b loss from discontinued steam heat, and heatit,g-all ur.its of ing operations was recognized in %"rv'fc'se*['[hcas 1982. The major portion of the steam laciudes use of the pool and distribution system which ACSH had

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work on the homes, trim-operated was transferred to, and is ming shrubs and mowing being operated by, a newly formed inwns. The s7o people who cooperative of steam users. ,'*A"i[f,"%7r'g$'g'E n l Ilates that living there is never expand. They also know On January 28,1983 the Pennsylva. going to be much trouble, nia Public Utility Commission (I'UC) ,,'%"'","c'n' 'n"',',' thins"' i entered a final order covering the few acres. sut. as we said Company's request for a $165 million indeed diverse (subsequently reduced to $155 mil-lion) increase in annual rates which was filed on April 30,1982. The order 1973 '74 '15 '76 '77 '78 '79 '80 '81 '82 '83 G=t of Fu.il amt Nuclear Fuci l 6

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a allowed $105.8 million or 64% of the Heaver Valley Unit No. 2 is on 5IBOROUGHS rate increase originally requested. schedule On April 29,1983 the Company Construction of Beaver Valley Unit 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 7-- 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 Homestead settlement of the rate proceeding performance. Barring unforeseeable which provided for an increase of delays, the operating license should 94 1, $21 million, or 42% of the amount be granted by the time the unit is wewW requested. The early settlement of ready for its initial core loading near y this request allowed the Company to the end of 1985. m begin collecting the increase about 4 % months earlier than the normal III. ENVIRONMENT Our other community pro-files show you the diver- ',[l"'llo saual,e;,mne decision date. For the second year running, various f m, On July 22,1983 the PUC membem of Congress proposed leg-offers a more traditional approved the Company's request to islation to "do something" about the an ottegmesstgreotyped _ 9, g lower its Energy Cost Rate for serv. acid rain problem. If some of the miii 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 y',"' ,,""*,",ay rins a y gg9 k age residential customer by about required to spend as much as $335 ouquesne. munhari. 5g-million for flue gas scrubbers and an monessen. ror many years. through tt:a Fifties and Six-additional $100 milh.on a year for ties. mitis in these towns II. NUCLEAll operation and maintenance of these roared round the crock. Heaver Valley Unit No.1 is a devices. Customers' bills could [","$',y","[,'j',",","[y reliable performer increase as much as 6% to 12%, and of reasons,the boom ended Beaver Valley Unit No. I was shut this area's already depressed steel in the seventies and early down for refueling and modifications and coalindustries would be badly 3'tl,n[c,s ha e been on June 11,1983 and was returned to hurt. Duquesne Light has proposed goingcoid. service as scheduled on September an alternative. It calls for acceler-i,",,g,c{eyt the b ex iis 24,1983. During the outage,33 ated research (the causes of acid rain butin Homestead, niiquippa. design modifications were made to are not scientifically established); an araddock and the rest. the plant,21 of which were required emission ceiling for sulfur dioxide; Do'r*[00s" passe'E.'"*' by the Nuclear Regulatory innovative alternative methods of Homestead has endured C'ommission. neutralizing acidity in lakes and h'E h$e'n toI[s $s'7 d l From the beginning of the year streams; and a trade-off policy until the answer is in. peo-l until June 11, this nuclear unit oper-between types of chemical com. pie here are doing what l ated at an availability factor of 96%. pounds that may lead to airborne l,",'Iioui'*"'"'"'"' i On an annual basis, taking into acids. The plan would reduce the l account the shutdown period, its emissions that are blamed for l availability factor was 68%. causing acid rain, yet cushion the In February 1983, the Emergency human and cost impacts. Preparedness Plan for Unit No. I was tested in a full-scale, all-day drill. Federal agencies determined that public health and safety can be adequately protected in the event of a nuclear emergency. 8

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e IV. INTERNAL OPERATIONS 100 positions will be eliminated, DUR CIT is AND PERSONNEL including some 20 managerin' Management reorganization positions. Duquesne Light's overall organiza-New early retirement plan tional structure has not significantly ONROEVILLE The reduction in personnel called for j changed for about 17 years. Early in by the reorganization will be accom-1983, the Board of Directors retained plished largely by attrition and by a the consultmg firm of Booz, Allen & new limited early retirement pro-Hannlton, Inc. to examine the organ-gram which was entirely voluntary. izational structure of the Company When the option was offered in late and make recommendations for 1983,450 employees were eligible; g) improvement. In November, the 323 chose early retirement. The Board of Directors adopted a new ~ plan of organization. option was terminated in January 1984' Under the new organization, oper-ations are directed by five Group New two-year union contract [nrf,eji s, ansi,on p Vice 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 pianted $5 ""j/lig"l,,lla-Roger D. Beck, Administrative Ser-Workers signed a new contract f,, vices; Clifford N. Dunn, Power Sup-effective October 1,1983. It provides settled into the quiet rou-ply; John J. Carey, Nuclear; and for a 6% increase in wages and a t{ne ot a typical bedroom ,,, g,, William F. Gilfillan, Jr., Customer smallimprovement m, fringe benefits when Monroeville was Services. In addition, Walter T. each year of the two-year pact. Most just in the making, a shop-Wardzinskiis Vice President of import:mt in these times is a provi- @he resIden s neede Legal and Corporate Communica-sion that will help reduce costs by was huilt. it was a catalyst: tions. All repcrt to John M. Arthu,, increasing the werk week of certain gl",ro vil has ab0ut Chairman of the Board and Presi-clerical workers from 37 % to 40 idents, and shoppers drive dent. For a complete list of Company hours at no additional increase in miles to get here. Ft.ur oflicers, see the inside back cover of wages. This change results in a stan-yl,*[,'[ll",'f,"l,8 "" 2,rs. this report. dard 40-hour work week for all Com-That tilten the population The ;mrpose of the ucw reorgani-pany eniployees. mll:l,h ,s a h gh pe ent-zation is to provide more eflicient management and to r' duce costs. It ,82 management audit produces '83 accents from Sweden. Eng-land. France. Hungary. results will make our organiution leaner by India. Japan. More recently, reducing the number of departments While the PUC-mandated manage. a railroad moved its head-quarters here, and an 1i ment audit of 1982 by, Temple, an$ ncreasing the responsibilities of Barker and Sloane, Inc. found S,EINt$a"IltOt drew over i"" existing managers. A total of about half a million buyers and f conventioneers last year. Monroeville is only 14 1 miles from downtown Pittsburgh and even closer n = to three major universities. 7% It, and other communities. pf%p are starting to sprout build. i ? HWA ' lV ings with company names YW h'MQ I d that don't have any voweis, b b'$ h. Advanced-tech is taking root around here. 1982 1983 liigh/ low Common Stock The principal trading marketfor the Company's Common Stock is the New York Stock 10 change. The stock is also listed on the Philadelphia Stock E'rchange.

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I Duquesne Light's operations to be Duquesne Light has worked with os TomsF , >si ~ p 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 QyNSHIP these recommendations. One visible mdependent, non-profit agency F resultin 1983 was a wider use of which was formed to meet the spe-3 computerized information systems. cific problem ofinability to pay. O 7 ih Benefits included increased clerical Duquesne Light supported the Dol-1 ? productivity, improved customer lar Energy Fund with start-up, pro-m4R JOWNS. HIP M service and enhanced management motion and administration funds. We I i control. mailed more than a million of the Whip Fund's appeals along with our regu-T&D moves lar monthly bills. In addition, we will Early m the year, the Transm.ission 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 to south road, first cut when Duquesne Light customers receiving a new buildmg m Center Township. this was hidian country. This completed a multi-year consoh.- assistance from the Dollar Energy and you see one side of L Fund. While only in existence for a Center Township-a bed. r dation of Western District opera-room community. People little over three months, the Fund commute to Pittsburgh. 40 a tions. There are seven sections and had received $55,970 m cash contri-minutes on the express-approximately 200 employees at th.is butions from customers by year end. way. lt's a chore, but location. The consolidation of three seaver county taxes are [ facilities has reduced costs and has Conservation l vIhIe."p'eYp e m*en#!an" t I made it more convenient for several Besides conducting energy audits at the colleges-a community departments to work together. below cost for residential customers, [",P,"N s opp $g' t a P h e Duquesne Light conducted a series very large mall, and their y Most.important awards of1983 of free lunchtime energy conserva. friendly neighbors. We take pride m a good safety tion presentations for the public at yo,7[ $',*,'il,r sk' 't d' a record, and special pride m, awards our new headquarters in downtown Center Township-the g like these received in 1983: Pittsburgh. We also sponsored a load countryside. setter than From the Pennsylvania Electric management seminar for commer-Nu'ar' eel [ sir'm'a'n'il r Association, an award for the best cial, industrial and governmental failow. water and woods, s accident-prevent,on record in the customers' hills-places quite wild-i Commonwealth's electric utility l",d;,Qse ui* ' F c ,hton-mdustry. Morejobs ship is more than a 1o. From the Pennsylvania Electric For the 25th year, Duquesne Light minute walk from where = Association, an award for meritori-operated a full-time Area Develop-V '{'"" '"* ' d ','.' [ [ ous results in the prevention of ment Department that works to have them in center Town-disabling shocks and burns. expand the local economy and ship and in other parts of From the Edison Electric Insti-expand employment opportunities in tute, the Injury Frequency Reduc-our service area. The department = tion Award certificate, for having staff worked with 180 prospective [ l reduced injury rates 25% in a sin-employers during the year. Their i gle year. efforts included finding land or buildings, locating financing, expe. L V. COMMUNITY CONCERNS [ diting permits and providm, g studies Inability to pay on markets and labor skills. Our With heavy industry in our area still staff secured 52 commitments to ,f in deep recession, the number of our expand or relocate in our service E customers unable to pay for electric area.The result was 2,960 jobs service has grown noticeably. added or retained. s 12

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Company Report on Financial Stataments 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 ofinternal 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) recommend 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 resuRs 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 lie 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 C,h,QA-UE f financial information is reliable. 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 Stockholders. 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-TO THE DIRECTORS AND STOCKHOLDERS ments present fairly the consolidated financial position OF DUQUESNE LIGHT COMPANY: f Duquesne Light Company at December 31,1983 and 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 l were made in accordance with generally accepted / auditing standards and, accordingly, included such February 15,1984 14

Duquesne Light 00mp ny Statement of Consolidated Income For the Three Years Ended December 31,1983 (The, ands 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 Income taxes-credit (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 Otherinterest 5,736 3,471 6,957 Allowance for borrowed funds used during construction, net ofincome taxes (15.388) (14,853) (11,393) TotalInterest 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): Iess from operations of discontinue.1 steam heating subsidiary (921) (538) Loss 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 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 31.90 $1.85 The recompanying Notes to Financial Statements are an integral part of these statements. l l l l l If l

Duquesne Li ht Company Censzlidated Balanca Sheet December 31,1983 and 1982 (Thousands of Dollars) 1983 1982 ASSETS PROPERTY, PLANT AND EQUIPMENT: Electric plant in service $2,434,916 $2,347,640 Construction work in progresc 856,766 675,621 Held for future use 1,799 1.293 Total 3,293,481 3,024,554 Less accumulated depreciation 555.611 504,680 Property, Plant and Equipment-Net 2.737,810 2.519,874 OTHER PROPERTY AND INVESTMENTS: Nonutility soperty 2,050 2,008 Miscellaneous investments 12.424 8,489 Total Other Property and Investments 14.474 10,497 CURRENT ASSETS: Cash and temporary cash investments (at cost which approximates market) 73,751 33,663 Accounts receivable: Customers (less reserve for uncollectible accounts of $2,652 and $2,270, respectively) 69,822 60,177 Tax refund 5,507 Other 19,797 21,284 Materials and supplies (generally at average cost): Coal 59,205 69,194 Other operating and construction 34,983 33,964 Deferred income taxes 3,121 7,265 Other current assets 13.028 13.851 f Total Current Assets 273,707 244,905 DEFERRED DEBITS: Extraordinary property losses (Note B) 36.565 40,334 Deferred coal costs (Notes G and M) 22,343 18,338 Other deferred debits 60.882 49,476 Total Deferred Debits 119,790 108,148 Total $3.145.811 $2,883,424 The accompanying Notes to Financial Statements are an integral part of these statements. l l 16 I .y

r: i 1983 1982 i LIAHILITIES CAPITALIZATION (Note E): Common Stock (authorized-75,000,000 shares; outstanding-58,419,659 and $ 58,420 $ 53,277 53,276,525 shares, respectively) 724,147 649,376 C pitalsurplus 175,938 165,340 Retained earnings Total Common Stockholders' Equity 958,505 867,993 Non-redeemable Preferred and Preference Stock 156,137 156,137 Redeemable Preferred and Preference Stock 134.979 140,829 1,100,147 1,006,637 First mortgage bonds 234,019 199,934 Oth!r long term debt Unamortized debt discount and premium-net (10,967) (9.488) 2.572,820 2,362,042 Total Capitalization CURRENT LIABILITIES: Long-term debt maturing within one year (Note E) 16,700 12,500 I Accounts payable 95,030 98,399 Accrued income taxes (Note H) 5,778 6,403 Other accrued and deferred income taxes 19,430 13,658 9,974 Entrgy cost rate refunds 40,390 29,482 Accrued interest Dividends declared 34,771 30,302 Sinking fund and purchase requirements (Note E) 13,391 10,987 Reserve for loss on discontinued steam heating operations (Note C) 3.181 2,698 Total Current Liabilities 228,671 214,403 l DEFERRED CREDITS: Investment tax credits 143,764 126,447 Accumulated deferred income taxes 193,649 172,600 l Other deferred credits 6.907 7,932 j Total Deferred Credits 384,320 306,979 COMMITMENTS AND CONTINGENT LIABILITIES (Notes G, I, L and M) Total $3,145,811 $2,883,424 l l 1 l'

l Duquesne Light Company Statement of Changes in Consolidated Financial Position For the Three Years Ended December 3(,C iy { Dollars) 1983 1982 1981 SOURCE 0F FUNDS: Continuing electric operations: Income from continuing electric operations 1. fore extraordinary gain $145,226 $117,197 $109,409 Items not affecting working capital: Depreciation 79,800 66,303 63,560 Investment tax credit deferred-net 17,317 17,335 11,524 Income taxes deferred-net (noncurrent portion) 21,049 18,466 38,040 Allowance for equity and borrowed funds used during construction (66,097) (50.268) (36.012) Total 197,295 169,033 186,521 Discontinued steam heating operations (9,924) (538) Items not affectink2, $595: 198workingca ital (including depreciation: 19 $610) (349) 690 Total From Operations (excluding extmordinary gain) 197,295 158,760 186,673 Extraordinary gain on early extinguishment of bonds 9,609 l Sale of bonds 110,000 65,000 80,000_ Issuance of Common Stock 80,485 107,369 61,332 Nuclear fuel obligations 6,125 24,221 Construction costs reimbursed by trustees frcm proceeds of pollution control financings 19,680 50,000 Decrease in working capital (exclusive of current maturities of long-term debt)(a) 30,312 Total Source of Funds $413,585 $395,271 $378.005 APPLICATION OF FUNDS: Construction expenditures (net of allowance for equity and borrowed funds used during construction) $224,280 $231,022 $178,942 _ _ Dividends on capital stock 134,628 115,247 100,268 Reduction of bonds 12,500 43,852 Sinking fund and purchase requirements 4,696 2,691 4,461 Deferred coal costs 4,005 2,669 15,355 Decrease in notes payable 35,000 Other-net 14,742 (210) 15,679 Increase in working capital (exclusive of current maturities of long-term debt and notes payable)(a) 18,734 28.300 Total Application of Funds $413.585 $395.271 $378.005 (a) The components of working capital (exclusive of current maturities of long-term debt and notes payable) were as follows: Current assets: Cash and temporary cash investments S 73,751 $ 33,663 $ 50,655_ Accounts receivable 89,619 86,968 94,363 Materials and supplies and other current assets 107,216 117.009 95,878 Deferred income taxes 3,121 7,265 Total 273,707 244.905 240.896 Current liabilities: Accounts payable and accrued interest 135,420 127,881 106,337 Accrued taxes 25,208 20,061 24,280 Energy cost rate refunds 9,974 Dividends declared 34,771 30_J02 27,232 Sinking fund and purchase requirements 13.391 10,987 9,733 Reserve for loss on discontinued steam heating operations 3,181 2.698 l Total 211,971 201.903 167,582 Working capital at close of year 61,736 43,002 73,314 Working capital at beginning of year 43,002 73.314 45.014 Increase (decrease)in working capital (exclusive of current maturities of long-term debt and notes payable) $ 18,734 $(30.312) $ 28.300 l The accompanying Notes to Financial Statements are an integral part of these statements. l 18 i

DuquesneLightCorhpan'f Consolidated Retained Earnings Statement o For the Three Years Ended December 31,1983 (Thousandsof Dollars) 1983 1982 1981 BALANCE AT BEGINNING OF YEAR: $167,149 $158,546 As previously reported 3,444 3,444 Less settlement of prior years' income taxes (Note I) $165,340 163,7')5 155,102_ As restated 145,226 116,882 108.871 NET INCOME FOR THE YEAR 310,566 280,587 263,973 Total DEDUCT: Cash dividends declared: Preferred Stock: 1,100 1,100 1,100 4% Series 281 281 281 3.75% Series 291 291 291 4.15% Series 210 210 210 4.207 Series 246 246 246 4.10% Series 336 336 336 $2.10 Series 2.219 2,271 2,323 $8.64 Series 2,520 2,520 2,520 $7.20 Series 2,512 2,512 2,512 $8.375 Series Preference Stock: 1,944 2,038 2,119 $7.50 Series 891 1,035 1,177 $2.75 Series 2,778 2,778 2,778 $2.315 Series 2,520 2,520 2,520 $2.10 Series 4,563 4,563 4,563 $9.125 Series Common Stock (Per Share: 1983 -$2.00 1982-$1.90; 1981-$1.85) 112,217 92,546 77,292 134,628 115.247 100,268 Total Cash Dividends $175,938 $165,340 $163,705 BALANCE AT CLOSE OF YEAR Statement of Consolidated Capital Surplus For the Three Years Ended December 31,1983 (Thousands of Dollars) 1983 1982 1981 $649,376 $550 244 $494,228 BALANCE AT BEGINNING OF YEAR 1 75,342 99,395 56,196 Premium en Common Stock issued (571) (263) (180) Expense ofissuing capital stock $724,147 $649,376 $550,244 BALANCE ATCLOSE OlpAR The accompanying Notes to Financia: Statements are an integral part of these statements. 19

Duquesne Light Company Notcs'to Fmancial Statements A. SUmfARY OF ACCOUNTING POLICIES: gress. Investment tax credits are deferred and amortized over Consolidation the lives of the related facilities. The consolidated financial statements include the Company Deferred Fuel Costs and its wholly-owned subsidiary. See Note C concerning The Company defers the difference between actual fuel costs disposition of the subsidiary. and base fuel costs until the period in which such costs are Property, Plant and Equipment billed to its customers through its energy cost rate. The energy The properties of the Company are carried at original cost and, cost rate is based on projected costs, with provisions for subse-with minor exceptions, are subject to a first mortgage lien. All quent adjustments to actual cost. Any overcollections of reve-maintenance and repairs and replacements of minor units of nues are refunded to customers. property are charged to income. Replacements of retirement Nuclear Fuel Costs units of property and betterments are capitalized. In connection The Company's share of nuclear fuel costs under non-with retirements, reserves are charged with the carrying value, capitalized lease agreements is charged to fuel expense based plus dismantling charges, less salvage, of property retired. on the quantity of electric energy genu ated and reflects a zero Revenues net salvage value for the leased nuclear fuel. In 1982 the Com-Customer meters are read monthly or bimonthly and bills are pany began capitalizing acquisitions of nuclear material rendered on a monthly basis. Revenues are recorded when through a trust arrangement that is intended to finance a por-billed. tion of the Company's requirements for nuclear fuel. An accounting pronouncementissued by the Financial Accounting Allowance for Funds Used During Construction In accordance with the uniform system of accounts prescribed Standards Board in 1982 will result in capi,talization of the by regulatory authorities, an allowance for funds used during Company's nuclear fuel leases begmnmg m 1984. construction (AFC) is included in construction work in progress Under the Nuclear Waste Policy Act of 198,2(the Act), the United States Department of Energy (DOE)is responsible for and credited to other income for AFC attributable to equity the ultimate storage and disposal of spent nuclear fuel removed funds and to interest charges for AFC attributable to bor-from reactors. Under the Act the Company is required to pay a rowed funds, net of income taxes. AFC is a non-cash item and is computed using a composite rate, which is applied to the bal-quarterly fee to DOE of one mill per kilowatt hour on nuclear ance of construction work in progress and assumes that funds generation after April 6,1983 and a one-time fee for nuclear used for construction are provided by borrowings and by pre-generation through April 6,1983. Although the method of payment of the one-time fee, currently estimated to be approxi-ferred, preference and common stock equity. The rate, com. mately $8,921,000, has not been determmed, this amount has pounded semi-annually, was 9.67,8.57 and 7.64 in 1983,1982 and 1981, respectively.This accounting procedure results in the been recorded as long-term debt with a contra charge to, inclusion in property, plant and equipment of amounts consid, deferred debits.The Company began recovering the one-time ered by regulatory authorities as appropriate costs for the fee m rates m, February 1983 and has established a trust fund f r the deposit of the amounts recovered.The Company is also purpose of establishing rates for utility charges to customers. recovermg the fees for generation after April 6,1983 and mak-Deprec. t.ia ion ing payments to DOE on a quarterly basis. The Company provides for deprec. tion of electric plant, ia. Debt Discount, Premium and Expense exclusive of coal properties, on a straight-line basis determined in a manner consistent with applicable Pennsylvania law and Debt discount or pre,mmm and related expenses are amortized with methods applied by the Pennsylvania Public Utility Com. ver the lives of the issues to which they pertam. mission (Commission) in the determination of depreciation in B. EXTRAORDINARY PROPERTY LOSSES: rate proceedings. Provisions for depreciation and depletion of In January 1980, the Company and the other CAPCO compa-other Company property are made on various bases such as nies cancelled the construction of four nuclear generating tons of coal mined for coal properties. units. The Company received approval from the Federal The Company provides for decontammation and dismantim.g Energy Regulatory Commission (FERC) and the Pennsylvania costs for the Beaver Valley No.1 nuclear generatmg unit m Public Utility Commission (Commission) to amortize and accordance with the, provisions of the orders of the Commis-recover from its customers its share of the accumulated costs sion.The Company is, allowed to recover from its customers applicable to these units over a ten-year period which began annual decommissionmg annuity payments to provide for the January 29,1983. The unrecovered costs which were decommissioning of th,e nuclear related components. Such unamortized as of December 31,1983 were $31,291,000. costs are currently estimated to be approximately $30,000,000. On October 1,1982 the Shippingport Atomic Power Station The Company deposits certain revenues in a trust fund which was removed from commercial operation after notice from the has been established to pay for such costs. At, December 31, United States Department of Energy that it was planning to 1983, $1,573,000 was included in the Decommissionmg Trust terminate operation of the light water breeder reactor core at Fund, which represents the aggregate value of revenue de' the station as of that date.The Company requested approval posits and interest earned on mvestments made by the trustee. from FERC to record the undepreciated cost of the station as income Taxes an extraordinary property loss and to amortize such loss over a Deferred income taxes are provided principally for differences ten-year period beginning on the date that rates providing for between depreciation for income tax purposes and depreciation the recovery of such cost first become effective. Consistent for accounting purposes to the extent permitted by the Com-with this request, the Company reclassified the net amount to j mission for rate making purposes, and for fuel and extraordi-extraordinary property losses. The Company has received nary property losses deferred for accounting purposes but approval from the Commission to amortize and recover a por-deducted currently for income tax purposes. In compliance tion of this amount, net of income taxes, from its customers with regulatory accounting, income taxes are allocated over a ten-year period which began January 29,1983. between operating expenses and other income, principally with The Company is not earning any return on the unamortized l respect to interest charges related to construction work in pro-costs of either of the property losses. 20 l

s C. DISCONTINUED STEAM HEATING OPERATIONS: 31,1983. These losses were charged against 1982 income, and On September 30,1982 the Pennsylvania Public Utility Com-no additional loss is expected to be incurred due to the disposi-mission approved the application by the Company's steam tion. Prior years' operating results have been reclassified to heating subsidiary, Allegheny County Steam Heating Com-present separately the results of discontinued steam heating pany, to discontinue steam service to the public effective May operations from continuing electric operations. 31,1983 and to transfer to Pittsburgh Allegheny County Ther-At December 31,1983 and 1982 assets and liabilities included mal, Ltd. (PACT) a major portion of the subsidiary's assets for in the consolidated balance sheet applicable to the subsidiary nominal consideration.The transfer of the assets became effec-were not material. Revenues from discontinued steam heating tive June 1,1983. In addition, a lease to PACT of a steam gener-operations for the five months ended May 31,1983 and for 1982 ating plant for nominal consideration became effective on Jan-and 1981 were approximately $6,884,000, $8,845,000 and uary 3,1983 after completion by the subsidiary of certain $10,996,000, respectively, demolition work at the plant. The provision for loss on the disposition of the subsidiary's D, EARIX EXTINGl'ISIIMENT OF HONDS: assets was $9,000,000 (net of income tax benefit of approxi-In December 1982, the Company exchanged 1,406,898 shares mately $8,712,000) and the loss from operations was $924,000 of Common Stock for approximately $29,852,000 principal (net of income tax benefit of approximately $1,028,000) for the amount of outstanding First Mortgage Bonds which were nine months ended September 30,1982. The provision for loss owned by an investment banking firm. The exchange resulted on disposition included estimated operating losses for the sub-in a nontaxable extraordinary gain of $9,609,000, or $.20 per sidiary of $1,100,000 (net ofincome tax benefit of approxi-share, which was the difference between the exchange value mately $970,000) for the period October 1,1982 through May of the Common Stock and the net carrying amount of the bonds. E. CAPITALIZATION: December 31,1983 December 31,1982 Shares Shares Outstanding Amount Outstanding Amount Common Stock-$1 par value (1) 58.419,659 8 58.419,659 53.276.525 $ 53.276.525 CapitslSurplus: Premium on Common Stock $731,335,853 $655,993,654 Capital stock expense (debit) (7,622,344) (7,065,026) Other 433,442 447.147 Capital surplus $724,146,951 $649.375.775 Non-redeemable Preferred and Preference Stock: Preferred Stock-$50 par value (cumulative) (1) 4% Series (2) 549,969 $ 27,498,450 549,969 $ 27,498,450 3.75% Series (2) 150,000 7,500,000 150,000 7,500,000 4.15% Series (2) 140,000 7,000,000 140,000 7,000,000 4.20% Series (2) 100,000 5,000,000 100,000 5,000,000 4.101 Series (2) 120,000 6,000,000 120,000 6,000,000_ $2.10 Series (2) 160,000 8,000,000 160,000 8,000,000 $7.20 Series (3) 350,000 17,500,000 350,000 17,500,000 Preference Stock-81 par value (cumulative)(1) 82.315 Series (4) 1,200,000 1,200,000 1,200,000 1,200,000 $2.10 Series (4) 1,200.000 1,200,000 1.200.000 1,200.000 80,898,450 80,898,450 Premium on Non-redeemable Preferred and Preference Stock 75.238,760 75.238.760 ) Non-redeemable Preferred and Preference Stock $156.137.210 $156.137.210 Involuntary liquidation value $155.998.450 $155.998.450 Redeemable Preferred and Preference Stock: Preferred Stock-$50 par value (cumulative)(1) $8.64 Series (3) 256,872 8 12,843,600 262,872 $ 13,143,600 $8.375 Series (3) 300,000 15,000,000 300,000 15,000,000 Preference Stock-81 par value (cumulative)(1) $7.50 Series (3) 255,920 255,920 268,920 268,920 $2.75 Series (4) 270,570 270.570 365,020 365.020 $9.125 Series (3) 500.000 500.000 500.000 500.000 28,870,090 29,5 7,540 Premium on Redeemable Preferred and Preference Stock 109,173.360 113,027,160 Purchase and Sinking Fund Requirements (3.061,250) (1.475.500) Redeemable Preferred and Preference Stock $134.979,200 $140.829.200 Involuntary liquidation value $138,979,200 $140.829.200 (1) Authorized sharen: Common Stock-75.000.000;(increased (2) $50pershareinvoluntaryli uidationvalue, in 1983 from 60.000,000); Preferred Stock-4,000,000; (3) 8100pershareinvolur.taq quidation value, and Preference Stock-8,000,000. (4) 825pershareinvoluntary idation value.

Duquesne Light Company Notes (continued) The following summary indicates the changes in the number of shares of Common Stock outstanding during 1983,1982 and 1981: Year Ended December 31, 1983 1982 1981 Common.90ck: Shares outstanding at beginning of year 53,276,525 45,302,520 40,1G6,08: Issuances: Common Stock sales 2,475,000 4,500,000 4,100,00( Dividend Reinvestment Plan 2,524,407 1,962,320 902.97' Employee Stock Ownership Plan 143,727 104,787 133,464 Exchanged for outstanding First Mortgage Bonds 1,406.898 Shares outstanding at end of year 58,419.659 53.276.525 45.302.52t The number of shares reserved at December 31,1983 for 1988, and thereafter at $100 plus the applicable redemption issuance under the Dividend Reinvestment Plan and the premium decreasing from $5.03 in 1988 to $.34 in 2003. Employee Stock Ownership Plan are 6,364,124 and 448,115, respectively. Redeemable Preferred and Preference Stock: The Preference Stock is entitled to quarterly cumulative The shares of $7.50 Preference Stock are entitled to a non-dividends except that no dividends may be paid if dividends on cumulative purchase fund under which the Company offers to any series of the Preferred Stock are accumulated and unpaid. purchase annually at $100 per share up to 47c of the number of In the event that six quarterly dividends on any series of Pref-shares originally issued. The shares of $2.75 Preference Ltock erence Stock are in default, the holders of the Preference are subject to a cumulative sinking fund which will retire Stock are entitled to elect two directors until all dividends in 55,000 shares by August 1 in each year at $25 per share.The arrears have been paid. Company may on a non-cumulative basis retire an additional The outstanding Preference Stock of the Company is 55,000 shares in each such year.The shares of $9.125 Prefer-callable on not less than thirty days' notice at the following ence Stock are subject to a cumulative sinking fund beginning redemption prices plus accrued dividends: $7.50-redeemable with the year 1985 and continuing through 1997 inclusive at $105 through April 1,1986; $103 through April 1,1989; and which will retire 33,300 shares on January 1 in each year at $101 thereafter; $2.75-not redeemable prior to August 1, $100 per share. The Comps.ny may, on a non-cumulative basis, 1984 through certain refunding operations, otherwise redeem-retire an additional 33,300 shares in each such year, provided able at $27.75 through July 31,1984; $26.50 through July 31, that the Company may not redeem through the exercise of thi: 1989; and $25.25 thereafter; $2.315-redeemable at $26.60 option more than an aggregate of 150,000 shares. through March 31,1986; $25.90 through March 31,1991; and The shares of $8.64 Preferred Stock are entitled to a non- $25.25 thereafter; $2.10-redeemable at $26.40 through cumulative purchase fund under which the Company offers to March 31,1987; $25.70 through March 31,1992; and $25.00 purchase annually up to 6,000 shares at not more than $100 thereafter; $9.125-not redeemable prior to January 1,1989 per share.The shares of $8.375 Preferred Stock are subject to through certain refunding operations, otherwise redeemable a cumulative sinking fund beginning with the year 1984 which nt $100 plus the applicable redemption premium decreasing will retire 12,000 shares on April 1 in each year at $100 per from $6.72 in 1984 to $.48 in 1998. share.The Company may on a non-cumulative basis retire an The Preferred Stock is entitled to quarterly cumulative additional 12,000 shares in each such year. dividends. In the event that four quarterly dividends on any The combined aggregate sinking fund and mandatory pur-series of Preferred Stock are in default, the holders of the Pre-chase requirements for the next five years as of December 31, ferred Stock are entitled to elect a majority of the Board of 1983 are as follows: Directors until all dividends in arrears and current dividends have been paid. Year Ending Sinking Fund and Mandatorv The outstanding Preferred Stock of the Company is callable December 31 Purchase Requirements ' on not less than thirty days' notice at the following redemption 1984 $4,364,250 prices plus accrued dividends: 4%$51.50; 3.75%$51.00; 4.15%$51.73; 4.20%$51.71; 4.10b$51.75; $2.10-851.84; 1985 7,805,000 $8.64-redeemable at $107 through September 30,1984; $104 1986 7,805,000 through September 30,1989; and $101 thereafter; $7.20-1987 7'805'000 redeemable at $102.50 through March 31,1987; and $101 thereafter; $8.375-redeemable at $112 through March 31, 1988 7.805.000 22

e l The following summary indicates the changes in the number of shares of Redeemable and Non-redeemable Preferred and Preference Stock outstanding during 1983,1982 and 1981: Year Ended December 31, 1983 1982 1981 Preference Stock: Sh res outstanding at beginning of year 3,533,940 3,565,220 3,678,650 l Purchases and redemptions-$2.75 Series (94,450) (20,080) (103,750) -$7.50 Series (13,000) (11,200) (9.680) Shares outstanding at end of year 3,426,490 3,533,940 3.565,220 Pref rredStock: Shares outstanding at beginnmg of year 2,132,841 2,138,841 2,144.841 Purchases-$8.64 Series (6,000) (6,000) (6.000) Shares outstandinz at end of year 2.126,841 2.132,841 2,138,841 First Mortgage Honds (amount authorized is unlimited by indenture): December 31, 1983 1982 $ 12,000,000 Series due September 1,1983(3%%) Series dueJuly l,1984(3%%) 16,000,000 16,000,000 Series due April 1,1986(3%%) 20,000,000 20,000,000 Series due Aprill,1988(3%%) 15,000,000 15,000,000 Series due March 1,1989(4%%) 10,000,000 10,000,000 Series due February 1,1996(5%%) 22,800,000 22,800,000 Series due February 1,1997(5%%) 24,600,000 24,600,000 Series due February 1,1998(6%%) 34,700,000 34,700,000 Series dueJanuary 1,1999 6%) 30,000,000 30,000,000 Series dueJuly 1,1999 6%%) 28,947,000 28,947,000 Series due March 1,2000(8%%) 30,000,000 30,000,000 Series due March 1,2001(7%%) 35,000,000 35,000,000 Series due December 1,2001(7%%) 26,461,000 26,461,000 Series dueJune 1,2002(7%%) 28,470,000 28,470,000 Series dueJanuary 1,2003(7%%) 32,670,000 32,670,000 Series duc July 1,2003(7%%) 35,000,000 35,000,000 Series due April 1,2004(8%%) 44,100,000 44,100,000 Series due March 1,2005(9%%) 50,000,000 50,000,000 Series dueJune 1,2006(9%) 80,000,000 80,000,000 Series due Aprill,20(YT(8%%) 97,400,000 97,400,000 Series due February 1,2009(10%%) 100,000,000 100,000,000 Series due January 1,2010(12%%) 60,000,000 60,000,000 i Series due September 1,2010(14%%) 50,000,000 50,000,000 Senes dueJune 1,2011(163) 80,000,000 80,000,000 l Series due May 1,2012(16%%) 65,000,000 65,000,000 j Series due Aprill,2013(12%%) 60,000,000 Series due December l.2013(13%) 50,000,000 Total 1,126,148,9u0 1,028,148,000 I#ss: Current maturities-Series due_Sep_tember 1,1983 (3%%) 12,000,000 Current maturities-Series due July 1,1984 (3 %%) 16,000,000 Current sinking fund requirements 10,001,480 9.511,480 First Mortgage Honds $1,100,146,520 $1,006.636,520 23

Duquesne Light Company Notes (continued) Serial Maturity Otherlamg-Term Debt: Ibilution ControlObligations: Average or Mandatory December 31' Date of Interest Redemption Final Issuance Rate Beginning Maturity 1983 1982 September 21,1972 5.49% 1983 2002 8 23,500,000 $ 24,000,000 June 21,1973 5.685% 1984 2003 12,000,000 12,000,000 ; October 25,1973 5.755% 1984 2003 16,000,000 16,000,000 August 13,1974 7.97% 1989 2004 14,000,000 14,000,000 April 2,1975 7.50% 1993 2005 17,000,000 17,000,000 October 29,1975 8.40% 1991 2005 18,000.000 18,000,000 September 29,1976 6.90% 1994 2011 15,000,000 15,000,000 March 24,1981 12.00% 2002 2011 50,000,000 50,000,000 November 1,1983 10.50% 2013 20.500.000 Total 186,000,000 166,000,000 Less: Currentmaturities 700,000 500,000 Current sinking fund requirements 325,000 Pollution ControlObligations 184,975,000 165,500,000 Nuclear Fuel Obligations 30,345,499 24,221,187 Spent Nuclear Fuel Liability 8,920,790 5% Sinking Fund Debentures (authorized $20.000.000) due March 1,2010 9,778,000 10.213.000 Total Other Long-Term Debt $234.019.289 $199,934.187 The pollution control obligations arise from arrangements Year Ending Dec. 31. Sinking Fund Requirements Maturities between the Company and development authorities whereby 1984 $11,426,480 $16,700,000 the construction of certam pollution control facilities has been 1985 11,426,480 700,000 financed through the sale of bonds by those authorities, and the Company is obligated to pay to the authorities amounts 1986 11,429,480 20,700,000 equal to the principal of and interest on the authorities' bonds. 1987 11,676,480 800,000 The nuclear fuel obligations result from a trust arrange-1988 11,526.480 15,800,000 ment for the procurement of a portion of the Company s requirements for nuclear fuel. Interest amounts applicable to The sinking fund requirements in each year relate primarily the trust are capitalized and included in construction work in to the First Mortgage Bonds, which requirements may be sat-progress, at rates ranging from 1 %% to 1 %% over the isfled by the certification of property additions at 166%% of the trustee's commercial paper rate. Trust obligations will be paid Bonds required to be redeemed, and the pollution control obli-by the Company as the related nuclear fuel is withdrawn from gations. The remaining sinking fund requirement relates to the trust, the 5% Sinking Fund Debentures. At December 31,1983, sink-The spent nuclear fuel liability results from a requirement ing fund requirements for the 5% Debentures had been satis-l to provide for payment of a one-time fee to the United States fied for 1984 and 1985, and the 1986 sinking fund requirement Department of Energy for ultimate storage and disposal of had been partially satisfied in the amount of $222,000. spent nuclear fuel used in the generation of electricity through Total interest costs incurred during 1983,1982 and 1981 April 6,1983. See Note A to the financial statements. were $131,248,000, $125,004,000 and $111,331,000, respec-Sinking fund requirements and maturities for the next five tively, of which $73,310,000, $60,075,000 and $42,982,000, i years for long-term debt outstanding, exclusive of nuclear and respectively, were capitalized or deferred, including allowance spent fuel obligations, as of December 31,1983 are as follows: for funds used during construction. F. SilORTTER31 HORROWING ARRANGE 31ENTS: 15,1989. Interest rates fluctuate during the revolving and At December 31,1983 the Company had lines of credit with term periods, depending on the period of borrowings, at two banks totaling $15,000,000, all of which was unused. percentages in excess of prime, Euro-Rate or certificate of l Effective February 1,1984 these lines of credit increased to an deposit rates. Until December 15,1986 there is a commitment aggregate of $35,000,000. The range of interest rates under fee of %% per annum on the average unborrowed commit-these lines of credit are from prime rate less one half of one ment. There is no commitment fee during the term period. percent to the prime rate or at a special rate as may be offered During the years ended December 31,1983,1982 and 1981 from time to time by the banks. As part of the arrangement the maximum amount of short-term borrowings outstanding for one of the lines of credit, the Company is required to pay was $48,020,000, $37,000,000 and $80,140,000, the average a commitment fee of %% per annum on the unused portion daily short-term borrowings outstanding were $12,251,0e0, of the line.There are no compensating balances associated $1,559,000 and $28,341,000 and the weighted average daily with these lines of credit. In addition, the Company has a interest rate applicable to such short-term borrowings was $60,000,000 revolving credit arrangement available to Decem-9.40%,15.39% and 17.509, respectively, ber 15,1986, all of which was unused at December 31,1983. G. DEFERRED COAI, COSTS-Borrowmgs outstanding at D verted to term notes payable m,ece,mber 15,1986 may be con-The Company and the other CAPCO companies have made stx equal semi-annualinstall-long-term coal supply arrangements with Quarto Mining Com 24 ments commenemg June 15,1987 and concluding December pany (Quarto), an unaffiliated company, to supply coal for the

...~ 0 Bruce Mansfield Units. In December 1980 the Pennsylvania investigation entered an order, subject to review by the Com-Public Utility Commission (Commission) instituted an investi-mission, approving the Stipulation Agreement. On November gation into the reasonableness of the cost of coal supplied by 19,1982 the Commission remanded the Stipulation Agreement Quarto. By Interim Order entered January 12,1981 the Com-to the administrative law judge for hearings. Hearings were mission directed that, pending conclusion of the investigation held in January and February 1983, and on April 29,1983 the or further order of the Commi=sion, the Company limit its Commission issued an order allowing the Consumer Advocate recovery of the cost of Quarto coal through its energy cost to place into the record testimony regarding the prudence of rate to approximately the prevailing market price of similar the Quarto project. Further hearings were held in July and coal rather thar. the actual cost of Quarto coal. As required by August 1983. On February 3,1984 the administrative law the Interim Order, the Company is deferring the excess of the judge issued a recommended decision, subject to the Com-actual cost of Quarto coal over the cost being recovered mission's approval, concluding that the Company was prudent through its energy cost rate until recovery of the actual cost is by initiating and continuing the Quarto project and that the permitted by the Commission. At December 31,1983 the Stipulation Agreement is in the public interest and is a fair and unrecovered cost of Quarto coal paid by the Company was reasonable resolution of the investigation into the reasonable-approximately $21,541,000, including $876,000 applicable to ness of the cost of Quarto coal. The administrative law judge Quarto coal in inventory. If recovery of such excess is disal-recommended that the Stipulation Agreement and its method-lowed, the amount deferred would be charged to income in the ology for recovering the cost of the Quarto coal be approved year of disallowance.Thereafter, any excess of actual cost and the Commission's investigation terminated. The matter is over the amount permitted to be recovered would be charged presently pending before the Commission. Management of the to income on a current basis. The deferrals and methods of Company believes that the deferred costs were prudently ultimately recovering such deferrals were the subject of dis-incurred and that the eventual outcome of the Commission's cussions between representatives of the Company and the investigation will not have a material effect on the Company's Commission staff. Such discussions resulted in the filing with financial position or results of operations. The CAPCO compa-the Commission of a Stipulation Agreement, which sets forth nies are continuing to evaluate the economics of the Quarto a method intended to permit the eventual recovery of the arrangements and are considering and implementing various accumulated deferrals of the excess of Quarto coal costs over means for reducing production costs. See Note M to the market price. The administrative law judge assigned to the financial statements. H. INCOME TAXES: Totalincome taxes in 1983,1982 and 1981 were comprised of the following components: 1983 1982 1981 (Thousands of Dollars) Included in operating expenses: i Currently payable: Federal 8 33,931 $25,257 $20,519 State 14,295 12,694 13,680 income taxes deferred-net: Federal 22,955 13.997 26,080 State 5,555 (228) (1,057) Investment tax credit deferred-net 16.218 19.493 13.041 4 Total 92,951 71,213 72.263 included in other income (income taxes-credit): Currently payable: Federal (13,354) 0 4.267) (11.523) State (3,406) (3.639) (2.939) Totalincome tax expense S 76,19i $53.307 $57.801 Taxes currently payable-federal and state $ 31,466 $20,045 $19,737 Taxes deferred-net 28,510 13,769 25,023 Investment tax credit deferred-net 16.21R 19.493 13.041 Totalincome tax expense S 76.194 $53.307 $57.801 Total income tax expense is exclusive of income taxes applicable to discontinued steam heating operations. See Note C to the finincial statements. Sources of income taxes deferred and the tax effects were: I Excess of tax over book depreciation S 20,920 $14,490 $12,672 Futi corts expensed on tax return and deferred on books 9,786 (3,552) (3,062) Investment tax credit carryforward recognized 16,932 against income taxes deferred-r.et Extraordinary property losses expensed on tax return end deferred on books (1,562) 3.019 81 Other (63i) (188) (1.6001 Totalincome taxes deferred-net S 28.510 $13.769 $25.023 2a,

Duquesn2 Light Company Notehcontinued) Total income taxes from continuing electric operations were less than the amount computed by applying the statutory fed-eral income tax rate of 46% to income from continuing electric operations before income taxes. The reasons for this difference in each year were as follows: Computed federal income tax on continuing electric operations at statutory rate $101,853 $78,432 $76,917 Increase (decrease)in taxes resulting from: Allowance for funds used during construction (30.405) (23,123) (16,565) Excess of tax over book depreciation 3.246 1,131 (577) State income taxes, net of federal income tax benefit 8,880 4,766 5,229 Amortization of deferred investment tax credits (5,266) (4,251) (3,663) Other-net (2.114) (3.648) (3.540) Totalincome tax expense $ 76.194 $53.307 $57.801 l I. PRIOR YEARS' INCOME TAXES: t 1 The Company's income tax returns are settled through 1970. pany concerning percentage depletion for the years 1956 Income tax returns for 1971 through 1979 have been exam-through 1961. The settlement resulted in a charge to retained ined, the 1980 and 1981 returns are being examined, and the earnings of approximately $3,444,000. The Company has 1982 return is subject to review. The Internal Revenue Service received approval from the Federal Energy Regulatory Com-assessed deficiencies regarding the Company's computation of mission for this accounting treatment. The Company expects percentage depletion on coal mined for 1956 through 1979, as that this court decision will serve as the basis for settlement of well as certain other issues of relatively minor importance for the depletion issue for the yars 1971 through 1979. Manage-1971 through 1979. A settlement of the depletion issue for the ment of the Company believes that the settlement of federal years 1962 through 1970 occurred in June 1983 based on an and state taxes will not have a material effect on the Com-earlier court decision which was generally in favor of the Com-pany's financial position or resuhs of operations. J. EMl'I.OYEE IIENEl'ITS: The Company has trusteed retirement plans to provide pen-December 31, sions for all employees, except coal mme employees who are 1982 1981 1980 covered under a plan administered by the United Mine (Thousands of Dollars) Workers of America. Information concerning the plan cover-Actuarial present value of ing coal mine employees is not determinable and is not accumulated plan benefits: included in the data below. Pension costs are funded as Vested $159,956 $151,756 $135,345 accrued and include amortization of prior service costs over 30 Nonvested 11,494 11,566 10,750 years. Pension costs charged to expense or construction for Total s171.450 $163,322 $146,095 the years ended December 31,1983,1982 and 1981 were $10,803,000, $12,313,000 and $10,083,000, respectively. The Net assets available for decrease in pension costs in 1983 resulted principally from an benefits (at fair value) 3135.571 $111,013 $107,798 merease in the interest assumption. The increase in pension costs in 1982 was due principally to a plan amendment effec-tive May 1,1981, increasing pension payments to employees The Company is liable under federal and state laws for the retired prior to October 1,1979. payment of benefits to coal mine employees disabled by black The accumulated plan benefits and net assets available for lung and to their survivors and dependents. The estimated benefits for the trusteed plans are presented as of the Decem. costs of providing such benefits, including amortization of ber 31 benefit information dates. In 1983 the Company prior service costs over the remaining estimated life of the i l adopted an early retirement program in which certain benefits Warwick mine, are actuarially determined and accrued on the l will be paid from the assets of the retirement plans. Addition. basis of mine payroll costs and are deposited with a trustee. j ally during 1983, the Company refunded from such assets all Such costs were $1,574,000, $1,417,000 and $1,524,000 for the employee contributions. The impact of the early retirement years ended December 31,1983,1982 and 1981, respectively. program and the refund of contributions is not reflected in the At July 31,1983 (the date of the latest actuarial valuation), the amounts below.The assumed rate of return used in determin. unfunded prior service cost for these disability benefits was ing the actuarial present value of accumulated plan benefits approximately $23,513,000. was 5%% for 1982 and 5% for 1981 and 1980. l 26

e K. JOINTIX-OWNED GENERATING UNITS: The Company, together with other electric utilities, primarily the CAPCO companies, has an ownership interest in certain jointly-owned units. Information regarding the Company's share of such jointly-owned units as of December 31,1983 is as follows(thousands of dollars): Company's Interest Utility Plant Accumulated Construction Work Percentage Unit in Service Depreciation in Progress Ownership Megawatts Fort Martin No.1 8 46,131 $ 14,583 966 50.0 276 CAPCO Units: Eastlake No.5 50,216 11,282 1,606 31.2 202 Sammis No.7 67,484 12,150 3,825 31.2 187 Bruce Mansfield No.1 72,346 15,112 262 29.3 228 Bruce Mansfield No.2 20,221 3,530 106 8.0 62 Bruce Mansfield No.3 70,073 7,194 564 13.74 110 Bruce Mansfield Common and Shared Facilities 61,297 12,467 2,250 Beaver Valley No.1 333,582 52,279 13,660 47.5 385 Beaver Valley No.2 18 287,236 13.74 114 Beaver Valley Common Facilities 47,920 5,361 19,614 Perry No.1 265,147 13.74 165 Perry No. 2 188,165 13.74 165 Total $769,288 $133,958 $783,401 Under terms of the arrangements with the other owners of such jointly-owned units, the Company is required to provide its share of financing the cost of such units. The Company's share of the direct expenses (fuel, maintenance and other operation expenses) of thejointly-owned units is included in the corresponding operating expenses in the Statement of Consolidated Income. I. LEASES: Rental payments in 1983,1982 and 1981 amounted to At December 31,1983 minimum rental payments, based $30,028,000, $17,679,000 and $16,389,000, respectively, of principally on estimated usage of nuclear fuel under lease and which $31,994,000, $15,393,000 and $14,169,000 were charged building rentals,were as follows: to operating expenses. The Company has an undivided interest (Thousands or noitarsi m nuclear fuel lease agreements. Rental payments are made monthly during the terms of the leases based on the amount of 1984 $37.591 nuclear fuel leased and the amount of nuclear fuel burned. 1985 32.699 The increase in 1983 rental payments and amounts charged to 1986 32.474 operating expenses resulted from higher building rentals and 1987 29.269 an increased amount of nuclear fuel being burned. 1988 23.246 The nuclear fuel leases may be terminated by the lessees or 1989-1993 fJ.204 lessors with notice as defined in the agreements or by casualty After 1993 83.314 or certain other contingencies, including default by the lessecs. In certain situations involving a termination, the The Company accounts for all of its leases (exclusive of the lessees may be required to purchase the leased nuclear fuel nuclear fuel trust arrangement described above) as operating et the higher of fair market value or unamortized cost. At leases in accordance with the manner in which the Company's December 31,1983, the Company's share of the lessors' rates have been established by the Pennsylvania Public Utility unamortized cost of the leased nuclear fuel was $124,891,000 Commission. If the noncapitalized financing leases were capi-cnd the Company expects to lease an additional $81,262,000 of talized as of December 31,1983 and 1982, property, plant and nuclear fuel under current leasing arrangements. The Com. equipment-net would have been increased by $143,547,000 and pany finalized a nuclear fuel trust arrangement in 1983 which $117,538,000, respectively, with related increases in current provides an alternative method of financing nuclear fuel. liabilities and long-term debt of $24,271,000 and $119,761,000, The Company has certain buildings under lease, including respectively, in 1983 and $12,154,000 and $105,820,000, respec-its new corporate headquarters, subject to renewal options tively, in 1982. The impact on net income of capitalizing such cnd in certain cases purchase options. leases in each year would not be material. 27

Duquesne Light Company Notd(c:ntinued)

31. CO31311TMENTS AND CONTINGENT LIAHILITIES:

sion of time in which to file a refund plan together with an Construction application for a stay of the final order. On August 24,1983 the The Company's current estimate of construction expenditures, Commission denied the application for a stay but granted the exclusive of allowance for funds used during construction and petition for an extension of time in which to file a refund plan. nuclear fuel, during the period 1984 through 1988 amounts to Subsequently, the Company filed an application with the Com-approximately $860 million, principally related to CAPCO monwealth Court for a stay of the final order, and on Septem-generating units. ber 28,1983 the Commonwealth Court granted the application The Company and outside counsel do not agree with the Com-Quarto 31ining Company (Quarto) m ssion's order, and no provision has been recorded by the The Company and the other CAPCO companies have Company for any such refunds. While the Company is unable made long-term coal supply arrangements with Quarto, t predict what action the appellate courts may ultimately take an unaffiliated company, to supply coal for the Bruce Mans. and although the amount of such refunds could be substantial field Units. As part of these arrangements the individual management of the Company believes that the replacement CAPCO companies are severally, and not jointly, guaranteeing pown costs were prudently mcurred and that the eventual their proportionate shares of Quarto's debt and lease obliga. utcome of this matter will not have a matenal effect on the tions incurred in connection with the development, equipping Company's financial position or results of operations. and operation of two mines from which the coalis supplied. At December 31,1983 the Company had guaranteed the obliga. Perry Unit No.2 tions of Quarto with respect to approximately $54,142,000 of In September 1983, the Ohio Office of the Consumers' Counsel indebtedness and lease obligations relating to approximately the City of Cleveland, the Board of County Commissioners of l 4 $28,239,000 of capital equipment for the mines. The Company Geauga County, Ohio and three citizen groups filed a petition expect.s that it will make further guarantees with respect to with the Public Utilities Commission of Ohio (Commission) anc additional indebtedness and leased capital equipment, the the Power Siting Board of Ohio (Board) against The Cleveland amount of which will depend on the actual costs of further Electric Illuminating Company,0hio Edison Company and The development of the two mines. In general,it is contemplated Toledo Edison Company (respondents) requesting that the that the purchase prices to be paid for the coal to be received Commission and the Board jointly and/or individually investi-under the foregoing arrangements will include amounts suffi. gate the public need for the Perry Nuclear Power Plant Unit cient to service the guaranteed obligations. No. 2 (Unit) presently under construction by the CAPCO com-Under the terms of the coal supply contracts, which con-panies. The petitions also request that the Commission and th( tinue until December 31,1999 with options to extend for ten Board order the cessation of construction of the Unit and of additional years, the CAPCO companies must reimburse the accrual by the respondents of allowance tu funds used Quarto for their share of the costs of operating the Quarto during construction with respect to the Unit and a declaration mines, including those costs associated with mine construe. by the Commission that the issuance of securities by the tion, whether or not they receive coal from Quarto. The Com. respondents, the proceeds of which will be used to finance con-pany's total payments under these contracts amounted to struction of the Unit, will not be approved.The respondents $28,512,000 and $24,292,000 for the years ended December 31, have filed a motion to dismiss the petition filed with the Board 1983 and 1982, respectively. and an answer to the petition filed with the Commission The Company's estimated future minimum payments under requesting that the petition be dismissed. While the Company the coal supply contracts related to mine construction and is not a party to the proceedings,it has a 13.749 ownership equipment costs are: interest in the Unit. The Unit, which is presently scheduled to Year Endine December 31 be placed in service in 1988, is about 43% complete. The Com-pany's investment in the Unit, including allowance for funds 1984 s 8,773.000 used during construction, was approximately $188 milhon at 1985 8m December 31,1983. An order requiring the respondents to 83* M cease or terminate construction of the Unit could have the 1987 8,153.000 effect of cancelling the Unit. In such event, the Company 1988 7,947,000 would seek regulatory approval for the recovery from its After 1988 78,426,000 customers of its then investment in the Unit, together with any related cancellation costs, net of applicable taxes. Based The current price of Quarto coal to the CAPCO companies is on its present knowledge of the proceedings, management of based pnneipally on the actual current production costs plus the Company has no reason to believe that the proceedings amortization of certam production expenses which were not w 11 result in a decision adverse to the respondents and meluded in the price of coal to the CAPCO companies during believes that the ultimate resolution thereof will not have a the development period, which ended on May 31,1980. See material adverse effect on the Company's financial position. Note G to the financial statements. Nuclear Insurance Heaver Valley Replacement Power The CAPCO companies have coverage with American Nuclear in connection with a February 20,1981 rate order, the Com-Insurers (ANI)and Mutual Atomic Energy Liability Under-mission found that the Company had not proven that the costs writers (M AELU) to provide primary property insurance cov-of replacement power during a 1979 outage of Beaver Valley erage for Beaver Valley Power Station Units Nos. I and 2 in Unit No. I were prudently incurred. the amount of $500 million. l On November 19,1982 the Commission adopted an order The CAPCO companies are members of Nuclear Electric t nisi which ordered refunds of $12.5 million plus interest over a Insurance Limited (N ell). a mutual insurer established by the two-year period less a $1 million offset from another proceed-utility industry to provide Decontamination Liability and ing. The order nisi became final on June 10,1983. The Com-Excess Property insurance in excess of $500 million for mem-pany filed an app?al with the Pennsylvania Commonwealth bers' nuclear generating facilities. N EIL presently provides l Court and filed with the Commission a petition for an exten-such excess coverage in the amount of $375 million plus 121 i 28

e of the amount of the loss in excess of $500 million up to $1 bil-Supreme Court. lior.. Under this policy the CAPCO companies are subject to a On April 30,1982 the Company filed with the Commission a retrospective premium assessment of approximately $9.5 mil-new rate schedule estimated to increase annual revenues by lion per year for a period of seven years in the event of acci-approximately $165 million (subsequently reduced to approxi-dents at nuclear plants of member companies if losses exceed mately $155 million). On January 28,1983 the Commission premiums, reserves and other NEIL resources. The Com-entered a final order allowing an increase of $105.8 million pan 3 share of any such retrospective premium assessment beginning on January 29,1983. The Commission's order was woulu o pproximately $2.9 million. appealed to the Pennsylvania Commonwealth Court by both Damages in excess of the primary $500 million coverage are the Pennsylvania Consumer Advocate and the Company. also covered by an excess property insurance policy issued to Except for the Consumer Advocate's appeal with respect to the CAPCO companies by ANI and 31AELU which provides the Commission's allowance of the recovery of the cancellation $68 million of coverage.The ANI/31AELU and NEIL policies costs of four nuclear generating units (see Note B to the finan-provide quota sharing coverage for losses in excess of $500 cial statements), both appeals have been discontinued. million up to $1 billion. On April 29,1983 the Company filed with the Commission a The property insurance policies described above provide the new rate schedule affecting all classes of customers and esti-CAPCO companies with approximately $1 billion of coverage mated to increase annual r evenues based on projected levels on an investment in the two Beaver Valley Units at December of business at December 31,1983 by approximately $49.9 mil-31,1983 of about $2.9 billion. lion. On September 7,1983 the administrative law judge in addition, NEIL also provides insurance coverage for the assigned to the rate proceeding issued a recommended deci-extra expense of replacement power during prolonged acci-sion adopting a joint petition for settlement filed by the Com-dental outages of nuclear plants. Coverage is provided for the pany, the Commission's staff, the Pennsylvania Consumer Company's interest in Beaver Valley Power Station Unit No.1 Advocate and certain of the other parties to the proceeding and, after a deductible period of 26 weeks, weekly payments which provided for an increase in annual revenues of approxi-of up to $588,000 are provided for one year and up to $294,000 mately $21 million. On September 16,1983 the Commission for an additional year. If losses exceed accumulated funds approved the settlement. The Company began to collect the available to NEIL, the Company could be assessed approxi-increased rates effective September 17,1983. Two complaints mately $1.7 million for payment of NEIL's obligations. concerning rate structure issues remain pending, and further The Price-Anderson Amendments to the Atomic Energy Act hearings with respect thereto will be scheduled. limit liability to third parties to $580 million for each nuclear 3!anagement believes that the ultimate resolution of these incident. Coverage of the first $160 million of such liability is rate matters will not have a material adverse effect on the provided through ANI and 5f AELU.The next $420 million is Company's financial position or results of operations. provided by retroactive assessments of up to a limit of $5 mil-Other hon per operatmg nuclear reactor per meident, but not more In connection with coal supply arrangements for its wholly-than $10 milhon per operatmg reactor m any calendar year. owned generating units the Company has contracted with'an Based on its present ownership mterest m one operatmg unaffiliated coal supplier to purchase a minimum of 750,000 nuclear reactor, the Company,s maximum potential assess-tons of coal per year through December 31,1986. In 1983 the ment under these provisions would be $2.4 milhon per meident contract w as amended to provide that if the Company but not more than $4.8 milhon per calendar year. requests deliveries in 1983 and 1984 below the minimum Itat: 31:tters annual tonnage, the Company shall make up the shortfall Effective July 15,1981 the Company increased its rates by (plus a 63,000 ton shortfallin 1982) by purchasing additional tbout $64.2 million annually in accordance with an option tons during the remaining term of the contract or by extend-order of the Pennsylvania Public Utility Commission (Com-ing the term of the contract The contract also provides that mission). On April 15,1982 the Commission adopted its final any shortfall can be sold to purchasers other than the Com-order in the rate proceeding which determined that the option pany. The total shortfall under the contract at December 31, rate increase of $64.2 million annually was just and reason-1983 was approximately 317,000 tons. eble.The final order was appealed to the Pennsylvania Com-The Company is involved in various other legal proceedings. monwe lth Court by a commercial customer. On November 29, k the opinion of management of the Companv mich legal pro-1983 the Court affirmed the Commission's final order. The ceedings will not have a materM & on the financial posi-Court's onferis the subject of a petition for allowance of tion or results of operations of the Company, appeal by the commercial customer to the Pennsylvania N. SUPPLEMENTAltY INCO3tE STATE 3 TENT INFOIDI ATION: Year Ended December 31, 1943 1982 19M1 I (Thousands of Dollars) Under the system of accounting followed by the Company, M:intenance $75.9 87 $78.431 $73,029 a portion of maintenance expenses and of taxes other than, inc me taxes represents amounts charged to coal mventones. Amortization of extraordinary The mventory accounts are reheved and operations expense Jroperty loanes 6.099 charged as the coalis used. Taes other than payroll cnd income taxes: Grosa receipta 35,576 33,lM 34.980 l Pn perty 14.378 14,139 12.583 State capital atock 5.501 6.6nt 6.301 29

Duquesne Li Notds (ghtCompany c:ntinued) O. QUARTERIX FINANCI Al, INFORMATION (Unaudited): The following is a summary of selected quarterly financial data (in thousands of dollars, except per share amounts): 1983 Quarter Ended 1982 Quarter Ended March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31 Electric Operating Revenues (a) 8185,848 $198,666 5215,111 $200,690 $207,398 3186,628 $181,720 $170,716 Operating !ncome(a) 43,918 45,287 49,191 47,976 41,662 38,480 40,223 34,942 Income from Continuing Electric Operations Before Extraordinary Gain 32,975 31,883 39,392 37,977 32,296 28,990 30,845 25,066 Discontinued Steam Heating Operations (b) 371 (484) (9,811) Extraordinary Gain (c) 9,609 Net income 32,975 31,883 39,392 37.977 32.GG7 28,506 21.034 34.675 Earnings PerShare: Income from Continuing Electric Operations Before Extraonlinary Gain .51 .54 .60 .56 .58 .51 .51 .37 Discontinued Steam Heating Operations (b) .01 (.01) (.20) Extraordinary Gain (c) ,19 Net Income .51 .51 .60 .56 .59 .50 .31 .56 ( (a) Certain amounts previously reported as Operating Revenues and Operating Income for the first two quarters of 1982 have been reclassified to set forth separately the resulta of the steam heating subsidiary as discontinued steam heating operations. (b) See Note C to the Anancial statements for a discussion of discontinued steam heating operations. M See Note D to the Anancial statementa for a discussion of the extraordinary gain from early extinguishment of bonds. P. SUPPI.EMENTARY INFORMATION TO DISCI.OSE TIIE EFFECTS OF CIIANGING PRICES (Unaudited): The following supplementary information is supplied in accord-dollar) and changes in specific prices (current cost) have had o ance with the requirements of the Statement of Financial the Company's results of operations. The data provided are Accounting Standards No. 33, Financial Reporting and Chang-not intended as a substitute for earnings reported on a histori ing Prices. This Statement requires adjustments to historical cal basis, but offer some perspective of the approximate effect costs to estimate the effects that general inflation (constant ofinflation rather than a precise measurement of these effect: STATEMENT OF INCOME ADJUSTED FOR CIIANGING PRICES ForThe Year Ended December 31,1983 Conventional Constant Do!!ar Current Cos Historical Avera e Avera e Cost 1983 Dohars 1983 Dohar fThousandsof Dollars) Electric operating revenues $800,345 $800,345 $800,345 Fuel 192,512 192,512 192,512 Purchased power (sales)-net (7,330) (7,330) (7,330) Other operation and maintenance expensen 201,204 201,204 201',IE54 Depreciation expense 73,682 157,841 174,iE Taxes other than income taxes 60,651 60,651 60,651' Income taxes 92,954 92,9M 92,954 Otherincome and deductions-net (67,715) (67,715) (67,715) Interest charges 109.161 109.161 109,161 655,119 739,W8 755 M9 Ineome from continuing electric operations (excluding reduction of property, plant and equipment to net recoverable cost) 8145,226 $ 61,067' $ 44,796 Increase in specific prices (current cont)of property, plant and equipment held during the year" $251,349 Reduction of property, plant and equipment to net recoverable cost $(18,92:a (40,924) Effect of increase in general price level (213,079) Excess of increase in general price level over increase in specific prices after reduction of property, plant equipment to net recoverable cost (2,654) Gain from decline in purchasing power of net amounta owed 67,732 67,732 Net 8 4N,807 $ (A078 ' Including the reduction of progerty, plant and equipment to net recoverable coat, the net income on a constant dollar basis would have tren $42,142. " At Decemter 31,19tL3, current coat of property, plant and equipment, net of accumulated depreciation, was $5,369,69:1, while historical cost or net cost 30 recoverable through deprrelation was 82,739,M90.

+ --.~ ~ ~, . ~ 4 FIVE-YEAR COMPARISON OF SEl ECTED SUPPI.EMENTARY FINANCIAI, DATA ADJUSTED FOR EFFECTS OF CllANGING PRICES l (In Thousands, Except Per Share A mounts) Year Ended December 31, 1983 1982 1981 1980 1979 Average 19s3 dollars: i l Electric operating revenues $N00,345 $770,733 $861,562 $816,090 $839,296 Historical cost information adjusted for general innation: Income from continuing electric operations (excluding j mduction of property, plant and equipment to net recoverable cost)(1) 61,067 38,247 39,552 42,042 44,888 Income per share from continuing electric operations (:fter dividend requirements on preferred and preference stock)(1) .69 .31 .34 .36 .38 i Net assets at year-end at net recoverable cost 940,854 896,216 832,000 833,932 857,570 i Current cost information: Income from continuing electric operations (excluding reduction of property, plant and equipment to net recoverable cost)(1) 44,796 23,564 23,433 23,228 21,453 income (loss) per share from continuing electric operations (after dividend requirements on preferred and preference stock)(1) .40 (.04) (.13) (.34) Excess of increase in gewral price level over increase in specine prices after reduction of property, plant r.nd equipment to net recoverable cost 2.654 (237) 120.532 235,444 237,872 Net assets at year end at net recoverable cost 940,854 896,216 832.000 833,932 857,570 Generalinformation: Gain from decline in purchasing power of net amounts owed 67,732 64,128 148,054 206,745 237,532 Cash dividends declared per share of common stock 2.00 1.96 2.02 2.18 2.43 Market price per share of common stock at year-end 13.50 15.23 14.52 15.27 18.70 ( i Average consumer price index 29N.5 289.1 272.4 246.8 217.5 Historical basis: Electric operating revenues $800,345 $746,462 $786,229 $674,744 $611,547 1 Cash dividends declared per share of common stock $ 2.00 $ 1.90 $ 1.85 $ 1.80 $ 1.76 Market price per share at year-end $13.50 $14.75 $13.25 $12.63 $13.63 ) Proven and probable coal reserves at beginning of year (tons) 25.100 26,300 28,100 29,900 30,650 i Tons of coal mined 785 942 680 875 928 Average cost per ton of mined coal $36.59 $31.62 $35.10 $31.14 $28.71 (1) Amounts for 19M2 are before extraordinary gain. Amounts for IM9 are before cumulative efect of accounting change. Constant dollar amounts represent historical costa stated in in nominal dollars. Rate regulation limita the recovery of fuel terms cf equal purchasingpower, as measured by the Con-and purchased power costs through the operation of adjust-t sumer Price Index for all Urban Consumers. Current cost ment clauses or adjustments in basic rate schedules to actual amounts reflect the changes in specific prices of plant from the costa. For this reason fuel inventories are effectively monetary date the plant was acquired to the present and differ from con-assets. stant dollar amounts to the extent that specific prices have As prescribed in Statement 33, income taxes were not increased more or less rapidly than prices in general. adjusted. i The current cost of property, plant and equipment, which h regulatory process limits the Company to the recovery includes land, land rights, intangible plant, property held for of the cost of service in its rates.Therefore, any excess of the future use, construction work in progress and nuclear fuel in value of plant in constant dollars or current cost must be process, represents the estimated cost of replacing existing reduced to the net recoverable cost, which is historical cost. t plant assets and was primarily determined by indexing sur-The amount of this excess that accumulated as a result of viving plant by ti.9 Handy Whitman Index of Public Utility inflation in the current year must be reduced to net recovera-Construction Costa.1he current cost of coal properties was ble cost. determined by indexing coal reserves and machinery and The Company, by holding assets such as receivables, j equipment by the Marshall Stevens Mining and Milling Index. prepayments and inventory, suffers a loss of purchasing The current year's provision for depreciation and depletion on power during periods of inflation because the amount of cash the constant dollar and current cost amounts of property, received in the future for these items will purchase less. Con-plant and equipment was determined by applying the Com-versely, by owing monetary liabilities, primarily long term pany's deprocention and depletion rates to the indexed plant debt, the Company beneAts because the payment in the future amounts. will be made with nominal delles having less purchasing Fuel inventorisa, the cost of fuel used in generation and pur-power. The Company. has significant amounts of long term chased power have not been restated from their historical cost debt outstanding which will be paid back in dollars having less 31

Duquesne Light Com;;ny Notes (c:ntinued) purchasing power and, therefore, for purposes of these calcu-equity capital previously invested. While this effect is partiall lations, has a net gain from holding monetary liabilities in mitigated by the benefit derived from holding long term debt excess of monetary assets. the Company has a net purchasing power loss which is experi The regulatory process limits the amount of depreciation enced by the common shareholder and can only be overcome expense incluc ed in the Company's revenue allowance and lim-by adequate rate relief. However, the Company expects that ita utility plan. in rate base to original cost. Such amounts pro-will be able to establish rates which will recover the increase < duce cash flov s which are inadequate to replace such property costs of new plant. in the future or preserve the purchasing power of common Duquesne Light Company Selected Financial Data and Statistical Summary (Thousands of Dollars, Except Per Share Amounts) 1983 1982 1981 1980 1979 1973 SU515f ARY RESUI.TS OF OPERATIONS Residential revenues 267,110 238,496 223,146 196,400 176,744 79,113 Commercial revenues 290,370 263,374 243,501 209,871 185,880 75,113 Industrial revenues 221.107 22d,292 300,066 250,295 232,389 80,274_ Street lighting and other revenues 14.357 13,240 12,383 11,052 10,370 4,762 Miscellaneous revenues 7.801 6.060 7,133 7,126 6.164 2,580 Total electric revenues 800,315 746,462 786,229 674,744 611,547 241,N42 Operation and maintenance expenses 386,386 399,527 435,589 380,973 351,731 111,383, Depreciation 73,682 62,939 60,854 53,316 47,885 23.211 Taxes other than income taxes 60,651 57,476 57,694 47,637 4fi,956 20,462~ Income taxes 76,198 53,307 57,801 50,643 41,592 15,864 Interest chsrges net of allowance for borrowed funds used during construction 109,161 100,344 92,968 75,629 65,414 32,460 Other income, principally allowance for equity funds used furing construction 50,955 44.328 28.086 26,749 21,5R7 13.496 Income from continuing electne operations before extraordinary gain i15,226 117,197 109,409 93,295 79,556 51,958 less from discontinued steam heating operations 9.924 538 333 1,194 133 Income before extraordmaryv gain 115,226 107,273 108,M71 92,9fi2 7N,362 51,N25 Extraordinary gain 9.609 Net income 185,226 116.882 108,N71 92,962 N2,207 t 5]p25, Dividends on Preferred and Preference Stock 22,4II 22,701 22.976 23.353 23.721 9.233 Farnings for Common Stock 122,N15 94,1N1 H5,895 69,609 58,486 42,592, Average numtv of common shares outstanding 55 N83 48,236 41,764 38,267 32,239 18,181 Farnings per share of Common Stock: Income from continuing electric operations 2.20 1.96 2.07 1.83 1.73 2.35 Net income 2.20 1.95 2.06 1.82 1,81t 2.}34 Dividends declared on Common Stock 2.00 1.90 1.85 1.80 1.76 1.72 tincludes cumulative effect to January 1,1979 of the change in billing practice, net of income taxes, of $3,845 or $.12 per share. Pl. ANT Property, plant and c<luipment 3,293 481 3,024,554 2,809,751 2,604,333 2,380,805 1,423,135 1 Accumulated depreciation 555.681 504.f180 477,009 424,653 386,479 2t15.459 Prryerty, plant and equipment-net 2.737,Mio 2.519.N74 2.332.744 2.179.6x0 1.99 4.32ti 1.157,676 TOTAL, ASSETS 3,I l5.Ml l 2.883.424 2.668.577 2.447,163 2.222.537 1.256.291 l 32

i 19N3 1982 1981 1980 1979 1973 CAPITALIZATION Common Stock 58,420 53,277 45,303 40,166 35,550 20,400 Capital surplus 724,147 649,376 550,244 494,228 433,984 214,157 Retained earnings 175,938 165,340 163,705 155.102 155,328 125,261 Non-redeemable Preferred and Preference Stock 154,137 156,137 156,137 156,137 156,137 96,137 Redeemable Preferred and Preference Stock 134,979 140,829 143,924 146,867 149,998 62,482 First mortgage bonde 1.100,147 1,006,637 983,870 918,230 808,830 578,160 Other long-term debt 234,019 199,934 176,682 126,981 127,436 66,140 Unamortized debt discount and premium-net i10,967) (9.488) (9,453) (7.161) (5,770) Total capitalization 2,572,820 2,362,042 2,210,412 2,030,550 1,861,493 1,162,737 RES1DENTIAL SERVICES Av: rage use per customer (kilowatt hours) 5,752 5,668 5,698 _ 5,770 5,629 5,552 Av: rage revenue per kilowatt hour 9.195v 8.361, 7.806, 6.828, 6.363, 3.031, SALES OF ELECTRICITY (millions of kilowatt-hours) Residential 2.905 2.853 2.858 2,876 2,778 2,610 Commercial 4,257 4,163 4,069 4,024 3,870 3,638 Industrial 3,717 3,902 6,582 6,272 6,546 6,181 Street lighting and other 111 120 125 129 131 118 Total 10,990 11,038 13 634 13,301 13,325 12,547 ENERGY SUPPLY AND PRODUCTION DATA Energy supply (millions of kilowatt-hours) Generated in system plants 11,900 12,352 13,914 13,485 13,884 12,979 Purchased and net interchange (164) (689) 410 541 125 336 i Innses and company use (746) (625) (690) (725) (684) (768) Total 10,990 11,038 13,634 13,301 13,325 12.M7 Generating capability (thousands of kilowatts) 3,148 3,144 3,177 3,179 3,294 2,620 Peak load (thousands of kilowatts) 2,184 2,158 2,522 2,474 2,296 2,296 Cc:t of fuel per million I TU 167.140s 167.865< 159.660s 149,768, 131,779, 42.454s HTU per kilowatt hour generated 10,635 10,853 10,931 10,811 10,924 10,333 Average production cost per kilowatt hour 2,541a 2.575, 2.354, 2.202, 1,913, 0.540, NUMBER OF ELECTRIC CUSTOMERS-At End of Year Resklential 505.781 503,987 503,044 500,466 496,005 471,641 Commercial 49,493 49,320 48,859 48,308 47,978 45,975 Industrial 1,9N4 1,999 2,016 2,005 1,975 1,765 Street lighting and other 1,433 1,647 1,713 1,725 1,746 1,852 Total 558,M91 556,953 555,632 552,504 547,704 521.233 33

e Manti-einent's Discussion these issues were used to pay short term indebtedness 6 incurred pnncipally for construction purposes, and the balanci and Analysis of Financial was avelied to construction e.xi-naiture' cemnanycur rently estimates that approximately 70 of the funds reouired Condition and Results ur ita 1984 construction emeram wiii mme fmm ouisiae financing. The Company plans to sell additional First 51 ort-of Operations gage nonas in Siarch 19s4. The exact timing ana amount of Capital Resources and Liquidity this sale will depend on market conditions. In addition to the funds required for the construction pn* Con truction Construction expenditures during 1983, exclusive of allow. gram $16.8 million was required in 1983 for maturities of long-ance for funds used during construction and nuclear fuel, term debt and sinking fund and purchase requirements, and were approximately $224 million. These expenditures were pri. $21.4 million will be requiral in 1984 for such purposes. marily for the construction of three CAPCO generating unita interim financing will be through bank borrowings and in addition to improving and expanding production, transmis-sales of commercial paper. In addition, the Company has avail-sion and distribution systems and pollution control equipment. able a revolving credit arrangement with two banks which The Company currently estimates that it will spend, exclu. allows the Company to borrow up to an aggregate of $60 mil-sive of allowance for funds used during construction and lion through 1986 and to convert the revolvmg loans to term loans for an athlitional three years. See Note F to the fmancial nuclear fuel, approximately $235, $203, $158, $137 and $127 statements. \\,ariable market and general economic conditions million for each of the years 1984 thmugh 1988, respectively. ma atiect the Company a selection of financing alternatives These estimates include an aggregate of appmximately $294 am{adyersely affect its ability to raise capital. In o million for the three jointly-owned nuclear generating unita maintam earnmgs adequate to finance constructmn expemh,- being constructed under the CAPCO arrangements, including related transmission facilities. See Note K to the financial tures and refun,dmg reqmrements, the Company requires rate increases sulheient to oliset mereased costa and provide a fair statementa. rate of return. The amount which the Company must spend for its con- . The Restated Articles of the Company require that for the struction program is regularly under review amt is subject to issuance of Preferred Stock, earmngs (after meome taxes) changes influenced by business ami economic conditions and available for mterest charges be at least 1.5 times the sum of other factors, such as escalation of labor, material and equi, interest charges on allindebtedness and Preferred Stock divi-i ment costa, rate of construction progress, the development of environmental and nuclear safety regulations, service reliabil-dend reiuirements. This restriction currently precludes,th Company from issumg Preferred Stock. There is no simdar ity and system efficiencies. In addition, this review also must restriction upon the issuance of the Company a Preference or take into account difficulties in obtaining rate increases sufli-Conmn Stock. cient to generate adequate earnings, possible changes in load growth trends and,in the case of the CAPCO construction pn> Rate 31attern gram, the ability of each of the CAPCO companies to finance On January 28,1981 the Public Utility Commission entered its capital requirements. a fmal onler allowing an annual rate increase of $105.8 million The Company finances its nuclear fuel requirementa primar-beginning on January 29,19Kl. See Note 51 to the fmancial statements. ily by leasing and through a trust arrangement. See Note L to the financial statementa. In the third quarter of 1981 the Com-On April 29,1983 the Company filed a request for a $19.9 pany entered into arrangementa permitting the lease of an million annual rate increase with the Commission. On Septem additional $60 million of nuclear fuel, ber 16,1983 the Commission approved a settlement allowing an inen>ase of apimimately $21 million beginning on Septen Financing her 17,19K1. See Note M to the fmancial statementa, The Company anticipates that funds required for planned construction expenditures in the next severalyears will be pn> lhtraordinary Property I,owca vided principally from the issuance of additional equity and in 1980 the CAPCO companies cancelled the construction o debt securities and in part from cash becoming available fmm four nuclear generating unita, in January 1983 the C immis-operations. The Company issued $60 million of 12 p First sion approved the recovery of the accumidatulcosts from the Mortgage Honds on April 14,19st and $50 million of 131 First Company's customers but di i not allow any return on these Mortgage lionds on December 6,19W1. On August 2,19*1 the costa. See Note 11 to the financial statementa. Company issued and sold 2,475,0M shares of Common Stock. I)eferred Coal Cost. Net procents from the sale of the Common Stock were lly Interim Onler entered January 12,1981 the Commission approximately $39.4 million. Funds provided to the Company directn! that the Company limit its recovery of the cost of l under its Dividend Reinvestment Plan in 1983 amounted to Quarto coal through its energy cost rate to appnnimately the approximately $39 million, and an additional $10.2 million was prevailing market price of similar coal rather than the actual reinvested on January 1,1984. On November 1,1983 the Ohio cost of Quarto coal. The Company is deferring the excess of l Air Quality Development Authority issued $20.5 million of ml-the actual cost of Quarto coal over the cost being recovern! I l lution control revenue londs to reimburse the Company for its through ita energy cost rate until recovery of the actual cost i j share of the cost of certain pollution control facilities at Unit permitted by the Commission. If recovery of such excess is l No. 7 of the Sammis Power Station. The bonds have an inter-disallowed, the amount deferred wouhl be charged to income l cat rate of 10' W, and principal and interest on the lmnds will in the year of disallowance. See Note G to the financial be funded by the Company. Portions of the net proceeds from statementa. 34

e lleaur Valley Heplacement Power The Company was permitted two rate increases in 1983 In connection with a February 20,1981 rate order, tbe Com-effective January 29 and September 17. See Note M to the mission found that the Company had not proven that the costa financial statements. The decreases in electrical consumption of replacement power during a 1979 outage of ikaver Valley in 1982 and 1983 were due primarily to the severe impact of Unit No. I were prudently incurred. Further hearings in the the economic recession in the Company's service area, partie-lleaver Valley refund proceedings were held, and on Novem-ularly on steel and other industrial customers. ber 19,1982 the Commission adopted an order nisi which The decrease in operation (fuel, purchased power and other orderal refunds of $12.5 million plus interest over a two-year operation) and maintenance expenses in 1983 compared to period. The order nisi became fmal on June 10,1983, and the 1982 was due primaril expenses resulting fro'y to a substantial reduction in fue Company has filed an appeal with the Commonwealth Court. m higher generation from the lleaver See Note M to the financial statements. Valley No. I nuclear unit decreased deferred fuel expenses Allegheny County Steam IIcating Company and lower kilowatt hour sales. Net sales of power to other On September 30,1982 a final onler of the Commission utilities decreased as the market for such sales was not as tpproved the discontinuance of steam service by the Com-favorable in 1983. The decrease in operation expenses in 1982 pany's steam heating subsidiary effective May 31,1983 and compared to 1981 was due to substantial reductions in pur-the transfer of a major portion of the assets of the subsidiary chased power and fuel expenses. The significant reduction in to l'ittsburgh Allegheny County Thermal, Ltd. for nominal kilowatt hour sales to industrial customers resulted in a sur-consideration.The transfer of assets became effective June 1, plus capacity situation. This available capacity and the re luire-1983. See Note C to the financial statements. Since the subsidi-menta of neighboring utilities resuhed in substantial net sales try h d been losing money over the past several years, the of power in 1982. Other operation and maintenance expenses disposition should improve the Company's financial condition increased in 1982 compared to 1981 due to a scheduled outage end resulta of operations. for refueling and modification work at lleaver Valley Unit No. Other 1 and increased customer, general and administrative Under provisions of the Economic itecovery Tax Act of 1981 expenses, eligible individuals who are participanta in the Company's Depreciation expense increased in 1983 compared to 1982 as Dividend Iteinvestment Plan may elect to exclude from cur-a result of increases in utility plant and changes in deprecia-rent federal taxable income each tax year from 19o2 through tion rates to conform with the depreciation rates allowed by 1985 the fair market value of Common Stock received from the Pennsylvania Public Utility Commission in its rate orders. the reinvestment of dividends to the extent the aggregate fair Additionally, depreciation expense includes the amortization market vah;e of such shares does not exceed $750 ($1,500 for of the cancelled nuclear generating units and Shippingport. spoures who file a joint return.)This provision has provided See Note 11 to the financial statements. incentive for stockhoklers to reinvest dividends and thereby income taxes increased in 1983 compared to 1982 principally case the cash requirementa of the Company. an a result ofincreased taxable income. The effective income ' The Company has generated in each year funds from opera. tax rate for the three years ended December 31,1983,1982 tions zuflicient to meet its operating expenses, pay dividends and 1981 was 341,319; and 3553, respectively, end finance a portion of ita capital needs. The demands and The increases in allowance for equity and for borrowed commitmenta detailed in Note M to the financial statementa funds used during construction ( A FC) were primarily due to end those noted above are not expected to materially affect the the increased cost of construction and increases in the A FC Company's ability to finance its operations or its construction rate from 7.6's in 1981 to 8.5?; in 1982 and to 9.69 in 1983. program. Fluctuations in interest income resulted from changes in cash ResultM of Operations available for temimrary investments. Interest expense for Oprating revenues from continuing electric operations each of the years 1983,1982 and 1981 was higher due to increased 6h creased)in the years 1981 through 1983 nver the increased total borrowm, gs to finance the Company s capital respective preceding years, for the following reasons: expemlitures. In 1982 the Company's heatmg oieratmns resultm, subsidiary discontinued its s 1983 1982 1981 g in a charge to earnings of $9.9 (pfillions of Dollars) million, or $.21 per share. See Note C to the financial General rate increases $sM.8 $ 43.0 $ 65.6 statementa. Electricalconsumption ( 10.0 ) (62.3)

101, A non taxable extraordinary gain of approximately $9.6 mil-Energy clause revenues (31.0 t (19.0) 33.9 lion, or $.20 per share, in Decemher 1982 resulted fnnn the St:te tax adjustment exchange with an investment banking firm of newly issued common shares for certain First Mortgage lionds having an end other 6.5 f t 5)

II, exchange value substantially lower than their face value. See $53.9 $m9 Ni

111.5 Note D to the financialstatementa.

Earnings ger share of Common Stock for 1983,1982 and The operating revenues of the Company are based on rate tuthonzed by the Pennsylvama Public Utility Commission. " 1981 were adversely affected by increases in the average num-These rates are designed to recover the Company 8 operating twr of shares outstanding, which reduced earningn ier share cximnses, plus a rate of return on the investment in utility rate by $.35,8.31 and $.18, respectively, base. The Company also has an energy cost rate which allows Thy Company has prepared information on,the effects of it to recover the ditference between actual fuel costa and fu(I inflation and changing prices in acconlance with the i manen, t ccts included in base rates. Any overcolketions of revenues ACC?untmg Standants lloanl 8 Statement No. 33. Such infor-are refunded, with interest, to customers. maton is in Note P to the f,mancial statements. 35

Husiness of the Company Common Stock Dividends lectively referred to as " junior Duquesne Light Company is The Company has paid cash stock payments"L engaged principally in the produc-dividends on its Common Stock in No dividends or distributions tion, transmission, distribution each year since 1913 and on a reg-may be made on the Common and sale of electric energy. The ular quarterly basis (January 1 Stock if dividends or sinking or Company serves an area of April 1, July 1 and October 1)in purchase fund obligations on the i approximately 800 square miles in each year beginning in 1953 after Preferred Stock or Preference Allegheny and Heaver Counties. becoming publicly owned. Quar-Stock are accumulated and This area, which includes the City terly dividends related to the four unpaid. Furthermore, the aggre-of Pittsburgh, is located in South-quarters of 1982 were paid at the gate amount of junior stock western Pennsylvania and has a rate of 47 %e per share. Com-payments which may be made in population of about 1,430,000. mencing April 1,1983 the quar-any 12-month period are in gen-The executive offices of terly dividend rate was increased erallimited to(l)50'4 of consoli-Duquesne 1,ight are located at: to 50e per share. Future dividends dated net income for any period of One Oxford Centre will depend upon future earnings, 12 consecutive calendar months 301 Grant Street the cash position of the Company, within the 15 preceding months if Pittsburgh, Pennsylvania 15279. construction requirements, rate the effect of such payments would Duquesne I.ight Compans is regulation and other relevant fac-be to reduce the ratio of common an Equal Opportunity tors. The Company expects that stock equity to total capitahzatmn Employer. dividends will continue to be paid to less than 20'5 or(2) 75'1 of such in the future. consolidated net income if the Dividends may be paid on the effect would be to reduce such M.DE.kdh Common Stock to the extent per-ratio to 20'1 or more but less than D%g mitted by law and as declared by 25'1. No portion of retained earn- ~~' '9 the Board of Directors, subject to ings at December 31,1983 was g the provisions of the Company's restricted by virtue of this provi- ~ -l _ f_ /- M. Itestated Articles which restrict sion. The approximate number of ~ E the payment of cash dividends or holders of Common Stock as of

t E

f f g. ,h other distributions on, or the pur-the Alarch 2,1984 record date for g 'M f chase of, its capital stock ranking the 1984 Annual 3feeting was junior to the Preferred Stock (col-145,000. [""' ~'* Federal Income Tax Status of Common Stock Dividends ~ ~ "" e The Company estimates that portions of the Common Stock dividends M paid in 1983 represent a return of capital and are not taxable as divi-W dend income as follows: >S en q "A: Payment Taxable As Not Taxable As rC R jg gg Dates Dividend Income Dividend Income Jan.I 100.00'1 0.00', 1973-1983 Dimensions Apr.1 87.63'; 12.374 MilRHZine July 1 70.30'1 29.70'; In mid year 1981, the Company Oct,1 70.30'; 29.70'; i

t.,

rtii iit ese estimates are subject to audit by the Internal Itevenue Service. information concerning the Com-pany. Dimensions will include an Form 10 K Offer pany's Annual Report on Form 11 fear statistical review and a 10-K filed with the Securities and discussion of some of the impor-If you are a hohler or benefiem. ! Exchange Commission for the tant issues atiecting Duquesne "*"",I"I""F ""* "I m' year 1983 (including a list ef I,ight Company. For a copy of pany s stock as of Starch, 1984, exhibits). All requests must be Dimensions write: the record date for the 1984 made in writing to the Secretary, A numi cetmg, de ( ompany Duquesne 1,ight Company. One Duquesne 1,ight Company Publie information (30 5p wdl wnd you, upon request and at Oxford Centre,301 Grant Street, One Oxford Centre no chaye, a copy of the ( om-Pittsburgh, Pennsylvania 15279. 301 Grant Street Pittsburgh, Pennsylvania 15279 36

CAPCO Board of Directors Company Officers In 1967, Duquesne Lightjoined John M. Arthurt$ John M. Arthur with four other electric uti!ities to Chairman of the Board and President Chairman of the Board and President form the Central Area Power Charles M. Atkinson Charles M. Atkinson Coordination (CAPCO) group. Vice President-Finance and Accounting Vice President-Finance and Accounting Prior to 1980, ten generating Group Group units were committed under the Henry G. Allyn,Jr.*t Roger D. Beck CAPCO arrangements, which "- Retired President and Chief Executive Vice President-Administrative Services 7 vided forjoint ownership interests omeer of The Pittsburgh Group based on individual requirements. and Lake Erie Railroad Company Duquesne Light shares m mne of Daniel Berg t

Vice President-Nuclear Group these units. To date, seven are in Provost and Vice President for Academic service; three will be placed in Affairs, Rensselaer Polytechnic Institute Clifford N. Dunn Vice President-Power Supply Group service, one each m. 1985,1986 Doreen E. Boyce*t t and 1988.

Director, The Buhl Foundation Wilh.am F. Gilfillan, Jr. Since 1980 each CAPCO com. Vice President-Customer Services John H. Demmler $ Group pany has establish,been responsible for Partner, Reed Smith Shaw & 51cClay mg its own level of Attorneys-at-Law George I. Rifendifer reserve and its own generating Vice President-General Services f,. {te{c; a.. capacity needs beyond the jointly-irector Health Systems Walter T. Wardzinski" owned Umts still under construC-Agency of Southwestern Pennsylvania Vice President-Legal and Corporate tion. Duquesne Light is now Communications developing a program to meet its \\]l1g. H EarlJ. Woolever m p,; t nd r xecutive omeer. future capacity requirements. Cyclops Corporation Vice President-Nuclear Engineering and Construction 'Duquesne Light Company G. Christian Lantzsch*$ Bearer PaIIcy al Bearer Falley => Vice Chairman of 5fellon Bank, N.A. and James O. Ellenberger N[#I[)Ith0.!m KW NNI*t DIk$wne$$. 00 KW 8 Vice Chairman and Treasurer of Mellon Controller D wnership: 47 *W rship: 13.744 National Corporation D.L Share: 38a,000 KW D.L Share: 114.000 KW Ronald G. Males Eric W. Springertt Treasurer $fa sN d: " $ "es"eYd => I '*"$'y"18pringer and Siattern Thomas Welfer, Jr. do 1 n Coal-1976 Coal-1977 Secretary bT[be I)T[ bey em f Audit Committee D.L Share: 2M.000 KW D.L Share: 62,ho KW t Memkrof Compensation Committee Richard,J,. Ciora j g t 5femberof Employmentand fI" f Community Relations Committee Lawrence P. Galie C t 5fember of Nominating Committee Assistant Treasurer D1,a[lty: ww)fm KW wnership: 13.747 D.L Share: 110/W1 KW Transfer Agents and Joan S. Senchyshyn ' Ohio Edison Company Registrars Assistant Suntary Sa m mis =7 Coal-1971 Common, Preference and

Effective December 1,1983. the Board of Cap.acity: snom00 KW D.. Ownership: 317; Preferred Stock.

actors appointed Wa:ter T. Wardzinski D L Share: lb,000 KW Pittsburgh National Bank, Vice President of legal and Corporate Communications. 5fr. Wardzinskre res-

The Cleveland Electric Pittsburgh ponsibilities will include legal services, Ill:minating Company Chemical Bank, New York public information, public affairs and the IVrry c1 Irrry :J Secretary's office. Prior to his appoint-Nuclear-19r, Nuclear-1958 C padf: 1.20~,.000 KW Capacity: 1,201000 KW Anntial Meeting op ment as Vice President. Mr. Wardzinski D L Ownership: 00 KW D.L Share: 16aJm KW stockholders was General Attorney of the Company.

13.741 D.L Ownership: 13 741 D.L Share: 16a,0 Eastlake s5 The annual meeting of stockhold- $"a'it$N4sym Kw ers will be held at 10 a.m., Pitts-D L O.nershy 3:24 burgh time, on Tuesday, April 17, D L Share: 20Um KW 1984 in the David L. Lawrence "The Toledo Edinon Company Convention Center, Pittsburgh, nans Besse af Nuclear-1977 Penns}*1vania. Ccpacity: ko.000 KW D.L Ownership: 0 D.L Share: 0 Ton:tructing and operating company rw.m

f. g Ona Oxford Centra Pittsburgh, PA 15279 \\ t i i 1 I l i ,,,}}

ML20091A242

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