ML20093N746
| ML20093N746 | |
| Person / Time | |
|---|---|
| Site: | Perry  |
| Issue date: | 12/31/1983 |
| From: | Cole A, Rogers J PENNSYLVANIA POWER CO. |
| To: | |
| Shared Package | |
| ML20093N724 | List: |
| References | |
| NUDOCS 8408020126 | |
| Download: ML20093N746 (27) | |
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PEN W rnee N POWER gruu,s Financial Highlights For the Years Ended December 31, 1983 1982 Change (In Millions) Kilowatt.Ilour Sales. . ... . 3,396.5 3.057.4 + 11.1% Operating Revenues. ... ... $ 191.2 5185.9 + 2.8%
. Fuel Expense . . . . . . . . . . 47.7 62.0 -23.1%
Operating Income . . .. .. 44.0 40.6 + 8.3% Allowance for Funds Used
". During Construction, Net . . 18.4 14.5 + 26.8%
/ Interest Expense . . ....
. 35.1 30.3 + 15.6%
s Net income ........ . . 34.3 29.4 + 16.8% 4 Earnings on Common Stock .. ... . . .. ... 27.0 23.3 + 16.1% 7" Dividends on Capital Stock . . . 5 26.6 $ 24.4 + 8.8% 1 Property Additions: Construction of Facilities . . . S 71.6 S 68.7 Nuclear Fuel. . . . . . . ... . 8.5 18.2 I 5 80.1 5 86.9 - 7.8% Internally Generated Funds. . . 22.6 27.0 - 16.5% O- ' Net Financing Activities . . . . . . -58.2 51.9 + 12.0%
, Return on Average Common Equity. . . . ' . . . .. .. 13.0 % 11.8% .
LCentents NET INCOME s34.3
. Financial Highlights ...............I: gu,nionsi letter to Stockholders . . . . . . . . . . 2-3 s29 4
. : Operating Statistics '. . . . . . . . . . . . . . . 4 s24.9 n m t: ion and r$a' lysis
, BalInce Sheets ' . . . . . . . . . . .... 89 521.2- s20.8 StItements of Income . . . . . . . . . . . . 10
'iStatements of Sources of Funds for - / '
Property Additions '. . . . . . . . . . . . 1 I - i StatIments of Capitalization . . . . . . . . 12 Statements of Retained Earnings ~. . . . . 13
- Statements of Capital Stock and Other Paid-!n Capital . . . . . . . . . . . 13 '
4 Statements of Taxes. . . . . . . . . . ... 14 Notes to the Fiaucial Statements . .15 23 Auditors' Report . . . . . . . . . . . . . . . . 24 .. 1979 1980 1931 1932 1983
; Directors and Of'icers .. . Inside Back Cover i:
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Letter to the Stockholders Cost cutting and agg essive marketing paid off in 1983. Electric sales increased and the Company held the line on cxpenses for a 16.8 percent increase in net income. Operating revenues amounted to S191.2 million,a 2.8 percent increase. Western Penns~ y lvania appears to be on the road to economic recovery. Following a downturn in 1982, the Company's total kilowatt. hour sales increased by 11.1 per-cent in 1983.The upswing was due mainly to a resurgence of industrial kilowatt-hour sales and our successes in the highly I competitive bulk power market. Growth in the nation's automotive and housing markets j spurred sales foi several area industries. Consequently, the Company's industrial kilowatt-hour sales bettered the previous year by nearly 10 percent. Cornmercial and resi-dcatial customers recorded less dramatic, but stab!c gains in kilowatt-hour use. Long-term sales agreements To more fully utilize facilities and hold down rates to our customers, the Company and its parent company, Ohio Edison, cumpleted two long-term bulk power sales agree-ments in 1983. In May, the Companies began providing 150 megawatts to Potomac Electric Power Company for a minimum of the next five years. A ten-year contract with General Public Utilities for 200 megawatts started in July. Penn Power received $4.3 million in revenues from these sales in 1983. The Company filed for a $19.9 million, annual rate increase with the Pennsylvania Public Utility Commission (PPUC)in July 1983. A final decision from the Commission CONSTR T P ITURES is expected in April. twuions)
*^U"'d 572 5 Reduced operation and maintenance expenses
$716 s68.5 A paring of expenses t..oduced notable results in 1983.
Total operation and maintenance expenses for the year were
$57.4 557.0 slightly less than 1982. The operation and maintenance budget for 1984, excluding fuel, remains lean with a 1.8 Percent decrease from 1983 expenditere?.
550.0 The Company had no short-term debt outstanding at the end of 1983. Anticipating an increase in interest rates, the Company accelerated part ofits long-term financing program with a sale of $20 million in first mortgage bonds in December. Other sales for the year included $12 million of common stock to Ohio Edison and $15 million of preferred , stock. The Company also completed a $5.2 million pollution
. , control and environmental improvement refunding issue. The remaining portion of our 1983 construction program was financed internally. This year, our plans to finance the con-struction program include additional sales of first mortgage bonds, preferred stock and common stock, as well as internally-generated funds. -1979 1980 1981 1982 1983 1984 The Company has nearly completed its construction program for air quality controls on coal-fired generating 2
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PENN POWER Y@ re o m.m units. In April 1983, Unit 7 at the W. II. Sammis Plant began refueling to permit 18 months of continuous operatiou. operating with electrostatic precipitators. Penn Power, with The federal regulations for building a nuclear power plant an approximate 21 percent share in the unit,willhave made continue to increase in complexity. The total estimated cost pollution control expenditures of approximately $21 million of the Perry Nuclear Plant increased from 54.0 billion to for this project when completed in late 1984. $5.2 billion in early 1983. The Company has a 5.24 percent interest in the two. unit plant. Penn Power's portion of this " Acid rain" requires intensified research cost rose accordingly by $61.2 million from 5250.7 million The Company speaks out against the so called cures for to $311.9 million. An ensuing modification of the construc- " acid rain" which has become a major politicalissue. Costly tion schedule set back the completion date for Unit 1. The legislation based on conjecture more than reason and unit is now scheduled for completion in late 1985. The scientific fact could result. Intensified research on this completion date for Unit 2 will be assessed at the time Unit I phenomenon must precede a cost.cffective remedy. is completed. Penn Power will spend approximately $229 million for The PPUC has indicated that the Company may recover property additions and improvements over the next five costs allocable to retail customers for four cancelled CAPCO years, according to our current budget forecast. Our 1984 nuclear units. Recovery of the costs amounting to approxi. construction budget amounts to 573 million. Also, additional mately $10 million after taxes will take place over ten nuclear fuel investments are expected to amount to $13 years and are part of our current retail rate increase request. million in 1984. Construction of facilities and nuclear fuel Costs allocable to wholesale customers are being recovered amounted to $80.1 million m 1983. through interim municipal resale rates, subject to final The joint development of power plants and transmission approval by the Federal Energy Regulatory Commission. facilities with the Central Area Power Coontination Group (CAPCO) co upanies constitutes the greater part of our Market-pricing plan for Quarto coal current construction activities. The Company has partial In February 1984, a PPUC administrative law judge ownership in three CAPCO nuclear units, one operating and approved a method of market. pricing Quarto coal for the two under construction. Unit I at the Beaver Valley Power Mansfield plant that provides an opportunity for the Com. Statior, supplied 23 percent of our electric generation in pany to recover its deferred costs. The initial decision is 1983. For the year, the unit operated at 68.2 percent avail. subject to final Commission approval. The Company had ability, despite a 31/2 aionth refueling and maintenance deferred 59.9 million of Quarto coal costs through Decem-outage. The unit's core was modified during the outage to ber 31,1983. extend the time between refuelings from 12 to 15 months. Our 1984 sales forecast calls for a continued resurgence Additional modifications will be made during the next on the part of industry as well as steady growth in the com-mercial and residential sectors. A major expansion by one of our large steel-making customers, including an e!ectric furnace and continuous caster, will be completed this year. TOTAL SALES REVENUES Our goal is to ir rease new business by another 86 million t u ons) kilowatt hours. This and other goals we have set for ourselves
$166.4 .
am ac uw nn r emp yees han an excellent track record of getting the job done. Our ' 5153 0
$142.8 experienced and well. trained work force will continue to set
$1341 -
- , a course in which we can both contribute to and benefit from Western Penns)Ivania's economic recovery.
F. +, a Chairman of the Board 9 , y
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*j) President
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1970 1980 1981 1982 1983 New Castle, Pennsylvania March 13,1984 3 i
Operating Statistics 1983 1982 1981 1980 1979
- Revenue from Electric Sales (Thousands)
Residential. . . . . . . . ' . . . . . .. .... ... S 63.994 5 61.628 5 52,649 S 50,25I S 46,425 Commercial . . . . . . . . . . ...... .. . 36.,841 36,068 30,225 28,374 25,588
' Industrial .' . ....... . ...... ... .. 6I.959 61,611 64,787 58,623 58,128 Other.. . ............... ... .. 6,989 7,082 5,347 5,472 4,426 Subtotal '. ... .... .... ..... . 169.783 166,389 153,008 142,720 134,567
' Sales to Utilhics . . . . . . . . . . . . .... . 4.277 20 '4 73 114 !
_ Total. . . .... .. . _5174.060 5166.409 5153,032 5142.793 5134.681 Revenue from Electric Sales-% Residenti.:1. . . ..... ..... ... ... . 36.7% 37.0% 34.4% 35.2% 34.5% Commercial . . ........... ... .... 21 7 21.7 19.8 19.9 19.0 I Indust rial . . . . . . . . . . .. ......... . 35.6 37.0 42.3 41.0 43.1 Other .... ......... ..... ..... . 4.0 4.3 3.5 3.8 3.3
. . Subtotal . ....... .. .. . . . . Ri7.5 100.0 100.0 99.9 99.9 Sales to Utilities . . . . . . . . . . ... ....... 2.5 - -
0.1 0.1 Total. . . . . . . .. 100 m 100.0% 100.0% 100.0% 100.0% C- Kilowatt.llour Sales (Millions) Residential. . . . ...... ...... .... 876.0 865.0 862.4 845.5 823.3 Commercial . . . . . . . . . .......... .... 589.5 578.2 566.1 536.9 512.6 Industrial. . . ........... . . .. ... 1.627.3 1,487.7 1,915.8 1.737.2 1,878.5
~0ther................ ..... ...... 123.7 125.5 131.5 129.7 126.2
' Subtotal . . . . . . .............. .. 3,216.5 3,056.4 3,475.8 3,249.3 3,340.6 Sales to Utilities '. . ..... ..... ..... . I80.0 1.0 1.0 2.1 4.2
- Total. . . . . . . . . . . . ... 3.396.5 3.057 4 3.476.8 3,251.4 3.344.8 L Customers Served at End of Year
- Resf jential. . . . . . . . . . . .............. 112.768 111,931 111,121 110,012 109.032-
- Commercial ~. . . . ........... ........ 13.474 12,994 12,902 12,839 12,919 Industrial. . . . . . . . . ..... ........... 101 106 109 107 135
-Other'.. ... . ... . ....... .. . 129 122 118 117 114 Total. . ..... .. . I26.475 125.153 124.250 123.075 122.200 ResidentialCustomer Averages
- 1 Average Kwh Used per Residential Customer '. . . 7.804 7,755 7,813 7,726 7.626 Average Price per Kwh. Residential (Cents). . . 7.30 7.12 6.10 5.94 5.64 Kilowatt.Ilours Generated (Millions). ... ..... 3.563.7 3,546.7 3.834.6 3,146.0 3,194.8
- Kilowatt.liours Purchased and Interchanged, Net (Millions). ... ... .,....... ..... (3.3) (400.2) (256.4) 296.5 281.7 Peak Load (Megawatts). . . . . . ...... ...... 567 562- 577 548 554
' Cost of Coal per Million BTU. . ..... .. ... S 1.57 5 1.66 5 1.66 5 1.41 5 1.22 Generation Capability C0a1.................... . .. .. . 77.7% 77.7% 77.7% 77.5% 76.0%
0i1 . . . . . . . . . . . . . . . ... ......... 6.' 6.1 6.1 6.3 7.4 O Nuclea r . . . . . . . . . . . . .... . ... . . 16.2 16.2 16.2 16.2 16.6 Total. . . . .. ...... . 100 09 100.0% 100.0% 100.07, 100.0% y . Sources of Electric Generation
. Coal '. ......... ................ . 77.17 86.7% 78.3% 97.7% 88.4%
0i1.................. ............ - 0.1 0.2 0.7 2.1 Nuclear . . . . . ... ... . . ..... ... 22.9 13.2 21.5 1.6 9.5 Total. . . . . . .. .... 100.0 %_ _ _ 100.0% 100.0% 100.0% 100.0% Number of Employees . . . . . . . . . . . . . . .. . 1.x 38 1.868 1.779 1,682 1.500 4 a _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
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- Selected Financial Data f :- 1983 1982 1981 1980 1979 (Dollars in Thousands)
~ 0perating Revenues. ... .. ..... . .
S141 172_ $ 183,883 5174.488 S157,208 S145,340 Operating income . . . . .... .. .. .. . S 43.077 5 40,590 $ 37,412 5 32,427 5 29.421
~
- Net Income . . . . . . .. .. . .. .. S 34,343 $ 29,392 5 24,936 5 20,822 S 21,206 l Preferrhd Stock Dividend Requirements. . ... .. S 7,296 5 6,098 5 5.605 S 5.232 S 4.660 E:rnings on Common Stock . .. ... .. .. S 27.047 5 23,294 S 19.331 $ 15.590 S I6,546 Cash Dividends on Common Stock . , .. . . e. 19,203 5 18.324 S 15,876 S 14,301 5 12,278 Total Assets at December 31. . . . . . . . . . . 5783.894 5710.886 5637,607 $588,624 SS 17.285 Utility PI'a'nt . . . . . ....... . ........ $810,57s $733,395 5649,350 $599,982 $546,744 Depreciation Reserve . . . . ............ ... 151.278 137,016 124,115 113.044 101,585
- Net Utility Plant '. . . . . .......... .....
565 Moo _ $596.379 5525,235 5486.438 S445,159 Property Additions . . .... ........ ... 5 80,130 S 86.889 $ 52,858 5 57.204 5 57,676
' Nuclear Fuel Obligations. . ....... .. . . S 32.614 5 22.847 - - -
, CAPITALIZATION Common Stockholder's Equity . . . . . . S219,474 $ 199,680 $ 194,666 5170.755 5154,438
. Pr ferred Stock-Not Subject to Mandatory Redemption . . . . 41,905 41,905 41,905 41,905 41,905
- Subject to Mandatory Redemption. ...... 47,471 33,395 26,298 27,200 17,600 Long Term Debt . . . . . . . . . ...... 323.363 295,405 262,011 242,194 225,1f 6 ,
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Total Capitalization. ............ . 5632,213 5570,385 5524.880 $482,054 5439,099 l CAPITALIZATION RATIOS
. Com;non Stockholder's Equity . . . . . . . . . 34.7% 35.0% 37.1% 35.4% 35.2%
Preferred Stock-
' Not Subject to Mandatory Redemption . . 6.ci 7.3 8.0 8.7 9.5 Subject to Mandatory Redemption . . . . 7.5 5.9 5.0 56 4.0 Long. Term Debt . . . . . . . . . . ... .. ... 51.2 51.8 49.9 50.3 51.3 Total Capitalization . . . . ... ._100.0c: 100.0 % 100.0% 100.0% 100.0%
S
Managernent's Discussion and Analysis of Results of Operations and Financial Condition Results of Operation: The increase in operating revenues during 1983 resulted from several factors. most important of which we e a rate iacrease effective in September of 1982 and increased kilowatt-hour sales to most classes of customers. Industrial kilowatt-hour sales increased in 1983 following a substantial decrease in 1982. This increase in sales to industrial cus-tomers reflects the improving economic environment in the Company's service territory. In addition, the Company entered into two long-term sales contracts with other nen-associated utilities in 1983. These contracts contributed to the increased operating revenues for the year 1983. Partially offsetting this rever'ue increase was a reduction to the TOTAL ELECTRIC SALES I i Residentia' !cvelized ener cost rate. 'lhe 1982 o eratin revenue tMdlions of Kdowatt-Hours) _ u 21 Commercia' increase was primarily due to rate increases effective in
"'"*S'" January and September of 1982. This increase was par-tially offset by decreased kilowatt-hour sales and reductions 3500 to the levelized entgy cost rate.
Mw, ,rP ~j Reductions in fuel costs were primarily attributable to reduced consumption of coal as a result of outages to genera-3000 ting units at the New Castle Plant and Sammis Unit No. 7 during the year 1983. Fuel costs in 1982 were at substantially the same level as 1981. Net purchased and interchanged 2500 %
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power expenses increased in 1983 compared to 1982 princi-pally due to reduced deliveries of power to Ohio Edison in 1983 and increased purchases of low-cost power resulting 2000 o principally from the Company's contractual obligations with Ohio Valley Electric Corporation. The reduction in pur-1500 chased and mterchanged power, net,in 1982 cesulted from the improved availability of the Company's generating units. There were no significant changes in maintenance expenses 1000 for 1983 as compared to 1982. Maintenance expenses increased in 1982 following a decrease in 1981.The increase was principally due to the scheduled outage of Beaver Valley 500 Unit No. I for refueling and certain modifications. The provision for depreciation increased in 1982 princi-pally because of increased rates which were approved by the PPUC in January 1982. 1979 1980 1981 N2 198a Financing requirements associated with the Company's construction program continued to remain the principal 6
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factor giving rise to the increases in interest expenses in 1983 and 1982. As the Company's construction projects proceed and until the projects are placed in service and included in rate base, the total allowance for funds used during construc-tian (AFUDC) will continue to increase in order to capitalize the appropriate financing costs whien are not currently recovered thrr ugh rates. Information with respect to the estimated effects ofinfla-tion upon the Company is given in Note 8 of Notes to
. Financial Statements. . ELECTRIC SALES REVENUES r i nesident,ai (Maiions ot oonarst >- 12 commerciat Cr'pital Resources and Liquidity .
industria: The Company's current budget forecast reflects expendi- M AH Other turer of approximately $73,000,000 for new construction in 185 1984. In addition, the Company expects to invest approxi-mately $13,000,000 for additional nuclear fuel. The Com- 170 pany plans to meet its 1984 capital requirements, depending - on market conditions, through the issuance of additional first 155 mortgage bonds, preferred stock and common stock, as well as internally generated funds. 140 The Company had $23,000,000 of temporary cash invest. 125 ments at the end of 1983, resulting principally from the sale in December of $20,000,000 principal amount of first mortgage bonds. The Comp .ty accelerated its long term debt MO g g. linancing plans to take advantage of prevailing favorable 95 s#CN @ 2 Ob interest rates. Based upon earnings as of December 31,1983, under the go _e
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earnings coverage requirements of its first mortgage inden- 7 'i; m ; ^ N 1 6 ,, % pk 65 d WM N.
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ture, the Company could presently issue approximately oi.:i
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$52,000,000 principal amount of additional tirst mortgage "k* k bonds at an assumed interest rate of 13%. Based on those 50 - ~
earnings and assuming the issuance of no additional debt, - 35 under its Charter restrictions the Company conh! g resently ;, issue approximately $14,000,000 on additiona! preferred 20 stock at an assumed dividend rate of 13%. - u n .- W s The Company has a rate case pending with the pennsyl- 5 vania Public Utility Commission which,if granted in full,is designed to produce additional annual revenues of approxi-mately $19,900,000. New rates are expected to become e ma N h < '+1 effective in April,1984. 7 L
Balance Sheets Assets At December 31, 19S3 1982 (In Thousands) Utility Plant: In service, at original cost . . S558,780 $524.617 Less. Accumulated provision for depreciatien 151y78 137,016 407.502 387,601 Construction work in progress . 220.420 185,926 Nuclear fuel in process . . . 31.378 22,852
' 65W.300 596,379 Other Property and investments. . 2.683 2,666 Current Assets:
Cash. . . . 635 692 Temporary cash investments,at cost,which approximates market value . . .. . 22393 7,900 Receivables-Customers (less accumulated provision of $432,000 and
$420,000, respectively , for uncollectible accounts) 14.212 12,256 Parent company .
16,762 20,326 Other . . . . . . 14.447 15,737 Materials ar.<l supplies, at average cost-Fuel. . . . . . . . . 8.871 12,821 Other . 5,072 5,039 Prepayments. . . . 426 508 83.4I8 75,279 Deferred Charges: Deferred Quarto coal costs (Note 7) . 9.879 8,027 Unamortiied costs of terminated construction projects (Note 2) . 16.000 16.084 Other . ... . .. 12h09 12.451
~ 5NU 36.562 MiUUU $710,886 8
y . . .. a F i.- A P w r ENN POWER ,o _ h c CEpitalization and Liabilities At December 31, 1983 1982 b (in Thousands)
' Capitalization (See Statements of Capitalization):
Common stockholder's equity . . . . . . ... ......... .. .. .. .... . $219.474 $ 199,680
. Preferred stock-
. Not subject to mandatory redemption. . . . . .. . .. ...... ... .. ... .. 41.905 41,905 Subject to mandatory redemption . . . . ............. . ..... ... 47.471 33,395 Long-term debt. . . ... .. . ..... ....... ... ....... ..... .. 323.363 295.405 570,38$
632.213_
' Nuclear Fuel Obligations (Note 5) . . . . . . ...................... .. . . .. 32,614 22.847 Current Liebilities:
Current maturities oflong term debt and preferred stock . . . . . . . .... .......... 550 6,145 Notes payable to banks (Note 6) . . . . . . . . . . . . . . . . . . . . . . ... . . ... - - Accounts payabic-Parent company . . . . . . . . . . . . . . .. .. ........... ...... ... ..... 2,069 2,219 Other....... ....... ............ ...... ............... . 41.610 39,564
' Acc rued taxes . . . . . . . . . . . . . . . . . . .. . ... . . . .. ............. . 4.562 6,912 Accrued interest . . . . . . . . . . . . . . . . . . .. ........... . .. . .. 6,978 6,761 Other..... ................... .. .. .... .. ..... . .... . 5
_ _ .018 4.032 _ 60,787 65.633 Deferred Credits:
' Accumulated deferred income taxes . . ........... .......... .... ... .. 31,002 23,708 Accumulated deferred investment tax credits . ............ ..... .. .... 15.179 11,997 Energy costs recovered in advance ... ...... ... ......... . ..... . 3,569 8,641 Other . ........................... ......... . . .... . ..... 8,530 7,675 58,280 52.021 Commitments, Guarantees and Contingencies (Notes 2,3 and 7) . . . . . . ... .
._ _57x3 g $710,886 s -
The accompanying Notes to Financial Statements are an integral part of these balance sheets. 9
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=
m IK Statements of Income ;_ For the Years Ended December 31, 1983 1982 1981 K E_- (In Thousands) . w Operating Revenues. . . 5191.172 5185,883 5174,488 = E Operating Expenses and Taxes: 5 Operation- _ - Fuel . .. . 61,974 60,979
. 47.666
( Purchased and interchanged power, net . . . (3.818) (14,534) (4,975) Other operation expenses . . _ 36.33') 32.841 30.073 1 Total operation. . 30,187 80,281 86.077 E Maintenance. .. . . . . 18.467 18.585 17,017 - Provision for depreciation . 16.793 15,808 14,171 5 Amortization of terminated construction - project costs (Note 2). . .. 52 49 - g General taxes . . . . . I3,475 12,590 11,831 - Income taxes . . . . .
~
18.221
~
17,980 7,980 . Total operating expenses and taxes. . l 47.I95 145.293 137,076 Operating Income . . . . . . . . .. . '~ I3.07 40.590 37.412 = Other income and Deductions: Allowance for equity funds used during construction . 12.219 10,464 6,483 h Miscellaneous, net . .. . .. 892 763 723 . Income taxes-credit . . . . . 6.149 3,871 3,662 g Total other income and deductions. _ 19.2y0. 15,098 10.868 : Total Income . . . .. ..... .. .. .......... .. . 63.237 55 688 48.280 r k Net interest: , Interest on long term debt. . 30.300 27,019 23,210 - Interest on nuclear fuel obligations. . . . 2.931 1.068 - Allowance for borrowed funds used during construction, r.et of deferred income taxes. . .. . . (6.173) (4,040) (3,807) Other. . . . 1,836 2,249 3,941 2 Net interest . . . . . . 28.894 26,296 23.344 Net income . . . . . . . .. .. .. .. .. ... . 34.343 29,392 24,936 - Preferred Stock Dividend Requirements. . . 7.296 6,098 5.605
=
Earnings on Common Stock . . . . . . 5 27.047 $ 23.294 S 19.331
~
k The accompanying Notes to Financial Statements are an integral part of these statements. - 3 q s 10
Y, L-V e L $
-Statements of Sources of Funds PENN P frr Property _ Additions w ne_OWER
~ Foe the Years Ended December 31, 1983 1982 1981 (In Thousands)
- Internally generated funds-Net income . . . . . . . . . . . ........... . .... .... S 34.343 $ 29.392 5 24,936
' Principal non-cash items-Depreciation and amortization-Charged to provision for depreciation . . . . . . . . . . . . . I6,793 15,808 14,17i Charged to other accounts. . . . . . . . . . . . ...... ..... 313 271 202 Amortizatic,n of terminated construction project costs. . . 52 49 -
Deferred income taxes, net . . . . . . . . . . . ....... . . ... I3.585 6,653 8,096 Investment tax credits, net . ... . ...... ...... 3.182 7,847 1.248 Allowan: e for equity funds used during construction . . . . . . (12.219) (10,464) (6,483) Deferred fuel and energy costs, net . . ............ ... (6,924) 1.898 I,009
.19,125 51,454 43,179 I - Less-Dividends on common stock . . . . . . .. .. . . ... 19.203 18.324 15,876 k Dividends on preferred stock . .... 7,363 6,098 5,602 22.550 27,032 21,701
- Financing activities-Common stock . . . .......... .. ... . . .. ..... 12.000 -
20,400 Preferred stock . . . . . . . ........... .... . . ....... 15,000 8,000 - First mortgage bonds . . . . ..... .... ..... .... .. 20.000 30,000 20,000 l Secured notes. net . .. ........ .... ... .... ..... 7.955 9,173 5,645 Nuclear fuel obligations . ........ ...... . .. ..... . 9.767 22,847 - Retirement oflong-term debt and preferred stock . . . ... .... (6,569) (6,708) (5,402) Notes payable to banks. . . . . . . . . . . . . . ....... ..."... (11.400) (12,100) 51,912 28,543 _58.153___ ._ Net change in current assets and current liabilities excluding notes payable to banks and current maturities oflong-term debt and preferred stock-
. Temporary cash investments . . ..... ... . ...... ... (l5,0931 (3,600) (4.300')
Receivables . . . . . . . . . . . . . . . . . . . .......... .... 2.898 2,931 (729) Materials and supplies. . . . . . . . . . . . . . . ..... ........ 3,917 (344) (1.226) Accounts payable . . . . . . . . ......... .... .. ... .. 1.690 (7.545) 8,363
' Accrued taxes . . . . . . . . . . . . . . ...... .... ... .... (2,350) 2,877 (1,205)
Accrued interest . . .. . ... ...... .. ........ . 217 3,096 (45) Miscellaneous, net . . . . . . . . ........ ............ .. 1 3,594 (2,390) _ _ 125 _ _ _(7.390) 1.009 (1.532) Other, ne t-Allowance for equity funds used during construction . . . . . . . . . . 12.219 10,464 6,483 Sale of utility property. . . . . . . . . . . . . . . . . . . . . . . 2,039 -
' Deferred income taxes on allowance for borrowed funds used during construction. . . . . . . . . . . . . .......... .... (6.559) (4.291) (4.046)
Miscellaneous, net . . . . .. ......... . ... I,709 1.l_48 _ (1.276) 6,h08 6.936 4,146 Total Sources of Funds for Property Additions. . . ....... .... MO I30 5 86.889 5 52.858 Property Additions-Elect ric Plan t . . . . . . . . . . . . . . . . . . . . . . . .. ....... . $ 71.502 $ 68.533 5 49,965 Nuclear Fuel. . . . . . . . . . . . . . . .. .. .......... .. h,526 18,146 2,815 Nonutility property . . . . . . . . . . . . . . . . . . . . . . . . . ....... 12 210 78 5 x0.130 $ 86,889 $ 52,858 The accompanying Notes to Financial Statements are an integral part of these statements. 11
Statements of Capitalization At December 31, 1983 1982 (In Thousands) Common stockholder's equity: Common stock, $30 par value,6,500,000 shares authorized 5,490,000 and 5,090,000 shares outstanding, respectively . 5104,700 $152,700 Other paid-in capital . . 177 160 Retained eamings(Note 4a) . . . .. _ 14.59] . 46.820 Total common stockholder's equity . . 2 Pj.474 199,680 Optional Redemption Price Number of Shares Aggregate Outstanding (In 1983 1982 Per Share Thousands) Preferred stock (Note 4b): Cumulative, $100 par value Authorized-950,000 shares Not Subject to Mandatory Redemption: 4.24 % .4.64 % 141,049 141,049 $102.98 105.00 $14,614 14,105 14,105 7.64% 8.00% 118,000 118,000 104.47 105.27 12,374 11700 11.800 8.48% .9.16% 160.000 160,000 106.87-107.32 17,135 __16.000 16,000 Total not subject to mandatory redemption 0 4j 9,04_9 _419,049 0 $44,123 41.905 41,905 Subject to Mandatory Pedemption (Note 4c): 8.24 % 90,000 95,000 $108.24 $ 9,742 9.000 9,500 10.50% 100,000 100,000 109.41 10,941 10.000 10,000 11.00% 59,708 63951 1I2.11 6,694 5371 6.395 11.50% 150,000 - 103.29 15,494 15.000 - 15.00% 80,000 80,000 114.81 9.185 8 000 8,000 Redemption within one year . . . . (500) ($00) Total subject to mandatory redemption . .
. 479J08 J38,9 MI, $52,056 _ _
47 .4 71 33,395 Long-term debt (Note 4d): First mortgage bords-10.12% weighted average interest rate,due 1984 through 1988 . . . 37,512 37,512 11.91% weighted average interest rate,due 1989 through 1993 , .. . . . 99,890 79,890 10.68% weighted average interest rate,due 1994 through 1998 . . . I1590 11,890 8.46% weighted average interest rate, due 1999 through 2003 .. .. . 67.620 67,620 9.30% weighted average interest rate, due 2004 tnrough 2008 . . . f.0(8 42,088 Total first mortgage bonds . . . . . . . _ 25S000 239,000 Secured notes and obligation-5.83% weighted average interest rate,due 1984 through 1988 . . . 263 5,908 8.51% weighted average interest rate, due 1989 through 1993 . . 8,104 2,904 7.77% weighted average interest rate,due 1994 through 1998 . . . . .. 8.086 8.086 10.66% weighted average interest rate, due 1999 through 2003 . . 2S.839 28,839 7.53% weighted average interest rate, due 2004 through 2007 . . . . . .. _ 22.369 22,369 67.661 68,106 Amount held by Trustee. . _ g .572) _ (5,327) Total secured notes and obl;gstion . . . ., , . 65.059 62,779 Net unamortized discount on debt . . . . 976) (729) long-term debt due within one year . . . .. . __ _ _ QO) (5,645) Totallong. term debt . . . . . . . 323.4 3 295,405 Total capitalization . % 32,211 35 The accompanying Notes to Financial Statements are an integral part of these statements. 12
4~% Q rwPENNc;,P..OWER - .. Statements of Retained Earnings For the Years Ended December 31, 1983 1982 1981 (In Thousands) Balance at beginning of period . . .. .. . $ 46,820 $ 41,850 $ 38,392 Net income . ... . . . 34.343 29,392 24,936 81,163 71,242 63,328 Deduct: Cash dividends on common stock . . ... 19,203 18,324 15,876 Cash dividends on preferred stock. . . 7,363 6,098 5,602 26,566 24,422 21,478 Balance at end of period (Note 4a) . . . . $ 54.597 $ 46.820 $ 41,850 Statements of Capital Stock and Other Paid-in Capital Preferred Stock Subject to Not Subject to Mandatory Common Stock Mandatory Redemption Redemption Other Number Par Paid-In Number Par Number Par of Shares Value Capital of Shares Value of Shares Value (Dollars in Thousands) Balance, January 1,1981 4,410,000 $132,300 $ 63 419,049 $41,905 272,000 $27,200 Sale of Common Stock. 680,000 20,400 - - - - - Preferred Stock Sinking Fund Redemptions-11.00% Series . . . 53 - - (4.016) (402) Balance, December 31,1981. . 5,090,000 152,700 116 419,049 41,905 267,984 26,798 Sale of 15.00% Series of Preferred Stock. . . . . 80,000 8,000 Preferred Stock Sinking Fund Redemptions-8.24% Series . , , .. . . (5,000) (500) 11.00% Series . . 44 - - (4,033) (403) Balance, December 31,1982 . 5,090,000 152,700 100 419.049 41,905 338,951 33,895 Sale of Common Stock. . 400,000 12.000 - - - - - Sale of 11.50% Series of Preferred Stock . .
- - - - - 150,000 15,000 Preferred Stock Sinking Fund Redemptions-h.24% Serles . . .
(5.000) (500) l l .00% Series . . . . 17 - - (4,243) (424) Balance, December 31,1983 . 5.490,000 $ 164.700 $177 419.049_ $41.905 479,708 $47,971 The accompanying Notes to Financial S itements are an integral par of these statements. 13
Statements of Taxes For the Years Ended December 31, 19s3 1982 1981 (in Thousands) General Taxes: State gross receipts 5 -' 727 5 7,473 5 6,875 Real and personal property . 2.212 2.172 2,126 State capital stock. . 1.002 1,675 1,492 Social security and unemployment . . 1,% 7 I,207 1,275 Miscellaneous . . . . 47 63 63 Total general taxes. . L!_t471 5 12.590 5 11.831 Provision for Income Taxes: Currently payable-Federal . . . 5 64~ $ 1,644 5 (1,656) State. . . . . . 1. ? l 7 2,256 676 1 d4 3.900 (980) Deferred, net (see below)- Federal . , 10.708 5,253 6,754 State. . . 2.577 1.400 1.342 13.5 U 6.653 8.096 Investment tax credits, net of amortization 3'.182 7,847~ 1,248 Total provision for income taxes 1.I M 31 5 I8.400 $ 8.364 Income Statement Classification of Provision for income Taxes: Operating expenses . 5 18.221 5 17,980 5 7,980 Other income . ... . . Ih.149) (3.87I) (3.662) Allowance for borrowed funds used during construction . . .. . 6.550 4.291 4,046 Total provision for income taxes . . . ElMI 5 18.400 $ 8.364 Sources of Deferred Income Taxes: Allowance for borrowed funds used during co struction,which is credited to plant . . 5 6 5F4 5 4.291 5 4,046 Es ,:ess of tax over book depreciation. net . Ll45 3,375 1,568 Cost of terminated construction projects. net . (44 460 - Deferred fuel and energy costs, net . . . . Uh7 (97I) (498) Deferred interest on leased nuclest fuel, net . 1608) (13) 3.146 Nuclear fuel disposai costs. . . . (575) (497) - Other, net... 540 14 (166) Net deferred income taxes. . LR525. 5 6.653 5 8,096 Reconciliation of Federal Income Tax Expense at Statutory Rate to Total Provision for income Taxes: Book income before provision for income taxes . .. . . }3<j]4 5 47.792 5 33.300 Federalincome tax expense at statutory rate . . . 5 24.3tM $ 21,984 5 15,318 Increases (reductions)in taxes resulting from: Allowance for equity funds used during : construction,which does not constitute taxable income . ........ . . . . I4621) (4,813) (2,982) Excess of tax over bouk depreciation. net . (m) (1,307) (3,666) State income taxes. net of Federal income tax benefit. . . . . . . 2.2 I i 1,974 1,090 Other, net . . . . . . . ti AW 562 (1.396) Total provision for in:ome taxes . . . . (ljd t. $ 18.400 M The accompanying Notes to Financial Statements are an integral part of these statements. M l ___ _ _ _ _ ___
AE*h
~~~
Mggy PENN % ,m., POWER + l l Notes to the Financial Statements l (1) Summary of Significant Accounting Policies: Common Ownership of Generating Facilities-The Company, a wholly-owned subsidiary of Ohio Edison The Company and other Central Area Power Coordina. Company (Edison), follows the accounting policies and tion Group (CAPCO) companies own, as tenants in common, practices prescribed by the Pennsylania Public Utility Com- various power generating facilities. Each of the companies is mission (PPUC) and the Federal Energy Regulatory Commis- obligated to pay a share of the construction costs of any sion (FERC). jointly owned facility in the same proportion as its owner-ship interest. The Company's portion of operating expenses Revenues- associated with these jointly owned facilities is included in The Company's residential and commercial customers are the corresponding operating expenses on the Statements of metered on a cycle basis. Revenue is recognized for electric Income. The amounts reHected on the Balance Sheet under r - service based on meters read through the end of the month. utility plant at December 31, 1983, include the following: Revenues from the Company's largest customer, Sharon Steel Corporation, for 1983,1982 and 1981 amounted to approximately 522,846,000, S19,370,000 and $20,707,000, respectively. These amounts represented approximately c.amai cam t,. in s-O'd om =wa CQ'aa en. ore. C g;' soima 12.0%,10.47o and 11.97c, respectively, of the Company's on ni wo total operating revenues. Bruce Wnsfield Deferred Fuel and Energy Costs-The Company recovers fuel and energy costs,in excess of
,N* ', ,g,@s"@ ' - ** $* 'j '" ,, y g rmw i nd w : -
isi :so 5:44 amounts recovered through base rates, from its retail ""'- 1M '*^"' ILE customers through an annual "levelized" energy cost rate (ECR). The ECR, which includes adjustment for any over or under collection from customers, is recalculated each year. All uclear fuel in process relates to the CAPCO units but Accordingly, the Company defers the difference between is not segregated among them. actual energy costs and the amounts currently recovered from its customers. Nuclear Fuel- ' Reference is made to Note 7 with respect to accounting The Company amortires the cost of nuclear fuel based on for the cost of coal received from Quarto Mining Company the rate of consumption.The Campany also makes provision (Quarto). for future nuclear fuel disposal costs associated with the fuel. ' Utility Plant and Depreciation- Allowance for Funds Used During Construction (AFUDC)- ' Utility plant reuects the original cost of construction, AFUDC, a non cash item charged to utility plant under including payroll and related costs such as taxes, pensions construction during the construction period, represents the and other fringe benefits, administrative and general costs net cost of borrowed funds and equity funds used for con. _ and allowance for funds used during construction (see struction purposes. AFUDC varies according to changes in - A FUDC). the level of utility plant under construction and in the cost The Company provides for depreciation on a straight.line of capital. The Company computes AFUDC utilizing a net of basis at various rates over the estimated lives of property tax rate, which is consistent with the rate treatment. The included in plant in service. The annual composite rate for AFUDC rates related to nuclear fuel f nanced only through electrie plant was 3.2% in 1983 and 1982 and 3.07c in 1981. the incurrence of long-term obligations (see Note 5)is based The Company piovides for the estimated cost of decommis. on actual interest accrued on the obhgations during the sioning the radioactive components of its only nuelcar period. The rates used by the Company for all other con-generating unit in scritee, in accordance with a PPUC rate struction projects were 9.25"r during 1983 and 1982 and order. 8.59 during 1981. 15
Notes to the Financial Statements-cont. Income Taxes- A comparison of accumulated plan benefits and plan net Details of the total provision for income taxes are shown assets from the two latest actuarial reports is as follows: on the Statements of Taxes. The deferred income taxes result from timing differences in the recognition of revenues and expenses for tax and accourting purposes. June 30, The Company allocates the income tax benefit resulting 1983 1982 from interest expense related to utility plant under con- Actuarial present value of struction, to income t xes-credit mcluded under other accumulated plan benefits: income and deductions on the State' m ents of Income. $22,468,000 $ 19,574,000 Vested. For income tax purposes, the Company claims liberalized Nonvested . 3.500,000 2,369,000 depreciation and, consistent with the rate treatment, generally follows " normalization" accounting. The Company M M 000 $21943.000 expects that deferred taxes which have not been provided Net assets available for benefits . 545,233.000 _$_3] .5 50,000 will be collected from its customers when the taxes become . payable, based upon the established ratemaking practices of Assumed rate of return for the PPUC and the FERC. actuarial present value of The Company defers investment tax credits utilized and accumulated plan amortizes these credits to income over 'the estimated life of benefits . . E g the related property. At December 31,1983, approximately
$13,000,000 of unused investment tax credits were available to offset future Federal income taxes payable. These credits The total actuarial present value of accumulated plan expire at the end of the following years: benefits reflects pension benefits applicable to eligible employees based upon present salary levels and past years of 1995... . . .. . . . . .. $ 5,000,000 service accumulated through the valuation date. This is the 1996. . . . .. . ... . . 2,000,000 generally accepted reporting proecdure currently set forth by 1997. .... .. .. .. . ... . . 2,000,000 the Financial Accounting Standards Board. The Company's 1998. . . . . .. .. .. ... 4,000,000 annual contribution to the plan, however, considers estimated
$13.000,000 ultimate salary increases due to inflation and other factors and the estimated total service expected to be accumulated by employees. This is a widely recognized , inding technique Pensions-and is consistent with the recommendation of the Company's The Company's trusteed, noncontributory pension plan covers almost all full-time employees. Upon retirement, actuary. In additi m, the actuary recommended, and the emnloyees receive a monthly pension based on length of Company utilized, a discount rate of 7% for funding service and compensation. Pension .)sts for 1983,1982,and purposes. Differences between funding bases and reporting 1981, were $3,397,000, $2,987,000 and $2,668,000, requirements can have a significant effect on the comparisons respectively. Of those amounts, $1,309,000, $666.000 and shown above.
$354,000, respectively, were charged to operating expenses; the balances were primarily billed to the other CAPCO com. Significant Parent Company Transactions-panies or charged to construction. Such costs include the Operating revenues for 1983,1982 and 1981 include amortization of unfunded past service costs on an actuarial $12,745,000, $14,141,000 and $16,172,000, respectively, basis over approximately 40 years in 1983 and 30 years in attributable to transactions with Edison. Such revenues 1982 and 1981 The Company funds pension costs accrued. resulted primarily from Edison's purchase of capacity from the Company's ownership interest in Beaver Valley Unit No. I and W. II. Samnis Unit No. 7. Purchased and inter-changed power, net, reflects credits of $8,290,000,
$18,467,000 and $7,565,000 due to the Company's net delivery of interchanged power to Edison during 1983,1982 and 1981, respectively. In addition, other operation expenses for 1983,1982 and 1981 include $2,794,000, $2,251.000 and $ 1,570,000, respectively, attributable to services rendered by Edison to the Company.
1 1 16
h
~~
PEN W rmm,N POWER ues lN;tes to the Financial Statements-cont. 6 (2) Terminated Construction Projects: (4) Capitalization: In' January 1980, the Company and all other CAPCO (a) Retained Earnings-companies terminated plans to construct four nuclear genera. Under the Company's Charter, the Company's retained
' ting units. Costs,-it.cluding settlement of all asserted clainu earnings unrestricted for payment of cash dividends on the
;resulting from terminvion, unrecovered by the Company as Company's Common Stock were $33,773,000 at of December 31,1983, app!! cable to these units amounted to December 31.1983.
. approximately 516,000.000.
The Company 'is currently seeking approval from the (b) Preferred Stock-FERC! to recover. these costs from FERC jurisdictional At the Company's option, all preferred stock may be customers to the extent they are allocable to those customers, redeemed in whole,or in part,at any time upon not less than The Company is currently collecting interim rates from 30 nor more than 60 days notice, unless otherwise noted. FERC jurisdictional customers which are intended to pro. Redemption of all preferred stock issued within the past five vide for recovery over a ten-year period and, accordingly, . years is subject to certain restrictions regarding refunding those costs applicabic to FERC jurisdictional customers are operations. The optional redemption prices shown on the
' being amortized over that period. The Company believes that Statements of Capitalization will decline to eventual - the construction costs were prudently incurred and has no minimums per share according to the Charter provisions that reason to believe that the FERC will not act favorably upon establish each series. ; its request. The PPUC has indicated that it will allow the Company to begin recovering its share of the costs allocable (c) Preferred Stock Subject to Mandatory Redemption- ! to PPUC jurisdictional customers over a ten year period The Company's 8.24% Series and i1% Series each include . beginning with the effective date of new rates resulting from . provisions for a mandatory sinking fund to retire a minimum its pending rate increase request. of 5,000 shares and 4,000 shares,respectively,every year on December I and January 1, respectively, at $100 per share ' (3) leases: plus accrued dividends. Its 15% Series and 11.50% Series ; The Company leases nuclear fuel.certain transmission and each include provisions for a mandatory sinking fund to distribution facilities, office space and other property and retire a minimum of 3.200 shares and 15.000 shares,respec.
equipn ent under cancelable and noncancelable leases. Total tively, on July 15 of each year beginning in 1988 and 19f 9, r:nt expenses included on the Statements of Income were respectively, at $100 per share plus accrued dividends. The
$8,646,000,54,618.000 and 55,116,000 for 1983,1982 and Company's 10.50% Series includes a provision for mandatory 1981, respectively. The future minimum rental commitments redemption of the entire series on April 1,2040.at $100 per . as of December 31, 1983, for all noncancelable leases share plus accrued dividends.
recorded as operating leases are: As of December 31,1983, the Company's sinking fund requirements for the next five years are: 1984.......................... $ 5,071,000 1985................... ..... 4J69,000 1984...... .... ...... ...... S $00,000 1986....... .............. .. 3,857,000 1985.................. ....... 871,000
- 1987......................... 3,458.000 1986...... .. . ... ... ... .. 900,000 11988.......... ........ ...... 2,201,000 198i... ....... ........... 900.000 EYears thereafter . ............ ... 52,695,000 1988. .... .... . .... . ... 1,220,000 if all noneapitalized financing leases had been capitalized, the effect on total assets and total liabilities would not have been material.
17
3 Notes to the Financial Statements-cont. (d) temg-Term Debt- In November 1982, the Company also ' egan participating The mortgage and its supplements, which secures all of in a:rangements wherein the Central Area Energy Trust the Company's first mortgage bonds, serves as a direct first (CAET) finances the acquisition of nue. car material that will mortgage lien on substantially all property and franchises, ultimately be used to fuel various CAPCO generating units. other ,than specifically excepted pronerty, owned by the As part of these arrangements, the Company has entered into Company. purchase agreements whereby the Company is uneudition. Based on the amount of bonds authenticated by the ally obligated to purchase its share of the nuclear material Trustee through December 31,1.983, the Company's annual that has been financed through CAET in not less than two sinking and improvement fund requirements amount to nor more than three years from the date of the agreement,
$2,784,000. The Company expects to satisfy these require- unless the nuclear material reaches the point of fabrication, ments in 1984 by certifying unfunded property additions of at which time the purchase commitment will then be due.
166-2/3% of the required amount. Financing of up to $29,000,000 is available to CAET on As of December 31, 1983, the Company's sinking and behalf of the Company, subject to certain limitations. improvement fund requirements and maturing long. term The Company accrues interest applicable to the nuclear debt for the next five years are fuel obligations which is subsequently capitalized, net of income tax effect. No direct borrowings h;ne been or are 1984 . $ 2,834,000 expected to be made against the line of credit available to the 1985. . . 30.212,000 f uel corporation; the fuct corporation has issued and has out-1986. . , , . . . . 5,212,000 standing commercial paper supported by the line of credit. 1987.... ., . . 5,212,000 To the extent that borrowings are less than the $48,000,000 1988 ..,, .. . 8,225,000 available under this credit line, the fuel corr ~ ration must pay a commitment fee of 1/8'1 to 1/2% on th; available portion The weighted average interest rates shown on the State. of the line of credit. It also pays a fee of 5/8'1 to 7/87c for ments of Capitalization relate to long-term debt outstanding the letter of credit on the aggregate amount of outstanding at December 31,1983. commercial paper. Interest rates on CAET purchase commit. Total securcd notes outstanding at December 31, 1983 ments vary from I 1/8% to 11/2% over the interest rates and 1982 exclude $2,572,000 and $5,327,000, respectively, applicable to certain dealer placed commercial paper. The of pollution control notes, the proceeds of which were then effective aferage annual interest rates applicable to nuclear in escrow pending their disbursement for construction of fuel obligations were 10.6% and 12.0% in 1983 and 1982, certain pollution control facilities. The Company has pledged respectively. first mortgage bonds in a like aggregate principal amount to - secure its obligations under $14,500,000 of its pollution (6) Notes Payable to Banks and Lines of Credit; control notes. The Company has lines of credit with banks that pro-vide for borrowings of up to $30,000,000 at rates that vary (5) Nuclear Fuel Obligations: from prime up to 105% of the prevailing prime interest rates. In December 1981, Pennsylvania Power Fuel Corporation Short. term borrowings may be made under these lines of (a corporation in which the Company has no ownership credit on the Company's unsecured notes. All of the current interest) was created to provide funds for the procurement of lines expire December 31, 1984; however, all unused lines nuclear fuel. The fuel corporation willIcase fuel to the Com. may be canected by the banks. pany under a fuel lease which will require lease payments The Company maintains cash balances on deposit with sufficient to permit the fuel corporation to repay the obliga- banks to provide operating funds and to assure availability of tions. Under ordinary circumstances, the lease payments will $6,500,000 of the lines of credit. Such compensating be made at such time and in such amounts as will coincide balances, net of " float", are ex1.ected to be maintained at an with the burn.up of the nuclear fuel. Financing on behalf of avcrage of approximately $500,000 and are not subject to the Company of up to $48,000,000 is currently available any contractual restriction against withdrawal. In addition, _ through the Pennsylvania Power Fuel Corporation, either the Company is required to pay commitment fees that vary through revolving ciedit arrangements or the issuance of from a llat rate of 3/8% to a variable rate of 5% of the commercial paper, which is supported by a bank letter of applicable prime interest rate to assure the availability of credit,or a combination of both. $16,000,000 of the lines of credit. 18
ll
$h PEN DD rsr+ N POWER ,wn (7) Commitments, Guarantees and Contingencies Quarto mines which have the effect of reducing the annual Construction Program- tonnage production of these mines. Additional coal require-The Company's current budget forecast reflects expendi- ments for the Bruce Mansfield Plant are currently being tures of approximately $229,000,000 for property additions procured in the open market and the Company is presently and improvements from 1984 through 1988, of which continuing to evaluate the alternatives for making additional approximately $73,000,000 is applicable to 1984. In arrangements to fulfill, together with the use of coal f rom addition, the Company expects to invest approximately the Quarto project, the long. term fuel requirements of the $56,000,000 for nuclear fuel during the 1984 1988 period, Bruce Manstield Plant. These changes are part of a fuel pro-of which approxi nately $13,000,000 is applicable to 1984. curement strategy designed to reduce the weighted average The major portion of the Company's construction activities price of coal used at the Bruce Mansileld Plant. The during this Ove year period relates to the CAPCO companies' Company will continue to monitor the Quarto project and program for the joint development of power generation and conduct such additional studies of the economics of the pro-transmission facilities, ject as are deemed warranted by the circumstances.
Under the terms of the coal supply contract, the price of Quarto Project- Quarto coal is based on, among other things, the actual The Company, together with the other CAPCO companies, production com plus amorti/ation of certain production has entered into a long term coal supply contract with expenses which were not included in the price of that coal Quarto. The CAPCO companies have also agreed to severally, prior to May 31,1980, w hen the development period ended. and not jointly, guarantee their proportionate shares of Following the end of the development period, the Com-Quarto's debt and lease obligations incurred while developing pany was ordered by the PPUC to defer recovery of the cost and equipping the mines. As of December 31,1983, the of Quarto coal in excess of generally prevailing market prices, Company's share of the guarantee was $31,990,000, pending iurther proceedings. As a result of that order the Under the terms of the coal supply contract, which expires Company began deferring a portion of the cost of Quarto December 31, 1999, the Company must reimburse Quarto coal, rather than including such cost in its ECR. for its share of the costs of operating the Quarto mines, On February 10,1984, an Administrative Law Judge for including those costs associated with mine construction, the PPUC issued his initial Decision in the proceedings relat-whether or not it receives coal from Quarto. These pay ments ing to the recovery of the cost of Quarto coal. The initial will permit Quarto, over the life of the contract, to meet the Decision would allow the Company to recover in its ECR the debt and lease obligations it incurred while developing and current cost of Quarto coal and the costs which were equipping the mines. The Company's total payments under deferred in prior years (amounting to approximately this contract, including amounts related to mine construction $9,879,000 at December 31, 1983) to the extent that the costs, amounted to $ 10,708,000, 59,369,000 and actual cost of all coal bumed at the Bruce Mansfield Plant 510,836,000 during 1983,1982 and 1981, respectively. is less than the prevaihng delivered market price for com-Under the coal supply contract, the Company's future parable coal. The Company may continue to Jefer costs minimum payments related solely to mine construction costs which are in excess of the amount allowed to be recovered are: on a current basis. The initial Decision will become final unless it is appealed to the PPUC or the PPUC elects to 1984.. . . .. . $ 2,964,000 review the decision. Although unable to prediet the final 1985.. . . , , . . . 2,894,000 resolution of this matter, managemem believes that its 1986. . . 2,824,000 ultimate disposition wdl not have a material adverse effect 1987. . 2,754,000 upon the Company's results of operations. 1988. . 2,683,000 In the Company's current rate case before the FERC, Years thereafter . . 26.446,000 hearings are scheduled to begin in April,1984 concerning the amount of the cost of Quarto coal that should be included in the Company's charge for electric service to its wholesale
!!ased on studies concerning the economics of the Quarto customers. Management believes that the ultimate disposition project and the various alternatives available to provide the. of this matter by the FERC will not have a material adverse long term fuel requirements of the Bruce Mansfield Plant, elfcet upon the Company's results of operations, changes were made in 1981 in the mode of operation of the 19
Notes to the Financial Statements-cont. Emironmental Matters- Company estimates that the capital costs associateu with Various Federal, state and local authorities regulate tlie such .nstallation could exceed $100.000.000. The Company Company with regard to air and water quality and other would expect that any such capital costs, as well as any environmental matters. The Company estimates that compli- increased operating costs associated with such equipment, ance requires capital expenditures of approximately would ultimately be recovered from its customers. 521,000,000 for projects remaining to be completed.Of this On October !I,1983, the U.S. Court of Appeals for the amount,approximately $18,000,000 was spent prior to 1984 District of Columbia reversed sescral significant portions of and $3,000,000 is included in the construction estimate the EPA's regulations on the methods used by the EPA to given above under " Construction Program" for 1984 through determine the amount oi stack height credit for establishing 1988. If the Company is required to install off-stream individual source emission hmitations. The EPA is currently cooling in connection with the operation of the New Castle considering changes to its stack height regulations to con-Plant, costs (based on a 1980 study) estimated between form them to the court's decision. Such changes could result
$13,800,000 and $31,500,000, depending on the required in more stringent emission limitations for some existing thermal limitations, would be incurred. In addition, annual plants and increased capital costs and operating expenses.
operating costs would increase substantially. The Company The utility industry is seeking review of the decision before expects that the impact of any such capital and operating the U. S. Supreme Court. The Company is unable to predict expenditurcs would eventually be reflected in its rate the ultimate outcome of this proceeding. schedules. The Pennsylvania Department of Environmental On December 19, 1980. the Commonwealth of Pennsyl- Resources has informed the Company that it intends to enter vania petitioned the Federal Environmental Protection into a Consent Agreement with the Company in an effort to Agency (EPA) to make findings under Section 126 of the substantially reduce alleged opacity violations at the New Clean Air Act. Section 126 provides a remedy for a downwind Castle Plant. Such Consent Agreement may ultimately State that can show adverse impact because air pollution in include capital expenditures and changes in operations at the an upwind Stste causes nonattainment of air quality plant, as well as an undeterminable penalty payment. standards in the downwind State. Pennsylvania's petition Management is unable to prediet the terms of the Consent complains of excessise particulate and sulfur dioxide (502 ) Agreement but anticipates that any capital costs and emissions from a number of sources in Ohio and other states, increased operating expenses would ultimately be recovered including Sammis Unit No. 7. The States of New York and from the Company's customers and that any penalty Maine have filed similar petitions which have subsequently payment would not be material to the Company's results of been consolidated with the Pennsylvania petition. In January operations. 1984, a number of states, together with various environ-mental organizations,sent the EPA a notice of their intent to Other Legal Actions and Complaints-sue the EPA for f.ubng to render a timely decision on the in 1977, the Boroughs of Ellwood City and Grove City, pending Section 126 petitions. The notice also asserts that Pennsylvania,iiled a complaint against the Company, alleging the EPA has a manda:ory duty to order cutbacks in 50, that the Company, individually and in conspiracy with emissions in Ohio and other states under Section 115 of th~ Edison and other CAPCO companies, has violated Sections 1 Clean Air Act, which deals with international air pollution, and 2 of the Sherman Att and Sections 4 and 16 of the These proceedings could ultimately result in the revision of Clayton Act by restraining and monopoli<ing trade and the particulate and 50, emission limitations for Sammis Unit commerce in alleged markets for electric power. Damages of No. 7, to make them Timre stringent. The outcome of these 57,000.000 (to be trebled) and injunctions against the proceedings cannot be predicted at this time, alleged unlawful acts were originally sought. In February As a part of the reauthoritation of the Clean Air Act, 1984, the lloroughs revised their claimed damages up to legislation has been introduced in Congress to address the $9,743,000. In 1979, the Court granted summary judgment so. called " acid rain problem." Various bills introduced thus in favor of the Company as to certain allegations of the far would require reductions in 503 emissions from utility complaint. In February 1983, the Company filed a Motion power plants and other sources licated in several states, for Summary Judgment on the claims not dismissed by the including Ohio and Pennsylvania. The Company is unable to Court's 1979 order. Also in February 1983, the lloroughs predict whether the proposed bills will be enacted and,if so, asked the Court to allow them to amend their complaint. In to what extent, if any, the S03 emission limits at the August 1983, the Court granted the Company summary judg. Company's plants would be affected. Substantial changes in ment on the lloroughs' conspiracy claims, denied summary the 503 emission limits could result in the need for changes judgment on " price squee/e" and Robinson.Patman Act in coal' supply or significant capital investments in flue gas claims, and denied the !!omughs' request to amend their desulfuritation equipment to assure compliance. If flue gas complaint. Trial is anticipated to begin in the second quarter desulfurliation equipment were to be installed on all of the of 1984. Management is unable to predict the ultimate out. Company's generating units to achieve compliance, the come of this action. 20
F O PENN POWER
& rnt ep u,ws The PPUC is investigating an outage of Beaver Valley Unit during the outage. The PpUC is currently investigating the No. I which occurred during the period March-August 1979. Company's liability, if any, for thu outage and whether The outage had been ordered by the Nuclear Regulatory refunds are due to the Company's customers for purchased Commission to analyze possible seismic deficiencies of replacement power expenses incurred during the outage safety.related piping and pipe supports in the Unit. The which were included in its energy clause. If the Company is PPUC has ordered that the operating company of the Unit required at some future time to make such a refund,it is not make refunds to that company's customers based upon that expected that the amount would be material to the company's expenditures for purchased replacement power Company's results of operations.
l (8) Supplementary Financial Data Financial Reporting and Changing Prices: (Unaudited) Statement of Financial Accounting Standards No. 33, changes in prices on property, plant and equipment. This
" Financial Reporting a1d Changing Prices"(SFAS No. 33), data is presented in accordance with SFAS No. 33;however, provides for the preparation of supplementary f'mancial it is not intended as a substitute for carnings reported on a information to disclose the estimated effects ofinflation and historical cost basis.
Results of Operations Adjusted for the Effects Adjusted for of Changing Prices for Adjusted for Change in the Year Ended General Specific Prices December 31,1983 Inflation (Current Cost) (Thousands of Average 1983 Dollars) Income from continuing operations .. .. .......... .. ......... .. . $ 27.047 5 27.047 Inflationary Effects on Common Equity: Capital Investments Effects-Increase in specific prices
, (current cost) of property held during the year (i) . .. .. . .. .. . .
42,245 Change in general price level on property held during the year . . ... ... . - (40,063) Reduction to net recoverable cost. . . ..... . ... . .......... .. . (4,208) (4,454) Additional provision for depreciation . . .... .... ........ .. ..... (19,122) (21,058) (23,330) (23,330) Advantage from the decrease in purchasing power of net monetary liabilities . . . . . . . . . . . . . . .. ... ..... ...... . ..... . 15.594 15,594 Net erosion of common stockholder's equity . . ......... ... ...... . (7,736) (7.736) Income from continuing operations adjusted for changing prices (ii). . . . . . . . . ............. ..... ...... . .. . $ 19.311 $ 19.311
. (i) At December 31,1983, net property, plant and equipment, adjusted for changes in specific prices (current cost) was
$1,119,604,000, while historical cost (net recoverable s >st) was $659,620.000.
- (ii) Income from continuing operations, adjusted for general inflation and adjusted for change in specific prices (current cost) would be $7.925,000 and $5,989,000, respectively,if only the amount reportable as additional provision for depreciation was included in the adjustment.
21
Notes to the Financial Statements-cont. Compariso's of Supplementary Financial Data For the Years Ended December 31 1983 1982 1981 1980 1979 (Dollars in Thousands) Operating Revenues-IIistorical. . . . . . .. . $191,172 $185,883 $ 174,488 $157,208 $145,340 Adjusted to Average 1983 Dollars. .. . .. $191,172 $191,863 $ 191,143 $190,076 $ 199,492 Income (Loss) from Continuing Operations-IIistorical. . .. .. $ 27.047 $ 23,294 $ 19,331 $ 15,590 $ 16,546 Adjusted for changing prices (Average 1983 Dollars) . . . . . ... $ 19,311 $ 16,296 $ 4,679 $ (2,973) $ (2,239) Return from Continuing Operations on Average Common Equity-IIistorical. ... . . . . 13.0% 11.8% 11.1 % 9.9% 10.8% Adjusted for changing prices . . . . 9.3% 8.0% 2.4% (1.6)% (1.1)% Effective Income Tax Rate-Ilistorical. . . . ..... .. . . . 35.2% 38.5% 25.1% 26.4% 25.9 % Adjusted for changing prices . . . . 41.2% 45.7% 45.9% 72.9% 71.0% Excess ofincrease in the Speciuc Level of Prices on Property, Plant and Equipment Over General Price Changes (Average 1983 Dollars) . . . . . .. $ 2,182 $ 10,077 $ (832) $ (27,015) $ (30,128) Advantage Resulting from the Decrease in Purchasing Power of Net Monetary Liabilities (Aveiage 1983 Dollars). . . .... . .. $ 15,594 $ 13,848 5 31,029 $ 44,204 $ 49,072 Year End Common Stockholder's Equity ' Ilistorical. . ... . ... . . .. $219,474 $199.680 $194,666 $170,755 $154,438 Adjusted for changing prices (Average 1983 Dollars) . . .. ..... $215,831 $203,787 $206,892 $ 198.358 $201,760 Average Consumer Price Index. . ... 298.4 289.1 272.4 246.8 217.4 The increase in specific prices of property held during the the effect of regulation in setting the Company's electric year attempts to measure increasing asset values which rates. Since those rates are based upon historical costs of approximate dollars that would have to be spent today to utility plant, the inflationadjusted results of operations must acquire property, plant and equipment identical to assets recognize this limitation; this is accomplished by the reduc-currently owned. The Company uses the llandy-Whitman tion to net recoverable cost shown on the summary. Index of Public Utility Construction Costs and the 13ureau of Additional depreciation expense adjusted for generalinda. Labor and Statistics engineering indices to calculate the tion and for the change in specific prices was determined current cost of those assets.The indices are applied to actual using the same rates and methods used for computing the dollars spent on large construction projects according to the historical cost provision for depreciation. No in0ation adjust. year of expenditure. For all other plant facilities. the current ment has been reilected for income taxes,in conformity with cost is determined based upon the year the facilities were the reporting requirements of SFAS No. 33. placed in service. During periods of inflation, the Company's net monetary Changes in the valuation of assets adjusted for general liabilities (principally long. term debt and preferred rmek) inHation are computed by using the average Consumer Price will be repaid with dollars having less purchasing power than Index for All Urban Consumers for the calendar year, dollars had when the original liability was incurred. This according to the guidelines set forth in SFAS No. 33. economic ben: fit is portrayed on the summary as the As shown on the results of operations, adjusted for the advantage from the decrease in purchasing power of net effects of changing prices, the erosion of common stock, monetary liabilities, which serves as an offset to the in0ation. holder's equity is identical either adjusted for general inua- ary effects of replacing the Company's property, plant and tion or adjusted for specific price changes. This results from equipment. 22
- u. . . . . . . .
y P
& n..ENN POWER
+ , ~.n m. es
. (9) Summary of Quarterly Financial Data:
The following summarizes certain operating results for the four quarters of 1983 and 1982. Dree Months Ended March 31, June 30, September 30, December 31, 1983 1983 1983 1983 (in Housands) Operating Revenaes . . . . . . . . . . . . . . . 546,966 $45,724 $50,189 $48,293 Operating Expenses and Taxes. . . . . . . . 34,992 35,087 39,817 37,299 Operating Income . . . . . . ......... I1,974 10,637 10,372 10,994 Other Income and Deductions . . . . . . . . 4,356 4,571 4,885 5,448 Ne t In te rest . . . . . . . . . . . . . . . . . . . . 7,261 7,194 7,359 7,080 Ne t Income . . . . . . . . . . . . . . . . . . . . S 9.069 $ 8 014 $ 7.898 $ 9.362 Earnings on Common Stock . . . . . . . . , 5 7395 5 6.341 5 6.042 5 7,269 Three Months Ended March 31, June 30, September 30, December 31, 1982 1982 1982 1982 (In Thousands)
. Operating Revenues . . . . . . . . . . . . . . . 547,934 546.489 $46,268 545,192
. Operating Expenses and Taxes. . . . . . . . 37,926 36,402 36.189 34,776 Operating Income . . . . . . . . . . . . . . . . 10,008 10,087 10,079 10,416 Other income and Deductions . . . . . . . . 3,202 3,809 3,979 4,108 l
Net Interest . . . . . . . . . . . ........ 5.979 6,416 6.489 7,412 Ne t income . . . . . . . . . . . . . . . . . . . . QR $ 7,480 5 7,569 5 7,112 Earnings on Common Stock . . . . . . . . . 5 5,836 5 6.085 E
$ 5 5,429 l
1 23
,o ;i 4
t Auditors' Report AHTI1UH ANDERSEN & Co. New Youx N. Y. To the Board of Directors of Pennsylvania Power Company: v- s i We have examined ite balance sheets and statements of W ,. capitalization of Pennvivania Power Company (a Pennsylvania corporation'and a whollycwned subsidiary g of Ohio Edison Company) as of December 31,1933, and 1982, and the stat:ments of ,hwome, retained earnings,
^ capital stock and other pald-ite capital, sources of funds
, , for property additions and taxes for ea6h of the three years in the period ended llecember 31,.1983. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such teste of the accounting resords and such other auditing procedures as
. we considered necessai) in the circuttstances.
in our opinion, the financia) statements teferred to above present fairly the financial position of Penn2ylvania Power Company as of December 31, '1983, and 1982, and the resul's ofits operations and the sources of f unds for property additions for each of the three years in the perled ended December 31,1983,in conformity with generally accepted accounting principles applied on a conshtent basis.
& & & -: O S.
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HIGHLIGHTS 1983 1982 Change s4 Earnings Per Common Share $3.50 $3.18 + 32e 'p". .; .
- ,,- o Dividends Declared Per Common Share 2.46 2.38 + 8e }
(current quarterly rate is 63c - equivalent to $2.52 per year) 1.- >
'2 . -E 7, Return on Average Common Equity 14.5cc 13.37c ss,
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Financial Results (millions of dollars) Income from operations 63 57 + 11cc +- I Allowance for equity funds used during construction 65 49 + 33?c Net income. 128 106 + 217e h
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..,, --. o Operating Results (millions of kilowatt-hours) 12 Sales (y Pl .
Retail customers . 6811 6523 + 47c s't * - - Wholesale customers 320 395 - 197c System Performance Nuclear generation . 2383 1569 + 527c Fossil generation . 4683 5306 - 127c Employees 2405 2458 - 27c Earnings per Common Share Dividends . wclared per Common Share Dollars / Share Dollars / Share 3.75 , i 2.60 p- 4 v. c ' ' r
?. l; 3.25 $
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'79 '81 '83 '73 '78 '83 , j i
ABOUT TOLEDO EDISON The Toledo Edison Company is a public utility estimated population of 750,000, the company also whose primary activities are the generation, provides relatively small amounts of natural gas transmission, distribution and sale of electric and steam heating services. Toledo Edison is energy in Toledo and northwestern Ohio. Servic- owned by over 100,000 shareholders in all 50 ing approximately 2,500 square miles with an states and worldwide. [
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jg 2; g#.-ll [ Q Q' _-". It is a pleasure to report a sig- " * " " ^ J"I" * " - nificant earnings gain, especially in the second half of 1983. [f"h(("." $P,"# t"""" [](("(,% , Shareowners and customers that as further evidence of a direct fuel adjustment period. Trus came -- alike are benefiting from the correlation between industrial elec- at a time when it could be most 7 ^ results of our successful, on-going tric consumption and the economic beneficial - right before the winter _ cost reduction and control efforts. health of the community heating season. And an upturn occurred in kil -
'lbtal 1983 kilowatt-hour sales Of particular significance in watt-hour saler due to the improv- rose 3 percent. This was the first this commission decision was the 2_.
ing economy and a return to more norrr.al weather patterns. overall sales increase in the last partial allowance of carrying 5 four yeals. Sales to municipal cus- charges on Construction Work in - The price per kilowatt-hour of tomers decreased as a result of Progress (CWIP) for the Perry No.1 - electricity to our customers was their increased purchases of power generating addition project as part reduced significantly. Our power from other government entities. of the basic price increase. The first generation facilities, particularly Residential and commercial Perry Unit is now over 90 percent .__ nuclear, set new records for pro- kilowatt-hour sales showed only a complete. Work on a second unit, r duction and efficiency- slight annual increase. The first about 40 percent complete. is being ' The dividend rate was in. half of the year saw exceptionally minimized pending completion of f creessd two cents, to 63 cents per mild temperatures and low sales. the first unit and future evaluation - common share, by your board of However, the weather returned to of capacity timing needs. Your company has a 20 percent owner-directors in December. This was the more normal patterns in the sum. 21st increase declared in thelast 23 mer and fall, with December tem. ship share in the two units, which _ years. The new rate is equivalent to Peratures being very cold. are being built by Cleveland Elec- g
$2.52 0n an annualized basis.1983 tric llluminating Company on We decreased our prices to also was the 62nd consecutive year " "* * *" '"
customers during the year. Most of "" " l of dividend payments. this is attributable to a 50 percent "E " Y also have about a 20 percent owner- g_ Earnings rose to $3.50 per decrease in the " fuel charge.' por- ship share in the Beaver Valley Unit ecmmon sharti fmm the $3.18 cf the tion of our customers bills in No. 2, now about 80 percent com-previousyear,a lo percent inerease August. This reflected our lower plete and under the construction
~
leading the way to a 9 percent fuel costs over the prior six-month supervision of Duquesne Light increase in industrial kilowatt. peri d. It resulted primarily from Company. x hour sales were the substantial the low-cost generation of the - Our Davis-Besse station set a c gains registered by automotive- Davis-Besse Nuclear Station, along ~ new record for annuaI production i related customers. Their power use with continued efficient produc_ tion fmm our ceal-fired Bay Shore in 1983. The nuclear umt pmvided was up 18 percent for the year' over 5.2 billion kilowatt-hours, a - The improving economy also Station. six-year high ln 1983 the unit means employment in our eight. Also in August, the Public rated in the upper one-third for \ county servicc area has been on the Utilities Commission of Ohio production of all of the nuclear b rise. By late 1983, total employment approved a partially offsetting units in the country Of the com-was at its highest level in four increase in our base prices. The pany's total electricity output, 31 m years. commission approved a 5 percent percent was from the nuclear sta- M or $23 million, annual increase in Incally. two major automotive _ tion With the consequent lowering M~ related employers are operating at retail electric rates of costs and prices. it is not difficult pre-recessionary levels They've The net effect of the two deci- to p(unt out to customers the advan- . invested in retooling their existing sions was that our average total tages of nuclear generation We northwest Ohio plants and have price per kilowatt-hour decreased look forward to continued efficient called back laid-off workers We see about 10 percent for the six-month service m 1984 - _1 $ d (M
Coal fired units provided directors. The board also elected generating units under construc-about 66 percent of company Lyman C. Phillips vice president, tion, and were directed to charge generated power in 1983, a depend- corporate planning and adminis- off the investnient only against able complement to our nuclear tration. He has the added respon- shareowners, the resultant write-generating source. sibilities of administration of off could exceed the balance in its personnel, procurement, indus- Earnings Reinvested Account and We'll continue fine-tuning the probably result in a consequent trial security, transportation, procedures and equipment at our building and office services, and suspension of dividend payments. generating stations to keep their business analysts and planning, as Even a forced suspension in con-performance at peak efficiency, we11 as eorporate p1anning struction of a unit could result in a Our coal-fired units, in particular, reduction in the accrual for Allow-have been the recipients of many activities. Frank W. Keith, vice president, ance for Funds Used During Con-modifications in recent years, most administration, retired after 36 struction credits and a possible of which are designed to minimize reduction or termination of divi-meritorious years with the any harmful environmental dend payments. Either of these company, impact. events could, in turn, preclude a 1983 was a gratifying year. Improving air quality is the Our earnings were up while cus- company from selling additional reason we have already made sub- tomer prices were down, And we equi.ty and debt securities. This, stantial environmental equipment continued monitoring and evaluat- then, could result in a company investments at our Acme and Bay ing the CAPCO generating unit being unable to obtain funds suffi-Shore Stations in 'Ibledo. We have projects still under construction. cient to finance its share of the con-also changed to higher-cost, low struction costs of other units, Shareowners can be assured that unless the company was able to sulfur coal sources for our boilers. the same scrutiny and thought that obtain the necessary financing by Your management team believes went into our past year's successes the company probably should be ther means. Therefore, politicians will be applied to all of our future and regulators need to be made minimally affected and, in fact, efforts' will be less affected than most very aware of the serious conse-other utilities in this part of the But we entered 1984 with what quences of any actions to "pmtect could best be termed cautious optt- customers" that would affect util-country by proposed acid rain mism. For even the most prudent legislation. ity construction and financing decisions and the highest quality programs and, ultimately, ade-Cost-control programs work are no guarantee against quacy and reliability of customer lowered costs in 1983. For in- adversity. In the last few months service, as well as bills. stance, our operating expenses for we have seen how capricious use of the year showed only a slight regulatory standards can make a We at 'Ibledo Edision are not increase and maintenance mockery of the carefully balanced wavering in any ofour convictions. But as one of the most heavily expenses actually decreased by 16 relationship between utilities, percent. We achieved this by care- shareowners and customers. regulated of American industries, fully evaluating even the most mu wa s nd ou Providing future capacity m a n us ou cau-routine projects for ways to reduce involves risks, particularly finan-expenses- tious optimism. We can only ask cial risks these days. New capacity that authorities carefully weigh all Cost-control continues to be additions have become needlessly the repercussions of their actions truly an all-around effort. All of expensive. The regulatory process in the years ahead, especially with has created many uncertainties, our employees deserve a great deal respect to utilities. of credit for making the cost- driven up construction costs and reduction program work. Partially contributed to lowered bond rat-Cordially, through their hard work and sac- ings and higher financing costs. rifices, including wage freezes, we Yet new capacity is vital for new were able to experience an jobs and businesses. Since this gf impmved financial condition com- capacity benefits society as a /. pared to the p evious year. whole,it stands to reason that elec-tric customers, who benefit from Management was strength-ened and re-aligned in 1983. the power supply, should share the John P. Williamson Donald G. Nicholscn was elected risk. But there are those who Chairman and Chief Executive Officer senior vice president, finance. He believe that the investment risk continues to direct the extensive should fall only on the shoulders of utility " companies" and their financing of our construction pro-shareowners. This is patently gram and has the additional responsibilities for accounting and unfair and a real threat to our nation's ability to power its treasury activities. Paul M. Smart joined the company as senior vice economic future. president, with prime responsibil- For example, if a regulated l' resident and Chief Operatmg Officer ity for corporate development. He company such as ours were was recently elected to the board of required to cancel any of its 2
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y , Wj k," CONTENTS, i r t.@ p- , .: 4 a 7:
? i , Im&ted to'Etattowners ,m
. . . . , .4. 'l ~ ,
f( Board of Dhootors Inspection ' . .:.3) S 1 .. Coal / Nuclear .
- Fuel Min f . . . . '. . . . + e . . . . . . :4-
_ Imont Ennanrny News . .. . . . . .[6['. , FinanaW Analysis . . . . . . . c. . 7; a
~ Auditors' Report . . . . ; . . . . .'. .: 8b >
s Q e t,.7 .Palanam
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of Operations . . . . l . . , , .3 91a " Sheet . l. . . . . , ..... 10
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3- . . . 1, omgdtahantian ... ........ . .i11 -l ( 4i- Earnings Reinvested and ~ 12 " C Source ct Funds . . . ... ... f h"an"*y. fo Signifloant q i Accounting Pblicies . . . . g 13 4 3 m,
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e NotestoFinanaimi , p Statements . . . q . . . . . . . . .f 14 : . s. Finanntal Review .. . : . .. . . 19L , Mkatistinal Review . . . , . . . . . . 120. - a -c I(; *
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F p- ' O p sTHE ANNUAL BSETDIG ~
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~ct The 'Ibledo-in@The Edison Annual be held at 10 E 24,1984in the 7 h
p ' i a.m.(E.D.T.)ca p , company's headquarters, Edison: -
. Plass,800Mantienen Avenue,'Ibledo, 4
;Oldo.zFbraal notice of the meeti ng . D 2 willbe ment to shareowners with the r ~
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- This sport, including the finannimi . ' q E. j b statements, is submitted for the . :5 k*? information of The 'Ibledoi Company 4 shareownerofIt . ;j
' is notintenskd tobeusedin connece ,]
w h (3any 0 tion ith any: sale or purchase ; or
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~of Form 10-K 'as filed 'with~ -1 C eA ' l p 1- the ties and 5her hange Com :- l misatan will be available to share- i j i written request tc the"
~
b oumers eenior vice president,n b4
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com finanan, . G. Nicholson,300 Madi b f. son Avenue,'Ibledo; Ohio 43652.- - -
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m b BOARD OF DIRECTORS INSPECTS GENER ATING PHU.T ECT
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{ g.- 9, E The company's board of direr 5 - . t tors (right) inspected the Perry No i
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_ about 40 pert ent complete is being .h .o.. . .{ i# bg r . i. f.D ' .E ' - c [14,. f N (. minimized pending completion of % 9 '-l.' g[.i E - ['-j }-. f ([.j' D..,C d 1 M,'; M . , j[# " the first unit and future evaluation 'H'f.. i .. [ 3.,1 "' I I)U4 t..., of capacity taning needs " -
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a y manage m ent will con tin ue to j' closely momtor developments and L progress at Perry during 1984. Construction Expenditures Declining Meanwhile. work at a third CAPCO V - I' 1 s F i generating project. Heaver Valley n , 4 No. 2 in southwestern Pennsylva. ! nia. is about 80 percent complete ! -_ and on schedule l l
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BALANCED COAL / NUCLEAR ENERGY MIX WORKS FOR NORTHWEST OHIO
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6 helped lower energy prices for customers in our se; vice _ area last year. i
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The Davis Besse Nuclear Power Station (above) had its best operating year everin 1983 and generated
- 5.2 billion kilowatt-hours. The low cost ofits nuclear fuel,
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being unloaded (left) upon arrival at the station, enabled
" us to initiate about a 50 percent reduction in the fuel charges , which make up about 25 percent of a custom-p er's bill.
Coal fired generating stations of the company pro-p vide efficient, reliable electricity generation. These p include Bruce Mansfield station (opposite page, top) in Pennsylvania and Acme and Bay Shore stations in Toledo. E y'+ Coal was the fuel source for 4.7 billion kilowatt-hours ( gas generated by Toledo Edison in 1983.
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{[ # We will continue examining operations at these p facilities to keep costs to a minimum. As an example, last O' year a maintenance outage schedule for a unit at Bay
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Shore Station (opposite page, bottom) was revised to p 11 F i reduce overtime work. The result was a cost reduction of about $40,000. Maintenance and operating costs for the total system were reduced $4 million in 1983 thanks to the cost-reduction program. Our Bay Shore units have ranked in the top ten of .m the entire nation's coal-fired stations for efficiency for 9 many years. Bay Shore No.1 had a 91 percent capacity factor from 1955, when it came on-line, through 1983. g P 4 ; 5
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-. .a~* _ ,L JYl B u 2 Northwest Ohio has been experieneing Toledo's largest employer. American Motors-Jeep renewed business investment. Construction activity (below right). reinvested substantially in production (below left)in downtown Toledo will lead to new office facilities and recently returned to full employment for space and hotel and convention facilities. It will also the first time in four years.
bring added tax revenue and jobs. Portside Market-place (top), along the Maumee River, is scheduled to open in May 1984. Its n.any restaurants and shops -a . m . ,. ; . p s.. .
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ters is centered in this redevelopment area.
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_. M.. lHl Financial Analysis tric utilities Sales of power tuider these cont racts Results of Operations declined m 1983 because many neighbormg utihties luu inore of their own low cost generation available Earnings per common share were $3.50 in 1983,10 percent rugher than last year The result- Operation and maintenance expenses were ing return on average shareowner's investment of 14 5 reduced reflecting an mtense cost reduction pm-percent is the highest return achieved since 1975 Iam durmg 1983 A well planred and officienuy executed maintenance schedule helped to nuninuze
'Ibtal revenues increased m 1983 due in higher the costs asweiated with the Davis-Hesse Nuclear kilowatt-hour sales to our retail electric custonwrs Power Station ref.ueling and maintenance outage.
and the full-year effect of our June 1982 price which started m late July 1W3. Tim outage schedule n u mspedmn an tesung d. mmus comp & increase. Sales to electric wholesale customers nen mt: tine major maintenance and government declined in 1983 as our municipal customers required t hanges The station returned to servtm m purchased a portion of their electrie needs from early October. Other supphers. - The Public Utilities Commission of Ohio N """""*E""""*'""*" """""* granted us an annual increase of $23 million in the mereased production from the Davis-Besse umt our retail electric rates in August 1983 Approxi~ <md the resultant umt-of-production depreciation mately $12 million of the rate increase was due to the provision. An merease in depreciable plant assets Mso tributed to the increase inclusion of $63 million of Construction Work In Progress (CWIP) in our rate base. The CWIP included in rate base was pr marily due to the Perry Nue' ear State and local taxes increased oue to a higher temporary state excise tax rate on increased reve-Unit. In addition. the PUCO allowed us to continue to amortize over ten years our share of the costs of nues and to lugher property taxes resulting from the four nuclear generating units cancelled by the increases m plant assets. In May 1983, the Ohio Central Area Power Coordm.ation Group (CAPCO) in public utility tax was temporarily mereased from 1980 ( see Note 6). 4.75 pecent to 5 28 percent. The effects of this tem-perary increase expire in April 1984. We are barred We requested a 50 percent reduction in the by statute from collecting this increase from our fuel component of our electric rates and received customer s The one-time cost to us is $2 5 million, of PUCO approval in August 1983. This reduction was which $1.7 million was charged to expense in 1983. attributed largely to the good operating perfor- The increase in federal income taxes resulted 1.om mance of our Davis-Besse Nuclear Unit combmed lbgher taxable earnings with continued efficient production from our coal-fired Bay Shore Station. The net result of tins. com- e for Debt and Equity Funds Used Dur-bmed with the rate increase described above. was a ing Construction (collectively known as AFUDC) mduction of our rates by approximately 10 percent e d Msum@ he W a Ngher CWIP base The next revision of the fuel component will be ni and lugher average AFUDC rates. Through AFUDC. February 198' we capitalized a substantial amount of the financing costs assomtM with our contintung construction We filed a price increase request in November P N *" " "E" "#""" "" "
=
1983 with the PUCO for a $61 million increase in retail electric rates. Continuing high financing costs Ieng-ter m financings in 1983 resulted in associated with our construction program make increased mterest and preferred stock dividend pay-these added revenues necessary. The PUCO will inents. as well as more commun shares outstanding probably rule on this matter in the summer of 1984. These fmancings, which were necessai y to fund our emstrem Fogram, also affected our earnmgs Total kilowatt-hour sales increased by 3.1 per-cent over 1982. Industrial sales showed a healthy 76.5 percent of 1983 common stock dividends increase indicatmg that our service area is recover- are n t taxable as current meome for federal income ing from the recession. Leading the way in the tax purposes and will be considered a return of industrial category were increases in sales to motor capital mstead. fu i ei 1 t stri 1 ue Note 11 explains the effect of inflation on our to a surge in manufacturing output. Favorable peranons. weather conditions also contributed to the increase. Liquidity and Capital Resources Fuel and net purchased power decreased in 1983. Greater use of low-cost nuclear fuel resulted m We are engaged . a major nuclear construction a decrease m fuel expense. This was partially offset program that has been, and will continue to be. mod-by a decline in short-term power sales to other elec- ified as noessary for changmg economic conditions. 7 n ,
_ _. ._ _ , . . , , , , _n , . . , , _ _ . s Construction expenditures totaled $294 nullion for mdustry will probably im rease < >ur exterlud finane F 1983. Most of this was due to the continuing construc- ing t < >sts ami may result in men ased lewis of short- _ tion on three CAPCO nuclear generating units. Perry term debt A n wrsal ot our 1981 ext rm mimary gam _ No.1. Perry No 2, and Beaver Valley No 2. Se Note 2 i see Note 1 > sh< ndd not af! tt our abiht v t< > issue [ for additional discussion regarding Perry No 2.) first mortgage tx mds Ibn wi .11as < harge o ,ubi These units are currently planned to be in commercial reduce t he amount < >t pr of erred st< ok issua ble dm - - service between 1985 and 1988. However, an on-gomg mg the subsequent t welw mont h pero ui review of the construction schedule of Perry No 2 continues by the members of the CAPCO gmup Our The amount i >t < ash t hat is pn >vided t n >m mter-ownership share in each of these umts is just under nal operations depends primarily up in t he level < it electricitv sales, t he timing anci anuiunt of rate 20 percent (see Note 51 mereases and our abihty to reduce or ( ontam eash expenses Alt h(, ugh < >ur net nu,)me has :nc reased in Public and private security markets contmue to 1983 a sulmtant1al portion < >t t hat me n ase is be a major source of our fmancing. Long-term exter- attributable to AFCIX' a non-omh mo >me < redit W nal financings provided $231 milhon in 19H3 ()f expect tlus ( onditu m to continue untd t tw generat this, we used about $161 milbon to fund the t on- mg um ts under const ru< ; ion a r" o >mpletrl ;md - struction program. $43 milhon to pay off the short- included m our rate bas" term debt that existed at the start of 1943. about $14 million to invest in short-term mvest ments at year end and the balance to pay off maturmg long-term Our 1984 construction expenditures are obligations estimated to be $328 million. % si ot flus wdl be inve'sted in t he t h t m C hl41) Initt s dist ussed ab< n t' Funding of our construction progr:un m the Net pnreeds f rom long tei m debt pref err ed ami future is dependent on obtaming external finanemg conunon sto( k issues are expm ted n > pn,vute ab4 n;t at reasonable terms and the amount of cash pre"ided $211 nulhon m external ima neme L r t he const rue-from internal operations Our abihty t<, obtam exter- tion program In ad(htion. we will need W1 unUu m ) nal financing and the cost of such funds depends f or long-term debt mat urities a nd pretert ed sto( k N upon fmancial market conditions. earnings suf fi- smkmg fund requiremer.ts u.1984 _ cient to maintain debt and preferred stock coverage ' ratios, and changes in our construction program In 1984. nunear fuel ampusit u m and related and credit ratings, among other iactors Rating costs wdl require an estunated $31 nuun m Tf us esti-agencies lowered our security ratings in 1983. mak- mate excludes fmanemg costs Nut leu r fuel fmane-ing the cost of raising new capital more expensive mg arrangements are in plat e covermg t hese Recent adverse developments in the nuclear power ex pendit u res i see Note x i 5; e . AUDITORS' REPORT e wy
'Ib The Shareowners and Board of Directors of The 'Ibledo Edison Company fp ,v We have exammed the balance sheets and state- In our opunon. subject to t he et f eet on the t man- T .}f, ,
ments of capitalization of The 'Ibledo Edison Comp my cial statements of such adjustments it any. as nught have been reqm red had t he outa >me < >t i h" uncer
*Q8s A (an Ohio corporation) as of December 31.1983 and 1982, and the related statements of results of opera- tamty discussed m t he precedmg paragraph been A3?
tions, earnings remvested and source of funds known. the fmaneml statements ref erred to above pre .g invested in plant and facihties for each of the t bree sent fairly t he fmancial position of The Toledo iUhson % years in the period ended December 31.1983 Our Company as of December 31.1983 and 19km and t he ./ 3 examinations were made m accordance wit h generally results of its operations and t he s< mrer of 1muis accepted auditing standards and. accor dingly. mvested m plant and f aciht ms bir each of t he 1 hr"" included such tests of the accountmg records and years m t he per iod ended I)ecember 31.1983. a u m such other auditmg procedures as we consulered nm - contornuty wit h generall> ac < epted account mg prm-essary in the circumstances ciples apphed on a ( onsistent basis As discussed further m Note 1. the PUCO has ordered that the extraordmary gam on an exchange of common stock for bonds recognred m 19H1 be reversed and amortized over twenty years The (tom. Arthur Andersen & Co.
'Ibledo ()ho ,
pany luts appealed this decision and cannot prmhet the outcome of this matter Januarvlit 19k4 8
-I Results of Operations For the years ended December 31, (thousands of dollars) 1983 1982 1981 REVENUES AND OTHER INCOME Electricity sales to retail customers 478 547 452 687 413 436 Electricity sales to wholesale customers 16 824 20 508 21 417 Gas and steam hcating sales 9 245 8 530 7 431 .
Other income 1 617 1 017 8 852 506 233 482 742 451 136 _
=
EXPENSES Fuel and net purchased power 125 975 127 658 122 442 Operating and administrative 77 632 75 834 63 976 = Maintenance of equipment and facilities 32 734 38 839 31 908 Depreciation and amortization . 51 138 43 838 43 427 State and local taxes 45 210 41 260 36 699 ' Debt interest . . 108 612 94 713 86 310 Allowance for debt funds used during construction . (30 443) (22 505) (15 491) 410 858 399 637 369 271 ' Income Before Federal Income Taxes 95 375 83 105 81 865 Federal income taxes . 32 616 26 277 31 226 Income From Operations 62 759 56 828 50 639 Allowance for equity funds used during construction 65 585 48 706 32 498 Not Income 128 344 105 534 83 137 Preferred stock dividends . 30 129 26 221 23 542 Earnings Before Extraordinary Item 98 215 79 313 59 595 Extraordinary gain (exchange of common stock for bonds) - - 10 807 EARNINGS ON COMMON STOCK 98 215 79 313 70 402 Average Number of Common Shares Outstanding (thousands) 28 040 24 917 21 507 EARNINGS PER COMMON SIIARE Before extraordinary gain $3.50 $3.18 $2.77 After extraordinary gain .
$3.50 $3.18 $3.27 RETURN ON AVERAGE COMMON EQUITY (before extraordinary gain) 14.5 % 13.3?c 11.6ere The notes on pages 13 thmugh 18 are an integral part of this statement.
9
Balance Sheet December 31 1983 1982 (thousands of dollars) Property, Plant and Equipment Plant in service 1 358 467 1 306 677 Iess accumulated provision for depreciation 324 826 285 453 1 033 641 1 021 224 Construction work in progrees . 1 118 802 878 535 Nuclear fuelin service, at amortized cost 22 904 18 390 2 175 347 1 918 149 Current Assets Cash and temporary cash investments 16 005 1 639 Accounts receivable - net . 51 225 44 550 Fossil fuel, at average cost . . 25 145 36 818 Materials and supplies, at average cost 11 457 10 680 Prepaid taxes . 16 495 14 330 Special deposits and other . 15 396 9 126 135 723 117 143 Other Assets Pmperty taxes - subsequent years . 20 984 20 947 Deferred charges - cancelled generating projects . 38 074 42 902 Quarto coal costs 11 678 11 618 Miscellaneous 19 972 14 064 90 708 89 531
'Ibtal Assets 2 401 778 2 124 823 CAPITALIZATION AND LIABILITIES Common shareowners' equity 715 584 617 127 Cumulative preferred stock 200 000 170 000 Cumulative preferred stock with mandatory redemption provisions 94 002 95 027 Iong-term debt . 984 976 E25 859 1 994 562 1 758 013 Nuclear Fuel Obligations Nuclear fuel trust . 41 513 34 780 Nuclear fuel lease 14 715 10 309 56 228 45 089 Current Liabilities Short-term notes payable -
43 000 long-term obligations due within one year 29 508 13 184 Accounts payable 44 152 31 354 Accrued taxes 48 665 46 231 Accrued interest 23 489 20 556 Dividends declared 26 505 22 798 Accrued expenses and other . 8 903 7 979 181 222 185 102 Accumulated Provisions and Other Deferred federal income taxes Accelerated depreciation and amortization 77 426 66 488 Cancelled generating projects 14 905 16 714 Pmperty taxes and other . 21 570 14 755 Investment tax credits . 40 164 30 963 Deferred credits and other 15 701 7 699 169 766 136 619
'Ibtal Capitalization and Liabilities 2 401 778 2 124 823 The notes on pages 13 through 18 are an integral part of this statement.
10
Capitalization December 31. (thousands of dollars) 1983 1982 Common Shareowners' Equity Common stock, $5 par value, (in thousands) 40,000 shares authorized, (Outstanding shares - 29,669 and 26,223). 148 343 131 116 Premium on capital stock 379 766 325 540 Earnings reinvested in the business 187 475 160 471 715 584 617 127 Cumulative Preferred Stock Annual 1983 Current Dividend Shares Outstanding Redemption Rate (thousands) Price Not subject to mandatory redemption, $100 par value
$ 4.25 - $ 4.50 310 $101 - $105 31 000 31 000
$ 7.70 - $10.00 590 $103-$106 59 000 59 000 Not subject to mandatory redemption, $25 par value
$ 4.28 800 $32 20 000 20 000 2.21 1 000 27 25 000 25 000 2.37 1 400 29 35 000 35 000 3.47 1 200 31 30 000 -
200 000 170 000 Subject to mandatory redemption provisions, $100 par value
$1. 00 60 $111 6 002 7 027 9.38 250 107 25 000 25 000 13.25 130 111 13 000 13 000 12.65 200 113 20 000 20 000 14.80 300 115 30 000 30 000 94 002 95 027 Long-Term Debt First Mortgage Bonds, excluding current maturities Maturities Interest Rates 1984 3%% . ,
14 000 1985 9.35% . 50 000 50 000 1986 3%% 15 000 15 000 1938 4% 15 000 15 000 1990 -1993 13%- 16%% . 265 000 195 000 1997 -2000 6% - 10% . . 66 378 66 378 2002 -2006 7% - 9.65% . , 111 725 111 725 2008 -2013 9% - 15% . 246 000 186 900 Discount in process of amortization . (727) (544) l 769 276 653 459 Other Long 'Ibrm Debt, excluding current maturities Notes. 8.75%, due 1985 - 1997 96 800 103 400
'Ibrm bank loan, average interest rate 10.08%, due 1987 - 1989 50 000 50 000
' Pollution control notes, 5.71 - 7%%, due 1985 - 2009 37 400 37 500 Pollution contIVI loan agreement, 9.93 - 10%, due 1990 - 2010 31 500 31 500 984 976 875 859
'Ibtal Capitalization. .1 994 562 1 758 013 The notes on pages 13 through 18 are an integral part of this statement.
11
Earnings Reinvested For the years ended December 31 1983 1982 1981 (thousands of dollars) Balance, at the beginning of year 160 471 142 220 122 743 Add - Net Income 128 344 105 534 83 137 Extraordinary gain - - 10 807 Deduct - Preferred stock dividends declared 30 803 26 766 24 222 Common stock dividends declared 70 537 60 517 50 245 Earnings Reinvested During The Year 27 004 18 251 19 477 Balance, at the end of year . 187 475 160 471 142 220 Source of Funds Invested in Plant and Facilities For the years ended December 31, (thousands of dollars) 1983 1982 1981 Provided From Internal Sources Net Income 128 344 105 534 83 137 Principal non-cash items: Depreciation and amortization 51 138 43 838 43 427 Deferred federal income tax 6s 18 523 13 380 13 295 Investment tax credits - net 9 201 13 393 9466
'Ibial allowance for funds used during construction (96 028) (71 211) (47 989)
Other - net 1818 1834 1 400 Funds provided from operations 112 996 106 768 102 736 Dividends . (101 340) (87 283) (74 467) Reinvested funds provided from operations 11 656 19 485 28 269 Net change in current assets and liabilities, and other accounts 26 634 (9 998) 3 609
'Ibtal allowance for funds used during construction 96 028 71 211 47 989 Provided from internal sources 134 318 80 698 79 867 Provided From External Financing Sale of Securities:
Common stock 71 453 48 700 51 706 Preferred stock 30 000 20 000 30 000 First mortgage bonds 130 000 12,0 000 70 000 Conversion of short-term debt to a term bank loan - - 50 000 Net change in short-term borrowings (43 000) 20 500 (66 500) Net change in temporary cash investments (14 178) 2 533 4 482 Redemption of long-term debt and preferred stock (7 625) (40 473) (15 840) Net change in nuclear fuel obligations 13 364 44 838 (2 797) Provided from external financing 180 014 216 098 121 051 Total Sources Of Funds 314 332 296 796 200 918 Construction Expenditures 294 010 248 515 200 918 Increase in Capitalized Nuclear Fuel . 20 322 48 281 - INVESTED IN PLANT AND FACILITIES 314 332 296 796 200 918 The notes on pages 13 thmugh 18 are an integral part of taese statements. 12
b 1 Summary of Significant Accounting Policies General Depreciation and Maintenance Our accounting records are mamtamed m accord- The company provides f or t he depreciation of t he ance with the Uniform System of Accounts as pre- original cost of prorrties except for the Davis Hesse scribed by The Federal Energy Hegulatory Commission Nuclear Power Station. over their estimated useful hves (FERC)and adopted by The Public Utihties Comnussion on a st raight-hne basis Depreciation expense nn the of Ohio (PUCOL Davis-Hesse Nuclear Power Station is base <i on t he unit-of-production method This includes a provision f or our Ravenues share of t he total estimated decomnussion mg costs of Customers are billed on a monthly c fele basis. $53 milhon The straight-Ime provisions for deprecia-based on rates authorized by the PUCO that are apphed tion averaged a 6 percent m 1%3. 3 5 percent m 1982 to electricity consumption. The larger indust nal and and a 4 percent m m81 wholecale customers are billed on a month end meter-reading basis. Mamtenance expense meludes repurs of preperty and renewal of nunor items Costs of replacements and Fust those renewal items t hat are units < W pr(>perty are The company collects estimated f uel costs over sub- charged to the utility plant accounts For retired prop-sequent six-month time periods through a fuel recov- erty. we take its cost plus removal cor . net of salvage. ery rate. The rate is based on actual and partially and charge it to accumulated provision f or depreciation projected costs and generation. The PUCO reviews and appmves the projected rate and historical performance Tans The difference between actual and estimated fuel The company provides for deferred federal meome charges are deferred until they are applied to the cus- taxes as required on the differ ences het ween straight-tomer's bill. This enables us to better match fuel Une depreciation and tax depreciation amounts for expenses with fuel adjusted revenues property additions smee December 31. 1973 For tax purposes. all mterest costs are deducted as they occur. The company charges the cost of. nuclear fuel to except for the amounts reqmred to be capitahMd for fuel expense based on the rate of consumption. In addi real propertv Other depreciation tmung differences tion, the estimated nuclear fuel disposal costs are are considered m rates in the year + hat t hey affect taxes included in fuel expense. The company contracted with payable We beheve such taxes can be recove.e6 m the Department of Energy (DOE) for permanent dis ~ future revenues based on PUCO and Ohio Supreme posal of spent nuclear fuel. For fuel used before 1983. Court decisions we owe the DOE $8.9 million, which will be paid on or after June 1985. We have already collected $4 6 milhon For certain propertv. the company receives mvest-from our customers and have requested additional reve- ment tax credits that are deferred and added to income nues of $4.3 million in our current PUCO rate case For over the hfe of that property Unrealized mvestment tax fuel used after April 1983, we are currently collecting credits from 1980 to 1983 total $331 million We will the fee from our customers and paying the DOE- record them as they are used in tuture years Ritirement Income Plan Property, Plant and Equipment Our retirement income plan is non-contributor y Property plant and equipment is stated at origmal and covers all employee groups. The company funds cost. Included m the costs of construction are such each year's cost and amortizes unfunded past service items as related payroll taxes pensions. fringe benefits. costs over a 30-year period. Pension ( ost is based on management and general overheads and allowance estimated salary levels and service years of employees for debt and equity funds used during construction at their retirement. 'Ibtal pension coots were: $4.5 mil- ( AFUDCL AFUDC represents the estimated composite licn in 1983; $4.4 million in 1982. and $3.7 million in debt mterest and equity costs of capital funds used to 1981. Experience gains and losses are amortized over finance construction These costs are charged to prep-15 years. erty. plant and equipment and credited to income as The actuarial present value of total vested and AFUDC on the Iksults of Operations statement Our nonvested plan benefits is based on salary levels and AFUDC rates net-of-tax. ranged from 10 percent to years of employees' service as of January 1 for each 10'4 percent in 1983,95 percent to 10' . percent in 1982. i year. These were: $42 million and $6 million in 1983. and 8S percent to 8 % percent in 1981. and $39 million and $6 million in 1982. The weighted average assumed rate of return used in determming these values was 8 percent for both 1983 and 1982. Reclassifications Market value of net assets available for lxmerits Certam reclassifications have been made m the amounted to $75 million as of January 1,1983 and $58 pnor years' amounts to make them comparable with million as of January 1,1982. 1983 classifications la
l N:tss to Financial Statoments December 31,1983 (1) Possible Charge Against Earnings As part of the June 1982 and August 1983 rate case In November 1981, we exchanged 946,293 shares of decisions, the PUCO prescribed an accounting method common stock for $25.6 million of outstanding bonds different from the one used for this gain. The PUCO owned by an investment banking firm. The stock's required that this gain be treated as a deferred credit exchange value was $16.025 per share. This exchange and amertized over 20 years. We opposed this decision provided a non-tayable extraordinary gain of $10.8 mil- and have it on appeal to the Ohio Suoreme Court. Lion. This is the dJference between the value of the stock traded and the principal amount of the bonds redeemed An unfavorable decision would result in a reversal of pitu their accrued interest. the extraordinary gain. This would involve an extraordi-nary charge against current earnings of $9.5 million, or 32 cents per share, based on the number of common shares outstanding at December 31,1983. (2) Petition on Perry No. 2 Construction If the construction of Perry No. 2 is not completed and we are not provided a means to recover our invest-In September 1983, the Ohio Office of Consumers' ment in the unit, we could be required to immediately Counsel (OCC) and several other parties filed a petition write off that investment including any cancellation with the PUCO and the Power Siting Board of Ohio (the charges against current earnings. Our investment in board) asking that the PUCO and the board investigate Perry No. 2 approximated $203 million at December 31, the need for the 1,205 megawatt Perry No. 2. The peti- 1983. Our net-of-tax write off at December 31,1983 tion also asked the PUCO and the board to order the Ohio would be $135 million, which would reduce Earnings CAPCO companies to stop construction of Perry No. 2 Beinvested fmm $187 million to $52 million. This reduc-and prevent them from accruing further AFUDC on that tion in Earnings Reinvested would have to be replaced unit. Finally, the petition asked the PUCO and the board with additional common equity funds. The amount of not to approve the issuance of securities to finance cancellation charges and other costs payable if work on further construction of Perry No. 2. The petition alleges Perry No. 2 were to be stopped is not presently determin-that the completion of Perry No. 2 will result in an able, but could be substantial. AFUDC related to Perry unreasonable level of excess capacity and that the result- No. 2, which accrues in increasing amounts, was $16 ing rates charged to customers would be excessive. million in 1983. Any termination of the accrual of such AFUDC before Perry No. 2 is included in rate base would reduce earnings by the amount of AFUDC that would otherwise have been accrued. (3) Federal Income Tax Details Supplementary information regarding federal income taxes is set forth in the following tables: (thousands of dollars) (thousands of dollars) For the years ended December 31. 1983 1982 1981 For the years ended December 31, 1983 1982 1981 FEDERALINCOME TAX EXPENSE FEDERAL INCOME TAX EXPENSE WAS COMPUTED AS IOLLOWS; DETAILS ARE AS FOLIDWS:
'lhx at statutory rates on Currently payable 2 441 1 930 7 477 pre-tax income 74042 60633 57 578 Investment tax cmdits -
"g"n ' Deferred 13127 14334 10119 es d Amortized . (1 439) (940) (653)
Allowance for funds used during construction (42 270) (32521) (22 075) Prior year adjustment (65) (2 857) 233 Extraordinary gain from Deferred taxes - exchange of common Accelerated depreciation (net) 11 179 11 806 12377 stock for bonds - - (4 971) Cancelled generatir g pmjects 468 (1809) (1 118)
- P 1886 2 435 Deferred fuel costs 3 276 ethod do er depreciation differences 3 286 428 2 375 Other pmvisions 5906 (350) 356 Miscellaneous (2442) (2263) (1681) 'Ibtal federal
'Ibtal federal income tax income tax expense 32616 26277 31 226 expense 32616 26277 31226 14 l
l (4) Quarto Coal Arrangements b. Coal Cost Deferral
- a. Coal Supply Contracts At present, the average cost of Quarto coal is higher The CAPCO companies have made long-term than other coal currently available. Prior to July 30, ,
arrangements with Quarto Mining Company (Quarto) 1982, the PUCO had ordered us not to charge customers to supply coal to the Mansfield units. The CAPCO com- more than market prices. We deferred the difference panies each have agreed to guarantee their respective between market price and actual cost. Beginning on shares of Quarto's debt and lease commitments incurred July 30,1982, the PUCO permitted us to recover addi-to develop and equip the mines. As of December 31,1983, tional Quarto coal costs plus a portion of cost deferrals our share of the guarantees was $27.8 million. Our share under a revised market price formula. We had recovered of these commitments incurred prior to 1983 is 6.89 per- $3 0 million of deferred Quarto coal costs in rates cent. Our share of commitments incurred after Decem- through July 1983. In August 1983, the PUCO ordered ber 31,1982 will increase in steps from 6.89 percent to us to discontinue recovery of Quarto coal costs in excess 12.4 percent in 1986, of market price, pending further consideration of this matter. Accordingly, we resumed the deferral of the dif-Our coal supply contract with Quarto expires ference between market price and actual cost. December 31,1999. Under its terms, the pricing provi-sions reflect Quarto's production costs and deferred A January 1984 PUCO order permits us to recover mine development charges. Our total purchases under specified Quarto coal costs plus a portion of cost defer-these contracts amouned to $14.5 million in 1983, $12.4 rals within a specifieu six-year period using a "new million in 1982 and $15.5 million in 1981. market price" formula. In the event that we do not recover at least one-sixth of our deferred fuel costs of Under these arrangements, we expect our minimum 811.7 million as of December 31,1983 in any of the next yearly payments for fixed charges on debt and lease six ye rs beginning in 1984, the amount of previous cost commitments to decline from $6.6 million in 1983 to deferrals not so recovered m that year shall be written
$5.8 million in 1988. off to expense. The "new market price" formula also pro-vides for the recovery of current Quarto coal costs to the extent that such costs do not exceed 125 percent of market price. Quarto coal costs in excess of 125 percent of market price must be written off to expense. We believe current and deferred costs will be recoverable within the periods specified by the PUCO.
l (5) CAPCO Power Pooling Arrangements The company has entered with four other utilities based on our ownership share, is currently estimated at , into a power-pooling arrangement (known as CAPCO), completion to be $1.8 billion. in the interest of reliability and economy. This involves substantial commitments for generation and transmis- We provide our own financing for this investment, sion facilities. " Expenses"in Results of Operations includes our share of direct expenses for operation of three CAPCO units CAPCO is currently building three nuclear gener- presently in service. ating units. We are obliga*ed to pay for our share of each of these units under construction and related nuclear The following represents our ownership in each of fuel inventory. Our total investment in the three units, the CAPCO units at December 31,1983: l l Actual or Ow nership Ownership Plant Accumulated Construction ) Generating Unit (Scheduled) Share Megawatts Fuel In-Service Depreciation Work in Progress I Completed: (thousands of dollars) Davis-Besse No.1 1977 48 62% 428 Nuclear 429 300 52700 21 200 Mansfield No. 2 1977 17.30% 135 Coal 69 900 11 700 800 Mansfield No. 3 1980 19.91 % 159 Coal 128 400 14 900 800 Under Construction: Ittry No.1 (1985)*" 19.91 % 240 Nuclear - - 462 400" Beaver Vallev No. 2 (1986) 19.91 % 166 Nuclear 15700* - 381 900 , Itrry No. 2 (1988)"* 19.91 % 240 Nuclear - - 203 000
- Common facilities with Beaver Valley No.1
[
" Includes common facilities for Ibrry No. I and lYrry No. 2 _ '" Currently. construction at the IVrry site is being concentrated to complete basic construction of Ibrry No.1 in 1985 and to minimize expenditures on Ibrry No. 2 pending future rescheduling. j 15 ,
m
(6) Previously Cancelled Generating Projects amortization on our books and allowed a specific addi-In January 1980, the company, along with the other tional risk factor as additional return on common equity CAPCO companies, cancelled the construction of four in our rates. This treatment was affirmed by the Ohio nuclear generating units. All cancellation costs related Supreme Court. to these units have now been paid. In our August 1983 rate order, the PUCO again pro-In April 1981, the PUCO appmved rate recovery vided incremental revenues to recover these costs of these costs over a ten-year period as an operating through the method used to calculate the allowed rate of expense. Since April 1981, we have been amortizing these return on common equity. The PUCO reaffirmed the con-costs to expense over that ten-year period. tinued amortization of these costs over a ten-year period ending in 1991. In June 1982, the PUCO disallowed recovery of these costs as an operating expense, based upon a 1981 Ohio The amortization of these costs amounted to $4.9 Supreme Court decision. This disallowance has been million in 1983, $4.7 million in 1982 and $3.3 million i 1 appealed to the Ohio Supreme Court and the decision is 1981 and is classified in depreciation and amortization still pending. The PUCO did allow continued ten-year on the Results of Operations statements.
- c. Cumulative Preferred Stock With Mandatory (7) Capitalization Redemption
- a. Capital Stock Transactions For the years ended The company held 10,335 shares at December 31, December 31. 1983 1982 1981 1983, and 4,730 shares at December 31,1982 of the
$11.00 series as treasury stock.
CAPITAL S*IOCK SIIARES SOLD (RETIRED): Common stock The sinking fund requirements for the various 2 500 000 2 200000 2053707 series of Cumulative Preferred Stock are: Public sales Exchange of common D vidend stock for bonds . - - 946 293 Shareowner Dividend 5000 1979 P.einvestment and $ 11.00 300 201 9.38 16 650 1985 Stock Purchase Plan . 945 474 574 680
'Ibtal common shares 3445474 2774 680 3300 201 1480 12 000 1987 Cumulative preferred stock Public sales, $25 par
$4.28 series . -
800 000 - The shares of the above series may be purchased at ~
$3.47 series 1200000 -- -
the sinking fund redemption price of $100 per share plus Cumulative preferred stock accrued and unpaid dividends. Future sinking fund with mandatory redemption redemption requirements are: $500,000 in 1984;
$2,165,000 in 1985; $3,831,000 in 1986 and $5,031,000 Public sales, $100 par
$14.80 series - -
300 000 in 1987 and 1988. Retirement, $100 par d. Long Term Debt
$11.00 series (5 000) (5 000) (5 000) The annual interest requirement on long-term debt outstanding at December 31,1983 is $109.2 million for (thousands of dollars) an average mterest rate of 11.13 percent. This includes PREMIUM ON CAPITAL S'IOCK: amortization of debt discount and expense but excludes Balance, beginning of year 325 540 290713 255 508 Premium, net of expense - interest on the nuclear fuel ot' ligations. '
Common stock . 52 502 33763 35569 Preferred stock i724 1044 (364) Sinking fund redemption requirements and sched-325 540 290713 uled maturities for long-term debt, excluding nuclear Balance, end of year 379 766 fuelleases, through 1988 are as follows: Sinking Ftmd
- b. Cumulative Preferred Stock Redemption Schedukd We are authorized to issue 3,000,000 shares of $100 D *"""t8- M turities par and 8,000,000 shares of $25 par Cumulative Pre- (thousands of dollars) -
ferred Stock under our amended articles of incorpora- 1984 3 600 20 700 tion. The annual dividend requirement on Cumulative 1985 3 600 56 700 Preferred Stock outstanding at December 31,1983 is 1986 3450 21700
$31.2 million for an average dividend rate of 10.61 1987 3 450 23367 1988 3300 38367 percent.
10
i In addition, the first mortgage bond indenture pro- The mortgage securing first mortgage bonds issued vides for a required annual payment after certain cred- by us constitutes a direct first mortgage lien on substan-its, as defined, to the 'n ustees as a Maintenance and tially all property and franchises owned by us. This does Heplacement Fund. We have been satisfying the require- not include expressly excepted property, such as cash ments under the indenture by pledging more property and securities, accounts receivable, fuel, supplies and additions which might have otherwise been used as the automotive equipment. basis for the icsuance of additional bonds. (8) Nuclear Fuel Financings In November 1982, the CAPCO companies created In September 1983, we capitalized our share of the Davis-the Central Area Energy Trust (the trust). The trust will Besse No.1 fuel lease related to the portion of the oversee the financing of procurement, conversion and nuclear fuel loaded into the reactor. This is in accord-enrichment stages of nuclear fuel for the CAPCO units. ance with the provisions of PUCO orders. Total commit-Each company's role in the trust is independent of its ments under the lease arrangements were $123.2 million ownership share of any CAPCO unit. Also, each com- at December 31,1983. pany's rights and requirements in connection with the trust are separate and distinct from the other com-Financing under these agreements, including the panies. At of December 31,1983, we have an obligation cf $41.5 million to the trust. This includes $4.7 million trust, of up to $298 million is available. We expect our nuclear fuel leasing arrangements to be adequate in 1983.capitalized The 1983interest incurred interest was through calculated at anDecember average n 31' atethrough 1985. Estimated payments based on burn-up, of 10.6 percent. Including interest, are: $12.1 million in 1984; $33.0 mil-lion in 1985; $42.0 million in 1986; $45.4 million in In addition, the company has lease arrangements for 1987; and $69.4 million in 1988. nuclear fuel to be loaded into the CAPCO nuclear units. (9) Short 'Ibrm Borrowing Arrangements We had $96.1 million in unused credit lines at whereby banks expect us to maintain average deposits December 31,1983 with various banks and pay commit- equal to 5 percent to 20 percent of the line of credit, ment fees for about two-thirds of those lines. The rest are depending on the borrowed amount. The deposits provide based on informal compensating balance arrangements, operating balances for us and are not legally restricted. (10) Selected Quarterly Data (Unaudited) The following quarterly results renect all adjust- l ments (that are of a normal recurring nature) to ensure a ) fair statement of results for such periods: (thousands of dollars) (dollars per common share) . Earnings Market Price
- Three months Itevenues and Income before Net on Common Dividends ended Other Income Income Taxes Income Stock Earnings l' aid fligh Inw 1983 March 31 129 457 20 403 28845 22031 .84 .61 22h 20 June 30 126722 19 259 28 536 20 903 .78 61 22 % 20 %
September 30 131978 35167 40064 32218 1.10 .61 21 % 19 % Decemner 31 118 076 20 546 30899 23 063 .78 61" 21 % 17M 1982 March 31 124 738 23 841 25650 19 683 .84 .59 17 % id% June 30 112217 15983 24 078 17387 .72 .59 18b 16 6 September 30 126 914 27757 32108 25359 .98 .59 19 % 16 % December 31 118 873 15524 23698 16884 .65 59 21 % 18 %
- The Common Stock is listed on the New Wrk Stock Exchange. The priw quotations are from The Wall Street Journal.
The number of common stock shawholders as of December 31,19b3 and 1982 were 87.78I and 86.710. respectimly.
** The dividend decland in December 1D83 and pud in January 1984 was increased to 03 cents per share.
17
E (11) Effects of Changing Prices (Unaudited) The following financialinformation shows the During a period of inflation, issuers of debt experi-effects on our company of general inflation (Constant ence an economic gain. This is especially important for Dollar Accounting) and changes in prices of specific us due to the substantial amounts of debt issued to assets, namely property, plant and equipment (Current finance our construction program. This gain is shown Cost Accounting). in the following statement under the caption " Gain from decline in purchasing power of net amounts owed". Constant dollar amounts represent historical dollars stated in terms of dollars of equal purchasing power, as The comparative Constant Dollar and Current Cost measured by the Consumer Price Index for All Urban values of all items on the income statement, except depre-Consumers (CPI). Current cost amounts reflect the ciation, represent the amounts recorded in the historical changes in specific prices of plant from the date the plant cost income statement. Income taxes are not adjusted was acquired to the present. The current cost of plant because current tax laws do not allow for the inflation estimates the probable cost of replacing existing plant effect on capital investment. We have calculated deprecia-assets and was determined by indexing the surviving tion provisions, for the current year, on the Constant plant by the Handy-Whitman Index of Public Utility Dollar and Current Cost amounts of property, plant and Construction Costs. equipment. We figured this by applying the ratio of the provision for depreciation over the average property, Because our rates are regulated, we cannot recover plant and equipment on the Historical Cost basis, to the through revenues any more than the original cost of indexed plant values. plant assets, even though the cost to replace such assets will substantially exceed the original cost. In 1983, the The following table shows the net effect of inflation added cost, due to inflation, of replacing our plant assets on common stock equity in 1983: is shown in the following statement under the caption- Co nt Cumnt
" Inflation effect during 1983 on capital investment .-
Accounting Accounting (millions of dollars) inflation effect during 1983 on capital investment: 171 Increase in specific prices to current costs . - Effect of change in general price level . - (147) Reduction to net recoverable cost . (52) (72) (28) (32) g Additional pruvision for depreciation . (80) (80) Gain from decline in pun:hasing power of net amounts owed (primarily debt) 54 54
'Ibtal effect of inflation on common stock equity. (26) (26)
The table below presents selected operating and reportable as an additional provision for depreciation .. financial data for the past five years adjusted for infla- were deducted from the reported amount of such income. tion as measured by the CPI. Earnings on common stock We revised the 1982 data to reflect actual indices. and earnings per share are shown as if only the amount (millions of dollars except per share amounts) 1983 1982 1981 1980 1979 General Inflation (constant dollars) Operating Revenues .. 505 497 485 486 501 Earnings on Common Stuck 70 53 34 36 29 Earnings per Common Share 2.52 2.14
- 59
. 1.89 1.70 Dividends Declared per Common Share . 2.46 2.46 2.52 2.66 3.02 Market Price per Common Share (year-end) . 1800 21.84 17.82 1869 23.18 Specific Prices (current cost)
Earnings on Common Stock 66 49 28 32 23 Earnings per Common Share . . . . .. 2.37 1.96 1.30 1 66 1.39 Increase in General Price level Over (Under) Increase in Specific Prices (24) (42) 5 84 77 Net Plant 3951 3 555 3 177 2804 2 390 General Information Gain Frum Decline in Purchasing Power of Net Amounts Owed . . . . . 54 45 93 113 102 Net Assets at Net Ihroverable Cost 702 610 532 457 408 Consumer Price Index
- Annual Average 2985 289.1 272 4 246 8 2174 =
- Year End 304.1 292.4 281 5 258 4 229 6 18
,.g,,,
l Financial Review i e Revenues and Other Income (thousands of dollars) " lbtal Gas & Revenues .-(. _ lbtal ibtal Steam Other & Other
^
Year Bemdential Commernai Industnal Other Retad Wholen. ale Elec tne l{eatmg income Income ^O 1083 161 275 105 482 169 672 42 118 478 547 16 824 495 371 9 245 1 617 506 233 / 1982 153 662 101 789 158 930 38 306 452 687 20 508 473 195 8 530 1 017 482 742 1981 138 781 90 863 151 539 32 253 413 436 21 417 434 853 7 431 8 852 451 136 , 1980 126 085 80 836 137 860 28 458 373 239 21 647 394 886 6 982 879 402 747 1970 113 464 72 354 128 931 25 119 339 868 18 839 358 707 6 414 1 017 366 138 J 40 696 1973 27 390 43 632 10 426 122 144 4 271 126 415 2 732 227 129 374
.W r 1 Expenses (thousands of dollars) _.
Fuel & Net . Depreciation Federal Purchased & State & Deot AFUDC- Expenses Income Income Year Ibwer Operation Maintenance Amortization local hxes Interest Debt Before FIT Before FIT h xes '
+-
1983 125 975 77 632 32 734 51 138 45 210 108 612 (30 443) 410 858 95 376 32 616 k-1982 127 658 75 834 38 839 43 838 41 260 94 713 (22 505) 399 637 83 105 26 277 =? -
- 1981 122 442 63 976 369 271 81 865 31 226
~
31 908 43 427 36 699 86 310 (15 491) 1980 155 771 55 842 29 319 26 002 31 202 70 866 (15 148) 353 854 48 893 10 158 1979 146 800 44 691 21 137 29 117 29 700 52 584 ( 9 991) 314 167 51 971 16 888 .. , 2 1973 42 507 22 098 7 471 12 318 11 822 14 126 -
- 110 342 19 032 5 746 - .
1, : g Income (thousands of dollars) Common Stock (dollars per share and Tc) Return ,, Income Preferred Farnings Avarage on _: From AFUDC- Net Sta k on Shares Average Dividends Market Pr ce Book _ War Operations Equity Income Dividends Common Outstandmg Earnmes Equity Declared Egh low Year End Value 1983 62 759 65 585 128 344 30 129 98 215 28 040 3.50 14.5 2.46 22.50 17.50 18.00 24.12 1982 56 828 48 706 105 534 26 221 70 313 24 917 3.18 13.3 2,38 21.13 15.75 21.00 23.53 -
= i
-1981 50 639 32 498 83 137 23 542 50 595" 21 507 2.77'* 11.6 " 2.30 18.38 15.00 16.50 23.46 - - 1980 38 735 28 443 67 178 18 O21 49 157 19 226 2.56 10.5 2.20 20.75 15.00 15.88 23.77 2 1979 35 083 23 512 58 595 13 894 44 701 16 848 2.65 10.7 2.20 23.38 17.38 17.50 24.15 - 1 1973 13 286 10 282* 23 568 3 911 19 657 6 282 3.13 14.3 1.04 30.88 23.13 26.88 22.20
'In 1973. allowance for debt funds was included in allowance for equity funds.
"In 1981, excludes extraordinary gain fmm exchange of common stock for bonds (after gain, earnings on common - $70.402; earnings per share - $3 27; return on average common equity - 13.5 pemnt). - -
.~
,- =
i
Statistical Review Electric Sales (millions of kilowatt-hours) Electric Customers (end of year) Hesidential Usage Annual Price Annual KWH Per Revenue Industrial F+r KWii I%r Tbtal Resulential Commercial & Other Ibtal Customer (Cents) Customer War Residential Commercial Industrisa Wholesale Other 1 341 3 127 320 428 7 131 242 959 23 694 3 864 270 517 7 900 8.44 665 1983 1915 1982 1 911 1 325 2 873 395 414 6 918 241 492 23 495 3 815 268 802 7 906 8.04 636 1981 1 919 1 294 3 080 449 409 7 151 241 663 23 573 3 844 269 080 7 966 7.23 576 1980 1 971 1 282 3 165 560 410 7 388 240 142 23 532 3 818 267 492 8 232 6.40 527 ;~ 1979 1 934 1 256 3 559 559 401 7 709 238 353 23 636 3 695 265 684 8 166 5.87 479 1973 1 552 1 085 3 249 356 349 6 501 218 105 21 399 4 119 243 623 7 187 2.62 188 Load (megawatts) Energy (millions of kilowatt-hours) Fuel Net Purthased Imad Reserve & Net Fuel Cost Efficiency Capabihty at Time Ibak Factor Factor Genera *ed Interthanged IVr KWil BTU Tvr Imad Fbsml Nack ar 1btal Ibwer 1YAal (Cents) KWil War ofl%ak ("e' l (%) 1983 1 777 1 325 66 34 4 683 2 383 7 066 593 7 669 1.67 10 337 1982 1 700 1 355 d2 32 5 306 1 569 6 875 510 7 385 1.80 10 220 1981 1 773 1 315 66 35 5 349 2 142 7 491 157 7 648 1.68 10 274 . 1980 1 700 1 310 68 34 5 529 1 031 6560 1 352 7 912 1.65 10 246 1979 1 825 1 395 67 31 5 349 1535 6 884 1 348 8 232 1.33 10 262 1973 1 358 1 246 64 9 5 376 - 5376 1 670 7 046 .52 9880 Investment (thousands of dollars) Awumulated Construction Annual Plant In Pronsu>na For Ne+ Work in Nuclear Fuel Ibtal Construction 1btal Sernce Depreciation 1%grens In Sernce Ihnt Expendit ures A. wets War Ihnt 1983 1 358 467 324 826 1 033 641 1 118 802 22 904 2 175 347 294 010 2 401 778 1982 1 306 677 285 453 1 021 224 878 535 18 390 1 918 149 248 515 2 124 823 1981 1 261 174 252 310 1 008 864 656 999 10 951 1 676 814 200 918 1 869 967 1980 1 208 001 220 629 987 372 518 746 17 644 1 523 762 234 827 1 701 655 1979 979 809 201 895 777 914 519 464 11 786 1 309 164 239 010 1 467 512 1973 407 195 108 467 298 728 192 133 - 490 861 119 524 540 896 Capitalization (thousands of dollars) Cumulative Preferred Common Cumulative with long-Sharenwners Preferred Mandatory 11E tm War Fxputy % Stock % Bedemptum S Debt s 1btal 1983 715 584 36 200 000 10 94 002 5 984 976 49 1 994 562 - - 1982 617 127 35 170 000 10 95 027 5 875 859 50 1 758 013 1981 550 176 35 150 000 10 95 500 6 762 584 49 1 558 260 1980 478 093 34 150 000 11 66 500 5 708 295 50 1 403 788 1979 432 554 35 150 000 12 34 000 3 611 137 50 1 227 691 2 1973 145 665 31 71 000 15 - - 259 164 54 475 829 :r i 20
Board of Directors Officers 2 Richard P Anderson ' O ! Jnhn P Williamson Stock Transf er Agents Partner and General Manager i .a n a n The Andersons (b !Fx"- 'M' + ' ' 1" Samuel G Carson : E n N
- w S r Wendell A Johnson :o ' ' '
Chair man Pr m ,# , , ,.c1 , + e. i r N'^ 'I r N 't ' ' Tbledo 'n ust Company and < ipe .e m e < n ' LlWlo Tr usteor p > rat i on Inc Anthony A Hov h Ir bt"CN NPK ihlF3FS
- s. r . 'K ' 'B" "
Richard P. Crouse 11 e Pn.s u nt <.v .- Vice President. Nuclear Hrhard P Crouse ,, Robert IL Davies iC* x 0 x S i V me Pres d"n' Nu e.u ,
' ' 4"
#$ 'd "^ s.' ' "
Sernor Vice President " ^ "^ '" Owens-llhnois Inc s, e Pr es:o" P .h: . N i e .n s "N"RC , U Chester Devenow t A xCi ""*U " "" I ' "'" '
' ' ' " 4 Chairman and Chief " # \.' "I' "# " " " * ' "^ ^ #" "I Executive Of ficer Sheller-Globe Corporation Lyman C Philb ps Auditors "M "P""* "' W ^"d"*'*'
Elwocxl L Elberson (C) ""d^""""#*'" ""' ""' ^ " " ' Chairman Presidet.t and " ' ' ' ' ' 3*4 Chief Executive imelf E Roe Dinner BeH Foods Inc V u e Pr es.deM F.noe Suppi Exchange Listings Stanley W. Gustafson iDeceased , Paul M Smart
" " ^ * " ^ * ' "
- I President. Dana Corporation Nh'4 VM e Pr"s + n' (i a piirate I ,cve spm"m a w i M""*"**"^E*""!'*
Wendell A. Johnson (El ." " " " .'"""
'"'"D"dJh "C"5 President and Chief H sn ; h5 K F.o hine Operatmg Officer Stratman Cooke Sect enu s t .m m na . ss k E w .a n e.
Isabel F. Martin i Ai h#' Consultant Donald 11 Saunders f,! Aa ,## ned . ss x F.m
' ""d
.a n o
%lede Area United Way T.r"u u r" r Paul G Husby h.Mr d M pa: .a. - %1 Donald G Nicholson
(.oraride (> .o;5 (; m
- +4 r-Senior Vice Pres; dent. Fmance . .
N e w 'n.a s m < x E x, 5 ne Henry A. Page. Jr. ( E x N > h * , q : ro S e u s pa r Cm i Director of Development x 32 'm and ui + ,s The Medical College of Oluo \ m. , an sn s Ex t.an o-at %ledo Executive Offices Lyman C. Phillips w ,< > Mmbs n Awnur "O Vice President. Corporate p, jew , ()he, C m S2 I'"'#'"' " I "" '"* Planning and Admmistration Pn< nr -ilo 259 N x H > w. !)ue 2< W n 9 h5 1)+ 200H Paul M. Smart Dividend Disbursing and 9 : Due2<wu) n I )ue 2< w
- Senior Vice President Reinvestment Agent Corporate Development and rho Tnle4 > Tr ust (ianpany yf g3nc iy %
General Counsei Toled< > ( )h o > M6( M ^ e w Y a k St( x K E X( ha n e' Willard I. Webb Ill ( A* m E WS! Chairman and Chief Executive Officer Ohio Citizens Bank r a 's .
. 4 Director Changes John P Williamson f E' xS* i g,-' Chester Devenow, chairman and chief exccutive offi-Chairman and Chief ' 'Y -
4... cer, Sheller-Globe Corporation, was elected to the board Executive Officer d i of directors in August,1983. Sheller-Globe, a %1edo-Robert G. Wingerter (N x O' W Si '; ( .>. based company, is a major manufacturer of parts and Chairrnan. Executive Committeo S. e assemblies for cars, trucks and off-highway equipment. Libbey-Owens. Ford Company 7 1 : y: Mr. Devenow is a graduate of New York University.
,i -: - ) e c Key to Directors, Committees
+' c, t.f.
.a f
;g . .cg lie replaces Marvin S. Kobacker, who was elected director emeritus after 14 years of distinguished board (A) Audit Committee .-
service. (C) Compensation Committee (E) Executive Committee (N) Nommating Con nittee Paul M. Smart, senior vice president. corporate devel-W- opment. was elected to the board of directors in January (O) Operations Comnut tee 1984. (S) Strategic Planning - A former senior partner with Fuller & Ilenry with denotes comnut ue chairman specialization in %1edo Edison regulatory matten. Mr Smart contmues as the company's general counsel. with added responsibilities for marketing, rates. area devel-Directors Emeritt opment, and research and development Floyd M. Canter lie replaced board member Stanley W. Gustafson, William S. Carlson who died shortly before year'd end We wiH miss Mr Gus-Virgil A. Gladieux tafson's talent. energy and keen advice Marvin S Kobacker
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