ML20095F922
| ML20095F922 | |
| Person / Time | |
|---|---|
| Site: | Perry  |
| Issue date: | 12/31/1991 |
| From: | TOLEDO EDISON CO. |
| To: | |
| Shared Package | |
| ML20095F890 | List: |
| References | |
| NUDOCS 9204280330 | |
| Download: ML20095F922 (27) | |
Text
.
5 e ee e e................ -
E O,
w E
O m==
m O
O m
mall O> ,
urma nulle I
E n-
, m _ . . .1- .._. , _. . . - _.. . . _. . _._.-.__ _ . _ . . __ ,_ . _ _-_ . - - . .._.
- Conients . .
jy -
1-- About Toledo Edison ~
>1 - Directors -
1 Officers Report ofIndependent Public Accountants
-:3 - Summary of Significent Accounting Policies
-5 Management's Financial Analysis,
- Financial Statements and Notes 22: Financial and Statistical Review ;
24 Investor Information d
e m.-
M b'
s N
,--P- ,,yn. '- --
- About Toledo Edison : Directors
- The Company, a wholly owned subsidiary of c Rebert J. Farling? President and Chief Operating j Centerior Energy Corporation, provides electric Officer of Centerior Energy Corporation and L service to about 760,000 people in a 2,500-square mile Centerior Service Company.
? aredof northwestern Ohio, including the City of
. Edp H. Mm'a%** Vice President and Chief roledo. The Company also provides ekctric energy financial Officer of the Company and The Cleveland :
at wholesale to 13 municipally owned distributen Electric illumm.ating Company and Ewcutive Vice systems and one rural electn.c cooperat.we distribut. ion .
. . President of Centerior Energy Corporz. tion and
- system m. its service area. The Company's 2,600 Centerior Service Pmpany.-
- employees serve about 285.000 customers. -
Richard A. Miller?** Chairman and Chief Executive Officer of Centerior Energy Corporation and es Centerior Service Company.
Executive Off.ic...............
Lyman C. Phillips, Chairman and Chief Executive -
TheToledo Edison Company , Officer of the Company, President and Chief 300 Madison Avenue- Executive Officer of The Cleveland Electric Toledo, OH 43652-0001 Illuminating Company and Executive Vice President
'(419)249-5000 of Centerior Energy Corporation and Centerior-Service Company.
- Donald H. Saimden, President of the Company and Vice President of Centerior Service Companys
- Detted Chairman, President and Chief Executive Offker of Centerior Energy Comoration and Centerior Smice Cornpany effectwe March 1.1W2,
- Des ed Director of the Compaw and The Cic#and Dectric '
muminating Company efrective' March 1,1992.
"* Retired from these capacities effectwe March 1, IW2.
' Officers Chairman and Chief Executive Officer . , . . . . . . . . .Lyman C. Phillips President . . . ... . .DonaU H. Saunden Vice President & Chief - _
Financial Oflicer . . . . . .Edy H. Maugans Vice President . . . .. . . Fred f Lange, fr.
Controller .. . . . . . . . . Paul G. Busiv :
Treasurer . . . . . . . Gary M. Hawkinson -
Secretary . . . . .. .. . .E. Lyle ikpin
~
Report ofIndependent Public Accountants ARTHUR To the Share ")wners of ANDERSEN The Toledo Edison Company:
Q We have audited the accompanying balance sheet and in our opinion, the financial statements referred to statement of cumulative preferred stock of The above present fairly, in all material respects, the Toledo Edison Company (a wholly owned subsidiary financial position of The Toledo Edison Company as of Centeiior Energy Corporation) as of December 31, of December 31,1991 and 1990, and the results of its 1991 and 1990, and the related statements of inccme, operations and its cash flows for each of the three retained eamings and cash flows for each of the three years in the period ended December 31,1991, in
" years in the period ended December 31,1991. These conformity with generally accepted accounting financial statements are the responsibility of the principles.
Company's management. Our responsibility is to As discussed further in the Summary of Signihcant express an opinion on these financial statements Accounting Policies and Note 12, a change was made based on our audits. in the method of accounting for nuclear plant We conducted our audits in accordance with depreciation in 1991, retroa'ctive to January 1,1991.
generally accepted auditing standards. Those As discussed further in Note 3(c), the future of standards requ'.re that we plan and perform the audit . Perry Unit 2 is undecided. Construction has been to obtain reasonable assurance about whether the suspended since July 1985. Various options are being financial statements are free of material misstatement. considered, including resuming construction, An audit includes examining, on a test basis, converting the unit to a nonnuclear design, sale of all evidence supporting the amounts and disclosures in or part of the Company's ownership share, or the financial statements. An audit also includes canceling the unit. Management can give no assurance assessing the accounting principles used and when, if ever, Perry Unit 2 will go in service or significant estimates made by management, as well as whether the Company's investment in that unit and a evaluating the overall financial statement return thereon will ultimately be recovered.
presentation. 'Ve believe that our audits provide a reasonable basis for our opinion.
Ib ,
Cleveland, Ohio February 14.1992 i
&=
2
Surttrifittti of Sigrtifcitrit Accottrifirig Policy GENERAL purchased power transactions and reported as part The Toledo Edison Company (Company) is an of fuel and purchased power expense. The amounts electric utility and a wholly owned subs'idiary of I r prior years have also been reclassified to conform Centerior Energy Corporation (Centerior Energy). with current reportmg requirements. See Note 13.
The Company follows the Uniform System of Accounts prescribed by the Federal Energy Regulatory FUEL EXPENSE
. Commission (FERC) and adopted by The Public The cost of fossil fuel is charged to fuel expense based Uliiities Commission of Ohio (PUCO). As a rate-regulated utility, the Company is subject to Statement on inventory usage. The cost of nuclear fuel, of Financial Accounting Standards 71 which governs including an interest component, is charged to fuel accounting for the effects of certain types of rate expense based on the rate of consumption. Estimated regulation. future nuclear fuel disposal costs are being ' recovered The Company is a member of the Central Area through the base rates.
Power Coordination Group (CAPCO). Other The Company defers the differences between members include The Cleveland Electric illuminating actual fuel costs and estimated fuel costs currently Company (Cleveland Electric), Duquesne Light being recovered from customers through the fuel Company (Duquesne), Ohio Edison Company (Ohio factor. This matches fuel expenses with fuel-related Edison) and Ohio Edison's wholly owned revenues.
subsidiary, Pennsylvania Power Company (Pennsylvania Power). The members have PRE-PHASE-IN AND PHASE IN DEFERRALS f constructed and operate generation and transmission OF OPERATING EXPENSES AND facilities for the uge of the CAPCO companies.. CARRYING CllARGES Cleveland Electne is also a wholly owned subsidiary of Centerior Energy, The PUCO authorized the Company to record, as rre c arges, certain operating expenses and RELATED PARTY TRANSACTIONS carrying charges related to I en Nuclear Power Plant
- Operating revenues, operating expenses and interest Unit 1 (Perry Unit 1) and Beaver Valley Power charges include those amounts for transactions with Station Unit 2 (Beaver Valley Unit 2) from their affiliated companies in the ordinary course of respective in-service dates in 1987 through December busmess operations
- 1988. Amortization and recovery of these deferrals Th,e Company's transactions with Cleveland (called pre-phase-in deferrals) began in January 19S9 Electnc are pnmanly for firm power, interchange in accordance with the January 1989 PUCO rate order power, transmission line rentals and jointly owned discussed in Note 6. The amortizations will continue po y r plant operations and constructmn. See Notes 1 over the lives of the related property.
As discussed in Note 6, the January 1989 PUCO
. Centerior Service Company (Service Company),
the third wholly owned subsidiary of Centerior rate order for the Company mcluded an approved rate Energy, provides - management, financial, phase-in plan for the Company's mvestments m administrative, engineering, legal and other services at Perry Unit 1 and Beaver Valley Unit 2. On January 1, cost to the Company and other affiliated companies. 1989, the Company began recording the deferrals of The Service Company billed the Company operating expenses and interest and equity carrying
$61,000,000, $49,000,000 and $40,000,000 in 1991,1990 charges on deferred rate-based investment pursuant and 1989, respectively, for such services. to the phase-in plan. These deferrals (called phase-in =
deferrals) will be recovered by December 31,1998.
' REVENUES Customers are billed on a monthly cycle basis for their DEPRECIATION AND AMORTIZATION energy consumption based on rate schedules or contracts authorized by the PUCO or on ordinances The cost of property, plant and equipment is with individual municipalities. An accrual is made at depreciated over their estimated useful lives on a the end of each month to record the estimated straight-line basis. Prior to 1991, only nonnuclear amount of unbilled revenues for kilowatt-hour sales property, plant and equipment was depreciated on a rendered in the current month but not billed by the Straight line basis, as depreciation expense for the end of that month. nuclear generating units was based on the units-of-
- A fuel factor is added to the base rates for electric production method.
service. This factor is designed to recover from The annual straight-line depreciation provision for customers the costs of fuel and most purchased nonnuclear property expressed as a percent of C power. It is reviewed and adjusted semiannually in a average depreciable utility plant in service was 3.4%
PUCO proceeding. in 1991,3.3% in 1990 and 3.6% in 1989. The rate Operating revenues include certain wholesale declined in 1990 because of a PUCO-approved change power sales revenues in accordance with a FERC in depreciation rates effective January 1,1990.
clarification of reporting requirements. Prior to 1991, attributable to longer estimated lives for nonnuclear these bulk power sales transactions were nethd with property. See Note 13.
3
in 1990, the Nuclear Regulatory Commission DEFERRED GAIN AND LOSS FROM (NRC) approved a six year eMension of the operatinS SALES OF UTILITY PLANT license for the Davis-Besse Nuclear Power Station
' (Davis-11 esse), The PUCO approved a change in the The Company entered into sale and leaseback units-of production depreciation rate for Davis- transactions in 1987 for the coal-fired Bruce Mansfield Besse, effective January 1,1990, which recognized the' Generating Plant (Mansfield Plant) and Beaver life extension. See Note 13, Valley Unit 2 as discussed in Note 2. These Effective January 1,1991, the Company changed transactions resulted in a net gain for the sale of its method of accounting for nuclear plant Mansfield Plant and a net loss for the sale of Beaver depreciation from the units-of production method to Valley Unit 2, both of which were deferred. The the straight-line method at about a 3% rate. The Company is amortizing the applicable deferred gain PUCO approved this change in accounting method and loss over the terms of leases under sale and for the Company and subsequently approved a leaseback agreements. The amortizations along with
- change to lower the 3% rate to 2.5% for the three the lease expense amounts are reemded as other operating nuclear units retroactive to January 1,1991. operation snd maintenance expense.
See Notes 12 and 13.
The Company uses external funding of future INTEREST CilARGES deccmmissioning costs for its operating nuclear units pursuant to a PUCO order. Cash contributions are Debt interest reported in the Income Statement does made to the funds on a straight-line basis over the not include interest on nuclear fuel obligations.
remaininglicensing period for each unit. Amounts Interest on nuclear fuel obligations for fuel under currently in rates are based on past estimates of construction is capitalized. See Note 5.
decommissioning costs - for the Company of Losses and gains realized upon the reacquisition or
$59,000,000 in 1986 dollars for Davis-Besse and redemption of long-term debt are deferred, consistent
$28;000,000 in 1987 dollars each for Perry Unit 1 and with the regulatory rate treatment. Such losses and Beaver Valley Unit 2. Actual decommissioning costs gains are either amortized over the remainder of the are expected to significantly exceed these estimates. originallife of the debt issue retired or am rtized over It is expected that increases in the cast estimates will the life of the new debt issue when the pre eeds of a be recoverable in rates resulting from future rate new issue are used for the debt redemption. The proceedings. The current level of expense being amortizations are included in debt interest expense, funded and recovered from customers over the remaining licensing periods of the units is PROPERTY, PLANT AND EQUIPMENT approximatelv $4,0M000 annually. The present funding requirements for Beaver Vallev Unit 2 also Property, plant and equipment are stated at original satisfy a similar commitment made as 'part of the sale c st less any am unts ordered by the PUCO to be and leaseback transaction discussed in Note , written off. Included in the cost of construction are items such as related payroll taxes, pensions, fringe n s, management and general overheads and FEDERAL INCOME TAXES allowance for funds. used during construction The financial statements reflect the liability method of (AFUDC). AFUDC represents the estimated accounting for income taxes. The liability method composite debt and equity cost of funds used to requires that the Company's deferred tax liabilities be fmance construction. This noncash allowance is adjusted for subsequent tax rate changes and that the credited to income, except for certain AFUDC for Company record deferred taxes for all temporary Perry Nuclear Power Plant Unit 2 (Perry Unit 2). See
- differences between the book and tax bases of assets Note 3(c). The gross AFUDC rate was 10.96% in and liabilities. A portion of these temporary 1991,11.17% in 1990 and 11 A5% in 1989.
differences are attributable to property-related timing Maintenance and repairs are charged to expense as differences that the PUCO used to reduce prior years' incurrei The cost of replacing plant and equipment tax expense for ratemaking purposes whereby no is charged to the utility plant accounts. The cost of deferred taxes were collected or recorded. Since the property retired plus removal costs, after deducting
. PUCO practice permits recovery of such taxes from any salvage value, is charged to the accumulated customers when they become payable, the net provision for depreciation.
amount due from customers has been recorded as a regulatory asset in deferred charges. A substantial RECLASSIFICATIONS portion of this amount relates to differences between the book and tax bases of utility plant. Hence, the Certain reclassifications have been made to prior recovery of these amounts will take place over the years' (mancial statements to make them comparable lives of the related assets. with the 1991 financial statements and consistent Investment tax credits are deferred and amortized with current reporting requirements. These include over the estimated lives of the applicable property. reclassifications related to certain wholesale power The amortization is reported as a reduction of sales revenues as discussed previously under depreciation expcase under the liabuity method. " Revenues" and accumulated deferred rents as See Note 7. discussed in Note 2.
4
un + -,, + - w.x x - ._, ._a-w - a u~~ -- . ~ + . - . . . .
Managernent's Financial Analysis RESULTS OF OPERATIONS related costs in rates, we have requested PUCO ONN approval to accrue post-in-service carrying costs and The lanuary 1989 PUCO rate order for the Company, defer depreciation for facilities that are in service but -
as discusse' d in Note 6, was designed to enable us to not yet recognized in rates. PUCO action on this begin recovering in rates the cost of, and earn a fair request has been postponed under the joint -
return on, our allowed investment in Perry Unit I recommendation approved by the PUCO discussed
- and Beaver Valley Unit 2. The rate order, which below.
provided for three rate increases, improved revenues in December 1991, the PUCO approved a joint and cash flows in 1989,1990 and 1991 frem the 1988 recommendation of the Company, Cleveland Electric levels. However, as discussed in the hrst four and customer representative groups involved in the paragraphs of Note 6, the phase-in plan was not 1989 rate case settlement. The joint recommendation designed to improve camings because gains in sought to secure an interim resolution of then-revenues from the higher ra' s and assumed sales pending accounting applications in 1991 and to growth = are initially offset by a corresponding establish a framework for resolving accounting issues reduction in the deferral of nuclear plant operating and related matters on a longer-term basis (i.e.,1992-expenses and carrying charges and are subsequently 1995). As part of this joint recommendation, the "
ottset by the amortization of such deferrals. Company and Cleveland Electric agreed to limit their Although the phase in plan had a positive effect combined 1992 other operation and maintenance ;
on revenues and cash flows, there are a number of expenses and capital evenditures to $1,050,000,000, '
factors that exerted a negative influence on eamings in exclusive of compliance costs related to the Clean Air i 1991 and will continue to present significant earnings Act Amendments of 1990 (Clean Air Act). Other challenges in 1992 and beyond. One such factor is operation and maintenance expenses and capital related to facilities placed in senice after February expenditures on a consolidated basis for Centerior 1988 and not included in rate base. The Company is Energy totaled $1,005,000,000 in 1991. The Company, required to record interest charges and depreciation Cleveland Electric and the customer representative on these facilities as current expenses even though groups also agreed to an ongoing review of our
. such items are not yet recovered in rates. We also are business operations, financial condition and l- facing the challenge of competitive forces, including accounting practices. This effort, with the participation l ..
new initiatives to create municipal electric systems, of the PUCO staff,is directed at the maintenance and The need to meet competitive threats, coupled with a ultimate improvement of our fmancial condition, the desire to encourage economic growth in the service improvement of the efficiency of our operations, and area, is prompting the Company to enter into an the delay and minimization of future rate increases.
increasing number of contracts having reduced rates The Company and Cleveland Electric also agreed not l - with certain large customers. Competitive forces also to seek any base rate increase that would become l prompted us to implement rate reductions m 1991 for effective before 1993.
l - residential and small commercial customers. Factors The Company continually faces competitive beyond our control also having a negative influence threats from municipal electric systems within its
- on eamings are the economic recession, the effect of service territory, a challenge intensified by municipal l inflation and increases in taxes, other than federal access to low-cost power currently available on the l -- income taxes. wholesale market. As part of our competitive The Company has taken several steps to counter strategy, we are strengthening programs that the adverse effects of the factors discussed above. We demonstrate the added value inherent in our service,
- have implemented most of the recommendations of beyond what one might receive from a municipal the management audit discussed in Note 6 and have electric system. Such programs include providing
( taken other actions which reduced other operation services to communities to help them retain and and maintenance expense by approximately attract businesses, providing consulting services to
$17,600,000 in 1991. As discussed in the Summary of customers to improve their energy efficiency and Significant Accounting Policies and Note 12, we developing demand-side management programs. To
! sought and received PUCO approval to lower our counter new municipa!ization initiatives, we are also j nuclear plant depreciation expense in 1991 to a level stressing the financial risks and uncertainties of L more closely aligned with -the amount being creating a municipal system and our superior
[ recovered in rates. In addition, we have increased our reliability and service.
I efforts to sell power to other utilities which, in 1991, Annual sales growth is expected to average l' resulted in approximately $3,100,000 of revenues in about 2% for the next several years, contingent on excess of the cost of providing the power. future economic events. Recognizing the limitations Despite the positive aspects of the measures imposed by these sales projections and current discussed above, more must be done to maintain competitive pressures, we will utilize our best
!. earnings. Continuing cost-reduction efforts will be efforts to minimize future rate increases through necessary to lessen the negative pressures on cost reduction and quality-of-service efforts and earnings. The Company is aggressively seeking long- exploring other innovative options. Eventually, term power contracts with wholesale customers to rate increases will be necessary to recognize the cost further enhance revenues, To counter the effects of of our new capital investment and the effect of I delays in recovering new investment since 1988 and inflation.
5
1991 rs.1990 The major factor accounting for the increase in Factors contributing to the 2.8% increase in 1991 base rates and miscellaneous ope:ating revenues was operating revenues are as follows: related to the knuary 1989 rate order. The PUCO inacase approved rate increases for the Company of 9%
effective in February 1989 and 7% effective in Change in Operating Revenues (Decrease)
Base Rates and Mmellaneous . $20 000 000 February 1990. The associated revenue increase in sales volume and Mm mwo 1990 was partially offset by reduced revenues Wholesale Sales. (3 000 000) resulting from a 9.1% decrease in total kilowatt-hour snoawo sales. Industrial sales decreased 3.3% because of the recession beginning in 1990. Residential and A significant factor accounting for the increase in commercial sales decreased 3.3% and 0AN, operating revenues resulted from the January 1989 respectively, as seasonal temperatures were more PUCO rate order for the Company. The PUCO moderate in comparison to the prior year's approved rate increases of 7% effective in February temperatures, resulting in reduced customer heating 1990 and 2.74% effective in February 1991. However, and cooling-related demand. Other sales activity as part of the Company's efforts to improve its decreased 221% as a result of lower wholesale sales.
competitive position in its service area, the Company Operating expenses decreased 1.7% in 1990.
waived its 2.74% rate increase for residential and Depreciation and amortization expense decreased small commercial customers and reduced its primarily because of lower depreciation rates used in residential rates by 3% effective in March 1991 and by 1990 tor nonnuclear and Davis Besse property an additional 1% effective in September 1991. See attributable to longer estimated lives and because of longer nuclear generating unit refueling and Note 6. Total kilowatt-hour sales increased 3.3% in 199' Residential and ccmmercial sales increased 4.6% maintenance outages in 1990 than in 1989. Federal and 4.3%. respectively, os a result of higher usage of income taxes decreascd primarily because of a cooling equipment in response to the unusually decrease in pretax operating income. These warm late spring and summer 1991 temperatures. The decreases in operating expenses were partially offset commercial sales increase was also innuenced by by an increase in taxes, other than federal income some improvement in the economy for the taxes, resulting from higher property and gross coramercial sector. Industrial sales declined 2% largely receipts taxes, and by lower operating expense because of the recession-driven slump a the auto, deferrals for Perry Unit I and Beaver Valley Unit 2.
glass and metal industries. Other sales increased 8.5% Credits for carrying sharges recorded in
~
because of increased sales to wholesale customers. nonoperating income decreased in 1990 because a Operating expenses increased 2.3% in 1991. The greater share of our investments and leasehold increase was mitigated by a reduction of $17,600,000 interests in Perry Unit 1 and Beaver Valley Unit 2 in other operation and maintenance expense, resulting were recovered in rates. Other income and primarily from cost-cutting measures. Offsetting this deductions, net, decreased primarily because of less decrease were an increase in federal income taxes interest income in 1990. These decreases were because of higher pretax operating income; an partially offset by an increase in federal income tax increase in taxes, other than federal income taxes, credits related to nonoperating income resulting from resulting from higher property and gross receipt taxes a decrease in pretax nonoperating income and federal and accruals for Pennsylvania tax increases enacted income tax adjustments of $18.810,000 associated in August 1991: an increase in fuel and purchased with previously deferred investment tax credits power expense resulting primarily from increased relating to the 1988 write-off of nuclear plant. Interest ~
amortization of previously deferred fuel costs over the expense decreased in 1990 because of refmancings by amount amortized in 1990; and lower operating the Company and a lower level of debt outstanding.
expense deferrals for Perry Unit 1 and Beaver Vallev Unit 2 pursuant to the Jinuary 1989 PUCO rate ~ EFFECT OF INFLATION order. Although the rate of inflation has eased in recent Credits for carrying charges recorded in years, we are still affected by even modest inflation nonoperating income decreased in 1991 because a since the regulator, process introduces a time-lag greater share of our investments and leasehold during which increased costs of our labor, materials interests in Perry Unit 1 and Beaser Valley Unit 2 and r *rvices are not reflected in rates and recovered, were recovered in rates. The federal income tax Morover, regulation allows only the recovery of provision related to nonoperating income increased historical costs of plant assets through depreciation mainly because the 1990 provision was reduced by even though the costs to replace these assets would
$18,810.000 for federal income tax adjustments substantially exceed their historical costs in an associated with previously deferred investment tax inflationary' economy.
credits relating to the 1988 write-off of nuclear plant. Changes in fuel hosts do not affect our results of 1990 es.1989 operations since those costs are deferred until reflected in the fuel cost recovery factor included in Factors contributing to the 0.3% decrease in 1990 customers' bills.
operating revenues are as follows:
Increase Change in Operatmg Kevenues ( Decrease)
Base Rates and Mmellaneous 5 37.000.000 Sales Volume and Mn . (2%000.000)
Wholesale Sales (10 000 000)
$_ ( 2.000.000) l
i Illcorne Staleinent . rue rottoo toiso.y com,,
For the years ended December 31, 1991 1990 1989 (thousands of dollars)
' Operating Revenues (1) . . .. . . .. ... . .. $ 887,258 $863,173 $865,623
_ Operating Expenses Fuel and purchased power. ... . ....... .. . . ... 177,642 174,309 172,220 Other operation and maintenance . . .. . . , . 355,728 373,374 372,530 Depreciation and amortiration . . . .. . ..... . ... . 72,137 72.627 85,057 Taxes, other than federal income taxes . . ... . . .. 88,656 79,320 72,123 -
Phase-in deferred operating expenses . . . . . . (5,796) (16,980) .(22,535) l Amortization of pre-phase-In deferred costs . . ... ... 6,943 7.196 6,782
- Federal income taxes . . . . . . . . . . . . . . . .... . . 31,767 _2',041 37,285 727,077 110,887 723,462 Operating income . . . , . ...... . ... .... .. .. 160,181 152,286 142,161 Nonoperating income Allowance for equity funds used iuring construction .. 1,499 3,352 8,568 Other income and deductions, net . . . . .. . 3,628 6,305 20,517 Phase-in carrying charges. .. . .. .. .. . 21,986 43,487 82,308 -
Federal income taxes -- credit (expense) . . . . .. ,. (6,228) 8,664 J21,563).
20,885 61,808 - 89,830
' income Before Interest Charges. . .. . .. . .., 181,066 214,094 231,991 interest Charges Debt intere* . . .... . ... .. 132,399 135,344 144,792 Allowance wr borrowed funds usM during construction -(946) (2,674) (5,479)
! 131,453 132.670 139,313
= Net Income . . . ... ...... . .... ....... . . , ...., 49,613 81.424 92.678 Prefejred Dividend Requirements .., . . . . 24,792 25 159 25,390 Earnings Available for Common Stock . . ... .. .. $ 24,821 $ 56.265 $ 67,288
. (1) . includes revenues from bulk power sales to Cleveland Electric of $127,691,000, $111,761,000 and $114,123,000
- in 1991,1990 and 1989, respectively.
Retained :arnings For the years ended December 31, 1991- -1990 1989 (thousands of dollars)
+ Balance at Beginning of Year. . . .. . .. . . $ 82,956 $ 99,965 $ 89,614
' Additions
. Net income . . . . .. . .. ... .. . -49,613- 81,424 92,678 Deductions i Dividends declared:
Common stock . . . ... .. ..... ... (17,831) (73,283) (63,285)
Preferred stock . . . . .. . . . (24,809) (25,145) (19,036) l - Other . . . . . . . . . . . . (5) (5) (6)
. Net. increase (Decreag) . . .. . .. . . 6,968 117,009) 10,351 Balance at End of Year . ... . . $ 89,924 $ 82,956 $ 99,965 l:
l i The accompanying notes and summary of significant accounting policies are an integral part of these statements.
L 7
Managenfent's Financial Analysis CAPITAL RESOURCES AND LlQUIDITY are espected to tv hnanced externally. If economical, In addition to our need for cash for normal corporate additional securities mav be redeemed under ;
operations, we continue to need cash for an ongoing optional redemption provisions. See Notes 10(c) and program of constructing new facilities and modifying (d) for information concerning limitations on the existing facilities to meet anticipated demand for issuance of preferred and preference stock and debt. l clectric service, comply with governmental gur capital requirements after 1994 will depend on :
regulations ar.d protect the environment. Cash is also the emplernentation strategy we choose to achieve
{
need d for the mandatory retirement of securities. c mpliance with the Clean Air Act. Espenditures for Over the three-year pc'riod of 19891991, these our plan are estimated to tv> approsimately i construction and mandatory retirement needs totaled $35,000.000 over the 1992 2001 period. See Note 3(b).
approximately $450,000.000, in addition, we We espect to be able to raise cash as needed. The exe cised various options to redeem and purchase availability and cost of capital to meet our extvrnal ;
appioximately $165,000,000 of our securities. hnancing nem hmn ver, depends upon such factors +
As a result of the January 1989 PUCO rate order, as hnancial market conditions and our credit ratings.
internally generated cash increased in 1909,1990 and Current securities ratings for the Company are as ;
1991 from the 1988 level. In addition, we raised I"IIOW5: i
$381,000,000 through security issues and term bank Stu dard Moody's f loans during the 1989-1991 period as shown in the y;ygn 3"yjf,"
Cash ilm"s statement. During the three-year period, the Company also u.ilized its short term borrowing 8i"' '""'4'F ** BBB- B'*3 arrangements (esplained in Note 11) to help meet U"""'d "o'" - BB+ B'l i l's cash needs. Proceeds from these hnancings were I'"*ned md . 88+ 12 2 .
u,cd to help pay for our construction program, to repay poruons'bf short-term debt incurred to hnance A write-off of the Company's investment in perry
. the conuruction program, to retire, redeem and Unn 2, as discussed in Note 3(c), depending upon purchase outstanding securities, and for general the magnitude and timing of such a write off, could corporate purposes, reduce retained earnings sufficiently to impair its Estimated cash requirements for 1992-1994 for the ability to declare dividends, but would not affect cash Company are $248.000.000 for its construction flow, program and $241,000,000 for the mandatory The Tax Reform Act of 1986 (1986 Tas Act) ,
redemption of debt and preferred stock. We c'.pect to provided for a 34% income tax rate in 1988 and finance externally about 50% of our total 1992 thereafter, a new alternative mmimum tax ( AMT) and construction and mandatory redemption other changes that resulted in increased tax payments requircrAnts of approximately $180.000,000. About and a reduction in cash flow duting 1989,1990 and 10 20% of t'n Company's 1993 and 1994 requirements 1991 because we were Subject to the AMT,
.8
C1sh lIC"..; nit wu no wmy coMIm 1 or the years ended Decyml.cr 31 ,
1991 Iwo 19 %
Ohouwsviu m Cash flows from Operating Activitin (1)
Net income $_49,613 $ 81J24 5 02 A78 Adjustments to Reconcia Net inwme to Cash from Operating Activities:
Depreciation and armtiration 72,137 72.627 85.057 Deferred federal inwme taxes . 31,522 30,642 79.199 investment tax aedits, eM 30,206 iP,063) 1.237 Deferred and unbdled revenues (25,566) (22,698) (42,624)
Defened fuel . 4,19S (433) 16.259 Carrying (harges capitalized (21,966) (43,487) (82,308)
Leased nuclear fuel amortization 53,904 37,122 46,40s Deferred operatiog espenses, net . 1,147 (9384) (15JS3)
Allowance for equity funds used during construction (1,499) (3,352) (8,568)
Amortiration of reserve for Davis-11csse refund obligations to customers . - -
(12,655) l'ension settlement gain . .
- (6,449) -
Changes in amounts due from customers and others net 2,780 (9,433) (4.406)
Changes in ins entories . . (7,135) (6,521) 1.890 Chrnges in accounts payable. . . (12,685) 6,658 (2,048)
Changes in working capital affreting operations. (25,975) 1.528 (30313)
Other noncash items . 14,730 16.309 16 840 Tots' Adjustments 115,778 45306 47.815 Net Cash from Operating Activities . 165,391 _ 127.130 140.493 Cash Flows from Tsnancing Activities (2)
Dank loans, commercial paper and other short term debt. (23,200) 23,200 -
Notes payable to affdiates . . . 14,200 16,000 -
Debt issues:
first mortgage bonds . .
- 67,300 56,100 secured medium-term notes . .
134,500 - -
Term bank loans and other long term debt 108,365 15,000 --
Maturities, edemptiens and sinking funds. (178,993) (183,477) (65,006)
Nuclear fuel lease and trust obligations (51,728) (42,947) (39,015)
Dividends paid . . (42,639) (98,427) (88.743)
Premiums, discounts and expenses j l,001) _(1.845) (925)
Net Cash Iron l'inancing Actisities . . _{40,496) _{205.196) J137.589)
Cash flows from Investing Activities (2)
Cash applied to mnstruction . (51,393) (80,667) (61,360)
Interest capitali/ed as allowance for borrowed funds used during construction . (946) (2,674) (5 479)
Loan, to af61iates . .
(12 ')00) 114,000 (114,000)
Other cash applied. . . _{3,374) _ 14.178) 13,261)
Net Cash from Investing Activities _(67,713) 26ARI J184,100)
Net Change in Cash and Temporary Cash investments. 57,182 _L51,585) _(181,196)
Cash and Temporary Cash Investments at Beginning of Year . 22,107 73.692 254,888 Cash and Temporary Cash investments at End of Year. Sj9,289 sy,107 $ 73;692 (1) Interest paid (net of amounts capitalized) was $120NO.000, $114,000,000 and $104,000,000 in 1991,1990 and 1989, respectively. Income tases paid were 59,465,000 and $2,272 000 in 1991 and 1990 respectively. No income tases were paid in 1989 (2) Increases in nuclear fuel and nuclear fuel lease and trust obligations in the Balance Sheet resulting from the noncash capitalizations under nuclear fuel agreements are escluded from this statement.
'the accompanying notes and summarv of signihcant accounting policies are an integral part of this statement.
9
Balance Sheet ,
j ljecember 31, i
1991 1990 (thousands of dellars)
ASSETS PROPERTY, PLANT AND EQUIPh1ENT Utility plant in service. $ 2,692,274 52.603,883 Less. accumulated depreciation and amortization . 709,505 640.252 1,982,769 1,963,631 Construction work in progress 53,965 93.154 Perry Unit 2. . 342,767 343.685 2,379,501 2.400,470 Nuclear fuel, net of amortiration . . 195,285 221.848 Other property, less accumulated depreciation . .
2,679 2.024 2,577,465 2.624,342
~
CURRENT ASSETS Cash and temporary cash investments 79,289 22,107 Amounts due from customers and others, net . 60,453 63,233 Accounts receivable from af60ates . 21,917 29,999 Notes receivable from af611ates. . . . . 12,000 -
Unbilled revenues . . . 21,644 20.166 Materials and supplies, at average cost . . . 36,575 32,666 Fossil fuel inventory, at average cost . 18,804 15,578 Taxes applicaSte to succeeding years. . 66,343 63.375 Other. . . .
2,760 2.473 319,9S5 249,597 DEFERRED CHARGES Amounts due from customers for future federal income taxes. 472,199 494.454 Unamortized loss from Beaver Valley Unit 2 sale. . 114,174 119,623 Unamortired loss on reacquired debt . 25,672 27,404 Carrying charges and operating expenses, prethase in . 244,404 252,206 Carrying charges and operating expensns, phase in . . 193,099 165.310 Other. . . .. 67 t51,4 68.582
~
1,117,062 1,127,579 Total Assets . . 54f14J12 3001,51J The accompanying notes and summary of signihcant accounting policies are an integral part of this statement.
10 i l
7Hi 70!!DO fIMSDN COAffMNY December 31, 1991 19uo (thouunds of dollar $)
CAPITALIZATION AND LIAll!LITIES CAPITAll2ATION Common shares, $5 par value: 60,(KKI.000 authonied; 39.134,(KK) outstanding in 1991 and 1990. $ 195,687 5 195.687 Premium on capital stock . 481,082 481.082 Other paid in capital . 121,059 121,059 Retained earnings. . .. . . 69,924 82.956 Common stock equity 887,752 880,784 Preferred stock With mandatory redemption provisions .. 63,663 66.328 Without mandatory redemption provisions 210,000 210,000 1.ong term debt . . . . . 1,158,550 1,097,326 -
2,319,965 2.254.438 OTilER NONCURRENT LIABILITIES Nuclear fuel 1(ase obligations . 143,145 180,825 Other. . . ... 49,756 48,009 192,901 228.844 CURRENT LIABILITIES Current portion of long term debt and preferred stock . 123,476 116,150 Current portion of lease obligations. 63,692 50,389 Notes payable to banks and others .. ..
- 23,200 Accounts payable .. . 55,274 67,959 Accounts and notes payable to affiliates . . . 39,53S 31,626 Accrued tases . . .. . 67,770 96,973 Accrued interest . . . . . 31,399 31,665 Other. . .
16,180 35,113 397,329 453,075 DEFERRED CREDITS Unamortlied investment tax credits. . . 107,729 83,377 Accumulated deferred 'deral in ,me taxes . . 577,479 571,233 Reserve for Perry Unit 2 allowance for funds used during construction . . 88,295 88,295 Unamortired gain from Druce Mansheld Plant sale . 227,380 236,835 Accumulated deferred rents for Bruce Mansheld Plant and Beaver Valley Unit 2 . 66,888 57,843 Other . . . .. . 36,546 27,578 1,204,317 1,065,161 Total Capitalization and Liabilities . $ 4,014,51] $4,00L518 s
11
int roui,o unwn comni Statetnent Of Cutnulative Preferred Stock ,, , , , ,
1991 Shares Current DJP.2"I*' 31' Outstanding, Call l'nce 1991 1990 (thouunds of tbilars)
I $100 par value, 3,000,000 preferred shares authorized an.1 $25 par value.
12,(VK),000 preferred shares authorized Subject to mandatory redemption:
$100 par $11.00 . 24,825 $101 (K) $ 2,483 $ 3,483 9.375 133,450 103 46 13,345 15,010 25 par 2.81 . . 2,000,000 26.56 50,000 :.0,(xx1 65,828 68,493 1.est Current maturities 2,165 2,165 Total Preferred Stock, tvith hiandatory Redemptiort Provisiorts $j3f63 g 33 Not subject to mandatory redemption:
$100 par $ 4.25 . . 160,000 104 625 $ 16,000 $ 16,000 4.56 . . 50,003 101.00 5,000 5,000 4.25 . . 100,(KK) 102.00 10,000 10,000 8.32 . . .. 100,000 102 46 10,000 10,(KK) 7.76 150,000 102.437 15,000 15,000 7.80 150,(KK) 101 65 15,000 15,000 10.00 . . 190,0(X) 101.00 19,000 19,000 25 par 2.21 .. . . 1,000,000 25.25 25,000 25,000 2.365 . , 1,400,00() 2645 35,000 35,000 Serie A Adlustable 1,200,000 2535 30,000 30,0(e Series B Adjustable 1,200,000 1535 30,000 30,000 Total Preferred Stock, tcithout hiandatory Redemption Provisiorts $ 210,000 $210.txx)
The accompanying notes and summary of signihcant accounting policies are an integral part of this statement.
. e 12
Notes to the Financial Staternents (1) PROPLitTY OWNLD WITil OTilER UTILITIES AND INVLS10RS The Company owns, as a tenant in (ommon with other utilities and those investors who are ownertarticipants in various sale and leaseback transactions (Lessors), certain generating units as hsted below. Iath owner owns an undivided share in the entire umt. Each owner has the right to a penentage co the generating capabihty of each unit equal to its ownership share I ach utility owner is obligated to pay for only its respective sha+e of the construction and operating, costs Lath 1.essor has leased its capacity nghts to a utihty whh h is obligated to pay for such Eessor's share of the wnstruction and operating wsts 1he Companyi share of the operating costs of these generatmg units is in(luded in the income Statement. Property, plant and equipment at December 31,1991 includes the following facdities owned by the Company as a tenant in cemmon with other utihties and Less. ors:
ow nen constnn imn in (h ner stop l'la nt Work m bef % K e stop Mena Power m Pror.tm and Anumulated Generanntilmt Date Share w aus bount Sm n e Susppi Qp won
[n % ,. (thousands of dollan)
Das n Drsw 1977 4"e2% 429 N ui tcar 6 661371 5 134% $13M304 Perry t!mt I and Comrnon f anhnes lW7 19 91 m Nutirar 923303 1.4 % 119 374 Deaser Valley li tut 2 and Common laubten (Note 2) . IVs? I 6s 11 Nuticar lH W 1 h4M 23.1 0
~
Constru tion Suspended Perry IJnit 2 (Note 30 )) . linartam 19 91 240 Nudcar -
342 767 -
$1773 6% SP93%7 5281 2 ,11
= =a= c -
(2) UTillTY PLAWT SALE AND 1EASEllACK Tit ANSACTIONS As a result of sale and leaseback transactions Valley Unit 2 lease e $44,556,000 and completed in 1987, the Company and Clevtland $72,276,000, respectivel* 1 mounts charged to Electric are co> ssees of 18.26% (150 megawatts) of cycnse in excess of the sease payments are now Beaver Valley Unit 2 and 6 5% (51 megawatts),45.9% clawihed as accumulated deferred rents on the (358 megawatts) and 44 38 % (355 megawatis) of Balance Sheet. Previously, the excess was included in Units 1,2 and 3 of the Mansheld Plant, respectively, accounts payable.
all for terms of about 29% years. The Company and Cleveland Llectric are As co-lessee with Cleveland Electric, the Company responsible under these leases for paying all taws, is also obbgated for Cleveland Electric % lease insurance premiums operation and maintenance costs payments. Il Cleveland Electne is unable to make its and cil other similar costs for the i r interests in the payments under the Mansheld Plant leases, the units sold and leased back. The Company and Company would be obligated to make such payments. Cleveland Electric may incur additional costs in No payments have been made on behalf of connection with capital improvements to the units.
Cleveland Electric to date. T he Company and Cleveland Electric have options to Future minimum lease payments under these buy the interests back at the end of the leases for the operating leases at December 31,1991 are summarized fair enarket value at that time or to renew the leasc- -
as follows: Additional lease provisions provide other purchase v or options along with conditions for mandatory f or the cleveland termination of the leases (and possible repurchase of lgr Eomfany nenm the leasehold interests) for events of default. These naom.m* "' d"W events of default include noncompliance with several iw2 5 inum 5 63 000 hnancial covenants affecting the Company,
!N4 jjjj Cleveland Electric and Centerior Energy contairied in an agreement relating to a letter of credit issued in luvs num on IW6 111 M bum connection with the sale and leaseback of Beaver teer han 2 sem 15i6000 Valley Unit 2. as amended in 1989. See Note 10(d).
Total f uture Mm. mum The Company is selling 150 megawatts of its lease ravments . s1014m. 5.iM_ _I.M Beaver Vallev Unit 2 leased capacity entitlement to Semiannual lease payments conform with the we anticipate that it will continue et least until 1998.
payment schedule for each lease. Revenues recorded for this transaction were Rental expense is accrued on a straight-line basis $106.589.000, $102,773,000 and $104.127,000 in 1991, over the terms of the leases. The amounts recorded by 1990 and 1989 respettively. The future minimum the Company in 1991,1900 and 1989 as annual rental lease payments associated with Beaver Valley Unit 2 expense for the Mansheld Plant leases and the Beaver aggregate 51.869.000F00.
13
g (3) CONSTRUC110N AND CONTINGENCll.S for $3.324 AR The punhase does not signal any plans to resume wnstruction of Perry Unit 2 but tather an (a) CONSIRUC110N PROGRAM intent to Lt ep the various options open, Duquesne The estimated cost of the Company % construction had stats d that it would not agree to resumption of program for the 1992 1994 penod is $260RR000, construction of the unit.
mduding AIUDC of $12AR000 and culudmg if Perry Umt 2 were to be (anceled, then the nuclear fuel. Company's net imestment m the unit (lew any tas in an agreement approsed by the PUCO, the saving) would haw to be w ritten off, We estimate Company and Cleveland Llectric have agreed to hmit that such a wnte-oft, based on our investment in this their combined 1992 ather operation and unit as of December 31,1991. w ould bas e been about maintenance espenses and (apital expenditures to $171 AR0(0, af ter taxes. See N >tes 10(b) and (d) 51,050.000PR eulusive of compliance costs related for a discussion of potential wnsequences of such a to the Clean Air Act Within this limitation, tapital a nte off.
espenditures are budgeted at $59AR000 for the If a decision is made to convert Perry Umt 2 to a Company, esclusive of the Clean Air Act comphance nor.nuticar design m tbc future, we would espect to costs w rite off at that time a portion of our investment for nut: car plant wnstruction costs not transferable to the (b) Cil AN AIR !!GISlAllON nonnuclear construction project.
T he Clean Air Att will require. among other things, Deginning in julv 1935. Perry Umt 2 AFUDC was signihtant reductions in the emission of sulfur dioside credited to a deferred intome acwue.t untd January 1, and nitrogen osides by fossil fueled electric 1955, w hen the accrual of AFUDC was discontinued.
generatirg units.1he Clean Air Att will require that N bdO.U D, blM sulfur dioside emissions be reduced in two phases over a ten year permd The Comprehensive Environmental Response, Centerior Energy has developed a comphan(e Compensation and Liabihty Act of 1990 as amended strategy foi the Company and Cleveland Ilectric (Superfund) estat>hshed programs addressing the which will be submitted to the PL'CO for resiew in deanup of hazardous waste disposal si es. emergency Apnl IW2. Centerior Energy will also seek United preparedness and other issues. The Company is States Environmental Protection Agency approval of aware of its potential involvement in tne deanup of Phase i plans in 1993. Ou comphance plan would two hazardous waste sites. The Company has require capital expenditures for the Company over the recorded reserves based on estimates of its 1992-2001 period of approximately $35 000,0(O for proportionate tesponsibihty for the'e sites. We believe nitrogen oside wntrol equipment, emission that the ultimate outcome of these matters will not monitoring equipment and plant modihcations. In hase a material adverse effect on our hnanc.al addition, higher fuel and othcr operation and condition or results of operations maintenance espenses would be incurred. The rate increase associated with the Company's capital (4) NUCLEAll OPERATIONS AND expenditures and higher expenses would be less than CONTINGENCIES 2% over the ten year period.
Our hnal compliance plan will depend upon future W OPERATING NUCLEAR UNITS environmentJ regulations and input from the PUCO, The Company's intetests in nuclear umts may be other regulatory bodies and other concerned entities. impacted by activities or events bevond its wntrol.
We believe that Ohio law permits the remvery of Operating nuclear generating units have esperienced compliance costs from cupomers in rates. unplanned outages or extensions of s(heduled
""'# W '#"~" 'H"W '"' Y ~ "" " "'"
fc) PfRRY UNIT 2 regulatory requirements. A major accident at a nuclear Perry Unit 2, including its share of the common facility anywhere in the world could cause the NRC facilities, is approsimately 50% comph te. Construction to lim'it or' prohibit the operation, construction or of Perry Unit 2 was suspended in 1485 pending future licensing of any nuclear unit if one of our nuclear consideration of various options, including units is taken out of service for an extended period of resumption of full wnstruction with a revised time for any reasoci, induding an accident at such estimated cost, conversion to a nonnudear design, unit or any other nudear facihty, the Company sale of all or part of our ownership share, or (annot predict whether regulatory authorities would cancellation. No option may be implemented without impose unfavorable rate treatment such as taking our the unanimous approval of the owners. In October affected unit out of rate base or disallowing certain 1991, Cleceland Electric, the cempany responsible for construction or mainte-ce costs. An extended the construction of Perry Unit 2, applied for a ten- outage of one of our m car units coupled with year estension of the construction permit which was unfavorable rate treatment could have a matenal to espire in November 1491. Under NRC regulations. adverse effec' on out tinancial poution and results of the wnstruction permit will remain in effect ahde operations.
the application is pending. We espect the NRC to grant the estension. R) NLCIEAR INSURANCE in Februaiy 1992, Cleveland Flectric purchased The Price Anderson Act hmits the liabihty of the Duquesne's 1334% ownership share of Perry Unit 2 owners of a nuclear power plant to the amount 14
provided by private insurame and an industry $71 A)0.0tR $33,000,000 and $15,000.000, respec tively, assessment plan. In the event of a nuclear incident at as of December 3L 1991. The nudear fuel amounts any unit in the United States resulting in losses in financed and capitalized also included interest excess of the level of private insurance (eunently charges incurred by the lessors amounting to
$200,000,000), the Company's masimum potential $9,000.000 in 1991, $14,000,000 in 1990 and $19,000,m)0 assessment under that plan (assuming the other in 1989. The estimated future lease amortiration CAPCO companies were to contribute their payments based on projected consumption are proportionate share of any assessment) womd be $45,000.000 in 1992, $45 000,000 in 1993, $40.000.R10 in
$58,503m) (plus any inflation adjustment) per 1994, $34.000,000 in 1995 and $35.000,000 in 1996.
incident, but is limited to $8S44,000 per year for each nuclear incident. (6) IIEGULATORY MATTERS The CAPCO companies base insurance coverage for damage to property at the Davis Bewe, Perry and On January 3L 1989, the PUW iaued a rate order Beaver Valley sites (including leased fuel and clean. which provided for three annual rate inacases for the up costs). Coverage amounted to $2,515,000,000 for Company of approximately 9% 7% and 6% effe(tive each site as of January 1,1992. Damage to property with bills rendered on and after february L 1989, could exceed the insmance coverage by a substant'ial 1990 and 1M respechely. As do.cuwed below, the amount. If it does, tr ompany's share of such 6% increase effettivt februa y 1,1991 was reduced to 2.74% for the Company, which later waived its 2.74%
euess amount could have a material adverse effect on its fmancial condition and results of operations. rnacase and reduced its rates on two occasions in The Company also has estra espense insurance 1991 for certain customers. The resulting annualized revenue increases in 1989,1990 and 1991 associated coverage which includes the incremental cost of any with the rate order were $50,700 000, $44,330A)0 and replacement power purchased (over the costs which' would have been incurred had the umts been IWEM R'spectively. The $1,600,000 increase in 1(#91 mflects the net of $18,600,000 of annualized operating) and other intidental expenses after the occurrence of certain types of accidents at our nuclear revenues authorized for the 2.74% increase less units. The amounts of the coverage are lomo of the $1 M O W 0 for te waiver and rate reductions.
estimated estra esperse per week during the 52-week Under the January 1959 rate oruer, a phase-in plan period starting 21 weeks after an accid [nt,67% of
- M 8d*M N0" *EN3">WPW such estimate per week for the nest 52 weeks and 33% with then-projected sales growth, would provide of such estimate per week for the nest 52 weeks. The revenues sufhcient to recover all operating expenses amount and Guratica of estra espense could and provide a fair rate of return on the Company's substantially esceed the insurance coverage. alhmed investment in Perry Unit 1 and Beaver Valley Unit 2 for ten years beginning.lanuary 1,1989. In the (5) NUCLEAll FUEL hrst hve years of the plan, the revenues were The Company has inventories for nuclear fuel which npected to be !ess than that required to tecover should provitie an adequate supply into the mid. operating expenses and provide a fair return on investment. T herefore, the amounts of operating 1990s. Substantial additional nuclear fuel must be obtained to supply fuel for the remaining useful lives npenws and return on investment not currently of DavivBesse, Perry Unit 1 and Beaver Vallev Unit maured are deferred and capitalbed as deferred
~
- 2. More nuclear tuel m uld be required if Perry Unit charges. Since the unrecovered investment wdl decline over the period of the phase in plan because 2 were completed as a nuclear generating unit.
In 1984, existing nuclear fuel hnancing cf depreciation and deferred fedeial income tases arrangements for the Company and Cleveland Electric that result from the use of accelerated tas depreciation, the amount of revenues required to were tehnanced through leases from a special, purpose corporation. The total amount of hnancing pmddy a fair return also declines Pursuant to such phase-m plan, the Company deferred the following:
currently available under these lease arrangements is
$509,000,000 ($309.000,000 from intermediate term 1*l 1*o 1**
notes and $200,000,000 from bank credit oh=nd$ hlW arrangements), although fmancing in an amount ap Defened operanng LArenu 6 5swo 516 wa $228 to $900,000,000 is permitted. The intermediate-term canyng chamet notes mature in the period 1993-1997. The bank credit %. 5owo 52 uni $mou arrangements are cancelable on two years notice by 14"4 IM 2113 51 691 the lenders. As of December 31,1991, $39,000 000 of $2196 50 W 582.N*
~~ ~~
nuclear fuel was fmanced for the Company. The Company and Clevelard Electric severally lease their The amount of deferred operating expenses and respective portions of the nuclear fuel and ate carrying charges schedubd to be recorded in 1992 and obligated to pay for the fuel as it is consumed in a 1993 total $33,000 000 and $15,000,000, respectively.
reactor.1he lease rates are based on various Beginning in the sixth year (1994; and continuing intermediate term note rates, bank rates and through the tenth year, the revenue hvels authori/ed cot, mercial paper ra'es. pursuant to the phase-in plan were designed to be lhe amoents hnanced include nuclear fuel in the suf6cient to recover that period's operating espenses, Davis-Besse, Perry Unit 1 and Beaver Valley Unit 2 a fair return on the unrecovered investment, and the reactors with remaining lease payments of amortaation of the deferred operating expenses and 15
carrying charges recorded during the earlier years of alimination of the 274% rate increase effectiw the plan. All phase in deferrals relating to these two February 1,1991 for all residential and small units wdl be amortbed and recovered by December commercial customers. a reduction in residential rates 31,1998. of 3% on Man h 1,1991 and a faither residential rate The phase-in plan was also designed w that reduction of 1% on September 1.1991. Commumties fluctuitions in sales should not affect the level of accepting the package agieed to keep the Company as camings. The phase in plan permits the Company to their sole .upplier of ele (tricity for a period of hve request PUCO approval of increases or decreases in years. The package also pernuts the Company to the phase in plan deferrals to compensate for the adjust rates m those communities on february 1,1994 effects of fluctuations in sales lesels, as compared to and February 1,1945 if inflation exceeds specihed the les els projected in the rate order, and for 50% of levels or under emergency conditions. All eligible
- the :: it af ter-tas savings in 1989 and 1440 identihed by communities in the Company's service area, except the mmagement audit as discussed below. Pursuant the City of Toledo. accepted the rate reduction to these provisions of the order, the Company package. In March 1991, the Company obtained recorded no adjustment to the cost deferrals in 1989 PUCO approval to reduce rates to the same levels for and recorded adjustments to redute its cost deferrals the same customer categories in the City of Toledo by approximately 514,000,000 in 1940 and to mercase and the rest of its service area. Annuali7ed revenues its cost deferrals by approximately $3,200.000 net in were reduced by about 517,000,000 as a result of 1991. The 53,200,000 net increase in 1991 included a these rate reduction packages. The revenue reductions 54 000.000 increase for an adjustment of 1940 cost do not adversely affect the phase-in plan as the deferrals and an 5800,000 reduction for the decrease in revenues is mitigated by the cost adjustment of the 1491 cost deferrals. reductions resulting from the management audit.
In connection with the 1989 order and a similar The 1989 order also set nuclear performance order for Cleveland Electric, the Company, Cleveland standards through 1998 We could be required to Electric and the Service Company have undergone a refund incremental replatement power costs if the management audit, which was completed in April standards are not met. No refund was required in 1991 1990, The audit identihed potential annual savings in nor is one espected for 1992. The Cormpany banked operating espenses in the amount of 598,160,000 $1,300,000 in benents in 1991 for above average from Centerior Energy's 1989 budget level, 45% nuclear performance based on industry standards for (544,172.000) for the Company. The Company operating availability estabhshed in the 1989 order.
realized a large part of the savings in 1991. These banked benehts are not recorded in the Fifty percent of the savings identified by tht- hnancial statements as they can only be used in future management audit were used to reduce the 6% rate y ears. if necessary, to offset disallowances of increase scheduled to be effective on February 1,1991 incremental rcplacement power costs.
for the Company. As discussed previously, our rates Under the 1989 order, fossibfueled power plant increased 214% under this provtsion with the peiformance may not be raised as an issue in any rate PUCO's approval proceeding before February 1944 as long as the in late 1990 in a move to become more competitive Company and Cleveland Electric achieve a in Northwest Ohio, the Company proposed a rate systemwide avadability factor of at least 64.9%
reduction package to all incorporated communities in anmully. This standard was exceeded in 1989,1940 its service area which are served exclusively by the and 1"91, with availabihty at approximately 80% for Company on a retail basis. The package called for the each year.
16
(7) rEDEllAL INCOME TAX lederal income tax, computed by multiplying in(ome before taxes by the statutory rates, is reconciled to the amount of federal income tax recorded on the books as follows:
f or the 3 cars ended Dnemtwr 31.
lW1 IWO jus 9 (thausands of dollars)
Itook income before lederal income Tas . $ 87Rik 5 93 N01 $151.%26 Tas on thiok inwmc at Statutor) I aie . $ 29,7K, $ 31 F92 $ $1319 innease (Dencaw) in Tas.
Auelerated deprectanon. 2.k57 (k%3) 5 W3 inmtment tas tre. hts on dmallowed nuticar plant -
(18 810) -
Taws other than federal income tases . (6921 t 2 647) (107)
Other items - 6043 2.M 1 443 Total f ederal inwma las I sperae. $ 37 W5 $ 12.377 t N4 648
== == -
lederal income tax expense is record..>d in the income Statement as follows:
f or the yer nded Dnember 31.
lW1 IWO 19't9
, (thousands of dollars)
Opcianng I- lpi nws- ,
Current Tax Provision . . JC . i . . . . $ 13.946 $ 17.045 $(llA58)
Changes m Atrumulated tieferred lederal Income lat Auclerated depredation and amortiranon. 8315 1380 14,764 Allematne rnmimum tas credit . (43 633) (5 480) 21 291 Sa!c and leawbmk transactior.s and amortinuon 12.682 5.121 4%
Property las espenw. -
(4.011) -
Ikaniuired delit costs . . 6,674 (532) (378)
Deferred conuruction work in progress revenues. 8.4 % 9.393 11.726 Defened het awts. ( 3.6N9 ) (4.021) f,1229)
D vis Besw replatemer t power . .- -
5.055 Other items . . 1.33M 7k4 1.337 Investment Tas Credits 27.4%I .162 1.722 Total Charged to Operaung 1.spenses. 31 767 .t.041 372M Nonopuating Inwme:
Current Tas Provision. ... .
(37.677) (It!]42) (10.129)
Changes in Arnimulated Deferred f ederal Income Tas:
Wnteuff of nuclear tosts . (180) (10 157) --
AfUDC and carrying charges . 9M 16 835 32.930 Net operating kws carryforward . 3%014 - -
Other items . 71 2 400 (1 238) lotal fspeme (Credit) ru Nonoperat ng inwme . 6228 (R 664 ) 21363 Total interal income Tas Espenw. 4 5 37W.
-. - $ 12_.377
-- - 5._5 u4. _8 The Company joins in the filing of a consolidated federal income tax return with its affiliated companies. The method of tax allocation reflects the benef ts and burdens realized by each company's participation in the consolidated tax return, approximating a separate return result for each company.
Federal incorre tax expense adjustments in 1990, associated with previously deferred investment tax credits relating to the 1988 write off of nuclear plant investment, decressed the net tax provision related to nonoperating income by $18,810,000.
The favorable resolution of an iwue concerning the appropriate year to recognize a property tax deduction resulted in an adjustment which reduced federal income tax expense in 1990 by $3,911,000 ($2.168.000 in the fourth quarter).
For tax purposes, net operating loss (NOL) carryforwards of approximately $1M,049.000 are available to reduce future taxable income and will expire in 2003 through 2005. The 34% tax effect of the NOLs generated is
$55,777,000 and is reflected as a reduction to deferred federal income tax relating to accelerat< .1 depreciation and amorti7ation. Future utilization of these tax NOL carryforwards would result in recording the related deferred taxes.
The 1986 Tax Act provides for an AMT credit to be used to reduce the regular tax to the AMT level should the regular tax exceed the AMT AMT credits of $27,822.000 are wailable to offset future regular tax. The credits may be carried forward indefmitely.
17
1he settlement (discount) rate assumption was (8) RETIREMENT INCOME PLAN AND 8.5% for both December 31,1991 and December 31, OTilER POSTRETIREMENT llENEFITS 1990. The long term rate of annual compensation h) REllREMENT INCOME PIAN increase assumption was 5% for both December 31, 1991 and December 31,1990. The long term rate of The Company sponsors a noncom- utmg penuon return on plan assets assumption was H.5N in 1991 plan which covers all employee groups. T he amount and 8% in 1990.
of retirement benents generally depends upon the Plan assets consist primarily of investments in length of service. Under certain circumstances. common stock, bonds, guaranteed investment benehts can begin as early as age 55. The plan also contracts, cash equivalent securities and real estate.
prosides certain death, medical and disability benehts.
The Company's ftmding policy is to comply with the @) OTHER POSTREllREMENT BENITlTS Employee Retirement income Security Act of 1974 '
he Fmancial Accounting Standards Board has issued guidelines. a new accounting standard for postretirement in 1990, the Company offered a Voluntary Early benehts other than pensions. The new standard Retirement Opportunity Program (VEROI ). would require the acuual ef the expected cost of suc h Operating espenws for l'990 included $7,000,000 of benehts during the employees years of service. The pension plan accruals to cover enhanced VEROP benehts plus an additional $8,000,000 of pension costs assumptions and calculations involved in for VEROP benchts paid to retirees from corporate determining the accrual dosely parallel pension funds. The $8Kio.000 is not included in the pension dC"mnhng requinwnts. ,
Ihe Company currently provides certam data reported below. Operating expenses for 1990 also included a (redit of $5,000.000 resulting from a postretirement health care, death and other benetits and npenws such costs as these benehts are paid, settlement of pension obligations through lump sum which is consistent with current ratemaking practices.
payments to a substantial number of VEROP retirees. c>uch costs totaled $3,700,000 m 1991, $3,000,000 m Net pension and VEROP costs for 1989 thmugh M and $2,22000 'n 1989, which mclude medical 1991 were compnsed of the following components: benehti of $3,100,000 m, 1991, $2,400,000 m 1990 anu, MI " W $2,100,000 in 1989.
rennon costs
("^"""'"'"'") The Company expects to adopt the new standard serme nwt for benehts earned prospectively effective January 1,1993. We plan to dunng the pniod. . . $ 5 $ $ $ 4 amorti7e the discounted present value of the Interest uwt on proietted twneht accumulated postredrement beneht obligation to At al t trk on plan aswts . (.1) (1 ) expense over a twenty-year period The Company has Net amortiratmn and deferral . 15 J15) 4 engaged actuaries who have made a preliminary Net penson awts. U 3 t review using 1990 data. Based on this preliminary review, the accumulated postretirement beneht VE ROP cost. - 7 -
oNi m n M he r 3L 199L muW in settlement gam _- 25) _- accordance with the new standard, is estimated in the Net costs . $ 1 $ 5 $ 1 range of $65,000,000 to $100,000.000. Had the new standard been adopted in 1991, the preliminary study The following table presents a reconciliation of the idicated that the additional postretirement beneht .
funded status of the plan at December 31,1991 and cost in 1991 would have been in the range of j 999, 58,000,000 to $14,000,000 (pretax). We believe the a nec,miy, 33, effect of actual adoptwn in 1993 may be similar, m m although it could be signihcantly different because of changes in health care costs, the assumed health care (milhons of dollars) cost trend rate, work force demographics, interest Act 41 prewnt value at leneht rates or plan provisions between now and 1993.
Vested twneh's . $ 92 $101 The Company does not know what action the Nons ested tynchts . 10 6 PUCO may take with respect to these incremental Atoimulated twncht obhgatmn 102 107 costs. However, we believe the PUCO will either Etiett of future compensation allow a means of current recovery of such incremental le"l$ 34 22 costs or provide for deferral of such costs until Total projected bent ht obhgation. 136 129 recovered in rates We do not expect adoption of the plan as-ts at fair market ulue 172 151 new standard to have a matcrial adverse effect on Surplus of plan aswts over proncted our hnancial condition er results of operations, twncht obhgation . 36 22 Unrecogntied net gam due to vanan(c between assumptions and expenente . (40) (24) (9) GUARANTEES Unrecognized prior service t' twt . 5 5 Transmon asset at January 1.19U Under a long term coal purchase arrangement, the being amortired over 19 years . J14 J19) Company has guaranteed certain loan and lease Net aarued pennon habihty obligations of a mining company. This arrangement included in other deferred requires payments to the mining tempany for any credits on the Balance Shcet . $(17) $(13) actual out of pocket idle mine expenses (as advance 1
18
payments for coal) when the mines are idle for Under its articles of inwrporation, the Company reasons beyond the control of the inining company. cannot issue p:eferred stock unless cettain earnings At December 31, 1991, after giving effect to a coverage requirements are met. flased on earnings refmancing completed on January 2,1992 by the for the 12 months ended December 31.1991,the mining company, the principal amount of the mining Company could not issue additional preferred stock.
companyiloan and lease obligations guaranteed by The issuance of additional preferred stock in the the Company was $24,000,000. future will depend on earnings for any 12 consecutive months of the 15 months preceding the date of issuance, the interest on all long term debt (10) CAPITAllZATION outstanding and the dividends on all preferred stock issues outstanding.
(a) CAPITAL. STOCK TRANSACTIONS Preference stock authorized for the Company is Preferred stock shares retired during the three years 5,000.000 shares with a $25 par value. No preference ended December 31,1991 are hsted in the followmg a ne currendy outstanding. There are no table.
uyi m inw restrictions on the Companyi abili:y to issue phousands of shares) preference stock.
With respect to dividend and liquidation rights, the Curnulatne Prefened Stod Sutyrt to Mandatory Company's preferred stock is prior to its preference Erdemption-stock and common stock, and its preference stock is
$100 par $11110. (10) (10) (5) prior to it.4cominori stock.
9375 (17) J7) _ (17)
Tot *\ 2) JD .2) td) LONG TERM DEBT AND OTHER BORROWING ARRANGEMENTS (b) EQUITY DISTRIBUTION RES1RIC110NS Long-term debt, less current maturities, was as At December 31, 1991, retained earnings were follows:
$89,924,000. Substantially all of the retained earnings g,^ $,'j y twember 31.
were available for the declaration of dividends on the car of statunty interest R3te 1991 1990 Companyi preferred and common shares. All of the cheusands of dollar,)
Com, 7"i common shares are held by Centerior nrst mortgage tende Energy. A writemff of the Companyi investment la 1995. 11.25 % $ - $ 60 0 %
Perry Unit 2, dy ,ading upon the magnitude and IW6. 9375 100.000 100.000 timing of such a write off, could reduce retained IW74001 7 65 66378 66378 2002 2006 . 8 62 111,725 111,72.5 camings stificiently to impair the Companyi ability 51,900 51,900 2007-2011 9.62 to declare dividends. 2017 4 021 m 67300 67,E Any fmancing by the Company of any of its 20 03' * " '# "7'#
nonutility affiliates requires PUCO authorization 545,103 605,103 unless the fmancing is made in connection with Tenn bank imns due transactions in the ordinary course of the Companyi public utilities business operations in which one de t rm notes company acts on behalf of another. due 1993-2021 9.06 134,500 -
Notes due 1993-199) 11 01 102.142 219,430 Debentures due 1997 11.25 125.000 125.000 (c) CUMUIATlVE PREEERRED AND PREEERENCE 370CK rollution control notes Amounts to be paid for preferred stock which must be redeemed during the next hve years are $2.000.000 m, gI* [' "_"
I
$I 1992 and $12,000J)00 in each year 1993 through 1996 ["NC"" $1.15 550 $1.097326 The annual mandatory redemption provhions are as follows: Long term debt matures during the next five years ~
Y,*'iC g%nning p""y as follows: $121,000,000 in 1992, $47,000,000 in 1993, in sbare $47,000,000 in 1994, $72J)00,000 in 1995 and
-Redeemed
$192JK)0,000 in 1996.
p,g y,a
$100 par $1uo. spoo 1979 $100 in 1991, the Company issued $134,500000 n 7s towso 1%s no aggregate principal amount of secured medium-term 25 par 2 81. wo.ooo tw3 :s notes. The notes are secured by hrst mortgar,e bonds.
At December 31,1991, the Company has $15,500,000 The annualized cumelative preteired dividend aggregate principal amount of secured medium-term requirement as of December 31,1991 is $25,000,000. notes registered with the SEC and available for The preferred dividend rates on the Company's issuance.
Series A and B fluctuate based on prevailing interest The Company's mortgage constitutes a direct hrst rates and market conditions, with the dividend rates lien on substanttally all property owned and for these issues averaging 8.82% and 9.67%, franchises held by the Company. Escluded from the respectiven, in 1991. lien, among other things, are cash, securities, 19
accounts receivable, fuel, supplies and automotive Most borrowing arrangements under the short-equipment. term bank lines of credit requite a fee of 0 25% per Additional hrst mortgage Imnds may be issued by year to be paid on any unused portion of the lines of the Company under it, mortgage on the basis of credit. l'or those banks without fee requirements, the bondable property additions cash or substitution for average daily cash balance in the Company % bank refundable hrst mortgage bonds. The issance of accounts satished informal tompensating balance additional hrst mortgage bonds on the basis of arrangements.
property additions is limited by two provisions of cur At Decerober 31, 1991, the Company had no --
mortgage. One relates to the amount of bondable commercial paper outstanding, if wmmercial paper property available and the other to earnings coverage were outstanding. it would be backed by at least an of interest on the bonds. Under the more restrictive equal amount of unused bank linea of credit.
of these provisions (currently, the earnings coverage test), we would have been permhted to issue (12) CilANGES IN ACCOUNTING l'OR approximately $164.000,000 of bonds at an assumed NUCLEAR l'LANT DEPRECIATION interest sate of 11% based upon available bondable property at December 31,1991. The Company also in June 1991, the Company changed the method used would have been permitted to issue approximately to accrue nuclear plant depreciation from the umts-
$186,000,000 of bonds based upon refundable bonds at of production rnethod to the straight line method :
December 31,1991. If Perry Unit 2 had been canceled retroactive to January 1,1491. The good performance and written off as of December 31,1991, the amount of the nuclear generating units over the past several of bonds which could have been issued by the '
years had resulted in units of production Company would not have changed. depreciation expense being signincantly higher than Certain unsecured loan agreements of the the amount implicit in current electnc rates. The Company contain covenants relating to capitalization straight-line method better matches revenue and ratios, earnings coverage ratios and limitations on expense, tends to levelite periodic depreciation secured hnancing other than through hrst mortgage expense for nuclear plant and is more consistent with bonds or certain other transactions. An agreement industry practice.
telating to a letter of credit issued in connection with The PUCO approved the change and authorized tiv ule and leaseback of Beaver Valley Unit 2 (as the Company to accrue depreciation for its three amended in 1989) contains several hnancial operating nuclear generating units at an accrual rate of covenants affecting the Company, Cleveland Electric about 3% of plant investrnant based upon the units' and Centerior Energy. Among these are covenants forty-year operating licenses from the NRC. This relating to earnings coverage ratios and capitalization change in method decreased 1991 depreciation ratiox The Company, Cleveland Electric and expense $13.949.000 and increased 1991 net income Centerior Energy are in compliance with these $10,995,000 (net of $2,954 000 of income taxes) from covenant provisions. We believe these covenants can what they otherwise would have been.
still be met in the event of a write-off of 'he in December 1991, the PUCO approved a Company's and Cleveland Electric's investments in reduction in the straight line depreciation accrual rate Perry Unit 2 barring unforeseen circumstances. from about 3% to 2.5% for each of the three operating nuclear units retroactive to January 1,1991. The m.,
(11) SilORT-TERM llORROWING Company believes the lower depreciation accrual rate W' ARRANGEMENTS is appr priate and reduces cembined annual 6 depreciation expense to a level more closely aligned The Company had $70,400.000 of dank lines of credit with the total amount carrently being recovered in arrangements at December 31,1991. There were no customers' rates for these units. This cMnge in rate borrowings under these bank credit arrangements at decreased 1991 depreciation expen< 33,000 and December 31,1991. increased 1991 net income $7,41. ' net of Sho.t-term borrowing capacity authorized by the $2.040,000 of income taxes) from wh. -y otherwise PUCO is $150.000,000 for the Company The would have been.
Company and Cleveland Electric hase been Depreciation expense recorded in prior years was authorized by the PUCO to borrow from each other not affected. Current electric rates were also on a short-term basis. unaffected by the PUCO orders.
N N
20
(13) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a tabulation of the unaudited quarterly results of operations for the two years ended December 31,1991.
Quarters l'nded Mars h 31. June M yM Dec 31.
(thousands of dollars) 1991 Operating Revenues. .
$212,930 $221,576 $23S,271 $208,481 Operating income. 36.807 42.428 42,307 38,639 Net income 12,341 14.210 14,49S 8,564 Eamings Available for Common Stock . 6.096 8,009 8,318 2,398 1990 Operating Revenues. $21 ,622 $210.412 $237,872 $204.267 Operating income. . 38,732 28.259 39,433 45,862 Net income 21,604 26.971 19,420 13,429 Earnings Available for Common Stock 15,357 20,660 13,109 7,139 Opera'ing revenues for the hrst three quarters of 1991 and the four quarters of 1990 were restated to comply -
with current IERC revenue reporting requirements, as discussed in the Summary of Sigm6 cant Accounting Policies. This restatement had no effect on earninp results for the applicable quarter. The unaudited quarterly results for the quarter ended March 31,1991 were also restated to reflect the change in accounting for nuclear plant depreciation to the straight-line method (at about a 3% accrual rate) as discussed in Note 12.
Earnings for the quarter ended December 31,1991 were increased as a result of year-end adjustments. A
$9,453,000 adjustment to reduce depreciation expense for the year for the change in the nuclear plant straight line depreciation rate to 2 5% (see Summary of Significant Accounting Pohcies and Note 12) was partially offset by an
$804,000 reduction in phase in carrying charges for the adjustment to 1991 cost deferrals (see Note 6). The total of these adjustments increased quarterly camings by $6,882,000.
Earnings for the quarter ended June 30,1990 were increased as a result or feoeral income tax expense adjuoments associated with deferred investment tax credits relating to the 1988 write-off of nuclear plant investment. See Note 7. The adjustments increased quarterly earnings by $17,907,000.
Eamings for the quarter ended December 31,1990 were decreased as a result of year-end adjustments. A
$13,933,000 reduction in phase-in carrying charges for the adjustment to 1990 cest deferrals (see Note 6) was partially offset by adjustments of $7,760.000 to reduce depreciation espense for the year for the change in depreciation rates for nonnuclear and Davis Besse property (see Summary of Significant Accounting Policies) and
$2,168,000 to reduce federalincome tax expense (see Note 7). The total of these adjustments decreased quarterly eamings by $2,000.001 21
Financial and Statistical Review Operating Revenues (thousands of dollars) i i Steam T otal
- Total lotAl heanng Operating Year Reudential - Commernal induntnal Othen Netail Wholesale (d) l lednc & Gas Revenues ,
1991. . . $229 840 183 323 236 049 90 919 740 33! 146 927 887 258 -
$887 258 {
223 920 174 540 215 578- N 535 713 573 149 600 863 173 - M3173 i 1990.
1989.. , 215 932 163 991 226 680 99 451 706 054 159 569 865 623 - 8td 623 r 1988. 200 916 142 696 199 521 34 961 578 094 71 663 649 957 - 649 957 l 1981. , 200 877 142 365 219 048 27 646 590 006 42 476 632 482 - 632 482 l
1451. 138 781 40 863 151 $30 32 253 413 436 47 427 460 863 7 ul 468 294 Operating Expenses (thousands of dollar >)
Other fuel & Oprration Depreciation T aws. l'hase-m & Tederal Total Purt hawed & & Other Than Pre phase m Inmene Og erstmg icar Pcwre(a) Mamirnarwe Amortisatu.n HT Deferred Net lases I.spreiws 1991. $177 642. 355 728 72137(b) BB 6$6 1 147 31 767 $727 077 1990. 174 304-~ 373 374 72 tc7 79 320 (9 784) 21 041 710 887 1989 172 220 372 510 M 057 72 123 ~ (15 753) 37 2M 723 462-198R. .. 138 121 358 623 75 093 8013H (83 813) 29 242 597 604 1987. . . 167 621 223 307 65 503 59 658 (39 797) 22 747 499 039 !
19614. . 148 452 95 884 -
43 427 - 36 699 - 40 842.- 365 304 - -
Income (Loss) (thousands of dollars) ,
Federat i Other Irwome incorne l Irmwne & Ta mes- lictore J
- Operstmg AfUDC- Dedadions. Cartpng Credit interest ,
year _ fncswne Equity Net Charges (hpense) . Charges .
- e 1.991 . . . . $160181 1499 3 628 21 986 (6 228) $181066
-1990. . 152 286 3 352 6 305 43 487 8 664 214 094 1989. . . 142 161 8 568 20 517 . 82 308 (21 563) 231 991 1988. . 52 353 5 452 (246 722)(c) 120 632 86 244 26 939 1987. 133 443 122 138 tit. 904 ) 14 989 42 726 2 % 392 h
1981. . 102 990 32 498 8 852 -
9 616 - 153 956
.. .. ..... .. ... ....,.. 4 . . ., .. . .. . . . .. . . . . . .. . . ... . . . . . ;
income (Loss) (thousands of dollars) income (Ims) Cumulatwe Before Lticci of an Earnugs Cumulanve Accountmg (las)
Llied cd an Charge or Nrt Prefernd Avadable Debt A!LDC+ Account.ng Estranrdmary inm me 5tmk for Common
, . Yew Interest De+t Change Gam (tvs4 (hidende Stock i 1991.... . $l32 399 .(946) 49 613- -
- 49 613 24 792 $ 24 821 J 1990, 135 344 (2 674) 81 424 - 81 424 25 159 $6 265 1989.. 144 792 (5 479) 92 678 - 92 678 25 390 67 288 1988.. . 150 523 ' (1833) (121 731) 6 2N(d) (115 452) 26 h3 (142 435) ;
1987. 185493: (54 272) 165 171 ~ 165 171 42 749 . 122 422 l 1981, 86 310 - (15 491) - 83 137 10 807(r) 93 944 23 542 70 402 (a) Wholer. ale revenues, fuel and purchased power, wholesale electnc sales and purchased power amounts are restated for 1940 and prior years to reflect a change in reporting of bull power sales transactions in accordance with ITRC requirernents.
' (b) In 1NI, a change in accounting for nuclear plant depreciatmn was adopted, changing from the units-of production method to the straight hne methat at a 2.5% rate.
(c) includes write off of nuclear mts in the amount of $276.955.000 in 1988.
(d) In 19bd. a change in the method of accounting for unbilled revenues was adopted.
a
- 4. . . . .
- 22 Y -+-a pe.-q.y .-m-rc -v..---mv1..--e-.mg.--q----eym,p- y y ygy y y y> p ygy-, 9w.- p9 ,. v-t-W'r-- y he +9y ~7
-apwy.,w-y-. e-=.y ,.r 7 y9 fee- 1.y'u-.-wr:=+y-
THE 101100 Il'ISON COMPA%
flectric Sales (millions of KWH) Ilettric Customers (year end) Residential Usage Ausge Average Aieraye Prit e- k n e'nur Indour.al k u li Por Per its j iear E.%ier tial G.rnmer c ial indwitnal h holesale f a ) (1t her t ot al Reude ntial C omet.e n tal di (1*ncr 1 mal ( uournc- khH l. tsi.tomer 199). 2 041 1 683 3 543 ? 587 482 10 33b 254 500 2b 044 4 444 284 988 I 990 11 2td $b9? 4) 1+r 194 1 614 3 617 2 333 496 10 010 251 96% 2" '22 45;5 2*4 342 7 642 11 48 M2 49 1999 2 017 1 622 3 740 3lb 49% 11 012 2%3 234 25 0 4 414 281 471 7 uw9 10 71 855 21 19 9 2 (w8 1 579 37&i 2 044 474 9 945 251 Sun 25 Nei 4 102 2k1218 8 264 9 72 N12 87 1987 i 977 1532 3 5N9 16tO 44 9 222 249 344 2% 170 4 055 278 599 7 969 10 16 809 66 1981 I91V 1294 30%0 1 Sk; 409 k287 241 663 3 573 3 844 269 0$0 7 9th 7 23 57595 l oad (MW & 'v.1 fnergy (million4 of kWil) fuel 0;wrabic n't h Peak Capartty lead C "*Pd" f""*"ated Pun hased f uel Gnt i r har of Peak l oa.!
. Maron f actor losul N ui lcar 1 o941 Power (cl l etal Per kh H kWH 1991 1 758 1 510 14 1 % 04.5"i 4 848 6 003 10 851 95 10 946 I.44t 10 327 1990. I ?$2 1 516 13 5 63 0 5$M 4 219 97%4 . 10 6%#i 1.50 10 220 1989 1 844 1 526 19 4 6% 2 % 206 5 552 10 756 7M 11 546 1 42 10 291 19M 1057(f) 1 614 (52 7) 62 8 5 R20 3 32% 9 14% 1 491 10 619 1 59 10 174 1987, 16e 1 454 12 6 64 9 5 916 3 214 9 134 br>9 9 M03 14% 10 j un 1941- 1 773 1 315 2.% 8 65 9 5 34M 2 142 7 490 1 243 8 781 16M 10 274 investment (thousands of dollars)
('oteStfui th Bn O'ork in l Uta!
Utiktv Anumulated l'rogrest N m ir ar Prop-rt y Uhlt)
Plant in Depecoation & Net is Perrg f uel end Plant and Plant T otal T ear Nm u e Amurusahon Plant Umt 2 Other 1 quipment A&imorn Aswu.
1991 $2 692 274 709 505 I 982 769 396 732 197 954 $2 577 465 $ 53 838 $4 014 512 1990 2 NOM 3 640 2%2 19 e31 436 639 223 872 2 624 342 66 693 4 001 518 1949. 2 528 355 564 bl5 143740 6 4 K) 340 237 31R 2 631 398 73 421 413M k46 19M . 2 4TM 927 4M7 546 1951 Mt 159 104 262 514 2 672 999 132 081 4 134 672 1987 2 600 511 419 149 2 181 362 374 274 267 Ota 2 822 705 340 974 4 277 587 19A1. I 250 190 252 310 997 M) 658 641 21 M9(g) 16'?5%0 201 000 1 bes9 967 Capitali7ation (thousands of dollars & 'o)
P c'ened sta k. wnh Prdrned 5w A wenous Mandatory Redempnon Mandatory ikdempoon i car Cornmori Atoi k I quity Provisions Pr .w tuime 1.oru! Term ()cbt Tntal 1991 5 887 752 38% 63 663 3% 210 000 9"4 1 158 550 Sh $2 319 965 1990. MO 764 39 66 328 3 210 000 9 1 (N7 326 49 2 254 418 19 R 697 793 P 64 490 3 210 000 9 1 197 277 50 2 374 Oh0 19% . MM7 442 36 71 155 3 210 000 9 1 291 444 52 2 460 041 1987 i Me 737 34 73 340 3 240 (U0 8 1 400 292 50 2 610 369 1981 E0 176 M 95 5m 6 150 000 10 762 584 49 1 %58 2ta (c) In 1%1. an ntraorJmary gam v as reabied frorn the enhange of wmrnon stat for Ivnds (f) Capac ity data rtflecte estendri generatmg unit outage for renovation and improvemenb.
(y) Lvred for riietts of capitahraten of nuclear fuel lease and hnanong arrangements purwant to Sta crnent of Imanaal Accounting E tandard, 71 23
ltivestar ittf.ontlatioII SilARE OWNER INI ORMATION INQUIRIES DIVIDEND REINVESThli NT AND STOCK i Questions regarding the Company or stock PURCilASE PLAN ANDINDIVIDUAL j accounts should be directed to Shaie Owner RETIREMENT ACCOUNT (IRA)
Services at Centerior Energy Corporation at the Centerior Energy Co poration has a Dividend address and tele; :e numbers indicated below Reinvestment and Stock Purchase Plan which for the Stock Tran .fer Agent. provides Toledo Edison share owners of record Please have your account nurnber ready and other investors a convenient means of when calling. purchasing shares of Centerior common stock by investing all or a part of their quarterly STOCKTRANSIER AGENT dividends as well as making cash investments.
Centerior Energy Corporation in addition, individuals r..av establish an
~
Share Owner Services Individual Retirement Account (IRA) which P.O. Box 94661 invests in Centerior common stock through the Cleveland Oli 441014661 Plan. Information relating to the Plan and the in Cleve'and area 642 6000 or 447 2400 1RA may be obtained from Centerior Share Outside Cleveland area 1-800 433-7794 Owner Services.
Stock transfers may be presented at INDEPENDENT ACCOUNTANTS PNC Trust Company of New Tork Arthur Andersen & Co.
40 Broad Street, Iif th Floor 1717 East Ninth Street New York, !!Y 10004 Cleveland,01144114 STOCK REGIST1bR FORM 10-K Ameritrust Co.opTny National Association The Company will furnish to share owners, Corporate Trust 1%ision without charge, a copy of its most recent annual P.O. Be 6477 repott to the Securities and Exchange Cleveland, Oli 44101 Co'nmission. Requests should be directed to the EXCil ANGE LISTINGS Secretary of Centerior Energy Corporation at the address of the Stott Transfer Agent.
Preferred-525 par value-8.84% $2.365 and 52.81 series, Adjustable Series A and Adjustable Series B-New York Stock Exchange Prefericd-5100 par value-4 %% 8.32% 7.76%
and 10% series- American Stock Excbange BOND AND DEBENTURE INFORMATION BONDTRUSTEE AND PAYING AGENT DEllENTURETRUSTEE AND PAYING AGENT The Chase Manhattan Bank. N. A. National City Bank Corporate Trust Administration Division 1900 East Ninth Street 1 New York Plaza,14th Floor Cleveland, 0 11 44114 New York, NY 10018 (216)573-2528 (212) 67t*5850 24
The Taledo Edisen Company ,q.,,,,,
300 Madison Avenue u s lost Act Toledo,01143652-0001 l'A1D Cli Vit AND 01110 l'1kM!i NO 4iw
_.