ML20096B258
ML20096B258 | |
Person / Time | |
---|---|
Site: | Davis Besse ![]() |
Issue date: | 12/31/1991 |
From: | Farling R, Miller R CENTERIOR ENERGY |
To: | |
Shared Package | |
ML20096B197 | List: |
References | |
NUDOCS 9205120090 | |
Download: ML20096B258 (271) | |
Text
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s Financial Summant ' 1%) 1990 % Change Earnings IVr Share of Common Stock i 1. ? I 5 1.90 (10.0) smeraussumnmarme**mmavmumrzeremmuunmmxAmtma:roa - Dividends Declared Per Share of Common Stock 5 lw $ 1.vd 0.0 Book Value Per Share of Common Stock at Year End 5 20 47 5 20.30 0.3 Closing Common Stock Price at Year End S "i , 5 18 10.4 Common Stock Share Owners at Year End !r W 183,723 (3.4) s Common Stock Shares Outstanding at Year End (000) J40.lon 138,401 1.3 numraasaammeransimmwaremmmwzwemnswwammistrazw*-" - --- - Operating Revenues (l000) $2 5eo.2M 52,427,441 5.5
- Operating Expenses (000) 5E W 202 51,923,021 3.0 Net income (000) f 23' 240 5 264,459 (10.3) -
Return on Average Common Stock Equity 54"o 9.4% - temrasth%hua.Mmme-****wauuAmancammama-- m?~ a-wurm weam.a.m.wwm Kilowatt-hour Sales (Millions of Kilowatt-hours) Residential A 9S! 6,666 4.7 Commercial ? 176 6,848 4.8 Industrial 11559 12,168 (5.0) Wholesak 2.711 2,487 9.0 Other 1,0i8 959 9.3 Total 3,475 29.128 1.2 meesammezwarmanawasemmwars,mermwmarmxmumrime-m Employees at Year End F v2 8,517 0.9 mLmr.mumtumsswamxsamamatumartumezmumwaarmarcavamwaamm QU ARTERL Y RANGE OF COMMON STOCK PRICES 1991 High Low 1990 High Low 1st Quarter 519% 516% 1st Quarter 521% 518 2nd Quarter _ 19% 16% 2nd Quarter 19% 17% 3rd Qucrter 18% 15 3rd Quarter 19% 16% 4th Quarter 19% 17% 4th Quarter 185 16h l
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Contents The D!cdo Edison 4 Letter to Share Owners Company 6 Niaintaining Earnings The Cicveland 8 hiceting the Competition h[,' """"#N"S y 10 Continuous improvement in Operations 14 hianagement's Statement of Responsibility for Financial Statements 14 Report of Independent Public Accountants 15 Summaryof Significant AccountingIblicies 17 hianagement's Financial Analysis. Financial Statements and Notes 35 Executives of Centerior Energy Corporation \ and Centerior Service Company 7 / 36 38 Financial and Statistical Review Board of Directors {W ;,1 39 Share Owner Information D 1991 Highlights Although reported earnings were dcwn 10%, to $1.71 per share, the common dividend was maintained at $1.60 per share and cash flow continued to improve. A commitment to cost control helped to reduce operation and maintenance expense (excluding fuel CnanMnm m_ emnon uu@nnwn and purchased power) by $62 million. Also, #nt 1m u;vn the @lation of The Clerdand construction expenditures were about $47 million Electnc luurmnating Com;uny and The Toleda lower than 1990. Edison Com;uny. Nth asscts of orv $12 blhon,
. The final step of the three-year rate phase-in plan Centenor Ennyy is one of the lagest clectric under the January 1989 rate adreement went into utility systems in the nation. The Centerier effect on February 1,1991. The 6% scheduled increase was reduced to 4.35% for Cleveland Electric *
- U "# #"* '"" "" "" * #" #I # '" " '
and to 2,74% for Toledo Edison as we shared our comh"ed Senre area of 4.2*4ad'r miles in cost reductions with our customers. Toledo Edison Northern Ohia Centener Encyy is an equal later waived the increase and reduced as rates tw. ice in 1991 for certain customers.
- rtunA W r."
While the City of Toledo continued to review the option to create a municipal ekctric system, two other communities rejected the municipalization option in 1991. A third, home to one of our five largest customers, undertook a study of the issue. With only Davis-Besse having a refueling outage during the year, our three nuclear units had an average availability of 90% in 1991, far exceed.ng the average for all nuclear plants in the country.
- emn! ,,apm Power sales to other utilities produced a record $334 million of revenue in excess of the related costs. These sales amounted to 9% of total kilowatt hour sales.
1
t i Orvration & h1aintenance Expense Tota! Kilouutt Hour Sales tExduding Tuel & Purchased 1%rr) I KWil Bilhons $ %1hons 30 1,000 14 0 20 tiU 15 400 10 2(U il 0 0 'd
'87 '88 '89 '%) 'VI .g7 .gg .gy ,g3 9j ONM k' stated) we achwved a signdicant reducion m (MM expense Despite the impact of the recessun on our industral in twl. The reductum was attamed by implementing customes total sales m 1W1 increased 1% on the the recomrnendations of a managemera audd completed stevngth of contmued puwth m the commercul sector, in 1W) and out ongomg wmnutment tu mmamue onts, a hot summer and increased sah to other utihtes.
Construction Expenditures Excess Ravnue otrr Cost (Ind dmg MUDCand EuhJmg %lcar heo from Off System Sales
$ Mdhons $ Mdhons 1,000 35 , f 30 i j
800 , 25 k
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i l \ un j l 10 o . 200 ! 0
'87 lI '88 '89 '90 '91 5
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'87 '88 '89 j
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'90 '91 with the completam of our nuclear constructen The increased svadabihty of our nuclear and fusil program m 1M, constructon spendaures haw generating uruts, m contuncton with lower avviage dropped dramatKally, averaging abiut SR4 milhon production tosts. has made us more cornpetitne in the past three wkrt We expect that our costs to comply the marketplace for sales of power to other unlihes.
with the new i in air legislation will be signdwantly hwnues from those sales in IW1 evreded the less than other hadwest utihtes. related costs by a record $D malen 3
Earnings ikr Sharr Dtal Electric Op rating Rewnues 5 5 IWns 3.00 30 2.5 2 00 1.50 110 1.5 0.50 10 0 (T 0.5
-0.50 -1 00 0.0 '87 '68 '89 #40 '91 '87 'M '89 "80 '91 m miuaes etic emi w . .me..e (190lWO RotatedJ a d aW e nie e a%t three Although earnings per sha e dechned to il 71 m IW1, annual rate measn has 988 ash t c ntnu h a dx7 easing ettect on earnings.
Awrage Retail Price EVr KWH Cmpured with the Consumer Price Inder a9sbnst um Customer Tawrahhty Index l'ercent 140 70 to
)
130 40 120
% i 110 10 100 -
0
'87 '88 '89 '90 #91 '87 '88 '89 '90 '91 REiE ConsumerPrueIndes Results of annue* antomer surveys indu ate that we (1991 Prehminary) have begun to reg sn customer suppri and conhderwe M Centenor Energy kwil Prwe indn [, ,Q^,"'g(',"'do "'hx")
a "a'I Despite the rate mcreas-s we have implemented over a em I r n st o iur sti bde j ddlars than a decade ago 2
Dear Share Owfler; } Ou r ccrporate mission is to provide quality units alw perfernted icell, thus helping us elect ric service to customers ichile ca rning a fair maintain reliable servi:e to our more Ihan one return for our investors. The year 1991 teas nn! hon customers. h ighligh ted by several ach ievemen t, co n ,isten t _
. . e Our favorability rattng teith customers fot l
teith that unssion: " ' 1991 clindvd almost 10 percentage p'ints from O { o$ $ N YL e 0 $ Y_ e e TCere dov'n from the $1.90lYr analysk lNC$G5nre_f$clU I l'A share reported in the tico ., customet apptectation of the previous years, ice main. , value of electricity and f ained the commoll sloCh ' - CUSltUnCY AIUd TCHCNN O! OU' n dividend of hk,00 pet share . Y [Yf0l$3 E ' b$d V YA$lb AU and ou r cash floie contin ued ? reduce costs. to improve. _\ We are f leased iC5th lhese We reduced operation and achievements. We also are e maintenance expense (ex- ' icell aivare of ou r contin uing cluding fuel and purchased . challenges. poicer) for 1991 by $62 The electric utih'ty business tnilhon, or i% from the 1990 _ amount, nr is in a state of transstion-front a lightly rCgulateb atld
~
e We icere successful in somezehat protected busittess
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to one that is tncreasingly obtaining approvalfrom The . Public Utilitics Commission more competitivt. We a re ol Ohio (PUCO) of Ih ree accou nting requests especia!iv challenged by proponents of nun.icipal designed to more closely align ,u t accounting electric sustems -a challenge miensified by t he for operating alld cGrilal iosis to aHunin!S cu r!cnt avan lb51 tU O! $0EC^C05$ poirer in the cu rrently being recovered in rates, zeholesale market.
- Our thrCC nuc!CaYgCnerating units perfortt:Cd 11: t his u n relenting clitnate, ice a re endea voring
- very zeell. They accounted for 43% vlthe elec- to keep our electric rates stable, even Ihaugh tricity zeegenerated in 1991. T:co of the ututs far inflation. operating demands and state and .
exceeded the industry average J'or avai!abihtyi $0caI lax 5ncreases continue to put do?Crnvard the third iCas licarly average. Our coal-fireN prC>Su Te on Oh r ea ' lH$8-Rc' . J. Ea rling Richard A Miller 4
We implemented a rate phase-in plan in Ihree The text Ihat follows describes our challenges annual steps starting in 1989 to begin re- and ou r st rategies in more detail. We lvliere that covering our allowed investment in the two the cou rse u e hats charted will enable us toful-
. nuclear generating units completed in 1987. fill our ultimate responsibility to you - namely Those units will provide an environmentally to justify the confidence you have placed in us , compatible source of electric power for years and to enhance the value of your investment.
to come. Hmeever, our prices are now higher On hian'h 1.1992, Dick h1 iller will retirefrom than those of many other investor-owned his position as Chairman and Chief Executive utilities in our region, Officer, completing 31 years of dedicated service We are working hard to narrow that pricegap. in to Clueland Electrit and Centerior Energy.
' the 19S9 rate agrrement. which uus reached w:th lie will continue as a member of the Board of customer representatives and approved by the Directors. Bob Farling will succeed Dick as PUCO, we committed to using ou r best cfforts to Chairman and CEO.
delay the needforfu rther rate increases after the one implemented in February 1991 At the Centerior Energy will continue working to Iv nmnized as a top-level performer in Ihe ener5y same time, we a re committed to rewarding your confidence in Centerior Energy as an irwestment, marketplace. That is Ihe vision we share for our Company We have a etrong management To satisfy both commitments, we have cha rted a organi:ation and a team of skilled, dedicated coursefor thefutu re based on specific strategies employees of whom we are justifiably proud. to achieve these primary oljectives: Theygive us the confidence that ou r rision will become a reality
- To maintain earnings and the current dividend through continued cost contain-ment, sales and revenue enhancement and Sincerely, thefurtherpursuit of appropriate account-ing treatmentfor investments and costs r.ot reflected in current rates. / _
, f. $
, Richard A. A1 iller
- To meet the competits.on by holding the line on electrse rates, offering customers the
.best possible valuefor their energy dollar h --
f. and workingfor Ihe economic development Robert J. Farling of the communitles we serve. 1
- To strivefor continuous improvement in
' operations, thus attaining optimal use of existingfacilities while maintaining our February 17,1992 commitment to the environment.
5
Maintaining Earnings HISTORICAL PE:R9Pt CTIVE off in 1992 due to the absence of a rate increase, w e expect it to provide nearly t he same percentage Our financial picture continues to be influenced of construction expenditures as it did in 1991. by the 1989 tate agreement. That agreement was critical to our f ort unes. It allowed us a three-step Throughout 1991, we worked to lessen earnings - rate increase for each of our operating companies, crosion by following three primary strategies: the last step implemented February 1,1991, to reducing costs, expanding wholesale revenues , recognize in rates our allowed investment in and achieving regulatory approvalof appropriate Unit 1 of the Perry Nu-lear Power Plant and accounting requests to better align our accounting Unit 2 of the Beaver Valley Power Station. The t wo for operating and capital nuclear generating units were completed in 1987. costs to the amounts being S'![ fkj recovered in rates. ,M -
,'3} g# 'Ryg; To help moderate the negative earnings impact of phasing in our large investment in these units, po3njyy:w n op the agreement included a 10-year phase-in plan cos'! REntc11oNs ]Yg@yf,gg /Q3 h g '
for each of our two operating companies allowing f' @fh Qh " . ,
- us to defer a portion of the nuclear-related in this Report a year ago, we %(4%g y operating expenses and carrying charges in the stated that we expected to ; Q first five years of the plan. In the latter five achieve significant reductions f y 4 ff)]#
i years. as that investment base accreases and in ourcosts of dmngbusiness. resenues increase as a result of sales growth, in 1991, we reduced other h the deferred operating expenses and carrying operation and maintenance [ w., charges are to be amortized to expense. expense by $62 million, or VIfa d 7% We also refinanced $310 ,Q: In this way, the phase-in plans adequately million of high-cost debt provide for recevery of thecosts associated with and preferred stock for a net our investment in Perry Unit 1 and Beaver Valley annual savings of $9 million e. Unit 2. But we are not currently recovering in interest costs and preferred bhh costs associated with new investments or increases in other expenses that have occurred dividends. Our cost reduction elforts continue. *
~
dhh NNN since the 1989 rate agreement. Investment that was not in rate base at the end of 1991 amounted Since mid 1990, about 1,500 employee, consultant to about $400 million. Unrecognized investment and contractor positions have been eliminated, and our comrnitment to delay further rate representing 14% of the 1988 total. Most em-increases continue to affect earnings adversely. ployees lef t through an early retirement program; the rest received equitable separation benefits. RESULTS FOR IW1 We have implemented, or plan to implement, Earnings for 1991 were $1.71 per share, down many other cost-reduction initiatives. For - from the previous two years. However, the quality example, we have centrali7ed training, testing i of our earnmgs has improved dramatically and access-authorization for employees and . since 1988 as evidenced by the contmuing contractors during ref ueling and maintenance ) decrease in the portion of earnings related to outages at the Davis-Desse Nuclear Power Station noncash credits. to save $480,000 during those outs.;es. At the Perry Plant, employees instead of contractors l Our cash flow in 1991, after payment of dividends, will perform the periodic refurbishment of I was sufficient to pay substantially all new cash ! safety relief valves in main steam lines. This is construction needs. While cash flow willlevel estimated to save at least $113FJU during each 6 i
refueling and maintenance outage at Perry teams organized throughout the Company and ! Unit 1. several joint teams set up with major customers and suppliers as well. Among additional examples, we ex pect improved j
, scheduling practices and work procedures to witati:sAtt RI VI Nuts l reduce overtime and save $250,000 annually in transmission and distribution operations. A Just as cost reductions helped earnings, so did better method ior detecting cracks in power our kilowatt-hour sales to other utilities. We plant piping will save an estimated $100,000 sold 2.7 billion kilowatt-hours to other utilities annually. We saved $40.000 at in 1991. Revenues f rom those sales in 1991 the Ashtabula Plant in 1991 eweeded the related costs by $33 million. We s.o L,. ,
j :4 / . by having employees rather are aggressively seeking opportunities for long-than contractors perform a term power contracts to achieve maximum 7 ,j'py , h [ \j}?
- p' 4 turbine inspection, improve- benefit f rom our generating capacity.
4_
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ments in materials manage-4 / ment will reduce inventories POSITlVL IMPACT Of ACCOUN i M. ORDi & F and help save an estimated h h '8/ %
$1 million in 1992 in our D ring 1991. the PUCO issued orders approving g $ t P'V h transmission and distribution three accounting requests designed to more , operations. closely align our accounting for operating and ggg (g] capital costs to amounts recovered in rates, thus
[4 hk w >hh1 Achieving these savings slowing earnings erosion. Each order was b n, ; while maintaining quality retroactive to January 1,1991. y;x . w~ ~ g 44p; g .= ; service to customers was b made possible only through One order allowed us to change the depreciation fMN@Di$k( - i 4 the extraordinary commit. method for our three operating nuclear units ment of our employees. They f rom units-of-production to straight-line. This
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M i3 Q also contributed, individually, change contributed 5.20 per share to annual s ~%\ %g to the cost-reduction effort. earnings in 1991. The second order reduced Their suggestions offered from about 3% to 2.5% the depreciation rate for through our " Bright Ideas" program, which nuclear units, contributing 5.15 per share to included some of the above improvements, con. 1991 earnings. The third permitted us to record tributed $3.5 million to annual savings in 1991, additional cost deferrals based on a provision in the 1989 rate agreement that permits such As noted, our refinancing activities also com action when our kilowatt-hour sales are lower tribute to overall cost reductions. We expect than the agreement projected, as occurred optional and mandatory redemptions in 1992 t in 1991. This contributed $.13 per share to result in another $9 million in annual savinga in 1991 earnings. interest costs and preferred dividends. In seeking regulatory approval for the latter two Perhaps of singular importance to ongoing cost items, we were joined by many of the customer reductions, we has e committed our organization representative groups who had participated
- to the " Total Quality" process that is improving in the 19S9 rate agreement. On our part, we the performance and profitability of some of agreed not to seek any base rate increase to be l the top corporations world wide. Total Quality effective before January 1,1993, thus extendmg l instills the training and tools necessary to make by nearly a year the rate moratorium included i'
continuous improvement a routine part of every in the 1989 agreement. employee's job. We have quality improvement 7
Regulatory apptoval and customer support in respon e, we have inneased our personal for such accounting requests underscore our contacts and developed special communications ccnfidence that pursuing these strategies is a programs for community officials and cituens' prudent business practice. We belies e that groups in these communities. We provide the customer representative groups and the information on the financial risks and uncer-regulatory commission will continue to support tainties of creating a municipalelectric system ourlonger-term operating and financial objectives and stress the superior reliability, service ' provided we continue to achieve our projected quality and s alue to the community of an cost reductions. investor owned company.
~~~"
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DI ( We will continue out ef forts to maintain earnings systems that boy power at .,,,.- by seeking further cost savings, advantageous wholesale costs f rom other v - [j . f business transactions, additional wholesale power utilities. The current avail- ( ,Mk revenues and appropriate accounting options. ability of low-cost, w holesale - j% power is espected to decline g - ( Q;# ng For example, we are seeking support from the in y ears to come. Very little - 1 F ^- customer representative groups for our request new electrk generating p N #p " gg7 to the PUCO to permit us to capitalize the capacity is under construc- # $ carrying charges and to defer depreciation on investment placed in service since February 1988 tion in our region. Old generating units, especially [E
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(( d f untilit is reflected in rates. high polluters, are expected to .__
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ba retired or equipped with , p - h Complementing these strategies, our" Total castly pollution controls. . Quality ~ commitment will help us f urther reduce / } ill, , lIL costs. We also expect it to improve our operating Developing an electric power 1
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performance and quality of service to customers- system involves many com- N A,.. . two critical factors in our strategy to compete plcsities: constructing the in today's challenging energy market. electrical f acilities, cont rolling the dispatch of power, providing back-up
- capabilities, meeting envit onmental requirements Meeting ihe Competition ar,d training a workforce to safely operate, maintain and repair highly complex equipment.
Tile MUNICll'AUZ ArlON Cll ALLENG1 Such costly endeavors would severely drain a community's financial resources which couid Rate recovery of our investment in Perry Unit 1 be better spent to maintain safety forces and and Beaver Valley Unit 2 resulted in rate increases improve other municipal services. in 19S9,1990 and 1991 totaling about 20% for Cleveland Electric customers and 16-19% for in the City of Toledo, where municipalization has been under review since 1989, a citizens' Toledo Edison customers, depending on the type of customer. Our rates in both service review committ:e is expected to make a recom-areas are higher today than those of many other mendation soon to City Council. A consultant's investor-owned utilities in our region. As a report in mic-1991 contended that a municipal result, a few communities in our service area electric system could save customers up to 20% are considering creating their own municipal of the costs expected to be paid to Toledo Edison electric systems in hopes of realizinglower over the next 20 years. We provided evidence to electric bills. refute that assessment. 8
Defiance, one of the largest cities in the Toledo During 1990 and 1991, we negotiated ordina nces Edison territory, completed a $100,000 munici- in the Toledo Fdison service area under which palization study in 1991. Af ter thorough review, municipalities agreed to retain us as sole elec-the City Council's utility task force recommended tricity supplier for lis e years in exchange for rate
, that the City rmt poceed with creation of its ow n benefits for residential and small commercial electric system because the risks were judged to customers. All municipalities signed the be greater than the potential gains. In Cleveland ordinances except the City of Toledo. We espect Electric's service area, the Village of Orwell also to resume talks with the City later in 1992.
turned down the municipalization option in 1991.
,-- for many decades, we have made reduced rates k flowever, cr ' tion of a available to industrial and large commercial ) 7 fl municipal electric system has been recently proposed in customers in recognition of their specialload characteristics that make them less costly to serve.
l [6j , Brook Park, a community Such characteristics include interruptibility, 3 i l that is home to one of our high load f actor and of f-peak demand. In turn, s W,[,- ' five largest industrial these customers commit to purchasing all their kd .g'l customers, Ford Motor's electric power f rom Cleveland Electric or Toledo _c
. j \ Brook Park plant, and some Edison for the length of the contract.
[{p [ * [7% B,000 residential customers. We are meeting with Ford Durmg 1991, we stepped up our efforts to help g representatives and City industrial and commercial customers attain the f".7 1 $gf \ 39 %> officials in efforts to seek best possible energy pricing in these challenging
;' economic times. These ef forts sometimes mean ~5$h N resolution.
l g^ bO reduced revenues f or os in the short term, but
& .i - Our long-time competitor, they benefit us in the long run by retaining 7 '. Cleveland Public Power (CPP), customers, keeping jobs in the community and
[' Q continues an expansion increasing sales once economic conditions
- 5) : J prograrr announced in 1986. improve and businesses grow. ,
zi CPP is essentially a distri-b~M g bution system now serving As an example, in 1989, we began of fering _ about 50,000 customers. CPP officials expect the mcentive pricing packages to select Toledo expansion to acquire about 20,000, or 1.9% of Edison customers which were considering our customers by the end cf 1992. We consider expansion or reorgamration. This economic that estimate overly optimistic. Most of their development incentive has since encouraged tarpt customers are residential; however, the more than 50 industrial customers to make CPP expansion already has taken three City. about $150 million in capital investments. This, operated water pumping stations, typically high in turn, retained or created some 1,800 jobs energy users. The loss of the 20,000 customers, and 23,000 kilowatts of load. It also had positive in addition to the three pumping stations, would implications for commercial and residential sales. reduce our annual re cenues by $16 million, or 0.6% offset somewhat by lower operating ADDED GLLFfORC N nib expenses and taxes. We always have valued our customers and placed (NCTNTlW PRICING the highest priority on serving their needs. Today, we are endeavoring even more to Incentive pricing is one strategy we employ to strengthen programs that demonstrate tho remain competitive and, at the same time, help added value inherent in our service. our customers keep energy costs dow n. 9
We serve as consultants to communities to help We are more than an electricity supplier-we , them retain existing businesses and attract new are a f ull-service energy company, of fering our f ones. We are equipped to advise communities customers experien e, technical expertise and a on infrastructure, land access, tax incentives broad *ange of special programs to suit their and environmental requirements. We provide needs. Customers are our reason for being in similar consulting services for prospective business. Our goalis to achieve the highest customers. Through our Partners in Productivity possible level of customer satistaction. ' campaign in the Cleveland Electric area, we introduce local enterprises to the newest electro. Corporate citizenshipis another aspect of the technologies to help make them more com petitive. arided value in our electric , _ , , , ,, service. In 1991 alone, our y/g ]@p7 ' Our three Customer Advisory Panels help us corporate contributions to M ,[ ~ e kee p attuned to current attitudes and needs. civic, cultural, educational, ' '6 ~. Today's customers are seeking new ways to health and social service , i . e increase their energy efficiency and realize agencies totaled $2.1 million. [_. >M more value from their energy dollar. We of fer in addition, Centerior em- ,
, f , ,
demand side management programs to respond playees pledged $1,65 million (_d )
~#
to that need. These programs encourage to the United Way, an average o customers to shif t some electricity consumption of about $200 per employce. [ I f rom high-use to low-use periods, with incentive Our Speakers Bureau reached $ . 58 b' pricing reducing the customer's overall energy audiences totaling 60,000. M ~ hj cost. Our Company, in turn, benefits as these Five thousand school children L p ,9 programs slow the growth in peak demand, attended our electrical safety ={t c g enabling us to delay costly investment in new presentations. More than E ~g; power plants. 2,400 Centerior employees I volunteered for community M We plan to invest about $90 million in demand- pro 3; rams in 1991. N s side management programs this decade. We are moving prudently to allow time for us to assess Such activities and propams e customer needs and acceptance levels for various substantiate our Company's - programs. To encourage demand-side manage- value to Northern Ohio communities as do the ment, the PUCO allows recovery through r 6tes taxes we pay to support schools and city services. of a utility's investment in demand side projects We stress these points in our discussions with for customers as well as recovery of some communities considering municipalization. associated carryir g charges and lost revenues. The PUCO also allows utilities 10% of the savings resulting from the investment. COnlinnonS hnpr0UC,nent in Operations We are helping commercial customers install . high efficiencylighting, thermalstoragecooling R ANT PERFORM ANCE EXCELS and energy management systems. In 1991, we launched a demand-side management demon-
"' """" ## " "E *** "Y*
stration program in conjunction with the Toledo in 1991, and we are working to continue this Area Small Business Association. Ultimately, P" "##" initiatives from this program are expected to reach 28,000 con.mercial customers. This is one . An important measure of unit performance is of thelargest energy-efficiency efforts ever . operational availability, which is the percentage undertaken in Ohio. . .. oft.ime a unn is available to generate electncity.
- 10
For the three years ended December 31,1991, Beaver %) ley Unit 2 is an 820200 kilowatt unit Davis-Besse attained an availability average of operated by Duquesne Light Company. We base 83%, as did Beaver %11ey Unit 2. Those results 44% ownership and leasehold interests in the were significantly better than the industry's unit. Like Davis-Besse, Beaver Wiley Unit 2
. most recent three-year average of 74% for units received its highest ratings ever in the NRC's with pressurized water reactors. Perry Unit 1 most recent SALP Report. This latest assessment attained a three year availability average of places it among the top 10 nuclear power units 70%, coming close to the 72% industry average in the nation.
for units with boiling water reactors. Nuclear y energy accounted for 43 Our iossil fueled generating units also performed s
.'E percent of the electricity we w ellin 1991. They achieved a combined operating generated in 1991. availability ava age of 80$ 1his considerably j The 883,000-kilowatt Davis-exceeds the minimum performance standard of q
64.9% availability which was stipulated in the
) ,' Besse station is f ully owned 1989 rate agreement.
j - , by Centerior. The station 3 gy returned to service from a The future of Perry Unit 2 is a continumg un-h 10-week ref ueling and main, certainty. Construction of this unit has been Mv d i tenance outage on November suspended since 1985 pending consideration of b M 4 S,1991. Since completing an various options including resumed construction.
- 'T extensive refurbishment in conversion to a nonnuclear design, sale of all 1988, Davis.Besse has become or part of our ownership share or cancellation.
a top performer among the The unit is about 50% complete, nation's 111 nuclear power units. Davis-Besse earned Our net investment in Perry Unit 2 wouH have its highest marks ever in to be written off if the unit were canceled. If it the Nuclear Regulatory were converted to a nonnuclear design, we would have to wr ite off the cost of unusable Commission's (NRC) most i recent Systematic Assessment nuclear equipment and f acilities. of Licensee Performance - To keep open all options regarding Perry Unit 2, (SALP) Report. This is a critical NRC evaluation we have applied to the NRC for a 13-year issued every 12 to 18 months for each nuclear power unit in the nation. On a SALP performance extensi n f the construction permit. It was to expire n November 1991 but remains in effect scale of 1 to 3, Davis-Besse earned a Category 1 rating, the top result possible, in three of seven while the application is pending. Additionally, evaluated areas and, for the other four areas, a Cleveland Electric recently agreed to purchase Duquesne Light Company's 13.74% ownership Category 2 rating which signifies a level of performar:ce above that needed to meet regulatory share of the unit at a purchase price of about 53 requirements. Additionally, Davis-Besse was
*IIII "' Duquesne had stated it would not agree to resume construction. The purchase comme-ded for improvement in three of the latter four areas, will give us a 64.76% share of the unit with the remainder owned by Ohio Edison Company Perry Unit 1 u a 1,194,000-kilowatt unit of which and its subsidiary Pennsylvania Power Company.
we own 51E The Perry unit also earned high marks in the NRC's recent SALP Report, receiving a Category 1 rating in two area s and a Category 2 rating in all others. 11
I .. .... .... . . . . . OUR ENVIRONMENTAL COMMllMLN1' Of the 600.000 tons of fly ash produced from coal combustion each year, we market more Through 1991, we continued evaluating the than 10% to concrete manufacturers for use in complex options f or complying with the Clean building and highway construction, We plan to Air Act Amendments of 1990. Thelegislation participate in a research project testing a fly requires substantial reductions in sulf ur dioxide ash compost combination as a topsoil replace-(SO2 ) emissions from coal-fired power plants, ment. We are seeking r.dditional opporturuties to be achieved in two phases. to find uses for fly ash, thus reducing landfill requirements and disposal costs. Each year we The combined SO, emissions from Cleveland also sell about two million v . r ,-r - Electric and Toledo Edison power plants already pounds of used aluminum hy / have been cut by about 50% from the 1977 level- and coE>Per,1'ust two of many Y,/ r Il.'/ f% j)h9%[/ ?1A ~ :i That puts us well ahead of many other Midwest 3 utilities which, like us, depend largely on coal. materials we tecycle. @fMm
%GM/4 Ms.gf N I m[m ug 3 k
Nevertheless, the legislation requires us to Many customers share our reduce emissions further, achieving the first e nvironmental commit ment. g , ggf pj { phase of reductions by 1993; the second phase, Our mid-1991 of fer ot' recycling %(is]g QR{
- by the year 2000. information kits to customers at no charge drew 150.000 ig{4: Q q gd,Q M L " ]f Our aim is to achieve those reductions at the lowest possible cost to customers. Consequently, requests representing about g} ]MP b .j i 15% of our customer total. x we are taking a multi-dimensioned approach @M b which emphasizes flexibility. Our approach Ir 1991, the Board of Directors b . I) f- b includes the additional use of low-sulfur coal, maximum use of our emission allowances, created an Environmental and Public Policy Committee
- p. _bf,
=*]. ^/ .
demand-side management of customerload and, af ter 2001, the instc.llation of a scrubber or to oversee the status and compliance with environ-t
-Mf a" ~q rh . .
other sulfur emission reduction technology at one plant. We will seek PUCO review of our mentallaws and make recom-
- y,' ,
mendations to management compliance plans in 1992. regarding environmental programs. We are preparing a report on our Thanks to our previous SO, reductions and environmental performance that will be offered our broad. based strategy, we expect to comply this spring at no charge to interested share with both phases of the 1990 legislation at owners and customers. comparatively moderate cost. Our anticipated capitale. . enditures and other expenses represent llE NOR11tl.RN 01110 M A RKl'T the potential for a 12% rate increase in the late 1990s and another increase af ter the year 2000, We expect electricity sa . in Northern Ohio for an aggregate increase of about 3-65 Many to increase about 2% annually over the next other coal-dependent utilities in our region face several years. We also expect the fastest growth emission-reduction costs two or three times to occur in the commercial sector where growth higher. As they absorb those higher costs has occurred every year since 1978 for an into their rates, our prices will become more aggregate increase of 395 competitive. The recession may have put a temporary damper P. educing emissions is just one of many ways on economic growth, but our Northern Ohio we maintain our commitment to the environ- service area has suffered less than other regions. ment. We have a broad range of corporate The local unemployment rate was lower than programs to re-use, recycle and reduce waste. the national average during the second half of j l '
1991. Northern Ohio industries learned f rom Toledo. Downtown Toledo's Portside market, the recession of the early 1980s and have since closed m 1989, may reopen to house a Center of improved operating efficiencies, thus con- Science and Industry museum. Burlmgton Air tributing to a more resilient manuf acturing base. Express' new international cargo hub was com-pleted in 1991 giving Toledo Express Airport in Cleveland, LTV Steel has installed major new air cargo and truck freight links. new production facilities at one of its plants. This expansion, now complete, will provide us In the residential sector, we continue promoting with $8 million in additional annual revenues, use of the heat pump for electric heating and y LTV has announced plans for cooling in the home. New electric heat pump a similar installation in its installations added some $860,000 to annual e other Cleveland plant to revenues in 1991 and are expected to contribute _ J$ -Q D become operational in the nearly $1 million to revenues in 1992. Increased g %y rdd 1990s. Ford Motor will heat pump saturation also twips to raise system y ~ jft s ,W x-complete expansion of its load f actor, which means we get more use from uJ Avon I ake plant to begin our generating equipment. s y <gm p,/ gg . g e product.wn of Mercury 4'E 3 gy Villager miruvans in 1992. UL'R DIRI ( lRW TOR 1Hi F LIURt:
) This will add $5 million to M[i our annual revenues. Centerior Energy ad' res to the traditions ef service reliability, e ,ncern for customers l[ 'g'#
v . Industrial sales in the Toledo and responsiveness it. Share owners. We also Edison area will be boosted believe in the worth of creativity, innovation jy f
\(h j,I c
in 1992 when Chrysler shifts and resourcefulness. This is reflected in our ((1 its Wrangler production from willingness to pioneer new approaches to kTj x Canada to the local Jeep Assembly Plant. BP America improve financial results, build relationships with our customers and meet new technological 7 " " ' plans to spend more than demands. WJ $100 million at its Toledo
" refinery for a process to reduce We are hving in very challenging times, but we sulfur in diesel fuel. The new facility will add are set on a coursc of action that we believe will $4-5 million to our annual revenues beginning meet those challenges. We of ten have said that in 1993, our employees are our single most important resource.They have contributed sigmficantly to in the commercial sector in 1991, Cleveland corporate achievements in the past year nd we Electric began service to some seven million count on them for further contributions in the square feet of new building apace, nearly half of years to come.
it electrically ? cated. Major new customers include downtown Cleveland's Bank One, Society With the help of this dedicated workforce Center and Wrriott Ilotel. Preparations are and the cooperation of customer representative moving ahead for construction of the 5350 million groups and regulators, we are confident we can Gateway sports complex in Cleveland's down. achieve our strategic objectives: @ ing town. It willinclude a stadium with enclosed earnings and the current dividend, meeting the portions featuring electric heating and coohng competition and improving operations. We also provided by Cleveland Electric. are confident that, in doing so, we will fulfill our prime responsibihty to you-that of in the Toledo area, expansions are planned at enhancinp the value of your investment. the Franklin Park Mall shopping center, the Medical College of Ohio and the University of 13
Management's Statement of Responsibility for Financial Statements The management of Centerior Energy Corporation is making changes in management or independent responsible for the consolidated financial statements public accountants if needed. In this Annual Report. The statements were
- The Board has appointed an Audit Committee,-
prepared in accordance with generally accepted comprised entirely of outside directors, which met accounting principles. Under these principles, some of three times in 1991. The Committee recommends the recorded amounts are based'on estimates which annually to the Board the hrm of independent public are, in tum, based on an analysis of the best accountants to be retained for the ensuing year and information avadable. reviews the audit approach used by the accountants We maintain a system of internal accounting plus the results of their audits. It also oversees the controls designed to assure that the financial records adequacy and effectivenesa of our internal accounting , are substantially complete and accurate. The controls controls and ensures that our accounting system also are designed to help protect the assets ar'd their produces financial statements which pnsent fairly related records We structure our control procedures our financial position. such that their costs do not esceed their benefits. Our internal audit program monitors the internal acaunting controls. This program gives us the A hn, - opportunity to assess the adequacy and effectiveness of existing controls and to identify and institute E. H. MAUG ANS changes where nee &41n addition, an examination Executim Vice President and of our financial statements is conducted by Arthur Chief financial Oficer Andersen & Co., independent public accountants, whose report appears below. Our Board of Directors is responsible for ] g determining whether management and the independent public accountants are carrying out their PAL 1 Dussy responsibilities. The Board is also responsible for Controller and Chief Accounting Ofcer Report ofIndependent Public Accountants AgrHUR To the Share Owr.e.s and Board of Directors of Centenor Energy Corporation: ggg We have audited the accompanying consolidated in our opinion, the hnancial statements referred to balance sheet and consolidated statement of above present fairly, in all material respects, the cumulative preferred stock of Centerior Energy fmancial position of Centerior Energy Corporation Corporation (en Ohio corporation) and subsidiaries and subsidiaries as of December 31,1991 and 1990, as of Decembe 31,1991 and 1990, and the related and the results of their operations and their cash Hows consolidated statementy of income, retained earnings for each of the three years in the period ended and cash flows for each of the three years in the December 31,1991, in conformity with generally period ended December 31,1991. These financial accepted accoueting principles. statements are the responsibility of the Company's As discussed further in the Summary of Signihcant management. Our responsibility is to express an Accounting Policies and Note 12, a change was made opirs an.these hnancial statements based on our in the method of accounting for nuclear plant
- audia depreciatian in 1991, retroactive to January 1,1991 We condut.ted our audits in accordance with As discuwed further in nom 3(c), the future of - generally accepted auditing standards. Those Perry Unit 2 is undecided. Construction has been standards require that we plan and perform the audit suspended since July 1985. Various options are being ;
to obtain reasonable assurance about whether the considered, including resuming cons,;uction, j financial statements are free of material misstatement. converting the unit to a nonnuclear design, sala of all 1 An audit includes examining, on a test basis, or part of the Company's ownership share, or ! evidence supporting the amounts and disclosures in canceling the unit. Management can give no assurance the financial statements. An audit also includes when, if ever, Perry Unit 2 will go in service or assessing the accounting principles used and whether the Company's investment in that unit and a significant estimates made by management, as well as return thereon will ultimately be recovered. evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. Ib , Cleveland, Ohio February 14,1992 l 14 l 1
4 Surninary of.Signifcani Accounting Policies.
}
GENERAL of fuel and purchased power expense. The amounts for prior yects have also been reclassified to conform Centerior Energy Corporation (Centerior Energy) .is a w th current reporting requirements. See Note 13. holding company with two electric utilities as ! subsidiaries, The Cleveland Electric illuminatmg FUEL. E APENSh Company -(Cleviand Electric) and The Toledo Edison Corripany (Toledo Edison). The consolidated The cost of fossil fuelis charged to fuel e pense based !
. financial statements also include the accounts of on inventory usage. The cost of nuclear fuel, Centerior Energy's other wholly owned subsidiary, including an interest component,is charged to fuel Centerior_ Service Company (Service Company), and expense based on the rate of consumption. Estimated Cleveland Electric's wholly owned subsidiaries. The future nuclear fuel disposal costs are being recovered Service Company provides management, fmancial, through the base rates.
administrative, engineering, legal and other services The Operating Companies defer the differences at cost to Centerior Energy, Cleveland Electric and between actual fuel costs and estimated fuel costs Toledo Edison. Cleveland Electric and Toledo Edison currently being recovered from customers through the * (Operating Companies) . operate as separate fuel factor. This matches fuel expenses with fuel- , companies, each serving the customers in its service related revenues. i
. area. The preferred stock, first mortgage bonds and other debt obligations of the Operating Companies PR 9PHA5fLIN AND PHA519N DilliRRAlb continue to be outstanding securities of the issuing OF OPER AIlNG EXPI N915 AND - utility,. All sigmf cant intercompany items have been '
eliminated in consolidation. CARRYING O= i ARGlN ~ Centerior Energy and the Operating Companies The PUCO authorized the Operating Companies to follow the Uniform System of Accounts prescribed by record, as deferred charges, certain operating espermis the federal Energy Regulatory Commission (FERC) and carrying charges related to Perry Nuclear Power ! and adopted by The Public Utilities Commission af Plant Unit 1 (Perry Unit 1) and Beaver Valley Power i Ohio (PUCO), As rate-regulated utilities, the Station Unit 2 (Beaver Valley Unit 2) & their t Operating Companies are subject to Statement of respective in service dates in 1987 thwp December . Financial Acm.nting Standards 71 which governs 1988. Amortization and recovery of these deferrals accounting for tie effects of certain types of rate (called pre-phase-in deferrals) began in January 1989 regulation. The Service Company follows the Uniform in accordance with the January 1989 PUCO rate System of Accounts for Mutual Service Companies orders discussed in Note 6. The' amortizations will prescribed by the Securities and Exchange continue over the lives of the related property. r Commission (SEC) under the Public Utility liolding As discussed in Note 6, the January 1989 PUCO Company Act of 1935. rate orders for the Operating Companies included The Operating Companies are members of the approved rate phase-in plans for their investments in Central Area Power Coordination Group (CAPCO). Perry Unit I and Beaver Valley Unit 2. On January 1,
- Other members include Duquesne Light Company 1989, the Operating Companies began recording the -{Duquesne), Ohio Edison Company (Ohio Edison) deferrals of operating expenses and interest and-and Ohio Edison's whohy owned subsidiary, equity carrying charges on deferred rate-based - IQnnsylvania Power Company (Pennsylvania investment pursuant to the phase-in plans. These Tower). T_he members have constructed and operate deferrals (called phase-in deferrals) will be recovered generation and transmission facilities for the use of by December 31,1998.
the CAPCO companies. DEPRECIATION AND AMOPTUAllON REVENUES The cost of property, plant and equipment is I Customers cre bilhxl on a monthly cycle basis for their depreciated over their estimated useful lives on a energy consumption based on rate schedules or straight-line basis Prior to 1991, only nonnuclear contracts authodzed by the PUCO or on ordinances property, plant and equipment was depreciated on a with individual municipalities. An accrual is made at straight line basis, as depreciation expense for the l- the end of each month to record:the estimated nuclear generating units was based on the units-of-
, amount of unbilled revenues for kilowatt-hour sales productiort method.
rendered in the current month but not billed by the - The annual straight-line depreciation provision for end of that month. nonnuclear property expressed as a percent of E - A fuel factor is added to the b3se rates for electric average depreciable utility plant in service was 3A% servicec This factor it designed to recover from in 1991,3.3% in 1990 and 3.8% in 1989. The rate customers the costs of fuel and most purchased declined in 1990 bec use of a PUCO approved change L ~ powRlt is reviewed and adjusted semiannually in a in depreciation rates effective lanuary 1,1990, l PbCO prcceeding. _. attributable to longer estimated liws for nonnuclear Operating revenues include certain wholesale property. See Nste 13. } o pnwer s,les revenues in accordance with a FEFC in 1990, the Nuclear Regulatory Commission l clarifitatic.n of reporting requirements. Prior to 1991, (NRC) approved a six-year extension of the operating these bulk power sales transactions were netted with license for the Davis-Desse Nuclear Power Station purchased power t ar;sactione and reported as part (Davis-Besse). The PUCO approved a change in the
. 4 15 Ls,
-units-of-pfoduction depreciation rate. for Davis; DFI'ljRRED GAIN ANU i 099 i ROM Desseaffective January 1,1990, which recognized the SME5 OF UTILITY Pl. ANT life extension. See Note 13.
Effective January - 1,1991E the Operating . The Operating Companies entered into sale and , Companies changed theirinethod of accounting for leaseback transactions in 1987 for the coal hred Bruce nuclear plant depreciation from the units of. Mansfield Generating Plant (Mansheld Plant) and
- production method to the straight-line method at Beaver Valley Unit 2 as discussed in Note 2. These
< about i 3% rate. The PUCO approved this change transactions resoited in a net gain for the sale of in accounting method for each Operating Company Mansheld Plant and a net loss for the sale of Beaver and subsequently approved a change to lower ' Valley Unit 2, both of which were deferred. The the 3% rate to 23% for the three operating nuclear Operating Companies are amortizing the applicaNe -
l I units retroactive to January 1,'1991. See Notes 12 deferred gain and loss over the terms of leases under and 13, sale and leaseback agreements. The amortizations The. Operating Companies use external funding along with the lease expense amounts are recorded as of future decommissioning costs for their operating other operation and maintenance expense, nudear units pursuant to a PUCO order. Cash INUREST CllAEit contributions are made to the funds on a straight h.ne basis over the remaining licensing period for each Debt interest reported in the inceme Statement does unit. Amounts currently in rates are based on past not include mterest on nue. ear fuel obligations. , estimates of decommissioning costs for the Operating Interest on nuclear fuel obligations for fuel under Companies of $122,000,000 in 1986 dollars for Davis, construction is capitahred. Le Note 5. Besse and $72 000.000 and $63,000,000 in 1987 Looes and gains realized upon the reacquisition or L dollars for Perry Unit I and Beaver Valley Unit 2, redemption of long-term debt are defe7 red, consic. tent respectively. Actual decommissioning costs are with the regulatory rate treatment. Such losses and e perted to signihcantly exceed these estimates. gains are either amortized over the remainder of the it is expected that increases in the cost estimates will original life of the debt issue retired or amortized over be recoverable in rates resulting from future rate the life of the new debt issue when the proceeds of a proceedings. The cmrent level of expense being new issue are used for the debt redemption. The funded and recovered fmm customers over the amortizations are included in debt interest expense. remair}ing licensing periods of the units is PROPERTY. PLANT AND I!QUIPMENT approumately 58,000,000 annually. The present funding requirements for Beaver Valley Umt 2 also Property, plant and equipment are stated at original satisfy a similar commitment made as part of the sale cost less any amounts ordered by the PUCO to be and leaseback transaction discussed in Note 2. written off; included in the cost of construction are items n ch as related payroll taies, pensions, fringe FEDERAL INCOME TAXES benefits, management and general overheads and The financial statements reflect the liability method of allowance for furHs used during construction accounting for income taxes. The liability method ( AFUDC). AFU. represents the estimated sequires that our deferred tax liabilities be adjusted composite debt and equity cost of funds used to for subsequent tax rate changes and that we record finance construction. This noncash allowance is deferred taxes for all temporary differences between credited to income, except for certain AFUDC for the book and tax bases of assets and liabilities. A Perry Nuclear Power Plant Unit 2 (Perry Unit 2). See portion of these temporary differences are attributable Note 3(c). The gross AFUDC rates averaged 10.7% in
'to property-related timing differences that the PUCO 1991,10.8% in 1990 and 11,2% in 1989.
used to reduce prior years' tax expense for Maintenance and repairs are charged to expense as ratemaking purposes whereby no deferred taxes incurred. The cost of replacing plant and equipment were collected or recorded. Since the PUCO practice is charged to the utility plant accounts. The cost of permits recovery of such taxes from customers when. property retired plus removal costs; after deducting l- any salvage value, is charged to the accumulated L . t..cy become payable, the net amount due from customers has been recorded as a regulatory asset provision for depreciation. ~
.in deferred charges. A substantial portion of this amount relates to differences between the book and RECl ASSlflC ATIONS tax bases of utility plant. Hence, the recovery of these Certain reclassincations have been made to prior L.. amounts will take place over the lives of the related years' financial statements to make them comparable assets. . with the 1991 financial statements and consistent Investment tax credits are deferred and amortif.ed 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 expense under the liability. method. " Revenues" and accumulated deferred rents as See Note 7. . discussed in Note 2 f > ++ e 16
Management's Finantial Analysis Rt SUI.TS Of OpmAIIOM depreciation for facilities that are in service but not yet recognized in rates. PUCO action on this request has Omen. been postponed under the joint recommendation
- The lanuary 1989 PUCO rate orders for the Operating approved t'y the PUCO discussed below.
- Companies, as discussed in Note 6, were designed to in December 1991, the pUCO approved a joint
; enable us to begin recovdng in rates the cost of, and recommendation of the Operatmg Lompanies and eam a fair return on, our allowed investment in customer representative groups involved in the 1989 Perry Unit I and Beaver Vallev Unit 2. The rate rate case settlement. The jomt recommendation orde s, which provided for th'ree rate increases, sought to secure an interim resolution of then-improved revenues and cash flows in 1989, lWO and pending accounting appliculons in 1991 and to 1991 from the 1988 levels. However, as discussed in esta'bsh a framework for resolving accounting issues the hrst four paragraphs of Note 6, the phase in and related matters on a longer term basis (i e , lW2-plans were not designed to improve earnings because 1995). As part of this joint recommendation, the gains in revenees from the higher rates and assumed Operating Companies agreed to limit their combmed sales growth a e initially offset by a corresponJmg 1992 other operation and maintenance expenses and reduction in the deferraf et nuclear plant operating capital expenditures to $1,050,000 000, exclusive of expenses and carrying charges and are subsequently compliance costs related to the Clean Air Act offset by the amontation of such deferrals. Amendments of 1090 (Clean Air Act). Other Although the phase-in plans had a positive effect operation and mz stenance espenses and capital on revenues and cash flows, there are a number of expenditures totaled $1005.000,000 in 1991 The _
factors that exerted a negative influence on camings Operating Companies and the customer in 1991 and will continue to present signihcant representative groups also agreed to an ongomg earnings challenges in 1992 and beyond. One such review of our business operations, hnancial condition factor is related to facilities placed in service after and accounting practicet This affort, with the iebruary 1988 and not included in rate base. The participation of the PUCO staff, is directed at the Operating Companies are required to record interest maintenance and ultimate improvement of our charges and depreciation on these facilities as current fmancial condition, the improvement of the : expenses even though such items are not yet ef6ciency of our operations, and the delav and recovered in rates. We also are facing the challenge of mimmization of tuture rate increases. The operating competitive forces, including new initiatives to create Companies also agreed not to seek any base rate mumcipal electric systems. The need to meet increase that would become effective before 1991 competitive threats, coupled with a desire to We continually face competitive threats f om encouraSe economic growth in the service area. is municipal electric systems within our service territory, prompting the Operating Companies to enter into an a challenge intensited by municipal access to low-increasmg number of contracts having reduced rates cost power currently available on the wholesale with certain large customers. Competitive forces also market. As part of our competitive strategy, we are promptad Toledo Edison to implement rate strengthening programs that demonstrate'the added reductions in 1991 for residential and small value inherent in our service, bey ond what one might commercial customers. Factors beyond our control receive from a municipal chstric system. Such also havmg a negative influence on earnings are the programs include prosiding services to communities eccaomic recession, the effect of inflation and to help them retain and attract businesses, providing increases in taxes, other than federal income taxes. consulting services to customers to improve their We have taken several steps to counter the adverse energy einciency and developing demand-side - effects of the factors discussed above. We have management 'p ro g r a m s . To ~ counter new implemented most of the recommendations of the municipalization mitiatives, we an also streszing the management audit discussed in Note 6 and have fmancial risks and uncertainties of creating a taken other actions which reduced other operation municipal system and our superio rehability and and mamtenance expense by approximately service. 062 000.000 in 1991, As discussed in the Summary of Annual sales grow th is expected 'o average about Signif ant Accounting policies and Note 12, we 2% for the next seseral years, contingent on future sought and received PUCO approval to lower our economic events- Recognizing the limitations nuclear plant depre(iation expense in 1991 to a level imposed by these sales projections and current more closely aligned with the amount being competitive pressures, we will utilire our best efforts recovered in rates. In addition, we have increased our to minimize future rate increases through cost-efforts to sell power to other utilities which, in 1991. reduction and quality-of-service efforts and exploring resulted in approximately $33 000KO of revenues in other innovanve options. Eventually, rate increases excess of the cost of providing the power. will be necessary to recognize the co'st of our new Despite the positive aspects of the measures capital investme'nt and the effect of inflation. discussed above, more must be done to maintain earnings. Co, tinuir7, cost-reduction efforts will be M91 m 1990 necessary to lessen the negative pressures on factors contributing to the 5 5% increase in 1991 earnings. We are aggressively seeking long-term operating revenues are as follows: power contracts with wholesale customers to further Chang in Operanng Rewnnes Innede enhance revenues. To counter the effects of delays in case Rates and menaneou4 5snmum recovering new investment since 1988 and related SM volun e and Ma a tmw costs in rates, we have requested pUCO approval to wholesaw sairs mum accrue post-in-service carrying costs and defer $13 17
- - . . - - - - . - - - - - - - . - - - . - - - ~ - - - - -
The increases in base rates and miscellaneous Companies of 9% effective in February 1989 and 7% revenues resulted primar4y from the lanuary 1989 - effective in February 1990. The associated revenue- [ PUCO rate orders for the Operating Companies. The increase in 1990 was partially offset by reduced 1
, PUCO approved rat ( increases of 7% effective in - revenues resulting from a 4.1% decrease in total -
February 1990 for both companies and rate increases kilowatt-hour sales, industrial sales decreased 2.8% , of 4.35% for Cleveland Electric and 2.74% for Toledo- because of the recessian beginning in 1990. - Edison effective in February 1991, However, as part of Residential sales decreased 2.1% as seasonal Toledo Edison's efforts to improve its competitive temperatures were more moderate in comparison to , position in its service area, Toledo Edison waived its the prior year's temperatures, resulting in reduced 2.74% rate increase for residential and small customer heating and cooling-related demand. ' commercial customers and reduced its residential rates Commercial sales increased 0.3% as increased by 3% effective in March 1991 and by an additional demand from new all-electric office and retail space
- 1% effective in September 1991. See Note 6. Total was offset by the effects of mild weather. Other sales kilowatt-hour sales increased 1.2% in 1991. Residential activity decreased 18A% as a result of lower and commercial- sales increased 47% and 4.8%i wholesale sales caused in part by Toledo Edison 3 respectively, as a result of higher usage of cooling municipal utility customers satisfying a- greater equipment in response to the unusually wann late portion of their power needs from other sources. The spring and summer 1991 temperatures. The inciease in revenues was also partially offset by the - commercial sales increase was also influenced by loss of revenues related to the May 1989 expiration of
. some improvement in the economy for the Cleveland Electric's agreement to sell a portion of its cc nmercial sector. Industrial sales declined 5% largely share of Perry Unit 1 capacity to Ohio Edison and because of the recession-driven slump in the steel, Pennsylvania Power. auto and chemical industries. Other sales increased Operating expenses decreased 0.3% in 1990. 9.1% because of increased sales to wholesale Depreciation and amortization expense decreased - customers and public authorities. primarily because of lower depreciation rates used Operating expenses increased 3% in 1991. The in 1990 for nonnuclear and Davis-Besse increase was mitigated by a reduction of $62,000.000 property attributable to longer estimated lives and in other operation and maintenance expense, resulting because of longer nuclear generating unit refueling primarily from cost cutting measures. Offsettmg this and maintenance outages in 1990 than in 1989. decrease were an increase in federal income taxes Federalincome taxes decreased primanly because of a
- because of higher pretax operating . income; an decrease in preta3 operating income. These increase in fuel and purchased power expense decreases in oper.aing expenses were partially offset resulting primarily from increased amortization of by an increase in taxes, other than federal income previously deferred fuel costs over the amount tau s, resulting from higher property and gross amortized .a 1990; an increase in taxes, other than receipts taxes, and by lower operating expense federal income taxes, resulting from higher property deferrals for Perry Umt 1 and Beaver Valley Unit 2.
and gross receipt taxes and accruals for Pennsylvania Credits for carrying charges recorded in tax increases enacted in August 1991: and lower nonoperating income decreased in 1990 because a 4 operating expense deferrals for Perry Unit I and greater share of our investments and leasehold Beaver \ alley Unit 2 pursuant to the January 1989 mterests in Perry Unit I and Beaver Valley Unit 2 PUCO rate orders, were recovered m rates. The decrease in the federal
. Credits for carrying charges recorded in income tax provision related to nonoperating income nonoperating income decreased in 1991 because a was the result of a decrease in pretax nonoperating greater share of our investments and leasehold income and federal income tax adjustments of . interests in Perry Unit 1 and Beaver Valley Unit 2 537,522,000 associated with previously deferred were recovered m rates. The federal income tax investment tax credits relating to the 1988 write-off of provision related to nonoperating income increased nuclear plant. Other income and deductions, net, mainly because the 1990 provision was reduced by decreased primarily because of less interest income in
,i j 537,522,000 for federal income tax adjustments 1990. associated with previously deferred investment tax credits relating to the 1988 write-off of nuclear plant. ElFECT Of INFLATION
,1990 m 1989 Although the rate of inflation nas eased in recent Factors comributing to the 2.8% increase in 1990 - years, we are still affected by even modest inflation .
operating revenues are as follows: since the regulatory process mtroduces a time lap increase during which increased costs of our labor, matenals - Change in Operating Revenues (Dwrease)- end services are not reflected in rates and recovered. Base Rates and Macellaneous . $152.000S00 floreover, regulation allows or.ly the recovery of Un tYCapacit es to O'h E5Nson -
)istorical costs of plant assets through depreciation l- and Pennsylvania l'ower, _
(32 000.000) even though the costs to replace these assets would
$ gooo3x3 sutetantially exceed their historical costs in an !
inflationary economy. The major factor accounting for the increase in Changes in fuel costs do not affect our results of E operating revenues was related to the January 1989 operations since those costs are deferred until , rate -orders for the Operating Companies. The reflected in the fuel cost recovery factor included in .
- PUCO approved rate increases for the Operating customers' bills. l i
l a l 1 a
., - -- - - ,,_,,-,c , , , . < , _ . . - _ _ _ _ _ _
- .m..........
191Corne Statetnent . ...
..,..... - ,... . m . ,
cwitaron cuenar coxrowwnuo suosiotaans For the_ years ended December 31, 1991 1990 -1989 l (thousands of dollm. escept per share amounts) Operating Revenues . . . . . . , . . . . . . ./. . .... . . ..
$2]60.252 $2.427.441 $2,361,304 ~ Operating Expenses Fuel and purchased power . . . . . . . . . . . . . . . .. . . 499,672 472,297 472,684 Other operation and maintenance . . ... . ., . . . 601,225- 862,738 860,138 Depreciation and amortization . . . . . . . . . . . . . , . . , , .. . 242,708 242,153 272.671 Taxes, other than federal income taxes . . . . . . .. . 304.709 283,425 259,871 1 - Phase-in deferred operating expenses . . ., . . . . . . . . . . (22.222) (50,940) (74,555)
Amortiution of pre-phase-in deferred costs . . . , , , 16,529 17,272 16,335 Federal income taxes . . . . . . .. .. . . . . . . 137t SSI 96,076 222,385 1,960,202 1,923,02! t,929,529 Operating income . . . . . , . . . . . ... . . . .... . 580,050 504.420 431,775
. Nonoperati_ng income Allowance for equity funds used during construction . . . , 9,351 7,883 16,930 Other income and deductions, net . .... . . . . . . 5,248 145 14,368 '
Phase-in carrying charges. . . . . . . . . . . . . . . . 109,601 205,085 299,159 Federal income taxes - credit (expense) . . , . . . . . . _ ]30,329) _ (12,948) (73,177) 93,671 200,165 257,280 income Before Interest Charges and Preferred Dividends . . 673,921 704,585 689.055
- intere: I Charges and Preferred Dividends Debt interest , , . . . . . . . . . ... , . . ... . . -381,280 384.278 369,481: - Allowance for borrowed funds used durine truction . (5,248) (5.993) (12.929)
Preferred dividend requirements of subt . . . 60.649 61,841 65,617 __ 436.6S1 440,12t! 422.169 ~ I Net incomc . . . . .
$JMg $J64.45_9 5 266.886 ^ Average Number of Common Shares Outstanding (thousands) ...,...... .., . ..... . . . ,,. . ,. 139,104 138,885 140,468 r.==== w .
Earnings Per Common Share . . . . . . . . . . . . .. $ n - 1.7
-.1.. .$
1,90 $ 1.90
. 'vidends Declared Per Common Share. . .. . . 1.60 -$ 1.60 $ 1,60 i -Retained Earnings For the years ended December 31. ..-. 1991 1990 1989 (thousands of dollars) ' Balance at Beginning of Year;. .. . .. . . ' $ 654.836 $ 613,774. 5 571,882 Addit' ions .. Net income . . . . , . . . . .. .. . . 237,240 264,459 266,886 IDeductions
. Commun stock dividends.. . . ..... .. . .. . .. (222,233) (222,482) (224,947)- 1 Other, primarily preferred stock redemption expenses of a~ subsidiaries . . .. ...... . . . .. , , . . . . . . (966) (915) -(47)-
. Net increasei . . . . . .. .. . 14,041 41,062 41,892 ' Balance at sna of year . .. . . . . . . . . .
s 66s,s77
$ 654,836 $ 613.774 The accompanying notes and summary of significant accounting policies are an integral part of these statements.
19
,, mn.... - -,n,- - , . - ~ , . . - -
. -. - . ~ - - . . - - ~ . - _ . ~ . - - - . . ~ _ _ - . . _ . . - . - . . .
Mqnagernenfs Financial Analysis ;
- CAPITAliRESOURCES AND 1IQUIDITY _ optional redemption provisions. See Notes 10(d) and In' addition 'o our need for cash for normal corporate (e) for inf rmation conceming limitations on the
- operations; we continue to need cash fr.. antngoing issuance of preferred and preference stock and debt.
gur capital requirements after 1944 will depend on
?existing program of constructing facilities to meet anticipatednew facilities demand idrand modifving the implementation strategy we choose to achieve electric service, comply with governmental comphance with the Clean Air Act. Expenditures for - regulations and pro t_ ect the environment. Cash is aho our optimaFplan are estimated to be approximately $190,000,000 over the 1992-2001 period. See Note needed for the mandatory retirement of securities.
Over the three-year period of 1989-1991, these 3(b). construction and mandatory retirement needs totaled We npect to be able to raise cash as needed. The approximately $1,250,000,000. In addition. we availability and cost of capital to meet our ntemal-exercised various options to redeem and purchase hnanang needs, however, depends upon such factors approximately $480,000,000 of our securities. as hnancial market conditions and our credit ratings. As a result of the January 1989 PUCO rate orders, Current securities ratings for the Operating
- internally generated cash increased in 1989,1990 and Companies are as follows:
1991 fmm the 1988 level. In addition, we raised are investic
$1,463,000,000 through security issues and term bank Cf qSatan Sm*e loans during the 1989-1991 period as shown in the cleveland Elutric Cash riows statement. During the three-year period, nmt monsage twas sorr - saa2 the Operating Companies also utilized their short- Prefened St*L - BB+ t'aa 2 term borrowing arrangements (explained in Note 11) Toledo Edson to help meet their cash needs. Proceeds from these _ nrst mongage twas. son- 04a3 financings were used to help pay for our construction tansecumt notes. BB+ Bat Preferred stak . 85+ t,a2 program, to repay portions _ of short-term debt - incurred to finance the construction program, to retire, redeem and purchase outstanding securities, and for Barring unforeseen circumstances, we believe that general corporate purposes. _
the rate orders and recent regulatory actions, coupled Estimated cash requirements for 1992-1994 for with stringent cost controls, _ have given us a
. Cleveland Electric and Toledo Edison, respectively,- reasonable opportunity to achieve hnancial results are _ $693,000,000 and $248,000,000 for their which should permit Centerior Energy to continue the construction programs and $464,000,000 and current quarterly common stock dividend of $A0 per = $24L000,000 for the mandatory redemption of debt share. Nevertheless, dividend action by our Board of and preferred stock. Additionally, Cleveland Electric. Directors will continue to be decided on a quarter to-has arranged to refund in 1992 $78,700,000 principal quarter basis after the evaluation of financial results, amount of its F st Mortgage Bonds,13%% Series due potential earning capacity and cash flow. A write-off 2012 by issuing an ec,ual principal amount of first - of our investment in Perry Unit 2. as discussed in -- mortgage bonds due 2013 having an effective interest Note 3(c), would not reduce our retained earnings acost of 8.25%. Cleveland Electric and Toledo Edison sufficiently 'o impair our ability to declare dividends . expect to finance externally about 50% of their total _ and would not affect our cash flow. - 1992 construction and mandatory redemption The Tax Reform Act of 1986 (1986 Tax Act) requirements of approximately $286,000,000 and ; provided for a 34%' income tax rate in 1988 and' $180,000,000, respectively. About 50-60% of the- ' thereafter, a new alternative minimum tas ( AMT) and .
Operating Companies' 1993 and 1994 requirements- other changes that resulted in increased tax payments -
- are expected to be financed externally, if economical, and a reduction in cash flow during 1989,1940 and additional securities may be redeemed under 1991 because we were subject to the AMT.
f 9 0 20
Cash FIows; , , , . crunxon twar canon. mon no suaswums For the years ended December 31, .j' 1991 _ 1990 1989
. (thousands of dollars)
Cash Flows from Operating Activities (1)_- . Net income ;. . ,4 ,.. . ,... .c,. .. ,, . .. . . $ 237,240 $ 264,459 $ - 266,886 LAdjustmsnts to Reconcile Net income to Cash from Operating Activities: Depreciation and amortization .. . . .. 242,703 242,153 272,671 Deferred federal income taxes . .. . .... .. , -85,331 142,190 181,240 '
- ' investment tax credits, net . ... , . . .. 42,860 (34,287) 1,179 1 . Deferred and unbilled revenues . . . . (50,S66) (60,792) (74,792)
Deferred fuel . . . ... . . . .. 17449 -(11,843) 25,086 Carrying charges capitalized . . . . . , (109,601) (205,085) (299,159) ,
- Leased nuclear fuel amortization .. . 122,770 84.150 102,120 Deferred operating expenses, net . .. . . (5.693) (33.668) (58,220)
Allowance for equity funds used during construction . .. (9,351) (7,883) (16,930) Amortization of reserve for Davis-Besse refund obligations to customers . .. , . . (24,817) Pension settlement gain ... . .. . ... . .. - (40,966) - - Changes in amounts due from customers and others, net - . 14,007 (26,445) (13,486)
- Changes in inventories . . . . . . -(22,175)' (29,015) (3,029)
Changes in accounts payable. . . . , .. (49,015) 45,654 (28,826) 1 Changes in working capital affecting operations. . . .. 18,858 (24,913) 17,120 Other noncash items . . . . . . . 1,396 7,184 7,775 Total Adjustments . . . . . . , . 29S,877 46,434 87,932 Net Cash from Operating Activities, . . _536,117 310,893 - 354,818 Cash Flows from Financing Activities (2)
= Bank loans, commercial paper and other short-term debt. . (109,903) 109,888 29 l Debt issues:
- ' Tirst mortgage bonds . . . . . . . . . . . . ... .. _- _
.167,300 123,800-Secured medium term notes .. ,, . . . . 284,500 337,500 212,500 Term bank loans and other long-term debt . , . .. . .. 108,365 31,000 40,000 Preferred stock issues .. . . .. . . . 125,000 - -
_ Common stock issues . . , .... . ..., .. . 32,028 - 740
- Reacquired common stock ,, . , . . .., .
(114) (25,601) (19,804) Maturities, redemptions and sinking funds. . . . .. (311,983) (395,287) (370,747)-
- Nuclear fuel lease and trust obligations , , . . . . . (175,623) (99,076)- (86,589)
Common stock dividends paid , , -. , (222,233) (222,482) (224,947)
- Premiums, discounts and expenses . ... . _ j6 29'1) (7,360) (2.622)
Net Cash from Financing Activities . ... . .. (216,954) ___(141.118) _(327,640) Cash Flows from investing Activities (2) . Cash ~ applied to construction:. . . . . . .. . .. . (189,244)' (237,436) .(210,403)
~7 Interest capitalized as allowance for borrowed funds used during construction ... . ... . . ... . (5,246) (5,993) (12,929)
Other cash applied . . . . . . . . . . . ... (568)- (13,211) (31.500)
. Net Cash from investing Activities . (195,060) (256.640) (254,832)
Net Change in Cash and Temporary Cash investments. ... .. . 124.103 (49,865) (227 654) Cash and Temporary Cash investments at Beginning of Year .. . 53,278 103,143 330.797 Cash and Temporary Cash investments at End of Year... . . $ 177.381; $ 53,278 $ 103,143 .
, (1) . Interest paid (net of amounts _ capitalized) was $339,000,000, $297,000,000 and $242,000.000 in 1991,1: s0 and 1989; respectively, income taxes paid were $56,728,000, $21,185,000 and $9,058,000 in 1991,1990 and 1989, - respectively. -
(2) Increases in_ nuclear fuel and nuclear fuel lease and trust obligat ons in the Balance Sheet resulting from the
' noncash capitalizations under nuclear fm1 agreements are excluded from this statement.
The_ accompanying notes and summary of significant accounting policies are an integral part of this statement. L 21
l Balance Sheet December 31, 1991.. 1990 (thouwkts of dollm)~ ASSETS -- PROPERTY, PLANT AND EQUIPilENT Utility plant in service. . ....... .. .. .. .., .. .. $ F.SSS,219 $ 8,636,219 . Less; accumulated depreciation and amortization . ,, , 2,274.480 2,038,510 6,613,730 6,597,709 Construction work in progress . . . . . . . .. . .., . 215,855 268,3S6
- Perry Unit 2. . . . . , ., , , .. . S50,573 865,149 7,6SO,15S 7,731,244 Nuclear fuel, net of amortization ... . . . 458,414 522,672 Other property, less accumulated depreciation .. .. . .. 44,513 45,452 S.183,0S5 8.299,368 CURRENT ASSETS ' Cash and temporary cash investments . . . . , .. .. 177,381 53,278 Amounts due from customers and others, net . . . , 228,754 242,761 Unbilled revenues .... . .. . .. 107,S44 80,866 Materials and supplies, at average cost . . .. . . 125,618 108,758 Fossil fuel inventory, at average cost . . . . . . 57,S93 52.578 - Taxes applicable to succeeding years. , . . . . . 234,096 218,444 Other . . . . . . . . .. .. . ... . . .. . 9,298 9,922 940,SS4 766,607 DETERRED CHARGES Amounts due from customers for future federal income taxes . . 1,145,925 1,165,904 ~ Unamortized loss from Beaver Valley Unit 2 sale. . . . . 114,174 119,623 Unamortized loss on reacquired debt . . .. .. . . . 75,265 80,564 Carrying charges and operating expenses, pre-phase-in . 612,852 629,530 Carrying charges and operating expenses, phase.in . . . .
761,571 629,744-Other . . . . . . .. . . . 208,333 202,895 2.918,120 2,828,260 i Total Assets . . . .. . . . . 512,042,089 $11,894,235 - The accomoanying notes and summary of significant accounting policies are an integral part of this statement. 22
CEl.TEWOR ENERGY CORPORATION AND SllBSIDIARlLS 7 December 31, 1991 1990 (thousands of dollars) CAPITAUZATION AND LIABILITIES CAPITAU2ATION= Common shares, without par value (stated value of $221,477,000
!and $189,460,000 for 1991 and 1990, respectively): 180,000,000 . ' authorized; 140,160,000 (excluding 2,522,000 shares in Treasury) and 138,401,000 (excluding 2,511,000 shares in - .
Treasury) outstanding in 1991 and 1990, respectively . . . . . . . . $ 2,185,607 $ 2,155,197 Retained earnings . . . . . . . . . . . . . . .. ... .. . . .. 668.877 654.836
. Common stock equity . . . . .. ...., ........ .. ... .. 2,S54,484 2,810,033 . Preferred stock With mandatory redemption provisions . .. . . 332,031 237,490 Without mandatory redemption provisions . . . . . . . ... 427.334 -427,334 Long-term debt . . . ..... . .. . . .. . . . . . _ 3,841,355 3,729,237 1 7J55;204 _7,204.094 OTHER NONCURRENT UABlUTIES - Nuclear fuel lease obligations . . , , . . , , ... .. 340,507 427,295 Other, ...... . .. .. . .. . . ... ..,. . . .. . 83,14Z 81,399 423j54 508.694 - - CURRENT UABlUTIES a - Current portion of long-term cebt and preferred stock . . ,. 216.333 214.138 Current portion of lease obligations. . . . . . . . . . . . . 144,620 114,943 L Notes payable tc, banks and others .- . 191. 110,094 : - Accounts payable . . . . ... . .. .... . ... 147,810 196.825 = Accrued taxes . .. . .. .... .. .. . .. . . 350.550 323,716 Accrued interest -. . ..,, ,. .. . . .. , .. . S4,495 84,778 O ther . . . . . . .. . . . . . . . . . . .. . . . . . . . .. 57,683. 73,801 1,001,652 1,118,295 .
DEFERRED CREDITS E Unamortized investment tax credits . . . .. . . . .. . . 366,04/ 336,136
-- Accumulated deferred federal income taxes . . . ............ 1,784,749 1,730,954 Reserve for Perry Unit 2 allowance for funds used during construction . . . . .. . . . .. .. . .. .. o .... .. 212,693 212,693 Unamortized gain from Druce Mansf eld Plant sale . .. . . , . 602.456 626.493 - Accumulated deferred rents for llruce Mansfield Plant and Beaver Valley Unit 2. . . . . ... .. . .. ... .131,082 114,888 Other, . .... ... . .. .... . . ...... 64.522 41,988 3,161,549.- 3,063,152 Total Capitalization and Liabilities . . . . . .. . . . $12,04. 0.S 9 .q-,r.2. $11,894.235 .3- 7 T
23 -
.:. .=- . - , - a.-.- .. - :. :.-
t
-i . twnm umcr coww.non suo summu l .'AQltinent of Cuntulative Preferred Stock i
themier 31, 1991 dhares Current guyan3n3 C.,all Prke _ _ !p ! , ,., _ 1W _ CLEVELAND ELECTRIC Chousanoi of dolla'il Without par value,4,000,000 preferred shares authorized Subject to mandatory redemption: 5 7.35 Series C. .. . .. . . 170.0(O 5 101.00 5 17.000 $ 18,000 ; 88.00 Series E . . . . . .. . . 27,000 1,030 61 27.000 30.000 , 75.00 Series F . . . . .. . . . - - - 2,384 l
- 145.00 Series I . . . . . . . . . - - - 13,779 113.50 Series K . . . , .
- t 10.000 Adjustable Series M . . . . . . .. 400,000 102.00 39,200 49,000 9.125 Series N . . 4 . 750,000 105 07 73,966 73,968 91.50 Series Q . .. . . 75 000 - 75,000 -
l 88.00 Series R . . . 4 . 50,000 - joy 00 - 282,168 197,131 .t less: Current maturities _13J00 25.969 ! 268,368 171,162
- ~ ~ ~
Not subject to mandatory redemption: 5 7.4 ~ Series A . . . . . . . S'10,000 101.00 50.000 50,000
- - 7.56 Series D . . . . . . . 450,000 102.26 45,071 45,071 Adjustable Series I. , . . . . . , 500,000 103.00 4S,950 48,950 Remarketed . Series P . . . . . . . . . . , 750 100,000,00 _ 73,313 73,313 _
TOLEDO EDISON ' 25 4 2' '3 5100 par value,3,000,000 preferred shares authorited and $25 par value,
.4000,000 preferred shares authorized '
Subject to mandatory redemption: 5100 par $ 11.00 . . . . . . . . . . . . 24,825 101.00 2.463 3,483 9.3 75 . . . . . . . . . . . 131450 103,46 13,345 15,010
- 25 par 2.81 . . . . . . . . . . 2.000,000 2656 ,_ 501000 50,000 l 65,828 68,493 :
1.ess: Current maturities 2,165 2,165
~ ~',663 63 66,328 Not subject to ruandatory redemption: l 5100 par 5 4.25 . . . .. . . . 160,000 104.625 16,000 16,000 4.5 6 . . . . . . . . . . , . 50,000 101.00 5,000 5,000 .
4.25 . . . . . . . . . . . . . 100,000 102.00 10,000 10,000 8.3 2 . . . . , . . . . . . 100,000 102.46 10,000 10,000 7.76 ...... . , . . . 150,0^'t 102.437 15,000 15,000 , 7.80 . . . . . . . . . . . . . . 150A C 101.65 15,000 15,000 i 10.00 s . . . . . .... , 190,000 101.00 19,000 19,000 ! 25 par 2.21 . . . . . . . 1,000,000 - 25.25 25,000 25,000 . 2.365 ... . .. .. . .. 1,400 000 28.45 35,000 35,000 . Series A Cjustable- 1,200,000 25.75 30,000 30,000 ; Series B Adjustable 1,200,000 25.75 _ 30,000 30,000 CENTERIOR ENERGY N000 - '0'000
' Without par value,5,000,000 preferred sNres authorized, none outstanding Total Preferred Stock, teith Mandatory Redemi.tlon Provisiota . . . . . . . .. . .. _5_ 3 3 2.._,_03.1,. 5.,237,.490 g
Total Preferred Stock, tvilhout Mandatory Redemption Provisions . . .. .. . .. 5427,334 5427.334
. = . = . . -- -a The accompanyN notes and summary of significant eccounting policies are an integral part of this statement, t
a ( . .. 24
. %.,_ - - ___ __;_ u _ . _ _ . .~_2._.. _ _. _ _._ . _ _ _ _ _ _
.- ~ -.~ - ~ - - - _ -.- - - _-. - - - -
Notes to the Financial Statements (1) PROP 1 RlY OWNI D Wi1H OlllLR UlliIlli s AND INVlMDR9 The Operating Companies own, as tenan's in common with other utilities and those investors who are owner-participants in various sale and leaseback trane.actmns (traors), certain generating units as hsted below. Each owner owns an undivided s, hare in the entire unit. Each owner has the right to a percentage of the generating capability of each unit equal to its ownership i. hare. Each utility owner is obligated to pay for only its respective !
- share of the construction and operating costs. Each I.essor has leased its capacity rights to a utihty which is
. obligated to pay for such lesser's share of the construction and operating costs.1he Operating Companies' share of the operating costs of these generating units is induded in the imome Statement. Property, plant and eqt..pment at December 31,1091 includes the following facilities owned by the Operating Companies as tenants . in common with other utilities and 1.ewors: .
Ownri- Conntiurtion in- Ownet- s, hip Plant Work in berme ship Mega - Power in Progrew atJ Arrumulated Generstmg Unn Da te, % are y, garr tery Sugended (kprenation in Scryke, ohousands of dollars)
$rnesa Pumped Storage . 1970 70 0W 312 Ilydro $ $7,733 $ 1.021 6 19 k% i l'estide Un.t 5. . . . . . .. 1972 M NO 41t Coal 151.1%0 2.199 - !
Perry Unit I and Common Ianhnes . 1987 41 02 NN Nudear 234hJ26 9.M? 310 #11 Ikawr Valley Und 2 and Common f anhtwe (Note 2) . 1987 26 12 ;14 Nudear 1338 @ 7 t.W 167,081 Construction su pended Perry Unit ? (Note 3(r)) . . Uns ertam $102 61$ Nudrar - 6 0.373 -
$. 41_11 al% - S_k_ rara 9 $_4_97_.539 Depreciation for Eastlake Unit 5 has been accumulated with all other nonnudear depredable property rather than by specihe units of depreciable property.
Effective May 1,1991, FERC approved an agreement under which Cleveland Ehctric is sellmg the power from its share of the Seneca Power Plant to two subsidiaries of General Public Utilities Corporation through 1993. Revenues from this transaction were $16,0(X),000 in 1991. C,hio Edison and Pennsylvania Power purchned 80 megawatts of Cleveland Electric's capacity emitlement in " perry Unit I from Noven ber 1987 through May 1989. Revenues from this transaction were $31,831,000 in lu89. The ownership share of Perry Unit 2 set forth above does not reflect Cleveland Electric's acquisition of Duquesne's 13.74% ownership share in February 1992 See Note 3(c). (?) UlliITY Pl. ANT sal E AND 1.EASFSACK IRANSACllONS As a result of sale and leaseback tramartions payments are now classihed as accumulated deferred completed in 1987, the Operating Companies are rents on the Balance Sheet. Previously, the ncew was co lessees of 18.26% (150 megawatts) of Beaver Valley included in accounts payable. Unit 2 and 6.5% (51 megawatts), 45.9% (358 The Operatmg Companies are responsible under megawatts) and 44 38% (355 megawatts) of Units 1. 2 these leases for paying all tases. insurance and 3 of the Man 5 held Plant, respectively, all for premiums, oper; ' in and maintenance costs and all terms of about 29% years. other similar costs for their interests in the units sold Futare minimum lease payments under these and leased back. The Operating Companies may incur ! operating leases at December 31,1991 are summari7ed additional costs in connection with capital as fol!ows; improvements to the units. The Operating
~irar Amount Companies have options to buy the interests back at ,
osouona. oe are the end of the leases for the fair market value at that ;
, IW2. . $ 173foo time or to renew the leases. Additional lease ;
lw). .. 1744xo provisions provide other purchase options along with 1994 . I?4 000 conditions for mandatory termination of the leases '., _$L 1.cer Years ,, Q 3 wuxo (and possible repurchase of the leasehold interests) for events of default. These events of derault include Total ruture Mmimum noncompliance with several fmancial covenants lesw rayitwnts . $4.wafuo decting Centnior Energy and the Operating
=~~
Companies contalned in an agreement relating to a Semiannual lease payments conform with the letter of credit issued in connection with the sale and
- payment schedule hr each lease, leaseback of Beaver Valley Unit 2, as amended in ;
Rental expense is accrued on a straight line basis 1989. See Note 10(e). over the terms of the leases. The amounts recorded in Tohdo Edison is selling 150 megawatts of its 1991,1990 and 1989 as annual rental npense for tne Beaver Valley Unit 2 leased capacity entitlement to Mansfield Plant leases and the Beaver Valley Unit 2 Clev. land Electric. This sale commenced in 1988 lease were $114,564,000 and $72,276,000, respectively. and we anticipate that it will continue at least until
- - Amounts charged to expense in ncess of the lease -1998 e l 25
(3) CONSTRUCTION AND CONTINGENCIES 1991, Cleveland I:lectric, the company responsible for
' ~ " " ' " *" "Y """ #' ' Y '*"~
(al CONSTRUCTION PROGRAht year estenvon of the construction permit which was The estimated cost of our construction program for the to espire in November 1991. Under NRC regulations, 1992 1094 period is $991,000,000, including AFUDC the construction permit will remain in effect while i of $50,000,000 and escluding nuclear fuel. the application is pending. We espect the NRC to in an agreement approved by the PUCO, the grant the extension. Operating Companies have apeed to limit their in February 1992, Cleveland Electric purchased combined 1992 other operation and maintenance Duquesne's 13 71% ownership share of Perry Unit 2 i espenses and capital expenditures to $1,050,000,000, for $3,324,000. This purchase increased the Operating ; exclusive of compliance costs related to the Clean Air Companies' ownership share of the unit to 64.76%, { Act. Within this limitation, capital expenditures are with ti.e remainder owned by Ohio lhlison and , budgeted at $250,000,000, exclusive of the Cican Air Pennsylvania Power, The purchase does not signal Act compliance costs. any plans to resume construction of Perry Unit 2, but rather our intent to keep our options open. Duquesne (b) L, LEAN AIR LEGISLATION had stated that it would not agree to resumption of The Clean Air Act will require, among other things, construction of the unit. significant reductions in the cruission of sulfur diode if Perry Unit 2 were to be canceled, then our act
.and nitrogen oiddes by fossil fueled electric investment in the unit (less any ta saving) would generating units. The Clean Air Act Will require that have to tv written off. We estimate that such a write-sulfur dioxide emissions be reduced in two phases off, based on our investment in this unit as of over a ten year period. December 31, 1991 and after adjustment for the :
We have developed a compliance strategy which February 1992 purchase of Duques:".'s ownership : will be submitted to the i UCO for review in April share, would have been about $438 000,000, after f 1992. We will also seek United States Environmental tases. See Notes 10(d) and (e) for a discussion of ' Protection Agency approval of l'hase I plans in 1993. potential consequences of such a write off, The compliance plan which results in the least cost if a decision is made to convert Perry Unit 2 to a and the greatest flexibility provides for compliance nonnuclear slesign in the future, we would espect to-with both phases through 2001 by greater use of low write off at that time a portion o! our investment for sulfur coal at some of our units and the banking of nuclear plant construction costs not transferable to the emission allowances. The plan would require capital nonnucle cor.struction project. expenditures over the 1992-2001 period of Begimung in July 1985, Perry Unit 2 AFUDC was aporoximately $190,000,000 for rdtrogen oxide control credited to a deferred income account until January 1, equ pment, emission monitoring equipment and 1988, when the accrual of AFUDC was discontinued. i plant modifications. In addition, higher fuel and other operation and maintenance expenses would tw M SUPERTUND SITES incurred. The least cost plan also calls for Cleveland The Comprehensive Environmental Response, Electric to place in r.ervice after 2001 a scrubtwr or Compensation and Liability Act of 1980 as amended other sulfur emission reduction technology at one of (Superfund) established programs addressing the its generating plants. The rate increase associated with cleanup of hazardous waste dispesal sites, emergency r
' the capital expenditures and higher expenses would preparedness and other issues. The Operating !
be about 1-2% in the late 1990s and another increase Companies are aware of their potential involvement after the year 2000i for an aggregate rate increase in in the cleanup of nine hazardous waste sites. The the range of 3-6%. Cleveland Electric would incur Operating Companies have recorded reserves based substantially more of these costs than Toledo Edison. on estimates of their proportionate responsibility for Our final compliance plan will depend upon future these sites. We believe that the ultimate outcome of environmental regulations and input from the pUCO, these matters will not have a traterial adverse effect other regulatory bodies and other concerned entities, on our fmancial condition or results of operations, if a plan other than the least cost plan is required, ., significantly higher capital expenditures could be (4) NUCIIAR OPERAllONS AND required during the 1992-2001 period. CONTINGENCIES - We beliese that Ohio law permits the retovery of , compliance costs from customers in rates. (a) OPERATlNG NUCLEAR UNITS Our interests in nuclear units may be impacted by
-(r) PERRY UNIT 2 act v ties or events beyond our control. Operating Perry Unit 2, including its share of the common nuclear generating units have experienced unplanned - facilities,is approximately 50% complete. Construction outages or extensions of scheduled outages because . of perry Unit 2 was suspended in 1985 pending future of equipment problems or new reputatory - consideration of various options, including requirements. A major accident at a nuclear facility _
resumptbn of full construction with a revised anywhere in the world could cause the NRC to limit estimated cost, conversion to a nonnuclear design, or prohibit the operation, construction or licensing of
- sale of all or part of our ownership share, or - any nuclear unit. If one of our nuclear units is taken cancellation, No option may be implemented without out of service for an extanded period of time for any the unanimous approval of the owners, in October reason, including an accident at such unit or any
=a - ., - - - _ ,.. - , - -- - ,, - _ _ .. ~. _ . _ - ..- - . _ . - - ... _ . _ - _ - -
other nudear facility, we cannot predict whether to $MI,000,000 is permitted. The intermediate term , regulatory authorities would impose unfavorable rate notes mature in the perhxi 19931997. The bank credit ! treatment such as taking our affected unit out of rate anangements are cancelable on two years' notke by a base or disallowing certain construction or the lenders. As of December 31,1991, $490,0tKt000 of maintenance costs. An extended outage of one of our nuclear fuel was (manced. The Operating Companies ; nuclear units coupled with unfavorable rate severally lease their respective portions of the ; treatment could have a material adverse effect on our nuclear fuel and are obligated to pay for the fuel as it , financial position and results of operations. is consurned in a reactor. The lease rates are based on ! various intermediate term note rates, bank rates and i (b) NUClLAR INSURANCC commercial paper rates.
'the price Anderson Act limits the liability of the The amounts financed include nuclear fuel in the i owners of a nuclear power plant to the amount Davis Desse, perry Unit 1 and Deaver Valley Unit 2 l
provided by private insurance and an industry reactors with remaining lease payments of i assessment plan. In the event of a nudcar incident at $147,000,000, $87,000,000 and $33,000,000, , any unit in the United States resulting in losses in respectively, as of December 31,1991. The nudear fuel exress of the level of private insurance (cunently amounts hnanced and capitalired also included )
$2W,000,000), our maximum potential assessment interest charges incurred by the lessors amounting to {
under that plan (assuming the other CApCO $21,000,000 in 1991, $33,000,000 in 1990 and ! companies were to contribute their proportionate $44,000,000 in 1989. The estimatee future lease l share of any assessment) would be $129,257,000 (plus amortiration payments based on- projected any inflation adjustment) per incident, bat is limited consumption are $96,000,000 in 1992, $99,000,000 in i to $19,540,000 per year for each nudear incident. 1993, $91,000,000 in 1994, $78,000,000 in 1995 and The CApCO companies have insurance coverage $82,000,000 in 1996. for damage to property at the Davisfesse, perry and 11eaver Valley sites (including leased fuel and clean-up costs). Coverage amounted to $2,515,000,000 for (6) REGULATORY MATTERS each site as of January 1,1992. Damage to property On January 31,-1989, the pUCO issued orden, which could exceed the insuroce coverage by a substantial provided for three annual rate increases for the ; amountiffit does, our share of such excess amount Operating Companies of approximately 9% 7% and , could have a material adverse effect on our hnancial 6% effective with_ Hils rendered on and after February ! condition and results of operations. 1,1989,1940 and 1991, respectively, As discuued We also have extra expense insurance coverage below, the 6% increase effective February 1,1991 was j- which includes the incremental cost of any reduced to 4.35% for Cleveland Electric and 2.74% for replacement power purchased (over the costs which Toledo Edison, which later waived its 2.74% incicase l would have been incuned had-the units been and reduced its rates on two occasions in 1991 for t operating) and other incidental excenses after the certain customers. The resulting annualized revenue occurrence of certain types of accidents at our increases in 1989,1990 acd 1991 associated with the - nudear units. The amounts of the coverage are 100% rate orders were $120,700,000, $105,700,000 and of the estimated extra expense per week during the $71,400,000, respectively, for Cleveland Electric and l; 52 week period starting 21 weeks after an accident, $50.700 000, $44,300,000 and $1,600,000, respectively,
)
67% of such estimate per week for the for Toledo Edison. Toledo Edison's $1,600,000 increase ; next $2 weeks and 33% of such estimate per week for in 1991 reficcts the net of $18,600,000 of annualized { the next 52 weeks. The amount and duration of extra revenues authorized for the 2.74% increase less expense could substantially exceed the insurance $17,000,000 for the waiver and rate reductions. coverage. Under the January 1989 rate orders, phase-in plans (5) NUCLEAR FUEL. were designed so that the three rate increases, coupled with then pmjected sales growth, would The Operating Companies have inventories for provide revenues sufficient to recover all operating nudear fuel whk h should provide an adequr+ supply expenses and pruide a fair rate of return on the into the min-1990s. Substantia; additional nuclear Operating Compaaies' allowed investments in perry fuel must be obtained to supply fuel for the remaining Unit I and Beaver Valley Unit 2 for ten years
- useful lives of Davis-Besse, perry Unit 1 and lleaver beginning January 1,1989. In the first five years of the Valley Unit 2. More nudear fuel would be required plans, the revenues were expected to be less than if perry Unit 2 were completed as a nuclear generating that required to recover operating expenses and unit- _
provide a fair return on investment Therefore, the _ in 1989, ex, i sting nuclear fuel financing amouets- of operating expenses and return on l arrangements for the Operating Companies were investment not cunently recovered are deferred and refmanced through leases from a spedal purpose capitalized as deferred charges. Since the unrecovered corporation. The total amount of hnancing currently investment will dedine over the period of the phase-
-available under these lease arrangements is -
in plans because of depreciation and deferred tederal
$509,000,000 ($309,000,000 from intermediate term actes and $200,000,000 from bank credit income taxes that result from the use of accelerated tax depreciation, the amount of revenues required to arrangements), although financmg in an amount up provide a fair return also dechnes. pursuant to such j .-
27
prosision with the PUCO's approval. T he rate impact phase-in plans, the Opetatmg Companies deferred was ditietent for the two (ompanies bwause mu(h of the following: IW 1" the savings were espected to be achroed in areas l*3 - phea of MW suth as nuticar operations in whith Toledo !!dison was to achieve greatri savings relative to its ute tum,t Opemmg l ynws $ _ _ 2;222~~ $ 30 %n 5 J4 m in late 1990 in a mos e to betorne more wmpetitive j J Cunmg etwn m Northwest Ohio, loledo I dison proposed a rate
$ VMt $ 22 N2 f il U14 ;ie Iktt . reduction patkage to all intorporated wmmunities in l len fM MM J(?M Toledo Edisoni service area whkh are served j
tu y 5oson $2w tw
~ " " ~ ~
esclusively by Toledo l'Jison on a retail basn ~lhe pJckage (alled for the chmination of the 274% rate lhe amount of dcIerred operating expenses and inirease effectne i ebruary 1,1991 for all residential carr)1ng (harges scheduled to be recorded m 1992 and and small sommercial customers a reduction in 1993 total $S0000,000 and $24 AXt01Xt0, respectivelv. residential rates of 3% on Mar h 1,1991 and a further Iteginnmg in the sixth year (1444) and mntmumg residential rate redm tion of IN on September 1,1991. through the tenth year, the resenue levels authonied Communities aucpting the package agreed to keep pursuant to the phase in plans were designed to be Toledo I'dnon as their sole suppher of electricity for sufhcient to recoser that period s operatinr, espenses, a pened of hs e years. 't he pwkage also permits a f air return on the unrecovered imestments, and the Toledo I dnon to adjust sates in those communities on amortization of the deferred operating espenses and Iebruary 1,1444 and l'ebruary 1,1995 if inflation - carrying (harges recorded during the cather years of cu ecds speahed levels or under emergency the plans. All phase-in deferrals relating to these two conditions All eligible wmmunities in Toledo units will be amortued and recovered by De(ember Edisoni service area, cuept the City of toledo, 31,1998 accepted the rate redu(tion package. In March IWI, The phase in plans were also designed so that Toledo Ednon obtamed pUCO approval to redme fluctuations in sales should not affect the level of rates to the same levels for the same customer earnings. The phase in plans permit the Operating categories in the City of Toledo and the test of its Companies to request PUCO approval of increases or servue area Annualved revenues were teduted by decreases in the phase in plan deferrals to about $17AXXt000 as a result of these rate reduc tion compensate for the effects of fluctuations in sales packages The revenue reductions do not adversely levels, as compared to the levels projected in the rate affect the phase in plans as the decrease m revenues is orders, and for 50% of the net after-tas savings in mitigated by the cost reductions resulting from the 1989 and 1490 identihed by the management audit as management audit. discussed below. Pursuant to these provisions of the The 1989 orders also set nu(lear performame orders, the Operatmg Companies recorded no standards through 1998 The Operating Companies adjustments to the cost deferrals in 1989 and could be required to refund inaemental replacement recorded adjustments to increase he cost deferrals by power costs if the standards are not met. No refund approximately $10,000,000 and $28,000?00 in 1940 was required in N1 nor is one npected for 1992. The and 1991, respectively. Operating Companies banked $2500 000 in benehts in connection with the 1989 orders, the Operating in 1991 for above-average nudear performance Companies and the Service Company base based on industry standards for operating as ailabihty undergone a management audit, which was established in the 1989 orders. These banked benchts completed in apnl 19% The audit identihed potential are not recorded in the fmancial statements as they annual savir gs in operating expenses in the amount can only be ust d in future years,if netessary, to offset of $98,160J00 from 1989 budert levels, 55N disallowances of inuemental replacement power ($53,988,000) for Cleveland Electric and 45% costs. ($44,172 000) far Toledo Edison The Operating Under the 1989 orders. fossil fueled power plant Companies reMited a large part of the savings in 1991. performance may not be raised as an issue in any rate lifty percent of the savings identihed by the prcceedmg before l'ebruary 1994 as long as the management audit were used to reduce the 6% rate Operating Companies achieve a systemwide increase scheduled to be effective on l'ebruary 1,1991 availability factor of at least 64.9% annually. This for each of the Operating Companiet As discussed standard was exceeded in 1489, lWO and 1991, with , previously, Cleveland Electnc rates increased 4.35% availabihty at appioumately 80% for each y ear. and hiedo Edison rates increased 234% under this 28
i ~ ,
./ .- 5 ) < , ( .s . . ..
A
'Mdj"9 NQ #@ L INCOMi! TAX . ,
o i - Federality.. ac tax, computed by multiplying the income before taxes and preferred and preference disidend regobem s ! subsidiaries by the statutory rates, is reconciled to the amount of federal income tax recorded on [a^ v> 3 c TN hvk v wows: let the ye ars_ ended Dnember 31, y 1991 19 % 19N9 1, (thousands of dollars) , ook income Ikfore f ederal Income Tas . . . . . $4ht?99 $4 K 324 $528.065 ~* $158,372 $179,542 Tas on Ih.k tncome at Statutory Rate . $148.010 increase (Decrease) in Tas: Anelerated depreciation. ... ... .. ... . W6 6.287 10.415
, _ investrnent tas credits on dtullowed nudear plant . - (37,522) -
Taws. other than federal income taws . (2373) (12.116) (107) Other items . . .. - . . 10.915 4365 5.712 Total l'ederal income Tas tapense. .
$167,910 $104.024 $195.562 --a r.=ma Federal income tax expense is recorded in the income Statement as follows:
lor the years ended December 31, IWI 1990 19H9 , (thousands of dollars) '
' Operating Espenses:
Cunent Tai Provision . . . . . . . . . . . . . . . . . . . . .... $ 88,189 $ 42.6M $ 51.869 , Changes in Arwmulated Defened lederal Income Tas: Accelerated depredation and amortiration. 17,137 41177 44,144 Altemative minimum tas cre. tit . . . . . . . . . . (45.902) (24,340) (12.874) Sale and leaseback transactions and amorttiation , 3A44 8,t 17 ~ 4348 Propersy tas expense. , , .. . ,. (14 )91) - Reacquired d4i mots . .. . . 22.403 1.355 (l.250; Defened CWIP revenues . . . .. . , . 6.972 20.466 22,731 Deferred fuel msts. . , . . (8129) 742 (4384)
- Davis-Besse replacernent power . . . . . -- - 9,191 Other items . . . . . . . . ... . 14.970 16.W4 6.830 investment Tai Credits. . .. .. . . 38 697 2 651 IJHO Total Charged to Operating Espenm. . . _137,581 96 076 122,385 Nonoperating income; .
Cunent Tas Provision . - . . . . . . . . . - . . . . . ... . , . (46,089) (42,2%6) -(39,341)
= Changes in Accumulated Defened f ederal incuma Tas:
(22,143) i Wnte-off of nuclear rows. . , , - , , (379) -
- Af'l)DC and carrying charges . . - . . 40,7t'9 74 447 114,300 Net operating loss carrylorward . . , . ,. . 35.014 - - ' Other items . J u . . . o ....., . . . . . . _1,014 2.900 (1J82)
Total Espense Charged to Nono',wrating inmme , , . 30.329 12.948 73,177 Total lederal Income Tas Empense. . . , . $I67,910 $109.024 $195.562 Federal income tax expense adjustments in 1990, associated with previously deferred investment tax credits relatmg to the 1988 write.off of nuclear plant investments, decreased the net tax provision related to nonoperating-income by L7,522,000 and increased camings per share by $.27. The favorable resolution of an issue concerning the appropriate year to recognize a property tax deduction resulted in an adjustment which reduced federal income tax expense in 1990 by $14,011,000 ($10,375,000 in the . , fourth quarter) and increased earnings per share by $.10 ($.07 in the fourth quarter).
. . For tax purposes, net operating loss (NOL) carryforwards of approximately $402,407,000 are available to-reduce future taxable income and will expire in 2003 through 2005. The 34% tax effect of the NOLs generated is ' $136,818,000 and is reflected as a reduction to deferred federal income tax relating to accelerated depreciation and , amortization. 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 $82,851,000 are available to offset future regular tax. The credits may
- be carried forward indefinitely.
29
. . - .- -.,_--a._--
i (0) RETIREMENT INCOME PLANS AND The settlement (discount) rate anumt - , was OTilER POS'IRErlREMIENT DENElITS 8.5% for both December 31,1991 and December 31, y 1990. The long term rate of annual compensation (a) RETIREAtENTINCOAfC PLANS increase assumption was 5% for teth Decemter 31, . We sponsor noncontributing pension plans which 1991 and Decernber 31,1990. ~lhe long. term rate of cover all employee groups The amount of retirement return on plan a$ sets assumption was 8.5% in 1991 ) benefits generally depends upon the length of and 8% in 1990. , service. Under certain chrumstances, benehts can Plan assets consist primarily of insestments in begin as early at age 55. The plans also provide common stock, bonds, guaranteed investment certain death, medical and disability benefits. Our contracts, cash equivalent securities and real estate. ; funding policy is to comply with the Employee : Retirement incorce Secunty Act of 1974 guidehnes, W OTER POSTRETIRLAfENT 11ENTElTS ; in 1990, we oh'ered a Voluntary Early Retirement The Financial Accounting Standards Board has issued ! Opportunity Program (VEROP). Operating a new accounting standard for postretirement i expenses for 1990 included $15,000,000 of pension benents other than pensions. The new standard l plan accruals to coser enhanced VEROP benefits plus would require the accrual of the espected cost of such l an additional $28,000,000 of pension costs for YEROP benehts during the employees' years of service. The benefits paid to retirees from corporate funds. The assumptions and calculations involved in e
$28,000,000 is not included-in the pension data determining the accrual closely parallel pension >
reported below. Operating expenses for 1990 also accounting requirements. included a credit of $41,000000 resulting from a We currently provide certain postretirement health settlement of pension obligations through lump sum care, death and other benehts and expense such costs payments to a substantial number of VEROP as these benehts are paid, which is consistent with , retirees. - current ratemaking practices. Such costs totaled Net pension and VEROP costs (credits) for 1989 $9,700,000 in 1991, $8,200,000 in 1990 and $6,500,000 through 1991 were comprised of the following in 1989, which include medical benents of $8,500,000 components: in 1991, $6,500,000 in 1990 and $5,000,000 in 1989. iwi two 19p We expect to adopt the new standard (nuthons et dottari) prospectively effertive January 1,1993. We plan to > tNekts ca ned amortire the discounted present value _ of the i N"ce e - accumulated postretirement beneht obligation to during the period . . . . . . . . . . . ' $ 14 $ 15 $ 14 , Interest cat on proiened beneht expense over a twenty year period. We have engaged obhution. ...... . 36 37 35 actuaries who have made a preliminary review using . Actual rerum on plan anets . . (129) 5 (73) 1990 data. Based on this preliminary review, the Net amortiratwn and deferral . J y) J accumulated postretirement beneht obligation as of Net pension credits . . (14) (8) (11) December 31,1991, measured in accordance with the
; WROP cmt. . . .. . . .
15 - new standard, is estimated in the range of settlernent pin $150,000,000 to $230,000,000. liad the new standard _- 3) _- Net credits . . . . . . . 5(14) $p4) 5111) been adopted in 1991, the preliminary study indicated
= '" "
that the additional postretirement benefit cost in 1971 The following table presents a reconciliation of the would have been in the range of $17,000,000 to funded status of the plans at December 31,1991 and $2000,000 (pretax). We believe the effect of actual + 1990. adoption in 1993 may be similar, although it could be twember 31, Significantly different because of changes in health- , iwi iwo care costs, the assumed health care cost trend rate, i (rnithons or work force demographics, interest rates, or plan d uars) provisions between now and 1993. Actuarial present value of benef.t obuptions: We do not know what action the PUCO may take , with respect to these incremental costs. liowever, we veued benents .. . . $ 301 $ 330 Nonvested benehts. 33 24 believe the PUCO will either allow a means of 1 Accumulated benchi obhutmn . 3 354 current recovery of such incremental costs or provide Effect of future compemanon for deferral of such costs until recovered in rates. We . I"'I' - . . 113 72 do not expect adoption of the new standard to have Total projected benent obhanon . 447 426 a material adverse effect on our hnancial condition or Plan asnets at fair market value. . 757 M3 results of operations. Surplus of plan anets over projected
. beneht obligation n . 310 227 '
Unrerosnized net pin due to vanance (9) GUARANTEES between auumptions and npenence. (177). (101) Unrecogniaid pnor servke cmt . . . . 13 13 Under two long term coal purchase arrangements,
- Traneuon auct at January 1,1987 Cleveland Electric has guaranteed certain loan and teing amortired over 19 years . (106) (113) lease obligations of two mining companies. Toledo Net prepaid pension cost Edison is also a party to one of these guarantee i
g!" , aghg'j;"{ , ,
= , 3 arrangements. This arrangement requires payments to the mining company for any actual out-of pocket idle p
mine expenses (as advance payments for coal) when 1992 in the open market when the comtnon 6tock the mines are idle for reasons tyyond the control of price in below a predetermined level. As of December the mining company. At December 31,1941, after 31,1991,38.000 shares had tven purchased at a total giving effect to a rehnancing completed on January 2, cost of $610,000. We had a similar progra n tu 1992 by one of the mining companiet the principal purchase up to 3,000,000 shares of our common stock
. amount of the mining companies' loan and lease in the period March 28,1989 through Man h 3,1991.
obligations guaranteed by the Operating Companies Under this program, 2,510,000 shares were was $102,000,000. purchased at a total cost of $46,198,000. Su(h shares are being held as treasury shares.
. (10) CAPITAIJZATION (b) C0hfMON SHARLS RESERVED TOR ISSUL . (a) CAPITAL STOCK TRANSACTIONS Common shares reserved for issue under the Shares sold, retired and purchased for treasury during Employee Savings Plan and the Employee Purchase the three years ended December 31,1991 are listed in Plan were 2,828.848 and 21,423 shares, respectively, at the following table. December 31, 1991. At the April 1992 Annual M3 - 1" 1* Meeting, share owners will be asked to authorize an Ohouunds of sharn) additional 500.000 common shares for the Employee centenor Energy Common stak: Purchase Plan Stock options to purthase unissued shares of 5 L u a En. 1.422 - -
mmmon stock under the 1978 Key Employee Stock Employee savings rian . 34s - - Employee Purthaw Plan . - - 38 Option Plan were granted at an exercise price of 1004 1978 Key Employee Stock of the fair market value at the date of the grant. No Option Plan. . 17 additional options may be granted. The exercise : Total Cc,mmon Sta k $ain . 1,770 - 53 prica of option shares purchased during the three Trusury Sharre . . (11) (1.nN2) years ended December 31,1991 ranged from $14.09 to 11391) 1.n9 517.41 per share. Shares and price ranges of Net Change. {133 )
=== a= lim 9) outstanding options held by employees were as , Cumulative Prefermi and (o[Jowg Petference StutL of Subsidiann 1978 Key Employee '
Subi ect to Mandatory sit =L Opuun Plan 1991 ~1990 1989 Radernptorv - ~~ t Cleveland Electric Sain Options Outstandmg at Preferred. De<emier 31: i 75 Shares . 129,798 169,fA5 215.187 5 91.50 Series Q. . 88.00 Series R o .. , 50 - - Optmn Prices . $14 09 to $14 09 to $14 09 to Cleveland Elecinc Rcurements $20 73 - $20 73 520 73 s Preferred I s 7.35 serin C . . 00) 00) (10) (c) EQUITY DISTRIBUTION RESTRICTIONS 88 00 Senes E . , (3) (3) D) n 00 scrin F , (2) - (1) At December 31,1991. consolidated retained earnings anoa serin c . . - (1) (2) were comprised almost entirely of the undistributed ' 14100 seran ti . .
- 04) (4) retained camings of the Operating Companies.
145m senn 1 . (14) (4) (4) Substantially all of their retained earnings were
" 113.50 series K . (10) available for the declaration of dividends on their . . Adjustable series M (100) - -
respective preferred and common shares. All of their s [75ro n1 i .. . - - (61 mmmon shares are held by Centerior Energy, Any Snancing by an Operating Company of any of Toledo nbon Retirements its nonutility affiliates requires PUCO authorization Preferred: unless the fmancing is made in connection with
$100 par $11.00- 00) 00) - 15) transactions in the ordinary course of the companies' 9,3 75 . 07) 07) J1, 7) pblic utilitin business 0;5erations in which one- ,. Net Change. . (41) (59) j) company acts on behalf of another. ,
Shares of common stock required for our four (d) CUMULATIVE PRETERRED AND ,
, stock plans in 1991 were either acquired in the open PRETERENCE STOCK market or issued as new shares of common stock when the common stock price reached a Amounts to be paid for ; eferred stock which must be predetermined threshold for such transactions, redeemed during the next hve years are $16,000,000 We began a program in July 1991 to purchase up to _ in 1992, $41,000,000 in 1993, 541,000.000 in 1994, ' 1,500,000 shares of our common stock by June 30, 552,000,000 in 1995 and $42,000,000 in 1996, .
t 31
i The annual mandatory redemption provisions are (r) LONG 7ERM DEST AND OTHER as followc: BORROWING ARP.ANGEMENTS Ri r nP bne DMenn e , ess Wrrent maturiths, for the g ,,,, g Operating Companies was ajtollows: lo tie lieginning Per n,Ay,,,g, themtwr 31. , Redern el in Share har of Maturity Interest Rate IW1 1990 Cleveland Dectric (thousando of dollars) mortgage bonds: r
.3 Series C . 10100 1984 $ llU uoo se uw i9si 1.au 2"- - - 15.25 % $ -
s no . Adjusta' ole Series M , 100l w IW1 llo
' ' ' I ~
O'# I 9.125 Series N . . 150J00 1993 100 10,714 IW5 1,100 l , 91.50 Senen Q. . . . I ss 00 Senes R . 50A00 2001* 1.mo 1993 835 50 000 SO M 1993.. . 1375 4334 4,334 1994. ,. . 4375 25.000 25,000 1 . . . 1315 4,334 4,3M i
$ $1100. . 5100 1979 100 9.375. . , ., .. . - 60,@ i . 16 t>SO 1985 100 1995. . .. . 13.75 4314 .4334 25 par 2 81. . 400100 1993 25 1995. . 7.00 750 750 'All outstandmg shares to te redeemed Decemter 1,2001. }996 . . . 13.75 43M 4J34 r 1996.. . , , 7.00 750 750 The annualized cumulative preferred dividend 3996. ..... . . .. . 9375 100,000 10M 00 requirement as of Decemtwr 31,1991 is $66,000,000. 1997-2001 . . ,
936' 127,798 127,798 . The preferred dividend rates on Cleveland 2002 2006 ... . . 8.98 251,801 251,801 Electric's Series L M and P and Toledo Edison's Series 2007 2011 . 819 387,250 387,250 <
- A and B fluctuate based on prevailing interest rates 2012-2016 .... 8.97 439,085 439,085 and market conditions, with the dhidend rates for 2017-2021 . 833 635,180 635,180 ,
these issues averaging 8.26%,7.61% 6.24% 8.82% and 2022 2023 -... .. 7.68 322.100 .322.100 9.67%, respectively, in 1991. . _ 2387,050 2,511,384 Under its articlu of incorporation, Toledo Edison Term bank loans due , 1993 1996 8.46 196,700 127,900 cannot issue preferred stock 1:nless certain carnings . .... coverage requirements are met. Based on carnings for Mediumaenn notes I' the 12 months ended December 31,1991, Toledo [",'s du i '
- 3. I9h7 . . 3 Edison could not issue additional preferred stock. The Debentures due 1997. . 11.25 125,000 125,000 issuance of additional preferred stock in the future pollution control notes will depend on earnings for any 12 consecutive duc 1993 2015 . . . 9.70 189,900 Do,860 months of the 15 months precading the Ate of other - net .. . - 6.063 ~
4.663 l issuance, the interest on all long te- ebt Total Long Term outstanding and the dividends on all pref, stock Debt . . ... 4.... - $3.841,355 $3,729,237
~ '
issues outstanding. , Preference stock authorized for the Operating Long term debt matures during the next fwe years
, Companies are 3,000,000 shares without par value for as follows: $200,000,000 in 1992, $318,000,000 in 1993, Cleveland Electric and 5,000,000 shares with a $25 par $89,000,000 in 1994, $278.000,000 in 1995 and .
value for Toledo Edison. No preference shares arr $343,000,000 in 1996. currently outstanding for either company. During the.19891991 period, the Operatint;
. There are no restrictions on Cleveland Electric's Companies issued $834,500,000 aggregate principal ability to issue preferred or preference stock or Toledo amount of secured medium term notes. The notes are . Edison's ability to issue preference stock, secured by first mortgage bonds. At December 31, With respect to dividend and liquidation rights, 1991, Toledo Edison has $15,500,000 aggregate each Operating Cmoany's preferred stock is prior to ' principal amount of secured medium term notes its preference stock and common stock, and each registered with the SEC and available for issuance.
Operating Company's preference stock is prior to its Cleveland Electric has arranged to refund in July
' common stock. 1992 $78,700,000 principal amount of a public '
authority's tax-exempt bonds due 2012 and having a . 13%& % rest rate with the proceeds from the sale in July of an equal principal amount of the authu ,'s bonds due 2013 and having an effective
-interest cost of 8.25%. Cleveland Electric's first mortgage bonds collaterally secure both issues. The PUCO authorized Cleveland Electric to record interest expense equal to a blend of the higher rate on the outstanding bonds with the lower rate on the new bonds for an interest expense reduction 'of $1,000,000 in 1990, $3,400,000 in 1991 and approximate!p $3 000,000 in 1992. ,
32 _ .w mm _ . a- _ _ _ _ _ . _ _ _ _._ _ _ _._ _ _-
- - - - . - . - - - - . - - - - - - . - _ - - ~ . -
The mortgages of Cleveland Electric and Toledo (11) SHORUll RM DORROWING Edison cor.stitute direct hrst liens on subotantially all ARRANGEMENTS property owned and franchises held by them. Our bank credit arrangements at December 31,1991 Excluded from the liens, among other things, are were as followo cash, securities, accounts receivable, fuel, supplies ciesciana tointo sens e and, in the case of Toledo Edison, automotive 1 lect"c l~d
- a CamPant . Total phousands of dollars) -
equ,pment. Additiorial fust raortgage bonds may be issued by tiant lanes or creait . $tnau 570 400 5saio suo.4m ,, Cleveland Eledric t..ider its mortgage on the basis of There were no borrowings under these bank credit bondable property additions, cash or substitution for arrangements at December 31,1991. An additional refundable fin.t mortgage bonds. The issuance of $5,000000 line of credH b available to the Service
. additional first mortgage bonds by Cleveland Electric Company under a $30,000,000 Cleveland Electric line on the basis of property additions is limited by two of credit, if unused by Cleveland Electric. The provisions of its mortgage. One relates to the $3,000,000 line of credit is included in the Cleveland amount of bondable property available and the other Electric total.
to earnings coverage of interest on the bonds. Under Short. term borrowleg capacity authorized by the the more restrictive of these provisions (currently, PUCO is $300,000,000 for Cleveland Electric and the amount of bondable property callable), $1R000,000 for Toledo Edison. The Operating Cleveland Electric would have been permitted to issue Companies have been authortied by the PUCO to approximately $335,000,000 of bonds based upon borrow from each other on a short term basis, ' available bondable property at December 31,1991. Most borrowing arrangements under the Cleveland Electric also would have been pennitted to Operating Companies'short term brnk lines of credit issue approximately $214,000,000 of bonds based require a fee of 0.25% per year to be paid on any upon refundable bonds at Carmber 31,1991. If Perry unused portion of the lines of credit. For those banks Unit 2 had been canceled and written off as of without fee requirements, the ave-age daily cash Decembe: 31,1991, Cleveland Electric would not have balance in the Operating Companiev oank accounts been permitted to issue any bonds based upan satisfied informal compensating balance
--available bondable property, but would have been arrangements.
perm;tted to issue approximately $214.000,000 of At December 31,1991, the Operating Companier. ' tends based upon refundable bonds. had no commercial paper outstanding. If commercial The issuance of additional ftret mortgage bonds by paper were outstanding,it would be backed by at least Toledo Edison also la limited by provisions in its an equal amount of unused bank lines of credit. rnortgage similar to those in Cleveland Electric't. The fee for the Service Company's lines of credit is mortgage. Under the more restrictive of these 0.25% per year to be paid on any unused portion of its provisions (currently, the carnings coverage test), lines of credit-Toledo Edison would have been permitted to issue No formal shoreterm borrowing arrangements approximately $164,000,000 of bonds at an assumed have been established for Centerior Energy, interest rate of 11% based upon available bondable property at December 31,1991. Toledo Edison also (12) C11ANCES IN ACCOUNTING 1OR would have been permitted to isst.e approximately NUCLEAR PLANT DEPRECIATION
$186,000,000 of bonds based upon refundable bonds in June 1991, the Operating Companies changed the at December 31,1(Mt. If Perry Unit 2 had been method used to accrue nuclear plant depreciation j canceled and written off as of December 31,1991, the from the units-of production method to the straight.
amount of bonds which could have been issued by line method retroactive to January 1,1991. The good Toledo Edison would not have changed. performance of the nuclear generating units over the Certain unsecured loan agreements of Toledo past several years had resulted in units-of production
- Edison contain covenants relating to caphallration depreciation expense being s'gnihcantly higher than ratios, earnings cose age ratios and limitations on the amount implicit in current electric rates. The Secured hnancing other than through first mortgage stre.ight line method better matches reve nue and bonds or certain other transactions. An agreement expense, tends to levellie periodic depreciation relating to a letter of credit issued in connection with expense for nuclear plant and is more consistent with the sale and loseback of Beaver Valley Unit 2 (as industry practice, amended in 1989) contains several financial The PUCO cpproved the change for each covenants affecting Centerior Energy and the Operating Company and authorized them to accrue . Operating Con panies. Among these are covenants. depreciation. for their three operating nuclear relatmg to earnings coverage ratios and capitalization generating units at an accrual tate of about 3% of their ratios. Centerior Energy and the Operating plant investment based upon the units' forty year Companies are in compliance with these covenant operating licenses from the NRC. This change in provisions. We bclieve Centerior Energy arid the method decreased 1991 depreciation expense Operating Companies will continue to meet these $35,946,000 and increased 1991 net income $27,952,000 covenants in the event of a write-off of the Operating (net of $7,994,000 of income taxes) and earnings per Companies' investments in Perry Unit 2, barrieg share $.20 from what they otherwise would have unforeseen circumstances. been.
33 _m_ _ _ _ _ _ . _ . _ . _ _ _ - _ .. _______ _ _. _ _ _ _ . _ _
in December 1991, the PUCO approved for each change in rate decreased 1991 depreciation expenw ! Operating Company a reduction in the straight line $27,762,000 and increased 1991 net income $21,419,000 + depreciation arctual rate from about 3% to 2.5% fcr (net of $6343,000 of income tases) and earnings per each of their three operating nuclear units retroactive share $.15 from what they otherwise would have- i to January 1,1971. We believe the lower depreciation been, i accrual rate is appropriate and reduces combined Depreciation espense recorded in prior years was ! annual depreciation espense to a level mere dosely not affected. Current electric rates were also , aligned with the total amount currently being unaffected by the PUCO orders. ! recovered in customers' rates for these units. This (13) QUARTERLY RESULIS OF OPERATIONE (UNAUDITED) The following is a tabulation of the unaudited quarterly results of operations for the two years ended December 31,1991. Quaom fruled i hiatth31 1 . )_une 30 S Tt 30. Dec. 31._ _ _ l (thomnds of donars. empt pct share amounts) j
-1991 ,
Operating Revenues. .... .. . . . $608,583 $645355 $716,070 $590,244 Operating income. . . . . . . . . . . .. . $129,003 $145,709 $182,085 $123,253 i Net income . . . . . ..... .......... .. ... . . $ 35,470 $ 51,736 $ 95333 $ 54,701 ; Average Common Shares (thousands) . .. .. . . .. 138.404 138,881 139,336 139,737 Earnings Per Common Share . . . . . . . . . . . . $ .26 $ 37 $ .68 $ 39 Dividendt, Paid Per Common Share . . . . .. . . ... $ .40 $ .40 $ .40 $ .40 ; 1990 Operating Revenues. . . . . .... .... . . $566 725 $586,164 $699,499 $575,053 ! Operating income.4 n.. . .. . . .... .......... ,... $116,169 $ 86.743 $171,684 - $129,824 Net income . . . . . . . . . . . . . . . . .. . ... .. .... $ 50,509 . $ 54,9':1 5 99,749 $ 59,280 Average Common Shares (thwsands) . . . ... .. .. 130 486 138,980 138,610 138,441 l Earnings Per Common Share . . . . . .... $ .36 5 .40 $ .72 5 .43 ; Dividends Paid Per Common Share , ......... .. .... $ .40 $ M $ .40 $ .40 l Opera *ing revenues for the first three quarters of 1991 and the four quarters of 1990 were restated to comply with current TERC revenue reporting requirements, as discussed in the Summary of Signihcant Accounting' i PoUcies. This restatement had no effect on camings 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 cf year end adjustments of
$27,762,000 to reduce depreciation expense for the year for the change in the nuclear plant straight-line depreciation rah to 2.5% (see Summary of Significant Accounting Policies and Note 12) and $28,215,000 to 3 ~
- increase phasec in carrying chreges for the adjustment to 1991 cost deferrals (see Note 6). The total of these !
adNstments increased qutrterly earnings by $40,041.000, or $.29 per share. Earnings for the quarter ended June 30,1990 were increased as a result of federal income tax expense adjustments associated with deferred investment tax credits relating to the 1983 write-off of nuclear plant investments. See Note 7. The adjustments increased quarterly earnings by $36,298,000, or 5.26 per share. ,, Earnings for the quarter ended December 31,1990 were increased as a result of year end adjustments of - ;
$25,790,000 to reduce depredation expense for the year for the change in depreciation rates for nonnuclear and ;
Davis.Besw property (see Summary of Signincant Accounting Policies), $10,169,000 to increase phase-in carrying charges for the adjustment to 1990 cost deferrals (see Note 6) and $10,375,000 to reduce federal income - tax expen$e (see Note 7). The total of these adjustments increased quarterly earnings by $35,000,000, or $.25 per-share. {
, - , . - . - . - . . - . . . - - - . - - - - _ - . - _ - . _ = _ . -
a Executives of Centerior Energy Corpon tion and Centerior Service Contpany l CEN11RIOR ENERGY CORPOR AIION Executive Vice President . lyman C. Philhrs Chairman and
. Richard A. A! aller
- Vice President-1.egal &
Chief Esecutive Officer . Corporate Affaits . .
. I rcd I. lengc. fr.'"
President and , Ikul G. Fm.ly
. Ro!ert J. Tarhng" Controller .
Chie' Operating Of ficer. . Treasurer. . Gary A1. Hamlinson Executive Vice President . . Aiurray R. f&lman
. Edgar H. Aiaagans Secretary . . E. lyle livin Executive Vice President .
CENTERIOR SERYlCE CONtPANT Vice President-System Chairman and Alvin Raplan
. Richard A. Afillcr* Engineering & Control Chief Esecutive Officer Vice President- Legal &
President and . Fred f. Iongc, f r?"
. Roh rt J. f athng" Coiporate Affairs .
Chief Operatmg Officer. Vice President-Executive Vice President-Aiurray R. Edcf man lluman Resources & Ihver Generation . .
. Joh t S, freicli Strategic Planning Esecutive Vice President-Finance & Administration . . Edgar H. Afangans Ysce President-1 egal k General Counsel . Terrence G. Linnert""
Fsecutive Vice President-Vice President-Nuclear-Perry. Afichael D. Lyster Customer Operations Vice l' resident-(and Chairman & CEO Transmission & of Toledo Edison and Distnbution Operations . . David L Afonscau President & CEO of
. lyman C. Philhps Vice President-Marketing . Thomas A1. Quinn Cleveland Electric) .
Vice President (and Pc wident Vice President-of Toledo Edison). . Donald H. Saunders Fossil Operations . . Rkhard P Creuse Vice President-Nuclear-Vice President-Javis liesse . Dona!d C. Shciton Transmissioti and Controller . . , , Paul G. Busly Distribution Engineering & Treasurer. . Gary Af. Hamlinson Services .. . . . Carj f, Grcirn . Vice President-Secretary . . E. Lylc !Prin [ Customer Service & Community Affairs . Jacquita K. Hauscrman
- Retired effective hianh 1.1W2 "Dected Chairman I' ret.ident and Chief LAesunve Otther ettedne Mmh 1. IW2
'"l:leded Senior % l' resident-led. Iiuman & Corporate Afist, ettectnr Mmh 1,1WL "** Ueded etfennt March 1,1w2 e
as
Filtaltcial and Statistical Review l Operating Revenues (thousands of dollars) Sinm total total Total lleatma Operaung iear Rec.dential Commer< tal Industnal Other Retail Wholesale {a) thtnc & Gai Revermes 1991. ...... $177273 723 318 782 747 188 026 2 471 364 88 888 2 560 252 -
$2 560 252 1990. . . . 719 078 M8910 779 391 189 754 2 357 133 70 508 2 427 441 -
2 427 44) . 1989.. . . MS735 616 902 746 534 204 769 2 253 940 107 364 2 361 304 - 2 361 304 4 1988. 637 329 537 861 675 584 M 524 1 935 298 119 50% 2 054 NO3 - 2 054 803 1987 . . 629 M3 531682 6R9 959 36 272 1 687 576 45 275 1 932 851 13 371 1 946 222 . 1961. 449 190 354 471 538 344 60 314 1 402 319 71 4;0 1473 7t9 19 v27 1 493 396 ,
... . .. . . . . j Operating Expenses (thousands of dollars)
Other Fuel & Operatam tieprenaten fam, Phoe m & Iederal Total Ptm hawJ & & Other than l're phne m Imume Operaung ' Year Power (s) kiamienamv Amortuatite f1T Octened. Net Tam t apenses 1991. .. . $499 672 801 225 242708(b) 304 709 (5 693) 137 581 $1980 202 two. . . 472 297 662 738 242 153 283 425 (3) 668) 96 076 1 923 021 1989 . . 472 684 860 138 272 671 259 871 (5B2201 122 385 1929 $29 1988. .. 408 644 865 632 264 824 268 550 (188 209) 123 697 1743 D8 1987.. ... . 491 332 642 594 214 421 207 521 (87 623) 105 912 1 574 157 4 1981. , 512 323 319 894 128 721 128 347 - 108 417 1 197 702 Income (l.oss) (thousands of dollars) Federal oo.cf traume income Preferred & income & Tam- Defore Preference Operahng AFUDC- Deduettims. Carrying Credit intemt DeH AIU DC-- Sta k
-lear income E quity Net Chrpn (Impense) Charyes Interest Debt thvidends 1991 . . .. $580 050 9 351 5 248 109 601 (30 329) 673 911 381 280 (5 248) 60 649 1990.. .. . . 504 420 7 883 145 205 085 (12 948) 704 585 3M 278 (5 993) 61 841 1989. . .. . 431 775 16 930 14 368 299 1%9 (73 177) 689 055 369 481 (12 929) 65 617 1988. . . 311 % 5 13 504 (489 047)(c) 372 155 131 254 339 531 378 292 (6 137) 69 489 1987.- . . 372 065 299 308 (57 821) 39 $99 121 122 774 273 435 042 (137 257) 86 135 1981. . . 295 694 81 468 19 469 - 25 741 422 372 233 022 (49 521) 58 459 j Income (Loss) (thousands of dollars) Common Stock (dollars per share & S.)
Income (tmal tieftve Cumulatrve Cumulauve IHett of an Effect c4 an Return on Acmunung . Airuuntmg Average Average Change Change ce Net Shares Common or EntraorJmary Estranniinary income Outstanding Ear.atngs Suwk [hv6dends Bme Year Gam Gain (las) (thousands) (las) Equity Dedared Value 1991. . . $237 240 - $237 240 139 104 $ 1.71 84% $1.60 $20.37 1990. ,,... 2M 459 - -- 264 459 138 885 1.90 9.4 1.60 20.30 , 1969. . .. . 266 BA6 - 266 886 140 468 1.90 9.6 1.to '9.99
.1988. .. ,. .(102 113) 28153(d) (73 960) 140 778 (0.53) (23) 1.84 19.68 I 1987...,... .. 390 353 -
390 353 138 395 2.82 12.8 236 22.10 1981. . .. . 180 412 10 807(r)- -191 219 74 679(f) 236(f) - 13.0 2.00(f) 19.29(f) l
.. ..., .i .. . .. .... . . .. ,..,... . .. .. . , , .
NOTE 1981 data is the result of comNning and restating Cleveland I.lectne and Toledo Edison data.
..(s)- Wholesale revenues, fuel and purchased power, whol< tale electne. sales and purchased power amounts are restated for 1990 and prior years to reftert a char'6e in reporting of bulk power sales transactions in accordance with FERC requirements (b) In 1991, the Operatir:g Companies adopted a change in accounting for nuclear plant deprenation, changing from the uruts-of-pnxluction method to the staalght-hne method at a 23% rate. . (c) Includes write-off of nuclear costs in the amount of $534,355,000 in 1988.
(d) In 1988, the Operatmg Companies adopted a change in the method of accounting for unbilled revenues. 36'
. . _ _ _ . _ . _ . _ _ . ~ _ _ _ _ _ _ _ _ _ . _ _ _ _ - . . _ . _ _ _ _ -- _ _ _ _ _ __
ClNifRIOR LNIEY CORPORAll0N AND SUBSIDIARil5 bleCtric Sales ( illions of KWH)- Electric Customers (year end) Itesidential Usage , 6 c.,e .cra,e Aserage Prue kenenue j industnal LWH rer Per l'er j
.s icar kendenual Commernal Industnal Wholesale (a) _ Other lotal_ __ Ressient.al Commer(tal & Othet Total , Customer khH Cusuvner 1991.. 6 951 7 lit 11 559 1 711 1 048 29 475 921 995 96 449 12 843 1 031 287 7 410 11. lN $ $27.10 .. 19% , 6 666 6 848 12 1M 2 487 V59 29128 91890 94 522 12 90h 1 026 393 7 079 10 82 765 93 .1989.. 6 son 6 830 12 520 3 235 M 30 387 914 020 93 M3 12 763 1 020 616 7 295 100M 737.58 ]
1930. 6 920 6 5?? 12 793 1 828 946 29 064 4(N 182 92 132 12 305 1 013 619 7 462 9 21 6W On i 1907, 6 659 6 350 11 985 1 166 949 27It9 903 365 90 148 12 240 1 005 753 7 217 9 46 6M 43
-1981. 6 295 5 472 113M) - 2 170 N08 26105 M4SM 84 287 11 530 980 405 6 939 7 16 490 57 Load (MW & a.) Energy (millions of KWii) f uel opeiable I Wienty--
Caratts Cornpany C.enerated f uel Cost biU Po at Time Peak Capacity lead Pun hawd iear ofPeak trad Margm f actor losul Nudear 1Nal , l'ower (s ) Idal Per kUH kWH 1991 . 6 453 3 MI 16 9% 62.9% 18 041 13 454 31 495 40 31 535 148f 10 442 1990 6 437 5 261 18.3 63 6 21 114 9 481 30 595 413 31 M 1.52 10 354 1989. . ' 6 430 $ 389 - 16.2 63 3 20 174 12 122 32 246 21 32 317 1.47 10 435 1988. .5 525(g) 5 673 (2.7) 60 8 21576 7 H05 29 381 1 MS 31 266 1.59 10 410 1937. 5 955 5 173 13 1 63.6 20 894 6 907 27 Mol 1 368 29 169 1.53 to 466 1981. 6 440 4 762 26.1 63 6 20 573 4 397 24 97D 2 94% 27 91% i N0 10 440 Investment (thousands of dollars) cmiru< ten i Wrk in Total Utility Arcumulated - Progrese Nudear Pngerty, t h-bry Plant in _ Depreciat.on & Net & Perry Iuchand Plant and nant lotal . icar Sers we Amorunatum Phnt Umt2 Othn i qmpment, Addirmni Aswis _ t 1991 ... $8 888 219 2 27! 189 6 613 730 1 066 428 502 927 $8183 085 $103 843 $12 042 089 19 % 8 636 219 2 038 510 6 597 709 1 133 535 568 124 8 299 368 251 312 11 894 235 1989.. 6 397 638 1 823 520 6 574 !!8 11572?3 591 692 8 323 083 217 319 11 666 547 1988, . . 8 143 673 1 569 304 6 574 369 1 222 732 643 087 84401M 343 143 11 573 098
. 1987.. 8 388 114 1 324 446 7 063 668 1 007 707 656 391 8 727 725 947 921 11349 Un 1901,, 3 874 628 873 b63 3 000 % 5 1645W 143 590(h) 4 789 653 610 277 5 378 446 i - Capitalization (thousands of dollars & 'e) i I
j Preferwd & Prefererac Pretened beak, sothout SimL, with Mandatory Mandatory Redemptiott icar - Common Stak Iquoy Redempuon Provnues Provamns t ung Term Debt Total 1991 ,, '$2 854 484 38% 332 /13! 4% '427 334 6% 3 841 355 52% $7 455 204
~ ~
1990.. 2 810 033 39 237 4W 3 427 334 6 3 729 237 52 7241094 1989, 2 794 572 40 281 352 4 427 334 6 3 533 656 50 7 036 914 1988. . 2 771 744 39 303 781 4 427 334 6 3 551 614 51 7 054 473 1987.. 3 109 060 41 343 985 4 457 334 6 3 718 249 49 7 628 628 , 1901... ., 1 545 829 36 420 500 10 245 071 5 2 090 988 49 4 302 388 4 4 4 (c) In 1981, Toledo Edison realized an extraordinary gain from the enhange of common stock for Londs.
' (f) Average shares outstanJmg and related per share wmputations renect the Cleveland Electrw 1.11.for one enchange ratio and the Toledo Edaan one-for one eut 7e ratio for Centerior Energy shares at the date of afnliation, April 29.1986-l (g) Capacity data reflects extended generating unit outage for renovation and improvements.
(h) Restated for effects of capitalization of nuclear fuel lease and hnancing arrangements pursuant to Statement of financial Accountmg Standards 71. 37
_ -- . - . - - ~ . - - - - . . - . - . - - - - , - . I Bmmiof.
.. .... ................ Directors .......................... ................................... .
RichaniP. Anderson President and Chiefliecutive Rofert A1. Ginn Executhe in ResJdence at John Officer of The Andersons Management Carroll University. Chairman Emeritus and , Corporation, a grain, farm supply and retired Chairman and Chief Executive Officer retailing firm. of the Company.
- Allyrf C. Fcrsticler President and Chief Executive Geoye II. Kaull Chairman of Premis, Inc., a developer, Officer of Trtro Corporation, a producer of manufacturer and fabricator of thermoset .
specialty chemical materials for manufact ured reinforced composite materials. ! prodt'.-ts. RichardA. Afiller" Chairman and Chief Executive . Leigh Carter Retired President and Chief Operating Officer of the Company and Centerior , Officer of The Bir,oodrich Corapany, a producer Service Company. ' of chemicals, plastics and aerospace products-Frank E. Afosicr Vice Chairman of the Advisory lloard - Retired Chairman of Tremco, incorporated. a of BP America Inc., a producer and refiner of rnanuf acturer of specialty chemical products petroleum products. !' and a wholly owned subsidiary of The BFGoodrich Company. Sister Atary Marthe Reinhard. SND Director of Development for the Sisters of Notre Dame of i Thomas A. Commes President and Chief Operating Cleveland, Ohio. Former President of Notre Officer of The Sherwin-Williams Company, a Dame College of Ohio. manufacturer of paints and painting supplies. ' Rolert C. Satwe President and Chief la.ceutive Officer Wayne R. Embry Executive Vlee President and of Savade & Associates, Inc., an insurance, - General Manager of the Cleveland Cavaliers, financial planning and estate planning firm, i a professional basketball team. Chairman of Michael Alan Lewis Company, a fabricator of Paul Af. Smart Attorney and retired Vice Chairman of hardboard, fiberglass and carpeting materials the Company and The Toledo Edison Company. for the utomotiveindustry. William J. Williams Chairman of Huntington ; National Bank, Rokrt J. Tarling* President and Chief Operating , Officer of the Company and Centerior Service , . Company. ........ ...... ....... ... .* ..... ....
................ ....... .........., .... Jahrt P. hilliamson Chairman Emeritus ! -' Elected Chairman President and Chief becutive Officer cffective March L IW2. . . j - ** Retired as Chairman and Chief becuthy Offker effectnv -
March 1,1W2.
^
Committees
..........o of.the Boant Ca;ntal Enciwnnwntal . Human Auda - Expenditures and PuNic EWicy - Eurutire Dnarue Rewurces Nominatmg Nudear T. A. Commes, G.ll. Kaull, St M.M. Reinhar1, R.A. Miller. R. A. Miller. WJ. Williams, EE. Mosiet R.R Anderson, Chairman Chairman Chairman Chairman Chairman Chairman Chairman Chairman .
W.R. Embry. .. A.C. lbticle- L Carter . L Carter R.R Anderson L rarter R.R Anderson A.C. Bersticker
- I'M. Smart RJ, Farling W.R. Embry R.M. Cinn T. A. Commes G.d. Kaull A C. Bersticker L Carter WJ. Williams R M. Ginn ' RJ. Farling WJ. Williams W.R. Embry EE, Mosier L Carter - RJ. Fariing .
R. A. Mdler R.A. Miller ; RJ. Farbng R.C. Savage T.A. Commes R.M. Ginn F E. Mosier . EM. Smart R.C. Savage - - W.R. Embry R,A. Miller Sr M.M.Reinhard RM. Smart R.M. Ginn - Sr. M.M. Reinhard ; G il. Kaull RA Miller - Sr M.M.Reinhard R.C. $ avage RM. Smart- ! W.J. Williams i
= . . . . ._ _ _ . . _ _ _ _ _ _ _ _ _ _ __ _ _ , _ . _ . _ _ _ _ _ _ _ . _ ~ _ _.. _
.s . 'I Shart .. ... .... Owner ... .. ...htf.imnation DIVIDEND REINVI 5%1LNT AND 'iTOCK Rt GISTR AR
~
' PCRCJ I ASI l't.AN ANDINDIVIDUAL RL'11RE M ENT Ameritrust Company National Aworiation ACCOUNT (CX+!RA) Corporate Trust Division The Company has a Dividend Reinvestment P.O. Dox 6477 i and Stock Purchase Plan which pnwides share Cleveland, Ohio 44101 a- owners of record and cummers of the Company's Q WA WODM subsidiaries a com enici., means of purchasing AH communications about an custing CXalRA + hares nf Company common stuck by investing
'* should be directed to the Custodian at the address allor a part of their quarterly dividends as well as or telephone numberslisted below:
= making cash investments, in addition. Individuals may establish an individual :rtirement account Ameritrust Company National Association ]
(IRA) which invests in Company common stock Custodirn, CX*1RA l
. through the Plan. Information relating to the P.O.Ikn 6477 j Cleveland, Ohio 44101 -
Plan and the CX*1RA may be obtained from ; Share Owner Services at the Company. In Clewland area 737-5742 or 737 5744 . l SilARE OWNER SERVICES - Elsewherein Ohio - Communications regarding stock transfer ' . 1800 362 0697, Extension 5742
'- requirements, lost certificates, dividends and Outside Ohio , changes of address should be directed to Share - 1 800 321 1355, Extension 5742 Owner Services at the Company.To reach Share INDEPENDENT ACCOUNTANTh 1
' - Owner Services by phone, call: Arthur Andersen & Co. i t . In Cleveland area 642-6900 or 447 2400 1717 East Ninth Street
-- Outside Cleveland area 1-800-43F7794 ; Cleveland; Ohio 44114
. - Please have your account number ready - COMMON STOCK l when callint;. ggd on the New York. Midwest and Pacific I clNVESTOR RELATIONS) . _ Stock Exchanges. Options are traded on + Eing'uiries from security analysts and institutional The Pacific Stock Exchange. Newibrk Stock ; L investors should be directed to Terrence R. Mor an,. Exchangesymbol-CX Newspaper ,
" Manager-Investor Relations, at the Company's abbreviation-CentEn or CentrEngy.
rnall address or by telephone at (216) 447-2882. l ANNUAL MirrlNG
? TRANSFER AGENT . - The1992 annua! meeting of the share owners of . (
Centerior Energy Corporation . _ the Company will be held at 10 a.m. on April 28,1 Share Owne: Services 1992 at Executive Caterers at Landerhaven in '
- P.O. Box 94661 : Mayfield Ileights, Ohio Owners of common ' Cleveland, Ohio'44101 4661 = stock as of Februarf 26,1992, the record date for -
the meeting, will be eligible to vote on raatters = Stock transfers may be presented at brought up for share owners' consideration. _ PNC arust Company of New York
, 40 Broad $treet, Fif th Fhior FORM 10K New York, N.Y.10004 The Company will furnish ta hare owners, without charge; a copy of its most recent annual 4 4 - FXECUTIVE'OITICES . report t the Secunties and Exchange Commlwion. ;
Centericd Energy Comoration E-Requests should be directed to the Secretary
^ 6200 Oak Tree Boulevard f the Company. ;lndependence, Ohio AUDIO CASSETTES AVAllABLI; Telephone: (216) 447-3100 -- ,
S FAX: (216) 447 324u - Share owners with impaired vision may obtain l audio cassettes of the Company's Quarterly
- MAIL ADDRESSs Reports and Anr< aal Report. To obtain a cassette, Centerior Energy Corporation simply write or call Share Owner Services, P.0, Box 94661 ere as mi charge for this service.
Cleveland, Ohio 441014661. , 4 t
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l 9 I Contents :
...... ....................-.............. j 1 Aleut Cleveland 1:lettric 1 Directors -
1 Officers } 2 ' lielwrt ofIndependent l'ublic Accountants { 3 . Summary of Signifkant AccountingIblicies 5 Management's financial Analpis, . ,
- Financial Statements and Notes 22 Financialand StatisticalRevinv 24 imestor information t
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/dnout Cleveland Electric Directors L ..........- ............................. .. ................ .....................
The Company, a n holly owned sutwidl.ry of Robert J. Tarung? President and Chief Operating Cer.terior Energy Corpration, pmvides electric Officer of Centerior Energy Corporation and service to an area of northea5 tern Ohta cuending Centerior Service Company. itnnub along the southern shore of Lake Erie imm Edgar H. Main'aen.u ., ice Preu. dent and Chief :o IVnnsvlenia on the east through the caty of Avon - h_nancial Officer of the Company and 1.he'Ioledo
. le..eanihe west.T ue southerd boundary of the Edison Company and Ewcutive \, ice Pres. dent .
setrice area is appmtimately 17 miles south of 1. ale of Centerior Energy Corporation and Centerior Rle, Ibc complete bou ndary prescribes ar. area of 6
. . Service Company.
about 1%hquase mitee,1otal population served is - about 1R.Mul. Although the principri city in the Richard A. Millcr?" Chairman and Chief becutive
. werrice area is Clevdand, the Company derDes about Offices of Centerior Energy Corpoution and 7bf us tv.Al cledrie revent;c frarrt untorners out. Centerior Servite Company.
side of the city. Tlie Company's 4,M10 e mployees sen e nar C. 01 dlips, President ared Chic' f secutive about 716#10 customers' Of ficer of the Company, Chairman ;nd Chief , Fwcutive Officer of The1oledo Edison Compeny E a"d E*c"""" V'(" P"de"' "I C""'"ri"' E""'8Y ExcenIive Offices ...., corporation and Cento rer Service Company.
*!leded onirman. Pienident and chiet t waiste offwei of The Cleveland Electric liluminating Company cenwnor i ne,n cor anon and revernor senu company SS Public Souare ritevin e Man h 1.1W Chteland,D11 ""'*d D""*'"h" company ettconC"*P""Y.'"d e Manh 1.1% T h"l"Icao 1.aun (216)62MM .*4rtired from thne cap.mtin etfedny Man h I. lW2. - Mail Addtrss ........................ ......... .... . O ficers..f.... ,,,,,........................,,,,
a P.O. Box S000 President and Chief
< C'eveland, Oil 44101 Ewcutive Of ficer . . . .. . . . . Lyrnan C. Phillips Vice President &
Chief Financial Officer . . . . Edgar H. Aianyans Vice President . , . . ... . . . Tred J. litnge, lr. s Controller ... .. . . .. .lkul G. Busby " Treasurer. .. ..
, .. . Gary A1. Hatelinsen Secretary .. .... . .E. Lyle (Ypin 4
9'
.t . e. ,
1
Report of.. Independent Public Accountants-
...~. . . ... . . . ... .. , . . .. . .. . ..
ARTHUR L, the Sharc Owrm of ANDERSEN
@)
The Cleveland Electnc illuminating Company: We have audited the accompanying consolidated in our opinion, the hnancial statements referred to
' balance sheet and consolidated statement of abme present fairly, in all material respects, the cumulative preferred stock of The Cleveland Electric financial position of The Cleveland Electric illuminating Company (a wholly owned subsidiary of Illuminating Company and subsidiatics as of Centerior Energy Corporation) and subsidiaries as of December 31,1991 and 19X). and the results of their
- December 31,1991 and 1990, and the related operations and their cash flows for each of the three consohdated statements of incorne, ietained earni.4gs yests in the period ended December 31.1991, in and cash flows for each of the three years in the conformity with generally accepted accounting -
period ended December 31. 1991. These hnandal principle $. statements are the responsibility of the Company't. As discuwed further in the Summary of Signihcant management. Our responsibility is to esplen an Accounting Policiet, and Note 12, a change was made openion on these hnancial statements based on ou in the method of accounting for nuclear plant radits. depreciation in 1991, retto.utive to lanuary 1,1991. W-anducted our audits in accordance with An diwussed further in Note 3(c), the future of generally a cepte:f auditing standards. Those Perry Unit 2 is undecided. Construction has been 1 standards require that we pian and oerform the audit suspended since ply 1989. Various options a.c being j to obtain reasonable assutance /mst whether the consider 1d, including resuming construction. financial statements are free of materjal misstatement. converting the unit to a nonnuclear design, sale of all An audit includes esamining, on a test basis, or part of the Company's ownership share, or
- evidence s.upporting the amounts and disclosures in canceling the unit. Management can give no assurance the fmancial statements. An audit also includes when. il ever, Perry Unit 2 will go in service or assessing the accounting principles used and whether the Company's investment in that unit a:id a l signihcant estimates made by management, as weli as return thereon will ultimately be recovered. i evaluating the overall financial statement presentation, We believe that our audits provide a reasonable basis for our opinion, pg Q (
Cleveland, Ohio February 14,1992 t I S
- ..e 2
l Surntrtary of..Sigtlif.icart! Accounting Policies GENERAL Operating revenues include certain wholesale . pow ^r sales revenues in accordance with a IERC The Cleveland Electric illuminating Company clanfication of reporting requirements. Prior to 1991, (Company) is an electric utility and a wholly owned these bulk pmeer sales transactions were netted with subsidiary - of Centermt Energy Corporation puhued power transactions and reported as part (Centerior Energy). The Company follows the of fuel and purchased power espense. The amounts Umform System of Accounts preyribal by the for pdor years have also been reclassified to conform j Federal Energy Regulatory Commission (1ERC) and with cunent reporting requirements. See Note 11 adopted by The Public Utilities Commaston of Ohm
, (PUCO). As a rate regulated utility, the Company 15 FUEL EXPENSE subject to Statement of 11nancial Accounting ,
Standards 71 which governs accounting for the effects The cost of fossil fuel is charged to fuel espense based
, of certain types of rate regulation. The fmancial on inventory usage. The cost of nuclear fuel, statements include the accounts of the Company's including an interest component,is charged to fuel wholly owned subsidiaries, which in the aggregate are espense based on the rate of consumption. Estimated not material. 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 Compan) defers the differences between i members include The Toledo Edison Company actual fuel costs and estimated fuel costs currently (Toledo Edison), Duquesne 1.lght Company being recovered from customers through the fuel (Duquesne), Ohio Edison Company (Ohio Edison) factor. This matches fuel expenses with fuel related and Ohio Edison's wholly owned subsidiary, revenues.
Pennsylvaria Power Company (Pennsylvania Power) The memben, have constructed and operate PRE PilASE IN AND Pil ASE IN DEFERRAL.S generation and transmission facilities for the use of OF OPERATING EXPENSES AND the CAPCO companies. Toledo Edison is also a CARRYING CilARGES wholly owned subsidiary of Centerior Energy
- The PUCO authorized the Company to recoid, as RELATED PARTY TRANSACTIONS
#""" # E"' ' " " # "'# "E "* E#"" #"
carrying charges related to Perry Nuclear Power Plant Operating revenues, operating expenses and interest Unit 1 (Perry Unit 1) and 11eaver Valley Power charges include those amounts for transactionr. 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 busines: rperations. 1988. Amortiration and recovery of these deferrals
'The Company s transactions with T*do Edison (called pre nhase in deferrals) began in 'anuary 1989 are primarily for interchange power, transmission line in accorda,.c with the January 1989 PUCO rate order rentals and jointly owned power plant operations discussed in Note 6. The amortitations will continue and construction. Gee Notes 1 and 2. over the lives et the related property.
Centerict Service Cornpany (Service Company), As discussed in Note 6, the January 1989 PUCO the third wholly owned subsidiary of Centerior rate order for the Company included an approved rate -
- Enert;y, provides management, financial, phase in plan for the Company's investments in adrninistrative, engineering, legal and o'her services at Perry Unit I and lleaver Valley Unit 2. On January 1, es' to the Company and other affiilated companies.- 1989, the Company began recording the deferrals of The Service 1 Company billed the Company operating espenses and interest and equl'y carrying
$138/00,000, $106.000,000 and $92,000,000 in 1091, charges on deferred rate based investment pursuant 1990 and 1989. rsspectively, for such services. to the phase-in plan, These deferrals (called phase-in deferrals) will be recovered by December 31,1998.
REVEN*1ES Customers are billed on a monthly cycle basis for their DEPRECIATION AND AMORTIZATION energy consumption based on rate schedules or The cost of property, plani and equipment is contracts authorized by w PUCO. An accrual is depreciated over their estimated useful lives on a made at the end of each month _to record the straight-line basis. Prior to 1991, only nonnuclear estimated amount of untitled revenues for Eilowatt- . property, plant and equipment was depreciated on a bour sales rendered in the current month but not straight-line basis, as depreciation espense for the bilkd by the end of that month, nuclear generating units was based on the units of-A fuel factor is added tnthe base rates for electric production method. service. This factor is designed to recover fro _m The annual straight-line depreciation provision for customers the costs of fuel and most purchased nonnuclear property espressed as a percent of power. It is resiewed and adjusted semiannually in a average depreciable utihty plant in service was 3A% PUCO proceeding. in 1991, 3 3% in 1990 and 3.9% in 1989. The rate 3
declined in 1990 because of a PUCO approved change depredation espense under the liability method, in depreciation rates effective January 1,1990, See Note 7. attributable to longer estimated lives for nonnuclear
- property. See Note 13. DEFERRED GAIN IROM in 1940, the Nuclear Regalatory Commission SAL E OF UTILITY PLANT -(NRC) apptoved a sidyear estension of the operating The Company entered into a sale and leasebark license for the DavieBesse Nuclear Power Station (Davis-Besse). The PUCO approved a change in the transaction in 1987 for the coal +hred Druce Mansheld
. units-of-production depreciation rate for Davi,. Gennating Plant (Manshchi Plant) as discussed in Besse, effective January 1,1990, which recognized the Note 2. The transaction resulted in a net gain which life estension. See Note 13. was deferred. The Company is amortizing the i Effective January 1,1991, the Company shanged applicable deferred gain over the term of leases under . Its method of accounting for nucleaf plant the sale and leaseback agreement. The amortitation and the lease espense amount are recorded as other depreciation from the units-of-production method to the straight line method at about a 3% vate.1he operation and maintenance cycnse. . PUCO approved this change in accounting method , for the Company and subsequently approved a _ INTEREST CilARGES change to lower the 3% rate to 2 5% for the three Debt interest reported in the income Statement does operating nuclear units retroactise to lanuary 1,1991. not include interest on nuclear fuel obligations. i See Notes 12 and IA Interest on nuclear fuel obhgations for fuel under j The Company uses external funding of future construction is capitalized. See Note 5. i decommissioning costs for its operating nuclear unit
- Losses and gains realized upon the reacquisition or pursuant to a PUCO order. Cash contributions are redemption of long term debt are deferred. consistent made to the funds on a straight-line basis over the with the regulatory rate treatment. Such losses and remaining licensing period for each unit. Amount 5 gains are either aniortited over the remainder of the currently in rates are based on past estimates of original hfe of the debt issue retired or amortited over decommissioning- costs - for the' Company of the life of the new debt issue when the proceeds of a
$63,000,000 in 1986 dollars for Davis Besse and new issue are used for the debt redemption. The $44AC,000 and $35,000A00 in 1987 dollars for perry amortitations are included in debt it terest espense. '
I Unit 1 and Beaver Valley Unit 2, respectively, Actual decommissioning costs are espected to significantly PROPERTY, PLANT AND EQUIPMENT esteed these estimates. It is e pected that increases in I the mst estimates 'will be recoverable in- rate, Property, plant and equipment are stated at original resulting from future rate proceedings. The current cost less any amounts ordered by the PUCO to be level of expense being funded and recovered from written off. Induded in the cost of construction are customers over the remMning licensing periods of the items such as related payroll tases, pensions, fringe units is approximately $t000E0 annually. benehts, management and general overheads and allowance for funds used during construction FEDERAL INCOME TAXES ( AFUDC). AFUDC represents the estimated C mPosite debt and equity cost of funds used to The financial statecnents reflect the liability method of finance c nstruction. Tha noncash allowance a accounting for income taxes, The liability' method re9uires that the Company's deferred tax liabilities be credited to income, ejcept for certain AFUDC for Perry Nuclear Power Ilant Unit 2 (Perry Unit 2) See adjusted for subsequent tax rate changes and that the Note 3(c). The gross AFUDC rate was 10.47% in Company re(ord deferred taxes for all temporary 1991,10.48% in 1990 and 10.91% in 1989. differences between the book and tas bases of assets Maintenance and repairs are charged to egense as and liabilities. A porilon of these temporary incurred. The cost of replacing plant and equipment differences are attributable to property-related timing s charged to the utility plant accounts. The cost of - differences that the PUCO used to reduce prior years' property retired plus removal costs, after deducting tax expense for ratemaking purposes whereby n any salvage value,is charged to the accumulated deferred taxes were collected or recorded. Since the movision for depreciation. 4 - PUCO practice permits recovery of such ines from customers when they become. payable, the net RECLASSIFICATIONS amount due from customers has been recorded as a
.. regulatory asset in deferred charges. A substanual Certain reclassifications have been made to prior ,
portion of this amoun* relates to differences between years' hnancial statements to make them comparable the book and tas bases of utility plant.11ence, the with the 1991 (mancial statements and consistent >
. recovery of these 3 mounts will take place over the with current reporting requirements. These include - lives of the related assets. reclassifications related to certale wholesale power investment tax credits are deferred and amortized z sales revenues as discussed previously under over the estimated lives of the applicable property. " Revenues" and accumulated deferred rents as : - The amortiration is reported as a reduction of discussed in Note 2.
t Martagement's Financial Analysis.s i RESULTS OF OPERATIONS approval to accrue post in servke rarrying costs and ggq, defer depreciation for facthties that are in service but i not vet recognited in rates. PUCO action on this The January 1989 PUCO rate order for the Company, requ'est has been postponed under the joint as discussed in Note 6, was designed to enable us to recommendation approved by the PUCO discussed i begin recovering in rates the cost of, and earn a fair below. ! return on, ou,r allowed investment in Perry U .it 1 in December 1991, the PUCO approved a joint I and Beaver \ alley Unit .. The rate order.
- Wh recommendation of the Company, Toledo Edison and provided for three rate increases, improva evenues customer representative groups involved in the 1989 >
and cash Hows in 1989,1990 and 1991 fron, the 1988 levels. However, as discussed in the 6rst four rate cae wulement The Joint recommendation sought to secure an interim resolution of then- ' paragraphs of Note 6, the phase-in plan was not pending accounting applications in 1991 and to designed to improve earnings tvcause gains in ! establish a framework for resolving accounting issues revenues from the higher rates and assumed sales and related matters on a longer-term basis (i c.1992 _ growth are initially offset by a cortesponding 1995). As part of this joint recommendation, the
- reduction in the deferral of nuclear plant operatmg Company and Toledo Edison agreed to limit their expenses and carrying charges and are subsequently combined 1992 other operation and maintenance offset by the amortization of such deferrals. expenses and capital expenditures to $1,050 000,WR Although the phase in plan had a positive effect exclusive of compliance costs related to the Clean Air on revenues and cash flows, there are a numtvr of '
factors that exerted a negative influence on earnings in Act Amendments of 1940 (Clean Air Act). Other ~ operation and maintenance expenses and capital 1991 and will continue to present sigmhcant camings expenditures on a conwlidated bai.is for Centerior challenges in 1992 and beyond One such (actor " Energy totaled $1005.000,0N in 1991. The Company' related to facilities placed in service after February . Toledo Edison and the customer representative ' 1988 and not included in rate base. The Company 85 required to record interest charges and depreciation [woups esiness Mw greed to an operations ongoingcondition (mancial review ofand our , on these facilities as current expenses even though accounting practices; This effort, with the participation such items are not yet recovered in rates, ye also are of the PUCO staff,is directed at the maintenance and facing the challenge of competitive forces, includmg ultimate improvernent of our hnancial condition the new initiatives to create municipal e;ectnc systems. Improvement of the ef6ciency of our operations, and , The need to meet competitive threats, coupled with a the delay and minimization of future rate increases. i deshe to encourage economic growth in the service The Company and Toledo Edison also agreed not to area,is prompting the Company to enter into an seek any base rate increase that would become ' increasing number of contracts having reduced rates effective before 1993. with certain large (ustomers. Factors beyond our The Company continually faces competitive control also having a negative influence on carnings ; are the economic reusion, the effect of inflation and threats from munic' pal electnc systems within ity
- increases in taxes, other than federal income taxes. service territory, a challenge intensified by municipal
. The Company has taken several steps to counter acass to low-cost power currently available on the , the adverse effects of the factors discussed above. We wholesale market As part of our competitive 3
.have implemented most of the recommendations of strategy, we are strengthening programs that demonstrate the added value inherent in our servke, the management audit discussed in Note 6 and have taken other actions which reduced other operation beyond what one might receive from a rnunicipal and maintenance expense by- approximately electnc system. Such programs include providing . $44,700.000 in 1991. As discussed in the Summary of ' 5"VIC"5 to. communities to help them retain and Significant Accounting Policies and Note 12, w(; attract businesses, providmg consulting services to ,
sought and received PUCO approval to lower our customers to improve their energy efficiency and r nuclear plant depreciation expense in 1991 to a level developing demand-side management programs. To more closely abgned with the amount being counter new municipalization initiatives, we are also
- recovered in rates. In addition, we have increased our . stressing the hnancial nsks and uncertainties of efforts to sell power to other utilities which,in 1991, creating a municipal system and our supenor resulted in approximately $30,200,000 of revenues in reliabihty and service. . excess of the cost of providing the powe . ^"nual sales growth is expected to average about '
Despite the positive aspects of the measures 2% for the next several years, contingent on future dismssed above, more must be done to maintain economic events. Recognizing the limitations
. earnings. Continuing cost-reduction efforts will be imposed by these sales projections and current necessary to lessen the negative pressures on __ competitive pressures, we will utilize our best efforts camings. The Company is aggressively seeking to minimize future rate increases through cost-long term power contracts with wholesale customers reduction and quality-of service efforts and exploring-to further enhance revenues. To counter the effects other innovative options. Eventually, rate increases of delays in recovering new investment since 1988 will be necessary to iecognite the cost of our new and related costs in rates, we have requested PUCO capital investment and the effect of inflation.
S u - - - - -- - - . _ . , . _ . - . . -- - , _ _ , - - - . . _ , - . -
1991 t's.1990 Company of 9% effective in 1ebruary 198" and 7% Factors contributing to the 8% increase in 1W1 effective in February 1%). The associated sevenue operating revenues are as follows: increase in 1900 was partially offset by teduced revenues resulung from a 3h% deucase in total chang in opnaunER ennun in<n aw kilowatt hour sales. Industrial sales decreased 2 6% B'w Rain and Mane . 5 mm because of the recession beginning in 1990. IN $ by Residential sales deacased 1.5% as seasonal temperatures were more moderate i gp % the pnor year s temperatures, resultm,n comparison g in reduced The increases in base rates and miscellaneous customer heating and cooling related, demand, Commercial sales increased 0.5% as mcreawd revenues resulted primarily from the January 1989 demand from new all-electric office and retail space PUCO fate order for the' Company. The PUCO was offwt by the effects of mild weather. Other sales approved rate increases of 7% effective in f ebruary activity decreased 21.4% primarily as a result of lower 1900 and 4.35% effective in iebruary 1491. Total whoksale sales, The increase in revenues was also kilowatt hour sales increased 4.3% in' 1991. Residentiel artially offset by the loss of revenues related to the and commercial sales increawi 4.8% and 4.9%, { lay 1959 espiration of the Company 5 agreem,ent to respectively, as a result of higher usage of cooling dion of its share of I erry Unit 1 capacity to equipment in response to the unusually warm late sell Ohioa fdison and Pennsylvania Power. spring and summer 1991 temperatutes. The commarcial sales increase was also influenced by Operating espenses decreawd 0.3% in 1990. Some improvement in the economy for the Depreciation and amortitatmn espense decreawd i commercial sector. Industrial sales declined 6.3% primarily because of lower depreciation rates used in largely because of the recession-driven slump in the 1990 for nonnuclear and Davis Desse property l steel, auto and chemical industries. Other sales attributable to longer estimated lives and because of increased 45.3% because of -increased sales to longer nuclear generating unit refueling and wholesale rustomers and public authorities. maintenance outages in 1990 than in 1989. Federal Operating expenses increased 4.9% in 1991. The income taws decreased primaruy because of a increase was mitigated by a reduction of $44,700 000 decrease in pretax operating income. Fuel and in other operation and maintenance expense, resulting purchased power expense decreased primarily from primarily .from cost cutting measures. Offsetting this less amortization of previously deferred fuel costs decrease were an increase in fuel and purchased than the amount amortized in 1989. These decreans power expense resulting from increased purchased in operating espenses were partially offset by an power costs and increased amortitation of previous!v increaw in taxes, other than federal income tases, deferred fuel cost., over the amount amortired in ' resulting from higher property and gross receipts 1990; an increase in federal income taxes because of taxes, an increase in other operation and maintenance higher pretax operating income; an increase in taws, expense and by bwer operating expense deferrals for other than federal income taws, resulting from Perry Urit I a'nd Beaver Valley Unit 2. l higher property and gross receipt taxes and accruals Credits for carrying charges recorded in i for Pennsylvania tax mneases nonordng income" decreased in 1990 because a 1991; and lower operating espense enacted deferrals for m Aug" Perry nicater share of our investments in Perry Unit 1 and i Unit 1 and Beaver \ alley Unit 2 pursuant to the beaver Valley Unit 2 were recovered in rates. The ' january 1989 PUCO rate order- decrease in the federalincome tax provision related to Credits for carrying charges recorded in nonoperating income was the result of a decrease in nonoperating income decreased in 1991 because a pretas nonoperating income and federal income tax greater share of our investments in Perry Unit 1 and . adjustments of $18,712.000 associated with previously Beaver Valley Unit 2 were recovered m rates. The . deferred investment tax credits relating to the 1988 federal mcome tax provision related to nonoperatmg write-off of nuclear plant. Interest expense increased mcome mereased mamly because the 1990 provtsson in 1990 because of the higher level of debt outstanding was reduced by $18,712,000 for federal income tax which was partially offset by refmancing. adjustments associated with previousi deferred in st as credits relating to the 1 88 write-off of EFFECT OF INFLATION , Although the rate of inflation has cased in recent 1990 es.1989 years, we are still affected by even modest inflation Factors contributing to the 3.5% increa;e in 1900 since the regulatory process introduces a time-!as operatmg revenues are as follows: during which increased costs of our labor, matenals and sMces am not rected in rates and recovered. change in operating Rewnm (tN[e'aIe) Moreover, regulation allows only the recovery of - Base Rato and MncvHancous . $11430A00 historical costs of plant assets through depreciation sain votume and Mu . . . (25aoAo) even thou >h the costs to replace these assets would-Perry Una i caramy Sain to Ohio Ediwn ' ed their historical costs in an and Pennsyhania Power. (3HOOAO)
, gg, inflat.onary economy.
Changes in fuel costs do not affect our results of The major factor accounting for the increase in operations since those costs are deferred until operating revenues was related to the January 1989 reflected in the feel cost recovery factor included in rate order. The PUCO approved rate increases for the customers' bilk
'6 -.-.--.-.----.---a _ . - -
EHCOHIC SlalCHICHI THE CU VUAND IUC1RIC HLUMINATING COMPANY AND SUBMDIARilS For the years ended December 31, 1991 1990 1989 Ohousands of dollars) Operating Revenues . . . . . . . . .. . . $1825,738 $1,691.159 $1,634.227 Operating Erpenses. Fuel and purchased power (1) . .. .... . . 455,055 412.397 427,108 Other operation and maintenance . . .. . . .. _469,530 514.186 508,151
. . Depreciation and amortiration . . . . . . . . . 170,571 169,526 187,614 Tases, other than fee 9 income taxes . ... 215,908 197,454 183,120 phase-in deferred operat..g espenses . . ... . . (16,426) (33,960) (52,020) . Amortir.ation of pre. phase-in deferred costs . . 9,586 10,076 9,553 Federal income tases . . . . . . . . . . . . , . . . . . . . 105,824 75,099 85.275 1,410,048 1,344,778 1,348.801 Operating income . . . . . . . . . . . . . 415,690 346.381 285,426 Nonoperating income i Allowance for equity funds used during construction 7,852 4,531 8,362 Other income and deductions, net . . . . .. 5,809 1.836 7,934 Phase-in carrying charges. .. .., ,. 87,615 161,598 216,851 Pre-phase.in carrying charges . . . . . . . . . . . . . . . - - 17,937 Federal income taxes - credit (espense) . .. ... .. . _ (24,311) _(20.401) (55.699) 76,965 147,564 195.385 Income Before Interest Charges . . ... . . . . 492,655 - 493,945 480,811 Interest Charges -
- Debt interest . . . . . ..... ... ... . . . .. . . . 250,799 254,936 238,042 Allowance for borrowed funds used during construction . . (4,302) (3,319) -- (7,450) 246,497 251,617 230,592 Net Inconie . . . . . . . . . . . . . . . . . . .. ... , . . 246,158 242,328 250,219 Preferred and Preference Dividend Requirements. .... .
35,857 36.682 40,227 Earnings Available for Common Stock . . . .. . . . . . . . 5 _210,301 ~ $ - 205.646
$ 2,0_9_._992 ~ '(1)' includes purchased power expense of $127,691,000, $111,761,000 and $114,123.000 in 1991, '1990 and 1989, respectively, for purchases from Toledo Edison.
Retained Earnings For the years ended December 31, 1991- 1990 1989 Chousands of dollars) Balance at Beginning of Year... ... .. .. . . .. $ 563,559 s 507,375 $ 459,709
. Additions.
Net income . .. ...... . . . ... ......... ... . . 246,158 242,328 250,219 Deductions l Dividends declared: Common stock '. . . . . . . . . . . . . .. .. . .(194,306) (149,199) (161,662) Preferred stock; . . . ... . ... ... . . .. .. (36,389). (36,205) (40,769) Preference stock _. . . . . . . . . i . , . . . . .. .. . (124)
'Other, primarily preferred stock redemption _ expenses .
(816) (740) 2
' Net Increase . . . . . .... . ...... ... .. 14,647 56,184 - 47,666 Balance _ at End of Year .. . . . . . . . . . . . . . $ 578,206 $
563_,559 $ 507.375
- m,_ - The accompanying notes and summary of signihcant accounting policies are an integral part of these statements.
7
~
Management's Financial Analysis . . ... . CAPITAL RECOURCES AND LIQUIDITY construction and mandatory redemption in addition to oui need for cash for normal corporate requirements of apnrostmately $286A100,000. About 60M of the Company's 1993 and 1994 requirements operations, we con.inue to need cash for an ongoing are espected to be fanced esternally. If economical, program of constructing new facilities and modifying existing facilities to meet anticipated demand for additional securities may be redeemed under electric service, comply with governmental optional redemption provisions. See Notes 10(c) and (d) for information concerning limitations on the regulations and protect the environment. Cash is also needed for the mandatory retirement of securities. issuance of preferred and preference stock and debt. Over the three-year period of 1989-1991, these Our apital nviuirements after 1994 will depend on construction and mandatory retirement needs totaled the implementation s.trategy we chome to achieve - approximately $809,000,000. In addition, we mniphance with the Clean Air Act. Ihpenditures for esercised various options to redeem and punhase our optimal plan are estimated to be approximately
$155.000,000 over the 1992 2001 period. See Note l approsimately $270,000,000 of our f.ecurities. .
As a result of the January 1989 PUCO rate order, 3(b). internally generated cash increased in 1989,1990 and We espect to be aNe to raise cash as needed. The 1991 from the 1988 level. In addition, we raised availability and cost of capital to meet our etternal
$1,049,000,000 through security issues and term bank hnancing needs, however, depends upon suth factors - ;
as hnandal market conditions and our credit ratings. ! loans during the 1959-1991 period as shown in the Cash Flows statement. During the thne-yect period, Cunent securities ratings for the Company are as I the Company also utilized its i.hort-team borrowing 2"II "52 arrangements (esplained in Note 11) to help meet its W nded Meus cash needs. Proceeds from these financings were u.ed to help pay for our construction program, to g IQS repay portions of short term debt incurred to fmance first monpy bondo BBB- Baa2 the construction program, to retire, redeem and ,,refened > ion eB+ twa2 purchase outstanding securities; and for general corporate purposes. Estimated cash requirements for 1992-1994 for the A write-off of the Company's investment in Perry Company are $693,000,000 for its construction Unit 2 as discussed in Note 3(c), would not reduce program and $464,000,000 for the mandatory retained earnings sufficiently to in. pair its ability to redemption of debt and preferred stock. Additionally, declare dividends and would not affect cash flow. the Company has arranged to refund in 1992 The Tax Reform Act of 1986 (1986 Tax Act) i
$78.700,000 principal amount of its First Alortgage provided for a 34% income tas rate in 1988 and Bonds,13%% Series due 2012 by issuing an equal thereafter, a new attemative minimum tas ( AMT) and '
principal amount of Srst mortgage bonds due 2013 other changes that resulted in increased tax payments having an effective interest cost of 8.25%. We espect to and a reduction in cash flow during 1989,1990 and , finance esternally about 50% of our total 1992 1991 because we were subject to the AMT. t N '4 e5 . 8
Cash Flows mt eu m.so tu cme su uwus uw cm.m .mo sumosAust s __liLthmaff8d themkr 31 1991 1990 1989 , (thouunA of Mlars) Cash Flows from operating Activities (1) Net income . . . . . ... .... .. .. . $ 246.158 $ 242.328 $ 250.219 Adjustments to Reconcile Net income to Cash horr Jpn 'ing Activities: Depreciation and amortization . . . 170,571 169.526 187,614
. Deferred federal income taxes . . .. 50,934 111,029 108,201 investment tas credits, net . . .. . . 12,653 (17,224) (58)
Deferred and unbilled revenues . . .. (25,300) (38,134) (32,168) Deferred fuel . . . . . . . ,. .. . . . 13,450 (11,410) 8,327 Carrying charges capitalized .. . . ... (87,615) (161.598) (234.788) Leased nuclear fuel amortitation . . . . 68,866 47,028 55,712 Deferred operating expenses, net . . . . . , (6,840) (23,884) (42,467) Allowance for equity funds used during construction . . . (7,852) (4.531) (8,362) Amortliation of reserve for Davis liesse refund obligations to customers . . . 4. . . . ... . . . - ~ (12,162) pension settlemen' ,,aln . . . . . . ... . . . . - (34,517) - - Changes in amounts due from customers and others, net . 11,904 (16.878) (9,251) Changes in inventories , . .. .. ..m . ... . (15,040) (22,494) (4,919) Changes in accounts payable. . . . . . . . 4 .. . . . (23,667) 31,901 (13,844) Changes in working capital affecting operations . . .. 36,997 (5,195) 29,504
- Other noncash items . . . . . . . . . . . . .. ,
(13J34) _(9,125) (9.065) . Total Adjustments . . . . . . . . . . . . . . . . . ... . .. 185,727 14 494 22.834
' Net Cash from Operating Activities. . . .. .. . _ Q1,885 256E22 273.053 Cash Flows from ('L,m'ing Activities (2)
Itank loans, comt trcia. paper and other s.hort.te m debt. . (86,703) .% 688 29 Notes payable to affiliates . . . . . . . . . . . . . .. 7,000 (15?EC) 90,200 Debt issues: first mortgage bonds , . . n . ...... . . . . . . . . . - 100MO 67,700 Secuted medium. term notes . . . . . . . . . . . . . . . . .. . 150,000 JES00 212,500 Term bank loans. . . . . . . . . . . . . ..<....... . .. - 16N00 40,000 preferred stork laues . . . . . . . . . . . . . .... . ........ ..... 125,000 - - Maturities, redemptions and s"mking funds. . .-. . . ... (132,990) (211,810) (305,741) Nuclear fuellcase and trust obligations .. . ... .. . . (63,895) (56.129) (47,574) Dividends paid . . . . . . . . . . .. . . . . . . . . . . . . . . . . . .. .. .. (229,671)_ (185.851) (202,444) premiums, discounts and expenses .... .. . . , . . ..... (5,990) (5f,11) _ _(1,697) Net Cash from Financing Activities . . . . (237,249) (76.M) jl47,027) - Cash Tiows from investing Activities (2) Cash applied to construction . . . . . . ... . . ... .. . ...... (137,851) - (156,A9) (149,043) Interest capitalized as allowance for borrowed funds used
- during construction ... . . . ... . . .. (4,302) - (3.319) (7,450)
Loans to affiliates . .. .. ,,.. . .. .. .. . 11,000 (11.000;' - Other cash received (applied) . ......... . .... . . .. . 2,254 16 3 ) (16.840)-
- c Net Cash from investing Activities . . . . . . . .... jl28,899) jl77,787) J173.333) i
. Net Change in Cash and Temporary Cash investments. ,. _ 65,737 2.718 _(47,307)
Cash and Temporary Cash inve:.tments at Beginning of Year . 31,048 28.330 75.637
. Cash and Temporary Cash Inuestments at End of Year. u . ,, . . . . $ 96,785 $ _1 3 _048 $ 28,330 m _ _ _ .
(1) Interest paid (net of amounts capitalized) was $221,000,000, $189,000 000 and $151.000.000 in 1991,1990 and
' 1989., respectively, income taxes paid were $49,536,000, $18,589 000 and $29,106,000 in 1991,1990 and 1989, 'respectively.
(2) Increases in nuclear fuel and nuclear fuellease and trust obligations in the Balance Sheet resulting from the
- noncash capitalizatius under nuclear fuel agreements are excluded from this statement.
The accompanying notes and summary of significant accounting polic6s are an integral part cf this statement. 9
-. . . - - . -- .- - .~ .-.- . -. - . . , .
Balance Sheet December 31, _ 1991 1990 (thousands of dollan) ; LASSETS 1 PROPERTY, PLANT AND EQUIPMENT Utility plant in service. ... .. . . $6,195,945 56,032.336 1.ess: accumulated depreciation and amortization . .. . 1,564,9S4 1,398,258 4,630,961 4,634,078 Construction work in progres., .... .. 161,890 175,232 perry Unit ' 507,806 521,464 5,300,657 5,330,774 , Nuclear fuel, net of amortization , , . . 263,129 300,824 ! Othe property,less accumulated depreciation . 41,834 43,428 : 5,605,620 5,675,026 CURRENT ASSETS Cash and temporary cash investments . . 96,785 31,048 Amounts due from customers and others, net . . . . . . . 167,280 179,184
' Amounts due from affiliates . . . . . 3,648 19,542 Unbilled revenucs , , . . . , . . . S4000 60,700 Materials and supplies, at average cost .. . .. ,. . . . 69,043 176,092 Fossil fuel inventory, at average cost . .. . . . 39,089 37,000 > Taxes applicable to succeeding years. . . . . . . 167,753 155,069 Other... ........ . . ...., .. . . . 5,453 (,.926 655,051 565,561 DEFERRED CHARGES . Amounts due from customers for future federal income taxes. 673,726 671,450 Unamortized loss on reacquired debt ... .. .. .. . ..... 49,593 53,160-Carrying charges and operating expenses, pre-phase.in ., . 368,448 377,324 Carrying charges and operating expenses, phase-in . . 568,472 464,434 Other . . . . . ..... ,, . ... .. .. ..... ,. 145,670 138,202_ 1 1,605,909 1,704,570 Total Assets . , ...... . . .. . .. $J066J80 5J945157 1 .
The accompanying notes and summary of signincant accounting policies are an integral part of this statement. 10
THE CLEVLIAND LLLCTRlC ILLllMINATING COMI'ANY AND SUllSIDIAXils
.... 54 . ....... . ....... . . .. ,,....... ..... ... . . ,, . . ., . .... . ..... ,
December 31, 1991 1990 (thousands of dollars)
- CAPITALIZATION AND LIABILITIES
- CAPITALIEATION.
Common shares, without par value: 105,000,000 authonred; 79,591,000 outstanding in 1991 and 1WO. , . . , , . 51,240,570 $1,242,074 Other paid-in capital . . . . . . . . . 78,625 78,625 Retained earnings, ... .. . ., , .. .. . _ 578,206 563.559
. Common stock equity ,,, . . . 1,897,401 1,884.25S Preferred stock -
With mandatory redemption provisions , ,. , , 268,368 171,162 Without mandatory redemption provisens , ,. 217,334 217,334 Long-term debt . ,.. . . . .. . ... .. . 2,682,805 2,631,911 5,065,908 4.904,665
- OTHER NONCURRENT LIABILITIES - Nuclear fuel lease obligations . . . . . . .. .. .. 197,362 246.460 Other. . . . ... ... , , . ., , 33,391 33,390 230,753 279,850 CURRENT LIABILITIES Current portion of long-term debt and preferred stock . .
92,857 97,9F9 Current portion of lease obligations. . . 80.928 64,554 Notes payable to banks and others .. .. . . . 191 86.894
- Accounts payable . . . . . . . .. . ,, . . 97,251 120,918
. Accounts and notes payable to affiliates . .. . . 58,578 59,884 Accrued taws . . . ... ... .. . .. .. 281,526 225,666 Accrued interest . ,, .. , , , ., 53,096 53,113 - ~Other.. .. .. ... . . .- . ... . . . 34,499' 37,697 i 698,926 746.714 = DEFERRED CLE.DITS Unamortized investment tax credits. . ,. . . 258,318 252.759 $ccumulated deferred federal income taxes . . .. ... . 1,203,722 1,159,199 Reserve for Perry Unit 2 allowance for funds used during construction , . ..., , ...... ..... . . . . ..... ... 124,398 124.39f 1 Unamortized gain from Bruce Mansfield Plant sale . . . 375,076- 389,658 Accumulated deferred rents for Bruce Mansheld Plant .. .. 64,194 57,045 Other. ..... . ... , . .,... . .. . 45,285 30,869 2.070,993 2.013.928 . Total Capitalization and Liabilities.. . . . $8,066,580 57,945,157 A
11
[ Statement of Cumulative
$ # '.#$.?.I* b... ,. .. .. . , . . .?!' ???9?." f".9'?!?f",^.""^".",". "'"."?.'9?."{".'!?!?"?.
1991 Shares Current December 31. Outstanding Call Price 1991 19%)- (thousands of dollars)
- Without par valuei 4.000,000 preferred shares authorized Subject to mandatory redemption:
$ - 7.35 Series C . . . .. .. 170,000 $ 101110 $ 17,000 ' $ 18,000 88.00 Series E. .. . . 27,000 1,030.61 27,000 30,000 ' 75.00 Series F. . ... . - - - 2,384 145.00 . Series I .., . . - - - 13,779 - . I 113.50 Series K . .... ., ... - - - 10,000--
Adjustable Series M . . . ... 400,000 102.00 39,200- 49,000 9.125 Series N . . 750,000 105.07 73,968 73,968 , 91.50 Series Q . . . 75,000 - 75,000 - 88.00 Series R . . ... 50,000 - 50.000 - 282,168 197,131 Less: Current maturities 13,800 25,969
- Total Preferred Stock, with Mandatory R< demption Provisions $268,368 $171,162 1 j
i Not subject to mandatory redemption.
$ 7.40 Serie A ... . 500,000 101.00 $ 50,000 $ 50,000 7.56 Series B. , . .. 450,000 102.26 45,071 45,071 Adjustable Series L. . . . . ,.. .... 500,000 103.00 48,950' 48,950 Remarketed Series P .. . . , .. -75C 100,000.00 73,313 73.313 Total Preferred Stock, without Mandatory Redemption Provisions $217,334 $2l7.334 The a: companying notes and summary of significant accounting policies are an integral part of this statement. +
N k , 12
Notes to the Financial Staternents
..,.o.. -........ .. . .... . ...... .... .. ., . . .. . .... .
(1) . PROPERTY OWNED WITil OTilER UTILITIES AND INVESTORS The Company owns, as a tenant in common with other utilities and those investors who are owner participants in various sale and leaseback transactions (i essors), certain generating units as listed below. Each owner owns an
- undivided share in the entire unit. Each owner has the right to a percentage of the generating capability of each unit equal to its ownership share. Each utility owner is obligated to pay for only its respective share of the construction and operating costs. Each lessor has leased its capacity rights to a utility which is obligated to pay for such lessor's share of the construction and operating costs The Company's share of the operating costs of these generating units is included in the income Statement. Property, plant and equipment at December 31,1991 , includes the following facilities owned by the Company as a tenant in common with other utilities and Lessors:
i Owner- Construction in- Owner- slup Plant Work in Service ship Mega. Power in Progress and Accumulated Generating Unn . Date Share watts Source service Suspended tkpreciation in Service . (thousands of dollars) Seneca Pumped Storage. , 1970 80AN 312 11ydro 5 57.733 $ 1,021 5 19.855 fastlake Unit 5. 1972 68 80 all Coat 151.I'io 2.199 - Davis Bewe , . . 1977 51 38 454 Nuclear 680.121 21,055 150.911 Pcrty Unit I and Common Facihnes . 1987 31.11 371 Nuclear 1+22 823 4.201 191.227 - Beaver VaDey Urut 2 and Comrnon f acihties (Note 2) ; 1987 24 47 201 Nucleat 1.170N6 54M 143,750 Construction Suspended. Perry Umt 2 (Note 3(c)) . Uncertain 31 11 375 Nuclear - 507.806 - 53.f41 M ; 5411.743 5505.743 Depreciation for Eastlake Unit 5 has been accumulated with all other nonnuclear depreciable property rather than by specific units of depreciable property. Effective May 1,1991. FERC approved an agreement under which the Company is selling the power from its
. share of the Seneca Power Plant to two subsidiaries of General Public Utihties Corporation through 1993.
Revenues from this transaction were $16,000,000 in 1991. Ohio Edison and Pennsylvania Power purchased 80 megawatts of the Company's capacity entitlement in Perry Unit 1 from November 1987 through May 1989. Revenues from this transaction were $31,831,000 in 1989 The ownership share of Perry Unit 2 set forth above does not reflect the Company's acquisition of Duquesne's 13.74% ownership share in February 1992. See Note 3(c), (2) UTILITY PLANT SALE AND LEASEBACK TRANSACTIONS As a result of sale and leaseback transactions Semiannual lease payments conform with the completed in 1987, the Company and Toledo Edison payment schedule for each lease. are co-lessees of 18.26% (150 megawatts) of Beaver Rental expense is accrued on a straight-line basis
' Valley Unit 2 and 6.5% (51 megawatts). 45.9% (358 over the terms of the leases. The amount recorded by megawatts) and 44.3S% (355 megawatts) of Units 1,2 the Companyin 1991,1990 and 1989 as annual rental and 3 of the Mansfield Plant, respectively, all for expense for the Mansheid Plant leases was . terms of about 29% years. _ $70,008.000. Amounts charged to expense in excess of As co-lessee with Toledo Edison, the Company is the lease payments are now classihed as accumulated also obligated for Toledo Edison's lease payments. If deferred rents on the Dalance Sheet. Previously, the Toledo Edison is unable to make its payments under excess was included in accounts payable.
the Beaver Valley Unit 2 and Mansheld Plant leases, The Company and Toledo Edison are responsible . the Company would be obligated to make such under these leases for paying all taxes, insurance
, payments No payments have been made on behalf of premiums, operation and maintenance costs and all Toledo Edison to date. _
other similar costs for their interests in the units sold
- Future minimum lease payments under these and leased back. The Company and Toledo Edisco , operatmg leases at December 31,1991 are summarized may incur additional costs in connection with capital as follows: pg improvements to the units. The Company and Toledo For the - Toledo Edison have options to buy the interests back at the .g Company Edison end of the leases for the fair market value at that time (thousands of dollars) or to renew the leases. Additional lease provisions 1942. 5 63 2 0 $ 110 2 0 provide other purchase options along with conditions y
l - Q jij for mandatory termination of the leases (and possible repurchase of the leasehold interests) for events of 1995. _ ow0 illmo 19%.; . , emo ulmo defaulc These events of def ault include leer iem ; 1,516 m o 2,4 Homo noncompliance with several fmancial covenants Total _ ruture Mmimum affecting the Company, Toledo Edison and Centerior
- 1. ease Payments . $1M31/MO __ $3,034 000 Energy contained in an agreement relating to a letter 13
of credit issued in connection with the sale and significantly higher capital expenditures could be leaseback of Beaver Valley Unit'2, as amended in ' ' required during the 1992-2001 period. 1989. See Note 10(d). ' We believe that Ohio law permits the recovery of Toledo Edison is selling 150 megawatts of its compliance costs from custcmers in rates, Beaver Valley Unit 2 leased capacity entitlement to the Company. This sale commenced in 1988 (c) PERRY UNIT 2 and we anticipate that it will continue at least until 1998. Purchased power expense for this transaction ' Petty Unit 2, including its share of the common
' was $106,589,000, $102,773,000 and $104,127,000 in facilities, is approximately 50% complete. Construction 1901, .1990= and 1989/ respectively. "Ihe future of Perry Unit 2 was suspended in 1985 pending future minimum lease payments associated with Beaver consideration of v:.rious options, including Valley Unit 2 aggregate $1,869,000,000. resumption of full construction with a revised estimated cost, conversion to a nonnuclear design, sale f all or part of our ownership share, or (3') CONSTRUCTION AND CON INGENCIES cancellation. No option may be implemented without (a) CONSTRUCTION PROGRAM the unanimous approval of the owners. In October The estimated cost of the Company's construction 1991, the Company, which is responsible for the program for the 1992-1994 period is $731,000,000, construction of Perry Unit 2, applied for a ten-year including AFUDC of $38,000,000 and excluding extension of the construction permit which was to nuclear fuet expire in November 1991. Under NRC regulations, the in an agreement approved by the PUCO, the construction permit will remain in effect while the Company and Toledo Edison have agreed to limit application is pending We expect the NFC to grant their combined 1992 other operation and maintenance the extension.
expenses and capital expenditures to $1,050,000,000, in February 1992, the Company purchased exclusive of compliance costs related to the Clean Air Duquesne's 13.74% c,wnership shatr of Perry Unit 2 Act. Within this limitation, capital expenditures are for $3,324,000 This purchase increased the budgeted at $191,000,000 for the Company, exclusive Company's ownership share of the unit to 44.85%, of the Clean Air Act compliar.ce costs. with the remainder owned by Toledo Edison, Ohio Edison and Pennsylvania Power. The purchase does (l-) CLEAN AIR LEGISLATlON not signal any plans to resume construction of Perry The Clean Air Act will require, among other things, Urit 2, but rather our intent to keep our options significant reductionsin the emission of sulfur dioxide. pen. Duquesne had sta
- that - could not agree to and nitrogen oxides by fossil. fueled electric resumpti n f construction of L unit.
generating units. The Clean Air Act will require that . If Perry Unit 2 were to be canceled, then our net sulfur dioxide emissions be reduced in two phases mvestment in the unit (less any tax saving) would
= over a ten-year period. have to be written off. The Company estimates that such a write-off, based on its investment m this unit Certerior Energy has developed a compliance strategy for the Company and Toledo Edison which as of December 31,1991 and after adjustment for the = will be rubmitted to the PUCO for review in April February 1992 purchase of Duquesne s ownership 1992 Centerior Energy will also seek United States share, would have been about $267,000,000, after - Erwitonmental Protection Agency approval of Phase I taxes. See Note 10(d) for a discussion of potential
- plans in 1993._ The compliance plan which results in C "5"I"*"C"5 f such a writeoA the least cost and the greatest flexibility provides for if a decision is made to convert Perry Unit 2 to a compliance with both phases through 2001 by greater n nnuclear design m the future, we would expect to use of low sulfur coal at some 'of our units and the write- ff at that time a portion of our . investment for banking of emission allowances. The plan would nuclear plant construction costs not transferable to the require capital expenditures for the Company over the n nnuclear construction project. _
-1992-2001 period of approximately $155,000,000 for Beginning in July 1985, Perry Unit 2 AFUDC was nitrogen oxide control equipment, emission credited to a deferred income account until January 1, 1988, when the accrual of AFUDC was discontmued.
monitoring equipment and plant modifications. In addition, higher fuel and other operation and
- maintenance expenses would be incurred. The least (d) SUPERFUND SITES
- cost plan also calls for the Company to place in The Comprehensive Environmental Response, service after 2001 a scrubber or other sulfur emission Compensation and Liability Act of 1980 as amended reduction technology at one of its generating plants. (Superfund) established programs addressing the The rate increase associated with the Company's cleanup oi hazardous waste disposal sites, emergency capitd expenditures and higher expenses would be preparedness and other issues. The Company is about 12% in the late 1990s and another increast after aware of its potential involvement in the cleanup of the year 2000, for an aggregate rate increase in the seven hazardous waste sites. The Company has range of 3-6%. .' recorded res- cves based on estimates of its Our final compliance plan will depend upon future proportionate responsibility for these sites. We believe environmental regulations and input from the PUCO, that the ultimate outcome of these matters will not other regulatory bodies and other concerned entities. have a material adverse effect on our financial If a plan _ other than the least cost plan is required, condition or results of operations.
- 14
;(4) NUCLEAR OPERATIONS AND (5) NUCLEAR FUEL CONTINGENCIES The Company has inventories for nuclear fuel which should provide an adequate supply into the mid-(a) OPfRATING NUCLTAR UNITS 19%. Substantial additional nuclear fuel must be ~ The Company's interests in nuclear units may be obtained to supply fuel for the remaining useful lives
- impacted by activities or events beyond its control. f Davis Besse, perry Unit 1 and Beaver Valley Unit Operating nuclear generating units have experienced 2, Mon > nuclear fuel could be required if Perry Unit unplanned outages or extensions of scheduled 2 wne completed as a nuclear generating uru,t.
outages because of equipment problems or new in 1989, existmg nuclear fuel financing regulatory requirements. A major accident at a nuclear arrangements for the Company and Toledo Edison facility anywhere in the world could cause the NRC wne rehnanced through leases from a special-
- to limit or probibit the operation, construction or purpose corporation The total amount of financing '
- licensing of any nuclear unit. If one of our nuclear currently available under these lease anangements is units is taken out of service for an extended period of $509MM ($309MM from intermediate-term ' n tes and $200,000,000 from bank credit time for any reason, including an accident at such --_ unit or any other nuclear facility, the Company arrangements)ialthough financing in an amount up cannot predict whether regulatory authonties would to $900.000,000 is permitted. The intermediate-term impose unfavorable rate treatment such as taking our notes mature in the period 1993-1997. The bank credit affected unit out of rate base or disallowing certain arrangements are cancelable on two years notice by the lenders. As of December 31,1991, $281,000,000 of construction or maintenance costsi An extended outage of one of our nuclear units coupled with nudear fuel was fmanced for the Company. The - unfavorable rate treatment could have a material Company and Toledo Edi .on severally lease their adverse effect on our financial position and results of nspectwe portions of the nuclear fuel and are -! - operations.
bligated to pay for the fuel as it is consumed in a reactor. The lease rates are based on various
"*"' #'*'"" "* ' ' ' ' ' b#"k '*' **O (b) NUCLEAR INSURANCE commercial paper rates.
The Price Anderson Act limits the liability of the The amounts fmanced include nuclear fuel in the Davis Besse, Perry Unit I and Beaver Vdley Unit 2 owners of a nuclear power plant to the amount reactors with remaining lease payments of provided by private insurance and an industry $MM,000, $54,000,000 and $18,000,000 respectively, assessment plan. In the event of a nuclear incident at as f December 31.1991. The nuclear fuel amounts any unit in the United States resulting in losses in excess of the level of private insurance (currently financed and capitahred also mcluded mterest charges incurred by the lessors amounting to
. $200,000,000), the Company's maximum potential $12,000,000 in 1991, $19,000,000 in 1990 and assessment under that plan (assuming the other $25,000,000 in 1989. The estimated future lease CAPCO companies were to contribute their am rthati n payrnents based on projected proportionate share of any assessment) would be consumpti n are $51,000,000 m 1992, $54,000,000 in $70,754,000 (plus any inflation adjustment) per I993' $51,000.000 m 1994, $44,000,000 m 1995 and incident, but is limited to $10,696,000 pe year for each nuclear incident.
047#M
- 1995 The CApCO companies have insurance coverage for damage to property at the Davas-Besse, perry and (6) REGULATORY MATTERS Beaver Valley sites (including leased fuel and clean. On Janus c 31,1989, the PUCO issued a rate order -
up costs)J Coverage amounted to $2,515,000,000 for -which pro..ded for three annual rate increases for the
- each site as of January 1,1992. Damage to property Company of approximately 9%. 7% and 6% effective could exceed the insurance coverage by a substantial with bills rendered on and after February 171989, amount. If it does, the Company's share of such 1990 and 1991, respectively. As discussed below, the excess amount could have a material adverse effect 6% increase effective February 1,1991 was reduced to on its financial condition and results of operations. 4.35% The resulting annualized revenue increases in The Company also has extra expense insurance. 1989,1Y90 and 1991 associated with the rate ordei
! coverage which. includes the incremental cost of any were $120,700,000, $105,700,000 and $71400,000, " replacement power purchased (over the costs which respectively, would have been incurred had the units been Under the January 1989 rate order, a phase-in plan operating) and other incidental expenses after the was designed so that the three rate increases, coupled l ! occurrence of certain types of. accidents at our with then-projected sales growth, would provide nuclear units. The amounts of the coverage are 100% revenues sufficient to recover all operating expenses l l of the estimated extra expense per week during the and provide a fair rate of retuin on the Company's
' 52-week period starting 21 weeks after an accident, allowed investment in perry Unit 1 and Beaver Valley 67% of such estimate per week for the Unit 2 for ten years beginning January 1,1989. In the next 52 weeks and 33% of such estimate per week for first five years of the plan, the revenues were the next 52 weeks. The amount and duration of extra expected to be less than that required to recover expense could substantially exceed the insurance operating expenses and provide a fair return on coverage. investment. Therefore, the amounts of operating l
15
~ -. - - - . .-- - - - - - -- . _ - - . _ - . - - . +
expenses and return on investment not currently- . and recorded adjustments to increase the cost recovered are defened and capitalized as deferred: . deferrals by approximately $24,000,000 and 1 charges Since the unrecovered investment will $24,500,000 in 1990 and 1991, respectively The decline over the period of the phase-in plan because $24,500.000 increase recorded in 1991 included a-of depreciation an_d deferred federal income taxes $29,000,000 increase for the adjustment of the 1991 that. result from the. -cse of- accelerated tax cost . deferrals, 'which was partiallv ' offset by a depreciation, the amount of revenues required to $4,500 000 reduction for an adjustmeht of the 1990
; provide a fair return also cectines. Pursuant to such cost deferrals. . phase in plan, the Compan s ' deferred the followingn in connection with the 1989 order and a similar order for Toledo Edison, the Company, Toledo Edison -
N' " I* and the Service Company have undergone a i W = madi n M management audit, which was completed in April , Defenea operaung Expene. $ 16.426 5 n960 5 52.020 1990. The audit identified potential annual savings in
. Carrying charges .
operating expenses in the amount of $98,160,000-e den. 5 21615 5 51,421 sswn from Centerior Energy's 1989 budget level, 55% 64.000 110.177 135,754
- Equity ,.
_ ($53,988,000) for the Company. The Company 5 87.615 5161.598 $216.851 realized a large part of the savings in 1991-1- . Fifty percent of the savings identined by the The amount of deferred operating expenses and management audit were used to reduce the 6% rate 4 increase schedultd to be effective on February 1,1991
- carryinF charges scheduled to be recorded in 1992 and ;
1993 total $51,000,000 and $16,000,000, respectively, for the Company. As discussed previously, our rates Beginning in the sixth _ year (1994) and continuing increased 4.35a, under this provision with the through the tenth year, the revenue levels authorized pUCO's approval. . pursuant to_ the phase-in plan were designed to be The 1989 order also set nuclear perfortnance sufficient to recover that period's operating expenses, standards through 1998, We could be required to 4 a fair return on the unrecovered investment, and the refund incremental replacement power costs if the
- amortization of the deferred operating expenses and standards are not met. No refund was required in 1991 - carrying charges recorded during the earlier years of nor is one expected for 1992. The Company banked the plan.- All phase-in defenals relating to these two $1,500,000 in benefits in 1991 for above average - . units .will be amortired and recovered by December nuclear performance based on industry standards for 31,1998. . .
operating availability established in the 1989 order. The phase-in plan was also designed so that These banked benents are not recorded in the fluctuations in~ sales should not affect the level of financial statements as they can only be used in future , earnings. The phase-in plan permits the Company to yearsi if ; necessary,- to ' offset disallowances of request pUCO approval of increases or decreases in . incremental replacement power costs.
. the phase-in plan deferrals to compensate for the- . Under the 1989 order, fossil-fueled power plant effects of fluctuations in sales levels, as compared to performance may not be raised as an issue in any rate the levels projected in the rate order, and for 50% of proceeding before February 1994 as long as the ,
- the net after-tax savings in 1989 and 1990 identified by Company and Toledo Edison achieve a systemwide the management audit as discussed below, pursuant availability factor of at least 64.9% annt. ally, This
' to these provisions of the order. the Company standard was exceeded in 1989,1990 and 1991, with recorded no adjustment to the cost deferrals in 1989 availability at approximately 80% for each year.
_ __ _ ~_ _ .
.(7) FEDERAL INCOME TAX Pederal income tax, computed by multiplying income before taxes by the statutory rates, is reconciled to the amount of federal income ta recorded on the books as follows:
For the years ended Decemtvr 31, 1991 19W 19M9 (thousands of dollars) ' Book Income Before Federal income las . 5391,193 5376.2_93 m- _5337.828_ Tas on Ibuk inwme at Statutory Rate . , 5127,040 5114 862 5133,006 increase (Dmeaw) in Tat Acwlerated depreciatim .... , ,- (1.861) 7,140 4,422 lovestment tas credits on dw610wed nu&ar plant . .
- (15,712) -
Tases, other than federal income tases . , - (1.680) (9 469) -
. Other items . . 5,73h 1,679 3.546 Total 1ederal Income Tas Espense < . 5130._135 5 95.5(O $14a974 Federal income tax evense is recorded in the income Statement as follows:
For the 3 ears ended Decemter 31, 1991 1990 1989 tthousands of dollars) Operating Espemes.
, Current Tas Provbion. . , . . . . 5 74.552 5 26.934 5 63,447 Changes in Accumulated Dderred Federal Income Tas:
Accelerated oepteriation and amortisation. 8.623 40,197 35,380 Alternative ini.1 mum tas cre&t . .. (2.550) t 18.8c 0) (34.874) Sale and leaseback transaction and amortization . (8.838) 3.496 3,893 Property las espense. - (10D0) - Reacquired debt (mts . ..,. . 15,729 1.887 (872) Deferred runstruction work in progress revenues. (1 509) 11.093 II AIDS Deferred fud costs. , (5.040) 4 7t0 (3.155) Davis-Besse replacement power . - - 4,136 Other items , . . . , , 13.615 14.990 6.257 Intestment Tax Credits- . 11.242 1.489 - 58 Total Charged to Operating Eso mes. 105.824 75.tN9 85.2?5 Nonoperating inco ne-Current Tas Pro. ision. . . .. .. . . .. . .. (8.203) (25,225) '(31,298) Changes in Accumulated Deferred Federal income Tas: Write-off of nudear costs . (199) (11.986) -
' AFUDC and carrying charges . 31,769 57.612 87,541 Other items . , , 944 -
(544) Total Espeme Charged to Nonoperatmg income , 24.311 20.401 55.hW
. Total Federal Income las Expense. 5130.135 5 95N10 5140,974 The Company joins in the filing of a consolidated federal income tax return with its affiliated companier The method of tax allocation reflects the benefits and burdens realized by each company's participation in the consolidated tax return, approximating a separate return result for each company, Federal income tax expense adjustments in 1990, associated with previously deferred investment tax credits relating to the 1988 write-off of nuclear plant investments, decreased the net tax provision related to nonoperating income by $18,712,000 The favorable resolution of an issue concerning the appropriate year to recognize a property tax deduction resulted in an adjustment which reduced federal income.tav expense in 1990 by $10,100,000 ($8,20'/,000 in the fourth quartct). -
For tax purposes, net operating loss (NOL) carryforwards of approximately $233,451,000 are available to reduce future taxable income and wi.it expire in 2003 through 2005. The 34% tax effect of the NOLs generated is
$79,373,000 and is reflected as a reduction to deferred federal incorre tax relating to accelerated depreciation and . amortization. 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 $56,448,000 are available to offset future regular tax. The credits may be carried forward indefinitely, 4 17
I (8) RETIREMENTINCOME PLAN AND The settlement (discount) rate assumption was OTHER POSTRETIREMENT llENEFITS 8.5% for both December 31,1991 and December 31, 1990. The long-term rate of annual compensation
' (a) RETIREAfENT INCOAiE PL4N increase assumption was 5% for both December 31, The Company and Service Company jointly sponsor a 1941 and December 31,1990. The long-term rate of noncontributing pension plan which covers all return on plan assets assumption was 8.5% in 1991 employee groups. The amount of retirement benefits and 8% in.1990.
generally depends upon the length of service Under Plan assets consist prirarily of inve>tments in certain circumstances, benehts can begin as early as comman stock, bonds, guaranteed investment age 55. The plan also provides certain death, medical contracts, cash equivalent securities and : cal estate, and disability benents. The Company's and Service I
' Company's f'unding policy is to comply with the (b) OTHER POSTRET!REAiENT BENEUTS Employee Retirement income Security Act of 1974 The Financial Accounting Standards Board has issued guidelines. _ a aew accounting standard for postretirement in 1990, the Company and Service Company benehts other than pensions. The nev standard offered a Voluntary Early Retirement Opportunity would require the accrual of the expected cost of such Program (VEROP). Operating expenses for both bene 6ts during the employces' years of service. The companies for 1990 included $8,000,000 of pension assumptions and calculations involved in plan accruals to cover enhanced VEROP benehts plus determining the accrual clostly parallel pension an additional $20,00k000 of pension costs for VEROP accountiag requirernents, benents paid to retirees from both companies' The Company currently piovides certain corporate funds, The $20,000,000 is not included in postretirement health care, death and other bene 6ts the pension data reported below, Operating expenses and expenses such costs as these benefits are paid, for 1990 for both companies also included a credit of which is consistent with current ratemakmg practices. $36,000,000 resulting from a settlement of pension Such costs totaled $6,000,000 in 1991, $5,200 000 in obligations thcough lump sum payments to a 1940 and $4,200,000 in 19S9, which include medical t substantial number of VEROP retirees, benefits of 54.900,000 in 1991,54,100,000 in 1990 and Net pension and VEROP costs (credits) for 1989 $2,900 000 in 1989.
through 1991 were comprised of the following The Cempany expects to adopt the new standard components: g yy prospectively effective January 1,1993. We plan to amortire the discounted present value of the ( * *"" ' d""d
- accumalated postretirement benefit obligation to rension costs (creditsp Service cost for benehts earned expense over a twetYty-year period The Ccmpany has dunng the penod . , . $ 9 $ 10 $ 10 engaged actuaries who have made a preliminary Int tc on projected beneht Nview' 1990 h Nd m n #ng'
' Actual return on plan esets . (19) 3 (Sc) review. the accurnulaid postretirement bene 6t Net amortization and deferral. 20 5 1 0) 9 obligation as of Deet mber 31, 1991, measured in Net pension credits , (15) (11; (12) accordance with the new standard, is estimated in the ' VEROP cost. -- 8 - range of $80,000,000 to $115,000,000. Had the new - sentement pin -
(V) - standard been adopted in 1991, the preliminary study Net credits. indicated that the aditional postretirement bene 6t
$(15) $(39) $(12) cost m 1991 would have been m the range of $7.500.000 to $13,500,000 preta). We believe the The following table presents a reconciliation of the effect of actual adoptmo in 1993 may be similar, fu ed status of the plan at December 31,1991 and although it could be sig heantly different because of December 31, changes in health care costs, the assumed health care mi mo cost trend rate, work force demographics, interest (mhns or rates, or plan provisms between now and 1993.
Actuarial present ydre of benent d rs) The Company does not know what action the obngtiont PUCO may take vnth respect to these incremental vested benehtm . $ 209 $m costs. However, we believe the PUCO will either Nonvested benehts . 23 18 allow a means of current recovery of such incremental Accumulated benent obhution 232 247 costs or provide for deferral of such costs until , Effect of future compensation recovered in ratew We do not expect adoption of the
* * ' ' 50 new standard to have a material adverse effect on our huancial condition or results of operations.
rian a a$ r et u Surfus of plan assets over projected (9) GUARANTEES beneht obhption . 274 205 Unrecognized net pin due to variar:e Under two long-term cop purchase arrangements, between assuniptions and expenenca . (137) (77) the Company has guaranteed certain loan and lease Unrecognized prior senice rost . , 8 8 obligations of two mming companies. One of these Transition asset at January 1,1987 arrangements requires payments to the mining twng anwruied over 19 years . ,jM) (94) Net prepaid pen
- ion cost -
Q t 42 e pense's (as advance payments for coal) when the 18
- , .~ . ~ - - - . - . . .~ , - . .~--- - - - - - - . ~ _ - - ~
mines are idle for reasons beyond the control of the - The annualized cumulative preferred dividend i'
' mining company. At December 31,1991lafter giving requirement as of December 31s 1991 is $41,000,000._ ; effect to a rehnancing completed on Janmry 2,1992 The preferred dividend rates on the Company's-Jby one of the mining companies, the principal amount Series L M and P fluctuate based on prevailing
- .~ of the mining companies' loan and lease obligations interest rates and market conditions, with' the guaranteed by the Corr.pany was $78,000,000. dividend rates for these issues averaging 8.26%,7.61%
and 6.24% respectively, in 1991.
< (10) CAplTAllZATION Preference stock authorized for the Company is 3,000,000 shares without par value. No preference ~
(a) CAPITAL STOCK TRANSACTIONS . shares are currently outstanding. Preferred and preference stock shares sold and retired There are no restrictions on the Company's ability _ during the three years ended December 31,1991 are to issue preferred or preference stock.
~ ' listed in the following table. _ With respect to dividend and liquidation rights, the tw1_ two Iw9 - Company's preferred stock is prior to its preference Ohousands of shares) Stock and common stock, and its preference stock is Cumulative treferred and p,,fy,,nc, 3,,yg 3,3j,y, io prior to its common stock.
l7 h,"jsf.""#" (d) !.ONG-TERM DEBT AND OTHER s 9130 se,sn n. 75 - _. BORROWING ARFANGEMENTS ,
' 8sro series R . . 50 - - -
Long term debt, less current maturities, was as
. Preferred Retirements;_ follows; $ 7.35 Series C . . (10) (10) (10) Actual or Average Detenber 3tc 88.00 Senes E .4 . . (3) (3) (3) 75.00 Series F , Y'8' I M'tunty Interest Rate IW1 1940 _
(2) - (1) 80.00 Serio G. . -
-(1) (2) (thourands of dobrs) 145.00 Senes 11; ,
(14) (4) First mortgage bonds: 145.00 Senes 1 (14) (4) (4) 1992, 15.25 % 5 - 5 20Ak) 11330 Senes K . (10) - - 1992. . . 1038 - 40,000 (100) - - 1992 . 13.75 - - 4,334-. Adiustable Series M - . . .
~ Pieference Retirements 1993. 3.875 30 000 .0,000 5 7730 Series t ,
(6) 1993.. 835 50,000 50.000 Net Change. . g-2) (30) 1993. . . , . 13.75- 43M 1334 (14) 25,000 25,000 1994. , 4375 1994. _ 13.73 4,334 4,334 (b) EQUITY DISTRIBUTION RESTRICTIONS 199; . . 13.75 4334 4,334 At December 31,1991; consolidated retained earnings 1995... . . . 7.00 750 750 were $578,206.000. The retained eamings were I9 % '
' ' I P
4334 - 4034 available for the declaration of dividends on the- 001 , l1 M M Company's preferred and common shares. All of the 2002-2006 . . 9.27 140.076 140',076 Company's common shares are held by Centerior 2007-2011 8.66 335350 335350 Energy. 2012 2016 . . 8.97 439,085 439,08' Any financing by the Company of any of its 2017 2021 . - 8.59 567,880 - 567,880 nonutility affiliates requires PUCO authorization 2022-2023 . / 78 174300 174300 -
. unless the financing is made in connection with - _
1,841,947 1,906,281
- transactions in the ordinary course of the Company's - Term bank loans due.
public utilities business operatior s in which one 1993 1996 - . 7.96 81,200 114,400 company acts on behalf of ano*her. Medium term notes due 1993-2021 9.17 700.000 - 550.000 , PoHutfor, control notes
> (c) CUMULATIVE PREFERRED AND due 1993-2012 . 6 30 53,750 54,260 . PREFERENCE STOCK ..
+ - Other - net . . 5.908 ' 6.970 ,
- ,' = Amounts to be paid for preferred stock which must be L'
l redeemed during the next five years are $14,000,000 in 1992; $29,000,000 in 1993, $29,000,000 in 1994, [b $2481805 $2A31'911 e - $40,000,000 in 1995 and $30,000,000 in'1996. Long term debt matures during the next five years The annual mandatory redemption provisions are as follows: $79,000,000 in 1992, $271,000,000 in 1993; as lfollows: $42,000,000 in - 1994, $206,000,000 in 1995 and '
# $151,000,000 in 1996.
To IE . Beginning $";' Redeemed in -~ ~-Share -During the 1989-1991 penod, the Company issued Preferrec $700,000,000 aggregate principal amount of secured 5 7.35 Senes C4 10.000 1984 .$ 100 medium term notes. The notes are secured by first
' 88.00 Series E ; . 3,000 198: 1.000 mortgage bonds The Company has arranged to refund in July 1992
' 9I n . 9150 Series Q. . 10.714. 1995- t jXy $78,700,000 pnncipal amount of a public authority's 8820 Senes R ; 50,000 -200!* 1,000 tax exempt bonds due 2012 and having a 13%% _ - - - - -
- All outstanding shares to be redeemed December 1,2001. interest rate with the proceeds from the sale in July
,- 19-L . _, .
. _. . _ _ . .- _ _. _ _ _ _ _ _ _ _ _ . _ _ s._ __
1992 of an equal principal amount of the authority's Short-term borrowmg capacity authorized by the bonds due 2013 and having an effective interest cost' - PUCO is $300,000,000 for the Company. The - of 8.25%. The Company's first mortgage bonds Company and Toledo Edison have been authorized collaterally secure both issues. The PUCO authorized by the PUCO to borrow from each other on a short-the Company to record interest expense equal to a term basis. , blend of the higher rate on the outstanding bonds Most borrowing arrangements unc'er the short-
.with the lower rate on the new bonds for an interest term bank lines of credit require a fee of 0.25% per .
expense reduction of $1,000,000 in 1990, $3,400,000 in year .o be paid on any unused portion of the 1:nes of -I
- 1991 and approximately $3,000,000 in 1992. credit. For those banks without fee requirements.- the i The Company's mortgage constitutes a direct frst average daily cash balance in the Company's bank lien on substantially all property owned and accounts sathfied informal compensating balance franchises held by the Campsny. Excluded from thc arrangements. _ _
lienf among other things, are cash, sesurit:es, z At December 31, 1991, the Company liad no -
- accounts receivable, fuel and supplies. commercial paper outstanding. If comme.cial paper n Additional hrst mor: gage bonds may be issued by were outstanding, it would be backeJ by at least an l the Company under its mortgage on the basis of _ equal amount of unused bank lines of credit.
- bondabla property additions, cash or substitution for refundable first mortgage bonds. The issuance of additional hrst mortgage bonds on the basis of (12) CIIANGES IN ACCOUNTING FOR
, property additions is limited by two provisions of our NUCLEAR PLANT DEPRECIATION mortgage. One relates to the amount of bondable
' property available and the other to earnings coverage in June 1991, the Company changed the method used of interest on the bonds. Under the more restrictive to accrue nuclear plant depreciation from the units-of these prov:sions (currently, the amount of of-production method to the straight-line method bondable property available), we would have been retroactive to January 1,1991. The good performance permitted to issue approximately $335,000,000 o' f of the nuclear generating units over the past several bonds based upon available bondable property at years had resulted in units-of-production December 31,1991. The Company also would have depreciation expense being significantly higher than - been permitted to issue approximately $214,000,000 of the amount implicit in current electric rates. The bonds based upon refundable bonds at December 31, straight-line method better matches revenue and E 1991. If Perry Unit 2 had been canceled and written evense, tends to levelize per" - depreciation .
l ._ off as of December 31,1991, the Company would not - expense for nuclear plant and ~ .nore consistent with F have been permitted to issue any bonds based upon industry practice. available bondable property, but would have been The PUCO approved the change and authorized permitted to issue approximately $214,000,000 of the Company to accrue depreciation for its three bonds based upon refundable bonds. operating nuclear generating units at an accrual rate of An agreement relating to letter of creca issued in about 3% of plant investment based upon the units' connection _with the sale and leaseback of Beaver __ forty-year operating licenses from the NRC. This Valley Unit 2 (as amended in 1989) contains several change in method decreased 1991 depreciation financial covenants affecting the Company, Toledo expense $21,997,000 and increased 1991 net income
. Edison and Centerior Energy. Among these are $16,957,000 het of $5 040,000 of income taxes) from covenants relating to earnings coverage ratios and what they otherwise would have been.
capitalization ratios The Company, Tokdo Edison - In December 1991, the PUCO approved a and Centeiior Energy are in compliance with these reduction in the straight-line depreciation accrual covenant provisionsdVe believe these covenants can rate from about 3% to 2.5% for each of the three
; still be: met in- the event of. a write-off of the operating nuclear units retroactive to January 1, Company's and Toledo Edison's investments in Perry 1991 The Company believes the lower depreci-Unit 2, barring unforeseen circumstances. ation accrual rate is appropriate and reduces combined annual depreciation expense to a level more closely aligned with the total amount ~ (11) SHORT-TERM ' BORROWING , - ARRANGEMENTS . currently being recovered in customers' rates for these units. This change in rate decreased 1991 The Company had $152,000.000 of bank lines of credit depreciation expense $18,309.000 and increased '
arrangements at December 31; 1991. This included a 1991 net income $14,006.000 (net of
$30,000,000 line of credit whkh provided a $4,303,000 cf income taxes) from what they otherwise , $5,000,000 line of credit to be available to the Service would have been; ~ Company if unused by the Company' There were no . Cepreciation expense recorded in prior years was borrowings under these bank credit arrangements at not affected. Current electric rates were also December 31; 1991. unaffected by the PUCO orders.
4
.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 Ended Mart-h 31, June 30, Sept 30. Dec. 31. (thousands of dollars)
-1991.
Operating Revenues. . 4 . . . . . . . .. ... . 5431,087 $455,614 $518,lt6 $420,932 Operating income. . . . . . . . . . . . ., . 90,340 102,283 139,400 83,667
. Net income 4 . . . . . .. . 37,894 52,088 94,845 61,331 Earnings Available for Common Stock . . 29,197 43.402 85,874 51,828 '1990 . Operatmg Pevenues. . . . . . . $387,241 $403,150 $495,337 $ 403,431 Operating income . . . . . . . .
76,273 57,599 130,348 82,161 Net income ..,. . . . . 43,831 43,019 95,005 60.473 Earnings Available for Common Stock . . . . 34,280 33,682 86,043 51,641 Operating revenues for the first three quarters of 1991 and the four quarters of 1990 were restated to comply with current FERC revenue reporting requirements, as discussed m the Summaiy of Signihcant Accounting Policies. This restatement had no effect on earnings 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 f 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 of
$18,309,000 to reduce depreciation expense for the year for the change in the nudear plant straight line - depreciation rate to 2.5% (see Summary of Signincant Accounting Policies and Note 12) and $29,019,000 to increase phase-in carrying charges for the adjustment to 1991 cost deferrals (see Note 6). The total of these adjustments increased quarterly earnings by $33,159.000 Earnings for the quarter ended June 30,1990 were increased as a result of federal income tax expense adjustments associated with deferred investment tax credits relating to the 1988 write-off of nuclear plant investments. See Note 7. The adjustments increased quarterly earnings by $18,391,000.
Earnings for the quarter ended December 31,-1990 were increased as a result of year-end adjustments of
$18.030,000 to reduce depreciation expense for the year for the change in depreciation rats for nonnuclear and - Davis-Besse property (see Summary of Significant Accounting Policies), $24,102,000 to increase phase-in carrying charges for the adPstment to 1990 cost defe rals (see Note 6) and $8,207,000 to reduce federal income Ltax expense (see Note 7). The total of these adjustments increased quarterly earnings by $37,000,000.
l l I y l-21
Financial and Statistical Review .. . ... ... ..... . . . . ... .. . .. .
......-.4 ........ .... .... .... . .. ... .. . . - Operating Revenues (thousands of dollars) ,
Total Total Total Steam Operaung irar Rendental Commerctal Indastrul Other Retad Wimicule(s) Flectnc Heatmg Revermes j 1991. . $S47 433 539 795 546 698 116 826 1 750 752 74 986 1 825 738 -
$1825 738 19 W , 495 158' 494 370 ~ 543 813 122 701 1656 N2 . 35 117 - 1 691 159 -
1691 l$9 1989.' . . 469 803 452 911 519 854 117 220 1 559 788 74 439 1 634 227 - 1 634 227-1988. 436 413 ' 395 165 476 063 59 804 1 367 445 85 756 1 453 201 - 1 453 201 . 1987 428 786 389 297 470 661 12 322 - 13012o6 13 416 .1 314 682 13 371 1 328 051 ,
'1981.. . 310 409 - 263 608 386 805 28 350 989 172 27 867 '1 017 039 12 1 % 1 029 235 -
Operating Expenses (thousands of dollars) Othre Fuel & Operanon Deprenatwn Ta m. Phame-in & lederal Total Purchased & & Other Than Pre phaein income Operanns . Year . Power (s) Maintenance Amortuanon iTr Duerred. Net Tam L=penn 1991.,, $455 055 469 530 170 571(b) 215 905 (6 B40) 105 824 $1410 048 - 1990. 412 397 514 166 169 526 197 454 (23 884) 75 099 1 344 778 - 1989. , 427 108 508 151 187 614 183 120 (42 467) 85 275 1 348 801 1988. . 308 637 524 478 189 731 184 813 (148 39e) 94 6M i 197 917 1987. - 3M 328 425 938 148 918 146 407 (47 826) 83 179 1 090 944 1981. . 367 715- 224 249 85 294 91 648 - 67 575 83e 531 Income (thousands of dollars) federal Other - Income income income & Tam- Before Operating AFUDC- Deductions. Carryms Credit Interest Year income Equity Net Charges (Espense) Charges 1991; .. . . $415 690 7 852 5 809 87 615 (24 311) $492 655 i 1990. 346 381 4 531 . 1 836 161 598 (20 401) 493 945 1989. 285 426 8 362 7 934 234 7h8 (55 o99) 4R0 811 1968. . 255 284 8 052 - (243 297)(r) 224 585 53 162 297 786 1987.. . 237 109 17' 170 (41040) 24 610 79 60o 476 555 1981. , 192 704 . 46 970 10 617 - 16 125 268 416 Income (thousands of dollars) Income
' Behwe Cumulative Cumulatne Preferred & Estnmgs Effect of an fitect of an e retererwe Avadable for -
Debt AFUDC- Accounnng Accounting Net Suwk Common - Year Interest Debt Change Change income Dwktends Stock , 1991.. . . . $250 799 (4 302) 246 158 - 246 153 35 857 $210 301 ,
.1990, ..,. 254 936 (3 319) -212 328 -
242 328 36 682 205 646 1989. ' 238 042 (7 450) -250 219 - 250 219 40 227 209 992-
;1988. .. 228 879 (4 304) 73 21I . 21874(d) 95 085 42 506 52 579 .'1987 . . 249 958 (82 985) . 304 582 -
309 582 43 386 26619f, 1981.. .. 14e 712 (34010) 155 734 - 155 734 34 917 - 120 817
! (s) Wholesale revenues fuel and purchased power, wholesale electric sales and purchased power amounts are restated for 1990 and prior years to reflect a change ir, reporting of bulk power sales transacu ' a in accordance with FERC requirements, - (hl In 1991, a change in accounting for nuclear plant depreciation , adopted, changing from the units-of-production method to the straight-line - metnod at 4 2.5% rate.
(c) Includes write-off of nuclear costs in the amount of $257,4n0.000 in 1988.
. (d) In 1968. a change in the n.ethod of accounting for unbilled revenues was adopted. -22
THF ClLVELAND llECTRIC 11 L UMINMING COMPANY AND buBSil)lARIES Electric Saks (millions of KWH) Electric Customers (year end) Residential Usage Average Average A ver ante Pni e Revenue indetnal kWH Per Per Per har Res.dential Commercul Industnal h%lesale(d) Orbet Total Reude ntial Commercut & Other lotal C usromer kWH Customer 1991. 4 940 5 493 8 017 2 442 565 21 457 667 495 70 405 8 393 746 298 7 170 11 ON $797.25 INO . 4 716 5 234 8 551 1 N7 463 20 571 665 000 68 700 8 351 742 051 6 667 10 53 723 15 1989 4 789 5 208 8 780 2 132 Tl 21 410 660 766 68 OM 8 329 707 145 7 025 9 kl 691 83 ' 1981 4 852 4 u9S 9 013 749 s2 20 OM 657 592 66t*> 8 20.3 732 401 7 152 8 49 M6 35
, 1987. 4 682 4 818 8 396 183 4S5 18 SM 654 021 M 978 8 155 727 154 6 427 4 16 h37.46 1981. 4 376 4 178 8 250 714 3W 17 947 642 925 60 714 764 711 325 6 548 7.12 46631 e
Load (MW & S.) Energy (millions of KWH) Fuel oPerat* Capacets i ffiaenry - at Time Peak Capaary load Companv Generated Purt ha+ed f uel Corit B lU l'er pae d reak tad Marcin f actor twst! Nudear T otal Pow er t 6t l Total Per kWH kW){ 1991 4 695 3 886 172 % 618% 13 193 7 451 20 644 2 144 22 785 1.494 10 503 - 1990. 4 M5 3 778 19 4 u3 3 15 5"9 5 262 20 841 %4 21 805 132 10 417 1989 4 536 3 866 14 8 h5.2 14 9tM 6 'C0 21 SV 126N 22 60n 1.49 10 M6 1988 4 46S(r) 4 067 90 59.8 15 756 4 4RO 20 236 1 M9 21 595 1 59 10 517 1987 4 257 3 ~22 12.6 62 5 14 978 3 689 18 667 1 376 20 043 1 56 10 5 % 1981, 4 667 3 447 26.1 621 15 225 2 255 17 480 1 731 19 2nl 1.85 10 582 Investment (thousands of dollars) Constna tion hork in lotal Utditv Accurnulated Progrew N udear Property, Utdtry Plant in Deprenation & Net & Perry Fuel anJ Mant and hant Total N ear Serme Amorniarmn Mant Unit 2 Other Iqugwg Additions A wts 1991 56 195 945 1 564 931 4 630 961 669 696 304 9o3 $5 e05 620 5150 005 $8 066 580 19WL 6 032 336 1 398 758 4 634 078 6% 6% 344 252 5 675 026 th4 619 7 945 157 1989 5 869 283 1 258 405 4 610 378 726 933 354 374 5 col M5 143 M98 7 670 405 1988. 5 704 746 1081 758 462299 763 628 340 573 5 767 189 ?!l 0o0 7 4 % 198 1987.. 5 787 603 905 297 4 882 306 633 433 3A9 281 5 @ 020 586 947 7 089 026 1981. 2 624 438 621 353 2 003 085 986 457 122 231(f) 3 til 773 409 277 3 514 457 Capitalization (thousands of dollars & S.) Prerred & Preference Presened Stoik without Stod. with Mandatory Mandatory Redernption Year Common stak E. quay Redernptmn Prouuons Promen+ 1 ort erm i Debt T otal 1991 51 897 401 38% 26S 368 5% 217 334 4% 2 682 805 53 % $5 065 903 1990 18M 258 38 171 162 3 217 334 4 2 631 911 55 4 464 665 1989 I 828 074 40 212 362 4 217 334 5 2 316 379 51 4 594 149 1988, 1 780 408 40 232 62o 5 217 334 5 2 260 170 50 4 490 538 1987. 1 925 719 41 270 M5 6 217 334 4 2 317 957 49 4 731 655 1981. 1 002 206 36 323 000 12 95 071 4 1 328 404 48 2 750 681 (t) Capaaty data re0erts extended generating unit outage for renovation and trnprovements. (f! Restated for effects ef capitalization of nudear fuel lease and hnancing arrangements pursuant to Staternent of Financial Accounting Standards 71 23
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I_hivestor111]Onllatio11 n .. .,.............'.................................................. .................
- $ HARE OWNER INFORMATION, i INQUIRIES L _ . __.
INDEPENDENT ACCOUNTANTS ( Questions regarding the Company or stock . Arthur Andersen & Co. . accounts should be directed to Share Owner 1717 East Ninth S*reet
- Services at Centerior Energy Corporation at the Cleveland, OH 44114
' ~address and telephone numbers indicated below FORM 104,
- for the Stock Transfer Agent.
The Company will furnish to share owners, ' . Please have your account nu mber ready without charge, a copy of its most recent annual .
-when calhng. i report to the Securities and Exchange = STOCKThANSFER AGENT Commission. Requests should be directed to 1
_.Centerior Energy Corporation the Secretary of Centerior Energy Corporation Shire Owner Services at the address of the Stock Transfer Agent. BONDHOLDER INFOR; i \ TION
~' 1 el d i 44101 4661 <
BOND TRUSTEE
- In Cleveland area 642-6900 or 447-2400 Morgan Guaranty Trust Company of New York Outside Cleveland area 1-800-433-7794 CorporateTrust Administration 1 Stock transfers may be presented at - 60 Wall Street LPNC Trust Company of New York New York, NY 10260 40 Broad Street, Fifth Floor Telephone Number (212) 235-0602 New York, NY 10004 BOND PAYING AGENT -
STOCK REGISTRAR ~ Inquiries regarding interest payments should be JAmeritrust Company National Association' directed 't o either Manufacturers Hanover Trust
= CorporateTrust Division Company or Morgan Guaranty Trust Company -
w rk for the series of bonds for which be 1 d H 44101, each acts as paying agent as noted below._ . =- EXCHANGE LISTINGS - Co-paying agerits for
- Preferred Stock; Series A, B and L are listed.on 37.'% Series due 1993 4\% Series due 1994 '
the New York Stock Exchange.
# '# " rs Hanover Trust Company ~ DIVIDEND REINVESTMENT AND STOCK ."Il St t . PURCHASE PLAN ANDINDIVIDUAl.
New York. NY 10015
. RETIREMENT ACCOUNT (IRA),
LCenterior Energy Corporation has a Dividend Ameritrust Company National Association Reinvestment' arid Stock Purchase Plan which 900 Euclid Avenue f provides Cleveland Electric share owners of - Cleveland, OH 44114 record and other investors a convenient means - Paying agent for all other series of bonds-of purchasmg shares of Centerior common stock Morgan Guaranty Trust Company of New Wrk' by investing all or a part of their quarterly - 60 Wall Street i dividends as well as making cash investments. New York, NY 10260 = In addition, individuals may establish an m Individual Retirement Account (IRA) which
- invests in Centerior common stock through the Plan. Information relating to the Plan and the ,
IRA may be obtained from Centerior Share Owner Services; l
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The Cleveland Electric illuminating Company g,,1 ym P.O. Box 5000 usluSTACE Cleveland, OH 44101 l ^ iI g g.'t t n ['1 RMIT NO &N D E 1
~
i f 1991 Annual m__{go{t__ , , ,,,, ... .. . ... . - O, u E O e== Q ma O m mE O> M 1 E
.. ... -. _ . . . _ . ~ . _ -.~_. - .' Contents ;
d.f - About Toledo Edison .s 1. [ ;- 1j. i Directors 1 - 1 Offices - -
- 2 ,- 'eport of Independent Public Accountants [ ~
3 >ammarp of Significant Accounting Iblicies 5: Management's Financial Analysis, -[ Financial Statements and Notes - ,
-- 22 Financial and Statistical Review 24 InvestorInformation ,
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4 e
.s.- _.
1
-m Mbout Toledo Edison . Directors-fThe Company, a' wholly owned subsidiary of RArt J. Tarlingf President and Chief Operating 1 Centenor Energy Corporation. provides electric Officer of Centerior Energy Corporation and Teervice to about 760.000 people in a 2,500-square mile Centerior Service Company, area of northwestern Ohio, including the City of
- Toledo. The Company also provides electne energy IJ arlt Mauvans" Vice President and Chief Rnancial Officer of the Company and The Cleveland at wholesale to 13 municipally owned distribution -, Electric liluminating Company and Ewcutw.e Vi.e
= systems and one rural electn.c cooperatw.e distribution President of Centerior Energy Corporation gnd system in its service area. The Company s 2,600 -
Centerior Service Company. employees serve about 2S5,000 customers. Richard A. Afiller."* Chairman and Chief Ewcutive Officer of Centerior Energy Corporation and , s Cenwrior Service Compariy.
. - Execnfive Off. ices Lyman C. Phillips, Chairman and Chief Ewcutive TheToledo Edison Company. Ofbcer of the Company, President and Chic! . 300 Madison Avenue Ewcutive Officer of The Clewland Electric LToledo, OH 43652-0001 Illuminating Company and Ewcutive Vice Pres! dent -(4191249-5000 ' of Centerior Energy Corporation and Centnior Service Company. .
E Donald H. Saun.fers, President of the Company and - Vice President of Centerior Service Company.
*Eleded Chairman,1%ident and Chief Ewcutive Officer of Centerior I.nergy Corpration and Centerior bervke Company effective March 1.19% ' "Dected Director of the Company and The Ciculand Dectric illummating Cumpmy ettect! v March 1.1W2. "* Retired from these capaateri etfectiw March 1.1W2 Officers Chairman and Chief Executive Officer . . . . , Lyman C. Phillips President . . . . . .. . . . .DonaldIL Saunders :,
Vice President & Chief Financial Officer . . . . . .Edgarlt Afangans Vice President . . . . . ... ... . Fred J. lange, Jr.
- Controller . ,. . . . .Thul G, Busly Treasurer . . . . . . . ...... . Gary M. Hawkinson Secretary . . . . ...... .. ....E.Lylelbrin' .-9 1
4
ARTHUR Tu the Sharc Owners of ANDERSEN The Toledo Edison Company: Q(j) We have audited the accompanying balance sheet and In our opicion, the f nancial statements referred to statement of eumulative preferred stock of The above present fairly, in all material respects, the Tokdo Edison Company (a wholly owned subsidiary fin mcial ; sition of The Toledo Edison Company as of Centerior Energy Corporation) as of December 31, of December 31,1991 and 19% and the results ofits 1091 and 1990. and the related statements of income, eperations and its cash Gows for each of the three retained earnings and cash !!ows for each of the three years in the period ended December 31,1991, in , years in the period ended Deceinber 31,1991. Ther,e conformity with generally accepted accounting financial statements are the fesponsibihty of the principles. Company's management. Our respc.nsibility is to As discussed further in the Summary of Significant express an opinion on these fmancial 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, retroactive to January 1,1991.
genezally accepted auditing standards. Those As discussed further in Note 3(c), the future of standards require 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 1983. Various options are being fmancial statements are free of material misstatement. considered, including resuming construction, An audit includes examining, on a test basis, converting the unit to a nonnuclear dcrign, 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 cancehng the unit. Management can give no assurance assessing the accounting principles used and when, if even 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. We believe that our audih provide a
- reasonable basis for our opinion.
Cleveland, Ohio Ib , February 14,1992 e 2
i Surntnary of..Signif.icant Accounting Policies
.. . . ... . .. . - ~. .. . ... -GENERAL purchased power transactions and reported as part . The Toledo Edison Companv (Company) is an of fuel and purchased power expense. The amounts electric utility and a wholly ' owned subsidiary of f r prior years have also been reclassified to conform with current reporting requirements. See Note 13.
Centerior Energy Corporation (Centerior Energy). 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 Utilities Commission of Ohio (PUCO). As a rate.
- regulated utility, the Cotnpany is sabject to Statement on inventory usue. The cost of nuclear fuel, of Irmancial Accounting Standards 7i 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 c
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 (Duquest.e), 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 PIIASE-IN AND PIIASE-IN DEFERRALS constructed and operate generation and transmission OF OPERATING EXPENSES AND facilities for the use of the CAPCO companies. CARRYING CilARGES Cleveland Electric is also a wholly owned subsidiary of Centerior Energy. The PUCO authorized the Company to record, as
# 8"' '## P"' "" 8 "* E"" ** ""
RELATED PARTY TRANSACTIONS carrying charges related to Perry 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 n-service dates in 1987 through December busmess opera ions. 1988. Amortization and recovery of these deferrals The Company's transactions with Cleveland (called pre. phase-in deferrals) began in January 1989 Electric are primarily for firm power, mterchange n accordance with the January 1989 PUCO rate order power, transmission line rentals and tomtly owned discussed in Note 6. The amortizations will continue po vezr plant operations and construction. See Notes 1 over the lives of the related property. As discusseo in Note 6, the January 1989 PUCO Centerior Service Company (Service Company), rate or the third wholly mmed subsidiary of Centerior phasemger planfor theCompany,s for the Companyinvestments mcluded m an approved ra Energy, provides management, financial, Perry Unit 1 and Beaver Valley Unit 2. On January 1, adninistrative, engineering, legal and other services at 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 561,000,000,549,000,000 '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 aferrals (called phase-in deferrals) will be recovered oy 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 J. amotmt of unbilled revenues for kilowatt-hour sales property, plant and equipment was depreciated on a rendered in the current month tut 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-power. It is reviewcd and adjusted semiannually in a aserage depreciaNe utility plant in service was 3A% PUCO proceeding. in 1991, 3.3% in 1990 and 3.6% in 1989. The rate Operating revenues include certain wholesale declined in 1999 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 netted with property. See Note 13. 3 -
r in 1990, the Nuclear Regulctory Commission DEFERRED GAIN AND LOSS FROM -
- (NRC) approved a six-year extension of the operating SALES OF UTILITY PLANT license for the Davis-Be.sse Nuclear Power Station (Davis-Besse). The PUCO approved a change in the The Company entered into sale and leaseback unitsiof-production depreciation rate for Davis- transactions in 1987 for the coal-hred Bruce hiansfield Besse, effective January 1,1990, which recognized the Generating Plant (htansfield 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 hiansheld 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 rnethod 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 recorded as other ,
operating nuclear units retroactive to January 1,1991. operation and maintenance expense. See Notes 12 and 13. The Company uses external funding of future INTEREST CIIARGES decommissioning costs for its opercting nuclear units pursuant to a PUCO order. Cash contributions are Debt interest reported in the income Statement does made to the funds on a straigb' line basis over the not include mterest on nuclear fuel obligations. remaining licensing 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 amortized over 'It is expected that increases in the cost estimates will the life of the new debt issue when the proceeds 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 EQUIPh1ENT approximately $4,000,000 annually. The present funding requirements for Beaver Valley Unit 2 also Property, plant and equipment are stated at original satisfy a similar commitment made as part of the sale e st less any amounts ordered by the PUCO to be and leaseback transaction discussed in Note 2. written off. Included in the cost of construction are items such as related payroll taxes, pensions. fringe benents, 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 finance 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 11.45% in 1989.- differences are rttributable to property-related timing Maintenance and repairs are charged to expense as differences that the PUCO used to reduce prior years' incurred. 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. Smce the property retired plus removal costs, after deducting - F - 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 ataunt 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 pla.e over the years' financial statements to make them comparable
':ves of the related assets, with the 1991 hnancial statements and consistent Investment tax sets are deferred and 'mortized with current reporting requirements. These include over the estirned lives of the applicable property. reclassifications related to certain wholesale power The amortation is reported as a reduction of sales revenues as discussed previously under - /.epreciation expense under the liability method. " Revenues" and accumulated deferred rents as See Note 7. discussed in Note 2. ~4
Management's Financial Analysis RESULTS OF OPERATIONS
. related costs in rates, we have requested PUCO Decrtucw approval to accrue post in service carrying costs and ;The January 1989 PUCO rate order for the Company, defer depreciation for facilities that are in service but i as discussed 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 from the 1988 recommendation of the Company, Cleveland Electric levels. However, as discussed in the first 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 earnings because gains in suught to secure an interim resolution of then-revenues from the higher rates and assumed sales pending accounting applications in 1991 and to . growth are initially offset by a corresponding ott.blish a framework for resolving accounting issues reduction in the deferral of nuclear plant operating and related matters on a longer-term basis (i.e.,1902-exp nses and carrying charges and are subsequently 1995). As part of this joint recommendation, the offset 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 expenditures to $1,050.000,000, factors that exerted a negative influence on earnings in exclusive of cor.ipliance costs related to the Clean Air 1991 and will continue to present signincant earnings Act Amendments of 1990 (Clean Air Act). Other challeng% in 1992 and beyond. One such factor is operation and maintenance expenses and capital related to facihties placed in service 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 facing the challenge of competitive forces, including accounting practices. This effort, with the participation ] 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 hnancial 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 agrced not with certain large customers. Competitive forces also to seek any base rate increase that would become , prompted us to implement rate reductions in 1991 for effective before 1993. 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 earnings are the economic recession, the effect of service territory, a challenge intensified by municipal
- inflation and increases in taxes, other than federal access to low-cost power currently available on the i income taxes, wholesale market. As part of our competitive The Company has taken several steps to counter strategy, we are strengthening programs that
- the adve-se 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 i and maintenance expense- by approximately attract businesses, providing consulting services to $17,600,000 in 199L 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 municipalization initiatives, we are also nuclear plant depreciation expense in 1991 to a level stressing the hnancial risks and uncertainties of , ;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.
efforts to sell power to_ other utilities which, in 1991, Annual sales gro.vth is expected to average j resulted in approximately $3,100,000 of revenues in about 2% for the next several years, contingent on p excess of the cost of providing the power. future economic events. Recognizing the limitations i Despite the positive aspects of the measures imposed by these sales projections and current l discussed above, more must be done to maintain. competitive pressures, we will utilize our best l- 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 ou new capital investment and the effect of delays in recovering new investment sin'e 1988 and inflation. 5
'1991 t s.1990 The maior factor accounting'for the increase in Factors contributing to the 2.8% increase in 1991 base rates and miscellaneous operating revenues was operating revenues are as follows: related to the January 1989 rate order. The PUCO
- Increase approved rate increases for the Company of 9%
Change in Operating Revenues (Decrease) effective in February 1989 and 7% effective in . Baw Rates and hbcellaneom . 520.000,000 February 1990. The associated revenue increase in Sales Volume and Ma, 7.000.000 1990 w'as partially offset by reduced revenues Wholesale Sales. (10tR000) resulting from a 9.1% decrease in total kilowatt hour s a a u 000 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 33% and 0.4%, operating revenues resulted from the January 1989 - respectively, as seasonal temperatures were more PUCO rate order for the Company. The PUCO mod.erate in comparison to the prior year's approved rate incTeases 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 22.1% 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 l resiJential rates by 3% effective in March 1991 and by 1990 for nonnuclear and- Davis-Besse property ! an additional 1% effective in September 1991. See -- - attributable to longer estimated lives and because of. '
- Note 6. Total kilowatt-hour sales increased 3.3% in longer nuclear generating unit refueling and q 1991. Residential and commercial sales increased 4.6% maintenance outages in 1990 than in 1989. Federal i and 4.3%, respectively, as a result of higher usage of income taxes decreased primarily because of a cooling equipment in response to the unusually decrease in pretas operating income. The-warm late spring and summer 1991 temperatures. The decreases in operating expenses were partially ch = commercial sales increase was also influenced by - by an increase in taxes, other than fecinal income e some improvement in the economy for the taxes, resulting from higher property and gross commercial sector, industrial sales declined 2% largely receipts taxes, and by lower operating expense - ' ~
because of the recession. driven slump in the auto. deferrals for Perry Unit I and Beaver Valley Unit 2. glass and metal industries. Other sales increased 8.5% Credits for carrying charges recorded in because of increased sales to wholesale customers. nonoperating income decreased in 1990 because a I 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 I primarily from cost-cutting measures. Offsetting this deductions, net, decreased primarily because of less l
- decrease were an increase in federal income taxes interest income in -1940. These decreases were J because of higher pretax operating income; an partially offset by an increase in federal income tax i 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 pietax nonoperating income and federal and accruals for Pennsylvania tax increases enacted income tax adjustments of 518,810,000 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 refinancings by
. amount amortized in 1990; and lower operating the Company and a lower level of debt outstanding.
E expense deferrals for Perry Unit 1 and Beaver Vallev '
. Unit 2 pursvar4t to the January 1989 PUCO rate . EFFECT OF INFLATION order. Although the rate of inflation has cased in recent Credits -for: carrying charges recorded in vears, we are still affected by even modest inflation nonoperating income decreased in 1991 because a since the regulatory 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 Beaver Valley Unit 2 - and services are not reflected in rates and recovered. '
were recovered in rates. The federal income tax Moreover, regulation allows only the recovery of
- provision related to nonoperating income increased historical costs of plant assets th' rough 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 relatir.g to the 1988 write-off of nuclear plant. Changes in fuel costs do not affect our results of ggg 3 ygg'a operations since those costs are deferred until reflected in the fuel cost recovery factor included in Factors contributing to the 0.3% decrease m. 1990 ' customers' bills.
-operating revenues are as follows:
Increase Chan6e in Operating Revenues (Decreaw) Base Rates and Miscellaneous . - 5 37.000,000 Mes Volurne and Mix. (29,000.000) Wholesale Sales. (10D.E000)
$ (2D R 000) 4 4 6-
a
. Incorne Statement me rottoo nnson comw For the years ended December 31, 1991 1990 1989 (thouunds of doUars)
Operating Recenues (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 amortization . . . . .. . 72,137 72.627 85,057 * ' es, other than federal income tases . . . .... 88,656 79,320 72,123 - Phase-in deferred operating expenses .. . . .. . (5,796) (16,980) (22,535)
Amortization of pre-phase-in deferred costs . .. 6,943 7,196 6,782 Federal income taxes . . . . . 31,767 21,041 37,285 727,077 710,887 723,462 Operating income . . .. ... . .. 1 60,181 152.286 142,161 Nonoperating income Allowance for equity funds used during 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 (21,563) 20,885 61.808 89,830
; income _ _Before Interest Charges. . .. . . . .. .. 181,066 214,094 231,991 Interest Charges - Debt interest .. . . . . 132,399 135,344 144,792 Allowance for borrowed funds used during construction . (946) (2,674) (5.479) 131,453 132,670 139,313 = Net income . .. .. . . . .. .. . 49,613 81,424 92.678 Preferred 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 Earnings For the years ended December 31, 1991 1990 1989 (thouunds of dollars)
Balance at Beginning of Year. .. . . . $ 82,956 $ 99.965 $ 89,614
, . Additions Ne: income . .... ... .. .. . .. . 49,613 81,424 92,678 Deductions Dividends declared: ' Common stock . . . . . .. . (17,831) (73,283) (63,285)
Preferred stock ..... . .. .. . (24,809) (25,145) (19,036) Other. . . . . . . . . .. .. .. . ... .. .. .. .. . (5) (5) (6)
- Net increase (Decrease) . ... . . 6.968 (17,009) 10,351 Balance at End of Year .. . . . $ 89.924 $ 82.956 $ 99,965 The accompanying notes and summary of significant accounting policies are an integral part of these statements.
7
Management's Financial Analysis .... .. . . . . . . . . . . . . . . . . . . _ . . . CAPITAL RESOURCES AND LIQUIDITY _' are expected to be fmanced externally. If economical, in addition to our need for cash for nortral corporate additional securities may be redeemed under optional redempnon provisions. See _ Notes 10(c) and. operations we continue to need cash for an ongoing (d) for information concerning limitations on the
- program of constructing new facilities and modifying issuance of preferred and preference stock and debt.
existing facilities to meet anticipated demand for aelectric service, comply : with' governmental Our capital requirements after 1994 will depend on j the implementation strategy we choose to achieve - !
- regulations and protect the environment. Cash is also needed for the mandatory retirement of securities. cornph,ance with tlae Clean Air Act. Expenditures for <
Over the three-year pe'riod of 1989-1991, these ur plan are estimated to be apprcximately j
- construction and mandatory retirement needs totaled $35,000,000 over the 1992 2001 period. See Note 3(b). i We expect to be aNe to raise cash as needed. The approiimately $450,000,000. ~ 1n addition, we '
exercised various options to redeem and purchase availability and cost of capital to meet our external l approximately $165,000,000 of our securities, fi"d"Ci"8. needs, however, depends upon such factors j As a result of the January 1989 PUCO rate order, as (mancial market conditions and our credit ratings, Current securities ratings for the Company are as l internally generated cash increased in 1989,1990 and I
-1991 from the 1988 level. In addition, we raised ION WS $381,000,000 through security issues and term bank standard Mood y'.
loans during the 1989 1991 period as shown in the Cash Flows statement. During the three-year period, ejg', h yg' 1 First rnortgage tends. BBB- B443 the Company also utilized its short-term borrowing unsecured note.. 88+ cat arrangements (explained in Note 11) to help meet its cash needs. Proceeds from these fmancings were Pn*rna see . BB+ tia2 used to help pay for our construction program. to
- repay portions of short-term debt incurred to fmance A write-off of the Company's investment in Perry
. the construction program, to tetire, redeem and Unit 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 19921994 for the ability to declare dividends, but would not affect cash Company are 5248,000,000 for its construction flow, program and 5241,000,000 for the mandatory The Tax Reform Act of 1956 (1986 Tax Act) redemption of debt and prefem 1 stock. We expect to provided for a 34% income tai rate in 1988 and finance externally about 50% of our total 1992 thereafter, a new alternative minimum tax ( AMT) and construction and mandatory redemption other changes that resulted in increased tax payments requirements of approximately $180,000,000. About and a reduction in cash flow during 1989,1990 and l10-20% of the Company's 1993 and 1994 requirements 1991 because we were subject to the AMT. 2
. 94 8
Cash Flows; rut rouvo wiso.v cowar
............. .......... , ........ . . . . ... ... . . .... ..4 ....... .................
For the years ended December 31, .! 1991 1940 1989
.. . (thousands of dollars) . Cash Flows from Operating Activities (1) .
Net income . . . . . . . . . . . . . . . . .. , , S 49,613 $ 81.424 5 92,678 -
- Adjustments to Reconcile Net income to Cash from Operating Activities: '
Depreciation and amortization . ,. . . .. . . 72,137 72,627 85,057 Deferred federal income taxes . ... .. . 31,522 30,642 79,199
! Investment tax c1redits, net . . . . . .. . 30,206 (17,063) 1.237 Deferred and unbilled revenues . .... . . . . (25,566) (22,658) (42.624)
Deferred fuel . . ... . .. .. ... . .. . 4,198 (433)- 16,259-Carrying charges capitalized ' ,, .... . . .. . (21,986) (43,487) (82,308) Leased nuclear fuel amortization , . . . . . 53,904 37,122 46.408 Deferred operating expenses, net . . . . . . . . .. . ... . 1,147 (9.784) . (15,753) Allowance for equity funds used during construction .. . (1,499) (3,352) (8,568) Amortiza' ion cf reserve for Davis.Besse refund obligations L to customer - . ... ....... . . . . . . .
.(12,655) - Pension settlement gain .., ....... .... .
(6.449) -
. Changes in amounts due from customers and others, net 2,780 (9,433) (4,406)
Changes in inventories .. . .. .. . (7,135) (6,521) 1,890 Changes in accounts payable. .. . .. (12,685) 6.658 -(2,048) Changes in working capital affecting operations . . (25,975) 1.528 (30,713) Other noncash iten.s . . . . . . . .. 14,730 ~ 16.309 16,840-Total Adjustments . ... . . . . . . 115,778 45.706 47,815
- Net Cash f.om Operating Activities . . . . . .. 165,391 127,130 140,493 - Cash Flows from Financing Activities (2)
Bank loans, commercial paper and other short-term debt. . (23,200) 23,200 - Notes payable to affiliates . .' , . . .. . . . 14,200 16,000 - Debt issuesi 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, redemptions and sinking funds. , .. . (178,993) (183,477)- (65,006)' Nuclear fuel lease and trust obligations . . . . -(51,728) (42,947) (39,015) > Dividends paid i . . . . . . . . . ... ., . . (42,639) (98,427) (88,743) (1,001) Premiums, discounts and expenses . . . . . . . . . (1,845) (925)
- Net Cash from Financing Activities . ,. . -(40,496) (205.146) (137,589)-
[ Cash Flows from frivesting Activities (2) Cash applied to construction . ... . . .. (51,393) (80,667) (61,360) Interest capitalized as allowance for borrowed funds used dudng construction . . . . . . ... .. . .. . (946) (2,674) (5,479)
. Loans to affiliates . . . . ..... . . . . (12,000) 114.000 (114,000)
Other cash applied . . . . . . . . . . .. ... . . . (3,J74) (4.178) (3,261) Net. Cash from Investing Activities . . . . . . . . (67,713)- 26.481 (184,100)
; ; Net Change in Cash and Temporary Cash Investments. .... 57,182 (51,585) (181,196). ^
Cdsh and Temporary Cash Intrestments at Beginning of Year . . . 22,107 73,692 254.888 Cash and Temporary Cash investments at End of Year. . . .. $ 79,289 $ 22.107 $_ 73,692 (1). Interest paid (net of amounts capitalized) was $120,000,000. $114,000,000 and $104,000,000 in 1991,1990 and 1989, respectively. Incorrie taxes paid were $9,465,000 and $2.272,000 in 1991 and 1990, respectively. No-income taxes were paid in 1989.
-(2) Increases in nuclear fuel and nuclear fuellease and trust obligations in the Balance Sheet resulting from the noncash capitalizations under nuclear fuel agreements are excluded from this statement. ' The accompanying notes and summary of significant accounting policies are an mtegral part of this statement.
I' I
- i a
9 (
-- , , _ - . , _ - _ _ .~. .
Balance Sheet l Decemlvr 31, 1991 1990 (thousands of dollars) ASSETS-PROPERTY, PLANT AND EQUIPMENT Utility plant in service. . . , .. . $2,692,274 $2,603,883 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 ; . . . .. .. .. . . . . , 342,767 343,685 2,379,501 2.400.470 Nuclear fuel, net of amortization 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 affiliates . . . . 21,917- 29,999 Notes receivable from affihates . . . . . . .. ... ..... .. . 12,000 - Unbilled revenues . ....... . ... . . 21,844 20,166 Materials and suppbes, at average cost . .. . ... .. 36,575 32,666 Feail fuel inventory, at averat;e cost . . , .. 18,804 15,578 Taxes applicable to succeeding years . . . . . . .. . . 66,343 63,375 Other. . . .... . .. . . .. . 2,760 2.473 319,985 249,597
. DEFERRED CHARGES - Amounts due from customers for future federal income taxes. . 4h,199 494,454 Unamortized loss from Beaver Valley Unit 2 sak . . . . 114,174 119,623 ' Unamortized loss on reacquired debt . . . .. . .. . 25,672 27,404 Carrying charges and operating expenses, pre-phase-in . 244,404 252,2 %
Carrying charges and operating expenses, phase in . . . . . 193,099 165,310 Other . . . . . . , . . . . . . .. .. ,, . .. , , 67,514 68,582 1,117,062 1,127,579 Total Assets . .. . .. . . . ... .. $4,014,512 $4,001,518 The accompanying notes and summary of significant accounting policies are an integral part of this statement. 10'
if fi 1011DO ll>lSON CoMl%N) Dnember 31, 1991 19c.0 onouuns or uimi cal'!TAllZATION AND LIAlllLITIES \ CAPITAIJ2ATION Common shares, $5 par value: 60,000,t00 authonted; 39.134 000 outstanding in W91 and 1990. $ 195,687 $ 195.6M7 Premium on capital sicu k . 481,082 481.082 Other paid.in capital . 12!,099 121.059 Retained earnings. . 89.924 82.956 Common stock equity , 8S7,752 8SO.784 l' referred stock With mandatory redemption provisions 63,663 66,328 i Without mandatory redemption provisions 210.000 210 000 1 ongactm debt . . . 1,158.5.".0 1 m7.3.16 2,319,965 2.254 A38 OTHER N0hCLIRRENT LIABILITIES Nuclear fuel lease obligations . 143,145 180,H35 Other. 49,756 48.009 192,901 228344 CURRENT LIABILITIES Current portion of long-term debt and preferred sto(L . 123,476 116,150 Corrent 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 afhliates . 39,538 31,626 Accrued tases . 67,770 96.973 Attrued interest . . . 31,399 31.665 O'her. . . . 16,180 35,113 397.329 453.075 DLTERRED CREDITS Unamortiied investment tax credits . 100729 83,377 Accumulated defened federal income tases 4 577,479 571,233 Reserve for Perry Unit 2 allowance for funds used during construction . . .. . 88,295 ' 295 Unamortized gain from 11ruce Mansheld Plant sale . 227,360 23o/A5 Accumulated det' erred rents for Ilruce Mansheld I'lant and Beaver Valley Unit 2 . . 66,SSS 57.843 Other. . . 36,546 27,578 1.104,317 1.065.161 Total Capitalitation and Liabilities. , . $ 4,014,512 54.001.518 w= = n= == 11
., u . , -. .
zou ,ou vo rie.ou cortesu) SlalC11\Clli Of OllllllIQlitfC PICfCTYCll Sl0Ck iwi s6aie, coneni tw emt+' 31-Outstandmy, Call Pruc 1991 IWO Ohouunds of dollm)
$100 par salue,3,(KK)AK) prefer ed shares authorized and $25 par value, 12,000AK) preferred shares authorized Subject to mandatory sedemption: $100 par $11.00 24,H25 $101 m) $ 2,483 $ 3,483 9.375 , 133,450 103 46 13,345 15,010 25 par 2 81 2.000.000 26R 50,000 50,000 65,828 68,493 Less: Current maturities 2,165 2,165 Total Preferred Stock teith hiandatory Redernption ProPisions $ f 663 y.p.ys Not subject to mandatory redemption. $100 par 5 4.25 160,000 104 625 $ 16,000 $ 16.000 4.56 . 50.000 101.00 5,000 5,00()
4.25 100,000 102.00 10,000 10,000 8.32 100,000 102.46 10,000 10,(KX) 7.76 150,000 102 437 15,000 15,000 7.80 150,000 101.65 15,000 15,(KK) 10.00 190,0(K) 101 00 19,000 19,000 25 par 2.21 1,000,(KK) 25 25 25,000 25AK) 2.365 1.400,000 28 45 35,000 35,060 Series A Adjustable 1,200,000 25.75 30,000 30,000 Series B Adjustable 1,200,000 25.75 30,000 30nK) Tctal Preferred Stock, teithout hiandatory Redernption Provisions y10,000 $210gn) The accompanying notes and summny of signihcant accounting policies are an integral part of this statement. 0 , 4 12
Notes to the Financial Statements (1) I'HOPillTY OWNI D Willi 01111 R Ulill110S AND INVI STOllS lhe CompJny ow f% as a tenant in common with other utilities and those m\ estoth w ho are owy erpartuipants in various sale and leaseba(k tranW tions (I essors), rettain generating umts as hsted btlow, fach ow ner owns an undivided share in the entire unit. Fach owoer has tne right to a percentage of the generating capabihty of each unit equal to its own(rship share. Each utihty owner is obbgated to pay for only its icspectwe share of the construction and operatmg wsts. La4 h ! euor has leased its (ap.aity nghts to a utihty whuh is ob9 gated to pay for
$U(h I essori share of the wnstruttion and operating wsts The Companvi shair of the operatmg wsts of these generating unith is iruluded in the income Statement. I'roperty, plant and eqmpment at December 31, lWI includes the lohowing fauhties owned by the Company as a tenant in wmmon with ether utilities and l euors Ow ner Censtruc tion in Dw ner- sh:e llant Work in Senue ship Mcp l'owtr m l'ropew and Au umulated Generatme Unit Date % ate w ans Mrw %nho sup nded Deptrua non M '.cnia (thousands of dollars)
Dn v. lWe 1977 4 M f>2** 429 Nut trat i M157) $ 13 436 $13On4 l'erry Urut I amj Commun lauhue, luk7 19 41 2M % Ir ar 921301 1 es6 119 374 tWor Valin Urut 2 and Comenon l auhtirs tNote 2) 1947 1 64 13 N uc lea r 16k3# I t9h 2133 (onstrWison buApondCd Perry Umt 2 (Note 3(t )) Unartam 19 ul 240 N ut irar _ ;_ )42]t] _ {l774ta6 SM4 3(7 $31211 (2) UT111TY PLANT sal.E AND LEASEllACK TRANSACTIONS As a result of sale and leaseback transactions Valley Unit 2 lease were 544,556,000 cnd completed in 1957, the Company and Cleveland $72,276.000, respectively. Amounts charged to Liectric are w lessec3 of 18 26% (150 megawatts) of espense in e xcess of the lease payments are now Deaver Valley Unit 2 and 6.5% (51 megawatts),45.9% classihed as accumulated deferred rents on the (358 megawatts) and 44.3b% (355 megawatts) of Balance Sheet. Previously, the cuess was included in Units 1,2 and 3 of the Mansheld Plant, respectively, acwunts payable. all for terms of about 29% years. The Company and Cleveland Ilectric are As m lessee with Cleveland 1:lectric, the Company responsible under these leases for paying all tancs, is also obligated for Cleveland 1:lectric's lease insurance premiums, operation and mamtenan(c costs payments. If Cleveland E lecti;c is unable to make its and all other similar wsts for their interests in the payments under the Mansheld Plant leases, the units sold and leased back. The Company and Company would be obligated to make such payments Cleveland Liectric may incur additional costs in No payments have been made on behall of wnnection with capital improvements to the units. Cleveland Electric to date. The Company and Cleveland Electric have options to Future minimum lease payments under these buy the interests buk at the end of .he leases for the operating leases at December 31,1991 are summarited fair market value at that time or to n new the leases. as follows: Additional lease provisions provide other purchase f or options along with wnditions for mandatory toi the cln riand termination of the leases (and possible repurchase of Par Cm"Pany 11"'"' the leasehold interests) for events of default. These Ohousande of dollars) evens of default include nonco liance with s n ral tw2. 5 litum 5 hiom hnancial covenants affecting the Company, w4 i!!$ num o[ oum Cleveland Electric and Centerior Energy wntained in an agreement relating to a letter of credit issued in , tw lwin ui tm ouw connection with the sale and leaseback of lleaver te wan 2 4mm 1516 M Valley Unit 2, as amended in 1989. See Note 10(d). Total f uture Maumum The Company is selhng 150 megawatts of its traw Pumenn . S un4}w stygm Beaver VaUey Unit 2 leased capacity entitlement to Cleveland Electric. This sale commenced in 1988 and Semiannual lease payments wnform with the we anticipate that it will continue at least until 1998. payment schedule for each lease. Hevenues recorded for this transaction were Rental expense is accrued on a straight line basis $106,584,000 5102,773,000 and $1%127,000 in 1991, over the terms of the leases. The amounts recorded by 1990 and 1989, respectwely. The future minimum the Company in 1991,1990 and 1989 as annual rental lease payments associated with Beaver Valley Unit 2 expense for the Mansheld Plant leases and the Beaver aggregate $1,869,000M 13
(3) CONSTRUCTION AND CONTINGENCIES for $3,3:4mt 1he puuba ,e does not signal any plans to resume :enstrutt on of Perts Umt 2, but rather an (a) CONSTRUCll0N PROGRAM intent to keep the various opnors open. Duquesne
- The estimated cost of th( Company % construttmn had stated that it would not agree to resumption of program for the IW21994 period is $2t0 0WUKK), construction of the unit.
includmg Al'UDC of $12, LOO,000 and escludmg if Perry Unit 2 were to be tanteled, then the nudear fuel. Company's net investment m the unit (less any tas in an agreement approced by the pUCO, the saving) would bas e to be written off. We estimate Company and Cleveland Electnc have agreed to hmit that such a write-ott, based on our investment in this their combined 1992 other operation and unit as of De(ember 31.1991, would have been about maintenance expenws and carital expenditures to $171 AK),0W), af ter tases See Notes 10(b) and (d) 51,050A10EK), n(lush e of wmpliance w+ts telated for a dncussion of potential conscquences of such a to the Clean Air Act. Within this hmitation, capital write-off. espenditures are budgeted at $59AK1AK) for the If a decikion i. made to con ett Perry Unit 2 'o a Company, esdushe of the Clean Air Att comp' ante nonnuclear design in the future, we would espect to costs, wt te-off at that time a portion of our investment for nudear plant constructwn msts not traraferable to the (b) CLEAN AIR LLGISlATK)N nonnudear mnstruction project, The Clean Air Act will require, among other things. Beginning in July 1985, Perry Unit 2 Al UDC was anm ant ieductions in the emission of sulfur diodde credited to a deferred inwmc account until January 1. N .orogen oxides by lossil fueled elettnc 1%8, when the accrual of Al UDC was discontinued. geneating units. The Clean Air Act wdl require that sulfur dioside emissions be reduced in two phases Idl bUEINI.UNU blIIS over a ten-year period. The Comprehenshe Emironmental Response, Centenor Energy has deseloped a comphame Compensation and 1.iabihty Act of 19N) as amended strategy for the Company and Cleveland Electric (Superfund) established programs addressing the which will be submitted to the PUCO for review in (leanup of hazardous w aste disposal sites, emergency April 1992. Centerior Energy will also seek United preparedness and other issues The Company is States Environmental Protection Ag(ncy approval of aware of its potential imolvement in the cleanup of Phase i plans in 1991 Our comphance plan would two harardous waste sites. The Company has require capital expenditures for the Company over the recorded reserves based on estimates of its 1992-2001 period of approstmately $35AK)AK) for proportionate responsibihty for these sites. We beheve nitrogen eside control equipment, emnsion that the ultimate outcome of these matters will not monitoring equipment and plant modihcations in have a matenal adverse effect on our brwncial addition, higher fuel and other operation and (ondition or results of operations maintenance npenses would be incurred. The rate increase associated with the Company's capital (4) NUCl EAR OPER ATIONS AND expenditures and higher npenses would be less than CONTINGENCIES 2% over the ten year period. Our hnal compliance plan will depend upon future f a) OPLRATING NUCLTAR UNils envitonmental regulations and input from the PUCO, The Company's nterests in nudear units may be other regulatory bodies and other mncerned entities. impacted by actnities oi events bevond its control. We believe that Ohio law permits the recovery of Operating nudear generating units'have nperienced compliance costs from customers in rates. unplanned outages or atensmns of scheduled outages because of equipment problems or new W PERRY UNIT 2 regulatory requirements. A .aalor accident at a nuclear Perry Unit 2, indading its share of the mmmon facihty anywhere in tha world could cause the NRC f acilities, is approumately 50% complete. Construction to liniit or' prohibit the operation, construction or
- of Perry Unit 2 was suspended in 1985 pending future licensing of any nudear unit. If one of our nudear con <ideration of various options, including units is taken out of service for an ntended period of resumption of full constructic o with a revised time for any reason, induding an accident at such estimated cost, conversion to a nonnuclear design, unit or any other nudcar facihty, the Company sale of all or pari of our ownership shme, or cannot prellict 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, Cleveland Electric, the company responnNe for construction or maintenance costs. An ntended the construction of Perry Unit 2, applied for a ten- outage of one of our nuclear units coupled with year extension of the construction permit which was unfavorable rate treatment could have a material to npire in November 1991. Under NRC regulations. adverse effect on our hnancial position and results of the construction permit will remain in effect while operations.
the application is pending. We espect the NRC to grant the estension. (b) NUCLEAR INSURANCE in l'ebruary 1992, Cleveland Electric purchased The Pri(e Anderson Act limits the liabihty of the Duquesne's 13 74% ownership share of perry Unit 2 owners of a nuclear power plant to the amount 14
proGded by private insurante and an industry $71JKUAKO, $13 RK1 RKl and $15 W10AOO, reqw tis ely, aswoment plan. In the event of a nuticar incident at as of De(ember 31, 1991, lhe nudear fuel amounts any unh_m the United States resulting in losses in Iman(ed and (apitahred also included interest escess of the level of private insuran(e (sunently cru.r ges incuned by the lessors amounting to
$2RIXXXIjiOO), the Compan)i maximum potential $4 R10100 in 149), $14,RO RK) m 19%) and $19jMkl 000 atsessment under that plan (assuming the other in 1%0.1he estimated future lease amortization CAPCO companies were to contobute their payments bawd on pmietted consumption ne proportionate share of any assessment) would be $45m1000 in lW2. $45.MkuKU in 1993, $40,R4MK4) in $58,503.0(O (plus any inflation adjustment) per 1994, $34.000.RU in 1995 and $35 iKO1xKl in 14%
incident, but is limited to $R8441XK1 per year for cath nuclear incident- (6) IIEGUI A'lOltY MAT 11IIS The CAPCO companies have insutame coverage On January 31,19W, the PL'CO e sued a rate order for damage to property at the Davis-Besse, perry and Beaver Valley sites (including leased fuel and clean- w hi(h provided for three annual rate increases for the e costs). Coverage amounted to $2.515.000200 for Company of approsimately 9% 7% and 6% effective each site as of January 1,1992. Damage to property with bills rendered on and af ter l'ebruary 1,1989, could eweed the imurance coverage by a substant'ial I""0 and 1491, respectively. As discussed below. the amount. If it does, the Company's share of such 6% '""Cd'C CIfC'tive l'ebruary 1,1991 was rt duced to excess amount could have a material adverse effect 214N for the Company, whhh later waised its 2.74% on its fmancial condition and results of operatie is. inuease and redmed its rates on two occasions m 1991 for certain customers The resulting annuali/ed lhe Company also has cura espense insurance coserage whkh imludes the hicremental cost of any revenue inacases in 1% 1990 and 1991 aswiated with the rate order were $50J00A40. $44,3R1,000 and replacement power punhased (over the costs whh h' would base been incuned had the units been $lhmWu respectively. The $lh00JO0 increase in operating) and other incidental espenses after the 1991 redects the net of $18.NK1000 of annualized occurrence of certain types of anidents at our nuclear revenues authorized for the 2 74% innease lesi units. The amounts of the coverage are 100% of the $171KMO for the waiver and rate teductions. Under the January 1989 rate order, a phase-in plan estimated estra espease per week dunng the 52-week m designed so that the three rate increases, coupled period starting 21 weeks after an accident. n7% of smh estimate per week for the nest 52 weeks and 33% with then projened sales growth, would provide of such estimate pet week for the nest 52 weeks The revenues sufhcient to rea vr all operating espenses amount and duration of extra espen e could and provide a fair rate of return on the Company's substantially esceed the insurance coverage. allowed investment in Perry Unit 1 and Beaver Valley Unit 2 for ten years begmning January 1,1989. In the (5) NUCLEAlt i Ull hrst hve years of the plan, the revenues were expated to be Icw than that required to recover The Company has inventories for nuclear fuel which should provide an adequate supply into the mid, operating expenses and prmide a fair return on inmtment. 'lherefore, the amounts of operating 1990s. Substantial additional nuclear fuel must be expene and n turn on investment not currently obtained to supriv fuel for the remaining useful lives of Davis Besse I erry Unit 1 and Beaver Vallev Umt renwered are deferred and capitaliied as deferred
- 2. More nuclear fuel would be required if Perry Unit chugn Rnu the unn awcred investment will dahne om the period of the phase-in plan because 2 were completed at a nuclear generating unit, in 1989, esisting nuclear fuel hnancing of dernciation and deferred federal income taxes anangements for the Company and Cleveland Electric that inuh fmn1 du' use of anelnated tas were tehnanced through leases from a special- depreciation, the amount of revenues required to p rpose corporation. The total amount of hnancing provide a fair returr! also dedines. I ursuant to such currently available under these lease arrangements is phaWn plan, the umpany defened the following-
$509,000%K)0 ($309,000,000 from intermediate term W IW" 1*
notes and $200,000,000 from bank credit ("ad W MW arrangements), although fmancing in an amount up D*tred Omaung tve 5 U26 516 W $22p q to $900,000.000 is permitted. The intennediate term carning chargv notes mature in the period 1993-1997. The bank credit brM . 5 W6 $2 U61 $10 6U arrangements are cancelable on two yeart. notice by Ique Isroo 22 126 siwt the lenders. As of December 31,1991, $209#00 000 of $21wa 5414n
$82.w nuclear fuel was hnanced for the Company. The Company and Cleveland Electric seseraHy lease their The amount of deferred operating expenses and respective portions of the nucleat fuel and are carrying (harges scheduled to be recorded in 1992 and obligated to pay for the fuel as it is consumed in a 1993 total $33 000 000 and $15A00 000, re< pectively.
eactor. The 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 rnenue levels authorized commercial paper rates. pursuant to the phase-in plan were designed to be The amounts hnanced include nuclear fuel in the sufficient to recover that period's operating expenses, Davis-Besse, Perry Unit 1 and Beaver Valley Unit 2 a fair return on the unrecm ered investment, and the reactors with remaining lease payments of amortization of the defened operating espenses and 15
car.ying (harges recorded during the earlier > cars of chmmatton of the 234% rate increase effettne the plin. All phase in defenah relatin3 to these two lebruary 1, lW1 for all residential and small units will be amortired and rewvered by December wmmercial customen.. a redut tion in residential rates 31,199R of 3% on Mar (h L IW1 and a further residentialiate ! The phase in plan was aho designed so that reduttmn of 1% on 5cptember 1. lWl, Conunumties I fluctuations in sales should not atfed the lesel of autpting the pac kage agieed to keep the Company as carningt The phase.in plan pernuts the Company to their sole suppher of elettraity for a period of fue request pUCO approval of increases or deocases in years lhe package also permits the Company to the phase-in plan deferrah to compensate for the adjust rates in those wmmumtics on lebruary 1,1994 effects of fluctuations in sales levels. as wmpared to ard iebruary 1,19% if inflation cuecds specihed the leveh projected in the rate order, and for 50% of leveh or under emergency wnditions. All eligible the net af ter tas savings in 1989 and 1940 identified by wmmunities m the C,mpany's servue area. euert the management audit as discussed below. Pursuant the Cits of lotedo, aucpted the rate reductmn to these provisions of the order, the Company package. In Matth IW1. the Company obtained rewrded no adlustment to the cost deferrah m 1989 l'UCO approval to reduce rates to the samt lesch for aod recorded adjustments to redute its cost deferrak the same customer categones m the City of loledo by approsimately $14.000AKlin IWO and to muease and the rest of its servue area. Annuahted revenues its cost deferrals by approximately $3100 000 net in were redu(ed by about $17AORK) as a result of 1991. The $3.200A10 net increase in 1991 included a these rate reduction packages.1he revenue reductions
$4,000.000 increase for an adjustment of 1WO mst do not adversely affect the phase-in plan as the deferrah and an $800.000 reduction for the decrease in res enues is mitigated by the wst adjustment of the lu91 cost deferrah. redmtions resulting from the management audit.
In connection with the 19S9 order and a similar lhe 19s9 order also set nuclear performante order for Cleveland Electr;c the Company, Cleveland standards through 1998. We muld be required to Electric and the Service Company base undergone a refund incremental replacement power wsts if the management audit, which was wmpleted m Apnl standards are not met. No refund was required in 1991 1990. T he audit identihed potential annual savings in nor is one (spected for 1992 The Company banked operating espenses in the amount of $98,160 000 $1,300A)0 m benefits m 1991 for above-average from Centerior Energy's 1989 budget level, 45% nuclear performance based on industry standards for ($44,172A10) for the Company. The Company operating availability established in the 1989 order. realized a large part of the savings in 1991. T hese banked benehts are not recorded in the fif ty percent of the savings identihed by the hnancial stati ments as they can only be used in future management audit were used to reduce the 6% rate years, if necessary, to off set disallowances of increase scheduled to be effective on l'ebruary 1,1991 incremental replacement power costt for the Company. As discussed previously, our rates Under the 1989 order. fossil fueled power plant increased 2.74% under this provision with the performame mr not be raised as an issue in any rate PUCO's approval. pro (eedmg before f ebruary 1994 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 availability factor of at least 64 4% reduction prckage to all incorporated wmmunities in annually. This standard was euceded in 1989.1990 its senice area which are served exclusively by the and 1WI, with availabdny at approximately 80% for Company on a retail basL. The package called for the each year. 16
l (7) f LDER AL INCOME TAX lederal income talt, computed by multiplying inceme before taxes by the statutory rates, is recoruited to the amount of federal income tax secorded on the books as followw f or the s eats ende d Detrmber 31.
!W1 IWO IW9 (thousands of dollars)
Ikiok income !More lederal Inwme Tas . 5 k? M* $ ,931 1151326 Tas on ikiok inwme at 6tatutory 4te . 5 29767 $ 318u2 5 51319 inivease (Decreau ) in Tas-Auclerated depreoanon. ? 8%7 (653) 5,W3 investment tas credas on dtsallowed nuticar plant - (18 810) - T4 set other than ledera: 'nwme taw. . (692) (2.f.47) (107) Other Hems . e 04 ) 2 ?9% 1 441 Total lederal inwme las I spenw 1 37 WS i 12177 $ *>N k44 Fede' ' income tax expense is recorded in the i: nome Statement as follows I or the wars ended Det ember 31. 1Wl_ two 1%9 (thousands el dollarO Oper timg laps 1w$ Cuivent las Prevmon. . . .
$ 13.946 5 17.045 $(11,4%)
Changes in Anumulated Defened lederal income lav Auclerated depteuanon and amortitation 831% 1380 kJf>4 Alternatne mmimum tas oedit (43h))) (5 440) 21.291 Sale and leawbad transactions and amortuanon 12M2 5.121 4% Property tas espense, - t 4 011) - Reacquired debt co ts . 6.674 (532) (378) Deferred wnstruttion work m progrew resenues 8 480 9.343 11126 Dr fened f uel unts. (3 689) (4.0a ) (1.229) Dans IWe replacement [wer . - -- 5,055 Other items . . 1.338 754 1.337 inwstment las Credits. 27 4'.4 1162 1722 Total Charged to Operating I. spen es . 31367 21 041 _ 37.2 h% Nonoperating inwme: Curren' las Proviwon . . . , ... .. . (37.677) (18 242) (10,129) Char ges m Auumulated Delerred leveral income Tai Write-off of nuclear wsts . (lHO) (10 157) - ALUDC and carrpng charges . 9.(n) 16 83% 32.9 K) Net operating Ims carryforward . 3%014 - - Other items . 71 2 900 jl.23) Total Espen e (Creat) to Nonogwratmg i uome 6.22n 38 6e 4 ) 21361 Total l'ederal incorne Tas INpenw i 17 995 .. _ 5._ __12.3 7_7 5_5_8 848 The Company joins in the 6hng of a consolidated federal income tax return with its affihated companies. The rethod of tax allocatloa reflects the benefits anM burdens reallied by each company's participation in the consolidated tait retum, approximating a r.cparate return result for each company. Federal income tax expense adjustments in 1990, associated with previously deferred investment tait credits , elating to the 1968 write off of nuclear plant investment. decreased the net tax provision related to nonoperating m income by $18,810,000. The favorable resolution of an issue concerning the appropriate year to recognite a property tax deduction resulted m an adjustment which reduced federal income tax expense in 1990 by $3,911,000 ($2,168,000 in the
. fourth quarter),
for tai purposes, net operating lo >s (NOL) carryforwards of approximately $164,049,000 are available to reduce future taxable income and will expire in 2003 through 2005. The 34% tait effect of the NOls generated is
. $55.777,000 and is reflected as a reduction to deferred federal income tax relating to accelerated depreciation and amortization. Future utilization of the>c tax NOL carryforwards would result in recordHg the related deferred taites.
The 1986 Tax Act provides for On AMT credit to be used to reduce the regular tax to the AMT level should the regular tax eitceed the AMT. AMT credits of $27,822,000 are available to offset future regular tax The credits may be carried forward indehnitely. 17
(S) RETIREMENT INCOME ptAN AND T he settlemer.t (dinount) rate awumption nas N.5% for both December 31. 1441 and December 31, OTilER POS THET.REMENT liENEllTS 19%), lhe long term rate el annual compensation (a) RErlRDdfNT INCOME pMN incicase assumption wari SS for both December 31, i 1991 and Daember 31,1990.1hc long-term rate of , The Company sponsors a noncontributmg pension return on plan m assumption was 8 5% in 1991 plan which covers all employee groups The amount and 8% in 1990. I of retirement berahts generally depends upon the plan assets consist pnmarily of investments in length of service. Under certain circumstin(es, common stock. bonds. guaranteed investment i benehts can begin as early as age 55 The plan also mnuacts cash equivalent secuntws and real estate. provides certain death, medical and disabihty benehts. The Company's fundmg policy is to comply with the p) 07Hrg postgr7Jgr.MINr prNrf;75 Employee Retirement income Security Act of 1974 1heim.ancial Aaounting Standards Board has issued guidelines. a new aaounting standard for postretirement in 1990, the Company offered a Voluntary Early benehts otha than pensient The new standard Retirement Oppormnity program (VEROp!, would require the accrual of the espected cost of such Operating espenses for 1990 included $7 000fXK1 of benehts during the employees' yean, of service. The pension plan accruals to cover enhanced VEROp benehts plus an additional $SIKX11410 of pension costs assumptions and calculations involved in detennining the accrual closely parallel pension for VEROp benehts paid to retireco from corporate , funds. The $8 000AKU is not included in the pension anounung nynnwnN data reported below. Operating espenses for 19%) also lhe Company currently provides certain included a credit of $5,000,000 resulting (mm a posheunwnt health care, death and other benehts and expenws such awts as these benehts are paid, settlement of pension obligations through lump sum which is consistent witu current ratemaking practices. payments to a substantial number of VEROp retirect Such wsts totaled $3,700,000 in 1991, $3A)00,000 in Net pension and VEROp costs for 1989 through 19*) and $2.200 000 in 1489, whic h include medical 1991 were mmprised of the following components: benehts of $3,100,000 in 1991, $2.400 000 in 1990 and
*1 * * $2,100A00 in 1989 U" "' "I "U" The Company espects to adopt the new standard Pensmn Own Servite awt for bencha ranwd prospectively effective January 1,1993. We plan to dunny the renod . &5 5 5 $ 4 amortire the divounted present value of the accumulated postretirenient beneht obligation to t?1 ath 11 11 to Actual terum on plan anets . (3a) 2 (17) npenw user a twentryear period. lae Company has Net amortuanon and defenal . l 'i y _4 engaged actuaries who hase made a preliminary Net pendon nets, 1 3 I resiew usmg 1990 data. Based on this prehminary review. the accumulated postrethement beneht NP "* ~ ? -
obligation as of December 31, 1991, measured in seulement p n - ts) - accordance with the new standard, is estimated in the Net own 5 1 5 5 range of $65,000A40 to $100,000200. Had the new
" " $_ J~-
standard been adopted in 1991, the preliminary stud) The following table presents a reconciliation of the indicated 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
$8,000h00 to $14 000JK10 (pretas). We believe the 1999.
Dmms r 31. effect of actual adoption in 1993 may be similar, mi g although it could be signihcantly different becauw of (mmiens og changes in health care costs, the assumed health care dohm) cost trend rate work force demographics, interest Au r ent salue of Nnrht i or isions beheen now and 1993. veued benents . 5 v2 5101 The Company does not know what action the Nonsested N nrhu . 10 6 pUCO may take with respect to these incremental Aummutated hncht obhpuon 102 107 costs However, we believe the pVCO will either 1ifect of future rompensahan allow a means of current recovery of such inctemental I" el' 34 22 costs or provide for deferral c! such costs until Total proietted beneht obhpuon , lh IN recovered in roes. We do not espect adoption of the Plan awen at fair market value . 172 151 new standard to have a raaterial adverse effect on Surplus of plan anets over projected our hnancial condition or results of operations. bencht obhpuon . % 22 Unrecognued net pin due to vanante htween assumpnons and npenence . t40) 124) (9) GUARANTEES Unrecognued pnot serme cost 5 5 Tranenon awet at January 1. Iw7 Under a long term coal purchase arrangement, the twg amonued over 19 3 em lin) l 19) Company has guaranteed certain loan and lease Net accrued penuon hahhty obligations of a mining company. This arrangement repm paymenu to the mining company for any Ni r i e sb . 5071
=
SON
= actual out-of pocket idle mine expenses (as advance {
18
h payments for wal) when the mines are idle for Under its articles of incorporation, the Company unsotis beyond the control of the tr.ining company. cannot issue preferred Mock unless certain carning At December 31, 1991, after gleing effect to a mvera,te requirements are met, liased on carnings refinancing completed on January Z 1992 hy 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. compan/5 loan and lease oblh;ations guaranteed by The issuance of additional preferred stock in the the Corrpmy was $24,000.000. future wdl 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) CAPITALIZATION outstanding and the dividends on all preferred stock issues outstanding. -(a) CAP 1TAL STOCK TRANSACT 10NS e etence M aumo for the Company is Preferred stock shares retired during the three years 5 000,000 shares with a $25 par value. No preference ended Dnember 31,1991 are listed in the following shares are currently outstanding. There are no taNe y, , restrictions on the' Company's ability to issue (thousands of sharts) preference Md. - Cumulative prefened StM With respect to dividend and liquidation rights, the Sube to Mandatory Company's preferred stock is prior to its preference Redemptm stock and common stock, and its preference stock is $100 r u lil m . 00) 00) ts) prior to its common stock. - ?J75. . _ 07) (17) 07) 1ma' - . .
j) j) ,J22) (d) LONG TERhl DEBT AND OTHER BORROWING ARRANGEAfEN7S (b) EQUl7Y DISTRIBUTION RESTR1CT10NS Long term debt, less current maturities, was as At December 31, 1991, retained camings were follows:
^ $89h24,000. SLbstantially all of the retained earnings ,, 4'",*k, twember 31. . were avallible for the dedaration of dividends on the icar of Mm.nty interent Rate swi iwo Company's preferred and common shares. All of the tihousand of donars)
Compan/s common shares are held by Centerior flest mortgage bonds: <
- Energy. A write-off of the Company's investment in tw3. . 11.25 % $ - $ 60.000 Perry Unit 2, depending upon the magnitude and 1996..... . . .. 9375 100S00 100,000 timing of much a write off, could reduce retained 1997 2001 . 7.65 66,378 66,378 2002a006. 8 62 111,725 111,725 . cantir$gs sufficiently to impair the Company's ability to declare dividends. 2007 20H 9.62 SI M 51 M L Any financing by the Company of any of its nonutility affiliates requires PUCO authorir.ation y ; ',, , (( j 545,103 605,103 a us,less tl$e sinancing is made in connection with T
transactions in the ordinary course of the Company's 1 31 . 8.82 115.500 13.500 pebhc utilities business operations in whkh one Medium term notes company acts on behalf of another. duc 1993 2021 .. 9.06 144.500 - Notes due 1993-1997. 11.01 102.142 219.430 (c) CUAtulATlVE PRETERRED AND Debentures due 1997. 11.25 125,000 18,000
. PRETERENCE STOCK po!!ution control notes Amounts to be paid for preferred stock which must be redeemed during the next five years are $2,000,000 in d"' #- net Other 2# '. .
155 _ ,,(2J07) 1992 and $12,000 000 in each year 1993 through 1996. To a pTenn
.. 51.15L550 $1097,326 The annual mandatory redemption provisions are as follows:
Long term debt matures during the next hve years ( as follows: $121,000,000 in 1992, $47,000,000 in 1993, , Yo'E . neginning r"e[ Nedeemed in Share $47,000h00 in 1994, $72,000,000 in 1995 and
* $192,000,000 in 1996.
P,dened
$100 par 5two. . 5,000 1979 $10o In 1991, the Company issued $134,500,000 9375o . . 16,f60 19M 100 aggregate principal amount of secured medium-term
. 25 par . 241. . . . 400.000 19u 25 notes. The notes are secured by hrst mortgage bonds. At December 31,199L the Company has $15,500,000 The annualized cumulative preferred dividend _ aggregate principal amount of secured medium term re luirement 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, s . Series A and B fluctuate based on prevailing interest The Company's mortgage constitutes a direct first
- rates and market conditions, with the dividend rates lien on substantially_ all property owned and e ' for : these issues averaging 8.82% and 9.67%, franchises held by the Company. Excluded from the respectively, in 1991. lieni among other things, are cash, securities, h .s 4 19
area.mtr tercivable, fuel, supplies and automotive Most borrowing arrangements under the short-equipment. term bank Imes of credit require a fee of 0.25% per Additional hrst mortgage bondt tvay be bsed by yeat to be paid er any unused puttion of the hnes of the Company under its mortgage on the bavs of credit.1or those banks without fee requirements, t'ne ! hmdable property additians, cash or subtitution foi average daily (ash balance in the Company's bank
- refundable fint mortgage bonds ' tw inunce of account, satist.ed informal tempensatmn balame addiuor.al first mortgage bonds on the basis of e rrangements.
property additions is limited by two pre"isions et our At December 31, 1991, the Company had no mortgage. One relates to the amount of bondable commemal paper outstanding Il commersial paper property available ad the other to earning; wverage were ou'standms it would be batted by at least an of interest on the bonds. Under the more restrictive ettual amoum of unused bank hnes of credit. of these provisions (currently, the carnings coverage test), we would have been permitted to issu" (12) CllANGl S IN ACCOUN11NG I OR approumately $164 000,000 of bonds at an assumed NUCLEAR PLANT DLPRECIATION interest rate of 11% based upon available bondable property at December 31,1991. The Compan) also in June 1991, the Company changed the method used would have been permitted to issue anproumately ta accrue nuclear plant depreciation from the unite
$166.000.000 of bonds bai.ed upon refundable bonds at of production method to the straight hne method Decembe 31,1991. !f Perry Unit 2 had i een canceled retroactive to January 1,1991. The good performame and written off as of DecJmber 31,1991, the amount of the nuclear generating units over the past several of bonds which muld have been issued by the years had resulted in units of production Company would nct hase changed. depreciatica expense being signihcantly higher than Certain unsecured loan agreements of the the amount implicit in current electric rates. The Company contain covenants relating to (apitalization straight line method better matches revenue and ratios, earnings coverage ratios and limitations on efense, tends to levelite periodic depreciation secured hnancing other than through fust mortgage espense for nuclear plant and is more consntent with bonds or certain other transactions. An agreement industry piactice.
relatinj, to a letter of credit issued in connection with The PUCO yproved the change and authorized the sale and leaseback of thaver Valley Unit 2 f a the Company to accrue depreciation for its three amended in 1989) contains several hnancial operating nuclear generating umts at an accrual rate of covenants affecting the Company, Cleveland Electric about 3% of plant mvestment based upon the units' and Centerior Energy. Among these are covenants forty year operating licenst s from the NRC. This relating to earnings coverage ratics and capitalization change in method decreased 1991 depreciation ratios. 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 $2.954h00 of mcome taxes) from covenant provisions We believe these covenants can what they otherwise would haec been. still be met in the event of a write off of the in December 1991, the PUCO approved a Company's and Clevelaad Elcctric's investments in reduction in the t.traight line depreciation accrual rat, Perry Unit 2, barring unforeseen circumstances. hom about 3% to 2.5% for each of the three operating nuclear units retroactise to January 1,1991. The Company beh, c, the lower depreciatian accrual rate (11) SilORT-TERM llORROWING is appropriate anc reduces wrnbined annual ARRANGEMENTS depreciation espense to a level more closely aligned The Company had $70,400,000 of bank lines of credit with the total amount currently being rewvered in arrangements at December 31,1991. There were no customers' rates for these units. This change in rate borrowings under these bink cred;t arrangements at decreased 1991 depreciation expense 59,453.000 and December 31,1991. increased 1991 net income $7,413,000 (net of Short-term borrowing capacity authorized by the $2,040200 of imor.ie taxes) from what they c,therwise pUCO is $150 000,000 for the Compaay. The would have been. Company and Cleveland Electric have been Depreciation expense recorded in prior yean, 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. 4 e 4 20
l (13) QUARTLitLY ltLSUL'IS Ol' OITitATIONS (UNAUDITI D) The following is a tabulation of the unaudited quarterly tesults of operations for the two y ears ended December 31,1991. cuanm t n. int htmh 31 lur.c W Nyt U. tw R (themarni of dollars) 1991 Operating Res enues. $212,930 $227,576 $238.271 $208.481 Operating Inwme. 36,807 42,428 42,307 38 M9 12,341 14.210 14,498 8,5 64 Net income . . Earnings Asailable for Common Stod 60% 8.004 8,318 2,398
. 1990 Operating Revenues. $210,622 $210.412 $237.872 $201.267 Operating incomc . 38,732 28,259 39,433 45,862 Net income 4 21.604 26.971 19,420 13,429 Earnings Availabh for Common Stock 15,357 20,660 13,109 7,139 Operating revenues for the fust three quarters of 1991 and the four quarters of 1990 were testated to wmply with cu rent IIRC revenue reporting requirements, as discussed in the Summary of Signihtant Accounting Policies. This restatement had no effect on earnings results for the applicable quarter. The unaudited quarterly results for the quarter ended March 31,1991 were also restated to reflect the change in acwunting for i.uclear plant depreciation to the straight-line method (at about a 3% accrual rate) as discussed in Note 12 Earnings for the quarter ended Derember 31,1991 were increased as a result of year-end adjustments. A $9,453.000 adjustment to reduce depreciation espense for the year for the change in the nuclear plant straight line depreciation rate to 2.5% (see Summary of Signihcant Accounting Policies 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 caraings by $6,882,000.
Earnings for the quarter ended June 30,1940 were increased as a result of federal it.come tas expense adjustments associated with deferred investment tax credits relating to the 1988 writeoff of nuclear plant investment. See Note 7. The aojustments increased quarterly earnings by $17,907,000. Earnings ior the quarter ended December 31,1990 were decreased as a result of year-end adjustments A
$13,933,000 reduction in phase in carrying chcrges for the adjustment to 1990 mst deferrals (see Note 6) was partially offset by adjustments of $7,760,000 to reduce depreciation espense for the year for the change in depteriation rates for nonnuclear and Davis i esse property (see Summary of Signihcant Accounting Policies) and $2,168,000 to redute federal income tas espense (see Note 7). The total of these adjustments decreased quarterly earning., by $2,000,000.
4 21
--- .--_,_____._.___m_____._. _ _ _m_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ , _ , _ _ _ _ , , _ , _ __ _ _ _ _ _ _ _ _ _
Financial and Statistical Review Operating Revenues (thousands of dallais) t w ain l oist t otal l eial licetmp ogreatmg j i raf Fearlential (SWmtPOal 14duttf al Other Nrtall O holmaIr fi) I lre trP & (sa4 h t t chum I 199). $229 540 183 523 23o 049 90 919 740 331 It6 927 887 258 -
$887 253 1+ao. 2D 920 174 % 0 215 5'8 79 US 713 573 149< W 663 173 -
863 173 19 % 215 932 161(41 .2 o+1 'N 4;l ?Ut. 064 IW %9 hh5 621 - K6% 63 luu . 200 916 142 696 IW %21 34 961 578 (N4 71 % 3 149 957 - 649 457 1987, 200 k77 142 3 % 219(N9 27 646 WI 006 4244 632 4R2 - 612 442 1981. 13k 781 90 % 1 1;l 539 3229 413 4 % 47 427 4Ni$63 7 411 468 294 Operating 13penses (thousands of dollars) (.T hef f uel k O}Wation Drptet14tp.n T a mes. Ihaw m & 1 edef al Total Pon hawd & 6 Other than Pte phaw m inunne Operstmg g e ae Pow er (e s Mamtenanic Amomism n lli Drietted Net lam ingny 1991.. $177 642 355 728 72137(h) 88 656 1 147 31 767 $727 077 Iwo 174 M9 373 374 72 a27 79 320 (9 764) 21 M1 710 687 1989. 172 220 372 530 M 057 7213 (15 751) 3729 723 462 1958 138 121 TM 823 75 (N3 A0134 (M3813) 29 242 %97 604 1987 167 621 223 307 65 503 59 b59 139 797) 22 747 499 039 1981, 148 452 95 M4 43 427 36 699 - 40 642 365 304 Income (loss) (thousands of dollars) l edeial Ot het amome Im ome trwmc & Taws- ikfore OperaMg AIUDC- Dedwtums. Carrymg ( redit intemt
) car tru ome i quit y Nei ( haryes 1I 9en* ) Cha g 1991. $l60181 1 499 3 628 21 98o (6 228) $181066 pm 152 2K 3 352 6 305 43 487 8tM 214 (N4 1999 142 161 8 566 20 517 82 MM (21561) 31491 19e 5239 5 452 (246 722)(c) 129 02 66 244 26 959 1987. 133 443 122 138 (16 904) 14 9W 42 726 296 392 1981, 102 990 32 498 8 852 -
9 616 19 956 Incorne (loss) (thousands of dollars) Income (lax) Cumalatn e Ikhwe I ttect of an l'armop Cumulatne Aucunhng (I ms) I flect et an (. hange or Net heferred A s adable-Det t Al-UIC- Ai r ountmg i stramdmary Inn ome %k for Lomrnon
*. car Intemt Debr Change Gam (t ms) thodends Arm k 199!. $132 399 (946) 49 613 -
49 613 24 792 $ 24 821 1990. IB 344 (2 674) kl424 - 81 424 25 159 56 265 1989, 144 792 (54N) 92 678 - 42 678 25 M) 67 268 1988, 150 521 (1 813) (121 731) 6 2N(d) (115 452) 2699 (142 43%) , 1987 185 493 (54 272) 165 171 - 165 171 42 749 122 422 1981, 66310 (15 491) 83137 10 807(t) 93 944 3 542 70 402 ( ) Whole ale revenue s fuel and purshased power, wholmle elettne sales and runhaw power amounts are restated for 1 ) and prior years lo reflect a thange in reportma of bulk power wies transactions in accordan4 e with ll RC requirements (h) In 1991 a change in a:tounting for nudear plant depreciatmn was adopted, thanging from the umteof production method to the straight hne method at a 2 5% rate. (c) Inclub wnte-off of nuclear costs in the amount of $276.955 000 in 19M (d) in 195% a change m the method of accounung for unbdied revenues was adopted 22
- . - - - . ~ _ - _ - _ . - - - . _ - -.- - - - - _ -.-
t L 7HL 100 fM LDIMW COMPAw Elatric Sales (millions of NWil) Eintric Customers (year end) Residential Uwge ' . 6 V4't a7.0 Att'f age p A s esap rna swesm Ithbtnal kWH for !'er ter a
. har - kendental Commerdal le.htr,al WhWeweia) Rher Total Rendentut Comme %I is O't.et t otal t' ustorner k%H Cwomes .1991 . 2 041 1 683 3 543 2 587 482 10 33b 254 500 26 044 4 444 181 988 7 990 i L 2 t< $$97 41 19t0. I950 1 614 3 617 2 333 496 10 010 253 %5 25 8n 4 555 284 342 7f.92 11 48 882 99 ;
19M9.. 2 017 1 622 3 740 3 138 4 75 11 012 251 234 25 HO) 4 414 2k3 4?1 7 989 1011 85529 1988 2 06ti i $79 3 7N0 2 044 474 9 945 251 5 % 25526 4 102 281 718 8 264 9 72 802.II7 ! 1987. I 977 1 532 3 589 1 660 464 9 222 249 344 25 170 4 085 27s .y 709 6 10.16 809 66 : I
, 1981. . I919 1 294 3 Os0 1 585 409 5287 241 663 23 573 3 s4 269 Ono 7 966 723 575 v5 - Load (MW & %) Energy (millions of KWil) fuel , . OsweaHe -
Cariacity I thnetwy-at 'Isme red Capacity leaJ C"* P8 " U"*"d Purtha ed Iuel r:ost BTU Per iest of reak load _ Marpn l ame, _ f o nal Nurlent Total _ . _ _ _ Pow erla) Total . Pet k W H kWH ; 1991 . 1 758 1 510 14 1% 64.5 6 4 848 6 003 10 851 95 70 946 I444 10 327 19tD. I 752 1 516 13 5 63 P 5 535 4 21V 9 754 402 10 6 % 130 10 220 1989 ! 894 1526 ~ 19.4 65 5206 5 552 10 756 788 11 546 1.42 10 293 19E l 057(f) 1 614 (52 7) 62 s 5 820 3 325 9 145 1491 10 6 % ' 1 59 10 174 49N7. I698 14M 12 6 64 9 5916 3 21B 9 134 660 4 8t0 1 45 10 196
-1981, 1 773 1 315 ' 25.8 65.9 5 348 2 142 7 490 1 293 6 781 1 68 10 274 !
Investment (thousands of dollars) con.mmn Work in loial Utdary Accumulated Nudcar Proprety Unhty Plant in Deprenatmn er Net Prh.resa 46 erry f uel and I%ntand I tant kal
. Year Servwe Amortuatm Plant Urut 2 Other . I qu.pment Additmew Anwto ,
1991 . - $2 692 274 709 505 1 982 769 396 732 197 964 $2 577 465 $ 53 838 $4 014 512 19ED. . 2 60314t3 640 252 1 963 631- $4 5139 223 872 2 624 342 h6 69) 4 001 518 ? 1969. . 2 528 355 564 615 1 9fu 740 430 340 237 316 2 631 398 73 421 4 138 646 1988, . 2 438 927 487 546 3 951 381 459 104 262 514 2 672 999 132 081 4 134 672 > 1987. , 2 600 $11 419 149 2 181 362 37, 274 267 069 2 822 705 ' 380 974 4 277 587
'1981. . 1 250 190 252 310 997 880 M8 641 21359(g) 1 677 880 ?01 000 1 869 467 Capitallration (thousands of dollars & %)
Preferred b L with Preferred 5tosk, without Mandatory Redemption Mac.datory Redempim Icrylerm Is bt
) ear Common Stoikgity Provmone Ptuvhms r Total 1991 . $ 887 752 Jer% 63 663 3%- 210 WO 9% 2 158 550 50% $2 319 965 1990. . . 880 784 39 66 328 3 210 (40 9 1 097 326 '49 22544%
1989c . 897 793 38 68 990 3 210 000 9 1 197 27; 50 2 374 0h0
,- 11988E . 887 442 36 71 155 3 210 000 9 1 291 444 32 2 460 041 i1987.. 1 096 737 39 73 340- 3 240 000 8 1 400 292 50 2 810 369 -190li ... S'i0176 35 95 500 6 150 000 10 7625M 49 1558 2to .......... .......v.,, ..... . .. . . ... . . . ., .. . ,. . .. . . . . . ..
(r) in 19814 an nttaordmary gain Was reahred from the exchange of common stock for txmds. , (f) Capacity data reflects euended generating unit outage for renovation and improvements
~ . (g) Restated for effects of capitalization of nudcar fuel lease and imancmg arrangements pursuant to Statement of hnancial Accounting Standards 71; 23
_ . . _ . . _ _ _ _ _ _ ._ _ ._ u._ _ _ _ _ . _ _ _ _ _ _ . - . '
IlltYStor l1If.on11allott SilARE OWNER INFORMATION INQUIRIES DIVIDEND RiINVI SI AIENT AND S1OCK Queshons regarding the Company or stak PURCilASE Pi AN ANDINDIVIDUAL accounts should be diluted to Share Owner HET1REMENT ACCOUNT (IRA) Services at Centenor Energy Corporation at the Centerior Energy Corporattoa has a Dividend address and telephone numbers indicated below Reinvestment and Stock Purchase Plan u hkh for the Stock Transfer Agent. presides Toledo Edison share owners of record Please have your account numt er ready and other investors a convenient means d when calling. pmchasmg shares of Centerior common stock by investing all or a part of their quarterly STOCKTRANSIER AGENT dividends as well as making cash investrnents. Centerior Energy Corporation in addition, individuals may establish an Share Owner Sen ices Individual Retirement Account (IRA) which P.O. Box 94661 invests in Centerior common stock through the Cleveland, OH 44101 4661 l'lan. Information relating to the Plan and the in Cleveland area 642 6WO or 447-2400 1RA may be obtained from Centerior Share Outside Cleveh nd area 1-MS433-7794 Owner Services. Stock transfers tray be presented at INDEPENDl!NT ACCOUNTANTS PNC Trust Company of New Tork Arthur Andersen & Co 40 Broad Street, Eirth floor 1717 East Ninth Street New brk,NYHXO4 Cleveland, Oli 44114 STOCK REGISTRAR IORM 10 K Ameritrust Company National Association The Company will furnish to share owners, Corporate T.ust Dn.aon without charge, a copy of its most recent annual P.O. Bos 64~7 report to the Securities and Schange Cleveland,01144101 Commission. Requests should be directed to the EXCH ANGE LISTINGS Secretary of Centerior Energy Corporation at the address of the Stock 1ransfer Agent. Preferrnf- 325 par value-3 8% 52.365 and 52.81 series. Adjustable Series A and Adju , table Series B-New York Stock Schaage Pntrrnf-$100 par value-4%% 8.32% 7.76% and 10% series-American Stock Exchange BOND AND DEBENTURE INFORMATION BONDTRUSTEE AND PAYING AGENT DEllENTURE TRUSTEE AND PAYING AGENT The Chase Manhattan Bank, N. A. National City Bank CorporateTrust Administration Division 1900 East Ninth Street 1 New York Plaza,14th Eloor Cleveland. 01144114 New York, NY 10018 (216) 575-2528 (212)676-5850 4 24
The Toledo Edison Company y,t uut 300 Madison Avenue e s tusrua-Toledo,01143652.(011 l'A1D 011\ li ANit DH10 ! I'l L\t:1 NO 4w i i
- l 1
i e i O
L:::; ;;T.u C.2: :::: = :.: Y:=L '" . ta:L . ' = .: 2- ^ ^ "': : Z .= :J2:L C='-^L*.L'~ - . 's r L ::'a=% L % ~ . - - -O; - Mi - - - - ' - - -- UNITED STATES SECURITIES AND EXCilANGE COMMISSION wASDiNc10s, D.C. 20s49 o .
. Form 10-K (Stark One) lN] ANNUAL. RI: PORT Pt RSUAN'l 10 SITI'lON 13 OR 15(d)
Ol' Tile SECURITil:S EXCil ANGl: ACT Ol' 19M (II:l: HI Ql'IRI:D) Lor the fiscal year ended December 31.1991 OR [] TRANSillON REPORT PURSUANT 10 SI:CTION 13 0F 15(d) Ol' Till SITURITil:S I:XCilANGE ACI Ol' 19M (NO l'l:0 REQt IRl:D) l'or the trani.ition period from to Commiwlon lleglitrant; Nate of Incurpuestion: I 105. I mpitner file Number Addrew: and 'f elephone Number idennhcatian No. 1-9130 Cl!NTERIOR ENI!RGY CORPORATION 34 i479083 ( An Ohio Corporation) 6:00 Oak Tree Itoulevard independence, Ohio 44131 Telephone (216) 447-3100 1-2323 Tile CLEN I 1.AND El.I'CTRIC ll.I.UN11N AllNG 34-015W12a CON 1PANY ( An Ohio Corporation) 55 Public Square Cleveland, Ohio 44113 Telephone (216) 622-9800 1-3583 Tile Toll!DO EDISON CON 1PANY 34-4375005
, ( An Ohio Corivration) 300 Niadison Avenue Trledo, Ohio 43652 g Tdephone (419) 249-5000 IndWate by check mark whether eact of the registrants (1) has fi!cd all reports required to be tiled by Section 13 or 15(d) of the Securides Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were , iequired to file such reports), and (2) has been subject to such filing requirements for the past 90 da d Yes X. No .
4 e Ind;cate by check mark if disclosure of delinquent filers pursuant to item 405 of Registration S K is not contained herein, and will not be contained. to the best of registrant's knowledgc, in definitive proxy or information statements incorporated by reference in Part 111 of this Form 10-K or any amendment to this f orm 10 K. (X) The aggregat mark: t value cf Centerior Energy Corporation Common Stock, without par value, held by non athliates was
$2,574,470.742 on February 28,1992 based an the closing sale price as quoted for that date on a compsite transactions basis in i,
The Wall Street Journal and on the 141,066,890 shares of Common Stock outstanding on that date. Centerior Energy Corporation is the sole holder of the 79,590,659 si' ares and 39,133,887 shares of the outstanding common stock of The Cleveland Electric illuminating Company and The Toledo Edison Company, respectisely. __ _ ___ _ - - ___===_- - , _ _ _ _ _ _ _ = = _ = = = . = = = =
..._-__-_-___-_____-_--_-_----.---__.___---_-______-__________.___-___a
TABLE Ur CONTEttTS
- Page !
Ilumber 18 Glosrary of Terms v
'I - PART I Item 1. Busir.ast . . . . . . . ................. 1 The Centerior System . . . . .. ................ 1 ,
CAPCO Group . . . . . . . . . ....-............. 2 Construction and financing Programs . . . . . . . . . . . . . . 2 Construction Program . . .. . .......... ..... 2 Financing Program _ . . . ... ................ 4 General Regulation . . . . . . . . . . . . . . . . . . . . . . . 5
!!olding Company. Regulation . . . . . .-. . . . . . . . . .. . . 5 State litility Commissions . . ................ 5 Ohio Pover Siting Board ... ................ 6 Federal Energy Regulatory Commission . . . . . . . . . . . . _. 7 Nuclear Regulatory Commission ........-........ 7 i Other Regulation . . . . . . . ................ 7-
+ Environmental Regulation . ... . . . . . . . . . . . . . . . . . 7 General- . . . . . . . . . .. ........... .... 7 Air Quality Control . . .. . . . . . . . . . . . . . . - . . . 8 Vater Quality control .- ... ................ 9 Vaste Disposal . . . . . . . . . . . . . . . . . . . . . . . 9 Electric Rates .-. . . . . . . . .:. . . . . . . . . . . . . . . 10 Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 i Sales of Electricity . . , . . . . . . . . . . . . . . . . 11 Operating Statistics . . .. ....:.. . - . . . . . . . . _. 12 Nuclear Units . . . . .- ... ................ 15 l-Competitive; Conditions . . . . ._. . . . . . . . . . . . . . . -
,16 General . . . . , . . . . . ................ 16 -Cleveland Electric . . . .. .....:........... 16 Toledo Edison . - . . . . . . .-. . . .- . . . . . - . . . . . . - . .
17 I l-l
.-~-,,.~.-.%.--,r,. ,.~.-<m.~ry.... .,-6,-..,,-,-,_,, ..s.r. .., ,,,.m. ,, ..,,,m-,_.,----.-- ....w,w..3
t Page Number Fuel Supply . . . . . . . . . . . . . ... . . . . . . . . . 18 Coal . . .' . . . . . . . . . . . . . . . . . . . . . . . . 18 Huclehr . ... . . . . . . . .. . . . . . . . . . . . . . 19 011 .. . ... . . . . . . . . . . .. . . . . . . . . . . 20 Executive Officers of the Registrants and the Service company . 21 Item 2. Properties . . . . . . . . . . . ... . . . . . . . . . 30 Ccaeral .. .... . . . . . . . .. . . ... . . . . . . . . 30 The Centerior System . . . . . . . . . . . . . . . . . . . . . 30 Cleveland Electric . . . . . . . . . . . . . . . . . . . . . . . 30 Toledo Edison . . . . . . . . . .. . . . . . . . . . . . . . 31 > Title to Property .. . . . . . . . . . . .. . . . . . . . . . . 32 i Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . 33 ) Item 4. Submission of Matters to a Vote of Security lloiders . . . 34
- PART II Item 5. ' Market for Registrants' Common Equity and Related Stockholder Matters . . . . . . . .. .. . . . . . . . . - 34 Centerior Energy . . . . . . . . . . . . . . . . . . . . . . . . 34 Market Information . . . . . . . . . . .. . . . . . . . . . . 34 i
Share Ovners . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Dividends . . , . . . . . . . . . . .. . . . . . . . . . . 35 Cleveland Electric and Toledo Edison . . . ... .. . . . . . . . . 35 Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . 35 , Centerior Energy . . . - . . . . . . . . . . . . . . . . . . . . . 35 Cleveland Electric . . . . . . . . . . . . . .. . . - . . - . . . . 36 Toledo Edison- .................. . . . . . . . 36 Item-7. Management's Discursion and Analysis of Financial Condition and Results of Operations . . . . . _ . . . . . . 36 Centerior_ Energy . . . . . . . . . . . . . . . . . . . . . . . . 36 - Cleveland _ Electric-.-
. . . . . . - .- . - - . .. . . . . - . . . - . . . . - 36 Toledo-Edison .. . . . . . . . . . . .. . . . - . . . . . . . . 36 ,
i
, ,,....c--. , . . - - . w--,.w.. -- - - - .- .-_n--,.,...,_n....,,.-. ..~..w,. - - - , . - - . . . ,<.n,...r-n ...nn , I.- - + > - - ..
Page , Number Item 8. Financial Statorents and Supplementary Data . . . . . . . 36 Centerior Energy . . . . . . . ,........... . . . . . 36 C hveland Electric . . ., . .. ............ . . . . 36 1oledo Edison . . ... . . . . . ....... ... . . . . . 36 Item 9. Changes in and Disagteements Vith Accountants on '
- Accounting and Financial Disclosure . ..... . . . . . 37 ;
PART III ! i Item 10. Directors and Executive Officers of the Registrants . . 37 I i Centerior Energy , ,. .
. .. ...... .... .. . . . . 37 Cleveland Electric . . . . . . ............. . . . . 37 , . Toledo Edison . ... .. . . ...... ....... . . . . 38 ;
Item 11. Executive Compensation . .. ..... . . . . . . . 38 . Centerior Energy Executive Compensation ........ . . . . 38 Salaries and' Insurance . . . . ...... ...... . , . . . 38 , Pension Plan Benefits ..-. . . ..., ........ . . . . 40 Employee Stock Plan Tranr. actions--. . ...... ... . . . . . 41 (a) Employee Purchase Plan . .. .......... . . . . . 41 (b) Employee Savings Plan. . ... ... ...... . . . . . 42 ' (c) 1978 Key Employee Stock option Plan ... . . . . . . . . 43 (d) Employee Stock Ownership P]an ..... ........ 44 ' Item 12. Security Ovnership of Certain Beneficial.0Vners and Management .. . . . .. ............ . . . . . 44 Centerior Energy . ... . . . ......... . . . . . . . . . 44 Cleveland Electric . . . . . . . . . . . . . . . . .. . . . . . . 45-4 Toledo Edison. . . .. . 46 Item 13. Certain Relationships and Related Transactions . . . . . 46 [ Centerior Energy and Toledo Edison .. ...... ... . . . . . 46
- i. Cleveland Electric . . . . . . ... ... ... ... . . . . . . 46
- PART IV ,
- Item 14. Exhibits,-Financial Statement Schedules and Reports on-Form 8-K .. ... . ..........,.. . . . . -
46 l 1
- lii -
l-1 l r
,-- . ..v---... ._+,m. _ - - . , - ,, , . , , . ., .....,.,._e,,e - - , . . . . ~ . , . . _ , . . , .
i l' age . Number Signatures .-. .. . . . ... . . ................. 4 11 ; l Index to Selected Financial Data Management's Discur+icia and i t.nalysis of Financial Condition and Results of Operations; and Financial Statements . . . . ..,.............. F-1 Inden to Schedules . . . . .. . . ..........,....,, 33 . Exhibit Index . . . . . . .. . ..... . . , . . , , , , , , , g_3 1 [ l 4 I i t
- iv -
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i
- This combined Form 10-K is seperrtely filed by Centerior Energy Corporation, l The Cleveland Electric illuminating Company and The Toledo Edison Company.
Information contained herein relating to any individual registrant is flied by such registrant on its own behalf. !Jo registrant makes any representation as to information relating to any other registrant, excent that information relating to either or both of the Operating companies is also attributed to l Centerior Energy. ' GLOSSARY OF TERHS 1 The f ollowing tertns and- abbreviations used in the text of this toport are I defined as indicated: ; Term Definitfor! AFUDC Allovance for Fundr Used During Construction. AMP-Ohio American Municipal Pover-Ohio, Inc., an Ohio corporation, not-for-profit the rnembers of which are certain Ohio municipal electric systems. . i Beaver Valley Unit 2 Unit 2 of the Beaver Valley Power Station, in which the Operating Companies have ownership and leasehold interests. CAPC0 Group Central Area Poser Coordination Group. Centerior Energy er Centerior Centerior Energy Corporation. Centerior System Centerior Energy, the Operating Companies and the Service Company. Clean Air Act Federal Clean Air Act of 1970 as amended. Clean Air Act Amendments tJovember 1990 Amendments to the Clean Air
- Act. .
Clean Vater Act Federal Vater l'ollu tion Control Act as amended. Cleveland Electric The Cleveland Electric Illuminating Company, an electric utility subsidiary of Centerior ' Energy and a member of the CAPC0 Group. Consol Consolidation Coal Company.
- Consumers Pover - Consumers Power Company, an electrie utility subsidiary of CMS Energy Corporation.
_y - c- E , .y,-& .- -<w, # .
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Term Definition CPP Cleveland Public Pover, a municipal electric systcm operated by the City of Cleveland. CVIP Construction Vork in Progress. Davis-Desse Davis.Besse Nuclear Pover Station. . Detroit Edison Detroit Edison Company, an electric utility. D.4 strict of Columbia United States Court of Appeals for the Dis. Circuit Appeals Court trict of Columbia Circuit. DOE United States Department of Energy. 1 Duquesne Duttuesne Light Company, an electric utility subsidiary of DQE, Inc. and a member of the CAPCO Group. ECAil East Central Area Reliability Coordination i Group. FERC Federal Energy Pegulatory Commission. F1CA' Federal Insurance Contributions Act. . General Electric General Electric Company. l GPU General Public Utilities Corporation, an electric utility holding company. Holding Company Act Public Utility liolding Company Act of 1935. ' Ludington Plant Ludington Pumped Storage Power Plant, a pumped-storage, hydro-electric generating . station - jointly owned by Detroit Edison and' consumers'Pover. Hansfield Plant Bruce Mansfield Generating Plant, a coal-fired power plant, in which the Operating Companies have leasehold interests as joint and several lessees. Pt or NJte Note or Notes to the Financial Statements in
- 2, the- Centerior Energy, Cleveland Electric and Toledo Edison Annual Reports for 1991-(Note t or Notes, where aed, refers to all three companies unless otnervise specified) . .
?'PDES Natinnal Pollutant. Discharge Elimination System. r
- . - vi -
. . _ :. u _ m.- .--a-___..;_..._.__----.,.---_ _-.--,_._:_... a _.- _ .. - _.. _ .,, _,.. _._.,,..-_._.,_ _ . , ~ . . _ . . . _
. Term Definition NRC United States Nuclear Regulatory Commission.
Ohio Edison Ohio Edison company, an electric utility and a member of the CAPC0 Group. Ohio EPA Ohio Esafronmental Protection Agency. Ohio Power Ohio Power Company, an electric utillty sub- l sidiary of American Electile Power Company, Inc. 1 Ohio Valley The Ohio Valley Coal Company, the successor corporation to The Nacco Mining Company and a j subsidiery of Ohio Valley Resources, Inc. j Operating companies Clevelano Electric and Toledo Edison. (individually, Operating l Company) ; OPSB Ohio Power Siting Board. PaPUC- Pennsylvania Public Utility Commission. Penelec Pennsylvania Electric Company, an electric utility subsidiary of GPU. i Pennsylvania Power Pennsylvania Power Company, an electric utility subsidiary of Ohio Edison and a member of the CAPC0 Group. Perry Plant Perry Nuclear Pover Plant. Perry Unit 1 and Perry Unit 2 Unit l'and Unit 2 of the Perry Plant, in which the Operating Companies have ovnership interests. PUC0 - The Public Utilities Commission of Ohio. Purchase Plan Centerior Energy's Employee Purchase Plan.
-Quarto Quarto _ Mining Company, a subsidiary of > 'Consol. .RICO Federal Racketeer Influenced and Corrupt Organizations Act.
Savings-Plan -Centerior Energy's Employee Savings Plan. SEC Securities and E "hange Commission.
- vii -
_,_,-,.,a-_ . . . , _ , _ _- _ - , . - ,._.__._.2 ..;__:._,.___ ___.u. __ -_ ,. m-._. .
Term Definition
-Seneca Plant - Seneca Power Plant, a pimpod-storage, hydrn-electric generating station jointly evned by Cleveland Electric and Perielec.
Service Company Centerlor Setvice Company, a service sub-sidiary of Centerior Enetgy. Sixth Circuit United States Court of Appeals for the Sixth ; Appeals Court Circuit. Superfund Comprehensive Environmental Response, Com-
- pensation anu Liability Act of 1980 and the Superfund Amendments and Reauthorization Act ;
~
of 1986. Toledo Edison The Toledo Edison Company, an electric , utility subsidiary of Centerior Energy and a member of the CAPC0 Group. , l
~
U.S. EPA United . States Environmental Protection Agency. , Vestinghouse Vestinghouse Electric Corporation. f b a b t
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PART I ltem 1. Business Tile CP.MTERIOR SYSTEM Centerior Energy is a public utility holding enmpany and the pareat company of the Operating Companies and the Serviec Company. Centerior vas incorporated under the laws of the State of Ohio in 1985 for the putpore of enabling Clevelar Electric and Toledo Edison to affiliate by becoming wholly ovned subsidia es of Centerior. The affiliation of the Operating Companies became effemtive in April 1986. Nearly all of the consolidated opetating revenues of the Centerior System are derived from the sale of electric energy by Cleveland Electric and Toledo Edison. The Operating Companies' combined service areas encompass approximattly 4,200 square miles in northeastern and northwestern Ohio vith an estimated popula-tion of about 2,600,000. At December 31. 1991, the Centerior System had 8,f?2 employees. Centerior Energy has no employees. ; Cleveland Electric, vhich was incorporated under the laws of the State of Ohio . ; in 1892, is a public utility engaged in the generation, purchase, trnnsmis- , sion - distribution and sale of electric energy in an area of approximately ' 1,700 square miles in northeastern Ohio, including the C'ty of Cleveland. Cleveland _ Electric also provides electric energy at wholesale to other elec-tric utility companies and to two municipal electric systems in its service area. Cleveland Electric serves approximately 746,000 customers and derives approximately 74% of its total c1cetric revenue from customers outside the City of Cleveland.- Principal industries served by Cleveland Electric include those producing steel and other primary metals automotive and other trans-portation equipment; chemicals; electrical ard nonelectrical machinery; fabricated metal products; and rubber and plastic products, Nearly all of Cleveland Electric's operating revenues are derived from the sale sf electric i energy. _ December 31, 1991, Cleveland Electric had 4,531 employees of which about 54% vere represented by one union having a collective bargaining agreement with Cleveland Electric. Toledo Edison,.which was incorporated under the laws of the State of Ohio in 1901, is a '"blic utility engaged in the generation, purchase, transmission, distribution ni sale of electric energy in an area of approximately 2,500-square miles in northwestern Ohio, including the City of Toledo. Toledo Edison ~ also provides electric energy at wholesale to other electric utility companies and to 13 municipally ovned distribution systems (through AHp-ohio) and one rural electric cooperative distribution system in its service area. Toledo Edison-serves approximately 285,000- customers and derives approximately 60% of its total electric revenue from customers outside the City of Toledo. Among -the principal industries served by Toledo Edison are metal casting, forming and fabricating; petroleum refining automotive equipment and assembly; food processing; and glass. Nearly all of Toledo Edison's operating revenues are derived from the sale of electric energy. At December 31, 1991, Toledo Edison had 2,$62 employees of which about 55% vere represented by three unions having collective bargaining agreements with Toledo Edison.
._ _ _ _ . . - , _ _ - . _ _ _ _ , . _ _ . _ . . ~ . _ _ _ _ . _ _ . _ _ _ _ . . ____._._ _._._
The Service Company. vhich vas incorporated in 1986 under the laws of the State of Ohio, ;s also a wholly owned substray of Centerior Energy. It pro- , vides management, financial, administrative, engineering, legal, governmental l and public relations and other services to Centerior Energy and the Operating l Companies. At December 31, 1991, the Service company had 1,499 employees of ; which about 1% vere represented by a union. CAPC0 GROUP i Cleveland Electric and Toledo Edison are members of the CAPCO Group, a pover pool created in 1967 vith Duquesne, Ohio Edison and Pennsylvania Pover. This pool affords greater reliability and lover cost of providing electric service through coordinated generating unit operations and maintenance and generating reserve back-up among the five companies. In addition, the CAPCO Group has . completed programs to construct larger, more efficient electtic generating units and to strengthen interconnections within the pool. J The CAPCO Group companies have placed in service nine major generating units, of which the Operating Companies have ownership or leasehold interests in seven (three nuclear and four- coal-fired). Construction of another nuclear generating unit (Perry Unit 2) has been suspended (see Note 3(c)).- Each CAPC0 Group company owns, as a tenant-in-common, or leases a portion of certain of . these cencrating units. Er.ch company has the right to the net capability and associated enotgy of its respective ovnership and lenschold portions of the units and is, severally and not jointly, obligated for the capital and oper-ating costs equivalent to its respective ownership and leasehold portions of the units and-the required fuel, except that the obligations of Pennsylvania Power - are the joint and several obligations of that company and Ohio Edison and except that the leasehold obligations of Cleveland Electric and Toledo Edison are joint and several. (Scc " Operations--Fuel Supply".) In all cases but one, the company in whose service area a generating unit is located is responsible for_the operation of that unit for all the ovnces, except for the
- procurement of nuclear fuel for a nuclear generating unit. Each company evns *
-the necessary interconnecting transmission facilities within its service area, and the other CAPC0 Group companies contribute toward ffxed charges and operating costs of those trat.smission facilities, i
2 All of the CApCO Group companies are members of ECAR, which is comprised of 28 electric companies located _in nine contiguous states. ECAR's purpose is to improve reliability of buik power supply through coordination of planning and operation of member companies' generation and. transmission facilities. C_0NSTRUCTION AND-FINANCING PROGRAHS Construction Program The Centerior System carries on a continuous program of constructing ' transmission, distribution and general facilities and modifying existing generating facilities-to meet anticipated demand for electric service, to comply- vith governmental regulations and to protect the environment. The Centerior System's integrated resource plan for the 1990s combines demand-side management programs-vith maximum utilization of existing generating capacity to postpone the need for nev generating units until early in the next decade. Demand-side management programs, such as direct load control, residential h 1
= . , = - .. a - - _ .- - - .---------.a..--
I e appliance interlocks, curtallable load, thermal storage and energy management, ! are expected to reduce peak load growth'and increase energy usage in off-peak periods. The next increment of generatJng capacity to be constructed by the i
-Operating Companies is expected to be_relatively small, 100,000-150,000-kilowatt units with short construction lead times. According to the current long-term integrated resource plan, and assuming construction on Perry Unit 2 j is not resumed in the interim (see Note 3(c)), the Centerior Syster, plans to put into service 272,000 kilowatts of such generating capacity after 2002.
The following tables shov, categorized by major components, the construction expenditu.cs by Cleveland Electric and Toledo Edison and, by aggregating them, for the Centerior System during 1989, 1990 and 1991 and the estimated cost of their construction programs for 1992, 1993 and 1994, in each case including i APUDC and excluding nuclear fuel Actual Estimated 1989 1990 1991 1992 1993 1994
' Cleveland Electric (Mil [ Tons of Dollars) ~~~~
Beaver Valley Unit 2 $ 1 $ 0 1$ 0 $ 0 $ 0 $ 0 ' Perry Unit 2* O O O 3 0 0 Transmission,' Distribution and General Facilities 87 82 77 98 117 124 Renovation and Hodification of Generating snits Perry Unit 1 4 8 5 12 16 11 Beaver Valley Unit 2** -3 (3) 4 4 4 3 Davis-Besse 25 40 16 '7 16 13
~ Non-Nuclear Units 24 37 48 67 89 87 Clean Air Act-Amendments
_ Compliance y _0 0 0 9 17 Total $$ $)JQf $$ @ SM $$ Actual Estimateo 1989 1990 1991 1992 1993 1994 Toledo Edison (Hillions of Dellars)
. Beaver Valley Unit 2 $ 1 $ 0 $ 0 $ 0 $ 0 $ 0 ' Perry Unit 2* _
2 0 0 0 0 0 Transmission, Distribution and General Facilities 27 29 30 31 65 37 Renovation and Hodification of Generating Units Perry Unit 1 2 5 2 8 9. 7 Beaver Valley Unit 2** 2 (2) 4 4 4 3 Davis-Besse 29 39 11 5 15 12 Non-Nuclear Units 10 16 7 11 18 -_30 Clean Air Act Amendments . Compliance 0 0 .0 0 'l 0-Total $y $R- $2 $2 $jl2 $2 Note; The footnotes _to the tables are on the folloving page.
- P
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~ ~ - - - - -.-- . - - - - - _ _ _ - - - .- - - - - - -~. -
Actual Estimated II)89
~ -199(i ~ ~ ~ ~
1WI 1992 IW3~ lW4
~~~ -Centerior Qstem (MIT1%ns of Dolint s)
Deaver Valley Unit 2 $ 2 $ 0 y 0 $ 0 $ 0 $ 0
- Perry Unit 2* 2 0 0 3 0 0 Transmi.ssion, sistribution and General Facilities 114 111 107 129 182 161 l ' Renovation and Modification of l Generating Units '
Perry Unit 1 6 13 7 20 25 18 Beaver Valley Unit 2** 5 (5) 8 8 8 6 i Davis-Besse 54 79 27 12 31 25 , Non-Nuclear Units 34 53 55 78 107 117 i Cleat Air Act Amendments i Cimpliance 0 0 _0 9 18 34 Total $M $M $10J $M $$ $$
*Constructitn of Perry Unit 2 has been suspended. The amount shown for Perry Unit 2-in 1989 for Toledo Edison and the Centerior System is the result of a reallocation of previous years' costs between Perry Unit 1 and Perry Unit: 2 ,
for Toledo -Edison. In February- 1992, Cleveland Electric purchased Duquesne's ovnership share of Perry Unit-2 for $3,324,000 (see Note 3(c)).
**The amount shown for Beaver Valley Unit 2 in 1990 is the result of prior- ,
period adjustments for AFUDC. ! Each company in the CAPCO-Group 'is responsible for financing the portion of the capital costs of nuclear fuel equivalent to its ownership and leased inter in the unit in which the fuel vill be utilized. See " Operations-- Fuel jply--Nuclear" for information regarding nuclear fuel supplies and Note
-5 regarding le.2ing arrangements to finance nuclear fuel capital costs..
Nuclear fuel capital' costs incurred by Cleveland Electric Toledo Edison and
- the Centerior.5ystem during 1989, 1990 and 1991 and .their estimated nuclear i fuel capital costs for 1992, 1993 and 1994 are as follows:
Actual Estimated . 1989 1990. 1991 1992 1993 1994 (Millions oT~5ollars)_ > Cleveland Electric $ 2s S 38 $ 32 $ 34 . $ 42 $ 23 Toledo Edison
$ 21 $ 24 $ 27 $ 22 $ 34 $ 21 Centerior System $ 50 $ 62 $ 59 $ 56 $ 76 $ 44 Financing Program t
Reference is .made to Centerior -Energy's, Cleveland Electric's and Toledo , Edison's.Hanagement's Financial Analysis contained under Item 7 of this Report and ~to Notes 10- and _11 for discussions of the Centerior System's financing activity in 19911 debt and preferred stock. redemption requirements during the l 1992-1994 period; . expected -external financing needs during such period; 1 restrictions on the issuance of additional debte securities and preferred and preference stock;' short-term 'and - long-term financing capability; and securities ratings for the Operating Companies.
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In the.second quarter of 1992, Cleveland Electric plans to register-vithithe SECfL$125,000,000 of, notes secured by first mortgage. bonds, which notes'are Jexpected to be issued periodically over a-12-month period. In._ March-1992, Toledo Edison sold -$15,500,000 of notes secured -by first mortgage _ bonds. Toledo Edison's _ financing plans for the remainder of 1992 include 1 the rodemption in April 1992 of 24,825 shares of its lit Cumuletive Preferred Stock at a redemption' price of $101 per share and the registration with the-SEC of an additional S75,000,000 of notes secured by first mortgage bonds,=-which notes are expected to be issued periodically over a-12-month period. ' Centerior expects to raise about S40,000,000-S50,000,000 in 1992 from the sale ;
-of- authorized but unissued common stock under certain 01 its employee and '
share owner stock purchase plans. GENERAL REGULATION ypiding campany Regulation Centerior Energy is currently exempt from regulation under the Holding Company Act. Congress is considering legislation to amend.the Holding Company Act which, among other matters, vould create a new class of wholesale electric generator > that vould be largely exempt from' regulation. Consideration is also being _given to legislation which vould allov these exempt wholesale generators to have,-access to any electric utility's transmission system to provide power to
-other-utilities or wholesale customers. If_the Holding Company Act is amended F as described above, the Centerior S/ stem could face increased competition for wholesale power scles from such exempt wholesale generators.
U State Utility Commissions , The Operating Companies are subject to the jurisdiction of the PUC0 vit'. re-spect to rates, service, accounting, issuance of securities and other matters. Under- Ohio lav,-municipalities may regulate rates, subject to _ appeal to:the PUC0 if not acceptable to the utility.- See " Electric Rates" for-a description of certain-aspri;s of Ohio rate-making lav. -The Operating Companies are also subj ec t to the jurisdiction = of the -PaPVC in certain respects relating to their ownership-interests 3- canarating facilities located in Pennsylvania. The PUCO.is composeo it ..tve commissionersfappointed. by the Governor of Ohio from nominees; recommended by a Public Utility Commission Nominating Council. Nominees must nave:at least thrce years' experience. in one of several disci- - __ plines . Not more than three- commissioners may belong to the same political
- party.
Under--Ohio lav, a public utility must file annually with the PUC0 a long-term forecast of- customer loads, facilities needed to serve those loads and ' cprospective sites for those facilities. This forecast must include the-following: l
. . . m - -. - _ _ _ . _ _ _____.=__ _._.__._____ ..__ _
1 i 1
-(1) _ Demand Forecast--the_ utility's 20-year-forecast of sales and peak demand, l before and after the effects of demand-side management programs. ?(2) Integrated Resource Plan-(required biennially)--the utility's projected mix of_ resource options to meet the projected demand.
(3) Short-Term Implementation Plan and Status Report (required biennially)-- the utility's discussion of how it plans to implement its integrated resource plan over the next four years. Estimates of annual expenditures and security issuances associated with the integrated resource plan over the four-year period must also be provided.
-The PUC0 must hold a public hearing on the long-term forecast at least once every five yaars to determine the reasonableness of such forecast. The PUC0 and the OPSB are- required to consider the record of such hearings in proceedings _for approving facility sites, changing rates, approving security issues and initiating energy conservation programs. Centerior expects-the PUC0 to hold a public hearing on the Operating companies' 1992 long-term forecast.
The PUC0 has jurisdiction over certain transactions by companies in an elec-tric utility holding company _ system if it includes at least one Ohio electric - utility and is exempt from regulation under Section 3(a)(1) or (2) of the Holding , Company Act. An Ohio electric utility in such a holding company system, such as Centerior, must obtain PUC0 approval to invest in, lend funds
-to, guarantee the obligations of or otherwise finance or transfer assets to any- nonutility company in that holding company system, unless the transaction is_in the ordinary course of business operations in which one company acts for nr with respect to another company. Also, the holding company in such a hold- ; company _ system must obtain PUC0 approval to make any investment in any
, . u'111ty subsidiaries, affiliates or associates of the holding company if investment vould cause all such capital investments to exceed 15% of the idated capitalization of the holding company unless such funds were or. Red by acnutility subsidiaries, affiliates or associates. 7hc ,UC0 ' has a reserve. capacity policy for electric utilities in Ohio stating too, .(i) 20% of service area peak -load excluding interruptible load is an appropriate generic benchmark for an electric utility's reserve margin; (ii) n reserve margin exceeding 20% gives rise to a presumption of excess capacity, but. may! be appropriate'Lif it confers a positive net present benefit to customers or- is justified by unique system characteristics; and (iii) appropriate remedies for excess capacity (possibly including disallowance of costs in rates) vill be determined by the s'UC0 on a case-by-case basis. Ohio Pover Siting Board The OPSB has state-vide 4urisdiction, except to- the extent pre-empted by Federal lav, over the locatica, need for and certain environmental aspects of 4
- electric generating units with a capacity of 50,000 kilowatts or more and - transmission-lines-vith a rating of at least 125 kV.
f
.- , .,,.w..a _.,--.r -e .m -n
Federal Energy Regulatory Commission
~
- The Operating Companies are each. subject - to the jurisdiction of the PERC vi t h
-- res pec t to the. transmission and sale of power at wholesala in interntate com-merce, interconnections with other -utilities, accounting and certain other Lmatters.- ' Cleveland Electric _ is also subject to FLRC jurisdiction vith respect to its ovnership and operation of the Seneca Plant. ~ -Nuclear Regulatory Commission The nue2eir generating units in which the Operating Companies hava an interest are subje.t to regulation by the NRC. The NRC's jurisdiction encompasses broad supervisory and regulatory powers over the construction and-operation of nuclear reactors, including matters of health and safety, antitrust considera-tions and environmental-impacts.
Owners of nuclear' units are requiced to purchase the full amount of nuclear liability insurance available. See Note 4(b) for a description of nuclear in-surance coverages. Other Regulation The Operating Companies are subject to regulation by Federal, state and local authorities vith. regard to the location, construction and operation of certain facilities.- The Operating Companies are also subject to regulation by local authorities with respect to certain zoning and planning matters. ENVIRONMFNTAL REGULATION i
-General The. Operating Companies are subject to regulation with respect to air quality, vater -quality and vaste disposal matters. Federal' environmental legislation affecting .the operations and properties of the Operating Companies includes the Clean Air Act.. the Clean Air Act Amendments, the Clean Vater Act, Superfund, and-the Resource Conservation and Recovery Act. The requirements of these-statutes and related 3, ate and local laws are continually changing due to.the promulgation of new or revised lavs and regulations and the results of-judicial and agency proceedings. -- Compliance with such-lavs and regulatio s mayf require the Operating Companies to modify, supplement, abandon or repla facilities and may-delay or impede construction and operation of facil'itie-all; at. costs which.could be substantial.
The Operating Companies expect that l' the _ iinpact of -such costs vould eventually be reflected in their respective rate schedules. . Cleveland Electric-and Toledo Edison plan to spend, during the period-_1992-1994,-584,000,000-and $4.000,000, respectively, for pollution con' trol facilities,-including Clean Air a t Amendments compliance costs.
'The. Operating Companies believe that they are currently in compliance in all -material respects 1vith all applicabli environmental lavs and regulations, or ,
to the extent that.lone or both of the operating Companies may dispute the applicability or interpretation of a particular environmental lav or regula-
-_t ion, the affected company has filed an appeal or has applied for permits, revisions in requirements, variances or extensions of deadlines.
l
" Concerns have been raised regarding the possible health effects associated with' electrictand magneticLfields. Although scientific research has yielded ' inconclusive'results, additisaal studies are being conducted. If electric and magnetic fields. arc _ul timately found to pose :. a health risk, the Operating Companies may beirequired to modify transmission and distribution lines or-other facilities.- ) -Air Quality Control j Under the' Clean Air Act, the Ohio EPA has adopted Ohio emission limitations )
for particulate matter and sulfur dioxide for each of the Operating Companics' plants. i The Clean Air Act provides for civil penalties of up to $25,000 per day for each violation of an emission limitation. The U.S. EPA has approved ] I the 20hio EPA's. emission limitations and the related implementation plans except for_ fugitive dust emissions and certain sulfur dioxide emissions.- The U.S. SPA has adopted separate sulfur dioxide emission limitations for each of
-the-Operating Companies' plants.
In November 1990, the Clean Air Act Amendments were signed into lav imposing restrictions on nitrogen oxides and making sulfur dioxide limitations significantly. more severe beginning in 1995. See Note 3(b) for a description-of _the Operating Companies' compliance strategy to-meet the new requirements. The Clean Air Act: Amendments also require studies to be conducted on tha etission of-certain potentially hazardous air pollutants which could lead to additional restrictions. In.1985,Lthe U.S. _ EPA-issued revised regulations specifying the extent to which; power plant stack height may be incorporated into the establishment of an. emission limitation. Pursuant to the revised regulations, the Operating 4 Companies- ' submitted to the Ohio EPA information intended to support continuation of the stack height credit received under the- previous regulations for stacks at Cleveland Electric's-Avon Lake and Eastlake Plants Land -Toledo Edison's Bay Shore Station. The Ohio EPA has accepted the submissions and forwarded them to the U.S. EPA for approval. In January 1988, the District of Columbia Circuit Appeals Court remanded portions of the 1985-regulations to the U.S. EPA for- further consideration; however, no action has
-been.taken by the U.S._ EPA.
In 1986, the-SixthL Circuit Appeals Court ruled.on a . challenge filed by an environmental group and.several states; east'of Ohio seeking to overturn the Federall sulfur dioxide emission -limitations for the Eastlake and Avon Lake Plants. The Court ruled that the validity of the-air _ quality model used by the_-U.S. EPA to set the sulfur dioxide emission linitations for those plants had not been adequately established. The Court permitted the Ohio sulfur , dioxide emission' limitations'to remain in effect while the U.S. EPA completed its reviev of'the application of the air quality model. The U.S. EPA, along
- wi th Centerior, demonstrated the validity lof the model used to establish the sulfur, dioxide emission. limitations for -those plants. In January 1990, the U.S. EPA proposed to reinstate the overturned emission _ limitations; hove /er, final action has not been taken by the U.S. EPA.
f
Congress. is_considering11egislation lto reduce emissions of gases that are thought to cause global varming.- The burning of coal is thought to be a cause of global varming. If- such legislation is--adopted, the cost of operating coal-fired plants could increase significantly and coal-fired generating
' capacity _could. decrease 1significantly.
Vater Quality Cantrol Tlur Clean Vater Act requires that power plants obtain permits that contain certain effluent limitations (that-is, limits on discharges of pollutants into bodies of vater). It_also provides that permits for new power plants include even more stringent- effluent limitations, including zero discharges, where practicable. The Clean Vater Act also requires that cooling water intake structures _for pover_-plants incorporate the best available technology for minimizing adverse environmental impact. The Clean Vater Act requires the states to establish water quality standards (which could result in more strin-gent effluent limitations than those described above) and a permit system to
-be -approved by the U.S. EPA. Violators of effluent limitations and water quality- standards are subject to a civil penalty of up to S25,000 per day for each such violationc l The Clean Vater Act permits thermal effluent limitations to be established for .
a facility which-are less stringent than those which otherwise vould apply if the _ owner can demonstrate that sach less stringent limitations are sufficient to assure the protection and propagation of aquatic and other vildlife in the affected body of water. By 1978, the Operating-Companies had submitted to the Ohio- EPA such demonstrations for review with respect to their Ashtabula. Avon
-Lake, Lake Shore, Eastlake, Acme and Bay Shore plants. The Ohio EPA has taken
, no action on the submittals. The Operating Companies have received NPDES permit renevals from the Ohio EPA L .for all of their power plants except for Toledo Edison's Acme Plant. An L application has been filed With the Ohio EPA for.the reneval of the NPDES permit for the Acme Plant but has not yet been approved. However, Acme may continue to operate under the expired permit while the application for reneval is pending.-JAny violation of an NPDES permit is considered to be a violation of the Clean Vater Att subject to the penalty discussed abeve. In 1990,-the 0hio EPA issued revised water quality standards applicable to Lake Erie'and waters of the State of Ohio. Based upon these revised water quality standards,othe Ohio EPA placed additional effluent-limitations-on the , !; Ashtabula Plant in its -most recent NPDES permit renewal. The revised standards also may serve as-the basis for more stringent effluent limitations in future NPDES permits. 'sch limitations could result in the installation of additional pollution control equipment and increased operating expenses. The Operating Companies are monitoring discharges at their plants to support their position that additional effluent limitations are not justified. LVaste Disposal See 1 Note 3(d) for a discussion of- the Operating Companies' po t en tial-involvement- in - certain hazardous vaste disposal si tes, including.those subject to Superfund. l- _- ___ u, _ _ __ _ _. _ _ . . _ . . _ _ -
- . . - - . - - - _ - - . - - - - - - . ~ ~ _ -
e Theirederal Resource Conservation.and Recovery _Act exempts certain fossil fuel combustion vaste products, such as fly ash, from ha:ardous vaste disposal requirements. JThe Operating Companies are unable to predict whether_ Congress villt choose : to amend this exemption in the future or, if so, the costs relat-ing-to any required-changes in the operations of the Operating Companies.
,7,lICTRIC RATES -
_Under Ohio- lav, . rate base is the original cost less depreciation of a Lutility's total-plant adjusted for certain items. The lav permits the PUCO, in its' discretion, to include CVIP in rate base when a construction project is at least 75% complete, but limits the amount included-to 10% of rate base ex-
-cluding -CVIP or, in _the case of a project to construct pollution control _fa-cilities which would remove sulfur and nitrous oxides from flue gas emissions, 20%
of rate base excluding CVIP. _ Vhen a _ project is com,leted, the portion of its cost which'had been included in rate base as CVIP is excluded from rate base until the revenue received due to the CVIP inclusion is offset by the
. revenue -lost due to its exclusion. During this period of time, an AFUDC-type credit is allowed on the portion of the project cost exclude *1 f rom rate base.
Also, the lav-permits inclusion of CVIP for a particular project for a period not longer _than 48 consecutive months, plus any time needed to comply with
--changed; governo. ental regulations, standards or approvals. The PUC0 is em- .
povered to poimit inclusion for up to another 12 months for good cause shovn. If a projec t is _ canceled or not completed within the allovable period of time after inclusion of its CVIP has started, then CVIP is excluded from rate base and any revenues which resulted from such prior inclusion are offset against
-future revenues over the same period of time as the CVIP was included.
Current- Ohio lav further provides that requested rates can be collected by a public utility, subject to_ refund, if the PUC0 does not make a decision within 275 daystafter the rate request application is filed. If the PUC0 does not make_its final decision within 545 days, revenues collected thereafter are not subj ec t to refund. A notice of intent to file an application for a rate in-crease cannot be filed-before the issuance of a final order in any prior pend-ing application for_a rate increase or until 275 days after the filing of the. prior - application, whichever- is earlier. The minimum -period by which the notice of intent to file must precede the actual filing is 30 days. The test. year 'for1 determining rates may not end more than nine months after the date the application for-a rate increase is filed. Under Ohio lav, electric rates are adjusted every six months, after a-PUC0 proceeding, .to reflect changes in. fuel costs. Any difference between actual fuel costs.during a six-month period and the fuel revenues recovered in that period-.is deferred ,and-'is taken into account in-setting the fuel recovery factor for a subsequent six-month period. i
- The PUC0 has authorized the Operating-Companies to adjust their rates _on a seasonal basis such that-electric rates are higher in the summer.
L Also, under.0hio-lav, municipa'lities may. regulate rates charged by a utility, subj ec t .to appeal to the; PUC0 if not acceptable to the utility. -If municipally fixed rates are accepted by the utility, such rates are bindinguon both parties-for the speciflad'_ term and cannot be changed by the PUCO. l*
_ - __ _ ._ -.. _ . _ _ _ _. , _ . ~ . . _ _ _ . _ . _ _ _ _ _ - . . . _ _ _ _ . _ _ _ _ _ . . i See Note 6 and Management's Financial Analysis contained'under Item.7 of this , Report: .for a discussion of the rate increases and_other matters relating to the :PUCO's' January 1989 rate orders and the rate-reduction packnSe that-vas implemented in Toledo Edison's service area in 1991. OPERATIONS . Sales of Electricity
. Kilovatt-hour sales by .the' Operating Companies follow a seasonal pattern marked- by' increased customer usage in the summer for air conditioning and in - the vinterLfor heating.- Historically, Cleveland Electric has experienced its heaviest _ demand for electric service during the summer months because of a significant; air conditioning. load on its system and a relatively lov amount of electric' heating load in the vinter. Toledo Edison, although having a significant electric heating load, has experienced in recent years- its heaviest demand for electric service during the summer months because of heavy air condi'.ioning usage.
The Centerior System's largest customer is a steel manufacturer which has two major steel producing facilities served by Cleveland Electric. Sales to this customer -in 1991 accounted for 2.5% and- 3.5% of the 1991 total electric operating revenues of Centerior Energy and Cleveland Electric, respectively. The loss of'this customer (and_ the resultant loss of another large customer whose primary product is purchased by the two steel producing facilities) would reduce Centerior Energy's and Cleveland Electric's net income by about
- $34,000,000 based-on 1991 sales levels. - The largest customer served by Toledo Edison is a major automobile manufac-turer. Sales to this customeri in 1991 necounted for 1% and 3% of the 1991 total electric operating revenues of Centerior. Energy and Toledo Edison, re-spectively. The loss of this customer vould reduce Centerior Energy's and . Toledo Edison's net income by about $10,000,000 based on 1991 sales levels.
O l
.. ,. - . . - . . - _ . - . - - . - . ~ - - . - . . - . - - . - . - - . - . - . - .
T0 perating StatisticsL Centerior System Ytars Ended December 31, 1991 1990 1989 Energy Generated.(Millions.of-kVh):- Net Generation 31, 4 9.', 30,595 32,296 Purchases
- 4) 413 21 Total Energy ]__31,0QS
_ red _%RZ
' Electric Sales (Millions of kVh): -Residential' 6,981 6,666 6,806 ' Commercial 7,176 6,848 .6,830 Industrial 11,559 12,168 12,520 Wholesale
- 2,711 2,48; 3,235
-Other 1,048 959 996 Total Electric Sales 29.41.5 29.12_q . % 331 Customers (End of. Period): '
Residential. 921,995 918,965 914,020 Commercial. 96,449 94,522 93,833 Industrial & Other 12,843 12,906 12,763 Total Elegtric Customers 1.1DHJB1 kQ24t313 Lf22d14 Operating Revenues (In Thousands): Residential $ 777,273 $ 719,078 $ 685,735-l Commercial 723,318 668,910 .616,902 :, Industrial .782,747 '779,391 746,534 other- 188,026 189,754 204~,769 Total Retail 2,471,364 2,357,133 2,253,940 Vholesale* 88,888 70,308 _107,364
-Total Operating Revenues $2.560.252 .$ M 2 h441 $2.361.3Q4
- Energy purchases-(or purchased pover),. wholesale electric sales and vholesale revenues: are.. restated for 1990 and-1989 to -reflect a change in reparting of Lbulk power sales transactions in accordance with FERC requirements.
.. , . ~ . . . --.-~ . - - . . . . . - . . . _ . ~ . _ . _ . . _ - . _ . . . -
Cleveland Electric ' Years Ended December 31, 1991 1990 1989 Energy Generated (Millions of kVh): NetzGeneration 20,644 20,841 21,538
-Purchases
- 2,144 964 1,268 Total Energy 2LlBB 21.13D5 _ _2.23B_D4
- Electric Sales (Hillions of kVh): }
Residential. 4,940 4,716 4,789 Commercial _. 5,493 5,234 5,208-Industrial 8,017 8,551 8,780 Wholesale *- 2,442 1,607 2,132.
'Other 565 463 501 Total Electric Sales .. 21,452 20.571 21.410 - Customers (End.of Period):
Residential 667,495 665,000 660,786 Commercial 70,405 68,700 -68,030 , , Industrial-& Other 8,398 8,351 8,329 Total Electric' Customers 74613H _L41DSl 737.1.45 Operati'ng Revenues (In Thousands): Residential- $ 547,433 $ 495,158 $ 469,803 Commercial 539,795 494,370 452,911
-Industrial: 546,698 543,813 519,854 Other .
116,826 122,'701 117,220 Total-Retail 1,750,752 1,656,042 1,559,788 Vholesale*- . 74,986 35,117 74,439 Total Operating Revenues .$LH1L]JH $12 691.159 $h134,121 1
-
- Energy purchases (or purchased power), vholesale electric sales and wholesale revenues are-restated'for 1990 and 1989 to reflect a change in reporting of bulk pove'r sales transactions in accordance with FERC requirements.
a
_ _ _ ._. ~ . _ . . . _ _ _. . _ . . _ . _ - _ . _ _ _ . _ . _ . . . _ _ . . _ _ . . . . _ . . _ _ _ _ _ _ _ . _ . _ . 1 Toledo-Edison Years Ended December 31, 1991 1990 1989 Energy. Generated (Millions of kVh): ' Net-Generation 10,6';1 9,754 10,758 Purchases *. 95 902 788 Total Energy _1QJ.4_6 10.656 J1d41 Electric' Sales (HilJ' ions of kVh): Residential 2,041 1,950 2,017-Commercial- 1,683 1,614 1,622 Industrial 3,543 3,617 3,740 Vholesale* 2,587 2,333 3,138 Other- 482 496 495 Total Electric Sales 10.3) JQd10 J 2012 Customers (End of Period): Residential 254,500 253,965 253,234 Commercial 26,044 25,822 25,803 Industrial & Other~ 4,444 4,555 4,434 Total Electric Customers 2E2Bfl . gjj,14Z ZRL471 Operating Revenues.(In Thousanas):
-Residential '$229,840 $223,920 $215,932 Commercial 183,523 174,540 163,991 Industrial 236,049 235,578 226,680 -Other _
90,919 79,535 99,451 Total Retail 740,331 713,573 706,054
- Vholesale* 146,927 149,600 159,569 Total Operating Revenues ' $S01258 $dd)) $flfdd2)
- Energy purchases (or--purchased power), wholesale electric sales and wholesale
' revenues -are restated for 1990 and 1939 to reflect a change in reporting of bulk power sales transactiohs.in accordance with FERC requirements.
l
,,, 2,:,- , - -
_ _ . _ ....m __ _ _ -. _ _._ _ - _ . _ . _ _ . - - - _ _ - ~ _ . Nuclear Units The Operating Companies' generating facilities Include, among others, three nuclear- units owned-or leased by the CAPCO Group--Perry Unit 1, Beaver Valley i Unit 2 and Davis-Besse.. These three units are in commercial operation. -- Cleveland Electric has responsibility-for operating Perry Unit 1, Duquesne has responsibility for operating. Beaver Valley Unit 2 and Toledo Edison has re-sponsibility-;for operating Davis-Besse. Cleveland _ Electric and Toledo Edison-own . 'respectively,_31.11% _and 19 91% of Perry Unit 1, 24.47% and 1.65% of
-Beaver Valley' Unit 2 and 51.38% anc' 1.62% of Davis-Besse. Cleveland Electric and Toledo Edison. also lease, sa jc.nt lessees, another 18.26% of Beaver Valley Unit 2 as a result of a September 1987 sale and leaseback transaction (see Note 2).
Davis-Besse .vas placed in commerciel operation in 1977, and its operating license expires-in 2017. Perry Unit 1 and Beaver Valley Unit 2 were placed in commercial operation in 1987, and their operating licenses expire in 2026 and 2027, respectively. The nuclear plant performance standards set for the Operating Companies as a result of the PUCO's January 1989 rate orders (see Note 6) vill be based on rolling three-year industry averages of operating availability for pressurized water reactors and for boiling -vater reactors over the 1988-1998 period. Operating availability is the ratio of the number of hours a unit is available to generate electricity (vhether or not the unit is operated) to the number of hours in the period, expressed as a percentage. The January 1989 rate orders allov_ for the three-year operating _ availability averages of the Operating Companies' nuclear units to be compared against the industry averages for the same three-year period vith a resultant penalty or banked benefit. If the industry performance standards are not met, a penalty would be incurred which would- require the Operating Companies to refund incremental replacement power costs to customers through the semiannual fuel cost rate adjustment. Hovever, if the . performance _ of the Operating Companies' nuclear units exceeds the industry- standards, a- banked benefit results which can be used to offset
-disallowances of lacremental replacement power costs should future performance be belov industry standards.
The -relevant industry standards for the 1989-1991 period are 74.5% (preliminary) for pressurized water reactors such as Davis-Besue ano Beaver Valley Unit 2 and 72.1%-(preliminary) for boiling water-reactors such as Perry Unit 1. The ._1989-1991_ availability average vas -82.8% for Davis-Besse _and 1 Beaver Valley Unit 2 and 70.2% for Ferry Unit 1. At December 31, 1991,_the
-total banked benefit for the Operating Companies is estimated to be between- $6,000,000 and $8,000,000. The actual amount vill not be available until the second quarter of 1992. , 'See. Note'3(c) for a discussion of the status of Perry Unit 2 and see Note 4 i for- a discussion of potential problems facing owners of nuclear generating a units. -1s-
_ _ m .. _ __. _-m--__ - _ _ . __ _ _ - - . _ _ . _ _ - . _ _ . Competitive Conditions
-General. The operating Onmpanies compete in their respective service areas vith suppliers of. natural gas =to satisfy customers' energy needs with regard to heating and appliance usage. The Operating Companies also are engaged in competition to;a lesser extent with suppliers of oil and liquefied natural gas -for_ cheating purposes and with suppliers of cogeneration equipment. One -competitor provides steam for heating purposes and plans to provide chilled vater for cooling purposes in downtown Cleveland.
The~ Operating Companies also compete with municipally ovned electric systems wi thin their respective service areas. As discussed below, two of the.munici-palities served by the Operating Companies, the City of. Toledo and the City of Brook Park, are investigating the economic feasibility of establishing and operating -municipally owned electric systems. A few other communities have recently evaluated municipalization of electric service and decided to con-tinue._ service from Cleveland Electric and Toledo Edison. Officials in still other communities have indicated an interest in evaluating the municipalization issue. The- Operating Companies face continuing competition from locations outside their service areas which are promoted by governmental and private agencies in *
. attempts to influence potential and existing commercial and industrial cus-tomers to locate in their respective areas.
Cleveland Electric.and Toledo Edison also periodically compete with other producers of electricity for sales to electric utilities which are in the market- for bulk. power purchases. The Operating Companies have inter-connections vith other electric utilities (see " Item 2. Properties--General")
.and provide a transmission system for wheeling power from the Hidvest to the East. Revenue from these types of sales are excluded from the operation of the rate phase-in plans discussed in Note 6 and in Hanagement's Financial Analysis contained under Item 7 of this Report. ,
Cleveland 1 Electric. Loccted within Cleveland Electric's service area are two municipally -owned electric systems. Cleveland -Electric supplies -a small ., portion of'those systems' power needs at wholesale rates. ' One of those systems, CPP, is operated by the City.of Cleveland in competition Lvith Cleveland Electric. CPP is primarily an -electric distribution system which._ supplies electric power in approximately.35% of the City's area and to approximatelyj 23%-(about 53,000) of the electric consumers in the_ City--equal , to about.7% of all customers-served by Cleveland -Electric. CPP's kilowatt-hour 1 sales and -revenues are _ equal to about 3% of Cleveland Elcetric's l- kilova't t-hour- sales and revenues. Much of the area served by CPF overlaps that of Cleveland Electric. Cleveland Electric is obligated to make available
- up to-100,000 kilowatts of CPP's energy requirements over two 138 kV inter-Econnections - ifovever, in recent- years --CPP has .not made significant power
_ purchases from Cleveland Electric. In 1991, Cleveland Electric provided less
-than 1% of CPP's energy requirements. The balance of CPP's pover is purchased from- other sources and transmitted or "vheeled" over Cleveland Electric's transmission system. For_all classes of customers, Cleveland Electric's rates are; higher than CPP's rates due largely to lower-cost power and financing i- , o,, , .~ s < - - -
- available to CPP and to CPP's exemption from_ taxation. 'In 1983, CPP announced its intention to convert some of Cleveland Electric's customers to its service. CPP is constructingr new transmission and dis t ri bu t ior iacilities extending into easterly portions of Cleveland, comprising over 20% of.the area of the City, which nov,are-served exclusively by Cleveland Electric. Over the past three years,1 Cleveland Electric has experienced. the net loss of an insignificant - number of customers (about 2.600), which vere primarily residential, to the CPP system. _During 1991, CPP completed work which enabled the City to convert 1three vatet pumping stations from Cleveland Electric service, The-annual -sales effect of this conversion is about 103,000,000 kilowatt-hours with related revenues of about $6,000,000. CPP has also signed 2 contracts with several small and medium-sized companies in the expansion area and vill be_ able- to offer service to residential and small commercial <
customers ;in that area late in 1902. The expansion, as nov planned, could take away about 40,000 of Cleveland Electric's customers over the next several years. -This could eventually reduce Cleveland Electric's annual revenues by
$40,000,000 exclusive of- the water pumping load, although there vould be partially- offsetting reductions in operating expenses and taxes. Cleveland Electric has retained large commercial and industrial customers in Cleveland despite CPP's expansion efforts.
In June 1991, the City of Brook Park, located within the Cleveland Electric
/ service- territory, announced (nat it had commissioned a fcasibility study
- regarding the establishn.ent at a municipal electric system. Ford Motor Company, which operates an enP ine manufacturing plant in Brook Park, has expressed a desire for lover electric rates and reportedly vould support the idea of Br,ok Park forning its ovn electric system if such a system would
- result in lover rates. Cleveland Electric has entered into separate discus-sions vith officials et Brook Park and Ford in an effort to address their concerns._ In 1991, Cleveland Electric derived about 3% of its total revenues and Centerior Energy derived about 2% of its total revenues from sales to the 8,500 customers-located in Brook' Park, Currently, (vo commercial customers and one industrial customer of Cleveland
. Electric.have cageneration installations. A number of customers have inquired about cogeneration applications although there vere no new installations in 1991. Cogeneration vendors _ continue to be active in Cleveland Electric's service area.
Toledo Edison. Located wholly or partly within Toledo Edison's service area are six rural electric cooperatives, five of which are supplied with power, transmitted in some cases over Toledo Edison's facilities, hv Buckeye Pover, Inc. .(an affiliate of a number of Ohio _ rural electric cooperatives) and the sixth-is supplied-by Toledo Edison, i Also _ located withln Toledo Edison's service area are 16 municipally ovned
- j. ' electric distribution systems, three of which are supplied by other_ electric systems. ~ Toledo Edison provides_a portion of the power purchased by the other 13 fmunicipalities .at- _vholesale rates through AMP-Ohio. In December 1939,-
I ' Toledo Edison' commenced billing-AMP-Ohio under a new agreement which was l accepted by the- FERC in March 1992. Under this 20-year agreement, Toledo
- Edison vill supply certain ' power requirements of AMP-Ohio and transmission e
I l= g 1 o . . _ . . _ _ _ . - _ . . . _ _. , -_ . _ . - - , _ _,
service for 13 of its -vunicipal members. . Rates under this agreement are _ permitted _to increase annually to compensate for-increased costs of operation. Less than 2% of Tole'A Edison's total electric operating _ revenues in 1991 vere derived from sales'under the AMP-Ohio contract. In October 1989, the City of Toledo adopted an ordinance establishing an Electric Franchise Retiev Committee for the -purpose of studying Toledo
- Edison's franchise agreement vitb the City to -Jetermine if alternate energy sources are availalle.. The Committee _ is investigating the feasibility of establishing a municipal electric system vithin the City of Toledo and the feasibility of utilizing other alternative electric power sources. The Committee's report is expected to be made public in the spring of 1992.
Toledo Edison is continuing-to make an effort to address the City's concerns.
'See Centerior's and Toledo Edison's Note 6 for a discussion of a late-reduction riackage implemented by Toledo Edison in 1991.
The one remaining commercial customer of Toledo Edison having a cogeneration unit' hasLreached-agreement with Toledo Edison to cease operation of its unit during- the first half of 1992. However, cogeneration vendors continue to be active in Toledo Edison's service area. i LFuel Supply Generation by type of fuel for 1991 vas 64% coal-fired and 36% nuclear for Cleveland Electric; 4;( coal-fired and 55% nuclear for Toledo Edison; and 57% coal-fired and 43% nuclear for the Centerior System. Coal. 'In 1991, C1'eveland Electric and Toledo Edison burned 5,419,000 tons and 1,873,000 tons of coal, respectively, for electric generation. Each utility normally maintains a. reserve supply of coal sufficient for about 40 days of i normal operations. On March 1, 1992, this reserve vas about 50 days for e plants operated by Cleveland Electric, 48 days for plants operated by Toledo LEdison and 100 days for the Mansfield Plant, which is operated by Pennsylvania Pover. In 1c91,-about 63% of- Cleveland Electric's coal requirements vere purchased undez long-term contracts, with the longest remaining term being almost nine years. In most. cases, these contracts provide for: adjusting the price of the coal _on-the basis of changes in coal quality and-mining costs. The sulfur content. of the coal purchased under_ these contracts ranges from about 2% to
- . about 4%. The balance of Cleveland Electric's coal was purchased on the spot market-vith sulfur content ranging from less than 1% to 3.5%.
_ In -1991, all. of Toledo _ Edison's coal requirements vere purchased under =
=long-term contracts, with the longest remaining term being almost nine-years.
In mobt cases, these contracts provide for adjusting the price of the coal on
-the . basis of changes in coal quality and mining costs. The sulfur content of o :
the coal-purchased under these contracts: ranges from less than 1% to 4%. Or.e _of C]eveland Electric's.long-term coal supply contracts is with Ohio - Valley. Cleveland Electric has agreed to pay Ohio Valley certain' amounts to cover Ohio' Valley's costs regardless of whether coal is actually delivered. Included in those costs are amounts sufticient.to service certain long-term
= . - - . . - - _ . - . . - . - - - - - . . . - - - . . . . _ ,
Spent fuel reprocessing is not_ commercially available in_the United States. Off; site. dibposal of spent _ nuclear fuel is also unavailable, but the CAPC0 Group companies have contracts with the DOE vhich _ pron do fnr the future acceptance of spent fuel for disposal by-the Federal government. Pursuant to the_NuclearLVaste Policy Act of 1982, the Federal' government has indicated it vill .begin accepting- spent fuel from utilities by the year. 2010. On-site storage capacity-at Davis-Besse and Beaver Valley Unit 2 should be sufficient through 1996 and 2010,-respectively. On-site storage capacity at the Perry Plant -should'be' sufficient through 2007 for Perry Unit 1. Any additional storage capacity needed for the period until the government accepts the fuel scan be provided for either on-site or off-site by the time it is needed.
- 011. The Operating Companies each have adequate supplies of oil and fuel for their oil-fired electric generating units which are used primarily as reserve and peaking capacity.
4 d f-i i l !~ l l
i, debt and lease obligations i t.c u r red by Ohio Valley. If the coal sales agreement is terminated for any reason, including the inability to use the , coal, Cleveland Electric must assume certain of Ohio Valley's debt and lease obligations and may incur other expenses. Cleveland Electric believes that the cost of assuming such obligations and incurring such expenses vould not have a material adverse effect upon its financial position. The principal amount of debt end termination values of leased property covered by Cleveland Electric's agreement vas $37,599,000 at December 31, 1991. Centerior and Cleveland Electric expect that Ohio Valley revenues from sales of coal to Cleveland Electric vill continue to be sufficient for Ohio Valley to meet its debt and lease obligations. The contract with Ohio Valley expires in 1997. The CAPC0 Group companies, including the Operating Companies, have a long-term contract with Quarto and Censol for 'he supply of about 75%-85% of the annaal
- coal needs of the Mansfield Plant. The contract runs through at least the end of 1999, and the price of coal is adjustable to reflect changes in labor, materials, transportation and other costs. The CAPC0 Group companies have _
guaranteed, severally and not jointly, the debt and lease obligations incurred by Quarto to develop, equip and operate two of the mines which " apply the Mansfield Plant. At December 31, 1991, after giving effect to a refinancing completed by Quarto on January 2, 1992, the total dollar amount of Quarto's debt and lease obligations guaranteed by Cleveland Electric was $40,644,000 and by Toledo Edison was $23,729,000. Centerior, Cleveland Electric and Toledo Edisen expect that Guarto revenues from sales of coal to the CAPCO Greup companies vill continue to be sufficient for Quarto to meet its debt and lease obligations. The Operating Companies' least cost plan for complying with tne Clean Air Act Amendments to be filed with the PUC0 in 1992 (see Note 3(b)) calls for greater use of low-sulfur coal and less use of high-sulfur coal. Bids bave been received for an adequate supply of lov-sulfur coal at prices not significantly different than the current price of coal which would be replaced. The only long-term coal contract affected by the Clean Air Act Amendments is Cleveland Electric's contract with Ohio Valley. Centerior and Cleveland Electric believe that steps can be taken to mitigate or eliminate any costs associated w i '. h the termination of the Ohio Valley contract should the contract be - terr.inated. Nuclear. The acquisition and utilization of nuclear fuel involves six dis-tinct steps: (i) supply of uranium oxide rav material, (ii) conversion to uranium hexafluoride, (iii) enrichment, (iv) fabrication into fuel assemblies, (v) utilication as fuel in a nuclear reactor and (vi) storing and reprocessing or disposing of spent fuel, The Operating Companies have inventories of rav material sufficient to provide nuclear fuel through 1995 for the operation of their nuclear generating units and have contracts for f abrication services fot all of that fuel. The ;APC0 Group companies have a 30-year cont rac t with the DOE vhich vill supply ril of the needed enrichment services for thei: nuclear
-ini t s ' fuel supply through 1995. Beyond 1995, the amount of enrichment services under the DOE contract varies by CAPCO Group company, with Cleveland
- lectric's and Toledo Edison's enrichment setvices reduced to 70% in 1996-1999 and reduced to 0% in 2000 and 2001. The additional required enrichment setvices are available. Substantial additicnal fuel vill have to be obtained in the future over the remaining useful livec of the units and if Perry Unit 2 is completed. There is a plentiful supply of uranium oxide ras material to meet the industry's nuclear fuel needs.
' Securities registered pursuant-to Section 12(b) of the Act:
Name of Each Exchange Registrant Title of Each Class on Vhich Registered _ Centerlot Energy Common Stock, Corporation without par value New York Stock Exchange Midvest Stock Exchange Pacific Stock Exchange The Cleveland Electric Cumulative Serial Preferred Illuminating Company Stock, vithout par value: S7.40 Series A New York Stock Exchange S7.56 Series B New York Stock Exchange Adjustable Rate, Series L New York Stock Exchange First Mc.rtgage Bonds: 3-7/0).' Series due 1993 New York Stock Exchange 4-3/8% Series duc 1994 New York Stock Exchange 8-3/4% Series due 2005 Nov York Stock Exchange 9-1/4% Series due 2009 New York Stock Exchange 9.85% Series due 2010 New York Stock Exchange 8-3/C% Series due 2011 New York Stock Exchcnge 8-3/8% Series due 2012' Nov York Stock Exchange The Toledo Edison Cumulative Preferred Stock, Company par value $100 per share: 4-1/4r Series American Stock Exchange 8.32% Series American Stock Exchange 7.76% Series American Stock Exchange 10% Series American Stock Exchange Cumulative Preferred Stock, par value S25 per share: 8.84% Series tce v York Stock Exchange
$2.365 Series- New York Stock Exchange Adjustable Rate, Series A New York Stock Exchange Adjustable Rate, Series E New York Stock Exchange $2.81 Series Nev. York Stock Exchange First Mortgage Ponda:
9% Series due 2000' New York Stock' Exchange 7-1/I% Series due 2002 New York Stock Exchange 8% Series due 2003 New York Stock Exchango 9.65% Series due 2006 New York Stock Exchange 9-5/8% Series due 2008 New York Stock Exchange f
. . _ . . . . . . . . , _ _ _ . ~ _ . - _ . - . . . _ . . . . _ . . . _ _ _ . _ _ . _ . = _ _ . . . . . _ . - . _ . _ . _ ~ -Securities registered pursuant-to Section 12(g).of-the~Act:
{ Registrant Title of Each Class
-Centarior Energy. None-Corporation-The Citveland-Electrio. l'one -Illuminating Company _
The Toledo Edison Cum *ilative Preferred Stock,
. Company. . par.value $100 per share:.
4.56% Series and 4.25% Series i . DOCUMENTS INCORPORATED BY REFERENCE Part of Form 10-K Into Vhich Document Des c ri p t ion - Is Incorporated
- Portions of' Proxy Statement of Centerior Energy Corporation, dated March.6, 1992 Part III.
f 4_ L u r l
EIECITTIVE OFFICERS OF Tile REGISTRANTS AND TIIE SERVICE COMPANY Set forth belov are the names, ages as of March 15, 1992, positions and brief accounts of the business experience during the past five years of the execu-tive officers of Centerior Energy, the Service Company, Cleveland Electric and Toledo Edison. Positions currently held are designated with an asterisk (*). Centerior Energy Executive Officers
, Business Experience Effective Date Name Age (Positions as Indicated) of Position Robert J. Farling 55
- Chairman of the Board and March 1992 Chief Executive Officer of Centerior and the Service company Chairman of the Board and February 1989 Chief Executive Officer of Cleveland Electric
- President of Centerior October 1988 Chairman of the Board and October 1988 Chief Executive Officer of ,
Toledo Edison
- President of the Service July 1988 Company President of Cleveland April 1986 Electric Executive Vice President of February 1986 Centerior Murray R. Edelman 52
- Executive Vice President- April 1990 Power Generation of the Service Company
- Executive Vice President of July 1988 Centerior President of Toledo Edison July 1988 Vice President-Nuclear April 1986 of the Serv'ne Company and Senior Vice tresident-Nuclear of Cleveland Electric l
l l !
.. . . . - - ~. .. -- - . - - . - . _ - . - - . . - . ~ -
Business Experience Effective Date Name- --Age (Positions'as Indicated) of Position
~
Edgar'H. Haugans 15 7
- Executive Vice President of April 1990 Centerior and
- Executive Vice President-Finance &
Administration of the
' Service Company. *Vice President and Chief April 1990 Financial Officer of Cleveland Electric and Toledo Edison Senior-Vice President-Finance April 1988 of Centerior-Senio: Vice President-Finance April 1986 of the Service Company Vice President-Finance of February 1986 Centerior Lyman C. Phillips 52
- Executive Vice President- April 1990 Customer Operations of the Service Company and *Chairmsn of-the Board and Chief-
- Executive Officer of Toledo Edison and
- Chief Executive Officer offCleveland Ele'tric
- Executive Vice President of July 1988 Centerior and
- President of Cleveland Electric Executive Vice-President of June 1987 Toledo Edison and Senior Vice President of Centerior Senior Vice President- April 1986 Administration of the 4
Service Company Fred J. Lange, Jr. 42
- Senior Vice President- March 1992 Legal, Human &_ Corporate Affairs. -
Vice' President-Legal &. April 1990 Corporate Affairs of
.centerior and the Service Company and *Vice President of. Cleveland Electric and Toledo Edison General Attorney and. Senior July 1989 Director of Governmental Affairs of the Service Company
- Assistant General Counsel November 1986 and Principal Corporate Counsel of the. Service Company
~ . . _ _ _ _ . . . _ . _ __ _ ' Business Experience _ Effective Date Name- Age .( Positions as' Indicated)- of' Position . ~
Paul . G.1. Dusby - 43 .* Controller'of Cleveland April 1990 Electric and Toledo' Edison
- Controller'of Centerior April 1988
- Controller of the Service June 11986
' Company-Gary M. !!avkinson 43 ~* Treasurer of Cleveland April 1990 Electric and_ Toledo Edison Assistant Treasurer of August 1907 Cleveland Electric
- Treasurer of the-Service April 1986
-Company
- Treasurer of Centerior February 1986 -
E. Lyle Pepin. 50
- secretary of Cleveland. October 1988 Electric and Toledo Edison
- Secretary of the Service April 1986 Company
- Secretary of Centerior February 1986
-Service Company Executive Officers Busincas Experience (Positions
- Vith the Service Company Effective Date
'Name Age- Unless Othervise Indicated) of Position ,
Robert J. Farling 55-
- Chairman of the Board and March 1992 Chief. Executive Officer
~* President July 1988 See listing under Centerior Energy Executive Officers for additional business experience.
hMurrayR.Edelman 52 AExecutive Vice President- April 1990 Power Generation-See listing under Centerior'- Energy-Executive Officera for additional business experience. Edgar H. Maugans- 57 -
- Executive Vice President- April 1990 Finance & Administration See listing under Centerior.
Energy Executive _ Officers forzadditional business experience.. i
~
1 3 f .
- + , ,e -
t Business: Experience (Positions Vith the Service Company'_ Effective Date Name Age _ Unless Otherwise-Indicated) of Position
-Lyman C. Phillips 52
- Executive Vice President- April 1990 Customer Operations
- See listing under Centerior Energy Executive Officers-fer additional business experience.
Richard P. Crouse 52 *Vice President-Fossil April 1990 Operations Senior Vice-President of April 1988 , Toledo Edison ' Vice President-Fossil __ August 1987 Engineering & Operations Senior Vice President, June 1986 Engineering & Operations of Toledo Edison P Gary J. Greben 54 *Vice President-Transmission April 1990 - and Dist bution Engineering 6-Services Vice President-Marketing- July 1987 of Cleveland: Electric 1 Manager-Business Ventures November 1984 of Cleveland Flectric Jacquita K. Hauserman 49 *Vice President-Customer April-1990 Service 6 Community Affairs
--Vice President-Administration October 1988 :
of Cleveland Electric p Director-Consumer. Services April 1986 , Dapt. of-Cleveland E.lectric-
- Alvin Kaplann 53 *Vice President-System April-1990 L _ Engineering & Control.
ji
-Vice President-Nuclear December-1987 of Cleveland Electric ~
Vice President-Nuclear February 1984- >. Operations Division of Cleveland Electric t Fred J. Lange, J r. '42 =* Senior Vice President- _ March 1992 Legal, Human _&' Corporate j' Affairs b See listing-under Centerior
-Energy Executive Officers for additional business
- experience.
L l l ls
. . . _ . . _ _ _ . ~ . _ . _
Business Experience-(Positions Vith the Service Company Effective Date-Name- Age _ Unless Othervise Indicated) ,of Position
-fJohn S.-Levicki - 52 *Vice President-Faman April 1990 Resources & Strategic-Planning Vice President-Public October 1988 Affairs & Rates Vice President-Finance, January 1988 Administration & Legal of Cleveland Electric '
Vice President-Finance & - April 1986 Administratior, of Cleveland Electric
.Terrence G. Linnert 45 *Vice President-Legal and March 1992 General Counsel-General Counsel and May 1990 Director-Legal Services Dept.
General Counsel July 1989 . Principal Counsel June 1987 Senior Corporate Counsel January 1987 Senior Corporate Counsel June 1984 at Cleveland Electric Michael D. Lyster- 48- *Vice. President-Nuclear- April 1990 Perry-General Manager-Perry March 1988 Plant Operations Dept. of Cleveland Electric Director-Perry Plant December 1987 Operations Dept. of
-Cleveland Electric Manager-Perry Plant - October 1984 Operutions Dept. of -Cleveland Electric David L. Honseau- 51 *Vice President-- April 1990 Transmission-6 Dis t ribution- Opera tions Vice President-Customer September 1987 Operations of Toledo -Edison Director-Human Resources April 1986 Dept. of the Service Company l'
f
= .
m _ ,_ -, ._ . .._m.. .-._____.....___..___.._..._.._.-m _ . _ _ .
- Business Experience (Positions '
Vith'the Service Company Effective Date _ jf ane ; Age- Unless Otherwise Indicated). of-Position
- Thomas H.-Quinn- *Vice President-Marketing April 1990- ,
Vice President-Marketing September 1987-of Toledo Edison General Manager-Consumer- August 1986 '
-Services Dept. of Toledo Edison . Donald H. Saunders. 56 - *Vice President and
- President April 1990 of Toledo Edison Vice President-Administra- January'1990 i tion & Governmental Affairs of-Toledo Edison Vice President-Finance & July 1986
-Administration of Toledo Edison Donald'C. Shelton- 58 *Vice President-Nuclear- April 1990 Davis-Besse Vice President-Nuclear August 1986 of Toledo Edison Paul G. Busby 43 -* Controller June 1986 See listing under Centerior Energy Executive Officers for additional business-experience.
Gary M.;Hawkinson- 43 " Treasurer April 1986-See listing under Centerior Energy _ Executive officers for additional business experience. E..Lyle Pepin .50'
- secretary- __
April 1986 See. listing under Centerior Energy _ Executive Officers for additional business experience.
. . . . , . . . ~ . _ _ _ , - .
. . _ _ _ ._ _ . _ . ~ . - . . .. __ .. _ _ __ _ ..____ . _ _ _ _ - . .
Cleveland Elecitic Executive Officers Business Experience (Positions JVith Cleveland. Electric . Effective Date Name Age: 'Unless Otherwise Indicatedl_ of Position-
-Lyman C. Phillips ~
52
- Chief Executive Officer April 1990
- President July 1988 See listing under Centerior Energy Executive.0fficers for additional business experience. -
Fred J. _ Lange, Jr. 42 *Vice President April 1990 See listing under Centerior Energy Executive Officers for additional business experience.
-_ Edgar H 'Maugans 57 *Vice President and Chief April 1993 Financial Officer ~ See listing under-Centerior .
Energy Executive Officers for additional business experience.
' Paul G.-Busoy 43
- Controller April 1990 See listing under Centerior
' Energy Executive Officers for additional business experience.
Gary M. Hawkinson 43
- Treasurer April 1990 See listing under Centerior Energy Executive Officers for additional business. '
experience. E. Lyle Pepin 50
- Secretary October 1988-See listing.under.Conterior Energy Executive Officers for additional business experience.
( L L
=
Toledo Edison-Executive Officers Business Experience (Positions Vith. Toledo. Edison Effective Date Name- Age Unless Othervise Indicated) of Position ; Lyman C._Phillips 52;
- Chairman of the Board and April 1990 Chief Executive Officer ,
see listing under-Centerior Laergy Executive Officers' for additional business . experience. ! Donald H. Saunders 56'
- President April 1990-See listing under Service Company Executive Officers for additional business--
experience. Fred J . Lange, J r.
. 42 *Vice President Apt 21 1990 See listing under Centerior -
Energy Executive-Officers
- for additional business experience.
. Edgar H. Haugans' 57 *Vice President and Chief April 1990 Financial Officer See listing under Centerior . Energy Executive Officers for additional business experience.
Paul G.' Busby. .43
- Controller April 1990 See listing under'Centerior Energy' Executive Officers-for additional business:
experience. Gary M. Hawkinson 43
- Treasurer .
April _ -.1990 - See listing under Centerior Energy Executive Officers for additional business experience. p
-Business Experience-(Positions =. Vith Toledo Sdison Effective Date Name Unless Otherwise . indicated)
AJJ - of Position E. Lyle Pepin 50-
- Secretary October 1988 See listing under Centerior 4
Energy Executive Officers for additional business experience. All of the executive officers of Centerior Energy, the Service Company, Cleveland Electric and Toledo Edison are elected annually for a one-year term by the Board of Directors of Centerior, the Service Company, Cleveland
. Electric or Toledo Edison, as the case may be.
No family relationship exists among any of the executive officers and direc-tors of any of the Centerior System companies. ' I i.! l
d Item 2. Properties l CENERAl. - The'Centerior System. The wholly ovned, jointly ovned and Icased electric generating facilities of the ;0perating Comparies in commercial operation as of December 31, 1991 pro-vide the Centerior- System vith a net. demonstrated capability of 6,687,000 , R11ovatts during the vinter. These facilities include 28 generating units , (4,390,000 kilovatts) at seven fossil-fired steam electric generation sta- , tions: - three nuclear generating units (1,833,000 kilovatts); a 305,000 kilo. vatt share-of- the Seneca Plant; seven combustion turbine generating units (135,000 kilowatts) and one diesel generator (4,000 kilowatts). All of the ; Centerior System's generating facilities are located in Ohio and Pennsylvania. The Centerior System's net 60-minute peak load of it service arc 1 for 1991 vas 5,361,000 kilowatts and occurred on August 29. at the time of the 1991 peak load, the operable capacity available to serve the load vas 6.453,000 kilowatts. The Centerior System's 1992 service area peak load is forecasted
'to be 5,280,000 kilowatts, before demandiside management considerations. The operable capacity expected to be available to sek'e the Centerior Lystem's ~
1992 peak is 6,463,000 kilowatts. Over the 1992-1994 petiod, Centerior Energy forecasts its operable capacity marg!ns at the time of the projected Centu lar System peak loads to range from 14% to 18%. Each Operating Company ovns the electric transmission and distribution facili-ties located in its respective service area. Cleveland Electric and Toledo Edison are interconnected by 345 kV transmission facilities, some portions of which are owned and used by Ohio Edison. The Operating Companies have a long-term contract vith the CAPCO Group companies, including Ohio Edison, relating to the use of these facilities. These interconnection facilities provide for the interchange of power between the tvo Operating Companies. The Centerior , . System is interconnected with- Ohio Edison, Ohio Fover, Penelet and Detroit Edison. Effective May 1, 1991, the FERC approved an egreement between Cleveland Electric and GPU under which Cleveland Electric voeld sell the power from its , 305,000-kilowatt share of the Seneca Plant to two subsidiaries of GPU through 1993. For the same time period, Toledo Edison has entered into separate
- agreements--vith Consumers Power and Detroit Edison under which Toledo Edison vould - purchase 312,000 kilowatts from their Ludington Plant. Toledo Edison vould then sell to Cleveland Electric power- equivalent to the amount that Toledo Edison purchases from the Ludington Plant. The net re-ult of the power "
purchase and sale agreements is economically beneficial for L!aveland Electric and economically neutral for Toledo Edison. Cleveland Electric
;The wholly ovnen, jointly owned and -leased electric generating facilities of -Cleveland ' Electric in commercial operation as of December 31, 1991 provide a net demonstrated capability of 4,588,000 kilovatts during the vinter. These facilities include 21 generating units (3,197,000 kilowatts) at five fossil- , -- , . , _ . . n,, , . - - ~
h
fired steam electric generation stations: its share ci thice nuclear generat-ing units (1,024,000 kilovatts); a 305,000 nilowatt share of the Sencen Plant; two combustion turbine generating units (58,000 kilowattri and one diesel gen-erator (4,000 kilovatts). All of Cleveland Electric's generating faellities are located in Ohio and Pennsylvania. t The net 60-minute peak load of Cleveland Electric's service area for 1991 vas 3,886,000 kilovatts and ccurred- on. July 19. The operable capacity at the , time of the 1991 peak vas 4,695,000 kilovatts. Cleveland Electric's 1992 service orca peak load is forecastea to be 3,780,000 kilovatts, befc;e demand-side management considerations, the operabic capacity, v.sch includes firm purchases, expected to be available to serve Cleveland Electric's 1992 peak is 4,554.000 kilovatts. Over the 1992-1994 period, Cleveland Electric a fotecasts its operable capacity margins at the time of its projected peak loads to range from 14% to 17%. ? Cleveland Elcetric ovns the facilities located in the area it serves for transmitting and distributing pover to all its customers. Cleveland Electric has interconnections with Ohio Edison, Ohio Pover and penelec. The intercon-nections vith chio Edison provide for the interchange of electric power with ' the other CApCO G mup companies and for transmission of povec from the tenant-in-common ovned 65 leased CAPCO Group ger.erating units as well as for the , Interchange of pover vith Toledo Edison. The interconnection v!th Penelee provides for tran, mission of power from Cleveland Elcetric's share of the Seneca Plant. 'n aidition, these interconnections provide the means for the interchange of electric power with other utilities. Cleveland -Electric has interconnections with each of the municipal systems operating within its service area. Toledo Edison ; The wholly ovned, jointly ovned and leased electric Jenerating facilities of 3 Toledo. Edison in commercial operation as of December 31, 1991 provide a not demonstrated capability of 2,099,000 kilovatts during the vinter. These facilities include nine generating units (1,193,000 kilovatts) at three fossil-fired steam electric generation stations; its share oi three nuclear generating units (829,000 kilowatts) and five combustion -turbine generating units! (77,000 kilowatts). All of Toledo Edison's generatina facilities are Jocated in Ohio and Pennsylvania. The net 60-minute peak load of Toledo Edison's service area for 1991 vas 1,510,000 kilowatts and occurred on August 29. The operable capacity at the time of the 1991 peak vas 1,758,000 kilovatts. Toledo Edison's 1992 service area peak load is forecasted to be 1,510,000 kilovatts, before demand-side management considerations, The operable capaci ty, t ..ich includes the effect of. firm sales, expected to be availabic to serve Toledo Edison's 1992 peak is 1,726,000 kilowatts. Over the 1992-1994 period. Toledo Edison forecasts its operable capacity margins at the time of its projected ' peak loads to range from 14% to 20%. Toledo Edison owns-the facilities- located in the area it serves for trans-mitting- and distributing power to all its customers.- Toledo Edison has interconnections .vith Ohio Edison, Ohio Power and Detroit Edison. .The in-terconnection vith Ohio Edison provides for.the interchange of electric pover l
l a vith the other CAPC0 Group companies and for trant. mission of pover from the t enan t -in-cornmon owned or leased CAPCO Group generating units as well as for the interchange of power with Cleveland Electric. In addition, there inter-connections utovide the means for the interchange of electric power with other utilities. Toledo Edison has interconnections with each of the municipal systems operating within its service area. TITLE TO PROPERTY The generating plants and other principal facilities of the Operating Companies are located on Innd ovned in fee by them, except as follovst t 1 (1) Cleveland Electric _and Toledo Edison Icase from others for a term of about ~29-1/2 years starting on October 1, 1987 undivided 6.5%, 45.9% and 44.38% tenant-in-common interests in Units 1, 2 and 3, respectively, of , the Hansfield Plant located in Shippingport, Pennsylvania. Cleveland l Electric anc Toledo Edison' lease from others for a term of about 29-1/2 years starting on October 1, 1987 an 18.26% undivided tenant-in-common ; interest in Beaver _ Valley _ Unit 2 located in Shippingport, Pennsylvania. ' Cleveland Electric and -Toledo Edison own another 24.47% frterest and ' l.65% interest, respectively, in Beaver Valley Unit 2 as a tenant-in-
-commor. Cleveland _ Electric and Toledo Edisoa continue to own- as a w ant-in-common the land upon which the Hansfield plant and Beaver lley Unit 2 are located, but have leased to others certain portions of '
that land relating to the above-mentioned generating unit leases. (2) Most of tiie facilitics_of Cleveland Electric's Lake Shore Plant are situated on artificially tilled land, extending beyond the natural shore- ; line of Lake Erie as it existed in 1910. As of December 31, 1991, the , cost of Cleveland Electric's facilities, other than vater intake and discharge facilities, located on such artificially filled land aggregated i approximately $110,874,000. Title to land under the water of Lake Erie within the territorial limits of. Ohio (including artificially filled land) is in the State of Ohio in trust for the people of the State for the _public;uses to which it may be. adapted, subject to the pavers of the United States.- the public rights of navigation, vater commerce and fishetyr and the rights of upland owners to sharf out or fill to make use of the water. The State is required- by statute, after appropriate pro-ceedings, to grant a lease to an upland owner, such as Cleveland Elec-tr'c, which erected and maintained facilities on such filled land prior to October 13r 1955, Cleveland Electric does not have such a lease from the - State with respect to the artificially' filled land on which its Lake
- Shore Plant facilities are located,_but Cleveland Elec*~ic's position, on.
advice of counsel for Cleveland Electric, is that -(s facilities .and occupancy may not be- disturbed because they do not interfere with the free flov.of commerce in navigable channels- and constitute (at.least in part) and_are _on land filled pursuant to_the exercise by it of its _ property rights as ovner of the land above_the_ shoreline adjacent to the filled . land. Cleveland Elertric holds permits, under Federal statutes relating to navigation, to_ occupy such artificially filled land. t
- 32 - . _ -,_ .2 .. . _ _ - . _ _ _ . _ __ _ . _ _ .. _ . _ _ - _ =
(3) The facilities of Cleveland Electric's sencee Plant in Varien County, Pennsylvania, are located on land owned by the United States and occupied by Cleveland Electric and penelee pursuant to a liecen luned by the { PERC for a 50-year period starting Decembu 1, 1965 for the construction.
- , operation and maintenance et a pumped-storage hydroeler.tric plant.
(4) The vater intake and discharge facilities at the electric generating plants of Cleveland Electric and Toledo Edison located along Lake Erie, , the Haumee River and the Chio River ate extended into the lake and rivers i under their property rights as ovners of the land above the vater line i and pursuant to permits onder Pederal statutes relating to navigation. ' (5) The transmission systems of the Operating Companies are located on land, casements or rights-of-vay ovned by them. Their distribution systems also are located, in part, on interests in land owned by them. bu', for l the most part, their distribution systems are located on lands osned by others and on streets and highvays. In most cases, permicsion has been obtained 11om the apparent owner of the property or, if the distribution system is located on streets and highways, from the apparent ovner of the abutting property. Their electric underground transmission and distri-bution systems are located, for the most part, in public streets. The Pennsylvania portions of the main transmission lines from the Seneca . Plas ;. the Hansfield Plant and Beaver Valley Unit 2 are not ovned by Cleveland Electric or Toledo Edison. All Cleveland Electric and Toledo Edison properties, with certain except 3ns, # are subject to thr lien of their respective mortgages. The fee titles which Cleveland Electric and Toledo Edison acquire as tenant- ; in-common ownerr. and the leasehold interests they have as joint lessees, of certain generatn.g units do not include the right to require a partition or i sale for division of proceeds of the units without the concurrence of all the oth:r 'ovners and their respective mortgage trustees and the trustees under Cleveland Electric's and Toledo Edison's mortgages. Item 3. Legal Proceedings Regulatory Proceedings and Suits- Contesting Sulfur Dioxide Emission Limitations and Related- Regulations __ Applicable to the Operating _ Companies. See " Item _1.- Business--Environmental Regulation--Air Quality control". Vestinghouse Lawsuit. In April 1991,- the CAPC0 Group companies filed a Tavsuit against Vestinghouse in the United States District Court for the Vestern District of Pennsylvania. The suit alleges that Vestinghouse supplied six steam generators for Beaver Valley Pover Station Units-1 and 2 which contain serious defects, particularly defects causing tube corrosion and cracking. As a result of the defective steam generators, the owners of Unit 1 of. the Beaver Valley Pover Station, in which the Operating Companies have no interest, are incurring large unanticipated costs and the owners of Beaver Valley Unit 2-(which is identical to but never than Unit 1) ate incurring unanticipated costs which are expected to-become-larger in the futtre. Based on informatinn known at this time, it is expected that the steam generators vill have to be replaced vell short of the 40-year design life of each unit. I l _ _ . _ _ _ . _ ~._ ____ _._-_,_ __. _ _ . . . _ . . _ _ . _ . _ . . _
The suit seeks cortective action, compensatory damages, punitive damages, tieble damages and seasonable attoincys' fees for claims including breach of conttact, fraud, negligent r'isrepresentation and violations of RICO, Cencral Elect ic Lavsuit. In August 1991, the CAPC0 Group companies filed suit agalbst General Electric in the United States District Court in Cleveland alleging that Geneial Electric pro <iaed defective design information relating to the containment vessels for Perry Units 1 and 2. The suit further alleges -that necessary cortection of the inadequate engineering services provided by General Electric caused extensive delays and cost increases in the construction of the Perry Plant. The suit seeks damages, interest and Icgal fees in unspecified amounts for claims including, among others, bre d af contract, fraud, negligent misrepresentation, negligent perfote .cc of services, deceptive trade practices and violations of RICO. As con.mructed, Perry Unit 1 is properly designed and safe and has consistently met or exceeded the requirements of the NRC. Item 4. Submission of Matters to a Vote of_ Security Holders CENTDt10R ENERGY, CLEVELAND ELECTRIC AND TOLEDO EDISON None.
,P/;"T II Item 5. Market for Registrants' Common Equity and Related Stockholder Matters CENTERIOR ENERGY Market _Informa 3 j Centerior Energy's common stock in traded on the New York, Midvest and Pacific Stock Exchanges. The quarterly high and lov prices of Centerior .'mmon stock (as reported on the composite tape) in 1990 and 1991 vere as follovs:
I 1990 1991 ! I High Lov ljig Lov l 1st Quarter $21-1/8 $18 $19-7/8 S16-7/8 2nd Quarter 19-1/2 17-3/8 19-7/8 1611/4 3rd Quarter 19-1/8 16-1/8 18-1/4 15 4th 0narter 18-1/2 16-1/2 19-)/B 17-5/8 Shace Owners As of March 18, 1992, Centerior Energy had 175,250 common stock share owners. l c
___.m._._._._.._-._._. _ --- - Dividends See Note 13 to Centerior's Financial Statements for quarterly div1<8end pny-ments in the last two years. See Centerior's "Hanagement's Financial Anelysis--Capital Resources and Liquidity" contained under Item 7 of this Report for a discussion of the ' payment of future dividends by Centerio.. . At December 31, 1991 Centerior had earnings retained in the business of about
$669,000,000 and capital surplus of about $1,964,000,000, both of which vere available _to pay dividends. Cleveland Electric and Toledo Edison tan make cash availabic for the funding of Centerior's common stock dividends by paying dividends on their own common stocks. At December 31, 1991, Cleveland
- Elcetric had about $578,000,000 of retained earnings and about $1,319,000,000 of capital surplus and Toledo Edison had about $90,000,000 of retained earn-ings and about $602,000,000 of capital surplus available under Ohio lav for the declaration of divider /s on thtir respective preferred and common stocks.
Iloveve r , the payment of dividends out of capital surplus by the Operating Companies may be restricted under the Federal Pover Act. In addition, Toledo Edison is prohibited from paying dividends out of capital surplus by its mortgage indenture. . CLEVEl.AND ELECTRIC AND TOLEDO EDISON Dividends paid in 1991 on each of the Operating companies' outstanding series of- prefarred-stock vere fully taxable. The Operating Companies believe that their preferred stock. dividends vill continue to be taxable in 1992 and 1993. The Operating Companies' beliefs are based on present circumstances and on assumptions about_ future events and circumstances, including an assumption that their investment in Perry Unit 2 vill not be vritten off. The Operating Companies have made no projections with respect to the taxability of preferred stock dividends beyond 1993. If Perry Unit 2 is cancelled and recovery of the Operating Companies' investsent in that Unit is not alloved and must therefore be written off, it is likely that at least a portion of the dividends paid in the year in which such write-off vere to occur vnuld be a tax-free return of capital. See Note 3(c). The information regarding common stock prices and number of share ovners required by this. Item is not applicable to Cleveland Electric or Toledo Edison because all of their common stock is held solely by Centerior Energy. Item 6. Selected Financial Data CENTER 10R ENERGY The 'information required by this Item is contained on Pages P-23 and F-24
- attached hereto.
I i-l
. ,. = - --.= = - . .-. .- - - - . - _ - - . . - , , , - , - - - -.
. . ~ - -. - - . . ..-.... - - - - - . . .
CLEVE!AND El.EL*TRIC 6 The information required by this item is contained on Pages F-46 and F-47 t attached hereto. T01.EDO EDISON The information required by this Item is contained on Pages F-68 and F-69 attachad hereto. . Item 7. ' Management's Discussion and Analysis of Financial Condition and Resuhs of Operations i CENTERIOR ENERGY j The information required by this Item is contained on Pages F-5, F-6 and F-8 t attached hereto. ('LEVEIAND ELECTRIC The information required b; 'Y' ' h aontained on Pages F-28, F-29 and F-31 attached hereto.
- 1G;. Q DlBON The information required by this tem is contained on Pages F-5), F-52 and F-54 attached hereto.
Item 8. Financial Statements and Supplementary Dat_a CENTERIOR ENERCY The information required by this Item is contained on Pages F-2 through F-4, F-7 and F-9 through F-22 attached hereto. CLEVELAND ELECTRIC The information required by this Item is contained on Pages F-25 through F-27, ! F-30 and F-32 through F-45 att2ched hereto. l , TOLEDO EDISON
. The information required by this Iterr is contained on Pages F-48 through F-50, o
F-53 and F-55-through F-67 attached hereto, r o l l 4 l
Item 9. Changes in and Disagreetents Vith Accountants on Accounting and Financial Disclosure CPRTERIOR ENERGY, CLEVELAND El.ECTRIC AND TOL.ElX) EDISON None. j PART III l Item 10 Directors and Executive Officers of the Registrants CEffrER10R PRERGY The information required by this Item for Centerior regarding directors is incorporated herein by reference to Pages 2 through 9 of Centerior's definitive proxy statement dated March 6, 1992. Reference is also made to
" Executive Officers of the Registrants and the Service Company" in Part 1 of this report for information regarding the executive officers of Centerior Energy.
l CLEVEIAND E!ICTRIC Set forth below is the name and other directorships held, if any, of each director of Cleveland Electric. The year in- which the director was first elected to Cleveland Electric's Board of Directors is set forth- in paren.
-theses. Reference is made to " Executive Officers of the Registrants and the Service Company" in Part I of this report for information regarding the directors and executive officers of Cleveland Electric. The directors received no remuneration in their (.apacity as directors.
Robert J. Farling* Hr. Farli_ng is a director of National City Bank. (1986) Edgar H. Haugans , (1992) Lyman C. Phillin Mr. Phillips is a director of Society National Bank. (1988)
*Also a director of Centerior Energy and the Service Company.
j
TOLEDO EDISON Set fotth bcInv is the name and other directorships hold, if any, of each i director of Toledo Edison. The year in which the director was fitst elected to- Toledo Edison's Board of Directors is set forth in parentheses. Reference is n.ade to " Executive officers of the Registrants and the Service Company" in Part I of this report for information regarding the directors and t'e executive officers of Toledo Edison. The directors received no remuneration in their capacity as directors. Robert J. Farling* Mr. Parling is a ditector of National City Bank. (1908) E_dgar H. Haucans (1992) Lyman C. Thillips
'Mr. Phillips is a director of Society National Bank. . (1990)
Donald 11. Saunders (1988)
. i *Also a director of Centerior Energy and the Service Company.
Item 11. Executive Compensation CENTERIOR ENERGY EXECUTIVE COMPENSATION The information required by this Item for Centerior is incorporated herein by reference to the information concerning compensation of directors on Page 9, and the information concerning employee stock plan transactions of executive officers on Pages-18 through 20, of Centerior's definitive proxy statement
-dated March 6, 1992.
SALARIES AND INSURANCE , Centerior Energy, Cleveland Electric and Toledo Edison _ Centerior has an Incentive Compensation Plan which provided that cash incentive compensation avards of up to 10% of base salary could be made to vice presidents and above based on performance. Beginning in 1991, that plan was amended to -provide both short-range and long-range compensation to management based on the achievement of individual and corporate goals.
-Incentive awards under the revised plan-vill _ be made in tvo approximately equal components - a cash component payable at the time an incentive award is made and a deferred cash component payable five years later. JThe total award vill be-limited to no- more than 10% to 25% of base salary for target goal performance depending on the level of .he employee. Performance above or below these goals earns incentives proportionally __ higher or lover _than_ the target amount established for each participant.
l. _. _ i_ _ . _ _ _ . _ _ _ . _ , . . _ _ , - - . . _ , _ . . _ - . _ __ . - , , , ~ . . _ . .
.___._.- _ _ __._= --. -
The deferted cash cornponen t is avatded in the form of Deferred Incentive Units. The number of_ Units is dete: mined by dividing the deferied cash amount i by the average of the high- and lov trading prices of Centerior common stoex for the 52-veek period immediately preceding the avard date. Units accrue earnings at a rate equivalent to the dividend rate paid on common stock which + are then converted to additional Units. The Units vest five years after the-award date and are paid in cash. The conversion to carh is determined by multiplying the number of Units by the average of the high and lov trading > prices of common stock for the 52-veek period immediately preceding the con-version date. If a participant leaves for reasons other than death, 3 disability or retirement prior to the conversion date, the Units are forfeited. In 1991, only vice presidents and above vere eligible to participate in the plan. The Human Resources Committee of the Centerior Board of Directors t administers the plan and establishes the goals and awards for those partici-pants, subj ec t to approval by the Board. Effective January 1, 1992, the plan was amended to include employees at the department head level throughout the Centerior System. The Human Resources Committee administers the plan and establishes the goals and awards for these employees. The. following information summarizes (1) compensation paid by the Centerior , System to the five highest paid executive officers of Centerior Energy for < services rendered in all capacities in 1991 vhile an executive officer of Centerior Energy, the Service Company, Cleveland Electric or Toledo Edison and , (2) the aggregate compensation paid by the Centerior System to all executive officers of Centerior Energy, the Service Company, Cleveland Electric or - Toledo-Edison ,as a group for such servicee i Cash Compensation i Salaries and Incentive Deferred To Vhom Paid and Principal Compensation Incentive Capacities in_Vhich, Served (1)(2J (3) Other (4) Compensation Richard A. Hiller S 7,271 S 558,016 $ - , Robert J. Farljng 304,016 4,516 26,000 Lyman C. phillips 252,223 3,852 21,000 Murray R. Edelman 247,926 3,809 20,000 Edgar H. Haugans 220,152 3,391 21,000 All 19 executive officers of the Service Company (including the above of ficers) as- a gr oup 3,442,718 60,305 210,000 All 9 executivu officers of Cleveland Electric (including the above named officers) as a , group 2,000,1*6 32.489 99,000
- All 10 executive officers of
. Toledo Edison (including the above named officers) as a group 2,119,441 34,567 110,000 + l _ -_. -._._.;~,_..______.m____,_ . . _ _ _ , , _ _ . _ , _ _ , _ _ . _
(1) The five named officers are included for Cleveland Electric and Toledo Edison regaidless of whether they are officers of Cleveland Electric or Toledo Edison because they ate key policymakers for the Centerior System. (2) Data are included for the portion of 1991 during which the persons vere
-executive ofilcers of Centerior Energy, the Service Company, Cleveland Electric or Toledo Edison and includes cash compensation paid or accrued in all capacities with the Centerior System as listed in " Business-- '
i Executive Officers of the Registrants and the Service company" for that ; period. ; t (3) Includes the cash component of Incentive Compensation awarded on March 24, !' 1992 for services rendered in 1991. (4) Centerior pays long-term disability benefits and premiums for life, acci-dent and personal liability insurance benefits for executive officers to ' the extent those benefits exceed the benefits uniformly available to sal-arled employees under the Centerior System's benefit plans. No such long-term disability benefits vere paid in 1991. In addition, Centerior provides additional compensation to certain executive officers to purchase ether employee benef1ts. t Centerior has a deferred compensation plan ender which Centerior System employees designated by the iluman Resources Commit tee of Centerior's Board of Directors may elect to defer the: receipt of up to 25% of salary and up to all incentive compeasation until a year selected by the employee not later than the year in which the employee attains age 70 or, if it occurs earlier, at. retirement, 12 months after death or at other termination of employment. Amounts deferred by executive otficers in 1991 have been included in the cash compensation table. PENSION PLAN DENEFITS > Centerior System employees, including officers of Cleveland Electric and Toledo Edison, are covered by Centetior's pension program. The' pension pro- > gram is a_ noncontributory fixed-benefit-program which provides benefits upon retirement at or-after age 55. The annual amount of the pension is based pri-marily upon the monthly average straight-time salary and incentive compensa-tion in the 60 consecutive highest paid months (" covered- compensation") and the number of years of service. The resulting benefit is reduced by a percentage (based on the number of years of service) of the average FICA vage base. The pension is reduced in the event of retirement prior to age 62 and
-in certain cases prior to age 65.
Appropriate reductions are made if the employee elects a_ joint and _ survivor, guaranteed years certain, lump sum-or other form of pension in place of payments for life. To the extent limits imposed by Federal lav apply to reduce a pension which otherwise vould be
. payable- under the pension program, the amount of the reduction vill be paid, as permitted by Federal lav, directly by Centerior. The following table shovs the _ annual amount of-payment-for-life- pension payable to salaried employees who retire _under the pension program at or after age 62 at stated levels of covered compensation and years of service:
___.______._.____.-___._m___..__ Covcied Years of Service Compensation 30 3h 40
$150,000 ............. S '/8,041 $ 81,544 $ 5,048 200,000 ............. 105,041 109,794 114,548 250,000 ............. 132,041 138,044 144,048 300,000 ............. 159,041 166,294 173,548 ,
350,000 ............. 186,041 194,544 203,048 l 400,000 ............. 213,041 222,794 232,548 : 450,000 ...... ...... 240,041 251,044 262,048 Centerior Energy, Cleveland Electric and Toledo Edison The following table sets forth the years of service and the covered compensa-tion as of year-end 1991 of the five highest paid executive officers of Centerior Energy, Cleveland Electric and Toledo Edison: Years of Covered Executive Officer Service Compensation Richard /s. Hiller 31 $413,12" Robert J.-Farling 32 237,709 , Lyman C. Phillips 30 202,049 ' Hurray R. Edelman 30 194.755 Edgar 11. Haugans 35 174,874 EMPLOYEE STOCK Pl.AN TRANSACTIONS (a) Employee Purchase Plan All employees, including- officers, of Centerfor, the Service Company, Cleveland Electric (and its participating subsidiaries) and Toledo Edison , are eligible to participate in the Purchase Plan. A participant may contribute to purchase U.S. Savings Bonds up to-100% of-his straight-time pay less (1) payroll vithholding tax and other payroll deductions, (2) any -other contribution he makes into the Purchase Plan- and (3) any contribution he makes into the Savings Plan. A participant also may contribute up to 8% of his pay. less_any Basic Contribution he makes into the Savings Plan, .to purchase Centerior common stock at a price 15% belov the fair market value on the semiannual dates of purchase, March 15 and September 15. .The Bonds and common rtock are- distributed to the participant immediately after purchare. -Centerior's contribution into , the Purchase Plan is the 15% discount on the price of the common stock. . The 15% discount is taxable ordinary-income to the participant in the tax year the common stock is purchased and is deductibic by-Centerior.
' Cleveland Elcetric and Toledo Edison lIn 1991, Edgar H. Haugans purchased a total'of 439 shares at an aggregate purchase price of S6,475.25. The aggregate market-value_of the_ stock on thel purchase date- vas $7,517.88. None of the other eight executive officers of Cleveland Electric nor the other nine executive officers of Toledo Edison acquired Centerior common stock through the Purchase Plan in 1991.
1 (b) Employee Savings Plan I i All employees, including officers, of Centerinr, the Service company, I Cleveland Llectric (and its participating subsidiaries) and Toledo Edison may ).articipate in the Savings Plan by means of payroll deduction contributions. The Sevings Plan consists of two parts: the After Tax Part and the Before Tax Part. The After Tax Part receives a participant's contributions after they have been taxed as pay. The Before ' lax Pat t t eceives a par ticipant 's contributions before they have been taxed as pay; however, they vill be taxed when withdrawn from the Savings Plan. The combined maximum en ployee centribution into both Parts of the Savings Plan is 16% of pay. A participant may contribute up to 6% of his straight-time pay as a Basic contribution and up to another 10% as a Supplemental Contribution into the After Tax and Before Tax Parts com-bined. The minimum contribution is 1% of pay. Centerior contributes out of current income or retained eatnings an amount equal to 50% of the employee's Basic Contribution. Contributions of highly compensated employees and Centerior's matching contributions are reduced when neces-saty to keep the contributions within the limits of Fedeial tax lav. Contributions are placed in a tax-exempt trust administered by a corpo-rate trustee. The trust invests in (1) Centerior common stock, (2) a diversified group of common stocks, excluding Centerior common stock and (3) fixed income debt or stock investments, which currently are deposits under insurance company contracts at fixed rates of interest. A partici-pant may allocate his contributions into the three funds in such portions as he designates. Centerior Stock Fund contributions and earnings are invested in Centerior common stock putchased by the trustee fcom Centerior at its fair market value or in the open market. Centerior's contributions are invested in the same funds and in the same portions as a participant's contributions. Centerior contributions and the earnings thereon become 100% vested in the participant after the participant makes at least 36 months of contributions in the After Tax Part, but become immediately vested in the Before Tax Part. Effective January 1, 1992, the Savings Plan vas amended to allov participants to borrow up to the lesser of 50% of their vested account balances (excluding vested Centerior contributions made during the current year and the prior two calendar years) or $50,000. Cleveland Electric and Toledo Edison The following table presents information relating to Centerior's 50% matching contributions for executive officers of Cleveland Elec tr ic and Toledo Edison under the Savings Plan during 1991:
i i Centerior Executive Officer Contributions Richard A. Hiller $ 2,500 Robert J. Parling 8,609 Lyman C. Phillips 2,491 Murray R. Edelman 3,333 Edgar 11. Haugans 1,529 s All 9 executive officers of Cleveland , Electric (including the i above named officers) as a Croup 27,947 , All 10 executive i officers of Toledo
- Edison (including the above named officers) ,
31,169 as a group (c) 1978 Key Employee-Stock Option Plan
-Prior to becoming a subsidiary of Centerior, options to-buy Cleveland r Electric common stock vere granted at various times by Cleveland Electric
- to- certain of its key employees pursuant to its 1978 Key Employee Stock Option- Plan.-.-Vhen Cleveland Electric became a subsidiary of-Centerior, the plan was changed to provide for the sale of Centerior common stock inst'ead of Cleveland-Electric common stock upon exercise of those op-
- tions, and Centerior assumed all the obligations of Cleveland Electric under those options and the plan. No. additional options can be granted under the plan.
Cleveland Electric and Toledo Edison The- following table presents information relating to the exercise of options. by the eligible executive officers of Cleveland Ele'.ric and
- Toledo Edison under the 1978 Key Employeo Stock Option Plan during 1991:
Options Exercised Excess of
. - Market Value Number of Over-Executive Officer Shares Exercise-Price Richard A. Miller 13,875 $41,733 Robert J. Farling 4,000 14,940 Murray R. Edelman- 4,440 19,636-Edgar 11. Maugans 6,660 28,122-All.5 eligible executive officers (including the above officers);as-a group. 28,975 104,431 - r a,- - . < v, b ha - -i~5---- ,wma'e e vwv---, - e tr- g - e u m e- *=~'ssm --F r rw r--e v =r---r*vv ww4 g- v w'
(d) Employee Stock Ovnership Plan Under the Toledo Lu; son Employee Stock ovnership Plan, common stock of Toledo Edison vas, and since 1986 Centerior common stock is, allocable to the accounts of all eligible employees of Toledo Edison in proportion to their compensation from Toledo Edison. Toledo Edison made ce>:ributions in 1977, 1984, 1986 and 1988, in each ease for the preceding tax year. Participants are always fully vested in the common stock credited to their accounts. Upon the affiliation of Cleveland Electric and Toledo Edison, the Toledo Edison common stock in the plan was converted into Centerior common stock. Cleveland Electric and Toledo Edison ;
-At December 31, 1991, under the Employee Stock Ovnership Plan, 589 shares '
of Centerior common stock vere held in the account of Lyman C. phillips and 1,337 shares vere held in the accounts of the three eligible Cleveland Electric executive officers (including Mr. Phillips) as a , i grcup and 1,988 shares were held in the accounts of the four eligible Toledo Edison executive officers (including Mr. Phillips) as a group. Item 12. Security Ownership of Certain Beneficial Ovners and Management -
-CENTER 10R ENERGY -The following table sets forth the beneficial ownership of Centerior common stock by individual directors of Centerior and all directors and officers of Centerior Energy and the Service Company as a group as of February 29, 1992:
Name of Beneficial Number of Common Owner Shares Ovned (1) Richard P. Anderson 1,214 Albert C. Bersticker 1,000 Leigh Carter 2,257 Thomas A. Commes 5,000 Vayne R. Embry 1,000 Robert J. Farling 31,169 (2) Robert M. Ginn 32,071
' George H. Kaull' 4,752 Richard A. Miller 38,606 (2)
Frank E. Hosier 1,337
- Sister Mary Harthe Reinhard, SND 2,220 (3)
, Robert C. Savage 1,000
- Paul H. Smart 3,527 Villiam J. Villiams 1,386 A1: directors and officers as a group- 219,762 (2) d
_. . .__ ._., _ ,.; _.,..-.._ _ _ _.~ _ __ _ ____._ . . _ ,._
l (1) Beneficially ovned shares include any shares vith respect to which voting l or investment pover is attributed to a director or officer because of l joint or_ fiduciary ovnership of the shares or telationship to the record owner, such as a spouse, even though the director or officer does not consider himself or herself the beneficial ovner. On February 29, 1992, all directors and officers of Centerior Energy and the Service Company as a group were considered to own beneficially 0.2% of Centerior's common stock and none of the preferred stock of Cleveland Electric and Toledo Edison, except for one officer who ovns 50 shares of Toledo Edison preferred stock. Certain directors and officers disclaim beneficial ownership of some of those shares. (2) Includes the folloving numbers of shares which are not owned but could have been purchased within 60 days after February 29, 1992 upon exercise of options to purchase shares of Centerior common stock: Mr. Farling - 17,730; Mr. Miller - 15,373; and all other officers as a group - 46,544.
-None of those options have been exeteised as of March 27, 1992 vith the ;
exception of 7,564 which vere exercised by Mr. Miller on March 2, 1992. (3) Owned by the Sisters of Notre Dame. l CLEVELAND ELECTRIC Individual directors of Cleveland Electric and all directors and officers of Cleveland Electric as a group as of March 15, 1992 beneficially ovned the following number of shares of Centerior common stock on February 29, 1992: f Name of Beneficial Number of Common Ovner Shares Ovned (1) Robert-J. Farling 31,169 (2) Edgar 11. Haugans 10,068 (2) Lyman C. Phillips 2,695 All directors and officers as a group 75,625 (2) , (1) Beneficially ovned shares include any shares with respect to which voting or ' investment power is attributed to a director or officer- because of joint or fiduciary ownership of the shares or relationship to the record ovner, such as a spouse, even though the director or officer does not consider himself or herself the beneficial owner. On February 29, 1992, all directors and officers of Cleveland Electric as a group vere considered to own beneficially 0.1% of Centerior's common stock and none of Cleveland Electric's serial preferred stock. Certain directors and officers _ disclaim beneficial ownership of some of those shares. l (2) Includes the following numbers of shares which are not ovned but could : have been purchased vithin 60 days.after February 29, 19P2 upon exercise of options to parchase shares' of Centerior common stock: Mr. Farling - 17,730 -.Mr. Maugars - 1,665; and all other officers 'as a group - 20,351. None of those options have been exercised as of March 27, 1992, t i
~
a---,- -. - . . - , . , . - . - . - . . - . - . . . . . - . - . - . - . . . . . . - . - - . - . . . - - . -
. _ . _ _ . ~ . _ _ _ . _ _ _ . _ _ . _ . _ - _ _ _ . . _ _ _ _ _ _ . _ _ _ _
E TOI.EDO EDISON Individual directors of Toledo Edison and all directors and officers of Toledo Edison as a group as of March 15, 1992 beneficially owned the following number , of shares of Lenterior common stock on February 29, 1992: ! Name of Beneficial Number of Common 5 Ovner Shares owned (1) , Robert J. Farling 31,169 (2) Edgar H. Haugans 10,068 (2) Lyman C. Phillips 2,695 Donald H. Saunders 1,418 All directors and officers as a group 77,074 (2) (1) Beneficially owned shares include any shares with respect to which voting or investment power is attributed to a director or officer because of joint or fiduciary ownership of the shares -or relationship to the record ovner. such as a spouce, even though the director or officer does not consider himself or herself the beneficial owner. On February 29, 1992, all directors and officers of Toledo Edison as a group vere considered to " ' own- beneficially 0.1% of Centerior's common stock and none of Toledo Edison's -preferred stock.- Certain directors and officers disclaim bene-ficial ownership of some of these shares. (2) Includes the following numbers of shares which are not owned but could have been purchased within 60 days after February 29, 1992 upon exercise of options to purchase shares of Centerior common stock: Mr. Parling - 17,730; Mr. Haugans - 1,665; and all other officers as a group - 20,351. None of those options have been exercised as of Harch 27, 1992. Item 13. Certain Relationships and Related Transactions CENTERIOR ENERGY AND TOLEDO EDISON The information required by this Item is incorporated herein by reference to ' Page 10 of Centerior's definitive proxy statement dated March 6, 1992. CLEVELAND ELECTRIC None. PART IV Item 14. ~ Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) Documents Filed as a Part of the Report
- 1. Financial Statements:
Financial . Statements for _Centerior Energy. Cleveland Electric and Tolado. Edison are listed in the Index to Selected Financial Data; Hanagement*s Discussion _and Analysis of Financial Condition and Re-
.sults of Operations; and Financial Statements. See Page F-1.
1
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- 2. Financial Statement Schedules
~Finnneial Statement Schedules for Centerinr Energy, Cleveinnd Electric and Toledo Edison are listed in the Index to Schedules. See Page S-1.
- 3. Exhibits:
Exhibits for Centerior Energy. Cleveland Electric and Toledo Edison are listed in the Exhibit Index. See Fage E-1. (b) Reports on Form 8-K Centerior Energy, Cleveland Electric and Toledo Edison filed one current i Report on Form 8-K during the fourth quarter of 1991. The Form 8-X, vhich -vas dated October 11, 1971, discussed under " Item 5. Other Evesits -- 1. Regulatory and Accounting Matters" the filing with-the PUC0 of a joint recommendation between 'the Operating Companies and customer representative groups relating to certain accounting treatment requests of the OperatinC Companies and other matters. b P 4
-.c.. . . c ; _._ _ . . _ _ _ _ - . . _ , . _ , , _ ..._._.2.._.._.,_..,_...._ , _ . , _ . - ..
SIGNATtfRES ' Pursuant to the requirernents of Section 13 or 15(d) of the Securities T.xchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, theteunto duly authorized. CENTERIOR ENERGY CORPORATION hegistrant i March 27, 1992 By
- ROBERT J F/sRLING, Chairman of the
- Board, President and Chief Executive Officer l
Pursuant to the requirements of the Securities Exchange Act of 1934, this re- [ port has been signed belov by the following persons on behalf of the regi-strant and in the capacities and on the date indicated: Signature _ Titic Date Principal Executive Officer: . )
- ROBERT - J . FARLING - Chairman of the Board, )
President and Chief ) - Executive Officer ) !
--Principal Financial Officert- _ )
- EDGAR !!. MAUGALS Executive Vice )
President ) Principal Accounting Officers
- PAUL G. BUSBY Controller )
Directors ' )
*RICUARD P. ANDERSON Director )
- ALBERT C. BERSTICKER Director )
l
*LEIGli CARTER Director ) *T110 MAS A. COMMES Director ) March 27, 1992 *VAYNE-R.-EMBRY Director ) *ROBEET J.,FARLING Director )
- ROBERT M.-GINN. = Director )
- GEORGE 11. KAULL Director )
*RICilARD A. MILLER Director. )
- FRANK E. MOSIER Director )-
*SR.. MARY MARTilE REINHARD, SND Director )
- ROBERT C. SAVAGE Director )'
- PAUL M. SMART Director )
*VILLIAM J.-VILLIAMS Director ) *By Q. T. PERCIO J . .T . Percio,. Attorney-in-Fact .. _ . . . . _ . _ . . . . _ .. _._ _ _ . _ m _ . _ _ .. _ ~ . . _ _._.u_._, __..,,,_.._.,_._...,_._.a..
SIGNATURES Putsonnt to the tequitements of Section 13 or 15(d) of the Securities Exchange Act of 1934, tie teglattant has duly caused this report to be signed on its behalf by the undersigned, thereurto duly authori::ed. THE CL)', . LAND ELECTRIC ILLUMINATING COMPANY kagistrant March 27, 1992 By *LYHAN C. PilILLIPS, Pt esident and Chief Executive Officer i Pursuant to the requircraenis of the Securities Exchange Act of 1934, this re-port has been signed belov by the following persons on behalf of the regi- , strant and in the capacities and on the date indicated: Signaturo Title Date Principal Executive Officers )
*LYHAN C. PHILLIPS President and Chief )
Executive Officer ) Principal Financial officers )
- EDGAR 11. MAUGANS Vice President and )
Chief Financial ) Harch 27, 1992-Officer ) Principal Accounting Of ficers )
- PAUL G. BUSBY Controller )
' Directors: )
- ROBERT J. FARLING Director )
- EDGAR 11. MAUGANS Director )
*LYHAN C. PHILLIPS Director ) *By J. T. PEi!CIO J. T..Percio, Attorney-in-Fact l' . , _ - _ _ . _ . _ _ _ _ ~ _ _ -. . _ _ . _ _ _ . _ _ , ~ . , _ _ , . . _ _ . . , - , _ . _
, i i SIGNATlfRP.S f Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange t Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. t THE TOLEDO EDISON COMPANY hegistrant March 27, 1992 By *LYHAN C. PHILLIPS, Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this re- ' port has been signed belov by the following persons on behalf of the regi-strant and in the capacities and on the date-indicated: , S_ignature Title Date Principal Executive Officer
) -*LYHAN C. Pli1LLIPS Chairman of-the Board )
and Chief Executi' -
) '
f Officer )-
- Principal Financial Offleer: )
- EDGAR 11. MAUGANS Vice President and ) '
Chief Financial ) Officer ) Principal Accounting Offictr ) March 27, 1992
- PAUL G. BUSBY Conttoller )
Directors: )
- ROBERT J.LFARLING- . Director )
- EDGAR H._MAUGANS Director )
*LYMAN C. PilILLIPS Director -) '
- DONALD 11. SAUNDERS Director- )
t 5
*Dy J. T. PERCIO- - -
J. T. Percio, Attorney-in-Fact EKillBIT INDEX
- The exhibits designated with an asterisk (*) ate filed hetevith. The exhibits not s t. derignated have previously been filed with the SEC in the file indi-cated la patenthesis folloving the description of such exhibits and ate in-corporated herein by reference.
COMMON EXillBITS (The following documents are exhibits to the seports of Centerior Enctgy, Cleveland Plcetric and Toledo Edison.) Exhibit 14 umber Document 10b(1)(a) CAPCO Administration Agreement dated !Jovember 1, 1971, as of September 14, 1967, among the CAPCO Group ucmbers te-garding the organization and ptocedures fot implementing the objectives of the CAPCO Group (Exhibit 5(p), Amendment tio . 1 File No. 2-42230, filed by Cleveland Electric). 10b(1)(b) Amendment No. 1, dated January 4, 1974, to CAPC0 Adminis-tration Agreement aniong the CAPCO Group members (Exhibit 5(c)(3), File No. 2-68906, filed by Ohio Edism ). . 10b(2) CAPCO Transmission Facilities Agreement dated November 1, 1971, as of September 14, 1967, among the CAPCU Group members regatding the installation, operation and mainte-nance of transmission facilities to carry out the objet-tives of the CAIC0 Group (Exhibit 5(q). Amendment No. 1, File No. 2-42230, filed by Cleveland Electric). 10b(3) CAPCO Basic Operating Agreement as Amended September 1, 1980 nmong the CAPCO Group members regarding coordinated operation of the members' systems (Exhibit 10.24, 1980 Form 10-K, File No. 1-956, filed by Duquesne). 10b(4) Agreement dated September 1, 1980 for the Tetmination or Construction of Cettain Agteements by and among the CAPC0 Group members (Exhibit 10.25, 1980 Form 10-E, File !Jo. 1-956, filed by Duquesne). 10b(5) Construction Agreement, dated July 22, 1974, among the CAPCO Group members and relating to the Petty !Jutlear Plant (Exhibit 5(yy), File No. 2-52251, filed by Toledo Edison). 10b(6) Contract, dated as of December 5, 1975, among the CAPCO Group members for the construction of Beaver Valley Unit No. 2 (Exhibit 5(g), File No. 2-52996, filed by Cleveland Electric). 10b(7) Amendment No. 1, dated May 1, 1977, to Contract, dated as of December 5, 1975, among the CAPCO Group members for the construction of Beaver Valley Unit No. 2 (Exhibit 5(d)(4), File No. 2-60109, filed by Ohio Edison). 10b(0) Contta t, dated May 24, 1976, among the C/sPCO Group members for the operation of Beaver Valley Unit No. 2 (Exhibit 5(d)(4), File No. 2-56944, filed by Pennsylvania Pover). 2-1
i Exhibit Number Document j 10b(9) Amendment No. 1, dated May 1, 1977, to Contract, dated May 24, 1976, among the CAPC0 Group members for the opera-tion of Beaver Valley Unit No. 2 (Exhibit 5(d)(6), File No. 2-60109, filed by Ohio Edison). 10b(10) Addendum No. 1, dated November 1, 1980, to contract, dated May 24, 1976, as amended among the CAPCO Group members for the operation of Beaver Valley Unit No. 2 (Exhibit 10-9, File No. 2-68906, filed by Ohio Edison). 10b(11) Amendment No. 1, dated August 1, 1981, to CAPC0 Basic Operating Agreement as Amended September 1, 1980 among the CAPCO Group members (Exhibit 10.27, 1981 Form 10-K, File No. 1-956, filed by Duquesne). 10b(12) Amerdment_ No. 2, dated September 1, 1982, to CAPCO Basic - Opera',ing Agreement as Amended September 1, 1980 among the ' CAPC0 Group members (Exhibit 10,29, 1982 Form 10-K, File , No. 1-956, filed by Duquesne). 10c(1) Participation Agreement, dated as of October 1, 1973, among Quarto, the CAPC0 Group members, Energy Properties, Inc., General. Electric Credit Corporation, the Loan , Participants listed in Schedules A and B thereto, Central National Bank of Cleveland, as owner Trustee, National City Bank, as Loan Trustee, and National City Bank, as Bond Trustee (Exhibit ->(z), File No. 2-59794, filed-by i Toledo Edison). 10c(2) Amendment- No. 1, dated as of September 15, 1978, to Par-ticipation Agreement, dated as of October 1, 1973, among the same-parties es Exhibit 10c(1) (Exhibit 5(e)(2), File No. 2-68906, filed by Pennsylvania Pover). 10c(3) Participation Agreement No. 2, dated as of August 1, 1974, among the same parties as Exhibit 10c(1) (Exhibit 5(h)(2), File No. 2-53059, filed by Ohio Edison). ' 10c(4) Amendment No. 1, dated as of September 15, 1978, to Par-ticipation Agreement No. 2, dated as of August 1, 1974, among-the samefparties as Exhibit 10c(1)_(ExhiLit 5(e)(4), _ _ File No. 2-68906.- filed by Pennsylvania Pouer).
~10c(5) Participation Agreement No. 3, dated as of September 15, 1978, among the same parties as Exhibit 10c(1) (Exhibit 5(uu), File No. 2-6460). filed by Toledo Edison).
10c(6) Participation Agreeme; t No. 4, dated as of October 31, 1980, among Quarto, 'the CAPC0 Group members, the Loan. Par-ticipants listed in Schedule A thereto, and National City: Bank. -as Bond Trustec (Exhibit 10-16, File No. 2-68906, filed by Ohio Edison). 10c(7)- Lease and Agreement, dated as of June 7, 1973, as amended and restated as of October 1, 1973, between Central National Bank _of Cleveland, as Trustee, and -Quarto, to-gether: With Guaranty, dated as October- 1, 1973, with re-spect thereto by the CAPC0 Group members ~(Exhibit 5(aa), File No. 2-59794, filed by Toledo Edison). - E-2
. _ _ _ . _ _ . _ - ___ . - - - ~._ _.__ _ _. _ ___.__ _ _ _ _.
Exhibit Number Document 10c(8) Trust Indentute and Hortgage, dated as of Octoher 1, 1973, . between Quarto and National City Bank, as Bond Ttustee, ' together with Guaranty, dated as of October 1, 1973, with respect thereto b,- the CAPCO Group members (Exhibit 5(bb), File No. 2-59794, filed by Toledo Edison). 10c(9) Amendment No. 1, dated as of August 1, 1974, to Trust In- ; denture and Hortgage, dated as of October 1, 1973, between Quarto and National City Bank, as Bond Trustee, together with Amendment No. 1, dated Augast 1, 1974, to Guaranty, dated as of October 1, 1973, with respect thereto by the CAPC0 Group members (Exhibit 5(L)(2), rile No. 2-53059, filed by Ohio Edison). 10c(10) Amendment No. 2, dated as of September 15, 1978, to Trust i Indenture and Hortgage, dated as of October 1, 1973, as amended, between Quarto and National City Bank, as Bond Trustee, together with Amendment No. 2, dated as of ' September 15, 1978, to Guaranty, dated as of October 1, 1973, with respect theteto by the CAPC0 Group members (Exhibits 5(e)(11) and 5(e)(12), File No. 2-68906, filed by Pennsylvania Pover). ' 10c(11) Amendment No. 3, dated as of October 31, 1980, to Trust Indenture _ and Hortgage, dated as of October 1, 1973, as amended, between Quarto and National City Bank, as Bond Trustee- (Exhibit 10-16, File No. 2-68906, filed by Ohio Edison). 19c(12) Amendment No. 3, dated as of Oct' tr 31, 1980, to Guaranty, dated as of October 1, 1973, with respect to the CAPCO Group members (Exhibit 10-18, File No. 2-68906, filed by Ohio Edison). . 10c(13) Open-End Hortgage, dated as of October 1, 1973, between Quarto and the CAPCO Group members and Amendment No. I thereto, dated as of September 15, 1978 (Exhibit 10-5, File No. 2-68906, filed by Ohio Edison). 10c(14) Agreement, dated October 20, 1981, among the CAPCO Group members regarding the use of Quarto coal at Hansfield Units 1, 2 and 3 (Exhibit 10(ff), 1981 Form 10-K, File No. 1-3583, filed by Toledo Edison). 10c(15) Agreement, dated July- 1.- 1982, among the CAPCO Group members reallocating the rights and liabilities of the members with respect to certain uranium supply contracts (Exhibit 10(ff), 1982 Form 10-K, File No. 1-3583, flied by Toledo Edison). 10d(1)(a) Form of Collateral Trust Indenture among CTC Beaver Valley Funding Corporation, Cleveland Electric, Toledo Edison and 1rving Trust Company, as Trustee (Exhibit 4(e), File No._ - 18755, filed by Cleveland Electric and_ Toledo Edison). 10d(1)(b) . Form- of Supplemental Indenture to Collateral Trust In-
' denture constituting Exhibit 10d(1)(a) above, including form __of Secured Lease Obligation Bond (Exhibit 4(b), File No. 33-18755, filed by Cleveland Electric and Toledo Edison).
L E-3
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. . - ._. . __ _ _ _._ _ _ _ _ _ = - _ _ _ _ _ _ _ __ _ _ _ _ _ ~
Exhibit Number Document 10d(2)(a) Form of Collateral Trust Indenture among CTC Hansfield Funding Corporation Cleveland Electric, Toledo Edison and IBJ Schroder Bank 6 Trust Company, as Trustee (Exhibit 4(a), File No. 33-20128, illed by Cleveland Electric and Toledo Edison). 10d(2)(b) Form of Supplemental Indenture to Collateral Trust In-denture constituting Exhibit 10d(2)(a) above, including forms of Secured Lease Obligation Bonds (Exhibit 4(b), File No. 33-20128, filed by Cleveland Electric and Toledo l Edison). ; 10d(3)(a) Form of Facility Lease dated as of September 15, 1987 be-tween The First National Bank of Boston, as Ovner Trustee ; under a Trust Agreement dated as of September 15, 1987 l vith the- limited partnership Ovner Participant named therein, Lessor,_and Cleveland Electric and Toledo Edison, Lessees (Exhibit 4(c), File No. 33-18755, filed by > Cleveland Elcetric -and Toledo Edison). + 10d(3)(b) Form of Amendment No. I to Facility Lease constituting Exhibit 10d(3)(a) above (Exhibit 4(e), File No. 33-18755, r filed by Cleveland Electric and Toledo Edison). > 10d(4)(a) Form - of Facility Lease dated as of September 15, 1987 be-
-tveen The First National Bank of Boston, as Ovner Trustee under a Trust Agreement dated as of September 15, 1987 '
vith the corporate--Owner Participant named therein, Lessor, and Cleveland Electric and Toledo Edison, Lessees (Exhibit- 4(d), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). 10d(4)(b) Form of Amendment No. 1 to Facility Lease constituting Exhibit 10d(4)(a) above (Exhibit'4(f), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). . 10d(5)(a) Form of Facility Lease dated as of September 30, 1987 be-tween Maridian Trust Company, as Ovner Trustee under a Trust Agreement dated as of September 30, 1987 with the Owner Farticipant named therein, Lessor, and Cleveland Electric and Toledo Edison, Lessees-(Exhibit 4(c), File No. 3 ;0128, filed by cleveland Electric and Toledo g~ Edison). 10d(5)(b)- Form of Amendment No. I to the Facility Lease constituting , Exhibit 10d(5)(a).above (Exhibit 4(f), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). 10d(6)'" Form of Participation Agreement dated as of September 15, 1987 among the limited partnership owner Participant named
- therein, the original Loan Participants listed :in Schedule 1 'thereto, as Original Loan Participants, CTC Beaver Valley Funding Corporation, as Funding Corporation, The
- i. First National Bank of Boston, as Ovner- Trustee, Irving l -Trust Company, as - Indenture Trustee, and Cleveland Electric and Toledo Edison, as Lessees (Exhibit 28(a),
File No. 33-18755, filed by Cleveland Electric and Toledo Edison).- 10d(6)(b) Form of Amendment No. I to Participation Agreement consti-tuting -Exhibit 10d(6)(a) above (Exhibit _28(c), File No. 33-18755, filed by Cleveland Electric and Toledo Edison). E-4 \,
, . - ~ . - . - - . - . - - - - . . - - . . . - . - - . . - . --- . - - . -
Exhibit Number Document 10d(13) Form of Assignment, Assumpt' inn and Further Anreement dated as of September 15, 1987 among The First National Bank of ; Boston, as owner Trustee under a Trust Agreement dated as of September 15, 1987 vith the Ovner Participant named ; therein, Cleveland Electric, Duquesne, Ohio Edison, ! Pennsylvania Power and Toledo Edison (Exhibit 28(f), File , No. 33-18755, filed by Cleveland Electric and Toledo ' Edison). 10d(14) Form of Additional Support Agreement dated as of ' September 15, 1987 between The First National Bank of ' Boston, as Ovner Trustee under a Trust Agreement dated as of September 15, 1987 vith the Ovner Participant named : therein, and Toledo Edison (Exhibit 28(g), File No. { 33-18755, filed by cleveland Electric and Toledo Edison), 30d(15) Form of Support Agreeaent dated as of September 30, 1987 , between Heridian Trust Company, as Ovner Trustee under a ' Trust Agreement dated as of September 30, 1987 with the , owner Participant named there, Toledo Edison, Cleveland ' Elcetric, Duquesne, Ohio Edison and Pennsylvania Power . (Exhibit 28(e), File No. 33-20128, filed by Cleveland , Electric and Toleda Edison). 10d(16) Form of Indentur(, Bill of Sale, Instrument of Transfer and Severance Agreement dated as of September 30, 1987 between Toledo Edison, seller, and The First National Bank of Boston, as Ovner Trustee under a Trust Agreement dated as of September 15, 1987 vith the Ovner Participant named therein, Buyer (Exhibit 28(h), File No. 33-18755, filed by ' Cleveland Electric and Toledo Edison). ! 10d(17) Form of Bill of Sale, Instrument of Transfer and Severance ! Agreement dated as of September.30, 1987 between Toledo ; Edison, Seller, and Heridian. Trust Company, as Ovner Trustee under a Trust Agreement dated as of September 30, ! 1987 vith the Ovner Participant named therein, Buyer
-(Exhibit 28(f) . File- No. 33-20128. filed by Cleveland Electric and Toledo Edison).
10d(18) Form of Bill of Sale, Instrument of Transfer and Severance Agreement dated as of September 30, 1987 between Cleveland Electric, Seller,-and Heridian Trust Company, as Ovner Trustee under a Trust Agreement dated as of September 30, 1987 vith the owner Participant named therein, Buyer ' (Exhibit 28(g), File No. 33-20128, filed by Cleveland Electric and Toledo Edison). 18(a) -Letter regarding change in accounting principles (Exhibit 18, June 30, 1988 Form 10-0, File Nos. 1-9130, 1-2323 and 1-3583).
-18(b) Letter regarding change in accounting principles (Exhibit 18 .- June 30, 1991 Form 10-0, Tile Nor. 1-9130, 1-2323 and 1-3583).
28(a) Financial Statements cf H.e Cen*erior Energy Corporation ' Employee Savings Plat for too fiscal year ended December 31, 1991 (to be flied by amendment). E-6
. ~ . , - ,- - ,, . _ - . - . . .- ~ - . . - - . . . .. ---.- . - . . . - - - . - -
i l Exhlbit flumber Document 10d(7)(a) Form of Participation Agreement dated as nf September 15, 1987 among the corporate Owner Participant nar.ed therein, the Original Loan Participants listed in E:hedule 1 thereto. as Original Loan Participants, CTC 1r er Valley Funding Corporation, as Funding Corporati- the First IJational Bank of Boston, as Ovner Trusa.; ,-ing Trust Company, as Indenture Trustee, and Cleveland Electric and a . Toledo Edison, as Lessees (Exh1 bit 28(b), File fio . 33-18755, filed by Cleveland Electric and Toledo Edison). 10d(7)(b) Form of Amendment tio. 1 to Participation Agreement consti- ' tuting. Exhibit 10d(7)(a) above (Exhibit 28(d), File llo . 33-19755, filed by Cleveland Electric and Toledo Edison). , 10d(8)(a) Form of Participation Agreement dated as of September 30, , 1987 among the Ovner Participant named therein, the origi- , nal Loan Participants listed in Schedule II thereto, as Original Loan Participants, CTC Hansfield Funding Corpora- l tion, Heridian Trust Company, as Owner Trustee, IDJ Schroder Bank & Trust Company, as Indenture Trustee, and Cleveland Electr0 and Toledo Edison, as Lessees (Exhibit l 28(a), File lio. 33-20128, filed by Cleveland Electric and i Toledo Edison). 10d(8)(b) Form of Amendment lio. 1 to the Participation Agreement constituting Exhibit 10d(8)(a) above (Exhibit 28(b), File 11 0 . 33-20128, filed by Cleveland Electric and Toledo , Edison). . 10d(9) _ Form of Ground Lease dated as of September 15, 1987 be-tween Toledo Edison, Ground Lessor, ano The First 11ational Bank of Boston, as Owner Trustee under a Trust Agreement dated as of September 15, 1987 vith the Owner Participar.t named therein, Tenant (Exhibit 28(e), File flo. 33-18755, filed.by Cleveland Electric and Toledo Edison). 10d(10) Form of Site Lease dated as of September 30, 1987 between Toledo Edison, Lessor, and Heridian Trust Company, as owner Trustee under a Trust Agreement dated as of , September 30, 1987 vith. the Owner Participant named i therein, Tenant (Evhibit 28(c), File tio. 33-20128,-filed by Cleveland Electric and Toledo Edison). 10d(11) Form of Site. Lease dated as of September 30, 1987 between Cleveland Electric, Lessor, and Heridian Trust Compnny, as Ovner Trustee under a 'trus t Agreement dated as of September 30, 1987 vith the owner Participant named L therein, Tenan, (Exhibit 28(d), File No. 33-20128, filed - by cleveland Electric and !?oledo Edison). 10d(12) Form of Amendment No. I to the Site Leases constituting Exhibits 10d(10) and 10d(11) above (Exhibit 4(f), File No. L 33 20128, filed by Cleveland Electric and Toledo Edison), p ! E-5 _ _ , __. .. _ _ . _ _ .. _ . _ .. _ _ .. ~....... _,. _ ,_.
C_12m:R10R ENERGY EX111111TS Exhibit Number Document
;3a Amended Articles of Incorporation of Centerior Energy ef-fective April 29, 1986 (Exhibit 4(a), File _No. 33-4790),
3b. Regulations of Centerior Energy effective April 28, 1987 (Exhibit 3b. 1987 Form 10-K, File No. 1-9130). 10a
- Indemnity Agreements between Centerior and certain of its current directors and officers.
10e(2) Employment and Consulting Agreement, dated November 30, 1989, with P. H. Smart regarding his employment with Toledo- Edison through August 31, 1990 and-his providing consulting services to Centerior and-Toledo Edison for the period Septeuiber 1, 1990 through January 31. 1994 (Exhibit 10e(2). 1989 Form 10-K, File fio. 1-9130). 22 List of subsidiaries (Exhibit 22, 1986 Form 10-K, File No. 7 1-9130). , 24a
- Consent of Independent Accountants.
24b
- Consent of Counsel for Centerior Energy.
25 *Fovers of Attorney and certified resolution of Centerior Energy's Board of Dinctors authorir.ing the signing on behalf of Centerior pursuant to a power of attorney. CLEVELAND ELECTRIC EXIIIBITS Exhibit Number Document 3a
- Amended Articles of_ Incorporation of Cleveland Electric, effective October 30, 1987.
3b Regula'tions of Cleveland Electric,-dated April 29, 1981,
. as ' amended effective October 1, 1988 and April 24,- 1990 (Exhibit 3b, 1990 Form 10-K,-File No.11-2323).
4b(1)_ Hortgage and Deed of Trust between Cleveland Electric and Guaranty Trust Company of New York (now Horgan Guaranty Trust Company of New York), as Trustee, dated July 1, 1940 (Exhibit 7(a), File No. 2-4450). Supplemental Indentures between Cleveland Electric and the Trustee.' supplemental'to Exhibit 4b(1), dated as followst. E-7 l i _.--, m_ _ , . - . - . m_ _ _ . . . . , , _ . ,e,, , , , . . - -
, , , . . , . , . . , ~ . ,-_...-c--, ,,,...,.x .. , . - ,,.-
Exhibit Number Document 4h(2) .Jiily 1, 1940 (Exhibit 7(h), File No. 2-4 /> 50 ) . 4b(3) August 18, 1944 (Exhibit 4(c). File No. 2-9887). 4b(4) December 1,1947 (Exhibit 7(d), File No. 2-7306). 4b(5) September 1, 1950 (Exhibit 7(c), File No. 2-8587). 4b(6) June 1, 1951 (E.thibit 7(f), File No. 2-8994). 4b(7) May 1.-1954 (Exhibit 4(d), File No. 2-l'J830). l 4b(8)_ March 1, 1958 (Exhibit 2(a)(4), File No. 2-13839). l 4b(9) April 1, 1959 (Exhibit 2(a)(4), File No. 2-14753). ; 4b(10) December 20, 1967 (Exhibit 2(a)(4), File No. 2-30759). 4b(11) January 15, 1969 (Exhibit 2(a)(5), File No. 2-30759). ' 4b(12) November 1, 1969 (Exhibit 2(a)(4), File No. 2-35008). . 4b(13) June 1, 1970 (Exhibit 2(a)(4), File No. 2-37235).- i 4b(14) November 15, 1970 (Exhibit 2(a)(4), File No. 2-38460). ! 4b(15) May 1, 1974 (Exhibit 2(a)(4), File No. 2-50537). 4b(16) April 15, 1975 (Exhibit 2(a)(4), File No. 2-52995). Ab(17) April 16, 1975 (Exhibit 2(a)(4), File _No. 2-53309). 4b(18) May 28, 1975 (Exhibit 2(c), June 5, 1975 Form 8-A, File No. 1-2323). 4b(19) February 1, 1976 (Exhibit 3(d)(6), 1975 Form 10-K, Flie , No. 1-2323).
- 4b(20) November 23, 1976 (Exhibit 2(a)(4), File No. 2-57375).
4b(21) July 26, 1977 (Exhibit 2(a)(4), File No. 2-59401). 4b(22) September 27, 1977 (Exhibit 2(a)(5), File No. 2-67221), 4b(23) May 1-1978 (Exhibit 2(b), June 30, 1978 Form 10-0, File No. 1-2323). . 4b(24) September 1, 1979 (Exhibit 2(a), September 30, 1979 Form 10-0, File No. 1-2323).- 4b(25) April 1, 1980 (Exhibit 4(a)(2), September 30, 1980 Form 0, File No. 1-2323). 4b(26) April 15,- 1980 (Exhibit 4(b), September 30, 1980 Form 10-0, File No. 1-2323). 4b(27) Hay 28, 1980 (Exhibit 2(a)(4), Amendment No._1, File No. l 2 67221).- , 4b(28) June 9, 1980 (Exhibit ad), September 30, 1980 Form 10-0, File No. 1-2323). . 4b(29) December 1, 1980 (Exhibit 4(b)(29), 1980 Form 10-K, File , No. 1-2323). _ _ 4b(30) July 28, . 1981 -(Exhibit-4(a), September 30, 1981. Form x 10-0 File No. 1-2323). 4b(31) August 1, 1981- (Exhibit 4(b), September 30, 1981, N rm 10-0, File No. 1-2323). 4b(32) March 1, 1982 (Exhibit 4(b)(3), Amendment No. 1, File No. 2-76029). 4b(33) JF ' ') , 1982 (Exhibit 4(a), September 30, 1982 Form 10-0,
;. 1-2323).
14b(34) ytember 1,- 1982 (Exhibit 4(a)(1), -September 30, _1982 i lorm'10_Q,_ File No._'-2323). l 4b(35) November 1, 1982 (Exhibit 4(a)(2), September 30, 1982 Form 10-0, File No. 1-2323). 4b(36) November 15, 1982 (Exhibit 4(b)(36), 1982 Form 10-K, File-No. 1-2323). Y E-8 1 L
- -- - ---- - ~ ~~ - - -a-----~--~~ ~
. .-. - - _ . _ . - ~ - . . . - . . . - . _ .~.. - . _ -. . _ . -. .~ .
l Exhibit' Number- Document t Ab(37)._ _May_ '24,e 1983 (Ex.hibit 4(al, June 30, 1903 Form 10 0. Flie No. 1-?323). 4b(38) -Hay-1, 1984 (Exhibit 4,-June 30, 1984 Form 10-0, File No. 1-2323).
- Ab(39) May_-L23,.1984 (Exhibit 4, May 22, 1984 Form 8-K, File No. =1-2323), '
4b(40) June 27, 1984 (Exhibit _4, June 11, 1984 Form 8-K, File No. 1-2325). 4b(41) September 4, 1984 (Exhibit 4b(41), 1984 Form 10-K, File No. 1-2323). 4b(42) November 14, 1984 sPxhibit 4b(42), 1984 Form 10-R, File No. 1-2323). 4b(43) November 15, 1984'(Exhibit 4b(43), 1984' Form 10-K, File No. 1-2323). 4b(44) April 15, 1985 (Exhibit 4(a), May 8, 1485 Form B-K, File
-No. 1--2323).
4b(45) May 28, 1985 (Exhibit 4(b), May 8, 1985 Form 8-K, File No. 1-2323). 4b(46) -August 1, 1985 (Exhibit 4, September 30, 1985 Form 10-0, File No. 1-2323).
- 4b(47) -September 1, 1985 (Exhibit 4, September 30, 1985 Form 8-K, File No.-1-2323).
4b(48) November 1, 1985-(Exhibit 4, January 31,1986 Fet m 8 .K, File No. 1-2323). 4b(49) April 15, 1986 (Exhibit _4, March 31, 1936 Form 10-0, File ' No. 1-2323). 4b(50) Hay 14, 1986~(Exhibit 4(a), June 30, 1986 Form 10-0. File
-No. 1-2323).
4b(51) Hay 15, 1986 (Exhibit 4(b), June 30, 1986 Form 10-0, File No. 1-2323). 4b(52) February 25, 1987 (Exhibit 4b(52), 1986 Form 10-K, File No.-1-2323). 4b(53) . October 15, 1987 (Exhibit.4, September 30, 1987 Form 10-0, File No. 1-2323).
._4b(54)- February- 24, 1988 (Exhibit 4b(54), 1987 /orm 10-K, File No. 1-2323).-
4b(55) September 15,- 1988 (Exhibit 4b(55), 1988 -Form 10-K,-File
-No. 1-2323).
. -_ 4b(56) May 15,.1989 (Exhibit 4(a)(2)(1), File No. 33-32724). 14b(57)~ June 13, 1989 (Exhibit 4(a)(2)(ii), File No. 33-32724). 4b(58) October 15,- 1989- (Exhibit 4(a)(2)(iii), File No.
- 33-32724).
4b(59) January 1, 1990 (Exhibit 4b(59), 1989 Form 10-K,-File No. 1-2323). 4b(60) June 1,.1990 (Exhibit 4(a), September 30, 1990 Form 10-0,. File No. 1-1223). 4b(61) August 1, 1990_ (Exhibit 4(b), September 30, 1990 Form 10-0, File No. 1-2323). 4b(62) May 1, 1991-(Exhibit 4(a), June 30, 1991 Form 10-0, File p No 'l-2323). 4 E-9
- , _ _ _ . . -. =- - - . _ _ . . ~ ..__ }
Exhibit Number -Document 10a' Indennity Agreements between Cleveinnd Electric and cor-tain of its current directors (Exhibi t 10a, 1988 Form ' 10 K File No.1-2323). 10a(1). Key Employee Incentive Stock Plan (Exhibit ((d), File No. 2-37309).
- 10a(2). 1978 Key Employee Stock Option Plan (Exhibit 1, File No.
2-61712).
- 22.
- List of subsidiaries.
24a
- Consent of Independent Accountants.
24b-
- Consent of Counsel for Cleveland Electric.
25- Fovers of Attorney and certified resolution of Clevelar,d Electric's Board of Directors authorizing the signing on behalf of Cleveland Electric pursuant to a power of attorney (Exhibit 25(a), File No. 33-46665). TOLEDO EDISON EXIIIBITS - Exhibit Number Document
-3a Amended Articles of Incorporation of Toledo Edison effec-tive September 25, 1986 (Exhibit 3a, 1986 Form 10-K, File No.7 1-3583). . 3a(1) Certificate of Amendment effective July 31, 1987 to imended Articles of Incorporation of Toledo Edison (Exhibit 3a(1), 1988 Form 10-K, File No. 1-3583).
13b Code of Regulations of Toledo Edison dated- January 28, 1987, as amended effective July 1 and October 1, 1988 and April 24, 1990 -(Exhibit 3b, 1990 Form 10-K, File No 1-3583).
- Ab(1) Indenture, dated as of April 1, 1947 between the Company and The Chase National Bank of the City of Nev. York (nov The Chase Manhattan Bank (National Association)) (Exhibit 2(b), File No. 2-26908).
Supplemental Indentures between Toledo Edison and the Trustee, Supplemental to Exhibit 4b(1), dated as follows: 4b(2) September 1, 1948 (Exhibit 2(d), File No. 2-26908). L4b(3) . April 1, 1949 (Exhibit 2(e), File No. 2-26908). , 4b(4) December 1, 1950 (Exhibit 2(f), File No. 2-26908). L L 4b(5) . March 1, 1954 (Exhibit 2(g), File No. 2-26908). 74b(6)' February 1, 1956 (Exhibit'2(h), File No. 2-26908). 4b(7) May 1, 1958 (Exhibit 5(g), File No. 2-59794). E-10 1 E . . , . .. , , , , - . -_ _
m _.___._.m_ _ . . _ ... _ .. _ ..._ _ . _ _ . . _~_-._._. _ _. _ . _ _ l
-Exhibit Number Document ]
4b(8) . August _1,1967-(Exhibi t 2(c), File No. 2 264M). 4b(9) November 1, 1970 (Exhibit 2(c), File No. 2-38569).
'4b(10) Augutt 1, 1972 (Exhibit 2(c), File No. 2 44873). - 4b(11) November 1, 1973 (Exhibit 2(c), File No, 2-49428).
4h(12)- July 1, 1974 (Exhibit 2(c), File No. 2-51429).
~4b(13) October 1, 1975 (Exhibit 2(c), File No.- 2-54627).
4b(14)- June 1, 1976-(Exhibit 2(c), File No. 2-56396). 4b(15). October 1, 1978 (Exhibit 2(c), File No. 2 62568). 4b(16) September 1, 1979 (Exhibit 2(c), File No 65350), 4b(17) September 1, 1980 (Exhibit 4(s), File No. 2-69190). Ab(18) October 1,1980 (Exhibit 4(c), File No. 2-691M). 4b(19) . April 1, 1981 (Exhibit 4(c), File No. 2-71580). 4b(20) November 1, 1981 (Exhibit 4(c), File No. 2-74485). 4b(21) June 1, 1982 (Exhibit.4(c), File No. 2-77763).
' 4b(22) . September 1, 1982 (Exhibit 4(x), File No. 2-87323).
- 4b(23) April ., J983 (Exhibit 4(c), March 31, 1983 Form 10-0, File No. 1-3583).
4b(24) December 1,1983 (Exlabit 4(x),1983 Form 10-K, File No. 1-3583). 4b(25) April 1, 1984 (Exhibit 4(c), File No. 2-90059). 4b(26) October 15, 1984 (Exhibit 4(z), 1984 Form 10-K, File No. 1-3583). 4b(27) October 15, 1984 (Exhibit 4(aa), 1984 Form 10-K, File-No. 1-3583). 4b(28) August 1, 1985 (Exhibit 4(dd), File No. 33-1689). 4b(29) . August 1, 1985 (Exhibit 4(ee), File No. 33-1689). Ab(30) December 1, 1985 (Exhibit 4(c), File No. 33-1689). 4b(31) March 1, 1986 (Exhibit 4b(31), 1986 Form 10-K, File No. 1-3583). Ab(32) October 15, 1987 (Exhibit 4, September 30, 1987 Form 10-0, Mle No. 1-3583). 4b(33)- September- 15, 1988 (Exhibit 4b(33), 1988 Form 10-K, File No. 1-3583). ' Ab(34) June 15, 1989 (Exhibit 4b(34), 1989 Form 10-K, File No. 1-3583). Ab(35) ' October 15, 1989 (Exhibit 4b(35), 1989 Form 10.K, File No.
=
1-3583). 4b(36) May 15, 1990-(Exhibit 4, June 30, 1990 Form 10-0, File No. l - 1-3583). l 4b(37) March 1, 1991 (Exhibit-4(b),. June 30, 1991 Form 10-0, File i No. 1-3583), 10a Indemnity Agreements'between Toledo Edison and certain of its current directors (Exhibit 10a, 1988 Form 10-K, File No._1-3583). 10e(2) Employment -and Consulting Agreement, dated November 30, 1989, with P. M.. Smart regarding his employment with . , _ Toledo- Edison through August 31,- 1990 and his providing i I consulting services to Centerior and Toledo Edison for the-period Sep* ember 1, 1990 through January 31, 1994 (Exhibit l 10e(2), 1989 Form 10-K, File No. 1-9130). E-11 i
-------___._.___________________..__.m . .m,, .a--,,.m- , . , ,y-m-._ ___.m.~_,,.y. - .
5- , . , , ,, 7
-_ _ ~ _ _
Exhibit Number. Document 24a
- Consent offIndependent Accountants.
24b ~* Consent of Counsel for Toledo Edison. -- 125 ^ Povet-. of Attorney: and certified resolution of Toledo Edison's Board of Directors authorizing the signing on behalf. of Toledo Edison pursuant to e power of e.ttorney (Exhibit 25(b),-File No. 33-46665). 28(b) Financial Statements of The Toledo Edison Company Savings
-Incentive Plan for the fiscal year ended December 31, 1991 (to be filed by amendment).
Pursuant to Paragraph (b)(4)(iii)(A) of Item 601 of Regulation S-K, the Regis-trants have not; filed _as an exhibit. to this Form 10-K-any instrument with
. respect to:long-term debt _if the total amount of securities authorized there-under~does not exceed _10% of the: total assets of the applicable Registrant and its subsidiaries on.a consolidated basic, but each hereby agrees to furnish to the-Securities and Exchange commission on request any such instruments. - Pursuant to Rule 14a-3(b)(10) under the Securities Exchange Act of 1934, - copies of exhibits filed by the Registrants with this Form 10-K vill be fur-nished by'the Registrants to share ovners upon written request and upon re- -ceipt: in advance of1the aggregate fee for preparation of such exhibits at a ~
rate lof-$.25-per page,'plus -any postage or shipping expenses which would bt incurred by the Registrants. 4 0 3 f
-E-12
- - . .- - - - . _ ~ . - . -
INDEX TO SELECTED FINANCIAL DATA: h!ANAGEhiENT'S DISCUSSION
. AND ANALYSIS Of FINANCIAL CONDITION AND RESULTS OF OPERATIONS; AND FINANCIAL. STATEhiENTS Centerior Energy Corporation and Subsidiaries: - Report of Independent Public Accountants . . .. . ... , ,. . F-2 Summary c( Significant Accounting Policies . . .. . . , ...... . F-3 hianagement's Financial Analysis . . . . . . . .... ... .. .... F-5/F-8 Income Statement for the years ended December 31,1991,1990 and 1989 .. F-7 Retained Earnings for the years ended December 31,1991,1990 and 1989 . F-7 Cash Flows for the years ended December 31,1991,1990 and 19S9 . . . F-9 Balance Sheet as of December 31,1991 and 1990. . . .. F-10 Statement of Cumulative Preferred Stock at December 31,1991 and 1990. F-12 - Notes to the Financial Statements . ... .. .. . . . F-13 Financial and Statistical Review . .. . ... . F-23 The Cleveland Electric illuminating Company and Subsidiaries:
Report of I_ndependent Public Accountants . . . F 25 Summary of Significant Accounting Policies .. . . F-26 hlanagement's Financial Analysis . . . F-28/ F Income Statement for the years ended December 31,1991,1990 and 1989 . F-30 Retained Earnings for the years ended December 31,1991,1990 and 1989 F-30 Cash Flows for the years ended December 31,1091,1990 and 1989 F-32 Balance Sheet as of December 31,1991 and 1990. . . . . F-34 Statement of Cumulative Preferred Stock at " ember 31,1991 and 1990. . F-36 Notes to the Financial Statements . .... . . , , , . . F-37 Financial and Statistical Review . . .. .. ...... , . ., . . F-46 The Toledo Edison Company: Report of Independent Public Accountants . ,, . . .. . F-4 5 . Summary of Significant Accounting Policies . ,. F-49 hianagement's Financial Analysis . . . . F-51/F-54 Income Statement for the years ended December 31,1991,1990 and 19S9 F-53 Retained Earnings for the years ended December 31,1991,1990 and 1989 F-53 I= Cash Flows for the years ended December 31,1991,1990 and 1989 . . F-55 Balance Sheet as of December 31,1991 and 1990. . . F-56 Statement of Cumulative Preferred Stock at December 31,1991 and 1990. F 58 Notes to the Financial Statements , , F 59 Financial and Statistical Review . . . F 68 (Centerior Energy) F-1 (Centerior Energy)
Report ofIndependent Public Accountailts To the Share Owners and ' Board of Directors of DERS M Centerior Energy Corporation: Q We have audited the accompanying consolidated for each of the three years in the period ended balance sheet and consolidated statement of December 31, 1991, in conformity with generally cumulative preferred stock of Centerior Energy accepted accounting principles. Corporation (an Ohio corporation) and subsidiaries As discussed further in the Summary of Signi6 cant
- s of December 31,1991 and 1990, and the related Accounting Policies and Note 12, a change was made consolidated statements of income, retained earnings in the method of accountin3 for nuclear plant and cash flows for each of the three years in the depreciation in 1991, retroactive to January 1,1991.
period ended December 31,.1991. These financic. As discussed further in Note 3(c), the future of statements and the schedules referred to below are the Perry Unit 2 is undecided. Construction has been responsibility of the Company's management. Our suspended since July 1985. Various options are being responsiblity is to express an opinion on these considered, including resuming construction, financial statements and schedules based on our converting the unit to a nonnuclear design, sale of all audits. or part of the Company's ownership share, or We conducted our audits in accordance with canceling the unit. Management can give no assurance generally accepted auditin3; standards. Those when if ever, Perry Unit 2 will go in service or standards require that we plan and perform the audit whether the Company's investment i.. that us.it and a to obtain reasonable assurance about whether the return thereon will ultimately be recovered. hnancial statements are free of material misstatement. Our audits were made for the purpose of forming An audit includes examining, on a test basis, an opinion on the basic hnancial statements taken as evidence supporting the amounts and disclosures in a whole. The schedules of Centerior Energy the 6nancial statements. An audit also includes Corporation and subsidiaries listed in the Index to assessing the accounting principles used and Schedules ne presented for purposes of complying significant estimates made by management, as well as with the Securities and Exchange Commission's rules evaluating the overall financial statement and are not part of the basic financial statements, presentation. We believe that our audits provide a These schedules have been subjected to the auditing reasonable basis for our opinion. procedures applied in the audits of the basic financial In our opinion, tt e finandal statements referred to statements and, in our opinion, fairly state in all L above present fair!y m an material respects, the material respects the financial data required to be set
- hnancial pcsi
- ivn of Centerior Energy Corporation forth therein in relation to the basic hnancial and subsidiaries as of December 31,1991 and 1990, statements taken as a whole.
and the results of their operations and their cash flows ! Cleveland, Ohio l February 14,1992 Arthur Andersen & Co. l l (Centerior Energy) F-2 (Centerior Energy)
- .~ _ _ _ _ _ _ _ _ . _ _ _ _ _ _ . _ _ _ _ _ ._
lSunirnary of Signipcant Accounting Policies GENERAL of fuel and purchased power evense. The amounts
+
for prior years have also been reclassihed to conform Centerior E.nergy Corporatmn (Centerior Energy) is a with current reporting requirements, See Note 11 1 holding company with two electnc utilities as subsidiaries, The Cleveland Electric illuminating FUEL EXPENSL, CompanyEdison dom (Cleveland pany (Toledo Edison). The Electric)consolidated and TheThe Toledo cost of .'ossil fuel is charged to fuel expense based financial statements also include the accounts of on inventory usage. The cost of nuclear fuel, Centerior Energy's other wholly owned subsidiary, including an interest component, is charged to fuel
- Centerior Service Company (Service Company), and expense based on the rate of consumption. Estimated Cleveland Electric's wholly owned subsidiaries. The future nuclear fuel disposal costs are being recovered ,
- Service Company provides management, financial, through the base rates, administrative, engineering < legal and other services The Operating Companies defer the differences at cost to Centerior Energy, Cleveland Electric and between actual fuel costs and estimated fuel costs Toledo Edison, Cleveland Electric and Toledo Edison currently being recovered from customers through the - (Operating Compames) operate as separate fuel factor. This matches fuel expenses with fuel-companies, each serving the customers in its service related revenues.-
area. The preferred stock, first mortgage bonds and , other debt obligations of the Operating Companies PRE-PilASE-IN AND PilASE-IN DEFERRALS continue to be outstandmg secunties of the issuing OF OPERATING EXPENSES AND utility. All significant intercompany ;tems have been eliminated m consolidation. CARRYING CHARGES Centerior Energy and the Operating Companies The PUCO authorized the Operating Companies to follow the Uniform System of Accounts prescribed by record, as deferred charges, certain operating expenses the Federal Energy Regulatory Commission (FERC) and carrying charges related to Perry Nuclear Power - and adopted by The Public Utilities Commission of Plant Unit 1 (Perry Unit 1) and Deaver Valley Power
- Ohio (PUCO), As rate-regulated utilities, the Station Unit 2 (Beaver Valley Unit 2) from their Operating Companies are subject to Statement of respective in-service dates in 19S7 through December Fincncial Accounting Standards 71 which governs-1988. Amortization and recovery of these deferrals accounting for the effects of certain types ot' rate (called pre phase-in deferrals) began in January 1989 , - regulation. The Service Company follows the Uniform in accordance with the January 1989 PUCO rate System of Accounts for Mutual Service Companies orders discussed in Note 6. The amortizations will prescribed by the Securities and Exchange continue over the lives of the related property.
Commission (SEC) under the Public Utility Holding As discussed in Note 6, the January 1989 PUCO Company Act of 1935. rate orders for the Operating Companies included The Operating Companies are members of the approved rate phase-in plans for their investments m Central Area Power Coordination Group (CAPCO). Perry Unit I and Beaver Valley Unit 2, On Januar/1,
-Other members include Duquesne Light Company 1989, the Operating Companics began recording the (Duquesne), Ohio Edison Cornpany (Ohio Edison) deferrals of operating expenses and interest and L and Ohio Edison's -wholly owned subsidiary, equity carrying charges on deferred rate-based Pennsylvania Power Company (Pennsylvania investment punuant to the phase in plans. These Power). The members have constructed and operate deferrals (called phase-in deferrals) will be recovered generation and transmission facilities for the use of by December 31,1998.
the CAPCO companies. DEPRECIATION AND AMORTIZATION REVENUES The cost of property, plant and equipment is Customers are billed on a monthly cycle basis for their depreciated over their estimated useful lives on a energy consumption based on rate schedv ies or . straight-line tiasis. Prior tn 1991, only nonnuclear - contracts authorized by the PUCO or on ordinances property, plant and equipment was depreciated on a l-with individual municipalities. An accrual is made at straight line basis, as depreciation expense for the the end of each month to record the estimated - nuclear generating units was based on the units of-amount of unbilled ievenues for kilowatt-hour sales production method. rendered in the current month but not billed by the The annual straight-line depreciation provision for end of that month. - nonnuclear preperty expressed as a percent of A fuel factor is added to the base rates for electric average depreciable utility plant in service was 3A%
- service. This factor is designed to recover from in 1991,3.3% in 1990 and 3A in 1989. The rate '
L customers the costs of fuel and most purchased - declined in 1990 because of a PUCO-approved change j- power. ft:is reviewed and adjusted semiannually in a in depreciation rates effective January 1,1990, ,
- PUCO proceeding. attributable to longer estimated lives for nonnuclear l Operating revenues include certain wholesale property. See Note 13.
power sales revenues in accordance with a FERC in 1990, the Nuclear Regulatory Commission clarification of reporting requirements. Prior to 1991, (NRC) approved a six-year extension of the operating these bulk power sales transactions were netted with license for the DarwBesse Nuclear Power Station purchased power transactions and reported as part (Davis Besse). The PUCO approvcd a change in the (Centerior Energy) F-3 (Centerior Energy)
. .- ~ ~ - - - .- .. - - _ - - . _ . - - ._ _ ~ - - - .- ~ . ~ - - _ . -
units of production depreciation rate for Davis- DEFERRED GAIN AND LOSS FROM Besse, effective January 1.1990, which recognized the SALES OF UTILITY PLANT life cuension. See Note 13. Effective Januarv li 199'1, the Operating Theyperating Companies entend into sale and Companies changed'their method of accounting for leaseback tramactions in 1987 for the coal-hred Bruce nuclear plant depreciation from the units-ot. Mansheld Generating Plant (Mansheld Plant) and prodztion method to the straight line method at Beaver Valley Unit 2 as discussed in Note 2JThese about a 3% rate. The PUC(! approved this change transactions resulted in a net gain for the sale of in accouating method for each Operatin Mansheld Plant and a net loss for the sale of Beaver and subsequently approved a change 'g Company to lower Valley Unit 2, both of which were deferred. The the 3% rate to 2.5% for the three operating nuclear Operating Compames are amortizing the applicable units retroactive to January 1,199L See Notes 12 deferred gain and loss over the terms of leases under and 13. sale and leaseback agreements. The amortizations The Operating Companies use external fundmg along with the lease expense amounts are recorded as of future decommissioning costs for their operating other operation and maintenance expense. nuclear units pursuant to a PUCO order. Cash contribu' ions are made to the funds on a straight-line INTEREST Cll ARGES basis over the remaining licensing period for each Debt interest reported in the income Statement does unit. Amounts currently in rates are based on past not include mterest on nuclear fuel obligations. estimates of decommissioning costs for the Operating interest on nuclear fuel obligations for fuel under Companies of $122,000,000 in 1986 dollars for Davis. construction is capitalized. See Note 5.
- Besse and $72,000,000 and $63,000,000 in 1987 Losses and gains realized upon the reacquisition or dollars for Perry Unit I and Beaver Vallev Unit 2, redemp. tion of long-term debt are deferred, consistent respectively, Actual decommissioning costs are with the regulatory rate treatment. Such loues and L expected to signihcantly exceed these estimaten gains are either amortized over the remainder of the it is expected that increases in the cost estimates will original life of the debt issue retired or amortized over be recaverable in rates resulting from future rate the life of the new debt issue w hen the proceeds of a .
proceedings. The current level of expense being new issue are used for the debt redemption. The funded .and recovered from customers over the amortizations are included in debt interest expense. remaining licensing periods of the units is
. approximately $8,000,000 annually. The present PROPERTY, PLANT AND EQUIPMENT funding requirements for Beaver Valley Unit 2 also Property, plant and equipment are stated at original
- satisfy a similar commitment made as part of the sale cost less any amounts ordered by the PUCO to be and leaseback transaction discussed in Note 2. written off, included in the cost of construction are items such as related payroll taxes, pensions, fringe FEDERAL INCOME TAXES benehts, management and general overheads and
- The financial statements reflect the liability method of allowance for funds used during construction accounting for income taxes. The liability method ( AFUDC) AFUDC represents the estimated requires that our deferred tax liabilities be adjusted composite debt and equity cost of funds used to '
, . for subsequent tax rate changes and that we record hnance construction. This noncash allowance is
- deferred taxes for all temporary differences between credited to income, except for certain AFUDC for the book and tax bases of assets and liabilities. A Perry Nuclear Power Plant Unit 2 f Perry Unit 2). See portion of these temporary differences are attributable Note 3(c).The gross AFUDC rates averaged 10.7%.in to property-related timing differences that the PUCO 1991,10.8% in 1990 and 11.2% in 1989. - used to ieduce prior years' tax exper c for Maintenance and repairs are charged to expense as ratemaking purposes whereby no defei - 1 taxes incurred. The cost of replacing plant and equipment were collected or recorded Since the PUCO practice is charged to the utility plant accounts. The cost of permits recovery of such taxes from customers when property retired plus removal costs, after deducting they become payable, the net amount due from any salvage value, is charged to the accumulated _
customers has been recorded as a regulatory asset provision for depreciation. in deferred charges. A substantial portion of this amount relates to differences between the book and RECLASSIFICATIONS tax bases of utility plant. Hence, the recove:j of these Certain reclassifications have been made to prior
. amounts will take place over the lives of the related years" hnancial statements to make them comparable 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, reclassif cations related to certain wholesale power The amortization is reported as a reduction of sales revenues as. discussed previously under j . depreciation expense under the liability method. " Revenues" and accumulated defened rents as l_ : See Note 7. discussed in Note 2.
L - (Centerior Energy) F4 (Centerior Energy)
ManagemenVs Financial Analysis - RESULTS OF OPERATIONS depreciation for facilities that me in service bu' not yet recognized in ratet pUCO an a on this request has Over~iem . been postponed under the joint recommen6 tion
.The January 1989 PUCO rate orders for the Operating approsed by the PUCO discussed below.
Companies, as discussed in Note 6, were designed to in December 1991, the pUCO approud a joint enable us to begin recovering in rates the cost of, and resmmenda: ion of the Operating Comranies and earn a fair return on, our allowed investment in customer representative groups involvec in the 1989 Perry Unit 1 and Beaver Valley Unit 2. The rate rate case settlement. The joint recommendation orde'rs, which provided for three rate increases. sought to secure an interim resolution of then-improved revenues and cash flows in 19S9,1990 and pending accounting applications in 1991 and to 1991 from the 1988 levels, llowever, as discussed in establish a framework for resolving accounting issues the first four paragraphs of Note 6, the phase-in and related matters on a longer-term basis (i e.,1992 plans were not designed to improve earnings because IW3). As part of this joint remmmendation, the gains in revenues from the higher rates and assumed Operating Companies agreed to limit their combined sales growth are initially offset by a corresponding 1997 other operation and maintenance expenses and reduction in the deferral of nuclear plant operating capital expenditures to $1,050,0001100, exclusive of enses and carrying charges and are subsequently compliance costs related to the Clean Air Act ev[ of set by the amortization of such deferrals. Amendments of 1990 (Clean Air Act)< Other Although the phase-in plans had a positive effect operation and maintenance expenses and capital on revenues and cash flows, there are a number of expenditures totaled $1,005M000 in 1991. The factors that exerted a negative influence on earnings Operating Companies and the customer in 1991'and will continue to present signihcant representative groups also agreed to an ongoing earnings challenges in 1992 and beyond. One such review of our business operations, financial condition factor is related to Acilities placed in service after and accounting practices. This effort, with the February 1988 and not included in rate base, The
~
participation of the PUCO staff, is directed at the Operating Companies are required to record interest maintenance and ultimate improvement of our , charges and depreciation on these facilities as current fmancial condition, the improvement of the
~ expenses even though such items are not yet efficiency of our operations, and the delav and recovered in rates. We also are facing the challenge of minimization of future rate increases. The Dperating competitive forces including new imtiatives to create Companies also agreed not to t'eek any base rate municipal electric systems. The need to meet increase that would become effective before 1993.
competitive threats, coupled with a desire to he continually la e competitive threats from encourage economic growth in the service area. is municipal electric systems within our service territory, prompting the Operating Companies to enter into an a challenge intensi6ed bv municipal access to low ' increasing number of contracts having reduced rates cost power currently av'ailable on the wholesale
- with certain large customers. Competitive forces also market. As part of our competitive strategy, we are .
prompted Toledo Edison to implement rate strengthening programs that demonstrate the added reductions- in 1991 for residential and small value inherent in our service, beyond what one might ccmmercial customers. Factors beyond our control receive from a me cipal electric system. Such also having a negative influence on earnings are the programs include providing services to communities economic recession, the effect of inflation and to he!p them retain and attract businesses, providing increases in taxes, other than federal income taxes. consulting services to customers to improve their We have taken several steps to counter the adverse energy efficiency and developing demand-side effects of the factors discussed above. We have management p ograms. To counter new implemented most of the recommendations of the municipalization initiatives, we are also stressing the management audit discussed in Note 6 and have fmancial risks and ancertainties of- creating a taken other actions which reduced other operation municipal system and our superior reliability and and maintenance expense by approximately service.
$62,000,000 in 1991. As discussed in the Summary of Annual sales growth is expected to average about Significant Accounting policies and Note 12r we 2% for the next several years, contingent on future - sought and received PUCO approval to lower our economic events. Recognizing the limitations nuclear plant depreciation expense in 1991 to a level imposed by these sales projections and current more closely aligned : with the amount being competitive pressures, we will utilize our best efforts recovered in rates. In addition, we have increased our to minimize future rate increases through cost-efforts to sell power to other utilities which, in 1991, reduction and quality-of-service efforts and exploring resulted in approximately SR000,000 of revenues in other innovative options. Eventually, rate increases - excess of the cost of providing the power. will be necessary to recognize the cost of our new Despite the positive aspects of the measures capital investme'nt and the effect of inflation.
discussed above, more must be done to maintain earnings Continuing cost-reduction efforts will be g gg necessary to lessen the negative pressures on Factors contributing to the 5 5% increase in 1991 earnings. We are aggressively seeking long term operating revenues are as follows: , - power contracts with wholesale customers to further ownge in opnnne Revenun increase enhance revenues. To counter the effects of delays in Base ames ana uncenan,o 5 3x w ooo recovering new investment since 1988 and related sales volume and m - Mooo,tw costs in rates, we have requesed pUCO approval to Wholmie 59es- teorm i accrue post-in-service carrying costs and defer num
===
(Centerior Energy)- F5 (Centerior Energy)
-. - -. - . - - _ - . - . . _ - - - _ - - - ~ ~ . - - _ ~ ~ ..The increases in b' ase rates and miscellaneous . Companies' of 9% effective in February 1980 and 7%
revenues resulted primarily from the lanuarv 1984 effective in February 1440. The associated revenue
-PUCO rate orden, for the Oper.ating Compa'nies. The increase in-1940 was partially offset by reduced PUCO approved rate increases of 7% effective in - revenues resulting from a 4.1% decreec in total February 1990 for both-companies and rate itureases kilowatt hour sales, industrial sales decreased 2E%
of 4.33% for Cleveland Electric and 2.74% for Toledo - because of the recession beginning .in 1990. Edison effective in February 1991. However, as part of - Residential sales decreased 2.1% as seasonal Toledo Edison's efforts' to improve its competitive temperatures were more moderate in comparison to sition in its service area, Toledo Edison ivaived its the prior year's temperatures, resulung in reduced p74% rate increase for residential and small .
~ customer heating and cooling-related demand. ,
commercial customers and reduced its residential rates Commercial sales increased 0,3% as increased by 3% effective in March 1991 and by an additional demand from new all-electric office and retail space . 14e effective in September 1991. See Note 6. Total was offset by the effects of mild weather. Other sales kilowatt-hour sales increased 1,2% in 1991. Residential activity decreased 18.6% as a result of lower
. and commercial sales increased 4.7% and- 4,8%, wholesale sales caused in part by Toledo Edison's respectively, as a result of higher usage of cooling municipal utility customers satisfying a greater ,
equipment in response to the unusually warm late portion of their power needs from other sources. The sprmg and summer 1991 temperatares. The merease in rcvenues was also partially offset by the commercial sales increase was also influenced by loss of revenues related to the May 1989 expiration of , some improvement in the economy for the . Cleveland Electric's al;reement to sell a portion of its commercial sector. Industrial sales declined 5% largely share of Perry Unit 1 capacity to Ohio Edison and
~because of the recession-driverc slump in the steel, Pennsylvania Power.
auto and chemical industries. Other sales increased Opbrating expenses decreased 0.3% in 1990. 9.1% because of increased : sales to wholesale Depreciation and amortization expense decreased customers and public authorities. . primarily because of lower depreciation rates used Operating expenses increased 3% in 1991. The in 1990 for nonnuclear and Davis-Besse increase was mitigated bv a reduction of $62,000,000 property attributable to lenger estimated lives and in other operation and mhintenance expense, resulting because of longer nuclear generating unit refuelhg primarily from cost-cutting measures. Offsetting this and maintenance outages in 1990 than in 1989.
- decrease ivere an increase in federal income taxes Federal income taxes decreased primarily because of a because of higher pretax operating income: an decrease in pretax operating income. These
- increase in fuel and purchased power expense decreases in operating expenses were partially offset resulting pnmarily from increased amortization of by an increase in taxes, other than federal income previously deferred fuel costs over the amount taxes, re ulting from higher property and gmss amortized in 1990; an increase in taxes, other than receipts taxes, and by lower operating expense federal income taxes, resulting from higher property deferrals for Perry Unit I and Beaver Valley Unit 2. . and gross receipt taxes and accruals for Pennsylvania Credits for carrying charges recorded in tax increases enacted in August 1991; and lower nonoperating income decreawd in 1990 because a operating expense deferrals for Perry Unit I and };reater share of our investments and leasehold 1 Beaver Valley Unit 2 pursuant to the' January 19S9. mterests in Perry Unit I and Beaver Valley Unit 2 PUCO rate o'rders, were recovered in rates. The decrease in the federal Credits for - carrying charges - recorded in income tax provision related to nonoperating income nonoperating income decreased in 1o91 because a . was the result of a decrease in pretax nonoperating greater share of our investments and leasehold income and federal income tax adjustments of interests in Perry Unit 1 and Beaver Valley Unit 2 $37,522,000 associated with. previously deferred were recovered ln rates. The federal income tax investment tax credits relating to the 195S write-off of
, provision related to nonoperating income increased - nuclear plant. Other income and deductions, net. 1
- mainly because the 1990 provision was reduced by decreased primarily because of less interest income in $37,522.000 for federal income tax adjustments 1990.
associated with previously deferred investment tax credits relating to the 1988 write off of nuclear plant. EFFECT OF INFLATION
- 1990 t7s.1989 .Althoug,h the rate of inflation has eased in recent Factors contributing to the 21% increat in 1990 years, we are still affected by even modest inflation-operaring revenues are as follows: since the regulatory process introduces a time-lag Increase during which increased costs of our labor. materials--
Change in Operatmg Revenues (Decrease) .and services are not reflected in rates and recovered.
. Base Rates and Macellaneous , $152 W O,000 Moreover, regulation allows only the recovery of I histancal costs of plant assets through depreciation
! NcNnU c'a" pansies tiokioMon and Pennsvlvania Power. (32 000.000). even though the costs to replace these assets would 3 ggoo,non substantially exceed their historical costs in an inflationarv economy.
- i. 1The major factor accouming for the increase in Changes in fuel costs do not affect our results of
!. operating revenues v.as related to the January 1989 operations since those costs are deferred until _ rate orders for the Operating Companies. The reflected in the fuel cost recovery factor included in PUCO approved rate increases for the Operating customers' bills. (Centerior Energy) F-6 (Centerior Energy)
. . - ~ - _ . - - _ . . _ - .. - - - . ,-, . - - - - - - _. - -
lHC0 HIC SlalCHICHI CENTERIOR ENERGiCORPOREDON 4ND sUBSIDIARils For the years ended December 31, 1991 1990 1989 (thouunds of dollars, escept per share amounts) Operating Revenues . . . . . . . . . . .... ... ..... . $2,560,252 $2.427.441 $2.361,304
- Operating Expense.< .
fuel and pttrchased power. . . ... ... . . .. . 499,672 472,297 472,684
= Other operation and maintenance ... . ... ,.. ..... 801,225 862,738- 860,138 Depreciation and amortization . . _ _ ... . .. 242,708 242,153 272,671 - Taxes, other than federal income taxes . . . . .. .. 304,709 283,425 259,871 Phase.in deferred operating expenses . . . .. .. .. .. (22.222) (50,940) (74,555)
Amortization of prc-phase in deferred costs . . .... 26,529 17,272 16.335 Federal income taxes . . . . . . . . . . . . . . .... . . . . 137,581- 96,076 122,385 1,980,202 1,923,021 1,929,529
' Operating income . . . . . .. . . . . . . 580,050 504,420 431,775 Nonoperating income L Allowance for equity funds used during construction . 9,351 7,883 16,930 ' Other income and deductions, net . . , .. . . 5,246 145 14,368 L Phase-in carrying charges. .. ,, , . . . . .. . , . . 109,601 205.085 299,159 Federal income taxes -. credit (expense) . . .. . (30,329) (12.948) (73,177) 93,671 200.165 257,280 .
Income Before Interest Charges and Preferred Dividends . 673,921 704,585- 689,055 Interest Charges and Preferred Dividends ~ Debt interest . .... , , . . .. .. 381,280 384,278 369,481-
' Allowance for borrowed funds used during construction , . (5,248) (5.993) (12,929)
Preferred dividend requirements of subsidiaries . . .. 60,649 61,841 65.617 436,681- _ 440.126 422,169 Net Income . . . . . , , ... .. ........ . ... .. ,, .. .. $ - 237,240_ S 264.459 $ 266,886 Average Number of Common Shares Outstanding (thousands) . . . . . . . . . . . . . .. . .... ..... .. 139,104 138.885- 140,468 .. Earnings Per Common Share .. . . .. .. $ - 1.71 $ l.90 $ -1.90
. Dividends Declared Per Common 5 hare. . . . $ 1.60 $ 1.60 s 1 60 .Relained Earnings For the years ended December 31, -1991 1990 1989 . (thouunds of dollars)
Balance at Beginning of Year. '
.. ,, , , $ 654,836 $ 613.774 $ 571.882 . Additions .
Net income'. . . . . .. . 237,240 264,459 - 266,886
~ Deductions - Common stock dividends . . ... , ,. ,. . ~(222,233) _( 222,482) (224,947)
LOther, primarily preferred stock redemption expenses of L subsidiaries . .. .. . . ,, . .. (966) (915) (47) Net increase . .. .. 14,041 11,062- 41192 Balance at End of Year ., . . .. $ 668,677 $ 654,836 5 613,774
. The accompanying notes and summary of significant accounting policies are an integral part of these statements.
(Centerior Energy) F-7 (Centerior Energy) 4
- r -n.-. ._- _. . , , . - , - , . . . _ - ,_ _ , . _ _ < , . , , , e~. ..-
Management's Financial Analtisis CAPITAL RESOURCES AND LIQUIDITY optional redemption provmons bee Notes 10(d) and in addhion to our need for cash foi normal corporate (c) fm infonnanon wncerning lunitatmns on the operations, we contmue to need cash for an ongoing issuance f preferred and preterence stock and debt program of constructing new tacilities and modifying Our caphal rquirmnents aher 1444 will deps ad on existing facilities to meet anticipated demand for the implementation strategy we chooce to achiese electric service, comply with governmental c mphance with the Clean Air Act. lkpenditures for regulations and protect th'e environment. Cash is also our optimal plan are estimated to be approximately needed for the mandatory retirement of securities. $190.000.000 over the 1992-2001 period. See Note Over the three-year pe'riod of 19891991, these 3(bb construction and mandatory retirement needs totaled We expect to be able to rah.e cash as needed. The approximately $1,250,000[000. In addition, we avaHabHity and cost of capital to meet our external exercised various options to redeem and purchase hnancing needs, however, depends upon such factors approximately $480,000,000 of our securities. as hnancial market condiuons and our credit ratings. As a result of the January 1089 PUCO rate orders, Cunent securities ratings for the Operating internally generated cash increased in 1989,1990 and Lompanies are as follows. 1991 from the 19S8 level in addition, we raised & %rs inumrs
$1.463.000,000 through security issues and term bank Carfor a n serm e loans during the 1989-1991 period as shown in the OndanJ Dectnc Cash Flows statement. During the three-year period, hrst rnor pn bon 1+ BBB- naa:
the Operating Companies ako utilized their short- Preferred *c6 BB+ baa: term borrowing arrangements (explained in Note 11) Toledo Edun to help meet their cash needs. Proceeds from these nrst rnorton bonds BSD- naal hnancings were used to help pay for our construction Unsecured notes 004 Dal program, to repay portions of short-term debt Prderred stock - BD+ ba: incurred to hnance the construction program, to retire, redeem and purchase outstanding securities, and for Barring unforeseen circumstances, we belitre that general corporate purposes. the rate orders and recent regulatery actions coup'ed Estimated cash requirements for 1992-1994 for with stringent cost controls, have given us a Cleveland Electric and Toledo Edison, respectively, reasonable opportunity to achieve nnancial results are $693,000,000 and $248,000,000 for their which should permit Centerior Energy to contmue the construction programs and $464,000,000 and current quarterly cor mon stock dividend of 5.40 per
$241,000 000 for the mandatory redemption of debt share. Nevertheless, dividend action by our Board of and preferred stock. Additionally, C'eveland Electric Directors will continue to be decided on a quarter-to-has arranged to refund in 1992 $78,700,000 principal quarter basis after the evaluation of hnancial resuhs, amount of its First Mortgage Bonds,13%% Series due potential earning capacity and cash flow. A write-off 2012 by issuing an equal principal amount of hrst of our investment in Perry Unit 2, as discussed in mortgage bonds due 2013 having an effective interest Note 3(c). would not reduce cur retained earnings cost of 8.25%. Cleveland Electric and Toledo Edison sufficiently to impair our abilite to declare dividenJw expect to fmance externally about 50% of their total and would not affect our cash flow _
1992 construction and mandatory redemption The Tax Reform Act of 1986 (1966 Tax Act) requirements of approximately 5256,000,000 and provided for a 34% income tax rate in 1988 and
$180,000,000, respectively. About 50-60% of the thereafter, a new alternative minimum tn ( AMT) and Operating Companies' 1993 and 1994 requirements other changes that resulted in increased tax payments are expected to be hnanced externally li economical, and a reduction in cash flow during 19S9.1990 and additional securities may be redeemed under 1991 because we were subject to the AMT.
(Centerior Energy) F-8 (Centerior Energy)
_ _ . ___ _ _ -. _ . _ . _ _ _ . - - _ _ _ _ _ _ .m__-_
; Cash Flows ciuttman istacr covounomo sueswmnts For the years ended December 31, j 1991-1990- 1989 (thousaMs of dollm)
Cash Flows from Operating Activities (1) . Net income . . . . . . . . . . ,. . . .... . . , . .. .$ 237,240 $ 264,459 $ 266,886 Adjustments to Reconcile Net income to Cash from Operating
; Activities: ' Depreciation and amortization . .... .. .. . . . 242,708 242,153 272,671 Deferred federal income taxes . . ... . . .. . 85,331 142,190 181,240 investment tax credits, net . ....... ... . . .. .. 42,860 (34,287) 1,179 Deferred and unbilled revenues . .. .. . . (50,866) (60,792) (74,792)
Deferred fuel'. . ... .. ... . . . . . 17,648 (11,843) 25,086
- Carrying charges capitalized . . ... (109,601) (205,085) (299,159)
Leased nuclear fuel amortization . . . ..... . . .. ... 122,770 84,150 102,120 Deferred operating expenses, net . .. .. . . . . .. (5,693) (33,668) (58,220)
- Allowance for equity funds used during construction . . (9,351/ (7,883) (16,930)
Amortization of reserve for Davis-Bes;e refund obligations to customers . . . .. .. .. . .. .. - -- (24,817)
= Pension settlement gain _. . . . . .. . ... . . - . . . . ..
140536) - Changes in amounts due from customers and others, net 14,007 (26.d5) (13,486) Changes in inventories . . . . . (22,175) (29,015) (3,029) Cnanges in accounts payable. . . . . ..... .. (49,015) 45,6 % (28,826)- , Changes in working capital affecting operations.
.. 18,858 (24,913) -17,120 Other noncash items . . .. . . ... . .. 1,396 7,184 7,775 Total Adjustments ......, , . .. ... . . .. 298,877 46,434 87.932 --Net Cash from Operating Activities. . . . . 536.117 310,893 354,818 Cash Fiows from Financing Activities (2)
Bank loans,' commercial paper and other short-term debt. . (109,903) 109,o88 29
- Debt issuest First mortgage bonds . . . . . . . . . . . . . . .. . . ...... .. . .. - 167,300 123,800
, - Secured medium-term notes . . . . . . . . . . . . . . . . . . . . . . . 284,500- 337,500 212,500 Term bank loans and other long-term debt . . . . . . ..... . . . 108,365 31,000 40,000 Preferred stock issues .... ... ... . .. .. , ,, . . 125,000 - -
- Common stock issues . . . . . . . . . . . 32,028 740 Reacquired common stock . . . . . . . . . . . .
(114) (25,601) (19,804) Maturities, redemptions and sinking funds.. . .. . . .. (311,983) (395,287) (370,747) Nuclear fuel lease and trust obligations . .. . ..... -(115,623) -(99,076) (86,589) Common stock dividends paid . . . . . . .. .... (222,233) (222,482) (224,947) Premiums,~ discounts and expenses . . .- . .. . . (6,991) (7,360) - (2,622) -
< Net Cash from Financing Activities . _ .. ., . (216,954) (104,118) (327,610)'
- Cash Flows from investing Activities (2)
~ Cash applied'to construction . . . . . . . . . . ,.. . (189,244) (237,436) (210,403)
Interest capitalized as allowance for borrowed funds used during construction , .... .. .. ... . .. - (5,248) (5,993) (12,929) Other cash applied . . . . . . . . . .... ... ... . .. . (568) (13.211) . (31,500) Net Cash from Investing Activities .. .. ... . (195,060) -(256,640) (254,832) [ Net Charige in Cash and Temporary Cash investments. .. 124.103 (49,865) (227,654).
- Cash and Temporary Cash investments aLBeginning of Year ... 53,278 103,143 330,797
. Cash and Temporary Caah investments at End of Year. ., 'S 177,381 5 53.278 $ -103,143 - (1) Interest paid (net of amounts capitalized) was $339,000,000, $297,000,000 and $242,000,000 in 1991,1990 and 1989, respectively. Income taxes paid were $56,728,000, $21,185,000 and $9,05S,000 in 1991,1990 and 1989, ' respectively.
(2) Increases in' nuclear fuel and nuclear fuel lease and trust obligations in the Balance Sheet resulting from the
'noncash capitalizations unds.r nuclear fuel agreements are excluded from this statement.
l - The accompanying notes and summary of significant accounting policies are an integral part of this statement. li
--(Centerior Energy) . F-9 (Centerior Energy) l I: -. , , -
Balanch Sheet December 31, 1991 1990 (thousanA of dollars) ASSETS PROPERTY, PLANT AND EQUIPMENT
. Utility plant in service.. .... .... ... . . S S,SSS,219 $ 8.636,?!9 Less: accumulated depreciation and amortization . 2,274,489 2,038,510 6.613,730 6,597.709 Construction work in progress 215,855 268,386 Perry Unit 2. . . . . .., ,. .. . .. . .. . , 850,573 865,149 7,680,158 7,731,244 Nuclear fuel, net of amortization . 459,414 522,672 Other property, less accumulated depreciation . . 44,513 45.452 S,183,085 8.299,368 CURRENT ASSETS Cash and temporary cash investments . . . 177,3S1 53,278 Amounts due from customers and others, net . .. , 228,754 242,761 ~ Unbilled revenues . ,,, ..... ... ,. . 107,844 80,866 . Materials and supplies, at average cost . . ... 125,618 108,758 .
Fossil. fuel inventory, at average cost . .. ... . 57,S93 52,578 Taxes applicable to succeeding years . .. .. .. . . 234,096 218,444 Other.. . . . - . . . 9,299 _ 9,922 940,884 766.607 DEFERRED CHARGES Amounts due from customers for future federdi income taxes. 1,145,925 1,165,904 Unamortized loss from Beaver Valley Unit 2 sale. . 114,174 119,623 Unamortized loss on reacquired debt .... .. . . 75,265 80,564 Carrying charges and operating expenses, pre-phase-in .. 612,852 629,530
' Carrying charges and operating cxpenses, phase-in . . . 761,571 629,744 Other.. . . . .. ,.. . . ,. . 209,333 202.895 2,918,120 2,828.260 Total Assets .. ,,, . , , .. . . $12,042,0S9 $11,894,235 I The accompanying notes and sum. mary of signihrant accounting policies are an integral part of this statement.
i (Centerior Energy) E-10 (Centerior Energy)
CENTLRIOR LNLRCY CORPORATION AND SUBSIDIARIES I 1 December 31, ! 1991 1990 I (thousands of dollan) CAPITALIZATION AND LIABILITIES , CAPITAllEATION
- Common shares, without par value (stated value of '?21,477.000 .and $189,460,000 for 1991 and 1990, respectively): 180,000.000 authorized! 140,160,000 (excluding 2,522,000 shares in Treasury) and 138,401,000 (excluding 2,511,000 shares in Treasury) outstanding in 1991 and 1990, respectively . $ 2,185,607 5 2,155,197 Retained earnings . . . . . . . . . . 66S,677 654,836 Common stock equity . . . 2,854,484 2.810,033 Preferred stock With mandatory redemption provisions .. 332,031 237A90 Without mandatory redemption provisions .. 427,334 427,334 tong-term debt . . . 3,641,355 ..__3.729,237 7,455,204 _ J04.094 OTHER NONCURRENT LIABILITIES Nuclear fuel lease obligations . . . .. . 340,507 427,295 Other. . . .. . 63,147 81,399 423,654 508,694 CURRENT LIABILITIES Current portion of lor g-term debt and preferred stock . 216,333 214,138 Current portion of lease obligations. . , , . 144,620 114,943 Notes payable to banks and others .. . . . 191 110,094 Accounts payable , . . . .. . 14,,810 196,825 Accrued taxes . . . . 350,550 323,716 Accrued interest ..... . , . , . .. . . 84,495 S4,778 Other . . . . . .. . 57,683 73,801 1,001,6S2 1,118.295
- DEFERRED CREDITS Ummortized investment tax credits. ,, . 366,047 336,136 Accumulated deferred federal income taxes . 1,784,749 1,730.954 Reserve for Perry Unit 2 allowance for funds used during construction . .. .. . . . .. , 212,693 212,693
_ Unamortized gain from Bruce Mansfield Plant sale . _
. 602,456 626,493 - ' Accumulated deferred rents for Bruce Mansheld Plant and Beaver Valley Unit ' 131,0S2 114,888 Other. , ... ,,,.. ... 64,522 41,988 3,161,549 3,063,152 Total Capitalization and Liabilities. . . . $12,042,0S9 511,894,235 (Centerior Energy) F-11 (Centerior Energy) 1 - -
answn mscr couarww.wo suesmums Statement of.. Cumulative Preferred Stock 1991 Shares Current December 31. Outstanding Call Price 1991 1990 CLEVELAND ELECTR1C (thousands of dollan) Without par value, 4,000,000 preferred shares authorized Subject to mandatory redemption:
$ L 7.35 Series C. ....... 170.000 $ 101.00 $ 17,000 $ 18,000 -
88.00 Series E . . . . . .... 27,000 1,030.61 27,000 30,000 75.00 Series F . ... . . - - - 2,3 84 145.00 Series 1 ... .
- - - 13,779 113.50 Series 10 . .. - - - 10,000 Adjustable Series M . . 400.000 102.00 39,200 49,000 - 9,125 Series N , . 750,000 105.07 73,968 73,968 91.50 Series Q . . 75,000 - 75,000 -
88.00 Series R. 50,000 - 50,000 - 262,16S 197,131 Less: Current maturities 13,600 25,969 Not subject to mandatory redemption 5 7.40 Series A . 500,000 101.00 50,000 50,000 7.56 Series B . 450,000 102.26 45,071 45,071
- Adjustable Series L. 500,000 103.00 46,950 48,950 Remarketed Series P . . 750 100,000.00 73,313 73,313 .
TOLEDO EDlSON - I' # A
$100 par value,3,000,000 preferred shares authorized and $25 par value, 12,000,000 preferred shares authorized Subject te mandatory redemption: $tt,0 par $11.00 .. . .. . 24,825 101.00 2,483 3,483 9375 . . . . 133,450 103.46 13,345 15,010 25 par 2.81 . . 2,000,000 26.56 50,000 50,000 65,628 68.493 Less: Current maturities - 2,165 2,165 63,663 66.328 Not subject to mandatory redemption: $100 par -$ 4.25 . , . . 160,000 104.625 F 10 16,000 4.56 . .., 50,000 101.00 5 M 5,000 4.25 , ,, 100,000 .102.00 10, s - 10,000 8.32 . 100,000 102.46 10,000 10,000 7.76 , .. . 150,000 102.437 15,000 15,000 7.80 , 150,000 101.65 - 15,000 15,000 10.00 , , . , .. 190,000 101.00 19,000 19.000 25 par 2.21 1,000,000 25.25 25,000 25,000 2.365 .. . . 1,400,000 28.45 35,000 35,000 Series A Adjustable 1,200,000 25.75 30,000 - 30.000 Series B Adjustable 1,200,000 25.75 30,000 30,000 210,000 210,000 CENTERIOR ENERGY Without par value,5.000,000 preferred shares authorized, none outstanding - -
Total Preferred Stock,^ with Mandatory Redemption Provisions . . $ 332,031 $237,490 Total Preferred Stock, without Mandatory Redemption Provisions . .
$ 427,334 . $427,334 l- ~ . The accompanying notes and summary of signincant accounting policies are an integral part of this statement.
I i l' (Centerior Energy) F-12 (Centerior Energy) l-
N0lCS 10 thC fiHGHCial StalCMCHIS
- (1) PROPERTY OWNED WITil OTilER UTILITIES- AND INVESTORS The Operating Cmopanies own, as tenants in common with other utilities and those investors who are owner-participants in various sale and leaseback transactions (Lessors), certain generating units as listed below. Each owner owns an undivided share in the entire unit. Each owner has the right to a percentage of the generating capability of each unit equal to its ownership share. Each utility owner is obligated to pay for only its respective share of the construction and operating costs. Each lessor has leased its capacity rights to a utility which is obliga:ed to pay for such Lessor's share of the construction and operating costs. The Operating Companies' share of the operating costs of these generating units is included in the Income Statement. Property, plant and equipment at December 31,1991 includes the following facilities owned by the Operating Companies as tenants in common with other utilities and Lessors:
Owner- Conuruction in- Owner- ship Plant Work in Service ship Mega - Power m Progress and Accumulated Generatmg Unit Date Share w atts Source Servwe Suspended Depreciation in Service; 'housands of dellars) Seneca Pumped Storage . 1970 80 00% 312 Hydro $ 57.733 $ 1.021 $ 19355 Eastfale Unit 5. . . . . ... 1972 68 80 411 Coat 151 150 2.199 - Perry Unit 1 and Common Facihtin 1987 51 02 609 Nucicar 2,546.326 5287 310.601 Beaver Valley Unit 2 and Common facilities (Note 2) . 1987 26 12 214 Nuclear 1.35K606 7.159 167.083 Construction Suspended: Perry Unit 2 (Note 3(c)) . Uncertain 51 02 615 Nuclear - 850.573 -
$4.113 815 $h639 $497.539 Depreciation for Eastlake Unit 5 has been accumulated with all other nonnuclear depreciable property rather than by specific units of depreciable property.
Effective May 1,1991, FERC approved an agreement under which Cleveland Electric is selling the power from its share of the Seneca Power Plant to two subsidiaries of General Public Utilities Corporation through 1993. Revenues from this transaction were $16,000,000 in 1991. Ohio Edison and Pennsylvania Power purchased 80 megawatts of Cleveland Electric's capacity entitlement in Perry Unit 1 from November 1987 through May 1989. Revenues from this transaction were $31,831,000 in 1959. The ownership share of Perry Unit 2 set forth above does not reflect Cleveland Electric's acquisition of Duquesne's 13.74% ownership share in February 1992, See Note 3(c). (2) UTILITY PLANT SALE AND LEASEBACK TRANSACTIONS
- As a result of sale and leaseback transactions payments are now classified as accumulated deferred completed in 1987, the Operating Companies are rents on the Balance Sheet. Previously, the excess was co-lessees of 18.26% (150 megawatts) of Beaver Valley included in accounts payable.
Unit 2 and 6.5% (51 megawatts), 45.9 % (358 The Operating Companies are responsible under megawatts) and 44.3S% (355 megawatts) of Units 1,2 these leases for paying all taxes, insurance and 3 of the Mansfield Plant, respectively, all for premiums, operation and maintenance costs and all terms of about 29% years. other similar costs for their interests in the units sold Future minimum lease payments under these and leased back. The Operating Companies may incur operating leases at December 31,1991 are summarized additional costs in connection with capital as follows: improvements- to - the units. -The - Operating
-Year Amount Companies have options to buy the interests back at , (ihous.nas ur aoi: rsj the end of the leases for the fair market value at that 1992. m 000 time or to renew the leases. Additional lease N93 - 174.610 provisions provide other purchase options along with 1994 . . 174.or a conditions for mandatory termination of the leases Q'
Later Years . 3 m6 aoD (and possible repurchase of the leaschold interests) for events of default. These events of default include Total Fu' w Minimum noncompliance with several financial covenants Lease. yments . $4 m 00 affecting Centerior Energy and the Operating Companies contained in an agreement relating to a Semiannual lease payments conFrm with the le+ter of credit issued in connection with the sale and payment schedule for each lease. leaseback of Beaver Valley Unit 2, as amended in Rental expense is accrued on a straight-line basis 1989. See Note 10(e). over the terms of the leases. The amounts recorded in Toledo Edison is selling 150 megawatts of its 1991,1990 and 1959 as annual rental expense for the Beaver Valley Unit 2 leased capacity entitlement to Mansfield Plant leases and the Beaver Valley Umt 2 Cleveland Electric. This sale commenced in 1988 lease were $114,564.000 and $72,276,000, respectively. and we anticipate that it will continue at least until i Amounts charged to expense in excess of the lease 1998. (Centerior Energy) F-13 (Centerior Energy)
(3) CONSTRUCTION AND CONTINCENCIES 1991, Cleveland Electric, the company responsible for the construction of Perry Unit 2, applied for a ten-(a) CONSTRUCTION PROGRAM year extension of the construction permit which was The estimated cost of our construction program for the to expire in Nos ember 1991. Under NRC regulations, 1992-1994 period is $991,000,000, including AFUDC the construction permit will remain in effect while of $50,000,000 and excluding nuclear fuel the application is pending. We expect the NRC to in an agreement approved by the PUCO, the grant the extension Operating Companies have agreed to limit their in February la , Cleveland Electric purchased combined 1992 other operation and maintenance Duquesne's 13.7 menership share of Perry Unit 2 expenses and capital expenditures to $1,050,000,000, for $3,324,000. 't hn, purchase increard the Operating exclusive of compliance costs related to the Clean Air Companies' ownership share of the unit to 64.76%, Act. Within this hmitation, capital expenditures are with the remainder owned by Ohio Edison and budgeted at $250,000,000, exclusive of the Uean Air Pennsylvania Power. The purchase does not signal Act compliance costs. any plans to resume construction of Perry Unit 2, but rather our intent to keep our options open. Duquesne (b) CLEAN AIR LEGISLATION had stated that it would not agree to resumption of The Clean Air Act will require, among other things, construction of the unit. significant reductions in the emission of sulfur dioxide Il Perry Unit 2 were to be canceled, then our net and . nitrogen oxides by fossil fueled electric investment in the unit (less any tax saving) would generating units. The Clean Air Act will requite that have to be written off. We estimate that such a write-sulfur dioxide emissions be reduced in two ' phases off, based on our investment in this unit as of over a ten-year period. December 31, 1991 and after adjustment for the We have developed a compliance strategy which February 1992 purchase of Duquesne's ownership will be submitted to the PUCO for review in April share, would have been about $438.000,000, after
- 1992. We will also seek United States Environmental - taxes. See Notes 10(d) and (e) for a discussion of ,
Protection Agency approval of Phase I plans in 1993. potential consequences of such a write-off. The compliance plan which results in the least cost if a decision is made to com er: Perry Unit 2 to a and the greatest flexibility provides for compliance nonnuclear design in the future. we would expect to with both phases through 2001 by greater use of low write-off at that time a portion of our investment for sulfur coal at some of our units and the banking of nuclear plant construction costs not transferable to the emission allowances. The plan would require capital nonnuclear construction project. expenditures over the . 1992-2001 period of Beginning in July 1985, Perry Unit 2 AFUDC was l approximately $190,000,000 for nitrogen oxide control credited to a deferred income account until January 1, equipment, emission monitoring equipment and 19SS, when the accrual of AFUDC was discontinued. plant modifications. In addition, higher fuel and other operation and maintenance expenses would be (d) SUPERFUND SITES incurred. The least cost plan also calls for Cleveland The Comprehensive Environmental Response, Electric to place in service after 2001 a scrubber or Compensation and Liability Act of 1980 as amended other sulfur emission reduction technology at one of (Superfund) established programs addressing the
- its generating plants. The rate increase associated with cleanup of hazardous waste disposal sites, emergency the capital expenditures and higher expenses would preparedness and other issues. The Operating - be about 1-2% in the late 1990s and another increase Companies are aware of their potential involvement after the year 2000, for an aggregate rate increase in in the cleanup of nine hazardous waste sites. The the range of 3-6% Cleveland Electric would incur Operating Companies have recorded reserves based <
cubstantially more of these costs than Toledo Edison.- on estimates of their proportionate responsibility for Our final compliance plan will depend upon future these sites. We believe that the ultimate outcome of environmental regulations and mput from the PUCO, these matters will not have a material adverse effect other regulatory bodies and other concerned entities. on our financial condition or results of operations. If a plan other than the least cost plan is required, significantly higher capital expenditures could be (4) NUCLEAR OPERATIONS AND
- required during the 1992-2001 period. CONTINGENCIES We believe that Ohio law permits the recovery of . compliance costs from customers in rates. (a) OPERATING NUCLEAR UNITS Our interests in nuclear units may be impacted by (c) PERRY llNIT 2. activities or events beyond our control. Operating Perry .Umt 2, including its share of the common nuclear generating units have experienced unplanned facilities, is approximately 50% complete. Construction outages or extensions of scheduled outages because - of Perry Unit 2 was suspended in 1985 pending future of equipment . problems or new regulatory consideration of various options, including requirements. A major accident at a nuclear facility resumption of full constructica with -a revised anywhere in the world could cause the NRC to limit estimated cost, conversion to a nonnuclear design, or prohibit the operation, construction or licensing of sale of all or part of our ownership share, or any nuclear unit. If one of our nuclear units is taken cancellation. No option may be implemented without out of service for an extended period of time for any the unanimous approval of the owners. In October reason, including an accident at such unit or any i _ . .
(Centerior Energy) F-14 (Centerior Energy)
. _ _ __ _ _ _ . ~m . . _ -._._ _.._ _._._._ _ _ _
other nuclear facihtyf we cannot predict whether to $900,000,000 is permitted. The intermediate term
- regulatory authorities would impose unfavorable rate notes mature in the period 19931997. The bank credit -
treatment such as taking our affected unit out of rate arrangements are cancelable on hvo years
- notice by base _ or ' disallowing certain construction or the lenders. As of December 31,1991, $490.000,000 of maintenance costs. An extended outage of one of our nuclear fuel was hnanced The Operating Companies nuclear units coupled _with unfavorable rate severally lease their respective _ portions of the
' treatment could have a material adverse effect on our nuclear fuel and are obligated to pay for the fuel as it financial position and results of operations. is consumed in a reactor. The lease rates are based on ' IbL NUCLEAR INSURANCE commercial paper rates.
The Price-Anderson Act limits the liability of the The amounts financed include nuclear fuel in the owners of a nuclear power plant to the amount Davis-Besse, Perry Unit I and Beaver Valley Unit 2 provided by private insurance and an industry reactors with remaining lease payments of assessment plan. In the event of a nuclear incident at $14 7,000,000, $87,000,000 and $33,000,000, any unit in the United States resulting in losses in respectively, as of December 31,1991. The nuclear fuel excess of the level of private insurance (currently amounts hnanced and capitalized also included
- $200,000,000)cour maximum potential assessment interest charges incurred by the lessors amounting to-under that plan (assuming the other CAPCO $21,000,000 in 1991, $33,000,000 in 1990 and companies were to contribute their proportionate $44,000,000 in 1989. The estimated future lease share of any assessment) would be $129,257,000 (plus amortization payments based on projected - . any inflation adjustment) per incident, but is limited consumption are $96,000,000 in 1992, $99,000.000 in to $19,540,000 per year for each nuclear incident. 1993, $91,000,000 in 1994, $78,000,000 in 1995 and The CAPCO companies have insurance coverage $S2,000,000 in 1996.
fet damage to property at the Davis Besse, Perry and Beaver Valley sites (including leased fuel and clean
- up costs). Coverage amounted to $2,515,000,000 for (6) REGULATORY MATTERS each site as of January 1,1992. Damage to property .On January 31,1989, the PUCO issued orders which could exceed the insurance coverage by a substantial provided for three annual rate increases' fo* the amount. If it does, our share of such excess amount - Operating Companies of approximately 9%,7% and
.could have a material adverse effect on our nnancial _ 6% effective with bills rendered on and after February condition and results of operations. 1,1989,1990 and 1991, respectively. As discussed - We also have extra expense insurance coverage below, the 6% increase effective February 1,1991 was which includes the incremental cost of any reduced to 4.35% for Cleveland Electric and 2.74% for -
replacement power purchased (over the costs which- Toledo Edison, which later waived its 2.74% increase
- would have been incurred had the units been and reduced its rates on two occasions in 1991 for operating) and other incidental expenses after the certain customers. The resulting annualized revenue occurrence of certain types of accidents at ou- increases in 1989,1990 and 1991 associated with the nuclear units. The amounts of the coverage are M)%- rate orders were $120,700,000, $105,700,000 and of the estimated extra expense pei week during tne $71,400,000, respectively, for Cleveland Electric and 2- week period starting 21 weeks after an accident, $50,700,000, $44,300,000 and $1,600,000, respectively, - 67% - of such estimate- per : week - for the for Toledo Edison. Toledo Edison's $1,600,000 increase Lnext 52 weeks and 33% of such estimate per week for .in 1991 reflects the net of $18,600,000 of annualized the.next 52 weeks. The amount and duration of extra revenues authorized for the 2.74% increase less expense could substantially exceed the' insurance $17,000,000 for the waiver and rate reductions.
coveragec Under the January 1989 rate orders, phaselin plans . were designed so that the three rate increases,
-(5) NUCLEAR _ FUEL - coupled with then-projected sales growth; would The Operating Companies have inventories for provide revenues sufficient to recover all operating nuclear fuel which should provide an adequate supply - expenses and provide a fair rate of return on the into the mid 1990s. Substantial additional nuclear Operating Companies' allowed investments in Perry L fuel must be obtained to supply fuel for the remaining - - Unit 1 and Beaver Valley Unit 2 for ten years -
usefullives of Davis-Besse, Perry Unit 1 and Beaver beginning January 1,1989. In the first five years of the Valley. Unit 2. More nuclear fuel would be required plans, the revenues were expectad to be less than
- - _if Perry Unit 2 were completed as a nuclear generating that required to recover operating expenses and l unit; _
_ provide a fair return on investment.- Therefore, the in 1989,; existing nuclear fuel financing amounts of operating expenses and return on arungements for the Operatin's Companies were investment not_ currently recovered are deferred and ' rehnanced through leases from a special-purpose capitalized as deferred charges. Since the unrecovered -
, corporation. The total amount of financing currently investment will decline over the period of the phase-available under these lease arrangements is in plans because of depreciation and deferred 'eoeral 5509,000,000.($309,000,000 from intermediate-term income taxes that result from the use of accelerated I. notes and $200,000,000 - from bank credit tax depreciation, the amount of revenues requLed to
[- arrangements), although financing in an amount up - provide a fair return also declines. Pursuant i.o such l (Centerior Energy) F-15 (Centerior Energy)
., - - - ~. __ -, --. . - . - .- - .- - - -.
i
- phase in plans, the Operating Companies deferred provision with the PUCO's approval. The rate impact the following: '
was different for the two companies because much of IWO- M
~
IWI the savings were expected to be achieved in areas oh - e u w such as nuclear operations m which loledo Edison Dekrrnt OFratmg hgmes - L22,222 . [s0W3 L74;5y was to achieve greater sayings relative to C; si/e. Carrpng Chargev k b a nm W me mme wpdiw
- Debt . 5 30 601 5 1762 5111J34 in Northwest Ohio, Toledo Fdison proposed a rate Equity MIO . 132303 I C 44s reduction package to all incorporated communities in sm01 52asoss 52* iso ' ~ ~
Toledo Edison's service area which are derved exclusively by Toledo Edison on a retail basis. The The amount of deferred operating expenses and package called for the elimination of the 2J4% rate carrying charges scheduled. to be recorded in 1992 and increase effective February 1,1991 for all residential 1993 total S84,000,000 and $24,000,000, respect vely, and small commercial customers, a reduction in Deginning in the sixth year (1994) and continuing residential rates of 3% on March 1,.1991 and a further through the tenth year, the revenue levels authorized residential rate reduction of 1N on September 1,1991. pursuant to the phase-in plans were designed to be Communities accepting the package agreed to keep suf6cient to recover that period's operating expenses, Toledo Edison as their sole supplier of electricity for
. a fair return on the unrecovered investments. and th a period of five years. The package also permits amortization of the deferred operating expenses and Toledo Edison to adjust rates in those communities on . carrying charges recorded during the earlier years of Febmary 1,1994 and February 1,1995 if inflation the plans. All phase-in deferrals relating to these two excwds specihed levels or under emergency units will be amortized and recovered by December conditions. All eligible communities in Toledo 31,1998. _
Edison's service area, except the City of Toledo, The phase-in plans were also designed so that accepted the rate reduction package. In March 1991, fluctuations in sales should not affect the level of Toledo Edison obtained PUCO approval to reduce earnings. The phase-in plans permit the Operating rates to the same levels for the same customer - Companies to request pUCO approval of increases or categories in th( City of Toledo and the rest of its
; decreases in the phase in plan deferrals to service area. Annualized revenues were reduced by ccmpensate for the effects of fluctuations in sales about $17,000,000 a> a result of these rate reduction levels, as compared to the levels projected in the rate packages. The revenue reductions do rot adversely orders and for 50% of the net after-tax savings in affect the phase-in plans as the decrease m revenues is - 1989 and 1990 identihed by the management audit as mitigated by the cost reductions resulting from the discussed below. Pursuant to these provisions of the management audit.
orders, the Operating Companies recorded no The 1989 orders also set nuclear performance adjustments to the cost deferralt in 19S9 and standards through _1998. The Operating Companies recorded adjustments to increase the cost deferrals by could be required to refund incremental replacement approximately $10.000,000 and $28,000.000 in 1990 power costs if the standards are not met. No refund
- and 1991, respectively, was required in 1991 nor is one expected for 1992. The in connection with the 1989 orders, the Operating Operating Companies banked $2,800,000 in benents Companies _ and the Service Company have - in 1991 for above average nuclear performance . undergone a management audit, which was . based on industry standards for operating availability completed in April 1990. The audit identified potential estabhshed in the 1989 orders. These barked benefits annual savings in operatmg expenses in the amount are not recorded in the financial statements as they of $9S,160,000 ~ from 1989 budget levels, 55% can only be used in future years, if necessary, to offset (553,985,000) for - Cleveland Electric and 45% disallowances of incremental replacement power . (544,172,000) for Toledo Edison. The Operating costs.
Companies realized a large part of the savings in 1991. Under the 1989 orders, fossil-tueled power plant Fifty percent of the savings identified by the performance may not be raised as an issue in any rete management audit were used to reduce the 6% rate proceeding before February 1994 as hmg as the increase scheduled to be vilective on February 1,1991 Operating Companies achieve a systemwide for each of the Operating Companies: As discussed availability factor of at least 64.9% annually. This previously, Cleveland Eleuric rates increased 4.35% - standard was exceeded in 1989,1990 and 1991, with and Toledo Edison rates increased 254% under this availability at approximately 80% for each year. l l (Centerior Energy) F-16 - (Centerior Energy)- t
. _ . , w 3 ... . ...-.-,--,m w , _ , - , .-. w-.- - , , - , ,
(7) FEDERAL INCOME TAX
. Federal income taw computed by multiplying the income before taxes and preferred and preferei.ce dividend requirements of subsidiaries by the statutory rates,is reconciled to the amount of federal income tax recorded on the books as follows:
For the years ended December 31, 1991 IWO 1989 (thousands of dollars) Book income Before Federal income Tas , $465/N9 $4n324 $;28 m.5 Tas on Book Income at Statuinry Rate . $158372 $148,010 $179,542 increase (Decrease) in Tas: 10,415 Accelerated depreciation. , . .. W6 6,287 investment tait credits on disallowed nudcar plant . - (37,522) -
- Tates, other than federal income tases . (2,373 ) (12,116) (107)
Other items . 10.915 4 365 5.71,2 Total Federal Income Tas I:spense. $167.910 $109.024 $195.5f,2 Federal income tax expense is recorded in the income Statement as follows: For the years ende.i December 31, 1991 1990 1989 (thousands of dollars) Opnating Espenses: Current Tax Provision. _ .. . ... ..... .. . 5 88.189 5 42,fe3 $ 51.869 Changes in Accumulated Defened Federal income Tan: Accelerated depreciation and amortization. 17,137 41.777 44.144 Alternative mammum ax credit . . (45302) (24340) (12.674) Sale and leaseback transacticas and amortization 3.844 8.617 4348'
- Property tax expense. -
(14 891) - Reacquired debt costs . 22.403 1.355 (1.250) Deferred CWIP revenues . 6,972 20.486 22,731 Deterred fuel costs. ,. . , (8/'29) 742 (4384) Davis-Besse replacement power . . - - 9,191 Other items . . . . . . 14.970 16 ?94 6 830 Investment Tax Credits.. . . 38 697 2.651 L780 Total Charged to Operating Expenses. 137,581 96.076 _122385 Nonoperatmg income Current Tax Provison. . _ . . . . . . . . .... .... . , (46,089) (42,256) (39,341) Changes in Accumulated Deferred Federal Income Tax: Wnte+ff of nuclear costs . (379) (22.143) - AFUDC and carrying charges , . 40,769 74.447 11(300 Net operating loss carryforward . . 35.014 - - Other items . 1.014 2 400 (L782) Total Espense Charged to Nonoperatmg Income . 30329 12,948 73.177 Total Federallncorne Tait Expense. $167.910 $109 024 $Ji3.562 Federal income tax expense adjustments in 1990, associated with previously deferred investment tax credits relating to the 1988 write-off of nuclear plant investments, decreast d the net tax prevision related to nonoperating
. income by $37,522,07) and increased earnings per share by 5.27, The favorable resolution of an issue concerning the appropriate year to recognize a property tax deduction resulted in an adjustment which reduced federal income tax expense in 1990 by $14,011,000 ($10.375,000 in the , fourth quarter) and increased earnings per share by $.10 ($.07 in the fourth quarter).
For tax purposes, net operating loss (NOL) carryforwards of apprournately $402,407,000 are available to !- reduca future taxable income and will expire in 2003 through 2005. The 34% tax effect of the NOLs generated is l-
$136,o18,000 and is reflected as a reduction to deferred federal income tax relating to accelerated depreciation and . amortization. Future utilization of these tax NOL carryforwarJs would result in recording the related deferred taxes.
The 1986 Tax Act provides for an AMT credit to be used to reduce the regular tex to the AMT level should the regular tex exceed the AMT. AMT credits of $S2,851,000 are available to offset future regular tax.The credits may
' be carried forward indefinitely.
I (Centerior Energy) F-17 (Centerior Energy)
(8) RETIREMENT INCOME PLANS AND The settlement (discount) rate assumption was OTHER POSTRETIREMENT BENEFITS 8.5% for both December 31,1991 and December 31, IMO. The long-term rate of annual compensation (a) RETIREAfENTINCOAff PLANS increase assumption was 5% for both December 31. We sponsor noncontributing pension plans which 1991 and December 31,1990. The long-term rate of Leover all employee groups. The amount of retirement return on plan assets assumption was 8.5% in 1991 benehts generally depends upon the length or and 8% in 1990. service. Under certain circumstances, benents can Plan assets c .nsist primarily of investments in begin as early as age 55. The plans also provide common stock bonds, guaranteed investment certain death, medical and disability benehts. Our contracts, cash .quivalent securities and real estate. funding policy is to comply with the Emph.vec Retirement income Secunty Act of 1974 guidennes (b) OTHER POSTRET/REAfENT BENEE!TS In 1990, we offered a Voluntary Early Retirement The Financial Accounting Standards Board has issued Opportunity Program (VEROP). Operating a new accounting standard for postretirement expenses for 1990 included $15,000,000 of pension benehts other than pensions. The new standard plan accruals to cover enhanced VEROP benehts plus would require the accrual of the expected cost of such an additional $28,000,000 of pension costs for VEROP benents during the employees' years of service. The benehts paid to retirees from corporate funds. The assumptions and calculations involved in
$28,000,000 is not included in the pension data determining the accrual closely parallel pension reported below. Operating expenses for 1990 also accounting requirements.
included a credit of $41,000,000 resulting from a We currently provide certam postretirement health settlement of pension obligations through lump sum care, death and other benehts and expense such costs payments to a substantial number of VEROP as these benefits are paid, which is consistent with retirees. current ratemaking practices. Such costs totaled Net pension and VEROp costs (credi:s) for 1989 $9,700,000 in 1991, SS.200,000 in 1990 and $6,500,000 through 1991 were comprised of the following in 1989, which include medical benehts of $8,500,000 components: in 1991 s6dk000 in 1990 and $5,000,000 in 1989. Iwl im 1989 We expect to adopt the new standard (milhem of dollars) , Wpectively efk f"e January 1,1953. We plan to rension costs (cred"* smortin the discounted present value of the n[t$e hr ! 14 5 15 5H acmmulated prg etirement beneht obligation to Interest cost on projected bene 6L e4Pr'te over a twenty-year period. We have engaged obhu non. .. 36 r b ateies who have made a preliminary review using Actual return on plan assets . 0 29) 5 (73) Net amoitization and deferral. 65 - ' 13 M90 h!a. Based on this preliminary review, the 165) ycmc.icted postretirement beneht obbgation as of Net pension credas 04) (8) m) Twember 31,1991, measured in accordance with the vraor costL - 15 - new standard, is estimated in the range of seulement pin - H1) $80,000,000 to $230,000,000. Had the new standard Net credits . 504) 5fM) 9 111 been adopted in 199L the preliminary study indicated that the additional postretirement beneht cost in 1991 The following table presents a reconcibc' an o' the would have been in the range of $17,000,000 to funded status of the plans at December 3L 1991 and ~
$30,000,000 (pretax). We believe the effect of actual 1990. adoption in 1993 may be similar, although it could be December 31. signihcantly different because of changes in health m tw care costs, the assumed health care cost trend rate, g;ign, g work force demographics, interest rates, or plan.
A al , esent salue of Fmht donars) provisions between now and 1993.
. We do not know what action the PUCO may take vested ber.chts 5 301 5 330 with respect to these incremental costs. However, we Nonvested benehts 33 24 believe the PUCO will either allow a means of Accumulaw benent at son . 334 334 current recovery of such incremental costs or provide Effect of future cor^pshon for deferral of such costs until recovered in rates. We 1"eb- 113 0 do not expect adoption of the new standard to have Total r're xt; dit obHption 447 426 Plan assets n 'iit .nm . value . 757 653 a materit adverse effect on our hnancial condition or results of operations.
surplus of plan aA $ mer pro,cced 6ndt et ugation , 310 227 L tcugnized net uin due to sariance (9) CUARANTEES Ur n M N e"rb"c [ "" Under two long term coal purchase arrangements. . - Transinon asset at unuary 1.19s7 Cleveland Electric has guaranteed certain loan and being arnomzed met 19 years . U13) 0 06) . lease obligations of neo mining companies. Toledo Net prepaid penson cost Edison a also a party to one of these guarantee included in ener deiertro charges on the Balance Sheet . arrangemens This arrangement requires payments to
$_40 $_ 26 bM co ny for any actual out-of-pocket idle (Centerior Energy) F-18 (Centerior Energy)'
; mine expenses (as advanr* payments for coal) when 1992 in the open market when the commen stock the mines are idle for reawns beyond the control of pr:ce is below a predetermined level. As of December the mining company. At December 31,1991, after - 31,1991,38 0')0 shares had been purchased at a total giving effect to a tehnancmg completed on January 2, cost of $610,000E We had a similar program to 1992 by one of the mining companies, the principal . purchase up to 3,000,000 shares of our common stock ' amount of the mining companies' loan and lease in the period March 28,1989 through March 31,1991, ooligations guaranteed by the Operating Companies Under ~this program, 2,510,000 shares were was $102,000,000, purchased at a total cost of $46,198,000. Such sharm are being held as treasury shares.
(10) CAPITAllZATION (b) Coh1 MON SHARES RESERVED FOR ISSUE (a) CAPITAL STOCR TRANSACTIONS Common shares reserved for issue under the Shares sold, retired and purchased for treasury during Emnloyee Savings Plan and the Employee Purchase the three years ended December 31,1991 are listed in Plan were 2,828,848 and 21 A23 shares, respectively, at the fotbwing table. December 31, 1991. At the April 1992 Annual 1991 1990 1989_ Meeting, share owners will be asked to authorize an (thousands of shares) additional 500,000 common shares for the Employee Centerior Energy Common Stock: Purchase Plan. Dividend Remvestment arti Stock options to purchase unissued shares of Stock Purchase Plan . . 1.422 - - common stock under the 1978 Key Employee Stock Ernployee Savings Plan . 348 - _ Employee Purchase Plan . 1 36 Option Plan were granted at an exercise price of 100% 1978 Key Employee Stock of the fair market value at the date of the grant. No Option Plan. . - - 17 additional options may be granted. The exercise Total Common Stock Sales .. 1J70 - 53 prices of option shares purchased during the three Trecury Shares . , (11) (1391) (t082) years ended December 31,1991 ranged f m $14.09 to '
$17.41 per share. Shares and price ranges of .
Net Chan6e. . . IJ59 (1391) (1.029) outstanding options held by employees were as Cumulative Preferred and [ggiowg; Preference Stock of Subsidiaries 1978 Key Employee Stock Option Plan Subject to Mandatory 1991 1989 Redemption: ~ ~1990 ~ Cleveland Electnc Sales Optin Outstandmg at
- Preferred; December 31:
75 Shares , 129J98 168.655 215.187 5 91.50 Series Q . - -. 88.00 Series R - 50 - - Option Pnces . $14.09 to $14.09 to 514.09 to Cleveland Electne Retirements $20J3 $20J3 $20J3 Preferred: s - 735 Series c ~ . . L (10) (10) (to) (c) EQUITY DISTRIBUTION RESTRICTIONS 68.00 Series E . - (3) (3) (3) 75.00 Series F , ,. (2) - tl) At December 31,1991, consolidated retained earnings 80.00 Series G . - (1) (2) were comprised almost entirely of the undistributed 145.00 Series H . . (14) (4) retained earnings of the Operating Companies. 145.00 Senes I. (14) (4) (4) Substantially all of their retained earnings were 113.50 Series C , (10) Adjustable Series M avadable for the declaration of dividends on their (100) - - respective preferred and common shares. All of their s ries 1 - - (6) common shares are held by Centerior Energy. Any financing by an Operating Company of any of Toledo Edison Retirements its nonutility afftliates requires PUCO authorization
. Preferred unless the fmancing is made in connection with L 5100 par 511.00. (10) (10) (5) transactions in the ordinary course of the umpanies'
[ Net Change; 9375. . (17)- (17)_ . (17) public utilities business operations in which one (41) (59)- (52) company acts on behalf of another. Shares of common stock required for our four (d) CUMULATIVE PREFERRED AND stock plans in .1991 were either acquired in the open PREFERENCE STOCK L market or issued as new shares of common stock L when :the common stock price reached a Amounts to be paid for preferred stock which must be predetermined threshold for such transactions. redeemed during the next fwe years are $16,000,000 We began a program in July 1991 to purchase up to in 1992, $41,000JX)0 in 1993, 541,000,000 in 1994, 1,500,000 shares of our common stock by June 30, $52,000,000 in 1995 and $42,000,000 in 1996. I (Centerior Energy) F-19 (Centerior Energy) l i
, .- . -- - _ . - . - - . . - . - - - - . . - _. . -. ,.~ .
The annual mandatory redemption provisions are (e) LONG TERM DEBT AND OTHER ! as follows: BORROWING ARRANGEhlENTS Red n ption Pr ns ng shares trice -
@gtmMg M,Gmpames ley current msmaturities, hm for. the To Be Beginning Pe' Act i or Average December 31. j Redeemed in . Share Year of Matunty _ Interest Rate IW 1990 Cleveland Electric ~
Preferred (thou>and, of dollars) 5 4 7.35 Senes C . . ., 10,000 19M . 5 100 s mogage Mnds:
' ~
88.00 Series t . , , 3,000 1981 1,000 ;' I 'O
- Adjuuable Series M . , , 100,000 1991 100 ; ' 0 ~
O'O 9.125 Series N, , . 150.000 1993- 100
}, 85 9130 Series Q. . .. 10,714 1995 1.000 30hD 3 88.00 Series R . 50.000 2&]1* 1.000 1993. . 8.55 50.000 : 50.000 " " 1993. . . 13.73 4.334 4,334 p '
1994. . . 4.375 - 25,000 25,000 5100 par $11.00. . . . 5,000 1979 100 1994. ., 13.75 4,334 4,334 9.375 . 16,650 1985 100 3 W,WO 25 par 2.81. , 400,000 . 199 . .... 75 ;4,334 4,334 1993 25 3 13;00
'All outstandmg shares to be redeemed December 1. 2001*
1993.. . . <. 750 /50-1996. . . 13.75 4,334- 4.334 1996. 7,00 750 750 The anr.iulded cumulative preferred dhidend 1996. .. 9.3 75 100.000 100,000 requirement as of December 31,1991 is $66,000,000. 1997 2001 .. 9.36 127,798
. 127,798
__ - The preferred dividend rates on Cleveland 2002 2006 . .. 8.98 251.801 251,801 Electric's Series L, M and P and Toledo Edison's Series 2007-2011 8.79 387,250 387,250 A and B fluctuate based on prevailing interest rates 2012-2016 , .. .. m. 8.97 - 439,085 439,085 and market conditions, with the dividend rates for 2017-2021. m . . 8.53 635.180 635,180
- these issues averaging 8.26% 7.61%,6.24%,8.82% and 2022 2023 . , 7.68 322,100 322.100 9.67%, respectively, in 1991. 2,387,050 2,511.384 Under its articles of incorporation, Tcledo Edison Term bank loans due cannot issue preferred stock unless certain earnings 1993-1996 .. . 8.46 196,700 127,900
-coverage requirements'are met. Based on earnings for ~
hiedium term notes the 12 months ended December 31,1991, Toledo -
- Edison could not issue additional preferred stock. The d"[ldu[ 3d, 1 Debentures due 1997. 11.25 125,000 125,000 issuance of additional preferred stock in the future Pollution control notes will depend on earnings for any 12 con ecutive due 1993 2015 . .. 9.70 189.900 190,860 months of the 3 months preceding the date of Other - net ... - 6,063 4.663 issuance, the- inten ;t on all long-term debt Total Long Term outstanding and the dividends on all preferred stock Debt . . . . 53,841.355 $3,729,237 issues outstandmg. -~ Preference stock authorized for the Operating ~
Long-term debt matures during the next five years Companies are 3,000,000 shares withaut par value for as follows: $200,000,000 in 1992, $318,000,000 in 1993,
. Cleveland Electric and 5,000,000 shares wi+h a $25 par $89,000,000 in 1994, $278,000,000 in 1995 and Lyalue for Toledo Edison. No preference shares are $343,000,000 in 1996.
currently outstanding for either company. During the 1989-1991 period, the Operating There are no restrictions on Cleveland Electric's - Companies issued $834,500,000 aggregate principal ability to issue preferr3 or prefererce stock or Toledo _ amount of secured medium-term notes. The notes are Edison's anility to isu preference stock- _ secured by first mortgage bonds. At December 31 With respect to dividend and liquidation rights, 1991, Toledo Edison has $15,500.000 aggregate each Operating Company's preferred stock is prior to principal amount of secured medium-term notes its preference stock and common stock,- and each _ 1 registered with the SEC and available for issua_nce. Operating Company's preference stock is p 'or to its
' ~ . Cleveland Electric has arranged to refund in July . common stock. 1992 $78,700,000 principal amount of a public authority's tavexempt bonds due 2012 and having a 13%% interest rate with the proceeds from the sale in July 1992 of.an equal principal amount of the authority's bonds due 2013 and having an effective interest cost of 8.25E Cleveland Electric's 'trst mortgage bonds collaterally secure both issues. The PUCO authorized Cleveland Electric to record interest expense equal to a blend of the higher rate on the outstanding bonds with the lower rate on the new bonds for an interest expense re'luction of $L000,000 in 1990, $3,400,000 in 1991 and approximately
- $3,000,000 in 1992.
i
- (Centerior Energy) F-20 (Centerior Energy)
L
_ ~ _ _ . _ _. _ __ - _ _ - _ _ _ __ _ _ _
- The mortgages of Cleveland Electric and Toledo (11) SiiORT TERM UORROWING Edison constitute direct first liens on substantially all ARRANGEMENTS property owned and franchises held -by them. Our bank credit arrangements at December 31,1991-Excluded from the liens, among other things, are were as follows:
cash, securities, accounts receivable, fuel, supplies cleveland Toledo sente , and, in the case of Toledo Edison, automotive 11uw Ednon company Tota 1 =
. equipment.: Ohousands et dollars)
Additional first mortgage bonda may be issued by tiant unes or oeda . $152,000 570 430 ss.too m e,4ao Cleveland Electric under it mortgage on the basis of There were no borrowings under these bank *dit bondable property additions, cash or substitution for arrangements at December 31,1991. An additiong refundable first mortgage bonds. The issuance of $5,000,000 line of creJo is available to the Service additional first mortgage bonds by Cleveland Eiectric Company unaer a $30hn0,000 Cleveland Electric line on the basis of property additions is limited by two of credit, if unused by aeveland Electric. The provisions of its mortgage. One relates to the $5,000,000 line of credit is included in the Cleveland amount of bondable property available and the other Elettric total. to earnings coverage of interest on the bonds. Under Short term borrowing capacity authorized by the the more restrictive (;f these provisions (currently, PUCO is $300,000.000 for Cleveland Electric and
- the amount of bondable property available), $150,000,000 for Toledo Edison. The Operating Cleveland Electric would have been permitted to issue Companies have been authorized by the PUCO to approximately $335,000,000 of bonds based upon borrow from each other on a short-term basis.
available bondable property at December 31,1991. Most borrowing arrangements under the Cleveland Electric also would have been permitted ti Operating Companies'short-term bank lines of credit
-issue approximately $214,000,000 of bonds based require a fee of 0.25'o per year to be paid on any upon refundable bonds at December 31,1991. If Perry unused portion of the lines of credit. For those banks Jnit 2 had been canceled and written off as of without fee requirements, the average daily cash December 31,1991, Clev21and Electric would not have balance in the Operating Companies' bank accounts been permitted to issue any bonds based upon satisfied informal compensating balance available bondable property, but would have been arrangements, permitted to issue approximately $214,000,000 of At December 31,1991, the Operating Companies bonds based upon refundable bonds. had no commercial paper outstanding. if commercial The issuance of additional first mortgage bonds by paper were outstanding, it would be backed by at least Toledo Edison also is limited by provisions in its an equal amount of unused bank lines of credit.
mortgage similar to those in Cleveland Electric's The fee for the Service Company's lines of credit is mortgage. Under the more restrictive of these 0.25% per year to be paid on any unused portion of its provisions (currently, the eamings coverage test), lines of credit. Toledo Edison would have been peemitted to issue . No formal short-term borrowing arrangements approximately $1M,000,000 of bonds at an assumed have been established for Centerior Energy. interest rate of 11% based upon available bondable , property at December 31,1991. Toledo Edison also (12) CilANGES IN ACCOUNTING FOR would have been permitted to issue approximately NUCLEAR PLANT DEPRECIATION
$186,000,000 of bonds based upon refundable bonds In June 1991, the Operating Companies changed the at December 31,1991. If Perry Unit 2 had been method used to accrue nuclear plant depreciation canceled and written off as of December 31,1991, the from the units-of production method to the straight-amount of bonds which could have been issued isy line method retroactive to January 1,1991. The good Toledo Edison would not have changed. performance of the nuclear generating units over the Certain unsecured loan agreements of Toledo past several years had resulted in unito-of production Edison contain covenants relating to capitalization depreciation expense being signincantly higher than ratios, earnings coverage ratios and hmitations on the amount implicit in current electric rates. The secured financing other than through first mortgage straight-line method better matches revenue and bonds or certain other transactionsi An agreement expense, tends to levelize periodic depreciation relating to a letter of credit issued in connection with expense for nuclear plant and is more consistent with the sale and leaseback of Beaver Valley Unit 2 (as industry practice.
amended- in 1989) contains several financial The PUCO approved the change for- each covenants' affecting Centerior Energy and the Operating Company and authorized them to accrue Operating Companies. Among these are covenants depreciation for their three operating nuclear relating to earnings coverage ratios and capitahzation generating units at an accrual rate of about 3% of their ratios. Centerior Energy and the Operating plant investment based upon the +mits' forty-year Companies are in compliance with these cevenant operating licenses from the NRC. This change in provisions. We believe Centerior Energy and the method decreased 1991 depreciation expense Operating Companies will continue to meet these 535.946.000 and increased 1991 net income $27,952,000 coeenants in the event of a write-off of the Operating (net of $7.994,000 of income taxes) and earnings per Companies' investments in Perry Unit 2. barring share 5.20 from what they otherwise would have unforeseen circumstances. been. _ (Centerior Energy) . F-21 (Centerior Energy)
in December 1991[the PUCO approved for each ige in rate decreased 1991 depreciation expense - Operating Company a reduction in the straight-line R ,/62,000 and increased 1991 net income $21,419,000 depreciation accrual rate from about 3% to 2.5% for (net of $6,343,000 of income taxes) and earnings per each of their three operating nuclear units retroactive share $.15 frorn what they otherwise would have p' Lto January 1,1991. We believe the lower depreciation - been. _
- accrual rate is appropriate and reduces combined -
Deprecigtion expense recorded in prior years was - annual depreciation expense to a level more closely - not affected. Current electric rates were also - ' align <d with the total amount currently being . unaffected by the PUCO orders. I recovered in customers' rates for these units. This - i L(13) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) - E iThe following is a tabulation of the unaudited quarterly results of operations for the two years ended December l- .31,1991.
-l Quarters Ended March 31. June 30. Sept.30 Dn. 31, (thousands of dollars. euert per t. hare arnounts) 1991 Operating Revenues. , ...... ........ .. .. . .. $608,583 $645,355 $716,070 $590,244 l_ Operating income-. , .. . . ... . $129,003 $145,709 $182,085 $123,253 l Net income . . . . . . . . . . . . .=. $ 3L470 $ 51,736 $ 95,333 $ 54,701 Average Common Shares (thousands) . . . 138,404 138,881 139,336 139,737 -
Earnings Per Common. Share .. . .
$ .26 '$ .37 $ .68 $ .39 Dividends Paid Per Common Share .. .. . . $- .40 $; .40 $ .40 $- .40 ,
1990 Operating Revenues. . . , ,. $566,725 $386,164 $699,499 $575,053 Operating income. . . . . .. $116,169 $ 86~43 $171,684 $129,824 Net Income .. . .. .. ., $ 50,509 $ 54,921 $ 99,749 $ 39,280 Average Common Shares (thousands) _ 139,486 138.YSO 138,610 138,441 Earnings Per Common Share . . . . $ .36 $ .40 $ .72 -$ .43 Dividends Paid Per Common Share .. . . $ .40 - S .40 $ .40 $ 10
. Operating revenues for the first three quarters of 1991 and the four quarters of 1990 were restated to comply with current FERC revenue reporting requirements, as discussed in the Summary of Significant Accounting Policies. This restatement had no effect on earnings 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 of
$27,762.000 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 Policies and Note 12) and $28,215,000 to increase phase-in carrying charges for the adjustment to 1991 cost deferrals (see. Note 6). The total of these adjustments increased quarterly earnings by $40,041,000, or_5.29 per share. Earnings for the quarter ended June 30,1990 were increased as a result of federal income tax expense-adjustments associated with deferred investment ta credits relating to the' 1988 write off of nuclear plant
-investments. See Note 7. The adjustments increased.quarly earnings by $36,298.000, or 5.26 per share. - Earnings for the quarter ended December 31,1990 were increased as a result of year-end adjustments of . $25,790,000 to reduce depreciation expense for the year for the change in depreciation rates for nonnuclear and :
Davis-Besse property (see Summary of Significant Accounting policies), $10,169,000 to increase phase-in carrying charges for the adjustment to 1990 cost deferrals (see Note 6) and $10,375,000_to reduce federal income - tax expense (see Note 7). The total of these adjustments increased quar *erly eamings by $33,000,000, or 5.25 per share.
.(Centerior Energy) IL22 (Centerior Energy) h l, _. _ _
E Financial and Statistical Review
' Operating Revenues (thousands of dollars) . Steam Total lotal '- . llcatmg Ope.ratmg . - icar Reudendal Commetrial inJamat Other - Erfad Wholasaie(#) - fien..c & Cas Resenues-1991. $777 273 - 723 318. 732 747 188 026 2 47_1 364 SR 888 ' 2 560 252 - $2 560 252 1990s- . 719 078 668 410 779 391 189 754 2 357 133 70 308 2 427 441 -
2 427 441 1989 . 685 735 616 902- 746 534 204 769 2 253 940 107 364 2 361 304 - 2 3nt 304 1988 . - 637 329 537 861 e 75 584 84 524 1 9 M 298 119 505 2 054 803 -- 2 054 803
-1987.. . ' 629 663 531 682 - 689 959 36 272 1 887 576 45 275 19.12 BS) 13 371 1 946 222 1981; . 449 190 354 471 538 344 60 314 1 402 319 71 450 1 473 769 19 627 1 493 396 Operating Espenses (thousands of dollars)
Othet Fuel & Opratmn Depreciaten Tam Phase-in & Federal Total l Purthawd 4 & Other Than Pre phase m Irv orne Operatmg yen Powerf a) Mamienance Amorti7.ation FIT Deferred Rt Taws I spnses 1991. $499 672 801 225 242 703(b) 304 709 (5693) 137 581. $1960 202 19 % 472 297 862 738 242 153 283 425 (33 668) 96 076 1 923 021 1989. 472 684 860 138 272 671 259 67) (58 220) 122 385 1 929 529 1988. 408 644 865 632 264 824 268 550 (188 209) 123 697 1 743 138 - 1987.. 491 332 642 594- 214 421 207 521 (87 623) 105 912 1 574 157 1981 512 323 319 894 128 721 128 347 - a6 417 .1 197 702 incorne (Loss) (thousands of doHars) Federal Other ' Income income Preferred & income & Taws ~ Before - Prefersnce Operating - AFUDC- Deductions Carrymg Credit interest Debt AFUDC~ 5ta k - Year income Eqmty Net Charges ( Expenr.e) Charges Interest Debt Dwidends 1991 . ... $580 050 9 351 5 245 109 601 (30 329) 673 921 381 280 (5245) 60 649 1990. 504 420 7 883 145 205 085 (12 948) 704 585 '384 D o (S 993) 61 841 1989, . 431 775 .16 930 14 368 299 159 _ (73 177) 689 055 369 481 (12 129) 65 617 1988. 311 665 - 13 504- (489 047)(c) 372 !$5 131 254 - 339 531 378 292 (6 137) 69 489 21987, 372 065 299 308 (57 821) 39 599 121 122 774 273 435 042 (137 25 0 86 135
-1981. 295 644. 81 468 19 469 -
25 741 422 372 233 022 0 521) 58 459 Income (Loss) (thousands of dollars) Common Stock (dollars per share & %) l Incomi (Loo.) - Ikfore
.. Cumulative Cumulative Effect of an - Effett of an Return on Accounnng Accounting Average Aserage Change Change or tvet - Sham Common of Extraordmary Earraordmary -_ Income Outstandmg Fammgs Stock Dmdends (Wk iear Gam Gam - (Loss) (thousands) ( Loss) Eqmtv Declared Value .1991, . $237 240 .- $237 240 139 104 $ 1.71 8.4 % $1,60 $2037 1990,, 264 459 - 264 459 13S 835 - 1.90 94- IE 20.30 1989 266 8S6 - 266 886 140 468 1.90 96 1.60 19.99 1938, (102 113) - 28153(d) - (73 960) 140 778 (0 53) (2.5) 1.84 - - 19.68 -1987. - 390 353 -
390 353 138 395 2.52 12.8 2.56 22.10 1981. 180 412 10 807(c) '91 219 74 679(f) 2.56(f) 13 0 2.00(f) ' 19.29(f) NOTE 1981 data is the result of combming and restating Cleveland Electric and Toledo Edison data. (a) Wholesale revenues fuel and purchased power. wholesale electnc sales and purchased power armounts are restated for 1990 and prior years M reflect a change in reporting of bulk power sales transactons in accordance with FERC requirements. l (b) 'In 1991. the Operatmg Companies adopted a change in accounting for nuclear plant depreciation, changmg from the units of prodt.ction method to the straight line method at a 2.5$a rate.. (c) includes write-off of nuclear costs in the amount of $534,355.000 in 1938 !. (d) .in :988, the Operating Companies adopted a change in the method of accountmg for unbdled revenues.
-(Centerior Energy) F-23 (Centerior Energy) l
-~ . . - - - .- -- .- - -_-- - ~ _ _ - - -- . - . . - .-
CENTERIOR ENERGY CORPORATION AND SUBSIDMRIES Electric Sales (millions of MVH) Electric Customers (year end) Residential Usage Average Averar Average Pru e Ecsenue trkhv. trial h WH Per Per Per L Yoar ' Residential Commercial Industnal Wh.>lesa l a A) - other ~ Total Rendential Cornmercial & Other Total C uuomer LWH ' Customer 1991., . 6 981 -7 176 .11 559- 2 711 1 048 29 475 921 995 96 449 12 643 1 031 287 7 410 11.16c $627.10 1990.., 6 666 ' 6 848- 12 168 2 4B~ 959 29 128 918 965 94 522 12 906 . 1 026 393 7 079 10.62 765,93 1909c. 6 806 6 830 . 12 520 - - 3 2.t 996 30 367 914 020 93 N33 12 763 1 020 616 7 295 10 08 737.58
- 1988. . 6 920 6 577 12 793 1 828 946 29 064 - a09182 92 132 12 305 1 013 619 7 462 9.21 090.06 1987.. . 6 659 6 350 11 985 1 166 949 27 109 - 903 365 90 14S 12 740 1005 75a 7 217 9.46 685.43 1981. . 6 295 5 472 11 360 2 170 Bos 26105 884 588 84 287 11530 980 405 o939 7.26 490.57 Load (MW & %) Energy (millions of MVH) Fuel
- Operable
= Capacity Idhnency-
- at Time Peak Capamy Load C"*P'ny C.en-rated Purchawd ruct Coe BTU Per Tn_
Yect ' of Peak load Marpn Factor Fooil Nudear Power (d) Total Per LWH kWil
..1991 . .. 6 453 5 361. 16.9% 62.9 % 18 041 13 454 l1495 40 31 535 L48t 10 442 --1990. . .. - 6 437 5261 15.3 63.6 - 21 114 9 481 30 595 413 31 008 1.52 10 354 1989c 6 430 . 5 389 16.2 63.3 20 174 12 122 32 246 21 32 317 1.47 10 4b 1988., 5 525(g) -5 673 (2.7) 60.8 21 576 7 605 - 29 381 1 885 31 2o6 1 59 10 410 19f'. 5 955 5 173 - 13.1 63.6 20 894 - 6 907 27 801 1368 29 169 1.53 10 466 '1981. . 6 440 4 762 26.1 63.6 20 573 4 397 24 970 2 945 27 915 1.80 10 490 investment (thousands of dollars)
Construcuon work In Total Unhty Accumulated - Progress Nuclear Property. Utihty Plant in Deprecation & Net & l'eny Fueland Plant and Plant Total iear Serv n Amortization Plant Unit 2 Other Equipreent Additions Assets 1991- . $8 883 219 - 2 274 489 6 613 730 1 066 428 502 927 $3183 035 $203 E43 $12 042 039 1990, 8 636 219 2 038 510 6 597 709 1 133 535 568 124 8 299 368 251 312 11 894 235
'1989.;.. 8 397 638 1 823 520 : 6 574 118 1 157 273 591 e 92 8 323 083 217 319 - 11 666 547 1983., , 8 143 673 1 569 304 6 574 369 1 222 732 643 087 .8 440 188 343 143 . 11 573 098 1987. 8 383 114 1 324 446 7 063 666 1 007 707 656 350 8 727 725 947 921 11 349 836 1991., 3 874 628 . 873 663 3 000 965 1 645 098 143 590(h) 4 789 653 610 277 5 378 446 Capitalization (thousands of dollars & %)
Preferred & Preference Prefened Stock, without Stock, with Mandatory Mandatory Redemption Year - Common Stock Equity Redemption Provisions - Provisions LortTerm Debt Total 1991 , $2 834 484 38%' ' 332 031 4% 427 334 6% 3 841 355 52% $7 455 204 1990.. 2 810 033 39 ' :237 490- 3 427 334 6 ' 3 729 237 52 7 204 094 > , :1989. ... 2 794 572 40 281 352 4 427 334 6 3 533 656 50 7 036 914
.1988J,. . 2 771 744 . 39 303 781 4 427 334 6 3 551 614 51 7 054 473 1987.1 , 3 109 060- 343 985 4 457 334 6- 3 718 249 49- 7 628 628 1981..-.. 1 545 829 - 36- 420 500 10 245 071 5 2 040 988 49 4 302 388 - (c) In 1981, Toledo Edtson realized an extraordinary gain from the exchange of common stock for bonds- . (/J Average shares outstandmg and related per share computations reflect the Cleveland Electric 1.114or one eschange ratto and the Toledo Edison - ' one-for-one exchange ratio for Centerior Energy sh. ires at the date of afhhJtj0n, Apnl 29,1986
- (g) Capacity data reflects extended _generatmg unit outage for renovation and improvements _
(h) Restated for effects of capitahiation of nuclear fuel lease and hnancing arrangements pursuant to Statement of Financial Accountmg Standards 71. (Centerior Energy) F724 (Centerior Energy)
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Rppot'l of IlldCPClldCIll Pilblic AccottillaillS 1 10 mphs - on nerar ARTHUR ; lhe lleveland liet dc illuminating C,mpany; ANDERSEN ' l i W have audited the accompanying couliJated eperations and their cash flows for each of the three l balance sheet and consohdated statement of years in the period ended December 31,1991, in cumulative prefe red stock of ine Cleveland Electric wriformity with ge,erally accepted accounting Illuminating Company (a wholly owneJ subsidiary of principles. Centerior i nergy Corpontion) and subsidianes as of As do. cussed forther in th t ammary of cignificant 3 December J1.1W1 and 1990, and the nlated Accounting Policies and Nete 12, a change was made censolidated sta'ements of income, retained earning < in the method of accountmg for nuclear plant , and c.ah flows for cach of the threer years in the depreciation in 1991, retroactive to January 1,1991, pe iod ended Dwember 31, 1991. Thew fmancial As discussed further in Note 3f c), the future of statements and the st hedules referred to below are the Perry Unit 2 is undetided. Construction has been responubility of the Company's management. Our suspended since July 1985. Various options are hing responsibihty is to express an opinion on these considered, induding resuming construction, hnancial statements and whedules based on our converti the unit to a nonnudcar design, sale of all audits, or part of the Company's ownership share, or We conducted our acAts in accordance with canceling the unit. Management can give no assmo. cc I generally accepted auditing standards. T hose when, if ever, Peq Unit 2 will go in senice or standards require that we plan and pertoim the audit whether the Company's investment in that unit and a , to obtam reasonable auurance abo it whether the return thereon will ultimately be sc< overed. financial statements are hee of material misstatement. Our audits were made for the purpcae of fntming An . mdit indades esaiaming on a test basis ,
, an opinion on the basic fmancial statements taken a, evidence supporting the amounts and disdosures in a whole. The sd.edules of The Cleveland Electric the fmancial statements. An audit also includes illuminating Company and subsidlanes listed in the assening the accounting principles used and Indes to Schedules are presented for purposes of sigtdhcant estimates made by management, as well as comp'ying with the Securities and Exchange evaluating the overall financial statement Commission's rules and are not pr t of the basic presentation. We believe that our audits provide a hnancial statements. These schedu. S vc been reasonable basis for our opinion. subjected to the auditing procedures . phed in the In out opirWn. the hnancial riatements referred to audits of the basic hnancial statemeias and. in our above prese. rly, in all material respects, the opinion, fairly ttate in all material respects tF ?
hnancial pt i of The Cbveland Electric fmancial data required to be set forth therein in Illuminating 1pany and subs.idiaries as of relation to the basic tmancial statements taken as a December 31, i 1 and 1990, and the resultt, of their whole.
- Cleveland, Ohio February 14,1992 Arthur Andersen & Co.
l 1 l l l (Cleveland Electr;:) iL25 (Cles eland Electric) w-w= vfr- -ef e- -g yorm'.*+,m d' ,,,, ,=.y. .% g> q -- -m.e-oi_m._m-.-->t=g - - - > - + - - - '- --se, -
Summary of Significant Accounting Policies
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GENERAL Operating recenues mdude tertain wholesale power sa rewnun in uco h The Cleveland Electnc illuminating Company (Company) is an electric utility and a wholly owned
~ # " '"I "E '"4" ante "#"* w$""a I ' ' " I EltC '
subsidiary of Centerior Energy Corporation duw u Power sa transact ns wen neued with (Centerior Energy). The Company follows the pu a power hansac nsan wroned as pan Umform System of Accounts prescribed by the an pn power eeny he ammnts a rederal Ercr: y Regulatory Commission (FERC) and " F'" ^" " " " '#" *""I"'* adopted by The Public Utilities Commission of Ohio w unent mp ning nyulanents. See Note 13. (PUCO). As a rate regulated ucility, the Company is FUEL EXPENSE subject to Statement of linancial Accounting Stand uds 71 which governs accounting for the effects The cost of fossil fuelis charged ta fuel expense based of certain types of rate regu% tion. The hnancial on inventory usage. The mst of nuclear fuel, statements include the accounts of the Company's induding an in.erest component, is charged to fuel wnolly owned subrMiaries, which in the aggtegate aie expense based on the rate of consumption. Estimated not material 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 tr.ernbers include he Toledo Edison Company actual fuel costs and estimated fuel costs currently (Toledo Edison), Duquesne Light Company being revered from customers through the fuel r (Duquesne), Ohio Edison Company (Ohio Edison) factor. T e matches fuel expenses with fuebrelated and Ohio Edison's wholly owned subsidiary, reven ta , Pennsylvania Power Company (Pennsylvania , : Power). The members have constructed and operate PRE PilASE IN AND PilASE IN DEI ERRAI.S ' generation and transmission facihties for the use of OF OPERATING EXPENSES AND the CAPCO companies. Toledo Edison is also a CARRYING CllARGES wholly owned subsidiary of Centerior Energy. The PUCO authorized the Company to record, as RELATED PARTY TRANSACTIONS 'E"'"#"#E"""E"""*"#"k carrying charges related to Perry Nuclear Power i lant Operating revenues. operating expenses and imerest Unit 1 (Perry Unit 4) and Beaver Valley Power charges include those ammts for transactions with Station Unit 2 (Beaver Valley Unit 2) from : heir , affiliated companies in inc ordinary course of respective in service dates in 1987 through December busincss operations. 1988. Amortization and recovery of these deferrals The Company's transactions with Toledo Edison (called pre phase in deferrals) began la January 1989 i are primarily for interchange power, transmbsion line in Lccordance with the January 1989 PUCO rate order rentals and jointly owned power plant operations discussed in Note 6. The amortizations will continue and construction. See Notes 1 and 2. over the lives of the related property. , Centerior Service Company (Service Company) As discussed in Note 6, the January 1989 PUCO ; the third wholly owned subsidiary of Cemerior rate order for the Company included an approved rate Energy, provides management, financial, phase-in plan for the Company's investments in administrative, engineering, legal and other services at Perry Unit 1 and Beaver Valley Unit 2. On January 1, cost to the Comnany and other affiliated companies. 1989, the Company began recording the deferrals of The Service Company billed the Company operating expenses and intewst and equity carrying
$130000,000, $106,000,000 and $92,000,000 in 1991, charges on deferred rate based investment pursuant ,
1990 and 1989, respectively, for such services, to the phase in plan These deferrals (called phase in deferrals) will be recovered by December 31,1998. o REVENUES Customers are billed on a montHy cycle basis for their DEPREC ATION AND AMORTIZATION eeergy consumption based on. ate schedules or The cost of property, plant and equipment is contracts authorized by the PUCO, An accrual is depthted over their estimated useful hves on a made at the end of each month to record the - straight line basis. Prior to 199L only nonnuclear estDnated amount of unbilled revenues for kilowatt- property, plant and equipment was depreciated on a hour sales rendered in the current month but not straight line briis, as depreciation expense for the Mlled by the end of that month. nuclear generating units was based on the unitoof.
- A fuel factor is added to the base rates for electric production method.-
service. This fac*or is designed to r_ecover from The anneal straight line depreciation provision for
-customers the costs of futi and most purchased nonnuclear property expressed as a percent of power. It is reviewed anu adjusted semiannually in a average depreciaNe utility plant in service was 3.1%
PUCO proceeding. in 1991, 33% m 1990 and 3.9% in 1989. The rate (Clevela,d Electric) F-26 (Clevelard Electr'c) A..,_.. i. .i...~ ,_.-,_.--,,_-,_____.a.._;._._.._..__-___..____..,_,...-, _ _ . . _ . _ , . _ _ _ _ _
_ _ _ _ _ _ _ . _ _ _ _ _ _ _ . ._.____._______m -_ declinsiin 1990 because of a PUCO approved change depreciation expense under the liabihty method. ! in dep eciation rates effectisc Januarv 1, 1990. See Note 7. ! attributable to longer eMimated hves h' nonnuclear ' property. See Note 13. DLrrill(ED GAIN IllOM 1 in 1990, the Nuclear Regulatory Commission SAti: Of UTILITY PLANT ! (NitC) approved a siv) ear ntension of the operatmg lica a.e for the Daviellesse Nuclear Power Station The Company entered into a sale and leaseback (Davis-Besse). The PUCO approved a change in the uansaction in 1987 for the coal bred tiruce Mansheld uniteobproduction depreciation rate for Davis- Generating Plant (Mansheld Plant) as discussed in Besse, effective January 1,19N, which . agnized the Note 2 The transaction resulted in a net e,ain which k life extension. See Note 13. was defarred. The Company is amortizing Abe i Effective January 1,19% the Company changed apphcable deferred gain over the term of leases under its method of accounting for nuclear' plant the sale and leaseba(L agreement The amortiration depreciation hem the units-of. production method to and the lease expense amount are rece.ded as other the straight line method at about a A rate The operadon and msintenance expense. j PUCO approved this change in accounting method
- for the Company and subsequendy approved a INTEllEST Cil AltGES change to lower the 3% rate to 2.5% for the three Debt interest reported io the inconic Statement does !
operaung nuclear units retroactive to January 1,1991, not include interest on nuclear fuel obligations. ! See Notes 12 and 13. Interest on nuclear fuel obligations for fuel under The Company uses cuernal funding of future conuruction is capitaheed. See Note 5. decommissioning costs for its operating nurlear unit $ i osses and y,ains realized upon the reacquisition or pursuant to a PUCO order. Cash contrioutions are redemption of long. term debt are deferred, consistent made to the fundi, en a straight-line basis over the with *be regulatory rate tretrncid Such losses and remaining licensing period for each unit. Amounts gains are either amorthed over the remalnder of the - currently in rates are based on past estimates of originallife of the deb, issue retired or amortired over decommissioning costs for the Compan', - the life of the new debt issue when the proceeds of a 563.000 000 in 1986 dollars or Davis Desse and new issue are used for the debt rehrnption. The f
$44,000,000..od $35.000,000 m 1987 dollars for Perry amortizations are included in debt interest expense.
Unit 1 and licaver Valley Unit 2, respectively, Actual decommissioning costs aa expected to signi6cantly PitOPEllTY, PLANT AND EQUIPMLNT ' neced these estimates. It is expected that increases in the cost estimates will be recoverable in rates Pmperty, plant and equipment are stated at original resultian from future rate proceedings. The current ' cost less any amounts ordered by the PUCO to be level of npense being funded and recovered from written off, included in the cost ce mstruction are customers over the remaining licensing periods of the items such as related payroll tase , pensions, fringe unitt. is approximately 54 000,000 annually. ' benefits, management and general overheads and allowance for funds used during construction l'EDEllAL INCOME TAXES ( AFUDC). AFUDC represents the estinv ied The fit ancial statements reflect the liabilit; method of **E # #"
#49 C"" I"""' " * '
accounting for income taxes, The liabihty method hnance conumdon. Dus nonmh aHoyana n requires that the Company's deferrrd tax liabilities be ',n > b mmme, napt fm certain AlUDC for I erry Nuclear Power Plant Unit 2 (Perry Unit 2). See adjusted for s bsequent tax rate changes and that the Note 3(c). The gross AFUDC rate was 10,47% in Company record deferred taxes for all temporary 1991,10.48% in 1990 and 10.91% in 1989.- differences between the book and tax bases of assets and liabilities. A portion of these temporary nhyana and wpab am chargd m openw as , differences are attributable. to propert related tirning jncurw cn f wplacing plant and equipment > is charged to the utility plant accounts. The cost vf differences that tH PUCO used to reduce prior years, property wtued plus removal costs. after deducting tax expense for ratemaking purposes wherebv no any salvage value, is charged to the accumulated deferred taxes were collected or wcorded. Since the 7 PUCO practice permits recovery of such taxes from E "" * " ' "P"d# "' customers when they become payable, the net itECLASSillCATIONS
-amount due fron customers has been recorded as a regulatory asset in d-fe; 7d charges. A substantial Certain seclassifications have been made to prior portion of this amount relates to differences between years' financial statements to make them comparable the book and tax bases of utility plant. Hence, the with the 1991 hnancial statements and consistent recovery of these amounts will take place mer the with current reporting requirements, These include lives of the related assete reclassi6 cation related to certain wholesale powet investment tax credits are deferred and amortired sales revenues as discussed previomly under over the estimated lives of the applicable property. 7 Revenues" and accumulated deferred rents as - The amortization is reported as a reductmn of discussed in Note 2.
(Cleveland Electric) F 27 (Cleve..ind Electric)
-Manayment's Financial Analusis .
RI SUI.TS 01 OPl R ATIONS approval to atoue post m+cnice carrvmg was and g y ,7, g , defer depreciation for facihties that are'in service but not vet recognized in rates. pUCO action on this The .lanuary 19.w PUCO tale order for the Company, ,cgie ,t has been postponed unda the joint as divussed in Note 6, was designed to enable us to recommendation approved b'v the PUCO discu%ed begin recovering in rates the cost of, and earn a fair belmv. return on, our allmved investment in Perry Unit 1 in inbn 19% the PUW. approve 4 a joint
.and Beaver Vallev Urut 2. The rate order /which rnwninendaHon of the Company, loledo Ldison and provided for thre' e rate ine e improved revenues "*""" '"P'cwntauw gmurs mmived m the 1u89 and cash flows in 1989, W W 991 from the 1988 levels However, as dist m the fust four ' # "' C d * - """' D" I"hI "'mmmendation paragraphi. of Note 6. tm -m plan was tw " "M' '" 5""N "" I""' Urn reso{udon of Wen-penWng armunting applications m 1991 and to )
designed to improve carmngs because gains in revenues from the higher rates and r.sumed sales eMa a framework Im rem!ving acc unting issues j growth are initially offset by a corresponding and related rnaum gn a Jongn*nn bash O e, W92, i redation in the deferral of nuclear plant operating As ran of dus p, nt tecommendation, the , Company and loledo Ldison agreed to limit their esbsenses and carrying conhned 1992 other operation and maintenance of et by the anmr'iration ofcharges such deferrals. and are subsequently expenses and capital expenditures to $1,050.000,WO, Although the phase-in plan had a positive effect edusin I c mphanw cous related to the (. lean Air 1 on revenua and cash flows, there are a number of factors that ewrted a negative influence on earnings in Act Arnendments of 1990 (Clean Air Act) Other 1991 and will continue w present sipuncant earnings opnaHon and maintenance expenws and capital challenges in 1992 and beyond. One such factor is cypenditures on a consolidated basis . Centerior related to facilities placed in service after February Lnerp totaW REMM in W9L The Gunpany, 198S and not included in rate bcse; The Compariy is edo Won and the cuwmn reprewntauve groups aho agreed to an ongmng rWiew of our required to record interest chuges and depreciation paadont hnancial mndition and on these facilities as current expenses even though nm t such items are not yet recovered in rates. We also are ac unting practices. Ths effort. with th,e panicipation f the I,UCO staff, ts directed at the mamtenance and facing the challenge of competitive forces, including ultimate improvement of our financial condition, the new initiatives to create municipal electric systems, The need to meet competitive threats, coupled with a knpr wment of Hu cUiciency of our opnaHons, and the delay and minunnation of future rate increaset. desite to encourage economic growth in the service , to enter into an 1he Company and 1oledo Ldison also apeed not to area,is prompting the Companb'aving reduced wek any baw rate innease that would become rates increasing number of contracts eUnhe befme m with certain large customers. Factors bevond our control also having a negative influence 'on earnings The Company continually faces competitive are the economic recession, the effect of inflation and. threats from municipal electne systems within its increases in taxes, other than federal income taxes. $nvice territory, a challenge intensihed by municipal - The Company has taken several steps to counter access to low. cost power currently available on the the adverse effects of the factors discussed above. We whoh' sale market. As part of our competitive have implemented most of the recommendations of St'dle8F> WP - are strengthening programs that the management audit discussed L Note 6 and have danonstrate the added value inherent in our seren taken other actions wh'ch reduced other operation bey nd what one might receive from a municipal ' and maintenance expense by approximately eintnc system. Such pregrams include providing 544,700.000 in 199L As discussed in the Summary of services m mmmunities to help them retain and Significant Accounting policies and Note 12, we attract businesses, providing consuhing services to wupht and received pUCO approval to lower our cusumers to improve their energy ef6ciency and nuclear plant depreciation expense in 1991 to a level _ developing demand side management programs. To more closelv aligned with the amount being counter new municipalization initiatives, we are also recovered in' rates. in addition, v e have inneased our stressing the hnancial risks and uncertainties of efforts to sell power to other utihties which,in 149), creating a municipal system and our superior resulted in approximately $30,200,000 of revenues in reliabihty and service. excess oft he cost of providing the power. Annual sales growth is expected to aserage about Despite the positive aspsis of the measures 2% for the next several years, contingent on future discussed above, more most be done to maintain economic events, liecognizing the limitations earnings. Continuing cost reduction efforts will be imposed by these sales _ projections and current necessar, to lessen the negative pressures on competitive pressures, we will utilite our best efforts earnings. The Company is aggressively seeking to minimize future rate increases through cost- ' long-term power contracts with whoh! sale customers reduction and quality of-service efforts and exploring to further enhance revenuet To counter the effects other innovative options. Eventually, rate increases of delays in recovering new investment since 1988 will be necessary to recognize the cost of our new and related costs in rates, we have requested pUCO _ capital investment and the effect of inflation. (Cleveland Electric) F 28 . Cleveland Electric)
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1991 tw 1990 Company of 9% effective in february 1909 and 7% factors contributing to the 8% increase in tool effective in February 1990. The auociated revenue operating revenues are as followy increase in 1990 was partially offwt by reduced Chalr, e in Oprtaung Hrscnuen jnrerav b kilowatt hout sales industrial sales decreased 2 6% lia.,c katem end MmrHa.we . 5 74 tWW because of the receuion beginning in- 1940, win volunw ana Mn . :unung Hesiden'ial sales decreased 1M a senonal MAule sairs 40 mo! temperatures were more moderate in cornparison to s t 3smuix' the pnor year's temperatures, resulting in reduced ' cuMorner heating and cooling-related demand. The increases in base rates and miscellaneous revenues resulted primarily from the January 1989 Commercial sales increased 0.5% as increased pUCO rate order for the Company. The PUCO demand from new all electric offne and retail space was oHwt by We eHects of mild weather. Other sales ab, roved and 435%rateeffective increases of 7% effective in February 1991. Total in-Februarv activity decreased 214% primarily as a result of lower 1 wholesale sales. The mcrease m revenues war, also , kilowatt. hour sales increased 43% in 1091. Residential j and commercial sales increased 4.8% and 4.9%, anlah o h me loss of revenues related to the [iay expiration of the Company 6 agreement to respectively, as a result of higher usa equipment in response to the unusuab:e y warm late of cooling s a r n phan* of I erry UnH 1 capach w OMo fhon and i ennsyNanta Pmt. ; spring and summer 1991 temperatures. The commercial sales increase was also influenced by Operating expenses decreased 03% in 1990. some improvement in the economy for tiie Lerreciation and amortitation expense decreased commercial sector. Industrial sales d4 lined 63% ;Hmarily because of lower depreciation rates used in largely because of the rctetsion driven slump in the .990 for nonnuclear and Davis Desse property steel, auto and (hemical industrie.s Other sales attributable to longer estimated hves and because of increased 453% be(ause of increased sales to longer nuclear generating unit refueling and wholesale customers and public authorities. maintenance outages in 1990 than in 1989. Federal Operatmg expenses increased 4.9% in 1991, The income taxes decrea,ed pnmarily because of a increase was mitigated by a reduction of $44,700.000 decrease in pretax operating income fuel and , in other operation and maintenance expense, resulting purchased power expense decreased primarily from primarily from cost cutting measures. Offsetting this less amortization of previously deferred fuel costs decrease were an increase in fuel and perchased than the amount amortired in 1989. These decreases power expense resulting from incicased purchased in operating expenses were partially offset by an power costs and increased amortization of previously increase in taxes, other than federal income taxes, - deferred fuel costs over the amount amortized in resulting from higher property and gross receipts l 1990; an increase in federal income taxes because of taxes, an increase in other operation and maintenance higher pretas operating income; an increase in taxes, expense and by lower operating expense deferrals for other than federal income taxes, resulting from perry Unit I and Beaver Valley Unit 2. tJgher property and gross receipt taxes and accruals Credits for carrying charges recorded in for pennsylvania tax increases cuacted in August nonoperatin;; income decreased in 1990 because a 1991; and lower operating expense deferrals for perry orcater share of our investments in Perry Unit 1 and Unit 1 and Beaver Valley Unit 2 pursuant to the Beaver Vallev Unit 2 were recovered in rates. The January 1989 pVCO rate order. decrease in the federal income tax provision related to Credits for carrying charges recorded in nonoperating income was the result of a decrease in - nonoperating income decreased in 1991 because a pretas nonoperatin ' nreater share of our investments in perry Unit 1 and adjustments of $18,g income
<12 000 and nederal associated income tax with previously >
beaver Valley Unit 2 were recovered in rates, The . det, red investment tax credits . elating to the 1988 federal income tax provision related to nonoperatin3; wnte-off of nuclear plant. Interest expense increased mcome increased mamly because the 1990 provistor* in 1990 because of the higher tevel of debt outstanding was reduced tiy $18,712,000 for federal income tax which was partially offset by ref nancing. adjustments associated with previously deferred investment tax credits relating to the 1988 write-off of nuclear plant. EFFECT OF INFLATION Although the rate of inflation has eased in recent 1990 1% 19S9 years we are still affected by even mobst inflation Factors contributing to the 3 5% increase in 1990 since the regulatory process introduces a time-lag operating revenues are as follows: during which increased costs of our labor, materials and services are not reflected in rates and recovered. ChanLe in C'ivrating Nevenues 11 rNe) Moreover, regulation allows only the recoverv of tiase Ram and Mmenanum slumum historical costs of plant assets through depreciation t even thou h the costs to replace these assets would car Sai" to OE I dvn substantia ly exceed their histoncal costs in an and renyhania her. tmmmy
,g inflationary economy. - - - ~ ~
Changes in fuel costs do not affect our results of The major factor accounting for the increase in operations since those costs are deferred until operating revenues was related to the January 1989 reflected in the fuel cost recovery factor included in rate order. The pUCO approved rate mcreases for the customers' bilk JCleveland Electric) F-29 (Cleveland Electric)
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inconte Statenient int ctrviisuo iticinic ittustinsrsua costraur svo ruesroisnits . Ior the years ended December 31. 1991 1940 1989 (thousands of dollars)
- Operating Revenues . . . . . . . . , . . . . . . . . . . . . ..., ... . $1,825,738 $1,691,159 51.634.227 Operating Expenses fuel and purchased power (1) . . . . . . . . . . . , . . . 455,055 412.397 427,108 Other operation and maintenance . . . . . . . . . . . . 469,530 514,186 508,151 Depreciation and amortization . . . . . . . . . ... . .. 170,571 169,526 187,614 Tases, other than federal income tases . . . . . . . . . 215,908 197,454 183.120 Phase in deferred operating expenses , . . . . . . . . . . . . . . . (16,426) (33.960) (52,020)
Amortization of pre. phase.in deferred costs . . .. . . . . 9,586 10,076 9,5$3 federal income taxes . . . . . . . . . . . . . . . . . . .... .. 105,824 75,099 65.275 , 1,410,048 1.344,778 _1,348.801 Operating incorne . . . . . . . . . . . . . . . . . . . . . . . .. .. 415,690 346.381 285 M 6 Nonoperating income l Allowance for equity funds used during construction . . 7,852 4,531 8,362 l Other income and deductions, net . . . . . . . . . . 5,809 1,836 7,934 l
- Phase in carrying charges. . . . . . . . . . . . . . . 87,615 161,598 216,851 l Pre. phase-in carrying charges . . . . . . . . . . . . . . . . . . .
17,937 Tederal income taxes - credit (hpense) . . . (24,311) (20A01) (55,699) 76,965 147,564 195.385 incorne Before Interest Charges. . . . . . . . . . . . ... . . ,. 492.655 493,945 480,811 Interest Chirges Debt interest . . . . . . . . . . . . . . . . . . . . . . . 250,799 254,936 238,042
-Allowance for borrowed funds used during construction . . (4,302) (3,319) (7A50) 246,497 251.617 230.592 Net income . . . . . . . . . . . . . . . . . . .. . . . 246,158 242,328 250,219 Preferred and Preference Dividend Requirements . . . . . . 35857 36,682 40,227 Earnings Availabic for Common Stock . . . . . . . . . . . . . . $__210_,301 . r$_20_5.6,4_6 $2 m_09,992, (1) includes purchased power expense of $127,691.000, $111,761,000 and $114,123,000 in 1991,1990 and 1989, ,
respectively, fer pubeses from Toledo Edison. > Retained Eantings For the years ended December 31, 1991 1990 1989 (thousands of dollars)
. Balance at Beginning of Year. . . . . . . . . .. .... . S 563,559 .5 507.375 5 459,709 . Additions . Net income . . , . . . , , . . . . . .. 246,158 242,328 250,219 Deductions Dividends declared; Common Stock.. . . . . . . .. . .... (194,306) (149,199): (161,662)
Preferred stock . . . . , , . . , ,,.. , (36,389) (36,205)- (40,769) Preference stock . . . . . . , . . (124) Other, primarily preferred stock redemption expenses . (F" i) (740) 2 Net increase . . . . . . 14,647 56,184 47.666
' Balance at End of Year . . . $57M 06 S 563.559 5 507,375 Tha accompanying notes and summary of significant accounting policies are an integral part of these statements.
I (Cleveland Electnc) F-30 (Cleveland Electric) -
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Management's Financial Analysis CAPITAL RESOURCES AND LIQUIDITY construction and rna nda tor y redemption in addition to our need for car' for normal corporate requirements of appnwinsately 52M000,000. About operations, we cc ntinue to need cash for an ongoing (470% of the Company's 1993 and 1994 requirements program of constructing new facihties and modifying are espnted to be fmanced esternally. If economical, existing facilities to meet anticipated demand for additional securities may be sedeemed under i electric service, comply with governmental opu,onal redemption provisions. See Notes 10(c) and
. regulations and protect the environment. Cash is also (d) for information concerning limitations on the needed for the mandatory retirement of securities, issuance of preferred and preference stock and debt.
Over the three. year period of 1989-1991, these Our capital requirements after 1994 will depend on construction and mandatory retirement needs totaled the irnplementation strategy we chooae to achieve comphance with the Clean Air Act. Expenditures for approximately 5800,000.000. In addition, we , exercised various options to redeem and purchase eur optirnal plan are estimated to b( aproximately - approximately $270.000,000 of our securities.
$1MM over the 1992 2001 period. See Note As a result of the January 1989 PUCO rate order, 3(bb internally generated cash increased in 1989,1990 and We expect to be able to saise cash as needed. The l .1991 from the 1988 level. In addition, we raised availability and cost of capital to meet our esternal . $1,049.000,000 through security issues and term bank fmancmg needs, however, depends upon such factors ;
loans during the 1989 1991 period as shown in the as hnancial market mnditions and our credit ratings. Car.h Flows statement. Dunng the three.vear period, Current securities ratings for the Company are as I U"*5; ' the Company also utilfred its short-term' borrowing arrangements (explained in Note 11) to help meet its standard Mmtv i i cash needs. Proceeds from these fmancings were j, n gg used to help pay for our construction program, to - repay portions of short-term debt incurred to fmance nm rnonpa tenat bita- Bad the construc00n program, to retire, redecin and p,g ,3,a g . p g purchase outstanding securities, and for general corporate purposes. Estimated cash requirements for 1992 1994 for the A write-off of the Company's investment in Perry Company are $693,000,000 for its construction Unit 2, as discussed in Note 3(c), would not reduce program and $464,000,000 for the mandatory retained earnings suf6ciently to impair its ability to t redemption of debt and preferred stock. Additior. ally, declare dividends and would not affect cath flow. I the Company has arranged to refund in 1992 - The Tax Reform Act of 1986 (1Du Tax Act)-
$78,700,000 principal amount of its First Mortgage provided for a 34% income tax-rate 1988 and '
lionds,13%% Series due 2012 by issuing an equal thereafter, a new alternative minimum tas ( AMT) and. principal amount of hrst mortgage bonds due 2013 other changes that resulted in increased tax payments having an effective interest cost of 8.25%. We expect to and a reduction in cash flow during 1989,1990 and ' finance externally about 50% of our total 1992 1991 because we were subject to the AMT. L l L
.(Cleveland Electric) F-31 (Cleveland Electric)
Cash F10ws im cum.wo m enac niunsmuc commwo sunwwns For the yearie:3 ded December 31, 1991 1990 _1%9 (theusana el dollm) Cash Tlotes from Operating Activities (1) Net income . . ........ . . . . .. . . .. . . .. $ _ 246,158 5 242.328 5 250.219 Adjustments to Reconcile Net income to Cash from Operating Activities: Depreciation and amortization . . . . . . . . . . . . . . 170,571 169,526 187.614 Deferred federal income taxes . . . . .. . .. . 50.934 111,029 108.261 Investment tax credits, net . . . . . . ....... .. . 12,653 (17,224) (58) Deferred and unbilled revenues . .. ..., ... .... .... (25,300) (38,134) (32,168) Deferred fuel . . . . . . m . . . . ..... . .. .. .... . 13,450 (11,410) 8,827 Carrying charges capitalized . . . . . . . . . . . . . .. . . (87,615) (161,598) (234,788) Leased nuclear fuel amortization . . . . . .. ......., , , 66,666 47.028 55,712 Deferred operating expenses, net . . . . . . . . . . . . .. (6,S40) (23,884) -(42.467) Allowance for equity fund., used during construction . . , (7,857) (4.531) (8,362) Amortization of reserve for Davis Besse refund obligations , to customers . . . . . 4 . .............. . . .... .... - - (12,162) pension settlement gain . . . . . . . . . . . . . . . . . ... .. ... - (34.517) - Changes in amounts due from customers and othern, net . . 11,904 (16,878) (9,251) Changes in inventsries . . . .... ..... . ... ... . . (15,040) (22,494) (4,919) . Changes in accounts paycble. . . . . . . ...... .. . .. (23,667) 31,901 (13,844)
- Changes in working capital affecting operations . . . . . . . . . . 36,997 (5,195) - 29,504 Other noncash items . . ... .. . .......... . .. . . (13,334) _(91_25) (9,065)
Total Adjustments . . . . . . .... .. . . . . ... . 185,727 14A94 12.834 Net Cash from Operating Activities.. . ... . . 431,685 256.822 273,053 Cash Flows from Financing Activities (2) Bank loans, commercial paper and other short-term debt. . .. . (86,703) 86.688 29 Notes payable to affiliates . . . . . . . , , , . . . . . . . . . .. ... . 7,000 (157,200) 90,200 Debt issues: Wst mortgage bonds . . . . . . . . . . . . . . ............... ... - 120,000 67,700 decured medium term notes . . . . . . . . . . . . . . . . . . . . . . '150,000 337,500 212,500 Term bank loans. . . . .... ....... ........... . ...... . - 16,000 40,000 preferred stock issues . . . . .. ..... .... ..... ..... 125,000 - - Maturities, redemptions and sinking funds. . . . . , , . . . . . . .. (132,990) (211,810) (305,741) Nuclear fuel lease and trust obligations . . . . . , . . . . . . . . . . . . . (63,695) (56,129) (47,574) Dividends paid ........ ......... ...,.. .... ..... ... (229,671) (185,851) (202,444) premiums, discounts and expenses . . ..... . ....... , . (5,990) (5.515) (1,697) Net Cash from linancing Activities . . . .. ... .. _(237,249) (76,317) ,,,(147,027 ) Cash Flows from investing Activities (2) . Cash applied to construction . . . . . . . . . . . . . . . ...... . .. (137,851) (156,769) (149,043) Interest capitalized as allowance for borrowed funds used during construction .. ... .. ... . ........... . (4,302) (3,319) (7,450) Loans to affiliates . . . . . . ...... .. ., . ... .. .. .. 11,000 (11,000) - Other cash received (applied) . . .. . . .. . . 2c254 (6.699) (16,840) Net Cash from Investing Activities ... .. , .... (128,899) (177.787) (173.333)
. Net Change in Cash and Temporary Cash Investments. . . .. 65.737 2.718 .
(47,307) Cash and Temporary Cash investments at Beginning of Year . 31,048 2s 330 :75.637 Cash and Temporary Cash investments at End of Year, ~.. . .. S 96,785 $ 31.048 28,330
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(1) Interest paid (net of amounts capitalized) was $221,000.000, $189.000,000 and $151,000.000 in 1991.1990 and ' 1989, respectively, income taxes paid were 549,536,000, $18,589.000 and $29,106,000 in 1991,1990 and 1969, respectivaly. (2) Increases in nuclear fuel and nuclear fuellease and trust obligations in the Balance Sheet resulting from the noncash capitalizations under nuclear fuel agreements are excluded from this statement.
- The accompanying notes and summary of significant accounting policies are an integral part of this statement.
-(Cleveland Electric). F 32 (Cleveland Electric)
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- (Cleveland Electric) F 33 (Cleveland Ele. tric)
Balance Sheet l
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I December 31, 1991 1990 Ohousands of dallar>) ASSETS PROPERTY, PLANT AND EQUIPMENT \ Utility plant in service. . . . .. . . . 56,195,9J5 56,032,336 l Less: accumulated depreciation and amortization . . . ... . 1,564<984 __1.398,258 i 4,630.961 4,634,078 l Construction work in progress . . . . .. .. ... . . 161,690 175.232 perry Unit 2. . . . . . . . . . . . . .. . . .. . .. 507,806 521,464 5,300,657 5,330,774 , Nuclear fuel, net of amortization .. . . .. . 263,129 300.824 Other property, less accumulated depreciation . . ... 41.834 41428 5,605,620 5.675,026 CURRENT ASSETS. Cash and temporary cash investments . . . . . . .. 96,785 3L048 Amounts due from customers and others, net . . .. 167,280 179,184 Amounts due from affiliates . . . . . .. 3,648 19,542 Unbilled revenues ...... .... . . . . ... Sti,000 - 60,700 i Materials and supplies, at average cost . . . . . ....., . .. 89,043 76,092 Fossil fuel inventory, at average cost . . . . ... .. . .. 39,0S9 37,000 Taxes applicable to succeeding years. . . . . . .. . .. . 167,753 155.069 O t h e r . . . . . . . . .. . . . . . . . . .. ... .. . .. 5,453 6,926 655,051 5(.5,561 DEFERRED CHARGES Amounts due frorn customers for future federal ir.come taxet.. . . . 673,726 671,450 Unamortized loss on reacquired debt . ......... .... .. .. 49.593 53,160 Carrying charges and operating expenses, pre-phase-in , . .. 368,44S 377,324 Carrying charges and operating expenses, phase-in . . . . .. .. 568,472 464,434 Other . . . . . . . . . . ..... . . .. .. .. .. .. .. 145,670 138,202 1,805,909 ,1,704.570 i Total Assets . .. . .... . . , . ,, . $S,066JS0 57,945,157 ' The accompanying notes and summary of significant accounting policies are an integral part of this statement. i. l - l
. (Cleveland Electric) F-34 (Cleveland illectric) .
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i-THE CllTilAND iLECTMC lLLUMINATING COMPANY AND $UFSIDIAMIS December 31, _ 1991 1990 Ohoanands of dollm) CAPITALIZATION AND LIAlllLITIES CAPITALl7.ATION Common shares, without par value: 105,000.000 authorized; 79,591,000 outstanding in 1991 and 1990. . . . .. . 51,240.570 $1.242,074 Other pald-in capital . . , , . . ... . . . . ... . ,625 78,625 Retained earnings. .... . . .. . .. . .. . 57S.206 563,559 Common stock equity . . . . . .. .. .... . .. 1,897,401 1,884,258 preferred stock With mandatory redemption provisions . . . . . . . . . . . . . . . . . . . 268,368 171,162 Without mandatory redemption provisions . . .. . . ...... . 217,334 217,334 ; Long term debt . . . . . . . .. . . ......... .. 2,682,805 2.631,911-J065,908 _4.904.665 OTHER NONCURRENT LIABILITIES Nuclear fuel lease obligations . ..., . ......... ..... 197,362 246,460 Other. , .. .... .. ..... . .. . . . .. . .. . 33,391 33,390 I 230,753 279.850 CURRENT LIABILITIES Current portion of long term debt and preferred stock . . . i . 92,857 97,988 ; Current portion of lease obligations. . . . ... . . . . 80,928 64.554 Notes payable to banks and others . . . . . . . . - ........,. 191 86,894 Accounts payable . . . . . . . . . . . .. ... ... ... ... .. .. . . 97,251 120,918 Accounts and notes payable to affiliates . . . . . . . . . . . . . . .. 58,578 59,884 Acen2ed taxes . . . . . . . . . ........ ...... .. . .. .. 281 526 225.666-A ccru ed in terest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... 53,096 53,113 Other........... ...... . . .... ........ . .. .. ...... 34,499 37.697 ) 698,926 746,714 DETERRED CREDITS Unamortized inve-tment tax credits. .. . ....... .... .., 258,318 252,759 Accumulated deferred federal income taxes . . . . . . .. .. . .. 1,203,72? 1,159.199 Reserve for Perry Unit ? allowance for funds used during construction ; ..... .. . . .... . ......... . . - . . 124,398 124,398 - Unamortized gain from Bruce Mansfield Plant sale . . . . . . . . . . 375,076 389,658 Accumulated deferred rents for Bruce Mansfield Plant . ...... 64,194 57,045 Other............... ... .. ... ... ... . . .. . .... 45,285 30,869 2,070,993 2.013,928 Total Capitalization and Liabilities. . ....... $8,066,580 57.945,157 7 L(Cleveland Electric) F 35 (Cleveland Electric) __ .- . . _ . . -._ . - _ .._ ______n_..-._ u ._ _ _ _ , . _ _ . _ _ . - _ _ _ . _ .
Statement Of Cumulative I'
."$?#!?.Y... I ..... .. . " ?.*""". *?.*'? '!"."*""'?.^""? ?? ""?""?"'
1991 Share $ Current December 11. Outstanding Call Pnte 19.91 1990 (thousands of dollars) Without par value, 4.000,000 preferred shares authorized - Subject to mandatory redemption: 5 7.35 Series C .... . .. 170.000 5 101.00 $ 17,000 5 18,000 88 00 Series E. . .... .... . 27,000 1.030 61 27,000 30.000 75.00 Series F. . . . . . . ... - - - 2,384 145.00 Series I . . . . . . . . . . .... - - - 13,779 113.50 Series K ... .. ... - - - 10,000-Adjustable Series M . . . . . ... 400,000 102 00 39,2M 49,000 9.125 Series N . ... .. . ... 750,000 105.07 73,968 73,968 91.50 Series Q . , , , . . . .. 75.000 - 75,000 - 88.00 Series it .. ..... .. .... 50,000 - 50,000 - 282,168 197,111 1.ess: Current maturities 13,600 25.969 Total Preferred Stock, teith hiandatory Redemption Provisions $268.368 $ s 71,162 Not $ubject to mandatory redemption: ,
$ 7.40 Series A . . .. . . . . 500,000 101.00 $ 50,000 - $ 50,000 7.56 Series B. . . . ,.... . 450,000 102.26 45,071 -45,071-Adjustable Series L. . . . .... . 500,000 10100 48,950 48,950 lieniarketed Series P . . . . . . . . 750 100,000.00 73,313 73,313 - .
Total Preferred Stock, teithout hiandatory Redemption Provisions $217,33) 5215 334 The accompanying notes and summary of signihcant accounting policies are an integral part of this statement; t h, I l 1 I' T L _ (Cleveland Electric) .F-36 (Cleveland Electric)
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Notes to the Financial Staternents
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(1) PROPERTY OWNED WITil OTilFR UTILIT!ES AND INVESTORS :
- ll.e Company owns, as a tenant in common with other utilities and those investors who are owne*-paiticip.ints in various sale and leaseback transactions (Lessors), certain generating units as listed below. Each owr owns an undivided share in the entire unit. Each owner has the right to a percentage of the generating capabihty of each unit equal to its ownership share. Each utill'y owner is oMigated to pay for only its respective share of the construction and operating cats. Each lessor has leased its capacity rights to a utility which is obligated to pay fer such Lessor's share of the construction and operating costs. The Company's share of the operating costs of these generating units is included in the income Statement. Property, plant and equipment at December 31. 1991 includes the following facilities owned by the Company as a tenant in common with other utilities and Lessors:
Owner + Constructmn in- Owner- ship Plant Work in Servi <e ship Mcpa. Power m Progre$n and Anumulated Cencra' y Urut . Date Share watts Source Service Su mended _Depredanon in Service. (thousands of dol:ars) Seneca Purnred Storage. 1970 M oo% 312 liydro $ 57,73) $ 1,021 $ 19.855 Eastlake Umt 5. . 1972 caso 411 Coal 151.150 2.1W - ; Davio!We . . . . . .... 1977 5138 454 Nuclear (40,121 21.055 150.911 Perry Unit I and Common Taohnet . 1987 31.11 371 Nudear 1 A22.82.1 4,201 193.227 Ikaver Valley Unit 2 and Cornmon Ianhtws (Note 2) 1987 24 47 201 Nudear 1.170.046 5.461 143,750 Construction Suspended Pety Unit 2 (Note 3(r)) . Uncertain 31 11 375 Nurteer - 507,0 6 - 5MM73 524jd $4] . Depreciation for Eastlake Unit 5 has been accumulated with all other nonnuclear depreciable property rather
- than by specific units of depreciable property.
Effective May 1.1991, FERC approved an agreement under which the Company is selling the power from its share of the Seneca Power Plant to two subsidiaries of General Public Utilities Corporation through 1993. Revenues from this transaction were $16,000.000 in 1991. Ohio Edison and Pennsylvania Power purchased 80 megawatts of the Company's capacity entitlement in Perry Unit 1 from November 1987 through May 1989. Revenues from this transaction were $31,831,000 in 1989 The ownership share of Perry Unit 2 set forth above does not reflect the Company's acquisition of Duquesne's 13.74% ownership share in February 1992. See Note 3(c).
-(2) UTII.lTY PLANT SALE AND LEASEUACK TRANSACTIONS As a result of sale and leaseback transactions. Semiannual lease payment: conforrn with the completed ir 1987, the Company and Toledo Edison payment schedule for each lease, are co lessees of 18.26 % (150 megawatts) of Beaver Rental expense is accrued on a straight line basis - Valley Unit 2 and 6.5% (51 megawatts),45.9% (358 over the terms of the least The amount recorded by :
megawatts) and 44.38% (355 megawatts) of Units 1,2 the Company in 1991,1990 and 1989 as annual rental and 3 of the Mansheld Plant, respectively, all for expense for the Mansfield Plant leases was terms of about 29% years. $70,008,000. Amounts charged to expense in excess of
. As co-lessee with Toledo Edison, the Company is the lease payments are now classified as accumulated also obligated for Toledo Edison's lease payments, if deferred rents on the Balance Sheet. Previously, the Toledo Edison is unable to make its payments ur der excess was included in accounts payable.
the Beaver Valley Unit 2 and Mansfield Plant leases, The Company and Toledo Edison are responsible the Company _would be obligated to make such under these leases for paying all taxes, insurance
- payments; No payments have been made on behalf of premiums, operation and maintenance costs and all .
Toledo Edison to date. other similar costs for their interests in the units sold Future minimum lease payments under these and leased back. The Company and Toledo Edison operating leases at December 31,1991 are summarized may incur additional costs in connection with capital as follows: 70, improvements to the units. The Company and Toledo - ror the - Toledo Edison have options to buy the interests back at the g g. Company Edison end of the leases for the fair market value at that time - _ (thourands of do!!ars) or to renew the leases. Additional lease provlsions 1992. . 5 61000 5 nomo provide other purchase options along with conditions
' ' yjg 4 , $3] f r mandatory termination of the leases (and possible repurchase of the leasehold interests) for events of 1995. 61000 nuco 1996. .
tact Years . 61000 1 m oo default. These events of default include 1.516 mo - 2.4uco0 noncompliance with several fmancial covenants Total l'urure Mmimum . affecting the Company, Toledo Edison and Centerior
- t. ease Pay ments . sigtue 51.034 000 Energy contained in an agreement relating to a letter (Cleveland Electnc) F-37 (Cleveland Electric)
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of credit luued in wnnection with the sale and significantly higher capital espenditures could ie leaseback of Itcaver Valley Unit 2 as amended in required during the 1992-2001 period. 1989. See Note 10(d). . We believe that Ohio law permits the recovery of ' Toledo !!dison is selling 150 megaw atts of its compliance costs from customers in rates.
= Beaser Valley thnt 2 leased capacity entitlement to the_ Company. This salc commenced in 1988 fc) PERRY UNIT 2 ; and we a-ticipate that it will continue at least until 1098. Purchasedt wer expense for this transaction Perry Unit 2, including its share of the common was $106,589,000, $102,773.000 and $10L127.000 in facilities, is approximately 50%omplete. Construction 1991,1990 and 1989, respectively. The future of Perry Unit 2 was suspended in 1985 pending future ' ninimum lease payments associated with Beaver consideration of various options, including Valley l'ait 2 aggregate $1,869,000,000. resumption of full construction with a revised estimated cost, conversmn to a nonnuclear design, **I" "I "II " part of our ownership share, or (3) CONSTRUCTION AND CONTINGENCIES cancellatiori lo option may be implemented without (a) CONSTRUCTION PROGRAM the unanimous approval of the owners. In October The estimated cost of the Company's construction 1991, the Company, which is responsible for the construction of Perry Unit 2 applied for a ten year I program for the 1992 1994 period is $731,000,000, including Al UDC cf $38,000.000 and excluding extension of the construction permit whkh was to ,
nuclear fuel, expire in November 1991. Under NRC regulations, the ; construction permit will remain in effect while the in en agreement approved by the PUCO, the Company and Toledo Edison have agreed to limit application is pending We espect the NRC to grant their combined 1992 other operation and maintenance the extension, expenses nd capital expenditures to $1,050.000,000, in February 1992, the Company purchased exclusive of compliance costs telated to the Clean Air Duquesne's 13 76 ownership share of Perry Umt 2 Act. Within this limitation, capital expenditures are for $3,324,000. This purchase increased the -
- budgeted at $191,000 000 for the Company, exclusive Company's ownetship share of the unit to 44 85%,
of the Clean Air Act compliance costs. ' with the temainder owned by Toledo Edison, Ohio Edison and Pennsylvania Power. The purchase does (b) CLEAN AIR LEGISL4 TION not signal any plans to resume construction of perry The Clean Air Act will require, among other things, Unit 2, but rather our intent to keep our options significant reductions in the emission of sulfur dioxide open. Duquesne had stated that it would not agree to ; and nitrogen oxides by fossil-fueled electric resumption of censtruction of the unit. generating units. The Clean Air Act will require that if Peny Unit 2 were to be canceled, then our net sulfur dioxide emissions be reduced in two phases investment in the unit (less any tax saving) would over a ten year period, have to be wntten off. The Company estimates that such a write-off, based on its investment in this unit Centerior Energy has developed a compliance as f December 31,1991 and after adjustment for the strategy for the Company and Toledo Edison which February 1992 purchase of Duquesne's ownership will be submitted to the PUCO for review in April share, would have been about $26'/ 000,000, af ter 1992. Centerior Energy will also seek United States LEn ironmental Protection Agency approval of Ph&se I taxes. See Note 10(d) for a discussion of potential c nsequences n, such a write-off. plans in 1993. The compliance plan which results in the least cost and the Freatest flexibility provides for . If a densmn is made to convert Perry Unit 2 to a n nnuclear design in the future, we would expect to . compliance with both phases through 2001 by greater write- ff at that time a portion of our mvestment for use of low sulfur coal at some of our units and the nuclear plant construction costs tot transferable to the banking of emission allowances. The plan would n nnuclear c nstruction project. require capital expenditures for the Company over the Beginning m July 1985, Perry Unit 2 AFUDC was 1992-2001 period of approximately $155,000,000 for credited to a deferred income account until January 1, nitrogen; oxide control equipment, emission 1988, when the accrual of AFUDC was discontmued.
' monitoring equipment and plant modifications. In-addition, higher fuel and other operation and - maintenance expenses would be incurred. The least (d) SUPERTUND SITES cost plan also calls for the Company to place in The Comprehensive Environmental Response, service after 200i a scrubber or other sulfur emission Compensation and Liability Act of 1980 as amended reducti_on technology at one of its generating plants. (Superfund) established programs addressing the The rate increase associated with the Company's cleanup of hazardous waste disposal sitesiemergency capital expenditures and higher expenses would be preparedness and other issues. The Company is -
!. about 1-2% in the late 1990s and another increase after aware of its potential involvement m the cleanup of e the year 2000, for an aggregate rate increase in the seven hazardous waste sites. The Company has range of 3-6% recorded reserves based on estimates 'of its Our final compliance plan will depend upon f. - proportionate responsibility for these sites. We believe
- environmental regulatio s and input from the PUCO, that the ultimate outcome of these matters will not other regulatwy bodies and other concerned entities. have a material adverse effect on our financial if a plan other than the least cost plan is required, condition or results of operations.
(Cleveland Electric)- F 38 (Cleveland Electric) _ _ _.. . . , _ _ . . . . - ._ . _ _._ _ . __ _ _ ,_ , _ _ - ~ _ _ - . . -
(4) NUCLEid OPERATIONS AND (5) NUCLEAR IUEL CONTINGENCES The Company has inventories for nmlear 'nel whkh (a) OPLRATlNG NUCLEAR UNITS &ould pmvide an adeouate supply into the mid-IW0s. Substantial additional nuclear fuel must be The Company's interests in nuclear units may be obtained to supply fuel for the reniaining useful hves impacted by activities or events beyond its control, of Davis-llesse, Perry Unit 1 and Itcaver Valley Unit c Operating nuclear generating units have experienced 2. Mme nuclear fuel would be required if Perry Unit unplanned outages or extensions of scheduled 2 were completed as a nmlear generating unit. outages because of equiprnent problems or new I" 1989* ""*II"8 nuclear fuel hnancing regulatory requirements. A major accident at a nuclear arrangements for the C,ompany and Toledo Edison facility anywhere in the world could cause the NRC were unanced through leases from a speciab to limit or'psohibit the operation, construction or purpose wrporation. t he total amount of hnancing , licensing of any nuclear unit. If one of our nuclear cartently available under these lease arrangements is units is taken out of service for an extended period of IN9'## (IM9'#'# I** I"I"""CU3I"dC"" time for any reason, including an accident at such notes and $200.000,000 from bank uedit unit or any other nuclear facility, the Company arrangements). although hnancing in an amount up cannot predict whether regulatory authorities would to 5900,000,000 is permitted. The intermediate term impose unfavorable rate treatment such as taking our notes mature in the period 19931997. The bank credit affected unit out of rate base or disallowmg certain anangements are cancelable on two years notice by construction or maintenance costs. An extended the lenders. As of December 31,1991,5281,000.000 of outage of one of our nuclear units coupled with nuclear fuel was hnanced for the Company. The unfavorable rate treatment could have a material Compaay and Toledo Edison severally lease their adverst effect on our hnancial position and results of "'spective portions of the nuclear fuel and are operations, obbgated to pay for the fuel at it is consumed in a reactor. The lease rates are based on various *
"""' # # "" " '" ' b#"k '# *"0 lb) NUCLEAR INSURANCE commercial paper rates.
The Price-Anderson Act limits the liabihty of the The amounts hnanced include nuclear fuel in the owners of a nuclear power plant to the amount Davis Desse, Perry Unit 1 and lleaver Valley Unit 2 provided by private insurance and u industry n' actors with remaining lease payments of assessment plan. In the event of a nuclear incident at 576,MM, $54,W,M and 518,000,000, respectively, any unit in the United States resultin>;in losses in as f December 31,1991. The nuclear fuel amounts excess of the level of private insurat (currently hnanced and capitahzed also included intuest
$2n0,000,000), the Company's maxia...m potential charges incurred by the lessors amounting to :
assessment under that plan (assuming the other 512,MM in 199 5 ,W,W in 1 M and CApCO. companies were to contribute their $25,000,000 in 1989 (The estimated future lease proportionate share of any assessment) would be arnoruzatior payments based on proketed , 570,754,000 (plus any inflation adjustment) per consumption are 551,000,000 in 1992,554,000,000 m t 1993, 551,000,000 in 1994,544.000.000 m 1993 and hicident, but is limited to $10,696,000 per ycat for each nuclear incident, bU'# #
- N9b i
.The CAPCO c'Opanies have insurance coverage for damage to property at t'ne Davis-Besse, Perry and (6) RECUl,ATORY MATTERS Beaver Valley sites (includingleased fuel and clean- On January 31,1989, the PUCO issued a rate order up costs), Coverage amounted to $2,515,000.000 for w hich provided for three annual rate increases for the each site as of January 1,1992. Damage to property Company of approximately 9%,7% and 6% effective could exceed the insurance coverage by a substantial with bills rendered on and after February 1,1989, amount. If it does, the Company's share of such 1990 and 1991, respectively. As discuued below, the excess amount could have a material adven.e effect 6% increase effective February 1,1941 was reduced to on its financial condition and results of operations. 4.35%. The resulting annualized revenue increases in The Company also has extra expense insurance 1989,1990 and 1991 associated with the rate order coverage which includes the incremental cost of any were 5120,700.000, $105,700,000 and 571,400,000, replacenut power purchased (over the costs which respectively.
would have been incurred had the units- been _- Under the January 1989 rate order, a phase.in plan operating) and other incidental expenses after the was designed so that the three rate increases, coupled l occurrence 'of certain types of accidents at our with ther.-projected sales gn wth would provide l- nuclear units. The amoums of the coverage are 100% revenues sufhcient to recover all operating expenses l of the estimated extra expensejer week during the- and provide a fair rate of return on the Company's 52-week period starting 21 weeks after an acident, allowed investment in perry Unit I and Beaver Valley
- 67% of _ such _ estimate per week for _ the Unit 2 for ten years beginning January 1,1989. In the
! next 52 weeks and 33% of such estimate per week for hrst hve years of the plar, the rev ies were the next 52 weeks. The amount and duration of extra expected to be less than th. t requireu to recever expense could substantially exceed the insurance operating expenses and previde a fair retum on coverage. investment. Therefore, the amounts of operating (Cleveland Electric) F-39 (Geveland Electric) m _ . _ . . _ . - _ . _ __ _ _ _-._ _. _._. _ _ _ _._ _ __ _ _ .._ _. _ ._ __
. _ - . - - -~-.- - -. . - - - - - - ~ . - . - . - . - -._
espenses and return on investment not currently and recorded adjustments to increase the cost recovered are deferred and tapitalized as deferred deferrals. by approximately $24,000,000 and charges. Since the unrecovered investment will $24,500,000 m 1990 and 1491. respectively. The decline over the period of the phase in plan because $24,500.000 increase recorded in 1991 included a of depreciation and deferred federal income tases $29,000,000 increase for the adtustment of the IW1 that result from the use of accclerated tax cost deferrals, which was partially offset by a depreciation the amount of rnenues required to $4,500.000 reduction for an adjustment of the 1990 provide a fair return also declines. Pursuant to such cost defenals. phase in plan, the Company deferred the following: In connection with the 1%9 order and a similar , order for Toledo Edison, the Company, Tc'edo Edison i
# * # and the Service Company have undergone a l tomnmm**) management audit, which ivas completed in April p..te: J opema.g hi vnm. g43 ggg 522 1990 The audit identihed potential annual savings in Carrying Charret operating expenses _ in the amount of $98,160,000 i IW1. 5 21615 5 51.421 $ 81.o97 from Centerior Energy's 1989 budget level, 55% >
Equay . 84om im.tn osis4 ($53,988,000) for the Company. The Company '
$ W IS S LL5M E1 9 1 J. realized a large part of the savings in 1991. .
Fifty percent of the savings identihed by the The amount of deferred operating expenses and management audit were used to reduce the 6% rate carrying charges scheduled to be recorded in 1992 and increase scheduled to be effedive on Feornar) 1,1991 1993 total $51,000,000 and $16,000,000, respectively, for the Company. As discussed previously, our rates lleginning in the sixth year (1994) and continuing increased 4.35*, under this provision with the through the tenth year, the revenue levels authorized PUCO's approval. pursuant to the phase in plan were designed to be The 1989 order also set nudear performance sufficient to recover that period's operating espenses, standards through 1998 We could be required to
-a fair retum on the unrecovered investment, and the refund incremental replacement power costs if the amortization of the deferred operating expenses and standards are not met. No refund was required in 1991 carrying charges recorded during the earlier years of nor is one expected for 1992. The Company banked the plan. All phase in deferrals relating to these two $1,500,000 in benehts in 1991 for above average units will be amortirs; and recovered by December nuclear performan(c based on industry standanis for 31,1998. operating availability established in the 1989 order. ;
The phase-in plan was also designed so that These banked benehts are not secorded in the fluctuations in sales should not affect the level of hnancial statements as they can only be used in future camings. The phase-in plan permits the Company to yet, , if necessary, to offset disallowances of request l'UCO approval of increases or decreases m incremental replacement power costs. the phase-in plan deferrals to compensate for the Under the 1989 order, fossil fueled power plant effects of fluctuaticins in sales levels, as compared t) performance may not be raised as an issue in any rate the levels projected in the rate order, and for 50% of proceeding before February 1994 as long as the the net after-tax savings in 1989 and 1990 ldentihed by Company and Toledo Edison achieve a systemwide the management audit as discussed below. Pursuant availtbility factor of at least 64.9% annually. This to *hese provisions of the order, the Company standard was exceeded in 1989,1990 and 1991, with recorded no adjustment to the c 3st. deferrals in 1989 availability at approximately 80% for each year.
?
(Clevelan_d Electric) F 40. (Cleveland Electric)
mines are idle for reasons beyond the co.itrol of the lhe annuattred cumulatne piciened dividend mining company. At December 31,1991, after giving requirement as of December 31,1941 is $41,000,000. effect to a rehnancing completed on January 2,1992 The preferred dividend rates on the Company's by one of the miniri,, companies, the rrmtipal amount Seites L, M and p Ductuate based on prevailing of the mining companies' loan and lease obligations interest rates and market wnditions, with the guaranteed by the Company was $76A00,000. disidend rates for these iwues averaging R26%,7.61% and 6.24%, respectively, in 1991. (10) CAPITALIZATION Preference sto(L authorized for the Company is 3.000A100 shares without par value. No preference (a) CAPITAL STOCK TRANMrTIONS shares are surrently outstanding. Preferred and preference stock shares sold and tetired There an' no restrictions on the Company's ability dur!ng the three veats ended December 31,1991 are to inue prefened er preference stock listed in the following table. N, th rppect to dividend and hquidation rights, the i Iwi tuo im Company a prefened stock in prior to its preference
@""""d' of sharn) stocL and common stock, and ite, preference stock is Cumuladve Prefened and Preference 5tmk Subint to prior lo its common stock, f,d"0&"#"'
7 (d) LONG TERhl DEUT AND OTilER
$ 9150 senes Q. 75 - - DORROWING ARRANGEAfEN75 H 00 $crten R . . 50 - -
[.ong. term debt, less current maturities, was as Treferred Retirernentt (p}lmy3;
$ 735 Series C . (10) (10) (10) Aoual M10 Serica l' ,, ,
- 0) (3) (3) of A5etMe D"'""4 '"' K 75 00 Series F . ,4 (2) -
(1) Edl d Md'"'."1 I"* "" R ' "' -I" W i f40.00 5enen G . - (1) (2) (thouunds of dall.m1 l 143 00 Senn 11. , (14) (4) first mortp, age bondt 145 00 $erien t. (14) (4) (4) IW2. 15.25 % $ -
$ 20J00 11330 senn K . -(10) - - 1992. 10.58 -
40F00 Adjugable Series M , (100) - - 1992, . 13 75 - 4,334 Preferente Retirements- IW3. 3M75 30 000 30f00
$ 77.50 sene$ 1 - .
_(6) 1993. . 8.55 50XOO 50no Net Change. . . . (14) (32) (30) 1993. ... , 13 75 4334 4.334 r= - 1944 . . . 4 J'S 25J00 25.000 1994. 1315 4,334 4,334 (b) EQUllY DISTRIBUTION RESTRICTIONS 1995. , g 3 75 4334 4334 At December 31,1991, consolidated retained earnings 1995. m m 750 750 were $578,206,000. The retained earnings were I"- ' ' ' * ,, 1315 g34 g34 available for the declaration of dividends on the Company's preferred and common shares. All of the [j.'7pgj 2002 2006 .
$927 g$
140,076 g[ 140.076-Company's common shares are held by Centerior 2007 2011 . 8 66 331350 335350 - Energy. 2012 2016 . . 8.97 439,085 439,085 Any Snancing oy the Company of any of its 2017 2021 . . .. 8.59 567.650 567,880 nonutility affiliates requires PUCO authoritation . 2022 2023 . . 756 174300 _ 174 33 unless the hnancing is made in connection with L841,947 1,4062 81 transactions in the ordinary course of the Company's Term liank loans due public utilities business operations in which one 1993 1990 ... ,, m 736 81100 114.400 l company acts on behalf of another. Medium. term notes due 1993 2021, . . . 9.17 70(UOO 550,000
. (c) CUMULATIVE PREFERRED AND rollutmn control notes PREFERENCE STOCK due 1993 2012 . 6 30 53,750 54260 Other -- net -
SM08 6.970 Amounts to be paid for preferred stock which must be redeemed durir.g the next hve years are $14,000,000 Tm1 WWrm Det t' $2,682,805 $2.63t911 in 1992, $29,000,000 in 1993, $29,000,000 in 1994, -- -
$40,000,000 in 1995 and $30,000,000 in 1996. Long term debt matures during the next hve years The annual mandato*y redemption provisions are - as follows: 579,000,000 in 1992, $271,000,000 in l'993, - as follows; $42,000 000 in 1994, $206,000,000 in 1995 and $'" g gymny $"_
in Share
$151,000,000 in .1996.
During the 1989 1991 period, the Company issued '
~ Redeemed Prefened $700,000,000 aggregate principal amount of t.ecured . ! $ 7.35 Senn c. 10nio 19 4 - $ im medium-term notes. The notes are secured by hrst.
M 00 rsenes E . . . 3,000 1MI 1,000 Adjustable Series M 100,000 owl 100- mortMaEf, bonk 9125 Series N. 150 000 tw3 100 lhe Ompany has arranged to refund .m July 1992 9150 setin O. . 10J14 les 1Ao $78,700,000 principal amount of a public authority's i M 00 Series R . . 50.000 Ow1
- 1Aio tavexempt bonds due 2012 and having a 13%%
l *All outstanding 6 hares to be redeemed December 1,2001. interest rate with the proceeds from tht sale in July (Cleveland Electric) F-43 (Cleveland Electric)
l 1992 of an equal principal amount cf the authority's Short term borrowing capacity authorized by the bonds due 2013 and having an effectis e interest cost PUCO is 5300M000 for the Company. The i of K25$r The Cempanyi hrst mortgage bonds Company and Toledo I:dison have been authorized I collaterally secure both issues. The PUCO authorized by the PUCO to borrow from each other on a short-the Company to record mterest espense equal to a term basis blend of the higher rate on the outstanding bonds Most bonow' arrang ments under the short. j with the lower rate on the new bonds for an interest term bank hnes nedit require a fee of 0.25% per ' expense reduction of $1,000.000 in 1940,53,400,000 in year to be paid on any unused portion of the lines of ' 1991 and approximately $3,000,000 in 1992. credit. For those banks without fee requirements, the The Company's mortgage constitutes a direct first average daily cash balance in the Company's bank lien on substantially all property owned and accounts satished informal compensating balance franchises held by the Con.pany. Excluded from the anangements. lien, among other things, are cash, securities, At December 31, 1991, the Company had no accounts receivaMe. fuel and supplies. commercial paper outstanding if (ommercial paper i Additional hrst mortgage bonds may be issued by were outstanding. it would be backed by at least an the Company under l's mortgtge on the basis of equal amount of unused bank hnes of iredit. . bondable property additions, cash or substitotion for i refundable hrst mortgage bonds. The issuance of additional first mortgage bonds on the basis of (12) CllANGES IN ACCOUNTING I OR property additions is limited by two provisions of our NUCLEAR PLANT DEPRECIATION mortgage. One relates to the amount of bondable property available and the other tc, cornings coverage in June 1991, the Company changed ti e method used of interest on the bonds. Under the more restrictive to accrue nuclear plant depreciation from the uruts-of these provisions (currently, the amount of of production method to the straight hne method bondable property available), we would have been retroactive to January 1,1991. The good performance , permitted to issue appmximately $335,000,000 of of the nuclear genctumg units over the past several bonds based upon available bondable psoperty at years had resulted in units of production December 31,1991. The Company also would have depreciation expenre being significantly higher than been permitted to issue approximately $214,000,000 of the amount implicit in current electric rates. The bonds based upon efuiidable bonds at December 31, straight-line method better matches revenue and l
-1991. If Perry Unit 2 had been canceled and written expense, tends to levelize periodic depreciation off as of December 31,1991, the Company would not expense for nuclear plant and is more consistent with - have been permitted to issue any bonds based upon industry practice.
available bondable property, but would have been The PUCO approved the change and authorized permitted to issue approximately 5214 000,000 of the Company to accrue depreciation for its three , - bonds based upon refundable bonds. operating nuclear generating units at an accrual rate of L An agreement relatmg to a letter of credit issued in about 3% of plant investment based upon the unit ' connection with the sale and leaseback of Beaver ' forty year operating licenses frore the NRC. This Valley Unit 2 (as amended in 1989) contains several- change in method decreased 1991 depreciation .
- financial covenants affecting the Company, T xdo expeme 521,997,000 and inerened 1991 net income !
Edison and Centerior Energy. Among these are $16,957,000 (net of $5,040,000 of income taxes) from , what they otherwise would have been.
~
covenants reiating to earnings coverage ratios and capitalization ratios. The Company, Toledo Edison in December 1991, the PUCO approved a l and Centerior Energy are in compliance with these reduction in the straight line depreciation accrual i covenant provisions. We believe these covenants can - rate from aoout 3% to 2.5% for each of the three-still be met in the event of' a write-off of the operating nuclear units reter ive to January 1,
- Company's and Toledo Edison's investmsnts m Perry 1991, The Company believes the lower depreci-Unit 2, barring unforeseen circumstances. a%n accrual rate is appropriate and reduces combined annual depreciation expense to a ;
level more closely aligned with the total amount
~(11) SilORT TERM llORROWING """*I Y DCI"8; recover d m customers rates for -ARRANGEMENTS these units This change in rate da.reased 1991 i The Company had 5152,000,000 of bank lines of credit depreciation expense $18,309 000 and increased l' arrangements at December 31; 1991. This includ?d a' 1991 net income 514,006.000 (net of L .
530,000,000_ line of credit which provided a $4.303,000 of income taxes) from what they otherwise ( 55 00000 line of credit to be available to the Service would have been. Company if unused by the Company. There were no - Depreciation expense recordad in prior years was
~ borrowings under these bank credit arrangements at ' not affected. Cuirent electric rates were also December 31,1991 unaffected by the PUCO orders, (Cleveland Electric) F-44 (Cleveland Electric) 4 e-.e.--.-.~,-..,*m.. r--. ~ , - .,, ...m - . . .-..w4.w.+,-,..-.,m . _w..r, ,r,, - ..m-.-.--.-,-,.-,, -,-w--g - ---y,~,.rv-, ,r.%--r.~ ~ - - , ,~,.n -
(7) FEDERAL INCOME TAX Federal income tat computed by multiplying income before taxes by the statutory rates,1% reconoled to the amount of federal income tax temrded on the books as follows: f or the $ rars ended Drwmt.cr 31, 1991 lo ,o 3g9 (thousands of dollars) lbok income Before lederal incom t Tas . Sr6 243 5U7524 $
- ==== _ _ , . . r 391
- 1,93 ' . las on Bool Income et Statutory Itate . $127.940 $114362 $133m, Increase (Dectrase) in Tas:
ActeleratrJ depreciation. . . . . . . . . . . (191) 7,140 4 422 Insestment tas credits on disallowed nudcar plant . - (18.712) - Tases, other than federal moome taies . . (1 A h0) (9,464) .- Other items . . . 5 736 I A.79 3.546 Total Federal Income las lapense.. . $ 1.101 % 5 v;NK) 5140 974 c= m.= Federal income tax expense is recorded in the income Statement as follows: lor the years ended Derrmber 31, . 1991 IWO 19H9 f (tbousands of dollan) Operating Espensco Current Tai Provisian. . . . . . . . . . . . , .. . $ 74.552 $ 26.934 5 63/47 Changes in Accumulated Deferred lederal income Tas: Attelerated depreciation and amortizauon. . B.623 40.197 ",3.340
- Alternanve minimum tas credit . .. (2.550) (IR,860) (34 f;74)
Sale and leaseback transaction and amordration . . (8138) 3 496 3,893 Property tax espense. , (10RO) - Reacquired debt costs . . . . . . 15J29 1457 (872) . Delerred con <.truction work in progress revenues. (1309) 11.093 11.005 Deferred fuel ests = .. , (5.040) 4.763 _ (3,155) , Davls-Ilcue replacernent power . . . - -- 4,136 Other items . . . . . . . . . . 11615 14,9'40 6.257 , investment Tai Credits. . . 11.242 , 1 a*9 rs i Total Charged to Operating Espenses. . , 105 824 75,099 _ _ _e 5.275 Nonoperating income: Current Tai Provision. . . . . . .. . ..<. . .. (8203) (2t225) (31.298) Changes in Accumulated Deferred Iederal Incorre Tas: Wnte.off of nudear rosts . . , (199) (11.986) - AlUDC and carrying charges . . . 31J69 57.612 87.541 Other items . . .... . . ,, 944 - (544) ' Total hpense Charged to Nonopetating income . , 24.311 20.401 55.699 Total Federal Income Tas Expense. . . , , $ 130.135 5 95NO $140.974 , The Company joins in the filing of a consolidated federal income tax return with its affiliated companies. The method of tax allocation reflects the benefits and burdens realized by each company's particiP ation in the consolidated tax return, approximating a separate return ret. ult for each compaay. Federal income tax expense adjustments in 1990, associated with previously deferred investment tax credits s.lating to the 1988 write-c!f of nuclear plant investments, decreased the net tax provision relrded to nonoperating
- income by $18J12,000.
The favorable resolution of an issue concerning the appropriate year to recognize a property tax deduction resulted in an edjustment which reduced federal income tax expense in 1990 by 510,100.000 ($8,207,000 in the fourth quarter).. For tax purpases, net operating loss (NOL) carryforwards of approximately $23341,000 are available to reduce future taxable income and will axpire in 2003 through 2005. The 348o tax effect of the NOls generated is
$79,373.000 and is reflected as a reduction to deferred federal income tax relating to accelerated depreciation and amortization. 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 esed to reduce the regular tax to the AMT level should the regular tax exceed the AMT. AMT credits of $56,448,000 are available to offset future regular tax. The credits may ',
- y be carried forward indefinitely, i
- (Cleveland Electric) F-41 (Cleveland Electric) n .w . ....-#%,..-~c. - , .. _ , . - - . , . -.-. -e.,.,, , . + - , . , . , , , 're-.,r,rv-- r- --i.ew---.--, .--mee- --r.-.-.r -..w---w v +.-ws*me p-- .w ' e +e. m a a
t (8) RETIREMENT INCOMI: PLAN AND The settlement (discount) rate anumption was OTilfR POSTRETIREMENT llENFilTS 8.5% for both December 31,1991 and December 31, t 1990. The long-term rate of annual (ompensation (a) RfilklMLNT INCOML PLAN increase anumption we 5% for both December 31, ' The Company and Senice Company jointly sponsor a 1991 and December 31,1990. The lont; term rate of noncontnbutmg pension plan which covers all return on plan aucts anumption was 8.5% in 1991 employee groupt The amount of retirement benehts and 6% in 1990. , generally depends upon the length of service. Under Plan assets consist primarily of investments in , certain circumstances, benehts can begin as early as common stock, bonds, guaranteed investment : age 55.1he plan also provides certain death, medical contracts, cash equivalent securities and real estate, and disability benchts. The Company's and Service Company's funding policy is to comply with the N N E M M M.M ND. ' Employee 3ctirement income Security Act of 1974 The financial Accountmg Standards Picard has Issued ; guidelines. a new accounting standard for postretirement : In 1990, the Company and Service Company benents other than pensionx The new standard offered a Voluntary Early Retiremont Opportunity would regaire the accrual of the espected cost of such Program (VEROP). Operating expenses for both benehts during the employees' years of service. The companies for 1990 incbided $8AOO.000 of pension assumptions and calculations involved in plan accruals to cover enhanced VEROP benents plus determining the accrual closely parallel pension an additional $20,0Q,000 of pension costs for VEROP accounting requirements. benehts paid to retirees from both companies' The Company currently provides certain corporate funds. The $20J00,000 is not included in postretirement health care, death and other benehts
- the pension data reported below. Operating expenses and expenses such costs as these benehts are paid, ' for 1990 for both companies also included a credit of whi ch is consistent with current ratemaking practices. $36,000,000 resulting from a settlement of pet, aon SuQ costs totaled $6,000,000 in 1991, $5,200,000 in obligations through lump sum payments to a 1990 and $4,200.000 in 1989, which include medical '
substantial number of VEROP retirees. benehts of $4,900100 in 1991,54,100,000 in 1990 and Met pension and YEROP costs (credits) for 1989 $2,900.000 in 1989, through 1991 were comprised of the following 'Ibe Company espects to adopt the new standard components: prospectively effective January 1,1993. We plan to - I"3 I" 1* amortize the discounted present value of the renyon can (cndits): ( m* ""* ' kH$ ) accumulated postretirement benefit obligation to service toa fm bencha earned expense over a twenty year period. The Company has durms the period . .., 5 9 5 10 5 to engaged actuaries who have made a preliminary inte i st on pm ected beneht review using 1990 data.11ased on this preliminary Anual return on plan men . (W) 3 ($6) review, the accumulated postretirement bencht Net amomranon and deferrat . so jso) 9 obligation as of December 31, 1991, measured in Net penwn nedia . 7til 01) . 02) accordance with the new standard,is estimated in the VEROP cost. . - 8 - range of MO,000,000 to $115,000,000. Ilad the new ! setdement pm standard been adopted in 1991, the preliminary study { E) - mdicated that the additional postretirement beneht = Net nedib , .. g) p) ,5jl2) g g 3993 ,gg gg g
$7,500,000 to $13,500,000 (pretax). We believe the The following table presents a reconciliation of the effect of actual adoption in 1993 may be similar, i n ed status of the pbn at December 31,1991 and although it could be signincantly different because of perember 31 changes in health care costs, the assumed health care twa two cost trend rate, work force demographics, interest (mdhons of rates, or plan provisions between now and 1993.
Anuanat preseni salue of bencht douars) The Company does not know what action the 1 obhpnony PUCO may take with respect to these incremental-Vested benehn . . 5 209 5 229 costs. Ilowever, we believe the PUCO will either Nonsested benehts . 23 18 allow a means of current recovery of such incremental
- Accumulated beneht obhpuon 232 247 costs or provide for deferral of such costs until Effect of future compensabon recovered in rates. We do not expect adoption of the '*" ' N' -.8 5 new standard to have a material adverse effect on rian a affa ry "
Q ] ur hnancial condition or results'of operations. Surplus of plan noen mer praected (9) GUARANTEES beneht obhpnon . 274 205 Unrecognued net pin due to varunce Under two long-term coal purchase arrangements, the between .mumpnons and openente . 037) t77) Company has guaranteed certain loan and lease Unrecognized prior sernce cou - 8 8 obligations of two mining companies One of these Transinon asset at January L 19s7 y) arrangements requires payments to the mining bang amoruzed mer 10 years yj g 4 g Net prepaid pennon cou . 5] {4] g, g (Cleveland Electric) F+42 (Cleveland Electric)
-(13) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a tabulation of the unaudited quarterly results of operations for the two yean. ended December j 31,1991. ' Quarters I nded j March R jne M M t 30. fer R (thousands of dollars) 1991 Operating Revenues. . . . . . . $431,087 $455.614 $518,105 $420,932 Operating income. . . . . . , . . . . . 90,340 102.283 139,400 83,667 Net income . . . . . . . . . . . . . . . . . . . . . . ... . 37.894 52,088 94,845 61,331 Earnings Available for Common Stock . . . . . . . 29,197 43,402 85,874 51,828 1990 Operating Revenues. . . . . . . . . . . . . . . . . .. $387,241 $405,150 $493,337 $403.431 Operating income. . . . . . . . . . . . . . . . .. 76,273 57,599 130,348 82,161 Net income . . . . . . . . . . .. . . . . . . . . .
. . . . . . . . . 43,831 43,019 95,005 60,473 Earnings Available for Common Stock . . . . . . . . ... 34,280 33.682 86.043 51,641 Operating revenues for the first thne quarters of 1991 and the four quartert, of 1990 were restated to comply with current FERC revenue reporting requirements, as discussed in the Summary of Significant Accounting Policies. This restatement had no effect on earnings results for the applicable quarter. The unaudited quarterly l 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 of .
$18,309,000 to reduce depreciation expense for ihe year for the change in the nuclear plant straight line depreciation rate to 2.5% (see Summary of Significant Accounting Policies and Note 12) and $29,019,000 to increase pha$c in carrying charges for the adjustment to 1991 cost deferrals (see Note 6). The total of these adjustments increased quarterly earnings by $33,159,000. . Earnings for the quarter ended June 30,1990 were increased as a result of federal income tas expense adjustments associated with deferred investment tax credits relating to the 1988 write-off of nuclear plant investments. See Note 7 The adjustments increased quarterly earnings by $18,391,000.
Earnings for the quarter ended December 31,1990 were increased as a result of year-end adjustments of
$18,030,000 to reduce depreciation expense for the year for the change in depreciation rates for nonnuclear and !
Davis.Besse property (see Summary of Significant Accounting Policies), $24,102,000 to increase phase-in ; carrying charges for the adjustment to 1990 cost deferrals (see Note 6) and $8,207,000 to reduce federal income tax expense (see Note 7). The total of these adjustments increased quarterly earnings by $37,000.000. l i
. (Cleveland Electric) F-45 (Cleveland Electric) ,
l
- . ~ . . - - . - . _._.,_..-__-_--._.._.-.-,.m..~._-.,.,-, . ......._--._-._..._.-.,._.-g , . , - , , - -
Financial and Statistical Review .. . . ... . . .... . Operating lievenues (thousands of dollate.) wi 1oist t otal suam op. rane.g star kc8 Ohal Commernal Induttnal Other Retad W hoituir (# J 16n tru liratmr Kes enun 1991... . $547 433 539 795 546 698 116 S2b 1 ISO 752 74 956 1 825 735 -
$1525 7M ,
t 1990 495 158 494 370 543 8D 122 701 1 656 012 34 117 1 691 159 - 1 691 159 1989 .. 469 803 452 911 519 854 117 220 1 559 768 74 419 1 634 227 1 M4 227 19M8- . 436 413 395 165 476 (53 59kD4 1 367 445 M 756 149 401 - 1 453 201 1987. . 428 766 3V3297 470 hol 12 322 1 301 266 D 416 1314 M 2 13 371 132509 1981 . 310 4W 263 608 3 % 805 28 3N1 989 172 27 667 1017 Ow 12 196 102V 2 6 > Operating Expenses (thousands of oollars) I Diner Fuel & Operatum Derreristion i c = r s, Ptw m& l ederal total Purchased & & Othn 11,an Pret hese m Inmme Opevaung
- Tear Power (#) _ .Mamienarge Amerhratum fil Detentd Net fasce i ag$n 1991, . . . $455 055 469 530 170 571 @) 215 905 (6 840) 105 824 $1410 048 1990, 412 397 514IM IfA 526 197 454 (23 M4) 75 (m 1 344 778 1989. 427 109 508 151 187 614 Ik3120 (42 467) 85 275 1 34B 801 1988. 308 637 524 478 189 731 164 813 (104 3 % ) 94 654 1 197 917 1987, 334 328 425 938 118 918 146 407 (47 826) 63 179 1 (NO 944 .
1981. 367 715 = -224 299 85 294 91 648 - 67 575 816 531 Income (thousands of dollars) Fedetal Othet inwme income into.nr & T o g et- IWore Operstmg AFUt h Dedurbons, Car *ying Ciedit intere=t Year Inttsme Equity Net Clia'res (Empenne) Chatres 1991. $415690 7 552 5 809 S7 615 (24 311) $492 655 1990. . 346 381 4 531 16%. 161 598 (20 401) 493 945 1989... 285 426 8 362 7 934 .234 7M (55 699) 4s0 811 i'88
. 255 284 8 052 (243 297)(t) 224 585 53 162 297 786 1987, 237 109 177 170 (41 940) 24 61D 79 bD6 476 555 1981,. 192 704 48 970 10 617 - 16 125 26844 .... . . .. . . . . .. .. . 4 .. .... . .. . .
ince:ne (thousands of dollars) Income . Before h Cumulative Cumulatn e Preferred & farnmgs Eticct of an i tiert of an Pech tence Available for Debt AT UDC- Acrountmg Aucuntmg Net Stod Common Year Interent thrit Change Change income DwWnds Sind 1991.. $250 799 (4 302) 246 158 - 246 158 35 657 $210 301 1990 .. 254 9 % (3 319) 242 326 - 242 328 36 682 205 H 6 1989. . 236 042 (7 450) 250 219 90219 40 227 209 992 1988. < 226 679 . (4 304) 73 211 . 21674(d) 95 085 42 506 52 579
- 1987, . 249 958 -- .(82 9515) 309 552 - 309 582 43 3A6 266 196 1981 . , 146 712 (34 030) - '155 734 -
155 734 34 917 120 til7 - 3 .. ... .. , .. . . . . .. . , . . ., . . (a) Wholesale revenues. fuel and purchased power, wholesale elecmc sales and purchased power atnounts are restated tot 1990 and pnot years to reflect a change in reporting of bulk power sales transactions in accordance with ITRC requirements
- 9) In 1991. a change in accounting for audear plant depreciation was adopted. changing frorn the unitoof production rnethod to the straight-hne rnethod at a 2.56 rate, (c) Includes wnte-off of nuclear costs in the aniaunt of $257.40CL000 in 19M i- . (d) in 199. a change in the method of accounting for unHlled revenues was adcipted i
l l
)
l (Cleveland Electric) F-46 (Cleveland Electric) , l t l L- . - . . - _ - . - _ . _ __,-_-,_,_-,.._._---._-.-._c -- l
itu CllVilAND Ll.lC1RIC lllllAtIN411NG CDk11'AN1 AND Sub5IDIARHS ljectric Salei. (millions of KW){} Electric Customerfu (yeatend) Reudential Usage Asevan 4 6 *,u.* 4tfrare ff h t ).% li. tumist kn H l're Pee re,'ur scae t w denhat Comthen I Indetnal Wholi%)e(s) Oshi, Total Riwteni.at Cometual & Other 1otal r ushnen knH ( uemee 1991.4 4 940 5 493 F 017 2 442 565 21 457 667 495 70 405 F 398 74fi198 ? 170 11.0R $797 25 i l 1990, 4 716 5 234 N $51 1(07 463 20 571 685 ON #W 700 8 351 742 051 6 667 10.53 I 723 15 1989. . 4 7tc9 5208 8 780 2 132 501 21 410 660 766 68 030 8 329 737 145 7 025 9 81 691 83 19M. 4 M2 4 998 9 013 749 4 72 23 Okt 657 592 66 tab 8 20) 732 401 7 152 8 99 646 15 l IH7, 4 682 4 816 8 N6 183 455 18 5t 4 654 021 64 978 8 155 727 184 6 927 9 lei 637 46 1981.. . 4 376 4 17tt 8 280 714 399 17 947 642 925 60 714 7 686 711 325 6 548 7 12 466 51 Load (MW & %) Energy (millions of KWii) fuel OperaHe t apanty 1thnenn at hme Peak Capacity imd Company fannated Punhawed l uct (mt ' t' li1U Pet 3 car of Preb ived Marym I achst __fomi Nu< li at letal PowetJa). _ lotal i et k n H in H 1991 . 4 695 3 886 17.2% 61.8"4 13 193 7 451 20 044 2 144 22 763 149t 10 503 1990. . 4 645 3 778 19 4 63 3 15579 5 262 20 841 ud4 21 kos 1 52 10 417 1984. 4 536 - 3 866 14 R 65 2 14 vb8 6 570 21 534 126A 22 60n 1 49 10 506 i 19 R 4 46M(c) 4 Or 7 90 59.8 15 756 4 480 20 236 1 359 21 595 1.59 10 $17 1987- . 4 257 3 722 12=6 62.5 14 978 3 689 IB (*7 1376 20 043 1.56 10596 19ill . 4 667- 3 447 26 1 62.7 15 225 2 255 17 480 1 781 19 261 1 85 10 582 . Invatment (thousands of dollars) ( onstrucine Work In letal Ut.hty AuumulatcJ rcis Nudcar Pniperit Utihty Nant in Depremation & Net PtoI:erry
&I Iurland Nant a6d Nant Total T cat setware Amomuunn Nant Umt 2 Other i gmpment A Mitiom mets 1991 ..... $6195 945 1 564 954 4 630 961 669 696 308 963 $5 605 620 $150 005 $8066!50 1940.. .. . 6 032 336 1 398 258 4 634 078 696 646 344 252 5 675 026 164 619 7 945 137 1989. .... 5 869 283 1 258 905 4 610 378 726 9.13 354 374 5 691 685 143 898 7 670 405 1988. . 5 704 746 1 081 758 46229% h 3 626 Jt, 573 5 767 189 211 060 7 456 los 1987.. . 5 787 603 905 297 4 882 306 633 433 3H 281 5 905 020 566 947 7 089 026 1981i .., 2 (C4 419 621 353 2 003 085 966 457 122 231U) 3 111 773 409 ??7 3 514 457 Capitaliation (thousands of dollars & %) , PretencJ & Preference Prciened 5tml, without $tak with Mandatory Mandatory Redemption
- Year - Common h k I'quity fw.emptum remmons Provtssons long T..m Det.t Total
- 1991 . $1897 401 38% 268 368 5% 217 334 4% 2 652 805 53 % $5 065 908 1990.. . I 884 258 35 171162 3 -217 334 4 2 631 911- 55 4 904 6M 1989. . 1 828 074 40 212 3o2 4 217 314 5- 2 336 379 51 4 594 149
-; 19M . 1 780 408 40 232 626 5 217 334 5 2 260 170 50
- 4 440 538 1987. .. I925719 41 270 645 6 217 334 4 2 317 957 49 4 731 655 1981.. 1 002 20e M 325 000 12 95 071 4 1 328 404 48 2 750 681
., ,,,. ., ............. ... . ,4 ,. .. . ... . . . , , . . . . . '(t) Capaaty data reflects estended generatin'g unit eutage for renouuon and improvernents. t (f) Kestated for offects of cap:talaation of nuticar fuel lease and hnanang arranpments purwant to Statement of linang' . Atasunt.ng Standards 71. - (Cleveland Electric) F (Cleveland Electric)
l Report of Independent PuNic Accountants To the Shaie Owners of ERS W The Toledo Edison Company: g We have audited the accompanying balance sheet and years in the period ended December 3L 1991, in statement of cumulative prefened stock of The conformity with generally accepted accounting, Toledo Edison Company (a wholly owned subsidiary principles. of Centerior Energy Corporation) as of December 31, As discussed further in the Summary of Signifnant 1991 and 1990, and the related statements of income, Accounting policies and Note 12 a change was n ade retained earnings and cash flows for each of the three in the method of accounting for nuclear plant years in the period ended December 31. ;941 These depreciation in 199L tetroactive to January 1,1991 hnancial statements and the schedules referred to As discussed further in Note 3(c), the future of below are the responsibility of the Company's perry Unit 2 is undecided. Construction has been management. Our responsibility is to express an suspended since July 1985. Various options are being opinion on these hnancial statements and schedules considered, induding resuming construction, based on our audits. coaverting the unit to a nonnuclear design, sale of all We conducted our audits in accordance with or part of the Company's ownership share, or generally accepted auditing standards. Those cancehng the unit. Management can give no assurance standards require that we plan and perform the audit when, if ever, perry Unit 2 will go in service or to obtain reasonable assurance about whether the whether the Company's investment in that unit and a ' 6nancial statements are hee of material misstatement. return thereon will uitimately be recovered. An audit includes examining, on a test basis, Our audits were made for the purpose of forming evidence supporting the amounts and disclosures in an opinion on the basic hnancial statements taken as the hnancial statements. An audit also includes a whole. The schedules of The Toledo Edison assessing the accounting principles used and Company listed in the Index to Schedules are signihcant estimates made by management, as well as presented for ourposes of cornplying with the evaluating the overall financial statement Securities and achange Commission's rules and are presentation. We believe that our audits provide a not part of .e basic hnancial statements. These reasonable basis for our opinion. schedules have been subjected to the auditing in our opinion, the hnancial statements referred to procedures applied in the audits of the basic hnancial above present fairly, in all material respects, the statements and, in our opinion, fairly state in all hnancial position of The Toledo Edison Company as material respects the hnancial data required to be set of December 31,1991 and 1990, and th? results of its forth therein in relation to the basic hnancial operations and its cash flows for each of the three statements taken as a whole. Cleveland, Ohio February 14,1992 Arthur Andersen & Co. l l l (Toledo Edison) F-48 (Toledo Edison) o
~.. .. - _ _ , _ _ _ - , , _ . , _ , . , _ . . , , _ _ , _ _ . _ _ _ , _ _ , _ _ . . , _ . , _ _ _ ,,, , . _ , _ _ . ,
Sil111111aly of Sig!!ificallt Accoinilills Policics
- m , . . .
GlNERAI purchased power transactmns and reported as part The lotedo I dison Company (Company) is an of fuel and purchased power espense. The amaunts electric ut hty and a wholly ' owned subsidiary of fm prim years haw also been inlassified to conform Centerior En'ergy Corporation (Centerim Energy). with current reporting requirements. See Note 13. The Company follows the Uniform System of Accounts prescriled by the Federal Energy Regulatory I UEl, EXPENSE Commission (FERC) and adopted by The Public Utihties Commission of Ohio (PUCO). As a rate. The cost of fossil fuelis charged to foci espense based regulated utihty, the Company is subject to Statement on inventory usage. Ihe cost of cuclear fuel, of Financial Accounting Standards 71 which governs including an interest component, is chari;ed to fuel accounting for the effects of certain types of rate expense based on the rate of consumption. Estimated regulation, future nuclear fuel disposal wsts are being necovered The Company is a member of the Central Area through the base rates. Power Coordination Group (CAPCO). Other The Company defers the differences t>ctween members include The Cleveland Electric 111uminating actual fuel costs and estimated fuel costs cuirently Companv (Cleveland Electric), Duquesne Light being recovered from customers through the fuel Companv (Duquesne), Ohio Edison Company (Ohio factor. This matches fuel expenses with fuel related i Edison) and Ohio Edisoni wholly owned revenues, subsidiary, Pennsylvania Power Company
. ( Pennsylvania Power). The members have constructed and operate generation and transmission PRE PilASE IN AND PHASE IN DEFERRALS facilities for the use of the CAPCO comparues. OF OPERATING EXPENSES AND Cleveland Electric is also a wholly owned subsidiary CARRYING C11 ARGES of Centerior Energy. The PUCO authorized the Company to record, as deferred (harges, certain operating expenses and RELATED PARTY TRANSACTIONS carrying charges related to Perry Nuclear Power Plant Operating revenues, operating expenses and interest Unit 1 (Perry Unit 1) and ticaver Valley Power :
charges include those amounts for transactions with Station Unit 2 (Deaver Valley Unit 2) from their affil.iated companies in the ordinary course of respective in+ervice dates in 1987 through December business operations. The Company 5 transactions with Cleveland
. 1988. Amortitation and recovery of these deferrals E.iectric are primarily for firm ower, interchange (called pre-phase-in deferrals) began in January 1989 power, transmission line renta s and lomtly owned in accordance with the January 1989 PUCO rate order r plant operations and construction. See Notes 1 dbcussed in Note 6. The amortizations will continue over the lives of the related property, Centerior Service Company (Service Company), As discussed in Note 6, the January 1989 PUCO the third wholly owned subsidiary of Centerior rate order for the Company included an approved rate Energy, provides management, financial, phase-m plan for the Company's investments in '
administrative, engineering, legal and other services at Perry Unit I and Deaver 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 - 561,000,000, $49,000,000a ' nd $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 ecovered by December 31,1998.
REVENUES Customers are billed on a monthly cycle basis for their energy consumption based on rate schedules or DEPRECIATlON AND AMORTIZATION wntracts authorized by 4he PUCO or on ordinances The cost of property, plant and equipment is with individual municipalities. An accrual is made at depreciated over their estimated usefullives on a the end ci cach month to record the estimated straight line basis, Prior to 1991, only nonnuclear amount of unbilled revenues for kilowatt hout sales property, plant and equipment was depreciated on a 4 tendered in the current month but not billed by the straight hne 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.
p service, This factor is designed to recover from The annual s:raight-line depreciation provision for customers the costs of fuel and most purchased nonnuclear property expressed as a percent of powers it is reviewed and adjusted semiannually in a average depreciable utility plant in service was 3Ee o PUCO proceeding. in 1991, 3.30 in 1990 and 3M in 1989. The rate j 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 netted with property. See Note 13. (Toledo Edison) - F-49 (Toledo Edison)
In 1990, the Nuclear Regulatory Commimon DErrRRED GAIN AND 1OSS IHOM
. (NRC) apprm ed a sieyear extensmn sf the opeuting SAll'S OF UTilITT Pl ANT license for the Datiellesse Nuclear Power Station (Davis Bei.se). The PUCO approved a change in the The Company entered mte sale and leaseback units of. production depreciaten rate for Daviv transactions m 1987 for the coabbred Ilruce Mansheld Besse, cifectise January 1,1990, which recognited the Generating Plant (Mansheld Plant) and Beaser life extension. See Note 1"t Valley Unit 2 as discussed in Note 2. These active Janua.y 1,1991, the Company changed transactions tesulted in a net gam for the sale of its method of accounting for nuclear plant Mansheld Plant and a net loss for the sale of Beaver depreciation from ti e 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 opphcable deferred gain PUCO approved this change in accounting method and loss over the terms of leases under sale and for the Lompany and subsrquetly approsed a leaseback agreementt The amortizations along with change to lower the 3% rate to 2% for the three the lease expense amounts are recorded as other operation and maintenana expense. l operating nuclear units retroactive to January 1,1991.
See Notes 12 and 13. The Company use: external funding of future INTEREST CllARGES decommissioning costs for its operating nuclear units pursuant to a PUCO order. Cash contnbutions are Debt . . crest reported in the income Statement does i made to the funds on a straight-line bans over the not include interest on nuclear fuel obligations. remaining licensmg period for each unit. Amounts Interest on nuclear fuel obligations for fuel under l currently in rates are based on past estimates of construction is capitalized. See Note 5. i 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 s $28.000,000 in 1987 dollars each for Perry Unit 1 and with the regulatory rate treatment. Such losses and Bewer Wilev Unit 2. Actual decommissioning wsts gains are either amortized over the remainder of the are expected'to signihcantly exceed these estimates, original hfe of the debt issue retired or amortired over it is expected that increans in the mst estimates will the hfe of the new debt issue when the proceeds of a ;
be recoverable in rates resulting from future rate new issue are used for the debt redemption. The proceedmgs. The current level of expense being amortizations are included in debt interest expense. funded and recovered from customen, over the remaining licensing periods of the units is PROPERT% PLANT AND EQUIPMENT approximately $t000000 annually. The present funding requirements for Beaver Valley Unit 2 also Property. e, int and equipment are stated at original satisfy a similar commitment made as part of the sale cost les sny arn unts ordered by the PUCO to be written off, included in the cost of construction are and leaseback transaction discussed in Note ' items such as related payroll taxes. pensions, fringe ene s, manamment an gneral wnheads and FEDERAL. INCOME TAXES allowance for funds used during construction The hnancial statements reflect the liability method of ( AlUDC). AFUDC represents the estimated
- accounting for income taxes. The liability method composlie debt and equity cost of funds used to requires that the Company's deferred tax liabilitbs be fmance construction. This noncash allowance is adjusted for subsequent tax rate changes and that the credited to income, except for certain Al UDC for Company record deferred taxes for all temporary Perry Nt. clear 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 aM Lbilities. 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' incurred. The cost of replacing plant and equipment tax expense for ratemaking purposes whereby no is charged to the utility plant accounts. The cost of 1 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 bccome_ 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 reclassihcations have been made to prior recovery of these amounts will take place over the years' financial statements to make them comparable lives of the related assets. with the 1991 fmancial statements and consistent investment tax credits are deferred and amortized with current reporting requirements. These include over the estimated lives of the apphcable property. reclassihcations related to certain wholesale power The amortization is reported as a reduction of sales revenues as discussed previously under depreciation expense under the liability method. " Revenues" and accumulated deferred rents as See Note 7. discussed in Note 2. (Toledo Edison) F-59 (Toledo Edison)
Mariagement's Financial Analysis ItESULTS OF OprRATIONS Orcm.cw related wsts in rates. we have requested pUCO approval to atcrue post in+ervn. carrying costi, and The January 1969 pLCO rate order for the Ccepany, defer depreciation for facihties that are m service but as discussed in Note 6, was designed to (nable 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, w'tich belmv.
provided for thrc'e rate increases, improved revenues in December 1991, the pUCO approved a joint and cash flows '- 1989,1990 and 1991 f rom the 1988 recommendation of the Company, Cleveland Electric levels. Ilowever, a$ discussed in the hrst four and customer representative groups involved in the paragraphs of Note 6, the phase in plan was not 1089 rate case settlement. The joint recommendation designed to improve carnings because gains in sought to secure an interim resolution of then-revenues from the higher rates and assumed sales pending accounting appbcations 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 matterk on a longerderm basis (i.e,1992 expenses and carrying charges and are subsequemly 1995). As part of this joint recommendation, the offset 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 expenditures to 51,050,000J00, factors that exerted a negative influence on earnings in exclusive of compliance cocts related to the Clean Air 1991 and will continue to present signihcant 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 service after February expenditures on a consolidated basis for Centerior 1938 and not included in rate base. The Company is Energy totaled $1.005,000 000 in 19?1. The Company, required to tecord interest charges and depreciation Cleveland Electric and the customer representative on these facilities as current expenses even though groups also aerced to an ongoi4 review of our such items are not yet recovered in rates. We also are t usiness op rations, hnancial condition and facing the challenge of competitive forces, including accounting pr .uces. This effort, with the participation 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 hmncial cond.ition, the desire to encourage economic growth in the service improvement of the efficienc . I out operations, and area, is prompting the Company to enter into an the delay and minimization d future rate increases.
increasing number of contracts having reduced rates The Company and uleveland Electric also agreed not with certain large customers. Competitive forces also to seek any base rate incicase that would become prompted us to implement rate reductions in 1991 for effective before 1993. 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 earnings are the economic recession, the effect of service territory, a challenge intensihed by municipal inflation and increases in taxes, other than fedcral access to low cost power currently available on the 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 e"ects of the factors discussed above. We demonstrate the added value inherent in our service, have imple- nted 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 commurities to help them retain and and maintenance expense by approximately " tract businesses, providing consulting services to 17,600.000 in 1991. As discussed in the Summary of customers to improve their energy efhciency and Signincant Accounting policies and Note 12, we developing demand side management programs. To sought and received pUCO approval to lower our- counter new municipalization initiatives, we are also nuclear plant depreciation expense in 1991 to a level stressing the nnancial risks and uncertainties of 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. efforts to sell power to other utilities which, in 1991, Annual sales growth is expected to average resulted in approximately $3,100,000 of revenues in about 2% for the next several yers, contingent on
. r icess 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 lesen 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 recognin the cost further enhance revenues. To counter the effects of of our new capital investment and the effect of delays in recovering new investment since 198S and inflation.
(Toledo Edison) F-51 (Toledo Edison)
1991 es 1990 1he maior factor armuntmg for the increase m
- Facton, contributing to the 2 $% increase in logi be rates and mmellanceus opesatmg menues was operating reu.mes are as follows: related to tlw lanuan 1%9 rate inder lhe PUCO Inmaw apprmed rate increases for the Company of os chanan oponng umn @p.9 eff ettn e in lebruar3 1089 and 'N cfhs tn e in pase uce. and Mellancos . SN w mo l'ebruary 1990.1he awoaated rewnue inocase in baln Velume and Ma . 73WAU . 990 was partially offset by remed resenues
, micJe sah . U n m.0 resultmg from a 9.1% decrease in total Ldowatt hour smwom
~ ~
sales. Industrial sales droessed 32 because of the receumn begmning in 1940. Re: Jential and A signihcant factor accouoting for the mcrease m commercial sales decreased 33% and 04%, operating resenues resulted hem the January 1%4 respectively. as seasonal temperatures were more PUCO rate oider for the Company. The PUCO moderate in comparison to the prior yeat's approved rate increases of 7% effectwe in lebruary temperatures, resulting in reduced customer heatmg 1990 and 2 74% effective in February Pl. Howcut, and cooling-telated dem d. Other sales activity as part of the Company's efforts to improve its decreased 22.1% as a resmt of lower wholesale sales competitive positi"n in its service area, the Company Operatmg espenses decicased 15% in 1090. waited its 2.74% rate increase for residential and Depreciation and amortvation espense decreased . small commercial customers and reduced its primarily because of lower depreciatun rates used ir, i residential rates by 3% effective in March 1u91 and by 1990 for nonnuclear and Dasis-Bene property an additional 1% effective in Septemb sr 1991. See attnbutable to longer esumated lives and because of Note 6. l atal Lilewatt hour sales increased 3.3% in longer nuclear generating unit refueling and 1991. Residential and commercial sales increased 42 maintenance outages in 1990 than in 1989 J ederal and 43%. respectively, as a result of higher usage of income tases decreased pnmardy because of a cooling equipment in response to the unusually decrease in pretas operating income These warm late spring and summer 1991 temperatures, The decreases in operating expenses were partially offset commercial sales increase was also influenced by by an increase in taxes, other than federal income ' some improvement in the economy for rne taics, tesulting from higher property and gross commercial sector. Industrial sales declined 2% largely receira, tases. and by lower operating expense because of the recession driven slump in the auto, defeuals for Perry Unit I and lleaver Valley Unh 2. glass and metal industries. Other sales increased 8% Credits for carrying charg. i. recorded in because of increased sales to wholesale customers. nonoperating income decreased in 1900 because a Operatmg expenses increased 23% in 1991.1hs greater share of our insestments and leasehold increase was mittgated by a reduction of $17h00.000 interests in Perry Unit I and I caur 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 pnmarily because of less decrease were an increase in federal income tases 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 frdoal and accruals for Pennsylvania tax inenwes enacted income tax adjustments of $1M10.000 associated i in August 1991; an increase in fuel and pucchased with previously def cred investment tax credits power expense resulting primarily from increased relating to the 1988 write off of nuclear plant. Interest amortization of prevlously deferred fuel costs over the- expense decreased in 1*0 because of rehnancings by amount amorttred in 1990; and lower operating the Company and a lov.er level of debt outstanding. expense deferrals for Perry Unit 1 and Beaver Valley Unit 2 pursuant to the January 1959 PUCO rate ITFECT OF INI LATION order. Although the rate of inflation has cased 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 regulatory process introduces a time-lap greater share of our investments and Ic schold during which increased cotts of our labor, matenals interests in Perry Un:t 1 and Beaver Valley Unit 2 and services are not reflected in rates and recovered.
were recovered in rates. The federal income tas Moreover, regulation allows oniv the recoverv of provision related to nonoperating income increased historical costs of plant assets through depreciation mainly because the 1990 provision was reduced by even though thc. costs to replace these assets would
$18,810,000 for federal income tax adjustments substantially exceed their historical co3ts in an associated with previously deferred investment tax inflationarv economv.
credits relating to the 1985 write off of nuclear plant. Changs in fuel costs do not affect our results oi 1990 rs.1999 operations since those costs are defeited until reflected m the fuel cost recovery factor included in factors contributing to the 0 3% decrease .r 1990 customers' bdit operating revenues are as follows: innuw Change in Ornatingevenom Llyme ) fuse Rates and MMlaneous . $ MMmio 5AM Yolume and Mn : (2R000t00) WhoWie Sab. i10 OEMO)
$ (2.tuum)
Aw a-e-*++-.ue i (Toledo Edison) 1 52 (Toledo Edison)
- _ . - _ _ _ _ . _ _ . _ _ . _ . _ . _ ~ _ . _ _ .._
- --. . - - - - - - ~ . . . - . . - -.---._w.-- &lHConle Statement rut roucoo tosson cc.mur ,... ........c..,........ .....y.,.. . ...........y............. .... ....... .. . ................ ..., - For the years ended December 31, 1991 1990 1989 (the .aands of dollan)
- ; lOjerating Revenues (1) . . . . . . . . . . . . .
... .. . .. ,, S887,258 SS63,173 $s65.623 w . Operating Expenses ,
Fuel and purchased power . . . .+. , , . , , , , ... ..... 177,642. -174,309 172,220 Other operation and maintenance .... .... ... ... 355,728 373,374 372,530 i Depreciation and amortization .. 4 ,,....... . .. 72,137 72.627 - 85,057 -; iTaxes, otherithan federal income taxes . ., ... .... .... 88,656 79,320 72,123 . > Phase.in deferred Operating expenses . . . . . . (5,796) (16,9S0) (22.535) ,
' Amortization of pre. phase-m deferred costs . .. . . . 6,943 7,196 6,782' '
i ~ ; Federal income taxes . . . ............ . .. ... . 31,767 21.041 - 37,285-727,077 710,887 723,462' Operating income . . . . . . . . . . ...... ... . 16Egl, 152,286 142,16i
;Nonoperating idcome . .
t
. Allowance for equity funds used durits construction . . . 1,499 3,352 8,568 +
Other income and deductions, net . .. ..,... . . . . . 3,6?B 6,305 20a 7 Phase.in carrying ch:rges. .. .. .. .... . . ..... . 21,986 43,487 82,308 Federal income taxes - credit (expensci . . . . ..., . (6,228) 8,664 (21,563) - ; 20,885 61,808- 89,830
- Income Before interest Charges. . . .... . ...... . .. 2 1,066 214,094 231,991 .
- Interest Charges Debt interest . . ....... ... . ,_ . . . .. . 132,399 131344_- 144,791 Allowance for borrowed funds used during construction . (946) (2,674) . (5A Y.
131,453 , E2.670 139,313
. Net income . . . - -
49,613 81.42.t 9'.678 Preferred Dividend Requirements . . . . . . . . . . . , , 24,792 25,159 25.390 -
; Earnhtss Available for Common Stan . . . . . , . . . . . . . . ;
_$ 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 Earnings For the years ended December 31, 1991 1990 1989 (thousands of dollars) . Balance at Beginning of Year. . . . $ 82,956 $ 99,965 $ 89,674 Additions LNet income . ..... .. . , , ... .. . . ., . . 49,613 81,424 92,678 i; Deauctions Dividende declared:
Common .:tock . . . . . ..... . .... . ,. . . . (17,831) (73 283) (63,285) f _ Preferred stock ~ . .. ..... .... . . . (24,809) (25,145) (19,036) Other. . . . . . . . ... . . . v. 4 . o . ,. ... .. ...
-(5) _ (5) (6) ,
g; N s . Increase (Decrease) . . ... . . . .... . . 6,968 (17.009) 10,351 1'- Balance at End of Year . . . , . . . ... ..... .. . $ 89,924 $_82,956 $ 99.965
-The accompanying no s and summary of significant accounting policies are an integral part of these statements.
I [(Toledo Edison)-- F.53 (Toledo Edison)
, a. . u ._ - . _ _ _ _
Managentent's Fina.tcial Analysis l CAPITAL RESOURCES AND LIQUIDITY are expected to be financed externally. If economical, in addition to our need for cash for nonnal corporate. additional securities may be tedeemed under operations, we continue to need cash for an ongoing 'optignal redemption provisigm, See Notet 10(c) and
~ program of constructing new facilities and modifying (d) for mformation concernmg limitations on the issuance of preferred and preference s to k and debt.
existing facilit;es to meet anticipated demand for electric service, comph+ with governmental gumapital requirements after 1994 will depend on regulctions and protect thie environmentLCash is also the implementation strategy we choose to achieve needed for the mandatory retirement of securities. compliance with the Clean Air Act. Expenditures for
- Over the three-year period of 1989-1991, these our plan are estimated to be approximately j construction and mandatory retirement needs totaled $35,000,000 over the 1992 2001 per'od. See Note 3(b).
We expect to be able to raise cash as needed. The approximately $450,000,000. In addition, we exercised various options to redeem and purchase wailability . nd cost of capital to meet our external approximately $165,000,000 of our securities. financing needs, however, depends upon such factors As a result of the January 1989 PUCO rate order, as nnancial market conditions and our crec ratings. internally generated cash increased in 1%9,1990 and Current securities ratings for se Compan; are as 1991 from the 198S level. In addition, we raised f"Il0*S
$381,000,000 through security issues and term bank standard Moody'$ , loans during the 1989-1991 period es shown in the cf,y,Q, Q,"
Cash Flows statement. During tiie turee-year penod, the Company also utilized its short-term borrowing 9'58 '" "R*P b"d' BBB~ Bdd3 arrangements (explain"in Note 11) to help meet unwcured notes. e5+ Bat its cash needs. Proce< ' rom these fmancings were Pr*ned swi . . BB+ ba2 used to help pay for construction program, to repay portions of short-term debt incurred to finat.ce A w-ite-off of the Company's investment in Perry
- the construction program, to retire redeem and Unit 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 19921994 for the ability to declare dividends, but would not affect cash Company- are $248,000,000 for its construction (Wy.
program and $241,000,000 for the mandatory The Tax Reform Act of 1986(1986 Tax Act) redemption of debt and preferred stock. We expect to provided for a 34% income tax rate in 1988 and , finance externally about 50% of our totd 1992 thereafter, a new alternative minircum tax ( AMT) and construction end mandatory redemption other ch.anges that resulted in increased tax payments requirements of approximately $180,000.000, About and 6. ceduction in cash flow during 1989,1990 and
- 10 20% of the Company's 1993 and 1994 requirements 1991 because we were subject to the AMT, i
l l-i l
?
_-(Toledo Edison) F-54 (Toledo Edison)
Cash Flows ' rm row mson cowar
. . .......... . ., . ... .. ... .. . . . . . . s . .......................... ..............
For the years enddDecember 31, 1991 1990 _ 1989 (thousands of dollars)
- Cash Flows from Operating Activities (1)-
Net income . . . . . . . . . . . . . . . . .............. . ........ .. $ 49,613 $ 81.424 - $ 92,678
- Adjustments to Reconcile Net income to Cash from Operating Activities: - Depreciation and amortization 4 . . . . . . ... .... 72,137 72,627 85,057 Deferred federal income. taxes . . . ..... .............. 31,522 30,642 79,199 investment tax credits, net -., . ... .... ....... . ... 30,206 (17,063) 1,237 Deferred and unbilled revenues , . ................ . . . (25,5(6) (22,658) (42,624)
Deferred fuel . . . . . . . . . .... ........... .... . 4,198 s433) 16,259 Carrying charges capitalized . . . . . . . . ... . . ..... (21986) (43,487) (82,308) Leased nuclear fuel amortization . ... ................ i3,904 37,122 46,.108 Deferred operating expenses, net . . ... . . . . . . . . ... ... 1,147 (9,784) (15,753) Allowance for equity funds used during construction .... (1,499) (1,352) (8,568) Amortization of reserve for Davis-Besse refund obligations
" cu sto mers . . . . . . . . . . . , . . . . . . . . . . . . . . . . . . . , . - -
(12,655) a settlement gG . . . . . . . . . . . . . . . . . - (6,449) - in amounts due fron customers and others, net .. 2,780 (9,433) (4,406) in inventories . . . . . . . . . . . . . . . . . . . .. . (7,135) (6,521) -1,890
.in accounts payable. .. . . _ . .... (12,685) 6,658 (2,048) .
in working capital affecting operations. . .. . (25,975) 1,528 (30,713) ancash items . ... ;. . . . . . ,. 14,730 16,309 16,840
. Adjustments . . . . . . . . . . . . . . . . . . 115,778 45,706 47,815 . Net Cash from Operating ~ Activities.. ., 165,391 127.130 140,493 ? Cash Flows from Financing Activities (2) . Bank loans, commercial paper and other short-term debt. .... (23,200) 23,200 - ' Notes payable to affiliates = , .. . . . . ,. . .. . . 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, redemptions and sinking funds. . ~ . , . . (178,993) (183,477) (65,006)
- Nuclear fuel lease and trust obligations . . . . . .. , , . . . . . . (51,728) (42,947) (39,015)
Diridends paid , . . . . . . . . . . . . . . . . . . . .. . , . . . . ... (42,639) (98,427) (88,743) Premiums, discounts and expenses .. .,, , . (1,001) (1,845) (925)
- Net Cash from Financing Activities . . ..<... .. . -(40,496) (205,196) (137,589).
l Cash Flows from Investing Activities (2) Cash applied to construction . . , t ... ....... . . . (51,393) (80,667)- -(61,360)
~ Interest capitalized as allowance for borrowed funds used during construction ' . , . . . , . . . . . . . . . . ... (946) (2,674) - (5,479) -
Loans to affiliates , .... .. . .... . . . .. ... (12,000) 114,000 (114,000) Other cash applied. . . . . . , . . . . . . , . . .. ., (3.3 74) (4.178) (3,261) .
= Net Cash from investing Activities . . . .. . . . .. (67,713) 26,481 (184,100)
JNet Change in Cash and Temporary Cash investments.. ... 57,182. (51.585) (181,196)
. Cash and Temporary Cash investments at Beginning of Year . . 22.107 73.692 254.888 Cash and Temporary Cash investments al End of Year. . . .. ^ $ 79,289 $ 22.107 $ 73,692 (1). Interest paid (net of amounts capitalized) was $120,000.000,5114,000,000 and $104,000,000 in 1991,1990 and a L1989f respectively. Income taxes paid were ' $9,465,000 and $2,272,000 in 1991 and 1990, respectively. No - ' . income taxes here paid in 1989.
- (2);lacreases in nuclear fuel and nuclear fuel lease and trust obligations in the Balance Sheet resulting from the noncash capitalizations under nuclear fuel agreements are excluded from this statement.
The accompanying notes and summary of significant accounting policies are an integral part of this statement. 5 (Toledo Edison) F-55 (Toledo Edison) f
, . . ~ .. - - - -._.--.- -- - - . - - - -.. -
3
. Balance Sheet .............o . w.,.. .................. ...... . .., .. . . . .. ... ... .. . .. ....
December 31, 1991 1990 (thousands of dollars) ASSETS PROPERTY, PLANT AND EQUIPMENT
-- Utility plant in service. . . . . . . .. . . . . . . . . .. . .. . ..., . $2,692,274 $2,603,883 Less: accumulated depreciation and amortization . 709,505 640,252 i- .. . . .
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 amortization . . . . . . . .. . . ... . . ... 195,265 221,848 Other property,less accumulated depreciation . . .. . . . 2,679 2,024 2,577,465 2,624,342 CURRENT ASSETS Cash and temporary cash inve :ments . . . 79,289 22,107 Amounts due from customers and others, net. . . 60,453 63,233 Accounts receivable from affiliates . . . . . .... . . . . . 21,917 29,999 Notes receivable from affiliates . . . . . . . . ... . . ... 12,000 - Unbilled revenues ... . . . . . . . . . .. .. . 21,S44 20,166 Materials and supplies, at average cost . . . . . .. ... .. . . 36,575 32.666 Fossil fuel inventory, at average cost . . . . .... . 16,d04 15,578 Taxes applicable to succeeding years. . . . -66,343 63,375 Other. . . . . . . ..., . .. .. . , . . . . . . . . .. .., . . .. . 2,760 2,473 _ 319,985 249,597
- 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 Unamortized loss on reacquired debt . . .. . . 25,672 27,404 Carrying charges and operating expenses, pre-phase-in . . . 244,404 252,206 Carrying charges and operating expenses, phase-in . 193,099 165,310 Other. . . . ... . . . . . .. . .. . . , . . .. . .. 67,514 68,582
. 1,117,062he 1,127,5 M 4 Total Assets . . . . . . . , ,
$4,014,51{ 54,001.518 iThe. accompanying notes and summary of significant accounting policies are an integral part of this statement.
L
- (Toledo Edison) F-56 (Toledo Edison) -y- ---y
- g-,
91 .i , =s.. p - A ,e .a
THL TOLEDO LDISON COAtPANY December 31, 1991 1990 (thousands of dollars)
. CAPITALIZATION AND LIABILITIES CAblTAU2ATION . Common shares, $5 par value: 60,000,000 authorized; 39,131,000 outstanding in 1991 and 1990. , ..... . . . $ 195,687 $ 195,47 Premium on capital stock . . .. ... ... .. . . . . . . . 481,082 481,082 Other paid-in capital . . . . . . . . . . . . . . ...... . . . . . . 121,059 121,059 Retained earnings. . . . . . . . .... . . . . . . . 89,924 82,956 Common stock equity . . . . . .... .. . .. . . . . . . BS7,752 890,784 Preferred sts.
With mandatory redemption provisions . 63,663 66,328 Without mandatory redemption provisions ,. , , . . . . 210,000 210,000 Long-term debt . . . . . ... .. .. .. . . . 1,158,550 1.097,326 2,319,965 2.254.438 OTHER NONCURRENT UABlUTIES Nuclear fuel lease obligations . . . . , , . 143,145 180,835 Ot h er . . . .. . . . . . . . . ... .. . . ... . . 49,756 48.009 . 192.901 228,844 CURRENT UABlUTIES Current portion of long term debt and preferred stock . . 123,476 116,150 Current partion 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 . . . . ... . . . . 39,538 31,626
.- Accrued taxes , ,.. . . , . . . .... .... ... . 67,770 96,973 -
Accrued interest . . .. ... . .... . . ... . . . . . . . 31,399 31,665 Other. . . . . ...... . .. . . . 16,160 35.113 397,329 _ _453,075 DEFERRED CREDITS Unamortized investment tax credits. . . .. . . , . 107,729 83,377 Accumulated deferred federal income taxes . . . . . . . 577,479 571.233 Rewrve for Perry Unit 2 allowance for funds used during construction . . . . . . . . . , . . .. ... . . ... . , . SS,295 88,295' Unamortized gain from Bruce Mansfield Plant sale . . . . .227,380. 236,835 Accumulated deferred rents for Bruce Mansfield Plant and Beaver Valley Unit 2. . . , . 66,SS8 57,843 Other. .. . .. . ... . .. . . . . . 36,546 27,578 1,104.317 1,065.161 4
- Total Capitalization and Liabilities. .. $4,014.512 $_4,001.518 l
p e (Toledo Edison) F-57 (Toledo Edison) m -,.
- . _ _ _-, . ,._ _ . . . _ . _ _ . _ _ _ . _ _ _ . _ . - . _ . . . . _ _. _ _ - . -._4 - _
Statement' Of.Citmulative Pref. erred Stock rut rouvo wsou co.urav 1991 Shares Current December 31. Outstanding Qll l' rice 1991 1490 (thousands of dollars) . [$100 par value,3,000,000 preferred shares authorized and $25 par value, 12,000,000 preferred shares authorized Subject to mandatory redemption:
$1.00 par $11.00. . . . , , . , . - 24,825 $101.00 $ 2,4S3 $ 3,483 9375. . . . 133,450 103.46 13,315 15,010 25 par. 2.81 . .. .,, ,. . 2,000,000 26.56 50,000. 50,000 65,828 68,493-l_ess: Cuir.,,t maturities 2,165 2,165 Total Preferred Stock, with Maridatory Redemption Provisions $ 63,663 $_66,328 1 ' Not subject to mandatory redemption: .
5100 par $ 4.25 . .. . 160,000 104.625 $ 16,000 $ 16,000
- 4.56 . ,, ,. . 50,000 101.00 5,000 - 5,000 4.25 ,,, . ... ., 100,000 102.00 10,000 10,000 832 ,, . 100,000 102.46 10,000 10,000 7.76 , . . -150,000 102.437 15,000 15,000 7,80 150.000 101 65 15,000 15,000 10.00 . . , . 190,000 101.00 19,000 19,000 25 par 2.21 , ... . .. , .. 1,000,000 25.25 25,000 25,000 2,365- . . ., 1,400,000 28.45 35,000 .35,000 Series A Adjustable , 1,200,000 25.75 30,000 30,000 Series D Adjustable 1,200,000 25.75 30,000 30,000 Total Preferred Stock, without Mandatory Redemption Provisions 5 21J,000 S210,000 .The accompanying notes and summary of significant accounting policies are an integral part of this statement.
d ._ 2 (Toledo Edison) F-58 (Toledo Edison)
. . . _ _ . . , . . _ _ , u
Notes lo the Financial Statements.
-(1) PROPERTY OMEU WITil OTilER UTILITICS AND INVESTORS The Company owns, as a tenant in common with other utilities and those investors w ho are owner-participants in - various sale and leaseback transactions (Lessors), certain generating units as listed 1 elow. Each owner owns an undivided share in the entire unit. Each owner has the right to a percentage of thm nerating capability of each unit equal to its ownership share. Each utility owner is obligated to pay for only its respective share of the constiuction and operating costa. Each Lessor has leased its capacity rights to a utility which is obligated to pay for such Lessor's share of the construction and operating costs. The Company's share of the operatin6 costs of these generating units is included in the Income Statement. Property, plant and equipment at December 31,1991=
includes the following facilities owned by the Company as a tenant in common with other utilies and Lessors: Owneb Construction In- Owner- ship Plant Work in Servke ship Mega- Power m Progress and Accumulat< d Generating Unit Date Share watts Scarce Service Suspended Depreciatg in Service; (thousands of dollars) Davis Besse . . . . . . . la77 48.62% 429 Nudear 5 661,573 $ 11436 $138.504 ,, Perry Unit I and Common Facihties . 1987- 19.91 238 Nudcar 923.503 1.486 119,374 Deaver Valley Unit 2 and Common Facihties (Note 2) . . 1987 1.65 13 Nudcar 168.560 1,698 23.333 Construcuan suspended. Perry Unit 2 (Note 3(c)) . Uncertain 19.91 240 Nudear - 342.7td -
$1373.636 535').387 $281,211 r--
(2) UTILITY PLANT SALE AND LEASEBACK TRANSACTIONS As a result of sale and leaseback- transactions Valley Unit 2 lease were $44,556,000 and completed in 198~, the Company and Cleveland $72,276,000, . respectively. Amounts chirged to Electric are co-lessees of 18.26% (150 megawatts) of expense in excess of the lease payments are novi Beaver Valley Unit 2 and 6.5% (51 megawatts),45.9% classified as accumulated deferred rents on the (35S megawatts) and 44.38% (355 megawatts) of Balance Sheet. Previously, the excess was included in Units 1,2 and 3 of the Mansfield Plant, respectively, accounts payable. all_ for terms of about 29% years. The Company and Cleveland Electric are
.As co-lessee with Cleveland Electric, the Company responsible under these leases for paying all taxes, is' also obligated for Cleveland Electric's lease insurance premiums, operation and maintenance costs payments. If Cleveland Electric is unable to make its and all other similar costs for their interests ir the - - payments under the Mansfield 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, The 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 market value at that time or to renew the leases.
as follows: Additional lease provisions provide other purchase for - options along wi:h condDions for mandatory For the Cleveland termination of the leases (and possible repurchase'of
; Year- Company Electric the leasehold interests) for events of default. These (thousands of dollars) events of default include noncompliance with several 1992. $ 110.000 $ 63,0m financial covenants affecting the Company, Q3; y Cleveland Electric and Centerior Energy contained in an agreement relating to a letter of credit issued in Ice 95. ut.000 63.000 - 1996. n i,ooo 63.000 connection with the sale and leaseback of Beaver Later Years ; 2 480.000 < -1.516.000 Valley Unit 2, as amended in 1989. See Note 10(d).
Total Future Minimum The Company is selling 150 megawatts of its tease Payments . 53 034 000 51.83toco Beaver Valley Unit 2 leased capacity entitlement to Cleveland Electric. This sale commenced in 198S and F Semiannual _ lease payrnents conform with the we anticipate that it will continue at least until 1998. payment schedule for each lease. Revenues recorded for_ this "ansaction 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, respectively. The future minimum the Company in 1991,1990 and 1989 as annual rental lease payments associated with Beaver Valley Unit 2 expense for the Mansfie!d Plant leases and the Beaver as;gregate $1,869,000 000. 1 f (Tole' do Edison) F-59 (Toledo Edison)
(3) CONSTF,UCTION AND CONTINGENCIES - for $3,324,000. The purchase does not signal any plans to resume construction of Perry Umt 2, but rather an
-(a) CONSTRUCTION PROGRAM ntent to keep the various options open. Duquesne The estimated cost of the Company's construction had stated that it would not agree to resumption of program for the 1992-1994 period is $260,000,000, construction of the unit.
including AFUDC of $12,000,000 and excluding if Perry Unit 2 were to be canceled, then the nuclear fuel; Company's net investment in the unit (less any tas
- In an agreement approved by the PUCO, the saving) would have to be written off. We estimate ' Company and Cleveland Electric have agreed to limit that such a write-off, based on our investment in this their combined 1992 other operation and unit as of December 31,1991, would have been about maintenance expenses and capital expenditures to $171,000,000, after taxes, see Notes 10(b) and (d) $ 1,050,000,000, exclusive of compliance costs related for a discussion of potential consequences of such a to the Clean Air ActL Within this limitation, capital write-off, expenditures are budgeted at 559,000,000 for the if a decision is made to convert Perry Unit 2 to a Company, exclusive of the Clean Air Ast compliance nonnuclear design in the future, we would expect to costs, write-off at that time a portion of our investment far nuclear plant construction costs not transferable to the (b) CLEAN AIR LEGISL4 TION nonnuclear construction project.
The Clean Air .Act will require, among other things, Beginning in July 1985, Perry Unit 2 AFUDC was significant reductions in the emission of sulfur dioxide credited to a deferred income account until January 1, and nitrogen oxides by fossil-fueled electric 1988, when the accrual of AFUDC was discontinued. . generating units; The Clean Air Act will require that sulfur choude emissions be reduced m two phases (d) $UPERFUND SITES over a ten-year period, 'The Comprehensive Environmental Response, Centerior !?nergy has developed a compliance Compensation and Liability Act of 1980 as amended strategy for the Company and Cleveland Electric (Superfund) established programs addressing the which will be submitted to the PUCO for review in cleanup of hazardous waste disposal sites, emergency April 1992. 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 the cleanup of Phase i plans in 1993. Our compliance plan would two hazardous was e sites. The Company has require capital expenditures for the Company over the recorded . reserves based on estimates of its
- 1992-2001 period of approximately $35,000,000 for prcportionate responsibility for these sites. We believe -
rtitrogen oxide control equipment, emission that the ultimate outwme of these matters will not monitoring equipment and plant modifications. In have a matenal adverse effect on our financial additixy higher fuel and other operation and condition or results of operations. maintenaree expenses would be incurred. The rate increase associated with the Company's capital (4) NUCLEAR OPERATIONS AND expenditures and higher expenses would be less than - CONTINGENCIES 2% over tne ten-year period.
. Our fmal compliance plan will depend upon future (a) OPERATING NUCLEAR UNITS environmental regulations and input from the PUCO, The Company's interests in nuclear units may be other regulatory bodies and other concerned entities. impacted by activities or events beyond its control.
We believe that Ohio law permits the recovery of Operating nuclear generating units have experienced compliance costs from customers in rates, unplanned outages or extensions of scheduled ' utages because of equipment problems or new
-(c) PERRY UNIT , regulatory requirements. A ma}or accident at a nuclear Perry Unit 2, including its share of the common facility anywhere in the world could cause the NRC facM - is approximately 50% complete. Construction to limit or prohibit the operation, construction or of 1 w t .u 2 was suspended in 1985 pending future -licensing of any nuclear unit. If one of our nuclear consider n of various options, including units is taken out of service for an extended period c' -resumption of full construction with a revised time for any reason, including an accident at such estimated c:)st, conversion to a nonnuclear design, unit or any other nuclear facility, the Company sale . of all or part of our ownership share, or cannot predict whether regulatory authorities would cancellation. No option may be implemented without impose unfaverable rate treatment such as taking our the unanimous approval of the owners. In October affected unit out of rate base or disallowing certain 1991, Cleveland Electric, the company responsible for construction or maintenance costs. An extended
. the construction of Perry Unit 2, applied for a ten- outage of one of our nuclaar units coupled with year extension of the construction permit which was unfavorable rate treatment could have a material to expire in November 1991. Under NRC iegulations, adverse effect on our financial position and results of the construction permit will remain in effect while operations. the application is pending. We expect the NRC to grant the extension. (b) NUCLEAR INSURANCE In February 1992, Cleveland Electric purchased The price- Anderson Act limits the hability of the Duquesne's 13.74% ownership share of Perry Unit 2 owners of a nuclear power plant to the amount (Toledo Edison) F-60 (Toledo Edison)
provided by private insurance and;an industry _ $71,000,000, $33,000,000 and $15,000,000, respectively, assessment planf in the event of a nuclear incident at as of December 31,1991. The nuclear fuel amounts any unit in the United States resulting in losses in - hnanced and capitalized also included interest-excess of the level of private instirance (currently charges incurred by the'-lessors amounting to l
$200,000,000), the Company's masimum potential $9,000,000 in 1991, $14,000,000 in 1940 and $19,000.000 1ssessment under that plan (assuming the other in 1989, The estimated future lease amortization CAPCO companies were to contribute- their payments based on projected consumption are propertionate share of any assessment) would be $45,000,000 in 1992, $45,000,000 in 1993,540,000,000 in $58,503.000 (plus any inflation adjustment) per 1994, $34,000,000 in 1995 and $35,000,000 in 1996. - incident, but is limited to $8,844,000 per year far each nuclear incident.
(6) REGULATORY MATTERS The CAPCO companies have insurance coverage for damage to property at the Davis-Besse, Perry and On January 31,1989, the PUCO inued a rate order Deaver Valley sites (including leased fuel and clean- which provided for three annual rate increases for the
- up costs). Coverage amounted to $2,515,000,000 for Company of approximately 9%,7% and 6% effective -
e ach site as of January 1,1992. Damage to property with bills rendered on and after February 1,1989, could exceed the insurance coverage by a substantial 1990 and 1991, respectively. As discussed below, the amount. if it does, the Company's share of such 64e increase effective february 1,1991 was reduced to excess amount could have a material adverse effec, 2J4% for the Company, which later waived its 2J49o on its fmmcial condition and results of operations. increase and reduced its rates on two occasions in The Company also has extra expense insurance 1991 for certain customers. The resulting annualized coverage which includes the incremental cost of any revenue increases in 1989,1990 and 1991 associated replacement power purchased (over the costs which with the rate order were $50,700,000, $44,300,000 and
' would have been incurred had the units been $1.600,000, respectively. The $1,600,000 increase in operating) and other incidental expenses after the 1991 reflects the net of $18.600,000 of annualized occurrence of ce *ain types of accidents at our nuclear revenues authorized for the 2S4% increase less .
units. The amounts of the coverage are 1004o of the $17,000,000 for the waiver and rate reductions. estimated extra expense per week during the 52-week Under the January 1989 rate order, a phase-in plan period starting 21 weeks after an accident,67% of was designed so that the three rate increases, coupled such estimate per week for the next 52 weeks and 33% with then-projected sales growth, would provide
-of such estimate per week for the next 52 weeks. The revenues sufficient to recover all operating expenses amount and duration of extra expense- could and provide a fair rate of return on the Company's substantially exceed the insurance coverage, allowed investment in Perry Unit 1 and Beaver Vall-Unit 2 for tr- years beginning January 1,1989, in c.e (5) NUCLEAR FUEL first five years of the plan, the revenues were The Company has inventories for nuclear fuel which expected 'o Fe less than that required to recover - should provide an adequate supply into the mid. oPeratm expenses and provide a fair return on 1990s. Substantial ' additional nuclear fuel must be investment. Therefore, the amounts of operating obtained to supply fuel for the remaining usefullives o penses nd return on mvestment not currently of Davis-Besse, Perry Unit 1 and Beaver Vallev Unit "'c vered are deferred and capitah, zed as deferred - 2. More nuclear fuel would be required if Perry Unit charges. Since the unrecovered investment will 2 were completed as a nuclear generating unit. dectne over the period of the phase-in plantecause in -1989, existing nuclear fuel financinp of depreciation and deferred federal income ines arrangements -for the Company and Cleveland El$ctric that result from the use of accelerated tax-were refinanced through leases from a special- . depreciation, the amount of revenues required to purpose corporation; The total amount of hnancing pr vide a fair return also declines. Pursuant to such currently available under these lease arrangements is phase-m plan, the Company deferred the followmg:
S509,000,000 ($309,000,000 from intermediate-term " " W notes and . 5200,000,000 from bank credit (thouunas ol d"br>> arrangements), although f.nancing in an amount up Deferred Operatmg Expenses. 5 3.796 516Ms0 522.5 B to $900,000,000 is permitted The intermediate-term carrying charges' , notes mature in the period 1993-1997. The bank credit Debt . 5 63s6 521361 530 s arrangements are cancelable on two years notice by @ty no 22.126 Swi the lenders. As of December 31,1991, $209,000,000 of- 52 W 6 543 m 58230s nuclear fuel was finan:ed for the Company. The Company and Cleveland Electric severally lease their The amount of deferred operating expenses and respective portions of the nuclear fuel and are carrying charges scheduled to be recorded in 1992 and obligated to pay for the fuel as it is consumed in a 1993 total $33,000,000 and $15,00a000, respectively. reactor. The 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 levels authorized commercial paper rates.
~
pursuant to the phase in plan were designed to be The amounts financed include nuclear fuel in the ' sufficient to recover that period's operating expenses, Davis-Besse, Perry Umt 1 and Beaver Valley Unit 2 a fair return on the unrecovered investment, and the reactors with remaining lease - payments of amortization of the deferred operating expenses and (Toledo Edison) F-61 (Toledo Edison)
carrying charges recorded during the earlier years of elimination of the 214% rate increase effective the planL All phase-in deferrals relating to these two. Iebruary 1,1991 for all residential and small - units will be amortized and recovered by December . commercial customers, a reduction in residential rates
-31,1998. of 3% on Alarch 1,'1991 and a further residential rate .. The phase-in plan was also designed so that ~ reduction of 1% on September 1,1991. Communities fluctuations in sales should not affect the level of = accepting the package agreed to keep the Company as earnings.he phase-in plan permits the Company to their sole supplier of electricity for a period of hve request PUCO approval of increases or decicases in years. The package also permits the Company to the phase-in plan deferrals to compensate for the adjust rates in those communities on February 1,1994 effects of fluctuations in sales levels, as compared to and February 1,1995 if inflation exceeds specihed the leve s projected in the rate order, and for 50% of levels or under emergency conditions. All eligible the net atter-tax savings in 1989 and 1990 identified by communities in the Company's service area. except the management audit as discussed below, Pursuant the City of Toledo, accept" t the rate reduction to-these provisions of the order, the Company package. In htarch 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 reduce its cost deferrals the same customer categories in the City of Toledo ,
by approximately $14,000,000 in 1990 and to increase arat the rest of its service area. Annualized revenues
-its cost deferrals by approximately 53,200,000 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 packwes. The revenue reductions $4,000.000 increase for an adjustment of 1990 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 1991 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 replacement power costs if the ' management audit, which was completed in April standards are not met. No refund was required in 1991 1990. The audit identined potential annual savings in nor is one expected for 1992. The Company banked operating expenses in the amount of $98.160,000 $ 1,300,000 in benehts 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 availabihty established in the 1989 order.
reaMzed a large part of the savings in 1991. These barsked benents are not recorded in the
-Fifty percent of the savings identified by the nnancial statements as they can only be used in future
- management audit.were used to reduce the 6% rats years, if necessary, to offset disallowances of increase scheduled to be effective on February 1,1991 incremental replacement power costs.
for the Company. As discussed previously, our rates - Under the 1989 order, fossil-fueled power plant increased 2J4% under ' this provision with the performance may not be raised as an issue in any rate 1 pUCO's approval. . proceeding before February 1994 as long as the i in late 1990in a move to become more competitive Company and Cleveland Electric achieve a i
- in Northwest Ohio, the Company proposed a rate systemwide availability factor of at least 64.9%
reduction package to all incorporated communities in annually. This standard was exceeded in 1989,1990 its service crea which are served exclusively by the - and 1991, with availability at approximately 80% for Company on a retail basis. The package called for the each year, l l l' l l l l (Toledo Edison) F-62 (Toledo Edison) 1
lL (7) FEDERAL INCOME TAX-Federal income tax, computed by multiplying income before taxes by the statutory rates, is reconciled to the amount of federal income tax recorded on the books as follows: .i, for thelears ended December 31. 1991 IWO IW9 (thousands of dollars) $ tkvk Income itefore Federal income Tas . $ 87M8 . 1 918_01 $_151,5_26 Tas on Book tncome at Statutory Rate . . . $ 29.7tt7 $ 31.892 5 51,519 increase (Decrease) in Tac Accelerated depreciation. , .. . .. _ . 2.857 5,993 (653) Investment tax credits on disallowed nuclear plant . . - (18.810) - Taxes, other than federal income taxes .. (692) (2,647) (107) Other items . .
. . 6 043 2.795 1,443 -
Total Federal Income Tas Expense. $ 37.995 $ 12;317 $ p.848 Federal income tax expense is recorded in the Income Statement as follaws: for the years ended December 31, 1991 1990 1989 (thousands of dollars) Operating Expenses: Current Tas Provision . . . . . . . ... . ... .... . $ 13h46 5 17,045 ~ Changes in Accumulated Deferred federal Income Tam: $(11.458) Accelerated depreciation and amortization. 8.515 1,580 8.764 Alternative minimum tas credit . (43.633) (5,480) 21.291 Sale and leaseback transactions and amortization . 12.682 5,121 455 Property tas expense. . - (4.011) - Reacquired debt costs . . . 6,674 (532) (378) Deferred construction work in progress revenues. 8.480 9.393 11.726 Deferred fuel costs. , (3A89) (4,021) (1,229) . Davis-Desse replacement pov.er - - 5,055 Other items . . . . 1.338 784 1,337 investment Tax Credits. 27.4;4 1,162 1,722 Total Charged to Operating Expenses. , . . 31.767 21.041 - 37.285 Nonoperating income: Current Tax Provision.m ... ........ .. . ... (37A77) (18.242) Changes in Accumulated Deferred Federal income Tac (10.129) Wnte-off of nuclear cc,es . . (180) (10,157) - AFUDC and carrying charges . . , . 9,000 16.835 32.930 Net operating loss carryforward . , 35.014 - Other items . . . . . 71 2.900 (1,238) Total Expense (Credit) to Nonoperating Income . 6.228 21,563 (8.664 ) Total FederalIncome Tau Expnse. , . $ 37.995 $ 12.377 5 5E.848 The Company joins in the filing of a consolidated federal income tax return with its affiliated companies. The - method of tax allocation reflects the benefits and burdens realized by each company's participation in the consolidated tax return, approximating a separate retum result for each company. Federal income tax expense adjustments in 1990, associated with previously deferred investment tax credits relating to the 1988 write-off of nuclear plant investment, decreased the net tax provision related to nonoperating income by $18,810,000. The favorable resolution of an issue concerning the appropriate year to recognize a property tax deduction - resulted in an adlastment 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 $164,049,000 are available to reduce future taxable income and will expire in 2003 through 2005. The 34% tax effect of the NOLs generated is 555,777,000 and is reflected as a reduction to deferred federal income tax relating to accelerated depreciation and amortization. Future utilization of these tax NOL carryforwards would result in recording the related deferred taxes. The 1986 Tax Act provides for sa AMT credit to be used to reduce the regular tax to the AMT level should the regular tax exceed L AWT. M.1T credits of $27,822,000 are available to offset future regular tax. The credits may be carried forward indefinitely. (Toledo Edison) F-63 (Toledo Edison)
m . _ - _ _ _ _ _- _ . _ _ _ _ _ _-..._ _ _._ _ _ _. _ _ . . The 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 increase assumption was 5% for both December 31,
'(a). RETlREMENT INCOME PL4N 1991 and December 31,1990. The long-term rate of The Company sponsors a noncontributing pension return on plan assets assumption was 8.5% in 1991 plan which covers all employee groups. The amount and W in 1990.
of retirement benefits generall) depends upon the plan assets consist primarily of investments in length of 3ervice..Under certain circumstances common stock, bonds, guaranteed investment benehts can begm as early as age 55. The plan also contracts, cash equivaient securities and real estate.
- provides certain death, medical and disability benehtr.
The Company's funding policy is to comply with the (b) OTHER POSTRETIREMENT BENErlTS Employee Retirement income Security Act of 1974 The Financial Accounting Standards Board has issued guidelines. a new accounting standard for postretirement in 1990, the Company offered a Voluntary Early benefits other than pensions. The new standard Retirement - Opportunity Program (VEROP). w uld require the accrual of the expected cost of sech j Operating expenses for l'990 included $7,000,000 of benefits during the employees' years of service. The pension plan accruals to cover enhanced VEROp benehts plus an additional $8,000,000 of pension costs anu rnptions and calculations involved in determmmg the accrual closely parallel pension for VEROP benefits paid to retirees from corporate funds. The $S,003,000 is not included in the pension accounting requirements. data reported below. Operating expenses for 1990 also The Company currently provides certa,m ) included a credit of 55,000,000 resulting from a postretirement health care, death and other benehts ' and expenses such costs as these benefits are paid, settlement of pension obligations through lump sum which is consistent with current ratemaking practices. l
' payments to a substantial number of VEROP retirees. Such costs totaled $3,700,000 m 1991, $3,000,000 in -
Net p nsion and VEROP costs for 19S9 through 1990 and $2,200,000 in 1989, which include medical 1991 were comprised of the following components: benents of $3,100,000 in 1991, $2.400,000 in 1990 and
*
- N $2.100 000 in 1989 U"
- Id 'O The Company expects to adopt the new standard Pensen costsi service cost for benehts camed prospectively effective January 1,1993. We plan to dunng 'he period . . . . . . . . . $5 $ 5 $ 4 amortire the discounted present value of the intere t c on projected beneht _
accumulated postretirement benefit obligation to 2 (17) expense over a twenty + year period. The Company has Actual return on plan awets . (30) Net amortization and deferral. 15 (15) 4 engaged actuaries who have made a preliminary Net pension costs. 1 3 -i review using 1990 data. Based on this preliminary review, the accumulated postretirement benefit "P *' - 7- ~ obligation as of December 31, 1991, measured in seitlement gain . - t5) - accordance with the new standard,is estimated in the Net costs . $ 11 $ 5 5 i range of $65,000.000 to $100,000,000. Had the new standard been adopted in 1991, the preliminary study indicated taat the additional pouretirement benent The following table presents a reconcil:.. tion of the funded status of the plan at December 31/1991 and _ cost in 1991_ would have bee in the range of
$8,000,000 to $14,000,000 (pree.x). We believe the - 1990.
December 31. effect of actualadoption in 1993 may be similar, 3993 3999 although it could be significantly different because of changes in health care costs, the assumed health care (milhons of = dollars) cost trend rate, work force demographics, interest
. Act a present value of beneht - rates, or plan provisions between now and 1993..
Vested benehts . . . $ 92 $101 The Company does not know what action the Nonvested benehts . 10- 6 pVCO may take with respect to these incremental Accumulated beneht obbgation 102 107 costs. However. we believe the PUCO will either Effect of future compensation allow a means of current recovery of such incremental. Inels , 34 22 - costs or provide for deferral of'such costs until Total proiccted beneht obligation , 136 129 recovered in rates. We do not expeci adoption of the
' Plan anets at fair market value . 172 151 new standard to have a material adverse effect on .
Surplus of plan assets over protected our hnancial condition or results of operations. beneht obhgation .' 36 22 Unrecognized net gain due to variance between assumptions and experience . (43) (24) (9) . GUAR ANTEES . Unrecognized prior service cost . , 3 5 . -Transinon awet at January 1.19s7 Under a long-term coal purchase arrangement. the being am,rtaed over 19 years . (18) (19) Company has guaranteed certain loan and lease Net accrued pension habihty - obligations of a mining company. This arrangement induded in other deferred requires payments to the mining compc.ny for any
$(1,)
credits on the Balance Sheet . ]) actual out-of-pocket idle mine expenses (as advance j; (Toledo Edison) F-64 (Toledo Edison)
,n n--, .,-a ~ , ,
-- .- - - - - - _ - .- . . - . - - . - - - . ~ . - -
payments for coal) when the mines are idle for. Under its articles of incorporationi the Company reasons beyond the control of the' mining company, cannot issue preferred stock unless certain earnings At December 31,1991, after giving effect to a - - coverage requirements are met. Based on earnings rehnancing completed on January 2,1992 by the for the 12 months ended December 31,1991, the mining company, the principal aniount of the mining Company could not issue additional preferred stock
- company's loan 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 mcnths of the 15 months preceding the date of (10) CAPITALIZATION is.aance, .the interest on all long-term debt outstandmg and the dividends on ah preferred stock (a) CAPITAL STOCK TRANSACTIONS issues outstanding.
- Preferred stock' shares retired during the three years Preference stock authorized for the Company is
-- ended December 31,1991 are listed in the following 5,000,000 shares with a $25 par value. No preference table, shares are currently outstanding. There are no po 39,g 939 restrictions on the Company's ability to issue (thousands of shares) preference stock.
Cumulative Preferred Stock With respect to dividend and liquidation rights, the
' Suticct to Mandatory Company's preferred stock is prior to its preference = Redemptiott stock and common stock, and its prefeience stock is $100 par $1100. ,
(10) (10) (5) prior to its common stock. 9375, (17) (17) (17) Total . (27) 2) _ l 221 (d) LONG-TERA 1 DEBT AND OTHER BORROWING ARRANGEh1ENTS (b) EQUITY D!sTRIBUTION RESTRICTIONS 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 od'[s',I , December 3L were available for the declaration of dividends on the Year of wunty ^
interest aate 1991 1990 Company's preferred and common shares. All of the - Company's common shares are held by Centerior (thousands of dollars) First mortgage bonds: Energy. A write off of the Company's investment in 1995.., ., < 11.25 % $ - $ 60,000 , - Perry Unit 2, depending upon the magnitude and 1996. ,, 9.375 100,000 100,000 timing of such a write-off, could reduce retained 1997-2001 7.65 66.378 66.378 earnings sufficiently to impair the Company's ability 2002-2006 . , 8.62 111,725 111.725
' to declare dividends. 2007 2011 9.62 51,900 51,900 Any financing by the Company of any of its nonutility affiliates requires PUCO authorization $ 00 - unless the financing is made in connection with 545,103 605,103 transactions in the ordinary courr.e of the Company's Te k kans due - pubh,c utilities bt.siness operations in which_ one ; company acts on behalf of another. hiedium-term notes due 1993 2021 9.06 -134,500 -
Notes due 1993-1997 . 11,01 102,142 219A30 (c):CUAfULATIVE PREFERRED AND Debentures due 1997, 11.25 125,000 '125,000 PREFERENCE STOCK Pollution control notes Amounts to be paid for preferred stock which inust be due 1993-2015 . 11.04 136,150 136,600 redeemed during the next five years are $2,000,000 in other i net . . - 155 (2.307) 1992 and $12,000,000 in each year 1993 through 1996; To g&nn The annual mandatory redemption provisions are $1.153.550 $1.097,326 as follows: Long-term debt matures during the next five years y^$5 Begmruns er as f 11 ws: $121,000,000 in 1992; $47,000,000 in 1993, Redeemed in Share $47,000,000 in-- 1994, $72,000,000 in' 1995 and Preferred: $192,000,000 in 1996.
$100 par sitoo. . 5 000 1979 - $100 in 1991, the Company issued $134,500,000 9375. - 16.650 1963 100 aggregate' principal amount of secured medium term p 25 par L 2 81. . 400.000 ' 1993 25 no'es The notes are secured by first mortgage bonds.
At December 31,1991, the Company has $15,500,000 The annualized cumulative y . ferred dividend aggregate principal amount c 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 first
- rates and market conditions, with the dividend rates 1:en on substantially all property owned and for these issues averaging S.82% :and 9.67%, franchises held by the Company. Excluded from the respectively,'in 1991. lien, among other things, are cash, securities, ] Toledo Edison) F-65 (Toledo Edison)
o accounts receivable; fuck supplies and automotive Most borrowing arrangen ents under the short-te.rm bank lines of credit require a fec' of 0.25% per
~ - equipmentJ Additional first mortgage bonds may be issued by year to be paid on any unused portion of the lines of L the Company under its mortgage on the basis of credit. Ior those banks without fee requirements, the
- bondable property additions, cash or substitution for average daily cash balance in the Comranv's bank refundab;c first mortgage bonds.-The issuance of accounts satished informal compensating b'alance additional hrst mortgage bonds on the basis of arrangemems.
- property additions is limited by two provisicas of our At December 31,1991, the Company had no mortgage. One relates to the amount of bondable commercial paper outstanding. If commercial 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 lines of credit.
of these provisions (currently, the earnings coverage test), we would have been permitted to issue (12) CilANGES IN ACCOUNTING FOR approximately $164,000,000 of bonds at an assumed NUCLEAR PLANT DEPRECIATION interest rate of 11% based upon available bondable
- property at D* cember 31,1991. The Company also In June 1991, the Company changed the method used would have t,een permitted to issue approximately to accrue nuclear plan' depreciation from the units- $186,000,000 of bonds based upon refundable L;nds at of-production method to the straight line method December 31,1991. If Perry Unit 2 had been canceled retroactive to January 1,199L 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 electric 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 levelize periodic depreciation '
- secured financing other than through first mortgage expense for nuclear plant and is more consistent with bonds or certain other transactions. An agreement industry practice.
relating to a letter of credit issued in connection with The PUCO approved the change and authorized the sale and leaseback of Beaver Valley Unit 2 (as the Company to accrue depreciation for its three amended in 1989) _ contains several fmancial operating nu -lear generating units at an accrual rate c' covenants affecting the Company, Cleveland Electric about 3% of plant investment based upon the units' forty-year operating licenses from the NRC. 's and Centerior Energy. Among these are covenants relating to earnings coverage ratios and capitalization change in method decreased 1991 cepret an ratios. The Company, Cleveland Electric and expense 513,949,000 and increased 1991 net income Centerior Energy are in compliance with these $10,995,000 (net of 52.954,000 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 the 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 Company believes the lower depreciation accrual rate (11) SIIORT-TERM IlORROWING is appr priate and reduces combined annual ARRANGEMENTS depreciation expense to a level more closely aligned The Company had 570.400,000 of bank lines of credit with the total amount currently being recovered in arrangements at December 31,1991. There were no customers' rates for these units This change in rate borrowings under these bank credit arrangements at decreased 1991 depreciation expense 59,453,000 and December 31; 1991J ,
increased = 1991 ' net income 57,413,000 (net of ! Short-term borrowing capacity authorized by the 52,040,000 of income taxes) from what they otherwise l' PUCO is 5150,000 000 for - the Company. The would have been. Company and Cleveland Electric have been Depreciation expense recorded in prior years was authorized by the pUCO to borrow from each othe. not affected. Current electric rates were also
- on a short-term basis unaffected by the PUCO orders.
L l (Toledo Edison) F-66 (Toledo Edison) 4
(13) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
~ - The following is a tabulation of the unaudited quarterly results of operations for the two yees ended Decemhr r 31,19914 Quarters Eng.
March 31, lune 30 Sept 3n, - Dec. 31 (thousanA of dollars) 1991 Operating Revenues. .. . .. . . . $212.930 - $227,576 $238,271 $208A81 Operating income. . . . , .... . . . 36,807 42,428 42,307 38.639
- Net income .. . . ... .. . . ..... 12,341 14,210 14A98 8,564 Earnings Available for Cernmon Stock . . 6,096 8,009 8,318 - 2,398 1990 Operating Revenues. . . . . . ., . .. $210,622 $210,412 $237,872 $204,267 - Operating income. . . ... . . ... 38,732 28,259 39A33 45,862 Net income .. ........ . ,. .. . . 21,604 26,971 19A20 13A29 - Earnings Available for Common Stock . . . .. 15,357 20,660_ 13,109 7,139 Operating revenues for the first three quarters of 1991 and the four quarters of 1990 m.re restated to comply with current FERC revenue reporting requirements, as disrud in the Summary of Significant Accounting Policies. This restatement had no effect on earnings results so. the applicable quarter. The unaudited quart,rly results for the quarter ended March 31,1991 were also restated to reflect the change in accounting for nuc? car
_ 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 reuds of year-end adjustments. a
$9A53,000 adjustment to seduce depreciation expense for the year for the cha $e in the nuclear plant straight-line depreciation rate to 2.5% (see Summary of Significant Accounting Policies ard Note 12) was partially offset by an $804,000 reduction in phase-in carrying charges for the adjustment to 1991 e ost deferrals (see Note 6). The total of these adjustments increased quarterly earnings by $6,882,000.
Earnings for the quarter ended June 30,1990 were increased as a result of federal income tax expense adjustments 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. Earnings for the quarter ended December 31,1990 were oecreased as a result of year-end adjustments A
$13,933,000 reduction in phase-in carrying charges for the adjustment to 1990 cost Oferrals (see Note 6) was partially offset by adjustments of $7,760,000 to reduce depreciation expense for the year for the change in depreciation rates for nonnuclear and Davis-Besse property (see Summary of Significant Accounting Policies) and $2,16S,000 to reduce federal income tax expense (see Note 7), The total of these adjustments decreased quarterly earnings by $2,000.000.
i l { t (Toledo Edison) F-67 (Toledo Edison)
Financial and Statistical. ..Review .. . . .... ....... . , . . . .. . . . Operating Revenues (thousands of dollars) Steam ht.il Total Total Heatmg Oper.Jj g Rewdential Commercial Industrial Other ketail Wholesale (s) Dectric & Gas kevenues tear 1991. $229 840 183 523 236 049 90 919 ' 740 331 146 927 SS7 253 - $SS7 258
. 223 920 1174 $40 ' 235 578 79 535 713 573- 149 000 863 173 - B63173 '1990. ,
215 932 163 991 226 6M1 99 451 706 054 159 569 865 623 - 865 623
- 19t(9. . - 200 916 142 696 199 521 34 961 578 044 71 863 649 957 -
649 957 1988. 1987, , 200 874 142 385 219 0 % 27 t.46 590 006 42 476 632 482 - 632 482 138 781 40 863 151 539 32 253 413 436 47 427 4M) 863 7 431 468 294
-1981. .
Operating Expenses (thousands of dollars) Other Fuel & Operanon Deprecaten Tases, Phame-in & Federai lotal Purchased & & Other Than Pre phase in income Operstmg Mamtenante Amortaation HT Deferred. Net Taies hpenses T rar . Power (s)
.1991 $177 642 355 728 72137(b) 88 656 1147 31 767 $727 077 174 309 373 374 72 627 79 320 (9 7t(4) 21 041 -.710 837 1990..
- 1989J 172 220 372 530 85 057 72 123 - (15 753) 37 285 723 462 IW. 138 121 358 823 75 093 80 138 (83513) 29 242- 597 604 167 621 223 307 65 503 59 658 (39 797) 22 747 499 039 1937J 19S1, 148 452 95 634 43 427 36 699 -
40 842 365 304 Income (Loss) (thousands of dollars) Federal Other income income income & Ta ses- Bdore Operatmg - AFUDC- Deductions. Carrying Credat Interest Equuv Net Charges (Expense) Charges
-icar income -
1991.., $160181 1499 3 628 21 986 (6228) $181066 1940. 152 286 3 352 6 ?05 43 487 8 664 214 094 142 161 8568 20 517 82 308 (21 563) 231 491 1989._ 1988. . 52 353 5 452 (246 722)(c) 129 632 86 244 26 959 122 138 (16 904) 14 959 42 726 296 392 1987. . D3 443 1981. 102 990 - 32 498 8 852 - 9 616 153 956 Income (Loss) (thousands of dollars) locome (1 oss) Cumulanve
- Sciore Ettect of an Earnmps Cumulative Accountmg .
(Loss)
. Effnt of an Change or Net Preferred Available Debt ..AFUDC- Accountmg Estraordinary Income 5%xk for Common Interest Debt Chanze - Gam (Lou) Dividends Stock har-1991. 49 613 - 49 613 24 792 S 24 821
[ S132 399 (946) _ 1990, (2 674) 81' 424 - - 81 424 25 159 56 265 - 135 344)
- 92 c.78 92 678 25 390 67 288 1939. . 144 792 (5 479) .
1988- . 150 523 (1 833) : (121731) 6 279(d) _(115 452) 26 983 (142 435) 1987. 185 493 (54 272). 165 171 - 165 171 42 749 l2 422 1981 86 310 (15 491) 83 137 10 807(c) 93 944 23 542 70 402 ( ) kVholesale revenues it el and purchased power, wholesale electrk sales and purchased power mounts are restated for 1990 and pnot ears to tellect a change in reparting of bulk power sales transactions in accordance with FERC requirements.
' @) in .1991, a change in accountmg for nuclear plant depreciation was adopted, changmg from the units of production method to the straight-hne rnethod at a 2.5% rate. - (c) includes wr te-off of nuclear cost the amount of $276.955.000 in 19ss.
(d) In 1988, a change in the method or accounting for unbided revenues was adopted.
- (Toledo Edison) - F-68 (Toledo Edison)
- ~ _ - - . - - - - - - -- .- --n.._.-.-- .- - ~ . - ~ . .
_ ~ . ~ - . ~ ~ THE TOUDO EDISON COMPAw
- Electric Sales (millions of KWH)- Electric Customers (year end) Residential Usar,e Average Avetage As etare Price RcWnue Indostnal kWil Pet Pet Pet
- Year - Reudenhal ~ Cornmercial industnal Wholesale (s) Other - Total Reudential Commerda! & Othet Total Cumomer - Kh H Cmtomer 1991L . 2 041 -1 683 3 543 2 557 452 10 336 254 500 26 044 4 444- - 284 988 7 990 I L2t< $ 897.41 1990J. 1 950 1 614. 3 617 2 333 406 10 010 3306; 25 M2 4 555 284 342 . 7 692 11 48 8S2.99 1989 , 2 017 1 622 3 740 3 138 495 11 012 253 234 - 25 803 4 434 2R3 471 7 989 10.71 855.29 1988... 2 068 1 579 3 780 2 044 474. 9 945 _251540 25 526 4 102 281 218 . 8 264 9,72 802,87 1987. 1 977 1 532 3 589 1 660 464 9 222 249 344 25 170 4 O!(5 278 599.- 7 969 1016 809 66 -
1981.. 1 919- 1 294 3 080 150 409 8 287 241 663 23 573 3 844 - 2t,9 030 7 966 7.23 575 95-
. Load (MW & %) . Energy (millions of KWH) Fuel OperaW Ca my E mciency-at me Peak Capacity lead Compary C.cnerated
, Purchased Fuct Cost BTU lYr
, year of Peak Imd Margm Factor F mil Nuclear lotal Power (#) Total Per LWH NWH ?1991- + 1 758 1 510 14.1 % 64 5 % 4 548 - - 6 003 10 851 95 10 946 1444_ 10 327 1990. . 1 ?$2 1 516 13.5 63.0 5 535 4 219 _ 9 754 902 10 656 1.50 10 220 1989, 1 894 1 526 19 4 65.2 5 206 5 552 10 758 788 11 546 1.42 10 293 1988. , ..
1057(f) 1 614 (52.7) 62.8 5 820 3 325 9 145 1 491 10 636 1.59 10 174 1987. 4 1 698 1 454- -12.6 64.9 5 916 3 218 9 134 6e9 9 803 1.45_ 10 196 - 1981. -1 773 1315 25.8 65.9 5 348 2 142 7 490 1 293 - 8 783 1.68 10 274 - Investment (thousands of dollars) II Constructen , . . . Work in Total Utihty . Accumulated - : Progens Nudear Property. Utihty -
- Plant in Depreciation & Net - A Perry Fueland Plant and - Plant Total - ' ' rear Service Amortiration Plant Umt 2 Other Eqmpment Addinons Aucts 1991'. . - $2 692 274 709 505 1 982 769 ' 396 732 197 964 $2 577 465 $ 53 838. $4 014 512 "1990. 2 603 883 640 252 1 963 631 436 839 223 572 2 624 342 B6 693 4 001 518 1989 .. 2 528 355 564 615 1 963 740 (30 340 237 318 2 631 398 73 421. 4 138 846 ~1988,. , 2 438 927 487 546 1 951 381 459 104 262 314 2 672 999 132 083 41346"*2-1987.. . 2 600 511 419 149- 2 181 362 3N 274 267 009 2 822 705 380 974 4 277 587 1981. . . 1 250 190 252 310 997 880. 655 641 21359(g) 1 677 880 201 000 1 869 967 1
Capitalization (thousands of dollars & %)- Preferred stock, with Preferred Stock. without Mandatory Redempnon Handatory Redempuon iear Common Stock Equity Pravisinm Proviuons - Lone Term Debt Toul t1991 .,+.. $ 887 752 38% 63 663 3%- 210 000 9% 1 158 550 50% $2 319 965 1990. 880 784 -39 66 328 3 210 000 9 1 097 326 49 2 254 438 1989.' 897 793 38 68 900 3 210 000 9 1 197 277 50 2 374 060 1988. . 887 442 36 71 155 3 210 000 9 1'291 444 52 2 460 041
-1987. -1 096 737 39 73 340 3 240 000 S 1 400 292 50 - 2 810 369 i - 1981; 550 176 35 95 500 ~6 150 000 10 762 584 49 1 538 260 ~~ (c) In 1981, an extreordinary gam was realized from the exchange of common stock for bonds. -
( (f)' Capacity data reflects extended generating unit outage for renovation'and improvements. (g) Restated for effects of capitalization of nuclear fuel lease and hnancing arran;;ements pursuant to Statement of Financial Accounting i- Standards 71. i l l l'
. (Toledo Edison) F-69 (Toledo Edison) -
i:
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INDEX TO SCHEDULES. Page
- Centerior Energy Corporation-and Subsidiaries:
. Schedule V Property, Plant and Equipment for the Years S-2 -Ended December l 31,-1991, 1990 and 1989 i Schedule VI_ Acaumulated Depreciation And Amortization of S-5 Property,nPlant and Equipment for the Years Ended December-31, 1991, 1990 and 1989 Schedule VII- Guarantees of-Securities"of Other Issuers for S-8 the Year. Ended December 31,_1991: >- Schedule VIII Valuation and Qualifying Accounts'for the S-9 Years Ended December 31, 1991, 1990 and 1989 -Schedule =IX Short-Term Borrovings for_the Years Ended S-10 December 31, 1991, 1990 and 1989 . Scliedule' X! Supplementary Income' Statement Information for S-11 the Years. Ended December 31, 1991, 1990 and 1989 -The~ Cleveland Electric Illuminating Company and Subsidiaries: . .
Schedule V Property, Plant and Equipment for the Years S-12 Ended December 31, 1991-, 1990 and 1989
-Schedule VI Accumulated Depreciation and Amortization of S-15
- Property, Plant-and Equipment-for the Years Ended December 31, 1991, 1990 and 1989 ScheduleLVII Guarantees of Securities of Other Issuers for t
S-18
-the Year Ended December- 31, 1991 Schedule VIII Valuation-and Qualifying Accounts for the S-19 Years Ended December 31, 1991, 1990 and'1989 Schedule IX Short-Term Borrovings for the Years Ended S-20 December.31,-1991, 1990 and 1989 Schedule X Supplementary Income Statement Information for S-21 the Years Ended DecemberL31, 1991,.1990 and 1989 The Toledo Edison Company -Schedule 1V: Property, Plant _and Equipment for_the Years S-22 Ended December 131,:1991, 19.90_and 1989-
- Schedule VI: Accumulated-Depreciation and Amortization of S-25 Property, Plant and. Equipment for the Years L
LEnded December 31, 1991, 1990 and-1989 Schedule VII Guarantees of Securities of Other Issuers for S-28 the_ Year Ended December 31, 1991 Schedule-VIII Valuation and Qualifying Accounts for the S-29 L Years Ended P9cember-31, 1991, 19901and 1989 1
. Schedule IX lShort-Term Borrovings'for the Years' Ended S-30 December 31, 1991,-1990 and 1989 . Schedule X ' Supplementary Income Statement Information for S-31 the-Years Ended December 31,_1991, 1990 and 1989 l . . . Schedules. other than-those listed above are omitted for the reason that they are not required _or are not applicable, or the required information is shovn-in the financial' statements or notes thereto.
5-1 ll l ~
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CENTER 10R ENERGY CORPORATION AND $UBS!DI ARIES SCHEDULE V PROPERTY, PLANT- AND EQUIPMENT YEAR ENDED DECEMBER 31, 1991 (Thousands of Dollars) Balen.e at Retirements Balance et Beginning cf Additions or End of Classification Period at Cost- Sales Other Period Utility Plant
-Electric Intangible. 122,035 512,739' SO $0 $34,774 Production -.
i Steam 1,338,332 80,909 (5,480) 0 1,413,761 Nuclear 5,123,492 (a) 105,296 (1,395) 0 5,227,393 . Nyort.ulle 56,354 (557) (370) 0 55,427 other 14,693 48 9 0 14,750 Transmission- 694,181 =16,667 (631) 0 710,217 Olstribution-- -1,199,941 37,674 (4,439) 0 1,233,176 General 187,191- 18,174 (6,644) 0 198,721
............ ............ ............ ............ ............ I Total Utility Plant 8,636,219 270,950 (18,950) 0 8,888,219 Perry Unit 2 (b) 865,149 (14-576) , 0 0 850,573 Construction Work in-Progress 268,386 (52,531) 0 0 215,855 Nuclear fuel 927,268 58,513 0 0 985,781
.Other' Plant 63,524 1,254' -(15) 0 64,763 Total Property, Plant and Equipment $10,760,546 5263,610 ($18,965) So $11,00.,i91 EEE3XSASES33 833393333828 333322323333 333333333335 333383R33383 (a) Includes effect of reclassifications to conform with 1991 presentation. (b) Includes Perry Unit 2 MUDC subsequent to July 1985, see schedule VIII. S-2
s.._m _ _ - . 4 -.- __ . . _ _ _ _ _ . . - . _ _ . . _ . . _ _ _ .
- CENTERIDH ENERGY CDRPORAfl0W AND SUS $lDI ARIE$ ~
l' IDULE V PRDPERTY, PL ANT AND EQUIPMENT ' YEAR ENDED DECEMBER 31, 1990 (thousands of Dollars)
. f Balance at Retirements Balance at Beginning of . Additions or End of Classificationz Period at Cost sales Other Per8 4 Utility Plant Electric
~ Intangible- 50 -$22,035- 50 to $22,035 Production: Steam. 1,301,892 39,495 (3,055) 0 1,338,332 Muclear 5,016,127 (a) 131,973 (a) (24,608) 0 5,123,492 (a) hydraulic 56,300 54 0 0 56,354 -, other '13,995 749 (51) 0 14,693 Trensmission 680,080 15,028 (927) 0 694,181
- Distribution 1,143,810 62,309 (6,178) 0 1,199,941 ceneral 185,434 3,406 (1,649) ' O 187,191 Total Utility Plant 8,397,638 275,049 (36,468) 0 8,636,219 Perry unit 2 (b) 869,G48 (3,899) 0 0 865,149 Construction Work in Progress 2B8,225 (19,839)- 0 0- ~268,336 Nuclear Fuet 864,821. -62,447 L 0 927,268-Other Plant 62,449 1,136 (22) (39) 63,524
~
Total Property, Plant and Equipment --$10,482,181 $314,894 ($36,490) '($39) 510,760,546
==same====== . 3 ======== =======s3=== =====nas3 ras ============
(a) Includes ef fect of reclassifications to conform with -1991 presentation.
- (b) Includes Perry Unit 2 AFuct subsequent to July 1985. See schedule v!!!.
3 S-3
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i CENTERIDR ENERGY CORPDRAf!DN AND SUBS! DIARIES SCHEDULE V ' PROPERTT,' PLANT AND EDd!PMENT YEAR ENDED DECEMBER 31, 1989 (thousands of Dollars) Balance at Retirements Balance at i Beginning of Additions or End of ; Classification Period et Cost $ates Other Period
' Utility Plantt Electric Production:
Steam $1,290,036 $17,470 ($5,614) $0 $1,301,892 Nuclear - 4,833,173 195,331 (a) (12,377) 0 5,016,127 (a) Hydraulle 56,301 (1) 0 0 56,300 Other 13,943- 53 (1) -0 13,995- . Transmission 677,531 3,559 (1,014) 0 680,080 Distribution 1,094,766 54,837 (5,793) 0 1,143,810 General ~ 177,919 11,529 (4,014) O' 185,434 Total Utility Plant 8,143,673 282,778 (28,813) 0 8,397,638
-Perry Unit 2 (b) B66,911 2,137 0 0 B69, D48 * -ConstructionWorkIn Progress 355,821 (67,596) 0 0 288,225 . Nuclear fuel' 815,144 ~49,677 0 0 B64,821 Other Plant 59,945 '2,512 (30) 22 62,449 ' Total Froperty, Plant and Equipment $10,241,494 5269,508 (528,843) 522 ~$10.482,181 p; - (a) Includes ef fect of reclassifications to conform with 1991 presentation.
(b) Includes Perry Unit 2 AFUDC subsequent to July 1985, see schedule ville S-4
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CENTERIOR ENERGY CORPORATIDN AND SUBSIDI ARIES
~
SCHEDULE VI . ACCVMULATED DEPREC!tilDN AND AMORTI?Af!DN Of PROPEkif, PLANI AND EQUIPMENI YEAR ENDED DECEMBER 31, 1990 (Thousands of Dollars) Additions- Deduct ions Balance at Charged to Removal Cost Balance at Beginning of- Incore Net of Salvage End of Description Period Statement Other Retirements Add /(Deduct) Period - Utility Plant Electric . Depreciation 11,819,850 (a) 5249,381 (a) 12,685 (b) (136,468) ($5,011; $2,030,437 (a)
- Amortization 3,670 4,603 0 0 0 8, 0 73 Total Utility Plant 1,823,520 253,784 (c) 2,685 (36,468) (5,011) 2,038,510 Other Property
- Depreciation 15,132 2,957 (d) (17) 0 0 18,072
; Total $1.833,652 5256,741 52,f48 ($36,468) (55,011) 12,050,582 Nuclear Fuel . Amortitation $320,446 SS4,150 (e) 50 50 $0 54D4,596
_ (a) Includes ef fect of reclassifications to conform witt 1991 presentation. (b) Depreciation charged to construction work in progress. (c) Depreciation and amortization as reported in the income Statement includes approximately $12 mit tion of amortization of investment tax credits.
-(d) Nonutility plant expense charged to other income and deductions, net. ;(e) Charged to fuel and purchased power expense.
S-6
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CENTERIDR EkERGY CORPORATjlt AND $US$!DI ARIES SCHEDULE VI - ACCUMULATED DEPRECI'ATION AND AMORilIATION Of PRDPERty, PLANT AND EQUIPMENT YE AR ENDED DECEMBER 31, 1991 (thousands of Collars)- i Additions .- Deduetions Balance at Charged to Removal Cost Balance et Beginning of Incone Wet of Salvage End of Description Period Statement. Other Retirements Add /(Deduc t) Period Utility Plants Electric . Depreciation $2,030,437 (a) 1248,231 13,555 (b)(c) ($18,950) (53,087) 52,260,186
. Amortirttion 8, 0 73 5,6 79 551 (c) 0 0 14,303 4
Totat-Utility Plant 2,038,510 253,910 (d) 4,106 (18,950) (3,087). 2,274,489 other Property . Depreciation 18,072 2,178 (e) 0 0 0 20,250 Total $2,056,582 $256,085 $4,106 ($16,950) ($3,0ST) 52,294,739 Nuclear Fuel . Amortization $404,596 5122,771 (f) 50 $0 $0 $527,367
............ .s.......... ............- ............ ............ ............
(a) Includes ef fect of reclassifications to conform with 1991 presentatlon. (b) Includes nuclear plant decommissioning trust earnings charged to other deferred charges and depreciation charged to construction work in progress.
- j. (c) Transfer from accumulated depreciation to accumulated amortization.
~ (d) Depreciation and amortiration as reported in the income $tatement includes approximately $11 million of amortization of investment tax credits. -(e) Nonutility plant expense charged to other income and deductions, net.
(f) charged to fuel and purchased pcwer expense. l l l t S-5
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CENT (RIOR ENERGY CORPORATIDN AND SUBSib! Attt$
~ ~
SCHEDULE VI + ACCU 4UL ATED DEPRECI Afl0N AND AMORillAll0N OF PR0rf RTY, PL AWi' AND [0UlPMENT YEAR ENDED DECEM8tR 31, 1989
- (Thousands of Dollars) ' Additions Dedac t ions Balance et . Charged to Removal Cost Balance at Beginning of income Net of Salvage E nd o f -
Description:
Perlod Statement Other Retirements Add /(Deduct) Period Utility Plants flectrie .' Depreciation 51,565,978 $283,821 (a). 53,595 (b) ($28,813) ($4,731) 51,819,850 (a)
+ Amortization 3,326 344 0 0 0 3,610 Totat Utility Plant -1,569,304- 284,165 (c) 3,5 95 (28,813) (4, 731) 1,823.520 Other Property - Depreciation 13,676 1,484 (d) 0 (20) (8) 15,132 Total -51,582,980 $285,649 53,595 ($28,833) (14, 739) $1,838,652 ....===. == ............ ..........== ............ ==.......... .s==........
Nuclear Fuel Amortization - $218,326- $102,120 (e) 50 $0 $0 $320,446
=====....... ............ ===......... ............ =====..... . ==c ........
(a) Includes ef fect of reclassifications to conform with 1991 presentation. (b) Depreciation charged to construction work in progress. (c) Depreciation and amortization as reported in the income Statement includes approximately $12 million of amortization of investnent tax credits. (d) Nonutility plant expense charged to other. income and deductions, net.
.(e) Charged to fuel and purchased power expense.
S-7 i-
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37. CENtERIOR EhE20Y CDRPORATIDW AND CJBSIDI ARIES SCdEDULE Vil CUARAhTEES OF SECURITIES OF OTHER ISSUERS YEAR ENDED DECEMBER 31, 1991 (Thousands of Dollars) Principal Amount Name of Issuer of Guaranteed and Securities Guaranteed Title of issue (a) Dutstanding (a) kature of Guarantee
- Quorto Mining Company (b)(c) Guaranteed Mortgage Bonds, Due 2000 Series A 8.25% $1,056 Principal and Interest Series B 9.70% 1,030 Principal and Interest f Series C 9.40% 5,152 Principal and Interest Series EA 10.25% 1,226 Principal and intorest Series FA 10.50% 941 Principal and Interest Series G 9.05% 15,554 Principal and Interest Series HA 7.75% 10,637 Principal and Interest Series HB 8.31% 5,395 Principal and Interest Guaranteed Refunding Bonds, Due 1997 Series ! 7.45% 9,226 Principal a .1 Interest Uns cured Note, Interest at prime (8.50% ef fective 7/1/91 and applicable through 12/31/91) plus 2%, Due 2000 3,726 Principal and Interest Equipment leases 10,430 Termination Value per Agreements 64,373 The Ohio Valley Coal Company First Mortgage Notes Series D- 8.00% Due 1992 to 1997 -. 6,400 Principal and Interest Series E- 10.25% Due 1992 to 1997 3,575 Principal and Interest '
Equipment leases 5,456 Stipulated Loss value per Agreements Term Notes "9.53% Due 1992 to 1996 2,637 Principal and Interest
-10.85% Due 1992 to 1997 19,531 Principal and Interest 37,599 5101,972 5333E335 (a) None of the securities were owned by the Centerior Utilities; none were held in the treasury of - the issuer; and none were 'in def ault.
(b) The Operating Companies and the other CAPCO Group Companies have agreed to guarantee severally, and not jointly, their proportionate shares of Quarto Mining Company debt and lease obligations. incurred while developing and equipping the mines. The amounts shown are
- the Operating Companies' proportionate share of the total obligations.
(c) Includes the ef fect of a Quarto Mining Company refinancing completed on January 2,1992. The proceeds from the issuance of Series HA, HB and I Bonds on December 30,!991 were used to refund
- Series D EB, EC,- ED, FB and FC Guaranteed Mortgage Bonds on January 2,1992.
S-8
_ _ , _ _ _ . __ _. . _ . _ . _ _ _ _ . _ . . _ _ . . _ _ _ _ _ _ _ ~ _ CENTERIOR ENERGY CORPORATION AND SUBSIDIARlES
' SCHEDULE VI!! VALUAfl0N AND QUAllFYlNG ACCOUCS FOR 1HE YEARS ENDED DECEMBER 31,' 1991, 1990 AWD 1989 *
(Thousands of Dollars) Additions Deductions
- Balance at - Charged to- Deduct ions Balance et Beginning Income frca End of Description of Period - Statement Other Reserves Other Period Reflected as Reductions to the Related Assets:
Accuulated Provision f or uncollectible Accounts.
- (Deduction f rom Amounts Due from Customers and Others)
- 1991 $3,026 S20,567 (a) $3,192 (b) 523,082 (a)(c) 50 53,703 1990 2,276- 18,739 (a) 2,805 (b) 20,794 (a)(c) 0 3,026 1989 7,001 9.429 (a) 2,000 (b) 16,154 (a)(c) 0 2,276 Reflected as Reserves on the Balance Sheet -
Reserve for Perry Unit 2 Allowance for Funds Used
. During Construction'
! '1991: $212,653_ $0 50 $0 SO 5212,693 1990' '212,693 0 0 0 0 212,693 1939 '212,693 0 0- 0 0 212,693 (a) Includes a provision and corresponding writi of f of uncot tectible accounts of $6,020,000, $5,895,000 ard 1$2,598,000 in 1991,; 1990' and 1989, respectisely, relating to customers which qualify for the PUC0 mandated Percentage of Income Payment Plan. Such uncillectible accounts are recovered through a separate PUC0 approved surcharge tariff. _(b) Collection of accounts previously written o f-(c) Uncottectible accounts written off. S-9 l I i l l
l l CENTER 10R EWERGY CORPORATIOW AND SUBSIDIARIES SCHEDULE IX SHORT-TERM Boar 0 WINGS FOR THE YEAR $ ENDED DECEMBER 31, 1991, 1990 AND 1989 (Thousands of Dollars) Average Weighted Daily Average Average Max inn Weighted Daily Salance interest Amount Amount Weighted at End Rate at Outstanding Outstanding Interest of End of During the During the Rate During Category Period Period Period Period the Period Corrmercial Paper 1991 SO 0,0% 5170,900 $61,781 (a) 7.4% (b) 1990 110,310 9.4 163,200 88,870 (a) 8.7 (b) 1989 0 0,0 55,D00 5,534 (a) 9.8 (b) (a) Comuted by dividing the total of the daily outstanding balancesrfor the year by 365 days. (b) Comuted by dividing total interest expense for the year by the average daily balance outstanding.
, s a m 4
S-10
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1 CENTERICR ENERGY CORPORAllDN Ak3 SUBSIDIARIES
$CHEDULE X
- SUPPLEMENTARY INCOME $1A1EMENT INFORMATION FCR THE YEAR $ ENDED DECEMBER 31,1991,1990 AND 1989 (Thousands of Dollars)
Item 1991 1990 1987
.... ............ ............ ............ s Maintenance and Repairs -.
Charged to operating Expenses $174,121 S202,248- 5.87,559 Taxes, Other Than Payroll and income Tases: ' Charged to Operating Expenses: Real and Personal Property Taxes $163,123 $145,980 $136,477 Ohio State Excise Taxes 106,672 101,918 02,877 other 11,B83 8,850 9,199
' Total Charged to operating Expenses 281,678 256,746 238,553 -Total Charged to Nonoperating income 684 719 759 Total $282,362 1257,467 5239,312 S-11
TEL CLtVILAND [tttfRll llLUMihAftkG CC*WAkV Ak0 tv6$1DIARit$ LCHtDULE V + F RuttRTY, FL ANT 4WD 100ltMINT YEAR ENDED DICEMBik 31, 1991 (thousartfs of Dollars) Balence et Ret i r enent s Pstence et Beginning of Additions or ind if Ctesalfication Period et Cost turs Other terled ) Utility Plants Electric Intangible $18,499 53,963 10 50 122,462 Frcdactions
$ ten 1,046,921 63,374 (5,4Bos 0 1,104,615 *mleer 3,405,230 (e) 56,601 (723) n 3,461,105
- H ydr aul ic 56,354 (55T) (370) 0 55,427 other 7,967 99 9 0 8, 0 75 fransmission 547,300 14,518 (630) 0 561,188 Distribution 813,153 27,823 (3,5B4) 0 257,392 g General 116,912 11,184 (2,618) 0 125,475 Tota. Jttlity Plant 6,032,336 177,005 (13,396) 0 6,195,945
' erry On(t 1: (b) 521,464 (13,658) 0 0 5nt,806 Construction Work in Pre ress 171,232 (13,342) 0 0 161,800 Nuclear f uel 520,762 31,172 0 0 551,934 Other Plant 60,221 461 (15) 0 60,667 o
total Proper *y, Plant and E quiptent $7,310,015 5181,638 (113.411) $0 $ 7,478,242 (a) Inetudes ef fect of rectessifications to conform with 1991 presentation. (b) include Ferry Unit 2 AFUDC subseget to July 1985. See Schedule Vill. S-12 _ _ _ . , _ _ _ . , _ _ _ ___mm_ _ _ _ . - - - - - - - - - - - _ _ - _ - - - - ------ - -- -" - ' - - - - - - - - - - - - - - ^ ^ - - ' ^ - - - - - - - ' - ~ -"~'
th! Clivf LAND (LICTRIC ILlumihAllac COMPAWf AND $US$101 ARitt SCHEDutt V
- PRDetRTY, PL ANT AND LOUIPM(hi TEAR ENDED DICtMStk 31, 1990 (Thousands of 00Llarr)
Balance at httirements Balance at Beginning of Addit i ons or tnd of Classification Feriod at Cost Sales Other Period ; Utility Plants tiectric l. Intangible 50 $18,499 $0 $0 $ 18,499 P ProduetIont steem 1,017,617 32,353 (3,049) ' 0 1,046,921 , Nuclear 3,346,223 (a) 80,329 (21,322) 0 3,405.230 (a) Hydraulle 56,300 54 0 0 56,354 other 7,287 T31 (51) 0 7,967 tronamission 534,813 13,381 (894) 0 547,300 Distribution T92,438 46,167 (5,452) 0 831,1!3 ' b Ceneral 114,605 3,342 (1,035) 0 116,912 T fotal Utility Plant 5,669,283 /> j" (31,803) 0 6,032,336 I Perry Unit 2 (b) 523,294 ,a30) 0 0 $21,464 Construction Work in P* ogress 203,639 (28,407) 0 0 175,232 Nuclear Fuel 482,092 38,670 0 0 520,762 Other Plant 59,107 1,136 (22) 0 60,221 Totst Prope Plant and Equipment 57,137,415 $204,415 ($31,825) 50 $7,310,015
==.......... ............ ............ se...es .... .es=====sese '(a) includes ef fect of reclassifications to conf orm with 19/1 presentation, (b) includes Perry Unit 2 A7UDC subsequent- to July 1985. See Schedule Vlli, S-13 e . . - . .m ..- _- . . _ = . . _ . . _ . _ . ._ _. . ,_ . _ - . _ _ . . , . - _ . _ . _ . , , , _ _ _
j THE CttVELAWS (LtC1 kit IttbalhAtthG CDMFAwf AhD $UB$t0I Atitt
$CH[ butt 'l . Pf orttif, F1Akt AND tuulrNtW1 flat ikDtc DICEMBit 31, 1989 (thouwds of Dotters)
Date%ce et petirements Botence at beginning of Addi t i ons or t hd of Ctessification Per i od at Oost tales Other reriod Utility Plants tiectric Productions steam $1,013,636 19,595 (15,614) 10 $1,017,617 huclear 3,235,716 110,507 (e) 0 0 3,346,223 (a) Hydraulic $6,301 (1) 0 0 56,300 other 7,287 1 (1) 0 7,287 , iransmission $26,820 9,004 (1,011) 0 $34,813 Distribution 754,650 43,212 (5,424) 0 792,438 Generet 110,336 8,275 (4,006) 0 114,605 Total Utility Plant 5,704,746 180,593 (16,056) 0 5,869,253 Perry Unit 2 (b) 523,785 (491) 0 0 523,294 Construct!sn Work in Progress 239,B43 (36,204) 0 0 203,639 Wuclear Fuel 453,654 26,438 0 0 4B2,092 Other Pts.nt $6,625 2,512 (30) 0 59,107 Total Property, Plant and Equipment 56,078,653 $174,848 (516,056) 50 17,137,415
............ ............ ............ ............ ...u.s 364..
(a) includes ef fect of reclassifications to conform with 1991 presentation. (b) Includes Perry Unit 2 Af uDC subsequent to July 1985. See schedule Vill. S-14
.._.___-.m. _. - -- - _ . _ . - _ . - _ _ _ . _ _ _ _ _ _ _ . . - _ . . . _ - . . . _ - _ _ _
l i: 1 e THE CLfvitAND titCTRIC ltLUNihailWG COMPAWT AND $US$1DI ARit$ i r
$CHEDULt VI
- ACCUMJLAf tD ttPRECI AllDN AND AMORil2AllDN Of PRDFER1Y, PL Ahi AWD EDulPMf Wt YEAR ENDED DECEMBtX 31, 1991 {
(thousands of Dott( %) i Addi t i ons Dedactions Salance at Charged to Femoval Cost talence at Beginning of Incone het of Salvage tnd of [ Description Period Statoment Other Retirements Add /(DedJC t ) Period
. Utility Plants tiestric
- Depreciation $1,391,080 (a) 1173,126 11,794 (b)(c) ($13,396) $266 $1,552,870
- Amortliction 7,178 4,385 551 (c) 0 0 12,114
-Total Utility Plant 1,398,258. 177,511 (d) 2,345 (13,lth) 266 1,564,984 other Property + Depreciation 16,793 2,040 (e) 0 0 0 18,833 total $1,415,051 5179,551 $2,345 ($13,396) s266 $1,563,817 tucteer fuel
- Amottliation ' $219,976 568,867 (f) $0 $0 $0 $268,805
...... 55... ............ ............ ............ ............ ............
(a) Includes ef fect of reclassifications to conform with 1P91 presentation. (b) Nuclear plant decommissioning trust earnings charged to other deferred charget and depreciation { char 0ed to construction work in progress. (c) Transfer from accateter. cepreciation to accalated amortiration. (d) Depreciation and amortiration as reported in the lacome statement includes approximately $7 m!!(lon of amortitation of Investnent tan credits. (e) Nonutility plant expens) charged to other income and deductions, net. (f) Charged to fuel and purchased power expense, I t I i S-15 1: r i h.
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m ._- _
-l THE CLtyttAkD titC1RIC llluMihAflhG CDMPAEf AND $UBSIDIARits $CHEDULE VI
- ACDUN'JLAlfD DEPRICIAtlDN AND AMDAf f!ATIDW Of PROPERif, PLAhi AND (DUIPM[hi itAR ENDtb DECEM6ER 31, IP90 (thousands of Dollars)
Addi t ions Deducticos Balance at charged to Removal Cost Balance at Beginning of Incone Description het of salvage ind of ' Period St at enent other Ret ir enent s
........... Add /(Deduc t ) Period '
Utility Plants tiectric . Depreciation $1,255,235 (a) 8174,744 (a) $543 (b) ($31,803) (57,939) $1,391,080 (a)
. Anortitation 3,670 3,505 0 0 0 7,178 Total Utility Plant 1,258,905 178,252 (c) 643 (31,803) (7,939) 1,398,258 I Other Property . Depreciation 13,915 2,878 (d) 0 0 0 16,793 Total 61,272,820 $181,130 $$43 (s31,803) ($7.939) 51,415.051 Nuclear f uel . Amortitation $172,910 147,020 (e) 10 10 $0 $219,938 ............ ............ ............ ............ ............ ...u,........
I (a) includes ef fect of reclassifications to conform with 1991 presentation. (b) Depreciation charged to construction work in progress. _ (c) Depreciation and anottitation as reported in the income $tatement includes approximately $9 million of amortf ration of investrrent tax credits. (d) Nonutility plant expense charged to other income and deductions, net. (e) Charged to fuel and purchased power expense. i
,l S-16 .
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fME CitVILAWD titCl?lt ItttM!hAfikG COMFANt AND SUS $lDIAtit$
$CHIDutt VI
- ACCUMJtAftD DIPittlA110N AND AM31tillAllDN OF Ft00!tli, PLAWT AND (OulPMthi ,
ttAR (NDED DiCIM6ft 31, 1989 (thousa% of Dollars) AMIt ione Deductions [ i talance at CharpHfto etw val Cost Solance at beginning of ineme het of Salvane End of Description Feriod Statement Other tetir enent s AM/(Deduc t) Period Utility Plantt l tiectric
- Depreciation $1,078,432 $194,876 (a) 81,737 (b) (516,056) ($3,754) 81,25$,235 (a)
- AmortItatito 3,326 344 0 0 0 3,670 Total Utility Plant 1,081,758 195,220 (c) 1,737 - (16,056) (3,754) 1,2' ? 1 Other Property
- t preciation 12,$08 1,435 (d) 0 (20) (6) 13,91$
Total $1,094,266 1196,6$$ $1,737. (116,076) (83,762) 81,272,620 I t Nuclear fuel
- Amortiration 1117,196 $$$,712 (e) $0 10 10 $172,910 (a) includes ef f ect of reclosaf fications to conform with 1991 presentation.
(b) Depreciation charged to construction work in progress. (c) Depreciation and amortiration as reported in the Incme $tatenent Ireludes aproximately 18 Inlltion of amrtitation of Investnent tax credits. . (d) konutility plant expense charged to other income and deductluns, net. (e) Charged to fuel and purchased power expense. l j .. . i i I S-17
h THE CityttAND ILECit!C ILLtMih411kG CCs4PaWY add $UBSIDIAtlf $ ,
$thtDutt vil
- CUARAkitt$ OF sicutillts Of Olkit IS$UER$
itAR (WDED DECEMBit 31, 1971 (thousards of Collars) i Frircipal Anount haw of issuer of Gueranteed and Securities Guaranteed title of Issue (a) Outstarding (a) hature of Guarantee Quarto Mining Cm pany (b)(c) Guaranteed Mortgage Bords, Due ?000 series A 8.25% $707 Principal ard Interest series B 9.70% 690 Principal ard Interest series C 9.40% 3,451 Principal ord Interest teries (A 10.25% 766 Principal ard Interest series fA 10.50% $88 Principal and Interest Series G 9.05% 9,5 75 Principal ard Interest Series NA /.75% 6,549 Principal and Interest Series HD 8.31% 3,322 Principal and Interest
- Guaranteed Refunding Bords, Due 1997 Serics I 7.45% 5,680 Princ; pot ard Interest Unsecured Note, interest at price (8.50% ef fective 7/1/91 ord applicable through 12/31/91) plus 2%, Due 2000 2,329 Principat and interest Equipnent leases 6,987 Termination Value per Agreements 40,644
-The C5to Valley Coal Cm pany First Mortgage Notes Series D 8.00% Due 1992 to 1997 6,400 Principal ard Interest Series t 10.25% Due 1992 to 1997 3,375 Principal and Interest Equipnent Leases 5,456 Stiputoted Loss value '
per Agreements term hotes +9.53% Due 1992 to 1996 2,637 Principal aru Interest 10.85% Due 1992 to 1997 - 19,531 Principal and Interest 37,599
$78,243 ..c..n. .
1 (a) None of the securities were owned by Clevelard tie:tric; rane were b 1 in the treast.ry of the issver; and none were in default. (b) Cleveleid Electric and trie other CAPC0 croup Conpanies have agreed to guarantee severally, and not jointly, their proportionate shares of Quarto Mining Company debt aref lesso obligations incurred while developing and equipping the mines. Ibe annunts stown are Clevela-d Electric's proportionde share of the total obligations. (c) Includes the t f fect of a Quarto Mining Corpany refinancing corpleted on January 2,1992, the proceeds from the issuance of series HA, HB and i Bonds on December 30,1991 were used to refurd
- Series D, EB, Et, CD, FB ard FC Guaranteed Mortgage Bords on January 2,1992.
S-18
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1HC CLEVELAWD (LECTRIC ILLLMihAf tko 00McANY AND SUS $1DI Attt$ SCHIDutt Vill VALUA110k AND OUALIFYlkG ACCOUNi$ FOR Thi YEAt$ (@tD DECIMatt 31,1971,1990 AWD 1989 (thousards of Dollars) A111 t ions Deduc t ions Balance at Charged to Oeductions Salance at}}