ML20100M325

Annual Rept,1984

ML20100M325
Person / Time
Site:	Peach Bottom
Issue date:	12/31/1984
From:	Curtis N DELMARVA POWER & LIGHT CO.
To:
Shared Package
ML20100M290	List: ML20100M287 ML20100M311 ML20100M322 ML20100M325 ML20100M330
References
NUDOCS 8504170461
Download: ML20100M325 (47)

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To OUR S10CxiiotDrRs 3 [

." "The sound planning and hard work which f

brought us out of the embargo era will begin .

J.: J f P ,; . c ; y to be focused on the opportunities of the late g

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O lj k 1980s and 1990s." {

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6 STRENGTilS OF DELhlARVA POwtR h "Delmarva Power has powerplants in place ,

to supply the forecasted need for electricity "

through the mid 1990s."  ;

.s kU KEEPING FACitITIES RUNNING Wttt 8 -

"Within the PIM interconnection. Delmarva

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) ' Power's plants consistently rank among the l leaders in low totaloutage rate."

x INCREASING CUSTO5tER SATISFACTION 10 "The company has worked to understand better the needs of customers ar.d to provide them with usefulinformation." l FUTURE: OUILDING FRON1 STRENGTii 12

" . the company has tefined a methad to seek, encourage. and respect the ideas of the individual so it can continue to prosper -

through innovation." '

, SERVING Tiit Dotsi ARvA PENINSULA 14 "The peninsula's economy is growing as b shown by the increase in commercial sales

and the large number of new residential hookups in the shore communities."

FINANCIAL SECTION 16 Os une cxwta, run nov os ins sixa is rtatisc is ruos t or Tne Oxrona hirws snors is Oxrono, htARYuND.

Percent increase 1984 1983 (Ikcrease)

Rtytsets $ 702.6 million $ 649.8 million 8.1 Ntr IscostrJ - $ 92.1 million $ 85.1 million 8.2

Ernstscs Pt a $HARL - $ 2.63 $ 2.45 7.3 L Divinisns Dicuatn 5 1.83 $ 1.68 8.9 Costuos Stock OtristAsunc -

~ Avturct Siunts _ 30,248,482 29,541,415 2.4

Cosisios Stock Book Witt '$ 17.70 $ 16.87 4.9 Cossintctios Exrtsnittuts - $ 79.5 million $ 76.1 million 4.5 INiraNAtLY Gtst aAlin Fesns ' $ 110.5 million 5 117.6 million (6.0)

Ettcraic SAtts 8.31 billion kwh 7.88 billion kwh 5.5 Ett cinic Cesrostras(average) 303,965 294,965 3.1 Avt RAct Rtsintsiirt UsAct 8,283 kwh 8,109 kwh 2.1

- Cas $Atts ' 17.24 million mcf - 16.45 million mcf 4.8 gas Ctsrositas (average) 74,319 73,436 1.2

' AvtaAct Rtsmisitat Uuct 88.8 mcf 81.8 . mcf 8.6

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~ %'1jT In 1984.only 19% of electricity y

improved performance shows

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4 generated came from oil that the strategies developed > ; x .'s .

compared with 53% in 1979

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. is now the dominant fuel y w e,.. 4-

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y of the Arah oil embargo con- f#-

jy. g ~1 he last coal conversion project tinue to be succesful. Delmarva . ~ .i r.u T M was completed in 1983 in 1984.

Power has emerged from that -  % Delmarva Poweri coal-bred i penod with strength plants completed a full-year of in 1984, earnings increased excellent performance.1here

7% and dividends mcreased Niv CURUs, cnAIRNIAN AND CEO, are no more major opportu-

< % to an indicated annual rate mscussrs ct siostrus' orisioss 41 A nities to reduce price

'_ of 5142 Cosseurn RorsnrAst r. through switching fuels.

The price of electricity was First,let's look at where we in the area of maraging costs.

competitive m the region. have been. For the past five the company has consolidated Generating plants and trans- years, we have discussed m our 12 district offices and 12 store-nussion facihties are in plaec to annual reports the strategies fo - rooms in the past four years and provide energy through the mid dealing with the post-embargo reduced the workforce by tro

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1990s. Employees are truly world of high fuel prices. infla- through aurition and early committed to servmg both tion, and adverse public opinion. retirement. Through an mno-stockholders and customers. The key goals were to make vative program designed o E

You shouki feel good about rates more competitive region- increase employee participation your investment in Dehnarva ally and to improve the return in decisions af fectmg their work, Power. on your investment. Plans were employees are looking daily for creative ways to improve service "The soundplanning and hard work which brought us out of k .

wllile managing Costs.

the embargo era will begin to be focused on the opportunities

. of thelate 1980s and 1990s." D nana un hu nuni-g mixed major, new capital invest-Now, Delmarva Power is developed and implemented to ment. After a series of annual

[ approaching a turning point. switch away from oil as a prime reviews, the company now The sound planning and hard generating fuel, to reduce concludes that the completion work which brought us out of operating and maintenance costs of the next major generating the embargo era will begin to be while improving effectiveness, to plant, once scheduled for 1987 focused on the opportunities of mmimize newcapitalinvestment, at Vienna. htaryland, can now be the late 1980s and 1990s. and to increase customer delayed until 1996.

satisfaction.

N!uch of titis work has been comp!cted.

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7 r FRANK A. Coox SiNioR Vict PRtMoiNi or

- int COMPANY In the natural gw busmess, before While not forgetung that mvestment c.m he rapidly

citorts are conuntung io consert the t ompanyi mirion o to dimini3hcd by icchnologt 7 L ustoniers to gas along existing pr ovide relLihle, icasonably- bre.ikthrough3 and the lessons mains or to hulld new mains prited energv J}! the time. the til the titility industry that .i large buildmg procum c.m u hen cost iustitied company s thinking n mos mg E I mally customer opmion of away f rom dealmg u nh the het ome an albatrow Delin. lint Powci had iinproved altermath of the Arah oil I hereloie. more llexibility throuchout the servis e territory embargo and moung toward and creatirnv in researchme

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unprovemems in customet scr- energy enuronment of the I.nc cing all opnons will be needed q .

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Y ,k ig mtormation programs One challence uill be the has intensilied as ettorts to NoW. there are new chal- .ostirance of adetjuate energy in extend the ble of exhting b

Sotif tc5 ol cilcrRv slipply Will he projettlon3 show another power has loitied a nationwide demon-y needed in the iniddle of the plant uniy he needed -tration project to esalttite the f uel cell-an eneret source E next decade. and the nitiueiices I he coinpany s conceined of co-Reneration Jild w hecling ahotit the le-ors learned in the whith can he htiilt qmckly and w ill mJke supplying enCIg) railroad industry that the value in sm.ill components Our more comnet nive than ever of a larce. long-term capnal research dollars are directed to

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'.] .' f' Dit E. ARTuca TRABANT DU PoNT DE NIMOURS M . -  ;)[ . ,'.

.' ,' 'E PRLsIDI NT OF THE COMPANY (E NI RGY AND .

. . . h'5' 'N im UNisrRuTY Or' DELAWARF, DIVIR5itilD MANt'FACTUR- , . . . '

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NtwARK, De lawARt iNG) WitMINGTON, -' ' i

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DetAwARE, ViCE CllAIRMAN '- - - -

SAtty V. IIAwKiNs JOHN R. Coon a or Tile BOARD AND CHilf "'" .' . A '. r -- 6DIRICTOR AND PRt51 DENT MANAGE R OF ENVWONMEN-opt RARING OrnCr R OF ie g e ;;; } .h.r' TAL AtFAiRs AND .g '@  : .f ,

s of Di LAWARE OROADCAST-CONO( o lNC., s; s <- -

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OCCUPATIONAL HEAliH, ~,u ING COMPANY AND W!i MINGloN, Ot AWARE PETROOllMICALs DtPARr- ',h .p'- , -

PRLsIDENT AND GENE RAL MtNT O.' E. L Du Posi .,q.' MANAGE R of $1 AHON DE NLMoLR5 & COMPANY [ .'w.'t '. f ~ , . WILM (RADIO BROADCAST-

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\VAKrlittD,Jit StNioR ViCE PRE 51DINI OF THE COMPANY getting more elliciency f rom buy, but also from whom they We appreciate their achieve-existing generanng and trans- will buy it. ments in 1984 and look forward mission facihties as well as in addition to thorough to working together as a team to developing ahernative methods analyses of the cost of future meet the future, buikhng from of service. energy supply sources, em- Delmarva Power's strength of in marketing, the company ployees are being asked to today.

continues programs to increase become even more conscious the sale of electncity during off- of the cost-to-the-customer Smcerely.

peak hours and low-use months consequences of all of their since these new sales do not decisions. Increased employee require additional power plants. traming in participative skills v(

The company also supports the is helpmg us do that. Niv ct Rus peninsula's efforts to attract At this pomt, we are working hhn n N85 new business. on a plan for the future. We An unmediate challenge is the know we have the people pricing of our product With working at Dehnarva Power increasing competition, pnce capable of taking on the chal-will become more important in lenge. They have demonsnated decisions about not only how a commitment to doi ig a good much eneret customers will iob and a will rn succeed __

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_ ON Tiitin Ows TiuE,CONCEnNto Eu-Since the buikhngof a new power rtOu ts At UIE VitNN A POwe n PLANr The company also began an plant can create an enormous witt REAn sTairto Bass riNctat Ncs extensive chemical identificanon hnancul burden for both stock- Ar rACILIULS BUILT BY TnE COMPANY. program to insure that employees i holders and customers. a key neers have mtensilied their efforts know the possible effects of chemi-

=r strategy for the 10 sos is to keep to extend the usclul hfe of cu3nng cals m the workplace and how esisting facihties running as well generaung umts to handle them A

and for as long as possible. Progress has been made through in 1982, the company's safety thcn AvriuBillTY such project as ackhng tress program was strengthened m an In 1084 Dehnarva Powericoaland controlling devices to the turbme cifort to reduce accidents and

- oi Lhred plants ran well The aver- at Edge Moor Umt i Also. the to spare employees and their age < ompany availaNhty rate was company converted to a fresh- tamtlies the accompanying pain 87% compared to the most recent uater coohng system and instal!cd and anxiety. In 1984, accidents industrv average of 81.> wnhin new and rebuih turbme mtors at continued to be below 1982 levels.

the PJM mterconneenon Delmarva Indian Rner Urnis 1 and 2 Powers plants consistently rank SAf ETY AND ENviaONuENT h $ ); AM] ~

I among the leaders m low total As part of a3 connnuing concern  :. / 'h ~

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outage r.ne. for operating an energy compant i1 '

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.4; q Delmarva Power.s electne system as 3alcly and with as hule intru- v- , ,. . .;'-

atcommodated a % grow th in sion into the environment as .[ !# i I ' ~U sale 3. including a 12% growth in possible. Delmarva Power began

- '5-

$ columertial da!cs. Gas 5a!cs In- luo signihcant new programs Tile NEW MEDICAL CENTER AT treased % Employees connected in 1984. STANTON, DEuWME, AN EXAMPLE OF TnE COMMI.RCIAL GROWTil OF Tile

=.

,, Withm, the PJM m, terconnection, Delmarva Power,s AREA, BTCAME ONE OF Tile COMPANY'S i plants consistently rank among the leaders m. low total outage rate."

E 8 880 new electne customers and Ground was broken for a hsh 7 38 new g.ls customers to the bnwhng pond at the Vienna i Systein. Also, the company 5old Power Plant with the expectation electncay to :he PJM system. to the of producmg up to 100.000 stnped

cmes of Easton. Md , and Dover. bass hngedings for release mto De.. and to Northeast Unhnes. the neighbonog Nanticoke R.ver steam was sold to a nearby Dulbnt each year The idea for the hsh Company proCewsing factIity, pond came from employees who g I hese sales were benetical to both volunteered to mamtam it on their ctistomers and stockholders own time.

b

,. PUNT lire EmssiON In adJition to an aegressive, con-tmumg presentive mamtenance

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,s The price of energy is the domi- D% c W

/ stand bener the needs of tostomers nant concern of Delmarva Power's and to provide them u nh usclul customers 1hroughout the COurANY rtBucAuoNs iOcts Os infmmation 5 orae of the programs service terntory. strategies de- INIORMAllON CL SiOMt R4 CAN 0%I.. indtide.

veloped donng the 1970s, a On the supply side.the company a Consumer roundtables. where reboundmg economy. and addi- is seeking more efficient use of cuctomers discuss their concerns tional weather-related sales have existing facihties through Time-of- about company programs and come together to keep price Use rates. promotion of off-peal < pohcies and suggest changes sut h increases at or below the level sales, especially heat pumps, as upcommg revisions in the of intlanon dunng the last 3 years. programs w hich encourage resi- bill formar.

PRict STABluTY dennal energy efficiency, such a Pubhcations such as ~ Energy in 1984 Delmarva Power reduced as Super E+. and the monnoring New s Wu Can Use"-a monthly the pnte of electricity for Delaware of load management technology customer newsletter with tips on and wholesale customers for the development. how to use energy wisely. and first time in 20 years In these While the fuel conversion and o0 Pit.s"-a semor citizens infor-jurisdictions. regulators have workforce reduction programs mation senice.

allowed rates to be based on "The company ha.; worked to understand better the needs of current costs 11n Virgmia and ,

customers ann toprovide them with usefulinformation."

Maryland, where dillerent regu-E lators use different rules and are completed, daily ciforts to a Face-to-face advice to builders current rates are based on previous manage costs are ongoing In 1984 on how to use energy wisely costs, the company must contin- signihcant cost-savings were through the Super E+ program ually seek rate increases to catch achieved, for example in reducmg and to homeou ners through the up with current costs. transmission and distribunon Residential Energy Conservation

.. . inventones by about $500.000 seruce.

4*;- -[.1 -j without impaenng n.e ability to a customer services such as

- (I.* ;.l ; h ~;. serve. hudget bilbag installment pay-

, y ' , .9 To help manage the price of ments for overdue bills. load

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it has proposed innovative rate and work with human scruce Tut DirARIutNT Or ENr'RGY rRt- structtires designed to compete agencies throughout the nelmarva sf NTf D DrturRvA POWIR WHn A with the declining price of oil Peninsula to distribute eixrgy-NATIONAL AWARD rOR litirtNG Di$lGN and to allow Customers to trJnsport assistance Iunds AN INNOvATlvE IlOT wAllR STORAGE gas on Delmarva Power's system.

WsTrM AT A flTNIM ClOB. The company is also attively seekmg conveiston gas customers where ga; mains are in place.

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tricity through the middle 1990s,

%f4 AN EXPERIMENTAL FUSL CELL SUP ItS 3deas of the individual so it can continue to prosper through inno-  ;

the company is approaching a ELLCTRICITY AND IIOT WATER TO THE valion in a changing business and period where decisions must be EPISCOPAL CHURCll llOME IN people can work in an atmosphere made to supply energy beyond HOCxtssiN, DHAWARE. of increased appreciation for each that time. Delmarva Power is also con- other.

T he companyis concerned about tinuing its investment in the At the end of 1984, about the magnitude of investment re- utility industry research pool 1,740 of Delmarva Power's quired for a new generating plant. This investment in the Electric employees had received training the impact of such an investment Power Research Institute (EPRI) and had undertaken more than on rates, technok,gy breakthroughs provides many types of research 000 projects.

w hich could diminish the value including projects designed to An employee survey showed of that investment, and forces improve existing coal-fired and that on many issues, those people on the horizon likely to bring in- nuclear generating systems, trans- w ho had received this trainmg creased competition in the utihti mission designs. and computer were more positive about their business. forecasting techniques. work than those w ho had not yet been involved in the program.

". . the company has refined a method to seek, encourage, in these ways. Delmarva Power and respect the ideas of the individual so it can continue to is developing both the technol-prosper tbrough innovation."

g ogy and the people to meet the Therefore, the company is OuTsmE OrrORTUNmEs energy challenges of the next approaching the fumre with flex - Delmarva Power is also looking decade.

bihty, creativity, ar d thorough at outside opportunities with the analysis. policy direction of staying wahin .

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TECHNOLOGY EVALUADON the energy or investment field. W

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cell as part of a demonstration Delmarva Energy Company and M.$ .. . , ' ) ,a ,t .c .". . . . ,:.(

. l, project to evaluate the technology. Delmarva industries continue N 1.#i, . .: .

8.N dh. . i U 3 market potential, and customer to explore for and produce natural yh " 2 o # " W ' p;>gMD

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reaction to such backyard energy gas and oil. THE TEsRNG OF sArm GLOVES wAs sources. The fuel cell converts PARUCIPAUvE SKILLS PROGRAM IMPROVED TilROUGH AN EMPLOYEE the hydrogen in natural gas into One of the keys to the success PARTICIPATION PROJECT, both electricity and hot gam of supplying energy in the future making it a potentially more will be the creativity and deter-efficient generating source thar. mination of the people who will a central pourr plant. Fuel cells provide it.

also can be buik quickly in small During the past two years, the increments. company has refined a method to

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'The peninsula's econorny is growing as shown by the increase in comniercial sales and the large nuinber of new residential hookups in the shore conununities."

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FINANCIAL RtVitW AND t\NALYsts 18 RtionT or 51ANActsirNT 22 QuARTrntY CoststoN stock DivintNos ann PRICE RANcts 23 RtronT or INotPtNnI NT t\CCOUNTANTS 23 CoNsounATro FINANCIAL STAltsttNTS 24 Noits To CoNsounATrn FINANCIAL STATrsitNis 30 CoNsounAlto STATISTICS 42 Or rictus ann GtxtnAt IsionstATios 44

Delmarva Power & Light Company Selected FinancialData (Dollars in Thoucands)

For the Ymis Endat Decerrber31 1984 1983 1982 1981 1980 Operating Operatmg Revenues S 702,593 $ 649,799 S 636.666 S 608,504 S 520,470 Operating income 133,209 129,138 116.573 107,325 80.716 NetIncome 92,110 85.063 73,571 58,711 48,957 Earnings and Dividends Earnings Per Share 2.63 2.45 2.13 1.78 1.60 Dividends Declared on Common Stock 1.83 1.68 1.595 1.535 1.49 Average Shares Outstanding (000) 30,248 29,541 28.489 25,747 24.682 Total Assets 1,594.340 1,533,263 1.509,771 1,460,529 1,380,922 Construction Expenditures'" 79.488 76,056 110,646 84.206 110.739 -

InternalGeneration of Funds 110,485 117,582 77,061 72,346 37,866 Capitaffzation Long Term Debt <2' Prefened Stock without 567,761 567,935 592,615 596,219 569,724 I

mandatory redemption 105,000 105,000 105,000 105,000 105,000 -

Preferred Stock with mandatory redemption' ' 47,836 49,383 50,000 50,000 50,000  !

Common Equity 539,650 503,513 468,073 437,080 395.546 Total S1,260,247 St.225,831 S1,215,688 S1,188.299 S1,120,270 Capitalization Ratios Long Term Debt 45% 46% 49% 50 % 51%

Preferred Stock without mandatory redemption 8% 9% 9% 9% 9%

Prefened Stock with mandatory redemption 4% 4% 4% 4% 5% -

Common Equity 43 % 41% 38 % 37 % 35%

'Ibtal 100k 100 % 100 % 100 % 100%

Electric / Gas Sales Electric Sales (Kwh 000) 8,308.233 7,878,476 7,249,442 7,395,324 7,460,380 GasSales(Mcf 000) 17,239 16.449 15,604 16.520 15,693

"' Excludes Allowance for Funds Usn1 Dunng Consuuct10n

Includes long term debt due within one year

"' Includes mandrory redemption due wdun one year i-um -

Delmarva Power & Light Company FinancialReviewandAnalysis Results of Operations Eamings For the fourth consecuti"e year, Delmarva Power & Light Company's financial perfor-mance and strength continue to improve. Eamings per share of common stock were S2.63

- for 1984, an increase of 18: or 7% from 1983. Increased sales, impacted primarily as a result of a strong economy in the service tenitory and the cold winter weather conditions contributed to this increased earnings level. Etnings per share of common stock were S2.45 for 1983, an increase of 32: or 15% from 1!:82. The increase in 1983 earnings was primanly attnbuted to increased sales as a rest t c; an unusually warm summer, timely rate relief and reduced construction expenditu u.

I:

Dindends In December 1984, the Board of Directors incrce s" i the quarterly dividend 6.7% to 48: per I share, the eighth consecutive annualincrease. T c current indicated annual dividend rate

has increased to S1.92 per share from S1.80 per s' tre. This increase reflects a dividend policy which is to moderately increase dividencs m an anaual basis, eamings permitting, and thus provide stockholders with a fair and i ,mpetitive return on their investment.

Effective January 1,1985 all reinvested dividends under the Dividend Reinvestment Plan (DRIP) will be used to purchase shares on the opt 1 market.

g ElectricRevenuesandSales h Operating revenues reflect effects of rate changes in prices of units sold as well as vol-ume changes in unit sales. Electric revenues, nrt of fuel costs, increased S19.4 million or 4 9% in 1984 and S42.7 million or 12.1% in 1983. These increases in both years are net of Earnings and voluntary revenue refunds to Delaware retail elecaic customers. A potential refund of at i Dividends Declared least S7.5 milhon in 1985 as well as a refund of SS.8 million in 1984 were designed to bring m'd actual 1984 and 1983 eamed rctes of retum in hne with authonzed rates of retum as sales E

( of electricity.were greater than projected in both years.

L a

Electric rate changes did not have a significant impact due primanly to the fact that the

~

j company voluntarily decreased its electric rates to Delaware retail customers in June L 1984, the first reduction since 1964. A similar rate reduction for wholesale customers was 200 QIOi also approved by the Federal Energy Regulatory Commission in July 1984 The decreases offset rate increases in the company's other jurisdictions, Maryland and Virginia. Stabili-

[ '

P ( zation of the company's rates has been aided by the successful switch from oil to coal, n p~ higher sales and a montenance level construction budget. See the accompanying text

" Rate Regulation" for additionalinformation conceming rate case filings.

h m_n.mI 8

The increase in volume-related electric revenues in 1984 was primarily due to higher sales in the residential and commercial classes. These sales increases were mainly the result of n the improving overall economic situation and colder winter weather conditions in the first

- quarter of 1984. Residential sales increased 5 3% with an increase of 16.2% in residential y goo space heating sales due to the cold winter as well as an increase in customers with F electrically-heated dwelling units. An improved economy has been the main factor in sales increases considering the abnormally warm summer weather in 1983. Commercial E sales, which are not as weather-sensitive, increased 12A% being strongly impacted by the improved economy and the continued growth of commercial buildings, primanly in the so Wilmington area. In Delmarva's senace territory, the popular beach areas have been significantly impacted by the strong economy as indicated by expanded residential construction and a resulting increase in the number of commercial businesses. Future electnc sales will continue to be affected by the overall economic situation and level of

_ business activity in the company's service territory, as well as by weather conditions,

, o additional heating installations, and customer conservation offorts.

_ 80 81 82 83 84 O Earmngs 5 Dividends

. Delmarva Power & Light Company FinancialRoviewand Analysis i

GasSales Gas sales increased 4.8% in 1984 compared to a 5.4% increase in 1983. Residential space-heating sales increased 11.3% reflecting an increase in customers and the cold weather conditions earlier in the year Commercial sales increased 11.0% reflecting an 4 improved economy. Future gas sales will be affected by the price and availability of

( gas and competitive fuels, as well as by the ongoing impact of such factors as weather conditions, gas conversions and conservation efforts by our customers.

RateRegulation The company is subject to regulation with respect to its retail sales of electricity by the Delaware and Maryland Public Service Commissions and the Virginia State Corporation Commission. which have broad powers over rate matters, accounting and terms of service. The Federal Energy Regulatory Commission (FERC) exercises jurisdiction with respect to the company's accounting systems and policies and the transmission and sale at wholesale (resale) of electric energy in interstate commerce.

'L The company has been fihng rate increase applications on an annual basis in an effort to have rates set that more closely reflect current costs. However, due to the stabilization of rates in Delaware, the company filed a 1.4% decrease in electric rates effective June 1, 1984, and has pledged not to seek an electric rate increase in Delaware which would become effective before June 1985. A similar rate reduction of 1.5% for wholesale customers was also approved by the FERC effective June 20,1984.

Rate increases were filed in the company's other retail jurisdictions in 1984 and were Generation structured to recover increases in operating costs and to improve the return on utility investment. During 1984, rate increases were granted in Virgmia for S449,000 or 2.7%

i

[ and in Maryland for S4.8 milhon or 3.9%. On August 3,1984, the company filed an appu-cation with the Delaware Public Service Commission for an increase in gas revenues of too _ .-

SS.2 million or 5.5%. The case is still pending and a final order is expected by March 1985.

$0khk

, FuelMix e

i m(8.h

? dq The effective customer fuel cost, which includ.s fuel, interchange and purchased power costs, has decreased 5% since 1982, from 2.06 :/kWh in 1982 to 1.96 :/kWh in 1984 reflect-

[ ing a favorable shift in the company's interchange power position and the use of less it expensive generation facilities and sources. In 1984, generation from coal, nuclear and l oil sources was 65%,11% and 24% respectively.

40 IlI

! 20 Il O

II 81 82 83 84 85 a oil .

O Nuclear o coal

5 Delmarva Power & Light Company

( FinancialReviewand Analysis OperaungExpenses Other operation and maintenance expenses have increased since 1982 primanly as a result of higher payroll and associated benefits. the increased costs of matena'.s and supplies, and the higher cost of maintenance of jemtly-owned nuclear generating units.

Dunng 1984, both Salem Units #1 and #2 were removed from service due to electnc generator failures. Peach Bottom Unit #3 was also removed from service for a portion of the year for mamtenance repairs. Salem #1 has been retumed to service and the other units aie scheduled to begin operating again by the end of the first quarter of 1985.

Irnpac:offnilation Supplementary unaudited financialinformation showing the estimated effects of inflation on the company's operations is shown in Note 12 of the Financial Statements This data should ba viewed as estimates of the approxtmate effects of inflation, rather than as precise measures.

Liquidityand Capital Financingand Capitahzadon Resources The company is committed to maintaining its fmancial strength and flexibihty and believes that it is important to have a strong capital structure. The company's capital-ization goals are 45-48% Eng-term debt 10-12% preferred stock and 42-45% common

equity. These goals have been attained by increasing common equity through increased earnings and the sale of common equity pnmarily through the Dividend Reinvestment Plan. New debt has been mmimized and has been primarily issued on a tax-exempt basis See " Selected Financial Data" for the actual capitahzation ratios.

Due to contmued improvements in cash flow and to control the rapidly improving equity position, the company further modified its Dividend Reinvestment and Common Share Purchase Plan (DRIP). Effective January 1985, all reinvested dividends are being used to Ratio of Eamings purchase shares on the open market.

to FixedInterest Charges Credit ratings on the company's first mortgage bonds were further upgraded during the tsEc mM year. Mocdy's Investors Service has raised its rating to Aal from Aa2 and Standard &

Poor's raised its rating to AA. Duff and Phelps raised the rating from a D&P '3' to a D&P '2' 5

which is equivalent to the Aal rating from Moody's. The upgradmgs are primarily due to the company's continued strong fmancial performance.

L E The Ratio of Earnings to Fixed Charges, which is measured by the amount of pre-tax l eamings as related to fixed interest charges, showed improvement over the last three 4

years. This ratio, computed under the SEC method, for 1934 was 4.4 as compared to 3.9 in 1983 and 3.5 in 1982.

In 1984, financing activity consisted of common equity sales under the Dividend 3~g I Reinvestment Plan as well as the issuance of S15 5 million Floating Rate Weekly Demand Gas Facihties Revenue Bonds (Flexible Demand Series). The Flexible Demand Series, issued through the Delaware Economic Development Authonty, was used to refund S5.5

) mi!! ion short-term tax-exempt commercial paper with the balance being used for the -

i future construction of gas facihties. As of December 31,1984 there was $33 million in 7g E outstanding tax-exempt commercial paper classified as a term loan agreement which is expectedtoberefinancedonamorepermanentbasis.Thecompanydoesnotexpoctany

[ further externallong-term financings through 1986 except for the aforementioned refinancing and future refundmgs of matunng debt.

[

t lIIlI 1.0]Illl 0

80 81 82 83 84

E i Delmarva Power & I,ight Company FinancialReviewand Analysis Capital and Construction Requirements For the period of 1982-1984, the company had total capital requirements of $387 milhon, incluing S266 milhon for construction (excludmg AFUDC). During the same penod, S305 million was generated intemally which represents 79% of the capital requaements and

115% of the construction requirements. Capital requirements fc: the period 1985-1987 are estimated to be $338 million, including S315 milhon for construction (excluding AFUDC).

The company presently anticipates that, for the pened 1985-1987, intemally generated funds will be S367 million which equals 109% of the total capital requirements and 116% of its construction requirements.

The company estimates that its annual energy and peak load growth for the next 10 years will be at a rate of 2.22% and 1.40%, respectively. The company's present generating capacity of 2.225 megawatts provides a rescIve of approximately 37% against its company peak of 1,625 mw experienced in the summer of 1983. In 1984 the company peak was 1,624 mw. h1 addition, dunng January 1985 the company reached an all time peak of 1,682 mw due to the extreme winter weather conditions The company continues to plan for new

! generation at Vienna, Maryland (Nanticoke til)in the mid-1990 s. Prior to the commitment of significant capital expenditures, the company is looking at various altemative scenarios which may influence the timing and method of meeting customer load requirements.

These scenarios include cogeneration; implementing effective load management; gen-eration options; weather; economic demographics and customer behavior. The company continues to be committed to maintaining a high degree of flexibihty as long as possible in its plannmg to meet future capacity requirements.

Construction The construction i rogram and related expenditures have been developed in response Expenditures to the need to extend the hfe of existing production plant, upgrade the transmission and Internally and distnbution systems and provide for projected growth. These expenditures may Generated Funds vary from the estimates set forth above as a result of, among other factors, changes in (mias cf dcL:s; anticipated inflation, timing of expenditures, regulation and legislation, rates of load

, , growth, hcensing and construction delays, results of rate proceedings, and the cost 12s .

and availabihty of capital.

I " O3 The company issues commercial paper supported by adequate hnes of credit to meet -

• p d; ? llh 1

seasonal fluctuations m working capital requirements as well as the interim financing necessary for construction prolects. The company has lines of credit with banks in the amount of S14.5 million. These lines are available for bank loans and to secure k E commercial paper borrowmgs as the need arises. At December 31,1984, the company had no commercial paper or bank loans outstandmg.

+ c Liquidity The company's liquidity is affected principally by the construction program and, to a i lesser degree, by other capital requirements such as maturing debt and sinking fund re-so _ quirements. As a result of lower construction expenditures and an improved fmancial con-i dition, temporary cash investments and marketable securities increased from S7.9 milhon in 1933 to S27.6 million in 1984 with no short term debt outstanding at the end of either

?

year. The company's plan for utilizing cash generated from ongoing operations beyond construction Iequirements is to focus on energy diversification and finanaal opportunities.

25 4

0 83 84 85 86 87 5 Internallyoenerated Funds

- O Construction Expenditures

Ei- Delmarva Power & Light Company

" Report of Management on the FinancialStatements Report ofManagement The conschdated financial statements of Delmarva Power & Light Company have been prepared by company personnelin conformity with generally accepted accounting pnnciples, based upon currently available facts and circumstances and management's best estimates and judgements of the expected effects of events and transactions. It is the responsibihty of management to assure the integnty and objectivity of such financial statements and to assure that these statements fauly report the financial position of the company and the results of its operations.

Delmarva Power & Light Company mamtains a system of intemal controls designed to provide reasonable, but not absolute, assurance of the rehabihty of the financial records and the protection of assets. The intemal conti01 system is supported by wntten

.- administrative policies, a program of intemal audits, and procedures to assure the selection and traming of quahfied personnel.

These fir.ancial statements have been examined by Coopers & Lybrand, independent l certified public accountants. Their examination was conducted in accordance with generally accepted auditing standards which include a review of intemal accounting controls to determine the nature, timing and extent of auditing procedures, as well as such other procedures they deem necessary to produce reasonable assurance as to the faimess of the company's hnancial statements and to enable them to express an opinion thereon.

The audit committee of the Board of Directors, composed of outside Directors only, meets with management, intemal auditors and the independent accountants to review f accounting, auditmg and financial reporting matters. The independent accountants are appointed by the Board on recommendation of the audit committee, subject to i shareholder approval.

Su ,

l (

Nevius M.'Curtis Chairman of the Board and Chief ExecutiveOfficer

\

$ Roger D. Campbell Vice President and Chief FinancialOfficer

+

Delmarva Power & Light Comp any E

L

?

w l= Quarter 1y Common Common Stock

StockDMdends andPricoRanges The company's common stock is bsted on the New York and Philadelphia Stock

(

Exchanges and has unlisted tradmg pnvileges on the Cincmnati, Midwest and Pacific Stock Exchanges.

The company had 63,094 holders of common stock as of December 31,1984.

The company's Certificate ofIncorporation and the Mortgage and Deed of Trust securing the company's outstanding bonds contain restrictions on the payment of dividends on 1: common stock which would become applicable if its capital and retained earnings fall T below certain specified levels or if preferred stock dividends become in anears.

4 The retained earnings available for dividends on common stock as of December 31.1994 were approximately S121,974,000 under the most restrictive of these provisions.

I 1984 1983

, Dividend Price Dividend Price Declared High Low Declared High Low First Guarter S.45 19 % 17 % S 41 167/ 15 %

? Second Quarter .45 18 % 17 % .41 17 15 %

i Third Quarter .45 20 % 17 % .41 175's i

15 %

Fourth Quarter .48 22 % 20 % .45 19 % 16 %

ReportofIndependent To theBoardofDirectors

Certified PubHc andStockholders

,; Accountants Delmarva Power

& LightCompany Wilmington, Delaware We have examined the consohdated balance sheets and statements of capitalization of Delmarva Power & Light Company and subsidiary companies as of December 31,1984 and 1983, and the related consolidated statements of income, changes in common stockholders' equity and sources of funds for construction expenditures for each of the three years in the period ended December 31,1984. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessaryin the circumstances. '

In our opinion, the fmancial statements referred to above present fairly the consolidated financial position of Delmarva Power & Light Company and subsidiary companies at December 31,1984 and 1983, and the consohdated results of their operations and sources of funds for construction expenditures for each of the three years in the period ended

' December 31,1984, in conform.ity with generally accepted accountmg principles apphed on a consistent basis.

COOPERS & LYBRAND l

1900 Three Mellon Bank Center

[ Philadelphia, Pennsylvania

[ February 7,1985 5

I E

7 Delmarva PowerO UghtCompany

. ConsolidatedStatements ofIncome (Do!!arsin Thousands) 1984 1983 1982 For the YoursEndedDecember31 Electric S 584,163 S 542,252 S 534,770 Operating Revenues 84,747 101,578 94,358 Gas 16,852 13,189 17,149 Steam 702,593 649.799 636,666  ;

OperatingExpenses . Operation:

~

Fuelfor electric generation 278,474 275,117 239,965 (108.011) (108,654) (79,678)

Netinterchange and purchased power 74,082 72,475 58,690 Purchased gas Deferralof energy costs ( 2,345) (24,507) 20,837 108,001 107,496 100,956 Other operation 56,752 53,781 43,947 Maintenanc9 l 53,702 49,596 49,929 Depreciation 77,577 67,584 58,500

'Ihxes onincome 31,152 27,773 26,947 Taxes other thanincome 569,384 520,661 520.093 133,209 129,138 116,573 OperatingIncome OtherIncome ~ Allowance for other funds 2,447 4,548 used during construction 2,780 Other, net 3,243 2,440 2,015 6,023 4,887 6.563 Income BeforeInterest 139,232 134,025 123,136 Charges Long-term debt 45,815 45,697 48,895 Interest Charges 2,090 3.999 2,181 Short-term debt and other Allowance for borrowed funds used during construction ( 783) ( 734) ( 1,511) 47,122 48,962 49,565 92,110 85,063 73,571 Earnings Netincome Dividends on preferred stock 12,662 12,818 12,818 Eamings applicable to common stock $ 79,448 S 72,245 S 60,753-Average shares outstanding (thousands) 30,248 -29,541 28,489 Common Stock Eamings per average share S 2.63 S- 2.45 S 2.13 Dividends declared per share S 1.83 S 1.68 S 1.595 See accompanying Notes to Consobdated Anancial statements.

Delmarva Power & 1.ight Company Consolidated Statements of Sources of Funds for Construction Expendit ares l

(Dollars m Thousands)

For the Years Er&d December 31 1984 1983 1982 im Sources ofFunds Provided from operations:

Netincome S 92.110 S 85.063 S 73,571 12,818 12,818 I Less-Preferred dividends declared 12.662 49.668 45.471

-Common dividends declared 55.361 Earnings remvested during the year 24,087 22.577 15.282 Items not requinng (providing) funds:

Depreciation 58,464 56,599 51,121 Amortization of credit arising from r ( 7,003) ( 1,192) sale of contracts ( 4.762) 2,071 2,394 6,192 Amortization of nuclear fuel

?

Allowance for funds used dunng construction ( 3.563) ( 3,181) ( 6,059) a 3,495 5,718

Investment tax credit adjustments, net 2,253 Deferred income taxes, net 31.935 42,701 5,999 Funds provided from operations 110,485 117.582 77.061 Extemalfinancing:

Long-term debt:

Flexible demand series 15.500 -

b 15,500 ( 3,550) f- 'Ibrm loan ( 5.500)

Common stock 11.921 12.863 15,711

' Redemption oflong-term debt (10,100) (40,100) -

Redemption of preferred stock ( 1.418) ( 617) -

Extemally financed funds 10,403 (12.354) 12,161 Other sources (uses):

Decrease (increase) in warking capital * (29,557) (17,709) (13,172)

Construction funds held by trustee ( 4.933) ( 1,041) 32,507 Other, net ( 6.910) (10.422) 2,089 b Other sources (uses) (41.400) (29.172) 21,424 I Construction Expenditures (excludmg allowance for funds used during construction) S 79.488 S 76.056 S110,646

'lbmporary cashinvestments S(12,150) S 634 S( 1,545)

_- Decrease (increase)

Marketable securities ( 7,604) ( 4.948) ( 2,035) i in working capital *

- Accounts receivable ( 3.050) ( 7.586) 679 s Deferred fuelcosts, net ( 1,831) (23,126) 21,374 Inventories (15.114) 5.428 ( 9,516)

Accounts payable ( 5.865) 7,993 ( 3,607) s (21,877)

Taxes accrued 6.842 ( 4.488)

Interest accrued 908 ( 1,016) ( 9.265)

Other, net 8,307 9,400 12.620

'Ibtal S(29,557) S(17,709) S(13,172)

• Cther than long-term debt due and preferred stock tedeemable within one year and current d9terred r inccme taxes See accompanymg Notes to Const idated Fmancial Statements k

Delmarva Power & Light Company ConsolidatedBalanco Sheets (Dctus in Thousands)

ASSETS As ofDecember31 1984 1983 UtilityPlant- Electric S 1,555,174 S 1,499,606 ae originalcost Gas 83.104 75,067 Steam 24,143 24,108 s Common 71,391 65.772 1,733,812 1,664,553 Less: Accumulateddepreciation 488,987 440.079 Net utihtyplantin service 1,244,825 1,224,474 Plant held for future use 15.022 14,844 Construction work in progress 36,372 36,264 Nuclear fuel, at amortized cost 24,955 22,520 1,321,174 1,298,102 NonutilityPropertyand Net nonutihty property, at cost 5,385 12.436 OtherInvestments Construction funds held by trustee 15,578 10,645 20,963 23.081 CurrentAssets Cash 16,673 14,674 Temporary cash mvestments 13,061 911 Marketable secunties, at cost 14.587 6,983 Accounts receivable:

Customers 48,839 47,938 Other 24,568 22,419 Inventories, at average cost:

Fuel (coal, oiland gas) 68,364 51,693 Materials and supplies 21,975 23,532 Prepayments 3,776 3.943 Deferred income taxes 1,661 3,128 213,504 175,221 Deferred Charges and Refundable taxes and interest 32,322 30,134 OtherAssets Unamortized debt expense 4,827 4,915 Other 1,550 1,810 38,699 36,659 Total S 1.594,340 S 1,533.263 Sm accompanymg Notes to Conscl: dated Financial Statements.

Delmarva Power & Light Company Consolidated BalanceSheets tDollars in Thousands)

LIABILITIES As of Demmber31 1984 1983 Capitalization Common stock S 102,876 S 100,714 Additional paid-in capital 235,473 225,585 (see Statements l of Capitalization) Retained earnings 201,301 177,214 Totalcommon stockholders' equity 539,650 M,513 Preferred stock:

Without mandatory redemption 105,000 105,000 With mandatory redemption 47,036 48,583 Long-term debt 557,661 557,835 1,249,347 1,214,931 Current Liabilities Long-term debt due and preferred stock redeemable vathin one year 10,900 10,900 Accounts payable 26,244 32.109 Thxes accrued 20,636 13,794 Deferred fuel costs, net 1,049 2.880 Interest accrued 20,197 19,289 Dividends declared 14,631 13,409 Nuclear fueldisposalcosts 10,888 -

Other 15,026 16,229 119,571 108,610 Deferred Credits And Credit ansing from sale of contracts 27,949 33,637 OtherLiabilities Deterred income taxes, net 128,444 98,744 Deferredinvestment tax crechts 65,386 63.133 Nuclear fueldisposal costs -

10,888 Other 3,643 3,320 225,422 209,722 Other Commitments and Contingencies (Notes 6 and 10)

'Ibtal S 1,594,340 S1,533,263 See acccmpany:ng Notes to Consohdated Fmancial Statements.

T Delmarva Power O Light Company Consolidated Statements of Capitalization (Dollarsin Thousands)

AsofDecember31 1984 1983 Common Stockholders' Common stock, par value S3.375 per share Equity authorized 35,000,000 shares, outstanding 30,481.925 and 29,841,182 shares S 102,876 S 100,714 Additionalpaid-in capital 235.473 225,585 ,

-Retained earnings 201,301 177,214 l

'IbtalCommon Stockholders' Equity 539,650 43% 503,513 41%

Cumulative Preferred Par value S25 per share,3,000,000 shares authorized, none outstanding Stock Par value S100 per share,1,800,000 shares authorized Without Mandatory Redemption:

Series Issued 3.70L4.56% 240,000 shares 24,000 24,000 .

5.00W7.84% 330,000 shares 33,000 33,000 7.88L8.96% 480,000 shares 48,000 48,000 Preferred Stock without Mandatory Redemption 105,000 8"6 105,000 9%

With Mandatory Redemption:'

9.00% Series 192.000 chares 19,200 20,000 12.56% Series 300,000 shares 30,000 30,000 49,200 50,000 Less: Reacquired preferred shares heldin treasury (at cost) 1,364 617 47,836 4% 49,383 4%

Less: Amount to be redeemed within one year 800 800 Preferred Stock with Mandatory Redemption 47,036 48,583 Long-Term Debt First Mortgage and Collateral' Rust Bonds:

Materity Interest Rates May 1,1984 3W% - 10,000 Dec.1,1985 3h% 10,000 10,000 Jun.1,1988 3%% 25,000 25,000 1994-1997 4%W6%% 50,000 50,000 1998-2002 7%-11%% 158,100- 158,100 2003-2007 6.6L11% 121,250 121,250 2008-2011 9%L12% 111.900 111,900 476,250 486.250 Pollution Contro1 Notes Series,1973 5.7% effective rate, due 1985-1998 7,800 7,900 Series,1976 7.3% effective rate, due 1992-2006 34,500 34,500 42,300 42,400 Flexible Demand Series, due 2014 15,500 -

Term Loan 33,000 38,500 Unamorttzed prem!um and discount, net 711 785 567,761 45% 567,935 46%

Long-term debt due within one year (10,100) (10.100)

'Ibtal Long 'Ibrm Debt 557,661 557,835

'Ibtal Capitahzation S 1,249,347' 100 % S1,214,931 100 %

• Redemption pnces at December 31,1984 are $107 (9% Series) and $113 (12.56% series).

See accompanying Notes to Consobdated Financial Statements

[ DelmarvaPowerSUghtCompany ~

l s

. Consokiated Statements of Changes in Common Stockholders' Equity (Desus m husands)

Additional Fa the Throe YearsEnded Common Pat Paid-in Retained *

. December 3L 1564 Shares Value Capital Eamings 7btal Balanceasof ~

January 1,1982 27,908,345 S 94,191 S203,534 S139,355 S437,080 Netincome 73,571 73,571 Cash dividends declared Common stock (S1.595) (45,471) (45,471)

P4eferred stock (12,818) (12.818)

Issuance of common stock:

TRASOP 290,671 981 3,346 4,327 DividendReinvestment and Common Share Purchase Plan 849,429 2,867 8,767 11,634 Common stock expense ( 253) ( 250)

Balance as of December 32,1982 20,048.445 98,039 215,397 154,637 468,073 Netincome 85,063 85,063 Cash dividends declared Common stock (S1.68) (49,668) (49,668)

Preferred stock (12,818) (12,818)

Issuance of common stock:

DividendReinvestment and Common Share Purchase Plan 792,737 2,675 10,526 13,201 Conunon stock expense ( 338) (- 338)

Balance as of December 32,1983 29,841,182 100.714 225,585 177,214 503,513 Netincome 92,110 92,110 Cash dividends declared Common stock (St.83) (55,361) (55,361)

Preferred stock (12,662) (12,662)

Issuance of common stock:

Dividend Reinvestment ~

and Common Share Purchase Plan 640,743 2,162 9,888 12.050 Gain on retirement of preferred stock 125 125 Common stock expense ( '125) ( 125)

Balance as of December 31,1984 30,481,925 S102,876 S235,473 S201,301 S539,650-See accompanymg Notes to Consobilted Fmancal Statements c

Y '

' DelmarvaPowerCLightCompany -

' Notes to Consoiktated FinancialStatements

'1. Signincant FmancialStatements AccountingPolicies

.The consolidated financial statements mclude the accounts of the company and its totally-held subsidiaries, Delmarva Energy Company and De!marva Industries, Inc.

Accounting policies are in accordance with those prescribed by the regulatory

- commissions having jurisdiction with respect to accounting matters.

In December 1982, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 71 " Accounting for the Effects of Certain Types of Regulation" (Statement). The provisions of the Statement are effective with respect to the company's 1984 financial statements. Implementation of this Statement does not have a significant impact on financial position or results of operations.

, Revenues

Revenues are recorded at the time billings are rendered to customers on a monthly cycle basis and include rate increases permitted to be billed subject to refund pending final approval. At the end of each month, there is an amount of unbilled electric and gas service which has been rendered from the last meter reading to the month-end.

FuelCosts Fuel costs (electric and gas) are deferred and charged to operations on the basis of fuel costs included in customer billings under the company's tariffs, which are subject to periodic regulatory review and approval.

Depreciation andMaintenance The annual provision for depreciation is computed on the straight-hne basis using composite rates by classes of depreciable property. Provision for the costs of decommissioning of nuclear plant is made to the extent of the net cost of removal allowed for rate purposes (approximately 20% of plant cost). The relationship of the annual provision for depreciation for financial accounting purposes to average depreciable property was 3.4% for 1984 and 1983, and 3.6% for 1982.

The cost of maintenance and repairs, including renewals of minor items of property, is charged to operating expenses. A replacement of a unit of property is accounted for as an addition to and a retirement from utihty plant. The original cost of the property retired is charged to accumulated depreciation together with the net cost of removal. For income tax purposes, the cost of removing retired property is deducted as an expense.

NuclearFuel The company's share of nuclear fuel costs relating to jointly-owned nuclear generating -

stations is charged to fuel expense on a unit of production basis, which includes a factor

- for spent nuclear fuel disposal costs pursuant to the Nuclear Waste Pohey Act of 1982. The company is collecting future storage and disposal costs for spent fuel as authorized by the regulatory commissions in each jurisdiction and is paying such amounts quarterly to the -

Department of Energy.

7,

. Delmarva PowerO Light Company

? Notes to Conso&tated FmancialStatements 1

1 L Signihcant incomeTaxes

AccountingPolicies (continued) Deferred income taxes result from timing differences in the recognition of certain income and expenses for tax and financial accountmg purposes. The principalitems accounting l

for deferred income taxes are: (1) use of the Accelerated Cost Recovery System and other accelerated depreciation methods for income tax purposes, (2) deferred fuel and gas production costs deducted cunently for income tax purposes, and (3) other timing differences involvmg the capitalization of certain taxes and overhead costs.

Investment tax credits utilized to reduce federalincome taxes are deferred and generally amortized over the usefullives of the related utility plant. An additionalinvestment tax credit of % % in 1983 and 1984 related to the Payroll Based Employees Stock Ownership Plan (a "PAYSOP" plan) and of IW % in 1982 related to the Tax Credit Employees Stock

- Ownership Plan (a "TRASOP" plan) does not affect net income and is recorded as a liabihty until the contnbution is made to the Plan.

Allowance for Funds Used During Construction Allowance for funds used during construction (AFUDC) is a non-cash item and is defined in the regulatory system of accounts as "the net cost for the period of construction of borrowed funds used for construction purposes and a reasonable rate on other funds so used." AFUDC is segregated into components: (1) the interest on debt component l'

(" allowance for borrowed funds used during construction"), which is net of taxes and classified as a credit to interest charges, and (2) the common stock equity and preferred dividend component (" allowance for other funds used during construction"), which is classified as an item of other income. AFUDC is considered a cost of utility plant with a concurrent credit to income. It is excluded from taxable income for tax purposes. The rate used in determining AFUDC, which includes semi-annual compounding, was 9.0%

in 1984,7.8% in 1983, and 9.1% in 1982.

2. Taxes onincome income tax expense for 1984,1983 and 1982 is as follows:

(Douarsin Thousands) 1984 1983 1982 Operations:

Federal:

Current 'S 36,131 S 16,557 S 37,508 Defened 27,380 36,654 4,700 State:

Current - 6,560 4,345 7,672 Deferred 4,555 6.047 1,363

!. Investment tax credit adjustments, net - 2,951 3,981' 7,257 Otherincome:

e Cunent 1,528 816 2.046 Deferred - -

- (64)

'Ibtal S 79,105 S 68,400 S 60,482 Investment tax credits utilized to reduce federal income taxes payable amounted to

}- S6,890,000 in 1984, S7,654,000 in 1983 and S10,445,000 in 1982. The amounts for 1984,

[  : 1983 and 1982 include Employee Stock Ownership Plan credits of S707,000, S360,000 and j St.553,000lrespectively.-

u

6

? DehnarvaPowerd Light Company Notes to Consolklated FinancialStatements

2. Taxes onIncome. The following is a reconciliation of the difference between income tax expense and the (continued) amount computed by multiply'ing income before tax by the federal statutory rate:

(DouarsinThousands) 1984 1983 1982 1 Amount Rate Amount Rate Amount Rate Statutoryincome tax expense S 78,758 46% S 70,594 46% S 61,664 46%

Increase (Decrease)in taxes resulting from:

Exclusion of AFUDC for income tax purposes (1,639) (1) (1,463) (1) (2,787) (2)

Depreciation notnormalized 2,490 1 ( 171) -

(1,312) (1)

Investment tax credits amortized toincome (3,939) (2) - (3,673) (2) (3,188) -(2) i State income taxes, net of federaltax benefit 6,067 3 5,682 4 5,065 4 Amortization of credit arising from sale of contracts (2,190) (1) (3,221) (2) ( 548) (1) -

Other, net ( 442) -

652 -

1,588 1-Income tax expense S 79,105 46% S 68,400 45% S 60,482 45%

i The components of deferred income taxes relate to the following tax effects of timing differences between book and tax income:

l (DOUatSInThousands) 1984 1983 1982 Depreciation S 18,887. S 19,251 S 18,493 Deferred fuelcosts 954 12,480 (10,402)

Capitalized overhead costs 1,508 1,648 926 Nuclear fueldisposalcosts -

5.675 ( 2.054)

Pollution controlamortization 3,687 3,548 -781 ADR repair allowance 4,863 - -

Other, net 2,036 99 ( 1,745)

Total S 31,935 S 42,701 S 5,999 The company has not provided deferred income taxes of approximately S129 million on -

cumulative timing differences arising before the adoption of full tax normalization for ratemaking purposes by the regulatory authorities. The company is currently collecting ,

the unnormalized taxes in its Delaware and resale electric rate jurisdictions, on a levehzed .!

basis, over thelife of the related plant facilities with similar rate treatment anticipated for the gas jurisdiction beginnmg in 1985. For the other jurisdictions, it is estimated that the amounts will be recoverable for rate purposes when paid.

The company's federalincome tax returns have been examined for the years 1975 through 1979. The company has been assessed additional taxes and interest resulting -

predominantly from the taxability, on an ordinary income basis, of the net proceeds from the sale of contracts for a nuclear steam supply system. The assessment would result in net additional federal and state income taxes of approximately S20.3 million and interest of

$17.6 million. These amounts are net of anticipated refunds that result from the reversal of the previous tax treatment applied to the sale of the contracts. The company's appeal on the taxability of the net proceeds is presently in Tax Court. In the opinion of management and tax counsel, it appears probable that this issue will ultimately be resolved as taxable in an amount which approximates taxes on a capital gains basis. During 1982 the com-pany made federal tax and interest payments totalhng S28.5 million on a capital gains basis, to prevent the compounding of interest on the tax deficiency. The ultimate dispo-sition of this issue will not have a material effect on the company's fmancial position or results of operations.

Delmarva Power L LightCompany Notes O Consolidated FinancialStatements (Dollarsin Thousands)

3. Taxes Other Than 1984 1983 1982

- Delaware utility S 13.732 S 12,341 S 11,733 Property 6,652 6,483 6,129 Other gross receipts 4,995 4,149 3,601 Payroll, franchise and other 5,773 4,800 5,484 Total S 31,152 S 27,773 S 26,947

- 4. Pension Plan and The company has a trusteed noncontributory pension plan covering all regular em-Post-Retirement ployees Pension contubutions for 1984,1983, and 1982 were S2,354,000, S4.400,000 and BeneSts _ S4,895,000 includmg S1,010,000, S765,000 and S914,000 charged to construction, respec-tively. The contnbutions provide for normal cost and amortization of prior service costs over periods of five to twenty-five years.

The actuanal present value of accumulated plan benefits, determined as of January 1, 1984, was $80,311,000 for vested benefits and S13,816,000 for accrued nonvested benefits.

The market value of net assets at that date, available for plan benefits were S191,062,000.

The actuarial present value of accumulated plan benefits, determined as of January 1,1983 was $72,432,000 for vested benefits and $11,901.000 for accrued nonvested benefits. The market value of net assets, at that date, available for plan benefits were S161,749,000. The assumed rate of retum used in determining the actuarial present value of accumulated plan benefits was 8.0% for 1984 and 1983.

The company provides certam health care and hfe insurance benefits for retired employ-ees. Substantially all of the company's employees may become eligible for these benefits if they reach normal retirement age while still working for the company. The company recognizes the cost of providing those benefits by expensing the insurance claims as they are paid. These costs totalled $1,640,000, S2,076,000 and St.445,000 for 1984,1983 and 1982, respectively.

S. Capitalization RetainedEamings The current first mortgage bond indenture restricts the amount of consolidated retained eamings available for cash dividend payments on common stock to $35,000,000 plus accumulations after June 30,1978, which available amount at December 31,1984 was apptoximately$121,974.000.

PreferredStock The annual preferred dividend requirements on all outstanding preferred stock at

' December 31,1984 are S12,599,000, If preferred dividends are in arrears the company may not declare common stock dividends or acquire its common stock.

WithoutMandatoryRedemption These series may be redeemed at the option of the company at any time, in whole or in part, at the various redemption prices fixed for each series (ranging from $103 to S106 at December 31,1984).

'a.e m

Delmarva PowerOLightCompany

- Notes to Consolidated FinancialStatements

5. Capitalization - With MandatoryRedemption (continued)

(1) The 9% series, issued in 1978, has a sinking fund requirement, which commenced in December,1984, to redeem 8,000 shares annually at $100 per share plus accrued and unpaid dividends. At the option of the company, an additional 8,000 shares may be redeemed on any sinking fund date, without premium. (2) The 12.56% series, issued in 1980. has a sinking fund requirement, commencing in December 1986, to redeem 9,000 shares annually at S100 per share plus accrued and unpaid dividends. At the option of the 7

company, an additional 9,000 shares may be redeemed on any sinking fund date, without premium. (3) Under certain conditions these series may also be redeemed at the option of the company. (4) Aggregate mandatory sinking fund redemptions during the next five years are S800,000 in 1985 and S1,700,000 in 1986,1987,1988 and 1989- (5) During 1984, the

company purchased 17,150 shares of its 9% preferred stock for a total cost of S1,418,000. In December 1984, 8,000 shares were used to satisfy the mandatory sinking fund requirement.

As of December 31,1984,16,350 shares are held in Treasury at a cost of S1,364,000.

Long-Term Debt (1) Sinking iund provisions with respect to substantially all issues of the First Mortgage and Collateral Rust Bonds require that there be deposited annually with the Trustee cash equal to one percent (1%) of the greatest aggregate principal amount at any one time l outstandmg There shall be credited against such cash requirements (a) an amount not exceeding sixty percent (60%) of the bondable value of property additions which the company then elects to make the basis of this credit, and (b) the aggregate principal amount of bonds which might then be made the basis of the authentication and delivery of bonds and which the company then elects to make the basis of this credit. For the years 1982-1984, the company elected to certify property additions to satisfy its sinking fund requirements equal to 1% of each series as permitted by the indenture.

(2) Substantially all utility plant of the company now or hereafter owned is subject to the lien of the related Mortgage and Deed of Rust.

(3) Pursuant to a bank loan agreement the company has a S33,000,000 revolv:ng credit commitment through November 1,1989, convertible into a term loan due November 1, 1992. From time to time, the company issues short-term tax-exempt revenue notes, and, in recognition of the long term financing commitment, these notes have been classified as long-term debt (term loan). The loan agreement requires a commitment fee of %% on any unused portion of the revolving credit commitment and term loans may be prepaid at any time without penalty and would bear interest at 100% of the prime rate.

(4) On November 1,1984 the company issued, through the Delaware Economic -

Development Authority, $15,500,000 tax-exempt Floating Rate Weekly Demand Gas Facilities Revenue Bonds-Series 1984, due November 1, 2014 (Flexible Demand Series).

Proceeds were used to refinance SS 500,000 of existing tax-exempt commercial paper, with the balance being deposited with the trustee to finance the construction of certain gas facilities. This series was collateralized with S16,500,000 First Mortgage Bonds due November 1, 2014, which secure repayment of principal and accrued interest. The interest rate on the Flexible Demand Series is subject to change weekly on the basis of .

prevailing market rates for these bonds and may be converted to a fixed rate under specified conditions. The Flexible Demand Series has a put option for the bondholden whereby the bonds can be presented for payment at specified times. The bonds can t.

sold by the remarketing agent. The company has sufficient long-term financmg arrangements available to redeem any bonds not remarketed. In recognition of the long-term financing capability, these bonds have been classified as long term debt.

(5) Matunties of long-term debt during the next five years are 1985-S10,100,000; 1986 -

and 1987-S150,000; 1988-S25,150,000; 1989-S150,000.

(6) The annual interest requirements on all bonowings classified as long-term debt at December 31,1984 ate S46,182.000.

DelmarvaPower at LightCompany -

JWotes to Consolidated Financia1 Statements

5. Capitalisation . ' Unamortized Debt Discount, Premium and Expense

- (continued)

These amounts are amortized on a straight line basis over the hves of the long-term debt issues to which they pertain.

' 8. Commitments ' The company estunates that approximately S107,745,000, excludmg AFUDC, will be expended for construction purposes in 1985. The company also has commitments under

' long-term fuelsupply contracts.

Under SFAS No. 71, regulated industries were required to adopt the lease accounting regmrements of SFAS No.13 for all capitalleases commencmg on or after January 1,1983.

The company's capitalleases commencing after January 1,1983, were not material and,

- therefore, were not recorded. All capitalleases,includmg leases commencing prior to

' January 1983, were treated as operating leases. However, if capital leases had been recorded on the balance sheet, related assets and liabilities would have increased by S13.324,000 and $13,791,000 at December 31,1984 and 1983, respectively.

Mmimum commitments as of December 31,1984 under all non-cancellable lease agreements are as follows:

1985 S 5.892.000 1986 4,617,000 1987 3.213,000 1988 3,116,000 1989 1,159,000 Remainder 4,149,000 Total S 22.146,000 The total minimum rental commitments are applicable to the following types of property; railroad coal cars, S1,664,000; distnbution facihtles, $5,022,000; other, pnncipally transportation and computer equipment, S15.460,000. Rentals charged to operating expenses aggregated S6,213,000 in 1984, S6,677,000 in 1983 and $6,837,000 in 1982.

Nuclear fuel requiiements for Peach Bottom Generatmg Station are being provided by the operating company through a fuel purchase contract. The company is responsible for payment of its share of fuel consumed and interest expense. Nuclear fuel expense totalled S6,072,000 in 1984 S4.283,000 in 1983 and $7,112,000 in 1982.

The company has an agreement providmg for the availability of fuel storage and pipeline :

facilities through 1999. Under the agreement, the company must make spect! led minimum -

payments monthly, which totaled S1,912,000 in 1984, S2.101.000 in 1983 and S2,454,000 in

= 1982. The amount of required payments is S1,682,000 tn 1985, $2,004,000 in 1986,'

S1.701,000 in 1987, $1,173,000 in 1988; S1,027,000 in 1989 and S11,915,000 between 1990

' and 1999.

70 Sale of Contracts The proceeds received by the company for the sale in 1975 of the contracts for a nuclear .

' forNuclearPlant steam supply system (Summit) and related fuel, net of related plant expenditures which are considered of no future value to the company, are classified as a deferred credit in the balance sheet, The credit has been reduced by applicable income taxes and reiated interest (See Ncto 2). The company has obtained regulatory approval for this account-ing treatment. As a result of ratemaking ordets commencmg in 1982, the company is amortizing the not credit in all retall jurisdictions over approximately five years and is recording the credit for financial reporting purposes as a reduction in depreciation expense. Amounts amortized in 1984,1933 and 1982 were $4,762.000, S7,003,000 and 31,192,000, respectively, which includes, in 1983, amortization of $3,818,000 for the resale jurisdiction,

Delmarve Power OIJ9htCompany Notes to Consolidated FinancialStatemen 3 7 SaleofContracts In December 1984, the company entered into an agreement to sell the land that was forNuclearPlant origmally acquired as the site for the nuclear plant. The loss on the sale of the land and (continued) wnte down to fair market value of associated nghts-of way, net of taxes was $1,644,000. 1 The net loss has been recorded against the related deferred credit in the balance sheet.

i l

.8. Short 71erm Debt and As of December 31,1984, the company had unused bank lines of credit of S44,500,000 LinesofCredit and is generally required to pay comrnitment fees for these hnes. Such Imes of credit are periodically reviewed by the company, at which time they may be renewed or cancelled.

9. Jointly-Owned Plant Information with respect to the company's share of jointly-owned plant, includmg nuclear fuel for the Salem plant, as of December 31,1984 is as follows:

(Do!Lus in Thousands)

Construcdon Ownership Plantin Accumulated Workin Share Service Depreciadon Progress Nuclear:

Peach Botten 7.51 % S 76,632 S24,004 S 8,630 Salem 7.41% 179,754 41,039 16,665 Coal-Fired:

Keystone 3.70% 10,061 3,836 1,093 Conemaugh 3.72% 13,030 5,088 242 Total S279,477 S73,967 S26,630 The company provides its own financing during the construction period for its share I of jointly owned plant. In addition, the company is a joint guarantor ofloans (S858,831 proportionate share) advanced for operating of the coal mines that supply the Keystone plant. The company's share of operating and maintenanco expenses of the jointly owned plant is included in the correspondmg expenses in the statements of income.

20. Contingencies See Note 2 for possible payment of taxes, a)FERCRata Cascs On May 29,1981 the company filed an application with the Federal Energy Regulatory Commission (FERC) for an increase in wholesale electric revenues, Settlement with seven customers was approved by FERC, and the remaining six customers have stipulated that rates be based on the results of the cost of service issues decided in the pr9viously ap-proved FERC cases. Based upon settlements with the resale customers, not revenues re-corded pursuant to this interim rate increase are approximately $1.6 million. This increase is subject to refund pending FERC approval, and the company behoves that substantially allsuch revenues will be approved.

b)PlantHeldforFuture Use in 1982, the company delayed the construction schedule for the coal fired Nanticoke sti (formerly Vienna It9) generating unit. The plant is now schedukd to begin commercial operation in the mid 1990's. The decision is based on the company's current load forecast, which indicates a lower rate of growth in the coming decade than had previously been projected The net investment of $14.295,000 is classifkx1 as plant held for future use and is anticipated to be recoverable through the normal ratemaking process.

Dolmarva PowerI.L10htCompany -

Notes to PanaaNdated Flaeacialstatements l

' 10. Contingencies c)NuclearInsurance (continued) The Company's insurance coverages applicable to its nuclear power units are as follows:

(M2ons of Dollars)

Maximum Retrospective Maximum Assessmentfora 7ypeandSourceofCoverage Coverage singicincident Public Liability:

Private S160 None Prtco Anderson Assessment'" 420 S t .5'"

S580'"

Property Damage:"'

Peach Bottom'" S585 -

Salem'a S585 S2.8 All units'" S450 St.3 Replacement Power:

Nuclear ElectricInsurance Limited (NEIL)'" S2.8 S2.3

"'Betrospecuvepremium program under the Pnce-Anderson habdtyprovlstons of tt;e Atomic Energy Act of 19M as amended Sublect to retrospecuve assessment with twpect toloss from an inadent at any bcensed nudeat reactorm thn United States.

• • • Masamum assessment would be $k000.000 In the event of snore than one Inadent in any year.

• • btntt of habmty under the Pnce Anderson Act for each nuclearinadent.

• 1he companyis a self Insurer to the extent ofits ownetstup interest, for any property loss in excess of the statedamounts

• ' For property damage to the Peach Bottom nudoatplant fac&ues. the company and its co-owners have private insurance up to1585 mWton.

• • Nudoat MutualUmited. a uutty-owned mutualInsurance company with which the company and the Salem nudear faabty co-owners are tnembers Subtect to retrospecttve assessment of ten Omns annualpremium with respect to loss at any nucloat genetaung stacon insured by the mutualinsurance company

• All units are insured by Nuclear Electnc insurance Unuted INEll, W for lwses in excess of $500 trulhott in the event oflosses, the company would be sublect to a nununum axessment ofseven and a half ttrnes the annual premtums

• • UthtyownM mutualInsurance company wtth which the companyis a member which provides cmrtage agamst extra expense incutted in obtauung replacement power dunng prolonged acadental outages of nudsat power uruts Maxtmum week!yindemnity for 62 weeks wtuch commences after the lust 26 weeks of an outage.

Also provules $1.4a1000 weekiy for an additional 52 weeks.

d) Atlanac CityContract The company entered into a five-year contract, to expiro May,1985, with Atlantic City Electric Company to sell one cighth of the electricity generated by Indian River unit 4.

The major provisions of the contract allow for the company to receive, irrespective of the availability of electric generation, one-eighth of all operation and maintenance expenses incurred and a fixed retum on the plant investment. Approval of this agreement was received from the FERC and the Delaware Public Service Commission (DPSC) in 1980.

e) Other Tho company is involved in certain other legal and administrative proceedmgs before various courts and governmental agencies concerning rates, environmentalissues, taxes, licensmg, fuel contracts and otter matters. In the opinion of management, the ultimate disposition of thene proceedmgs will not have a material effect on the financial position or results of operations of the company.

.Dehnarva Power 2 Light Company Notes to Consondated FinandalStatements t.

22 SegmentInformation Segment information with respect to electnc, gas and steam operations was as follows:

(Dc!hrsin Thousands) 1984 1983 1982 Operating Revenues:

Electric S 584,163 S 542,252 S 534,770 Gas 101,578 94.358 84,747 Steam 16,852 13,189 17,149 Total S 702,593 S 649,799 S 636.666 OperatingIncome:

Electric S 125,200 S 122,993 S 109,620 Gas 6,616 4,928 5,800 Steam 1,393 1,217 1.153 Total S 133,209 S 129,138 S 116,573 Utihty Plant:"""

Electric S 1,257.728 S 1,242,145 S 1,226,140 Gas 59,097 51,033 47,044 Steam 4.349 4,924 5,653 1,321,174 1.298,102 1,278,837 OtherIdentifiable Assets:

Electric 121,959 106,308 114,931 Gas 30,774 12,351 14,710 Steam 440 471 455 153,173 119,130 130.096 Assets Not Allocated 119.993 116,031 100,838 Total Assets S 1,594,340 S 1,533.263 S 1,509.771 Depreciation Expense:*

Electric S 54,255 S 52.530 S 47,276 Gas 3,310 3.173 2,950 Steam 899 896 895 Total S 58,464 .S 56.599 S 51,121 Construction Expenditures:"'

Electric S 69.233 S 70,927 S 107,533 Gas 10,109 5,070 3,019 Steam 146 59 94 Total S 79.488 S 76,056 S 110,646 .

"'rneludes plant held for future use, construction work in progress and allocation of common utsty property

'8' Stated net of the respect!ve accumulated provimons for depreciation

"' Excludes amortization of crextit anang from sale of contracts.

"T,xcludes allowance for funds ussi dunng constructxtt Operating income by segments is reported in accordance with generally accepted accounting and ratemakmg plinciples within the utlbty industry and, accordmgly, includes each segment's proportionate share of taxes on income and general corporate expenses.

L_

. Delmarva Power O Light Company .

Notes to Consolidated Financia1 Statements 1

22. Supplementary The following supplementary financial information, as prescribed by the Financial Infonnation to Disclose Accounting Standards Board in Statement No. 33, as amended, is supplied for the purpose the Effects of Changmg 'of providing information about the effects of changing prices on the company's operations.

Prices (Unaudited) The information should be viewed as an estimate of the approximate effect of inflation rather than as a precise measure.

Current cost amcunts reflect the change in specific prices of plant from the date the plant was acquired to the present, The current cost of utility plant represents the estimated cost of replacing existing plant assets and was determined by indexing existing plant by the Handy-Whitman Index of Public Utility Construction Costs. Constant dollar amounts represent historical costs stated in terms of dollars of equal purchasing power, as mea-sured by the Consumer Price Index for All Urban Consumers, and differ from current cost amounts to the extent that prices in general have increased more or less rapidly than specific prices.

Supplementary Financial Data Adjusted for the Effects of Changing Prices (Dollars in Thousands)

For the Year ended December 31. Historical Cost Cunent Cost (Average 1984 DoBars)

Operating Revenues S 702,593 S 702,593 Operating Expenses:

Operation and Maintenance 406.953 406,953 Depreciation 58.464 102,927 Amortization-Summit (4,762) (4,764

'lhxes 108,729. 108,729 Other Income-Net (6,023) (6,023)

Interest Charges 47,122 47,122 Net Income'" S 92.110 S.47,647 Eamings per common share (after preferred dividend requirements)"' S 2.63 S 1,16' Increase in current cost of utility plant held during the year"' 75,006 Adjustment to net recoverable cost 8,236 Effect of increase in general prico level (93.398)

Excess of increase in current costs after adjustment to net recoverable cost over increase in general price level (10,156)

Purchasing power gain on net amounts owed 25,029 Net S 14,873

'" Inclu6ag the adsstment to net recoverable cost, the income on a current cost basts for 1984 would have

~ been $M.883.

d' Exc Jding adjustment to net recoverable cost.

d' At Dece.nber 31.1984, the current cost of net utuity plant was $2,265.604 whde histortcal cost was $1.321,174 u.. . ..

Delmarva Power O Ilght Company c Notes to Consolidated Fmancial Statements

12. Supplementary - Supplementary Five-Year Compadson of Selected Financial Data

- Information ' Adjusted for the Effects of Changing Pn'ces (continued) ' ,

(In Thousands'" of Average 1984 Do!!ars)

For the Years ended December 31 1984 1983 1982 1981 1980, Operating revenues Historical cost dollars $702,593 S649,799 S636,666 S608,504 S520,470 Constant dollars 702,593 677,672 685,335 695.178 656,281 Net income Current costs 47,647 32,963 24,209 17,167 10,545 Eamings per common share Current costs 1.16 .67 .37 .10 (.05)

Net assets at year end'2' Historical cost dollars 644,650 608,513 573,073 542,080 500,546 Current costs 634,055 623,951 609,919 599,273 602,825 Excess of increase in general price level over increase in

- Current costs'8' (10,156) 5,648 3,896 (68,785) (117,994)

Purchasing power gain on net amounts owed 25,029 23,653 24,413 57,164 78,591 Cash dividends declared per common share Historical cost dollars S 1.83 S 1.68 S 1.595 S 1.535 S 1.49 Constant dollars 1.83 1.75 1.72 1.75 1.88 Market prico per common share at year-end Historical cost dollars 22.00 19.25 16.38 12.63 11.75 Constant dollars 21.64 19.74 17.43 13.96 14.15 Average Consumer Price

' index (1967 = 100) 311.2 298.4 289.1 272.4 246.8

"'Except per share amounts.

• At net recoverable cost.

• After adjustment to net recoverable cost.

As required by Statement No. 33, the current provisions for depreciation on the current cost amounts of utility plant were determined by applying the company's depreciation rates to the indexed plant amounts, even though depreciation is limited to recovery of historical costs as further discussed below. Other operating expenses were either not -

required to be adjusted or were not adjusted due to rate-making considerations.

The company, by holding monetary assets such as cash and receivables, loses purchasing -

- power during periods of inflation because these items can purchase less at a future date.

. Conversely, by holding monetary liabihties, primarily long-term debt, payments in the future will be made with dollars having less purchasing power. For the years 1980-1984, the company's monetary liabihties exceeded monetary assets which resulted in a pur-chasing power gain on net amounts owed during the year. -

. The rate regulatory process limits the compr.ny to the recovery of the historical cost of- ~

plant. Therefore, the excess of the cost of riant stated in terms of current cost over the

' historical cost of plant is not presently recos etable in rates as depreciation and is reflected as a reduction to net recoverable cost. Br. sed on past practices, however, the company believes it will be allowed to aun on the hereased cost of its facilities when replacement actually occurs.

Since the gain from the decline in pu' chasing power is attnbutable to long-term debt which has been used to finance utility plant, the reduction of utility plant to net recover-able amount is netted against the p archasing power gain on net amounts owed during .

L the year.

Dehnarva Power & Light Company Notes to Consolidated FmancialStatements

23. Quarterly Financial The quarterly data presented below reflect all adjustments necessary in the opinion of Infonnation (Unaudited) the company for a fair presentation of the intenm results. Quarterly data normally vary seasonably with temperature variations, differences between summer and winter rates, the timing of rate increases and the scheduled downtime and maintenance of electric generating umts.

l Eammgs Eamings Apphcable Average per Quarter Operating Operating Net to Common Shares Average Ended Revenue Income income Stock Outstandng Share (Dc11ars m Thousands) 1984 March 31 S190,185 S 36,823 S25,996 S22,809 30,003 S0.76 l June 30 164,181 29,957 19,130 15,9 % 30,172 0.53 September 30 188,901 42,862 33.092 29,937 30,337 0.99 December 31 159.326 23.567 13.892 10,748 30,482 0.35 S702,593 S133.209 S92,110 S79.448 30.248 S2.63 1983 March 31 S156,749 S 30,164 S19,906 S16,702 29,237 S0.57 June 30 152,452 27,485 16,218 13.013 29,443 0.44 September 30 188,155 45,130 33,687 30.483 29,655 1.03 December 31 152,443 26,359 15,252 12.047 29.831 0.41 S649,799 S129,138 S85,063 S72.245 29.541 S2.45 In the fourth quarter of 1984, adjustments for a voluntary Delaware revenue refund and other regulatory items were recorded. The effect of these adjustments reduced fourth quarter net income by approximately S4,200,000 (142 per sha'e).

In the fourth quarter 1983, adjustments wera recorded for FERC rate issues which increased income and charges for a voluntary Delaware revenue refund and other regulatory items.

The net effect of these adjustments was to reduce fourth quarter net income by approxunately S2,200,000 (70 per share).

Delmarva Power & IJght Company Consolidated Statistics r

10 Yeats of Ecvww 1984 1983 1982 1981 Electric Revenues Residential S 205,910 S 193,021 S 183,258 S 164,919 (thousands)

Commercial 156,507 140,809 137,434 123,099 Industrial 128,833 126,703 127,441 129,601 Other utthties, etc. 79.235 68,991 73,469 73,602 Miscellaneous revenues 13,678 12,728 13,168 12,898

'Ibtal electric revenues S 584.163 S 542,252 S 534,770 S 504.119 Electric Sales Residential 2,249,270 2.136,265 2,026,398 1,996,647 (1.000 h!cwatt hours)

Commercial 2,073,457 1,84?,324 1,729.863 1,660,147 Industrial 2,569,572 2,600,492 2,256,673 2,454,685 Other utihties, etc. 1,415,934 1,297,395 1,237,508 1,283.845

'1btal electric sales 8.308,233 7.878,476 7,249,442 7.395,324 Electric Custorners (end of penod). Residential 275,175 267,357 260,371 255,646 Commercial 31,548 30,525 29,966 29,450 Industrial 929 949 741 788 i Other utihties, etc. 502 434 434 434

Total electric customers 308,154 299,265 291,512 286.318 Gas Revenues

(thousands): Residential S 40,933 S 36,694 S 36.505 S 34,123 Commercial 18,663 16,527 15,792 14.344 Industrial 22,940 23,232 20,112 22,259 l Interruptible 18,098 17,026 11,733 11,711 Other utihties, etc.

160 115 53 61

!.11scellaneous revenues 784 764 552 572

'Ibtal gas revenues S 101,578 S 94,358 S 84,747 S 83,070 Gas Sales (rrulhon cubic feet). Residential 6,213 5.640 6,062 6,193 Commercial 2,971 2,677 2,768 2,704 Industrial 4,245 4,378 4,108 4,809 Interruptible 3,769 3,723 2,656 2,802

Other utilities, etc. 41 31 10 12 Total gas sales 17,239 16.449 15,604 16,520 Gas Customers (end of penod). Residential 70,183 69,608 69,092 68.608 Commercial 4,233 4,075 4,057 3,967 Industrial 165 160 166 167 e -Interruptible 19 19 18 16 h Other utilities, etc. 1 1 1 1 c

p 'Ibtal gas customers 74,601 73,863 73,334 72,759 I RefineryService p Electricity delivered 298,203 309,043 322,804 343,063 I (1,000 blowatt-hours)

I Steam dehvered 6.683.335 6,965,904 7,778,929 7,673,420 E (1.000 pounds) k

=-

E iL Average Annual n Compound %

1980 1979 1978 1977 1976 1975 1974 Rate of Growth S 144,637 S 115.381 S 105,237 S 97.691 S 80,416 S 77,069 S 68,730 11.60 112.166 91,798 82,796 74,641 60,111 58,169 51,192 11.82 116,401 98,023 83,972 76,801 64.458 64,141 66,381 6.86 63,698 53,782 40,840 38,974 34,896 35,606 32,976 9.16 7,025 4,682 5.261 3.461 2,398 4,370 9,194 4 05 S 443,927 S 363,666 S 318.106 S 291,568 S 242,279 S 239,355 S 228,473 9.84 2,046.546 1,968,452 1,979,624 1,924.723 1,787,663 1,672,180 1,597,472 3 48 i- 1,648,776 1,598.299 1.568.600 1,495,796 1,412.259 1,359,673 1,303,053 4.75 2,429,842

( 1,335,216 2,624,438 1,300,611 2,418,527 1,281,498 2,277,630 1,207.911 2.260.661 1,199.155 2,142,151 1,218,7CS 2,461,303 1.230,528 0.43 1.41 b 7,460,380 7,491,800 7,248,249 6,906.090 6,659,738 6,392,789 6,592,356 2 34

' 246,887 242,745 237,925 233,106 230,579 221,780 215.516 2.47 28,162 27,998 28,421 29,648 28,345 27,345 27,132 1.52 821 874 858 921 1,002 923 891 0.42 440 478 480 561 550 545 501 0.02

[ 276,310 272.095 267,684 264.236 260,476 250,593 244,040 2.36 S 26,525 S 25,719 S 28,370 S 21,829 S 18,826 S 15.365 S 14,298 11.09 10,342 8,954 10.154 7,133 6,062 4,676 4,201 16.08 12,404 9,884 10,191 6,950 5,984 4,343 3,726 19.93 9.293 4,440 716 169 1,301 1,211 1,532 28.01

46 55 93 49 44 33 26 19.93 430 270 116 103 31 45 96 23.37 S 59,040 S 49,322 S 49,640 S 36,233 S 32,248 S 25,673 S 23.879 15.58 6.321 6,423 6,941 6,751 6,956 6,540 6,863 (0.99) 2,683 2,415 2,593 2,439 2.586 2,429 2,526 1.64

= 3.937 3,388 3,290 2,811 3,264 2,849 3,215 2.82 2,738 1,720 319 81 953 1,073 2,257 5.26

_ 14 16 29 17 20 18 16 9.87 15,693 13 9'R 13,172 12,099 13,779 12,909 14,877 1.48 67,784 66,631 66,364 66,231 67.754 68,160 68,262 0.28 l 3,846 3,712 3,773 3,738 4,154 4,189 4,356 (0.29) a 155 131 163 163 198 198 195 (1.66) i 16 16 21 21 21 21 21 1.00 1 1 1 1 1 1 1 -

k 71,802 70,491 70,322 70,154 72,128 72,835 72.569 0.24 328,420 262,159 270,006 289,049 318,389 297.282 350,021 (1.59) 7,570,944 6,378,705 4,888,366 5,301,421 5,517,000 5,921,000 f- 6.016.095 1.22

Delmarva Power & Light Company Officersand GeneralInformation Nevius M. Curtis Trustees Chaumanof theBoard, President Fust Mortgage and Collateral Trust Bonds-and Chief Executive Officer ChemicalBank.

New York. New York.

Howard E. Cosgrove Pollution Control Revenue Bonds-Executve Vice President McIlon Bank (DE) N. A.

Frank A. Cook #A""9' "' 0*I *""

Senior Vice President Bank of Delaware, Wilmmgton Delaware H. Ray Landon Wumington Trust Company, Senior Vice President Wilmmgton. Delaware.

Irvmg Trust Company Harland M. Wakefield, Jr. new yo7y,ye ,yo7g_

Senior Vice President h n ferAgentsandRegistrars RogerD. Campbell -

Vice President and Chief Financial Officer ,

gg Co m W Imington, Delaware.

Donald E. Cain Division Vice President. Northem Division Common Stock-Wilmmgton Trust Company.

Wayne A. Lyons W1hnington, Delaware.

Division Vice President. Southem Division Manufacturers Hanover ' Dust Company, PaulS. Gerritsen Vice President. Regulatory Practices StockSymbol Thomas S. Shaw, Jr Common Stock. DEW-hsted on the New York and Philadelphia Stock Exchanges.

Vice President. Production Alfred C. Thawley, Jr. Regulatory Commissions Secretary and Treasurer Federal Energy Regulatory Commission, 825 North Capitol Street, N.E.,

Charles Marchyshyn Washington D C. 20426.

Comptroller Delaware Public Service Commission, Executive Committee 1560 S. du Pont Highway.

Nevius M. Curtis, Chairman; Dover, Delaware 19901.

Oscar L Carey; Wilham G.Simeral; Dr. E. Arthur 'habant; Harland M. Maryland Public Service Commission, Wakefleid, Jr. Amencan Buildmg, 231 East Balt:more Street.

Audit Committee Baltimore, Maryland 21202.

Oscar L. Carey, Chairman; V ugl M. tate Corporate Commssion.

John R. Cooper; James O. Pippin, Jr.

P.O. Box 1197, Nominating Committee. Richmond, Virguna 23209.

Dr.E. ArthurTracant. Chairman; Nevius M. Curtis; Sally V. Hawkins Corporate Address Delmarva Power.

Compensation Committee 800 King Street. P.O. Box 231, William G.S1meral, Chairman; Wilmmgton, Delaware 19899.

Oscar L Carey; Ne"ius M.Curtis; Telephone (302)429-3011 David D.Wakefield investment Committee David D. Wakefield. Cha.rman; James O. Pippin, Jr.; Nevius M. Curtis ,

r

e -

AssuAt hii:ETisc The Annual Meeting will be held on April 30 at 11:00 a.m.,in the Clayton Hall, University of Delaware, Newark, Delaware.

AnoniosAi. Ri:ioars To supplement information in this Annual Report a Financial and Statistical Review (1974-1984)and the Form 10-K are available upon request. Please write to Stockholder Relations, Delmarva Power,800 King Street, P.O. Box 231; Wilmington Delaware 19899.

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