ML20100N239

Toledo Edison Co Annual Rept - 1984

ML20100N239
Person / Time
Site:	Beaver Valley, Davis Besse, Perry, 05000000
Issue date:	12/31/1984
From:	Johnson W, Williams J TOLEDO EDISON CO.
To:
Shared Package
ML20100N233	List: ML20100N229 ML20100N235 ML20100N239 ML20100N242 ML20100N245
References
NUDOCS 8504180517
Download: ML20100N239 (24)

Text

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950 4100b 17 850412 POR ADOCK 0500 I

THE LAND OF GOOD LIVING i

A VIBRANT ECONOMY Northwestern Ohio is one of the most

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A TRANSPORTATION HUB (T c -- sg The modern Port of Toledo connects c

Northwestern Ohio with markets throughout

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The Toledo Museum of Art ranks among the f.r7-top ten in the United States

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A LEADER IN EDUCATION l

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A COMMUNITY VITALITY i

The redevelopment of Toledo's riverfront fjh symbolizes the city's rejuvenation I

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TOLEDO... AN ALL-AMERICA CITY

ABOUT TOLEDO EDISON

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The Toledo Edison Company is a public utility engaged in I

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the generation, transmission, distribution and sale of elec-F f,]

tric energy in Toledo and Northwestern Ohio. The Company

'N also provides small amounts of natural gas and steam heat-

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Ing s:rvices. The Company is owned by over 100,000 p

i shareholders in all 50 states and worldwide.

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ABOUT OUR SERVICE AREA Toledo Edison describes its 2,500-square mile service area in Northwestern Ohio as the" Land of Good Living." And with

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l go d r:ason. A sophisticated industrial infrastructure, lf i plenteous agricultural production, exceptional transporta-l

! tion, cnd abundant supplies of energy and water make the l area highly attractive to business. Paddlewheel riverboats and historic forts blend with the latest in contemporary living t

trends to create an appealing ambiance.

The 750,000 people who call Nor thwestern Ohio home have the best of two worlds - the cultural, recreational and economic benefits of urbanization, but in a neighborly, small town ctmosphere. Area residents can select the lifestyle Toledo is within 250 miles of 43% of the U.S. primary metal best suited for their individual tastes. The lifestyles may be industry, and within 500 miles of 58% of U.S. fabricated diverse, but the area's labor force is united in dedication to metal production and 53% of U.S. electric and electronic craf tsmanship and pride in achievements.

manufacturing.

HIEHLIGHTS 1984 1983 Change Camings Per Common Share

$3.70

$3.50

+ 20c Dividends Declared Per Common Share 2.52 2.46

+ 6c Retum on Average Common Equity 15.3 %

14.5 %

Fin ncial Results (millions of dollars)

Income from operations 71 63

+ 13%

Allowance for equity funds used during construction 83 65

+ 28%

Net income 154 128

&20%

Operating Results S:les (millions of kilowatt-hours)

Retail customers 7 240 6 811

+ 6%

Wholesale customers 305 320

- 5%

Generating efficiency (BTU por kilowatt hour)

System heat rate 10 193 10 337

- 1%

Fossil fueled heat rate 9 855 10 053

- 2%

1

TO OUR SHAREOWNERS:

1984 was a good year for The Our creative marketing ap-tomers because its fuel cost per kilo-Toledo Edison Company.

proach enabled us to add new cus-watt-hour is about one-fourth the cost,

New records were set for retail tomers in 1984. To cite only one of coal. The station is now going from a sales revenues and earnings. Our example,we added a20-megawattload 12-month refueling cycle to an even,

total revenues of $551 million included customer who will install new electro-more productive 18-month refueling clectric sales to retail customers of plating technology to serve the auto-cycle.

$528 million. Our sales to industry also mobile industry. We obtained this new The combined effectiveness of our established a new mark of $195 million.

business by negotiating a contract with coal and nuclear facilities has helped These gains helped enable us to attain highly competitive energy cost provi-control the prices customers pay for earnings per common share of $3.70,6 sions that made the custorner s process electricity. Although our fueladjustment percent higher than in 1983.

competitive and our profit reasonable.

cost factor was higher in 1984 than in Substantial gains in kilowatt-Our proximity to Detroit's auto 1983, our fuel charges were lower than hour usage resulted from the assembly plants is a plus.The major they would have been if we relied only rebounding Northwestern Ohio automobile companies plan a greater on coat.

economy. Our total kilowatt-hour sales emphasis on the "just-in-time" delivery Construction of two nuclear increased a healthy 6 percent over concept, which means they will be plantr.ls moving ahead as part of our 1983, while our kilowatt-hour sales to utilizing parts suppliers located near power-pooling arrangements with industry rose 10 percent, their Detroit assembly lines. Our serv-other utilities. The major emphasis is ice area will benefit from this trend.

Since a mild summer and an being placed upon completing the exceptionally warm fall and winter more Assembly and machine plants have Perry No.1 Unit. Located near Cleve-than of fset a cooler spring, the been operating at high production land, this unit is 97 percent complete extremes in weather that cause higher levels. These are not just temporary and is expected to go on-line about the than normal usage of electric heaters surges, but are being built into the long-end of 1985. The Beaver Valley No. 2 and air conditioners were not in evi-range planning of these manufacturers.

Unit, near Pittsburgh, is more than 80 dence in 1984. Thus, our gains in kilo-We continue to enhance our percent complete and is now sched-watt-hour sales stemmed primarily operating efficiencies as part of our uled to go into service about the end of from economic growth.

program to ensure an adequate supply 1987.

Economic studies show there is a of electricity for our service area. Since Construction of a third unit, the high correlation between a growing it started operating nearly 30 years Perry No. 2 Unit, has been placed in a economy and increased electricity use, ago, our Bay Shore Station has been

" minimal expenditure" mode pending Economic growth depends upon the one of the most reliable plants in the evaluation of future economic growth cvailability of a reliable source of United States. It enabled the Company and electricity needs. The construction energy, and the viabi!ity of an electric to be ranked tenth overall, among fos-activity may be reduced to such a level utility depends upon the economy o sil-fueled stations of the 100 largest s

by about mid-1985 that related allow-the area it serves.

Investor owned utilities in the nation, ance for funds used during construc-for 1983 in system heat-rate efficiency.

We are seeking to recognize this tion accruals may need to be offset, interdependence by devoting a portion Our Davls-Besse Nuclear Power and a corresponding reserve estab-of our Annual Report to point out the Station also operated reliably. Prior lished in the financial statements. This attributes that make Northwestern to a scheduled maintenance and re-would not affect cash flow, but would Ohio the " Land of Good Living."We are fueling outage during the fourth quar-reduce earnings below what they also doing our share to boost North-ter, the station was available to produce otherwise would be. Allowance for western Ohio as an attractive place for electricity 88 percent of the time during funds used during construction accru-Industry through our area development the 1983-84 fuel cycle. Nuclear energy als are expected to average about $2 and marketing activities.

continues to be a bargain for our cus-million per month in 1985 for Perry 2.

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John P. Wmiamson Wendell A. Johnson cwm.n.no ca.e e.cunv. oevc.,

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B:cause of its large scale, our nent rate increase request. The Com-significantly since 1975, while con-nuclear construction program creates mission was expected to act on the sumption of other types of energy has i

l financial difficulties for the Company, agreement in February,1985.

dropped. Electricity is in its second l Our cash income must be sufficient so Our Board of Directors was century of helping power America's that ws can maintain our credit and strengthened by the addition of Edwin economic engine, and we are taking attract the capital needed to finance D. Dodd, a director, consultant and actions to ensure that Toledo Edison our construction program. An inability chairman emeritus of Owens-lllinois, will continue to generate growth in to raise capital or a failure to obtain nec-Inc. He brings an impressive level of Ohio. If Gross National Product rises essary increases in our customer business statesmanship and civic lead, substantially, some regions may face charges could pose serious problems.

ership to our Board.

shortages of electricity by the 1990s.

Our concerns in this area are dealt with Northwestern Ohio will not be among AeMWws@m in more detailin the Financial Analysis se W ons.

agement team is Joseph E. Murray, section beginning on page 6.

who was elected Vice President, The following pages provide an in-in any event, we are confident that Energy Supply, in March. He suc.

depth perspective about our past, pres-our financial integrity will be ceeded Lowell E. Roe, who took early ent and future prospects. We are proud maintained. Management is deter-retirement af ter a distinguished 35 of our accomplishments and of our mined to make every effort to resolve year career with the Company.

solid reputation for reliability. And we our financial problems in a way that increased competition is the are grateful for the continuing dedica-tion of our talented employees and for b:nsfits our shareowners, our cus-way of life in the electric utility tom:rs and the economy we serve

• Industry. However, the industry's the support of our loyal shareowners.

This determination is exem-foremost challenge is to obtain ade.

There is no doubt that we face plified by a compromise agreement quate prices for its services. A closely major challenges in completing our into which we entered in early 1985 with related problem involves phasing in nuclear construction program, just as the staf f of The Public Utilities Commis-rates for newly completed generating there are challenges to the state to sion of Ohio. As part of our interim rate units. Gradually including the costs of attract new business and industry to increass request proceeding that the new unit in a utility's rate base over Ohio.

st:rted late in 1984, the staff agreed to a period of years avoids the ' rate However, we are confident that the recommend tothe Commission that the shock" that could result if the cost were completion of our nuclear construction Company bo allowed to collect $30 mil-added to the rate base in one lump program will strengthen our financial lion in additional annual revenues sum.

situation, and that the availability over through collection of a temporary sur-We are convinced that elec, the long term of a reliable, reasonably charge on customer bills.

tricity is tho energy source of the Priced supply of energy will play a vital During the period this surcharge f uture. Electncity prices in Toledo were role in the economic growth in the Land would be in of fect, our accrual of allow.

12 cents per kilowatt-hour at the turn of of Good Uving.

cncs for funds used during construc.

the century, a time when 12 cents repre.

Cordially, tion would be offset by the not of-tax sented an hour of hard work for many

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cmount of the interim relief received.

people. Despite many years of inflation, The t:rms of the agreement also pro, today's electric prices are slightly more vide that the Company would report on than half of that 1900 price, and the typ-John P. Williamson the f::sibility of reducing its participa.

icalemployee works about 30 seconds chairman and Chief Executive Officer l

tion in the construction program of the to pay for a kilowatt-hour of electricity.

C:ntral Area Power Coordination That electricityis a bargain is sug-M8 Group. In addition, the Company would gested by the fact that electric energy Wendell A.

nson egree to withdraw its pending perma-consumption in the U.S. has increased President a hief Operating Officer 3

TOLEDO: AT THE CROSSROADS OF COMMERCE

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The "All America" city of in addition, downtown Toledo is s

Toledo is a transportation currently undergoing a rejuvena-i f

crossroads located in the heart tion that includes a Portside Mar-r y

of a rich agricultural and industrial ketplace composed of numerous z_

g region. A manufacturing commu-shops and boutiques.

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and automobileindustries, Toledo Noneof thisvibranteconomy has awell-educatedlabor forco of would be possible without the

'l 275,000. In recent years, the labor existence of a reliable supply of force has grown more rapidly electricity. The Toledo Edison

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Company has been a driving force in the area's economy for Toledo is a focal point of many years. The Company is in g

International trade. The Port of the midst of a $2 billion construc-7 Toledo lies at the hub of a trans-tion program to guarantee the portation network that includes continuation of a dependable e

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five rail systems and nearly 100 energy supply for both business i

t motor freight carriers. This ideal and residents. In the process of location provides Midwestern providing reliable service at rea-r shippers with inland transporta-sonable costs Toledo Edison tion costs that are lower than expects to continue a trend of g

those to many East Coast ports. recent years -increasing its share of the Northwestern Ohio energy market.

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THE HANDS-ON APPROACH TO MANAGEMENT

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closely moratoring Toledo Edison five in the U S. for the lowest 85

-C." lf-w r4 and Central Area Power Coordi-worker exposure to radiation.

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Toledo Edison has the lowest

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$l.. 5, j Operating efficiency - out of of any major Ohio utikty.

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FINANCIAL ANALYCl3 RESULTS OF OPERATIONS Earnings per common share increased to $3.70 in Company's 1981 earnings had been in doubt as a result of 1984, about 6 percent higher than in 1983. The resulting rulings by The Public Utilities Commission of Ohio and by the annual return on average shareowners' investment of 15.3 Ohio Supreme Court. The gain involved an exchange of com-percent, although due largely to non-cash credits, was the mon stock for outstanding bonds owned by an investment highest retum achieved in the past 17 years.

banking firm. A September Commission ruling allowed the The 1984 economic rebound in Northwestern Ohio gain to be treated as a component of the Company's capital helped spur a healthy 6 percent increase in the Company's structure in determining the rate of return. This decision sup-kilowatt-hour sales. Paced by sales to the motor vehicle ported the Company's treatment of the 1981 extraordinary and primary metals industries and to petroleum refineries, gain.

industrial sales rose 10 percent. Sales to residential and Steam heating services will be discontinued as of commercial customers were also higher.

June 1,1985. The system had incurred annual losses in Total revenues increased in 1984 as a result of recent years.

greater consumption by retail customers and the full-year Fuel and net purchased power expense increased impact of an August,1983 pnce increase. Revenues from 16 percent over 1983, reflecting greater reliance on higher wholesale electricity users declined as municipal custom-cost fossil fuel generation in 1984 (see " Summary of Signif-crs continued their 1983 trend of buying part of their elec-icant Accounting Policies"on page 12).

tna needs from other suppliers.

Maintenance expenses also rose in 1984, due to the A rate increase authorized by The Public Utilities extensive scheduled refueling and maintenance outage at Commission of Ohio was significantly below the the Davis-Besse Nuclear Power Station during the fourth amount requested by the Company. In September 1984 quarter. Among the improvements made during the outage the Commission granted the Company a $17 million were nuclear fuel changes that will extend the time between increase in annual retail electric rates. This was only 28 percent of the Company's December,1983 request. In par-ngs from 12 months to 18 months. This will increase m

the station s availability for futuro power generation. The ticular, the Commission allowed just $7 million of construc-a@sse Station returned to service in early 1985. The tion work in progress in the rate base out of the Company's repair of electn,c plant and substation equipment at Bruce

$186 million request. Instead of increasing the allowance Mansfield Units 2 and 3 also contributed to higher mainte-for Perry Unit No.1 over the amount allowed for it in the nance expense.

Company's prior rate order, the Commission eliminated the Perry Unit No.1 construction work in progress allowance Allowance for debt and equity funds used during con-altogether. As it had concluded earlier in 1984 in another struction increased due to a higher investment in nuclear utility's rate case, the Commission reasoned there would generating units under construction. Allowance for debt be no significant generation from Perry Unit No.1 during and equity funds used during construction is a non-cash the period the rates would be in effect and excluded it from credit to the Results of Operations statement. Through this rate base.

allowance, the Company capitalized a substantial amount The Company filed a request in late 1984 for an of the financing costs associated with its onping construc-8 percent permanent rate increase in its customer tion program, including a return on equity funds used.

c harges. The Company also requested an interim rate The funding of the Company's construction program increase of $45 million. In early 1985 the Company was accomolished through external financings. These r: ached a compromise agreement with the staff of the financings csused increasod interest expense and larger Commission in connection with these requests. The terms dividend payments on preferred and common stock. In of the agreement,if approved by the Commission, would addition, the financings resulted in a greater number of cllow the Company to collect $30 million in additional common shares outstanding and diluted earnings per Ennual revenues through collection of a temporary sur-common share.

charge on customer bills.

About 79 percent of the Company's common divi-During the period this surcharge would be in effect, the dend paid in 1984 will be regarded as a return of Company's accrual of allowance for funds used during con-capital, and therefore nontaxable as ordinary income for struction would be offset by the net-of-tax amount of the federal income tax purposes in 1984. The Deficit Reduction interim relief received. The agreement also provides that Act of 1984 requires certain changes in the way corpora-the Company would report on the feasibility of reducing its tions calculate earnings and profits in determining the por-participation in the construction program of the Central tion of dividends treated as a return of capital. These Area Power Coordination Group. In addition, the Company changes are expected to eliminate the return of capital por-would withdraw its pending permanent rate increase tion of dividends paid in 1985, when the Act takes effect, request. Commission action on the agreement was and in subsequent years.

cxpected in February,1985.

Note 12 on page 17 explains the effect of inflation on A non taxable extraordinary gain of $11 million in the the Company's operations.

6

LIEUIDITY AND CAPITAL RESOURCES with 81 percent for 1983 and 96 percent in 1982. In 1984 the Company used some of its increased working capital in C:pital Commitrnents The Company is engaged in a nuclear construction addition to all of its remaining cash available from opera-program as part of a power-pooling arrangement with four tions for common dividends, leaving minimal internal cash other utilities. In the interest of reliable power generation and to fund its construction program. The Company expects that almost all of its cash construction expenditures will economy, Toledo Edison joincd in 1967 with The Cleveland Electric illuminating Company, Duquesne Light Company, congnue to require external financings through 1986. Exter-Ohio Edison Company and Pennsylvania Power Company to nal financings will continue to increase the Company's interest and dividend requirements. External sources pro-form the Central Area Power Coordination Group. The com-vided $342 million in 1984. Of this, the Company used panies are building three nuclear generating units: Perry Unit

$227 million to fund construction and $25 million for Nos.1 and 2 near Cleveland, and Beaver Valley Unit No. 2 north of Pittsburgh. Toledo Edison's share in each of these nuclear fuel inventory, about $69 million for short-term units is 19.91 percent (see Note 1 on page 13). During 1984, investments, and the balance to pay off maturing oblica-tions (see Notes 5,8 and 9 on pages 15 through 17).

the Company invested $316 million in these units. Other 1984 iny:stments in plant and equipment, including nuclear fuel, Company earnings for the year ended December 31, totaled $73 million.

1984 would permit the issuance of about $48 million of first During the five-year period 1985-89, the Company mortgage bonds or about $98 million of preferred stock, cxpects its construction program to cost about $1 billion.

assuming no additional issues of long-term debt, at This excludes nuclear fuel, but includes $440 million of assumed interest and dividend rates of 15 percent. Should allowance for funds used during construction. However, the the Company be required to write off its investment in Perry levels of direct cash expenditures for the Perry Unit No. 2 Unit No. 2, the Company believes its ability to issue first beyond 1985 are indeterminable, pending completion of the mortgage bonds would not be affected. However, such a studi:s referred to in the following paragraph. Therefore, write-off could reduce the amount of preferred stock issu-the construction program does not reflect such amounts for able or prohibit the issuance of preferred stock during the that unit beyond 1985. Construction delays or cost escala.

subsequent 12-month period and perhaps longer. The tions may cause additional expenditures. Nuclear fuel Company would not be restricted in issuing preference tcquisition and related costs will require about $101 million stock authorized in April,1984 by the common shareow-during 1985-89, excluding financing costs.

ners. Issuance of this stock is not subject to earning 3 in keeping with the Group's ongoing evaluation of elec-coverage restrictions as are first mortgage bonds and pre-tric generation needs, Perry Unit No. 2 has been placed in ferred stock (see Note 5 on page 15).

a minimal expenditure mode pending the completion of Porry Unit No.1 (see Note 2 on page 13). Should Perry The Company's continued financial viability Unit No. 2 be mothballed, the Company would have to depends upon adequate and timely rate increases and cease the related accrual of allowance for funds used dur-ready access to capital markets. Rate increases granted by ing construction. Such accruals for Perry Unit No. 2 are The Public Utilities Commission of Ohio during the past expectad to average about $2 million per month in 1985.

three years have been significantly lower than amounts The construction activity may be reduced to such a level by requested by the Company. In particular, the Company's about mid 1985 that relatec' allowance for funds used during opportunity to generate significant additional cash was construction accruals may raed to be offset, and a corres, adversely impacted by the Commission's September,1984 ponding reserve established in the financial statements. Cre-gecision that denied any Perry Unit No.1 construction work ation of such a reserve would not af fect cash flow, but would in progress in the rate base (see "Results of Operations" on reduce earnings below what they otherwise would be.

page 6). As a result, common stock earnings in 1985 are expected to continue to be composed entirely or almost If the Perry Unit No. 2 is cancelled and the Company entirely of non-cash allowance for debt and equity funds were not provided a way to recover its investment in the used during construction. This allowance was 91,100 and unit, the Company would be required to write off this invest-ment. Preliminary estimates project a write-off of $154 mil-fn nin s on common stock in 1982,1983 8 re p cti lion. net-of-income tax effect, as of December 31,1984.

Such a write-off would reduce Earnings Reinvested from The Company's ability to obtain external financing and

$222 million to $68 million. The Company bclieves its abil.

the cost of such funds depend upon financial market condi-ity to maintain its current common stock dividend would not tions, the Company's camings, changes in the Company's be impaired solely because of such a write-off. However, construction program, and its credit ratings, among other any reduction in Earnings Reinvested resulting from such a factors. In 1984, rating agencies lowered the Company's write-off may require modifications to future financing pro.

security ratings, making the cost of raising new capital grams. This could incbde a greater reliance on sales of more expensive. If sufficient rate relief is not granted in common stock in order to maintain a more balanced capital future rate orders, it could be extremely difficult for the structure.

Company to maintain interest and dividend coverage ratios necessary to issue first mortgage bonds and preferred Sources of Funds stock. If the Company were unable to obtain sufficient The Company's cash construction outlays in 1984 external financing, it would have to consider postponing t

wero provided almost entirely by issues of short and construction expenditures and conserving internally long-term debt and equity securities. This compared generated cash by reducing other cash outlays.

7 i

i

RESULTS GF CPERATIOND For the years ended December 31, 1984 1983 1982 (millions of dollars)

REVENUES AND OTHER INCOME Electricity sales to retail customers 528 478 453 Electricity sales to wholesale customers.

14 17 21 Gas and steam heating sales 9

0 8

Other income.

8 2

1 559 506 483 CXPENSES Fuel and net purchased power.

146 126 128 Operating and administrative.

81 78 76 Maintenance of equipment and facilities 38 33 39 Depreciation and amortization.

50 51 44 State and local taxes.

46 45 41 Debt interest.

140 111 95 Allowance for debt funds used during construction.

(45)

(33)

(23) 456 411 400 income Before Federal Income Taxes.

103 95 83 Federalincome taxes.

32 32 26 income From Operations.

71 63 57 Allowance for equity funds used during construction.

83 65 49 Not income 154 128 106 Preferred stock dividends accrued.

35 30 27 EARNINGS ON COMMON STOCK.

119 98 79 Average Number of Common Shares Outstanding (millions).

32 28 25 EARNINGS PER COMMON SHARE

$3.70

$3.50

$3.18 RETURN ON AVERAGE COMMON EOUlTY.

15.3 %

14.5%

13.3 %

The ncAss on pages 12 through 18 are an integral part of this statement.

8 i

EARNINGJ REINVEDTED For the years ended December 31, 1984 1983 1982 (millions of dollars) l Balance, at the beginning of year.

188 161 143 Add - Net income.

154 128 106 i

Deduct - Preferred stock dividends declared.

37 31 27 Common stock dividends declared.

83 70 61 Eamings Reinvested During the Year.

34 27 18 i

Balance, at the end of year.

222 188 161 CT!URCE OF FUNDS INVESTED IN PLANT AND FACILITIES For the years ended December 31, 1984 1983 1982 (millions of dollars)

Provided From Intemal Sources Net income.

154 128 106 Principal non-cash items:

Depreciation and amortization 50 51 44 Deferred federalincome taxes 19 19 13 Investment tax credits - not.

9 9

14 Allowance for funds used during construction (debt and equity).

(128)

(98)

(72)

Other - net.

12 2

2 Funds provided from operations.

116 111 107 Dividends.

(120)

(101)

(88)

Net change in current assets and liabilities and other accounts.

13 26 (10)

Allowance for funds used during construction (debt and equity) 128 98 72 Provided from internal sources.

137 134 81 Provided From External Sources Sale of Securities:

Common stock.

64 71 49 Preferred stock.

65 30 20 First mortgage bonds.

107 130 120 Term loans.

29 Pollution control notes - proceeds at issuance.

45

-deposited in escrow account (21)

Net increase (decrease) in short-term notes payable 28 (43) 21 Net (increase) decrease in temporary cash investments.

(69)

(14) 2 Redemption of long-term debt and prc: erred stock (21)

(8)

(41)

Net increase in nuclear fuel obligations.

25 49 45 Provided from external sources.

252 215 216 Total Sources Of Funds.

389 349 297 invested In:

Construction Expenditures 356 294 249 increase in Nuclear Fuel Inventory.

33 55 48 Total Invested in Plant and Facilities 389 349 297 I

The notes on pages 12 through 18 are an integral part of these statemerfs.

9

b_.

ii BALANCE SHEET F

]

December 31,

+

1984 1983 b

4 (millions of dollars) h ASSETS f

Property, Plant and Equipment

<t Plant in service.

1391 1 358 p

Less accumulated provision for depreciation 365 325

' l-1 026 1 033 i

Construction work in progress.

1 480 1 154 4

Nuclear fuel in service, at amortized cost.

40 23 2 546 2 210 k

Current Assets l

Cash and temporary cash investments.

88 16 4

i Accounts receivable - net.

54 51

}

Fossil fuel, at average cost.

25 25 1

Materials and supplies, at average cost 9

12 Prepaid taxes 18 17 jy Special deposits and other.

20 15 214 136 e'-

?

Other Assets Property taxes - subsequent years.

21 21 Deferred charge - cancelled generating projects.

33 38 f

Construction funds held in escrow and miscellaneous.

51 32 2

105 91 Total Assets.

2 865 2 437 CAPITALIZATION AND LIABILITIES 2

Capitalization f

Common shareowners' equity.

814 716 Cumulative preferred stock 200 200 i;

Cumulative preferred stock with mandatory redemption provisions 158 94 Cumulative preference stock.

Long-term debt.

1 110 985 S

2 282 1 995 q

Nuclear Fuel Obligations Nuclear fuel trust.

48 41

[

Nuclear fuelleases.

63 50 5

111 91 9

Current Liabilities

.)

Short-term notes payable 28

-[

Long-torm obligations due within one year.

72 30 Accounts payable.

50 44

[

Accrued taxes.

50 49

)

Accrued interest 30 23 T

Dividends declared.

32 26 b

Accrued expenses and other.

7 9

269 181

?

Accumulated Provisions and Other

(?

Deferred federal income taxes related to:

?

Accelerated depreciation and amortization.

89 77 D

Cancelled generating projects 13 15 9

Property taxes and other.

33 22

=

{.

Investment tax credits.

49 40

[

Deferred credits and other.

19 16 j!

203 170 l

Total Capitalization and Liabilities.

2 865 2 437 The notes on pages 12 through 18 are an integral part of this statement.

k 10 -

q.g

CAPITALIZATCN I

December 31, l

1984 1983 Common Shareowners' Equity Common stock, $5 par value,40 million shares authorized, 34 and 30 million shares outstanding 171 148 Premium on capital stock.

421 380 Earnings reinvested in the business.

222 188 814 716 Cumulative Preferred Stock Annual Shares Outstanding Current Par Dividend December 31,1984 Redemption Value Rate (millions)

Price Not

$100

$ 4.25 - $ 4.56

.3

$101 - $105 31 31 Subject to 7.76-10.00

.6 103-105 59 59 Mandatory 25 4.28

.8 32 20 20 Redemption 2.21 1.0 27 25 25 2.37 1.4 29 35 35 3.47 1.2 31 30 30 200 200 Subject to 100 11.00

.1 106 6

6 Mandatory 9.38

.2 107 24 25 Redemption 13.25

.1 110 13 13 Provisions 12.65

.2 113 20 20 14.80

.3 115 30 30 25 3.75 1.2 29 30 3.72 1.4 29 35 158 94 Cumulative Preference Stock, $25 par value.

l Long-Term Debt First Mortgage Bonds, excluding current maturities Maturities Interest Rates 1985 9.35%.

50 1986 3%%

15 15 1988 4%.

15 15 1990 -1994 11 % - 1G%%

373 265 1997 - 2000 6% - 10%.

66 66 2002 - 2006 7% - 9.65%.

112 112 2008 - 2013 9% - 15%.

247 247 Discount in process of amortization.

(1)

(1) 827 769 Other Long-Term Debt, excluding current maturities Notes,8.75%, due 1986 - 1997.

90 97 Term bank loan, average interest rate 11.53%, due 1987 - 1989.

50 50 Term bank loans, 13.57 - 14.49%, due 1989 - 1990 29 Pollution control notes,5.71 - 7%%, due 1986 - 2009.

37 37 Pollution control loan agreement, 9.93 - 10%, due 1990 - 2010 32 32 Pollution control notes,13%%, due 2014.

45 1 110 985 Total Capitalization 2 282 1 995 The notes on pages 12 through 18 are an integral part of this statement.

11

CUMMARY OF CIGNIFICANT ACCOUNTING POLICIED General The Company's accounting records are maintained in ing units, $33 million, is not included in rate base for rate accordance with the Uniform System of Accounts as pre-determination purposes.

scribed by the Federal Energy Regulatory Commission and Maintenance adopted by The Public Utilities Commission of Ohio. In Maintenance expense. includes repairs of property and accordance with the Statement of Financial Accounting renewal of minor items. Costs of replacements and those Standards No. 71, the Company's 1983 financial state-renewal items that are units of property are charged to the monts were restated to reflect the capitalization of nuclear utility plant accounts. For retired property, the Company fuel lease commitments entered into af ter December 31, takes its cost plus removal cost, net of salvage, and W82.

charges it to the accumulated provision for depreciation.

Revenues Taxes Customers are billed on a monthly cycle basis for their The Company provides for deferred federal income electricity consumption, based on rates authorized by the taxes as required on the differences between straight line Commission. Larger industrial and wholesale customers depreciation and tax depreciation amounts for property cre billed on a month-end meter reading basis.

additions since December 31,1973, as well as the tax effects of certain other timing differences. Remaining tim-Fuel ing differences are considered in rates m the year in which The Company collects estimated fuel costs over sub-they affect taxes payable. The estimated cumulative effect sequent six-month periods through a fuel recovery rate.

on earnings of the flow-through treatment of the timing dif-The rate is based on both actual and projected costs and ferences at December 31,1984 and 1983 is $75 million and generation. The Commission reviews and approves the

$76 million, respectively. Based on Commission and Ohio projected rate and historical performance. The differences Supreme Court decisions, the Company believes such between actual and estimated fuel costs are deferred until taxes can be recovered in future revenues. For federal they are applied to the customer's bill. This allows a better income tax purposes, all interest costs are deducted as match of fuel expenses with fuel adjusted revenues. At they occur, except for the amounts required to be December 31,1984, the Company had a deferred fuel capitalized for real property.

recovery balance of $7 million.

For certain property, the Company receives investment The cost of nuclear fuel is charged to fuel expense tax credits which are accounted for as deferred credits.

based on consumption. In addition, the estimated future These tax credits are reflected as reductions to tax nuciear fuel disposal costs are included in fuel expense.

expense over the life of the related property. Investment tax The Company has contracted with the Department of credits generated from 1980 to 1984, amounting to $27 mil-Energy for permanent disposal of spent nuclear fuel. The lion, are available to offset future taxes payable and will be Company is currently collecting the fee from its customers recorded when utilized.

and paying the Department of Energy.

Property, Plant and Equiprnent Depreciation and Arnortization Property, plant and equipment are stated at original The original cost of properties, except for the Davis-cost. Included in the costs of construction are such items Besse Nuc! ear Power Station, is depreciated over their as related payroll taxes, pensions, fringe benefits, rnanage-cstimated useful lives on a straight-line basis. Depreciation rnent and general overheads, and allowance for debt and cxpense on the Davis-Besse Nuclear Power Station is equity funds used during construction. This allowance based on the unit-of-production method. This includes a represents the estimated composite debt interest and provision for the Company's share of the total estimated equity costs of capital funds used to finance construction.

decommissioning costs of $53 million previously approved These costs are charged to property, plant and equipment.

by the Commission. The equivalent straight-line provisions They are concurrently credited to income as allowance for for depreciation overall averaged 3.5 percent in 1984, 3.6 debt and equity funds used during construction on the percent in 1983 and 3.5 percent in 1982.

Results of Operations statement. The Company's allow-Costs associated with the four Central Area Power an e rates, not-of-income tax effect, ranged from 10 per-cent to 10% percent in 1984 and 1983, and 9% percent to Coordination Group nuclear generating units cancelled in 10% pcrcent in 1982.

1980 are being amortized over a 10-year period ending in 1991 in accordance with the Company's rate orders. Amor.

Reclassifications tiration of these costs amounted to $5 million annually from Certain reclassifications have been made in the prior 1982 through 1984. At December 31,1984, the unamortized years' financial statements to make them comparable with balance of the costs associated with the cancelled generat-1984 classifications.

12

NOTED TO FINANCIAL STATEMENTS December 31,1984 (1) Power Pooling Arrangement fuelinventory. The Company's portion of operating As noted on page 7, the Company is a member of the expenses associated with these facilities is included in the

. Central Area Power Coordination Group. The five rnember corresponding expenses on the Results of Operations

' utilities own, as tenants in common, various power generat-statement. The amounts reflected on the Balance Sheet ing facilities. Toledo Edison is obligated to pay its share of under property, plant and equipment at December 31,1984, each of the units under construction and its related nuclear include the following:

Actual or Scheduled in-Ownership Ownership Plant Accumulated Construction Generating Unit Service Date Share Megawatts Fuel in-Service Depreciation Work in Progress (millions of dollars)

Completed:

Mansfield No. 2 1977 17.30 %

135 Coal 71 14 1

Davis-Besse No.1 1977 48.62 %

428 Nuclear 444 66 18 Mansfield No. 3 1980 19.91 %

159 Coal 129 20 1

Under Construction (see Note 2):

Perry No.1 1985 19.91 %

240 Nuclear 642*

Beaver Valley No. 2 1987 19.91 %

166 Nuclear 17'*

498 Perry No. 2 Uncertain 19.91 %

240 Nuclear 222

• Includes common facilities for Perry Unit No.1 and Perry Unit No. 2

Common facilities with Beaver Valley Unit No.1 (T) Construction Commitments and Contingencies The estimated cost to complete Perry Unit No.1 was Completion of Perry Unit No.1 is expected about year-end revised upward in March and September 1984 as a result 1985.

of risingexpendituresforconstructionlabor,supportstaff and in late January 1985, the Central Area Power Coordina-equipment. The Company calculates that its total investment tion Group Executive Committee announced that the Group in Perry Unit No. I and common facilities, including allow-would concentrate on completing Perry Unit No.1. The ance for debt and equity funds used during construction, will estimated completion date of Beaver Valley Unit No. 2 has amount to approximately $800 million, a $190 million increase been delayed from late 1986 to about year-end 1987 and the

. over 1983 estimates. Of the total investment, $56 million estimated cost to complete the unit was increased. Based on

' represents the Company's share of construction expendi-preliminary estimates, the Company calculates that its total tures reallocated to Perry Unit No.1 from Perry Unit No. 2 in investment in Beaver Valley Unit No. 2 and related common 1984. The reallocation involved costs that were properly facilities, including allowance for debt and equity funds used allocable to Perry Unit No.1 and common facilities regard-during construction, will amount to approximately $890 mil-less of the future of Perry Unit No. 2 discussed on page 14.

lion, a $237 million increase over 1983 estimates.

(conanuesonnextpage 13

The Group has also reaffirmed their early 1984 decision investment in that unit through customer rates, and no to minimize work and cash expenditures on Perry Unit No. 2 other basis for recovery were anticipated, the Company pending completion of the studies concerning the unit's cost would be required to write off this investment against that cnd in-service date. Accelerated or extended construction year's earnings. At December 31,1984, such a write-off schedules, mothballing (including suspension of allowance would approximate S222 million, or $154 million net-of-fed-for debt and equity funds used during construction accruals) eralincome tax effect.

or cancellation are among the alternative courses of action Further delays in completing construction of the three being considered for Perry Unit No. 2.

units as well as delays in obtaining required licenses would Moreover, construction activity may be reduced to such substantially increase their costs and

• elated nuclear fuel a level by about mid-1985 that related allowance for funds financing charges. Major changes in safety regulations used during construction accruals may rieed to be offset-have lengthened considerably nuclear unit construction cnd a corresponding reserve established in the financial schedules over the past ten years. Such changes, as well statements. Creation of such a reserve would not affect as high inflation and prolonged construction schedules, cash flow, but would reduce earnings below what they have greatly increased nuclear construction costs over the otherwise would be. Allowance for funds used during con-same period. If high inflation were to resume, major new struction accruals are expected to average about $2 million safety regulations were imposed by the Nuclear Regulatory,

per month in 1985 for Perry Unit No. 2.

Commission, construction schedules were lengthened if construction were terminated on Perry Unit No. 2, further, or additional licensing-related delays were experi-cnd the Company was not provided a means to recover its enced, nuclear construction costs would rise.

(3) Petition on Perry Unit No. 2 Construction in September 1983, the Ohio Office of Consumers' tion on that unit. Finally, the petition asked the Commission Counsel and several other parties filed a petition with The and the Board not to approve the issuance of securities to Public Utilitics Commission of Ohio and the Power Siting finance further construction of Perry Unit No. 2. The peti-Board of Ohio asking that the two agencies investigate the tion alleged that completion of Perry Unit No. 2 will result in need for Perry Unit No. 2. The petition also requested the unreasonable excess generating capacity and that the Commission and the Board to order the Ohio Central Area rates charged to customers would therefore be excessive.

Power Coordination Group companies to stop construction The matter has not been scheduled for a hearing. If and of Perry Unit No. 2 and prevent them from accruing further when it becomes necessary, the Company will vigorously tilowance for debt and equity funds used during construc-oppose any efforts to impede its construction program.

(4) Federal income Tax Details Supplementary information regarding federal income taxes is set forth in the following tables:

For the years ended December 31.

1984 1983 1982 For the years ended December 31 1984 1983 1982 (milhons of donars)

(mdions of donars)

FEDEF1AL INCOME TAX EXPENSE FEDERAL INCOME TAX EXPENSE WAS COMPUTED AS FOLLOWS:

DETAILS ARE AS FOLLOWS:

Tax at statutory rates on Currently payable 4

2 2.

pre-tax income.

85 74 61 Investment tax credits:

Deferred 15 13 14 Increases (reductions) in taxes due to:

Amortized (2)

(1)

(1)

Allowance for funds used Prior year adjustment (3) during construction (54)

(41)

(33)

Deferred taxes:

Accelerated depreciation Accelerated depreciation (net) 12 11 12 methods and other Cancelled generating projects.

(2)

(2) depreciation differences.

2 3

Deferred fuel costs (2) 3 2

Nuclear fuelinterest charges -

8 2

Miscelbneous (1)

(4)

(2)

Other provisions (1) 4 Total federalincome tax expense 32 32 26 Total federalincome tax expense 32 32 26 14

. (!) Capitalization Shares of these series may be purchased at the sink-

c. Capital Stock Transactions ing fund redemption price of $100 per share plus accrued and unpaid dividends. Future sinking fund redemption

For the years ended requirements are: $2 million in 1985; $4 million in 1986; December 31, 1984 1983 1982 and $5 million annually in 1987 through 1989.

' FUMBER OF SHARES (thousands of shares)

c. Cumulative Preference Stock

' SOLD (RETIRED):

Common stock The Company is authorized to issue 5 million shares of Public sales.

3 000 2 500 2 200

$25 par cumulative preference stock under its amended Shareowner Dividend articles of incorporation. The preference stock's dividend Reinvestment and and liquidation rights are junior in priority to the Company's Stock Purchase Plan -

1 589 945 575 cumulative preferred stock, but senior in priority to the Total common shares 4 589 3 445 2 775 Company's common stock. At December 31,1984 there wem no shares of cumulative preference stock Cumulative preferred stock outstanding.

Public sales, $25 par

$4.28 series 800

$3.47 series.

1 200

d. Long-Term Debt Cumulative preferred stock The annual interest requirement on long-term debt with mandatory redemption outstanding at December 31,1984, excluding current Public sales, $25 par maturities, is $130 million, or 11.7 percent. This includes sejes j

amortization of debt discount and expense, but excludes 99 interest on.m clear fuel obligations.

Retiremant, $100 par

$11.00 series.

(5)

(5)

(5)

Sinking fund redemption requirements and scheduled (minions of donars) maturities for long-term debt, excluding nuclear fuel leases, PREMlUM ON CAPITAL STOCK through 1989 are as follows:

Balancs, beginning of year.

380 326 291 Premium, net of expense -

Sinking Fund Common stock.

44 52 34 Redemption Scheduled Pref;rred stock.

(3) 2 1

War Requirements Maturities Balanc:, end of year 421 380 326 (mpons of donars) 1985 4'

57 1986 3

22

$8 3

b. Cumulative Preferred Stock The Company is authorized to issue 3 million shares of 1989 3

33

$100 par end 8 million shares of $25 par cumulative pre-

. ferred stock under its amended articles of incorporation.

In addition, the first mortgage bond indenture provides

The cnnual dividend requirement on cumulative preferred for a required annual minimum payment (after certain

! stock outstanding at December 31,1984 is $41 million, or credits, as defined) to the trustees as a maintenance and 11.4 percent.

replacement fund. The Company has been satisfying the requirements by pledging property additions that otherwise The Company held as treasury stock 5,335 shares at might have been used as the basis for the issuance of

December 31,1984, and 10,335 shares at December 31, additional bonds.

l 1983 of the $11.00 series. The sinking fund requirements

for the various series of cumulative preferred stock through The first mortgage bond indenture constitutes a direct 1989 tre:

first mortgage tien on substantially all property and fran-chises owned. This does not include expressly exempted Dividend Minimum Effectnre property, such as cash and securities, accounts receiv-Rate Yearty Shares Date able, fuel, supplies and automotive equipment.

- (in thousands)

$11.00 5

1979 9.38 17 1985 13.25 9

1986 12.65 8

1986 14.80 12 1987 15

(6) Retirement income Plan The Company's retirement income plan is non-contrib-Accumulated pension benefit information as of the utory and covers all employee groups. The Company funds valuation dates follows:

cach year's cost currently and amortizes unfunded past serv-January 1.

1984 1983 ice costs over a 30-year period. Pension costs are based on (mimons or donars) estimated salary levels and service years of employees at Actuarial present value of accumulated their retirement. Total pension costs were $4 million annually plan benefits:

in 1982 through 1984. Experience gains and losses on invest-Vested 46 42 ments are amortized over 15 years.

Non-Vested 6

6 52 48 The actuarial present value of total vested and nonvested plan benefits is based on salary levels and years of employ-Market value of net assets available ees' service as of January 1 for each year. The weighted for present and future plan benefits 89 75 average assumed annual rate of return used in determining these values was 8 percent for both 1984 and 1983.

(7) Quarto Coal Arrangernents

a. Coal Supply Contracts The Central Area Power Coordination Group companies unless such price exceeds a prescribed market price test.

have made long-term arrangements with Quarto Mining The Company's total purchases under these contracts Company to supply coal to the Mansfield units. Each of the amounted to $16 million in 1984, $15 million in 1983 and companies guaranteed its share of Quarto's debt and lease

$12 million in 1982.

commitments incurred to develop and equip the mines. As of Under these arrangements, the Company expects the December 31,1984, the Company's share of the guarantees minimum yearly payments for fixed charges on debt and was $27 million, or 7.3 percent. The Company's share of com-lease commitments to decline from $6 million in 1985 to $5 mitments incurred af ter December 31,1984 wi!! increase to 11 million in 1989.

percent in 1985 and 12.4 percent in 1986*

b. Coal Cost Recovery The Company's coal supp!y contract with Quarto expires in January 1984, The Public Utilities Commission of December 31,1999. The contractual pricing provisions reflect Ohio prescribed a methodology to allow the Company to Quarto's production costs, deferred mine development recover specified Quarto coal costs plus a portion of prior charges and fixed charges on debt and lease commitments, cost deferrals within the six-year period ending in 1989. As among other charges. The operation of one Quarto mine was of December 31,1984, $6 million remains on the Com-suspended in 1984 and the future operation alternatives are pany's Balance Sheet as a miscellaneous other asset being reviewed. The Company's share of the suspended pending recovery in rates. The Company believes such mine's deferred mine development costs of $15 million prior deferred costs will be recoverable within the periods will continue to be recovered in the delivered coal prices specified by the Commission.

(?) Nuclear Fuel Obligations The Company's leasing and trust arrangements can obligations of $149 million under other nuclear fuel leasing finance up to $298 million of the cost of acquiring nuclear arrangements at December 31,1984. These obligations material, processing it into fuel and hold ng the fuel until it resulted from the financing cf nuclear fuel assemblies at vari-is used up in the reactor. The Company expects thest ous stages of completion. Of these obligations, the Company crrangements for financing nuclear fuel to be adequate had capitalized $77 million at December 31,1984. Included through 1986. At December 31,1984, the Company had a in the capitalized balance was $5 million related to interest

$48 million obligation to its Central Area Energy Trust on the leases during 1984. The 1984 interest on the leases (nuclear fuel trust) resulting from the acquisition, conver-was calculated at an average interest rate of 11.4%.

sion and enrichment of nuclear fuel materials. This included $5 million of interest capitalized during 1984. The The lease payments are made to coincide with the usage 1984 interest was calculated at an average interest rate of nuclear fuel in the reactor. Estimated lease payments, of 11.9%.

including interest, are: $20 million in 1985; $31 million in 1986; in addition to the nuclear fuel trust, the Company had

$38 million in 1987; $47 million annually in 1988 and 1989.

16 l

I

' (:) Short-Term Borrowing Arrangements At December 31,1934, the Company had line of credit Banks expect the Company to maintain average deposits arrangements with various banks for $73 million. Of this equal to 5-20 percent of the line of credit, depending on amount, $45 million was unused. The Company pays com-the borrowed amount. The deposits provide operating bal-mitment fees on almost all of those lines. The rest are ances for the Company and are not legally restricted.

based on informal compensating balance arrangements.

(12) Environmental Matters On November 8,1984, the United States Environmental have upon its operations. However, the final regulations

Protection Agency proposed revised regulations governing may require the Company either to install flue gas desul-the use of smokestacks to disperse pollutants into the air.

furization equipment or to use lower sulfur coal at its Bay The proposal is in response to a 1983 federal court deci-Shore Station. The installation of such equipment would

' sion. The agency intends to issue final regulations during involve substantial capital expenditures and increased

, April,1985. The Company is currently unable to determine operating costs. The alternate use of lower sulfur coal the impact that the proposed regulations, if adopted, would would likely result in higher fuel and operating costs.

(11) Selected Quarterly Data (Unaudited)

The following quarterly results reflect all adjustments (that are of a normal recurring nature) to ensure a fair statement of results for such periods:

(millions of dollars)

(dollars per common share) income Earnings Revenues Before on and Other income Net Common Dividends Market We*

Quarter ended income Taxes income Stock Earnings Paid High Low 1984 March 31 141 31 39 31 1.03

.63 18 %

16 June 30 133 23 35 26

.87

.63 17 %

13 %

September 30 144 27 40 31

.92

.63 17%

13 %

December 31 141 22 40 31

.89

.63 18 %

16%

1983 March 31 129 20 29 22

.84

.61 22 %

20 June 30 127 19 28 21

.78

.61 22 %

20 %

September 30 132 35 40 32 1.10

.61 21 %

19 %

December 31 118 21 31 23

.78

.61 21 %

17%

'The Common Stock is listed on the New York, Midwest and Pacific Stock Exchanges. The price quotations are from The Wall Street Joumal. There were 86,209 common stock sharehcWers as of December 31,1984, compared to 87,781 in 1983.

(12) Effacts of Changing Prices (Unaudited) surviving plant by the Handy-Whitman Index of Public f

Utility Construction Costs.

This section shows the effects on the Company of Because its rates are regulated, the Company cannot changes in prices of specific assets, namely property, plant recover through revenues more than the original cost of

, end equipment, using Current Cost Accounting.

s4m W hMbWeM e Current costs reflect changes in specific prices of plant will substantially exceed the original cost. In 1984, the from the date the plant was acquired to the present. The added cost, due to inflation, of replacing the Company's current cost of plant estimates the probable cost of replac-plant assets is shown under " Inflation effect during 1984 ing existing plant assets. it was determined by indexing the on capital investment."

(cononued next page) 17

During a period of inflation, issuers of debt experience inflation effect in 1984 on capitalinvestment (mil! ions of dollars):

an economic gain. This is especially important for the Increase in specific prices to current costs 149 Company due to the substantial amount of debt issued to Effect of change in general price level (127) finance its construction program. This gain is shown under Reduction to net recoverable cost.

( 89)

" Gain from decline in purchasing power of net amounts Add'tional provision for depreciation

( 31) owed."

( 98)

The comparative Current Cost values of allitems on Gain from decline in purchasing power of net the income statement, except depreciation, represent the amounts owed (primarily debt) 66 amounts recorded in the historical cost income statement.

Net ef fect of inflation on common stock equity.

( 32) income taxes are not adjusted because current tax laws do not allow for the inflationary impact on capital investment.

The table below presents selected operating and finan-The Company has calculated depreciation provisions for cial data for the past five years adjusted for inflation as 1984 on the Current Cost amounts of property, plant and measured by the Consumer Price Index for All Urban Con-equipment. The calculation was made by applying the ratio sumers. Earnings on common stock and earnings per of the provision for depreciation over the average property, share are shown as if only the amount reportable as an plant and equipment on the historical cost basis, to the additional provision for depreciation were deducted from indexed plant values.

the reported amount of such income. Data from 1983 were The above right table shows the net effect of inflation on revised to reflect actual indices.

common stock equity in 1984 from Current Cost Accounting:

(millions of dollars except per share amounts) 1984 1983 1982 1981 1980 l

Operating Revenues.

551 526 519 505 507 Earnings on Common Stock 87 67 49 28 32 Gain from Decline in Purchasing Power of Net Amounts Owed 66 52 45 93 113 increase in General Price Level Over (Under) Increase in Specific Prices (22)

(29)

(42) 5 84 Net Property, P! ant and Equipment 4 380 3 926 3 555 3 177 2 804 Net Assets at Net Recoverable Cost 801 704 610 532 457 Per Common Share Amounts:

Earnings.

2.73 2.38 1.96 1.30 1.66 Dividends Declared 2.52 2.57 2.56 2.63 2.77 Market Price at Year End.

18.88 18.77 22.72 18.55 19.44 Consumer Pnce Index:

Annual Average 311.2 298.4 289.1 272.4 246.8 Year End 316.4 303.5 292.4 281.5 258.4 AUDITORS' REPORT To The Shareowners end Board of Directors of The Toledo Edison Cornpany We have examined the balance sheets and statements In our opinion, subject to the effects on the 1984 and of capitalization of The Toledo Edison Company (an Ohio 1983 financial statements of such adjustments, if any, as corporation) as of December 31,1984 and 1983, and the might have been required had the outcome of the uncer-r: lated statements of results of operations, earnings rein-tainty discussed in the preceding paragraph been known, vested and source of funds invested in plant and facilities the financial statements referred to above present fairly the for each of the three years in the period ended December financial position of The Toledo Edison Company as of 31,1984. Our examinations were made in accordance with December 31,1984 and 1983, and the results of its opera-generally accepted auditing standards and, accordingly, tions and the source of funds invested in plant and facilities included such tests of the accounting records and such for each of the three years in the period ended December other auditing procedures as we considered necessary in 31,1984, all in conformity with generally accepted account-the circumstances, ing principles applied on a consistent basis.

As discussed further in Note 2, the Company has incurred construction costs in a nuclear generating unit, Perry Unit No. 2. The Company cannot now predict when, Arthur Andersen & Co.

if ever, Perry Unit No. 2 will go in service or, if cancelled.

Toledo, Ohio, that the investment is recoverable from its customers.

January 30,1985.

18

FINANCIAL AND STATISTICAL REVIEW Revenues and Other income (millions of dollars)

Total Gas &

Revenues Total Total Steam Otrer

& Other War Resutertal Commercial industnal Other Retad Wholesale Electnc Heating income Mcome 1984 173 115 195 45 528 14 542 9

8 559 1983 161 105 170 42 478 17 495 9

2 506 1982 154 102 159 38 453 21 474 8

1 483 1981 139 91 151 32 413 22 435 7

9 451 1980 126 81 138 28 373 22 395 7

1 403 l 1974 47 30 49' 6

132 12 144 4

148 Expenses (millions of dollars)

Fuel & Net Depreciaton Federal Purchased State &

Debt AFUDC -

Expenses income Mcome War Power Operaton Maintenance Amortizaten local Taxes interest Debt Belore FIT Belare FIT Taxes 1984 146 81 38 50 46 140 (45) 456 103 32 1983 126 78 33 51 45 111 (33) 411 95 32 1982 128 76 39 44 41 95 (23) 400 83 26 1981 122 64 32 43 37 86 (15) 369 82 31 1980 156 56 29 26 31 71 (15) 354 49 10 1974 61 23 7

13 13 21

( 5) 133 15 1

Income (millions of dollars)

Common Stock (dollars per share and %)

Amrage Return hcorne Preferred Earrungs Shares on From AFUDC-Net Stock on Outstanding Average Dnndends Market Pnce Sock War Operatons E<pty income Dvdmds Common (mdtr>ns)

Earrungs Equity Deciared Hgh tow war End Value 1984 71 83 154 35 119 32 3.70 15.3 2.52 18.88 13.38 18.88 23.76 1983 63 65 128 30 98 28 3.50 14.5 2.46 22.50 17.50 18.00 24.12 1982 57 49 106 27 79 25 3.18 13.3 2.38 21.13 15.75 21.00 23.53 1981 51 32 83 23 60*

22 2.77*

11.6* 2.30 18.38 15.00 16.50 23.46 1980 39 28 67 18 49 19 2.56 10.5 2.20 20.75 15.00 15.88 23.77 1974 14 11 25 5

20 7

2.85 12.5 2.00 28.00 15.25 16.13 21.73 l

• In 1981, excludes extraordinary gain from exchange of common stock for bonds (af ter giving effect to the extraordinary gain, earrungs on comrnon were equal to $70 mdhon; earnings per share to $3.27, and return on average common equity to 13 5 percent).

19

FINANCIAL AND STATISTICAL REVIEW Electric Sales (millions of kilowatt-hours)

Electric Customers (year end)

Residential Usage Annual Annual Price Revenus KWH Per Per Industral Per KWH Custmer War Residertal Commeroal hdustnal Wholesale Other Total Residermal Commeroal

& Other Total Castcwe (Cents)

(Ocaers) 1984 1 958 1 398 3 444 305 440 7 545 243 912 23 891 3 920 271 723 8 045 8.81 709 1983 1 915 1 341 3 127 320 428 7 131 242 959 23 694 3 864 270 517 7 900 8.44 665 1982 1 911 1 325 2 873 395 414 6 918 241 492 23 495 3 815 268 802 7 906 8.04 636 1981 1 919 1 294 3 080 449 409 7 151 241 663 23 573 3 844 269 080 7 966 7.23 576 1980 1 971 1 282 3 165 560 410 7 388 240 142 23 532 3 818 267 492 8 232 6.40 527 1974 1 634 1 107 3 062 401 338 6 542 221 846 22 360 3 249 247 455 7 419 2.85 212 Load (megawatts)

Energy (millions of kilowatt-hours)

Fuel l

Net Purchased Capabildy Load Capacdy

& Net Fuel Cost Effidency at Time Peak Factor Margin Generated Interchanged Per KWH BTU Per War of Pealt Load

(%)

(%)

Fossd e*Jcear Total Power Total (Cents)

KWH 1984 1 726 1 327 68 23 5 182 2 091 7 273 719 7 992 1.73 10 193 1983 1 777 1 325 66 25 4 683 2 383 7 066 593 7 659 1.67 10 337 1982 1 790 1 355 62 24 5 306 1 569 6 875 510 7 385 1.80 10 221 1981 1 773 1 315 66 26 5 349 2 142 7 491 157 7 648 1.68 10 274 1980 1 760 1 310 68 26 5 529 1 031 6 560 1 352 7 912 1.65 10 245 1974 1 453 1 249 64 14 5 239 5 259 1 737 6 996

.75 10 065 investment (millions of dollars)

Accur,uinted Constructen Annual Plant h Provisions For Net Worit h Nuclear Fuel Total Construccon Total War Service Deprecation Plant Progress h Sennce Plant Experdeures Assets 1984 1391 365 1 026 1 480 40 2 546 356 2 865 1983 1 358 325 1 033 1 154 23 2 210 294 2 437 1982 1 307 286 1 021 879 18 1 918 249 2 125 1981 1 261 252 1 009 657 11 1 677 201 1 870 1980 1 208 221 987 519 18 1 524 235 1 702 1974 439 116 323 276 599 121 655 Capitalization (millions of dollars)

Cumulative Preferred Common Cumulative with Long-Shareowners Preferred Mandatory Term War Equny Stocit Redempte Debt Total 1984 814 36 200 9

158 7

1 110 48 2 282 1983 716 36 200 10 94 5

985 49 1 995 1982 617 35 170 10 95 5

876 50 1 758 1981 550 35 150 10 96 6

762 49 1 558 1980 479 34 150 11 67 5

708 50 1 404 1974 177 32 81 15 299 53 557 I

20

BOARD OF DIRECTORS OFFICERS Richard P. Anderson (O)

John P. Williamson EXECUTIVE OFFICES Managing Partner Chairmar and Chief Executive Offcer 300 Madison Avenue The Andersons (Agribusiness)

Wendell A. Johnson Toledo, Ohio 43652 Samuel C. Carson (E)(N*)(S)

Presidert and Chief Operating Offcer Phone (419) 259-5000 Chairman (Retired)

Donald G. Nicholson (aHed29 85 - 249M)

The Toledo Trust Company Senior Vce President. Finance (Commercial Banking)

STOCK TRANSFER AGENT, REGISTRAR, DIVIDEND Richard P. Crouse Vce esident.

8 OA Vice President, Nuclear Corporate Developrnent and General Counsel Chester Devenow (A)(C*)(S)

Anthony A. Bosch, Jr.

The Toledo Trust Company Chairman and CNef Executive Officer Vce President, Custorner Servces Toledo, Ohio 43603 Sheller-Globe Corporation (Automotive)

Richard P. Crouse Edwin D. Dodd (C)(O)

Vce President. Nuclear MORTGAGE TRUSTEE Chairman Ementus and Director John R. Dyer The Chase Manhattan Bank, NA Owens-lllinois, Inc. (Packaging Products)

Vee President, PLbic Relations New Wrk, N.Y.10081 Elwood L Elberson (C)

Joseph E. Murray Chairrten, President and CNef Executive Vce President, Energy Supply AUDITORS Adhur Andersen & &

Dnner Bell Foods. Inc. (Meat Packing)

Lyman C. Phillips ad nA Wendell A. Johnson (E)

Vee President. Corporate Planrung President and Chief Operating Officer and Adrnirustration 3

Isabel F. Martin (A)

St an Cooke Former Consultant, Toledo Area United Way tary EXCHANGE LISTINGS Donald H. Saunders Common Donald G. Nicholson Treasurer New York Stock Exchange (TED)

Senict Vce President, Finance Henry A. Page, Jr. (E)(N)

Paul G. Busby Midwest Stock Exchange Contmner Pacific Stock Exchange Drector of Development The Medical Conege of ONo at Toledo Unlisted Trading Privileges Boston Stock Exchange Lyman C. Phillips Cincinnati Stock Exchange Vics President, Corporate Philadelphia, Baltimore and Planring and Admirustration Washington Stock Exchange Paul M. Smart THE ANNUAL MEETING Senior Vee Pensident Preferred - $25 par value - 8.84%,

Ceportte Development and General Counsel The Annual Meeting of The Toledo Edism

$2.365, $4.28, $3.47, $3.75 and Company will be held at 10 a.m. (E.D.T.) o

$3.72 series Willard I. Webb, Ill (A*)(E)(S)

Apnl 23,1985 in the Company's headquarters, New Ybrk Stock Exchange Chairman and Chef Executive Off.icer Edison Plaza 300 Madison Avenue. Toledo, ONo Citizens Bank (Commercial Banking)

Ohio. Formal notice of the meeting will be sent Preferred - $100 par value - 4%%,

John P. Williamson (E*)(S*)

to shareowners with the proxy statement.

8.32%,7.76% and 10% series Ch'.irmen and Chef Executive Officer Amencan SM EM The Annual Report, including financial state.

Robert G. Wingerter (N)(O*)(S) ments, fs for the general information of the Bonds Chairman, Executive Committee Company's shareowners. It is not intended to 7%% - Due 2002 Libbey-Owens-Ford Company be used in connection with eny tale or pur-8%

- Due 2003 (Gla:.s Products) chase of secunties.

9%

- Due 2000 9.35% - Due 1985 A copy of Form 10-K as filed with the Securi.

9%% - Due 2008 ties and Exchange Commission may be 9.65% - Due 2006 obtained by writing: D. G. Nicholson, Senior 11 % - Dw 2009 Vice President. Finance,300 Madison Avenue, Toledo, Ohio 43652.

New wrk Stock Exchange KEYTO DIRECTORS' COMMITTEES (A) AuditCommittee (C) Compensation Committee NEW DIRECTOR (E) Executive Committee Edwin D. Dodd, Director, Consultant and Chairman t (N) Nominating Committee Ementus of Owens-lllinois, Inc., was elected in July to the

(!) Operations Committee Toledo Edison Board of Directors. His election filled a vacancy j (S) Stritegic Pianning left by the May 1984 death of Robert H. Davies, who had i

served ably on the Board for eight years.

denotes committee chairman J

Mr. Dodd joined the multinational packaging products com-pany in 1946 and was named chief executive officer in 1972.

He has played a leadership role in numerous Toledo, Ohio and national civic and business organizations, and has served on DIRECTORS EMERITI several Presidenbal commissions. He was 1983-84 chairman of the Chamber of Commerce of the United States.

Floyd M. Canter Virgil A.Gladieux William S. Carlson Marvin S. Kobacker

TOLEDO BULK RATE

%se EDISON u s,Osam PAID EDISON PLAZA 300 MADISON AVENUE TOLEDO. OHIO TottDO, OHIO 43652 Permit No. 230

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