ML20100N242
| ML20100N242 | |
| Person / Time | |
|---|---|
| Site: | Beaver Valley, Perry, 05000000 |
| Issue date: | 12/31/1984 |
| From: | Arthur J DUQUESNE LIGHT CO. |
| To: | |
| Shared Package | |
| ML20100N233 | List: |
| References | |
| NUDOCS 8504180518 | |
| Download: ML20100N242 (44) | |
Text
{{#Wiki_filter:. . . '~ *- *::Aj ;p,,pl ) f f. ', w + a ,n .g""# 1 *A. 7 ) g -:- *
~~
,-*y '
. - L yg s
. fj;. y
- 4 aa - - -
4 4 ,: 4, , e a' ' ' s' , .,
, wy p;;;:, ; t;., '.g .e- "D.... u"
/? - *'_; _ + , + , j .1 ., # ,
- s ',
,i.,
e v -- s
'1'S r y s ' '
n k _[sr n.,.. 'a.-
.. u $6 g4 ..'r .*]f-
'o- + .
'-D
-.y( , bf. -'f'.,-4 a_ g ' , ,*f- 4.a
~ Np: ?
M A Q'f
- y _, ,
If" * , L,'4 4 * ",;;
- t. v Y.w i
, e s ;,] -
- F.3 $
,e n g,% + l, ,.r.w[f
- ry;:-y -
.:(.
.s_
._ 3.
j'h E *' j ,$,
'k'.,- g
;m l 6 f; f .qA't ' r-F 4
.'s '
p- 3_ . [, . -
.,gA-e : yn' i*ny,;e.
3 u{ , q '. g' W
./' 1
.i.-
+ g '. .
<- w .4w <
;t 3
J. s> N- s ,i, .' 'A-lh ;=.' s? '
,",- ., ; e 'v , h'
- s. .
?'g ,
- $. :' ,, , ..~.4,'.,t%,
s g k ' ., g 4 . + . ,-- i ,.p J.4'..* -
*u, "'i-W i . ' g ,. . fiT '.
* * 'Nf.;k .,v A t .
Nr.... m y
,'a-?ne l t +-lc f ' "'.
f h g. 29'-
,,Ts' yv. .yum sy -
N.. y' yl $ u k r%.. U'nN .,4 ., -
~ '
t sI:d?-
^
\ { -i, Ys-*^ . ;a.+ g:Q ~Y
,w. ,\ w .-_ .
c} \ 1.! A h,. h. : -.f ' ,jf ,l .-
.N . *
<.J- ..f,.g,g',Q '.Mg> ".r. '- .
a '
<* ,V; f .5 n'
, 1 .s- . 4< ,g * $ I ,
- y. . ,I e.' , ,
('a, % -' ; M"- f
%# ?
" 1 4 D
s 4 ((4 i *
) '
3-t.- f%' S'* J ,.'1'. + - .., %*rf.9'lr
'3 ~ $'[4 ?,,,.,
j'[\ h. i L
.n
.',3,. 2
*--:~
gr -4y+ ,7 p' Ia p y en ~ < # n y a.Yc. , _.%g , y 4 _^*m.g' 3f-,' y;
'*~4 -%' - t .y k fM' A f 1. . - -
.T' . ;M' &'n' n .*.O.? j
,- ,'>n-W h t?p.? w_$ eU'*i o > g n y ,' ?x"0.s{x' Y 'f,Q;
'R x q.mweq% &Nr o c.v-
_u4y. v
-* $ 8'f g > - ) . i.
+,N. k 9
;w..
1 . g, )
* - rm' r v'
( i y+ qiF 4: s,x9 - Tq. %:e,-,. o h . t M' w '
= - - -
w- 4 MD.dI f . _e.-
.-n%. M13
- n. - . ..
f $ _ J- _d
.n.w =- re- - =a
_.y. .--.-_:r
, ~ ,w g , y '5
- s. .
' 7'
] ,. .g k l A'
h ci
-5 6 '
PDR MdB O S NN l d { =DH
Duquesne Light Company Percent Financial 1984 1983 Change-Electric Operating Revenues (000) $ 861,775 $ 800,345 + 7.7 Net Income (000) $ 156,794 $ 145,226 - + 8.0 . Earnings Per Share of Common Stock $2.21 $2.20 + 0.5 Dividends Paid Per Share of Common Stock $2.045 $1.975 + 3.5 Shares of Common Stock Outstanding at Year End 64,774,591 58,419,659 +10.9 Operating Electric Plant (000) $ 3,799,499 $ 3,293,481 +15.4 MWH Sales 11,562,846 10,990,239 + 5.2 - Peak Load Megawatts 2,172 2,184: 0.5 Cost of Fuel Per Million BTU 165.9v 167.1v - 0.7 : Average BTU Per KWH Output 10,682 10,635 ' + 0.4 : . Annual System Output MWH 12,179,795 11,736,037 .+ 3.8 During the early Eighties, when many U.S. Highlights-1934 . . . . . . . . . . . . This Page i cities were holding back until the recession Corporate Management Group . . . . . . . . . _1 i went away, Pittsburgh contracted a case of To Our Stockholders . . . . . . . . . . . . 2 de 3 : . Building Fever. Builders, entrepreneurs and Perspective on 1984 . . . . . . . . . . . . . . 4 to 15 . other people with new ideas changed the - Company Repc,rt on Financial town. Transformed it, you might say. Statements . . . . . . . . . . . . . . . . . . 16 L The cover photo shows one aspect of the Opinion of Independent Certified change. If you haven't seen downtown Public Accountants . . . . . . . . . . . . .' 16 Pittsburgh in a while, you might not recog- Financial Information . . . . . . . . . . 17 to 39 ; nize the skyline. Four large office towers Company Service Area Map . . . . . . . . . 40 completed since the spring of 1982---and Common Stock Dividends . . . . . . . . . . . 40' more started since this picture was taken. Form 10-K Offer . . . . . . . . . . . . . . . . . . . 40 : For those of you who are interested in the Board of Directors . . . . . . Inside Back Cover new Pittsburgh, we have a limited number Company Officers . . . . . . Inside Back Cove'r; of lithographs of our cover photograph CAFCO . . . . . . . . . . . . . . Inside Back Cover available. If you would like one, write: Duquesne Light Company, Pittsburgh Photo, One Oxford Centre (30-4), Pitts-burgh, PA 15279. You can see more new sides of our com-munity on pages 5 to 15.
l , Corporate su ~ FM7V ** 9.Q;W.t ??A W_y' fk^ s.
* . y
.7 D
i" 9NtWR C'Wc7 ..+ tt > g/ m:~-
'is Q Q W "W katT*CD*UMtif 1 i " C'
> :? ti l
. ' M m^'
.1
,,. ;& =
4 Yt: rfy" 17, '
+
l
- g. . - s e) _.743 -
g . ;f 4_ _ t , ;, - - g".; s I , . v .4 , : -..-
- p. ' :'. .... .-
D ,. . - y;'
'R_ _f
^
,L,
-y
' Q * .C
* '"h. g i." K p.f.p ':)
A %,
.g> q, ,, . . _ . _ . , f . g .. , _ ', ,
# p
._) ,,
;- s .
,.y K ' ; f.[- .gV -
- p. . ' g , #' +
'}
p : . . .- ' . . - 0. . . . . e-
..-. T%, '
2 :,,, z.g *';Y
~ . " 1 9 .' ' ' '_ y': ' - ~ ..a '*i r
A .
\.
4 .
) _ *: ; i
- 4. 2 a v
. Lw. . k.4 , .
.s .. . c' .y ,~ *.
_ ' ' ' T: -~ . _
" ~ "' N Thf"e . l . . . .
1
'i
',v ,,
\
,s g
y_ f
, 4 , .
^h
' '. .y. . . "
. =; - . ~ , . -
.; ?. g. .N . .
. nm -
s ; . ' :- - ;j. :. +. : .. .>.An- ,; . ' .
'l
= . .
9 W .a . . ,j) - I
,~p*,,p
,7y*^* '
4 .A .
? ., y
;Q . :.
M M** ^ f -
. n'?eQm ,
e t, .r.h' r r.
! ,i. . --.?d- t= .
w u. 4
..w.' .,1 4
v.
,3- .[
u.
--- . . , -' .- ' g .
. .- , ; p '.
.- - . _ ' , , . , , - m .v. x .
4 .
. ,.: .- ,. .. r , . .-
;y y *- >..- .N.. #
A g,( '
- y. .; .
- ., : +
y, q., .. - . . .;; . 3. . $y
~_4+.cs. ; . . _. ..s;
.. 9< .- ,.' ,,, ,.. -.* - * , ,k . , . ; . +r ..- ,..+: .
X
~
.n
- v. _. r - . ...
s . ,
. . .O
. , . - . . , s
, 4'.
11 - s m,.-[.'g [, r' e :-. '
- 3. 4 ..
..s.'r.. . . . , . .' ' %_ ....f.,..- -
_ .sj ~ p,.+s, ,.n, ;.v .; ' .q:1
+
, .g.y - . + ,L. -.-
z.; ',, i. ..
- 3. . . , ,c.. .
.s. -
w.-
. . ,~
w.' '. s,, +s,.. .'g
'A p"
p, T - - " , , * . * - . l' p. p
., .M, ;
- '~
.[,9 ?? ,..
f 8.- ,t, d" , +. .,,.=
'g. .'.,..;;,.7t
. %. ,., h'.u,.
2.di% , . .-p
.,',7
- h. %, '}'
vi,ti t
.Q 1,.f, ..o * ?.
e- , . . ,- .
;- c +., -.
- o. ,
4 x 3 ;.". . ;n. .. 4-s - . . ,w, y s -2s.
, . :. . .g. ,a . . 4. . - ..s . . . _mp 4 p..
t .m . u. . .< yg gg g : . .n
...^- s. ;s n'q.;
.-u
..r .s n:vu. ,, f n ; -
3 : . . .. b m. , " . .; ., s.h "..ta. w .? .: e. g : . - p'. r - .;.c . - W: , [:a. y. r _'_;
. y7_G- ,..a. . ~ . . . A. ....1..m. ,t ,. .ekg. ,
.y4.
..r.. ,y .:,L....
- . , . 79.%.
.. . . -c .. . .
- c. .,-
. 9...m w.4.7,e v
.L g8.,f,:'.'.i,t '.- -:.s 3 .., g.,,,.,9 i , 4.f. (y....! 1 J f.; .7 ". 4 1., p j....
. .. . .. . c. s g- . r . . . . .
4
% f.,.(- .. fs,,3..t., . q . yq y. ?J.$ , g,c_f,g y sc a . . <
S'![. :. 'f.-
'. -:5 '
- -h: h; Y ' d Y Scated. trom left. Walter T Ward inski, John M. Arthur and Charles M. Atkinson.
Standing. from left. Roger D. BecL Cliford N. Lhnn. William F Gilfillan Jr.. Ear!]. Woolevn,
]>hn J. Carey and % ley W von SchacL 1
espi te a drop in industrial sales in the Tartan Laboratories, Inc. which is auto-T o a r~ fourth quarter, our total kilowatt-hour sales . mating the process of compilm, g computer
. Stockholders in 1984 were 5.2% higher than in 1983. software,is one of many examples of local advanced technology success stories.
Revenues also were up 7.7%, from $800 million to $862 million, and earnings rose Formed in 1981 by three Carnegie-Mellon from $2.20 per share to $2.21 per share, professors, the firm now employs 50. Tartan In 1984 we took a one-time write-off of executives project sales of $70 million and approximately $5 million, or 4v per share, to employment to leap to 250 by 1986. pay for an early retirement incentive pro- The production of steelin Pittsburgh is gram that helped us accomplish the objec- about half of what it was three years ago. tives of our on-going, Companywide reor- However, agreements being negotiated by ganization. Three hundred twenty-four the Reagan administration with foreign pro-employees elected to take early retirement. ducers could help to stabilize the domestic steelindustry and possibly increase steel Economy production in and around Pittsburgh. During late February 1985, LTV Steel Co. Therapidly economy changing of our service from territory an industrial baseisrestarted one of two 100 megawatt electric to a research and service base. Today more arc furnaces and the blooming mill at its than 80 percent of the work force is Southside facility, resulting in the recall of < employed outside of the traditional manu- about 275 workers. Both units had been idle facturing environment, and despite a seven for most of 1984. percent regional population decline during Our Economic Development Department I the past 20 years,180,000 new jobs have continues to work with many local busi-been created in our service area and the sur- nessmen and government officials to expand rounding seven county southwestern and diversify the region's economic base. Pennsylvania region. A source of added business in 1984 was In 1984, the growing segment of our the sale of bulk power to other utilities.
' " commercial" market was medical and . Revenues from the sale of bulk power to research facilities, fast-food restaurants, and such companies as Allegheny Power, Cleve-new office buildings. ' land Electric, Ohio Edison and Toledo We are particularly pleased that Edison amounted to $27 million in 1984 Carnegie-Mellon University was chosen by versus $7 million the prior year.
the federal government as the site of the new $103 million Software Engineering Rate Changes Institute, a computer software research cen- Ta ^pril, your Company filed for a 4.8% ter. More than 400 adt nc~1 technology 1($42 million) rate increase. On January , companies, employing .warly 40,000 people 24,1985, the Public Utility Commission are now located in the Pittsburgh region, approved an increase of $31.4 million. This > and it is predicted that a growing number of rate adjustment, which went into effect Jan i these types of businesses will locate in our uary 26,1985, should allow earnings to area in the near future. show further improvement in 1985. Earlyin 1985, we expect to file for an , additionalincrease in rates. l 5 i
,2 i' - -
, . . 4 . _ ~-. . , ,-. ,_ ,.
i Reorganization Fund, a non-profit agency we helped launch Megawatts hroughout 1984, all areas of the Com- and continue to support, paid all or part of 3000 T' 1 pany were involved in our extensive the electric bills of 642 Duquesne Light resi- p ,,, reorganization program. We are concentra. dential customers in 1984. In a remarkable ting responsibility for running the Com- demonstration of community spirit,20,000 of our customers voluntarily added an extra 2500 !E pany in five major functional groups plus a 1: gal and corporate communications organi- $1 to their electric bills each month as their j zation, reducing the number of departments contribution to the Fund. a from 44 to 25. The overall goals of the reor-Deserved Praise E ganization plan are to strengthen our plan- a ning and control functions, to reduce man- T e especially want to salute our fellow 3 agtm:nt costs, and to further enhance our Duquesne Light employees, who 23co , ability to manage future changes. j ined together to go the extra mile in 1984 5 Cost Centainment when friends and neighbors needed help. One small example: 2,400 Duquesne Light Actual la Sev ral years ago we formalized on-going cost containment program. our employees gave more than $57,000 to the Salvation Army Food Fund. la The Company also wishes to thank its 8
' In 1984, the documented savings amounted to $3.5 million. Since the inception of the stockholders for their support through 5co a
program in late 1981, we have documented the difficulties members of of the year. management, Speaking for all we pledge our l3
- savings of approximately $26 million.
continued efforts to earn your support and o, lg l Our Ctmmunity confidence. 1910 20 30 40 so oo 70 80 84 94
" ocal basic industry remained depressed AnnualSystem Peak Load a in 1984, and unemployment was higher than the national average. Growth in other arras of the economy is helping to relieve the impact on our community; nevertheless, John M. Arthur unemployment remained a grave concern, Chairman of the Board and President and some of our customers have found themselves unable to cope with their utility bills. February 14,1985 Duquesne Light is committed to help the poor, the unemployed and the elderly cope with their utility bills. The Dollar Energy l
l l l 3
gg g REVENUES / EARNINGS / CUSTOMER SERVICES been an active participant in the continued efforts to diversify our service area. Our on 1984 operating Revenues rost 7.7 rercent Gain Third Quarter Report to Stockholders detailed the emergence of advanced tech-Duquesne Light's revenues rose 7.7 percent n I gy mdustries in our service area over
-from $800 million in 1983 to $862 million the past five years. That diversification in 1984. A rate increase approved in the fall m vement received a major boost in of 1983, an adjustment to the energy cost November when the U.S. Department of rate in April 1984, and improved sales to certain customer groups were the principal Dque announced that Carnegie-Mellon Umversity had been selected as the site for reasons for the increase.
the Software Engineering Institute, a $103 Earnings per share of common stock were ,
$2.21 in 1984 compared to $2.20 with a milhon computer software research center lower average number of shares outstanding which is expected to employ up to 250 peo-ple and to attract related firms that will in 1983.
employ many more. ] Sales Increase 5.2 Percent . A drop in fourth quarter industrial sales and Helping Those in Need The contmued steel industry slump has cooler-than-average summer temperatures , ] caused hardship m pockets of our service combined to moderate sales gains made in . area. The Company has supportcd economic the first half of the year. Overall, sales development groups throughout our service increased 5.2 perce'nt-from 10,990 million , kilowatt-hours in 1983 to 11,563 million terntory m their efforts to pubhcize positive kilowatt-hours in 1984. devqopment, features, to encourage The commercial market remains strong, inqumes fr m pr spective new companies with the continuing expansion of medical and to improve employment. Duquesne Light Company and its employees have a and office facilities leading the way. Cur-rently, six medical facilities totalling more I ng tradition of taking an active role m the than 10 megawatts of new load and $2.5 c mmunity. For example, m 1984, employ-ces donated $363,000 to the local United million in revenues are in the design stage aY Campaign and $57,000 to a Salvation or are under construction in our territory. Several major projects also are planned Army f d bank. The Company pledged an additional $318,000 to the local United for the downtown area. Construction is - expected to begin in the spring of 1985 on i 'Y' 32-story,1.3 million square foot corporate The Dollar Energy Fund, a non-profit energy assistance program Duquesne Light headquarters building for Allegheny Inter-national, Inc. In a related project, work har helped to establish and continues to sup-begun on the $36 million renovation of a port, was honored by a governor's task force n'.qrby theater into a second major perforti- as one of 25 model programs in Pennsylva-ing arts center. A few blocks away, directly "': F r its efforts, Duquesne Light was a across the street from the David L. Law- recipient of the Keystone Award. Customers . rence Convention Center, ground has been . enc uraged to voluntarily add $1 to broken for Liberty Center, a 1.5 million their monthly bills in support of the pro-square-foot hotel / office / parking comptet. gram t help those who legitimately have a verified inability to pay their utility bills. Advanced Technology Makes Gains The Company also worked to simplify While still working to revitalize our tradi- eligibility standards for the state's energy tional industrial base, Duquesne Light has assistance program, in the past, grant Billamsof Kh11 14 12 l h. 10 !N"ff!M 'E* W EW"E g l -'
'/d h JMl 1- 0 6 .
5 da v-4 2 la el; Eu Es I' o
'1080
}108ih mOl)* lih1 1982 io83 t oS!
'4- Kh11 Sales
1 i Suddenly new.U.Perhaps rnore l than any other S. city. l Pittsburgh changed during the recession. The rnost conspicuous changes occurred downtown. ConBned by hill and river, down- l town tends togrow upward: three l of the four fallest buildings seen 1 here are new.
,. , ,' ,s ...; .
I ['f 'g [ - f
^
~ #.enam -
_ spe . . - ** * * .
._3 ,
~ .A, .
g s' $} . ,.j-w 4..,-----.. m afF
* ,j y
,'.. ,g - - - -
y j . ... . c - . , . 7, ~
= . ,-- .e %B=. * ..,
v <*' . e s.
.&m .- . . *.. ,
I
-60
, L,y. , ,.-
m' 4 -
- t.... - .
e - '- e.
. ' l. .
*'V-,-- ,
e - .* "
. 3 +, g .^/' . l,';,q.7,
) , ,Y
^
_f' .; i=T. ,,,,,
,.' ,_ , .; - o
.w.- .. ( . 4: a
. n. v y
Vs. e ,v J. -
. - e. v .
_ jy 1 w f g . .e. cru -." T 4-
. ,m~r t ;;..y-fa u(.=:. are (,l ! %. ...
n
- w - p . .' .;
u,
- . kg~' 'g
.i _ ,-
3 , . ,
,7 f { ' i, p' [ . .w.kJ I); 'A '.
~
- -l - ? ------ { { ',
, I hp .}., f ! M- yy e k h b 7 j_ - 1 p:,
.y' c.: ,. - - ';
m m , .be[gF. %,. - L; g m , ,_ q ., - ..
, .p1 f.;in_o .cgitt u.* . .,~ ;,l
. ..,9 ,,
j ;. ' e 4 m- IM 3 3 ..e . . . - p.; . - g*# - ./1g- ,' ' ; ., . ; ,g ,.;f, % n .g. YS, ... : (y :r j.,", g p9 4.
.; g ~ f.....f s ~ l,(,,
fnp;Q'k y 7j (;.44 .. v.; y f g.g W H.
.y ph h, %-
Y l.l.?
.h,.,s'<<.',,..
." e -
- g. -, , , ,$~ '
.,-e ....g.
n ;. ; ,
- M y- . .
,% p.
it . s,
,,.Y,,e ..,.g
; .*
- i, P*. *'
.. -c. 4. ;,
' d
.f w -s . :
e
,g. . ,
/ '. 3
- ;.ye s . -g--.'4
. 3
' . ; ~' s . . . .
+ y ; g:. s 4j'
, 4 fu ,-; N ; .. - ~ ', _
^ '- k l .- .. "e, a '. . ~ {..
, : - < , '., .??, 'f, . p+ ,~~.f
'~ t-
- d' .i. *.%' , .j"*
(M. ,q y
,t
.: %. i .~y, . - ,, g'h
'3/
, ,,:- g ,,.h, ,
>4 ~.~
4 a ., - . ,
._< r . , .. ., y> -
e ..
&*4
, ,...;.v.. 1, :: .,, ,2--.p., .v - . ? l..
-. :..; r A .(V, ..
__ &,, .< - go e.
..[ ' _,? f.Y -{ q . L . l < ' #. L. l ' . .' 'i,l, ? L . p '- . -
s
.,/, % [ a,[ . - ' "
3 . . g -
,4, ";g' g. - s .? t .' >.*[ ) .. . , ..
m. [< b. . # ', T ' , l s: " - ^ -
, s. '- _ . g. , .
- e- s .y -. ' . + . - ..
~ .
9 -* : ? * - .;',
'.: . * ', -, ,., y _,
E dr . / - g
- . y_ _g< ;' ' , 7 1,
, , _.3
*'"'+. '
'vei
$ _,, i' ,, - ' *-
-^l- t <. &, ** '
Y'
.; }.
- 5. - g.-
s... Q g y y .r*
' .r.-*- -
, s.
_,,.',., y. ~ . .4-.,.. ; e
, g. .. ,, [
Ne . _ , - ,:' l% , . '-
~.-("'
.. g, 4
'...."g.. ' - - .' .
t
.q.< .,,
s
.4 8' a
- , ,.-.p
+
.% . g, ,, , -.
,. .-6
,j f . . , . . ,
., , , n ,- .
, _r *
*l, '
s
-<1.., .
.x ,9 jf " ?.
; ,i * - %1 ._.
- s.
g .,
.. ,./,
' c.
*'.'," . .4 - =
.g s - ,
, .y(,
], ' u fa , ,} ; ,, ,-
g , : '. ',. : ;- . .
.- 1< _ -
. ,..,.~...; -- .
s
=
.a - .-. , ys.. . -
- 7
' , g j- .. +,v'
- -. ~. .. . .. > -
, s. . ~ , .
.' . .g $ . ' . .#"m .
' 4 .;, [
,x l,, ,, V;, l' ' - .
g: ,,g.,,,, r { - 5
money could be paid only to the supplier of Test Scrubber at Elrama the primary heat source. We successfully Elrama Power Station is the site of a wet sought a modification of this provision to scrubber research project designed to include the secondary heat source, since vir- improve the efficiency of sulfur dioxide tually all sources of home heat rely on elec- removal and the reliability of the equip-tricity to operate. ment, thus reducing operating costs. The For the fourth year, Duquesne Light hon- new system could have advantages in terms cred 30 of its commercial, industrial and of improved use of lime, higher sulfur
"." governmental customers for their imple- dioxide removal, use of less costly additives, e rd Ce t o-hines a 46-story o/ Jct lower with entation of conservation measures that better sludge dewatering characteristics and a public urban plaza into a single resulted in significant energy savings as part decreased power usage. The testing, which flowing structure. Duquesne of the Edison Electric Institute's National is expected to cover a one-year period,is Light, Westinghouse Credit Cor- Energy Watch program. Energy Watch is a being conducted by our Environmental paration and[oy Manufacturing voluntary program to meet national energy Affairs and Fossil Generation units.
Company are allheadquartered conservation objectives through local and there. Thefor-story atrium is individual initiatives. Renewable Resources home to a oariety ofshops and Duquesne Light currently has contracts restaurants. OPERATIONS with four renewable resource electric gener-ating facilities located within our service Power Sales area. These include a small hydroelectric Successful negotiations resulted in the sale plant and three windmills. During 1984, the of 100 megawatts of power to the Michigan hydro facility supplied about 7.4 million Power Pool from December 1983 through kilowatt-hours of electricity to the Com-April 1,1984, and to The Cleveland Electric pany's system, and two of the windmills Illuminatmg Company from April 23,1984 supplied 423 kilowatt-hours. The combined through October 21,1984. In addition t total from all of the sources was approxi-these long-term arrangements, other power mately .06 percent of the Company's total sales were negotiated for weekly and daily generation, or enough to supply energy to Periods. over 1,000 homes for a year. UMWA Coal Contract Research and Development A 40-month labor agreement between the Duquesne Light pools its research dollars United Mine Workers of Amenca and the with more than 450 other electric utilities Bituminous Coal Operators of America (of across the country to fund the Electric which the Company is a member) was
, , . Power Research Institute's (EPRI) develop-signed in September. This is the first time in ment ef technology opticns for better pro-20 years that such a labor agreement was duction, transmission, distribution and uti-signed without a national coal strike.
lization of electric power. During 1984 we contributed $2,437,000 to EPRI's research
~
l
& M. ;
Pr ,- A* 1s 8 . 1 Financialhub. One Mellon Bank The 54-story Center is thefocalpoint of a four-building Snancial complex, and headquar-6 ters of the state's largest bank. _ _ - - . _ _ __ - - . _ _ _ _ - ~ _ _ - - . - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ . _ _ _ _
1 $ r, g4.gc, e, wn s-m gi
. . , ~ . . ..
4 .. ,, - ',y
# ~
FP p( . + b
- i. .e,
~
y' ..
, 5 y x, m .
Q'
.,; --O p 3g 1 -
/ ' I' 'N, .*j
. hl, # +
fNE: -
-19< gygg$-
r-E, e;f,_ + .D hl gl' , g.
-j. ~".-
,:* 3lM:.'Y. -
3
\i y
g is ;
+
ea - o =
\ ---"
. , a ^
- l e 4Q:
2 g , _ F. L =a i t$ f d [ 4 d.6k I /'l'l /'!. , . .i 7- . . , . , , , ,, , g 7, ,,,j.
<>><. c .. -,i" < ,
j, .g. , . j, , , ;;, ,,j,; ; ,
. ,- , ,, , , \ 1., .: (.i ;;, ;.4 c '< a * .
R ~
. , ;,f: ,: c , , ,, ,
i
' t i
, 5,;
' , , 5 g ,, -
t-
, , , 'I
' ' ' ' ' ( .
(r h k ,i , , ( .* * , > c ',f .i * : .f : t: g ',f
. ' 2 : c, 4 , ,,
a e t
.d 4 4 4 6 4 P ' :, ,
,,: r7 v .- 'fj .7, " ',
nU.' g% .U
..Q k;&- i*, ';3 i J .5
$gg7CEE
==::::===
9:::::===
- l:F ~4 E E s - ~~
N
< Nw --
E~ I.,".!.
~~
ll[
L F _ i l 2 7 4 [ t V E i
~ ,
5 i me+ggm- _ s 3T
; [. .
t g-t- 4-A (_ i M i+ l5 , g d Aa ,
.5 nnrute> l1 By the htgm- k' nune at tire Iok schtv!
~
vear eve'ry ,tudent, protes,cr a>ui ; adrru rtrsteater at ( arrtegie-A felion iIrucersity GilI, u~ill have a personal ecmruter with C (llt' abtllty !O lltlk up witbl sirly O t f lit' JtIle' ' SL tI l ['t'r s0Pla[ t tur! ruters artJ the urnsversitu _
- P'h11 PIt ' 63 m tN (3I[l F '4 t'Pil[k a CPI t
trat ted to run the new Settware - [riglt1t'er t rig ltistitu tt' f n {llt' t
~
De'rar twent at Deter:sv *[
. [ =
h ; g,u,an-,,Rabat mercJ ttse,,_,,.,,,,,,,- tire c**: - ' riopets
- rem Norti : Orclina tc bt- n ha ndy to Pitt,bu rgi , re~ea r: h 5
( 0?14 t'FitYa t10n IhY vears !a te' et has more than IR emv! vee. sb!rf'Itig f 'JJu th"I '?bJ? _
.~~ld--ett ertianal in its indu~ ~
D Iisis br0 t'P! .Pfl0 lkt' b[at k [
~.
l
. 1 Jniversity spinof. Formative U. Technologies ofers a
/ ..
computer-powered design system W,W. L > = that can link scores or even hun-dreds ofengineers and handle the n la t projects. Most new Pitts-bu companies of the "high h tec " variety are spinofs oflocal
- 1 J, industrial or university research, r i L and Formtek is typical-it scas j\hVf Q.
w, -,_ j fos.nded by a pair ofprofessors.
-- x \ v 7,
,. - [
. j' '
and development efforts. Through member- CAPCO companies to concentrate on the ship in EPRI, Duquesne Light maximizes its completion of Perry Unit No.1. This delay return on every R&D dollar, avoids costly is expected to increase the total estimated duplication of research, and allows for cost of the unit from about $3.5 billion to extensive projects far beyond the financial approximately $3.9 billion, including capability of any one utility, allowance for funds used during construc-tion. Duquesne Light's share of the increase NUCLEAR is $55 million, bringing our total commit-BVPS Unit No.1 Has Good Year ment in the unit to about $536 million. Prior to its October 11,1984 shutdown for The estimated completion date of Perry refueling, maintenance and modification Unit No.1, which is about 97% complete, work, the nuclear Beaver Valley Power Sta- remains unchanged-around the end of tion Unit No. I attained an on-line operat- 1985-and the cost estimate for this unit cents Per Mahon BTU ing availability of 92.3 percent for 1984. The remains unchanged. The schedule required unit's annual availability for 1984 was 71.8 to meet this target has little,if any, margin percent. During this refueling, the fourth in to accommodate the unexpected problems ao the 810-megawatt unit's eight-year history, that can arise during this stage of the con-the reactor core was upgraded to an struction of a nuclear generatmg umt. 14o .18-month refueling cycle, which should The estimated cost and completion time-table for Perry Unit No. 2 remain under 12o ! increase its availability in 1985. The unit
- was returned to service on January 5,1985. review. And, as announced previously, the ,gg CAPCO companies are considering all
) CAPCO Reviews Construction options with respect to this unit, including 30 l On January 28,1985, the CAPCO compa- cancellation. Duquesne Light owns 13.74% ) nies announced a delay in the completion of each of the three units under construction. 60 date of Beaver Valley Unit No. 2, which is l about 83% complete, from late 1986 to Last Fuel Removed from Shippingport 4o I about the end of 1987. The new schedule The final shipment of spent nuclear fuel i recognizes the need for more time to com- from the historic, and now closed, 2o I plete the unit in light of regulatory and Shippingport Atomic Power Station (SAPS) , i safety requirements adopted since the unit was completed on September 6,1984. This m4 a u so 82 84 was designed, as well as the decision of the ended the defueling of the plant and for- Cost of Fossd and Nudear Fuel l 9
Y atery weekend. During the Three Rivers Regatta, { half a million spectators flock to i rwerbanks and downtown buildings to watch them race sternwbrelers,100-mph Formula lassics in the park. The One hydroplanes, leather boats, Pittsburgh Symphony has crew shells. Anything That its summer home in 36-acre Floats. Between races there are Point State Park at the tip of sky shows, stage shows and a downtown. For a dozen perform-boat show Dessert, of course, is ances during July, music lovers freworks. need bring only lawn chairs and picnic baskets; the concerts are free. ((*F57 7 35 @ 5T]9NMgg%}?psN[eW@e${!; g
. rep
., y ., y
=,ay,
% g @;d 4 % ;
l
Qacers un the parL Bugatti, h Morgan Three Wheeler, Frazier-Nash, Turner, Elva-and other males of yore. Pitts-burgh s Vintage Grand Pri.r is an annual weekend-long event. y ;_' e ' , .
- g. :; ;
- u. y - ;. ,u ' ._.... _s. _ L.;
- +.. .W : y. <g. . ,. ... ... %, ' . ., _ .. . _
i '
-/.p *. 4' S . $ . .;
g . .,, ,7,,.
.. . n. . ; . -
a , - . _ .- , s'.> g- / Q'}.Y. 4 s j. [. >+ %-% [.y yy y y ' * ,Q ._; & '
;.j j.{ .M ' ' . . { i..t..[ J 9 . ';
3_
- s. n ; , . .p.M 's -.
wx w. 6 s. ,.4
%. [e,g. 4 g L,g ?s . r. I,y-y3 kM llge
_t ,.-
- w. -
.S . : . .. ;
g ~ .. - . . . . 3 . .3 - . q ' .* l' . t} i ~ \ ~ s q ',
.,c,'. [ m,'y
~ -
c
. , , e. . . .... .
y,s .; _4 ;- ' ','" ' A' t, , ;
.g..e ,' -' .^. )@o48 ;. j ..-
. . ;jW,,.'4 y..
2 , . . , . . . . . .- , - - _p _ -y ." . j' ' . . . .. .
, .N '
. J '*k~ ,' - % f , .% .__..
- .' 70 ,- . . % .* . . , ; .
l mally terminated the contract for operation will provide significant cost savings for of the station between Duquesne Light and nuclear fuel processing. I) Festival starred LionelJ ittsb the Naval Reactors branch of the U.S. Hampton, George Shearing, Rou Department of Energy (DOE). Responsibil- Successful Emergency Drill Eldridge, Ma.rine Sullivan, Sta'n ity for decommissioning of the plant was Beaver Valley Power Stati n and 27 sur- Getz and too rnany other Hall-transferred from Naval Reactors to the r unding communities, along with emer- of-Famers to list here. The finale, Richland Operations Office of the DOE that gency agencies from Pennsylvania, Ohio on Labor Day, was a free concert same day. and West Virginia, participated in a full- by Sarah Vaughan and her Trio. The d'etonunissioning of SAPS once again scale emergency exercise n June 27,1984. will focus the world's attention on Ship _ Nuclear Regulatory Commission (NRC) pingport, Pa. Within 20 to 30 years, over evaluators dici not find any deficiencies in l 100 nuclear units could be decommissioned mutmg on-site emergency planning I as their useful lives end. It is predicted that requirements during this exercise. The Fed-engineers from as many as 19 foreign coun_ eral Emergency Management Agency l tries and 50 domestic utilities may visit (FEMA) evaluated the performance of state
- SAPS during the decommissioning period. and local governments during the drill.
When the job is completed in 1988, it is I expected that the level of residual back- INTERNAL OPERATIONS I gr and radiation remaining on the property Reorganization Making Progress wil! be low enough to allow unrestricted use The reorganization implementation plan, of the property. Present plans call for using which was started late last year, continues , the land for facilities needed by the adjacent to make good progress. The purpose of the l Beaver Valley Power Station. reorganization is to develop an organiza-tional structure which focuses attention on Nuclear Fuel Savings the Company's external marketplace and to The CAPCO companies have renegotiated provide efficient, cost-effective service to contracts with the U.S. Department of the community. Energy to provide nucle.u fuel enrichment The new organization has brought about services on a requirements basis at a price the consolidation of 44 departments into 25 l 16wer than previous arrangements. The new departments through the integration of l wntracts also provide for accelerated liqui- related functions. This provides for maxi-dation of anticipated future inventories plus mum operating efficiency within functional additional flexibility features, all of which groups by expanding responsibility and g
7 avoiding duphtation I he strut tural reor - l { gami,atien pna,e of the impiementa,ien
, : _,- , , ,7 1
-)
g g .* j N' M pro (ess ts expet ted to he t ompleted in carly l ' - 1985 liowever, the reorgani/ation process a '[ [,n {fjw '
.. Will t ontinue throughout 1085, with empha-sis on developing and expanding manage-
~~
ment inf ormation and planning and tontrol r - systems to support the new organi/ation 4 [ f 4 Safety Record Best in State For t he set ond (onset utive year, I)uquesne
'Q l ight Company is the recipient of saf ety f{ awards trom the Pennsylvania l let tra
^
T tuum g %-, y-- s
.- P,A g 'u14> - - g " a~ % ' Assotiation (PEA) and the Edison Electrit
^
kp Ikh.p'l'- [j Institute (EEI) Ihe PEA award honored the g) j ( ompany f or at hieving the best results in
~* ^ a(tident prevention in 1983 among those
, g Pennsylvania elet tra utilities with more
" }j ,5 than one milhon work-hours annually It marks the first time in l)uquesne I.ight history that this honor has been at hieved two years in a row 4A f ..
I he eel award, also ret eived f or the set-
'} % ond year in a row, rec ogni/es elettrit utility
[ . 4 (ompames in the United States which at hieve a 25 pert ent or greater reduc tion in
) injuries as i ompared with the pret eding three years
_ ., HVPS Computer System
,-]{7( ) ,
A major new computer system to process _r . i the scheduling and project management P system f or the nutlear refueling outage at Beaver Valley Unit No. I has been installed
? '
to reduce outside expenditures and improve operational control The fourth refueling 2 ,. just completed at Unit No. I was success-
} l
}
fully auomplished using this computer g,+~ g a;
, system.
9 ?] Management Audit Completed i j' The Company completed its program to 3 s
!)) implement a series of retommendations
~ $f "
aimed at improving its operating efficiency and performance resulting from a 1982 = fcrmerly a u,arehcuse. Com-I
- merce L ourt wa, a monu mental turn-Of the-eentury but!dsng that stood empty for many years. Now it is Ls'0.000 squa rt I'et t Of shops and 0% es
~
l0cuted rust a live-minute walk across the bnJge trem downtown 5 5 1 2 12
r s f Pennsylvania Public Utihty ( ommission CONSTRUCTION AND FINANCING ormerly a grand hotel. Teddy - (PUC) mandated management audit in '"#"" - Capital Expenditures , " August 1984, a final implementation report Our net capital expenditures for the year - documenting the Company's progress was ume to $251 milhon About 26 percent of f7 7jf j[jffa /! = submitted to, and auepted by, the I UC this was generated mternally The balance : The renovators restored the best
} Equal Employment was raised by outside financing This of the oldgrandeur and com- ,
in August 1984, the Office of Federal Con included the f ollowing rletely rebuilt everything el3e. 1 On March 27,1984, the Company issued Nom it s the Unwersity of tract Compliance Programs conducted a
$50,000,000 prinopal amount of 13% % Pittsburgh student una -
review of Duquesne 1.ight's equal employment opportunity policies and pra, First Mortgage Bonds, Series due March
! tices and found the Company to be in tom I,1901. Net proteeds to the Company ! pliance with federal requirements were approximately $49.o million On July 10, Duquesne 1.ight and the 2 On November 14,1984, the Company Western Pennsylvania Brant hes of the issued 2,500,000 shares of Common National Association for the Advancement Stock Net proceeds to the Company -
of Colored People (NAACP) joined together were approximately $37 4 million . 3 On December 19,1984, the Beave.r e i to formally declare their support for the Fair
~
s i Share Principles endorsed by the Edison County Industrial Development Author- _
; Electrit Institute and the national office of ity issued $51 million of 11% % tax-I the N AACP The declaration sets forth exempt pollution control revenue bonds, _ _
mutually beneficial goals that the Company Series due December 1,2014, to finance f ~ s has supported in the past and will continue the Company's share of the costs of cer-to support as part of its (ommitment to the tain pollution control facilities at the , [ (ommunity. Duquesne I.ight was the first nuclear Beaver Valley Power Station. Net 5 utility company in Pennsylvania to achieve proceeds made available for payment of - such an agreement with the N A ACP. such costs amounted to approximately p
$40.7 million 4
Supervisory Training / Management 4. The Company issued 3,743,836 shares of
? Development Common Stock in 1984 pursuant to its f in January 1084, a new supervisory training Dividend Reinvestment Plan issuances ' -
r program for first-line supervisors and a of Common Stock through this Plan management development program for aggregated approximately $48 million. In
; mid-level managers were initiated Supervi- addition,61,00o shares of Common Stock
; sors receive skills training in handling were issued pursuant to employee stock i everyday supervisory situations Mid-level ownership plans.
# managers learn techniques to increase pro-ductivity, through and with their staffs, by Standby Credit The Company completed arrangements for i using a participative management style an increase in its existing revolving credit
[ when appropriate. One-third of the Com-pany's mid-level management and supervi- agreement with two banks from $60 million
- sors completed the two programs during to $100 million. In addition, the Company
) 1984. All supervisors and managers are
; scheduled to complete the programs by the first quarter of 1986.
Y # [ormerly a treight house. In ^
; L the old day +, t'reight trains pulled in here to be loaded. Now.
W ' still called Ine Freieht House, it hg shelters w resta mnts and 55 [ , hops that sell mostly out-o!L the-ordinary things. Some are housed e ir old tbut shin.d freight cars. b F s 13 i
_ , - ~ ~ ' " ' _ _ _ _ ~ ~ ~ ~ ~ ~ , _ - - - - " ' " - e,a.*-'M.r"W' wuW P Y d
';Td . pew"N ~ T. .., .. p .
sa .4 T, .:
.s , ].5 -; ,.. . .h'f.-~3h, '"
,v [ P O 'p 8F M,q 'f %. , , g. v .'._. (&g] .!k',.,. s , ;
\
wsh,f h, ghs e[ $ ?pl k'E 4[. j 1 L r-L o.o f-d 7,. < GnA F dw= i v e(. /wm,v b
- 5[e,h(k>., ,
e f !( ' i s. .
,f te e
p~; .p, 1, . M icM -(.I - _i $K g-4 i n. - t'q. '
' .'h m y-, Q) n1g
. ; ;9 au.sqt
,rp- (p - .
E
,o
?
a _ x . it # s e f p ~ , -
)m.# r (,L., h
@r- ~d ' '
+
m i ['ect{ f rt a, g #h-p# r m@ %g ( .O , -
@m y- p !m ' "
c , y$ #.7An$7h g , 33
't *
.\ ,' ,. 4 ;
y ,, . n. , - ' p o g;,'o[%s - : p- \ 'f TAG M=p 4,y uyk$$AhkN.*;f,r-. r g-e ? w, $$! 7 k - ; 1 g; 4($*, J:,n
,,; PfA.; . ,q
&xy$n4,kq e -rv +afn w pews =tw(h hW
.ww. n e,m h.$p. .b W. :-
.r. ,
W Wh.. Diihki.h Y ,"h"#"hi~ i V - . ; ;n, %Ag~~! m . g. 4 , f.:o y >m% e n [~: ) w wwm,a.m se f t _ - {- i r b. ym..L-o t . a~ s;."a.; $ ih M M N N t--1 ; a 1nep g .w4 i
,( , _
f p{;N - g,, g ; 3;Jh- d b g]._ v . ,
= ,;
1 I, c.
, h, j
^.
,-."o yg-.,Irg : J~<
9 '
) ;
we ualw J1
,. \
M n .,w :* a-y!
, .; t . , i' le:.
k+e. w {c""> y -
;_ . e,: .a.u- s g i u m y =-m
, 7: t- ~ m g) - per h' a (==
. sV ; '.g ; . , ..gX,4 f f i i e .
n q'7m yy' V_ n s[. ' g;.^
.x A s _h,_,
i? 6p.z f , . .
- 1. .,:. p b b, h Z-a..wde=8 A $l5.
a m n. p h; M; & Wj@ 4 a,b gg 9,.; ;gpg
- i. 4yb ,r
/
/s 7 i.tyu2e 4
* '[p ..s
'f -- .
'h 2L y er & *a'^f-T
. .;b v N0
- rz'i 6,$ '
gN,; 3
;% q;.
p ;m. .
.,} i-a . ~
.~.w . m[ '
<**"* f i s s.
s
.c . ,,
h, ~l & A . a . 1 h '- h V 3 a h ,
'We{'
}(Ei M [v%
--s. 1*
jh as:ss i.3 ~A - m
,m n
,. .cm m m d g,t { s 2 - ~
h '.i f. ,t , ' _ -. _ \'_\ . v y y
recently reached agreement with several Dividend Reinvestm:nt Plan banks on the basic terms and conditions for The Shareholder Relations Department con-an additional standby credit facility of $125 tinues to improve its administration of the ;\ million. The detailed documentation for the Dividend Reinvestment Plan, which was b agreement currently is being finalized, but is brought in-house late last year at a signifi- :H s not yet complete.The main purpose of the cant cost savings to the Company. The cur- Ch expanded credit facilities is to assure all rent annual cost savings are approximately d investors, including stockholders, that the $175,000. Company has the financial capabilities to Toll-Free Numbers complete its major construction projects currently underway. Two toll-free numbers have been estab- [ q,g lished for Duquesne Light stockholders. A 4 Rates major advantage will be the expediting of
~
, On January 25,1985, the Pennsylvania Pub- stockholder inquiries. The followmg num- q , lic Utility Commission entered a final order bers should be used for calling Shareholder i
'~
concerning the Company's request for a $42 Relations: Outside Pennsylvania (1-800- - million increase in annual rates which was 247-0400); Pennsylvania, except Pittsburgh filed on April 27,1984. The order allowed (1-800-367-6400); Pittsburgh (393-6167). , $31.4 million of the rate increase requested. Film Receives National Award - \ In December, the Company was awarded a J. /Downtown keepsfor A new headquarters changing. SIIAREHOLDER RELATIONS / CINE Golden Eagle Certificate by the Coun- AlleghenyInternational(model COMMUNICATIONS cil on International Nontheatncal Events for shown here) is about to start con-New Transfer Agent, Registrar its film "The Changing Nuclear Neighbor- struction. Half a block away, a The First Jersey National Bank of Jersey hood." The new public service film, used by huge old moeir palace is being City, N.J., has been named by the Board of our Company's Speakers' Team, deals with transformed into a Center for the Directors as the Company's sole transfer the controversialissue of nuclear energy- Performing Arts. (It's the second agent and registrar, effective February 1, how it affects and is accepted by people one downtown, but thefirst, 1985. This change was initiated by the living near a nuclear plant. This award is N'i" NdII' h0"StS SymP hony, announcement by Chemical Bank of New made annually for films judged suitable to #""" #"# #F"" "*F""I ""# can no longer meet the increasing York, the Company's previous major trans- represent American cinematography in fer agent, that it would discontinue stock transfer services. First Jersey, one of six international film festivals. This is the sec-ond time the Company has won the award. [ n
" "[rt c nm n )j"fb blocks away, across the street potential transfer agents mvited to submit in 1980, the film "Pittsburgh-an American from the Convention Center, the proposals to the Company,is expected to Industrial City" also was honored. Both double lowers of a hotel-plus-provide excellent service. The change to one films were produced by the Corporate office building willsoon rise.
transfer agent and registrar will result in Communications Unit, significant cost savings to the Company. 1083 1084 [
!8 18 p.,
k ITe 16 0 te. Io L 13s P 13 %
}
- , x ,
i 14 b 14 tr. fr. b W E 7 1
- stw c? . tw l
12 12 b 11 % lo 1o ist 2nd 3rd 4th ist 2nd 3rd 4th Highl Low Common Sta k Highilow Common Sta-k Th,rnwl tra.Img meine ok, comn+ comm % L a th, N,w Yes l %L U Wg,. Tk,stal m alw b.t,Jon th, rhula Mpkm %k h.kg,. e. e t 15 1 1___-- - - . - . . - . . - . , -
Company Report on Financial Statements The Company is responsible for the financial information Their examination was made in accordance with generally and representations contained in the financial statements accepted auditing standards and included a review of the and other sections of this Annual Report. The Company system of internal accounting controls and tests of trans-believes that the financial statements have been prepared actions to the extent they considered necessary to provide in conformity with generally accepted accounting princi- reasonable assurance that the financial statements are not plis appropriate in the circumstances to reflect,in all misleading and do not contain material errors. material respects, the substance of events and transactions The Board of Directors has an Audit Committee com-that should be included and that the other information in posed of four non-officer directors which met four times the Annual Report is consistent with those statements. In in 1984. The Audit Committee has the following duties pr paring the financial statements, the Company makes and responsibilities: (1) recommend the independent pub-informed judgments and estimates based on currently lic accountants;(2) review the planned scope and results available information on the effects of certain events and of their audit and other services to be performed; transactions. (3) review the financial statements and the related report , The Company maintains a system of internal account- of the independent public accountants; (4) review with the ing controls designed to provide reasonable assurance that officers, internal auditors and the independent public the Company's assets are safeguarded and that transac- accountants the adequacy of the Company's system of tions are executed and recorded in accordance with estab- internal accounting control, including their recommenda-lished procedures. There are limits inherent in any system tions with respect thereto; and (5) review the planned of internal control based on the recognition that the cost scope and results of the internal audit function. The inde- l of such a system should not exceed the benefits to be pendent certified public accountants and internal auditors l derived. The system of internal accounting control is sup- have full andgee access to the Audit Committee and meet ported by written policies and guidelines and is supple- with it, with and without management being present, to mented by a staff of internal auditors. The Company discuss internal accounting controls, auditing and financial believes that the internal accounting control system pro- reporting matters. vides reasonable assurance that its assets are safeguarded and the financialinformation is reliable. The accompanying consolidated financial statements g* pf
"/
have been audited by Deloitte Haskins & Sells,indepen. Weste W. von Schack John M. Arthur dent certified public accountants, whose appointment was Vice President-Finance Group Chairman of the approved at the 1984 Annual Meeting of Stockholders. and Chief Financial Officer Board and President Opinion of Independent Certified Public Accountants DELOITTE HASKINS & SELLS Certified Public Accountants 2400 One PPG Place Pittsburgh, Pennsylvania 15222 TO THE DIRECTORS AND STOCKHOLDERS OF DUQUESNE LIGHT COMPANY: We have examined the consolidated balance sheets of Duquesne Light Company at December 31,1984 and 1983 Duquesne Light Company as of December 31,1984 and and the results of its operations and the changes in its 1983 and the related statements of consolidated income, financial position for each of the three years in the period retained earnings, capital surplus and changes in financial ended December 31,1984,in conformity with generally position for each of the three years in the period ended accepted accounting principles consistently applied during December 31,1984. Our examinations were made in the period except for the change, with which we concur, in accordance with generally accepted auditing standards 1984 in the method of accounting for leases as described in and, accordingly, included such tests of the accounting Note L to the financial statements. records and such other auditing procedures as we consid- < ered necessary in the circumstances. I In our opimon, such consolidated financial statements present fairly the consolidated financial position of February 14,1985 i 13 i
Duquesne Statement LightofCompan" Consolidated Income For tha Three Years Ended December 31,1984 (Thousands of Dollars, Except Per Share Amounts) 1984 1983 1982 ELECTRIC OPERATINC REVENUES $861,775 $800,345 $746,462 OPERATING EXPENSES: Fuel 234,910 192,512 229,693 Purchased power (sales)-net (26,637) (7,330) (23,172) Other operation 149,477 136,188 126,151 Maintenance (Note N) 73,214 65,016 66,855 Depreciation 77,532 73,682 62,939 Taxes other than income taxes (Note N) 70,279 60,651 57,476 income taxes (Note H) 97,266- 92,954 71,213 Total Operating Expenses 676,041 613,673 591,155 OPERATING INCOME 185,734 186,672 155,307 OTHER INCOME: Allowance for equity ftuds used during construction 60,133 50,709 35,415 income taxes-credit (Note H) 22,666 16,760 17,906 Othtr income and deductions-net 4,594 246 8,913 Total Other Income 87,393 67,715 62,234 l INCOME BEFORE INTEREST CHARGES 273,127 254,387 217,541 ! 1 INTEREST CHARGES: Interest on long-term debt 133,431 118,813 111,726 Other interest 3,611 5,736 3,471 Allowance for borrowed funds used during construction, net of income taxes (20,709) (15,388) (14,853) Total Interest Charges 116,333 109,161 100,344 INCOME FROM CONTINUING ELECTRIC OPERATIONS BEFORE EXTRAORDINARY GAIN 156,794 145,226 117,197 LOSS FROM DISCONTINUED STEAM HEATING OPERATIONS (Note C) - - (9,924) INCOME BEFORE EXTRAORDINARY GAIN 156,794 145,226 107,273 EXTRAORDINARY GAIN ON EARLY EXTINGUISHMENT OF BONDS (Note D) - - 9,609 NET INCOME 156,794 145,226 116,882 DIVIDENDS ON PREFERRED AND PREFERENCE STOCK 21,955 22,411 22,701 EARNINGS FOR COMMON STOCK $134,839 $122,815 $ 94,181 AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (000) 61,054 55,883 48,236 EARNINGS PER SHARE OF COMMON STOCK: Income from continuintelectric operations $2.21 $2.20 $1.96_ Loss from discontinued steam heating operations (Note C) - - (.21) Extraordinary gain (Note D) - - .20 Earnings for common stock $2.21 $2.20 $1.95 DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $2.06 $2.00 $1.90 Tha accompanying Notes to Financial Statements are an integral part of these statements. 17
Duquesne Consolidate Light Compadn Balance Sheet December 31,1984 and 1983 (Thousands of Dollars) i 1984 1983 l PROPERTY, PLANT AND EQUIPMENT: Electric plant in service $2,537,398 $2,436,715 Construction work in progress 1,077,992 856,766 Property held under capitalleases (Note L) 184,109 - Total 3,799,499 3,293,481 Less accumulated depreciation and amortization 659,745 - 555,641 Property, Plant and Equipment-Net 3,139,754 2,737,840 I OTHER PROPERTY AND INVESTMENTS 32,358 14,474 1 l CURRENT ASSETS: Cash and temporary cash investments (at cost which approximates market) 50,416 73,751 Accounts receivable: less reserve for uncollectible accounts of Customers
$2,976 an (d $2,652, respectively) 70,467 69,822 Other 32,094 19,797 3-Materials and supplies (generally at average cost):
Coal 55,708 59,205 Other operating and construction 37,528 34,983 Deferred income taxes - 3,121 Other current assets 12,291 13,028 TotalCurrent Assets 258,504 273,707 DEFERRED DEBITS: Extraordinary property losses (Note B) 32,526 36,565 Deferred coal costs (Notes G and M) 22,635 22,343 Other deferred debits 44,533 60,882 Total Deferred Debits 99,694 119,790
. Total $3,530,310 $3,145,811 The accompanying Notes to Financial Statements are an integral part of these statements.
I 18 l
I 1984 1983 LIABILITIES l : CAPITALIZATION (Note E)d-75,000,000 shares; outstanding--64,774,591 and Common Stock (authorize j 58,419,659 shares, respectively) $ 64,775 5 58,420 Capital surplus 804,377 724,147 Retained earnings 184,313 175,938 l Total Common Stockholders' Equity 1,053,465 958,505 Non-redeemable Preferred and Preference Stock 156,137 156,137 Redeemable Preferred and Preference Stock 127,414 134,979 First mortgage bonds 1,149,547 1,100,147 Oth:r long-term debt 278,384 234,019 Unamortized debt discount and premium-net (10,8%) (10,967) Total Capitalization 2,754,051 2,572,820 119,335 - l OBLIGATIONS UNDER CAPITAL LEASES (Note L) CURRENT LIABILITIES: Long-term debt maturing within one year (Note E) 700 16,700 ! Lease obligations due within one year (Note L) 25,582 - Accounts payable 113,487 95,030 Accrued income taxes (Note H) 3,139 5,778 Other accrued and deferred income taxes 17,363 19,430 Energy cost rate refunds 2,775 - Accrued interest 35,131 40,390 Dividends declared 38,808 34,771 Sinking fund and purchase requirements (Note E) 16,423 13,391 Spent nuclear fuel (Note E) 9,131 - Reserve for loss on discontinued steam heating operations (Note C) - 3,181 Total Current Liabilities 262,539 228,671 DEFERRED CREDITS: Investment tax credits 165,802 143,764 Accumulated deferred income taxes 222,633 193,649 Other deferred credits 5,950 6,907 Total Deferred Credits 394,385 344,320 COMMITMENTS AND CONTINGENT LIABILITIES (Notes B, G, I, L and M) Total $3,530,310 $3,145,811 1 i ! 19 L
Statement of Duquesn2LightCompan" Changes in Consolidated Financial Position For the Three Years Ended Decernber 31,1984 (Thousands of Dollars) 1984 1983 1982 SOURCE OF FUNDS: Continuing electric operations: Income from continuing elettric operations before extraordinaggain $156,794 $145,226 $117,197 Items not affecting working capital: Depreciation and amortization _ 92,810 79,800 66,303 Investment tax credit deferred-net 22,038 17,317 17,335 income taxes deferred-net (noncurrent portion) 28,984 21,049 18,466 Allowance for equity and borrowed funds used during construction (80,842) (66,097) (50.268) Total 219,784 197,295 169,033
' Discontinued steam heating operations - -
(9,924); Items not affecting working capital (including depreciation: 1982, $595) - - (349) Total From Operations (excluding extraordinary gain) 219,784 197,295 158,760 i Extraordinary gain on early extinguishment of bonds - - 9,609 Sale of bonds 50,000 110,000 65,000 l Issuance of Common Stock 86,466 80,485 107,369 Obligations under capitalleases 155,805 - - Nuclear fuel obligations 4,269 6,125 24,221 Construction costs reimbursed by trustees from proceeds of pollution control financings 35,453 19,680 - Decrease in working capital (exclusive of current maturities . of long-term debt and lease obligations)(a) 39,489 - 30,312 ' Total Source of Funds $591,266 $413,585 $395,271 APrLICATION OF FUNDS: Construction expenditures (net of allowance for equity and borrowed funds used during construction) $250,522 5224,280 $231,022 Dividends on capital stock 148,419 134,628 115,247 Property held under capitalleases 155,805 - - Reduction of bonds 16,700 12,500 43,852 Reduction of obligations under capital leases 10,888 - - Sinking fund and purchase requirements 6,417 4,696 2,691 ' Deferred coal costs 292 4,005 2,669 Other-net 2,223 14,742 (210) Increase in working capital (exclusive of current maturities of long-term debt and lease obligations) (a) - 18,734 - Total Application of Funds $591,266 $413,585 $395,271 (a) The components of working capital (exclusive of current maturities of long-term debt and lease obligations) were as follows: , Current assets: Cash and temporary cash investments $ 50,416 $ 73,751 $ 33,663 Accounts receivable , 102,561 _ _ 89,619 86,968 ' 1 Materials and supplies and other current assets 105,527 107,216 117,009 Deferred income taxes - 3.121 7,265 Total 258,504 273,707 244,905 Current liabilities: Accounts payable and accrued interest 148,618 135,420 127,881 Accrued taxes 20,502 25,208 20,061 Energy cost rate refunds 2,775 - 9,974 l Dividends declared 38,808 34,771 30,302 < Sinking fund and purchase requirements 16,423 13,391 10,987 l Spent nuclear fuel 9,131 - - Reserve for loss on discontinued steam heating operations - 3,181 2,698 Total 236,257 211,971 201,903 ! Working capital at close of year 22,247 61,736 43,002 Working capital at beginning of year 61,736 43,002 73,314 Increase (decrease) in working capital (exclusiva of current l maturities of long-term debt and lease obligations) $09,489) $ 18,734 $(30,312) The accompanying Notes to Financial Statements are an integral part of these statements. 20
_ .-. -. _ . ~ - __ l l Statement o DuquesneLightCompaEConsolidated Retained Earmngs ! For th;Three Years Ended December 31,1984 (Thousands of Dollars) 1984 1983 1982 I BALANCE AT BEGINNING OF YEAR $175,938 $165,340 $163 , 705 i NET INCOME FOR THE YEAR 156,794 145,226 116,882 Total ' 332,732 310,566 280,587 DEDUCT: ' Cash dividends declared: Preferred Stock: 4% Series . 1.,100 1,100 1,1_00_ 3.75% Series 281 281 ' 281 4.15% Series 291 291 291 4.20% Series 210 210 210 4.10% Series 246 246 246
$2.10 Series 336 336 336
$8.64 Series 2,168 2,219 2,271
$7.20 Se' ries 2,520 2,520 2,520 l
$8.375 Series 2,437 2,512 2,512 Preference Stock:
$7.50 Series 1,859 1,944 2,038
$2.75 Series 646 891 1,C 35
$2.3'5 Series 2,778 2,778 2,778
$2.10 Series 2,520 2,520 2,520
$9.125 Series 4,563 4,563 4,5_63_
Common Stock (Per Share: 1984 - 52.06;1983---52.00;1982 - 51.90) 126,464 112,217 92,546 Total Cash Dividends 148,419 134,628 115,247 BALANCE AT CLOSE OF YEAR
$184,313 $175,938 $165,340 Statement of Consolidated Capital Surplus For ths Three Years Ended December 31,1984 (Thousands of Dollars) 1984 1983 1982 BALANCE AT BEGINNING OF YEAR $724,147 $649,376 $550,244 l Przmium on Common Stock issued 80,111 75,342 99,395 Othtr 119 (571) (263)
BALANCE AT CLOSE OF YEAR $804,377 $724,147 $649,376 t Thm accompanying Notes to Financial Statements are an integral part of these statements. i r; l 21 E'
Daquesne Ught Company Notes to Financial Statements A.
SUMMARY
OF ACCOUNTING POLICIES regulatory accounting, income taxes are allocated between Consolidation ^ optrating expenses and other income, principally with respect The consolidated financial statements include the Company to interest charges related to construction work in progress. and its wholly-owned subsidiary. See Note C conceming investment tax credits are deferred and amortized over the lives dispositionof thesubsidiary. of the related facilities. AI December 31,1984 the cumulative net amount of income Property, Plant and Equipment , tax tm.ung differences for which deferred income taxes have not The properties of the Company are carried at original cost and, with minor exceptions, are subject to a first mortgage lien. All been provided was approximately $168 milhon. These timing differences relate primarily to accelerated depreciation on assets maintenance and repairs and replacements of minor units of which was flowed through for ratemakmg purposes and other property are charged to income. Replacements of retirement H w-thmugh tax deductions, which are deductible currently units of property and betterments are capitalized. In connection with retirements, reserves are charged with the carrying value, f r tax purposes but capitalized for accounting and ratemakmg purposes, including certain taxes, the debt portion of AFC, pen-plus dismantling charges,less salvage, of property retired. sions and certam other employee benefits. Revenues Customer meters are read monthly or bimonthly and bills are Deferred FuelCosts r:ndered on a monthly basis. Revenues are recorded when The Company defers the difference between actual fuel costs and base fuel costs until the penod m, which such costs are billM* billed to its customers through its energy cost rate. The energy Allowance for Funds Used Dun.ng Construction cost rate is based on projected costs, with provisions for subse-In accordance with the uniform system of accounts prescribed quent adjustments to actual cost. Any overcollections of reve-by regulatory authorities, an allowance for funds used during nues are refunded to customers with interest. construction (AFC) is mcluded m construction work in progress i and credited to other income for AFC attributable to equity Nuclear FuelCosts funds and to interest charges for AFC attributable to borrowed The Company's share of nuclear fuel costs under lease agree-funds, net of income taxes. AFC is a non-cash item and is com- ments is charged to fuel expense based on the quantity of elec-puted using a composite rate, which is applied to the balance of tric energy generated. In 1982 the Company began capitah,zm, g construction work in progress and assumes that funds used for acquisitions of nuclear material through a trust arrangement construction are provided by borrowings and by preferred, that is intended to finance a portion of the Company's require-preference and common stock equity. The rates were 9.4 %, ments for nuclear fuel. In 1984 all nuclear fuel leases were capi- , 9.6% and 8.5% in 1984,1983 and 1982, respectively. This talized. See Note L concerning the capitalization of leases. accounting procedure results in the inclusion in property, plant Under the Nuclear Waste Iblicy Act of 1982 (the Act), the and equipment of amounts considered by regulatory authorities United States Department of Energy (DOE)is responsible for as appropriate costs for the purpose of establishing rates for the ultimate storage and disposal of spent nuclear fuel remeved utility charges to customers. fmm reactors. Under the Act the Company is required to pay a
. quarterly fee to DOE of one mill per kilowatt-hour on nuclear Depreciation generation after April 6,1983 and a one-time fee for nuclear The Company provides for depreciation of electric plant, exclu- generation through April 6,1983. The one-time fee of approxi-sive of coal properties, on a straight-line basis determined in a mately $8,921,000 is expected to be paid in June 1985. The manner consistent with applicable Pennsylvania law and with Company began recovering the one-time fee in rates in Febru-methods applied by the Pennsylvania Public Utility Commission ary 1983 and has established a fund for the deposit of the (Commission)in the determination of depreciation m rate pro- amounts recovered.The balance of the Spent Nuclear Fuel
- ceedings. Provisions for depreciation, amortization and dep!e- Fund was 52,896,000 at December 31,1984. The Company also tion of other Company property are made on various bases is recovering the fees ror generation after April 6,1983 and is such as amount of nuclear fuel burned and tons of coal mmed. making payments to DOE on a quarterly basis.
The Company provides for decontamination and dismantling costs for the Beaver Vallev No.1 nuclear generating unit in Other accordance with tH pmvisions of the orders of the Commis- Other property and investments are stated principally at cost, sion.The Company is allowed to recover from its customers {ess accumulated depreciation where applicable. Other operat-annual decommissioning annuity payments to provide for the tng and construction inventories are stated at average cost and decommissioning of radioactive compenents only. Such recov- include certain general and administrative costs related to oper-trable costs are currently estimated to be approximately atm8 the storerooms. General and administrative costs remain- l
$31,000,000. The Company deposits applicable revenues in a ing in inventory at December 31,1984 and 1983 were trust fund which has been established to pay for such costs. At $3,985,000 and $3,316,000, respectively. Debt discount or pre-December 31,1984, $1,971,000 was included in the nuum and related expenses are amortized over the lives of the l DecommissioningTrust Fund. issues to which they pertain.
Income Taxes B. EXTRAORDINARY PROPERTY LOSSES Deferred income taxes are provided principally for differences In January 1980, the Company and the other CAPCO compa- l between depreciation for income tax purposes and depreciation nies cancelled the construction of four nuclear generating units. for accounting purposes to the extent permitted by the Com- On October 1,1982 the Shippingport Atomic Power Station - l mission for ratemaking purposes, and for fuel and extraordi-was removed from commercial operation. The Company nary property losses deferred for accounting purposes but received approval from the Federal Energy Regulatory Com- I deducted currently for income tax purposes. In compliance with mission (FERC) and the Pennsylvania Public Utility Commis-22
.~. . -
sion (Commission) to amortize and recover from its customers mately $8,712,000) and the loss from op trations was $924,000
' its share of the accumulated construction costs and a portion of (net of income tax benefit of approximatdy $1,028,000) for the th2 undepreciated cost of the Shippingport station, over a ten- nine months ended September 30,1982. Tee provision for loss y:ar period which began January 29,1983. The unrecovered on disposition included estimated operating losses for the sub-costs as of December 31,1984 were $32,526,000.The Com- sidiary of $1,100,000 (net of income tax benefit of approxi-mission's order approving the amortization and recovery of the mately $970,000) for the period October 1,1982 through May accumulated construction costs has been appealed by the Penn- 31,1983. These losses were charged against 1982 income and no sylvania Consumer Advocate to the Pennsylvania Common- additionalloss was incurred due to the disposition. At Decem-w:alth Court. ber 31,1984 assets and liabilities included in the consolidated Tha Company is not earning any return on the unamortized balance sheet applicable to the subsidiary were not material.
costs of either of the property losses. D. EARLY EXTINGUISHMENT OF BONDS C. DISCONTINUED STEAM HEATING OPERATIONS in December 1982, the Company exchanged 1,406,898 shares of The Company's steam heating subsidiary, Allegheny County Common Stock for approximately $29,852,000 principal
- Stram Heating Company, discontinued steam service to the amount of outstanding First Mortgage Bonds which were public effective May 31,1983 and transferred to Pittsburgh owned by an investment banking firm. The exchange resulted i Allegheny County Thermal, Ltd. (PACT) a major portion of the in a nontaxable extraordinary gain of $9,609,000, or 5.20 per share, which was the difference between the exchange value of
( subsidiary's assets for nominal consideration. The provision for loss on the disposition of the subsidiary's the Common Stock and the net carrying amount of the bonds. assets was $9,000,000 (net of income tax benefit of approxi-E. CAPITALIZATION oecember 31,1984 December 31,1983 Shares Shares Outstanding Amount Outstanding Amount Common Stock-51 par value (1) 64,774,591 5 64,774,591 58,419,659 $ 58,419,659 Capital Surplus. Premium on Common Stock $811,446,733 $731,335,853 _ Capital stock expense (7,536,995) (7,622,344) Other 467,941 433,442 Capital surplus $804,377,679 $724,146,951 Non-redeemable Preferred and Preference Stock: Preferred Stock-550 par value (cumulative) (1) 4% Series (2) 549,% 9 $ 27,498,450 549,969 5 27,498,450 3.75% Series (2) 150,000 7,500,000 150,000 7,500,000 4.15% Series (2) 140,000 7,000,000 140,000 7,000,000 4.20% Series (2) 100,000 5,000,000 100,000 5,000,000 4.10% Series (2) 120,000 6,000,000 120,000 6,000,000
$2.10 Series (2). 160,000 8,000,000 160,000 8,000,000
$7.20 Series (3) 350,000 17,500,000 350,000 17,500,000 Preference Stock-51 par value (cumulative) (1)
$2.315 Series (4) 1,200,000 1,200,000 1,200,000 1,200,000
$2.10 Series (4) 1,200,000 1,200,000 1,200,000 1,200,000 80,898,450 80,898,450 Premium on Non-redeemable Preferred and Preference Stock 75,238,760 75,238,760 Non-redeemable Preferred and Preference Stock $156,137,210 $156,137,210 Involuntary liquidation value $155,998,450 $155,998,450 Redeemable Preferred and Preference Stock:
i Preftrred Stock-550 par value (cumulative) (1)
$8.64 Series (3) 250,872 $ 12,543,600 256,872 $ 12,843,600
$8.375 Series (3) 238,000 14,400,000 300,000 15,000,000 Preference Stock-$1 par value (amindative)(1)
$7.50 Seneg3) 245,320 245,320 255,920 255,920
$2.75 Serir" (1) 192,665 192,665 270,570 270,570
$9.125 Series (3) 500,000 500,000 500,000 500,000 27,881,585 28,870,090 Premium on Redeemable Preferred and Preference Stock 105,354,240 109,173,360 Purchase and Sinking Fund Requirements (5,821,625) (3,064,250)
Redeemable Preferred and Preference Stock $127,414,200 $134,979,200 Involuntary liquidation value ,
$127,414,200 $134,979,200 (1) Authoriicd shares: Common Stock-75,000,000; 2) $50 per share involuntary liquidation value. ! Preferred Stock-4,000,000; 3) $100 per share involuntary liquidation value. 23 and Preference Stock-8,000,000. 4) 525 per share involuntary liquidation value.
Duquesne Light Company Notes (continued) The following summary indicates the changes in the number of shares of Common Stock outstanding during 1984,1983 and 1982: Year Ended December 31, 1984 1983 1982 Common Stock: Shares outstanding at beginning of year 58,419,659 53,276,525 45,302,520 Issuances: Common Stock sales 2,500,000 2,475,000 4,500,000 Dividend Reinvestment Plan 3,793,836 2,524,407 1,962,320 Employee Stock Ownership Plans 61,096 143,727 104,787 Exchanged for outstanding First Mortgage Bonds - - 1,406.898 Shares outstanding at end of year 64,774,591 58.419,659 53,276,525 The number of shares of Common Stock reserved at Redeemable Preferred and Preference Stock December 31,1984 for issuance unde r the Dividend Rein- The shares of $7.50 Preference Stock are entitled to a non-vestment Plan and the Employee Stock Ownership Plans are cumulative purchase fund under which the Company offers 2,570,288 and 737,019, respectively, to purchase annually at $100 per share up to 4 % of the num- ' The Preference Stock is entitled to quarterly cumulative ber of shares originally issued. The shares of $2.75 Preference dividends except that no dividends may be paid if dividends Stock are subject to a cumulative sinking fund which will on any series of the Preferred Stock are accumulated and retire 55,000 shares by August 1 in each year at $25 per share. I I unpaid. If six quarterly dividends on any series of Preference The Company may on a non-cumulative basis retire an addi-Stock are in default, the holders of the Preference Stock are tional 55,000 shares in each such year. The shares of 59.125 entitled to elect two directord until all dividends in arrears Preference Stock are subject to a cumulative sinking fund have been paid. beginning with the year 1985 and continuing through 1997 The outstanding Preference Stock of the Company is which will retire 33,300 shares on January 1 in each year at callable on not less than thirty days' notice at the following $100 per share. The Company may, on a non-cumulative redemption prices plus accrued dividends: $7.50- basis, retire an additional 33,300 shares in each such year, redeemable at $105 through April 1,1986; $103 through provided that the Company may not redeem through the April 1,1989; and $101 thereafter; $2.75-redeemable at exercise of this option more than an aggregate of 150,000
$26.50 through July 31,1989; and $25.25 thereafter; $2.315- shares.
redeemable at $26.60 through March 31,1986; $25.90 The shares of $8.64 Preferred Stock are entitled to a non-through March 31,1991; and $25.25 thereafter; $2.10.--- cumulative purchase fund under which the Company offers redeemable at $26.40 through March 31,1987; $25.70 to purchase annually up to 6,000 shares at not more than through March 31,1992; and $25.00 thereafter; $9.125-not $100 per share. The shares of $8.375 Preferred Stock are sub-redeemable prior to January 1,1989 through certain refund- ject to a cumulative sinking fund which will retire 12,000 ing operations, otherwise redeemable at $100 plus the appli- shares on April 1 in each year at $100 per share. The Com-cable redemption premium decreasing from $6.24 in 1985 to pany may on a non-cumulative basis retire an additional
$.48 in 1997. 12,000 shares in each such year.
The Preferred Stock is entitled to quarterly cumulative The combined aggregate sinking fund and mandatory pur-dividends. If four quarterly dividends on any series of Pre- chase requirements for the next five years as of December 31, , ferred Stock are in default, the holders of the Preferred Stock 1984 are as follows: are entitled to elect a majority of the Board of Directors until Year Ending Sinking Fund and Mandatory all dividends in arrears and current dividends have been paid. December 31, Purchase Requirements ' The outstanding Preferred Stock of the Company is 1985 $7,121,625 callable on not less than thirty days' notice at the following 1986 7,805'000 redemption prices plus accrued dividends: 4 %-$51.50; 3.75 %-$51.00; 4.15 % -$51.73; 4.20 % -$51.71; 4.10 % - 1987 7,805,000 ! $51.75; $2.10-$51.84; $8.64-redeemable at $104 through 1988 7,805,000 September 30,1989; and $101 thereafter; $7.20-redeemable 1989 6,430,000 l at $102.50 through March 31,1987; and $101 thereafter; I
$8.375-redeemable at $112 through March 31,1988, and thereafter at $100 plus the applicable redemption premium decreasing from $5.03 in 1988 to $.34 in 2003.
,u; -
r, ,
'?
i 24
1 I The following summary indicates the changes in the number of shares of Redeemable and Non-redeemable Preferred and Preference Stock outstanding during 1984,1983 and 1982: Year Ended December 31, 1984 1983 1982 Preference Stock: Shares outstanding at beginning of year 3,426,490 3,533,940 3,565,220 Purchases and redemptions- -$2.75 Series (77,905) (94,450) (20,080)_
-57.50 Series (10,600) (13,000) (11,200)
Shares outstanding at end of year 3,337,985 3,426,490 3,533,940 Preferred Stock: Shares outstanding at beginning of year 2,126,841 2,132,841 2,138,841 Purchases-58.375 Series (12,000) - -
-58.64 Series (6,000) (6,000) (6.000)
Shares outstanding at end of year 2,108,841 2,126,841 2,132,841 Gains on the redemption of capital stocl< are recorded in capital surplus; losses, to the extent they exceed cumulative gains, are charged to retained earnings, l First M:rtgage Bonds (amount authorized is unlimited by indenture) December 31, 1984 1983 Series due July 1,1984 (3% %) $ - 5 16,000,000 Series due Aprill,1986(3%%) 20,000,000 20,000,000 Series due April 1,1988 (3% %) 15,000,000 15,000,000_ Series due March i,1989 (4% %) 10,000,000 10,000,000 Series due March t,1991 [13% %) 50,000,000 - Series due hbruary 1,1996 (5% %) 22,800,000 22,800,000 ! Series due February 1,1997 (Sy% %) 24,600,000 24,600,000 Series due Rbruary 1,1998 {6% %) 34,700,000 34,700,000 Series due January 1,1999 (7%) 30,000,000 30,000,000 Series duejuly1,1999 (7% %) 28,947,000 28,947,000 Series due March 1,2000 (8% %) 30,000,000 30,000,000 Series due March t,2001(7Fs %) 35,000,000 35,000,000 Series due December 1,2001 (7% %) 26,461,000 26,461,000 Series due June 1,2002(7% %) 28,470,000 28,470,000 Series due January 1,2003 (7% %) _ 32,670,000 32,670,000 Series due July 1,2003 (7% %) 35,000,000 35,000,000 Seriesdue April 1,2004(8%%) 44,100,000 44,100,000 Series due March 1,2005_(9% %_) 50,000,000 50,000,000 SeriesdueJune1,200j6 9%) 80,000,000 80,000,000 Series due April l,2007(8% %) 97,400,000 97,400,000 Series due February 1,2009 (10% %) 100,000,000 100,000,000 Series due January 1,2010:{12% %) 60,000,000 60,000,000 Series due September 1,2010 (14% %) 50,000,000 50,000,000 Series due June 1,2011 (16%) 80,000,000 80,000,000 Series due May 1,2012 (16% %) 65,000,000 65,000,000 Series due April 1,2013 (12% %) 60,000,000 60,000,000 Series due December 1,2013 (13%) 50,000,000 50,000,000 j Total 1,160,148,000 1,126,148,000 Less: Current maturities--Series due July 1,1984 (3 % % ) - 16,000,000 , Current sinking fund requirements 10,601,480 10,001,480 ( First Mortgage Bonds $1,149,546,520 51,100,146,520 l f
Duquesne 1.ight Company Notes (continued) Otherlong-Term Debt Pollution Control Obligations: Serial Maturity Average or Mandaory December 31' Date of Interest Redemption Final Issuance Rate Beginning Maturity 1984 1983 5.49 % 1983 2002 5 23,000,000 5 23,500,000 - _ September 21,1972 5.685 % 1984 2003 11,800,000 12,000,000 _ June 21,1973 _ October 25,1973 5.755 % 1984 2003 15,000,000 16,000,000 7.97 % 1989 2004 14,000,000 14,000,000 _ August 13,1974 7.50 % 1993 2005 17,000,000 17,000,000 _ April 2,1975 October 29,1975 8.40 % 1991 2005 18,000,000 18,000,000_ September 29,1976 6.90 % 1994 2011 15,000,000 15,000,000 March 24,1981 12.00 % 2002 2011 50,000,000 50,000,000 November 1,1983 10.50 % - 2013 20,500,000 20,500,000 51,000,000
]
December 19.1984 11.625 % - 2014 - l Total 235,300,000 186,000,000 less: Current maturities 700,000 700,000 Current sinking fund requirements - 325,000 Ibilut_ ion Control Obligations 234,600,000 184,975,000 Nuclear Fuel Obligations 34,614,888 30,345,499 _ Spent Nuclear Fuel Liability
- 8,920,790 5% Sinking Fund Debentures (authoriicd $20.000.000) due March 1,2010 9,169,000 9,778,000 Total Other Long-Terrr Debt $278,383,888 5234.019.289 The pollution control obligations arise from arrangements Year Ending Dec. 31, Sinking Fund Requirements Maturities between the Company and governmental authorities 1985 $11,601,480 $ 700,000 whereby the construction of certain pollution control facili- 11,401,480 20,700,000 1986 tils has been financed through the sale of bonds by those authorities, and the Company is obligated to pay to the 1987 11,776,480 800,000 authorities amounts equal to the principal of and interest on _
1988 11,995,480 15,800,000 such bonds- 1989 12,251,480 10,900,000 The nuclear fuel obligations result from a trust arrange-mint for the procurement of a portion of the Company's The sinking fund requirements in each year relate primar-requirements for nuclear fuel. Interest amounts applicable to ily to the First Mortgage Bonds, which requirements may be the trust are capitalized and included in construction work in satisfied by the certification of property additions at 166%% progress, at rates ranging from 1% % to 1% % over the of the Bonds required to be redeemed, and the pollution con-trustee's commercial paper rate. Trust obligations will be paid trol obligations.The remaining sinking fund requirement by the Company as the related nuclear fuel is withdrawn relates to the 5% Sinking Fund Debentures. At December 31, from the trust. 1984, sinking fund requirements for the 5% Debentures had i The spent nuclear luel liability results from a requirement been satisfied for 1985,1986 and 1987, and the 1988 sinking to provide for payment of a one-time fee to the United States fund requirement had been partially satisfied in the amount Department of Energy for ultimate storage and disposal of of $31,000. spent nuclear fuel used in the generation of electricity Total interest costs incurred during 1984,1983 and 1982 through April 6,1983 and was reclassified to current liabili- were $152,251,000, $131,248,000 and $125,004,000, respec-ties in 1984. See Note A to the financial statements. tively, of which $96,676,000, $73,310,000 and $60,075,000 Sinking fund requirements and maturities for the next five were capitalized or deferred, including allowance for funds yrars for long-term debt outstanding, exclusive of nuclear used during construction. , fuel obligations, as of December 31,1984 are as follows: 1 F. SHORT-TERM. BORROWING ARRANGEMENTS fees or compensating balances associated with the existing j At December 31,1984, the Company had lines of credit with lines of credit. In addition, the Company has a $100,000,000 ; three banks totaling $33,500,000, all of which were unused. revolving credit agreement available to December 15,1988. Effective January 1,1985 one of these lines,in an amount of At December 31,1984, no loans were outstanding under the - '
$20,000,000, expired. The range of interest rates under these revolving credit agreement. Borrowings outstanding at lines of credit is from prime rate less one half of one percent December 15,1988 may be converted to term notes payable to prime rate or basic rate or a special rate as may be offered in six equal semiannual installments commencing June 15, ,
2g fr m time to time by the banks.There are no commitment 1989 and concluding December 15,1991. Interest rates fluc-
4 tuat2 during the revolving and term periods, depending on on May 25,1984 to adopt the administrative law judge's rec-the period of borrowings, at fluctuating prime rate and at ommended decision subject to the Commission staff's percentages in excess of prime, Euro-Rate, certificate of exceptions which included revising the methodology set deposit or component cost of funds rates. There is a com- forth in the Stipulation Agreement effective January 1,1984. 1 mitment fee of % % per annum on the average daily On September 11,1984 the Commission entered its final ; unborrowed amount of the commitment. order reflecting this action. While certain aspects of the final
' During the years ended December 31,1984,1983 and 1982 order are unclear, the Company believes that the final order the maximum amount of short-term borrowings outstand- (a) should allow the Company to apply the methodology of i
ing, consisting principally of commercial paper borrowings, the Stipulation Agreement as originally approved by the l was $25,500,000, $48,020,000 and $37,000,000, the average administrative law judge retroactively to the period June - daily short-term borrowings outstanding were $4,631,000, 1980 through December 1983 and (b) will require the Com- ! $12,251,000 and $1,559,000 and the weighted average daily pany to apply the revised methodology approved by the l intIrest rate applicable to such short-term borrowings was Commission in its final order to Quarto coal costs commenc-11.45%,9.40% and 15.39%, respectively. ing on January 1,1984. At December 31,1984, the Company C. DEFERRED COAL COSTS estimates the deferred Quarto costs would have been $12.4
' Tha Company and the other CAPCO companies have long- milli n had the final order been implemented and approved t:rm coal supply arrangements with Quarto Mining Com- in a new enugycoshate pany (Quarto), an unaffiliated company, to supply coal for On September 26,1984 the Company filed with the Com-the Bruce Mansfield Units. In December 1980 the Pennsylva- smssion a petition for clarification, rehearing and reconsidera-nia Public Utility Commission (Commission) instituted an q n, mcluding a request that the Commission stay the effec-investigation into the reasonableness of the cost of coal sup- tiveness of the final order as it applies to the penod plied by Quarto. By Interim Order entered January 12,1981 c mmencing January 1,1984. On December 10,1984 the the Commission directed that, pending conclusion of the Commission entered an order denying the Company's peti-investigation or further order of the Commission, the Com. ti n in aH matuial respects.
I pany limit its recovery of the cost of Quarto coal through its The Company believes that the revised methodology pro-l cnergy cost rate to approximately the prevailing market price vided in the Commission's final order may not, under certam 4 of similar coal rather than the actual cost of Quarto coal. As circumstances, permit full recovery of the deferred coal costs > l required by the Interim Order, the Company is deferring the by the scheduled expiration dates of the Quarto coal 6 !es i excessof theactualcostof Quartocoaloverthecostallowed agements in the year 1999. Fluctuations in the deferred coal : to be recovered through its energy cost rate until recovery of c sts may result during this penod depending on actual thz actual cost is permitted by the Commission. At December Quart costs, market price of other coal, amount of Quarto 31,1984 the unrecovered cost of Quarto coal paid by the e al burned and other factors. On January 8,1985 the Com-Company was approximately 522,155,000. lf recovery of pany appealed the Commission's order to the Pennsylvania such excess is disallowed, the amount deferred would be Commonwealth Court. On January 30,1985 the Company
' charged to income in the year of disallowance. Thereafter, med a new enegy cost rate with the Commission which any excess of actual cost over the amount permitted to be reflects theapplication of themethodologyof theStipulation .
h recovered would be charged to income on a current basis. Agreement to the period June 1980 through December 1983 I A Stipulation Agreement between the Company and the and the revise d methodology commencing on January 1, I Commission staff which set forth a method intended to per. ".84 If approved by the Commission, the new rate will per- ! mit the aventual recovery of the unrecovered cost of Quarto mit the Company to recover about 59.7 milhon of the accu-
- coal was the subject of hearings during 1983 in which the mulated deferred Quarto coal costs. With respect to the bal-
! Consum:r Advocate and the Commission staff participated. ance f such costs and any additional defe-red costs, the ! On February 3,1984 the administrative law judge issued a Company believes that the deferred coal costs were pru-i recommended decision, subject to the Commission's dently incurred and that it is probable that all or substantially a sus c sts WmaW w m ved Mote M to l approval, concluding that the Company was prudent in initi-I ating and continuing the Quarto project and that the Stipula. th financia tatements. 1 n Agament was in the public interest and was a fair and l reasonable resolution of the investigation into the reason- rate order, the cost of coal mined at the Company's wholly-i tbleness of the cost of Quarto coal. The administrative law owned Warwick Mine in excess of the average market Prices ! judge recommended that the Stipulation Agreement and its of Sim lar 9uality C al purchased by Pennsylvania utilities i methodology for recovering the cost of the Quarto coal be may n t be passed through the energy cost rate, but may be l rpproved and the Commission's investigation terminated. deferred and recovered to the extent that the cost of Warwick t Exceptions to the recommended decision were filed by the coal falls below such market pnce. Such deferred costs * ! Commission staff and the Consumer Advocate.On Marchamounted to $480,000 at December 31,1984. Additionally, I 30,1984 theadministrativelawjudgedenied theexceptions the Commission eliminated the Warwick mine from the i and the Commission staff and Consumer Advocate appealed Company's rate base for ratemaking purposes. The exclusion I such denial to the Commission. The Commission took action fr m rate baseis approximately $48,000,000, i i ' 27
- m. _ _ _ '_ -_u -, _ _ _ . ~ . , , _ . _ . _ . _ , . _ _ _ _ . . - _ _
Duquesne Light Company Notes (continued) H, INCOME TAXES Total income taxes in 1984,1983 and 1982 were comprised of the following components: 1984 1983 1982 (Thousands of Dollars) Included in operating expenses: Currently payable Federal $ 38,004 $ 33,931 5 25,257 State 16,042 14,295 12,694 Income taxes deferred-net: Federal 16,577 22,955 13,997 State 4,893 5,555 (228) Investment tax credit deferred-net 21,750 16,218 19,493 Total 97,266 92,954 71,213 1 Included in other income (income taxes-credit): Currently payable: Federal (18,060) (13,354) (14,267) State (4,606) (3,406) (3,639) Totalincome tax expense $ 74,600 $ 76,194 5 53,3o7
; Taxes currently _ payable-federal and state $ 31,380 5 31,466 5 20,045 Taxes deferred-net 21,470 28,510 13,769 Investment tax credit deferred-net 21,750 16,218 19,493 Totalincome tax expense $ 74,600 $ 76,194 5 53,307 Total income tax expense is exclusive of income taxes applicable to discontinued steam heating operations. See Note C to the financial statements.
i Sources of income taxes deferred and the tax effects were: __ Excess of tax over book depreciation $ 24,281 $ 20,920 5 14,490 Fuel costs expensed on tax return and deferred on books (3,683) 9,786 (3,552) Extraordinary property losses expensed on tax retum and deferred on books (1,703) (1,562) 3,019 Other 2,575 (634) (188) Totalincome taxes deferred-net $ 21,470 $ 28,510 5 13,769 Total income taxes from continuing electric operations were less than the amount computed by applying the statutory fed-eral income tax rate of 46% to income from continuing electric operations before income taxes.The reasons for this differ-encein each year were as follows: Computed federalincome tax on continuing electric operations at statutory rate $106,441 $101,853 $ 78,432 I Increase (decrease)in taxes resulting from: Allowance for funds used during construction (37,187) (30,405) (23,123) Excess of book over tax depreciation 4,979 3,246 1,131 State income taxes, net of federal income tax benefit 8,828 8,880 4,766 Amortization of deferred investment tax credits (5,750) (5,266) (4,2511 Other. net (2,711) (2,114) (3,648) Totalincome tax expense $ 74,600 $ 76,194 $ 53,307 I. PRIOR YEARS' INCOME TAXES 1970 occurred in June 1983 based on an earlier court decision The Company's income tax returns are settled through 1970. which was generally in favor of the Company concerning income tax returns for 1971 through 1981 have been exam- percentage depletion for the years 1956 through 1961. The ined, and the 1982 and 1983 returns are being examined.The Company expects that this court decision will serve as the Internal Revenue Service assessed deficiencies regarding the basis for settlement of the depletion issue for the years 1971 Company's computation of percentage depletion on coal through 1979. Management of the Company believes that mined for 1956 through 1979, as well as certain other issues the settlement of federal and state taxes will not have a mate ' l of relatively minor importance for 1971 through 1979. A rial effect on the Company's financial position or results of ! settlement of the depletion issue for the years 1962 through operations. l 28 ,
J. EMPLOYEE BENEFITS December 31 The Company has trusteed retirement plans to provide pen- 1983 1982 1981 sions for all employees, except coal mine employees who are (Thousands of Dollars) c:vered under a plan administered by the United Mine ^','"'"'Io['["' *'Nnents: pi,, W:rk:rs of America. Since it is a multi-employer plan,infor- Vested $189,312 5159,956 5151,756 mation concerning the plan covering coal mine employees is Nonvested 11,945 11,494 11,566 not determinable and is not included in the data below. Pen-Total $201,257 5171,450 5163,322 sion costs are funded as accrued and include amortization of most prior service costs over 30 years and prior service costs Net assets available for related to the early retirement program over 15 years. Pen- benefits (at fair value) 5141,235 5135,571 5111.013 sion costs charged to expense or construction for the years ended December 31,1984,1983 and 1982 were $14,188,000, .
$10,803,000 and $12,313,000, respectively. The increase in The Company is liable under federal and state laws for the
. pen:lon costs in 1984 was due principally to the impact of payment of benefits to coal mine employees disabled by , ! th2 refund of employee contributions in 1983 and the early black lung and to their survivors and dependents. The esti-retirem:nt program supplemental benefits. In 1983 the Com- mated c sts of providing such benefits,, mcluding amortiza-pany adopted an early retirement program under which cer_ t1 n f prior service costs over the remaining estimated life of tain ben: fits will be paid from the assets of the retirement the Warwick mine, are actuanally determined and accrued plans. The decrease in pension costs in 1983 resulted princi- n the basis of mine payroll costs and are deposited with a trustee. Such costs were $1,658,000, $1,574,000 and pally from an increase in the actuarial interest assumption. The accumulated plan benefits and net assets available for $1,417,000 for the years ended December 31,1984,1983 and benefits for the trusteed plans are presented as of the 1982, respectively. At July 31,1984 (the date of the latest Dec:mber 31 benefit information dates. The assumed rate of actuarial valuation), the unfunded prior service cost for these return used in determining the actuarial present value of disability benefits was approximately $18,777,000. i accumulated plan benefits was 5% % for 1983 and 1982 and j 5% for1981. K. JOINTLY-OWNED GENERATING UNITS The Company, together with other electric utilities, primarily the CAPCO companies, has an ownership interest in certain jointly-owned units. Information regarding the Company's share of such jointly-owned units as of December 31,1984 is as follows(thousands of dollars): Company's Interest Utility Plant Accumulated Construction Work lercentage Unit in Service Depreciation in Progress Ownership Megawatts Fort Martin No.1 5 46,131 5 15,830 $ 4,054 50.0 276 CAPCO Units:
, Eastlake No. 5 51,280 12,666 1,392 31.2 202
~
Sammis No.7 69,428 14,251 3,843 31.2 187 Bruce Mansfield No.1 72,390 17,295 847 29.3 228 Bruca Mansfield No. 2 20,251 4,120 113 8.0 62 Bruce Mansfield No.3 71,123 9,432 558 13.74 110 4 Brucz Mansfield Common and Shared Facilities 62,748 14,365 466 Beaver Valley No.1 347,572 63,299 14,961 47.5 385 Beaver Valley No. 2 18 - 316,262 13.74 114 Beiver Valley Common Facilities 69,689 6,945 65,548 IVrry No.1, including Common Facilities - - 374,101 13.74 165 Perry No. 2, including Common Facilities - - 215,178 13.74 165 i Total 5810,630 $158,203 $997,323 l Und:r terms of the arrangements with the other owners of such jointly-owned units, the Company is required to provide its share of financing the cost of such units.The Company's share of the direct expenses (fuel, maintenance and other opera-tion cxpenses) of the jointly-owned units is included in the corresponding operating expenses in the Statement of Consoli-dated income. 29
Duquesne Light Company Notes (continued) L LEASES Capital rating In accordance with Statement of Financial Accounting Stan- Ieases ases dards No. 71 (SFAS 71)," Accounting for the Effects of Cer- (Thousands of Dollars) tain Types of Regulation," capital leases entered into in 1983, 1985 s 28,27o 510,819 as well as such leases executed prior to 1983, have been capi- 1986 30,334 8.663 talized.This change had no impact on 1984 net income. 1987 29,118 8,037 Leased property consists of the following: 1988 34,230 7,040 December 31,1984 1989 3o,598 6,835 (Thousands of Dollars) 1990 and thereafter 95,426 85,989 Nuclear fuel $164,001 Total minimum lease payments 247,976 5127,383 Electric plant (principally buildings and Less amount representing interest 68,444 data processing equipment) 20,108 Present value of net minimum 184,109 lease payments $179,532 Accumulated amortization (39,192) Property held under capital leases-net $144,917 M. COMMITMENTS AND CONTINGENT LIABILITIES Construction In accordance with SFAS 71, leased property is amortized The Company presently estimates that it will spend on con-in conjunction with the amortization of the related lease struction, exclusive of nuclear fuel and allowance for funds obligation. The leased nuclear fuel is amortized as the fuel is used during construction, between $794 million and $898 burned. The amortization of electric plant is based on the million during the period 1985 through 1989, depending on rental payments made. Amortization of leased property the construction schedule for Perry Unit No. 2. See Manage- 1 amounted to $10,888,000 for the year ended December 31, ment's Discussion and Analysis of Financial Condition and 1984. If the noncapitalized financingleases had been capital- Results of Operations-Capital Resources and Liquidity-ized at December 31,1983, property, plant and equipment- Construction. net would have been increased by approximately Perry Unit No. 2
$143,547,000, with related increases in current liabilities and In September 1983, the Ohio Office of the Consumers' long-term debt of $24,271,000 and $119,761,000. Counsel, the City of Cleveland, the Board of County Com-Lease payments in 1984,1983 and 1982 amounted to missioners of Geauga County, Ohio and three citizen groups
$26,203,000, $30,028,000 and $17,679,000, respectively, of filed a petition with the Public Utilities Commission of Ohio which $34,976,000, $31,994,000 and $15,393,000 were (Ohio Commission) and the Power Siting Board of Ohio charged to operating expenses. The Company has an (Board) against The Cleveland Electric Illuminating Com-undivided interest in nuclear fuel lease agreements. Rental pany, Ohio Edison Company and The Toledo Edison Com-payments are made monthly during the terms of the leases pany (respondents) requesting that the Ohio Commission based on the amount of nuclear fuelleased and the amount and the Board jointly and/or individually investigate the of nuclear fuel burned. Tbc increase in 1984 and 1983 public need for the Perry Nuclear Power Plant Unit No. 2 amounts charged to operating expenses resulted from higher (Unit) presently under construction by the CAPCO compa-building rentals and an increased amount of nuclear fuel nies. The petition also requests that the Ohio Commission being burned. and the Board order the cessation of construction of the Unit The nuclear fuelleases may be terminated by the lessees or and of the accrual by the respondents of allowance for funds lessors with notice as defined in the agreements or by casu- used during construction (AFC) with respect to the Unit and alty or certain other contingencies, including default by the a declaration that the issuance of securities by the lessees. In certain situations involving a termination, the respondents, the proceeds of which will be used to finance lessees may be required to purchase the leased nuclear fuel at construction of the Unit, will not be approved. The the higher of fair market value or unamortized cost. At respondents have filed a motion to dismiss the petition filed December 31,1984, the Company's share of the lessors' with the Board and an answer to the petition filed with the unamortized cost of the leased nuclear fuel was Ohio Commission requesting that the petition be dismissed.
$126,863,000, and the Company expects to finance an addi- While the Company is not a party to the proceedings,it has a tional $51,226,000 of such costs under current leasing 13.74 % ownership interest in the Unit.
arrangements. The Unit, exclusive of common facilities required for the The Company has certain buildings or portions thereof operation of Perry Unit No.1,is about 45% complete.The under lease, including its corporate headquarters, subject to Company's investment in the Unit, including AFC and renewal options and in certain cases purchase options. excluding common facilities required for the operation of At December 31,1984 future minimum lease payments for Perry Unit No.1, was approximately $152 million at Decem- , capitalleases are based principally on estimated usage of ber 31,1984. An order in the proceeding requiring that con-l nuclear fuel and building leases, and minimum lease struction of the Unit be terminated could have the effect of payments for operating leases are based principally on the cancelling the Unit. In such event, the Company would seek i corporate headquarters lease, as follows: regulatory approval for the recovery from its customers of its j 30
_ .. - - -- - -- - .- ~ then investment in the Unit, together with any related can- Yen Ending December 31, callation costs. Based on its present knowledge of the pro- 1985 $ 8,402,000 ceedings, management of the Company has no reason to 8,W5,000 believ3 that the proceedings will result in decisions adverse to the CAPCO companies, and the Company believes that 1987 7,989,000 the ultimate resolution thereof will not have a material effect 1988 7,782,000 on the Company's financial position. 1989 7,579,000 4 Tha CAPCO companies presently are reviewing their ; Aner 1989 65,W2,000 options with respect to the Unit. The alternatives include resumption of construction, with a new estimated cost and Total $105,889,000 completion date, or cancellation. It is not certain how soon this rzview will be completed. In the meantime, the principal The current price of Quarto coal to the CAPCO companies work being performed on the Unit is that necessary to enable is based principally on the actual current production costs I%rry Unit No. I to be placed in service. This reduced effort plus amortization of certain production expenses incurred will result in only minimal expenditures for construction on during the development period. See Note G to the financial th? Unit during 1985. The Company has been accruing AFC statements. during the construction period, and such AFC accruals on Beaver Valley Replacement Pbwer thm Unit are expected to be about $14.4 million in 1985. If the in connection with a February 20,1981 rate order, the Com-CAPCO companies do not decide during 1985 to increase mission found that the Company had not proven that the construction significantly on the Unit, a reserve will be pro- costs of replacement power during a 1979 outage of Beaver vided against subsequent accruals of AFC on the Unit until Valley Unit No.1 were prudently incurred. On November
- construction is resumed. A deferral of AFC would not affect 19,1982 the Commission adopted an order nisi which
- cash flow, but it would cause an equal reduction in reported ordered refunds of $12.5 million plus interest over a two-l carnings from what they otherwise would be. year period less a $1 million offset from another proceeding.
- If it ultimately is determined to cancel the Unit, the Com- The order nisi became final on June 10,1983. The Company j pany would seek to recover its investment therein and filed an appeal with the Pennsylvania Commonwealth Court
- related cancellation costs as discussed above. and filed with the Commission a petition for an extension of l QuartaMiningCompany(Quarto) time in which to file a refund plan together with an applica-The Company and the other CAPCO companies have tion for a stay of the final order. On August 24,1983 the mada long-term coal supply arrangements with Quarto, Commission denied the application for a stay but granted i an unaffiliated company, to supply coal for the Bruce Mans- the petition for an extension of time in which to file a refund fi
- Id Units. As part of these arrangements the individual plan. Subsequently, the Company filed an application with CAPCO companies are severally, and not jointly, guarantee- the Commonwealth Court for a stay of the final order, and ing their proportionate shares of Quarto's debt and lease on September 28,1983 the Commonwealth Court granted obligations incurred in connection with the development, the application. The Company does not agree with the Com-
- equipping and operation of two mines from which the coalis mission's order, and no provision has been recorded by the
- supplied. At December 31,1984 the Company had guaran- Company for any such refunds. While the Company is j teed the obligations of Quarto with respect to approximately unable to predict what action the appellate courts may 151,074,000 of indebtedness and lease obligations relating to ultimately take and although the amount of such refunds approximately $25,257,000 of capital equipment for the could be substantial, management of the Company believes mines. In general, it is contemplated that the purchase prices that the replacement power costs were prudently incurred
. to be paid for the coal to be received under the foregoing and the eventual outcome of this matter will not have a arrangiments will include amounts sufficient to service the material effect on the Company's financial position or results l guaranteed obligations. of operations. Und:r the terms of the coal supply contracts, which con- Rate Matters
- tinue until December 31,1999 with options to extend for ten Effective July 15,1981 the Company increased its rates by
, additional years, the CAPCO companies must reimburse about $64.2 million annually in accordance with an option Quarto for their share of the costs of operating the Quarto order of the Pennsylvania Public Utility Commission (Com-mines, including those costs associated with mine construc- mission). On April 15,1982 the Commission adopted its tion, whether or not they receive coal from Quarto. The final order in the rate proceeding which determined that the Company's total payments under these contracts amounted option rate increase of $64.2 million annually was just and to $30,729,000 and $28,512,000 for the years ended Decem- reasonable. The final order was appealed to the Pennsylvania ber 31,1984 and 1983, respectively. Commonwealth Court by a commercial customer. On [ The Company's estimated future minimum payments November 29,1983 the Court affirmed the Commission's l und:r the coal supply contracts related to mine construction final order. The Court's order was appealed to the Pennsyl-
- and equipment costs are
- - vania Supreme Court by the commercial customer.
i On December 19,1984 the Supreme Court ruled that the Commission's June 29,1981 option order was invalid under the applicable provisions of the Pennsylvania Public Utility 3 1
Duquesne Light Company Notes (continued) Code on the basis that the $64.2 million rate increase was a policies provide coverage for losses in excess of $500 million prohibited temporary rate.The Supreme Court remanded up to $1.06 billion. the case to the Commission for proceedings consistent with The property insurance policies described above provide the Supreme Court's opinion. The Company has filed an the CAPCO companies with $1.06 billion of coverage on an application for reargument with the Supreme Court. investment in the two Beaver Valley Units at December 31, Since the Supreme Court's opinion did not provide any 1984 of about $3 3 billion. guidance as to what action might be appropriate for the In addition, NSL also provides insurance coverage for the Commission to take on remand, the Company is unable to extra expense of replacement power during prolonged acci-determine what effect the Supreme Court's decision will dental outages of s uclear plants. Coverage is provided for ultimately have.The Company believes that the most the Company's interest in Beaver Valley Power Station Unit adverse effect that might result would be an order by the No. I and, after a deductible period of 26 weeks, weekly Commission requiring the Company to refund to its custom- payments of up to $729,000 are provided for one year and up crs amounts collected under the option rates in excess of to $364,000 for an additional year. If losses exceed accumu-amounts which it otherwise would have been entitled to col- lated funds available to NEIL, the Company could be lect as just and reasonable. While the Company estimates assessed approximately $1.9 million a year for payment of that such refund, after reflecting possible offsetting credits, NEIL's obligations. could amount to as much as $13 million,it believes that The Price-Anderson Amendments to the Atomic Energy additional credits might be available which could further Act limit liability to third parties to $595 million for each offset any such refund either in whole or in part. nuclear incident. Coverage of the first $160 million of such On April 30,1982 the Company filed with the Commis- liability is provided through ANI and MAELU. The next . sion a new rate schedule estimated to increase annual reve- $435 million is provided by retroactive assessments of up to I nues by approximately $165 million (subsequently reduced a limit of $5 million per operating nuclear reactor per inci-to approximately $155 million). On January 28,1983 the dent, but not more than $10 million per operating reactor in Commission entered a final order allowing an increase of any calendar year. Based on its present ownership interest in
$105.8 million beginning on January 29,1983.The Com- one operating nuclear reactor, the Company's maximum mission's order was appealed to the Pennsylvania Common- potential assessment under these provisions would be $2.4 wealth Court by both the Pennsylvania Consumer Advocate million per incident but not more than $4.8 million per cal-and the Company. Except for the Consumer Advocate's endar year.
appeal with respect to the Commission's allowance of the Other recovery of the cancellation costs of four nuclear generating In connection with coal supply arrangements for its wholly-units (see Note B to the financial statements), both appeals owned generating units the Company has contracted with an have been discontm, ued.
, unaffiliated coal supplier to purchase a minimum of 750,000 Management believes that the ultimate resolution of these tons of coal per year through December 31,1986. In 1983 the rate matters will not have a matenal adverse effect on the contrc.ct was amended to provide that if the Company Company's financial position or results of operations. requests deliveries in 1983 and 1984 below the minimum Nuclear Insurance annual tonnage, the Company will make up the shortfall The CAPCO companies have coverage with American (plus a 63,000 ton shortfallin 1982) by purchasing additional Nuclear Insurers (ANI) and Mutual Atomic Energy Liability tons during the remaining term of the contract or by extend-Underwriters (MAELU) to provide primary property insur- ing the term of the contract.The contract also provides that ance coverage for Beaver Valley Power Station Units Nos. I any shortfall can be sold to purchasers other than the Cem-and 2 in the aggregate amount of $500 million. pany. The total shortfall under the contract at December 31, The CAPCO companies are members of Nuclear Electric 1984 was approximately 463,000 tons.
Insurance Limited (NEIL), a mutual insurer established by The Company is involved in various other legal proceed-the utility industry to provide Decontamination Liability ings. In the opinion of management of the Company such and Excess Property Insurance in excess of $500 million for legal proceedings will not have a material effect on the finm-members' nuclear generating facilities. NEIL presently pro- cial position or results of operations of the Company. vides such excess coverage in the amount of $475 million. N. SUPPLEMENTARY INCOME STATEMENT Under this policy the CAPCO companies are subject to a INI'ORMATION Year Ended December 31, retrospective premium assessment of approximately $9.5 million per year for a period of seven years in the event of 1984 1983 1982 accidents at nuclear plants of member companies if losses (Thousands of Dollars) exceed premiums, reserves and other NEIL resources. The Maintenance $83,914 $75,947 $7s,431 Company's share of any such retrospective premium Amortization of extraordinary assessment would be approximately $2.9 million a year. _P oPertylosses 4,033 6,099 - Damages in excess of the primary $500 million coverage Taxes other than payroll also are covered by excess property insurance policies issued and income taxes: Cr SSreceiPts 38,349 35,576 33,186 to the CAPCO companies by ANI and MAELU which pro-PmPerty 16,604 14,374 14,139 , vide $85 million of coverage. The ANI/MAELU and NEIL Statecapitalst ck 8,901 5,501 6.601 32
Und:r the system of accounting followed by the Com- to coal inventories. The inventory accounts are relieved and i pany,a portion of maintenance expenses and of taxes other operations expense charged as the coal is used. than payroll and income taxes represents amounts charged O. QUARTERLY FINANCIAL INFORMATION (Unaudited) The following is a summary of selected quarterly financial data (in thousands of dollars, except per share amounts): , Electric t Operating Operating Net Earnings Per Quarter Ended Revenues income income Share March 31,1983 $185,848 $43,918 $32,975 $.51 ( June 30,1983 198,666 45,287 34,883 .54 September 30,1983 215,141 49,491 39,392 .60 ! December 31,1983 200,690 47,976 37,977 .56 March 31,1984 213,485 50,989 42,611 .63 June 30,1984 214,045 45,301 37,473 .53 September 30,1984 223,488 49,773 42,919 .61 December 31,1984 210,757 39,671 33,790 .45 P. SUPPLEMENTARY INFORMATION TO DISCLOSE THE EFFECTS OF CHANGING PRICES (Unaudited) The following supplementary information is supplied in prices (current cost) have had on the Company's results of accordance with the requirements of the Statement of Finan- operations.The data provided are not intended as a substi-cial Accounting Standards No. 33, Financial Reporting and tute for earnings reported on a historical basis, but offer Changing Prices.This Statement requires adjustments to some perspective of the approximate effects of inflation historical costs to estimate the effects that changes in specific rather than a precise measurement of these effects. STATEMENT OF INCOME ADJUSTED FOR CHANGING PRICES For The Year Ended December 31,1984 l (Thousandsof Dollars) Conventional Current Cost Historical Average Cost 1984 Dollars
! Electric operating revenues $861.775 $861,775 Fuel 234,910 234,910 Purchased power (sales)-net (26,637) (26,637)
Othrr operation and maintenance expenses 222,691 222,691 Depreciation expense _. 77,532 185,937 Taxes other than income taxes 70,279 70,279 income taxes 97,266 97,266 Other income and deductions--net (87,393) _ 87,393) ( Intirest charges 116,333 116,333 704,981 813,386 Income from continuing electric operations (excluding adjustment of property, plant and equipment to net recoverable cost) $156,794 5 48,389 l Increase in specific prices (current cost) of property, plant and equipment beld during the year' $216,023 Adjustment of property, plant and equipment to net recoverable cost 32 Effect of increase in general price level (212,822) l Excess of increase in specific price level over increase in general prices af ter adjustment of property, plant and equipment to net recoverable cost 3,233 Cain from decline in purchasing power of net amounts owed 72,125 Net $ 75,358
'At December 31,1984, current cost of property, plant and equipment (exclusive of capitalised leases), net of accumulated depreciation, was $5,985,993, while historicd cost or net cost recoverable through depreciation was $2,996,8o7.
33
Duquesne Light Company Notes (continuca) . 1 FIVE-YEAR COMPARISON OF SELECTED SUPPLEMENTARY FINANCIAL DATA l ADJUSTED FOR EFFECTS OF CHANGING PRICES (In Thousands, Ex<ept Per Share Amounts) Year Ended December 31, 1984 1983 1982 1981 1980 Current cost information: Income from continuing electric operations (excluding adjustment of property, plant and equipment to net
$ 48,389 546,702 524,567 524,430 524,216 recoverable cost)(1)
Income (loss) per share from continuing electric operations (af ter dividend requirements on preferred and preference stock)(1) .43 .42 - (.04) (.14) Excess of increase in general price level over increase in specific prices after adjustment of property, plant and equipment to net recoverable cost (3,233) 2,767 (247) 125,660 245,461 Net assets at year.cnd at net recoverable cost 1,039,107 999,286 934,346 867,398 869,413 Generalinformation: Gain from decline in purchasing power of net amounts owed 72,125 70,614 66,856 154,353 215,541 Cash dividends declared per share of common stock 52.06 52.09 52.04 $2.11 52.27 Market price per share of common stock at year-end $15.125 514.07 515.88 $15.14 515.92 Average consumer price index 311.2 298.5 289.1 272.4 246.8 l 1listorical basis: I Electric operating revenues $861,775 5800,345 5746,462 5786,229 5674,744 Cash dividends declared per share of common stock 52.06 52.00 $1.90 51.85 51.80 Market price per share at year cnd $15.125 513.50 514.75 513.25 512.63 Proven and probable coal reserves at beginning of year (tons) 23,200 25,100 26,300 28,100 29,900 Tons of coal mined 860 785 942 680 875 Average cost per ton of mined coal 534.65 536.59 531.62 535.10 $31.14 (1) Amounts for 1982 are before extraordinary gain. The current cost of property, plant and equipment, which recoverable cost, which is historical cost. The amount of this includes land, land rights, intangible plant, property held for excess that accumulated as a result of inflation in the current future use, construction work in progress and nuclear fuel in year must be reduced to net recoverable cost. process, represents the estimated cost of replacing existing The Company, by holding assets such as receivables, plant assets and was primarily determined by indexing sur- prepayments and inventory, suffers a loss of purchasing viving plant by the Handy-Whitman Index of Public Utility power during periods of inflation because the amount of Construction Costs. The current cost of coal properties was cash received in the future for these items will purchase less. determined by indexing coal reserves and machinery and Conversely, by owing monetary liabilities, primarily long-equipment by the Marshall-Stevens Mining and Milling term debt, the Company benefits because the payment in the Index.The current cost of property, plant and equipment future will be made with nominal dollars having less pur- , does not include capitalized leases. The current year's provi- chasing power.The Company has significant amounts of ! sion for depreciation and depletion on the current cost long-term debt outstanding which will be paid back in l amounts of property, plant and equipmer.t was determined dollars having less purchasing power and, therefore, for 1 by applying the Company's depreciation and depletion rates purposes of these calculations, has a net gain from holding to the indexed plant amounts. monetary liabilities in excess of monetary assets. Fuelinventories, the cost of fuel used in generation and The regulatory process limts the amount of depreciation , purchased power have not been restated from their historical expense included in the Company's revenue allowance and 1 cost in nominal dollars. Rate regulation limits the recovery of limits utility plant in rate base to original cost. Such amounts ; fu;l and purchased power costs through the operation of produce cash flows which are inadequate to replace such 1 adjustment clauses or adjustments in basic rate schedules to property in the future or preserve the purchasing power of actual costs. For this reason fuel inventories are effectively common equity capital previously invested. While this effect monetary assets. is partially mitigated by the benefit derived from holding As prescribed in Statement 33, income taxes were not long-term debt, the Company has a net purchasing power adjusted. loss which is experienced by the common shareholder and , The regulatory process limits the Company to the recov- can only be overcome by adequate rate relief. However, the cry of the cost of service in its rates. Therefore, any excess of Company expects that it will be able to establish rates which the value of plant at current cost must be reduced to the net will recover the increased costs of new plant. 34
Duquesne Light Cempany Selected Financial Data and Statistical Summary (Thousands of Dollars, Except Per Share Amounts) 1984 1983 1982 1981 1980 1979
SUMMARY
RESULTS OF OPERATIONS Residential revenues 280,647 267,110 238,496 223,146 196,400 176,744 Commercial revenues 314,129 290,370 263,374 243,501 209,871 185,880 Industrial revenues 244,970 221,107 225,292 300,056 250,295 232,389 Street lighting and other revenues 14,689 14,357 13,240 12,283 11,052 10,370 Miscellaneous revenues 7,340 7,401 6,060 7,133 7,126 6.164 Total slectric revenues 861,775 800,345 746,462 786,229 674,744 611,547 ' Operition an3 maintenance expenses 430,964 386,386 399,527 435,589 380,973 351,731 Depreciation 77,532 73,682 62,939 60,854 53,316 47,885 , Taxes other than income taxes 70,279 60,651 57,476 57,694 47,637 46,956 Income taxes 74,600 76,194 53,307 57,801 50,643 41,592 Interest charges, net of allowance for l borrowed funds used during construction 116,333 109,161 100,344 92,968 75,624 65,414 Other income, principally allowance for equity , funds used during construction 64,727 50,955 44,328 28,086 26,749 21,587 l Income from continuing electric operations I before cxtraordinary gain 156,794 145,226 117,197 109,409 93,295 79,556 Loss from discontinued steam heating operations - - 9,924 538 333 1,194 Income before extraordinary gain 156,794 145,226 107,273 108,871 92,962 78,362 Extraordinary gain - - 9,609 - - -
' Net income 156,794 145,226 116,882 108,871 92,962 82,207t Divid nds on Preferred and Preference Stock 21,955 22,411 22,701 22,976 23,353 23,721 Earnings for Common Stock 134,839 122,815 94,181 85,895 69,609 58,486 Averagt number of common shares outstanding 61,054 55,883 48,236 41,764 38,267 32,239 Earnings per share of Common Stock:
Income from continuing electric operations 2.21 2.20 1.96 2.07 1.83 1.73 Earnings for Common Stock 2.21 2.20 1.95 2.06 1.82 1.81t Dividends declared on Common Stock 2.06 2.00 1.90 1.85 1.80 1.76 ) tincludes cumulative effect to January 1,1979 of the change in billing practice, net of income taxes, of 53,845 or 5.12 per share. , PLANT l Property, plant and equipment 3,799,499 3,293,481 3,024,554 2,809,753 2,604,333 2,380,805 Accumulated depreciation and amortization 659,745 555,641 504.680 477,009 424,653 386,479 Property, plant and equipment-net 3,139,754 2,737,840 2,519,874 2,332,744 2,179,680 1,994,326 TOTAL ASSETS 3,530,310 3,145,811 2,883,424 2,668,577 2,447,163 2,222,537 l l l 35
Duquesne Ught Company Notes (continued) 1984 1983 1982 1981 1980 1979 CAPITALIZATION Common Stock 64,775 58,420 53,277 45,303 40,166. 35,550 Capital surplus 804,377 724,147 649,376 550,244 494,228 433,984 Retained earnings 184,313 175,938 165,340 163,705 155,102 155,328 Non-redeemable Preferred and Preference Stock 156,137- 156,137 156,137 156,137 156,137 156,137 Redeemable Preferred and Preference Stock 127,414 134,979 140,829 143,924 146,867 149,998 , First i mgrtgage bonds 1,149,547 1,100,147 1,006,637 983,870 918,230 808,830 Other long term debt 278,384 234,019 199,934 176,682 126,981 127,436 Unamortized debt discount and premium-net (10,8%) (10.%7) (9,488) (9,453) (7,161) (5,770)
,Totalcapit lization 2,754,051 2,572,820 2,362,042 2,210,412 2,030,550 1,861,493 AVERAGE REVENUE PER KILOWATT-
, HOUR-ALL CUSTOMERS 7.389v 7.215v 6.708v 5.715v 5.019v 4.546v SALES OF ELECTRICITY Ayerage annual residential kilowatt-hour use 5,768 5,752 5,663 5,698 - 5,770 5,629 Electric energy sales billed (millions of kilowatt-hours) Residential 2,918 2,905 2,853 2,858 2,876 2,778 l , Commercial 4,393 4,257 4,163 4,069 4,024 3,870 Industrial 4,148 3,717 3,902 6,582 6,272 6,546 Street lighting and other 104 111 120 125 129 131 Total 11,563 10,990 11,038 13,634 13,301 13,325 ENERGY SUPPLY AND PRODUCI1ON DATA Energy supply (millions of kilowatt-hours) _ Generated in system _ plants ~ 12,983 11,900 12,352 13,914 13,485 13,884 Purchased and net interchange (803) (164) (689) 410 541 125 Losses and Company use (617) (746) (625) (690) (725) (684) i Total 11,563 10,990 11,038 13,634 13,301 13,325 _ ! Generating capability _(t.housands of kilowatts) 3,148 3,148 3,144 3,177 3,179 3,294 I Ieak load (thousands of kilowatts) 2,172 2,184 2,15_8 2,522 2,474 2,2 % Cost of fuel.per millign BTU 165.868v 167.140v 167.865v 159.660v 149.768v 131.779v I BTU per kilowatt-hour generated 10,635 10,853 10,931 10,811 10,924 10,682 Average. production cost per kilowatt-hour 2.559v 2.541v 2.575v 2.354v 2.202v 1.913v NUMBER OF ELECTRIC CUSTOMERS-- At End of Year Residential 506 a 883 505,781 503,987 503,044 500,466 4 %,005 l Commercial 49,837 49,493 49,320 48,859 48,308 47,978 Industrial 1,990 1,984 1,999 2,016 2,005 1,975 Street lighting and other 1,588 1,633 1,647 1,713 1,725 1,746 Total _ 560,298 558,891 556,953 555,632 552,504 547,704 36
i
- Managernent's Discussion Fina h mpany anticipates that funds required for planned
and Analysis of Financial construction expenditures in the next several years will be provided principally from the issuance of additional equity L Condition and Results ana debt securities ana in pari from cash becoming avaiiabie i Of Operations from operations. On March 27,1984 the Company issued
$30 miiiion of 133 s Fi,s, uo,, gage Bonds, Series due j CepitalResourcesandLiquidity March 1,1991. On November 14,1984 the Company issued
! Construction and sold 2.5 million shares of Common Stock. Net proceeds Construction expenditures during 1984, exclusive of from thesaleof theCommonStock wereapproximately
- allowance for funds used during construction and nuclear $37.4 million. Funds provided to the Company under its full, were approximately $251 million. These expenditures Dividend Reinvestment Plan in 1984 amounted to approxi-we-a primanly for the construction of three CAPCO gener- mately $48 million, and an additional $10.7 million was rein-ating units in addition to improving and expanding produc- vested on January 1,1985. On December 19,1984 the Beaver tion, transmission and distribution systems and pollution County Industrial Development Authority issued $51 million control equipment. of 11% % tax-exempt pollution control revenue bonds to On January 28,1985, the CAPCO companies announced a reimburse the Company for its share of the cost of certain d
- lay in the completion date of Beaver Valley Unit No. 2, pollution control facilities at the Beaver Valley Nuclear which is about 83% complete, from late 1986 to about the Power Station. Principal and interest on the bonds will be end of 1987. This delay is expected to increase the total esti- funded by the Company. Portions of the net proceeds from
< - mated cost of the unit from about $3.5 billion to approxi- these issues were used to pay short-term indebtedness i mat:ly $3.9 billion, including allowance for funds used dur- incurred principally for construction purposes, and the bal-l ing construction. The Company's share of the increase is $55 ance was applied to construction expenditures. The Com- { million, bringing its total commitment in the unit to $536 pany currently estimates that approximately 79% of the [ million. The new schedule recognizes the need for more time funds required for its 1985 construction program will come l ~ to complete the unit in light of regulatory and safety require- from outside financing. The Company expects to complete a mints adopted since the unit was designed, as well as the pollution control financing in the first quarter of 1985 for the decision of the CAPCO companies to concentrate on the Perry Nuclear Power Station through the issuance of $39 mil-
- completion of Perry Unit No. l. lion State of Ohio Pollution Control Revenue Bonds secured The Company currently estimates that it will spend, by First Mortgage Bonds.The exact timing of this sale will l exclusive of allowance for funds used during construction depend on market conditions.
l (AFC) and nuclear fuel, approximately $229, $173, $186, The Company finances its nuclear fuel requirements pri-l $169 and $141 million for each of the years 1985 through marily by leasing and other arrangements pursuant to which l 1989, respectively. These estimates assume a severely it may finance up to $208 million of nuclear fuel. As of j restricted construction schedule for I erry Unit No. 2 in 1985 December 31,1984 the Company's share of the cost of ! and resumption of construction in 1986. nuclear fuel financed under these arrangements was about Estimated Construction Program $157 million, including interest, storage and other ($ in millions) nuscellaneous costs. 1 i 1985 1986 1987 1988 1989 n additi n to the funds required for the construction pro- l gram, $23.1 million was required in 1984 for maturities of l 7 including AFC
~$329 $240 '$247 $203 $180 long-term debt and sinking fund and purchase requirements,
( Excluding AFC $229 $173 $186 $169 $141 and $7.8 million wili be required in 1985 for such purposes ! Interim financing will be through bank borrowings and , if 1%rry Unit No. 2 construction does not resume until 1989, sales of commercial paper. See Note F to the financial state- ,
- construction expenditures for the years 1986 through 1989 ments for short-term borrowing arrangements. Variable mar- "
, are estimated to be $155, $144, $124 and $142 million, ket and general economic conditions may affect the Com-respectivily, in each case exclusive of AFC and nuclear fuel. pany's selection of financing alternatives and adversely affect l See Nota M to the financial statements. ! its ability to raise capital. In order to maintain earnings ade- ! The amount which the Company must spend for its con- quate to finance construction expenditures and refunding j struction program is regularly under review and is subject to requirements, the Company requires rate increases sufficient changes influenced by business and economic conditions and to offset increased costs and provide a fair rate of return. other factors, such as escalation of labor, material and equip- The Restated Articles of the Company require that as a ment costs, rate of construction progress, the development of condition to the issuance of Preferred Stock, earnings (after ' environmental and nuclear safety regulations, service relia- income taxes) available for interest charges be at least 1.5 i bility and system efficiencies. In addition, this review also times the sum of interest charges on all indebtedness and i must take into account difficulties in obtaining rate increases Preferred Stock dividend requirements.This restriction cur-
- sufficient to generate adequate earnings, possible changes in ' rently precludes the Company from issuing Preferred Stock.
l load growth trends and,in the case of the CAPCO construc- There is no similar restriction upon the issuance of the Com-l tion program, the ability of each of the CAPCO companies to pany's Preference or Common Stock. - } financ2itscapitalrequirements. 37
Duquesne 1.ight Company . Notes (continued) ) Perry Unit No.2 On April 27,1984 the Company filed a request for a $42 1 The CAPCO companies are presently reviewing their million annual rate increase with the Commission. The Com-options with respect to completion of the Perry Nuclear mission's final order allowed an increase of $31.4 million Power Plant Unit No. 2 (Unit). The alternatives include beginning on January 26,1985. This rate increase should
, resumption of construction, with a new estimated cost and result in improved earnings in 1985.
l completion date, or cancellation. It is not certain how soon Extraordinary Property Losses i this review will be completed. In the meantime, the pnncipal in 1980 the CAPCO companies cancelled the construction 4 work being performed on the Unit is that necessary to enable of four nuclear generating units. In January 1983 the Com-Perry Unit No.1 to be placed in service. This reduced effort mission approved the recovery of the accumulated costs from will result in only minimal expenditures for construction on the Company's customers but did not allow any return on the Unit during 1985. The Company has been accruing AFC these costs. The Commission's order has been appealed by during the construction period, and such AFC accruals on the the Pennsylvania Consumer Advocate to the Pennsylvania Unit are expected to be about $14.4 million in 1985. If the Commonwealth Court. See Note B to the financial CAPCO companies do not decide during 1985 to increase statements. construction significantly on the Unit, a reserve will be pro-
, vided against subsequent accruals of AFC on the Unit until Deferred Coal Costs construction is resumed. A deferral of AFC would not affect By Interim Order entered January 12,1981 the Commis-cash flow, but it would cause an equal reduction in reported sion directed that the Company limit its recovery of the cost carnings from what they otherwise would be. The Unit is f Quarto coal through its energy cost rate to approximately I
I about 45 % complete. The Company's investment in the the prevailing market price of similar coal rather than the ! Unit, including allowance for funds used during construction actual cost of Quarto coal.The Company is deferring the
! and excluding common facilities required for the operation of excess of the actual cost of Quarto coal over the cost being i Perry Unit No.1, was approximately $152 million at Decem- recovered through its energy cost rate until recovery of the l ber 31,1984. If it is ultimately determined to cancel the Unit, actual cost is permitted by the Commission. If recovery of j such excess is disallowed, the amount deferred would be the Company would seek regulatory approval for the recov-charged to income in the year of disallowance. See Note G to ery from its customers of its then investment in the Unit, together with any related cancellation costs. See Note M to the financial statements.
the financialstatements. Beaver Valley Replacement Pbwer Rate Matters In c nnection with a February 20,1981 rate order, the Commission found that the Company had not proven that 2 Effective July 15,1981 the Company increased its rates by the costs of replacement power during a 1979 outage of Bea-about $64.2 million annually in accordance with an option i order of the Commission. On April 15,1982 the Commission ver Valley Unit No.1 were prudently incurred. Further heanngs in the Beaver Valley refund proceedings were held, adopted its final order in the rate proceeding which deter-mined that the option rate increase of $64.2 million annually and on November 19,1982 the Commission adopted an order : msi which ordered refunds of $12.5 million plus interest over was just and reasonable. The final order was appealed to the a tw -Year Period. The order nisi became final on June 10, Pennsylvania Commonwealth Court by a commercial cus-
. tomer. On November 29,1983 the Court affirmed the Com- 1983, a d the Company filed an appeal with the Common-wealth Court. See Note M to the financial statements.
! raission's final order. The Court's order was appealed to the Pennsylvania Supreme Court by the commercial customer. Other On December 19,1984 the Supreme Court ruled that the Under provisions of the Economic Recovery Tax Act of Commission's June 29,1981 option order was invalid under 1981 eligible individuals who are participants in the Com-the applicable provision of the Pennsylvania Public Utility pany's Dividend Reinvestment Plan may elect to exclude Code.The Company has filed an application for reargument from current federal taxable income each tax year from 1982 with the Supreme Court. The Company believes that the through 1985 the fair market value of shares of Common most adverse effect that might result would be an order by Stock received from the reinvestment of dividends to the i the Commission requiring the Company to refund to its extent the aggregate fair market value of such shares does not customers amounts collected under the option rates in excess exceed $750 ($1,500 for spouses who file a joint retum). This of amounts which it otherwise would have been entitled to - provision has provided incentive for stockholders to reinvest collect as just and reasonable. While the Company estimates dividends and thereby ease the cash requirements of the ' that such refund, after reflecting possible offsetting credits, Company. j i could amount to as much as $13 million,it believes that addi- I tional credits might be available which could further offset - any such refund either in whole or in part. See Note M to the financial statements. r
- - , - , , - - , ,. ~ . _
In 1984 the Company capitalized all of its nuclear fuel maintenance expenses in 1983 compared to 1982 was due leases and certain property leases. There was no impact on primarily to a substantial reduction in fuel expenses resulting the Company's results of operations. from higher generation from the Beaver Valley No.1 nuclear The Company has generated in each year funds from unit, decreased deferred energy expenses and lower genera-cperations sufficient to meet its operating expenses, pay tion of electricity. Net sales of power to other utilities divid:nds and finance a portion of its capital needs. The decreased as the market for such sales was not as favorable in demands and commitments detailed in Note M to the finan- 1983. cial stat:ments and those noted above are not expected to Depreciation expense increased in 1984 and 1983 as a result mat rially affect the Company's ability to finance its opera- of increases in utility plant and changes in depreciation rates tions or its construction program or to pay dividends. in 1983 to conform with the depreciation rates allowed by the Results of Operations . Pennsylvania Public Utility Commission in its rate orders. Operating revenues from continuing electric operations Additi nally,beginninginJanuary1933 depreciation increased (decreased) in the years 1982 through 1984 over the expensg includes the amortization of the cancelled nuclear respective preceding years, for the following reasons: 8.eneratmg umts and Shippmgport. See Note B to the finan-cial statements. 1984 1983 1982 Taxes other than income taxes increased in 1984 compared (Millions of Dollars) to 1983 due primarily to increased Pennsyivania gross i General rate increases $26.9 $88.4 $ 43.0 receipts taxes, which vary in direct relationship to revenues, f Electricalconsumption and as a result of increases in Pennsylvania capital stock taxes 12.8 (10.0) (62.3)- and Pennsylvania public utility realty taxes relatmg pnnct-Energy clause revenues 18.3 (31.0) (19.0) pally to legislative changes implemented in 1984. Fluctua-State tax adjustment tions in income taxes are due primarily to changes in taxable and other 3.4 6.5 (1.5) income. The effective income tax rate for the three years
$61.4 $53.9 $(39.8) ended December 31,1984,1983 and 1982 was 32E 34% and a 31% respectively. See Note H to the financial statements.
The operating revenues of the Company are based on rates The increases in allowance for equity and borrowed funds authorized by the Pennsylvania Public Utility Commission. used during construction were primarily due to the increased These rates are designed to recover the Company's operating cost of construction. Fluctuations in interest inccme resulted expenses, plus a rate of return on the investment in utility from chaages in cash available for temporary investments. rate base. The Company also has an energy cost rate which Interest expense for each of the years 1984,1983 and 1982 gen: rally allows it to recover the differencc between actual was higher due to increased total borrowings to finance the full costs and fuel costs included in base rat es. Any Company's capital expenditures. ov rcollections of revenues are refunded, With interest, to Earnings per share of Common Stock for 1984,1983 and customers. 1982 were adversely affected by increases in the average The Company was permitted two rate inct eases in 1983 number of shares outstanding, which reduced earnings per effective January 29 and September 17. See Note M to the share by 5.20, $.35 and $.31, respectively. financial statements. The increses in electrical consumption The Company has prepared information on the effects of and energy clause revenues in 1984 were due principally to inflation and changing prices as prescribed by the Financial l increased sales to all significant customen groups and a higher Accounting Standards Board. Such information is in Note P avIrag? energy cost rate. The decreases in electrical consump. to the financial statements. tion in 1982 and 1983 were due primarily to the severe impact , of th2 economic recession in the Company's service area, par-ticularly on steel and other industrial customers. Total operation expenses (fuel, purchased power and other operation) increased in 1984 compared to 1983 primarily due l to increases in deferred energy expenses, increased genera-l tion of electricity and increased administrative and general l expenseswhichincludedaone-timechargeof approximately ' $5 million to pay for an early retirement program. These incr:ases were partially offset by increases in 1984 in net sales of powIr to other utilities due to favorable capacity situations and tha requirements of neighboring utilities which resulted , in increased power deliveries. Maintenance expenses ! increased in 1984 compared to 1983 due primarily to increased generating outage expanses. The decrease in operation and 39
Business of the Company Common Stock Dividends distributions on, or the purchase of, its capital stock ranking junior to Duquesne Light Company is The Company has paid cash the Preferred Stock (collectively engaged principally in the produc- dividends on its Common Stock in referred to as " junior stock tion, transmission, distribution and each year since 1913 and on a regu- payments"). sale of electric energy. The Com- lar quarterly basis (January 1, April 1, No dividends or distributions pany serves an area of approxi- July I and October 1)in each year may be made on the Common Stock mately 800 square miles in Alle- beginningin 1953 after becoming if dividends or sinking or purchase gheny and Beaver Counties. This publicly owned. The quarterly divi- fund obligations on the Preferred area, which includes the City of dend related to the first quarter of Stock or Preference Stock are Pittsburgh, is located in South. 1983 was paid at the rate of 47%v accumulated and unpaid. Further-western Pennsylvania and has a per share. Quarterly dividends more, the aggregate amount of jun-population of about 1,430,000, related to the last three quarters in ior stock payments which may be The executive offices of 1983 and the first quarter in 1984 made in any 12-month period are in Duquesne Light are located at: were paid at the rate of 50v per generallimited to (1) 50% of con-One Oxford Centre share. Commencing April 1,1984 solidated net income for any period 301 Grant Street the quarterly dividend rate was of 12 consecutive calendar months Pittsburgh, Pennsylvania 15279. increased to 51%v per share. Future within the 15 preceding months if clividends will depend upon future the effect of such payments would Duquesne Light Company is an earmngs, the cash position of the be to reduce the ratio of common Equal Opportunity Employer. Company, construction require- stock equity to total capitalization
, ments, rate regulation and other rel-Service Area Map to less than 20% or (2) 75% of such evant factors. The Company expects consolidated net income if the effect that dividends will continue to be would be to reduce such ratio to paid in the future. 20% or more but less than 25%. No Dividends may be paid on the
- k. w, portion of retained earnings at Common Stock to the extent per- December 31,1984 was restricted mitted by law and as declared by
%g _ the Board of Directors, subject to by virtue of this provision.The approximate number of holders of f9J - the provisions of the Company's Common Stock as of the March 1,
-k , .
I::.gg
! Restated Articles which restrict the payment of cash dividends or other 1985 record date for the 1985 Annual Meeting was 147,000.
~ _
,,,. FederalIncome Tax Status of Common Stock Dividends The Company estimates that portions of the Common Stock dividends paid in 1984 represent a return of capital and are not taxable as dividend income
'"*"E as follows:
Payment Taxable As Not Taxable As l Dates Dividend Income Dividend Income ' January 1 100.00 % 0.00 % 1974-1984 Dimensions April l 100.00 % 0.00 % Magazine July 1 79.77 % 20.23 % In mid-year 1985, the Company October 1 68.09 % 31.91 % plans to publish Duquesne Light . Dimensions, containing in-depth These estimates are subject to audit by the Intemal Revenue Service. information concerning the Com-pany. Dimensions will include an Form 10-K Offer Report on Form 10-K filed with the 11-year statistical review and a dis- Securities and Exchange Commis-cussion of some of the important If you are a holder or beneficial sion for the year 1984 (including a issues affecting Duquesne Light owner of any class of the Com- list of exhibits). All requests must Company. For a copy of Dimensions pany's stc,ck as of March 1,1985- be made in writing to the Secretary, write: the record date for the 1985 Annual (29-7) Duquesne Light Company, Duquesne Light Company Meeting, the Company will send One Oxford Centre,301 Grant Corporate Communications (30-5) you, upon request and at no charge, Street, Pittsburgh, Pennsylvania One Oxford Centre a copy of the Company's Annual 15279. 301 Grant Street Pittsburgh, Pennsylvania 15279 40
CAPCO Board of Directors Company Officers In 1967, Duquesne Light joined four John M. Arthurt$* John M. Arthur oth:r electric utilities to form the Chairman of the Board and President Chairman of the Board and President C;ntral Area Power Coordination Charles M. Atkinsonm Charles M. Atkinsont' (CAPCO) group. Executive Vice President Executive Vice President Prior to 1980,10 generating units w;ra committed under the CAPCO Henry G. Allyn,Jr.'t Roger D. Beck Retired President and Chief Executive Vice President-Administrative Services arrangements, which provided for Officer of The Pittsburgh Group
- joint ownership interests based on and Lake Erie Railroad Company individual requirements. To date, '
Vi e Pre dent-Nuclear Group Daniel Berg
- t$
- sevIn are in service, and three are Acting President, Provost and Institute und;r construction, Duquesne Light Professor, Rensselaer Polytechnic Institute Clifford N. Dunn shares in nine of the CAPCO units. Vice President-P Wer Supply Group Doreen E Since 1980 each CAPCO com- c, The uhlI ndation William F. Gilfillan, Jr.
pany has been responsible for estab- Vice President-Customer Services lishing its own level of reserves and John H. Demmler*t Group n gen 3 rating capacity needs beyond Parjg,ejRe, Smith Shaw & McClay Wesley W. von Schack(23 the jomtly-owned umts still under Vice President-Finance Group construction. Duquesne Light is Sigo Falk* $ . . now developing a program to meet sociate Dire or, eal
,f go t n PenIy vania ce Pres e Le I d Corporate its future capacity requirements. Communications William H. Knoell t' 'Duquesne Light Company President and Chief Executive Officer, Earl J. Woolever Beaver Wiley #1 Beaver Valley #2 Cyclops Corporation Vice President-Nuclear Construction G. Christian Lantzsch t $* Diane S. Eismont(3)
Ea"['Nity fE000KW D Ownership:47.5% a e ty D[,000 KW Ownership: 13.74 % Vice Chairman of Mellon Bank, and Vice Secretary D.L Share:385,000 KW D.L Share: 114,000 KW Chairman and Treasurer of Mellon Bank James O. Ellenberger
' Pennsylvania Power Ccmpany Corporation Controller Mansfeld #1 Mansfeld #2 -
Eric W. Springer t Coal-1976 Coal-1977 Ronald G. Males Capacity: 780,000 KW Capacity: 780,000 KW Partner, Horty, Springer and Mattern Treasurer D.L Ownership: 29.3% D.L Ownership: 8.0% Attorneys-at-Law D.L Share: 228,000 KW D.L Share:62,000 KW
. Member c,f Audit Committee Richard J. Ciora Mansfeld #3 Assistant Treasurer t Member of Compensation Committee Coal-1980 Capacity:800,000 KW t Member of Employment and Lawrence P. Galie D.L Ownership: 13.74 % Community Relations Committee D.L Share: 110,000 KW Assistant Treasurer
$ Memberof NominatingCommittee
- Ohio Edison Company
- Member of Nuclear Review Committee Joan S. Senchyshyn Sammis # 7 Assistant Secretary
@'3;ly'.7l,00,000 gw Transfer Agent and A. William SteinW D Ownership:31.2 %
D.L Share:187,000 KW Registrar Assistant Secretary Common, Preference and y,n g^gl i *The Cleveland Electric , 1,7,1y4gsoar
, , , of Djr cgrsy c, l Illuminating Company Preferred Stock President. Prior to his appointment, arry ci arry #2 The First Jersey National Bank Mr Atkinwn was Vice President, Finance Nuclear-1985 Nuclear " '"d ^" ""* 8 * ""
Crpacity:1,205,000 KW Capacity: 1,205,000 KW Jersey City, New Jersey aOn August 21,1984, the Board of Directors D.L Ownership: 13.74% D.L Ownership:13.74% elected Wesley W. von Schack Vice President-D.L Share:165,000 KW D.L Share: 165,000 KW Eastlair #5 Annual Meeting of Finance Group. In addition, on Se ember 18, 1984 the Board assigned Mr. von hack the Coal-1972 Stockholders duties cf Chief Financial Officer. Prior to his 648,000 KW appointment, Mr. von Schack was Senior Vice Ca[acity: D Ownership:31.2 % The annual meeting of stockholders President-Finance and Administrative Ser. D.L Share:202,000 KW will be held at 10 a.m., Pittsburgh $'p'o'ra'i@""'l Venn nt Public Service l *The Toledo Edison Company time, on Tuesday, April 30,1985 in con A ril17,1984, the Board of Directors l Dms Besse #i - the David L. Lawrence Convention elected E>iane S. Eismont Corporate Secretary. Nuclear-1977 Prior to her appointment, Ms. Eismont was a Capacity:880,000 KW Center, Pittsburgh, Pennsylvania. Senior Attorney in the Company's Legal Unit. D.L Ownership:0 D.L Share: 0 hon June 19,1984, the Board of Directors
" Constructing and operatin company elected A. William Stein Assistant, Secretary.In
' r n is an Attorney in the Com.
"* Construction schedule un er review p ,,"g
r i A4.On m L+t y One Oxford Centre Pittsburgh, PA 15279 l l I f I' y; , , j
-}}