ML20101S812

Annual Financial Rept 1983

ML20101S812
Person / Time
Site:	Comanche Peak
Issue date:	12/31/1983
From:	Brittain P, Farrington J TEXAS UTILITIES CO.
To:
Shared Package
ML20101S784	List: ML20101S790 ML20101S801 ML20101S806 ML20101S812 TXX-4403, Forwards Annual Financial Repts for 1983 for Facility CP Holders
References
NUDOCS 8502050652
Download: ML20101S812 (37)

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1984 Annual Meeting Contents The Annual Meeting of Shareholders of the Management's Letter 2

Company will be held at 9:30 a.m. on Friday, May System Companies 4

18,1984, at the Fairmont Service Area 5

Hotel, Ross and Akard Streets, Dallas, Texas.

System Report 6

Shareholders are cordially Operations 6

invited to be present at the Construction 8

annual meeting. Those Fuel Supplies 10 unable to attend are urged Research and to exercise their right to Development 12 vote by proxy. Notice of Employees 13 meeting and proxy Rates and Regulation 14 statement and form of Financial Report 15 proxy will be mailed shortly after March 30, the record Directors and Officers 36 date for the meeting.

Following the meeting, a report of the proceedings will be prepared and distributed to all shareholders.

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Dallas / Fort Worth Airport, the largest air traffic hub in the Southwest and the sixth largest airport in the world in passenger traffic, is a leading influence on the economy of the System's service area. The airport, which celebrated its 10th anniversary in early 1984, is widely credited with being the dominant reason why the Dallas Fort Worth Metroplex has become third in the nation as a corporate headquarters center. The Metroplex, home of 60 percent of the System's customers, has gained more than 2,300 new or relocating businesses since the airport opened.

During the same period, the labor force in the Metroplex increased 40 percent and both retail sales and building permits jumped by 260 percent. The airport itself contributes an astounding $4 billion a year to the area economy.

1 HIGHLIGHTS 1

1983 1982 Change 1

Utility Plant *.......

$9,967,653,000

$9,051,442,000 10.1 %

Construction Expenditures...........................

$ 906,930,000

$ 891,560,000 1.7 i

Electric Energy Sales in Thousands of Kilowatt-hours........................

62,709,927 60,380,142 3.9 Peak Demand in Kilowatts..........................

14,029,000 13,204,000 6.2 Operating Revenues..................................

$3,487,916,000

$3,238,025,000 7.7 Fu:1 and Purchased Power.........................

$1,526,525,000

$1,354,439,000 12.7 Operating Expenses Excluding Fuel and Purchased Power...........

$1,296,843,000

$1,249,532,000 3.8 Consolidated Net income.

$ 461,468,000

$ 428,646,000 7.7 Earnings per Share................................

$ 3.90

$ 3.85 1.3 Dividends Declared per Share....................

$ 2.20

$ 2.04 7.8 Book Value per Share *.................................

$26.16

$24.61 6.3 Custome rs *.........................................

1,788,347 1,695,863 5.5 Employees *..................

16,148 16,500 (2.1)

• End of year Consolidated Earnings Dividends Declared

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2 MANAGEMENT'S LETTER To the Sharuholders:

The lowering of the Cost and schedule esti-During 1983, the ratings also reflected in-mates for Comanche Peak economy brightened, both dustry developments that were revised in December nationwide and in the were especially disturbing after the System completed to utilities with nuclear a review of its construction System's service area, with the Dallas-Fort Worth area power plants under con-program. Fuel load for Unit i

struct,on. These 1 is presently scheduled i

continuing its steady cconomic development.

developm,ents included for mid-1984, and the unit Nevertheless, the electric cancellation of plants should be in full service in utility industry, including under growing cost and early 1985. Unit 2 is ex-i i

your Company, faced dif.

regulatory burdens.

pected to go into operation Lice about 18 months later. The specif,nsing difficulties at ficult financial and ic nuclear plants cast System's cost for the plant regulatory problems.

a shadow over the nuclear is 51,640 pn kilowatt, A number of significant developments affecting the industry, and,as Comanche which compares favorably Company took place during Peak s operation date to the coat of similar the year.

grows closer, the proce,ss plants. Tne only other A revised Public Utility for obtaining,ts operating change,iesulting from i

license has become more the revieu was a one-Regulatory Act was cdopted as part of the diffi, cult.

year delay in the regular sunset review by Significant construction scheduled completion of the state Legislature.

progress was made during one hgnite unit.

Changes included revision the year at Comanche Another major develop-of the procedures for Peak. A number of major ment during the year was recovering fuel costs and preoperational tests were the reorganization of the establishment of an office completed on Unit 1, in-System, which became ef-of public counsel. Some cluding hot functional fective January 1,1984.

proposed changes that testing of all major plant The new organization pro-would have been detrimen, systems. Among other vides opportunities to milestone events were reduce costs while main-tal to electric utility customers-such as elec.

delivery of nuclear fuel to taining the quality of ser-tion, instead of appoint.

the plant, licensing of 26 vice to cu,stomers.

ment, of Public Utility Com.

reactor operators and a Even with effective cost-fullscale exercise of the reduction programs in mission members-were not enacted.

emergency preparedness plee, rate increases were Texas has a long history plan in cooperation with neechd by Texas Electric of responsible regulation, state and county Service Company and but developmeats during governments.

Dallas Power & Light Com-Texas Electr,rease for pany. An inc the year raised uncertain.

Nuclear power is essen-tial to the nation, and ic was approv-ties regarding the regula.

Comanche Peak is essen-ed late in the year and for tory climate in the state' tial to the Company's ser-Dallas Power in early 1984.

These uncertainties, combined with inadequate vice area. Plant licens,ing In both cases, tha in-must be made less time-creases approved were rate increases approved for two System operating divi.

consuming and more disa3 pointing and came sions, contributed to deci.

predictable, while still too ate to help 1983 s'pns by two major bond allowing public inout and results. In March 1984, a providing for publ c safety.

Systemwide request.for an rating' agencies to lower in the interim, we 8% increase in revenues the credit ratings of the System's first mortgage recognize the critical was filed by Texas Utilities bonds from Triple 4 to nature of this process and Electric Company with the Double A. We are disap.

have placed high priority PUC and municipal pointed by these actions on doing everything possi-regulatory authorities.

cnd are committed to ble to obtain an operating license for Comanche Peak maintaining and improving the System's financial in a timely manner.

strength.

3 Earnings per share of Company's goal of pro-In February 1984, Dr.

common stcck were $3.90, viding a high quality of Margaret N. Maxey was compared to $3.85 per customer service. In early elected to fill a vacancy on share in 1982. The increase 1983, a new Energy Aid the Board of Directors. Dr.

In earnings was limited by Program was introduced to Maxey, director of the rising costs and inadequate help customers who have Chair of Free Enterprise rate levels.

severe financial hardships.

and professor in the The System's summer By year-end, the Company, Biomedical Engineering peak demand increased its customers and Program at the University 6.2% in 1983, and electric employees had contributed of Texas at Austin, is also energy sales were up 3.9%.

more than $475,000, and a an author, consultant and The inc' ease in sales total of 5,300 customers lecturer on energy, ethics reflectc the improving had received help.

and the environment.

economy, as well as a in May 1983, T. L.

The year just past 5.5% growth in the Austin, Jr. announced his presented the Company a System's total number of retirement as chairman of number of difficulties. The customers.

the board and chief ex-System has not emerged Construction expend-ecutive officer. During his unscathed, but it remains itures during the year total-years of service to the in a relatively strong posi-ed $907 million, an in-Company, Mr. Austin's tion. Among factors that crease of only 1.7% over leadership was instrumen-give confidence in the expenditures in 1982.

tal in the development of outlook for 1984 are the Funds from operations pro-lignite resources, which positir^ business climate vided 56.1% of 1983 con-already have saved and economic vitality of struction expenditures.

customers nearly $3 billion.

the service area.

During 1983, System The Board of Directors The dedication and loyal-companies raised about elected Perry G. Brittain, ty of our employees and

$471 million through long-who had been president of the continued support and term financing, lion from the the Company, to succeed interest of shareholders are including some $226 mil Mr. Austin. Jerry Farrington, sincerely appreciated. They sale of authorized but at the time president of have been the key to the unissued common stock.

Dallas Power, was elected System's growth and An offering of 5 million president of the Company.

development and are shares to the public in in August 1983, he was essential to its future August 1983 raised $120 elected a director.

progress.

million. Participation in the dividend reinvestment plan March 21,1984 and employee stock plans accounted for $106 million.

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At year-end, more than 47 percent of shareholders were reinvesting dividends.

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42 in February 1984, your e

Board of Directors raised i

1 the regular quarterly divi-

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4 dend from 55c to 59c per

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share. The new quarterly i

d rate is payable April 2.

Dividends declared on the common stock of the Com-pany have been increased Customer e catfon and PERRY G. BRITTAIN JERRY FARRINGTON Chairman of the Board President assistance programs re-mained integral to the A

g.

4 SYSTEM COMPANIES The Texas Utilities Company System is investor-owned and provides electric energy in 87 counties in north central, east and west Texas to more than four and a half million people-about one third of the state's population.

Texas Utilities Company is a holding company with six wholly-owned subsidiaries. The Company provides its subsidiaries with common stock capital and short-term funds re-quired for their construction programs. The Company's principal subsidiary is Texas Utilities Electric Company. At year-end, the common stock of the Company was owned by some 102,000 registered shareholders.

Texas Utilities Electric Company was Texas Power & Light Company serves incorporated in September 1982. On customers in 51 counties in north central January 1,1984, Dallas Power & Light Com-and east Texas. Included are the cities of pany, Texas Electric Service Company and Carrollton, Irving, Killeen, Mesquite, Texas Power & Light Company-formerly Plano, Richardson, Tyler, Waco and 262 the electric utility subsidiaries of Texas other incorporated municipalities. The Utilities Company-merged into and rich agricultural blacklands of central became divisions of the Electric Company Texas, farming and ranching sections along with a fourth division, Texas Utilities north and east of Dallas, part of the oil Generating Company. The Electric Com-and gas fields of east Texas and the pany is engaged in the generation, pur-Dallas Fort Worth Regional Airport-the chase, transmission, distribution and sale nation's largest airport-are all in the ter-of electricity.

ritory served. This area is also highly Dallas Power & Light Company serves diversified with light and heavy manufac-Dallas, the nation's seventh largest city, turing, electronics and substantial com-as well as three adjoining communities in mercial activities.

Dallas County-Cockrell Hill, Highland Texas Utilities Generating Company is Park and University Park. The area is a responsible for the planning, engineering, center for banking, insurance, commerce, construction and operation of all cultural activities and regional distribu-generating stations and for planning and tion. Major industries include electronics directing the dispatch and control of the and aerospace manufacturing. The na-transmission facilities of the Electric tional headquarters of more than 1,300 Company.

companies are located in Dallas, as are Texas Utilities Fuel Company owns a many regional headquarters.

natural gas pipeline system, acquires, Texas Electric Service Company pro-stores and delivers fuel gas and provides vides service in 48 counties in north cen-other fuel services at cost for the genera-tral and west Texas. This area includes tion of electric energy by the Electric Com-Fort Worth, Arlington, Grand Prairie, pany.

Midland, Odessa, Wichita Falls and 72 Texas Utilities Mining Company owns other incorporated cities. Fort Worth is a and operates fuel production facilities for banking, ousiness and industrial center.

the surface mining and recovery of lignite The area served between Fort Worth and for use as fuel, at cost, for the Electric Dallas is a highly diversified complex of Company's generating stations.

light industry, warehousing, commercial Texas Utilities Serv;c:= Inc. furnishes development and recreational attractions.

financial, accounting and other ed-The territory includes a major part of the ministrative services at cost to the SyMem Permian Basin in west Texas, other oil companies.

and gas fields, major defense-related Basic Resources Inc. is engaged manufacturing industries and extensive primarily in the development of energy farming and ranching areas.

resources, related technology and services.

Chaco Energy Company, chartered in New Mexico, was orgamzed to own and operate facilities for the acquisition, pro-duction, sale and delivery of coal.

s SERVICE AREA Diverse, strong and stable are words often used to describe the System's service area and its m

economy.

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The hub of the service

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territory-the dynamic 7ay"j%lM'n"y" Dallas-Fort Worth d

Metroplex-ended 1983 with an unemployment rate of J]4 T'

'*Tl* K'J pared to state (7.1%) and 4.5%-very favorable com-y p b 5 M;i

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national (8%) averages.

j2., wag <e> 'a rg,. b Economic growth con-t

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tinued during 1983, as it has e

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• c $ 1 4,y, A-for the past decade, at the y

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i steady pace that has allow-kf.pg,ay'.gpc-y v,W}q({VLj:y 7~

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ed the Metroplex to retain and enhance its pleasant

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Sunbelt lifestyle.

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%dfC The Metroplex took I

significant steps during 1983 to ensure it can adapt to the continued growth and development which is ex-pected in the area. Dallas and Fort Worth voters ap-proved new public transpor-tation authorities, with Dallas including plans for GENERATING STATIONS the first municipal rail tran-a UGNITE sit system in Texas.

O LIGNITE UNDER The outlook for the cONSTRUCTON System's West and east A GAS / OIL Texas service areas remains o NUCLEAR UNDER CONSTRUCTION optimistic. Petroleum pro-

- TRANSWSSION SYSTEM duction was in an upward trend at year end and con-tinued improvement was predicted for 1984.

Although agriculture in far west Texas suffered from drought conditions during 1983, gross agricultural income was the The System's service area is some 600 miles wide, from hlghest eyer reported ln fit west Texas eastward almost to Louisiana, and about 250 miles deep, from the oklahoma border southward into mUCp og Cengfal ang easg c:ntral Texas. Its healthy diversity of economic activities Texas.

rznge from energy production to manufacturing, com-The diversity nd stability merce and agriculture.

of the service area, whiCh enable it to withstand and overcome economic stress, is one of the major strengths of the System.

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7A SYSTEM REPORT OPERATIONS h

The Electric Company supplied more than 62 billion kilowatt-hours to b

meet customers' needs for mg. ',

electricity in 1983-an in-crease of 3.9% in enerqy sales compared to 1982.

The number of customers i

served grew by more than l

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92,000, or 5.5%, to 1,788,347 I

at year-end.

A new System peak de-5 mand of 14,029,000 4

kilowatts was set on August 15,1983, surpassing the

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previous record of O

13,204,000 kilowatts set in

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C 1982. System net capability was 17,957,000 kilowatts at the time of the 1983 peak.

Lignite Records Set Records for both lignite mining and kilowatt hour i

generation were set during 1983.

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4 generate aimost 35 biiiion Of M K O E. 1.'.r h ' g h:V b.

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kilowatt-hours, the highest

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annual total since the Sy&fM4:? j,W p%<,; erg, plp fy,,..;,y;j. 4,@,l. [:

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System began its major l W:., & L,, '

..cs lignite generation program ffg.y.v M

92W?.2 g W T $s y r4 @ 1/j N y8., h.ip, %), $ /;;7 4" Q,

%'-jn'+hsi't. NM42 cc,h

. IM in 1971. Lignite has provid-s S M. 4// '

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ed more than half the s

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System's generation in each

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1983 accounted for about

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f.Q ifeM:py 55% of the kilowatt hours 4

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nn.q&y 1983 Fuel Mix Lyj a-

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oasw 45 %

The Dallas Museum of Art's new $54 million facility open-ed in early 1984 to critical acclaim, joining the Kimbell Museum and Amon Carter Muxum of Western Art in Fort ses Worth as nationally recognized Metroplex museums. The public and private sectors, gh a joint venture between the Dallas museum, built throu as part of the developing 20squareblock Dallas Arts District set amid many of the new oflice buildings finished or under construction in downtown Dallas. More than 140 million square feet of new Natural gas, along with a commercial construction was authorized, begun or com-79lggjygly gmgll gmount of pleted during 1983 in the System's service area.

fuel oil, provided 45% of the System's generation in 1983, a substantial drop

7 from the 100% it provided such as a Distribution Infor-tivities throughout the before the System began its mation System which System and offers increas-lignite program.

makes it easier for ed financial flexibility.

Production of lignite also engineers to design and The System remains com-surpassed that of previous track distribution work.

mitted to a high standard of years with 28,776,000 tons Tangible cost-savings service to its customers, mined in 1983. On results also were brought and the new organization December 7,1983, the about during 1983 by a should further increase pro-System mined its 200 reduction in the System ductivity in providing that millionth ton of lignite. It work force of more than 350 service to a growing took nine years to mine the employees through normal number of customers.

first 100 million tons; but, attrition and an early retire-because more lignite units ment program. The System were in service, it took only was able to do this, without three and one-half more reducing the quality of ser-years to reach the 200 vice to customers, because million mark.

of the reorganization of

_f Productivity of the System Companies.

System's mining operations continues to exceed that of Reorganization Completed the industry by a substan-Under the reorganization tial margin. Average daily plan approved in 1982 by lignite production during the Board of Directors and 1983 was about 45 tons per the Public Utility Commis-man-day, which is about slon of Texas, a single elec-Load Man ement 50% higher than at similar tric utility corporation, Reducing ak mining operations in the Texas Utilities Electric Com-Load management pro-United States.

pany, was established. On grams were begun in 1981 January 1,1984, the three to encourage the use of L,gnite Cost Savings Grow System electric utilities energy-efficient equipment.

i The savings to customers merged into, and became The programs provide finan-brought about by the use of divisions of, the new Elec-clal incentives to residential lignite continue to grow. In tric Company. A fourth divi-and small commercial 1983, the average cost of sion, Texas Utilities customers who install high-lignite used was $0.92 per Generating Company, is efficiency air conditioning million Btu. By contrast, the responsible for planning, units or heat pumps in new cost of natural gas averag-engineering, construction or existing buildings or who cd $3.74 per million Btu.

and operation of all System build energy-efficient E-OK The total accrued savings generating facilities.

homes.

to customers from the use Lignite production and By the end of 1983, the of less expensive lignite transportation is performed load management program, fuel had surpassed $2.8 by Texas Utilities Mining combined with interruptible billion by the end of 1983.

Company. The Electric service contracts with some Company, Mining Company, industrial users, had suc-Productivity Efforts Fuel Company, Texas ceeded in limiting the Crntinue Utilities Services Inc., Basic growth in a peak load by Significant progress was Resources Inc. and Chaco 325,000 kilowatts. This is made during the year in the Energy Company are each the equivalent of a medium-System's ongoing program separate subsidiaries of sized generating unit and to increase productivity and Texas Utilities Company.

would be enough power to help hold down operating The reorganized System serve 57,000 homes.

costs.

structure offers more oppor-Data processing innova-tunities for efficiency and tions continae to save cost-effectiveness in opera-money and enhance produc-tions. It also allows reduc-tivity in the System through tion in the time and effort n:;wly introduced programs needed to coordinate ac-

8 f

CONSTRUCTION P

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The System made an ear-

' ' Construction Schedule ly start on diversifying its fuel resources, with con.

Capability Service struction beginning in the i

Station - Unit

- Fuel

'(kilowatts) ~

Date late 1960s on new generating plants to use

- Cornanche Peak 1 Nuclear -

.1,010,000*

1985:

Comanche Peak 2 Nuclear :

-1,010,000*

~1986 li nite and in the early 1970s on the Comanche

$n*Nk1 k2 Peak nuclear plant.

Twin Oak 2

_ Lignite 562,500*

1990 i

The major part of this Martin Lake 4

- Lignite 750,000 1991 4

construction program has

.. Net capabiiity to tne erectric company.

been concluded. Nme

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lignite-fueled generating units are in operation, and The estimated fuel lot The total estimated cost Comanche Peak is nearing date for Comanche Peak of Comanche Peak was completion-Unit 1 was rescheduled revised from $3.44 billion to Four other lignite units from December 1983 to

$3.89 billion. Of the total, remain under construction, mid-1984, with the unit ex-the Electric Company's scheduled for service be-pected to be in full service share is $3.31 billion, or tween 1989 and 1991, to in early 1985. Operation of

$1,640 per kilowatt-almost help meet the growth in Unit 2 is expected approx-30% below an average of need for electricity by imately 18 months after

$2,300 per kilowatt for System customers.

Unit 1.

comparable plants in this Comanche Peak Unit 1 country.

Estimates Revised was 97% complete at the Texas Utilities Electric During the 1983 annual end of 1983, but remaining Company owns 87 5/6% of review of the System's con-work-such as painting, Comanche Peak. Other struction program, schedule electrical cables, documen-owners are the Texas changes were made affect-tation, final inspections and Municipal Power Agency, ing Comanche Peak and testing activities-is taking 6.2%; Brazos Electric Power Unit 1 of the Twin Oak more time than previously Cooperative, Inc.,3.8% and lignite plant. Based on cur-allowed for in scheduling.

Tex-La Electric Cooperative rent estimates, the Twin At the end of the year, Unit of Texas, Inc.,21/6%.

Oak unit will not be needed 2 was 65% finished, with until 1989, and its service the overall project being Comanche Peak Milestones date was delayed one year.

84% complete.

Achieved A reliable eupply of M

affordable electricity is vital to the continued economic health of Texas, and Com-r i

i anche Peak will be essen-6.3r,

O ii tial to providing that supply.

P; During 1983, significant i{

progress was made, with Unit 1 nearly complete at i

the end of the year. Of the required testing,75% had j

been finished or was in pro-jQ"r gress.

Milestones achieved dur-iM",,

ing the year included:

.F

• The structural integrity test to verify the strength of the containment building.

9 I

oThe integrated leak rate Several technically-analysis, preparation of I

test to ensure the contain-qualified independent detailed testimony and ment building meets design groups have evaluated documented evidence and criteria for being airtight.

specific aspects of the expansion of the indepen-oHot functional testing, a Comanche Peak pro-dant assessment previously check of all major plant ject-including Sargent and conducted by Cygna Energy systems.

Lundy, a consulting firm Services. Management is oAwarding of operating with extensive experience in committed to providing the i! cense certificates by the the nuclear industr assurances the ASLB has architect-engineer, y as an requested and believes NRC to 26 reactor and operators.

Cygna Energy Services, a the plan will fulfill that oFull-scale exercise of California-based consulting commitment.

the Comanche Peak firm. These groups have However, the uncertain-emergency plan in coopera-concluded that Comanche ties created by these pro-tion with state and county Peak is being managed ceedings and related legal governments.

properly and built for safe, and regulatory develop-oDelivery of the fuel for reliable operation. They ments are of concern. The Unit 1.

found no significant prob-Company cannot predict lems that would affect the what effect these matters M

quested that the Company safety of the plant.

may have on the projected in late 1983, however, the completion cost or service ASLB expressed concern date of the plant.

about the design quality of the plant and asked for fur-Other Projects Underway ther assurances that it has Development of a new been designed and built mining area for the Martin properly. The Board re-Lake plant progressed in 1983. The new 25,000-acre file a plan to help resolve site will make an additional Licensing Hearings its concerns. The Company 102 million tons of lignite Continue has presented a plan callmg available for use by the Further public hearings for further testing and System, 'nith operations on the application for an

~

m-w operating license for Com-H anche Peak were con 1

'ed Construction Expenditures in 1983 by an NRC Atomic

+

Estimated Safety and Licensing Board.

The ASLB has scheduled 3933

3984, 1985 1986-additional sessions in 1984.

All but one of the 25 con-

. Mmions of Doliars tentions originally raised by Electric property:

$747.I intervenors and the NRC Production.................. s S431

$373

$377-Transmission..............

,40--

' - 74 70

. ' 81 1; staff either have been drop.

ped or fully pursued.

@,s Ia * *"""' "' "' """""'

~

The remaining issue con-cerns construction quality Fuel facilities:

1 Oas 'd " ' " " "* '"* "' ' """"'

l assurance. The System has gnit 22 been committed to a strong

~!

and effective quality Total........................

748 832:

963, 1,167 ]

assurance program since e

• A FU DC.....................

159 168 162 133 i construction began. Dunng 1983, this commitment was Totalconstruction expenditures

$907 $1,000.,$1125 ' $1,300 (

reemphasized to all plant Such expenditures do not include:

employees through a series Nuclear fuel................

$45'

$79

$70

$48 of meetings and print com.

Non-utility property...........

48

.23

-27 32 munications.

4,,owance for runds'used during construction.

j J

10 planned to begin in 1985.

Construction also began on a new facility to house the Texas Utilities System Operations Center. When completed in 1985, the ex-panded Operations Center will consolidate some

~

responsibilities of the three operating divisions. The result will be more efficient centralized dispatching of the generation of electricity from all System power 81 plants.

_E-More than 25% of 1983 h

construction expenditures 4

=

c involved work on the transmission and distribu-g a

g' s-tion system, much of it ddd because of the addition of ff-more than 92.000 new f,

customers.

FUEL SUPPLIES Long range fuel planning, t "

acquisition and manage-ment programs have kept the System in a strong fuel position for many years.

Fuel costs consistently have been held well below the state and national averages for electric utilities.

The System's use of lignite has reduced a

dependence on natural gas, and operation of Comanche

~

Peak will reduce gas use l

further as a percent of total f

p fuel requirements.

Major supplies of natural

_3 1

gas will be needed for the foreseeable future, however, saylor university in waco is one of the more than 50 in' especially during periods of stitutions of higher learning on the System's service area high electr Clty use. Tbe l -

They also include Southern Methodist University in Dallas.

Texas Christian University in Fort Worth and branches of Fuel Company supplied the University of Texas in Arlington, Odessa, Richardson 84% of tota l System gas re-and Tyler. About 250,000 students are enroIIed in the 4uirements in 1983. Effec-various universities. two and four-year colleges. medical schools and seminaries in the service area tive January 1,1984, all re-maining gas contracts held by Texas Electric and Texas Power were assigned to the Fuel Company.

11 Pipelines, Storage Provide Fisxibility The Fuel Company owns and operates a network of gas pipelines through which Jt-this fuel is gathered and T'%

transported for use in the generation of electricity. Ef-

:P

) * ' '

fective December 31,1983,

' ^

.l n

'~

1..

Wu

/

}f r"*

\\

\\

_\\

I and gas storage facilities Chaco Energy Company i

provide added flexibility in Chaco Energy Company the acquisition and use of is a non utility subsidiary of these fuels.

the Company headquartered in Albuquerque, New Mex-Lignite, Nuclear Fuel ico. Chaco signed agree-

- GAS PIPELINE SYSTEM Supplies Assured ments in 1977 for more than The System has acquired 320 million tons of coal in the Old Ocean Fuel Com-lignite deposits over a the northwestern part of the pany, formerly a subsidiary period of more than 30 state. In December 1981, of Texas Electric, was merg-years, and, thus, has been the Company and Chaco ed into the Fuel Company, able to carry out its pro-filed suit against Santa Fe adding 371 miles of pipeline gram to build generating industries, Inc., and two of and additional gas storage alants that use this relative-its subsidiaries and against to its system. The Fuel y low-cost fuel. The System Thercol Energy Co. and Company,s total usable has access to an estimated Peabody Coal Company storage capacity is now 845 million proven alleging, among other about 28 billion cubic feet.

recoverable tons to fuel the things, violations of federal lignite units in operation and state antitrust laws and o

and under construction.

other unlawful conduct in-Nuclear fuel for the first volving these agreements, 17 years of operation of which have made the com-each Comanche Peak unit mercial mining of this coal is under contract. The uneconomical. The suit s

f System also has long term seeks to have the agree-contracts for related fuel ments declared void and

~

processing services, except unenforceable and also

.4's for the disposal of spent seeks damages and other fuel. The Nuclear Waste relief.

Policy Act of 1982 In January 1983, the Com-authorizes a plan under pany and Chaco settled all which the federal govern-claims against Thercol and ment will develop interim Peabody. The settlement storage and permanent does not affect the claims disposal facilities for spent asserted against Santa Fe nuclear fuel.

Industries and its sub-The System also has oil Adequate storage for sidiaries in the suit.

j storage capacity of about s 3ent fuel is available on Discovery is proceeding on 6.9 million barrels. This oil s te for at least 17 years of schedule; however, the suit is used primarily when operation, and this storage is not yet set for trial, natural gas supplies are in-capacity can be increased.

terrupted or curtailed. Oil

12 s

RESEARCH AND s

DEVELOPMENT p

g l;;

The System remains in-

[

volved in ongoing research programs aimed at finding y

\\

new energy sources and N

q new technologies which will O

s' Mb help assure the continued d

dhg opin reliability of electric service

, : r? < ~W and hold down costs.

^

s 1

4

, T@M Environmental research 1

sc pg ' '

projects sponsored by the PJp=?b System. as well as its s

s E!

reclamation efforts, have

. N.4,.k.?,'{d[k. jug,'.

4 4

,?

minimized the effect of its i 1.

(

operations and have made g.J a 1. c,.. '.) ' 4.-[e, -

~ i. i.

g.

d{.,'

. L.. '

ecology.

gj.y '

4 positive contributions to the i

i

~ ~,.,.

,6 t The Environmental

....-e. g.7.,.

L..-^

?,d yM " '  ; $.. '. c. 44 ~,;

gt p

2 Research Center at the Big s

Brown lignite plant is a

&,e,

4

$.ly:',,. '~ 2:

center for graduate-level q

L ' ?,(? l. 3. (c. -6

' ' (('D7 j T b( M' ';;A '

.. W w.e

9..

f.,

j.

3 tW:y study and research carried I

- f '.'s J t ;

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f}

out under the direction of M.W.*yQ. gh.gc, [ Q. [- 7.4 &

an independent committee l

I 5,Q . j;,.,

.J

, J F ~ i]?l.19 )

of university professors.

l l

..yM w y..gw w:

1 These studies have con-I

'ny c....

..5 p.

.t.

.w j

wr 7

o tributed to significant cost

'%,i:

g -[u

. j p.. w 7

..j.

.. 4. w.

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. L.; 1./ ]

7,JN a.]

savings and improvements 4..)u, % *y3A 'W.

,,,.e.~-._.w.

• _.

in mining efficiency. land

.7.*3

.m._3.,.-

g.4 n...,,

reclamation, environmental

, g [.Q(., / r.:. j[f...gR.;

. y s;.7 ~.pi ~ ; J. '.,, g.c.;

protection and other lignite

<f

=., c.

a,,

y 1.

3 A.

,, -. v..

. g gf J 0.,y...e ( y 4.

Operations.

hs9.

.., e r '," /. z.,. :. s..,

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a - -

o my,

';l' 4 n['n,R}'q&,4,.

k 2,.:.Q I_'? :

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y, 5

.:j.y::: q..Ni. 1 3 6;

Q f,

3.S $- c L.... p.. y %. / <

.a i. L '...

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L;Q.fpjh.: * ; g% } }/... e. f. :. C:'QQQ.;ljy t

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.i i,q a 6..,,

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9 Part of the Company,s The Dallas. Fort Worth Metroplex has taken care to reCIamation program in-preserve and enhance the qrrality of its lifestyle In Fort Worth, new multi-story 0111:e buildings downtown overlook volves reforestation of Sundance Square (pictured). where historic buildings have surface mined areas, an ef-been renovated and turned into restaurants shops and fort that ss proving to be galleries. Clydesdale-drawn carriages are available to the growing numbe' of tourists who visit the area The very successful. Since 1976.

historic Stockyards area on Fort Worth's north side also more than 680,000 trees has been renovated and is a popular founst attraction have been planted at three The Mid-Citte.s area between Fort Worth and Dallas has become a maior family entertainment complex with such l ignite mining locations.

attractions as Six Flags Over Texas, other theme park s and sports stadiums W

"WNW- - " -

TTe -

w-m-

13 The overall survival rate in

'4 N \\~

National Safety Records Set recent years has been al-

--w-* ~h most 80%-in some areas I

Safety is a basic commit-ment in all System com-about 95%.

L

=""

panies. This objective is supported by ongoing pro-EPRI Conducts Major grams at all work locations Research and through recognition for The System supports the outstanding safety Electric Power Research in-achievements.

stitute, which conducts or

_..- C A sustained and highly directs research projects dedicated commitment by generic to the industry.

G employees to safety led to EPRI now has more than two national records being l

1,500 research projects set in 1983.

i underway, benefitting the Both power plant and min-System and other electric ing groups at the Monticello j

utilities through cooperative lignite plant set national in-efforts.

J dustry safety records during EPRI research includes the year-at a time when i

programs in solar energy offered at colleges, univer-generation and mining pro-and wind power develop-sities and technical schools, duction were at or near ment, fusion power Continuous training pro-record levels.

research, efficient use of grams are provided to On December 27, the electricity for improved load employees in many areas of Monticello power depart-management and research System operations, in-ment achieved four million in environmental protection.

cluding customer service, man-hours without a lost-transmission, distribution time injury-the most ever EMPLOYEES and power production.

attained by a coal-fueled The System's employees The world's first commer-power plant.

are its greatest asset. Ever-cial dragline simulator was Earlier in the month, improving productivity, na-installed durin of the System'g 1983 at oneemployees of the three tional safety records and s training Monticello mining sites dedication to excellence in centers. Another simulator, were honored for having customer service are some an exact replica of the achieved more than 1.9 of the more significant con-Comanche Peak nuclear million man hours without a tributions made to the alant's Unit 1 control room, lost time injury. That also System by its employees.

s scheduled to be installed was a national record, the l

Employees are afforded at the Nuclear O]erations most man hours worked equal opportunity in all Support Facility ate in without a lost time injury in phases of em3loyment and

1984, personnel act vities. This the surface mining Industry.

objective is carried out ef-F-

~ " ~

fectively through affirmative f

~ ~ 7 {"" -

r l

action programs developed I

by the companies.

Skills Training Emphasized Each System company has a firm commitment to providing employees with l

I formal training and with financial assistance for job-related educational coursos

._-_________-._-.-----,----n---.

_,-n.------n,,v

.r-----~_--m-,--,m.,-,_-

14 RATES AND REGULATION legislation also created an rule provides for emergency Texas Electric applied for office of public counsel to requests to change the fix-higher rates in June 1983 represent residential and ed fuel factor must be and in December received small commercial con-acted on within 30 days by an order from the Public sumers before the PUC.

the PUC if unforseeable cir-Utility Commission authoriz-Construction work in pro-cumstances substantially ing an increase in operating gress is to be an excep-change the cost of fuel r; venues of 6.1%. The new tional form of rate relief. It from the approved factor, rates were placed into ef-may be placed in the rate Dallas Power, Texas Elec-f ct in December.

base if it is necessary to tric and Texas Power jointly Dallas Power applied for the financial integrity of the filed the required informa-higher rates in July 1983. In utility and if the construc-tion and were granted an in-January 1984, the PUC tion project has been plan-terim fuel factor. In July, ap-Issued an order granting an ned and managed efficient-plications were filed for a increase in operating ly.

new fuel factor to become r; venues of about 6.5%.

The Act was amended to effective in January 1984 Billing on the new rates provide for an increase from based on the Electric Com-began in February.

125 to 185 days in the pany's estimated fuel cost Texas Power received an period after filing of an ap-per kilowatt hour during order from the PUC in June plication before new rates 1984. In December 1983, the 1982 which authorized an may be placed into effect PUC remanded an ex-increase in operating under bond.

aminer's report in the case r venues of 5.8%. The rates to be amended with the were placed into ef fect in Fuel Cost Recovery Rule stipulation that recovery of July 1982.

Developed fuel costs be based on a Texas Utilities Electric Pursuant to amendments historical test year adjusted Company filed a request for made to the PURA, the PUC for "known and reasonably cn 8.0% increase in in July 1983 adopted an predictable" changes.

Systemwide rates in March emergency amendment to On January 12,1984,the 1984. The PUC had its substantive rules to pro-PUC adopted its final rule specified, in its December vide that after the effective relating to fuel cost 1982 order approving the date of the new Act, no recovery. The provisions of System's reorganization automatic fuel adjustment this final rule are substan-plan, that rate filings after clause would be allowed.

tially the same as the January 1,1984 be filed on Recovery of all fuel costs emergency rule. The Com-a combined basis for the would be subject to PUC pany cannot predict how Electric Company.

approval, and would be part this rule will be further in-of base rates.

terpreted or applied; Regulatory Act Amended Each investor-owned elec-however, any significant in 1983, the state tric utility in Texas was re-delay in the recovery of ac-Lcgislature extended the quired to file with the PUC tual fuel costs may increase life of the Public Utility information necessary to financing requirements.

Commission and made establish an interim fixed s veral amendments to the fuel factor to become effec-Public Utility Regulatory Act live with September billings of 1975. The amended and to remain in effect until PURA became effective the utility's next general September 1,1983.

rate case or PUC reconcilla-Major changes affecting

tion, the electric utility industry No less than 12 months included eliminating the use after implementing a of an automatic fuel adjust-change in fuel cost ment clause. All rate recovery, a utility is required changes resulting from fuel to request reconcillation of cost changes must receive any over recovery of fuel prior approval from the PUC costs and may request af ts a public hearing. The reconcillation of any under-recovery of fuel costs. The

15 FINANCIAL REPORT Contents Management's Discussion and Construction Expenditures

.. - -._, - ~"~q Analysis of Financial Condition enditures and Results of Operations 16 p

Ak

..i e Construction Exhrlor Year as a Percent of 2a f 6 p y }T1 Total Capitalization Statement of Consolidated

[

g t,..L w n at...}.

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p e s"~w

-~ s ~ ~m - m Aa:

e u Jiu income 18

.jp v, w a ;;mp- -- ? "' 1/

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r. : D b k

Statement of Consolidated i-

..n...

4 madud m mm,kM.&,

5-

1. otdLib <h<

,~

i uw a

n w g P

Retained Earnings 18 p

pg ' n y a g F

j

,..$ U...F+1 h O h ks t fr -Lt ff..,

7 5s i W

q y q r <3 s

A,i. '..

ah#2au ka.:t ?. i a c:

p WR pL C* u.: J,.id. & u g w'i; 4 w,.d,.ui.M.,. d. A N@$ 7.r;91 y c-a e yK%a b Statement of Consolidated Wp' ?95 M. N: gl Source of Funds u. - n t for Construction 19 y-mm m 8 " L it rita ;"h ' : NP Consolidated Balance Sheet 20 p -. ? g ?;q r~g 1;b in - ~..,. e, w;,.,,, a,,u. u.,l a ) g o o Notes to Financial Statements 22 Statement of Responsibility 29 Accountants' Opinion 29 Net Funds From Operations as a Percent of Financial Statistics 30 Construction Expenditures ,,,...,m_--m__.,., p - p Operating Statistics 32 M' 2. 6 v* AFUDC as a Percent of f D'FT Supplementary Information 0 r,VjW)U. Consolidated Net incomew -"--~~ ~ Mj Concerning Effects J V_

e. m s

%y L(._ g;p /nden hu w] i,:. ] of Changing Prices 34 al Mwa ri - 2 ptqMr,A. M !;O E $[gg,J f- 'q3pryp3 y_: jh .hilM.4ni !!h jr - Limh-amu nm {m$ b e g p g f n v.

... <. m..tel m

m.s.w{ led ddJ f '17 ty pCS r Pg y?

.A s k k

[ ,g La w, M,e, e.jr,n.,,.ea., f r u.: + ji.j j ,h t j [ x Jt .. y s T' t..:. .d b bp. 3 td.t.sU b..4 kl. 2 J k.. ,3 vpgrggypq s b,.,, L.$.. Ab 1 n o 1 l

o TEXAS UTILmES CCMPANY AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition i and Results of Operations Liquiaity and Capital Resources The primary capital requirements for 1983 and as estimated for 1984 through 1986 are as follows: 1983 1984 1985 1986 Thousands of Dollars Construction expenditures (excluding AFUDC).. $748,000 $832,000 $ 963.000 $1,167,000 Nuclear fuel and non-utility property..... 93,000 102.000 97,000 80,000 Maturities of long-term debt and sinking fund requirements. 40.000 64,000 78,000 73,000 Total. $881,000 $998,000 $1,138,000 $1.320.000 For detail concerning major new construction work now in progress or contemplated by the System companies and commitments with respect thereto, see Construction. The System companies generate funds from operations sufficient to meet operating needs, pay dividends on capital stock and finance a significant portion of capital requirements. These funds are derived from consolidated net income, depreciation, deferred taxes and investment tax credits. Factors affecting the ability of Electric Company to fund a portion of its capital require-ments from operations include adequate rate relief and regulatory practices allowing a substantial portion of construction work in progress in rate base, adequate depreciation rates, normalization of federal income taxes, recovery of the cost of fuel used in the generation of electricity and the opportunity to eam competitive rates of return required in the capital markets. For 1983, approx-imately 56% of the funds needed for construction was generated from operations. External funds of a permanent or long-term nature are obtained by the System companies through the sale of common stock by the Company, and the sales of preferred stock and long-term debt by the System companies. The capitalization ratios of the System companies at December 31,1983, consisted of approximately 44% long-term debt,10% preferred stock and 46% common stock equity and similar ratios are expected to be maintained in the future. For in-formation regarding bank lines of credit and shott term borrowings of the Company, see Note 2 to Financial Statements. Financings to date in 1984 include the sa!e by Fuel Company in January of an additional $46,000,000 principal amount of 12.20% senior notes due 1990. System companies expect to sell securities as needed, including (i) the anticipated sale by Electric Company in April 1984 of $100,000,000 principal amount of first mortgage and collateral trust bonds,(ii) the possible future sale by Electric Compary of up to 350,000 shares of preferred stock currently registered for of-fering with the Securities and Exchange Commission pursuant to Rule 415,(iii) sales of additional shares of common stock of the Company pursuant to various plans described in Note 3 to Financial Statements and (iv) sales of additional securities from time to time, in amounts and of types presently undetermined. Although Electric Company cannot predict future regulatory prac-tices and is to some degree exposed to fluctuating economic and securities market conditions, no changes are expected in trends or commitments which might significantly alter its basic finan-cial position or ability to finance capital requirements. The new organization resulting from the merger of the former electric utility subsidiaries should provide greater financing flexibility and achieve additional economies and efficiencies. See Rates and Regulation and Note 10 to Finan-cial Statements. See Financial Statistics for additional information.

17 =l_ a: 1 Results of Operations 2 Operating revenues have increased $249,891,000 for 1983 and $499,648,000 for 1982 primarily 1 as a result of recovery of higher fuel costs, increased energy sales and rate levels. Energy con-2 sumption is affected by material variations in weather conditions. Temperatures during 1983 were relatively mild compared to temperatures experienced during 1982 and 1981, which were relatively normal. See Rates and Regulation and Operating Statistics. y Fuel and purchased power expense increased primarily as a result of higher unit costs of fuel m consumed and increased generation (see Operating Statistics). Operation and rnaintenance ex-1' penses have increased as a result of inflationary pressures on the cost of labor, materials and , services. In 1983 such inflationary pressures were offset somewhat by cost control measures

b'

~ taken by the Company and by reimbursement of approximately $17,000,000 from a municipality 'T representing water payments charged to expense in prior periods (see Note 10 to Financial 5" Statements). Increases in taxes other than income resulted primarily from increases in revenue Y and property based taxes. p ' increases in allowance for funds used during construction are primarily attributable to increases in the AFUDC rate effective January 1982 and increases in the level of construction work in pro-i gress of Electric Company not allowed in rate base by regulatory authorities, and also for 1982 to the interest capitalized (net of tax) upon the assumption of the 2X% interest in Comanche Peak released by Tex-La Electric Cooperative of Texas, Inc. (Tex-1a). Other income and deduc-tions-net and related federal income taxes for 1982 reflect the net gain on the sale of the 2%% 7 interest in Comanche Peak. Other interest charges declined in 1983 primarily because of the interest paid Tex-La in 1982 upon the assumption of the 2%% interest in Comanche Peak released by Tex-La. Consolidated net income for 1982 included an increase of approximately $3,400,000 as a y result of the sale of the 2%% interest in Comanche Peak (see Note 9 to Financial Statements). Electric Company expects to pursue adequate and timely rate relief in the future to offset the 4 effects of increases in the costs of providing electric service (see Rates and Regulation). 1 The Company has prepared supplementary informatior' concerning the effects of changing prices in compliance with the repoding requirements of Financial Accounting Standards Board Statement No. 33; such information is included on pages 34 and 35. _+: Financing in 1983 { Thousands of Dollars e Texas Utilities Electric Company Texas Utilities Fuel Company [ First mortgage bonds (Note 6): Senior notes (Note 6): l 12% % series due 2013. $ 50,000 12.20% due 1990.. $_5_4p00 12% % series due 2013. 75,000 12 % series due 1985. 1,000 Texas Utilities Company Prefered stock (Note 5): Common stock (Note 3): 1 300,000 shares at $11.32 per share. 29,670 Public offering. 120,125 4 l 350,000 shares at $10.08 per share. 34.6_96 Other plans.. 106,246 P Total. $190,366 Total. 226,371 Total System financing. $470J37 k .~ gy I

f 18

== [ TEXAS UTILITIES COMPANY AND SUBSIDIARIES Statement of Consolidated income K 1983 1982 1981 i Thousands of Dollars l OPERATING REVENUES. $3,487,916 $3238,025 $2,738,377 OPERATING EXPENSES k Fuel and purchased power. 1,526,525 1,354,439 1,053,777 Operation. 425,082 419,501 337,075 P Maintename 230,515 224,711 194.064 k Depreciaton 199,684 188281 180,445 i Federalincome taxes (Note 7) 226,372 222,581 236247 i Taxes other han income 215,190 194,458 173,768 = Total cperating expenses 2,823,368 2.603.971 2,175.376 p OPERATING INCOME. 664,548 634.054 563,001 l} OTHER INCOME l Allowance for equity funds used during construction. 118,032 97279 70,381 ? Other income and deductions--net. 3,678 11,163 5,568 Federalincome taxes (Note 7) 1,758 (2.645) 402 i Total other income 123,468 105,797 76,351 h TOTAL INCOME 786,016 739.851 639,352 h INTEREST CHARGES Interest on mortgage bonds 233,884 202,707 157238 L Interest on other long-term debt 58,442 60,880 61,539 b Chher interest. 23,129 40,054 38,424 l-A50wance for borrowed funds used dunng construction. (40,489) (38,765) (23.576) Totalinterest charges. 274,966 264,876 233,625 b PREFERRED STOCK DMDENDS OF SUBSIDIARY 51,582 46,329 46.329 E CONSOLIDATED NET INODME. .$_461,468 _$_428,646 $ 359,398 Average shares of cmynon stock outstanding (thousands). 118,455 111,357 102292 Eamings and dMdends per share of common stock: Earnings (on average shares outstanding). $3.90 $3.85 $3.51 5 Dividends declared. 220 2.04 1.88 1 R ( Statement of Consolidated Retained Earnings 1983 1982 1981 Thousands of Dollars nI BALANCE AT BEGINNING OF YEAR. $1,260,941 $1,059.371 $ 892279 ADD--Consolidated net income. 461,468 428.646 359,398 h Total. 1,722,409 1,488,017 1251,677 k DEDUCT-Dividends declared on common stock (for amounts per shara, see Statement of Consolidated income). 262,659 227.076 192,306 E_ BALANCE AT END OF YEAR (Note 4) $1f59,750 $1_.260,941 _$1,059,371 See accompanying Notes to Financial Statements.

19 TEXAS UllLITIES COMPANY AND SUBSIDIARIES Statement of Consolidated Source of Funds for Construction 1983 1982 1981 Thousands of Dollars FUNDS FRA OPERATIONS Consolidated net income. $461,468 $428.646 $359.398 Depreciaton (inchdng amounts charged to fuel). ??7,947 218.105 206.323 Deferred federalincome taxes-net 99,412 95.512 68.445 Federalinvestment tax credas-net 51,908 74.187 62.361 a Allowance for funds used dunng constructon (158,521) (136.04a (93.957) Total funds from operations 682,214 680.406 602.570 Less-Dudends declared on common stock 262,659 227.076 19'.306 2 Net funds from operations 419,555 453.330 410.264 FUNDS FROM FINANCING Sales of secunties: First mortgage bonds 142,079 300.414 218.507 Other long-term debt. 54,000 4.215 3.677 Preferred stock. 64,366 Common stock. 226,371 186.761 164.252 Retirement of long-term debt. (40,336) (29.533) (21.207) Decrease in notes payable: Bank loans. (50.000) Commercial paper. (70,715) (47.785) (20.910) Net funds from financing 375,765 414.072 294,319 OTHER SOURCES (USES) OF FUNDS Changes r1 working capital, excluding notes ~ payable and long-term debt due currently-Cash in banks and temprary cash investments. (707) 59.380 (56.644) Accounts receivable-net (34,872) (22.792) (38.503) Inventories 57,290 (55224) (56.402) Accounts payable (19,374) 13.037 4.704 Taxes accrued 12,169 3.716 46.652 Mvance payment on safe of utihty plant (Note 9) (90.420) 90.420 Other-net. 42,948 12.532 31.661 Net change. 57,454 (79.771) 21.888 Non4;tihty property-net. (47,654) (16.684) (22.985) Nuclear fuel. (45,581) (29.551) 4.271 Sale of utihty plant (Note 9). 36.220 Other-net. (11,330) (22,100) (9.446) Net other sources (uses) of funds. (48,911) (111.886) (6272) Total $748,409 $755.516 $698.3,11., CONSTRUCTION EXPENDITURES Utihty plant. $906,930 $891,560 $792.268 Allowance for funds used during constructon (158,521) (136.044) (93.957) CONSTRUCTION EXPENDITURES (excluding allowance for funds used during constructon) $748,409 $755.516 $698.311 See accompanying Notes to Financial Statements.

20 TEXAS UTil 4 TIES COMPANY AND SUBSIDIARIES Consolidated Balance Sheet December 31 1983 1982 Thousands of Dollars Assets UTILITY PLANT in service: Producton. $3,493,203 $3,430,197 Transmission. 1,014,929 946,138 Distrbuton 1,917,418 1,733.862 General. 220,364 196209 Total. 6,645,914 6,306.406 Constructon work in progress. 3,156,271 2,625,307 Nuclear fuel 156,088 110,707 Held for future use 9,380 9.022 Totai utikty plant 9,967,653 9,051,442 Less accumulated depreciaton, 1,958,103 1,758,156 Utihty plant, less accumulated depreciaton. 8,009,550 7293286 INVESTMENTS-at cost Nonistility property (Note 10). 146,367 98,713 Other investments (Note 1) 15,770 15.687 Totalinvestments 162,137 114,400 CURRENT ASSETS Cash in banks (Note 2) 15,430 17,723 Temporary cash investments-at cost. 3,000 Special deposits 27,135 17,516 Accounts recervable: Customers 207,771 170,814 Other 33,074 35,117 Allowance for uncollectble accounts (8,999) (8.957) Inventores-generally at average cost: Materials and supplies. 113,125 105.155 Fuel stock. 135,164 200,424 Other current assets. 23,432 35,333 Total current assets 549,132 573,125 DEFERRED DEBITS. 60,135 40,596 Total $ 8,780,954 $8.021,407 See accompanying Notes to Financial Statements.

S 21 J d i 1983 1982 Thousands of Dollars j Liabilities 4 CAPITALIZATION 2 Cornrnon stock, Texas Utihtes Comoany-without par value (Note 3): Authorced shares-200,000.000 J Outstanding shares-1983,123,685.058; 1982,114,182.319 $1,775,625 $1.549254 Retained earnogs (Note 4) 1,459,750 1260.941 Total common stock equity 3,235,375 2.810.195 Preferred stock (Note 5): I Not subject to mandatory redemption 629,779 600.109 Subject to mandatory redemption 34,696 } Long-term debt, less amounts due currently (Note 6). 3,103,452 2.973.253 Total capitalization 7,003,302 6.383.557 CURRENT LIABluTIES Notes payable-commercial paper (Note 2). 26,500 97215 Long-term debt due currentry. 64,180 39.880 Total (to be refinanced). 90,680 137,095 = Accounts payable. 160,529 179.903 5 Dividends declared 81,339 69.804 i Custorners' deposits. 29,541 25.425 g Taxes accrued 172,484 160,315 Interest accrued. 80,320 75.379 1 Other current liabilities. 62,665 42.291 ] Total current liabilites. 677,558 690,512 RESERVE FOR INSURANCE AND CASUALTIES. 11,747 9.003 ACCUMULATED DEFERRED FEDERAL INCOME TAXES. 569,289 469.745 3 UNAMORTIZED FEDERAL INVESTMENT TAX CRECITS 519,058 468.590 COMM'TMENTS AND CONTINGENCIES (Note 10) Total ,$8,780,954 $8.@,407 See accompanying Notes to Financial Statements. = 9 3

j a2 = l TEXAS UTILITIES COMPANY AND SUBSIDIARIES j Notes to Financial Statements L =

1. Significant Accounting Policies 5

i Consolidation-The consolidated financial statements include the Company and all of its sub-Mi P sidiaries; all significant intercompany items and transactions have been eliminated in consolida-tion. Effective January 1,1984, the Company's three electric utility subsidiaries, Dallas Power & z Light Company (Dallas Power), Texas Electric Service Company (Texas Electric) and Texas Power & Ught Company (Texas Power) were merged into Texas Utilities Electric Company (Electric Com- -m ? pany), a wholly owned subsidiary of the Company. All references herein to " Electric Company" include Dallas Power, Texas Electric and Texas Power. 3 r r Utility Plant-Utility plant is stated at original cost. The cost of property additions charged to [ utility plant includes labor and materials, applicable overhead and payroll-related costs and an 7" E allowance for funds used during construction. f Allowance for Funds Used During Construction-Allowance for funds used during construction h [ (AFUDC) is a cost accounting procedure whereby amounts based upon interest charges on borrowed funds and a return on other capital used to finance construction are charged to utility .= E plant. The accrual of AFUDC is in accord with established accounting practices of the industry, = g but does not represent current cash income. Effective January 1982 and 1981 Electric Company 'iq has capitalized AFUDC at a net of tax rate of 9% and 8% %, respectively, compounded semi-7 annually of expenditures incurred, except for that portion of construction work in progress allowed L in rate base by regulatory authorities. These rates were determined on the basis of, but are less 4 than, the cost of capital used to finance the construction program. Effective January 1984, Electric p Company began capitalizing AFUDC at a net of tax rate of 9%%. [ Depreciation-Depreciation is based upon an amortization of the original cost of depreciable j i properties on a straight-line basis over the estimated service lives of the properties. Depreciation as a percent of average depreciable property approximated 3.8% for 1983,1982 and 1981. E Other Investments-The difference between the amount at which the investment in a subsidiary is carried by the Company and the underlying book equity of such subsidiary at the respective dates of acquisition is included in other investments: $14,439,000 at December 31, y K 1983 and $14,411,000 at December 31,1982. P Federal Income Taxes-The Company and its subsidiary companies file a consolidated federal q income tax return, and federal income taxes are allocated to all subsidiary companies based upon taxable income or loss. Deferred federal income taxes are generally provided for timing g differences between book and taxable income; such differences result primarily from the use of _= a ( liberalized depreciation and accelerated cost recovery allowable under the Internal Revenue L Code. Investment tax credits are being amortized to income over the estimated service lives of [ the properties. (See Note 7.) ] [ Reserve for Insurance and Casualties-Electric Company, as albwed by regulatory authorities, has a reserve for major uninsured losses and claims. Effective January 1984, as prescribed by regulatory authorities, Electric Company discontinued additions to the reserve. -j A r 9 = c =

23

2. Bank Balances and Short-Term Borrowings At December 31,1983 and December 31,1982, the Company had lines of credit with commercial banks aggregating $300,000,000. The lines of credit may be used for either backup lines for commercial paper or for bank loans. At December 31,1983, the total amount of borrowings authorized by the Board of Directors of the Company from banks or other lenders was $500,000,000.

No commitments with respect to the maintenance of compensating balances have been made by the Company to any banks from which it has lines of credit; such arrangements are de-pendent upon the regular operating balances maintained in accounts with said banks by the Company and its subsidiaries.

3. Common Stock The Company issued and sold shares of its authorized but unissued common stock during the years 1983,1982 and 1981 as follows:

Automatic Dividend Employees' Thrift Plan Reinvestment and Common and Employee Pubre offering _ stock Purcfuse Plan stock ownership l.an_ Total yeaf shares Amou_nt shares Amount shares _ _ Amount sh_ ares _ Amount 1983 5.000.000 $120.125.000 3.052.467 $71.055.000 1.450.272 $35.191.000 9.502.739 $226.371.000 1982 5.000.000 103.925.000 2.549.435 52288.000 1.396.583 30.548.000 8,946.018 186.761.000 1981 5.000.000 86.100.000 2.358.142 42.699.000 1.789.514 35,453.000 9.147.656 164252.000 At December 31, 1983, 6,539,811 shares of the authorized but unissued common stock of the Company were reserved for issuance and sale pursuant to the above plans. The Company has 50,000,000 authorized shares of serial preference stock having a par value .of $25 a share, none of which has been issued.

4. Retained Eamings The articles of incorporation, the mortgages, as supplemented, and the debenture agreements of Electric Company contain provisions which, under certain conditions, restrict distributions on or acquisitions of its common stock. At December 31,1983, $77,081,000 of retained earnings of Electric Company was thus restricted as a result of the provisions of such articles of incorpora-tion. Retained earnings at such date also included $431,243,000, representing the Company's equity in undistributed earnings since acquisition included in transfers by Electric Company from its retained earnings to stated value of common stock, making a total of retained earnings which was restricted of $508,324,000 at December 31,1983.

24 Notes to Financial Statements (continued)

5. Preferred Stock of Electric Company (cumulative, without par value, entitled upon liquidation to

$100 a share) Redemption Price Per Share (before adding Shares Outstanding Amount accumulated dividends) -~ December 31, December 31, _ Eventual 1983 1982 1983 1982 Current Minimum Thousands of Dollars Not Subject to Mandatory Redemption $ 4.50 series........ 74,430 74,430 $ 7,443 $ 7,443 $110.00 $110.00 4.00 series (Texas Power) 70,000 70.000 7.000 7.000 102.00 102.00 4.56 series (Texas Power). 133.786 133,786 13.379 13.379 112.00 112 00 4.00 series (Texas Electric). 110,000 110.000 11,000 11.000 102.00 102.00 4.56 series (Texas Electric). 65,000 65.000 6.563 6.563 112.00 112.00 4.24 series. 100.000 100.000 10.081 10.081 103.50 103.50 4.64 series. 100.000 100,000 10.016 10.016 103.25 103.25 4.84 series......... 70.000 70,000 7,000 7,000 101.79 101.79 4.00 series (Dallas Power). 70,000 70,000 7,049 7,049 103.56 103.56 4.76 series. 100,000 100,000 10.000 10.000 102.00 102.00 5.08 series. 80.000 80,000 8.004 8.004 103.60 103.60 4.80 series. 100,000 100,000 10.009 10,009 102.79 102.79 4.44 series. 150,000 150,000 15.061 15,061 102.61 102.61 7.20 series. 200,000 200,000 20.044 20,044 105.01 103.21 7.80 series. 300.000 300.000 30,030 30.030 105.20 103.25 8.92 series. 200,000 200.000 20.076 20.076 105.83 103.60 6.84 series. 200,000 200.000 20.022 20,022 104.76 103.05 7.24 series. 250,000 250,000 25,113 25,113 105.23 103.42 7.44 series. 300,000 300,000 30,006 30,006 104.26 102.40 7.48 series. 300,000 300,000 30,073 30.073 104.82 102.95 8.20 series. 300.000 300,000 30.108 30,108 107.39 103.29 8.44 series 300.000 300,000 30.046 30.046 107.40 103.18 9.32 series. 300.000 300,000 29,625 29.625 106.99 102.33 9.36 series. 300,000 300,000 29.625 29,625 107.02 102.34 8.68 series. 300.000 300.000 29,550 29.550 106.26 101.92 8.16 series. 300,000 300,000 29.655 29,655 106.12 102.04 8.32 series. 300,000 300,000 29,655 29,655 105.88 101.00 8.84 series. 300,000 300,000 29,591 29,591 108.17* 102.05 10.92 series. 300.000 300,000 29,670 29,670 110.92* 102.73 10.12 series. 350.000 350.000 34,615 34,615 110.12* 100 00 11.32 series. 300,000 29.670 111.32* 100.00 Total. 6,323.216 6,023.216 $629,779 $600,109 Subject to Mandatory Redemption $10.08 series " _350,00_0 - $34,696 - $110.08 * $100.00 Redemption may not be effected currently through certain refunding operations. ' Annual 14,000 share mandatory redemption at $100 per share commencing April 1,1989, with a non cumulative option of Electric Company to redeem an additional 14,000 shares annually at $100 per share, i l l _.._.._________J

25

6. Long-Term Debt of Subsidiaries, less amounts due currently Dece.mber 31,. _ _ _

Maturity. Groups interest Rate Groups 1983 1982 From To From To Thousands of Dollars First mortgage bonds: 1984 1988 33 % 12 %. $ 121.500 $ 165.500 1989 1993 4% 4% 69,000 69.000 1994 1998 4% 6% 174.000 174.000 1999 2003 7% 9% 365.000 365.000 2004 2008 8% 10% 700.000 700.000 2009 2013 9% 17% 850.000 725.000 Polluton control seres: 2011 2012 10 13% 110.000 110,000 Funds on deposit with trustee (16.079) Sank:ng fund debentures *- 1985 1989 4% 5% 27.761 1993 1994 6% 7% _34p73 Total 2.451.634 2.292.421 Polluton control revenue bnnds: 2004 2009 5.70 7% 160.000 160,000 Funds on deposit with trustee (4.8_56) (4.856) Total 155.144 155.144 Sink;ng fund debentures *- 1985 1989 4% 5% 27.851 1993 1994 6% 7% 34.739 Total 62.590 Senor notes: 1990 1999 8.50 12.20 511.300 476.480 Unamortized premium and discount. (14.626) (13.382) Total long-term debt, less amounts duc currently $3.1_03 452 $2.973.253

• In June 1983, Electric Company collateralized its outstanding sinking fund debentures by depositing first mortgage bonds with the trustees of such debentures, effectively making such debentures of equal rank with its outstanding first mortgage bonds.

In January 1984, Fuel Company sold an additional $46,000,000 principal amount of 12.20% senior notes due 1990. Sinking fund and maturity requirements for the years 1984 through 1988 under long-term debt instruments in effect at December 31,1983 were as follows: Sinking Minimum Cash Year Fund (a) Maturity Requirement {a}(b) Thousands of Dollars 1984 $34.017 $45,000 $64.180 1985 47,481 45.270 78.376 1986 47.480 40.000 73.480 1%7 47.015 22.000 55.565 1988 47230 22,500 56280 (a) Excluding requirements satisfied prior to December 31, 1983: $2,060,000 for 1984, $1,194,000 for 1985, $820,000 for 1986, $535,000 for 1987 and $320,000 for 1988. (b) Other requirements may be satisfied by certification of property additions at the rate of 167% of such requirements, except for sixteen issues at 100%. Utility plant of Electric Company is generally subject to the lien of the mortgages.

28 Notes to Financial Statements (continued)

7. Federal income Taxes The details of federal income taxes are as follows:

1983 1982 198_1 Thousands of Dottars Charged to operating expenses Current.. $_82.57_c $_68.392 $101451 Deferred--net: Differences between depreciaton methods and lives. 72.045 69.435 63.831 Certain capitalized construction costs. 11,561 9.925 9.040 Other.. 8.288 642 (836) Total.. 91.894 80.002 72.035 Investment tax credits-net.. 51.908 74.187 62.361 Total charged to operating expenses.. _226.372 _222.581 _236247 Charged to other income Current.. (9.276) (12.865) 3.188 Deferred-net.. 7.518 15.510 __{3.590) Total charged to other income (1,758) 2,645 (402) Total federal income taxes. .$.224.614_ .$225.226 _$235.845 Federal income taxes were less than the amount computed by applying the federal statutory rate to pre-tax book income as follows: Thousands of Dollars Federal income taxes at statutory rate of 46%. _$339.3_26 $322.092 $295.123 Reductions in federal income taxes resulting from: A10wance for funds used dunng constructon.. 72.919 62.580 43.220 Depleton allowance. 28,021 27.565 14.662 Amortization of investment tax credits.. 12.956 14.677 10.348 Other. 816 (7.956) (8.952) Total reductons.. 114.712 96.866 59.278 Total federalincome taxes. $224.614 _$225.226 _$235.845 Effective tax rate.. 30.4 % 322 % 36.8 %

8. Retirement Plans The System companies have uniform retirement plans covering substantially all employees.

The costs of the plans are determined by independent actuaries and are funded by the com- -= panies as accrued. The costs of the plans, including amounts capitalized, approximated $46,724,000 for 1983 (including $2,664,000 associated with a one time early retirement program), $39,000,000 for 1982 and $31,791,000 for 1981. As of the annual valuations in 1983 and 1982, accumulated benefits and net fund assets were as follows: 1983 1982 Thousands of Dollars Actuarial present value of accumulated benefits: Vested.. $ 268.882 $ 234.978 Norr/ested.. 27.821 23.005 Total.. $ 296_.703 $ 257.983 Net fund assets. $_316225 $ 2_30_,827 An assumed rate of return of 7% was used in determining the value of accumulated benefits.

27

9. Sale of Utility Plant in January 1981, Texas Power completed an agreement to sell a 4%% undivided interest in the Comanche Peak station, nuclear fuel and associated transmission facilities to Tex-La Electric Cooperative of Texas, Inc. (Tex-La), with such sale subject to regulatory approvals and Tex-La's ability to obtain long-term financing arrangements. Texas Power received approximately

$90,000,000 from Tex-La in connection with this agreement for that portion of the cost of the plant and related facilities recorded through December 31,1980. Commencing in January 1981, Tex-La paid its pro-rata share of the construction costs of the facilities. In January 1982 Tex La notified Texas Power that it was unable to obtain long-term financing in an amount sufficient to support a 4X% participation and requested that consideration be given to reducing such par-ticipation to 2%%. In February 1982, Texas Power concurred in the Tex-La request by agreeing, subject to regulatory approvals and completion of Tex-La's long-term financing arrangements, to assume the 2%% ownership interest released by Tex-La. In May 1982, following regulatory ap-provals and completion of the long-term financing arrangements, Texas Power completed the sale of a 2%% interest in the Comanche Peak station, nuclear fuel and associated transmission facilit;es to Tex-La, assumed ownership interest of the 2%% released by Tex-La and refunded ap-proximately $66,000,000 for that portion of costs and interest expended by Tex-La allocable to the 2%% interest so released. (See Management's Discussion and Analysis of Financial Condition and Results of Operations.)

10. Commitments and Contingencies For major new construction work now in progress or contemplated by the System companies, and commitments with respect thereto, see Construction.

Electric Company has entered into contracts with public agencies to purchase cooling water for use in the generation of electric energy and have agreed, in effect, to guarantee the prin-cipal, $52,310,000 at December 31,1983, and interest on bonds issued to finance the reservoirs from vwtiich the water is supplied. The bonds mature at various dates through 2011 and have in-terest rates ranging from 5%% to 9%. Electric Company is required to make periodic payments equal to such principal and interest for the years 1984 through 1988 as follows: $4,406.000 for 1984, $4,397,000 for 1985, $4,383,000 for 1986, $4,387,000 for 1987 and $4,387,000 for 1988. In addition, Electric Company is obligated to pay certain variable costs of operating and maintaining the reservoirs. Total payments, including amounts capitalized, under such contracts for 1983, 1982 and 1981 were $4,784,000, $4,806,000 and $3,184,000, respectively. In July 1983, Electric Company received regulatory approval of an agreement with a municipality for that municipality to assume all contract rights and obligations of Electric Company in connection with $108,845,000 remaining principal amount of bonds issued for similar purposes which had previously been guaranteed by Electric Company; Electric Company is, however, contingently liable in the event of default by the municipality. Electric Company has entered into an agreement with Tex-La whereby Electric Company agreed to purchase an assignment of portions of Tex La's entitlement to capacity and energy from the Comanche Peak station in declining amounts over the first eight years of commercial operation of each generating unit. Under the agreement, Electric Company is required to make annual payments to Tex-La comprising a pro rata share of operating costs plus a capital charge on Tex-La's net investment applicable to the portion of Tex-La's entitlement assigned. (See Note 9.) s

28 s t Notes to Financial Statements (concluded)

10. Commitments and Contingencies (concluded)

Chaco entered into an agreement in 1977 for the rights to over 200 million tons of surface mineable coal located in New Mexico. The agreement provides, subject to certain limitations, for i advance royalty payments, payable over a remaining period of approximately 30 years, which are E based upon annual quantities ranging from approximately 3.1 million tons in 1984 to a maximum of approximately 8.3 million tons in 1991. Such payments approximated $5.50 per ton in 1983 [ and are subject to escalation in the future due to inflation In connection with the foregoing, the Company entered into a surety agreement pursuant to which it has undertaken to assure the performance by Chaco with respect to this agreement. Non-utility property at December 31,1983 and December 31,1982 includes $52,700,000 and $37,000,000, respectively, of minimum ad- ? vance royalties paid by Chaco under the terms of this agreement. Reference is made to Fuel Supplies-Chaco Energy Company for information concerning pending litigation relating to the validity and enforceability of such agreement. 6 Electric Company is involved in a proceeding before the Atomic Safety and Licensing Board (ASLB) with respect to Electric Company's application for licenses to operate the Comanche Peak [ nuclear generating station. In December 1983, the ASLB issued a memorandum in which it in-l dicated that charges made in the proceeding had raised concerns about the design of the Com-anche Peak station and requested further evidence be submitted. Electric Company has filed a plan with the ASLB to provide the information necessary to satisfy the ASLB's concerns on design adequacy. The Company is not able to predict the impact, if any, of this matter or of l related legal and ' regulatory developments, on the licensing schedule of the Comanche Peak sta-tion; any delay, however, may increase the cost of the station and the related financing re-quirements of the Company. (See Construction.) The Company and its subsidiaries are involved in various legal and administrative proceedings which, in the opinion of the Company, should not have a material effect upon the consolidated financial position or results of operations. v

11. Supplementary Financial Information (Unaudited) h the opinion of the Company, the following information includes all adjustments (constituting only normal recurring accruals) necessary to a fair statement of such amounts; quarterly results

[ are not necessarily indicative of expectations for a full year's operations because of seasonal and l other factors, including rate increases and variations in maintenance and other operating expense g g patterns: k Q Earnings Per [ Share of ,5 Consolidated Common _ Operating Revenues Operating income Net income Stock i Quarter Ended 1983 1982 1983 1982 1983 1982 1983 1982 Thousands of Dollars (except per share amounts) March 31. $ 732.926 $ 692.415 $132.919 $131,724 $ 79.512 $ 80.978 $0.69 $0.77 June 30. 763.535 748.016 139,002 139,059 85,155 86.179 0.74 0.77 September 30.. 1,141.912 1.076 211 235.576 226,440 186.073 174.864 1.57 1.55 December 31.. 849.543 721.383 157.051 136,831 110.728 86,625 0.90 0.76 Total. $3.487,916 $3.238.025 $664.548 $634,054 $461,468 $428,646 $390 $3.85

29 Statement of Responsibility The management of Texas Utilities Company is responsible for the preparation, integrity and objectivity of the consolidated financial statements of the Company and its subsidiaries and other information included in this report. The consolidated financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis. As ap-propriate, the statements include amounts based on informed estimates and judgments of management. The Company's system of intemal accounting control is designed to provide reasonable assurance, on a cost effective basis, that assets are safeguarded, transactions are executed in accordance with management's authorization and financial records are reliable for preparing consolidated financial statements. Management believes that the system of control provides reasonable assurance that errors or irregularities that could be material to the consolidated finan- .1 cial statements are prLvented or would be detected within a timely period. Key elements in this system include the effective communication of established written policies and procedures, selec-tion and training of qualified personnel and organizational arrangements that provide an ap-propriate division of responsibi!ity. This system of control is augmented by an ongoing internal audit program designed to evaluate its adequacy and effectiveness. The Board of Directors of the Company addresses its oversight responsibility for the con-solidated financial statements through its Audit Committee, which is composed of directors who are not employees of the Company. The Audit Committee meets regularly with the Company's management, internal auditors and independent certified public accountants to review matters relating to financial reporting, auditing and internal controls. To ensure auditor independence, both the internal auditors and independent certified public accountants have full and free access to the Audit Committee. The independent certified public accounting firm of Deloitte Haskins & Sells is engaged to examine, in accordance with generally accepted auditing standards, the consolidated financial statements of the Company and its subsidiaries and to express an opinion thereon. Accountants' Opinion DELoITTE HAsKINs & SELLS CERTIFIED PUBLIC KCoUNTANTs To the Shareholders of Texas Utilities Company: We have examined the consolidated balance sheet of Texas Utilities Company and subsidiaries as of December 31,1983 and 1982 and the related consolidated statements of income, retained earnings and source of funds for construction for each of the three years in the period ended December 31,1983. Our examinations were made in accordance with generally accepted y auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the financial statements referred to above present fairly the financial position of the companies at December 31,1983 and 1b82 and the results of their operations and the source of their funds for construction for each of the three years in the period ended December 31,1983, in conformity with generally accepted accounting principles applied on a consistent basis. DELORTE HASKINS & SELLS Dallas, Texas March 21,1984

30 TEXAS UTILITIES COMPANY SYSTEM Financial Statistics 1983 1982 1981 TOTAL ASSETS erd of year (thousands). $8,780,954 $8,021,407 $7,306.658 UTILITY PLANT erd of year (thousands). $9,967,653 $9.051,442 $8.194,803 Accumulated depreciation end of year 1,958,103 1,758,156 1.560.754 Construction expenditures (including allowance for funds used dunng constructon). 906,930 891,560 792.268 CAPITAUZATION end of year (thousands) Long-term debt. $3,103,452 $2.973253 $2,713.863 /, Preferred stock: Not subject to mandatory redempton. 629,779 600,109 600,109 Subject to mandatory redemption. 34,6 % Common stock equdy 3,235,375 2.810,195 2.421,864 Total. $7,003,302 $6,383.557 $5,735.836 i CAPITALIZATION RATIOS end of year Long-term debt. 44.3 % 46.6 % 47.3 % Preferred stock. 9.5 94 10.5 Common stock equdy 46.2 44.0 422 Total. 100.0 % 100 0 % 100.0 % EMBEDDED INTEREST COST ON LONG-TERM DEBT end of year 9.7% 9.5% 9.0% EMBEDDED DMDEND COST ON PREFERRED STOCK end of year. 8.0% 7.7% 7.7 % CONSOLIDATED NET INCOME l thousands). 5461,468 $428,646 $359.398 DIVIDENDS DECLARED ON COMMON STOCK (thousands). $262,659 $227,076 $192,306 COMMON STOCK DATA Shares outstanding-average 118,454,666 111,356.815 102,292239 Shares outstanding-end of year. 123,685,058 114,182,319 105236.301 Eamirgs per average share. $3.90 $3.85 $3.51 Dividends declared per share. $220 $2.04 $1.88 Book value per share-end of year $26.16 $24.61 $23.01 Retum on average common stock equity. 15.3 % 16.4 % 15.9 % ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION AS PERCENT OF CONSOLIDATED NET INCOME 34.4 % 31.7 % 26.1 % NET FUNDS FROM OPERATIONS AS PERCENT OF CONSTRUCTION EXPENDITURES (excluding allowance for funds used durrg constructon). 56.1 % 60.0 % 58.8 % e

31 1980 1979 1978 1977 1976 1975 1974 1973 $6,552.972 $5,821,933 $5,161,808 $4,563.806 $3.878,180 $3,245.663 $2.768.435 $2.352,427 $7,438.877 $6,631,618 $5,862,096 $5,111.037 $4,398.695 $3,736,126 $3,177,008 $2,771.698 1,378,654 1.213,927 1,057,068 917,637 813.837 716,726 629,236 552.477 807,008 872,916 737,353 734.282 671,708 570,016 418,776 321,907 $2,527,716 $2,368.612 $2,038.654 $1,859.057 $1.627.403 $1,334,881 $1.140.023 $ 995.352 ^ 600,109 535.824 506.233 476,578 446.923 417,373 358.123 297.969 2.090.520 1,830.472 1.624 298 1,432,830 1266,086 1.024.491 982,349 856,164 $5218,345 $4,734,908 $4,169.185 $3,768,465 $3,340.412 $2.776,745 $2.480.495 $2.149.485 48.4 % 50.0 % 48.9 % 49.3 % 48.7 % 48.1 % 46 0 % 46.3 % 11.5 11.3 12.1 12.7 13.4 15.0 14.4 13.9 40.1 38.7 39.0 38.0 37.9 3G.9 39 6 33 8 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 8.3% 7.9% 7.5% 7.3 % 72 % 69% 6.4% 5.7% 7.7 % 7.4 % 7.3% 72 % 7.1% 7.0% 6.6% 6.3% $297,844 $211,151 $200.738 $175,919 $147,920 $120.976 5123.107 $111.243 $164,527 $142,262 $119,945 $103250 $ 85,800 $ 74,400 $ 63.880 $ 57,590 93,719,257 86.319,396 79,026.787 73,194,444 64,625.000 60,000,000 56.588,889 55.354,167 98.088.645 87,985,098 80,665,889 75,000,000 70.000,000 60,000,000 60,000.000 56,000,000 $3.18 $2.45 $2.54 $2.40 $2.29 $2.02 $2.18 $2.01 $1.76 $1.64 $152 $1.40 $1.32 $1.24 $1.12 $1.04 $21.76 $20.80 $20.14 $19.10 $18.09 $17.07 $16.30 $15.09 15.2 % 122 % 13.1'/o 13.0 % 12.9 % 12.1 % 13.5 % 14,2 % 26.2 % 28.2 % 26.9 % 33.3 % 33.7 % 26.1 % 17.8 % 14.2 % 52.7 % 40.3 % 44 1 % 36.4 % 29.7 % 28.5 % 35.8 % 41.3 %

TEXAS UTILITIES COMPANY SYSTEM Operating Statistics 1983 1982 1981 ELECTRIC ENERGY GENERATED AND PURCHASED (megawatteours) Generated-net station output 67,706,594 64.224,726 62.447.413 Purchased and net interchange. 343,581 371,190 91.091 Total generated and purchased. 68,050,175 64.595.916 62.538.504 Company use, losses, and unaccounted for. 5,340 248 4215,.774 4.166,327 ~ Total electric energy sales 62,709,927 60,380_142 58,372_._177 ? FUEL MIX FOR ELECTRIC GENERATION (percent) i Gas. 42.9 % 44 4 % 46.4 % ? Oil. 1.7 0.6 02 i Lignite. 55.4 55.0 53.4 _ _00 0% j Total _ 100.0_% _ 00 0 % 1 1 ELECTRIC ENERGY SALES (megawatteours) i Residential. 20,162,506 19.945.087 18.676.240 Commercial. 17,366,563 16.475,253 15,383.162 Industrial 18,690,077 17.526,412 17,992261 Govemment and municipal. 1,790,476 1,730.273 1,692,106 L Total general business 58,009,622 55.677,025 53,743,769 ^ j Other electnc utilities 4,700,305 4,703.117 4,628.408 Total electric energy sales 62,709,927 60.380.142 58.372.177

= = = =

f OPERATING REVENUES (thousands) Residentral. $1,306,912 $1.237.632 $1,044.761 Commercial. 998,362 911,487 778.008 Industrial 808,016 745.243 659.678 Govemment and municipal. 104,730 95.673 83,077 r Total general busness 3,218,020 2.990,035 2.565.524 l Otner electric utilities 202,387 190.727 161.998 I Total from electro energy sales 3,420,407 3,160,762 2,727.522 y Other operating revenues 67,509 57263 10,855 $2.738.377 Total operating revenues $3,487,916 $3238.0]2 ELECTRIC CUSTOMERS (end of year) [ Residente!. 1,556,760 1,477,097 1,421.273 Commercial. 198,548 187.065 177269 m l Industrial 22,761 21,478 20,692 ) Government and municipal. 10,210 10,148 10.263 Total general business 1,788,279 1,695,788 1.629,497 f Other electric utilities 68 75 78 { Total ebetric customers. 1,788,347 _1,695,863 1.629.575 Residential classifcaten includes indirect sales (apartments, etc.), I dwelling units not included in number of customers 197,945 205.304 213.905 E lodustrial classification includes service to Alcoa-Sandow (interruptible prior to May 1981): Electric energy sales (megawatthours). 2,660,564 2,316,308 2.848,997 Operating revenues (thousands). $68,121 $68.035 $64,016 N

33 lt I M'!I u 1980 1979 1978 1977 1976 1975 1974 1973 j _:== 62.865,641 58,051,429 57,196,077 53,156235 47,573,856 45,862,942 43,969.560 42,169231 U 56,388 75,695 79.688 72,845 46,656 225.718 176,059 449,061 --O 62,922,029 58,127,124 57275,765 53,229,080 47,620,512 46,088,660 44,145,619 42,618292 4,422,762 4,001,684 4.041,486 3.549,768 3 290.124 3238,645 3,052.126 2,872,902 d 58,499267 54,125,440 53234.279 49,679,312 44.330,388 42,850,015 41,093,493 39,745,390 49.0 % 48.6 % 58.0 % 65.9 % 68.3 % 74.8 % 82.0 % 81.7 % 7(- 0.1 1.4 0.6 1.5 0.2 0.3 2.1 3.2 50.9 5C.0 41.4 32.6 31.5 24.9 15.9 15.1 - =! 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % g= =_ y 9 19,844,409 17,394,402 17,943,224 16,642,382 14.548,407 14,575.846 13,532,494 13,122,546 14,683.104 13.264,436 13,117,202 12,347,755 11.338,371 11,026,495 10285297 10,130,629 17.581265 17275,859 16,469,636 15,678254 13,917.588 12,962,019 13.231,004 12,715,469 ] 1,7S8.988 1,669,726 1,728,056 1,565,518 1,425,665_ 1,333,765 1,293,641 1 226,292 53,905.766 49,604,423 49258,118 46233,909 41230,031 39,898,125 38,342,436 37,194,936 1 4.593,501 4,521.017 3,976,161 3,445,403 3.100,357 2,951,890 2,751,057 2,550,454 ) 58.499267 54,125,440 53234279 49,679,312 44,330,388 42,850,015 41,093,493 39,745,390 $ 877,555 $ 672,340 $ 640,611 $ 552,331 5 442204 5 374,480 $ 308,735 $ 268,131 590,921 488,170 439,146 375,822 303.785 251,882 204,441 178,718 482,919 419224 373,456 310,811 238,426 182,491 149,526 125,144 5 68,396 54,565 49,623 40,331 32,390 25,337 20,200 16,974 2,019,791 1,634,299 1,502,836 1279295 1,016,805 834,190 682,911 588,967 M e 123,188 105.306 87,592 69,975 53,052 39,764 27,890 20,967 2,142,979 1,739,605 1,590,428 1,349270 1,069,857 873,954 710,801 609,934 g 31,574 16,684 13,928 18.508 12,473 14,782 15,796 5.162 $2.174.553 $1,756289 $1,604,356 $1,367,778 $1,082.330 { 888,736 $ 726.597 5 615.096 Y 1,356,651 1 287,701 1221,468 1,159,885 1,122,358 1,090,798 1,069,017 1,048,317 171,495 164291 160,170 153,658 146287 140,085 136241 134,895 5 19,590 18,654 17,953 17216 16,688 16,405 16.077 15,773 ] 10,488 11257 11,260 11274 11,121 10,736 10,330 9,886 w 1,558 224 1,481,903 1,410,851 1,342,033 1296,454 1 258,024 1231,665 1,208,871 80 80 62 60 59 63 58 58 6 1.558,304 1,481,983 1,410,913 1,342,093 1,296,513 1258,087 1 231.723 1208.929 E g ] 223.960 240,164 243,886 248,755 240,672 236,055 232,358 224,577 2.918,794 3,076,399 2,891259 2,786,027 1,822,488 2,038,618 2,431269 2,001.058 $48,813 $48,400 $41,572 $36,878 $20,052 518,704 $15.309 $10.037 7

=

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i 34 i b TEXAS UTILITIES COMPANY AND SUBSIDIARIES Supplementary Information Concerning Effects of Changing Prices j Unaudited information furnished in compliance with the reporting requirements of Financial 3 Accounting Standards Board Statement No. 33, Financial Reporting and Changing Prices 2 (FASB 33), follows. The Statement indicates the need for experimentation in providing information f about the effects of changing prices. Such information is intended to help readers better under- -j stand the impact of inflation on the Company. Because the information is presented on an experimental basis, it should be viewed with caution. Calculation of the information inherently } involves the use of assumptions, approximations, and estimates and, therefore, the resulting _j measurements should be considered in that context and not as precise indications of the effects of inflation. The effects of changing prices are not recognized for income tax or rate-making pur-poses; therefore the supplementary information should not be interpreted as adjustments to earn-2 ings reported in the Financial Statements. t laformation concerning the effects of general inflation (constant dollar) was determined by converting historical cost amounts into dollars of equal purchasing power, as measured by the 4 Consumer Price index for All Urban Consumers. Information concerning changes in specific prices (current cost) represent such changes in utility plant from the date costs were initially incurred to present, and differs from constant dollar information to the extent that the specific prices have increased at a rate aifferent than the general rate of inflation. The current cost of utility plant was computed by indexing the existing historical cost of plant by the Handy-Whitman index of Public Utility Construction Costs for the South Central Region and other appropriate indices. Such current costs are not necessarily i representative of the replacement cost of the Company's productive capacity that might be incurred in a future period. Depreciation on the constant dollar and current cost basis was determined by applying the System companies' straight-line depreciation rates used for financial accounting purposes to the appropriate indexed utility plant amounts and is the only income statement item (including depreciation charged to fuel) that has been restated from the Financial Statements. In compliance with FASB 33, no adjustment has been made to federal income taxes. 4 Under rate-making rules prescribed by the Public Utility Commission of Texas, only the original cost of utility plant is recoverable through revenues as depreciation. Therefore, the excess of the cost of plant stated in terms of constant dollars and current cost over the original cost is not recoverable through rates as depreciation and is reflected as Adjustment to Net Recoverable Cost of Utility Plant. The Company believes, based on past experiences, that System companies will be allowed to recover the investment in utility plant when replacement of facilities actually j occurs. ]* During periods of inflation, the holders of monetary assets suffer a loss of general purchasing power while holders of monetary liabilities experience a gain. The amount shown as Gain From Decline in Purchasing Power of Net Amounts Owed reflects the net of these two items and is primarily attributable to the substantial amount of long-term debt which has been used to finance utility plant. Since depreciation on this utility plant is limited by regulation to the recovery of historical costs, a holding gain on debt is not allowed and recovery is limited to only the embedded cost of debt capital. To reflect the results of rate regulation, Gain From Decline in Purchasing Power of Net Amounts Owed is offset by the Adjustment to Net Recoverable Cost of Utility Plant. 2 m

l 35 Summary of Consolidated Net income Adjusted for Effects of Changing Prices Year Ended December 31,1983 Historical Cost Adjusted for Changing Prices Reported in General inflation Specific Prices Financial statements (Constant Dollaj 1 Current _ Cost) Thousands of Dollars Average f983 Dollars ^ Operat' g revenues $3.487,916 $3,487,916 $3,487.916 n Operating expenses (a). 2,823,368 3,052,707 3.072,501 Operating inccma 664,548 435209 415,415 Other income 123,468 123,468 123,468 Totalincome 788,016 558,677 538,883 Interest charges. 274,966 274,966 274,966 Preferred stock dnndends of subsia ary. 51,582 51,582 51,582 Consoldated net income $ 461,468 $ 232,129 $ 21?,335 increase in specific prices of utikty plant held during the year (b). $ 256,196 Adjustment to net recoverable cost of utility plant. $ (54,910) 215,438 Effect of general inflation on utikty plant (506,750) Effect of general inflation in excess of increase in specific prices of utihty plant after adjustment to net recoverable cost (35,116) Gain from decline in purchasing power of net amounts owed 156.933 156,933 ^ Net change in purchasing power. $ 102,023 $ 121,817 (a) Depreciation, including amounts charged to fuel, was $227,947,000 for historical cost, $457286,000 for constant dollar and $477.080,000 for current cost. (b) At December 31,1983, utility plant, net of accumulated depreciation, was J 3,97J 803.000 for current cost and $8,009.550,000 for historcal cost. Comparison of Selected Financial Data Adjusted for Effects of Changing Prices 1983 1982 1981 1980 1979 Thousands of Average f983 Dollars Operating revenues. $3,487,916 $3.342,188 $2,999,749 $2.629.200 $2.410,656 Constant Dollar information Consolidated net income $232,129 $208,672 $173.828 $166,897 $120.885 Eamings per share of common stock. $1.96 $1.88 $1.70 $1.78 $1.40 Net assets at year end at net recoverable cost. $3,869,397 $3.510,974 $3230,992 $3,129,475 $3,086.856 Current Cost information Consolidated net income $212,335 $180,337 $139,889 $124,565 $61,552 Eamings per share of common stock. $1.79 $1.62 $1.37 $1.32 $0.71 Effect of general inflation in excess of increase in specife prices of utihty plant after adjastment to net recoverable cost $(35,116) $(7,731) $(340,793) $(574,904) $(647,367; Net assets at year end at net recoverable cost. $3,869,397 $3,510.974 $3230,992 $3,129,475 $3,086,856 General Information Gain from decline in purchasing power of net amounts owed $156,933 $148,987 $333,092 $464246 $501218 Divdends declared per share of common stock. $2.20 $2.11 $2.06 $2.13 $2.25 Market price per share of common stock at year end $22.86 $23.98 $20.80 $21.51 $23.04 Consumer price index-average. 298.4 289.1 272.4 246.8 217.4

DIRECTORS AND OFFICERS = Directors Officers PERRY G. BRITTAIN PERRY G. BRITTAIN Dallas, Texas Chairman of the Board and Chairman of the Board Chief Executive and Chief Executive BURL B. HULSEY, JR. of the Company Vice Chairman of the Board JAMES K. DOBEY JERRY FARRINGTON Aptos, California President Retired Chairman of the Board, Wells Fargo & ERLE NYE Company Executive Vice President JERRY FARRINGTON H.A. HORN Dallas, Texas Treasurer and Assistant Secretary President of the Company g_ g, gyggg9 WILLIAM M. GRIFFIN Controller Hartford, Connecticut PETER B TINKHAM Executive Vice President'f the Secretary' and Assistant Treasurer Director and Chairman o Finance Committees of Hartford Fire Insurance Company and Subsidiaries BURL B. HULSEY, JR. Fort Worth, Texas Vice Chairman of the Board of the Company MARGARET N. MAXEY Austin, Texas Director of the Chair of Free Enterprise and Professor, Biomedical Engineering Program, College of Engineering at the University of Texas at Austin. ABNER V. McCALL Waco, Texas Chancellor of Baylor University J. C. PACE, JR. Fort Worth, Texas Chairman of the Board and Director of KimbeII, Inc. CHARLES N. PROTHRO Wichita Falls, Texas Owner, Perkins-Prothro Company WILLIAM H. SEAY Dallas, Texas Chairman and Chief Executive Officer of Southwestern Ufe Insurance Company

iE miin: G = Directory Quarterly Market Price Ranges TRANSFER AGENTS AND REGISTRARS Price Range Mercantile National Bank at Dallas Dallas, Texas Quarter Ended 983 1982 Morgan Guaranty Trust Company of New York High Low High Low 3 New York, New York March 31. $24% $22% $21h $194 -Y June 30.. 26% 23% 23% 21 4 DIVIDEND DISBURSING AGENT September 30.. 26 23% 25 20% Morgan Guaranty Trust Company of New York December 31. 27% 22% 25% 22 -i 30 West Broadway _y New York, New York 10015 AGENTS FOR PARTICIPANTS Dividends Paid per Share of Common Stock AUTOMATIC DIVIDEND REINVESTMENT E AND COMMON STOCK PURCHASE PLAN E Dividends Paid Morgan Guaranty Trust Company of New York g Dividend Reinvestment Plans Quarter Ended 1983 1982 J P.O. Box 3506, Church Street Station New York, New York 10008 March 31.. 50.51 $0.47 a STOCK EXCHANGE LISTINGS June 30. 0.55 0.51 New York Stock Exchange, Inc. September 30.. 0.55 0.51 New York, New York Midwest Stock Exchange, incorporated A Deceh 31. ESS a51 Chicago, Illinois $2.16 $2.00 The Pacific Stock Exchange incorporated Los Angeles and San Francisco, Cahfornia The Company has declared common stock dividends E Ticker Symbol - TXU payable in cash in each year since its incorporaton in 1945 and has continued its record of annual duidend increases. _T which commenced in 1948. At its February 1984 meeting, the Board of Directors again raised the quarterly dudend by Ei The Annual Report has been prepared for the four cents per share, from 55 cents to 59 cents. This 4 purpose of providing shareholders with infor-regular quarterly dividend is payable April 2,1984, to j mation concerning the Company and not in shareholders of record on March 5. Dividends are paid in connection with any sale or purchase of, or cash to sharehoders who are not pani @ng in the any offcr or solicitation of an offer to buy or Automatic Dividend Reinvestment and Common Stock Pur-sell, any secutifie",. chase Plan; all dividends are reportable for federal income tax purposes as ordinary dividend income. Reference is T Texas Utilities Company distributes a booklet made to Note 4 to Financial Statements regarding limitatens containing detailed System financial and upon payment of dividends on common stock. operating data which have been compiled for Under provisions of the Economic Recovery Tax Act of the convenience of financial analysts; a copy 1981, quahfed individual shareholders of the Compay may 3 will be furnished upon request. elect to defer federal income taxes on dividends reinvested under the Automatic DNidend Reinvestment and Common 7 A copy of the Annual Report to the Securities Stock Purchase Plan in amounts up to $1.500 a year on g and Exchange Commission, form 10-K, will be iont reums or $ 50 a year on irdudual retums. This provi-3 fumished by the Company upon request. sion of the Act applies to dividends paid and reinvested from January 1,1982 through December 31,1985. -=' Requests for copies or other shareholder information should be directed to. Shareholder Relations _g Texas Utilities Company = 2001 Bryan Tower Dallas, Texas 75201 (214) 653 4646 '2: m ud 2m$-

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