ML20108F409
| ML20108F409 | |
| Person / Time | |
|---|---|
| Site: | Millstone, Seabrook, 05000000 |
| Issue date: | 12/31/1983 |
| From: | Cobey J, Fassett J UNITED ILLUMINATING CO. |
| To: | |
| Shared Package | |
| ML17054D536 | List: |
| References | |
| NUDOCS 8412200453 | |
| Download: ML20108F409 (37) | |
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- Highlights 1983 1988 Operating Revenues (000) . $ 449,586 $ 436,730 1
Netincome(000) . $ 80,503 $ 65,75b Eamings per Share of Common Stock ' ( (basedonaveragenumberof sharesoutstanding) $ 5.67 $ 5.30 t
' Dividends Declared per Share of Common Stock ' $ 3.08 $ 2.92 t
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9, .y.jkj,.2I.'i.;7.?[g. %t :<$ Utility Plant (000) ~ $1,238,096 $1,049,761 g,. [ ,. Y l.. .
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4 ,:7;; -J F . 2 w ' .@ <- ? Sales of Energy-KWH(000) 4,622,008 4,475,164
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- Average Residential Use-KWH 6,336 6,213 k .f' 'f ~,[i
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Q.4 %.,,+ :Numberof Employees; 1,569 1,517 j ., .@. Q ? h
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- Number of Common Shareowners - 41,067 39,213 dN [.. . h i . '. . 7. /. '.>
e Annual Meeting Date: . .
. Contents-The Company's Annual Meet.-
ing will be held in the audito-rium at 80 Temple Street, New - . Haven,on Wednesday. . .21.ettertoShareowners 14 Achieving More . 28 Statement of April 18,1984 beginning ' 4 1983: An Excellent Effective - Accounting Policies at 10 a.m. FinancialYear . Communications . - 29 NotestoFinancial S EnergySupply - 18 Planning for the Future - Statements Diversity: 18. Ten-YearSummaryof 33 ReportofIndeper' dent 11 Electricity Sales Rise . Selected Financial and - Certified Public
-Statistical Data Accountants 2 9I8 h 33 Ccmmon Stock Data u omer 20 Manage, ment's Docussion and 34 Supplementary Analysisof Finasal Ir: formation / Inflation Condition and Results of Operations 36 DirectorsandOfficers 24 Statementofincome 25 Statementof Sources of FundsforGross Property Additions ' 25 Statementof Retained Eamings 26 BalanceSheet
UnitsdIlluminating I
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. .j.,.g ,t cludes the financial world of Wall Street, con-y V .. 4. :,e;j i.; / ' :l. # g :. - struction at the Seabrook nuclear plant site, an q; 4 .. g. Agp; agreement to import hydropower from Canada and coal Lm f..g .f': :_ , 3,
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...= UI Chairman end Chief Executive Offcer John D. Fassett, repre-l "~
P: ~_1 " ., senting NEPOOL, and Hydro-Quebec President and CEO Guy
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Letter to Shareowners "During 1983 and the remaining 1983 uns ayearofexceptional to " consider favorably recovery of prudent fewfinalyears of the nuclear achietsments at Ul! expenditures."_ Perhaps it is too much to expect these construction pn>jects, afinn s detailed in the text of this report, distinguishing characteristics of Ul to be fountlationforsuch a rigonnes earnings reached a new high of $5.67 properly weighed in the equity market in future is being constructed ,, a share and encouraging advances view of the emotionalism and media atten-were made in virtually every area of the tion currently pervading every nuclear is-Company's activities. Were it not for the sue. Nevertheless, those who already are gray cloud of uncertainty regarding nuclear celebratingthedemiseof allaspectsof the generation construction projects through- nuclear industry not only are sadly mis-out the nation-and the impact of that guided, but flagrantly premature. Weak-cloud on stock prices, financing costs and nesses ,n the industry must be corrected, construction plans - 1983 clearly would but it surely would be absurd for this nation have been the most outstanding for UI in at to panic into rejection of what is accepted in least a score of years. most of the other developed nations of the Responding to troubling reports regard- globe as the safest, most environmentally ing nuclear projects in other regions of the benign and most economic of currently country, the prices of stock in utilities with viable base-load electric power supply nuclear construction programs plummeted options. at year-end 1983. In their lemming-like re- In the final analysis, it would appear sponse to some very real problems, traders highly improbable mat this nation will act so of utility shares and their advisors to a large irrationally as to abandon entirely the nu-measure failed to distinguish realistica!!y clear generation option. While the debate among companies and projects. continues, and until UI's projects are in op-UI's very significant differences from eration, full, robust corporate health un-most other utilities have been largely tram- doubtedly will remain an unattainable goal pied in the stampede. The fact that, since for UI. However, during 1983 and the re-UI's nuclear entitlements will replace ex- maining few final years of the nuclear con-pensive imported oil generation, commer- struction projects, a firm foundation for such cial operation of Seabrook Unit 1 and Mill- a vigorous future is being constructed. stone Unit 3 will not precipitate " rate shock" In addition to being a financial success, for UI's customers comparable to that being 1983 was also a year of major achieve-forecast in other areas is ignored. The ex- ments for UI in operations, communica-cellent records of these two projects for tions, planning, customer services and hu-quality assurance, a major problem for man resources, and recognitions thereof, some other projects, also seems unrecog- many of which are described in ensuing nized. And, inscrutably, the fact that the text. Recognizing that these accomplish-Company's participation and investment in ments would not have occurred without the these nuclear projects have been firmly determined efforts of UI's dedicated and recognized and endorsed by Connecticut's able employees and officers, we take pride regulatory agency appears to have been in acknowledging and thanking each of overlooked. them for their contributions to a fruitful year. Moreover, even as to Seabrook Unit 2, 1983 also was a year of important orga-which the Company is seeking to have can- nizational changes at the Company, as celled in compliance with the regulators
- summarized on subsequent pages of this decision, UI has a regulatory commitment report. Some organizational plans were ex-pedited, others delayed, as a result of Pres-ident Jim Cobey's heart attack in early June and his subsequent absence during car-diac surgery and recovery. Happily, Jim has recovered fully and has enthusiasticalh resumed the often arriuous responsibilities of a utility executive in the 1980s.
Jim Cobey's return has permitted the Board to move forward with implementation of CEO Jack Fassett's long-standing plan ts relinquish that office during 1984. This ac-tion reflects not only Jack's personal desire 2
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, that a program of Changes in the top office %' l of electnc utMt:es at reasonable intervals N' ; ; pf.y M g w"g.,'g.: . p. : . g5 l wdl contnbute to the health of these vita l t o' ) =.,,P . m . ," .< . .,..~ , , %.f, +* i.
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institutions Jack has been CEO of J since ? ; 1.. , V. - #4- c.7 - - :, , ?, . l January 1 1976 Q, ?:.,l.' I. .M ?. ' ,
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To f acatate an orderty transit.on. Jack % ' w. *.?M. , 4 . , s-4 a., an '. . r- a 7: . s ;.' r .-~ ,.-i -.'.'s*- 1(. has agreed subject to Board discretion to o- ',3' ~ ' . e." 'j -+ - - f. ' ? - .y .,S Y.I.s t '.,. Y . ,- V% [ - continue as chairman and to provtde part- T ' 'l /- ~[s-; *?.,' . time consulting services primardy uth re- l h. ".2? '. Z -n
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land Power Pool the nuc! ear projects and i.J., V4 sN-. p + 2"- e'A .# , ,J .%, r w w.,1. .- ,. 1.f %.c ,4 s.'c., _ .-
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3;, p.f .:t 3 4 ,..., . l l l the shareowners meeting on Aprd 18 - :, -
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The f trm dtrection sage aavice and out-O [4 .' . % - Q. .E. , s . ' J' + i c l
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ny's directors dunng this actwe year have .
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been cnticany important to the Company s . ;- l success and are hearthy appreciated We MOy." h'.g'.]f 9rl',, : .
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are also grateful for the understand:ng and K.[ 1. ; 3 jf o ,s l$ E, : . . . - '_
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" Rec <>gnizing that these January 30 1984 accr>m/dishonents ur>uld ncit hace <>ccm' red u ithc>ut the determined efforts <>f( Ts l dedicated and able emph>yees 1 and <>fficers, u e take pride in }
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_ ;._ _= _ _ _ _ _ _ _.. _ _ _ _ _ _ _ _ _ _ __ _._ __ _._ _ _ _ _ .__ _ _.... _ _ - ._ _._...._ _ _ _ 1983: An Excellent Financial lear By most stanclards, 9 , .
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1983 n'as an excellent se financialyearfor ' UnitedIlluminating 1,.m . . m y p.. ,:
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-4 Executive Vice President and A Chief Operating Officer Dick Grossi(left) and Vice Presi-dent-Engineering Jim Crowe (right) review construction progress of Seabrook Unit 1 with Robert J. Harnson, presi-dent and chief executive offi-cer of the project's lead partici- Effective with the Apnl 1.1983 quarterly t was a year of record earnings, improved pant, Public Service Company common stock dividend, the rate was in-of New Hampshire. sa'es. an increase in the common stock dividend. a landmark regulatory decision. Creased to 77 cents per share for a new indi-successful completion of a major annual fi- cated annual rate of $3 08 compared with the nancing program, encouraging achieve- previous $2.92.
ments toward long-term financial goals, and For the first time in four years. UI's kilowatt-the start of a transition from a utility with large hour sales increased. This jump of 3.3% over financing requirements for construction pro- the previous year reflects an upward trend l grams to one with more modest construction that began in Apnl and continued throughout l budgets as the Company continues to solia- the remainder of the year due pnmanly to im-ify its f;nancial health. proved business activity and warmer-than-
. Earnings per common share rose for the normal summer weather that increased air third successive year to a record high of conditioner load. The economy in the State of
) $5.67,28 cents above the previous high of Connecticut and UI's service terntory showed Executive Vice President and $5.39 earned in 1982. Increased sales and marked improvement as the nationa! econ-Chief Financial Officer Bob the absence of a non-recurring tax charge omy began to turn upward dunng the year, Fiscus discusses Ul's financ- and the unemployment rate dropped to ing needs and plans with aga:nst 1982 earnings contnbuted heavily to the 1983 gain. among the lowest in the nation. The boost in Robert Murray (right), principal sales Contr;buted to a 2 9% increase in oper-of Morgan Stanley & Co., the Company's investment advi- ating revenues to $449 6 million. sors, and Al Hayward (left), UI's trading specialist, from LaBranche & Co.during a visit to the floor of the New York 5 Stock Exchange.
l l l 1983:An Excellent Financial War... I m- , ,. mm---."7 Based on projected expenditures,1983 ing flexibility, closed the year at much more 13eekhperStore i is expected to be the peak year for UI's acceptablelevelsthanin mostof thelast i j nuclear construction program, the major decade and, despite the substantialin-
- $35j project being the Seabrook plant. To help crease in outstanding shares of common raise capital for the program, the Company stock, the book value of each share in-l j] completed two sales of common stock dur- creased significantly. Internal cash genera-2 a ing the year on better terms than virtually all tion, although less than in 1982, benefited ;
[% 30j of the nine prior such sales since the energy from the regulatory improvements of recent i
- f. j crisis began in 1973. On March 31, UI years and improved in the latter part of the l
-j closed on the sale of 900,000 shares at year as the result of a rate increase which
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l [ p -" $27.50 per share and on November 22, went into effect on August 29. 750,000 shares were sold at $25.50. In ad. An investor relations program, initiated in l~ dition, a shelf registration of 300,000 shares mid-1982, continued in the final quarter of 1
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filed in mid-year permitted sales at va ious 1983 as members of the Company's senior
- 20) prices, averaging $26.40 per share, from management met with representatives of
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Contact with theinvestment f l communityis a significant part - ; of Ursinvestor relations pro- ,- i I gram. Investor Relations Man-ager Mary Ellen Manthey, and g /. n; f ; g ) Charles J. Noble, investment executive with the New Haven , , 18,b - * - brokerage firm of Moseley, Hallgarten, Estabrook and f Weeden, Inc., review UI g 6 FinancialNews. * .L. ~% l
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The decision by the Department of Public Utility Controlin UI's 1983 rate case encompassed measures designed to improve cash flow. l portion of the construction costs of the Sea- Unit 2 as a means of disengag:ng itself from proposal to cance! Unit 2 was defeated by brook Unit 1 nuclear plant being bui:t in that commitment was d:sappointing from the joint owners. New Hampshrre. This marked the first in- the viewpoint of assunng an adequate long- Oil pnces remained at about the $30 per t stance of a Connect: cut efectnc utility being term supply of electncity to the Company s barrei level with most experts predicting allowed to earn a return on a port on of a customers and the New Eng!and reg:on as continued stab hty for the near future. In project still under construction. and was a whole. However, the statement in the or- view of UI's present oil dependence, this consistent with a law passed by the Con- der that. "in view of its past support ' for the will be beneficial for the Company in terms necticut General Assemb! yin 1983 The project. the DPUC "will consider favorably of electncity pnces and cash flow. DPUC decision also provided revenues to recovery of prudent expenditures currently Though Ul obviously cannot control cover amortization over two years of the associated eth Unit 2." was a we!come and world oil pnces, it can and does take ag-Company's share of the Pilgnm Un;t 2 nu- most significant hold;ng gressive actions to control the Company's clear facility which was cancel!ed in 1981 - Connecticut part:cipants are unique total oil cost. exercising constant cost con-Further, the decision provided for infla- among all Seabrook partic: pants in having trol initiatives and efficiencies in a vanety of tion in expenses through the midd:e of 1984 an express recognition by their regulatory operating areas desenbed eisewnere in inis and allowed a 16.4% return on common body regarding recoverability of invest _ report. stock equity- ments in the project Whde recovery of con _ Those actions. in combination with im-With reference to the Seabrook project. tinued investment in Unit 2 is dependent on proving regulation and the Company's con-the DPUC s strong reaffirmation that the UI following the DPUC direction to work for tinued efforts to maintain financing flexrbil-completion of Unit 1 is in the best interests the cancellation of that unit, the Company ity. augur well for UI's future financial health. of the Company and its customers was unequivocally accepted the DPUC decision gratifying The aspect of the decision di- with respect to Unit 2 and has and will con-recting UI to seek canceltation of Seabrook tinue to seek dihgently to accomphsh the DPUC objective. Planned expend 1tures on Unit 2 for 1984 have been cut from $153 milhon to $33 milhon. ref!ecting a Septem-ber resolution sponsored by Ul and North-east Utihties (NU) to reduce work on the unit to the lowest feasible level A pnor UI-NU 7
Assuring An Adequate, DiversifiedEnergy Supply
's long-range goalis to secure an nearly 200,000 individuals have visited the reduce the region's dependence on oil by U I adequate and reliable energy supply for its customers by reduc-center, representing all 50 States, and 82 foreign ccuntries.
about 4% and save more than five million barrels annually. UI's 5.75% share in the ing its more than 90% dependency on im- Work at Millstone Unit 3 is moving stead- project is equivalent to about 4% of its ported oil a !d achieving a more diversified ily toward its scheduled completion date of energy requirements. energy mix. In 1983, the Company made May 1986. The unit is more than 80% com- This intemational agreement, reached significant strides toward that goal. plete. Seabrook Unit I and Millstone Unit 3 before Mr. Fassett completed his term as Foremost in this plan is the Company's are each expected to save the New Eng- chairman of the NEPOOL Executive Com-nuclear construction program, which in- . land region about 12 million barrels of oil mittee, represents one example of recent cludes the Seabrook, New Hampshire prol- annually. efforts to advance the evolution of NEPOOL ect, of which UI owns 17.5%, and Millstone into the most sophisticated interconnected Unit 3 in Waterford, Connecticut, of which Converting To Coal energy network in the nation Others are: UI owns 3.7%. Seabrook Unit 1, now about Another important step in UI's energy a Developing effective cooperation be-88% complete, received strong endorse- diversification plan is the reconversion of tween NEPOOL and the Energy Planning ment from the DPUC dunng the Company's Bridgeport Harbor Station Unit 3 so that it Committee of the New England Gover-1983 rate case. The DPUC panel hearing w Il have the ability to burn coal as well as nors' Conference that was formed by the tha case urged its completion as soon as oi . The Company received confirmation in six New England governors in December possible. August f rom the federal Environmental Pro- 1981. Among the milestones reached on Unit 1 tection Agency that UI's plans meet all ap-during 1983 was the completion of the e initiating a reorganization of the NEPOOL plicable environmental regulations - the fi- staff to meet its constantly increasing deep-bedrock ocean cooling water tunnel nal necessary approval - and site work system. The administration and turbine responsibilities more effectively. began immediately. The approval allowed generator buildings also are virtually com- a Initiating a comprehensive review of the equipment modification contracts to be plete with remaining effort primanly re- awarded, and construction to commence NEPOOL agreement which constitutes quired in the reactor cor,tainment building. the basic charter of the operation, essen-on an adeon tothe Bridgeport Harbor Even prior to its on-line operation, Sea ~ tially unchanged since 1971. building which is integral to the project. brook serves as a major energy education Savings to customers from burning coal, in terms of oil supply and cost controf, center. In the more than four years since the scheduled to begin in January 1985, will the Company negohated new contracts station's nuclear information center opened, depend on the difference between coal and with Amerada Hess and Scallop Petroleum oil prices then in existence. Estimates indi. following the expiration of its long-term con-cate that over the first 10 years of coal. tract with Texaco. Besides being economi-buming, savings should be at least $135 cally competitive, the new agreements will million. Further. the Company should allow the Company greater flexibikty in achieve a reduction in oil consumed of ap. making its oil purchases including buying a m w.w--m--.m'~ ' ' portion of its requirements on the spot proximately two milhon barrels per year-NOE ' " about 25% of the more than eight million market. Also, UI continues to consuft with the barrels the Company now burns annually hi ' Ul's plan to meet Connecticut's strict envi- Connecticut Resources Recovery Authonty ronmental emission standards for fossil regarding reestabbshment of a refuse-fuels enables the unit to become the first burning facility in Bndgeport that would p ' utility boiler to bum coal in Connecticut provide a reaoy fuel supply as well as meet the area's need for a more environmentally I since coal-burning was discontinued in sound manner of ren.ise disposal than land. i favor of oilin the late 1960s. kE 1 fills. Although specific plans for a viable fa-c hty remain to be developed, the favorable
,dropouvrfactS/gned results of refuse-derived fuel buming at 1 Also significant to achieving UI's goal of Bndgeport Harbor Station prior to the de-
[ a secure energy future for its customers' and for the region, is hydropower from mise of the original project in 1980 justify hope for the future. Quebec. The New England Power Pool With the capabihty of generating elec-
.a (NEPOOL), led by UI's chief executive offi- tricity from nuclear, coal, and hydropower M cer John D. Fassett, signed a history-making as well as oil, coupled with load manage-contract with Hydro-Quebec in March to ment and conservation efforts by UI's cus-
< j bring hydropower from that Canadian prov- tomers, the Company is well positioned to ba- musam ] ince to New England starting in 1986. The pact, signed by Mr. Fassett as chairman of meet current forecasts projecting relatively '
modest increased electncity use by UI s l the NEPOOL Executive Committee, and customers at least into the early 1990s. l Guy Coulombe, chief executive officer of j Hydro-Quebec, initially will provide nearly 700 megawatts of electricity to the region, and could be expanded to 2.000 mega-watts depending on future negotiations. The 700-megawatt interconnection will 8
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1 March by John D Fassett ' , ' (seated, nght). as chairman of ,. the New England Power Pooi ..-- ..,A4 j Executive Committee. and g 4; f , , Guy Coulombe. Chief execu- g m ,;,, -/ tive officer of Hydro-Quebec --W (seated. left). to provide elec- . . , M ., g.' y [ j j tncity to New England starting 4:f , in 1986 Witnessing <from left) ./ ' M are Rhode Island Governor 1 Joseph Garrahy Quebec En-
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J q Part of Ul s energy diversefica A y tion van is the reconversion of Bndgeport Harbor Station Unit
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ma e g and Do Foremost in Ul s construction [ 4 program is Seabrook Unit 1. in , 8"9##*' New Hampshire The 1150-mw :
,,h unit of which UI owns t 7 5 o k. 4 is about 88% complete E i
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Tester Tory Aco+rson con- 7 . ducts water ana yses at B idge- V N.A ;f - ... & port Ha bor Stat on $ fs 1 C Er ptoyees h e Fred Vatu o. erviro"eerta. :ab super visor f > 4 l I and Asststart Superv.sor Kate Shar ey itop protoi ersure ,e' f i T is ' ' ~' that UI meets ererorr-ertat respors Deit es j w 1 9 - Y I; ( W's l Jerr/ Osocrons y imica e protoi. Ul r a or accourt' f- [e rr ar ager discusses dat y p o- , duction of 500 000 o+ast c U , j[' \ ,
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Electricity Sales Rise In Impmuing Business Climate were undertaken during overhauls of New r &mm-~~~mm increassd electricity sa!es of 3 3% is one indication of the improvement that oc-curred in the area's economy dunng Haven Harbor Unit 1 and Bridgeport Harbor Station Unit 2 in 1983. The result of such [ M h h % h i"h "' ' 1983. By year-end, unemployment in south- attention to efficiency is evident from the p 4 em Connecticut was well below 5%, the annual survey of the country's top 100 utili- i Resoentei commercer Inouetnal O lowest in nearly five years. This is due to the ties by Electric Light and Power magazine F .t 75 - div rsification in the industrial and commer- which listed UI's generating system as the [ fourth most efficient in the U.S. dunng 1982. j ,gg > cial economy of the area as well as im- [ ~ - ' provements in defense-related and capital The ranking shows steady improvement by i i .
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goods segments which continue to form a UI, from rankings of 24th in 1979,11th in substantial portion of the industrial base. 1980 and 5th in 1981 -improvement that ' 00 Activities in Bridgeport and New Haven, could take place only with the dedicated. I Connecticut's first and third largest cities, concerted effort of the Company's highly skilled employees. f t 0j serva as prime examples of growth poten- ' tialin Urs service area. Because of their efforts, the Company b in Bndgeport, plans are under way for a was able to meet the heavy demand placed [ $700 milhon redevelopment project for 135 on its system during the post-Labor Day [ weekend heat wave that resulted in near- LM L h aa.w - acres on the East Side that includes office buildirgs, a sports arena, movie theaters record energy use on Tuesday September and r: tail facihties to be built over a 20-year 6. A peak of 969.5 megawatts of electricity p --n-- " ~~m q~ period.Constructionof a240-roomhotel was reached that day, second only to the j- ; and conference center in downtown all-time high of 971.1 megawatts set on July t Bridgeport is scheduled to begin in July. 21,1980. l . m% Bridgeport's Downtown Council will focus in The electricity generating process also i 5 1984 on a course of action for renewing that carries with it certain environmental respon- [ 2D area of Bridgeport, while the Bridgeport sibilities such as air quahty monitoring and b 3 Economic Deve'epment Corporation will proper handling of oil to prevent major [ ^ g
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consid:r revitaRation of underutilized in- spills. The strength of Ul s air quahty moni- [ - dustrial properties. toring system was confirmed by an agree- [ In New Haven, work has begun on a $10 ment signed in 1983 permitting the State's i _ 7' Department of EnvironmentalProtection E million conversion of the former Seamless Rubber Company plant in the Long Wharf (DEP) to utilize data from the Company's 10 [ h- -8s tr:a near Long Island Sound for light indus- monitoring sites. The agreement was the [.
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first of its kind in the State. This data will L - to inal, commercial and office use. Construc-tion is progressing on the first build:ng in an 80-acre Science Park near Yale U. . ersity. help the DEP develop and evaluate the State's ambient air quahty attainment pfan. I f 71/]) _ j Meanwhile, downtown New Haven renova. To maintain UI s strong record of oil-spill [ . 24 (I tion is continuing, with numerous individual prevention, the Company played a leading I 25 projects, including the reopening of the his- role in organizing a three-day spill control [ - h toric Shubert Tleater. and hazardous materials conference in "c." ~ " ~ " " " " " " in towns surrounding these two major New Haven that involved more than 300 citi: s many other projects also are under professionals in pollution control. The con-w y or planned, including new off:ces, and ference was coordinated by the New Haven f " " ~ " " " P" ~ 7 2" g~ 1 r; tail and hght industnal f acihties, as Urs Harbor Petroleum Cooperative of which UI f MM - (thousanos) L 17-town area evolves toward a more tech- is a member. h nological, service orientation rather than {+ 10004 he;vy industry. [ q UIRankedRmrthin US h To meet this future energy demand, the { , Company is looking to add nuclear capac- [ ] f sty and diversity its energy mix, and also to maximize the use of its present generating i facihties through improved efficiency and [ .; j pr:ventive maintenance projects such as {): 800 4 6 4
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Getting Close To The Citstomer I i 1 4 Try1 f the Company is to continue to prosper and expanded programs that further stimu- l
' A fd in the years ahead, it must remain close late conservation. i to its customers, know their needs, antic- Included in Focus Nowis a plan to wrap ipate change and remain responsive. Meet- customers' water heaters for a nominal fee, ing this challenge will require a balanced low-cost energy-saving devices that can be strategy that considers equally the de- purchased through a mail-order program, mand, or customer side, as well as the more distribution of weatherization kits at no cost h.s s conventional supply side. This strategy will to customers who meet certain income 4- enable UI to develop programs diverse in guidelines, and a solar advisory service for scope, but common in purpose - serving customers interested in adding a solar-1 the customer. assisted water heater to their home. Details i i Reflecting this commitment, the Cus- of these programs are being explained to I
. tomer Services Department was reorga- customers through bill inserts as well as a nized in 1983, and customer services facili- series of advertisements appearing in local f ties centralized as detailed later in this newspapers and airing on radio.
'3~8 report. The customer-focused programs Often, customers simply want informa-i
* "q the Company is developing will augment tion about specific areas of energy use. The and strengthen those already in place. Company has taken steps to enhance its To determine if there are areas in which ability to satisfy such requests quickly and Ul can assist its large industnal customers, completely.
UI has been meeting with the top manage- Ul added four customer outreach repre-
?s ments of these organizations, which will sentatives in 1983 to provide free energy- ,
I give the Company a better understanding use seminars to low-income and elderly j of their operations and energy-related customers. Numerous informal meetings , problems. UI-sponsored efficient lighting also were conducted with customers at UI seminars for commercial customers were booths located in malls, banks and other I I heavily attended. The Company now offers areasof public accessin 1983. Allof the energy-saving audits of industrial and com- face-to-face meetings include literature ! I mercial facilities. These audits are similar to ' prepared on a wide vanety of energy-those available to residential customers saving subjects that is also available to any i through the CONN SAVE program spon- customer upon request. < sored by UI and the State's electric and All of these programs demonstrate to l gas utilities. customers that Ul cares - and can help. Initia!!y, CONN SAVE audits were limited Tho program 0 cmphasizo that customers , JayGallagher,generalplant A to Customers living in buildings of from one have the ability to conserve energy and use supenntendent for Bndge- to four dwelling units. Late in 1983, how- it wisely, and that Ul is committed to help. port's Carpenter Technology ever, the CONN SAVE program was ex-panded to include apartment dwellers, thus ca a di dustn7 executives whom Bob Hyde, making audits available to every customer assistant vice president-cus- in Ul s service terntory. l tomer services, and other members of Urs top manage-ment have met with in the past 7:MnMou'Pmgmin year. Meetings such as these UI has developed an extensive conser-give the Company a better un. Vation and Customer assistance program derstanding of customers' called Focus Now. This is a blend of proven operations. programs for conserving energy and new l
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Achiet'ing More Effectit'e Connnnnications
! re of the Company s maior stratenc y ' l i goais stated in .ast year s Annuat Y f Report was to conauct an ana'ysis in 1983 of U! s communicabons programs and f <
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i foremost recommendation of the report j[ l cahs for widespread commmnicat,ons wrth s ' I I UI customers and the pubi c-atdarge on Y~' j f- g l, Company conservabor act.v t'es and cor-t lf porate issues through a wed-deve:Oped
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cost-efficient med a advert s,ng campa gn Management current:y is rev.ew ng the Q' corporate adver!< sing proposa, as Aeh as a 4 < number of other nnovat ve task 'ur ce rec
.q _ ommendations Wh 'e each o' them mustbe S
JQ evatuated n the hght of buJget constra.nts 4'? % rC. and the most effecbve a :ocat<on o' re-J sour ces the report has served as a cataiyst i for achiewng rnore et'ect <e commurmca i y;t b t,v
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tions *n 1984 and beyoro [ Q; Q p w% s %;GQ ^ ~" AnnualReport n ins An'ard l_ Meanwhoe the Corrpany s ex stry i communicahans e" orts continue at a wgor-
, ous pace w s 1982 Annua Repon Aas Cited for e cec ence by 'ne Nat,ona Assoc, ation of Investors Inc The a Aard from this organizabor Ah ch stNes to educate .nd;-
viduaK about nvestments is especiahy
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tered rn this compet:t+or re revie Aed and rated by 'nds dua' 4nvestors The Compa ny S f)enodc news!etters 'or the rvestmen'
.' community focus and F'nanoa' Ne As cort,nue to be Aen received JI s Speaxers
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Members of Ul s board of A fatives rema n eHect,ve methods o' reach-directors were among many y og and donnng a vatef y O' audences individuals given tours of the Company s generating sta- Anothe' irrportant exterra' aud erce .n tions and other f acilities in Ul s comm n< u cat,ons p.an .s students tr 1983 Listening to New Haven 1:ed 1987 Thomas Hoover e'ementary schoo r Harbor Station Supenntendent . ,, Bndgeport becarr e the 'omr'h suc h nst % Mike Clarke are. from ie't. Leland W Miles. J Robert Gunther Frank Kenna 4 Strong Cornpany-Union sup-l Geraldine W Johnson. Chair- ,
*- port for the United Way by em-l man John D Fassett ' partially hidden behind Clarkel and 4'3
> ployees throughout the Corm pany resulted er nationa:
Robert D Russo. M D recognition along with this award presented by United Way s Hart Tartton to em-ployee coordinat'rg committee chairman Bdi McQuaton and other committee members (from .efti Ralph Aieho Karen Cholko Ben Mendez Arn Massimino Dominic Palumbo M a and Joe Roppo
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to include students from all - schoots in its service terntory [ ~1 _ _ , in 1983. hundreds of students developed messages with en- , ergy themes with the best of the entnes selected for ainng ,
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A Schoo: prograrr .n Ahich Ji pe'sor r e: c' - . fer the r nme and expe" se o energ y e:ec qM tnc safety and career opportun t es J1 s 1983 r aw,ng E nergy contes' on rad =o sta tion WICC n Becqepor' .o Ahtch huna'eus *' of Studen's t'om onde'garten 'hrough h gh j 5-I schooi deve oped rressages A th ene'qv .k themes A" ' be repeatea n ' 984 a ong A "' tours of Jl s f acc ! es Ah cn a'e a popu:a' . w, j Aay O' ed 4 a'.i >g cour gste's It;O . o et *
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- lar contact with the news me-those re Av adned and J der cor m do' dia througnout the year Here t,on d'e a resi . of co'r" or c d' or m r eet pres, dent Jim Cobey inght >
that ha've t;eer assessed try ? ' he v sP'
- and Manager Pubbc Infor-as e = a'r pies -:;' the 'r uce':src e .f p ac u mation Jack Dolan i fore- ,
oncon' o r . .; a' or s A h c h < r ""asa q , grounc , rneet with reporters and editona: wnters to discuss : De'nq Mrgetec M spec.f c aud er c.es the Company s 1983 rate case
PlanningFor TheFitture meet the challenges of tomorrow, UI has High AfarksIn Amlit in 1983,the Company took a number of steps to prepare its work force more fully to meet the challenges of the future. Par. increased the amount of employee training. In 1983, the number of participant days of All of these developments reflect sound planning by UI's management, a strength amount among these was a restructuring of training in management development pro- cited in a report on the Company com-a number of top-management functions, in- grams increased by more than 15% Ex- pleted in early 1983 by Temple, Barker & ciuding the naming of Robert L. Fiscus as panded job skills and technical training Sloane (TB&S), management consultants. executive vice president and chief financial programs are available to every employee. TB&S had undertaken a management audit officer, and R: chard J. Grossi as executive One of these programs was a line school of the Company in 1982 for the DPUC pur-vice president and chief operating officer. conducted in the fall, the first held by the suant to the Connecticut statute requinng Mr. Fiscus has responsibility for finance and Company since 1981, in which 10 gradu-periodic audits. The report, which gave the accounting, public affairs, management ates successfully completed four weeks of Company high marks overall, stated that,"In services and communications; Mr. Grossi intensive training. the past two years, Ul management has for customer services, human resources, To remain abreast of rapidly changing significantly strengthened the Company's corporate planning and development, as computer hardware technology, Manage- corporate planning capability, and the sta-well as operations, engineenng and envi- ment Services installed an IBM 3083 com- tus of planning at Ul is good by industry ronmental engineering. puter in November 1983, to replace its five-standards! Other changes aimed at continuing to year-old 3032 computer. The new computer Also gratifying were awards received strengthen the Company's management functions about 2.2 times faster than the during 1983 by UI from the Edison Electric team include the appointment of Leon A. previous computer, which imptrv.es re- Institute (EEI) citing five of the Company's Morgan, former executive vice president for sponse time on its many important affirmative action programs. eel. the trade operations, engineenng and customer ser- functions. association of the nation's electric utilities, vices, to senior vice president - finance and presented the awards at its annual Aff,rma-accounting; Charles W. Cook, former vice tive Action Seminar in March. Among the president - customer services, to senior .~ awards, the Company's overall affirmative vice president - corporate planning and y' action program garnered top honors for a development; E. Jon Majl<owski, previously ~ utility with less than 5,000 employees. Also, director of financial planning and control, to . cm ? . . an outstanding achievement award was the new position of vice president- public d ~ presented for a program entitled " Career affairs: and Robert H. Hyde, previously d'- ' p' Counseling For Female Employees." rector of engineering services and special - 3.m These honors, along with the ir,, prove-projects, to assistant vice president - cus- , L ments noted in training, management struc-tomer services. 1 . ture and facilities, are indications of UI's y commitment to provide high-quality service NewFac/ lit /es as well as reliable energy, through a well-Significant progress was made dunng trained, well-managed work force. the year on construction of modern, efficient facilities to house the Company's opera- .y BoardofD/ rectors. tions. A new building, adjacent to UI's cor- Frank Kenna, president of the Marlin porate headquarters in downtown New J Firearms Company of North Haven, and J. Haven, was completed in late 1983 and UI Robert Gunther, chairman and president of personnel from several corporate functions the George Schmitt & Company pnnting as well as customer contact personnel firm of Branford, were named to UI's Board serving the greater New Haven area, have of Directors at the Company's annual meet-occupied the four floors the Company will ing in Apnl. They were nominated to replace Employee Development Su- A be leasing. Ground was broken in the pervisor Laura Solomon is one retired Senior Vice President John M. C. spring for the new Western Division Service of anumberofindividualswho Betts and Senior Vice President Leon A. Center in Shelton, which will be the base for help train Ul employees to en. Morgan. Mr. Betts stepped down in accor-about 300 operations and customer ser- sure that they continue to have dance with the board s retirement policy vices personnel, as well as supporting per- the skills necessary to meet and Mr. Morgan vacated his seat to enable sonnel and facilities, that serve customers thechat:angesof tomorrow.In a greater number of outside directors to in the westem half of UI's service terntory. 1983. the number of partici-hold membership on UI's board When the center is occupied in late 1984, pant days o ain gin ma two existing divisions in several scattered work locations will be combined, and both grams increased 15% efficiency and quality of service to cus-tomers should be improved. To ensure that the Company's work force Mary Paquette, lead systems > continues to possess the skills needed to programmer, and Vin Pacelli, manager of data processing, are part of the team that brought a high-speed IBM 3083 computer on hne in 1983. The new computer functions about 2.2 times faster than the 16 previous computer.
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4 Customer Inquiry Representa- A The Western Division Service T~ _. Sp tive Came Ray and other cus- Center in She' ton wi!! be the t ~ ..a ' ' . , torner cortact personnel pro- base for serving customers in j k , 4 y __- vide more eMciert service thatha!f of UIs servicetern-g ~ N w L " to customers from modern tory Wa t Bawer, transmission quarters in a new budding and distnbution supennten-
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~ L. i. Ten-Jbar Summary ofSelected Financial and Statistical Data 1983 1982 The Kilowatt Hour Sales (000) Residential 1,637,581 1.593,854 United Commercial 1,657,518 1,578,433 Illuminating industrial 1,255,824 1,232,942 Company Other 71,085 69,935 Total 4,622,008 4,475,164 Financial Results (000) Sales of electricity-Residential $ 166,350 $ 161,237 Commercial 163,458 156,902 Industrial 107,724 106,788 Other 9,771 9,652 Other operating revenues 2,283 2,151 Total operating revenues 449,586 436,730 Operating expenses excluding income tax expense 356,380 353.070 income tax expense (credit) 37,746 31,810 Allowance for funds used dunng construction 52,407 40,349 Other income 13,981 8,595 Interest charges 41,345 35,039 Cumulative effect of change in accounting - - Net income 80,503 65,755 Preferred and preference dividends 14,084 14,084 Income applicable to common stock $ 66,419 $ 51,671 Capitalization (000) Long-term debt $ 394,115 $ 373.015 Preferred and preference stock Not subject to mandatory redemption 70,000 70,000 Subject to mandatory redemption 65,000 65,000 Common stock equity 408,331 319,720 Total $ 937,446 $ 827,735 Common Stock Number of shares at year-end 12,972,344 10,693.605 Average numoer of shares outstanding 11,708,570 9.579,312 Earnings per share (a) , Before cumulative etfect of change in accounting $5.67 $5.39 I Cumulative effect of change in accounting - - Income applicable to common stock $5.67 $5.39 Dividends declared per share $3,08 $2.92 Book value per share $31.48 $29.90 Shareowners-Total 41,067 39,213 in Connecticut 17,862 17,750 In Company terntory 13,742 13.439 General Peak load - kilowatts 969,500 951,700 Generating capability at year-end - kilowatts (c) 1,235,850 1,235,850 Number of customers 287,370 284.586 Kilowatt-hours per residential customer 6,336 6,211 Number of employees 1,569 1.51F Total payroil(000) $ 44,114 $ 40,31m Total taxes (000) 3 66,300 $ 64,31' Utility plant at year-end (000) $ 1,238,096 $ 1,049,761 Gross property additions (000) $ 197,412 $ 167,92-T Total assets at year-end (000) $ 1,179,409 $ 982.85@j (a) Earrungs per share based on the average number of sha'eS outstanding (b) neiates to change in method of accounting for fossil fuel costs (c) Represents maomum dependab'e net cad carrying at>hty during the n.nter perod for New Eng!and Power Pooi purposes inciud ng UI s sha e of capac;ty in Connecticut Yankee Atom,c Power Company (55290 KW) 18 1 _ _ _ _ _ _ _ _ __ _J
-1981 '1980 1979 1978 1977 1976 1975 1974 1,611.212 . '1,660,353 1,677,431 1,683,363 1,664,029 1,660,733 1,627,194 1,601,131 1,551,228 . 1,568,638 1,565,380 1,541,127 1,505,879 1,474,885 1,402,742 1,327,138 1,315,172 1,415,274 ' ~ 1,467,969 1,419.297 1,356.652 1,298,990 1,241,912 1,453,283 70,299 70,813 69,971 . 68,621 67,541 64,391 61,104 60,124
'4,547,911 4,715.078 4,780,751- 4,712,408 4,594,101 4,498,999 4,332,952 4,441,676
~
i 164,595' ' $ 133,763 $ 104,512 $ 8' 2,316 $ 84,099 $ 75,860 $ 74,684 $ 66.973 157,386 122,904 94,400 72,361 73,323 64,623 62,175 54,165 117,624 " 98,303 75,316 54,994 55,348 47,049 45,639 47,048 9,613 7,697 6,330 5,463 5,530 5,096 5,003 4.732 1,804 1,455 1,320 1,181 1,203 1,192 1,150 920 451,022 364.122 281,878 216,315 219.503 193,820 188.651 173,838 386,279 .328.253 238,605 183,289 182,696 162,060 161,322 148,638 22,454 (387) 4,963 (164) 2,259 466 (3,507) 98 28,113 27,555 15,501 8.268 4,937 2,843 6,630 7,186 9,040 710 1,102 740 143 528 292 546 29,904 30,055 25.245 20,721 15,970 16,103 16,204 14.081
--- - - - - - - 1,884(b) 49,538 . 34,466 . 29.668 21,477 23,658 18.562 21,554 20,637 12.351 9,296 5,744 4,751 4,751 3,717 3,431 3,431 o 37,187 $ 25,170 $ 23,924 $ 16,726 $ 18,907 $ 14.845 $ 18,123 $ 17,206
- i. 303,648 $ 295,581 $ 251,976 $ 233,953 $ 241,931 $ 216,908 $ 216.885 - $ 187,130
- 70,000 ~ 70,000 70,000 70,000 70,000 70,000 55,000 55,000 65,000 45.000 15,000 - - - - -
262,198 222,861 186,326 177,526 149,099 142,104 139,764 106.814
, 1700,846 $ 633,442 $ 523.302 $ 481,479 $ 461,030 $ 429,012 $ 411,649 $ 348,944 9,154,578' 7,660,132 6,090,448 6,047,018 5.020,119 '4,999.514 4,999,514 3,804,514 ,
8,775,667 7,061,241 6.072,725 5,458,428 5.012.122 4.999,514 4,424,281 3,677,117
$4.24 $3.56 $3 94 $3.06 $3.77 $2.97 $4.10 $4.17
.51(b)
$4.24 $3.56 $3.94 $3.06 $3.77 $2.97 $4.10 $4 68
. $2.76 $2.68 $2.62 $2.56 $2.47 $2.35 $2 32 $2.32
- $28.64 $29.09 $30 59 $29 36 $29.70 $28.42 $27.96 $28 08 37,868 36,447 34,554 35.285 32,354 32,879 33,468 29,066 s 17,765 18.372 18,439 19.018 18.695 19.484 20.355 19,783 11,815 12,456 12,155 12.343 12.201 13,037 13,718 13,634 949,100 971,100 915,300 952,900 944,100 862.500 859,100 829.800 1,281,050 1,299,360 1,299,360 1.322,800 1,331,020 1,403.290 1,438,140 1,010,330
'282,890 280,800 278,523 276.289 274,432 271,871 270.109 268,511 6.312 6,545 6,664 6.739 6,711 6,749 6.650 6 593 1,514 1,481 1,460 1,424 1,421 1,422 1.449 1,516 35,581 $ - 31,653 $ 28,405 $ 25,894 $ 23,317 $ 22,021 $ 20,613 $ 20 067 54,510 $ 34,777 $ 32,424 $ 23,180 $ 24.108 $ 21,583 $ 16,219 $ 18,112
- 922,734 $ 830,034 $ 764.651 $ 681,585 $ 612.237 $ 566.549 $ 534,156 $ 500,409 5 115,540 $ 98,413 $ 86.643 $ 70,731 $ 48.300 $ 35.396 $ 39.866 $ 73 608 h 836,506 $ 739,027 $ 666,387 $ 575.110 $ 515.037 $ 482,459 $ 458 617 $ 437,892 19
Management's Discussion anctAnalysis ofFinancial Conclition anctResults ofOperations Th3 Major Influences On The company's financial condition is sensit;ve to all of these factors: but only the Unittlid Financial Condition last two factors influence results of opera-Illuminating in recent years, and particularly over the tons, sm@e eM oWwo-monm p Ccmpany last few years, the financial condition of the ing lag is deferred for accounting purposes, Company has been affected by two interre- pend!ng regulatory approval of an amorti-lated factors- a heavy dependence on zation schedule and recovery through gen-expensive foreign oil as a source of fuel to eral rate revenues. Recovery of this deferral generate electncity and a large construc- effectively reverses the effect on financial tion program to meet the objective of re- condition caused by the lag in billing ducing the economic burden and reliability Changes in oil pnces. Current general rates, nsks of th's reliance on oil-fired generation. which became effective on August 29, The Company's financial condition is ex- 1983, include a provision for an eighteen-pected to be sensitive tc these factors until mon amomzaton of WAon o%M at least the mid 1980's. when the major por-tion of the present construction program is cosum As a resMWs amo@ zation and increasing oil prices. there was a expected to be completed and depen-
$33 mmon cmdit Mance of dewed fossd denceon oil substantially reduced fuel costs at the end of 1983.
Over f h efectncity sold by the N NN The Company is engaged in a large con-Company is produced by buming resicual stmcten pmgram, the major portion of
.- gm .,._ fuel oil. Substantial changes have occurred which consists of participation in the con-I ) in the pnce of this oil over the past three stmction of three nuclear generating units:
h years. After reaching a peak of just over $40 O -l 17 5% shares in Seabrook Unit Nos.1 and per barrel in March of 1981, the price of oil 2 in Seabrook, New Hampshire, and a f; has genera lly declined to :he point where 3 685% share in Millstone Unit No. 3 in the average fuel oil pnce for 1983 was ap- Waterford, Connecticut. Through the end of f proximately $29 per barrel. This reduction 1983. the Company had invested $650 mil-i j "' reflected both a weakened demand for oil lion in these three units under construction, U world-wide and the effect of a change in an amount in excess of present net plant in I Connecticut's environmental standards that service. Approximately 63% of thisinvest-
! permitted the sulfur content of oil burned to ment occurred dunng the last three years.
(h " ! ( beincreased from 0 5% to 1%. Although a fossil fuel adjustment clause Substantial additional investment will be re-quired to complete construction of these M* l in the Company's rates considerably miti_ un s
} gates the effects of oil pnce changes, there to are three significant effects of pnce fluenced by both the size and the cost of changes on the Company s financial condi-nq w hMmsMm ton The effects are favorable when oil TW e@m N mm pnces decrease below the base price in-n
- cluded in the adjustment clause and unf a.
, , ,. , , e MM m vorable when o!! pnces increase.
L -~ ~,., w" -
,~u limited to the income tax benefits of con-First, there is a time lag in the operation of the adjustment clause. since changes in fuel costs are not reflected in customer bill- flected #n rates charged to customers. How-ings until two months after the costs have been incurred Second, the Company is re-of financing such construction ba!ances is quired to pay the State of Connecticut a tax of 5% on all revenues. including the reve- d @ mahemo hWor funds used dunng construction nues resulting from the operation of the fuel adjustment clause. Third. there is the cost '
of financing oil purchases which vanes di- e cept e the case of Seabrook Unit No.1 rectly with the pnce of oil. 3MNmmb this exception, the Connecticut Department of Public Utility Control (DPUC), in its Au-gust 1983 decision on the Company's re-quest for a general rate increase, did allow the Company to include in rate base ap-proximately $ 120 milhon of its investment in Seabrook Unit No.1. 20
Also included in this rate decision was j .NW L esams l1 RateRelief an order requinng the Company to make The Company's three most recent rate every effort to seek the cancellation of Sea- decisions have included significant steps brook Unit No. 2, in which the Company had invested $124 million through the end of h C in the direction of improving internal cash generation, return on investment and the 1983. The DPUC indicated that it will con- , opportunity for achieving allowed returns. sider favorably recovery of prudent ex- The first major step was the DPUC's penditures currently associated with the adoption of full normalization accounting for unit ara further indtcated that if an ade- income tax benefits applicable to post-1980 quate effort to comply with its order were construction expenditures and additions to not made, it would consider seriously the plant in service. This step was substantially partial disa!!owance of future costs for the effected in connection with a $36 million an-unit. Therefore, the Company has been, nual revenue increase obtained in Decem-and intends to continue, making every ef- ber 1980. This increase also provided for a fort to obtain cancellation of the unit. To 151% retum on a common stock equity date, these efforts have resulted in unani* capitalization ratio of 40% (increased from mous agreement by the participants to re- 1 35% used previously). duce Unit No. 2 expenditures to the lowest 0l? The allowed rate of return was raised to feasible level untd Unit No.1 is ready for fuel . 1979 : SD ' ' M < et 1 as ' 16.5% in September 1981, when a general loading, unless Unit No. 2 is cancelled prior g,,,,,gr g rate increase of $41 mdlion in annual reve-to that date. L:' g < nues became effective. Another significant The Company currently estimates that its element of this increase was its provision for 1984 construction program will total $183 anticipated high inflation in operating and mdkon, including $97 mdhon for Seabrook financing costs through 1982, which, for the Unit No.1. $33 mdhon for Seabrook Unit No first time, afforded the Company a realistic 2, and $28 mdhon, including nuclear fuel opportunity to earn the allowed return under costs, for Mdistone Unit No. 3. These Liquidity And Capital inflationary condit.ons. In view of these pro-amounts. which assume a continuation of Resources visions. it was not necessary to request ad-construction work on Seabrook Unit No. 2, Current construction expenditures are fi- d:tional rate relief dunng 1982. and include allowance for funds used dur- nanced through a combinoMn of intema!!y On August 29,1983, a $35 mdlion in-ing construction, are based on cost esti- generated funds and short-term borrow- crease in annual revenues (aflowing for a mates and completion schedules prepared ings. Short-term borrowings are subse- 16.4% return on common stock equity) be-by the lead participants in both the Sea- quently repaid through sa!es of equity se- came effective A significant portion of this brook and Mdistone projects. The estimate cunties and long-term debt or by means of increase was based on measures designed of future construction expenditures is sub- other long-term arrangements. to improve cash flow, including $28 million ject to the results of a comprehensive re- In recent years, intemally generated attnbutable to inclusion of a portion of Sea-view of the estimated costs and in-service funds have provided varying percentages brook Unit No.1 construction work in prog-dates of both Seabrook Units. which review of construction expenditures. and the Com- ress in rate base and $10 mdlion for full is now in progress. As a result of this review, pany has been dependent on outside fi- recovery over a two-year penod of the expected to be completed by March 1 nancing to prov de a major portion of its Company's investment in the cancelled 1984, substantial increases in the current capital requirements. From a low of 3% in Pdgnm Unit No. 2 nuclear project. cost estimates and delays in the in-service 1980, the percentage of construction ex-dates are anticipated, particularly for Unit penditures financed internally increased to (Continued on Next Page) No. 2. 21% in 1981, primanly because of an im-A sma!!er but nevertheless significant provement in the adequacy of rate relief. construction project which is also designed Although internally generated funds in 1982 to reduce the Company's dependence on increased over 1981, the high level of con-residual fuel oil is the reconversion of its struction expenditures caused the percent-Bndgeport Harbor Station Unit No. 3 to the age to dechne to 16%. In 1983, an even dual-fired, coal / oil, fuel capabdity for which higher levelof construction expenditures it was onginally designed This project, esti- and the impact of the carrying costs associ-mated to cost $45 mil lion, offers potential ated with higher construction balances fuel cost savings to the Company's cus- combined to reduce the percentage to 8%. tomers of several million dollars per year, based on the current pnce differential be-tween coal and oil. It is expected that this project. on which construction commenced in 1983 will be completed early in 1985 21
Management's Discussion...
"""~~~""~{ Financ/ng Program million less than 1982 and $7.5 milhon less f
Y ' d The Company's financing program is than 1981, due mainly to the increased car-rying costs associated with large construc-
! 4 structured around maintaining target capi.
tion balances. The 1983 increase in earn-
; talization ratios of approximately 40% com.
[ mon stock equity,15% preferred and pref. ings per share oser the 1982 level can be C sog , attnbuted principally to an increase in 1983 erence stock, and $5% long-term debt. kilowatt-hour sales and the negative impact
;4 These target ratios have been incorporated I( o,, .
' 40 into the Company's rate decisions since on 1982 earnings of income taxes on a non-
_" December 1980, and have resulted in the recurring taxable gain on the sale of Sea-generation of increased amounts of re. brook nuclear fuel pursuant to the sa!e and h tained earnings. $30 million in 1983 alone. leaseback financing agreement. L 7 canimin 30 ] in 1983, kilowatt-hour safes increased p 2 1 This, combined with the emphasis placed 3.3% over the 1982 fevel, reflecting im-h lo >] on common stock financing in view of rela-tively favorable market conditions during proved commercial activity and warmer 1983, enabled the Company to end the year than normal weather for the summer b with a common stock capitalization ratio of months. This reversed the downward trend I ' Pretened ' to \ in kilowatt-hour sa!es which began in late
)' '
]
'i 42.2%, up 3.6% from 1982. Year-end 1983 long-term and short-term debt capitahza. 1979 and continued through 1982 with suc-O tion was 43.9% and preferred and prefer. cessive annual decreases. These lower
(} i i74 75' 76 77 7s 79 ao at er sa 1 ence stock was 13 9%, both down from sales volumes appear to have been due to persistent depressed economic conditions duaw_ . ~ m _ d 1982. Attaining this capitalization structure has in the Company's service terntory, evi-increased financing flexibihty, which the denced by a dechne in industrial activity, pe . *mo +-m including several plant closings, and by in- [ gggg g () Company retains by limiting short term bor. creased conservation of energy by cus-( rowings to approximately 5% of capitaliza_ [ tion and by following a regular pattem of tomers in all rate classes. [p y replacing such borrowings with long-term In 1982, the rate increase of September 1981 added $28 milhon to operating reve-financing. [ During 1983, the Company issued 2.3 nues, but was more than offset by the im-
- t. -
pact on revenues of lower 1982 fuel oil million shares of common stock, reahzing proceeds of $59 million. In addition, the prices through the operation of the fuel ad- {( s Company negotiated a $40 milhon term justment clause and the effect of decreased 7 loan agreement with a commercial bank kilowatt-hour safes. However, operating (.E revenues for 1983 exceeded those of 1982,
& : ys x and made an initial drawdown of $20 million in September. The Company continues to due mainly to tne increase in kilowa:t-hour h sales and the Argust 1983 rate increase.
k . Utilize a lease arrangement for the financMg of nuclear fuel for the Seabrook Units and, Fuel and interchange energy expense [ : :} k d dunng 1983 entered into a fuel reserve and declined by 17.8% in 1982 compared to the 1981 level, as the pnce of fuel oil decreased { 25 j supply agreement with the same financial institution to finance fossil fuel purchases from a high of $40 per barrel in early 1981 to [y .} up to $100 milhon, less the outstanding nu- a low of just over $27 in Decembe- 1982.
=ol clear fuellease obligation. At December 31,
( 31979 , so 81 , e2 . e3 Q 1983. an aggregate of approximately $36.4 [- _. _. . .
. m, . . _.-
- -] million of nuclear fuel and $43 million of fos- m m.
._ ,_]
sil fuel purchases was being financed un-der these arrangements. a t b W ' Results Of Operations income applicable to common stock for 18 : 1983 increased substantially over 1982 and 1981 to a record $66.4 milhon, or $5.67 per ~4 share. Return on year-end common stock < ,9 equity reached 16 3%, approximately the g r j level approved in the Company's 1983 rate t iW 1 decision. This marked the third successive k year of improved earnings, although inter- [ i2~. 1 na!!y generated funds in 1983 were $8 9 11
.c h
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i 1979 - 1 00 81, 82 . 83 .
- 5 Anowed- ' c ictuar 'j 22 Lu w.- - u.a._,a w m
v . w . .. c 7 p.* a . . g .o; w r i,. w m w. .. .e- . + . , _ a_ _ e. e nax, ., , . ~.. . . , , . , . . . . .,.
"~~"" ~F"~~"~" Outlook balance included in rate base, a change, if granted. is not likely to be effective before sWMMb h After seven successive years of in-creased nuclear construction expenditures, the beginning of 1985. Therefore, internally k . 1984 is expected to mark the beginning of a generated funds are expected to decline to a negative amount dunng the latter half of
{p
- 88 00. period of declining expenditures, as con-struction of the Seabrook and Millstone 1984.
{~ -~ Units proceeds toward completion. The From a financing standpoint, the Com-s 00 Company enters this period with the highest pany plans to continue to preserve its finan-common equity ratio in more than ten years, cial flexibility through a regular pattem of
- j. Emirige ggg .
a position which will allow flexibility in fi- replacing short-term borrowings with long-g nancing completion of the nuclear units. term financing in a manner consistent with p ^ 3 0N, Construction expenditures in 1984. pn- maintenance of its target capitalization ra- [ d marily related to the nuclear units, are antic. tios. In so doing, the Company plans to W 9 J :a* c 4001 ~' ipated to be about 7% below 1983. Al- continue to use the conventional sources used in the past as well as any other options
-- though expenditures are expected to hL 1 decline further in 1985 and subsequent that are consistent with the aim of accom-years, construction spending for these plishing the required financing on reason-
{( , og } able terms. In accordance with these ente-years will depend on the results of a revised p 0} na, the Company expects to do as much as
, Seabrook project cost and schedule esti-
[ mate expected to be released to the partici. $170 million of external financing during (1979, . 80; ^' 81L :ST 83 ; [hw t . umm;s pants on March 1,1984, and on the future of the second Seabrook unit. In any event, 1984. The sale of substantial amounts of common stock in 1983 under relatively fa-vorable market conditions is expected to the size of the Company's current invest-ment in construction work in progress wift permit the use of fower cost debt financing Fuel and interchange energy declined to meet mcst of 1984's requirements, al-increase, to as high as $1 billion, prior to the slightly in 1983 as the effect of the decrease though the sale of additional equity securi-in-service date of Seabrook Unit No.1, the in the average price of fuel oil more than ties in 1984,in the event of favorable market offset the increase due to higher kilowatt- Unit which requires the largest investment. This increasing construction balance will conditions. remains a possibility. hour safes. The Company also expects to complete Other operation and maintenance ex. have major implications for earnings and in-ternally generated funds until completion of during 1984 a $50 million project financing penses increased in 1982 and 1983, due arrangement to cover the cost of reconvert-Seabrook Unit No.1 which, as a result of the pnncipally to the continuing effect of infla. ing a generating unit in Bndgeport from an tion on employment and other costs. Ca. revised schedule, is likely to be delayed be. yond the currently scheduled date of July oil-burning to a coalloil burning capability. pacity purchased expense also rose each Revisione to cost est: mates and sched-1985. year, due to increases in operating and uled operational dates of the nuclear units Consistent with results for 1983, a major capital costs at the Connecticut Yankee nu. could change the Company's financing Company goal for 1984 and future years is clear unit. plans, the success of which is also depen. in 1982, other taxes were slightly above to continue to realize retums on common stock equity approximating the returns al. dent on other factors, including conditions 1981, due to increases in local property in the secunties markets, economic condi-taxes and payroll taxes, partially offset by a lowed for rate purposes. During the time prior to completion of the first Seabrook tions. the level of the Company's sa!es and drop in state gross earnings taxes associ- its ability to obtain adequate and timely rate ated with lower revenues. Higher state Unit, achievement of this goal will be facili. tated by the large proportion of earnings relief. gross earning taxes, payroll taxes and local property taxes were pnncipal causes of the that will be attnbutable to allowance for 1983 increase in other taxes over the prior funds used dunng construction, which is lnflatlOn based on the return currently allowed for For further discussion of the effects of year. income tax expense rose in 1982 and rate purposes. char'ging prices on the Company, see On the other hand, the cash outtavs re- Supplementary in'ormationsinflation. 1983, reflecting increases in pre-tax in. quired to finance the increasing construc-come and the effect of income tax normali. zation accounting adopted in 1981. tion balance will exert a negative influence In 1983, interest on long-term debt and on internally generated funds to the extent other interest charges were 38 3% above that the construction bafance is not in-the 1981 level, due to greater construction cfuded in the Company's rate base. Al-fin ncing requirements and higher interest though DPUC permission may be sought rit;s. However, net interest charges re, during 1984 to increase the construction flected in the statement of income for the same two-year period increased only 6.5% because the allowance for borrowed funds used dunng construction (including the tax l benefits attnbutable to the adoption of net-of-tax treatment in 1981) partially offset the increases in interest on long-term debt and other interest charges. 23
S
- Statement ofIncome For the Years Ended December 31,1983,1982 and 1981 (Thousands exceptper share amounts) 1983 1982 1981 ygge Operating Revenues v $449,586 $436.730 $451,022 United l Illuntinating Operating Expenses Conapany Operation Fuel and interchange ene gy- net 200,377 202,579 246,466 Capacity purchased, nN 11,148 8.081 7,147
! Other 65,928 59,140 52,737 Maintenance 22,453 23,471 18,464 l Depreciation 15,754 15.409 15,736 Amortization of deferred fossil fuel costs (1,336) 6.164 8,214 Amortization of cancelled Pilgrim nuclear project 2,461 - - Income taxes 37,746 31,810 22.454 Other taxes 39,595 38.226 37.515 Total 394,126 384.880 408,733 Operating income 55,460 51.850 42.289 Otherincome and Deductions Allowance for equity funds used during construction 40,443 31,631 21,022
, Other- net 910 (625) 1.541
' 41,353
,. Total 31.006 22.563 Income Before knerest Charges 96,813 82.856 64.852 Interest Chargets ,
Interest on long-term debt 38,862 31,971 26.639 Otherinterest 2,483 3,068 3.265 Allowance for borrowed funds used during construction (11,964) (8,718) (7,091) Income tax benefits attnbutable to the allowance for borrowed funds (13,071) (9.220) (7.499) Net Intetest Charges 16,310 17.101 15.314 Netincome y' 80,503 65,755 49,538 Div'dends on Preferred and Preference Stock 14,084 14.084 12.351 Income Applicable to Common Stock $ 66,419 $ 51.671 $ 37.187 Average Number of Common Shares Outstanding 11,709 9,579 8,776 Earnings per Share of Common Stock $5.67 $5.39 $4.24 Dividends per Share of Common Stock $3.08 $2.92 $2.76 The accompanpr$g Statement of Accounting Policies and Notes to Financial Statements are integral partsof thefinacialstatements. aA
- 24
_b
Statement ofSources ofFundsfor Gmss Pmperty Additions For the Years Ended December 31,1983,1982 and 1981 (Thousands o/ Dollars) 1983 1982 1981 SOURCES OF FUNDS ' internally Generated Net income $ 80,503 $ 65,755 $ 49.538 Add (deduct) Depreciation and amortization 17,352 21,763 24,144 Deferred income taxes 3,273 (2,690) 2.613 Deferred investment tax credits - net 13,091 17,776 7,253 Allowance for funds used during construction (52,407) (40.349) (28.113) Funds provided from operations 61,812 62.255 55,435 Deduct dividends declared 50,505 42.097 36.672 Internally Generated Funds 11,307 20.158 18.763 External Financing Secunties sold Common stock ' 58,982 34.102 27.675 Preferred and preference stock - - 20.000 Debentures - 30,000 20.000 Expenses of issues (365) (2.527) (1.341) 58,617 61.575 66.334 Retirement of debentures (5,667) (4.000) (12.000) Nuclear fuel financing obligation 5,332 31.049 - Increasein other long-term debt 26,700 43.300 - Increase (decrease)in notes payable 31,000 (39.902) 21.375 Funds Obtained from External Financing 115,982 92.022 75.709 Other Sources (Uses) (Increase) decrease in working capital, excluding notes payable and current portion of long-term debt 20,401 11.927 (6,189) Deferral of fossil fuel costs (1,334) 3,171 273 Other changes in noncurrent balance sheet items (1,351) 297 (1.129) Other Sources (Uses) 17,716 15.395 (7.045) Funds for Property Additions from Above Sources 145,005 127.575 87.427 Allowance for funds used during construction 52,407 40.349 28.113 GROSS PROPERTY ADDITIONS $197,412 $167.924 $115,540 Statement ofRetainedEarnings For the Years Ended December 31,1983,1982 and 1981 (Thousands of Dollars) 1983 1982 1981 Balance, January 1 $123,443 $ 99.785 $ 86.919 Netincome 80,503 65.755 49.538 203,946 165.540 136,457 Deduct Cash Dividends Declared Preferred and preference stock 14,084 14.084 12,476 Common stock 36,421 28.013 24,196 50,505 42.097 36.672 Balance, December 31 $153,441 $123.443 $ 99.785 25
BalanceSheet . December 31,1983,1982 and 1981 (Thousands of Dollars) ASSETS 1983 1982 1981 The Utility Plant at Original Cost United in service $ 571,852 $564.070 $556,448 Illurninating 201,954 196,220 Less accumulated provision for depreciation 213,987 Company 357,865 362.116 360,228 Construction work in progress 666,244 485.691 366.286 Net Utility Plant 1,024,109 847,807 726,514 Other Property and Investments 44,951 38.031 7,023 Current Assets Cash 3,526 1,252 2,567 Accounts receivable Customers, less allowance for doubtful accounts of $1.680, $1.550 and $1,350 47,892 41,404 43.364 Other 12,356 5.292 8,412 Accrued utility revenues 21,398 21.659 20,841 Fuel, materials and supplies, at average cost 7,815 7,518 7,761 Prepayments 695 222 440 Total 93,682 77,347 83,385 Deferred Debits Unamortized cancelled Pi! grim nuclear project 12,457 14.907 14.643 Deferred fossil fuel costs - - 2,949 Other 4,210 4,760 1.994 Total 16,667 19.667 19.586
$1,179,409 $982.852 $836,508 The accompanying Statement of Accounting Policies and Notes to Financial Statements are integral parts of the financial statements.
26
- m. -
CAPITALIZATION AND LIABILITIES 1983 1982 1981 Capitalization Common stock $ 260,468 $201,486 $167,384 Capital stock expense (5,578) (5.209) (4,971) Retained earnings 153,441 123,443 99,785 Common stock equity 408,331 319.720 262,198 Preferred and preference stock Not subject to mandatory redemption 70,000 70.000 70,000 Subject to mandatory redemption 65,000 65,000 65,000 Long-term debt 383,448 367,348 299,648
-Total 926,779 822.068 696,846 Current Liabilities - Current portion of long-term debt 10,667 5.667 4,000 Notes payable 31,000 - 39,902 Accounts payable 67,937 34,342 32,795 Dividends payable 13,507 11.325 9.838 Taxes accrued 20,369 20.052 18.589 Interest accrued 4,217 4,085 3.510 Other accrued liabilities 10,811 10.303 9,486 Total 158,510 85.774 118,120 Nuclear Fuel Financing Obligation 36,381 31.049 -
Deferred Credits Customers' advances for construction 1,818 1,763 875 Accumulated deferred investment tax credits 42,275 29,184 11,408 Deferred income taxes 9,930 6.628 9.259 Deferred fossil fuel costs 3,716 6.386 - Total 57,739 43,961 21,542 Commitments and Contingencies - - -
$1,179,409 $982,852 $836.508 27
StatementofAccountingPolicies AccotantingRecorc/s incorne Taxes The accounting records are maintained in accordance with 3e Company has adopted the policy of full normalizEtion the uniform systems of accounts prescnbed by the Federal . accounting for income tax benefits with respect to bcok-tax Energy Regulatory Commission (FERC) cno the Connecticut timing differences applicable to post-1980 property addi-Department of Public Utility Control (DPUC). tions and all ins estment tax credits used to reduce current federal income taxes. The major portion of the credits gener-UtilityPlant _ ated results from the Company's election to take investment The cost of additions to utility plant and the cost of renewals tax credits applicable to long-term projects on a progress-and betterments are capitalized. Cost consists of labor, ma. of-construction basis. These accounting policies were ap-t riais, services and certain indirect construction costs, in. proved by the DPUC in a December 1980 rate decision and ciuding an allowance for funds used during construction. in a supplemental decision issued in December 1981, the
. The cost of current repairs and minor replacements is purpore of which was to bring the Company into full con-charged to appropriate operating expense accounts. The formity with the income tax normalization accounting provi-original cost of utility plant retired or otherwise disposed of sions of the Eco.iomic Recovery Tax Act of 1981.
and the cost of removal less salvage are charged to the accumulated provision for depreciation. Accruert Ut///tyRet'entres The est; mated amount of utility revenues (less related ex-
' Allou anceforFunds Used During Construction penses and applicable taxes) for service rendered but not in accordance with the applicable regulatory systems of ac. billed is accrued at the end of each accounting period.
counts, the Company capitalizes an allowance for funds used during construction (AFUDC), which represents the Intestinents approximate cost of debt and equity capital devoted to plant The Company's investment in Connecticut Yankee Atomic under construction. In accordance with FERC prescribed Power Company, a nuclear generating company in which accounting, the portion of the allowance applicable to bor- the Company has a 9%% stock interest, is accounted for on towed funds is presented in the statement of income as a an equity basis. reduction of interest charges, while the portion of the allow-ance applicable to equity funds is presented as other in- MSS //ruez Costs
- come. Although the allowance does not represent current The amount of fossil fuel costs that, pursuant to the fuel cash income, it is recoverable under the rate-making proc- adjustment clause in the Company's rates, cannot be re-ess over the service lives of the related properties. The flected currently in customers' bills is deferred at the end of Company compounds semi-annually the allowance applica- each accounting penod. Since adoption of the deferred ac-ble to major construction projects. Pursuant to the DPUC's counting procedure in 1974, rate decisions by the DPUC August 1983 rate decision, AFUDC has not been recorded and its predecessors have consistently made specific provi-on $120 million of construction work in progress allowed in sion for amortization and rate-making treatment of existing rate base. deferred fossil fuel balances.
The Company accounts for the portion of the allowance applicable to borrowed funds on a net-of-tax basis, in Pension Plan accordance with a December 1980 rate decision by the Annual pension cost, including amortization of prior service DPUC. During 1981,1982 and 1983, the average rates cost over 30 years, is accrued each year and funded in the used for computing the allowance were 9%,10% and following year. 10.25%, respectively. Research andDeteloprnent Costs
# """" Research and development costs, including envirnnmental Provisions for depreciation on utility plant for book purposes studies, are capitalized if related to specific construction are computed on a straght-line basis, using estimated serv- projects and depreciated over the lives of the related assets.
ice lives determined by independent engineers. One-half Other research and development costs are charged to ex-year's depreciation is taken in the year of addition and dis" pense as incurred. position of utaty plant, except in the case of major operating units on which depreciation commences in the month they tre placed in service and ceases in the month they are r: moved from service. The aggregate annual provisions for depreciation for the years 1981,1982 and 1983 were equiv-alent to approximately 2.95%,2.84% and 2.87%, respec-tively, of the original cost of depreciable property. 28
e x e j} NotestoFinancialStatements
'(Dollar amounts, except per share amounts, are in thousands unless otherwise indicated) f(A) Capitalization atDecember31; 1983 '
Common Stock Equty(a) Long-term Debt (d) Common stock,no par value .
$260.468 Long-termdebentures:
Shares authon2ed : ' .17.500.0C0 3% 1984 Series, due October 1,1984 - $ 9.000 1 Shares outstanding at December 31. _ 4 %% 1987 Series. due November 1,1987 - 10.000
-1981- 9.154.578 15%% 1988 Senes,due December 6.1988 - 20.000 -
1982 . 10.693.605. 13%% 1990 Senes, dueJuly 1,1990 40.000
=1983 12.972.344 .
4 65% 1990 Senes, due August 15.1990 15.000 Capitalstockexpense - (5,578) 4%% 1991 Senes.due July 15.1991 10.000 Petained earnings (b) . 153.441 5%% 1996 Senes. due August 15.1996 15.000 408.331 6% 997 Series, due June 15,1997 22.500
. Total common stock equity 7% 1999 Series. due January 15.1999 . 15,000 Preferred and Preference Stock (c) 10%% 2000 Series. due June 15,2000 30.000
# 7%% 2002 Senes,due October 1.2002 25.000
- Cumulative preferred stock: 8%% 2003 Senes,due December 15.2003 30.000
- $100 par value. 1.350.000 shares '
e N es-
$25 par value. 2.400.000 shares -
8%% matunng senally as to $1.667 pnncipal amount Cumulative preference stock: on November 15 in each of the years 1984 to 1997,
. $25 par value,5.000.000 shares We 23M Outstanding at December 31.1983: 11% matunng senally as to $2.000 pnncipal amount Not subject to mandatory redemption:- on November 15 in each of the years 1985 to 1999.
Cumulative preferred stock $100 par value: 30.000 inclusive t 4 35% Senes A. 50.000 shares 5.000 16%% matunng senally as to $5.000 pnncipal amount
+
4.72% Senes B. 75.000 shares 7.500 on November 21 in each of the years 1987 and 4 64% Senes C,75.000 shares 7.500 1988. and as to $20.000pnncipal amount on 5%% Senes D. 75.000 shares 7.500 30.000 November 2L 1989 7.60% Series E.125.000 shares 12,500 15.000 324.833
' 7.60% Senes F.150.000 shares Long-term bank loans 70.000 Cumufative preferred stock, $25 par va'ue,
. 8 80% 1976 Series. 600.000 shares 15.000 394.833 Unamortized debt discount hess premium at Tota! preferred stock not subject to
- mandatory redempton 70.000 December 31.1983 (718)
. Total long-term debt 394.115 Subject to mandatory redemption.
Less current portion incfuded in Current Liabehties (10.667) Cumulative preferred stock. $100 par value, . 9%% Senes G.150.000 shares . 15,000 Total long-term debt included in Capitahzation 383 448 Cumulative preferred stock. $25 par va'ue. Total Capitatization $926.779 16% 1981 Senes. 800.000 shares 20.000 1 Cumulative preference stock. $25 par value.
- 15 88% 1980 Senes.1.200.000 shares 30 000 Total preferred and preference stock subject to mandatory redemption 65.000 (t) Common Stock Common stock, no par value, authorized at December 31,1983, included 750.000 shares and 400.000 shares. respectively, reserved for the a Company's Automatic Dividend Reinvestment and Common Stock Purchase Plan (DRP) and Tax Reduction Act Employee Stock Ownership 1 Plan (TRAESOP). -
Shares issued (000) dunng 1983.1982 and 1981 and increases to the common stock account from the proceeds of these issues were as follows: 1983- 1982 1981' Amount Shares Arnount Shares Amount Share,;
. Ba'ance. January 1 ~ $201.486 10 694 $167.384 9.155 $139,709 7.660 Additions resulting trorrr Publicoffenngs : 50.375 1.950 28.964 1.300 25,914 1.400 -
DRP 6.174 236 3.600 1 73 1.761 95 TRAESOP. 2 433 92 1.538 66 - -
! Balance. December 31 $260.468 12 972 $201.486 10 694 $167.384 9 155 i
Expenses related to these issues were charged to capital stock expense (b) Retained Earnings Restriction The indenture under which all of the Company's debentures are :ssued places hmitations on the payment of cash dividends on the common stock of the Company and on the amounts that can be expended to purchase or redeem shares of common stock Under the most restnctive
. provis!or, of the indenture, retained earnings in the amount of $104 million were free from such hmitations at December 31.1983 (c) Preferred and Preference Stock The aggregate redemption requiremerits for preferred and preference stock during each of the live years 1984-1988 are.1984 - None.1985
- $3.000,1986 - $5.000.1987 - $6,000 and 1988 - $6.000 The par va!ue of each of these issues was credited to the appropriate stock account and expenses related to these issues were charged to capital stock expense. g
. . . ~ , - ~ -. . - .
g Nores To FirumcialStaterrwurs Gmtimaal Preference stock is a form of stock that is junior to preferred stock but senior to common stock it is not subject to the eamings coverage requirements or minimum capital and surplus requirements governing the issuance of preferred stock. Shares of preferred and preference stock have preferential dividend and liquidation nghts over shares of common stock Preferred and preference shareholders are not entitled to general voting nghts However. if any preference dividends are in arrears for six or more quarters, or if some other event of default occurs, preference shareholders are entitled to elect two members of the Board of Cirectors. until all dividend arrears are paid and any event of default is terminated. If similarly affected, preferred shareholders are entitled to efect a majonty of the Board of Directors.
. (d) Long-Term Debt On February 1,1983. the Company increased its borrowings under its seven-year agreement with a group of intnr utional i anks from the original $30 million. borrowed in December 1982, to the full amount of $50 million. all at an annual rate of 13 035% Fu N fr ,t three years this agreement provides for the loans to be on a revolving credit basis.
In August 1983, the Company entered into a term loan agreement with a commercial bank which enabled the Company to borrow pnor to February 29.1984, on a ftxed-rate, non-revolving basis, up to an aggregate amount of $40 million. On September 30,1983. the Company borrowed $20 million under this agreement at an annual rate of 12 9% payable monthly, and on January 20.1984. borrowed the remaining $20 rnillic.i at an annual rate of 13.1% payable monthly. Aggregate matunties of these loans are $15 million in 1992 $15 million in 1993 and $10 milhon in 1994.
' The Con.pany has registered $40 million of Debentures under the Secunties Act of 1933 for public offenng from time to time depending upon market conditions. When offered, the proceeds will be used for general corporate purposes.
The aggregate matunties of long-term debt dunng each of the five years 1984-1988 are 1984 - $10.667; 1985 - $3.667,1986 - $3.667; 1987 - $18.667 and 1988 - $28.667. (B)RatePmceedings the Company's ownership share of the construction costs Rate increases, exclusive of amounts billed through fossil associated with Seabrook Unit No.1, a nuclear generating - fuel cost adjustment rates, approved by the DPUC were as unit currently under construction. In addition, the DPUC in-follows: Annual Percentage Cluded in its decision an order requiring the Company to make every effort to gain the support of the other joint own-increase of Ongina, Apphcaton Effective Approved Request ers of Seabrook Unit No. 2 for the cancellation of the Unit. Dates Dates (Wiions) Approved and requiring that the Company submit a report. by Novem-ber 15,1983, outlining the steps taken to withdraw from May 21.1981 September 1.1981 $41.1 76%* participation in Unit No. 2 and its specific plans to complete December to.1981 6 its withdrawal from that Unit. The DPUC stated that it would March 22,1983 August 29.1983 34 7 77 Consider favorably the recovery by the Company of prudent
'85% of adjusted request (see beto*) expenditures currently associated with Unit No. 2. However, The May 21,1981 application addressed inflation in the DPUC indicated that if ar1 adequate effort to comply w;th operating expenses and financing costs that had occurred the DPUC's order were not made, the DPUC would consider since the previous rate application, and the level of costs ex. seriously partial disallowance of future costs incurred in con-pected to prevail over the time new rates were anticipated nection with construction of Unit No. 2. See Note (J). "Com-to be in effect. The DPUC decision on this application ap- mitments and Contingencies."
proved substantially all of the Company's inflation proposals and provided for a 16.5% return on common stock equity. (C) Income raxes Income tax expense consists of: This decision reflected a deckne in fuel oil pnces subse- G83 1982 m quent to filing the application that reduced the originally requested increase by $5.7 million. On this basis. 85% of the operating expenses: l requested increase was approved. The approved increase Current: alsoincluded provision for an annual amortization of the Currentty payab;e $ 8.545 $ 7.739 $ 5.323 l deferred fossil fuel balance in an amount equivalent to the income tax attnbutab!e to the actual June 30,1981 debit balance of $10.5 million. allowance for borrowed funds 13 071 9 220 7.499 l , ! On October 9,1981, the Company asked the DPUC to Tota! current 21 616 16 959 12.822
. reopen its decision effective September 1.1981 for the sole Deferred purpose of amending it to include approval of an income investment tax credits (net of tax accounting change and a telated revenue increase,of amortizaton) 13.091 17,776 7.253 approximately $.6 million. This change was necessary in Construction overheads 1.654 1.375 1.380 order to bnng the Company into full compliance with the 1,383 Deterred fossil fuel costs (4.780) (4.337) provisions of the Economic Recovery Tax Act of 1981 Accelerated depreciation 1.239 734- 273 (ERTA). signad into law on August 13,1981. ERTA requires Cancened Pilgnm nuclear project 97 5.552 (917)
, rates of regulated public utilities to be based on a normaliza- Accrued utAty revenues (235) (235) (234) tion method of accounting as a condition of receiving accel- Acceterated amortitaten (57) (57) (57) erated depreciation and investment tax credit benefits for e (28) % 098)
. facilities constructed after 1980. The full request was ap-Total defe red 16.130 14 851 9 632 proved by the DPUC.
On March 22,1983, the Company filed a general rate Tota! operating income tax application, with the DPUC, requesting an increase of ap- expense 37.746 31.810 22.454 proximately $45 million in annual revenues or 9 9% over Otherincome and deductions - annualized current revenues, exclusive of fuel adjustment current 02) 1.813 591 clause amounts. The major reason for the application was Tota! income tax expense $37.734 $33 623 $23 045 the need to maintain eamings and cash flow sufficient to + attract the outside investment capital required h complete Accumulated deferredincome taxes the Company's future energy supply programs. The DPUC at December 31: decision provided for a 16.4% return on common stock eq- Cancelled Pi!gnm nuclear project $ 4.732 $ 5.649 $ 5.552 uity, the recovery, over a two-year period, of all of the Com- Constructen overheads 4.409 2.755 1.380 pany's investment in the cancelled Pilgnm Unit No. 2 nuclear Accelerated depreciation 2.246 1.007 273 proicci the amortization of approximately $6 million of de. Deferred fossil fuelcosts (1.899) (3.282) 1.498 ferred fossil fuel credits over an eighteen-month penod and Acceterated amortaat on 442 499 556
; the inclusion in rate base of approximately $120 milhon of $ 9 930 $ 6 628 $ 9 259 30
g -
~
4The amaunts reported for federalincome tax expense for . Information with respect to short-term borrowings is as the years 1983,1982 and 1981 were less than the amounts follows:
- computed by applying the federal income tax statutory rates ' 1983 1982 1981-to book income before federal income taxes. The reasons for Maximum aggregate principalamount such differences are as follows: of short-term borrowings outstanding 1E 1982 5 81 at any month-end $44.500 $35.505 $45.500
- Net income' ; $80.503 $65.755 $49.538 Average aggregate short-term borrowings outstanding dunng - Totlincometaxexpense 37,734 33.623 23.045 the year
- 17.805 18.195 14.661 Less stateincome tax expense 8.447 6.640 4.607 Weighted average Federalincorne tax expense 29.287 26.983 - 18.438 nterest rate
- 99% 13 2 % ' 16 8 %
- Bookincome before federalincome Principalamounts outstanding tIxes 109.790 92,738 67.976 at year-end:
Feder*.Iincome tax statutory rate 46% - 46% ' 46% Bank borrowings $31,000 $ - $ - Commercial paper borrowings - - 40.000 Federd income taxes at statutory rate - 50.503 ' 42.659 31.269 Less tax effects oft Total $31.000 $ - $40.000 A!Iowance for equity funds used dunng Annuanzed interest rate on principal ( . construction capitatized for book amounts outstanding at year end 10.5% - 13.5% purposes, not taxab'e income 18.604 14.550 9.670 Tax depreciationin excess of book
- Average short-term borrowings represent the sum of cady borrowings depreciation applicable to pre- outstanding, weighted for the number of days outstand ng and divided 1981 property additions 1,928 2,479 2.562 by the number of days in the penod. The weighted average interest rate is determined by dividing interest expense by the amount of average Taxableincome resulting from the borrowings saleandleasebackof the Seabrook nuclear fuel -
(2.051) - couityin eamings of subsieary (E)SupplementaryIncomeStatement ccmpanies for book purposes, ln[ormat/on not taxableincome 731 549 353 The amount of maintenance, advertising costs, and the Amortization of allowance for funds provisions for depreciation and amortization, other than set used during construction applicable forth in the Statement of income, are not significant, and tocancelled Pilgnm nuclear project (302) - - there are no royalties. Investment tax credits 184 149 109 Taxes, other than income taxes charged to costs and ex-Otheritems-net 71 - 137' penses, are set forth below: 8 83 G82 G81 Fideralincome tax expense $29 287. $26.983 $18.438 State gross earnings $22,489 $21.836 $22.553 Effective federalincome tax rates 26 7% 29 1 % 27.1% Local real estate and personal property 16.022 15.210 13.954 Other, principaHy payrott 3 138 2 986 2.506
' Th31975 Tax Reduction Act and succeeding amend-ments provide that up to 80% for 1981,90% for 1982 and $4 f.649 $4a032 $39.013 85% for 1983 of federalincome taxes currently payable may charged to be offset by investment tax credits. The total credits utilized Tax expense $39.595 $38.226 $37.514 in 1981,1982 and 1983 amounted to $7,362, $17,924 and Other accounts 2.054 1806 1.499
$13,275, respectively. $41649 $4a032 $39.013 Th3 investment tax credits carried forward at December 31,1983 amounted to approximately $13,500, of which $700
. opir:,s in 1997 and $12,800 in 1998. (F) Pension Plan Allinvestment tax credits utilized for tax purposes ,,1 the The Company has a pension plan covering substantially all
. futura will be deferred and amortized to income ratably over its employees. The entire cost of the plan is borne by the the in-service lives of the related properties. Company and is paid into an irrevocable trust fund.
Pension costs for the years 1981,1982 and 1983 were
. (D)CompensatingnalancesanctShort Term $4,217, $4.543 and $4,989. respectsvely. # 8 " *'#"8# Accumulated plan benefits and plan net assets at January Substant! ally all cash serves the dual purpose of providing 1 were- '
_ funds for operating requirements and for compensating bal- 1983 1982 ances to cover bank lines of credit. The Company's bank Actuartal present value of accumulated plan benef,ts: lines of credit, some of which are subject to renewal on April Vested bener,ts $36.030 $29.403 30,1984, amount to $70 million pursuant to individual ar. 4.785 4.928 Non vested benefits
- rangements with several banks. Compensating balances Cr3 required for $11 million of these lines of credit and fees in $40.815 $34 331 li, eu of such compensating balances are paid for the remain- $64.518 $50.341 Net assets available for benet.ts ing $59 million of the lines of credit.
The assumed weighted average rate of return used in determining the actuarial present value of accumulated plan benefits was 9% in 1983 and 9 %% in 1982. The reduction in the assumed rate of return contributed to the increase in the present value of accumulated plan benefits. 31
Nws ToIamcialstammwn contiment (G)fointly Orcner/ Plant - ance for funds used during construction and assume a con-The Company's 93.7% ownership share of the New Haven tinuation of construction work on Seabrook Unit No. 2, do not Harbor Station generating unit represented $131.8 milhon of include the possible effects that the minimization of con-utility plantin service and $27.8 million of accumulated pro- struction on Seabrook Unit No. 2 will have on the 1985-1988 vision for depreciation at December 31,1983. The Compa- construction program and the completion dates of the units, ny's share of the operating costs is included in the appropri- The Company's estimates are based on cost estimates and ate expense captions in the statement of income. completion schedules prepared by the lead participants
' The Company also has ownership shares in three nuclear constructing the units. However, the estimated costs and generating units under construction. See Note (J), " Commit- completion dates for Seabrook Unit Nos.1 and 2 are cur-ments and Contingencies." rently under review, with revised estimates scheduled for release by Public Service Company of New Hampshire (H) Cancellation ofPlanner/Pilgrhn Nuclear (PSNH) by March 1,1984. Although the Company is unable Pmject .
to predict the result of this review, it anticipates a substantial On September 24,1981 Boston Edison Company an. increase in the estimated cost of the project and delays in nounced its intention to cancel plans for the construction of the in-service dates, particularly for Seabrook Unit No. 2. Its Pilgrim Unit No. 2, a proposed nuclear generating unit in The current construction program costs reflect a late-1982 l which the Company had a 3.3% ownership interest. Cancel. upward revision in the cost estimates for Millstone Unit No. 3. lation of this project, effective October 22,1981, was caused This revision assumes a continuation of a construction by escalating costs and continuing regulatory uncertainties. schedule to meet a 1986 in-service date. The 1984 con-In March 1983, in its rate application to the Connecticut struction program costs do not include $40 million associ-
. Department of Public Utility Control (DPUC), the Company ated with the reconversion of a generatmg unit at the Com-requested recovery and amortization of $14.7 million in con. pany's Bridgeport Harbor Station from oil to dual-fired oil struction costs associated with this unit, less the related de, and coal-buming operation because the Company is ar-ferred taxes of $5.6 million. Pursuant to that request, in its ranging for the financing of this project on a lease basis.
August 22,1983 rate decision, the DPUC allowed recovery Pursuant to the DPUC's order to disengage from partici-and amortization of these amounts over a two-year period. pation in Seabrook Unit No. 2 (see Note (B), " Rate Proceed-ings"), on September 8,1983, at a special meeting of the (I)FuclFinancing Obligation owners of the Seabrook project, the Company and The Con-On June 11,1982, the Company entered into a sale and necticut Light and Power Company (CL&P) sponsored a leaseback agreement which provides for financing the costs resolution to cancel Unit No. 2. Upon rejection of this resolu-of its ownership share in the nuclear fuel of Seabrook Unit tion by participants owning 53% of Unit No. 2, the Company Nos I and 2, currentiy under construction. Under this ar. and CL&P then sponsored a resolution that would reduce rangement, the Company sold its interest in existing fuel for construction on that unit to the lowest feasible level until Unit its book value of $27.9 million (includ:ng allowance for funds No.1 has progressed to fuel loading, unless Unit No. 2 is used during construction). This agreement provided for fu. cancelled prior to that event. The latter resolution was unani-ture purchases of nuclear fuel by the lessor up to an aggre. mousfy adopted. gate of $40 million, including the original purchase. In March On November 10,1983, the Company filed with the DPUC 1983, the cei!!ng of this financing arrangement was ex. the report required by its August,1983 rate relief order to be tended to $60 million. When Seabrook Unit Nos.1 and 2 submitted by November 15,1983 conceming the steps begin producing electricity, the Company will commence taken by the Company to date, and its plans for future steps, paying rent based on the direct costs to the lessor of the to accomplish withdrawal from participation in Seabrook fuel, plus the lessor's financing costs. A balance of $36 4 Unit No. 2. The report concludes that there is no prospective million as of December 31,1983, including $6.0 million of purchaser of the Company's 17.5% ownership interest in this accrued financing costs, is included as a capitalized lease unit, and that a change in the regulatory and political climate in Other Property and Investments. In May 1983, the Com- in New Hampshire and elsewhere in New England, which pany completed arrangements, with the same institutional favors the current program of minimum construction on that lender, for the financing of its fossil fuel purchases by means unit until Unit No.1 has progressed to fuel loading, will be of a fuel reserve and supply agreement covering up to $100 necessary if the Company's efforts to obtain cancellation of Unit No. 2 are to succeed. In December 1983, the DPUC million, less the amount of the outstanding obligation under the nuclear fuel agreement. commenced hearings with respect to the Company's report. The Company believes that it has taken all of the steps rea-U)conunisments amtcontingencie, sonably available to it to date to implement the DPUC's order The Company has entered into substantial commitments in and that the DPUC will find that the Company's efforts ha se connection with its continuing construction program, which been sufficient in this respect; however, there is no assur-is presently estimated at approximately $599 million, for ance that the DPUC will be satisfied with the Company's 1984 through 1988. The major items in the construction pro _ dods. gram are $419 million, excluding nuclear fuel, for the Com- Since completion of construction of each of the three nu-pany's 17.5% ownership share in Seabrook Unit Nos.1 and clear generating units in which the Company is participating 2 presently scheduled for commercial operation in July 1985 is contingent, among other things, upon obtaining neces-and February 1988, respectively, and $58 million, including sary regulatory approvals. permits and sufficient financing, nuclear fuel, for the Company's 3 685% ownership share in it is possible that future developments could lead to cancel. Millstone Unit No. 3 presently scheduled for commercial op. lation of one or more of the units. If any of these units were eration in May 1986, These estimates, which include allow, cancelled, the Company estimates its share of the total can-cellation costs would be substantial; the precise amount would depend upon a number of factors, including the l 32 m
y i amount of termination charges an'd salvage and the results (K) Quarterly financ/al Data (Unauslited)
' of negotiations in connection with contract terminations. As Selected quarterly financial data for 1983 and 1982 are set ' in the case of tht. Pilgrim Unit No. 2 cancellation (see Note - forth below-'
(B), " Rate Proceedings"), the Company would apply to the Earnings DPUC for permission to amortize its share of totat costs over p,, 3ny, an appropriate future period and to recover such costs Operating - Operating Net of Cornmon .
- through its rates. The Company cannot predict whether and Oer -Revenues income income Stock (1) to what extent such recovery would be permitted. However, ? in the case of Seabrook Unit No. 2, the cancellation of which 1983 First $108.601 $12,706 $19.035 $1.44 - the Company is actively pursuing in compliance with the Second 98,506 9.731 16.843 . 1.14 DPUC's order of August 22i1983, the DPUC has indicated Third 119.627 16.572 - 23.137 1 66 1 that it will consider favorably recovery of prudent expendi. .
Fourth 122.852 - 16.451 21.488 1A3
, tur:s currently associated with that unit. However, the DPUC indicated that if an adequate effort to comply with the 1982 DPUC's order were not made, the DPUC would consider - First $117,132 $14.800 $18.209 $160 Second 101.638 9.714 12,2f 7 94 = seriously partial disa!!owance of future costs incurred in con.
Third 109.543 14385 17.570 1 51 nection with construction of Seabrook Unit No. 2. The Com. Fourth - 108.417 12.951 17,759 1.34' pany's investment in the three nuclear generating units was
- approximately $650 million at December 31,1983, including
$440 million invested in Seabrook Unit No.1, $124 million (1) Based on weighted average number of shares outstanding dur-ing e ch quarter.
invested in Seabrook Unit No. 2 and $86 million invested in Millstone Unit No. 3.- The generating units at the Company's Bridgeport Harbor
- Station are capable of burning either oil or coal. However, 1 the 11rgest unit has bumed oil exclusively since it was Report Of Independent Certified Public Accountents placed in service in 1968. The Company has undertaken the modifications required by present-day strict environmental To the Shareowners and Directors of The United Illuminating control regulations in order to restore this unit to a dual-firing Company:
. capability, having determir ed that reconversion is environ-mentilly, technically and financially feasible and offers po- We have examined the balance sheets of The United Illumi- . t;ntill fuel cost savings to the Company's customers of sev nating Company as of December 31,1983.1982 and 1981, - (r:1 million dollars annually, based on the current price and the related statements of income, retained earnings and diff;rintial between coal and oil in 1982, the Company filed sources of funds for gross property additions for the years petitions with the state and federal agencies having junsdic- then ended. Our examinations were made in accordance tion over its operations, financial structure and rates, re- with generally accepted auditing standards and, accord- <
questing approval with respect to the construction, environ- ingly, included such tests of the accounting records and mental and siting matters, rate treatment, and a financing such other auditing procedures as we considered neces-
. concept that would not require issuance of the Company's sary in the circumstances.
debt or equity securities in order to finance the estimated in our opinion, the financial statements referred to above
$45 million of required construction costs. The last of the present fairly the financial position of The United Illuminating several necessary approvals was received in August 1983. Company as of December 31,1983,1982 and 1981, and the Accordingly, engineering, design and procurement activi- results of its operations and sources of funds for gross prop.
, ties on the project, which had been suspended since March erty additions for the years then ended, in conformity with 1983 pending receipt of final approval, have been reinsti- generally accepted accounting principles applied on a con.
tuted. It is estimated that the project will be completed in sistent basis. early 1985. Connecticut Yankee Atomic Power Company (Connecticut Coopers & Lybrand Yankee), in which the Company has a 9 5% common stock New York, NewYork ownership share, owns and operates a nuclear electric gen- January 23,1984 er; ting station in Haddam Neck, Connecticut. Connecticut
. Yankee has been engaged in an extensive construction pro. -
gr:m which is essential to maintaining its station as a de. pend; ble source of low cost electnc power in New Engfand. Common StockData As a condition of the debt financing arrangements for this Ul's Common Stock is traded on the New York Stock construction program, the lenders have required guarantees Exchange, where the high and low sale pnces during 1983 from the shareowners of Connecticut Yankee. Accordingly, and 1982 were as follows: ; in December 1981, the Company guaranteed payment of its stock ownership percentage of a $50 million long-term debt 1983 Ste Pnce 1982 Sa!e Pnce issu3 of Connecticut Yankee and has agreed to furnish or H;gn g H3gn g
. guarantee payment of an equivalent percentage of a maxi- First Quarter 29 25w 22 18%
mum of $25 million of short term borrowings by Connecticut Second Ouarter 28w 25w 23w 20 % Yankee. Third ouarter 27% 25 % 23w 20W Fourth Ouarter 28w 19w 26 % 22 Ul has paid quarterly dividends on its Common Stock since 1900. Quarterly dividends were declared in 1982 and 1983 at the rates of 73c and 77c per share, respectively. As of January 31,1984, there were 41,229 Common Stock shareowners of record. 33
SupplementaryInfonnation/ Inflation . (Unaudited) - The Intrafuction dex, is not necessarily representative of the etfects United The following information is furnished as a supple. of inflation on the Company. A primary value of i 14nenineting ment to the historical cost basis financial state. constant dollar data is that it provides a common ! Cesupeny ments in order to convey the effects of certain price basis for comparison of companies in vanous in- < changes on selec'ed balance sheet and income dustries subject to the reporting requirements. statement items. This information has been com- The purchasing power gain on net monetary lia-piled in accordance with a requirement of the Fi. bilities shown in the accompanying data theoreti- . nancial Accounting Standards Board (FASB) that cally represents the extent to which equity investors r companies disclose certain effects of inflation on were hedged against the risk of inflation in plant their operations. The data should be viewed as an investment and other costs, pnmarily because a estimate, rather than as a precise measure, of the substantial portion of plant costs was financed by approximate effect of price changes on money in- long-term debt. The Company cautions that such vested in plant over many years and on money gains are unrealized and, therefore, do not contnb. borrowed to provide a substantial portion of the ute to cash flow or distributable income. Because , funds invested in plant.. depreciation on plant is limited to the recovery of Constant dollar amounts represent historical historical costs, the Company does no' have an amounts stated in terms of dollars of equal pur. opportunity to realize either the increase in specific chasing power, as measured by the 1983 average prices of plant investment held (somehmes called of the Consumer Price Index for All Urban Con. holding gains) or the related gains on debt used to sumers. Current cost amounts reflect the changes finance investment in plant assets. in specific prices of plant from the date the plant The reduction of inflation-adjusted plant invest. was acquired to the present, as measured by the ment to net recoverable, or historical cost has been : Handy-Whitman Index of Pubhc Utility Construction included in the 1983 data in view of the FASB's Costs. Current cost amounts of plant differ from opinion that it may not be appropriate for compa-constant dollar amounts to the extent that specific nies limited to recovery of the historical cost of their prices have increased more or less rapidly than plant investment through the regulatory process to prices in general. state their assets above the recoverable amounts. Plant investment as referred to in the accompa- This reduction should not be allowed to obscure nying data includes utility plant in service, net of the fact that inflation in prices affects virtually all the accumubted provision for depreciation, and con- Company's operations. While it is true that future struction work in progress. The constant dolfar and cash flows relative to the Company plant invest-current cost provisions for depreciatinn were deter- ment will be based upon recovery of histoncal cost mined by applying the Company's hi torical cost. plus a specified rate of returr , it is equally true that basis depreciation rates to the indexed plant the Company has the same problem as non-regu-amounts. lated businesses in maintaining its operating capa-Fuel, matenals and supplies inventories and re- bility and avoiding erosion of capital. Furthermore, lated expense categories have not been restated the Company and other utihties must compete in from historical amounts because, due to rapid turn- the same capital markets as non-regulated busl-over, especially of fuelinventory, these items are nesses and retums must be sufficient to raise the 4 already stated at or near current cost. capital required. The reduction should be viewed in . The depreciation adjustments to 1983 reported recognitionof thesefacts. net income and the similar adjustments used in cal-culating general and specific price level adjusted income applicable to common stock for 1979 through 1982, represent the additional cost of pro-viding sufficient funds to replace, at the assumed price levels, the service potential of plant used up dunng those years. As presenbed by the FASB, incomu tax expense is unadjusted for the effects of inflation. Discussion Of the two methods used to measure inflabon, the more relevant to Ul is the current cost method be-cause it is based on the Handy Whitman index, which depicts the trend in public utikty construction costs. The constant dollar data, because it is devel-oped using the broad based Consumer Price in-34
Selected Supplementary FinancialData Adjustedfor the Effects ofInfkition (Average 1983 dollars in thousands except per share amounts) For the Year 1983: Constant Current Dollar Cost Net income, as reported in the statement of incune $80,503 $80.503 Adjustment to depreciation expense based on plant investment recalcu, lated to recognize the effects of inftation in the general price level and in specife pnces 23.541 28.216 Netincome, as adjusted 56.962 52.287 Dividends on preferred and preference stock 14.084 14.084 income apphcable to common stock, as adjusted $42.878 $38.203 Purchasing power gain on net monetary liab6ities: Long>erm debt $15.055 $ t 5.055 Other. principalty net current liabihties 2.115 2.115 Total $17.170 $17.170 Effect of inflation on pfant investment he!d dunng tle year as measured by changes in: Specific prices $65.760 General pncelevel 58.428 inflation in specifc pnces of plant investment over general pnce level inflaton S 7.332 Reduction of inflation-adi usted plant investment to net recoverable (histoncal) cost $ 3 835 $15.992 At December 31,1983, the current cost of plant investment was $1.588.112 as compared to histoncal cost of $1,024,109 Five Year Summary 1983 1982 1981 1980 1979 Operating revenues $449.586 $450,930 $494.237 $440.400 $386 854 Histoncal cost information adjusted for inflabon in the general pnce level (constant dol!ar information) Income apphcable to common stock $ 42.878 $ 30.104 $ 16.636 $ 6.934 $ 13 235 , Eamings per share of common stock $3 66 $314 $190 $ 97 $2.17 Common stock equity at year-end(a) $934.572 $849 054 $808.9 t 5 $750,314 $686,403 Histoncal cost information adjusted for inflabon in specif.c prices (current cost inforrqation) Income applicable to common stock $ 38.203 $ 25.757 $ 11.559 $ 489 $ 5.644 Eamings per share of common stock $3 26 $2 68 $131 $ 07 $ 93 Inflabon in specific pnces of plant investment over (under) general pnce level inflation $ 7.332 $ 482 $ (22,922) $ (48.044) $ (26.439) Common stock equity at year end (a) $954,114 $865,782 $812.801 $776.637 $755,448 Generalinformabon. Purchasing power gain on net monetary habilities Long-term debt $ 15.055 $ 12.598 $ 28.098 $ 38.335 $ 41,784 Other, pnncipally net current liabilities 2.115 1.107 2, t 04 8 375 10.186 Total $ 17.170 $ 13 705 5 30.202 $ 46 7t0 $ 51.970 Dividends declared per share of common stock $3 08 $3 01 $3 03 $3 24 $3 59 Market pnce per common share at year end $20 24 $26 03 $200t $20 93 $27.41 Average Consumer Pnce index (1967 - 100) 298 5 2891 272 4 246 8 217 5 (a) Year-end data, stated in average 1983 dollars-1983 1982 1981 1980 19N Common stock equity at net recoverable (historica!) cost $ 400.679 $ 326.389 $278 032 $251.347 $241.819 Net awets Constant dollar $1.067,043 $ 986.870 $952.068 $892,109 $ 796,716 Current cost $1,006.585 $1.003 $98 $955 954 $909.432 $865 762 Net recoverable (histoncaf) cost $ 533,150 $ 464 206 $421. t 85 $390,142 $352,135 35 , J u
l Directors i l ' Angus N.Gordon Jr. James F.Cobey Jr. 4 FormerChairmanof the Presioent, "C _ Board, Untted illuminating United illuminating ' ~ ~ > l ' f l John D.Fessett Leland W. Miles President, b N' bc.; l Chairmanof theBoard I and Chief Executive University of Bridgeport ,,M j Officer, United illuminating Geraldine W. Johnson
- D. Allen Bromley Former Superintendent ;
~ ~ ~
j HenryFord ilProfessor of Schools, City of
! and Director, A.W. Wright Bridgeport Nucfeat Structure VirgilC.Dechant Laboratory, Yale Supreme Knight Universy Knights of Colurnbus
{ j hmick R. sM J.RobertGunther ' Chairmanof theBoard President n Chief Executive
- George Schmitt & Co., ,
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! People's Savings Bank - ;q i Bridgeport Frank Kenna - ! R:bert D. Russo,M.D. har$inrearms . Ikdology Company Left to nght James F Cobey Jr . Le'and W Wes O Alan BronAey t ent's Medical Center ,p.., , y*. [ p'. 1
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Angus N Gordon Je .Nowch 8 Goodspect J HotwtOuntnee w f g i 5
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FrankKenna JonnD Fassett 4 l i
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officers
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1 l Robert L Fiscus R'ctardJ Gross Leon A Morgan ChdNes W Cook Jr James F Crowe { A:be't Harary oavid W Hosa.nson E Jon Ma,howski Ma'cus R McCraven Hro4d J Moore Jr L i !
^m GeneralCounsel Wiggin & Dana '
l EF i J Independent Certified Coopers & Lybrand , I " Public Accountants f , Stock Transfer and The Connecticut Bank & Anne c :;perrey Robert H Hyde es L De n i Dividend Disbursing Trust Company, i Q t. Agent, Registrar and Dividend Reinvestment Hartford. Connecticut
" 9'"
b E.Jon Majkowski i Vice Prestcent - [ Public Affairs Stock Listing f# Marcus R. McCraven Vice President - The New York Stock Exchange Common Stock Environmental 8 80% Preferred Stock.1976 Series Engmeenng 16% Preferred Stock,1981 Senes w uma oom Rcna,d s anne, Harold J. Moore Jr. 15 88% Preference Stock Vice President - Human Resources Anne G. Spinney Dividend Reinvestment Plan J:hn D. Fassett Leon A. Morgan Vice President - Common Stock shareowners interested in obta!ning Chairman of the Board Senior Vice President - Communications information regarding the benefits of partic:pating in hfce Robert H. Hyde UI's dividend reinvestment plan may wnte either. ha i s . Cook r AssistantVice President - J:mes F. Cobey Jr. Senior Vice President - Corporate Planning Customer Services President The Connecticut Bank Mary Ellen Manthey nd Development James L Benjamin & Trust Company investor Relations Manager R:bert L. Fiscus Executive V>ce President James F.Crowe Controller PO Box 2699 United illuminating and Chief Financial Vice President - William A. Elder Hartford. CT 06101 O ox 166 Officer Eng:neenng Treasurer Rich:rd J. Grossi Albert Harary Richard F. Skinner Executive Vice President Vice President - Secretary and Chief Operating Management Services Officer David W. Hoskinson Vice President - ( Operations I
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West Haven ,5' ven M United muminating Steam Generat ng Statens
'ransmisson Lines Stratford 345.000 volt 115.000 voit Uneted muminating .......
Northeast Utilities ....... United murrunating is an operating electnc utikty serving an area of about 335 square rrules in the southwestem part of Connect. cut. The Cornpany 3 serv <e area (about 7% of the sta'e) includes the pnncipal cit >es of Bndgeport and New Haven and their surrounding areas The population of this area is approximately 707.000, or 23% of the pop-ulaton of the state The area NEP00L serves NEPEX. the New Engiand Power Exchange. is the operatons arm of NEPOOL coord>nating and de recting the operat on of alt mapr efectnc power New Ergiefwi Power Exchange generaton and transmisson facslet4es e New Eng-tand from a master control center in West Sprog. lield. MassachuseMs NEPEX d-rects tour saten.te
- NEW ENGLAND C "" ' C'"'' "'Y ' C*" h POWER EXCHANGE "'t r the peraton of the*s+'Ch C "'*s state regon (NEPEX) *"e*c'Y el tnc power* systern seiectog and implement-ing the best avaJabte combinations of generat.on und a Locationsof the transmiss on from mornent to moment to meet total NEPOOL-planned power demands Another functon of NEPOOL is to nuclear generating provide a central planning statt. New Eng!and units in which Ul Power Ptanning (NEPLANL which has the respon-is partcpating s.bmty for prepanno erectr c load forecasts evatu-af tng anemare generaton and transass on plans.
recommend <ng rehabehty standards and tacmtating the pnt ownersh!p of power piants through optim-ration of see and locat on The setemte CentrolCenters eret
@ CONNECTICUT VALLEY ELECTRIC EX-CHANGE (CONVEX)
Southervon. Connecticut Controls power in Connect: cut and westem Massachusetts
@ RHODEISLAND-EASTERNMASSACHU-SETTS-VERMONT ENERGY CONTROL (REMvEC)
S**" VMsfboro. Massachusetts Confrois power in Rhode island eastern Massachusetts and Vermont
@ NEW HAMPSHIRE CONTROL CENTER Manchester, New Hampsh re Controis power in most of Nea Hampshire C
@ MAINE POWER EXCHANGE J
"'" I Augusta Maine Controlspowerinrnostof f4 Ma,ne gC ka h bN
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