ML20116J018

Forwards 1984 Annual Rept

ML20116J018
Person / Time
Site:	Oyster Creek
Issue date:	04/29/1985
From:	Fiedler P GENERAL PUBLIC UTILITIES CORP.
To:	NRC OFFICE OF ADMINISTRATION (ADM)
References
NUDOCS 8505020429
Download: ML20116J018 (1)

Text

'

GPU Nuclear Corporation Nuclear

sa:;388 Forked River, New Jersey 08731-0388 609 971-4000 Writer's Direct Dial Number:

April 29, 1985 Director Office of Nuclear Reactor Regulation U.S. Nuclear Regulatory Commission Washington, DC 20555 Attention: Document Control Desk

Subject:

Oyster Creek Nuclear Generating Station Docket No. 50-219 Annual Financial Report Enclosed with this letter is one copy of the General Public Utilities Corporation 1984 Annual Report as required by 10 CFR 50.71(b).

Very truly yours, 22 1 Vice President and Director Oyster Creek PBF:DC: dam

(#0576A)

Enclosure cc: NRC Resident Inspector Oyster Creek Nuclear Generating Station Forked River, NJ 08731

/f 0$i 8505020429 850429 fL J)

PI R ADOCK 0500 9

GPU Nuclear Corporetion is a subsidiary cf the General Public Utilities Corporation

F

.L s-i

[ Nv(

Q.

p 4.g,,

SS 1[

3 4

. alf3 GENERAL PUBLIC UTILITIES CORP.

1 1

1 984 ANNUAL REPORT meenwe 're H

~

(Penelec). Another subsidiary, GPU Service Corporation (GPUSC), provides integrated A Profile System plans and policies, along with a broad range o professional services to the operating of the System and the Customers it Serves companies, while a fifth subsidiary, GPU Nuclear Corporation (GPUNC), is responsible for the operation, maintenance The General Public Utilities System and management of the System's nuclear facilities.

Companies provide some 33.5 billion kilowatt-hours of electricity for about 1.7 About 34 percent of the electricity distributed million customers (and a total population by the operating companies is used by exceeding 4 million) in service territories residential customers,26 percent by encompassing about half the land area of commercial accounts,35 percent by industry Pennsylvania and New Jersey.

and 5 percent by other customers.

The operating companies are Jersey Central The peak load periods of the operating Power & Light Company (JCP&L) and, in companies are in balance, with a 1984 winter Pennsylvania, Metropolitan Edison Company peak at Penelec and 1984 summer peaks at (Met-Ed) and Pennsylvania Electric Company JCP&L and Met-Ed.

Penelec JCP&L Met-Ed Operating Companies' Statislics-1984 Sales Mix:

Residential, Dett-ic Peak Revenues Total Assets Commercial, Customers-Sales Load Number of

($000)

($000)

Industrial Year-End (MWH)

( MW)

• Employees JCP2L

$1,351,303

$2,880,721 39 % 31 % 27 %

760,494 13,810,963 3,046 3,738 Met-Ed

$ 644,555

$ 1,541,743 33 % 24 % 40%

377,411 8,064,366 1,500 2,715 Penelec

$ 745,822

$ 1,743,678 28 % 23 % 41 %

527,400 11,615,901 1,655 4,171 GPU

$2,735,286

$6,215,792 34 % 26 % 35 %

1,665,305 33,491,230 6,401 13,216 '

• At time of CPU System peak.

• Includes employees of GPU Nuclear and GPU Service Corporations.

,., [ 4 N

19 84 FIN A N CI A L S U M M A RY 1984*

1983*

Net income before extraordinary items (000)

$ 128,505 66,907 Net income after extraordinary items (000)

$ 148,258 50,889 Per share (before extraordinary items) 2.05 1.09 Per share (after extraordinary items) 2.36

.83 Common shares outstanding, year-end (000) 62,864 62,864 Number of stockholders 97,868 112,058 Book value per share 26.05 23.67 Megawatt-hour sales (000) 33,491 31,500 Operating revenues (000)

$2,735,286

$ 2,480,304 Construction expenditures (000)

$ 311,381

$ 285,388 Cost of fuel and purchased power (000)

$1,243,268

$1,168,449 Total assets (000)

$6,215,792

$5,333,870 Generating capacity (megawatts) *

• 8,251 8,251 Peak load (megawatts) 6,401 6,140 Customers served at year-end 1,665,305 1,635,400 Number of employees at year-end 13,216 12,719

' See Notes 1 and 3 to Consolidated Financial Statements and Report of Auditors.

' includes 1,706 megawatts for both TMI Units 1 and 2.

MIN SID E G P U'S 19 84 A N N U A L R E PO RT

. Letter To Stockholders ~ 2

- Quarterly Financial Data 18

'A Piogress Report 5-Index to Consolidated Rate Regulatory Report 7 Financial Statements & Notes 19 Reportof Auditors 20

-Nuclear Report 8 _. 11 Consolidated Financial Sti.tements 21 Meet:cg Customer Needs

. Meeting future Needs 14 Notes to Financial Statements 25 Administration 14 System Statistics - 37

- Statementof Management 14 Effects of Changing Prices 38

' Management's Discussion & Analysis of Financial Directors and Officers 40

{

Condition and Results of Operations 15 Shareholder Notes inside Back Cover 1 L 4

US n~ e m x; =; _ _

T1 also a broad public relations and political DpD; Stockholders o the affairs program. Evaluations by the NRC staff, e

the utility industry's independent INPO

~

inspectors, and a re-inspection by Admiral Rickover, resulted in favorab!e

' Company accomplishments in 1984 were recommendations and overall high marks.

4 significant. All aspects of the cleanup program Yet, opponents of restart and those who, for at TMI-2 made giant steps forward this past whatever reason, continue to concentrate on year. The opening of the reactor vessel, the events, procedures and staffing now six years knowledge gained from testing core in the past, managed to re-open issues and conditions, and the preparations taken for fuel extend hearings with the result that a final removal were significant milestones. Each of NRC vote date cannot yet be predicted with these activities was carried out efficiently and any certainty. However, the NRC's safely. The pioneering learnings from these announced schedule for its consideration of i

actions contributed to the advancement of TMI-1 restart promises to make the next few nuclear technology around the world.

months particularly important to your The first step of a two-stage major outage and Company.

2 refurbishing program at the Oyster Creek It is indeed a tribute to the Corporation's Nuclear Plant was completed at year's end employees that during these lengthy and with that unit back on line at full power. The exhaustive efforts involving the TMI plants, repairs, modifications and improvements the primary commitment of the Corporation's completed at the plant to insure its continuing franchise-reliable service to the customer-reliable operation were prodigious.

has been maintained. No GPU customer lost service as a result of the TMI accident and its The Company continued during 1984 to carry out its strong commitment to worker and manifold post-accident consequences. At the public safety in all of its nuclear operations.

same time, although customers' rates have The results of this dedication to safety have risen markedly in the past six years, those been recognized in recent favorable rates remain very much in h,ne with those of t

evaluations by the Nuclear Regulatory our neighbonng Northeastern utilitie,s. And Commission and by the institute of Nuclear they have not had to deal with a major accident.

Power Operations.

Just as importantly, the effort to ull together The Company's continuing program to the financial funding program fo the TMI-2 purchase, power at favorable rates from other cleanup was essentially completed in 1984.

utilities with available capacity was another i..

Money began flowing in January 1985 under positive accomplishment this past year. A the utility industry's commitment for a total of new, long-range power purchase agreement with Pennsylvan,a, Power and Light Company i

$150 million over six years. These funds will be combined with the other participating was reached, and is cuirently under segments under the cleanup cost-sharing plan.

regulatory review in New Jersey.

Although considerable progress was again Your Company cont,inues to evaluate the made in 1984 toward the Company's alternatives for providing the power necessary to meet customers, needs into the late 90s as recovery, the one element most necessary to i

that recovery cor,tinued to elude our grasp-those needs show signs of steady growth.

I the return to service of the undamaged Three These alternatives mclude extension of power i

. Mile Island Unit 1 Nuclear Plant. It seems purchase contracts, expansion of transmission inconceivable that six years have assed line capabilities, and as a last resort, without a regulatory decision on t$at issue.

c nstruction of new generating capacity.

Your Company mounted an intensive effort in Bringing GPU back from the edge of

+

every as t of the program to obtain NRC bankruptcy in 1979 and 1980 to a position of approva restart TMI-1. That effort included relative financial stability has required a 4

• not only the technical modifications to the treme,ndous effort, with sacn,fices on the part 4

plant, procedural and organizational changes, of allinvolved-shareholders, customers and 4

and numerous test drills and inspections, but employees.

2' 4

-, ~

~

i.-

a r

.-wm

,_m gg.

4.y

,,y,,.,.._

,, ~

.-,y

,-.-r,,

r.w..-

-os

As all of you are painfully aware, the cash

- At least until the return to service of dividend on your GPU common stock was TMI-1, we cannot depend on access to capital suspended in November 1979. Despite the 48 markets on reasonable terms. We will percent increase in 1984, the CPU stock is continue to rely on internal cash generation still only about 70 percent of its price at the supplemented by small, specialized debt time of the accident. The substantial loss to security issues and bank credit for working shareholders in both market value and capital.

dividends is recognized by your management.

- We expect to be able to continue to delay Evaluation of the Company's future dividend construction of additional generating capacity policy has been a matter of continuing and to meet our customers' electricity needs consideration. Starting with a recognition of by purchasing energy from surrounding the basic needs and objectives of our utilities which currently have excess capacity, stockholders, factors necessarily include many We therefore do not anticipate a significantly internal and external matters beyond current increased construction program for new earnings per share. Our goal is to produce a generating facilities at least for the next several balanced program in the best long-term years. Notwithstanding our ability to defer interests of the investors and the customers.

expenditures for new generation programs, The investor and the customer are absolutely there are sizable construction requirements and mutually interrelated. We cannot serve that must be addressed currently. These needs the customers without satisfied investors, and are centered in three major areas:

we cannot serve the investors without the (1 ) environmental projects to keep our fossil-regulatory support that flows from satisfied fired plants in compliance with on-going customers.

regulatory requirements, (2) nuclear plant Let us review more specifically the matters modifications to meet changing NRC relevant to the dividend question:

regulatory requirements, and (3) our programs to improve the availability and

- Desp.ite the increase in earnings, the cash efficiency of our existing generating stations.

burdens and uncertainties resulting from the TMI-2 accident, together with the needs of

- Since the TMI-2 accident, we have paid the System to maintain adequate service to its off $477 million of maturing long-term customers, continue to force the Company to securities and have reinvested $256 million of conserve cash.

common stock earnings. As a result, our capitalization ratios are in line with industry

- The safe and efficient cleanup of TMI-2 averages and stand at 48 percent long-term remains an absolute responsibility. We have debt,12 percent preferred stock and 40 been successful m putting m place during percent common equity. Construction 1984 the last major piece of the nationally obligations identify a priority need, also shared cleanup furding program discussed recognized by others in the industry, to more fully on page 11. This essentially further strengthen those ratios consistent with completes the program for funding the our long-term objective of 45 percent long-cleanup, but at the same time imposes a cash term debt,10 percent preferred stock and 45 drain as the Company advances funds prior to percent common equity.

receipt of monies from the various cleanup funding participants.

- Despite the severely reduced return on

- In order to satisfy our obligation to total System equity resulting from the mairitain adequate service to our customers, exclusi n fr m rates of approximately $1.1 we must continue to spend sigr.ificant billion of investment, we see an ability to earn amounts of money on additions to plant and a (air retum on stockholder earnings ecuipment. These expenditures are carefu!Iy femvested in utility plant. Underlying th,s i

evaluated and monitred to impose as lo.v a judgment is a pledge that we will make every level of cash burden as possible, while effort to avoid undertaking majo,r generation meeting our service obligation. At the present projects unless we have clear pnor regulatory time, these funds are made available from internal sources--depreciation, deferred income taxes and retained e.aings.

3

p E

ma.

indications both that the project is necessary your investment without incurring a cash and appropriate and that the invested capital drain on the financial recovery of your will earn a cash return and be recovered in Company or setting the stage for a dilution in

rates, the value of your investment through the safe f additional shares at less than book value.

- The equity needs of the System, including the establishment of a stronger equity ratio, Admittedly, such a stock dividend program can be provided by reinvestment of would not be consistent with " conventional stockholder earnings. Accordingly, we do not wisdom." Electric utilities are " expected" to see a present need to raise more equity capital distribute a significant portion of their annual by selling additional shares of GPU common earnings as cash dividends and then, as more stock during a period when the market price common equity capital is needed, to sell could be significantly below book value. This additional shares of common stock to obtain will protect the stockholders from possible that capital. As we indicated above, the severe dilution of their investment while we particular circumstances of your Company do work to rebuild the earning power of the not permit that route at this time. Strong System.

arguments can be made that the common stock of electric utilities should sell more on Taking these matters into account, we have the basis of earnings than dividend policy. At concluded that:

the same time, fashions in investment analysis

- Your Company simply cannot pay a cash and investing cannot be ignored.

dividend at this time.

We are continuing our study of this important

- A dividend program which distributes a subject and will reach a decision later this portion of the common stock earnings in the year. We assure you that the commitment of form of a stock dividend may be a possible your management to the full financial alternative procedure under the particular recovery of your Company and our efforts to circumstances of your Company. It would achieve that goal have not diminished-nor permit individual stockholders to match their will they, individual needs by either retaining those j

dividend shares for longer term growth or by ge J/ j selling them for cash. From the standpoint of

/

the stockholder, and again under the W. G. Kuhns particular circumstances of your Company, Chairman and Chie/ Executive O///cer one could conclude that there is no difference between receiving common stock earnings in the form of a cash dividend on the one hand, 3

or as cash received from the sale of the f

dividend shares representing the capitalization H. Dieckamp r

of those same earnings on the other. Such a President and Chief Operating O//icer program would enable the Company to retain the cash which it requires for the reasons March 1,1985 stated above.

- Under such a plan, a mechanism would be provided for the sale of the stock dividend shares for those stockholders who wished to convert them to cash.

It is important to emphasize that this alternative program would be designed 1

primarily for those stockholders who wanted a current cash return of their investment. We believe that it could also be a mechanism to give tangible evidence of the growing value of 4

Creek Nuclear Generating Station. The A. Progress Report commission rate order in January 1985. A deferral resulted from a New Jersey regulatory similar credit related to Oyster Creek outage expenses of $11 million, or 18 cents per Earnings increase share, was included in the 1983 net income.

GPU's 1984 net income, before an The January 1985 order provided that the extraordinary item, was $128.5 million, aggregate amount deferred will be amortized compared with $66.9 million, before an over a future period without a return on the extraordinary item, in 1983 and with $20.6 million in 1980, the first full year following the March 1979 TMI-2 accident. Earnings per Earnings Per Share share before the extraordinary item were Before Extraordinary items

$2.05 compared with $1.09 per share, before M*

an extraordinary item, in 1983 and with 34 cents per share in 1980.

g The extraordinary item in December 1984 resulted from a New Jersey commission 120 decision allowing for the recovery of the g

original cost of JCP&L's investment in TMl Unit 2, beginning in 1989. As a result of this a60 order, previously accrued depreciation of "UU

$19.8 million, after taxes, or 31 cents per share, was recorded as extraordinary income.

1979 1MO IM1 1M2 123 1964 The 1983 extraord, nary item resulted from the i

settlement of a stockholders' suit in which $16 million, or 26 cents per share, was recorded as an extraordinary charge against 1983 unamortized balance. Cu rent revenues income. (See Note 3 to the Financial would recover the amount over Statements, page 32, for additional approximately 18 years. Earnings for the same information on both of these items.)

periods without the effect of these credits were $1.58 per share in 1984 and 91 cents in 1983.

Net income Separately, the New Jersey commission in Before Extraordinary items December 1984 ordered a comprehensive review of all costs associated with the recently m

completed Oyster Creek outage.

$160 The significantly higher net income for 1984, before the extraordinary items and the 120 unusual credit, reflected a 6 percent increase in kilowatt-hour sales and increases in rates 80 granted to the GPU subsidiaries in 1984, 40 '

partially offset by higher operating and maintenance expenses.

g 1979 1980 1981 1982 1983

'984 The most segrif cant impairment to earnings i

remains the lack of return on the GPU System's investments in the Three Mile Island (TMI) units and the abandoned Forked River The 1984 earnings include an unusual credit Nuclear Station and lack of recovery through of $29.8 million, or 47 cents per share, rates of the bulk of the TM!-1 operating costs.

representing the deferral of above-normal As a result of regulatory action in 1982, expenses related tc, the outage at the Oyster GPU's Pennsylvania subsidiaries have been collecting revenues from customers t 5

( _.

amortize their investments in TMI-2 but, as short-term debt outstanding, compared with a already mentioned, they are not receiving a peak of $326 million in short-term debt return on such investments.

outstanding in mid-1980. The 1984 borrowings were primarily for a working As a result of a recent decision by the New capital loan to finance JCP&L s unbilled fuel Jersey Board of Public Utilities under a 1983 expense. This sharp decline in short-term debt Fault Law, JCP&L will not begin recovering the has greatly reduced the System s interest capital it invested in TMI-2 until 1989. JCP&L expense.

has been amortizing its investment in the cancelled Forked River plant as a result of a 1981 regulatory action. The decision Construction Expenditures extended the amortization from a 15-year mas period to a 25-year period. No return is permitted on the Forked River investment.

$500 Electricity Sales 375 Sales of electricity were 33.5 billion kilowatt.

hours in 1984, a 6 percent increase over 250 1983. Sales for all customer classes increased over 1983, resulting primarily from an 125 improving economy and the impact of g

weather on usage. For the long term, CPU's forecast,of electric energy growth shows an ggg average increase of about 1.1 percent per

. met w year. The fastest growing customer class is expected to be commercial as the transition from a manufacturing to a more service-Continued close controls have kept operating oriented economy continues.

and maintenance, and construction Revenues for 1984, not including those expenditures in line with internally-generated related to energy costs, increased $177.5 funds. Other factors contributing to the million or 12 percent over 1983 due to rate improved cash position of the System since increases granted the GPU Companies and the TMI-2 accident include sales of nuclear higher kilowatt-hour sales.

fuel, amortization of TMI-2 and Forked River, and continuing success in securing economical long-term purchases of replacement power, along with timely GPU System Bank Debt recovery of these energy costs.

M nons Borrowings in 1985 are expected to be

$4JO modest, primarily for the retirement of maturing debt. At year-end 1984, Met-Ed had 300 put sufficient funds into an irrevocable trust to be used to retire $45 million of its maturing 200 debt in 1985.

10?

In 1984, the GPU System had $424 million of 0

capital requirements, with the majority of these funds, $311 million, going to plant 1979 1980 1981 1982 1983 1984 improvements and modifications to existing generating stations, including substantial iefurbishment of the Oyster Creek Nuclear Generating Station. The remaining $113 Cash Position improved; Borrowing Needs, miHi n was used to retire long-term debt. In Capital Expenditures Stabilized GPU's cash position has continued to improve si nificantly since 1980. For example, at year-8 end 1984, the System had $95 million in 6

1985, about $525 million has been budgeted capitalization ratio of about 45 percent for capital requirements, an increase of about common equity,45 percent debt and 10

$101 million, or 24 percent, over 1984. Of percent preferred stock.

this amount, about $440 million is budgeted As a result of the System's improved financial l

for plant improvements and about $85 million condition, three national rating agencies in is budgeted for retiring long-term debt. The 1984 upgraded their ratings of the GPU primary source of funds to meet expenditures operating companies' fixed income securities in 1985 will continue to be internally-for the first time since the TMI-2 accident in generated funds.

February 1985, Standard & Poors again Revised Credit Agreement Negotiated upgraded its ratings of the GPU companies' The GPU System has reached agreement with securities. In this action, Standard & Poors its banking group to renew its revolving credit raised to investment grade the bonds and agreement (RCA) throu8h March 31,1987.

debentures of JCP&L and Penelec and The current agreement would have expired Met-Ed's bonds. And in March 1985, Duff &

March 31,1985.

Phelps incorporated also again upgraded all of the System's securities.

The proposed RCA maintains the present credit level of $150 million. The agreement in upgrading the securities, the rating agencies also lowers interest rates and provides that cited stringent cost-cutting efforts and GPU no longer will be required to guarantee improvements in the overall financial profile the borrowings of its operating companies or of the CPU System, despite major to pledge their stock.

uncertainties that remain as a consequence of the TMI-2 accident.

Coverage and Capitalization Ratios improve; Security Ratings Are Upgraded As the CPU System's finances have stabilized and some earning power has returned, interest R

ate ne8usatorY nePort coverages now exceed the new-issue minimum for all three operating companies.

in addition, since the time of the accident, GPU has continuously improved the System's equity ratio through debt retirement and As a result of rate regulatory actions in 1984, retention of earnings. The capitalization ratio the Pennsylvan,ia subsid, anes were permitted i

has improved to 40 percent common equity

!o implement increases totalling $24.9 million in annual retail base rate revenues.

and 48 percent debt from a capitalization ratio of 34 percent common equity and 54 Also in 1984, JCP&L received two increases in percent debt in the period before the TMI-2 its Levelized Energy Adjustment Clause accident. It is the System's goal to achieve a (LEAC). In March 1984, the New Jersey Board of Public Utilities (BPU) approved a

$92.6 million increase in JCP&L's LEAC and in interest Coverage November 1984, an additional $61 million (Per Debenture Indenture) increase was granted. Consistent with the November LEAC decision, the BPU in December 1984 issued an order requiring a 4x comprehensive review of all costs, including Peneles cap:tal additions, operation and maintenance 3X

.JCP&L expense and replacement power Costs Met-Ed._

incurred in conjunction with the refueling, 2X maintenance and refurbishing outage at 1x Oyster Creek.

ex Penelec and Met-Ed received approvalin March 1984 from the Pennsylvania Public 1979 1980 1981 1982 1983 1964 Utility Commission (PUC) to increase their Energy Cost Rates (ECR) by $37.5 million and $38.4 million, respectively, effective with 7

F

/* E w

April 1984' sales. In December 1984, Penelec accounting changes to reallocate existing received PUC rpproval for an interim increase revenues to increase customer contributions in its ECR of $13.8 million annually, effective to the cleanup to the full annuallevel of $25 with January 1985 sales. The interim increase million for Met-Ed and $12.5 million for was necessary to limit the growth of Penelec.

underrecovered energy costs in the high-cost Since 1982, Met-Ed and Penelec have months of January and February.

received approximately $16.7 million and Even with these increases, GPU customers'

$5.0 million annually, respectively, from their bills remained at levels in line with those of customers to fund the TMI-2 cleanup. Earlier neighboring utilities.

that year, the PUC had approved customer participation in the TMI-2 cleanup at the full level only when TMI-1 resumes operations.

Today, the companies continue to request the Total Average Rate unlinking of the balance of the cleanup funds (All Customer Classes)

($8.3 million for Met-Ed and $7.5 million for

' lWelve Months Ended December 1984 Penelec, annually) from the requirement of

= t/KWH TMi-1's return to operation.

.in early'1985, Met-Ed and Penelec filed retail

' base rate increase requests of $47.3 million and $55.3 million, respectively.

9 The bulk of the base rate requests address e

higher non-TMI costs directly tied to the companies' ability to continue providing safe 3

and reliable service. Met-Ed and Penelec have O

also requested the POC to extend the existing prdvisions, established by prior rate orders, xP&L Man. PSE&G PW Met-PP&L Pen-West Dec.

Dec. Ed elec Penn for TMI-1's return to rates. In March 1385, the companies also filed proposed changes to their Energy Cost Rates, which include a

$19.8 million decrease for Met-Ed and a Certain adverse decisions by our regulatory

$25.2 million increase for T'enelec. Final agencies in response to the TMI-2 accident energy cost rates are proposed to become still remain. The mosi serious of these is the effective with April 1985 saies.

continued exclusion from customer rates of

~'

most of the costs associated with both TMI units.

In 1984 the BPU made a decision under the New Jersey Public Utility Accident Fault uclear Report Determination Act (Fault Law).That decision resolved a number of issues for JCP&L, including the ultimate reco,very of all the O ster Creek Returns 10 Service Y

capital mves:ed by JCP&L in TMI-2, with 1 hat The Oyster Creek Nuclear Generating Station recovery to begin in 1989.

returned to service Ocuber 29,1984 after Also in 1984, settlements of the Pennsylvania one of the most extensive overhauls in the companies' rate cases established a provision history of commercial n'uclear power.

that TMI-1 energy benefits, incurred during its The outage began in February 1983, and was startup but pnor to the unit,s restoration t originally planned to last'about 11 months.

rates,.would be used to repay investors for e h k ed d ther TMI-1 capital rather than to reduce originally planned was actually completed, at custone rates.

a cost of approximately $180 million, One unmsolved issue is a decision on the (xtending the outage to 20 months.

Pennsylvania companies' requested 8

The largest outage task was the $70 million Safety and Licensing Board approved the refurbishment of the torus, designed to make kinetic expansion process used to repair it maintenance free for 10 years. The torus is a almost 30,000 steam generator tubes at TMI-1 major component of the plant's safety system.

in 1982 and recommended that TMI-1 be During the outage, the plant's turbine permitted to operate with the repaired tubes.

This decision remo /ed one of the last 8enerator received the most extensive overhaul in its 14-year life. The 206-foot long technical hurdles blocking TMI-1 restart.

turbine was completely disassembled, cleaned In July 1984, the NRC staff identified the and inspected for a total cost of about $12 conditions under which TMI-1 could be million.

permitted to operate after completion of inc orporating lessons learned from the TMI-2 hearings. The staff's conclusion was similar to accident, GPU Nuclear reorganized many

!ts findmg reported in December 1983 and control panel indicators for easy identification included an initiallimit of 25 percent of full and response by control room operators.

P

• • I' In addition, new modern instrumentation in August 1984, a panel of outside experts replaced older technology, enhancing reported that GPU Nuclear's operator training operators' ability to monitor plant conditions.

program at TMI "now ranks among the top Oyster Creek's operation at full power means utility training programs in the United States."

savings of about $12 million a month in The five-member panel, known as the OARP replacement power costs for JCP&L (Operator Accelerated Requalification customers.

Program) Review Committee, was formed in 1979 to review changes in the training Nuclear Fuel Begins Return Trip program that stemmed from lessons of the to Oyster Creek 1979 accident at TMI-2. The panel's 1984 in compliance with a federal court order, report reappraised GPU Nuclear's training GPU Nuclear Corporation in January 1985 program in light of an operator cheating began the process of returning 224 spent episode at TMI-1 in 1981, and the continuing nuclear fuel assemblies to the Oyster Creek development of the program since 1980.

Nuclear Generating Station from a former fuel On February 28,1985, the institute of reprocessmg facility at West Valley, New Nuclear Power Operations awarded l

York, where they were shipped almost 10 accreditation of the following training years ago.

programs for GPU Nuclear's TMI-1: non-licensed operator training, licensed op training, licensed operator requalific,at,erator TMI-1 Restart Efforts ion Returning TMI-1 to service remains the primary goal of GPU because of its vital training, shift technical advisor training and importance to the Company's shareholders radiological protect, ion technician training.

I and customers.

At the end of 1984, TMI-1, undamaged in the March 1979 accident at TMI-2, remained Unit 1 received overall high ratings from staff physically ready for restart, but required inspectors of the NRC in May 1984 following authonzat,on from the NRC.

i an extensive evaluation. The NRC's Systematic Assessment of Licensee ASLB Reopens Hearings Performance (SALP) covered the period on TMI-1 Restart issues from October 1982 through January 1984 and Despite initial favorable decisions by an NRC l

evaluated 10 functional areas. Seven of the Atomic Safety and Ucensing Board and ratings were in " Category 1," the SALP favorable NRC staff reports regarding the Board's highest rating, three in " Category 2" ability of GPU to safely and competently j

and none in " Category 3."

operate TVI-1, a Licensing Appeal Board I

Testing of major systems at TMI-1 was remandy four issues to the Licensing Board successfully completed in June 1984. While for furthe bearings. These issues included the subsequent tests indicated the need for some circumstances surrounding a mailgram sent to l

additional tube plugging, the steam generators a member of Congress following the TMI-2 l

are expected to be acceptable for plant operation. In November 1984, an Atomic 9

l I

i L

E n,

accident, and the adequacy of the operator The Committee and its independent staff training program.

found safety attitudes and practices were Hearings on the first issue were completed in satisfactory, and iden,tified no instances of regulatory noncompliance.

December 1984, and hearings on the operator training program were completed in The committee is comprised of three of the mid-January 1985. Board decisions are four outside members of the GPU Nuclear pending on both issues, board of directors. It was created in February 1984 to provide additional review of the No Further Hearings Required for Restart safety operations at the GPU nuclear plants.

On February 25,1985, by a 3 to 2 vote, the The committee members are Robert Laney, a NRC issued an Order holding that no further consultant,n nuclear energy and energy i

hearings will be required before it can make a management, who serves as chairman of the decision on TMI-1 restart.

committee; Lawrence Humphreys, president The NRC Order directed the Atomic Safety and chief executive officer of UNC Nuclear and Licensing Board to issue its decisions on Industries; and Dr. Warren Witzig, the mailgram and operator training issues, but department head of Nuclear Engineering at stated that it was expressing no views in that the Pennsylvania State University.

Order on whether the proceedings on these matters must be completed pnor to a decision The report has been filed with the NRC-on TMl-1 restart. It also stated that the NRC TMI-2 Reactor Head Removed, would be addressing that issue in the Plenum Lifted immediate future.

In July 1984, another major milestone was in addition, the NRC Order stated that the reached in the TMI-2 cleanup when the top NRC has decided to institute a new structure, or head, of the reactor vessel was proceeding to consider what action to take successfully removed. Removal of the 156-concerning those individuals possibly ton head provides the first direct access to the involved in TMI-2 leak rate falsification, reactor's internal components since the except for those individuals (all the officers March 1979 accident at TMI-2 and is an and directors of GPU Nuclear and all the important preliminary step to actual removal directors of Metropolitan Edison) who were of the damaged fuel core, which is scheduled identified by the United States Attorney as not to begin later this year.

involved in those matters or those already Another major accomplishment was achieved reviewed and found not to be implicated by in December 1984 when technicians at TMI-2 the NRC,s Off,ce of Investigations m its TMI-1 succeeded in lifting the plenum about seven i

leak rate investigation. The NRC further stated inches from its normal position just above the that an mdividual whose utilization m nuclear fuel core. The procedure indicates that the matters had been restricted by a condition in plenum is free from possible interference, and the Appeals Boasd's order should be g,iven an no measurable increases in radiation levels x

opportunity to request a heanng with respect were detected as a result of the operation.

e to that condition.

The plenum lifting is a preliminary step to the Once restart is approved, it will take several ctual removal of the plenum from the weeks to bring the plant to initial power damaged reactor. The plenum must be operation. A power ascension program will c re can be reached,t fuel and debns in the rem ved s that spen then bring the plant to full power in about in order to defuel the three months.

reactor. Present plans call for full removal of CPU Nuclear Board Safety Committee the plenum in the spring of this year, TMI-2 Radiation Levels ReduceJ uc ear Safety and Compliance in continuing cleanup operations, techn,icians Committee of GPU Nuclear's board of at TMI-2 have been working to reduce directors in November 1984 filed its first semi-annual report on training, operations and management at TMI and O) ter Creek.

10

~ ^

radiation doses in the TMI-2 reactor building

- the processing of some 500,000 gallons of by removing contaminated paint and concrete contaminated water from the Unit 2 fuel from the floors. In this latest dose-reduction handling building; and the processing of some activity, GPU Nuclear Corporation decreased 600,000 gallons of accident-generated general area dose rates on the second floor of radioactive water from the basement of the the reactor building by about one-third.

Unit 2 containment building; Lowering radiation levels on the second floor

- decontamination of the Unit 2 fuel is important because that is where workers handling building; now are spending most of their time as they

- decontamination of most of the Unit 2 prepare for defueling.

auxiliary building surfaces affected by the Completion of the cleanup is scheduled as cccident; follows: remove fuel from original reactor

- an extensive program of manned entries core region during the third quarter of 1986; into the Unit 2 containment building to remove fuel from remainder of the reactor conduct damage assessments, equipment vessel and other reactor plant systems during maintenance, radiation surveys and cleanup 1987.

operations and to explore the most efficient TMI-2 Cleanup Funding ways of decontaminating affected areas; Funding to support the estimated $1 billion

- use of remote TV cameras and sensors to TMI-2 cleanup costs is basically in place, map the extent of damage inside the reactor including the last piece of the cleanup vessel, in preparation for removal; and funding-contributions from the U.S. utility

- the shipment off-site of all the solidified mdustry.

waste from the processing of the water in the Electric utility industry participation in a containment building.

voluntary program to aid in the TMI-2 cleanup The job ahead can be viewed in three stages:

has been finalized, and payments have begun.

continued processing of radioactive water in January 1983, the Edison Electric Institute from the reactor cooling system; removing the (EEI) adopted a resolution to create a damaged fuel core from the Unit 2 reactor voluntary program to provide $150 million as vessel and eventually from the TMI site; and its part of the cost-sharing effort for the TMI decontaminating the remainder of the reactor cleanup. In June 1984, eel's board of directors building interior. As throughout the entire approved a two-part program consisting of an cleanup operation, these activities will be industry voluntary program, and supplemental conducted with the greatest regard for worker research and development grants from six and public safety.

Pennsylvania and New Jersey utilities, including the GPU subsidiaries. The supplementary grants come from funds that would otherwise have been devoted to other utility industry R&D efforts, eeting The two-part program will contribute $25 Customer Needs million per year for six years for a total of

$150 million. In the industry voluntary program,41 utilities have thus far pledged JCP&LS.igns Long-Term approximately $76 million.

Power Purchase Agreement GPU's New Jersey subsidiary has signed a TMI-2 Cleanup Milestones long-term power purchase agreement with The TMI-2 cleanup remains an essential Pennsylvania Power & Light Company activity. It is in the best public interest to

( F P&L).

complete the cleanup safely and expeditiously. Major cleanup milestones achieved include:

11

E GPU System Power Purchase Savings

• percent of the GPU System's requirements were met with purchased power and interchange.

saco Meeting Environmental Concerns The System is vitally concerned with 600 protecting the environment in a responsible 400 M cun e e and cost-effective manner. Between 1979 and 1984, the System companies spent 200 approximately one-half billion dollars to protect the environment. The companies have o

entered into a number of consent orders and decrees with regulatory a8encies to provide 1979 1980 1981 1982 1983 1984 time to develop and implement control

• As compared to PJM interchanga strategies.

Conservation and Load Management Programs Result in Savings Under the agreement, JCP&L would buy 945 GPU s conservation and load management megawatts of power through 1995, in the form of a pro rata share of each of PP&L's pr grams have sav,ed the System's 1.7 million customers the equivalent of $700 mill,on in i

generating units, with the amount then new generat,ng capacity costs since the i

declining uniformly through 1999. The fuel System began introducing the programs,n the i

mix of the purchase would result in approximately 25 percent generation from early 1970s.

nuclear fuel,65 percent from coal and the Full attainment of GPU's conservation and remainder from oil and other sources.

load management plan would help defer more than 1,000 megawatts of new capacity by the The purchase would supply about 30 percent of JCP&L's energy requirements at a cost in end,of the century and would cut the System s the near term that would be comparable to projected load growth in half. With new generating stat,ons cos, ting bitiions of dollars, i

the cost of purchases from the PJM power these results become significant in reducing pool, but less costly than new generating financing needs and managing the cost of capacity. However, over the life of the contract, the cost of the purchase is expected serving customers.

to be well below that of alternative sources, RECAP Progress including new capacity.

About 4,000 residences in the GPU service Purchases under the contract are scheduled to territory have been outfitted with energy-begin upon approval by the New Jersey Board of Public Utilities.

Power Purchase Benefits Sources of Electricity Efforts by GPU to negotiate power-purchase contracts with other utilities since the 1979 Gigawatt Hours TMI-2 accident continue to produce savings for its customers.

40.000 The savings in 1984 totaled $88 million over 30,000 what it would have cost to purchase power 2a000 from the regional power pool. However, while the kilowatt-hour cost differential will 3agoo continue, the dollar savings are constrained by limitations on the transmission system.

O Negotiating these long-term purchases has 1979 1980 1981 1982 1983 1984 become a key element of GPU's power.

supply planning for the period through the mid-1990s. In 1984, for example, about 4S pdr' Nnerated 12

.u conservation improvements through the In addition, JCP&L will engage in a wide Company's Residential Energy Conservation variety of energy conservation pro 8 rams Action Program (RECAP).

beyond those the company has already Under RECAP, which was instituted in 1983, implemented, including additional electrically-heated residences are retrofitted c generation projects. In October 1984, with energy-saving measures by private JCP&L filed with the New Jersey Office of the contractors at no cost to the homeowner. The Secretary of State a certificate of contractors then are paid by the GPU incorporation for the formation of a new operating company based on the measured subsidiary (Energy Initiatives, Inc.) to engage energy savings achieved over a period of in the development of cogeneration projects.

years.

Customer Survey Shows Energy Savings The goal of RECAP is to produce long-term in 1984, GPU conducted its sixth residential energy savings, thus enhancing GPU's strategy customer energy survey. The results show the of delaying the construction of costly new overwhelming majonty of customers are generating capacity as long as possible.

responding to GPU's e ergy conservation,

There is evidence that RECAP has resulted in a "8 ""*'8Y

"'"8 down the thermostat, using supplemental significant shifting of electricity use to off-peak heating, and shifting electricity use to off-peak hours. However,,it is too soon to determm conclusis ely the energy cost savings result,e hours. The survey results also indicated the ing success of GPU's Time-of-Day (TOD) rate from the program, program. GPU's approximately 60,000 TOD GPU Implements New Conservation and customers who have controlled water heaters Load Management Programs have shifted about one-third of on-peak GPU has also implemented a conservation electricity use to the lower cost off-peak hours.

program geared to home building. Called

" Good Cents," the program establishes an The survey results will be used to identify energy-use performance standard for new customer energy-saving practices and will also residential construction and provides the assist GPU in developing additional programs builder with a variety of techniques to meet to promote energy conservation.

the standard.

Customer Service CPU,s t,wo Pennsylvan.ia operat.ing companies As part of its ongoing efforts to maintain and have j,oined the state Governor's Energy improve customer service, each of the GPU Councilin sponsonng a study by the Alliance operating companies has installed a new to Save Energy of investments in conservation computerized Customer Information System programs by electnc utilit,ies.

(CIS) effective in 1984. The new system Met-Ed and Penelec, which are the first provides customer service representatives utilities in the nation to participate in such a with rapid access to customer account and project, are being used as a case study by the billing records, thus enabling a more efficient Alliance because of their active involvement response to customer billing and payment in conservation activities since the early inquiries as well as service-related trouble 1970s.

calls. The CIS also increases the efficiency of operating personnel in the diagnosis and Cogenerat,on Proj,ects Grow restoration of ser ice during a storm i

The GPU companies have also become emergency.

involved in a number of cogeneration projects during 1984. Among these is a large greenhouse at Penelec's Homer City Station.

The five-acre greenhouse is heated by waste heat in water piped from the coal-fired station. Eventually the greenhouse is expected to cover at least 20 acres, making this one of the largest of its kind in the nation.

13

E

,__x Preliminary studies suggest that the GPU eet.m8 System may be able to defer the planned 1.

Future Needs retirement of about 1,700 megawatts of capacity over the next 15 years.

Future Financial Planning The most critical factor in the improvement of GPU's financial position continues to be the a

restart of TMI-1. Restart will return the capital g dm.. trat.

ims ion and the bulk of the operating costs of the Unit to the rates of each of the three System operating companies, improving both income and interest coverage. TMI-1's restart is Changes in Employment 1.evels crucial to any major progress in GPU's ability At year-end 1984, the number of GPU System to return to the capital markets. Additionally, employees totaled 13,216.

TMI-l's output will reduce the need for in the six years since the accident at TMI, the purchased power.

number of GPU System employees engaged Prior to Unit l's restart, near-term emphasis in non-nuclear activities has increased by 595.

remains on maintaining Systemwide cash The number of employees engaged in nuclear equilibrium through tight controls on activities has increased by 1,475 due to the expenses, limiting construction projects and increased need for meeting nuclear safety and aggressively pursuing rate increases.

compliance requirements.

GPU is currently laying the financial Ongoing attention to the administration of groundwork for generating capacity Affirmative Action programs continued within expansion in the 1990s should economical the GPU System companies during 1984, purchased power contracts and other increasing employment levels of women and alternatives become less feasible.

minorities.

Operations Planning At year-end 1984, GPU had expended almost half of the total $1 billion estimated to be required for the TMI-2 cleanup.

C tatement Decontamination work is scheduled to be J

completed by 1988.

of Management As part of its energy-supply planning for the next two decades, GPU is evaluating its older The management of General Public Utilities generating stations to keep them operating Corporation is responsible for the information efficiently well beyond their traditional and representations contained in the financial retirement ages. In the past, GPU's fossil-statements and other sections of this annual fueled power plants normally were retired report. The financial statements have been when they had been in service about 40 prepared in conformity with generally years, but only after a case-by-case review of accepted accounting principles consistently

[

the economics of continued operation.

applied. In preparing the financial statements, management makes informed judgments and The economics now favor investing in estimates of the expected effects of events rehabilitation of the existing stations to keep and transactions that are currently being them running longer, when compared to the reported.

option of building new generating stations to replace them.

To fulfill its responsibilities for the reliability of the financial statements, management has GPU's three operating companies are working developed and maintains a syste,m,of internal with consultants on detailed reviews of the material condition of their older stations and accounting control. This system is intended to on estimates of the cost to extend their provide reasonable assurance that assets are safeguarded and transactions are executed,in operating lives.

accordance with management s authonzation 14 l

l

Where the 1984 Revenue Dollar Went 418 Energy costs X

24c Operating & maintenance 154 Taxes A

94 Depreciation & amortization

/

76 Interest & preferred dividends

/

44 Common stock earnings and recorded properly to permit the preparation of financial statements in M aaasemeat's o,'scuss, ion aad accordance with generally accepted Analysis of Financial Condition accounting pnnciples.

and Results of Operations The Board of Directors, through its Audit Committee, consisting solely of outside directors of the Company, is responsible for Liquidity and Capital Resources reviewing and monitoring the Company's Since 1980, the GPU System's cash position financial reporting and accounting practices.

has improved dramatically. To evidence such The Audit Committee meets with improvement, short-term debt outstanding has management and internal auditors periodically been reduced from a peak of $326 million in to review the work of each and to monitor the mid-1980 to $95 million at year-end 1984.

discharge by each of its responsibilities. Th Rate increases granted by the state Audit Comm,ttee also meets periodically w?

i ith commissic,ns have contributed greatly to the j

the,ndependent auditors who have free solidification of the GPU System cash i

access to the Audit Committee, gvithout position. Such increases have enabled the management present, to d,scuss internal System to recover from customers the large i

accounting control, auditing, and financial cash expenditures for power purchases reporting matters.

required to meet customer demand. The Coopers & Lybrand, independent public System has also realized improved cash flow accountants, are engaged to examine and as a result of the rate relief granted to amortize express an opinion on the financial the investments in TMI-2 and Forked River.

statements. Their opinion, which appears on Although amortization is being permitted, or page 20, refers to the contingencies and will be permitted in the case of JCP&L's uncertainties resulting from the nuclear investment in TMI-2, the state commissions accident at Three Mile Island.

are not permitting a return on the unamortized balances of such investments, the impact of Reference is made to Notes 1 and 3 to the which is d,scussed below.

i accompanying financial statements and to the following Management's Discussion and The CPU System intends to continue in the Analysis of Financial Condition and Results of near term making only those construction Operations for further discussion of the effects expenditures which can be financed with and impact of the accident.

internally-generated funds. Such expenditures, which were $311 million in 1984 and expected to be about $440 million in 1985, are being kept to the minimum necessary to 15

E Per meet customer needs reliably and safely.

Return Share These levels are established to meet nuclear safety and to provide reliable service at the Earnings at a representative customer level through improvements to rate of return on common equity 5.5 %

53.80 existing generating stations and to the transmission and distribution system.

Earnings reductions Normal regulatory attrition (1.5%)

(.35 )

In 1984, Met-Ed placed Treasury notes in an irrevocable trust account in order to satisfy impact f TMI-1 (3.5%)

(.95 )

$45 million of first mortgage bonds which are impact of TMI-2 and Forked River (4.0%)

( 1.00) due in October 1985.

Net earnings 6.5 %

$ 1.50 The funding required to clean up TMI-2 is essentially in place at this time. During 1984, As can be seen from the preceding table, the the eel program for industry participation in restart of TMI-1 would result in an increase in the cleanup effort was finalized and $150 return of 3.5 percent or 95 cents per share million ($25 million per year for 6 years) will and raise the System return to 10 percent or be received. The BPU, in a decision in May about $2.45 per share. The remaining loss of 1984, reaffirmed allowance of JCP&L's 25 earning power results from the normal percent share of the TMI-2 cleanup costs. The regulatory lag between rate cases and the lack Pennsylvania subsidiaries are receiving of return on the unamortized balances of both revenues for cleanup costs at a level lower TMI-2 and Forked River. As the investments in than amounts prescribed by the Pennsylvania TMI-2 and Forked River are amortized and Governor's plan, but the commission's order the earning asset base is restored, the GPU provides that such levels of revenue will be System's return on equity should rise to increased when TMI-1 returns to service.

approximately that level representative of For the first time since the TMI-2 accident, the other electric utility companies.

national rating agencies have upgraded the Interest coverage for the GPU System has fixed income securities of the GPU improved dramatically since 1980 and such subsidiaries, in February 1985, Standard &

coverage ratios now exceed the two times Poors again upgraded its ratings of the GPU minimum new-issue requirements of the companies' securities. In this action, Standard subsidiaries' debenture indentures. Such

=

& Poors raised to investment grade the bonds coverages by subsidiary follow:

and debentures of JCP&L and Penelec and Met-Ed's bonds. And in March 1985, Duff &

Interest coverage Phelps incorporated also again upgraded all of the System's securities. The rating agencies 1984 1980 cited improvements in the GPU System's jersey Central Power & Light 3.23X 1.86X financial posture, which,ncluded stnngent Metropolitan Edison 3.03 1.02 i

cost-cutting measures and responsive Pennsylvania Electric 4.00 2.06 regulatory treatment, as the reason for the upgradings. The GPU System is investigating some longer-term financing in 1985.

With the restart of TMI-1, annualized interest As a result of the TMI-2 accident, the GPU coverage ratios for 1984 would approximate System's return on common equity has ranged 3.7,4.4, and 4.5 for JCP&L, Met-Ed and from a low of 1.5 percent in 1980 to 8.3 Penelec, respectively.

percent in 1,984. If we postulate a The GPU System's equity ratios have representative utility indu,stry allowed return improved since 1980 as a result of debt on average common equity to be about 15.5 retirements and retention of earnings. Such percent or about $3.80 per share, the ratios are as follows:

following reductions from the representat.ive level would bring, us approximately to the 1984 1980 current ongoing level of about 6.5 percent or Debt (long and short-term) 48 %

55 %

$1.50 per share:

Preferred stock 12 12 Common e< pity 40 33 100 %

100 %

16

g It is management's goal to improve the to the subsidiaries by the state regulatory capitalization ratios in order to obtain ratios of commissions in 1984, partially offset by approximately 45 percent debt and 45 increased operating and maintenance percent common equity.

expenses.

GPU's management feels at this time that the 1984 vs.1980 greatest opportunity to increase the The increase in 1984 net income, before an stockholders' total return is by continuing to extraordinary item and unusual credit, over retain cash earnings. This process allows GPU 1980 resulted primarily from rate increases to meet service obligations, maintain TMI-1 in granted to the subsidiaries by the state readiness status for restart and assure the regulatory commissions, increased kilowatt-TMI-2 cleanup.

hour sales, lower interest expense resulting from retirements of long-term debt, reduced levels of short-term debt and lower interest Operating Revenue rates. Partially offsetting such increases to by Component income were increases in operating and Maions maintenance expenses.

Although 1984 net income has increased over 1983 and 1980, such earning levels continue 2250 to be severely impacted by the regulatory treatment accorded the investments in the 1500 TMI units and Forked River. For additional information see the first section of this g

management report and Note 1 to financial 0-statements, page 27. For a discussion of extraordinary items in 1984 and 1983, see 1979 1980 1981 1982 1983 1984 Note 3 to financial statements, page 32.

Energy Base Results of Operations Net income, before an extraordinary item, for i

1984 was $128.5 million or $2.05 per share, for 1983 was $66.9 million or $1.09 per share and for 1980 was $20.6 million or 34 cents per share.

The 1984 and 1983 earnings include unusual credits of $29.8 million and $11 rnillion, respectively, related to the deferral of above-normal expenses related to the outage at the Oyster Creek Nuclear Generating Station.

Such deferrals were permitted in rate decisions by the New Jersey regulatory commission. (For further information, see Note 1, page 30.)

The year 1980 is being used for comparative purposes because it reflects the first full year impact of the TMI-2 accident.

1984 vs.1983 The increase in 1984 net income, before extraordinary items and unusual credits, resulted primarily from a 6 percent increase in kilowatt-hour sales and rate increases granted 17

ww=w=w====n= mw===c==== -

mx =.

t -

Ei Q U A R T E R L Y F I N A N C I A L D A T A C (U N A U DIT E D)

First Quarter Second Quarter in Thousands Except PerShare Data 1984 1983 1984 1983 Operating revenues

$693,113

$648,965

$658,710

$580,279 Operating income

$ 79,985

$ 60,999

$ 65,337

$ 53,802 income before extraordinary items

$ 33,272

$ 11,996

$ 19,049

$ 7,172

Extraordinary items (Note 3)

$ (14,647)

Net income (loss)

$ 33,272

$ (2,651)

$ 19,049

$ 7,172 i

Earnings per share before extraordinary items

.53

.20

.30

.12 Extraordinary items (per share)

(.24)

Earnings (loss) per share

.53

(.04)

.30

.12 Average shares 62,864 61,264 62,864 61,264 Third Quarter Fourth Quarter in Thousands Except PerShare Data 1984 1983 1984 1983 Operating revenues

$705,035

$645,491

$678,428

$605,569 Operating income

$ 81,591 5 71,833

$ 88,335

$ 68,438 Income before extraordinary items

$ 34,945

$ 25,858

$ 41,239

$ 21,881 Extraordinary items (Note 3)

$ 19,753

$ ( 1,371 )

Net income

$ 34,945

$ 25,858

$ 60,992

$ 20,510 Earnings per share before extraordinary items

.56

.42

.66

.35 Extraordinary items (per share)

.31

(.02 )

Earnings per share

.56

.42

.97

.33 Average shares 62,864 61,264 62,864 62,313 Income before extraordinary items for the fourth quarters of 1983 and 1984 include unusual credits of

$10.9 million and $29.8 million, respectively, representing the deferral of above-normal expenses, recognized in the prior three quarters, related to the outage at the Oyster Creek Nuclear Generating Station.

For additional information see Note 1, page 30.

See Note 1, page 27, which contains information with respect to rate orders and their effect on quarterly earnings.

t 18

' CONSOLID ATED FIN ANCI A L ST ATE M ENTS AN D NOTES TO TH E FIN ANCI AL ST ATEM ENTS Index Report of Auditors 20 Consolidated Financial Statements 21-24 Notes to Financial Statements 25-36 System Statistics 37 i

Effects of Changing Prices 38 19

REPORT OF AU DITORS To the Board of Directors and Stockholders General Public Utilities Corporation f'arsippany, New Jersey We have examined the consolidated balance sheets of General

c. The recovery of the excess,if any, of amounts which might Public Utilities Corporation and Subsidiary Companies as of be paid in connection with claims for damages resulting from December 31,1984 and 1983, and the related consolidated the accident over available insurance proceeds; and statements of income, retained earnings and changes in financial

d. Any action of the Pennsylvania Public Utility Commission position for each of the three years in the period ended December with respect to any portion of the replacement power costs 31,1984. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included for which recovery by the Pennsylvania subsidiaries is now such tests of the accounting records and such other auditing permitted.

procedures as we considered necessary in the circumstances.

As more fully discussed in Note I to Consolidated Financial As more fully discussed in Note 1 to Consolidated Financial Statements, the Corporation's New Jersey subsidiary is engaged in Statements, the Corporation is unable to determine the ultimate litigation with a nuclear fuel supplier involving the pricing of nuclear consequences of the accident at Unit No. 2 of the Three Mile Island fuel. At this time, the outcome of the litigation and the rate-making Nuclear Generating Station (TMI-2) and of the response of rate.

treatment of any increased fuel costs which might result from an making and other regulatory agencies to that accident. Among the adverse legal determination are uncertain.

contingencies and uncertainties which have resulted as a direct or in our opinion, subject to the effect, if any, on the consolidated indirect consequence of this accident are questions concerning:

financial statements of such adjustments as might have been required

a. The recovery from various funding sources, including had the outcome of the uncertainties discussed in the second and customers, of the costs yet to be incurred in connection with third paragraphs been known, the aforementioned statements (pages 21 through 36) present fairly the consolidated financial position of the cleanup of TMI-2; General Public Utilities Corporation and Subsidiary Companies at

b. The recovery of the approximately $485 million investment December 31,1984 and 1983 and the consolidated results of their in the Three Mile Island Unit No.1 Nuclear Generatin8 operations and the consolidated changes in their financial position Station; for each of the three years in the period ended December 31,1984, in conformity with generally accepted accounting principles applied on a consistent basis.

COOPERS & LYBRAND March 1,1985 1251 Avenue of the Americas New York, New York 10020 20

CONSOLIDATED STATEMENTS OF INCOME (Note 1 )

G:neral Public Utilities Corporation and Subsidiary Companies In Thousands For the Years Ended December 31, 1984 1983 1982 Operiting Revenues

$2,735,286

$2,480.304

$2,405,527 Operating Expenses:

Fuel 445,012 427,747 429,067 Power purchased and interchanged, net 798,256 740,702 591,614 Deferral of energy costs, net (Note 2)

(137,152)

(115,800) 106,495 Other operation and maintenance (Note 9) 715,289 620,915 522,539 Deferral of Oyster Creek operation and maintenance (Note 1)

(55,306)

(20,470)

Depreciation and amortization (Notes 2 and 3) 219,491 219,593 202,725 Amortization of property losses (Note 2) 17,494 27,023 26,547 Taxes, other than income taxes (Note 9) 246,669 221,900 218,507 Total 2,249,753 2,121,610 2,097,494 Operating income before income taxes 485,533 358,694 308,033 income taxes (Notes 2 and 7) 170,285 103,622 71,511 Operiting Income 315,248 255,072 236,522 Other income and Deductions:

Allowance for other funds used during construction (Note 2) 5,117 7,979 6,663 Other income, net 7,225 12,464 15,838 Income taxes on other income, net (Notes 2 and 7)

(4,099)

(6,773)

(7,726)

Total other income and deductions 8,243 13,670 14,775 Income Before Interest Charges and Preferred Dividends 323,491 268,742 251,297 Interest Charges and Preferred Dividends:

Interest on long term debt 150,824 157,058 171,770 Other interest 11,296 8,413 13,594 Allowance for borrowed funds used during construction-credit (net of tax) (Note 2)

(6,680)

(3,643)

(7,960)

Income taxes attributable to the allowance for borrowed funds (Notes 2 and 7)

(961)

(1,046)

(1,583)

Preferred stock dividends of subsidiaries 40,507 41,053 41,742 Total interest charges and preferred dividends 194,986 201,835 217,563 Income Before Extraordinary items 128,505 66,907 33,734 Extraordinary items, Net of Taxes (Note 3) 19,753 (16,018) 3,773 Net income

$ 148,258 50,889

$ 37,507 Eirnings Per Average Share Before Extraordinary items 2.05 1.09

.55 Extraordinary items Per Share

.31

(.26)

.06 Earnings Per Share 2.36

.83

.61 Av rage Common Shares Outstanding 62,864 61,526 61,264 CONSOLID ATED STATEMENTS OF RETAINED E ARNINGS (Note 1 )

General Public Utilities Corporation and Subsidiary Companies In Thousands For the icars Endel December 31, 1984 1983 1982 Balance, beginning of year

$ 578,654

$ 527,765

$ 490,258 Add, net income 148,258 50,889 37,507 Balance, end of year (Note 6)

$ 726,912

$ 578,654 5 527,765 The accompanying notes are an integral part of the consolidated financial statements.

21

CONSOLID ATED B AL ANCE SH EETS (Note 1)

G:,neral Public Utilities Corporation and Subsidiary Companies in Thousands December 31, 1984 1983*

Assets Utility Plant (at original cost):

In service

$4,304,029

$4,078,403 Less, accumulated depreciation (Note 2) 1,375,247 1,268,626 Net 2,928,782 2,809,777 investment in Three Mile Island:

Unit 1 570,758 550,507 Less, accumulated depreciation and amortization (Notes 2 and 3) 85,441 84,975 Unit 2 788,891 787,586 Less, accumulated depreciation and amortization (Notes 2 and 3) 222,116 177,775 Net 1,052,092 1,075,343 Construction work in progress 179,885 148,493 Property under capital leases, net (Note 12) 38,663 Held for future use 28,607 29,462 Nuclear fuel, net of amortization (Note 2) 124,550 123,485 l

Net utility plant 4,352,579 4,186,560 1

Investments:

Other physical property, net 2,810 3,598 l

Loans to non-affiliated mining companies (Note 8) 13,875 14,125 l

Other, at cost 759 763 Total 17,444-18,486 Current Assets:

Cash 3,402 7,169 Temporary cash investments 18,536 42,266 Funds held by subsidiaries for retirement of bonds due within one year 27,000 Funds held in special deposits for TMI cleanup 31,702 22,300 Special deposits 37,386 17,223 Accounts receivable:

Customers, net (Note 4) 198,170 181,212 Other 22,641 16,732 Inventories, at average cost or less:

Materials and supplies for construction and operation 95,708 85,599 Fuel (Note 4) 89,895 54,910 Deferred energy costs (Note 2) 190,393 71,794 Deferred income taxes (Notes 2 and 7) 38,339 34,228 Prepayments 15,003 14,375 Total 741,175 574,808 Deferred Debits:

Unamortized property losses (Note 2) 305,865 327,190 Deferred costs-TMI-2 cleanup, net of recoveries 491,848 (17,302)

-Nuclear fuel disposal fee (Note 2) 62,321 64,212

-Oyster Creek outage, net 71,324 20,112 Deferred income taxes (Notes 2 and 7) 95,616 86,541 Other 77,620 73,263 Total 1,104,594 554,016 Total Assets

$6,215,792

$5,333,870 The accompanying notes are an integral part of the consolidated financial statements.

• Reclassified to conform to 1984's presentation.

22 e

In Thousands December 31, 1984 1983' Liabilities and Capital Long-Term Debt, Capital Stock and Consolidated Surplus:

Long-term debt (Notes 4 and 5)

$1,797,154

$1,894,965 Cumulative preferred stock (Note 6):

With mandatory redemption, net of expenses 63,650 67,194 Without mandatory redemption, including premium 424,739 424,739 -

Common stock and consolidated surplus (Notes 4 and 6):

Common stock 154,054 153,229 Consolidated capital surplus 774,508 774,196 Less, capital stock expense 18,056 18,056 Consohdated retained earnings 726,912 578,654 Total 1,637,418 1,488,023 Less, reacquired common stock 70 70 Total 1,637,348 1,487,953 Total 3,922,891 3,874,851 Current Liabilities:

Securities due within one year (Notes 4, 5 and 6) 75,746 58,440 Notes payable to banks (Note 4) 95,000 14,000 Obligations under capital leases (Note 12) 11,398 Accounts payable 228,842 234,954 Taxes accrued (Note 7) 97,057 89,627 Deferred income taxes +nergy (Notes 2 and 7) 88,297 32,048 Interest accrued 39,387 37,990 Other 63,144 58,274 Total 698,871 525,333 Deferred Credits and Other Liabilities:

Deferred income taxes (Notes 2 and 7) 656,644 579,444 Unamortized investment tax credits (Notes 2 and 7) 152,362 116,896 TMI-2 cleanup costs 506,725 Deferred credits-nuclear accident:

Insurance funds held by trustee 6,892 3,840 Cleanup revenues and state funds held in escrow 15,426 20,549 Industry fends held in escrow 10,877 Obligations under capital leases (Note 12) 27,265 Nuclear fuel disposal fee 84,029 76,060 Reserve capacity (Note 2) 65,491 72,302 Other 68,319 64,595 Total 1,594,030 933,686 Commitments and Contingencies (Note 1)

Total Liabilities and Capital

$6,215,792

$5,333,870 23

CONSOLID ATED ST ATEM ENTS OF CH ANG ES IN FIN ANCI AL POSITION (Note 1)

GGneral Public Utilities Corporation and Subsidiary Companies in Thousands For the Years Ended December 31, 1984 1983 1982

$ource of Funds:

Operations:

Income before extraordinary items

$128,505 5 66,907 5 33,734 Principal non-cash charges (credits) to income:

Depreciation and amortization (Notes 2 and 3) 251,494 251,214 239,579 Investment tax credits, net (Notes 2 and 7) 40,043 (15,273) 76,444 Deferred income taxes, net (Notes 2 and 7) 112,455 115,244 (32,211)

AFUDC on other funds (Note 2)

(5,117)

(7,979)

(6,663)

Total from operations 527,380 410,113 310,883 Extraordinary items, net of taxes (Note 3) 19,753 (16,018) 3,773 Entraordinary items (non-cash portion)

(19,753) 10,510 (3,773)

Long-term debt (Note 5) 25,500 increase in obligations under capital leases (Note 12) 38,663 Increase in bank borrowings (Note 4) 81,000 Decrease in funds held for retirement of bonds 27,000 52,800 Deferred energy costs, net (Note 2) 106,495 Reserve capacity (Note 2)

(6,811) 20,470 28,672 Sale of nuclear fuel 36,096 34,193

)

Decrease in other working capital items (a) 72,338 Other, net 22,872 10,866 Total source of funds

$715,604

$597,175

$480,243 Applica> n of Funds:

Constructon expenditures (excluding AFUDC on other funds)

$306,264

$277,409

$241,952 Decrease in bank borrowings (Note 4) 5,000 41,300 increase in funds held for retirement of bonds 79,800 Additions to leased assets (Note 12) 38,663 Retirement or redemption of long-term debt and preferred stock 112,722 178,096 71,828 Defctred energy costs, net (Note 2) 137,152 115,800 Deferred costs-nuclear accident, net 2,425 400 18,866 Deferred costs--Oyster Creek outage 55,306 20,470 Increase in other working capital items (a) 63,072 24,487 Other, net 2,010 Total application of funds

$715,604

$597,175

$480,243 (a) Changes in components of other working capital:

Temporary cash investments

$(23,730)

$ (60,781 )

$ 60,753 Accounts receivable 22,867 11,702 30,784 Special deposits 20,163 10,372 3,076 Inventories 45,094 1,239 1,675 Accounts payable 6,112 (53,303)

(38,231)

Other, net (7,434) 18,433 (33,570)

Total

$ 63,072

$ ( 72,338)

$ 24,487 The accompanying notes are an integral part of the consolidated financial statements.

24 l

Compliance Committee to monitor the operation and maintenance of OteS to Consolidated the System's nuclear facilities. In January 1984, the NRC staff advised Finaricial Statements the NRC that in view of these and other actions taken by the Corporation, and fo! lowing a review of alleged leak rate test irregularities at TMI-1, the NRC could, in advance of completing the

1. Commitments and Contingencies ongoing inquiries by the NRC's Office of investigation (01) into other unresolved issues of management competence and integrity, Three Mile Island Nuclear Acc, dent i

authorize operation of TMI-1 at 25% of maximum power without On March 28,1979, an accident occurred at Unit No. 2 of the osing an undue risk to the public health and safety.

Three Mile Island nuclear generating station (TMI-2) resulting in On February 25,1985, by a 3 to 2 vote, the NRC issued an significant damage to TMI-2 systems and components, Order holding that no further hearings will be required before it can contamination of major portions of the plant, and a release of make a decision on TMI-1 restart. In that Order, the NRC directed radioactivity which published reports of governmental agencies the ASLB to issue its decisions on two issues which had been indicated did not constitute a significant public health or safety remanded to the ASLB and for which the hearings had been hazard. TMI-2 is jointly owned by the Corporation's subsidiaries as completed, but stated that the NRC was expressing no views in that follows: Jersey Central Power & Light Company (JCP&L),25%;

Order on whether the proceedings on these matters must be Metropolitan Edison Company (Met-Ed),50%; and Pennsylvania completed prior to a decision on TMI-1 restart. It also stated that the Electric Company (Penelec),25%.

NRC would be addressing that issue in the immediate future.

Three Mile Island nuclear generating station Unit No.1 In addition, the NRC Order stated that the NRC has decided to (TMI-1 ), which is adjacent to TMI-2, was out of service for a institute a new proceeding to consider w hat action to take scheduled refueling and was not directly involved in the accident.

concerning those individuals possibly involved in TMI-2 leak rate TMI-1 is jointly owned by the Corporation's subsidiaries in the same falsification, except for those individuals (all the officers and percentages as TMI-2.

directors of GPU Nuclear and all the directors of Metropolitan TMI-1 Restart: Following the accident at TMI-2, management Edison) who were identified by the United States Attorney as not decided to keep TMI-1 shut down pending evaluation of the TMI-2 involved in those matters or those already reviewed and found not to accident. The Nuclear Regulatory Commission (NRC) then directed be implicated by the NRC's Office of Investigations in its TMI-1 leak that TMI-1 remain shut down untilit authorized the unit's resumption rate investigation. The NRC further stated that an individual whose of operation. During 1981 and 1982, the NRC's Atomic Safety and utilization in nuclear matters had been restricted by a condition in the Licensing Board ( ASLB) issued three partial initial decisions Appeals Board's order should be given an opportunity io request a regarding plant design, emergency planning and management issues, hearing with respect to that condition.

and recommended that, subject to various conditions, TMI-1 be in late 1981, it was discovered that some tubes in the TMI I allowed to resume operation.

steam generators had experienced cracking. A program to test all In 1983, an Atomic Safety and Licensing Appeals Board tubes and to repair cracked tubes by plugging or by kinetic expansion

( ASLAB), heard appeals from the ASLB's partial initial decisions.

was undertaken and a related application to amend the TMI-1 The ASLAB affirmed the ASLB's partialinitial decision on plant operating license was submitted. Hearings on such application to design. On July 26,1984, the NRC upheld that decision on all but amend the TMI-1 operating license to allow such repairs were one issue which it referred to the N RC staff for review.

completed in July 1984 and on November 1,1984 the ASLB issued The NRC also determined that the emergency planning for an initial decision authorizing the license amendment subject to TMI-1 was adequate. However, the Federal Emergency Management specific conditions. A group of intervenors has appealed this decision Agency and the NRC staff are reviewing the results of recent to the ASLAB. Some of the plugged tubes were found to be defective emergency drills to determine w hether certain deficencies in the during subsequent testing, and have been repaired and retested.

response by counties around the TMI facility have been resolved.

Additional nondestructive testing of steam generator tubes has Failure to resolve these deficiencies could result in the NRC requiring revealed some defects requiring some additional tube plugging.

corrective action prior to restart.

Based on these and other developments, the same intervenors have With respect to the management phase of the TMI 1 restart filed a motion urging that the hearings be reopened.

proceedings, the NRC and its staff hase taken the following actions:

On January 20,1984, an intervenor in the TMI-I restart in April 1983, the NRC staff conducted a review of its previous proceeding filed a petition with the NRC requesting continuation of position that the ASLB's partialinitial decision on management the suspension of the TMI-1 operating license because of alleged competence and integrity provided a basis for the NRC to authorize deficiencies in the plant's emergency feedwater system. The NRC the unit's restart. The NRC staff report of May 17,1983 concluded staff denied the request, and on November 2,190' the intervenor that while management's policies and practices do support the restart requested the NRC to provide it with the opportu...ty to comment on of TMI-1, the staff could draw no conclusion regarding management the NRC staff's denial. The NRC has declined to review the staff's integrity and identified several unresolved issues they considered to denial of the petition.

require further review and investigation.

Pursuant to plans submitted to the NRC to assist in the TMI I restart decision, GPU Nuclear Corporation (GPUNC) has augmented its Board with four outside directors, inclu6ng a Chairman, of which three also constitute a Nuclear Safety and 25

=

On September 13,1983, the 01 issued a report concluding that that its members make voluntary contributions to cleanup funding in certain allegations of violations connected with the TMi-2 cleanup connection with the Governor's plan. At present,41 utilities, were true. The 01 report recommended a detailed review of the including the Corporation's subsidiaries, have pledged about $76 cleanup project. An NRC Performance Appraisal Team has resiewed million or $12.7 million per year for 6 years under the program.

TMI-2 management and gisen a favorable report. The NRC also Pennsylvania and New Jersey electric utihties (including JCP&L, asked its staff for a plan to assure compliance with required safety Met-Ed and Penelec) have agreed to provide a portion of normal rules and indicated that enforcement action may be taken against research and development funding each year to supplement the eel CPUNC. A February 1984 report of the Office of Inspection and voluntary program in an amount necessary to maintain an annual Enforcement found procedural violations in the repair of the polar funding lesel by the investor-ow n-d electric utikty industry of $25 crane to be of minor safety significance but reflective of management million per year for six years starting in January 1985; such failures which were "more the result of confusion than supplemental amount will be about $ 14 million for 1985.

deliberateness." On October 29,1984, the staff resersed its earlier The Federal government is providing research and deselopment position that there was no evidence of deliberate circumsention of funds (a portion of which directly offsets cleanup expenses) for procedural requirements and stated that the circumvention of certain activities engaged in during the course of the cleanup. The procedural requirements was at least to some degree deliberate. The total amount of such assistance is currently estimated at $80 million staff is currently in the process of determining whether further of which approximately $50 million has been committed. Funding enforcement action is now warranted.

beyond fiscal 1985 has to be authorized by the U.S. Congress. The On August 13,1984, a group of individuals and organizations U.S. Department of Energy (DOE) has agreed to take responsibility collectively filed with the NRC a petition seeking the revocation of for the disposal of certain wastes and the damaged fuel core for GPUNC's licenses to operate TMI-1, TMI-2 and Oyster Creek. This which the TMI 2 ow ners will make certain payments. In addition, a petition, which was denied by the NRC's Director of Nuclear Reactor consortium of Japanese power companies is funding $18 million of Regulation, may be the subject of further proceedings within the research and development cleanup at TMI-2 through the DOE.

NRC or the courts.

As part of the Governor's plan, the Commonwealth of The Corporation is unable to predict the impact of these Pennsylvania provided $5 million per year for certain cleanup developments upon the TMI-1 restart.

expenditures in 1983 and 1984, and the State of New Jersey has funded TMI-2 cleanup expenditures in the amount of about $1.8 TMI-2 Cleanup: The latest projections made in December 1982 rn i n per year f r fiscal 1984 and 1985. It is anticipated that such provide for the cleanup of TMI-2 to be completed in 1988, at a cost of funds will be approved and available in subsequent years.

approximately $1 billion (including post 1983 escalationi of which On January 24,1983, the subsidiaries entered into a settlement

$493 million had been expended at December 31,1984. The cleanup agreement with B&W, the supplier of the TMI-2 nuclear steam supply estimate is subject to major uncertainties, including (a) regulatory system. Under the agreement, B&W is to pay the subsidiaries rebates requirements, (b) the full scope of the challenges in decontaminating f up to $37 milhon on anticipated future purchases from B&W of up the reactor, (c ) the effect of government regulations on the issue of

$270 million of services and equipment to be made over a period t

waste disposal and (d) the availability of funds.

of ten to fifteen years. The subsidiaries are applying such rebates to The Governor of Penns)fvania has proposed a plan to proside cleanup costs and through December 31,1984, rebates totaling for the estimated remaining cost of the cleanup as of January 1,1982 appr simately $2.7 milhon have been received.

($760 million) to be shared as follows: the subsidiaries, $245 As menti ned abos e, the subsidiaries hase spent $493 million on milhon; the Federal gosernment, $190 million; the nuclear industry, c stsass ciatedwith thecleanupof TMi 2.Of suchcosts,$39 million

$190 million; insurance, $90 rr'illion; the State of New Jersey, $15 has been charged to capital additions to the plant, $ 46 million has been milhon; and the Commonwealt5 of PennsyIvania, $30 million.

charged to maintenance expense and the balance of $408 million has Rate settlement agreement 5 and orders approsed by the been deferred pending recovery of such costs. As of December 31, Pennsylvania Public Utihty Corrmission (PaPUC) in 1982,1983 and 1984, the subsidiaries hav e credited against such deferrals $ 299 1984 together with rate orders issued by the New Jersey Board of m

n surance pmc Un u npnmeg 6 mAon), D 2 Pubhc Utilities (NjBPU) in 1982 and 1983, allow for collection of rnilhon of contributions from the Commonwealth of PennsyIvan.ia, $72 cleanup res enues at the level called for by the Governor's plan m%on f cleanup resenues from customers, $ 32 million of DOE descnbed abose, namely $49 m.flion per year. However, in the case funding of certain tasks and $8 million from other sources.

of the Pennsylvania subsidiaries, collection of a part of such cleanup In acc rdance v.ith the criteria set forth in a statement issued by revenues is not to begin until restart of TMI-1, so that the aggregate the Financial Accounting Standards Board (FAS 71 ), the subsidiaries annual amount currently being collected from customers in recorded on the 1984 financial statements a deferred asset and a Pennsylvania and New Jersey is $13 milhon. The Pennsylvania (orrespondingliabihty for the estimated remaining costs of the TMI-2 subsidiaries have renewed requests (which the PaPUC denied in cleanup. These balances are reduced as funds are collected from 1983) to transfer about $16 million annually to customer funding of outside sources and as additional expenditures are made resulting in the TMi 2 cleanup from amortization of TMI 2. Such petitions are a liabihty balance at December 31,1984 of $507 million. The p nding before the PaPUC.

subsidiaries are receiving cleanup funds from customers, the Federal The [dison Electric Institute (EEI), the national trade association government, the utihty industry and others. Management beheves of insestor owned electric utihties, in January 198 3, recommended that any costs incurred by the subsidiaries for which they do not

=

26 1

reccive financial assistance, or reimbursement from suppliers or Pursuant to such order, JCP&L will ( 1 ) implement certain others, should be recoserable through the ratemaking process, but energy conservation programs and othr measures for its customers' recognizes this is not assured. It is management's intent to seek to benefit, (2) amortize its totalinvestmot in TMI-2 over an 18 year recover such costs in rate and/or judicial proceedings.

period beginning in 1989, and ( 3 ) establish a separate entity for the Purpose of exploring, encouraging and developing cogeneration Repair and Restoration of TMl 2: A final decision concerning the projects. The order also extends the period of recosery of the Forked future of TMI-2 depends upon an assessment of the usability of the River insestment from 15 to 25 years, resulting in reductions in retail major components, and/or an evaluation of the economic ra m 5 m@on annuah & Me insal wan &Wn Wng appropriateness and licensing feasibility of restoration.

been refunded to customers in 1984. No return has been allowed by Accounting for the Investment in TMI:

the NJBPU on the unamortized investments in TMI-2 and Forked River.

inv;stment in TM'-2: In January 1982 rate settlement agreements, in 1984, JCP&L filed with the NJBPU a petition for a $60 million the PaPUC authorized amortization of Met Ed's and Penefec's annual retail base rate inc rease w hic h was subsequently reduced as a investments in TMI-2. See Note 2 for additional information.

result of the settlement of the fault proceedings discussed abose and A 1984 NjBPU order permits JCP&L to amortize its insestment actual operating results. On February 11,1985, the N]BPU issued an in TMI-2 oser an 18 year period beginning in 1989. JCP&L also rder denying any increase in rates. The N)BPU has approved an reversed presiously accrued depreciation on TMI-2 as a result of increase in JCP&L's les elized energy adjustment clause charges of such order, For additionalinformation see Notes 2 and 3.

$61 miUion annuaHy, eHatne Nosember 1,1984.

In Apnl 1981 rate orders, the PaPUC directed Met-Ed and Penelec to cease the accrual of depreciation on TMI-2 effective Pennsylvania: In 1979, the PaPUC remosed from base rates the approximately when the operating and capital costs of TMI-2 were capital and operating costs associated with the ins estments made by eliminated from base rates (January 1979 for Met-Ed and Apnl 1979 the Pennsylvania subsidiaries in TMI 2 and prescnbed low er rates. In for Penelec ).

May 1980, the PaPUC took similar action to remove TMI-1 costs fr n custmwr rates and to pnscnbe lower temporary rates. Also in inv:stment in TMI-1: In Apol 1981 rate orders, the PaPUC the May 1980 order, the PaPUC allowed for full energy cost directed Met-Ed and Penelec to cease the accrual of depreciation on recovery fr m June I t December 31,1980 and permitted recovery TMI 1 effectis e June 1,1980, the date w hen the operating and f the then outstanding post-arcident deferred energy costs in the capital costs of TMl-1 were eliminated from base rates, Rate form of a surcharge. The PaPUC stated that the amounts of such settlement agreements approsed by the PaPUC in June 1984 allow costs are subject to review and to a later determination whether for the future recognition in Met Ed's and Penelec's base revenues of specific am unts of energy costs were imprudently or unreasonably the operating and capital costs associated with TMI I at essentially incurred. The PaPUC also stated that it would take notice of a judaial current levels and reductions in energy cost rates, contingent upon r administrative determination that Met Ed had been negligent in the restart of TMI 1 and the unit's satisfaction of certain operating the operation of the TMl facility.

cnteria. The PaPUC must reaffirm these TMi-1 restart related rate In 1980, the Pennsylvania subsidiaries filed complaints with the provisions in Met-Ed's and Penelec's next base rate cases for them to PaPUC against the temporary rates prestnbed by the May 1980 continue in effect.

rders and filed pr posed increases in base rates. In Apnl 1981, the The July 1982 rate orders of the NjBPU directed JCP&L to cease PaPUC granted part of the requested rate increases and in May 1981 the acuual of depreciation effectne Apnl 1,1980 (the date TMI-1's denied the complaints against the temporary rates. The Pennsylvania operating and capital costs w ere removed from JCP&L's base rates I subsidiaries appealed those orders and on Nos ember 18,1983 the on that portion of its investment subject to the NjBPU's jurisdiction.

Pennsylvania Commonwealth Court affirmed the PaPUC's actions.

A November 1983 rate order of the Nj6PU also makes provision, The Pennsylvania Supreme Court has agreed to resiew the PaPUC upon iMi l's return to sersice, for an increase in base rates to cover actions with respect to the proposed base rate increases.

TMl-1 operating and capital costs at 198 3 levels after further review On January 24,1985, Met Ed and Penelec filed with the PaPUC by the NjBPU and the satisfa(tion by TMI.1 of tertain operating petitions for annual retail base rate increases of $47.3 million and oiteria

$55.3 million, respectnely. On March 1,1985, Met Ed and Penelec Rate Proceedings:

filed proposed Energy Cost Rates (ECR) with the PaPUC. Met Ed is New ):rsey: In June 1979 and April 1980, the NIBPU issued orders requesting a $19.8 million decease in such (harges and Penetec is remosing from base rates the capital and operating costs associated requesting a $25.2 million inucase.

The base rate increase request filed by Penelec on January 25, with JCP&L's insestments in T Mi 2 and TMI 1, respectisely.

1984 was the sub e(t of a settlement agreement approved by the i

Iollowing hearings conducted in response to the New Jersey PaPUC whic h has become final as to all but one ratepayer's Public Utility f ault Determination Act of 1983, the N)BPU found that complaint. That complaint was the subject of a hearing held on ICP&L was partially at fauf t in either causing or failing to mitigate the January 24,1985 and the Company is awaiting a nx ommended sesenty of the T Mi-2 auident. By an order inued in June 1984, the NIBPU approved a 5tipulation of Settlement w hic h set forth the range decision by an Administratise Law judge.

On Deuwber 7,1984, the PaPUC proposed a form of of potential TMI-2 auident-related (osts within the provision of that mandatory ECR whi(h contemplates use of purported incentnes to Act.

27

e encourage the efficient operation of electric generating units. The damages) resulting from the accident and (ii) suits to enjoin the Corporation is unable to predict the impact of the proposed ECR, if future operation of TMI-2.

j eventually adopted, upon its Pennsylvania subsidiaries

• ability to fully Questions have not yet been resolved as to whether certain of recove7 their future energy costs, these claims, that are material in amount and arise out of both the accident itself and the cleanup and decontamination efforts, are (a)

{

Investigations: In 1980 and 1983, the NRC imposed civil penalties subject to limitation of liability set by the Price-Anderson Act and j

with respect to the TMI-2 accident and its aftermath. The NRC has (b) outside the insurance coverage provided pursuant to the Price-also stated that, depending upon the findings of continuing Anderson Act.

investigations, it may take additional enforcement action.

In September 1981, the U.S. District Court for the Middle On November 7,1983, a Federal grand jury returned an 11 District of Pennsylvania approved a settlement agreement between count indictment charging Met-Ed with criminal misconduct in the insurance companies and representatives of the class m certain connection with the performance of water inventory testing at TMI-2 class acti ns seeking rec very f r ec n mic I sses and the costs of beginning sometime before October 18,1978 and continuing medical detection services for persons, businesses and entities within through March 28,1979. On February 29,1984, Met Ed pleaded a 25 mile radius of TMI-2. Pursuant to the settlement, the insurance guilty to one count, charging that over a six-month period it operated c mpanies established a fund of $20 million for economic loss claims i TMI-2 with an inaccurate and unreliable water inventory testing and a separate fund of $5 million for public health purposes. Earlier, procedure, and no contest to six other regulatory counts. The the court had held that personalinjury claims (other than for medical remaining four counts were disrrdssed. Met-Ed paid fines totaling detection services) could not be pursued m class action proceedings

$45,000 and provided $1 million to establish a fund for emergency and the settlement agreement does not deal with such claims.

planning to directly benefit the area around TMI. Met-Ed has agreed in 1985, the insurance companies entered into settlement that it will not claim such amounts for either tax or ratemaking agreements with the individual plaintiffs in 256 of the approximately 300 personal injury claims (including some claims for punitive n March 1980, the NJBPU requested an independent analysis of damages) commenced as a result of the TMI-2 accident. Settlement strategic options for JCP&L in response to the extreme financial agreements provide for payment of an aggregate of $14.3 million in j

pressures experienced by JCP&L following the TMI-2 accident, for settlement of all claims brought by these plaintiffs. Approximately 40 i

the purpose of identifying options that would minimize additional individual personalinjury claims (including some claims for punitive costs to JCP&L's customers and continue to provide an adequate damages) are still pending.

supply of power. The report, which was submitted to the NIBPU in On Wary 12,1985, the U.S. District Court for the Middle April 1981, stated,in part, that (i) a Regional Power Authority District of Pennsylvania held that punitive damage claims would be owning and operating TMI would best provide the financing c vered by the Pnce Anderson Act.

capability to fund the TMi-2 cleanup and reduce its cost to the A gr up f 21 tounst-related businesses have filed suit seeking to ratepayer and (ii) some form of public ownership of JCP&L has the rec ver i ss of business and profits allegedly caused by the TMI-2 greatest likelihood of significantly moderating the growth in electric accident. A ma ion for summary judgment against such claims has rates. Commenting on other options, the report stated " merger, s

divestiture, bank optcy and a state-owned generating company in March 1981, a group of customers of the CPU operating would provide I:mited long term benefits to the ratepayer and involve substan.ial legal, economic and political risks". During 1982 c mpanies brought a class action suit against those companies and others in the U.S. District Court claiming damages m the form of and 1983, the NIBPU held fourteen public hearings to receive higher electric rates resulting from the TMI-2 accident. The District comments on the report's recommendations. JCP&L does not know what further action, if any, the NJBPU may take in this proceeding.

Court granted summary judgment dismissing that claim and the plaintiffs appealed to the U.S. Court of Appeals for the Third Orcuit.

Other investigations and inquiries into the nature, causes and The Court of Appeals, acting on its own motion, affi med the District consequences of the TMI-2 accident commenced by various federal and state bodies have been generally completed but continue to g urt decision, but on the ground that Federal courts have no provide a potential for further uncertainties. The Corporation and its junsdiction over the subject matter of the complaint. On February 19,1985, the U.S. Supreme Court declined to review the Third subsidiaries are unable to determine the final outcome or Circuit's decision.

consequences of these investigations. The Corporation and its subsidiaries are also unable to determine the impact, if any, the The suits referred to m, the two previous po.agraphs and some of the still pendmg individual personal injury cases have been or will be results of such insestigations may base on (i) the proceedings to

"'f" Pennsylvania state courts.

rcturn TMI.1 to operation, (ii) the efforts to clean up TMI-2, and Class action suits for alleged damages on behalf of purchasers ef (iii) the Pennsylvania regulatory agency decisions with respect to the the Corporation's common stock were instituted in 1979 against the ultimate recoverability from ratepayers of the replacement power Corporation and certa,n of its directors as a result of the accident at i

costs necessitated by the unavailability of TMl.1 and TMI-2.

TMI-2. Pursuant to a 1983 settlement agreement, approved by the Litigation: As a result of the accident and its aftermath, claims have court, $10.8 million in cash was deposited in an escrow account for been asserted against the Corporation, and/or its subsidiaries and the plaintiff class which included contributions by the corporation certain of their officers and directors. The claims include (i) and by its directors (through an insurance carrier). Of the $10.8 individual daims as well as purported and actual class actions for million in escrow, $1.8 million, pursuant to court order, has been alleged personal and property damages (including claims for punitive 28

L paid to plaintiffs' counsel. Also as a result of the settlement, the assessments of up to $5 million per nuck 3r reactor per incident, but Corporation will issue 1,270,000 shares of common stock to eligible not more than $10 million per reactor in any calendar year. Based on purchasers and has issued 330,000 shares to the plaintiffs' counsel in the ownership of three nuclear reactors, the subsidiaries' maximum payment of fees. The distribution of the escrow account and potential assessment under these provisions would be $15 million common shares to the plaintiff class will be made after individual per incident but not more than $30 million per calendar year for claims have been determined.

claims covered by this insurance. The current Price-Anderson On November 30,1982, the U.S. District Court denied a motion legislation expires in 1987. The NRC has recommended to Congress

- of the U.S. Government to dismiss the suit brought by the that such legislation be extended but amended to replace the Corporation and its subsidiaries in December 1981 against the limitation on liability with an annual assessment limitation of $ 10 Government under the Federal Tort Claims Act for damages and million per reactor per incident.

losses (estimated at approximately $4 billion) suffered by the Effective September 15,1980, JCP&L, with respect to Corporation and its subsidiaries and its customers as a result of the incremental replacement power costs resulting from an extended accident. The complaint alleges that the NRC violated its statutory accidental outage at its Oyster Creek nuclear generating station, and common law duties to warn of defects and hazardous conditions became a member of NEIL. Such coverage under NEIL provides for a in equipment, analysis, procedures and training at TMI-2 of which weekly indemnity of $2.8 million, beginning 26 weeks after an the NRC was aware as a result of an incident at another nuclear outage caused by an accident, for the incremental cost of plant. On September 28,1984 the U.S. Court of Appeals, without replacement power. The policy limits covered outages to 52 weeks at considering the merits of the claims, reversed the District Court's 100% of the weekly indemnity and 52 additional weeks at 50% of decision and held that the suit was barred by an exception to the the weekly indemnity. As a member of NEIL, JCP&L is subject to a Federal Tort Claims Act. On February 19,1985, the U.S. Supreme retrospective premium of up to $7.3 million annually,in the event Court denied a petition for review of the Court of Appeals' decision.

that losses exceed the accumulated funds available to NEIL. The subsidiaries expect to obtain similar coverage with respect to TMI-1 Insurcnce: At the time of the TMI-2 accident, the subsidiaries up n that unit's return to operation.

maintained property damage and decontamination insurance of 5 me p tentiallosses or liabilities to which the Corporation and

$300 million applicable to both TMI-1 and TMI-2. All of such

.ts subsidiaries may be subject are not msurable or the amount of i

amount has been paid to the subsidiaries for claims arising from the insurance carned may n t be sufficient to meet potential losses and TMI-2 accident. The insurance carriers have reinstated the coverage liabilities. Under those circumstances, such losses or liabilities could for the TMl site, but with regard to property insurance for TMI-2, have a material adverse effect on their financial condition.

such coverage has been reinstated only for possible damage which might result from a nonnuclear accident during the unit's cleanup and Nuclear Fuel Litigation 4

restoration period. Effective January 10,1983, on a prospective in 1971, JCP&L entered into a contract to purchase three basis, the primary property damage insurance coverage was raised to nuclear fuel reloads for the Oyster Creek station, with an option for

$500 million on the site.

five additional reloads beginning in 1976. JCP&L believes that it Effective April 1,1981, JCP&L became a member of Nuclear exercised the option the supplier offered to extend the contract to Mutual Limited (NML), a mutualinsurance company all of whose cover five additional reloads beginning in 1981. The supplier members and policyholders are electric utilities. Such membership disputed this position and, in November 1978, submitted bills for provides JCP&L with $500 million of primary property damage material and services in the aggregate amount of approximately $33 insurance for its Oyster Creek station. As a member of NML, JCP&L is million, covering reloads supplied in 1977,1978 and 1979. Of this subject to annual assessments of up to 10 times its annual premium, amount, JCP&L has paid the supplier $3.8 million. On January 26, or approximately $ 17.6 million, in the event that losses as a result of 1979, the supplier filed suits in the U.S. District Court for the District an accident at a nuclear plant of any member company exceed the of Washington against JCP&L, the Corporation and CPU Service accumulated funds available to NML, Corporation (GPUSC). In response, JCP&L sought a declaratory Effective January 15,1982, the subsidiaries inueased their judgment confirming its view of the supplier's contractual property damage insurance for damages in excess of $500 milhon at commitments and damages. In 1982 the court upheld JCP&L's each of their nuclear generating sites. The policies currently limit position of the existence of a binding contract for the sale of the coverage to $535 million for losses in excess of $500 million. This reload batches. On January 10,1985, the District Court issued a excess insurance is provided by Nuclear Electric Insurance Limited Memorandum Decision essentially upholding JCP&L's damage claims (NEIL), a mutualinsurance company all of whose members and with respect to one reload batch. In accordance with that decision, policyholders are electric utilides, and American Nuclear Insurers /

JCP&L has filed proposed judgements against the supplier for Mutual Atomic Energy Liability Underwriters and provides that approximately $18.4 million before deduction of the supplier's enpenses for decontamination and debris removal shall be paid counterclaims of about $3.9 million. The supplier has moved for before any payments in respect of claims for property damage.

reconsideration of the January 10,1985 decision. JCP&L's damage Under the NEIL portion of this coverage, the subsidiaries are subject claims for the remaining reload batch are pending. JCP&L does not to a retrospective premium of up to $15.8 million annually in the know whether the supplier will appeal any or all of the decisions of event of an accident at a nuclear plant of any member company.

the District Court, but believes that any additional amount that it The Price-Anderson Amendments to the Atomic Energy Act might be required to pay if the supplier is successful in any appeal presently limit liability to third parties to $620 million for each would be valid costs and should be recognized for ratemaking nuclear incident. Coverage of the first $160 million of such liability is purposes. However, there can be no assurance that this will be the provided by private insurance. The next $460 million is provided by case. If the supplier were to appeal successfuhy and the suits were 29

ultimately resolved in the supplier's favor, JCP&L would incur $18.7 Authority to assist in orderly movement of these shipments. The million in additiorni fuel expense, based on the amount of fuel Authority has stated it intends to appeal the District Court's decision.

consumed through December 31,1984.

Shipments of the spent fuel hae begun and are continuing.

Since 1975, JCP&L has been storing 224 spent nuclear fuel Other assemblies discharged from the Oyster Creek station at West Valley, The subsidiaries' construction programs, which extend over New York Nuclear Fuel Receiving Facility (Facility) under several years, contemplate expenditures of approximately $440 agreements with Nuclear Fuel Services, Inc. (NFS), and JCP&L has mill on during 1985. In connection with these construction programs, paid NFS storage charges m accordance with those agreements. In thmbsidiaries have incurred substantial commitments.

April 1982 the New York State Energy Research and Development The subsidianes have entered into long-term contracts with non-Authority ( Authority), the owner of the Facility, submitted invoices affiliated mining companies for the purchase of coal for certain for mcreased storage charges for the period January 1981 through generating stations in which they have ownership interests. These March 1982 of $1.3 million and additionalinvoices for the period contracts, which expire between 1997 and the end of the remaining April 1982 through June 1983 of $1.7 million have since been life of the generating station concerned, require the purchase of received. GPUSC and JCP&L refused to pay such increased charges minimum amounts of the station's coal requirements. The price of (other than payments of an additional $392,000).

the coal is determined by formulas providing for the recovery by the in May 1982, the Authority commenced an act. ion m the U.S.

mining companies of their costs of production. Beginning in 1985, District Court for the Western District of New York against the the price of coal will be based on escalation of indexed cost Corporation, CPUSC, JCP&L, NFS and its parent and two non-components under one of these contracts. The subsidiaries

• share of affiliated electnc public utilities which also have spent nuclear fuel the cost of coal purchased under these agreements amounted to stored at the Facility, alleging, among other things, that the

$104 million, $96 million and $101 million, for the years 1984,1983 defendants have unlawfully failed and refused to remove spent and 1982, respectively nuclear fuel from the Facility. In April 1983, the court ruled that the The subsidiaries have entered into agreements with other utilities utilities are liable to the Authority for storage charges after February for the delivery of an aggregate of approximately 1,100 megawatts 25,1982 at a rate to be determined by the court and that the (MW) of capacity and energy for various periods through 1990.

Authority s claims for trespass and unjust enrichment for periods Payments pursuant to these agreements are estimated to aggregate prior to February 25,1982 were subject to review. The GPU about $227 million for 1985. JCP&L has entered into an additional defendants and the Authority have entered into a court approved agreement, subject to the approval of the NJBPU, for 945 MW of scttlement agreement, which provides, among other things, that capac ty and energy through 1995, with the amount then declining subject to the receipt and maintenance of all necessary regulatory uniformly through 1999. The price of the energy purchased under and other approvals and the satisfaction of other specified the agreements is determined by formulas providing for recovery by contingencies, JCP&L shall complete the removal of its spent nuclear the sellers of their costs. Other possible long-term purchases are the fuel not later than May 31,1985. The Authority has agreed that in subject of pending negotiations.

the event JCP&L removes its spent nuclear fuel as provided in the The Oyster Creek nuclear generating station, owned by JCP&L, settlement agre. ment, it will no longer assert any claims against was tairen out of service for scheduled repairs, maintenance and JCP&L or CPUSC except those claims for additional storage charges refueling in February 1983 and returned to service in November and possible other monetary damages which are still pending before 1984. In 1983, the NJBPU authorized $4.2 million of annual the District Court.

revenues providing for a five year amortization of deferred The U.S. District Court for the District of New Jersey has incremental outage-related expenses of $21 million over normal declared invalid as conflictmg with controlling federal law, an levels of such expenses,in January 1985, the NjBPU permitted ordinance enacted by Lacey Township, New Jersey, m which the JCP&L to increase the deferral of outage-related expense by about Oyster Creek station is located, which would prohibit the return t

$55 million but did not increase revenues above the level authorized Oyster Creek of the 224 spent fuel assemblies. The township has in the 1983 proceeding. As a result of the additional deferral, the appealed the District Court's decision to the U.S. Court of Appeals.

amortization period will be extended from 5 to about 18 years. At The State of New Jersey has enacted legislation which, among other December 31,1984, the aggregate amount deferred was $71 things, prohibits the transportation of spent nuclear fuel through the million. No revenues have been provided for a return on the State along certain routes, mcluding those necessary to return unamortized balance. Another outage of up to a year in length is now JCP&L's spent nuclear fuel to the Oyster Creek station, without a scheduled to begin as early as late 1985 and JCP&L expects that the necessary permit which the State has refused to issue to ICP&L. The ca ital, o erating and maintenance costs of this outage will be U.S. District Court for the District of New Jersey has granted JCP&L's substantial request for an injunction against interference by the State with the The NJBPU issued an order on December 11,1984 initiating a shipments and requires any necessary permits to be issued. The State comprehensive review of all costs, including capital additions, has appealed ta the U.S. Court of Appeals. The New Jersey Turnpike o erating and maintenance expenses and replacement power costs Authority has also commenced an action against JCP&L and CPUNC incurred in conjunction with the Oyster Creek outage discussed seeking to prohibit transportation of the spent fuel on the New Jersey above. The NJBPU has indicated that to the extent any such costs are Turnpike without compliance with certa n we_ght limitation determined to have been unreasonably incurred, they may not be i

regulations. The District Court has granted an mjunction requiring the recoverable through rates.

As a result of existing and proposed legislation and regulations dealing with environmental matters, the subsidiaries may be required 30

to incur substantial additional costs to modify or replace existing and those employed for tax purposes. The subsidiaries use depreciation proposed equipment and to improve environmental sites currently or rates w hich, on an aggregate composite basis, resulted in an formerly used by them. The subsidiaries are unable to estimate the approximate annual rate of 3.28%, 3.27% and 3.24% for the years extent of such possible costs or the impact thereof on future 1984,1983 and 1982, respectively. Reference is made to Notes 1 operations.

and 3 regarding the accrual of depreciation on TMI-1 and TMI-2.

2. Summary of Significant Accounting Policies Amortization Policies GIneral Property Losses: Such losses are amortized and recovered through The consolidated financial statements include the accounts of all rates as prescribed by the NJBPU and the PaPUC The total amount subsidiaries.

of unamortized property losses at December 31,1984 was about it is the general policy of the subsidiaries to record additions to

$306 million, before taxes, of which $286 million related to the utility plant at cost, w hich includes material, labor, overhead and an abandoned Forked River project. No revenues were provided for a allowance for funds used during construction ( AFUDC). The cost of return on the unamortized balances.

current repairs (except for certain costs described in Note 1 ) and TMI-2 investment: Such investment for the Pennsylvania minor replacements is charged to appropriate operating expense and subsidiaries is being amortized in accordance with 1982 PaPUC clearing accounts and the cost of renewals and betterments is settlement agreements providing revenues for recovery of the original capitalized. The original cost of utility plant retired, or otherwise investment, nuclear fuel in the reactor at the time of the TMI-2 disposed of, is charged to accumulated depreciation.

accident and certain capital additions subsequent thereto. Rate Operating Revenues orders by the PaPUC in 1984 have resulted in a reduction in the Revenues are generally recorded on the basis of billings annual amortization of TMI-2. Pursuant to a lune 1984 order, JCP&L

- rendered.

will be allowed to recover its original investment, nuclear fuel in the reactor at the time of the TMI-2 accident and capital additions Ac ount.mg Under F.mancial Accountm.g Standards Board subsequent thereto, in TMI-2 commencing on or about April 1989 StitimInt (FAS) 71 and extending over a period of 18 years.

The subsidiaries follow the standards of accounting criteria set No revenues have been provided % a onorn o1 the forth under FAS 71. Such standards contain a provision that an unamortized balances.

enterprise shall capitalize all or part of an incurred cost that would otherwise be charged to expense if (i) it is probable that future Nuclear Fuel: Such fuel is amortized on a unit of production basis.

revenue in an amount equal to the capitalized cost will be recovered Rates are determined and periodically revised to amortize the cost through rates and (ii) future revenue will be provided to recover over the usefullife.

previously incurred costs rather than to provide for expected levels Allowance for Funds Used During Construction ( AFUDC) of similar future costs

• The applicable regulatory Uniform System of Accounts provides The FASB is currently considering certain revisions to FAS 71.

for AFUDC which is defined as including the net cost during the Certam of the proposed revisions would have the effect of limiting or period of con <.truction of borrowed funds used for construction restricting the deferral of certain historical costs in anticipation of purposes and a reasonable rate on other funds when so used. While recovery in future rates. These revisions, if enacted in their current AFUDC results in a current increase in utility plant to be recognized form, could have a material adverse effect on the reporting of for ratemaking purposes and represents current earnings, it is not an subsidiaries' earnings and capital structures. Hearings are being held item of current cash income until after the related plant is placed in by the FASB and at this time the subsidiaries are unable to assess the service and depreciated.

Outcome of such hearings

• To the extent permitted in the ratemaking proceedings of the Def rred Energy Costs subsidiaries, the income tax reductions associated with the interest Energy costs are recognized in the period in which the related component of AFUDC have been allocated to reduce interest energy clause revenues are billed.

charges and, correspondingly, have not reduced income taxes charged to operating expenses. Pursuant to rate orders, the R:serva Capacity Credit t

Pennsylvania subsidiaries employ a net of tax accrual rate for AFUDC Since April 1981, the Pennsylvan.ia subsidiaries have been while JCP&L is essentially employing a gross rate. On an aggregate recognizing a charge to current expense equivalent to the revenues composite basis the annual rates utilized to capitalize AFUDC were provided by the PaPUC for possible future reserve capacity 9.98%,10.86% and 11.03% for 1984,1983 and 1982, payments to other members of the Pennsylvania-New Jersey-res W i 4 Maryland Interconnection. Pursuant to rate orders received in October 1983, the annual provision for such payments was reduced Nuclear Plant Decommissioning Costs

! and a substantial portion of the accumulated reserve is being JCP&L, in accordance with rate determinations, is charging to returned to customers over three years.

expense and crediting to a reserve amounts intended to provide over their service lives for the cost of decommissioning nuclear plants at Depreciat,on i

the end of their useful lives. Current estimates for ratemaking The subsidianes provide for depreciation at annual rates determinations are $15 million for JCP&L's share of TMi-1 and $54 determined and revised periodically, on the basis of studies, to be million for Oyster Creek assuming in-place entombment. Although sufficient to amortize the original cost of depreciable property over not recognized in rates, JCP&L is continuing to charge expense for its estimated remaining service lives, w hich are generally longer than 31

7-share of TMI-2 decommissioning based on an estimate of $9 million.

3. Extraordinary items During 1982, similar charges to expense for TMl 1 were As a direct or indirect consequence of the nuclear accident at discontinued as a result of an NJBPU order directing the cessation of TMI-2, consolidated net income for 1984,1983 and 1982 reflects 1

depr tion accrua s s

in ote the following extraordinary items, net of related income tax effects.

p,,

d w iMim accruals pursuant to 1981 and 1982 rate orders, were charging to 1984 J

expense amounts intended to provide over their service lives for the As described in Note 1, the NjBPU issued an order in 1984 decommissioning of their shares of the radioactive components of permitting JCP&L to recover the investment in TMI-2 and as a result, their nuclear units (approximately $24 million per unit in then JCP&L ceased the accrual of depreciation on TMI-2 retroactively to current dollars). During 1981, such charges to expense were April 1979. The adjustment to reflect the reversal of the previously discontinued retroactive to the dates that the TMI units were accrued depreciation of $19.8 million (which is net of $13.3 million removed t' rom base rates in Pennsylvania. The estimate for TMI-2 of related income tax charges) for TMI-2 for the period April 1979 to decommissioning costs has not been revised since such costs were November 1984 has been accounted for as an extraordinary credit.

removed from base rates.

1983 The subsidiaries believe that any additional cash requirements As described in Note 1, a settlement was reached in class action with regard to nuclear plant decommissioning should be recoverable suits for alleged damages as a result of the accident at TMI-2 to through the ratemaking prncess.

purchasers of CPU common stock. An adjustment in the amount of Wasta Disposal

$16 million (which is net of $3.6 million of related income tax JCP&L is providing for estimated future handling costs for the benefits) to reflect the effect on the Corporation of the settlement, spent Oyster Creek nuclear fuel and similar treatment will be has been recorded as an extraordinary charge.

provided for future handling costs for the spent TMI-1 nuclear fuel 1982 when TMI-I returns to service. Previously accumulated estimated in 1982, the NJBPU approved JCP&L's request to cancel a residual credits, net of previously accumulated estimated costs of project entered into in 1981 with a Canadian power supplier due to reprocessing, for the Oyster Creek station nuclear fuel are being uncertainties of cost, scheduling and financing and the availability of amortized to fuel expense on a unit of production basis, in economic alternatives. The NjBPU di'ected that JCP&L may not accordance with the Nuclear Waste Policy Act of 1982, the recover from customers the costs associated with the project and as subsidiaries entered into contracts in June 1983 with the DOE for the a result, JCP&L wrote off $3.9 million (which is net of $2.9 million disposal of spent nuclear fuel. The total liability at December 31, for related income taxes) as an extraordinary charge.

1984 and 1983, including interest from April 7,1983, amounts to As described in Note 1, the NJBPU issued rate orders in July

$84 million and $76 million, respectively. As the actualliability under 1982 directing JCP&L to cease the accrual of depreciation on TMI-1 these contracts is substantially in excess of the amount recovered retroactively to April 1,1980. For the five months ended May 31, from ratepayers, the subsidiaries have reflected such excess, which 1982, depreciation expense for TMI-1 in the amount of $1.6 million totals $62 ' lion and $64 million at December 31,1984 and 1983, was charged to current operations. The adjustment to reflect the respectively, as deferred costs. The rates presently authorized for the reversal of the previously accrued depreciation of $3.0 millim subsidiaries recognize these levels of excess costs and provide for (which is net of related income tax charges of $4.7 millionI for collection over eight years for Met-Ed and Penelec and fourteen TMi-1 for the period April 1,1980 to May 31,1982, has been years for JCP&L.

accounted for as an extraordinary credit.

Income Taxes The July 1982 NJBPU rate orders directed JCP&L to defer certain The Corporation and its subsidiaries file consolidated Federal operating and maintenance expenses incurred for TMI-1 relating to income tax returns and all participants are severally liable for the full restart, public health and safety protection due to the extraordinary amount of any tax, including penalties and interest, which may be levels of expense and to the nature of theitems and permitted assessed against the group.

recovery from customers of such expenses over eight years Deferred income taxes, w hich result primarily from liberalized commencing with the restart of TMI-1. The adjustment in the amount depreciation methods and deferral of energy costs, are provided for of $4.6 million (which is net of $4 million of related income tax differences between book and taxable income to the extent charges) to reflect the reversal of expenses incurred for the period permitted for ratemaking purposes. Investment tax credits (lTC) are April 1,1980 to December 31,1981, has been accounted for as an being amortized over the estimated service lives of the related extraordinary credit.

facihties.

The effective tax rate for 1984 applicable to the reversal of The cumulative net amount of income tax timing differences for depreciation on TMI 2 is less than the statutory rate due to the effects which deferred income taxes have not been provided amounts to of reversing the portion of depreciation related to capitalized AFUDC about $761 million at December 31,1984. It is expected that future and the amortization of investment tax credits previously flowed revenues will be provided to cover such taxes as they become through to net income.

payable.

4. Short-Term Borrowing Arrangements On October 3,1983, the Corporation and its subsidiaries entered into a Second Restated Revolving Credit Agreement (Restated Credit Agreement) with a consortium of banks. The 32

/n Thousands Interest Rates Restated Credit Agreement, as amended, which expires on March 1% to 7% to 9% to 31,1985, provides for an aggregate borrowing limit of $ 150 million.

Matudties 6Ve%

8%%

13%%

Total Individual borrowing sublimits applicable to each company are as follows: the Corporation -$5 million; JCP&L-5125 million; First Mortgage Met-Ed-$25 million; Penelec-550 million. At December 31,1984, Bonds:

JCP&L had $70 million outstanding under the Restated Credit 1986-1991

$ 152,786 $

$ 20,000 $ 172,786 1992-2000 268,952 134,869 181,162 584,983 Agreement.

2001-2009 25,120 392,742 399,698 817,560 The notes issued under the Restated Credit Agreement bear Total

$446.858 $ 527.611 $600.860 1,575,329 interest at I / 4% above Citibank's alternate base rate as in effect from time to time in the case of Penelec and 1/2% above that rate in the Bond Sinking cases of the Corporation, JCP&L and Met-Ed. The Restated Credit Funds (10,491)

Agreement provides for payment of an annual agent's fee of Total 1,564,838

$150,000 and an annual commitment fee of 1/2 of 1% on the Debentures:

unused portion of the banks' total commitment.

1986-1990

$ 41,660 $

41,660 The Corporation has guaranteed all borrowings by its 1991-1998 22,400 119,620 18,000 160,020 subsidiaries outstanding under the Restated Credit Agreement and as Total 1 64.060 $119.620 $ 18.000 201,680 colhteral has pledged the common stock of JCP&L, Met-Ed, Penelec, Other long-term GPUSC and CPUNC. Met-Ed has pledged as collateral for its debt 33,344 indebtedness under the Restated Credit Agreement (i) $40 million of Unamortized net first mortgage bonds, (ii) its customer accounts receivable ($42 discount (2,708) milhon at December 31,1984) and (iii) its coal inventory ( $ 14 Total

$1.797.154 million at December 31,1984).

The Restated Credit Agreement and the purchase agreements for For the y ears 1985,1986,1987,1988 and 1989, the certain bonds sold by JCP&L ($102.5 million), Penelec ($55 subsidiaries have long-term debt maturities of $85 million (including millior ) and Met-Ed ($10 million) subsequent to the accident at

$9 million due to the DOE reflected as accounts payable on the TMI-2 contain provisions for the immediate payment of the balance sheet), $61 million, $57 million, $64 million and $48 indebtedness involved, under certain conditions including, among million, respectisely, including cash sinking fund requirements. As other things, upon the occurrence of an event deemed by specified reflected in the balance sheet at December 31,1983, the subsidiaries majonties of the lenders or holders of an issue of bonds to have a had $27 million held for retirement of bonds due within one year and materially adverse effect on the borrower.

such bonds were redeemed during 1984.

The Corporation and its subsidiaries have additional informal in December 1984, Met Ed placed in an irrevocable trust $44.5 bank knes of credit, under which aggregate borrowings outstandir g million of 10%% treasury notes due September 30,1985. Such at any one time are restricted by the Restated Credit Agreement (as notes will satisfy the 9%% $45 milhon series of first mortgage bonds amended) to a maximum of $60 million, with individual sublimits as due October 1,1985, including interest pay ments to be made on follows: the Corporation-$10 million; JCP&L-$ 35 million; such bonds. Such notes and bonds are not reflected on the Met-Ed-$25 million; Penelec-$50 million. Borrowings under these December 31,1984 balance sheet.

lines of credit bear interest at or below the prime rate and provide for CPUSC and the DOE have entered into an agreement for the various compernation requirements. At December 31,1984, JCP&L repayment in monthly installments ending in 1986 of amounts owed had $25 milhor. outstanding under these additionallines of credit.

DOE since 1979 by the subsidiaries under certain uranium The Corporation and its subsidiaries have reached a,,eement in enrichment contracts. Interest on these amounts is accrued using the principle with the agent banks to renew the credit agreement for tw Current Value of Funds Rate, as determined quartedy by the U.S.

years, until March 31, t 987. The new credit agreemert would permit Treasury Department (9% at December 31,1984). At December total borrowings to aggregate $150 million, with a $50 million 31,1984 and 1983, the aggregate amounts payable to DOE with sublimit apphcable to Met-Ed and a $10 million subbmit apphcable t interest under this agreement were $20.0 million and $28.9 million, the Corporation. Borrowings, how ever, would not be guaranteed by respectively of which $11.1 million and $20.0 milhon, respectively the Corporation, nor would they be secured by the common stock of were recorded as long-term debt.

the subsidiaries. Notes issued under the new credit agreement will be Substantially all of the subsidiaries' properties are subject to the subject to various (osenants and acc eieration under certain hen of their respective mortgages.

conditions, including the occurrent e of a material ads erse change in the financial condition or prospe(ts of the borrower or failure to

6. Capital stock and Surplus satisfy earnings cmerage or common equity ratio requirements. The Common Stock new c redit agreement is subjett to approval by each of the banks as Of the 75 million authorized shares of $2.50 par value common well as necessary regulatory approvals.

stock of the Corporation at December 31,1984 and 1983,

5. Long-Term Debt 62.864,000 were considered issued and outstanding and 28,000 shares were recorded as rea(quired at par value. The 62,864,000 At Det ember 31,1984, the Corporation's subsiduries had long-term debt outstanding, eu luding amounts due within one year, as follow 5:

(

33

~

shares includes 1,600,000 shares resulting from a stockholder earnings of $ 196 million was available for declaration and payment litigation settlement in 1983, which is described under " Litigation" in of dividends on JCP&L's common stock. The NjBPU has requested Note 1.

that JCP&L notify it before declaring dividends on its common stock.

In accordance with Met-Ed's supplementalindenture dated September 1,1984, common dividends payable by Met-Ed are, At Dec r 31,1984 and 1983, the subsidiaries had under certain circumstances, restricted to 50% of Met.Ed's outstanding the following issues of cumulative preferred stock:

accumulated earnings for the period commencing January 1,1984 and terminating at the end of the last fiscal quarter preceding the Shares Stated Value dividend payment, provided that Met-Ed's retained earnings do not Outstanding

/n Thousands fall below $12.9 million. In accordance with Met-Ed's supplemental Series 1984 1983 1984 1983 indenture dated March 1,1952, $3.4 million of the balance of Subject to Mandatory Met-Ed's retained earnings is restricted as to the payment of Redemption (a):

dividends on its common stock. As of December 31,1984, pursuant 10.88 % 13.5 %

677,500 731,000 $ 67,750 $ 73,100 to these provisions, $13.9 million of retained eamings of $26.8 milli n was available for declaration and payment of dividends on year (41,000) (41,000)

(4.100)

(4,100)

Total 616.500 690.000 $ 63.650 $ 69.000 n acco d nce h Penelec's supplementalindenture dated No Mandatory June 1,1979, the aggregate amount of any declaration or payment of Redemption:

dividends on common stock after December 31,1978 cannot 3.70 % 4.60 %

723,912 723,912 $ 72,391 $ 72,391 exceed Penelec's earnings available for common stock for the period 7.68 % -8.36 %

2,410,000 2,410,000 241,000 241,000 commencinghnuary 1,1979 and terminating at the end of the last 8.75 % 9.36 %

3,650,000 3,650,000 110,000 110,000 fiscal quarter preceding the date of such restricted payment. As of Total 6.781.912 6.783.912 $423.391 $423.391 December 31,1984, pursuant to that provision, $72 million of retained earnings of $109 million was available for declaration and (a) The annual redemption requirement is 53,500 shares of payment of dividends on Penelec's common stock, preferred stock. Based on shares outstanding at December 31,1984, the aggregate mandatory redemption requirement is $5.4 million per

7. Income Taxes year through 1989 All redemptions are at the stated values of the Examinations of Federalincome tax returns through 1978 have shares, plus accrued dividends. No redemptions of preferred stock been completed and the years 1979 through 1982 are currently j

may be made unless dividends on all of that subsidiary's preferred under audit by the Internal Revenue Service. At this time, the stock for all past quarterly dividend periods have been paid or Corporation does not know whether the Internal Revenue Service i

declared and set aside for payment. If dividends on the preferred will assess any additional income tax liability against the Corporation stock of any subsidiary are in arrears in an amount equal to the as a result of such audit.

annual dividend, the holders of preferred stock, voting as a class, are income tax expense for the years 1982 through 1984 was entitled to elect a majority of the board of directors of that subsidiary different from the amount computed by applying the statutory rate to j

until all dividends in arrears have been paid.

book income subject to tax as follows:

l At December 31,1984 and 1983, the subsidiaries were authorized to issue 37,035,000 shares of cumulative preferred stock, l

no par value.

In Mi// ions 1984 1983 1982 I

No shares of cumulative preferred stock have been sold during Operating income before income taxes

$ 486 $ 359 $ 308 the three years ended December 31,1984.

O*er income, n,3 7

12 j

RetCined Earnings Total 493 371 324 Under the Restated Credit Agreement described in Note 4, the Intemt expense (162)

(E (189 Corporation and its subsidiaries have agreed to maintain Book income subject to tas

$ 311 $ 206 5 139 consohdated retained earnings of at least $500,000,000. The income tax at statutory rate

$ 152 5 95 $ 64 agreement reached with the agent banks to extend the Restated Effect of difference between tax and Revolving Credit Agreement (see Note 4) requires the Corporation book depreciation for which deferred and its subsidiaries to maintain retained earnings of at least taxes were not provided (Note 2) 13 9

7

$600,000,000 and requires JCP&L, Met Ed and Penelec to maintain Amortization of TMI 2 12 13 11 retained earnings of at least $75,000,000, $1 and $40,000,000, Amortization of ITC (9)

(8)

(5) mp,c,jygg,

Other adjustments 5

1 y

In accordance with JCP&L's supplemental indenture dated June income tax e= pense

$ 171 $ 109 $ 78 1,1979, common dividends payable by JCP&L are limited, to the Effective income tax rate 52 %

51 %

56 %

extent they are not matched by cash capital contnbutions from the Corporation, to an amount equal to 25% of carnings for the years 1979 and 1980 and 100% of earnings thereafter. As of December 31,1984, pursuant to that provision, $133 million of retained 34

Income tax expense is comprised of the following:

9. Supplementary income Statement Information Maintenance and other taxes charged to operating expenses

/n Mi//5ns 1984 1983 1982 consistedof thefollowing:

Federalincome tax

$ 2

$ (3) $ 10 State income tax 16 6

18

/n Mi// ions 1984 1983 1982 Income taxes on other income, net 5

6 7

income taxes attributable to the Maintenance *

$243 $207 $175 allowance for borrowed funds (1)

(1)

(2)

Other taxes:

Provisions for taxes currently payable 22 10 33 State and local gross receipts

$149 $135 $134 Gross revenue and franchise 40 38 35 Deferred income taxes:

State surtax 17 16 15 Lit:2ralized depreciation 41 35 33 Real estate and personal property 20 14 15 Deferral of energy costs 56 51 (52)

Other 21 19 20 Forked River abandonment loss (9)

(11) 20 RJ revenue taxes (4)

(6)

(8)

Total

-$247 $222 $219 Reserve capacity credit 4

(11)

(15)

Nuclear fuel disposal fee (5) 30

• Excludes reversal of Oyster Creek outage-related expenses (see Deferral of O&M expense--Oyster Note I ).

Creek 24 9

Other 4

18 (9)

10. Pension Plans and Postretirement Benefits Deferred income taxes, net 111 115 (31)

The subsidiaries have several pension plans applicable to all empf yees, the accrued costs of which are being funded. Prior Current ITC (a) 49 (8) 81 Amortization of ITC (9)

(8)

(5) service costs applicable to all plans are being aniortized and funded over 25-year periods. Total pension cost for the years 1984,1983 Income tax expense

$173(d) $109(c) $ 78(b) and 1982 amounted to approximately $33.4 million, $33.1 million and $30.6 million, respectively.

(a) Unused ITC available for carryforward to future years as of Based on the latest available actuarial reports, the subsidiaries' December 31,1984 aggregate $72 milhon (which includes $7 plans had accumulated benefits iassuming an 8 percent rate of million of credits related to the Corporation's Employee Stock return) and net assets as follows:

Ownership Plan), of which $18 million, $25 million and $29 million expire in 1997,1998 and 1999, respectively.

8 ""

(b) Dcas not include $6 million (deferred income tax expense

/n Mi# ions 1984 1 83 related to hberalized depreciation-$9 million and currently payable tax benefit relating to an abandonment loss-$3 million) related to

,hynhva eof Ac extraordinary items. (See Note 3.)

Vested

$340

$305 (c) Dcas not include a $3.6 million tax benefit resulting from a Nonvested 47 45 litigation settlement. (See Note 3.)

$387

$350 (d) Dc2s not include $13.3 million (deferred income tax expense related to hberalized depreciation--$ 11.6 million and reversal of Net assets available for benefits

$480

$404 investment tax credit amortization-$1.7 million) related to extraordinary item. (See Note 3.)

In addition to providing pension benef ts, the company and its subsidiaries provide certain health care and life insurance benefits for

8. Loans to Non-affiliated M..mmg Compam.es retired employees. Substantially all of the company's employees Penelec has been providing hnancing to non-affiliated mining become eligible for those benefits in they reach retirement age while companies supplying coal to the Homer City generating station under working for the company. The cost of retiree health care and life long-term contracts. These loans were bearing interest at a rate insurance benefits is recognized as expense as premiums are paid, which was 1 %% per annum above the prime interest rate. In for 1984, those costs totaled approximately $2.8 million.

October 1984, Penelec sold its option to buy the stock of one of the mining companies to a third party. As a result of that third party exercising the option, Penelec received $6.1 milhon in January 1985 from the mining company representing payment in full of its loans outstanding.

35

n

. Jointip Owned Generating Stations The subsidiaries participated with non-affiliated utilities in the following jointly owned generating stations at December 31,1984:

2 (n Milhon$

Balance

-In Accumulated Station -

Ownership ' Service Depreciation

' Homer City 50

$331.1

'572.0 Keystone -

16.67 46.4 13.2 Conemaugh.

16.45

_ 50.7 14.7 YJrds Creek 50

'173 3.1

-Seneca 20 13.4 2.5 Each participant in a jointly owned generating unit finances its own portion and charges the appropriate operating expenses with its share of direct expenses. The dollar amounts shown above represent only those portions of the units owned by the subsidiaries.

' 12, Leases As a result of the criteria set forth in FAS 71 and Federal Energy Regulatory Commission Order 390, both of which were effective in 1984, the subsidiaries have reflected capital leases on the December i-31,1984 balance sheet. Approximately $39 million (which is net of

$25 million of amortization) has been recorded in Utility Plant and

- y as g liability. Such recording of capital leases has r 3 impact or net s

income because all leases, for ratemaking purposes, are considued

(/,

op<rting leases.

~,,

4 fr x<

s k

<.n.f a

t i

=36 D..

SYSTEM ST ATISTICS G;neral Public Utilities Corporation and Subsidiary Companies 1984 1983 1982 1981 1980 Gener1 ting Capacities and Peaks (MW):

Installed capacity (at year end) (a) 8,251 8,251 8,251 8.251 8,254 Annual hourly peak load 6,401(b) 6,140 (b) 6,442 (c )

6,215 (c) 6,161 (b)

Reserve (%)(a) 28.9 34.4 28.1 32.8 34.0 Net system requirements (in thousands of MWH):

Net generation 20,075 20,635 20,841 22,266 22,659 Power purchased and interchanged, net 16,681 14,333 13,336 12,659 12,346 Total Net System Requirements 36,756 34,968 34,177 34,925 35,005 Load Factor (%)

65.3 65.0 60.5 64.1 64.9 Production Data:

Cost of fuel (in mills per KWH of generation):

Coal 15.92 14.90 16.35 16.11 13.76 Oil 49.06 52.31 58.16 62.29 62.49 Nuclear 6.25 5.85 4.08 3.83 3.80 Other 59.74 55.55 64.06 56.82 42.29 Average 21.53 19.94 19.80 19.06 17.17 Gener: tion by fuel type (%):

Coal 85 87 81 78 81 Oil 3

3 2

3 5

Nuclear 1

9 11 8

Other (gas & hydro) 11 10 8

8 6

Total 100 100 100 100 100 Electric Energy Sales (in thousands of MWH):

Residential 11,273 10,901 10,604 10,707 10,810 Commercial 8,826 8,322 8,173 7,944 7,687 Industrial 11,770 10,608 10,752 11,535 11,520 Other 1,622 1,669 1,824 1,821 1,821 Total 33,491 31,500 31,353 32,012 31,838 Electric Operating Revenues (in thousands):

Residential

$1,049,257 $ 978,743 $ 919,532 $ 793,056 $ 719,166 Commercial 765,394 687,773 661,910 548,367 470,123 Industrial 772,923 673,101 694,291 609,177 531,369 Other 107,474 105,113 101,712 91,591 87,535 Total from KWH Sales 2,695,048 2,444,730 2,377,445 2,042,191 1,808,193 Other Revenues 36,141 32,140 24,391 20,097 21,102 Total

$2,731,189 $ 2,476,870 $ 2,401,836 $2,062,288 $ 1,829,295 C:sfomirs-Year-End (in thousands):

Residential 1,482 1,456 1,434 1,422 1,405 Commercial 170 166 164 163 161 Industrial 10 10 10 10 9

Other 3

3 3

3 3

Total 1,665 1,635 1,611 1,598 1,578 Price per KWH-all customers (cents) 8.05 7.76 7.58 6.38 5.68 (a) includes the installed capacity of the Three Mile island nuclear generating station Unit No.1 of 800 MW and 906 MW for Unit No. 2 for all periods. The reserve (%), excluding TMI for 1984,1983,1982,1981 and 1980 would be 2.2%,6.6%,1.6%,5.3% and 6.3%,

respectively.

(b) Summer peak.

(c) Winter peak.

37

SU PPLEM ENT ARY IN FORM ATION CO N C E R NIN G IN F L ATIO N E F F ECTS (U N A U DITE D)

The following supplementary information is provided in accord Since GPU's subsidiaries owed net monetary liabilities with FAS No. 33, " Financial Reporting and Changing Prices" (as (obligations to pay a fixed sum), primarily long-term debt, during a emended), which requires disclosure of certain inflation effects upon period in which the purchasing power of the dollar declined, inflation company operations. The inflation estimating method prescribed by adjusted figures reflect a net gain in purchasing power. This gain is FAS No. 33 involves restating significant monetary and non-strictly an economic concyt, is not realized in cash, and does not monetary items from conventional historical dollars to current cost represent funds available for actu l use or for distribution to dollars. The differences between these amounts are the estimates of shareholders.

inflation effects which occur in the current period. The Corporation Non-monetary items are those without any contractual utikzes company equipment cost indexes, the Handy Whitman conversion provisions to a fixed number of dollars as, for example, indexes of Public Utility Construction Costs, and the Consumer Pn.ce investments in plant and equipment and related depreciation. Utility index, as appropriate, to estimate equivalent current cost figures for tant and related accumulated depreciation were estimated in these purposes.

current cost dollars by applying appropriate cost indexes to vintaged The current cost estimating method employs a number of historical cost dollars by equipment classes. The current year's judgements and experimental procedures to approximate infla; ion depreciation provision in current cost terms was derived by applying effects. Consequently, the Corporation cautions readers that this data methods and rates as used in the historical financial statements to should not be viewed as any precise measurement of the effects of current cost restated plant investments.

inflation.

Other items, including revenues, taxes, and expenses other The primary items affec+ed by inflation are those financial than depreciation, are considered to reflect the average price level commitments which extend over many years of operation. These for the year, and consequently, remain the same as reported in the items fall into two classes termed " monetary" and "non-monetary."

primary financial statements.

Monetary items are those assets or liabilities which are PresenEregulatory ratemaking implicitly assumes that convertible into a predesignated fixed number of dollars by their compensation for inflation effects is incorporated as a component in contractaal terms and conditions, such as receivables, payables, and debt interest rates, preferred dividends, and the common equity long-term debt. Holding monetary assets during inflationary periods return rate used in the ratemaking process. Consequently, ratemaking results in a purchasing power loss, since the fixed dollars received ir, deals with recovery of plant investment and other expenses only in the future will purchase less. Conversely, holding monetary liabilities historical cost amounts. The estimated quantification of inflation results in purchasing power gains, since future fixed payments will be effects on monetary and non-monetary items, including adjustment made with dollars of diminished purchasing power, to historical costs recoverable via ratemaking, provides a tentative measure of inflation erosion of common equity which is not explicitly recognized in the ratemaking process.

EFFECTS OF CH ANGING PRICES In Thousands ofAverage 1984 Dollars Current Cost Net income, before extraordinary items, as reported *

$128,505 Erosion of common stockholder's equity due to changing prices:

Excess of current cost over historical cost depreciation

$ (249,746)

- Current cost increases, net of general inflation" (80,674)

Current year adjustment to recoverable costs 172,603 Net non-monetary items purchasing power gain (loss)

$ (157,817)

Net monetary items purchasing power gain (loss) 81,344 Net erosion of common stockholder's equity (76,473)

Net income, before extraordinary items, as adjusted

$ 52,032

• Adversely affected by regulatory disallowances of operating expenses and retum requirements associated with TMI-1 and TMI-2 (see Note 1).

• • Current cost increase was $237,910 for plant facilities. General inflation increase was $318,584.

38 L'

FIVE YE AR COM P ARISON O F S E L ECT E D FIN A N CI A L D AT A*

In Millions Except PerShare Data Year Ended December 31, 1984 1983 1982 1981 1980 Operating revenues:

As reported

$2,73f.3

$ 2,480.3

$ 2,405.5

$ 2,065.5

$1,831.7 In 1984 average purchasing power 2,735.3 2,585.9 2,388.6 2,358.9 2,309.0 income (Loss) before extraordinary items:

As reported

$ 128.5 5

66.9 33.7 20.5 20.6 in current cost dollars" 52.0

( 3.5 )

(40.5 )

(163.6)

(241.7)

Earnings (Loss) per share before extraordinary items:

As reported 2.05 1.09 0.55 5

0.33 0.34 in current cost dollars" 0.83 (0.06)

(0.66)

( 2.67 )

(3.94)

Market price per common share at year-end:

As reported

$ 11.50 7.75 5

6.75 6.75 5

5.00 in 1984 average purchasing power 11.34 7.94 7.18 7.46 6.02 Net plant assets (in 1984 year-end dollars):'"

In historical cost dollars

$4,135.3

$4,006.5

$3,958.4

$3,871.2

$ 3,729.5 In current cost dollars" 8,246.1 8,348.6 8,655.0 8,770.8 8,857.5 Net assets at recoverable cost:

In historical cost dollars

$ 2,062.1

$1,912.7

$ 1,861.6

$ 1,823.2

$1,807.3 in current cost dollars" 2,033.4 1,960.7 1,980.6 2,015.0 2,176.0 Current cost gain (loss), net of general inflation, after current year adjustment to recoverable cost" 91.9 89.8 81.1

$ (166.6) $ (379.7)

Cain in purchasing power of net amounts owed 81.3 81.5 85.0

$ 194.5 5 321.8 Selected balance sheet data at year-end (historical costs):

Total Assets

$6,215.8

$ 5,3 33.9

$5,196.8

$5,063.3

$ 5,076.5 Long-term debt 1,797.2 1,895.0 1,998.7 2,109.3 2,105.4 Cumulative preferred stock-mandatory redemption 63.7 67.2 72.3 77.3 82.4 Average common shares outstanding 62.9 61.5 61.3 61.3 61.3 Average consumer price index 311.1 298.4 289.1 272.4 246.8 December consumer price index 315.5 303.5 292.4 281.5 258.4

• All current cost amounts expressed in 1984 average dollars, except as noted.

' Prior years' current cost amounts adjusted to 1984 by applying the CPI-U indexes, as required.

• ' Includes $2.8 million for Other Physical Property and excludes $181.4 million (including $56.9 million related to TMI) of Nuclear Fuel and $38.7 million for Capital Leases.

The excluded amounts are treated as monetary items for FAS No. 33 disclosure purposes.

28 39

DIRECTORS OFFICERS Louis J. Appell, Jr.1,2 General Public Utilities Corporation President Wilh.am G. Kuhns Susquehanna Broadcasting Co.

Cha!. man and Chief Executive Officer York, Pennsylvania 17401 (Communications and Consumer Products)

Herman Dieckamp President and Chief ( eperating Officer Donald J. Bainton 1,2 Chairman and Chief Executive Officer Verner H. Condon Viatech, inc.

Vice President Syosset, N.Y.11791 and Chief Financial Officer (Engineering, Architectural and Surveying Services)

Edward J. Holcombe Comptroller John F. Burditt 1.2 Former Chairman and Chief Executive John G. Graham Officer Treasurer ACF Industries, Inc.

Wilh.am B. Murray New York, New York 10017 Secretary (Equipment Manufacturing)

Grace Wade Herman Dieckamp Assistant Secretary President and Chief Operating Officer General Public Utilities Corporation Parsippany, New Jersey 07054 Subsidiary Company Presidents Dr. David L. Grove 1,3 President Philip R. Clark David L. Crove, Ltd.

GPU Nuclear Corporation Armonk, New York 10504 Herman Dieckamp (Economic Consultants)

CPU Scrvice Corporation William G. Kuhns Chairman arH Chief Executive Officer James R. Leva General Public Utilities Corporation Pennsylvania Electric Company Parsippany, New Jersey 07054 Floyd J. Smith John F. O' Leary 1,3 Metropolitan Edison Company Energy Consultant William A.Verrochi Washington, D.C. 2001 S Jersey Central Power & Light Company Dr. lohn W. Oswald 1.3 President Emeritus The Pennsylvania State Univers;ty James B. Liberman Ogontz Campus General Counsel Abington, Pennsylvania 19001 Paul R. Roedel 1,2 President and Chief Executive Officer Carpenter Technology Corporation Reading, Pennsylvania 19603 (Specialty Metals)

Dr. Patricia K. Woolf 1.3 Visiting Research Sociologist Princeton University Princeton, New Jersey 08544 1 Member of Audit Committee 2 Member of Compensation Comren.ee 3Memberof NominatingCommittee 40

l g

hareholder T

he GPU System Notes Companies 1985 Annual Meeting General Public Utilities Corporation The Annual Meeting of Stoc kholders of General Public 100 Interpace Parkway Utilities Corporation will be held at 10 a.m. EDT, May 7, Paruppany New Jersey 07054-1149 1985 at the Cambria County War Memorial Arena, (2011 263 6500 Johnstown, Pennsylvania.

GPU Serv. ice Corporat. ion Transfer Agent GPU Nuclear Corporation Manufacturen Hanover Trust Company (Same address and telephone number as P.O. Box 24935 GPU Corporation)

Church Street Station New York, NY 10249 lersey Central Power & Light Company Transfers can also be hand-delivered to:

Madison Avenue at Purxh Bowl Road Manufacturers Hanover Trust Company M rrist wn, NJ 07960 Secunties Window, Street Level (201) 455-8200 130 John Street Metropolitan Edison Company New York, NY 2800 Pottmile Pike Too Many Reportsf Reading. PA 19640-0001 (215) 929-3601 Y90 may be receiving multiple copies of the GPU Annual Report because of multiple accounts within your Pennsylvania Electric Company household. To stop the extra copies, please wnte to 1001 Broad Street Manufa(turers Hanover Trust Company, P. O. Box Johnstown. PA 15907 24935, Church Street Station, New York, NY 10249 and (814) 533-8111 enclose the mailing labels from the extra copies.

79,7 gg Copies of GPU's System Statistics and the Corporation's GPU Stockholders Class Action Suit Settlement 198410-K Annual Report to the Securities and GPU stockholders who purchased shares Exc hange Commission will be available after March 31, between February 8,1974 and April 1,1979, and 1985. Wnte to Mr. William B. Murray, Secretary, who did not sell such shares prior to March 28, General Public Utilities Corporation,100 Interpace 1979, were entitled to participate in the class action Parkway, Parsippany, NJ 07054-1149.

settlement. Claim forms were mailed to eligible stockholders in June 1983. The deadline for filing the claim form with Heffler & Co., the accountants retained by the Settlement Committee to process claims, was August 12,1983.

Heffler & Co. and Manufacturers Hanover have advised CPU that, if no unforeseen delays occur, distribution of settlement proceeds to qualified shareholders will take place in late Apnl 1985.

Stock Price 1979 - 1984 20 18 %

15 \\\\9%

10 9

9 8%

9 9%

% 6%

7%

8YC

' to 5

- 6%

7%

7%

7%

7%

7%

7 8%

0 3%

3%

4%

1979 1980 1981 1962 10 20 30 40 10 20 30 40 1983 1984 General Public Utilities Corporation is listed as CPU on the New York Stoc k Exchange. At December 31,1984 there were 97,868 registered holders of CPU Common Sto(L. With respect to restriction on the payment of common stock dividends by GPU, see Note 6 to the Financial Statements.

GENERAL PUBLIC UTILITIES CORPORATION

(

100 Interpace Parkway Parsippany, New Jersey 07054-1149 (201) 263-6500

[

I t______________________________..._______________

_