ML20147J194
| ML20147J194 | |
| Person / Time | |
|---|---|
| Site: | Comanche Peak  |
| Issue date: | 03/04/1988 |
| From: | Beck J TEXAS UTILITIES ELECTRIC CO. (TU ELECTRIC) |
| To: | NRC OFFICE OF ADMINISTRATION & RESOURCES MANAGEMENT (ARM) |
| References | |
| TAC-R00342, TAC-R342, TXX-88285, NUDOCS 8803090206 | |
| Download: ML20147J194 (185) | |
Text
{{#Wiki_filter:_ _ _ - _ , , M FE Log # TXX-88285
.-- File # 231, 234
= r 843, 10047 10101, 10102 7t/ ELECTRIC Ref. # 10CFR50.30 10CFR50.90
[f,'",$d /,",$,,, March 4,'1988 U. S. Nuclear Regulatory Commission Atten: Document Control Desk Washington, D.C. 20555
SUBJECT:
COMANCilE PEAK STEAM ELECTRIC STATION (CPSES) DOCKET N05, 50-445 AND 50-446 REQUEST FOR AMENDMENT TO CONSTRUCTION PERMIT N05. CPPR-126 AND CPPR-127 AND APPLICATION FOR OPERATING LICENSES FOR CPSES UNITS 1 AND 2 Gentlemen: I Pursuant to 10CFR50.30 and 50.90, Texas Utilities Electric Company (TV Electric), licensee under the referenced NRC Construction Permits for the Comanche Peak Steam Electric Station (CPSES), acting for itself and the other licensees named in referenced Construction Permits, hereby requests amendment of the said Permits and hereby amends its Application for Operating Licenses to reflect revised ownership interests as described below, in support hereof, the following infonnation is submitted. A. Proposed Amendment of Construction Permit Applicants propose the amendments to reflect a reallocation of ownership interests in CPSES as follows: the transfer by the Texas Municipal Power Agency (TMPA) of its 6.2% ownership interest in CPSES to TV Electric which already holds an 87-5/6's interest therein, thereby bringing the aggregate interest of TV Electric to 94-1/30'5.* The transfer is memorialized in the Agreement between TMPA and TV Electric , dated February 12, 1988, which is discussed below. Under the tenns of the l Agreement, the foregoing transfer is subject to certain conditions precedent and regulatory approvals including the Commission's approval. Applicants request that these amen 6nents be approved at this time and be made ef fective as of the date of ce'npletion of the transfers of the ownership interest as set ! forth in the Agreement. The respective interests of the other owners, Brazos Electric Power Cooperative, Inc. (3-4/5'<) and Tex-La Electric Cooperative of Texas, p0 Inc. (2-1/6's) remain unchanged. '
\ 31 a w,,m- s,,- a u = rm, n.w
$3%B8M$$83h>
a I
--. _ - _ . ._ - - _. D
e TXX-88285 March 4, 1988 Page 2 o,f 4
- 8. Supporting Material in support of this request, there is sub'nitted for the Commission's convenience a copy of the Agreement.
10 Electric has the financial qualification and ability to complete construction of the additional 6.2% share of CPSES which it proposes to purchase under the Agraement. To that end, we furnish TV Electric's most recent SEC form 10-X dated December 31, 1986 and TV Electric's Form 8-K dated November 18, 1987. The Form 10-K for 1987 should be available later this month and will be furnished at that time. In addition, the most recent Annual Report of Texas Utilities Company is also enclosed. C. General This request is being submitted, pursuant to 10CFR50.30 and 50.90. The Amendments herein requested are administrative in nature and involve only the transfer of an ownership interest from one entity to another entity which is already an owner and licensee. This transfer will in no way affect the provisions of the Joint Ownership Agreement with respect to responsibility for the operation and control of CPSES nor in any way affect the design or construction of the facility. Accordingly, the proposed transfer does not involve any increase in the probability or consequences of accidents previously considered, does not create the possibility of an accident of a type different from any evaluated previously, does not involve any decrease in a safety margin, and therefore does not involve a significant hazards consideration. Finally, the proposed transfer will not have a significant impact on the environment. Pursuant to 10CFR170.12(c), this ap'1ication for amendments to the referenced permits and license is accompanied )y a check for $150 to cover the application fee. Further, in accordance with 10CFR50.30, one (1) signed original and thirty seven (37) copies of this request are enclosed, in view of the fact that the transfer proposed by this Amendment does not raise any complex issue, and that the proposed transfer is also subject to the jurisdiction of other regulatory agencies whose approval is a condition
Txx-88285 March 4, 1988 Page.3 o,f 4 precedent to the transfer, TV Electric respectfully requests an expedited processing of this Amendment so that the transfer can be consumated at the earliest possible date. Very truly yours, W. G. Counsil By: d. b in W. Beck ice President, Nuclear Engineering RSB/clk Enclosures c-Ms. Melinda Malloy, OSP-NRC Mr. R. D. Martin, Region IV Resident inspectors, CPSES (3)
TXX-88285 March 4,1988 Page,4 of 4 UtilTED STATES OF AMERICA fiUCLEAR REGULATORY COMM15SIOfi in the Matter of ) TEXAS UTILITIES ELECTRIC COMPAfiY Docket ilos. 50-44b
) 50-446 (Comanche Peak Steam Electric Station, Units 1 & 2)
AFFIDAVIT John W. Beck, being duly sworn, hereby deposes and says that he is Vice President, fluclear Engineering of the Generating Division of Texas Utilities Electric Company, the Applicant herein; that he is duly authorized to sign and file with the fluclear Regulatory Commission this request to amend the Construction permits (CPPR-126 and CPPR-127) for the captioned facilities; that he is familiar with the content thereof; and that the matters set forth therein are true and correct to the best of his knowledge, information, and belief.
' ' U, ohn W. Beck Vice President, fluclear Engineering STAIE OF lEXAS )
)
COUllTY OF DALLAS ) . Subscribed and sworn to before me, a flotary Public in and for Dallas County on this t/8 day of March,1988.
/
v?) flo'tary Public
#h fly commission expires: // '/d" If
tf s 4 n
~-
1 i i l l l l l l AGREEMENT between TEXAS MUNICDAL POWER AGENCY TMPA j and i TEXAS UTILFITES ELECTRIC COMPANY T U Elastrie Dated as of Fetruary 11, ISM i 1 l 4
e
- TABLE OP CONTENTS
=
PAGE DEFINITIONS .............................. 1 R E C IT A LS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 A RTIC L E 1, S A L E A N D P U RCH AS E . . . . . . . . . . . . . . . . . . . . , 9 1.1 Properties and Assets Sold and Purchamd ............. 9
- 1. 2 Closings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1.3 Transfer of Purchased Assets . . . . . . . . . . . . . . . . . . . 9 1.4 M e t!.od o f P ay m en t . . . . . . . . . . . . . . . . . . . . . . . 10 1.5 P aym en t o f Total Pay m en t . . . . . . . . . . . . . . . . . . . . 10 (a) Paym ent Upon Signing . . . . . . . . . . . . . . . . . . . . . 10 (b) Payment at the Initial Closing . . . . . . . . . . . . . . . . . . 11 (c) Payments at Subsequent Closings ................ 11 (d) Application of Payments . . . . . . . . . . . . . . . . . . . . 11 ARTICLE II, REPRESENTATIONS, WARRANTIES AND AGREEMENTS OP TMPA . 11 2.1 Leg al S ta tus . . . . . . . . . . . . . . . . . . . . . . . . . . 11 2.2 A u thori t y for Agree m en t . . . . . . . . . . . . . . . . . . . . . 11 2.3 Appro vals . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.4 Liab(11 tl es . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.5 Nontaxable Status . . . . . . . . . . . . . . . . . . . . . . . . 14 2.6 Title to Real Proper ty . . . . . . . . . . . . . . . . . . . . . . 14 2.7 Title to Personal Property . . . . . . . . . . . . . . . . . . . . 15
- 2. 8 Litiga tion . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
- 2. 9 Con tr a c ts . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 2.10 Exclusion of Implied Warranties . . . . . . . . . . . . . . . . . . 16 2.!! Accuracy of Representations and Warrantles . . . . . . . . . . . . 16 ARTICLE III, REPRESENTATIONS, WARRANTIES AND AGREEMEN115 O P T U E LECT RIC . . . . . . . . . . . . . . . . . . . . . . . . . . 16 3.1 Corporate Status . . . . . . . . . . . . . . . . . . . . . . . . 16 3.2 Authority for Agreement. . . . . . . . . . . . . . . . . . . . . 17 3.3 Appro vals . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 3.4 Authority for TUC Ouarar.*y . . . . . . . . . . . . . . . . . . . 18 3.5 Aeourney of Representatinas and Warrantles . . . . . . . . . . . . 18 ARTICLE !Y, TMPA'S PRI-CLOSING OBLIGATIOf.S. . . . . . . . . . . . . . 18 4.1 Representations, Warrantles and Covenants. . . . . . . . . . . . . 18 4.2 Abatement of Participation in Pending Litigation . . . . . . . . . . 19 4.3 Agreement to Obtain Approvals . . . . . . . . . . . . . . . . . . 23 l
,s, e - - a l
ARTICLE V, CONDITIONS TO OBLIGATIONS TO CLOSE. . . . . . . . . . . . 23 5.1 tonditions to 0bligation of TMPA to Close . . . . . . . . . . . . . 23 (a) Representations and Warranties . . . . . . . . . . . . . . . . . 23 (b) Compliance With Agreement . . . . . . . . . . . . . . . . . . 23 (c) Receipt of Payment . . . . . . . . . . . . . . . . . . . . . . 24 (d) Receipt of Closing Documents . . . . . . . . . . . . . . . . . 24 i 5.2 Conditions to Obligation of TU Electric to Close . . . . . . . . . . 24 ' (a) Representations and Warranties . . . . . . . . . . . . . . . . . 24 (b) Compliance with Agreement . . . . . . . . . . . . . . . . . . 24 (c) Delivery of Pending Litigation Documentation. . . . . . . . . . . 25 l (d) Approval of the Cities . . . . . . . . . . . . . . . . . . . . . 25 (e) Receipt of Closing Documents. . . . . . . . . . . . . . . . . . 26 5.3 Conditions to Obligation of Parties to Initially Close . . . . . . . . . 26 (a) No Adverse Proceeding . . . . . . . . . . . . . . . . . . . . . 26 (b) Walver of Right of First Refusal. . . . . . . . . . . . . . . . . 26 (c) Compliance with Statute . . . . . . . . . . . . . . . . . . . . 28 (d) Approval by P U C . . . . . . . . . . . . . . . . . . . . . . . 28 (e) Approval by N RC . . . . . . . . . . . . . . . . . . . . . . . 30 (f) Execution of Transmission Services Agreement . . . . . . . . . . 31 (g) Execution of Power Purchase Agreement . . . . . . . . . . . . . 32 ARTICLE VI, CLOSING DOCUMENTS FROM TMP A . . . . . . . . . . . . . . 32 6.1 Deeds and Transfers, etc. . . . . . . . . . . . . . . . . . . . . 32 6.2 Lien Search . . . . . . . . . . . . . . . . . . . . . . . . . 32 6.3 Cities Docu m ents . . . . . . . . . . . . . . . . . . . . . . . . 32 6.4 Certifieste of Secretarial Officer . . . . . . . . . . . . . . . . . 33 6.5 Counsel Opinions . . . . . . . . . . . . . . . . . . . . . . . . 33 ARTICLE VII, CLOSING DOCUMENTS FROM TU ELECTRIC . . . . . . . . . . 33 7.1 Proof of Payment. . . . . . . . . . . . . . . . . . . . . . . . 33
- 7. 2 O ther Instru m en ts . . . . . . . . . . . . . . . . . . . . . . . . 33 7.3 Certifloate of Secretarial Of ficer . . . . . . . . . . . . . . . . . 33 7.4 Counsel's Opinion . . . . . . . . . . . . . . . . . . . . . . . . 34 ARTICLE VIII, CLOSING AND INDEMNIFICATION . . . . . . . . . . . . . . 34 8.1 Indemnification by TMPA . . . . . . . . . . . . . . . . . . . . 34 8.2 Indemnifleation by TU Electric . . . . . . . . . . . . . . . . . . 35 8.3 Survival of Representation and Warrantles . . . . . . . . . . . . . 35 8.4 Notlee and Opportunity to Participate in Defense . . . . . . . . . . 35 ARTICLE IX, SETTLEMENT OF PRNDING LITIG ATION . . . . . . . . . . . . 36 9.1 TMP A Release . . . . . . . . . . . . . . . . . . . . . . . . . 36 9.2 Covenant Not to Sue . . . . . . . . . . . . . . . . . . . . . . 37 9.3 TU Elec tric Release . . . . . . . . . . . . . . . . . . . . . . . 40 9.4 Assumption of Liabilities and Obligations and Indemnification. . . . . 40 9.5 Cov enan t o f Coopera tion . . . . . . . . . . . . . . . . . . . . . 42 9.6 Termination of Participation . . . . . . . . . . . . . . . . . . . 42 9.7 TU Electric Actions and Litigation Costs . . . . . . . . . . . . . . 44 S.8 Termination of Joint Ownership Agreement Relationship . . . . . . . 44 9.9 P er mission to be Sued . . . . . . . . . . . . . . . . . . . . . . 45 9.10 Releases, ate. from the Cities . . . . . . . . . . . . . . . . . . 45 I
i i A RTIC L E X, TM P A P ROG R ESS P A Y M E NTS . . . . . . . . . . . . . . . . . 45
- 10. l iasumption of Payments . . . . . . . . . . . . . . . . . . . . . 45 ARTICLE XI TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . 45 11.1 Termination of Agreement by TU Electric . . . . . . . . . . . . . 45 11.2 Termination of Agreement by TMP A. . . . . . . . . . . . . . . . 46 11.3 Automatic Termination . . . . . . . . . . . . . . . . . . . . . 47 ARTICLE XII, MISCELLANEOUS PROVB!ONS . . . . . . . . . . . . . . . . 48 12.1 Bulk Seles Law hiver . . . . . . . . . . . . . . . . . . . . . . 48 12.2 T'.rther Assurance ....................... 48 12.3 No Dird Party Beneficiaries . . . . . . . . . . . . . . . . . . . 48
- 12. 4 De f au lt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 12.5 Property and Transfer Taxes . . . . . . . . . . . . . . . . . . . 49 (a) Proper ty Tax es . . . . . . . . . . . . . . . . . . . . . . . . 49 (b) Transf er Tax es . . . . . . . . . . . . . . . . . . . . . . . . 50 12.8 Exp enses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 12.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 50 12.8 Announce m en ts . . . . . . . . . . . . . . . . . . . . . . . . . 50 12.9 Entire Agr6ement, Amendments ................. 50 12.10 Assigns, e tc. . . . . . . . . . . . . . . . . . . . . . . . . . 50 12.1 1 N o tic es . . . . . . . . . . . . . . . . . . . . . . . . . . . !!
12.12 H ead ings . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 12.13 Execution and Counterparts .................. 52 12.14 Interest on Past Due Payments . . . . . . . . . . . . . . . . . 52 12.15 Use of Representations or Recitals . . . . . . . . . . . . . . . 52 12.16 Separate Litigation . . . . . . . . . . . . . . . . . . . . . . 52 i 12.17 Construction of Comanche Peak ................ 52 i 12.18 Se v er ab ili ty . . . . . . . . . . . . . . . . . . . . . . . . . 53 I i l l .* I l l 9
T I IRT OF EXHIBrF5 PAGE Exhibit A - Escrow Agreement 2 Exhibit B - Guaranty 2 Exhibit C - Speelal Warranty Deed and Bill of Sale 6 Exhibit D - City Ordinance 25 Exhibit E - City Release and Covenant Not to Sue 25 Exhibit F - Notice of First Right of Refusal 26 Exhibit G - Salley, Fubright & Jaworski and City Attorney Opinions 33 Exhibit M - Worsham, Forsythe, Sampels & Wooldridge Opinion 34 Exhibit ! - TMPA Release 37 Exhibit J - TMFA Covenant Not to Sue 39 Exhibit K - TU Electric Release 40 Exhibit L - TU Electric Amumption and Indemnity Agreement 41 Exhibit M - TMPA Indemnity Agreement 42 a -
9 i THE AGREEMENT is made and entered into this 12th day of February,1988 by and between thefollowing parties: TEXAS MUNICIPAL POWER AGENCY, a Texas municipal corporation, a political suodivision of the State of Texu, and a body politic and corporate, having its principal office at two and one-half (21/2) miles on FM 244 north of Carlos, Grimes County, Texu ('TMP A"), and TEKAS UTURIES ELECTRIC COMPANT, a Taras corporation, having its principal otNe at 2001 Bryan Street, Suite 1900, Dallas 1, Dallas County, Texas ("TU Electric", and where appropriate in the context of this /greement, TU Electric may include TU Electric's corporate predecessors, Dallas Power & Light Company, Texu Electric Service Company and Texas Power & Light Company). DEFDm10N8 As used in this Agreement and in the Exhibits attached hereto, unless otherwise specified therein, the following terms shall have the following meanings: (a) "Agreement" means this Agreement and the Schedule and all Exhibits attached to this Agreement. (b) "BEPC" means Brazos Electric Power Cooperative, Inc. I (c) "Business Day" means a day on which banks in Dallas, Taxu are open for regular banking business. (d) "Cities" means the Cities of Bryan, Denton, Garland and Greenville, Texas. (e) "Closing" means the Initial Closing or any Subsequent Closing hereunder. (f) "Closing Date* means the Initial Closing Date or any Subsequent Closing Date hereunder. (g) "Comanche Peak" means the nuclear-fueled electric generating facility under construction on certain lands situated in Hood and Somervell Counties, Tetas, and consisting of two units having a nominal capacity of 1,150 megawatts each, and related properties, and is the aggregate and combination of the
.g.
o i Station, Fuel and Transmission Fac!!!tles, and all other .-ights and interests
.asooelated with or relating to all of the same.
(h) "Concurrent Ordinances" means the concurrent ordinances adopted by ths Cities in connection with the establishment of TMPA. (i) "Escrow Agent" means Texas Commerce Bank (Dallas). (j) "Escrow Agreement" means the form of Escrow Agreement attached hereto as Exhibit A. (k) "Fue!" means the Comanche Peak nuclear fuel, irrespective of chemical and/or physical foem, and the rights and interests related thereto. (1) "Guaranty" means the form of Guaranty of TUC attached hereto u Exhibit B. (m) "Initial Closing" means tha consummation, pursuant to this Agreement, of the initial sale of a portion of the Purchased Assets by TMPA to TU Electric and the purchase of such portion of the Purchased Assets by TU Electric, as described in Section 1.3 hereof. (n) "Initial Closing Date" means such date on or before September 22,1981, as may be agreed upon by the parties for the Initial Closing, which date shall be within thirty (30) days after the last to occur of the NRC Affirmative Date or the PUC Affirmative Date. (o) "Initial Payment" means the amount equal to Pitty-One Million, Eight Hundred Seventy-Three Thousand Dollars ($$1,873,000) and (!!) an incremental amount equal to One Hundred Five 1housand, Six Hundred Nine Dollars and Eleven Cents ($105,809.11) per day from and including the date of execution of this Agreement to the Initla! Closing Date. (p) "Joint Ownership Agreement" means that certain Instrument entitled on the cover page thereof "Joint Ownership Agreement Between Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light i Company, Texas Utilities Generating Company Texas Munleipal Power Agency and Brazos Electric Power Cooperative, Inc. for Comanche Peak l 1 l
, a Steam Electric Station," executed on January 2,1979, together with and as
%odified by that certain instrument entitled on the cover page thereof "Modification of Joint Ownership Agreement Between Dallas Power & Light Company, Texu Electric Service Company, Texas Power & Light Company, Texas Utilities Generating Company, Texas Municipal Power Agency and Brazos Electric Power Cooperative, Inc. Por Comanche Peak Steam Electric Station," executed on June 1,197s, together with and u amended by (1) the Amendment of Joint Ownership Agreement, executed on December 9,1980, between Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light Company, Tezu Utilities Generating Company, TMPA, B2PC and Tex-La, together with and as amended by (11) the Second Amendment of Joint Ownership Agreement, executed on February 12, 1982, between Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light Company, Texas Utilities Generating Company, TMPA, BEPC and Tex-la.
(q) "New Lawsult" means the lawsuit that, pursuant to Section 4.2(e) of this Agreement, may be filed by TMP A or TU Electric, and if filed will be filed in Dallas County, Texas, in the event that nonsults are taken by TMPA and TU Electric la the Pending Dallas Sult pursuant to Sectiort 4.2(d) of this l Agreement or this Agreement is Geminated under Article XI hereof. (r) "NRC" means the United States Nuclear Regulatory Commission.
- (s) "NRC Affirmative Date" shall have the meaning set out in Section 5.3(e) l
' her.of. l l (t) "Owners" means collectively TMPA, TU Electrie, Tex-La and BEPC, as owners of Comanche Peak in accordance with the terms of the Joint 0wpership Agreement, or singularly any of such parties. l ( (u) "Pending Austin Sult" means Cause No. 399,334 - Tex-La Electric l Cooperative of Texas tne., and Texas Muntelpal Power Agency v. Texaj l 3 I J
Utilities and Texas Utilities Electric Cemoany. - in the District Coert of Travis County, Texas, Seth Judicial District. , (v) IPending Dallas Sult" means Cause No. 84-4409-A - Texas Utilities Electrie Company v. Tex-La Electric Cooperative of Texas, Inc., et al. - In the District Court of Dallas County, Taxas,14th Judicial District. (w) "Pending Houston Sult" means Cause No. 83-29889 - Charles A. Atchison, et al v. Brown & Root, Inc., et at - in the District Court of Harris County, Texu,215th Judicial District. (x) "Pending Litigation" means the Pending Dallas Suit and the Pending Austin Suit. (y) "Permitted Exceptions" means Matters affecting TMPA's title to all or any part of the Purchased Assets existing immediately prior to the time the same were acquired by TMPA from or through TU Electric or TU PJoetrie's predecessors-in-title
. Matters affecting TMPA's title to all or any part of the Purchased Assets created by the acts or omissions of (1) all parties owning Interests in Comanche Peak at the time involved acting collectively, or (ii) the Project Manager or TU Elsetric or both The lien for unpaid taxes and assessments relating to taxes and assessments unpaid by parties other than TMPA or imposed with respoet to the periods prior to whleh TMPA owned the property interest involved and after the initial Closing:
The rights of third parties in and to the Purchased Assets created by the acts or omissions of parties other than TMPA and not arising by, I through or under TMPAs The Joint Ownership Agreement and all lleenees, permits, leases, franchises and contracts relating to the Purchased Assets applied for.
\
l 4
obtained or created by the acts or omissions of (1) any Owner other
, than TMPA, (11) au parties owning interests in Comanche Peak at the time involved acting conectively, or (111) the Project Manager or ,
TU Electric or both i and Liens (existing or Inchoate) in favor of mechanics, materialmen, laborers and suppliers of materials, goods, services, equipment, inventory (of subcontractors) and labor to or for the Station, the Fuel 1 or the Transmission Facilities created by the acts or omissions of (i) any Owner other than TMPA, (11) all parties owning interests in Comanche Peak at the time involved acting collectively, or (!!!) the Project Manager or TU Electric or both. (a) "Power Sales Contracts" means those certain Power Sales Contracts, dated as of September 1,1978, ay and between TMPA and each of the Cities. (aa) "Project Manager" means TU Electric designated and acting as such in accordance with the terms of the Joint Ownernhlp Agreement. (bb) "PUC" means the Public Utility Commission of Texas. t , (ce) "PUC Affirmative Date" shall have the meaning set out in Section 5.3(d) ; ) hereof. j (dd) "Purchased Assets" means the aggregate of all that part of Comanche Peak
- (as Comanche Peak exists and is constituted on each Closing Date) owned by j TMPA or to whleh TMPA has a right, title or Interest, including without i limitation the foDowing, to the extent of TMPA's ownership interest therein
all real property and rights appurtenant thereto, and improvements thereon \ l l and flatures thereto; all personal property and rights therein, tangible or i intangible, Inchading all machinery, equipment, furniture and vehicles all rights or claims with respect to chargea, payments or prepaid items: all r l warranties and claims and proceeds therefrom au rights under all agr ements, permits, licences, franchises and authorizations; all intellectual 5-t J
l property rights; all computer hardcare and softcare and related r!ghts and 1 Interests; all books and records in the possesalon of the Project Manager or e . otherwise owned by all of the Owners in combination; the Fuel; the
]
Transmission Faciuties; and all other properties and assets ports!ning to l Comanche Peak; but excluding, however, any Subject Claim of TMPA arising out of or under this Agreement or the other documents delive.ed to TMP A pursuant hereto or contemplated herein. (ee) "Refunded Payment" means the progress payments under the Joint Ownership Agreement that TU Electric received from TMPA for the period subsequent to November 30, 1987 in the amount of One Million, Four Hundred Fifty-Four Thousand Four Hundred Ten Dollars and Forty-Five Cents ($1,454,410.45) which have heretofore been refunded by TU Electric to TMPA. (ff) "Signing Payment" means the amount of Fifty Eight Mullon, Six Hundred Eighty Thousand, Five Hundred Eighty Seven Douars ($58,880,587). (gg) "Site" means approximately 7,888 acres owned (in fee or other estate or interest) by the Owners, as tenants in common, and located in Hood and Somervell Counties, Texas, and more particularly described on the Schedule attached hereto. (hh) "Special Warranty Deed and Bill of Sale" means the form of Special Warranty Deed and Blu of Sale attached hereto as Exhibit C. (11) "Station" means the Site, all improvements thereon (including Squaw Creek I take and Park) and au fixtures and attachments thereto, as well as (i) all i personal property thereon and associated therewith or related thereto and owned by the Owners, and (!!) au rights (tangible or intangible), and all casements and other interests of any nature associated therewith or related ] thereto and owned by the Owners, excluding, however, the Fuel and Transmisalon Facilities. i i
. . l l
(jj) l "Subject Claims" means any and all claime, actims, controversies, causes of ' Jaetion, disputes, demands and complaints of whatsoever kind or nature and l 1 whether known or unknown. (kk) '"Bubsequent Closing" means in each case the consurnmation, pursuant to this Agreement, of each subsequent sale of a portion of the Purchased Assets by TMPA to TU Electric and the purchase of such portion of the Purchased Assets by TU Electric, u described in Section 1.3 hereof, pursuant to and in connection with the purchase of the Purchased Assets and settlement of the Pending Litigation as provided for in this Agreement. (11) "Subsequent Closing Date" means in each respective case a date which is six (6) consecutive calendar months after the Initial Closing Date and each succeaalve date that is six (6) consecutive calendar months thereafter during ten (10) successive six month periods following the Initial Closing Date so that the last such Subsequent Closing Data shall occw on a date which is five (5) years after the Initial Closing Deto. (mm) "Subsequent Payment" means the amount of Forty Five Million Four Hundred Seventeen Thousand Sir Hundred Thirty One Dollars and Seventy Five Cents ($45,417,831.7 5). (nn) ' Tex-La" means Tex-La Electric Cooperative of Texas, Inc. (oo) ' Total Payment" means the amount to be paid by TU Electric to TMPA hereunder la connection with the purchase of the Pwchased Assets and in osaneetion with the settlement of the Pending Litigation which shall be the total of (0 the Signing Payment, (ii) the Initial Payment and (ill) the aggregate of the Subsequent Payments. (pp) "Transmission Facilities" means the Comanche Peak - Parker Switching l : Station 345 kV electrical transmission line approximately 41 miles in length, and associated righte-of-way, equipment, fixtures and personal property. t 7 1 ;
(qq) 7UCS means Texas Utilities Company, a Texas corporation which is the corporate parent of TU Electric. M CFTAIA A. TU Electric is an investor owned utility which, pursuant to a statutory merger that occurred on January 1,1984, succeeded to all the rights, title and Interests and assumed and became liable for all obligations of Dallas Power & Light Company, Texas Electric Service Company, Texas Power & Light Company, and Texas Utilities Generating Company under the Joint Ownership Agreement, and is engaged in the generation, purchase, transmission, distribution and sale of electric energy within the State of Texas. B. TMPA is a jolnt powers agency, established pursuant to Tes. Rev. Civ. Stat. Ann, art.1435a (Vernon 1980) by the Concurrent Ordinances, whleh La engaged in the generation, transmlaslon and sale of electric energy within the State of Taxu. C. TMP A and TU Electric have previously entered into the Joint Ownership Agreement. D. TMPA and TU Electric each own an undivided interest in Comanche Peak, which in the case of TMPA consista of such interest in the Station and Puel(stated to be an undivided 8.2% interest in the conveyance involved) that was conveyed and j transferred to TMPA by TU Electric (or its predecessors) and such interest in the Transmission Pacilities (stated to be an undivided 20% interest la the relevant ! instrument but is subject to adjustment) that was conveyed and transferred or ! agveed to be conveyed and transferred to TMPA by TU Electric (or its predecessors). E. TMPA and TU Electrie have been involved in the Pending Litigetton and would like , to settle their disputes involved in the Pending Litigation and otherwise relating to Comanche Peak and TMPA would like to sell its Mterest in Comanche Peak and be I rolleved of its obligations under the Joint Ownership Agreement and TU Electric l would like to acquire such interest and is t'llling to relieve TMPA of such obligations eder the Joint Ownership Agreement. 1 i
.g.
F. TMPA and TU Electric have concluded this Agreement in order to provide for the sale by-TMPA and the purchase by TU Electric of au of TMPA's right, title and interest in Comanche Peak and the settlement of a11 Subject Claims between TMPA, the Cities and TU Electric and between TMPA, the Cities and TU Electric's affiliates pertaining to Comanche Peak, the Pending Litigation, and all matters in connection therewith, upon and subject to the terms and conditions set out herein. ARTICLE I SALE AND FORCHASE 1.1 Properties and Assets Sold and Purchased. Subject to the terms and conditions of this Agreement, TMPA hereby agrees to sell, transfer, assign, convey and deliver to TU Electric and TU Electric hereby agrees to purchase from TMPA, and pay TMPA for, the Purchased Assets in the manner and at the times hereinafter described. 1.2 Closines. De In!tlal Closing will occur at 10:00 a.m., Dallas, Texas time, on the Liitial Closing DAte. Each Subsequent Closing will occur at 1040 a.m., Dallas, Texas time, on each Subsequent Closing Data. The Initial Closing and each Subsequent Closing will be held at the offices of Wocsham, Forsythe, Sampels & Wooldridge, 2001 Bryan Street, Suite 3200, Dallas, Dallas County, Tezu or at such other addreas at which such firm shall then be located. De fact that any Closir.g is or was intended to be held in Dallas County shall not be used by TU Electric as evidence for venue pwposes in any { proceeding related to a Subject Claim arising out of or under this Agreement. 1.3 Transfers of Purchased Assets. At the Initial Closing, TMPA will sell, convey, assign and transfer to TU Electrie, and TU Electrie will purchase, under and
! pursuant to a form of the Special Warranty Deed and Bill of Sale, an undivided interest in j and to the Purchased Assets which shall be a percentage of the Purchased Assets equal to the percentage of the Total Payment which shall have been paid by TU Electric at such time. At each Subsequent Closing, TMPA wiu sell, convey, assign and transfer to ) TU Electric, and TU Electrie will purchase, under ud pursuant to a form of the Special Warranty Deed and Bill of Sale, an undivided ten percent (10%) Interest in and to the
remainder of the Purchased Assets. It is understood and agreed that upon payment of the initial Payment by TU Electric to TMPA at the Initial Closing, the absolute right to acquire all of the Purchased Assets shall vest in TU Electric, unless and until TU Electric shall default at any Subsequent Closing In the making of any Subsequent Payment hereunder. In such connection, the parties agree that the obligation hereunder to make the series of transfers provided for herein shall not be construed to create a mortgage or security interest, but shall be an absolute commitment for the conveyance of property in the manner, to the extent and upon the terms set forth herein. Accordingly, in order to facilittate each Subsequent Closing, TMPA agrees that at the Initial Closing, it will deliver to the Escrow Agent the Special Warranty Deeds and Bills of Sale for each Subsequent Closing to be held in escrow thereafter by the Escrow Agent in accordance with the terms of the Escrow Agreement and delivered by the Escrow Agent to ! TU Electric at each Subsequent Closing upon acknowledgement to the Escrow Agent of the making by TU Electric of each Subsequent Payment and the exchange of the closing 1 documents toferred to in Articles Y1 and Yt1. 1.4 Method of Pi.yment. All payments made by TU Electric to TMPA under this ! Agreement shall be made by wire transfer of immediately available funds through the federal reserve system to TMPA's bank designated in writing to TU Electric. If the due date of any payment under this Agreement falls on a day that is not a Suainoas Day, such paymert shall be paid on the first Business Day following the date on which such payment is due and the Subsequent Closing shallbe held on such date. i 1.5 Payment of Total Payment. TU Electric shall pay to TMPA the Total Payment as followas 1 (a) Payment Upon Strains. On the date of exof.ution of this Agreement. TU Electrie will pay to TMPA the Signing Payment. The Signing Payment i shall be held in a separately segregated fund by TMPA, but which TMP A may invest in its sola discretion, until the initial Closing. The Signing Payment will be subject to refund prior to the Initial Closing as provided Irl Article XI of this Agreement. Upon the Initial Closing, the Signing Payment will be
, deemed a part of the Total Payment.
(b) Payment at the Initial Closing. At the Initial Closing, TU Electric will pay to TMPA the Initial Payment. (c) Payments at Subsequent Closings. At each Subsequent Closing, TU Electric will pay to TMPA a Subsequent Payment. (d) Apodestion of Paymerits. De proper appUcation of all payments to be received from TU Electric by TMPA pursuant to this Agreement shall be the sole reponsibility of TMPA, and TU Electric shall have no right to direct the disposition of any of such payments after receipt by TMPA, except as provided in Section 1.5(a) hereof. ARTICLE E REFEEBENTAT10MB. WARE.ANTTES AND AGREEISENTS OF TMPA TMPA represents and warrants to, and agrees with, TU Electric as follows: 2.1 Leral Status. TMPA is a municipal corporation, a political subdivision of the . State of Texas, and a body poUtle and corporate, duly organised, valldly existing and in good standing under the laws of the State of Texas as a joint powers agency under Tex. Rev. Civ. Stat. Ann. art.1435a (Vernon 1980) established by the Concurrent Ordinancas. TMPA has full, requialte power and authority to carry on its businees as now conducted
,and to own, sell and transfer the Purchased Assets as provided for in this Agreement. De only customers of TMPA are the Cities, except to the extent TU Electric may be considered to become a customer incident to the transactions provided for or referenced herein.
2.2 Authority for Agreement. TMPA has full, requisite power and authority to execute, deliver and perform this Agreement, each Speelt.1 Warranty Deed and Bil' of Sale and each other agreement and inttrument to be executed and delivered in connection with this Agreement, and to carry out its obligations hereunder and thereunder. Each of the l Cities has (1) duly and validly approved a Concurrent Ordinance creating TMPA and such l
)
l l
]
ordinance has not been amended or repealed by any of the Cities, and (ii) duly and vall61y given its approval of Comanche Peak as a Project pursuant to Section 13 of the Power Sales Contracts, and such approval has not been amended or repealed by any of the Cities. Neither TMPA not any of the Cities is currently in default under the provisions of the Power Sales Contracts nor has any event occurred not does any condition exist which with the giving of notice or passage of time (or both) may constitute a default thereunder, which in either event would eithw adversely affect the Purchased Assets or prevent the consummation of any of the transactions provided for herein. TMPA has full, requisite power and authority to act for itself sad the other pwsons or entitles, private and govunmental, acting by, through and under TMPA, in connection with this Agreement, each Special Warranty Deed and Bill of Sale and the other agreements and instruments to be executed and dellywed by it pursuant hereto, his Agreement has been, and at the time of depoelt into escrow and at each Closing, each Special Warranty Deed and Bill of Sale and such other agreements and instruments as are delivered by TMPA will have been, duly authorized, executed and delivered , subject to the terms and conditions of the E.scross Agreement, by TMPA and this Agreement does, and at the time of deposit into escrow and at each Closing, each Special Warranty Deed and Bill of Sale and such cther agreements and instruments as are delivered by TMPA will, constitute valid and legally binding obligations of TMFA and the other persons or entitles, private and governmental, acting by, through and under TMPA, enforceable against such parties in accordance with i l their respective terma. De sneeution, delivery and performanco of this Agreement, each Special Warranty Deed and Bill of Sale and such other agreements and instruments will ; not confilet with or result in any violation of, or constitute a default under, (i) the organisational or governing documents or by laws of TMP A, or (ii) any matwial provision
- of any mortgage, indenture, lease, agreement oc other instrument, including any revenue i or other bonds or other obilgation or other evidence of Indebtednesa, to which TMP A, or
- any of TMPA's properties or assets, is subject or a party, or (111) any permit, concession, a
1 grant, franchise, license, judgment, order, deetee, statute, law, ordinance, rule or i i
regulation applicable to TMPA or any of its property, including the Purchased Assets: or with the paesage of time or the giving of notice or the taking of any action by any third " l party, have any of the effects described herein, except no representation is made with : l respect to any instrument, permit, concession, grant, franchise or license (and the laws I and regulations with respect thereto) made or obtained by TU Electric or the Project l Manager en behalf of the Owners. 2.3 Acorovals. TMPA has obtained all necessary consents, approvals, orders and authorizations of, and made all necessary registrations, declarations and filings with, each governmental authority required in connection with the uecution, delivery, and performance by TMPA of this Agreement, the Special Warranty Deeds and Bills of Sale and the other agreeinutts and instruments to be executed and delivered by TMPA hereunder, except (1) for any such required to be obtained by the Project Manager, (11) with respect to the rights of first refusal referred to in Section 5.3(b) hereof, (!!!) with respect to compliance with the provisions of V.T.C.A., theal Government Code Section 272.001 referred to in Section 5.3(c) hereof, and (iv) to the extent TMPA may be affected by the filings with the PUC and NRC referenced in Sections 5.3(d) and (e) hereof. No other filing or registration with, and no other consent, approval, authorization, permit, certificate or order of any court, tribunal or governmental agency or authority, Federal, state, county or municipal, is or will be required by any applicable statute or other law or by any judgment, order or decree or any rule or regulation of any court, tribunal or governmental agency or authority, Federal, state, county or municipal, to permit TMPA to execute, deliver and perform this Agreement, each Special Warranty Deed and Bill of i Sale or any agreement or instrument required hereby to be executed and delivered by it at any Closing. 2.4 Liabilities. There are no obligations or liabilities, including with respect to any revenue or other bonds or other obligation or other evidence of indebtedness, of l TMPA, whether accrued, ausolute, contingent or otherwise, which TU Electric may i become liable for or is assuming as a result of the purchase of assets provided for herein 1 I
or whleh may apply with respect '.o the Purchased Assets, except such as currently exist with respect to Comanche Peak and which were entered into or incurred by (1) all parties owning interests in Comanche Peak at the time involved acting couectively, or (!!) the Project Manager or TU Electric or both. 2.5 Nontaxable Status. TMPA is generauy exempt from tax liabilities with respect to the Purchased Assets and TMPA owes no taxes with respect, or the nonpayment of which would apply, to the Purchased Assets to any taxing authority. Further, no tax charge, tax expense or tax claim against the Purchased Assets originating with or caused by the action or inaction of TMPA individually or In combination with any cf the Owners other than TU Electric or the Project Manager will attach to or affect any portlen of the Purchased Assets conveyed after the Closing with respect thereto, except to the extent provided for in Section 12.5 hereof. 2.8 Title to Real Propertv,. TMP A has such title in and to the Site and all real property interests thereln and the real property interests included in the Transmission Faellities as was conveyed to TMP A by or through TU Electric or by TU Electric's predecessors-in-title. Except in combination with, or in conjunction with action by, all of the Owners of the Site and the real property Interests included in the Transmission Faellities acting couectively either directly or through the Project Manager, TMPA has not encumbered the Site or any of the real property interests therein or the real property interests included in the Transmission Feellities with any mortgages,11 ens, claims, ! charges, security lateresta or encumbrances. TMPA, separately or in combination with ariy or all of the Owners other than j TU Electrie or the Project Manager, has not taken any action which would result in the j structures, improvements and fixtures on such real property constituting a part of the Site , not being in conforn:lty with all applicable Federal, state and local soning, building, 1 health, safety and environmental laws, ordinances, rules or regulations. No notice from any governmental body, whleh has not otherwise been disclosed to TU Electric or the ! Project Manager in writing, has been served upon TMPA claiming any violation of any i i I
such lac, ordinance, rule or regulation or requiring any cock, repairs, construction, alterations or lastallation on or in connection with such teal property or the buildings, structures,' fixtures or improvements thereon, nor to TMPA's knowledge has any such violation, which has not otherwise been disclosed to TU Electric or the Project Manager in writing, been claimed or action with respect thereto threatened. 2.7 Title to Personal Property. TMPA has the title te such interast as was conveyed to TMPA by or through TU Electric or TU Electric's predecanor-in-title in all of the equipment, vehicles, fixtures, machinery and other items of personal property, tangible and intangible, to the extent the same are parts of the Purchased Assets to be conveyed at kny particular Closing. Except in combination or in conjunction with action by TU Electric, the Project Manager or all of the Owners acting collectively, TMPA has not one. umbered the equipment, vehicles, flutures, machinery and other items of personal property, tangibk and intangible, which are part of the Purchased Assets, with any mortgages, liens, claims, charges, security interests, encumbrances or other restrictions or Umitations, assuming payment by TU Electric of any and all property and transfer taxes that may become due on account of the transfer of the Purchased Assets contemplated by this Agreement and except for the liens for ad valorem taxes not yet due and paysble. 2.8 Littaation. There are no Subject Claims, suits or procesdings, administrative or otherwise, pending (l.a. TMP A having been served with process with respect thereto or otherwise having knowledge thereof) against TMPA or, to the best of TMPA's knowledge, I threatened against TMPA affecting the Purchased Assets, whether such be at law, M a equity or in art':tratic% or before or by any governmental department, commission, board, 4 bureau, agemey or instrumentality which, if adversely determined against TMPA, would affect TMPA's ability to perform its obligations under this Agreement, except the Pending , Litigation, the licensing proceedings to which TU Electric is a party and the Pending f Houston Suits and TMPA, separately and apart from the Owners in combination or in conjunction with action by allot the Owners acting collectively either directly or through l j ! 1
- . _ _ ~ . _ _ - _ . . -
the Project Manager (but cithout acknowledgment that such exists eith reference to the 1 Owners), is not in default with respect to any order, writ, injunction or decree of any court, arbitTator or governmental department, commission, board, bureau, agency or instrumentality affecting the Purchased Assets. 2.9 Contracts. There is not in effect any executory contract, agreemant, order or commitment to which TMPA is subject or a party, and to which TU E!cettic or the Project Manager is not a party, which would bind TU Electric after any particular Closing with respect to the portion of the Purchased Assets conveyed at such Closing and which would adversely affect the value of such portion of the Purchased Assets after such Closing. 2.10 Exclusion of implied Warranties. THE PURCHASED ASSETS ARE BEINO SOLD ' AS-IS". TMPA MAXES NO WARRANTIES CONCERN!NO THE MERCHANTA81LITY OR CONDrTION OF THE PURCHASED ASSETS OR OF THEIR FITNESS FOR ANY PARTICULAR PUEhME. EXCEPT TO THE EXTENT OTHERWISE EXPRE.SSLY SET PORTH HEREIN. 2.11 Accuracy of Representations and Warranties. All representations and warvanties of TMPA contained herein are, and will be at the time of each Closing, accurate and complete in all material respects and all documents delivered by TMPA to TU Electrie incident hereto are, and will be at mach times, valid and authentic in all respects. l AavicLE at 1 REPWATM WanRAlfTTES AND AQREEMENTS OF TU ELECTRIC TU Electrie represents and warrants to, and agrees with, TMPA as follows: 3.1 Coroorste Status. TU Electric is a corporation duly organized, validly existing and Lt good standing under the laws of the State of Texas with full, requisite corporate pwer and authority to carry on its business as now conducted and to own and 1 operate its properties as and in the places where such business is now conducted and such , { properties are now owned and operated. [ ,0 I'
3.2 Authority for Arreement. TU Electric has full, requisite corporate power and authority to execute, deliver and perform this Agreement and uch other agrument and instrument to be esecuted and delivered by TU Electric in connection with this Agreement, and to carry out its obligations hereunder and thereunder. This Agrument has bun, and at the Closing at which they are delivered such other agreaments and insthments wiu have been, duly authorized, executed and deUvered by TU Electric, and this Agreement constitutes, and at the Closing at which they are deUvered such other agreements and instruments will , aute, valid and legally binding obligations of TU Electric enforceable against i accordance with their respective terms. The execution, delivery and performance of this Agreement and such other agreements and instruments will not confilet with or result ln any violation of, e constitute a default under, (1) the Articles of Incorporation or by-laws of TU Elech e ' (11) any material provision of any mortgage, indenture, lease, agreement or other instrument to which TU Electric la subject or a party, or (iii) any permit, concesalon, grant, franchise, Ucense, judgment, order, decree, statute, law, ordinance, rule or regulation appilcable to TU Electric or any of its property; or with the passage of time or the giving of notice or the taking of any action by any third party, have any of the effects described herein. 3.3 Aporovals. TU Eleetrle has obtained all neceaaary consents, approyals, orders i and authorisations of, and has made all necessary registrations, declarations and flungs with, each governmental authority required in connection with the execution, delivery, and performance by TU Electrie of this Agreement and the other agreements and instruments to be sneeuted and delivered by TU Electrie hereunder, azeept (1) with respect to the rights of first refusal referred to in Section 5.3(b) and (11) for the finngs !
! with the PUC and NRC referenced in Sections 5.3(d) and (e) of this Agreement. No other f!!!ng oc registration with, and no othat consent, approval, authorisation, permit, i certifieste or order of any court, tribunal or governmental agency or authority, Federal, state, county or municipal, La or will be required by any appucable statute or other law or by any judgment, order or decree or any rule or regulation of any court, tribunal or i
]
governmental agency or authority, Federal, state, county or municipal, to permit TU ElectriFto execute, deliver or perform this Agreement or any agreement or instrument required hereby to be executed and delivered by it at any Closing, except as referred to above. 3.4 Authority for TUC Guaranty. TUC has full, requisite corporate power and authority to execute, deliver and perform the Guaranty and to carry out its obligations thereunder. At the laitial Closing, the Guaranty will have been duly authorized, executed and delivered by TUC, and will constitute the valid and legally binding obilgation of TUC enforceable against it in accordance with its terms. Me execution, delivery and performance of the Guaranty will not conflict with or result in any violation of, or constitute a default under, (1) the Articles of Incorporation or by-laws of TUC, or (ii) any material provision of any mortgage, indenture, lease, agreement or other instrument to which TUC is subject or a party, or (111) any permit, concession, grant, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to TUC or any of its property; or with the passage of time or the giving of notice or the taking of any action by any third party, have any of the effects described herein. 3.5 Accuracy of Representations and Warranties. All representations and warranties of TU Electric contained herein are, and will be at the time of each Closing, accurate and complate in all material respects and all documents delivered by TU Electric
. to TMPA incident hereto are, and will be at such timos, valid and authentic in all respects.
r ArrtCLE IV l FR& CLO8tNG 08tJGATION8 TMPA and TU Electric, as appropriate, covenant that between the date of this l Agreement and any Closing Date I 4.1 Representations. Warrantles and Covenants. TMPA shall not take any action l which would result in the representations and warranties set forth in Article II hereof being inaccurate, incorrect or incomplete to the extent applicable as of such Closing Date 4
. is .
i L _. _ _ - _ _ _ __ _ _ _ __ _ _ _ _ _ _ _ . _ _ . _ _ _ . . _ _ . _ _ _ _ _ _ _ _ . _ _ _ _ . _ - - _ _ _ _
and TMPA shall take all such action as may be necessary to insure that all covenants and agreements of TMPA set forth in this Agreement which are required to be performed by it at or prior to such Closing Date will have been so performed. TU Electric shall not take any action which would result in the representations and warranties set forth in Article W hereof being inaccurate, incorrect or incompkta to the extent applicable as of such Closing Date and TU Electric shall take all uch action as may be necessary to insure that all covenants and agreements of TU Electric set forth in this Agreement which are required to be performed by it at or prior to such Closing Date will have been so perforraed. 4.2 Abatement of Particloation in Pending Litigation. For purposes of this Section 4.2, the term "TU Electric" shall include not only TU Electric but TUC and its subsidiaries, Texas Utilities Mining Company and Texas Utilities Services Inc., all of which are parties to the Pending Litigation. Immediately after the execution hereof and to the fullest extent that would not violate court orders in effect in the Pending Dallas Suit, TMPA shall abate all of its voluntary activities in connection with the Pending Litigation, including cessation of the furnishing of any aasistance, financialor otherwise, to any party to such litigation and the retention and furnishing of advice or direction to any attorneys of or consultants to any party to such litigation, and any other activity adverse to TU Electric pertaining thereto. In such regard, TMPA agrees that it willimmediately direct any attorneys and consultants retained solely by it in connection with the Pending Litigation to abate their work, and, consistent with any agreements TMPA may have with BEPC or Tex-La and consistent with any agreements TMPA may have with consultants hired jointly with BEPC or Ter.-La (all of which agreements are terminable and will be abated by TMPA immediately after the date hereof and terminated by TMP A upon the Initial Closing), TMPA will as soon as possible withdraw its authorisation to any other attorney or consultant employed jointly by it and any of the other parties to the Pending Litigation to incur fees or expenses
chugeable to TMPA. Specificauy with regard to the Pending Litigation, TMPA (and TU Electric to the extent specified herein) agrees to take the following actions: 't (a) TMPA agrees to the continued abatement of the Pending Austin Suit and agrees not to revive such action during the pendency of this Agreement and to take any action necessary to oppose such revival In the event the Pending Dauas Suit is nonsulted in accordance with paragraphs (d) and (e) hereof, TMPA shall not claim that such nonsult entitles TMPA to revive the Pending Austin Sult; (b) TMPA and TU Electric agree to file within three (3) days after the date hereof and diligently pursue a joint motion to sever each of their respective Subject Claims against each other in the Pending Dallas Sult; (c) TMPA and TU Electric agree as part of the joint motion required by paragraph (b) hereof to request jointly that the Court in the Pending Dallas Suit approve a standstiu agreement with respect to the severed Subject Claims whereby the current scheduling order is withdrawn with respect to the severed Subject Claims and no new scheduling order or trial setting is made, and no discovery or any other steps to advance the litigation between TMPA and TU Electric shall be taken unless this Agreement is terminated or the transactions contemplated hereunder to be consummated prior thereto are not consummated on or prior to the Initial Closing Date, provided, however, any costs incurred and assessed against TMPA by the Court in the Pending Dallas Suit after approval of such standstill agreement shall be paid by TU Electric until mach time as this Agreement is terminated or the transactions contemplated hereunder to be consummated prior thereto are not consummated on or prior to the Initial Closing Date; (d) If for any reason the Court in the Pending Dallas Suit tofuses to grant the severance or refuses to approve the standstiu agreement referenced above prior to the end of three (3) weeks after the date hereof, TMPA and
TU Electric agree to immediately nensult each of their eespective Subject
,_ Claims against each other filed in the Pending Dallas Suit on such date which shall be three (3) weeks after the date hereof (or the next day the Court is open for business if such date is a holiday), provided that, as .specified in Section 9.7 of this Agreement, TU Electric shall have the right to retain TMPA as a party to the Pending Dallas Suit but only for the purposes specified in said Section 9.73 (e) If it is necessary for TMPA and TU Electric to nonsult the Subject Claims filed against each other in the Pending Dallas Suit, TMPA and TU Electric agree that such nonsults will not operate to prejudice either party's position with respect to the Subject Claims they have made and legal positions they have taken in the Pending Litigation. In the event this Agreement is terminated or the transactions contemplated hereunder to be consummated prior thereto are not consummated on or prior to the Initial Closing Date, TMPA and TU Electric agree that their Subject Claims in the Pending Dallas Suit shall be reflied in Dallas County in the New Lawsuit in the 14th Judicial i
District Court (and if such suit is not assigned initially to such Court, TMPA and TU Electric agree to thereafter file a Joint Motion to transfer such suit to such Court), within five (5) Business Days after such 'ermination of this Agreement or failure to close hereunder on the Initial Closing Date, with TU Electric as the plaintiff and TMPA as defendant and counter-plaint:ff, and that TMPA will not oppose venue in Dallas County, Texas except to the extent that TMPA could on the date of this Agreement contest venue in Dallas County, Texas in the Pending Dallas Sult. In the event this Agreen:ent is terminated or the transactions contemplated hereunder to be consummated prior thereto are not consummated on or prior to the Initial Closing Date, TMPA will retain, without limitation, any and all rights TMPA may now have to appeal the order of the Court in the Pending Dallas Suit dated
.1 -
September 19, 19860 For au purposes, ine!uding, althout limitation, (i) any statute of limitations claim, (ii) any claim concerning 516.069 of the Texas Civil Practice and Remedies Code, and (iii) any claim asserted in the Pending Austin Suit (including without limitation, any Subject Claim concerning which suit was first filed), the New Lawsuit win be considered as having been filed by TU Electric on May 29, 1986, and TMPA's counterclaim in the New Lawsuit win be considered as having been filed by TMPA on July 18,1906. All discovery, including documents produced and depositions taken, which had been conducted in the Pending Dallas Suit up to the execution of this Agreement, shall be for all purposes considered as having been taken in the New Lawsuit, and an orders issued by the Court in the Pending Dallas Suit up
- to the execution of this Agreement (except the scheduling order) shall have the same force and effect as if they had been lasued in the New Lawsult; (f) No efforts made or cooperation given by TMPA's employees, agents, consultants, experts or attorneys (including, without limitation, Fulbright &
Jaworski) pursuant to or under any provision of this Agreement shall create any ecnflict of interest which would prevent any such employees, agents, consultants or attorneys from participating adversely to TU Electric in any legal proceeding brought by TMPA against TU Electric should this Agreement be terminated or should the transactions contemplated under this Agreement to be consummated prior thereto not be consummated on or before the Initial Closing Date. TU Electric hereby waives any such conflict of interest which might otherwise exist because of any such effort or cooperation and ; l l (g) If it is necessary to nonsult the current Subject Claims, u set forth in paragraphs (d) and (e) above, then in such event upon or at any time after the Initial Closing, if TU Electric requests, TMPA and TU Electric agree that their Subject Claims in the Pending Dallas Suit shall be refiled in the New
Lawsuit in Dallas County and that the New Lawsuit and all such Subject 41 alms shall then immediately be dismissed with prejudice. 4.3 Agreement to Obta:n Approvals. TMPA shall use all reasonable efforts to obtain with respect to TMPA and TU Electric shall use all reuonable efforts to obtain with respect to TU Ehetric all necessary consents, approvals, authorizations, permits, certificates or orders of any court, tribunal or governmental agency or authority, Federal, state, county or municipal, which are required by any applicable statute or other law or by any judgment, order or decree or any rule or regulation of any court, tribunal or governmental agency or autherity, Federal, state, county or municipal, te permit each of them, respectively, to execute, deliver or perform this Agreement and any agreement or instrument required hereby to be executed and delivered by either of them at any Closing. ARTICLE V CONDrr!ONS TO OBtJOATIONE TO CLOSE 5.1 Conditions to Obligation of TMPA to Close. The obligation of TMPA to consummate and close the transactions contemplated by this Agreement at each and every Closing is sibject to the satisfaction of each of the following conditions at or prior to each such Closings (a) Representations and Warranties. The representations and warranties of TU Electric contained in this Agreement shall have been true and correct on and as of the date hereof and shall be true and correct on and as of each Closing Date in all material respects u though such representations and warrantles had been made on and as of such Closing Date, and TU Electric shall have delivered to TMPA a certificate, dated as of each Closing Date, of its Chairman of the Board, a Division President or a Vice President to the l l toregoing effects 1 (b) Compliance With Arroement. TU Electric shall have fully performed and compiled with all of the covenants, streaments and conditions to be performed or complied with by it at or prior to the particular Closing l l .'
}
l (including cithout limitation its assumption obligations with respect to the ) 1 2 Joint Ownership Agreement), and TU Electric shall have delivered to TMP A a l certificate, dated as of such Closing Date, of its Chairman of the Board, a Division President or a Vice President to the foregoing effect; (c) Rece'pt of Payment. TU Electric shall have delivered to TMPA the payments referenced in paragraphs (a) and (b) of Section 1.5 hereof in the case of the Initial Closing and the payment referenced in Section 1.5(c) hereof in the case of each Subsequent Closing; and (d) Receipt of Closing Documents. TMPA shall have received the fully executed Closing documents described in Article VII hereof to be delivered at that particular Closing. 5.2 Conditions te Obligation of TU Electrie to Close. The obligation of TU Electric to consummate the transactions contemplated by this Agreement at each and every Closing is subject to the satisfaction of each of the following conditions at or prior to each such Closing (a) Reoresentations and Warranties. The representations and warranties of TMP A contained in this Agreement sha11 have been true and correct on and as of the date hereof and shall be true and correct on and as of each Closing Date in all material respects as though such representations and warranties had been made on and as of such Closing Date, and TMPA shall have ! delivered to TU Electric a certificate, dated as of each Closing Date, of its President or Vlee President of its Board of Directors to the foregoing etfeet; (b) Comollance with Agreement. TMPA shall have fully performed and complied with all of the covenants, agreements and conditions to be performed or j complied with by it at or prior to the partleular Closing, and TMPA shall have 1 delivered to TU Electric a certificate, dated as of such Closing Date, of its President or Vice President of its Board of Directors to the foregoing effect; e
i (c) Delivery of Pending Litigation Documentation. At the Initial Closing, TMPA y have delivered to TU Electric the originals and all copies of au documents and other written material in its custody, control or possession (including without limitation those held by TMPA's agents, attorneys and consultants) pertaining to or involving Comanche Peak or the Pending Litig: tion, except those which are privileged or which may be the product of TMPA's attorney's or consultant's joint defense activities, if any, prepared in connection with the Pending Litigation. Such documents or other written matarial which are essential to the conduct of TMPA's on going business activities may be retained by TMP A except for one copy which wiu have been delivered to TU Electric prior to the Initial Closing. As concerns privileged or joint defense documents or written material, TMPA shall, to the fuu extent permitted by law, exercise such privileges and claims of confidentiality as may be available to prevent disclosure thereof to any person or entity, private or governmental; (d) Aporoval of the Cities. Prior to the Initial Closing, the various city councils or other governing and approving bodies or authorities of each of the Cities shan have duly and validly adopted and approved (i) the ordinance in the form attached hereto as Exhibit D and (11) the release and covenant not to sue in the form attached hereto as Exhibit E! any variances from the form of l ordinance set forth in Exhibit D or any variances from the form of release and oovenant not to sue set forth in Exhibit E shall be subject to i TU Electrio's reasonable satisfaction and acceptance, provided, however, TU Electrio shall notify TMPA of any such variances which r.re not satisfactory to TU Electric within three (3) Business Days of TU Electric's receipt of said ordinances and releases and covenants not to sue, provided that TU Electric receives same at least three (3) Business Days prior to tha l Initial Closing Date; and
(e) Recelot of Closing Documents. TU Electric shall have received the Closing documents described in Article VI hereof to be delivered at that particular
~
Closing. 1 5.3 Conditions to Obligation of Parties to Initially Close. The obligation of the parties to consummate the transactions contemplated by this Agreement at the Initial Clwing Date is seject to the satisfaction of each of the following conditions at or prior to the Initial Closing Dates (a) No Adverse Proceeding. There shall not be pending any suit, action or other proceeding by any person before any court or arbitrator or any governmental department, commission, board, bureau, agency or instrumentality in which it is sought to restrain or prohibit any of the transactions contemplated by this Agreement. (b) Walvar of Right of First Refusal Immediately upon execution of this Agreement, TMPA will notify BEPC and Tex-La of the execution of this Agreement by means of the notice attached hereto as Exhibit F. By the Initial Closing Date, BEPC and Tex-La will have executed an irrefocable waiver or other sufficient relinquishment of any rights of first refusal or consent to sale that BEPC and Tex-14 may have under the Joint Ownership Agreement (it being agreed that failure to exercise such right in accordance with the terms of the Joint Ownership Agreement by BEPC or Tex-La in response to the notlee from TMPA within the time period specified in the Jolat Ownership Agreement will constitute sufficient relinquishment of the rights of first refusal of BEPC or Tex-La as the case may be) with respect to any transaction provided for herein or such rights shall have been validly i exercised, in whole or in part, by either or both of BEPC and Tex-La and the purchase which arises as a result of such axercise fully consummated. In the event that either or both of BEPC and Tex-La shall have exercised any such rights of first refusal to the extent that BEPC and/or Tex-La acquire all of i ! \ _ - .. - _ _ . ._. ._ - --
TMPA's interest in the Purchased Assets, TMPA shall promptly reiund to TU Electric the full amount of the Signing Payment less Twenty-Five Million
#Dollars ($25,000,000) and TMPA shall, in consideration therefor, perform its obligations pursuant to Article IV, Sections 5.2(c) and (d), Section 8.1, Section 9.1, Section 9.2, Section 9.4, Section 9.5, Section 9.8 and Section 9.9 hereof, and shall refund to TU Electric the Refunded Payment and otherwise within ninety (90) days of the consummation of the sale to BEPC and/or Tex-La, bring all of TMPA's progress payments under the Joint Ownership Agreement fully current up to the date of transfer from TMPA to BEPC and/or Tex-La.
In the event that BEPC and/or Tex-La exercise any such rights of first refusal to the extent that all of TMPA's interest in the Purchased Assets have not been acquired by BEPC and/or Tex-La, after consummation of the sale to BEPC and/or Tex-La, TMPA shall promptly refund to TU Electric a proportional amount of the S!gning Payment (calculated after deducting Twenty-Five Million Dollars ($25,000,000l) equivalent to the proportion of the Purchased Assets which BEPC and/or Tex-La has elected to acquire. TMPA shall be entitled to retain the Twenty-Pive Million Dollars ($25,000,000), together with the balance of the Sign'ng Payment not refunded to TU Electric. TMPA and TU Electric agree to perform this Agreement with respect to the portion of the Purchased Assets not acquired by BEPC and/or Tex-La in the manner set forth herein, with appropriate proportional modifications to the payment obligations of TU Electric herein, and to the obligations of TMPA herein to deliver all of the Purchased Assets. In cddition, TMPA shall refund to TU Electric a proportional amount of the Refunded Payment equivalent to the proportion of the Purchased Assets being acquired by BEPC and/or Tex-La, and TMPA shall, within ninety (90) days of the consummation of the sale to BEPC and/or Taz-La, bring its progress payments under the Joint Ownership Agreement fully current 27 - ( . .
through the date of the sale to BEPC and/or Tex-Lc, but only with respect to
-that portion of the Purchased Assets acquired by BEPC and/or Tex-La.
(e) Compliance with Statute. TMPA shall have taken all such action as may be necessary or appropriate in order to comply with V.T.C.A., Local Government Code Section 272.001 (the "Statute"). In order for TMPA to comply with the Statute, TU Electric shall provide to TMPA, within thirty (30) days of the execution of this Agreement, a description of the Site and the real property associated with the Transmission Facilities. Within the time period specified in the invitation to bid to be published by TMPA pursuant to the Statute, TU Electric shall submit a bid to purchase the Purchased Assets, which bid shall be identical to this Agreement. In the event a bid or offer from another person is received by TMPA which piecludes TMPA from selling the Purchased Assets to TU Electric, TMPA shall promptly refund to TU Electric the full amount of the Signing Payment less Twenty-Pive Million Dollars ($25,000,000) and TMPA shall, in conalderatlon therefor, perform its obligations pursuant to Article IV, Sections 5.2(c) and (d), Section 8.1, Section 9.1, Section 9.2, Section 9.4, Section 9.5, Section 9.3 and Section 9.9 hereof, and shall refund to TU Electric the Refunded Payment and otherwise bring all of TMPA's progress payments under the Joint Ownership Agreement fully l current. l (d) Acoroval by PUC. By final action subject to no further appeal, the PUC shall have approved the amendment of TU Electric's certificate of convenience and necessity with respect to the Station and the Transmisalon Facilities permitting TU Electric's acquisition and ownership of TMPA's ownership interest in the Station and the Transmisalon Pacilities in accordance with the terms hereof. In such connection, it is understood and agreed that TU Electric will file within fifteen (15) Business Days of the date of this Agreement and prosecute to the best of its ability an application for such e
certificate of esnvenience and necessity Fights and such other applies 8 ions or ' filings with the PUC as shall, in its judgment, be necessary and essential in j "connection with the transactions contemplated under this Agreement. TU Electric will deliver promptly to TMP A copies of all such applications and filings and win advisa TMPA on a current basis with respect to the status of any such proceeding. In connection with all such proceedings, TMP A will, at TMP A's reasonable cost and expense, at the request of TU Electric, render au l such assistance as may be appropriate under the circumstances, including without limitation, providing such of its personnel as may be appropriate to testify and otherwise participate in any such proceedings in support (4 this Agreement. Upon the issuance by the PUC of any order or other document purporting to give the approval contemplated under this Agreement with or without conditions, TU Electrie wiu promptly deliver to TMPA a reproduced legible copy of such order or other document, and the parties, with their respective attorneys and other consultants, shall promptly xnfer and endeavor in good faith to determine if such order or other document evidences the final approval contemplated by this Agreement without any condition that is deemed by either party to be incotisistent with the provisions of this Agreement. If such determination is affirmative the parties shall promptly execute a stipulation dated currently to such effect. If such determination is l negative, TU Electric, with the assistance of TMPA, which shall be at TMPA's tsamonable cost and expense, wiu undertake to cause the PUC to l 1ssue such further order or document evidencing its approval as contemplated l by this Agreement, including the elimination of any such condition that was deemed by either party to be inconsistent with this Agreement and upon the issuance of any further order or other document by the PUC in such proceedings the same procedures will be fouowed by the parties as provided 29 -
in the case of the order or other document first issued by the PUC in such proceedings, including the execution of a stipulation dated currently
~
evidencing the affirmative action by the parties in respect of the order or other document issued by the PUC. The date of any stipulation executed by the parties under this paragraph is referred to as the "PUC Affirmative Date." The provisions of this paragraph shall not affect or detract from the rights of TMPA or TU Electric under Sections 11.1 or 11.2 hereof. (e) Approval by NRC. The NRC shall have granted all necessary and essential approvals and consents with resptet to the transactions provided for herein, including without limitation ttu entry of a final non-sppealable order approving the sale of TMPA's right title and interest in the Station and Fuel to TU Electric in accordance ith he terms hereof. In such connection,it is understood and agreed that TV Electric will file within fifteen (15) Business Days of the date of this Agreement and prosecute to the best of its ability all applications or filings with the NRC as shall, in its judgment, be necessary and essential in connection with the transactions contemplated under this Agreement. TU Electric will deliver promptly to TMPA copies of all such applications and filings and will advise TMPA on a current basis with respect to the status of any such proceeding. In connection with all such proceedings, TMPA will, at TMPA's reasonable cost and expense, at the request of TU Electrie, render all such assistance as may be appropriate under the circumstanees, including without limitation, providing such of its personnel as may be appropriate to testify and otherwise participate in any such proceedings in support of this Agtsement. Upon the lasuance by the NRC of any order or other document purporting to approve the transactions contemplated under this Agreement with or without conditions, TU Electric will promptly deliver to TMPA a reproduced legible copy of such order or other document, and the parties,
Oith their respective attorneys and other consultants, shall promptly confer and endeavor in good faith to determine if such order or other document I evidences the final approval of the NRC of such transactions contemplated by this Agraement without any condition that is deemed by either party to be inconsistent with the provisions of this Agreement. If such determination is affirmative the parties shall promptly execute a stipulation dated currently to such effect. If such determination is negative, TU Electric, with the assistance of TMPA, which shall be at TMPA's rearonable cost and expense, will undertake to cause the NRC to lasue such further order or document evidencing its approval of such transactions including the elimination of any such condition that was deemed by either party to be inconsistent with this Agreement and upon the issuance of any further order or other document by the NRC in such proceedings the same procedures will be followed by the parties as provided in the case of the order or other document first issued by the NRC in such proceedings, including the ezect', don of a stipulation dated currently evidencing the affirmative action by the parties in respect to the order or other document issued by the NRC. The date of any stipulation executed by the parties under this paragraph is referred to as the "NRC Affirmative Date." The provisions of this paragraph shall not affect or detract from the rights of TMPA or TU Electric under Sections 11.1 or 11.2 hereof. (f) Escoution of Transmission Services Agreement. TMPA and TU Electric shall have executed an appropriate amendment of the Transmission Agreement between TMPA and TU Electric's corporate predecessors dated January 2, 1979, as amended, only to reflect TMPA's sale of the Transmission Facilities l to TU Electric and to reflect a minimum credit of $250,000 per year during the billing years 1987 through 1994 for certain facilities constructed by
l i TMPA at TU Electric's Toln Oak Steam Electric Station in Robertson _ County, Texas. (g) Execution of Power Purchase Agreement. TMPA and TU Electric shall have executed a Power Purchase Agreement in form and content satisfactory to each of them. AR11CLE VI CLOBING DOCUMENTS PEON TMPA As a condition of Closing, TMPA, the Cities, the Escrow Agent on behalf of TMP A and ue referenced attorneys, in each case as appropriate, will deliver to TU Electric on the particular Closing Date referenced hereafter the following: 6.1 Deeds and Transfers, etc. (1) At each Closing executed and acknowledged Special Warranty Deeds and Bills of Sale; (11) at the Initial Closing, duplicate counterparts of the amendments contemplated under Section 5.3(f) hereof; and (111) at the Initial Closing, the Releases, Covenants Not to Sue and Indemnities specified in Sections 9.1, 9.2, 9.4 and 9.10 hereof. 6.2 Lien Search. At the Initial Closing, real property search certificates from a reputable title company and a UCC search certificate from the Secretary of State cf Texas disclosing no security interesta, judgments or other tiens outstanding against TMPA's ownership Interest in the Purchased Assets, other than the Permitted Exceptions and the various resolutions or other instruments relating to the financing of obligations of , TMPA filed under Chapter 35 of the Teras Uniform Commercial Code. l l 6.3 Cities Documents. At the Initial Closing, certified copies of the ordinances and the executed ralsases and covenants not to sue of each of the Cities in the form attached hereto as Exhibit D and Exhibit E, respectively, or with such changes therein as may be approved by the TU Electric. At the Initial Closing, certificates of the City Secretaries of each of the Cities dated the Initjal Closing Date with respect to (i) the incumbeney of their respective City officials and their signatures, and (11) the due 4
adoption of their respective ordinances referred to abeve oith copies of the executed releases and covenants not to sue attached thereto. 6.4 2Certifieste of Secretarial Officer. At the Initial Closing, a certificate of the Secretary or an Assistant Secretary of the Boted of Directors of TMPA, dated the Initial closing Date, with respect to the incumbency of officers and their signatures, the existence and good standing of TMP A, and the due adoption of resolutions of the Board of Directors of TMPA authorizing the execution, delivery and performance of this Agreement and the other agreements and instruments to be delivered to TU Electric and the Escrow Agent pursuant hereto at the Initial Closing. 6.5 Counsel Opinions. At the Initial Closing, opinions of the General Counsel of TMPA, the City Attorneys of each of the Cities and Pubright & Jaworski, special counsel for TMPA, dated the Initial Closing Date and addressed to the TU Electric, substantially in the forms set forth collectively in Exhibit G attached hereto. ARTICLE YE CLOEDIO DOCUMENT 5 PROM TU mfEN'uyt As a condition of Closing, TU Electric and the referenced attorneys, in each case as
. appropriate, will deliver to TMPA on the particular Closing Date referenced the following:
7.1 Proof of Payment. Proof of the payment to TMPA pursuant to Section 1.5(b) hereof in the case of the lattial Closing, excepting the Signing Payment, and proof of the payment to TMPA pursuant to Section 1.5(c)in the case of each Sesequent Closing. 7.2 Othy Instrussents. At the Initial Closing, duplicate counterparts of the amendments contemplated under Section b.3(f) hereof, the Release, Assumption and Indemnity Agreement speelfled in Sections 9.3 and 9.4 hereof and the Guaranty. 7.3 Certificate of Secretarial Officer. At the Initial Closing, a certificate of the Secretary or an Assistant Secretary of TU Electrie, dated the Initial Closing Date, with respect to the incumbency of officers and their signatures, corporate existence and l good standing, and the due adoption of resolutions of the Board of Directors of 33
l TU Electric authorizing the execution, delivery and performance of this Agreement and the other agreements and instruments to be delivered to TMPA pursuant hereto at the Initial Closing. l 7.4 Counsel's Opinion. At the Initial Closing, an opinion of Worsham, Forsythe, Sampels & Wooldridge, counsel for TU Electric, dated the Initial Closing Date and l addressed to TMPA in the form set forth in Exhibit H attached hereto. ARTICLE VRI CLOENG AND INDEMNIFICAT10N 8.1 Indemnification by TMP A. (a) TMPA agrees to indemnity, hold harmles; and defend TU Electric and anyone related to or affiliated with TU Electric, including its parent, subsidiaries and affiliates, from and against any and all claims, dernands, liabilities, losses, costs and expenses, including reasonable attorneys' fees, which TU Electric or anyone related to or affiliated with TU Electric, including its parent, subsidiaries and affilletes, may sustain .uid which arise out of or are based upon or relate to the inaccuracy or falsity of any representation or warranty made by TMPA set forth in this Agreement or in any other agreement or instrument delivered pursuant hereto or the breach or nooperformance by TMPA of any covenant or agreement with TU Electric or anyone related to or < affiliated with TU Electrie, including its parent, subsidiaries and affiliates, made by TMPA set forth in this Agreement or in any other agreement or
+
lastrument delivered pursuant hereto. (b) Any Indemnification obligation assumed by TMPA unc.er this Agreement is ' not and shall not be a pledge of any revenues of TMPA. TMPA covenants that the amount, if any, which TMPA may hereafter become obligated to pay to TU Electric hereunder, if not paid from other sources, shall be paid from I the revenues of the System and the amount to be paid in any one Contract e
Year shall be included in the Annual System Budget as an Annual System
~
Coet.
~
(c) TMPA reserves the right to issue refunding bonds, pursuant to Tex. Rev. Civ. Stat. Ann. art. 717k-3 (or any other law available) in order to refund eny amount which it may become obligated to pay to TU Electric hereunder, and in the event TMPA elects so to do, TU Electric agrees that it will cause a release of such obligation to be delivered against payment from the proceeds of such refunding bonds. 8.2 gldemnification by TU Elaetrie. TU Electric agrees to indemnify and hold harmless and defend TMPA and the Cities and anyone related to or affiliated with TMPA or the Cities from and against any and all claims, demands, liabilities, losses, costs and expenses, including reasonable attorneys' fees, which TMPA or the Cities or anyone related to or affiliated with TMPA or the Cities may sustain and which arise out of or are based upon or relate to the inaccuracy or falaity of any representation or warranty made by TU Electric set forth in this Agreement or in any other agreement or instrument delivered pursuant hereto or the breach or nonperformance by TU Electric of any covenant or agreement with TMPA or the Cities or anyone related to or affiliated with TMPA or the Cities made by TU Electric set forth in this Agreement or in any agreement or instrument delivered pursuant hereto. 8.3 Survival of Recrementation and Wwranties. With respect to each Closing, the hepresentations, warranties, covenants and agreements of the parties hereto shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereunder for a period of four (4) years after each Closing Date. 8.4 Noties and Opportunity to Participate in Defg}g. In the event that TMPA, the Cities or TU Electrie receives notice of the commencement of any action or proceeding or the assertion of any claim in respect of which TMPA, the Cities or TU Electrie, or anyone related to or affiliated with any of them, including the parent, subsidiaries and affiliates of TU Electric, may be entitled to indemnification, the party
l l Peceiving such notice shall give the indemnifying party written notice within 8en (10) { calendar des thereof (except that failure to so notify will not reUeve the indemnifying party of its obligations hereunder except to the extent it has been prejudiced thereby) and the opportunity to participate in the defense thereof and in any settlement negotiations with respect thereto, and will cooperate with the other party in all reasonable respects and make available to the other party all records, evidence and personnel for consultation and testimony reasonably requested by the other party in connection therewith. The settlement of any such action, proceeding or claim without the prior written approval of the indemnifying party shall relieve such party of any obligations to the indemnified party in respect of the subject matter of the settlement of such action, proceeding or claim. AR11CLE II SETTLEMENT OF PEllDDIO IJf10ATION 9.1 TMPA's Release. Upon the Initla! Closing, TMPA, for itself and on behalf of any person or entity, private or governmental, claiming by, through or under TMPA, including without limitation its or their respective insurers, agents, servants, employees, officers, directors, consultants, attorneys and representatives shall waive, release, discharge, renounct and relinquish any and all Subject Claims relating to Comanche Peak it has or they have, or may have, whether known or unknown, contingent or absolute, including, without !!mitation, those based on common law, whether contract (expressed or implied, including express or implied warranty) or tort (including, without limitation, lntentional tort, negligence or groes negligence, sole, joint or concurrent) or strict liability or fraud, and those based upon any Pederal, state or local statute, law, order or regulation, faciuding, without limitation, the Atomic Energy Act of 1954, as amended, the regulations of the NRC, the Securities Act of 1933, as amended or the Securities Act of 1934, as amenced, and any rule or regulation thereunder, the Texas Securities Act (Title 19, Articles 581-1, et seo., Y.A.T.S.) and the Texas Deceptive Trade Practices and Consumer Protection Act, against TU Electric or TUC, or both, in any capacity, whether individually, as Project Manager of Comanche Peak or otherwise, and their respective 9
insurers, agents, servants, empicyees, officers, directors, shareholders, consultants, attorneys and representatives, past and present, and any and all of their respective successors, beidlaries and affiliates and their respective agents, servants, employees, officers, directors, shareholders, consultants, attorneys and representatives, past and present, except Subject Claims arising out of or under this Agreement or any of the other agreements or instruments to be delivered by TU Electric or TUC pursuant hereto. TMP A hereby covenants and warrants that it has not assigned any Subject Claims that are to be released at the Initial Closing. At the Initial Closing, TMPA will execute and deliver to TU Electric the form of Release attached hereto as Exhibit L 9.2 Covenant Not to Sue. Except as provided for in Section 4.2(g) hereof, upon the Initial Closing, TMPA, for itself and on behalf of any person or entity, private or governmental, claiming by, through or under TMPA, including without limitation its or their respective insurers, agents, servants, employees, officers, directors, consultants, attorneys and representatives shall agree and covenant that it and they, individually, collectively or in any combination, will forebear from asserting against, and never sue for or look for satisfaction with respect to, TU Electric and TUC and their respective insurers, agents, servants, employees, officers, directors, shareholders, consultants, attorneys and representatives, past and present, and any and all of their respective successors, subsidiaries and affiliates and their respective agents, servants, employees. officers, directors, shareholders, consultants, attorneys and representatives, past and present, any Subject Claim (including without limitation any Subject Claim against any contractor, subcontractor, supplier, consultant, vendor or other person, firm or entity in privity in any asanner with any of them which may therefor or as a result thereof have a right over or Subject Claim in subrogation) in any manner involving, concerning, arising l out of, or relating to, the dealgn, construction, management and licensing of, or any other matter relating to, Comanche Peak, and the management, procurement, conversion, enrichment, fabrication, shipping, transportation and storage of the Fuel, except for claims arising out of or under this Agreement or any of the other agreements or
Instruments to be delivered by TU E10ctric pursuant hereto; and TMPA, for itself and on behalf of any person or entity, private or governmental, claiming by, through or under t TMPA, including without limitation its or their respective insurers, agents, servants, employees, officers, directors, consultants, attorneys and representatives hereby further egrees and covenants that, upon and after the Initial Closing, neither it nor they, individually, collectively or in any combination, will directly or indirectly, challenge, contest or assert any complaint in any court or before any adininistrative agency or body or In any other forum whatsoever with respect to, or in any manner involving, concerning, arising out of, or relating to, Comanche Peak and the incidents and attributes thereof including, without limitation, the design, construction, management and licensing of Comanche Peak or any other aspect thereof, the costs and schedule of construction and completion of Comanche Peak, and the reasonableness, prudency or efficioney of the planning, design, construction, management and lleensing of Comanche Peak, the costs of construction and the schedule of construction and completion of Comanche Peak, and the reasonableness, prudency or effielency of the msnagement, procurement, conversion, enrichment, fabrication, shipping, transportation and storage of the Fuel, and the costs incurred in connection with the rianagement, procurement, conversion, enrichment, fabrication, shipping, transportation and storage of the Fuel, and the breach of the Joint ownership Agreement and any express or implied warrantles arising out of the Jolnt Ownership Agreement, and any representation, misrepresentation, disclosure or non-disclosure in connection with the negotiations or preceding the execution by TMPA of the Joint Ownership Agreement, and in connection with the performance or nonperformance ) by TU Electrie of its duties, responsibilities or obilgations under the Joint Ownership 1 Agreement as Project Manager or otherwise, and the failure of TU Electric to pursue any l l remedies, either at law or otherwise, that may be, or may have been, available against l
)
any and all contractors, subcontractors, suppliers, consultants, vendors or others with ] respect to Comanche Peak (lncluding separately the Station, Fuel or Transmission Facilities) and on account of anything that hu occurred or may have occurred, in whole or 33 1
In part, cith respect to Comanche Peak, (including separately the Station, Fuel or Transmission Facilities) and the incidents and attributes thereof and any of the foregoing whether known or ur.known, except with regard to Subject Claims arising out of or under this Agreement or any of the other agreements or instruments to be delivered by TU Electric pursuant hereto. At the initial Closing, TMPA will execute and deliver to TU Electric the form of Covenant Not to Sue attached hereto as Exhibit J. Fur ther, 1 TMPA covenants and agrees that it will encourage and solicit its attorneys, including Fulbright & Jaworski, and TMPA's separately employed consultants, to cooperate and assist TU Electric in connection with any matters relating to Comanche Peak; and, if necessary to prevent a conflict of interest, it being understood and agreed that TMPA's separately employed consultants and attorneys may have obtained or developed information regarding Comanche Peak in the course of the Pending Litigation that arguably could be inequitable for them to otherwise ut!!!se in view of the consideration being rendered by TU Electric hereunder in order to obtain a final settlement of the matters referred to in this Agreement, TMPA covenants and agrees that it will take all such action as may be necessary or appropriate in order to prevent the consultants and attorneys, including Fulbright & Jaworski, separately employed tay it in connection with the Pending Litigation from participating or assisting in any manner adverse to TMPAs duty of cooperation h.wein or to TU Electric in connection with the Pending Litigation, the Pending Houston Suit or any current or future proceedings or matter before the PUC i 'or the NRC Involving or relating to Comanche Peak or say current or future proceedings before any court or before any administrative Agency ce body or in any other forum whatsoever with respect to, or in any manner involving, concerning, arising out of, or relating to (i) the acts or omissions of TU Electric or the Project Manager referred to or in question in the Pending Litigation or which could have been brought into question in the Pending Litigation; or (11) the acts or omisalons of TU Electric or the Project Manager with respect to Comanche Peak that occur, in whole or in part, prior to the Date of Commercial Operation (as said term is defined in the Joint Ownership Agreement). The 9 covenant set forth in the prior sentence shall survive all Closings horeunder and femain in force until the expiration of any Subject Claim covered thereby. 9.3 TU Electric Release. Upon the Inittel Closing, TU Electric, on behalf of itself, its parent, subsidiaries and affluates and on behalf of their respective insurers, agents, servants, employees, officers, directors, consultants, attorneys e.nd representatives shall waive, release, discharge, renounce and relinquish any and au Subject Claims relating to Comanche Peak (including separately the Station, Fuel or Transmission Facilities) it has or may have, nhether known or unknown, contingent or absolute, including, without limitation, those based on common law, whether contract (express or implied, including express or implied warranty) or tort (including, without limitation, intentional tort, negligence or gross negligence, sole, joint or concurrent) or strict liability or fraud, and those based on any Federal, State or local statute, law, order or regulation, including, without limitation, the Atomic Energy Act of 1954, as amended, the regulations of the NRC, the Securities Act of 1933, as amended or the Securities Act of 1934, as amended, and any rule or regulation thereunder, the Texas Securities Act (Title 19, Articles 581-1, et seo. Y.A.T.S.) and the Texas Deceptive Trade Practices and Consumer Protection Act, against TMPA and the Cities in any capacity, whether individually or otherwise, and their respective insurers, agents, servants, employees, officers, directors, consultants, attorneys and representatives, past and present, and any and all of their respective successors, subsidiaries and affiliates and their respective agents, servants, employees, offleers, directors, shareholders, consultants, attorneys, and representatives, past and present, except Subject Claims arising out of or under this Agreement or the other agreements and instruments executed and delivered pursuant hereto. TU Electric hereby covenants and warrants that it has not assigned any Subject Claims that are to be released at the Initial Closing. At the Initial Closing, TU Electric will execute and deliver to TMPA the form of Release attached hereto as Exhibit K. 9.4 Assumption of Liabilities and Obligations and Indemnifleation. Effective upon the Initial Closing, TU Electric agrees to assume all of the duties, responsibilities, 1
)
1
liabilities and obligations of TMPA under the Joint Ownership Agreement. Further, effective upon the Initial Closing,' TU Electric agrees to indemnify, hold harmless and { defend TMPA and the Citler from and against all Subject Claims or any alleged willful or intentional acts of the Project Manager, its agents, servants, employees or independent contractors acting on behalf of the Project Manager which may be asserted against TMPA by any third party, including without limitation Subject Claims predicated upon the alleged actual or imputed negligence or gross negligence of TMPA or the Cities, arising out of or connected with, the location, planning, design, construction, licensing, condition, maintenance, operation and decommissioning of Comanche Peak, including but not limited to all claims asserted or which might have been or might hereafter be asserted in the Pending Houston Sult; provided, however (and without limitation), that TU Electric specifically shall not indemnify TMPA or the Cities in connection with any Subject Claims which may be asserted by the Cities' or TMPA's bondholders acting in such capacity or their other landing institutions or TMP A's or the Citles' customers acting in such capacity, which in any manner relate to TMPA's participation as an Owner of Comanche Peak or as a party to the Joint Ownership Apeement, or by reason of TMPA's involvement in the Pending Litigation, or by reason of the execution of this Agreement and provided further, that TU Electric specifically shall not indemnify TMPA in connection with any Subject Claims which may be asserted by Tex-La or BEPC or others which in any way relate to JMPA's execution of the Joint Ownership Agreement, or which arlse by reason of TMP A's partletpation in the Pending Litigation, or by reason of TMPA's execution of this Agreement and participation !n the transactions provided for herein. TU Electric will, in addition to providing such indemnity, assume the defense of TMPA in any tribune.1 where any such cialm is asserted. Pursuant hereto, at the Initial Closing TU Electric will execute and deliver to TMPA the form of Assumption and Indemnity Agreement attached hereto as Exhibit L. Effective upon the Initial Closing, TMPA agrees to indemnify, hold harmless and defend TU Electric from ard against any and all Subject Claims of TMP A or anyone related to or affiliated with TMPA or anyone related to or effiliated with TMP A
or the customers of TMPA acting in such capacity or debt holders acting in such espacity (including wl.thout limitation the holder of any revenue or other bond or other obligation) of TMPA relating to TMPA's execution of the Joint Ownership Agreement, TMPA's execution of this Agreement and participation in the transactions provided herein, and TMPA's activities as an Owner separate and apart from joint activities with all other Owners or activities by, through and under the Project Manager. Pursuant hereto, at the Initial Closing TMPA will axecute and deliver to TU Electric the form of Indemnity Agreement attached hereto as Exhibit M. 9.5 Covenant of Cooperation, ne parties hereby covenant and agree to assist, cooperate with, and support each other (other than financial suppxt) in the event that a i third party institutes any action against either of them with respect to Comanche Peak and any incident or ettribute thereof, by virtue of either of tram being or having been an Owner, except that TMPA shall not cooperate with or se,prt any party in the Pending Litigation with regard to the Subject Claims being made therein by Tex-La and BEPC. 9.6 Termination of Participation. To the extent that TMPA can and not be in violation of Section 210 of the Energy Reorganization Act, 42 USC Section 5851 (1983), upon the execution of this Agreement, TMPA, for itself and on behalf of any person or entity, private or governmental, claiming by, through or under TMP A, includmg without limitation its or their respective insurers, agents, servants, employees, offleers, directors, consultants, attorneys, representatives and customers (to the extent in the case of such customers of TMPA it has legal right or standing to do so) agrees and covenants to immediately abate any and all currently pending actions whatsoever, directly or indirectly, involving or relating to the prosecution or processing of any Subject Claims against TU Electric or TUC, or their respective directors, offleers, employees, agents, insurers, consultants or attorneys, past or present, and any and all of their respective successors, subsidiaries and affiliates and their respective agents, servants, employees, officers, directors, shareholders, consultants, attorneys and representatives, put and present, presently or hereafter pending in any court or before any administrative agency s
or body (except Subj0ct Claims being made in the Pending Litigation, which shall be governed by the provisions of Article IV of this Agreement). In such capacity and to the extent TMPA can and not be in violation of Section 210 of the Energy Reorganization Act, 42 USC Section 5851 (1983)(TMP A hereby representing and warranting that it knows of no violation, actual or alleged, of Sect!on 210 of the Energy Reorgnization Act, 42 USC l l Section 5851 (1983) which has not heretofore been disclosed to TU Electric in writing), l TMPA agrees and covenants that TMPA for itself and on behalf any person or entity, private or governmental, claiming by, through or under TMP A, including without limitation its or their respective insurers, agents, servants, employees, officers, directors, consultants, attorneys, representatives and customers (to the extent in the case of such customers of TMPA it has legal right or standing to do so) sha11 not prosecute, directly or indirectly, any Subject Claims, objections, motions or other actions adverse to TU Electric in connection with applications for graating the requisite licenses and approvals for Comanche Peak pending before the NRC and its Atomic Safety and Licensing lloards and Atomic Safety and Licensing Appeal Boards, including, without limitation, in NRC Dockets Nos. 50-445-OL, 50-448-OL and 50-445-CPA, the ongoing antitrust review relative to the 11eensing of Comanche Peak, and any and all appeals from rulings and orders of the NRC related to, or growing out of, said Dockets which are pending before any court. Within three (3) Business Days af ter the Initial Closing, TMP A shall cause the dismissal, with prejudice to the refiling of same in any form whatsoever, of all of its Subject Claims against TU Electric, TUC and their subeldlaries and affiliates in the Pending Litigation, and shall withdraw all of its Subject Claims adverse to TU Electrie in oonnection with the granting of the requisite licenses and appewals for l Comanche Peak pending in the NRC Dockets Nos. 50-445-OL, 50-446-OL and 50-445-CPA and any and all proceedings in any manner related to, or arising out of, said Dockets. TMPA agrees and covenants, frotn and after the Initial Closing, to fully cooperate with TU Electric and provide all reasonably requested assistance, including providing the I .
legal assistance of its attorneys (including Pu1 bright & Ja,:orski), in a timely manner in connection with any legal proceedings (excluding the Pending Litigation) involving
~
Comanche P'eak, including the licensing of Comanche Peak by the NRC, including without limitation the ongoing antitrust review in connection therewith, and all proceedings involving Comanche Peak before the PUC. Ezeept as specifically provided otherwise in this Agreement, TU Electric shan promptly reimburse TMPA for any and au reasonable out-of-pocket expenses and any and au reasonable outside professional fees, includir.g, without limitation, attorneys fees, incurred by TMP A in providing such cooperation. 4 9.7 TU Electele Actions and Litigation Costs. Within three (3) Business Days after the initial Closing, TU Electric shall cause the dismissal, with prejudice to the refiling of same in any focm whatsoever, of an of its Subject Claims against TMPA in the Pending Litigation; provided, however, that TU Electric shall have the right to retain TMPA as a party to the Pending Dallas Suit, not for the purpose of seeking any affirmative relief against or from TMPA, but for the purpose of defeating a possible contention on the part of the other parties thereto with respect to the absence of a necessary party to TU Electric's Subject Claims against the other parties in said case (it being understood that *fU Electric's position is that any such contention would not be valid). TU Electric shall promptly reimburse TMPA for any and an expenses reasonably incurred because of any such retention of TMPA by TU FJoetric in the Pending Dallas Sult. It is expressly understood that nothing herein shall in any manner affect, dimish or impair TU Electric's right to fuuy prosecute any and all of its Subject Claims against the other parties in the Pending IJtigation, Except r.s provided otherwise above, all costs and expenses related to or incurred la connection with the Pending Litigation shall be borne and paid by the party by whom incurred or to which they are related. 9.8 Termination of Joint Owhership Agreement Relationship. Except as otherwise provided in Section 9.4 hereof with respect to TU Electric's assumption of TMPA's obligations under the Joint Ownership Agraement, TMPA and TU Electric hereby agree that, upon the final Subsequent Closing, the Joint Ownership Agreement, as 44
betceen TMPA and TU Electric, shell be deemed terminated and of no further force and effect as between them. l 9.9 Permission 'o be Sued. In any suit or other action by TU Electric that is based on claims other than tort arising out of the breach of this Agreement or the breach of any other agreement or instrument delivered pursuant to this Agreement, TMPA i hereby:(a) waives any immunity from :uit to which it may be entitled by virtue of its status as a political subdivision of the State of Texas, and (b) grants TU Electric permission to sue TMPA without the imposition of any additional condition to, limitation of (including but not limited to any limitation as to the time within which such soit may oe brought) or alteration of the effect of, such permission, other than such condition, limitation or alteration (if any) as may otherwise be expressly required by this Agreement and applicable statutes of limitstion. 9.10 Releases, etc. from the Cities. As a condition of the Initial Closing, TMPA agrees to cause each of the Cities to deliver to TU Electric at the Initial Closing the form of Release and Covenant Not to Sue attached hereto as Exhibit L ARTICLE I TMPA PROCEEN PAYMENTS 10.1 Assumption of Payments. Effective November 30,1987, TMP A shall have the right to discontinue making progress payments with respect to Comanche Peak pursuant to the Joint Ownership Agreement, and TU Electric assumes TMPA's ellgation to make and agrees it will timely make for TMPA any and all such payments that become due until the final Subsequent Closing Date or ninety (90) days after termination of this Agreement, whichever is the first to occur. I ART 1CLE II 1 TER?IDIA110N OF AORIEMENT 11.1 Termination of Agreement by TU Electric. In the event at any time after TU Electric's having given written notice of intent to terminate this Agreement and the lapse of two (2) days of discussion (which shall take place within five ($) days of said
- i written notice of intent) betceen TMPA and TU Electric with respect there to, !
I TU Electric reasonably determines.that the Initial Closing cannot occur for reasons that ) are beyond U Electric's control, TU Electric may terminate this Agreement upon seven f i (7) Business Days' written notice of termination from TU Electric to TMPA, and TMPA l agrees to promptly refund and pay to TU Electric the following:(1) the Signing Payment, plus an incremental amount calculated from the date of receipt of the Signing Payment by TMPA until repaid to TU Electric at the rate of 9-1/2% per annum; and (ii) the Refunded Payment, without any incremental amount. Further, in suen event, TMP A shall, within ninety (90) calendar days after receipt of such notice of termination, pay and reimburse to TU Electric, in view of TU Electric's obligation set forth in Section 10.1 hereof, all such amounts u shall be necessary to make TMPA's progrees payments under the Joint Ownership Agreement fully current, without any incremental amount, and TMPA agrees that it shall thereafter on a timely basis continue makt .g any progren payments due in accordance with the terms of the Joint Ownership Agreement, without prejudice to TMPA's right to contest its obligation to make such progrees payments under the Joint Ownership Agreement. TMPA agrees that it shall have no right to withhoki payment of any amounts it agrees to pay herein in respect to or on the basis of its alleged claims in the Pending Litigation. Payment by TMPA of all of such funds to TU Electric shall coastitute aceaptance by TMPA of TU Electric's right to terminate this Agreement under > the circumstances. 11.2 Termination of Aareement by TMPA. In the event at any time after TMPA's having given written notlee of intent to terminate this Agreement and the lapse of two (2) days of discussion (which shall take place within five (S) days of said written notice of intsat) between IMPA and TU Electric with respect thereto, TMPA reasonably determines that the Initial Closing cannot occur for reasons that are beyond TMPA's control, TMPA may terminate this Agreement upon seven (7) Business Days' written notice of termination from TMPA to TU Electric. If no written nottee of objection to such terminatfor. is given by TU Electric to TMPA within seven (7) Business Days of e l
. ' O having received TMPA's critten notice of termination, TMPA 0111immediately Pefund and pay to TU Electric the followings (i) the Signing Payment, plus in addition thereto an
~
incremental' amount calculated from the date of receipt of the Signing Payment by TMPA at the rate of nine and one-half percent (9-1/2%) per annum; and (11) the Refunded Payment, without any incremental amount. Purther, in such event, TMPA shall, within ninety (90) calendar days thereafter, pay and reimburse to TU Electric, in view of TU Elactric's obligation set forth in Section 10.1 hereof, all such amounts as shall be necessary to make TMPA's progress payments under the Joint Ownership Agreement fully current, without any incremental amount, and TMPA agrees that it sell thereafter on a timely basis continue making any progress payments due in accordance with the terms of the Joint Ownership Agreement, without prejudice to TMPA's right to contest its obligation to make such progress payments under the Joint Ownership Agreement. TMPA agrees that it shall have no right to withhold payment of any amounts it agrees to pay herein in respect to or on the basis of its alleged claims in the Pending Litigation. Acceptance by TU Electric of return of all of such funds from TMPA shall constitute acceptance by TU Electric of TMPA's right to terminate this Agreement under the circumstances, 11.3 Automatic Termhation. Unless either the Initial Closing has occurred or there is a written agreement signed by TU Electric and TMPA to extend the date set out in this paragraph, this Agreement shall automatically terminate at 5:00 p.m., Dallas, Texas time, on September 22,1988, without any need for the giving of notice or any other eetion by elther TU Elsetrie or TMPA. In the eyent such termination occurs, TMPA will Immediately refund and pay to TU Electric the followingt (l) the Signing Payment, pbs in l addition thereto an incremental amount calculated from the date of receipt of the Signing l Payment by TMPA at the rate of nine and one-half percent (9-1/2%) per annum; and (ii) l l the Refunded Payment, without any incremental amount. Purther, in such event, TMPA l shall, within ninety (10) calandar days thereafter, pay and reimburse to TU Electric, in i view of TU Electric's obligations set forth in Section 10.1 hereof, all such amounts as shall
be necessary to make TMPA's progress payments under the Joint Ownership Agreement fully curren_t, without any lacremental amount, and TMPA agrees that it shall thereafter on a timely basis continue making any progress payments due in accordance with the terms of the Joint Ownership Agreement, without prejudice to TMPA's right to contest its obligation to make such progress payments under the Joint Ownership Agreement. Payment by TMPA and acceptance by TU Electric, respectively, of the amounts set forth in this paragraph shall constitute acceptance by TU Electric and TMPA of termination of this Agreement. ARTICLE IB MBCELLANEOUB PROYBIOIIB 11.1 BuDe Sales Law Walver. To the extent it may lawfully do so, TU Electric hereby waives compliance by TMP A with the bulk sales law of any jurisdiction, if applicable, with respect to the transactions contemplated hereby, and TMPA agrees to hoki TU Electric harmisse from and against any liability, loss, cost or expense, including reasonable attorneys' fees, which TU Electric may sustain by reason of such noncompliance. TU Electric agrees to give TMPA prompt notice of the assertion of any claim resulting from such noncompliance. 12.2 Purther Assurane_e. TMPA agrees that, after any Closing, it will from time to time, upon the reasonable request of TU Electric, execute, acknowledge and deliver in tproper form any instrument of conveyance or further assurance necessary for perfecting in TU Electric or its successors and assigns, as the case may be, the title to the portion of
- the Purchased Assets conternplated herein to have been theretofore conveyed by TMP A to TU Electrie or for carrying out the purpose and intent of this Agreement.
12.J No Third Party Benefletarlea. The parties hereto acknowledge and agree that 4 this Agreement is entered into for the sole benefit of the TU Electrie, TMP A and the Cities, their respective successors and assigns (to the extant permitted) and, to the extent specifically and expressly set forth elsewhere in this Agreement, their respective insurers, agents, servants, employees, officers, directors, affiliates, representatives and customers, s
and that nothing in this Agreement shall be construed as giving any right, benefit, remedy or claim to any person, firm, corporation or othe entity, other than the TU Electric and t TMPA, their respective successors and assigns (to the extent permitted) and, to the extent l specifically and expressly set forth elsewhere in this Agreement, their respective insurers, I l agents, servants, employees, officers, directors, affiliates, representatives and customers. ! Without in any way limiting the foregoing provisions, it is expressly understood that nothing in this Agreement shall affect any of the rights, obligations and remedies among TU Electric and BEPC and Tex-La under the Joint Ownership Agreement or otherwise. 12.4 Default. In the event of defeult in performance hereunder by either TMPA or TU Electric at the time of any Closing hereunder, unless with respect to the Initial Closing this Agreement has been terminated in accordance with the provisions of Article XI hereof, the non-defaulting party shall be ei,utled to all remedies legelly available to it including the remedy of specific performance, the parties hereto agreeing that no adequate remedy at law exists. 12.5 Property and Transfer Taxes. (a) Property Taxes. All real and personal property taxes, and other similar taxes, charges, and fees imposed on or with respect to or measured by the Purchased Assets shall be procated between TMP A and TU Electric as of each Closing Dete, to the effect that TMP A shall be solely responsible for and shall pay with respect to its ownership share of Comanche Peak any such taxes (including all such taxes -hle or assessed against TMPA) relating to periods after i
- TMFA's acquisition of the Purchased Assets and prior to the particular Closing Date and TU Electric shall be solely responsible for and shall j pay with respect to its ownership share of Comanche Peak any such i
taxes relating to periods on and after the partleular Closing Date l (including all such taxes assessable or assessed against it and with i respect to its ownership of the Purchased Assets acquired pursuant to l* l ( l t
this Agreement), provided, however, TU Electrie agrees to assume the defense (with right to contest) of any such taxes asserted against
=
TMPA with respect to the period after the Initial Closing Date and shau reimburse TMPA for any taxes and penalties with respect thereto ! that may become due from TMPA. (b) Transfer Taxes. De payment of any and all real estate transfer, stamp, documentary, deed and recording taxes and fees, and all sales and excise taxes imposed in connection with the subject sales shall be the responsibility and liability of TU Electric. 12.6 Expenses. TMPA and TU Electric shall each pay au expenses lacurred by them respectively in connection with this Agreement, including the fees of their respective counsel and accountants, if any, except as may be otherwise provided. 12.7 Governing Law. This Agreement shall be construed, and the provisions hereof shall be enforced, in accordance with the laws of the State of Texas. 12.8 Announcements. All press releases or other announcements by TU Electric or TM.* A prior to or in connection with the execution of this Agreement shall be approved by TMPA and TU Electric prior to the issuance thereof, which approval shall not be I unreasonably withheld. 4 12.9 Entire Arreement. Amendments, nla Agreement, and the other documents I delivered pursuant hereto, constitute the entire agreement between TMPA and
'TU Electric relating to the subject matter hereof and supersede all other prior l
agreements, representations and understandings between the parties. No supplement, modificatica or amendment of this Agreement shall be binding, unless executed in writing by both TMPA and TU Electrie. 12.10 Assians, etc. His Agreement shall be binding upon and inure to the benefit of TMPA and TU Electric and their respective successors and assigns but shall not confer any rights upon any third persons except to the extent expressly provided herein. This 1
, .. . I l
Agreement may not be assigned by TMPA cithout the written consent of TU Electric or by TU Electt e without the written consent of TMP A.
]
12.11 Notices. A11 notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (a) if served personally on the party to whom notice is to be given at the addresses and to the attention of the persons named as follows, or (b) If sent by telex or nationally recognized overnight delivery service or by first class mail, postage prepald, certified and return receipt requested, and properly addressed as follows: (a) To TMPA att Texas Municipal Power Agency P. O. Box 7000 Bryan, Texas 77805 Attention: Ed Wagoner For Federal Express: Texu Municipal Power Agency 3 Miles North of Carlos on FM 244 Anderson, Texas 77830 Attention: Ed Wagoner (with copy to) Pubright & Jawor*1 1301 McKinney Houston, Texas 77010 Attention: Blake Tartt (b) To TU Electrie at: Texas Utilities Electric Company 2001 Bryan Street Suite 1900 Dallas, Texas 75201 Attention: Eria Nye (with copy to) t
ev . Worsham, Forsythe, Sampels & Wooldridge 2001 Bryan Street Suite 3200
' Dallas, Texas 75201 Attention: Robert A. Wooldridge 12.12 Headings. The division of this Agreement into Articles and Sections and the insertion of headings are for convenience of reference only and shan not affect the construction or interpretation of this Agreement.
12.13 Execution and Counterparts. This Agreement may be executed in any number of counterparts, each and an of which shau be deemed for au purposes to be one agreement. 12.14 Interest on Put Duc Payments. In the event that TMPA or TU Electric falls to timely make any payments to the other which become due under this Agreement, the incremental amount due on the past due payment for the period between and including the due date and the date actually paid shall be calculated at the rate of twelve and one-half percent (12-1/2%) per annum. 12.15 Use of Representations or Recitals. Any representations or recitals made by TMPA and TU Electric in this Agreement are fer the purposes of this Agreement only. In the event t; tat this Agreement is terminated or does not timely close at the Initial Closing l Date, neither TMPA nor TU Electric shall use, as evidence or otherwise, any such 1 l representations or reeltals against the other in any way in the New 14wsuit or any other lawsuit concerning any Subject Claims which have been made in the Pending Litigation. 12.18 Seoarate IJtiration. Any Subject Claims arising out of or under this Agreement shan be prosecuted in a lawsuit separate from the lawsuit in which any Subject Claims which have been mede in the Pending Litigation are prosecuted. 12.17 Construction of Comanche Peak, if TU Electric cont (nues to believe that the completion of Comanche Peak is economicauy and otherwise feasible, TU Electric covenants that it wul use its best efforts to complete, or cause to be completed, the construction of Comanche Peak and placing the same in operation. S I o ,. . 12.18 Severability. 'the parties hereto agree th:t the various obligations and undertakings _specified la this Agreement and in the other agreements or instruments referred to herein are each mutually dependent upon one another and, in the event that any fundamentalor essentialprovision of this Agreement or any of such other agreements or instruments is finally determined to be invalid, illegal or unenforceable by a court or administrative body having jurisdiction, TU Electric and TMPA hereby agree to conduct good faith negotiations for the purpose of reaching a mutually acceptable written j agreement to replace the deleted provision with a provision which will most nearly i accomplish the purpose and intent of the deleted provision. Falling to reach such a mutually acceptable agreement, the parties shall rescind the transactions provided for herein and therein. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date ut forth at the outset hereof. TEXAS MUNICIPAL POWER AGENCY (Seal) ATTEST: By im ww. By, / daad'Eh ItsWefEfc/&d afAYecl7ts TEXAS UTilJTIES ELECTRIC COMPANY (Corporate Seal) ATTEST: By: .. _ Its: (. +hdh'w a [ J IS b G G r A-(10 By: 4 <al G% ttai rRnO*% 1 l w SECURITIES AND EXCHANGE COMMIS$10N l Washington, D.C. 20549 FORM 8-K P i CURRENT REPORT , Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) - February 12, 1988 4 TEXAS UTILITIES ELECTRIC COMPANY (Exact name of registrant as specified in its charter) TEXAS 0-11442 75-1837355 (State or other Jurisdiction (Commi ssion (l R.S. Employer of Incorporat ion) File Number) Identification No.) 2001 BRYAN TOWER, DALLAS, TEXAS 75201 (Address of principal executive offices) Registrant's telephone number, including area code - (214) 812-4600 t
t ITEM 5. OTHEK CVENTS.
~
Reference is made to the Company's 1986 Form 10-K in item 1. Business under Peak Load and Capability and under Comanche Peak Nuclear Generating Statlon, in Item 2. Propert13s under Construction Program, in item 3. Legal Proceedings under Comancha Peak Nuclear Generating Station and in item 8. under Note 10 to Financ!al Statements. Reference is also made to the Cocpany's Form 10-Q for the quarter ended September 30, 1987 in item 1. under Note 8 to Financial Statements and in item 5. The Company, which is the principal subsidiary of Texas Utilities Company, is constructing two nuclear-fueled generating units at the Comanche Peak Nuclear Generating Station (Comanche Peak). The Company owns an 87 5/6% interest in such facility. Other owners of Comanche Peak are the Texas Municipal Power Agency (TMPA), Brazos Electric Power Cooperative, Inc., and Tex-La Electric Cooperative of Texas, Inc., which own 6.2%, 3.8% and 2 1/6% interests, respectively. On February 12, 1988, the Company entered into an Agreement with TMPA pursuant to which the Company will purchase TMPA's ownership interest in Comanchs Peak. Under the terms of the Agreement, the Ccapany will make a series of payments to ThPA over approximately a five year period totaling about $456 million on a present value basis. The purchase price is based on the Company's incurred cost per kilowatt, including allowance for funds used during construction, for it's existing share plus l pa rent for TMPA's interest in the nuclear fuel for Comanche i Peak, certain transmission facilities associated with Comanche t Peak and certain expenses. In connection with the purchase of TMPA's ownership interest by the Company, all outstanding claims and pending lawsuits between TMPA and the Company will be l settled and terminated. Finalization of the Agreamsnt is i subject to obtaining the approval of the Nuclear Regulatory Conni ss ion and the Public Utility Commission of Texas with respect to the transfer of TMPA's ownership Interest. The
~
Company plans to promptl y file applications to obtain such approvals and cannot predict when action with respect thereto will be taken. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, ttie Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TEXAS UTILITIES ELECTRIC COMPANY Date: February 16, 1988 By /s/ H. Dan Farell l H. Dan Farell 1 Treasurer and Assistant Secretary J
SECURITIES AND EXCHANGE COMMISSION WASillNGTON, D.C. 20549 Form 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF TIIE SECURITIES EXCIIANGE ACT OF 1934 For the Fiscal Year Ended December 31,1986 Commission File Number 0-11442 l Texas Utilities Electric Company (Exact name of registrant as specined in its char er) A Texas 1.R.S. Employ er Corporation No. 75-1837355 2001 Br>an Tower, Dallas, Texas 75201 l Telephone Number (214) 653-4600 Securities Registered Pursuant to Section 12(b) of the Act: None i Securities Registered Pursuant to Section 12(g) of the Act: Preferred Stock, without par salue i Indicate b) check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 da>s. Yes / No Aggregate market salue of Common Stock on January 31,1987 held by non-affiliates: None Common Stock outstanding at Januar) 31, 1987: 105,150,000 shares, without par salue DOCUMENTS INCORPORATED fly REFERENCE None 1 l _ . _ _ . - - _ . _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
.r
'IABIE OF CINIDfIS Lem DeSerietion e fan s
PART I 1 Bur.iness............................................................................... 3 TheCcrpany.................................................................... 3 Peak Load and Capability ..................... ................................... 4 F ue l Sum l y ard Pur c h a s ed P owe r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 R egu l a t i on and R a t e s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Ccunanch e Pe ak N uc l e a r Gener a t i ng S t a t i on . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Environnental Matters ................................ ........................... 16 2 Properties ................................................... ...... .................. 18 Construction Program ............................................................. 19 7 0 E l ec t r i c S ys t em Ma p . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 . 3 L eg a l P r oc eed i ng s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 4 $dni ss ion of Mat te rs t o a Vote of Securi ty H olde rs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 PARP II 5 Mar ket f or Regi st rant 's Ccrron Equi ty and R elated Stockholder Mat ters . . . . . . . . . . . . . . . . . . 25 6 Selected Financial Data ................................................................ 26 7 Management's Discussion ard Analysis of Financial Condition ard Results of operations .. 23 8 Financial Statements and Su mlementary Data ............................................ 34 9 D i sag reements or. Ac comt i ng ard F i nanc i al D i sc l osure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 PART III 10 D i r ec t ors ard E x ecu t i ve O f f i c e r s o f t h e R eg i s t r an t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 11 E x e c u t i ve C crpens a t i on . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 12 Secur i ty Ownershi p of Certain Benef ic i al owners ard Management . . . . . . . . . . . . . . . . . . . .. . . 62 13 Certain Relationships ard Related Transactions ......................................... 62 PART IV 14 fxhibits. Financial Statement Schedules and Reports on Form 8 K .. ..................... 63 2
PART I Item 1. IESDIESS.
'IHE(IMPMN Texas Utilities Electric Cagnny (Ccrpany) was incorporated uMer the laws of the Stata of Texas in 1982 aM has perpetual existence urder the provisiers of the Texas Business Corporation Act. me Cmpny is an electric utility engaged in the generation, pirchase, transmission, distribution and sale of electric energy wholly within the State of Texas. Se Cmpany possesses all of the necessary franchises and certificates required to enable it to corduct its business (see Regulation and Rates).
The Cmpany is the principal subsidiary of Texas Utilities Cmpany (Texas Utilities). Texas Utilities also has three other subsidiaries which perform specialized services for the Texas Utilities Cmpany System (System Ccepanies), including the cmpany: Texas Utilities Fuel Ccrpany (Fuel Ccepany) cuns a natural gas pipeline system, acquires, stores, and delivers fuel gas ard provides other fuel services for the generation of f I electric energy by the Ccepany; Texas Utilities Flining Cmpany (Minirg Cognny) cuns and operates fuel production facilities for the surface mining and recovery of lignite for use at the Cagnny's generating stations; ard Texas Utilities Services Inc. (Service Ccepany) furnishes financial, accountirq and other administrative services at cost. Effective January 1, 1984, the Ccrpany became the successor by nerger to Dallas Pwer & Light Cm pany, Texas Electric Service Ccrpany and Texas Pcuer & Light Cmpany which had been subsidiaries of Texas Utilities. ne cmpany serves the areas in the north central, eastern ud western parts of the State of Texas, with a population estirated at 5,110,000 - about one-third of the population of Texas. During the year 1986, approxirately 39% of operating revenues was derived frun residential sales, 29% fram cc: nercial sales, 21% from industrial sales ard 11% fram other sources. A description of the divisions of the Ccrpiny is as follcus: Dallas Pcuer provides electric service primrily in Ihllas County, includire the cities of Dallas, Highland Park, University Park and Cockrell Hill ard scm. of the adjacent unincorporated areas. We area is a banking, irsurance ard ccrrercial center with substantial electronics ard aerospace mnufacturing ard a variety of light indust 19y. Texas Electric prcr/ ides electric service in 48 counties in north central ard west Texas, including the cities of Fort Worth, Arlington, Grard Prairie, Midlard, Odessa, Wichita Falls and 72 other incorporated municipalities. We territory served includes a mjor portion of the Pemian Basin oil and gas area and other oil fields and substantial faming ard ranching sectiors in west Texas. Autccotive ard aircraft asserbly, petrcchemical and specialized steel mnufacturing are a-cng the larger irdustrial activities. Fort Worth is a center of bankirg, business and industry. Se area served between Fort Worth aM Dallas is a highly diversified ccrplex of light irdustry, warehousing and ccreercial development, and contains a variety of recreational attractiors. 3
It m 1. HJSINESS (C%mtineDd) . Texas Power provides electric service in 51 counties in north central ard east Texas, includirq the cities of Carrollton, Irving, Killeen, Mesquite, Plano, Richardson, Tyler, Wace ard 263 other incorporated mnicipalities. We territory served includes the agricultural blacklands of central Texas, the faming and ranchirg sections north and east of Dallas, part of the oil ard gas fields of east Texas ard the Dallas-Fort Worth Internatioml Airport. he area has a highly diversificd irdustrial base of light and heavy ranufacturirg, includirg electronics, oil field equirnent, aluh. s::elting ard air conditioning equipment, and oil and gas prot.iction. Generating Division is responsible for planning, ergineerirg, constructing ard operating all generating stations, for planning the transmission system ard for directing the dispatch ard control of the transmission facilities of the Ccrpany. At Dece:ter 31, 1986, the Ccrpany had a total of 13,475 full-time e: ployees. For ener,gy sales ard operating revenues contrib.Ited by each class of service, see Item 6, Selected Fimncial Enta - Operatirq Statistics. PEAK IDM) NtD CAPMIILTIY Net capability, peak load and reserve at the tiro of peak were as follow: Fen LeM(s) het i nc rease Capability Over Reserve (b) WE M 11 Prie" Year Ov2awatts) Je]I L % 1t15) t 15,254 16,537 4 . C'4 2,447 1?S6 .. .... .... 15,614 15,8;S 4.1 2,845 1;!5 . . . . ... . 17,0C5 15,265 S.8 2,716 1784 .. . .. ... .. (a) Inclu3es interrt.ptitle lead of 130 rega.aus in 1?St,129 rega.atts in 1;85 ard 76 regn=atts in 1784. (b) Encess cf net capability over reak lead, escitsiing interrtotible, at the tire of reak. We peak load increases for 1986 ard 1985 resultcd prirarily frcn customer grcwth and weather factors in the service area. We peak load in 1986 occurred on July 30. Su: ner weather in the service area durirq 1986 was near norral although heating dcgree days durirg the winter were approxirately 12% belcv norral. Includcd in the 1986 net capability was 1,050 megawatts of fiin purchascd carncity, includirg 920 mcgawatts of cogeneration. (See Fuel Supply ard Purchased Pomr ard Item 6, Selectcd Financial Data - Operating Statistics.) 4
IUSDESS (Ctritinued) .
- ~ - -
Item 1. Peak load increases through the mid-1990's are expected to average slightly less than 3% annually after giviry affect to an aggressive lead mnagement program (including interruptible contracts). The Carp ny's resource plan provides for meetirg the increases in required net capability (takiry into consideration expirity purchased pcuer contracts and possible retirenents of older gas-fired generating units) through the acquisition of purchased power capacity (includirg cogeneration) and - through the ccepletion of various nuclear, lignite and gas / oil fueled capacity additions. The msource plan is subject to annual review as prt of the Ccrpny's regular planning process. The cceponents of the resource plan (see Item 2, PropcIties-Construction Program) are as follchs: ' te wurce plan 10?7 iW 6 Capability ,. Res w ee (*cas.stts) Percent .. l Lignite 2,250 17% hxtear 2,020 17 < Certostion turbines 1,865 16 tead r.anage-ent 2, 05 7 18 j l l Cegeneration ard etber purchases 2,??1 19 Unspeeified LJ,22 _1_1_ Tctal 11,7*3 10*% FUEL SUPPLY AND IURCHASED IMR Net input for 1986 was 80,180 million kilcuatt-hours of which 75,468 million were generated by the Capny. During this period, 825,717,441 million Btu of fuel (including 33,988,273 million Btu furnished by Alcca at no cost) were consumed for electric generation, y A ccrparison of the unit cost per million Btu of fuel to the Ccrpany and the fuel mix for electric generation during the last three years is as follcus: Wit Cost Fuel Min For re e m iliin Stu flectric Generatim 10 % 1955 10 % 19'6 19*} 11M . Gas . . . 12.77 53.41 13.74 46.C% 49.7% 47.7% Cil . .. 6.14 4.26 4.30 0.1 0.7 0.3 Lig-ite' . .. 0.0? M 0.94 53.9 49.6 5?,0 weieted average /Tctat. 51. % 12.25 52.34 iCg.C4 100._0% 10p.0%
- L i gni t e c es t pe r t en t o t he C 3 r.a y =a 112.76 for life, $12.58 fer 19!$ and $12.13 fer 1984. .
All reasonable costs of fuel and purchased pcuer are generally recoverable subject to the rules of the Public Utility Ccomission of Texas. (see Regulation and Pates for informtion pertaining to the rothod of recovery of fuel costs.) 5
ILua 1. OCCHESS (Chitirued) . Gas Fuel gas for units at nineteen of the principi generating stations of the Ccrpany, having an aggregate gas / oil capability of 11,959 megawatts, was provided during 19Bi by Fuel Ccrpany. Nel Ccrpany 3 supplied appIcximtely 60% of such 1 lel gas requirenents under contracts with prcducers at the wellhead and other contracts with dcdicatcd reseIves, 16% under contracts with lone Star Gas Ccrpany (Inne Star) aM 24% urder contracts with other connercial suppliers. Durity periods of winter peak gas de:rard, short-tem curtailments of gas deliveries have been experienced urder the contracts with Ione Star; hcuever, such ' curtailments have been of relatively short duration aM have had miniral inpact on operations. Fuel Ccepany has acquired under contracts expiring at intervals thruugh 2006, with producers at the wellhead, supplies of gas khich are generally expected to be produced over a ten to fifteen year period. As gas production declines ard/or contracts expire, nes contracts are expected to be negotiated to replenish or augmnt such supplies. During 1986, no curta11ments were experienced under these contracts. In addition to the several gas purchase contracts with Icne Star khich expire at intervals through 1991, Fuel Ccrpmy has negotiatcd gas purchase contracts, rargirg in terrs frun two to ten years, with a nu-ber of other ccrnercial suppliers. Additionally, Fuel Ccrpany has entercd into a nurber of short-term gas purthase contracts with other ccrnercial suppliers at spt rarket prices; homver, these contracts typically do not pruvide for a fim supply obligation frcn the seller ror a fim purchase obligation frcn Fuel Ccepany. Durirg 1986, there kere fed irstances when such supplies were unavailable khen Fuel Ccrpany schedulcd purchases. Fuel Ccrpany ckrs and operates an intrastate natural gas pipeline system khich extends frcn the gas-producirg area of the Permian Basin in west Texas to the east Texas gas fields and scuthwant to the Gulf Coast area. 'Ihis system includes a one-half interest in a 36-inch pipeline which extends 395 miles frcn the Pemian Risin area of west Texas to a point of temination south of the Fort Worth-Dallas area and has a total estirated cap city of 800 million cubic feet per day with existire ccrpression facilities. Additionally, Nel Ccepany oies a 39% urdivided interest in another 36-inch pipeline, khich was cmpleted in January 1987, connecting to this pipeline ard extending 58 miles eastwani to one of Fuel Ccrpany's urdergrcund gas storage facilities. Fuel Ccrpany also cuns ard operates cNer 1,750 miles of vt-ious s~ aller capcity lines khich are used to gather and transport natural gas frcn other gas-producirq areas. 'Ihe pipeline facilities of Nel Ccepany form an integratcd network through which fuel gas is gathered ar d transported tc certain of the generatire stationa of the Ccrpany for use in the generation of electric energy. 6
Itm 1. DUSDEES (CrntinuM) . Fuel Ccrpany also owns and operates uMergrouM gas storage facilities with a usable capacity of 27,9 billion cubic feet with approxirately 23.7 billion cubic feet of gas in inventory at Decerber 31, 1986. Gas storcd in these facilities is currently capable of beig withdrawn at a rate of approximtely 785 million cubic rect per day for uso durirg periods of peak derard, to meet seasonal ard other fluctuations or curtailrent of deliveries by gas suppliers. 011 During 1986, the Ccrpany's utilization of fuel oil as an alternate source of boiler fuel amounted to 121,545 barrels or 0.1% of total fuel requirements. Fuel oil is stored at all nineteen of the principally gas-fueled generatirg stations. At Decenter 31, 1986, the Ccr:pany had fuel oil storage capacity sufficient to aa.u.adate the storage of approxim tely 6.2 million barrels of oil, with approxirately 3.0 million barrels of oil in inventory. It is anticipated that oil required to replenish that reroved fram storage aM consumed for the generation of electric energy will bs cbtained primrily through purchases in the cpen mrket. niel Ccrpany has access to an oil pipelinc and owns teminal facilities to provide for rcre deperdable ard efficient movemnt of oil. Lignite Two units in service at the Big BrtAn generating station, three units at the Monticello generating station, three units at the Partin lake generating station, ard one unit at the Sandat generatirg station (see Itcm 2, Properties), havirs an aggregate net capability of 5,845 megawatts, use lignite as fuel; three other lignite-fueled units, with an aggregate net capability of 2,250 megawatts, are now in design or urder construction (see Item 2, Properties - Construction Prtgram) . 'Ihese lignite units, khich are or will be base loaded to operate at the m ximum practical capacity factor, have been or are toirq constructed adjacent to lignite reserves khich will be surface mined. At the present time, the Ccepany csns in fee or has under lease an estimted 760 million proven recoverable tons of such reserves. Minirg Ctr.pany cans and operates equipnent to renove the overburden ard to recover lignite. One of the Ccepany 's lignite units, Sandow 4, is fueled frcrn lignite deposits caned by Alcoa, khich furnishes fuel at no cost to the Ccrpany for that portion of energy generated from such unit ard dedicated to Alcoa. (See Item 6, Selected Fimncial Data - Operatirg Statistics. ) For informtion concerrurg applicable air quality standards, see Environ ental Matters. Lignite production operations at the Big Brchn, Monticello and Partin Iake generatirg stations are acccrpanied by an extensive reclaration program which recurrs the land to prcductive uses and includes a vegetation restoration prcgram. Sinilar progra-s are planned for future lignite-fueled generati.rg stations mentioned above. For informtion concerning federal ard state laws with respect to surface minirg, see Envirortental Patters. 7
Itan 1. IUSINESS (021titurd) . liuclear Two nuclear-fueled units are under construction at the Ccenncho Peak generating station (see Ccrunche Peak !?uclear Generating Station, Item 2, Properties - Construction Program aM Item 3, I.oyal Proceedings) . We - nuclear fuel required for the first operating cycle of Unit 1 is ncw Comitunts have been obtained for anticipated onsite at the station. uranium ore concentrate requirenents and fabrication services for both units for the first 17 years of operation. Uranium hexafluoride conversion services have been contracted for through 1987; and uranium enrichment contracts, having a duration of approximtely 30 years, have been mde with the Departnent of Energy. Additional contracts for uranium ore concentrates and nuclear fuel cycle services will be required in the future; hcuever, it is not possible to predict the ultirate availability or cost thereof. The Nuclear Waste Policy Act of 1982 (IMPA) provides for the development by the federal government of interim storage and permnent disposal facilities for spent nuclear fuel and/or high level radioactive qf. waste mterials. The Capny is umble to predict when the federal govemment will be able to provide such storage and disposal facilities. Under provisions of the IMPA, funding for the program will be provided by
- a one-mill per kilowatt-hour fee levied on electricity generated and sold by nuclear reactors, including the Ccrunche Peak units. There will to onsite storage capacity for spent fuel sufficient to accuwdate the operation of Ccrunche Peak for approximtely 20 years and this storage capacity can be increased, subject to approval by the Ituelear Regulatory Camission.
Purdusod Ptuer In 1986, the Ccrpany purchased 4,712 million kilcuatt-hcurs or 6% of its energy requiremnts and had available 1,050 megawatts of firm purchased capacity at the time of peak load. Pursuant to the resourne plan adopted in 1986, additioml purchased capacity will be required over the next 10 years. Fim purchased capacity presently under contract is 1,658 megawatts for 1987; 1,318 megawatts for 1988; 868 megawatts for 1989 through 1995; and 798 megawatts for 1996. This fim purchased capacity is primrily cogeneration and does not include the capacity purchased frm Tex-Ia Electric Cooperative of Te m , Inc. (Tex-la) of its entitlement j fram Co anche Peak (see Note 11 to Firancial Statenents) . The Ccrpany expects to acquire additioml purchascd pcser capacity in the future and plans to investigate potential available sources. , Cemral The Cepany is not able to predict: (1) khether or not problems my be encountered in the future in obtaining the fuel and purchased pcser it will require, (ii) the effect upon its cperations of any difficulty it my , experience in protecting its rights to fuel and purchased pcmer ncu under contract, or (iii) the cost of fuel and purchased pcNer. All reasomble costs of fuel and ptrchased pcAer are generally recoverable subject to the rules of the Public Utility Ccmission of Texas. (See Regulation and Rates for informtion pertaining to the methcd of recovery of fuel costs.) 8
Itan 1. RBINESS (Omtimad) . mrznATICH AND PRIES Regulaticn Texas Utilities and its subsidiaries, incitdity the ompany, are exempt fran the provisions of the Public Utility Holding Cmpany Act of 1935, except as to Section 9(a)(2) khich relates to the acquisition of securities of 71blic utility cmpanies. Se Ccrpany does not transmit electric energy in interstate ccreerce or sell electric energy at stolesale in interstate ccmerce, or own or operate facilities therefor, ard its facilities are not connected directly or indirectly to other systers which are involved in such interstate activities, except durirq the continuance of energencies pemittirq terporary or permnent connections or urder an order of the Federal Energy Regulatory Cmmission (FERC) exe::ptirq the Corpany frcan jurisdiction urder the Federal Pwer Act. In view thereof, the Ccrpany believes that it is not a public utility as defined in the Federal Pwer Act ard has been advised by its counsel that it is not subject to general regulation under such Act. me Public Utility Ccruission of Texas (WC) has origimi jurisdiction over electric rates and service in unincorporated areas and exclusive appellate jurisdiction to review the rate and service orders ard ordimnces of runicipalities. Each runicipality within the Company's service area has original jurisdiction over the regulation of electric rates ard service within its corporate limits until such time as any such runicipality may elect to have the WC exercise original jurisdiction. Approxirately 20% of the Cctrpany's revenues for 1986 kere derived frun electric energy sales to custcriers in unincorporated areas ard runicipalities that have ceded original jurisdiction to the W C. We Texas Public Utility Regttlatory Act prohibits the collection of any rates or charges (includirq charges for fuel) by a public utility that do not have the prior approval of the WC (see Rates). Se provisions for inclusion of construction work in progress in rate base prtnide that such inclusion is an exceptiomi form of rate relief to be granted only when rmessary to the fimn::ial integrity of the utility ard that it shall not be included for major projects to the extent they have been inefficiently or irprudently planrod or mnaged. We System Ccrpanies are also subject to various other federal, state and local regulations. (See Ccrancho Peak Nuclear Generating Station, Envirorcnental Matters ard Item 3, IIgal Proceedings.) Rates Rates for electric service remined unchanged durire 1986, except for reductions in fixcd fuel factors discusscd belcu. At appropriate times in the future, the ccrpany intends to file rate applications with the WC ard its runicipal regulatory authorities to recover the costs ard a return thereon of its electric plant, includirq the Ctranche Peak nuclear units. It anticipates that such rate aplications will to subject to challerge with regard to the prudence of costs incurred. Se Ccrpany 9
Item 1. IUSDESS (Cintinucd) . has iMicated that it does not currently plan to include any additional Ccmncho Peak costs in a rate increase request until Unit 1 is ready for e xtrial operation aM has stated that it believes the initial rate increase that will be necessary to place Unit 1 into base rates can be held to abcut 10%. In Ibrch 1984, the Ccrpany made applications to the FUC aM to its nunicipal regulatory authorities for upward adjustments in rates for electric service throughoat its service area. The proposed rate adjustments, affecting all classes of service, sure estimted to increase operatire revenues by $304.2 million, or 8.0%, based upon the test year erded Septerber 30, 1983. On October 12, 1984, the EUC issued its final order khich decreased rates by approximtely $7.0 million, or 0.2%. The ' custcrer classes of Dallas Power, Texas Electric and Texas Pcuer were consolidated and adjustments were rade, affectire all classes of service, that recognized said revenue rcduction. On October 31, 1984, the IUC issued its final order in appeals frcra the ordinances of various nunicipal regulatory authorities fixire the ccrpany's rates within the corprate limits of those municipalities at the same level approved by the IUC in its October 12 order. (See Item 3, IIgal Proceedings.) The present rates were placed into effect in lloverber 1984. Prior general rate levels had been established separately for Dr11as Pcuer, Texas Electric ard Texas Pcuer. Dallas Pcuer had placcd rates into effect in February 1984, khich recognized a revenue deficiency for the test year ended Ibrch 31, 1983 of approximately $47.3 million, or 6.5%. (See Item 3, Ingal Prtcecdirge. ) Texas Electric had placed rates into effect in Decerber 1983 khich reccgnized a revenue deficiency for the test year ended !brch 31, 1983 of approximtely $73.9 million, or 6.1%. (See Item 3, Irgal Prccccdirgs.) Texas revenue Pcuer had placed rates into offect in July 1982 khich recognized a deficiency for the test year ended Septerber 30, 1981 of approxim tely $72.0 million, or 5.8%. In July 1986, the IUC adopted a revised rule relatirq to the rethod of recovery of fuel costs. This rule provides for reocr/ery of fuel costs through fixed fuel factors as approved by the IUC. (See Item 3, Irgal Preceedirgs. ) The rule requires refunds of mterial over-recoveries of fuel cost revenues ard reductions in the fixed fuel facto?.s in the event that the utility is mterially over-reccr/ered and projects that it will mterially over-recover its kncun or reasombly predictable fuel costs. Ibterial as approved defined in the rule is the lesser of $40 million or 4% of the annual kncun or reasonably predictable fuel cost. Final reconciliation of fuel costs is to be rade at the time of the utility's general rate case or a reconciliation proceedirg. The rule also provides for an emerge:ry request to increase the fixed fuel factors, khich must be acted upon within thirty days on an interim basis by the FUC, if reasonably unforeseeable under-reccr/ery of kncun circumstances or reasombly have resulted in a mterial prcdictable fuel costs. Reconciliation my be requested only if it has either been cr/er ore year since the utility's last fiml reconciliation or the utility has mterially under-recovered its kncun or reasonably predictable fuel costs. has In such reconciliation, the utility has the burden of provirg that it controls, generated electricity efficiently, mintained effective cost its non-affiliated fuel and fuel-related contracts have protaced the 1cuest reasomble ccst of fuel to ratepayers, and, for fuels acrpired 10 1
Itcm 1. DUSDUES (Ctntnucd) . fram affiliates, all fuel-relatcd expenses are reasonable and necessary and that the prices charged are no higher than prices charged by the supplying affiliate to other of its affiliates or divisions or to uraffiliatcd persons or corporations for the same item or class of items. Urder-recovery reconciliation will be grantcd only for that portion of fuel costs increased by corditions or events beyoM the utility's control. Interest will be paid er receivcd by the utility on any wer or urder-recovery of fuel costs at the utility's cwposite ccet of capital as established by the W C in the utility's most recent rate case. h e rule irposes penalties of up to 10% in the event that interim refurds, khen required, are not timely requested and in the event that an emrgency increase is grantcd sten there was no emergency. In July 1983, Dallas Ewer & Light Carpany, Texas Electric Service Carpany ard Texas Power & Light Carpany filed applications with the WC for the establishment of fixed fuel factors for calendar year 1984 bascd upon projectcd fuel costs for the year. After hearings on these applications ard the issuance of an examiner's report, the WC remarded this ratter to the exartiners with instructions to rewrite the report to authorize the recovery of such costs based upon a historical Furch 31, l 1983 test year adjusted for "kncun ard reasonably predictable" charges. I In April 1984, the WC issued its final order establishing fixed fuel factors khich were iglementcd in Fby 1984 on a uniform basis throughout the ccrpany's service area. R e rates established in connection with the WC 's October 1984 orders describcd above, included the sam fixed fuel factors khich were approvcd by the WC in April 1984. (See Item 3, Irgal Proceedings. ) In February 1986, the Ccrpany received approval frcn the WC to rcduce its comosite interim fixcd fuel factor by approximately 12.4% ard such reduction was irplemntcd in Karch 1986. In April 1986, the Corpany was authorizcd to refuM approxirately $140.4 million, representirg the cumulative arount of over-ree wered fuel revenues, includirg applicabic interest, as of January, 1986. Be refund was irplementcd with the R=.y 1986 billings. (See Item 3, Irqal Proceedings.) In August 1986, the Campany filcd an application with the WC for authority to refund approxirately $64.8 million, representing the ctrulative amount of over-recovered fuel revenues, includirg applicable interest, as of June 30, 1986. Se refund was irplenented with the October 1986 billings. (See Item 3, Lcgal Procecdirgs.) In October 1986, the Office of Public Utility Counsel (OWC) filed a petition with the WC seekirg to have the Carpany's interim fixcd fuel factors reduced and a refund of over-recovered fuel revenues. In Neverter 1986, the Ccrpany resporded to the ONC petition and filed an application seekirs authority to reduce its cceposite interim fixed fuel factor by approxirately 10.3% ard to refund approxirately $58.4 million, representirg the etntlative arount of over-recovercd fuel revenues, incitding applicable interest, as of Septerber 30, 1986. S e refund was irplementcd with the Decerber 1986 billirns and the rtduced interim fixed fuel factors were irplemntcd with the FehruaIy 1987 billirgs. 11
Itan 1. If1 SINGS (Crntirmd) . In Dawber 1986, the Capany filtd an application with the IUC for authority to refuM approxirately $55.6 million, representirg the cumtuative ancunt of over-recovered fuel revenues, includity applicable interest, as of liove2er 30, 1986. The refuM was inplemented with the February 1987 billirgs. CEMANCIE IDK NUCGAR GENTATING SIATICH The Cxpany is subject to the jurisdiction of the Itaclear Rcqulatory Ccmnission (IEC) with respect to nuclear power plants. lEC regulations govern the granting of licenses for the construction and operation of nuclear pcuer plants and subject such pcu r plants to continuing revies aM regulation. Pursuant to such regulations, a review is being corducted by the IRC of the Ccrpany's application for licenses to operate the ccranche Paak units. As a part of that review, a preMiry was initiated before an Atctnic Safety and Licensirq Board (ASG) ard hearirgs on various issues have toen orgoirq sirce Decmber 1981. After ccrpletion of the ASG proceedirg, the ASG will rake remardations to the imC regardirg the issuance of operating licenses for the Camanche Peak units. An intervenor is actively involvad in this ASG proceedirg. The one remainirg Contention before the ASG in the operatirg license prWirg relates to the ccrpany's quality assurance / quality control (QA/QC) prtgram for the design ard construction of the plant. In IMeerber 1983, the ASG issued a nererardum questioniry the QA program for design of certain portions of the plant ard requestod that the OTpany offer additional proof of adequate design ard design review procottres. The ASG is also revicairs several other related issues and has irdicated its intent to revied the results of the IRC's Technical Review Team (TRT) investigation discussed below. In July 1984, a separate ASG, irclulirq two of the three merbers of the original ASG, was convened to receive testimony on allegations that QC inspectors at the plant have been subjccted to an atmosphere of harassment ard intimidation which is alleged to have affected the inplementation of the Ocrpany's QA prtgram. In January 1986, this separate ASW was disestablished with all issues thereafter to be resc2ved by the origiml ASG. As a separate part of the IRC's review of the Ccrpany's operatirg license application, in March 1984 the IGC established a task force to consolidate ard carry out the various reviess remry for the !aC Staff to reach its decision regarding the operatirg licenses. This effort involvcd the establishment of the TRT khich began an intensive onsite investigation in July 1984 and subsequently has issued reports requestirq additional inferration frmt the Ccrpany with respect to several functiomi areas of the plant's construction program. The Ccrpany then formcd a special team, the Ccrunche Peak Respnse Team (CPRI), which ircitdes a number of irdependent experts in each area addressed by the IRT, ard submittcd a Program Plan to resperd to the questions raised. Such Plan, which is describcd further below, is presently beirq irplemented ard has been expanded to address the design ard other ASG issues described herein. In January 1985, the TRT issued a report on its review of the QA/QC programs at Ctranche Peak. The report stated that although the QA prtgram docunentation met IRC requirenents, the irplementatica of the QA program 12
Itan 1. DUSINES (Cultirmd) . derenstrated that the Ccrpany has lacked the ccmitment to aggressively irplement an effective QA/QC progran in several areas. The m iMicated that it has fouM cvidence of faulty constmction aM ineffective QA ard QC inspections. Questions were also raised concoming the training and qualification of QC personnel aM in the reportire of deficiencies. The TRT further found that prior to July 1984 problems had existed in the control of docunentation. In addition, deficiencies in several other areas were described. The Cceparty was requested to subnit to the Imc a prcgram and schedule for ccrpletirg a detailai and thorough assessnent of these QA/QC issues presented by the TRI. The ccrpany also was asked to consider the use of mnagement personnel with a fresh perspective to evaluate the TRT firdirgs ard implement corrective action, and to consider the use of an indererdent consultant to oversee the corrective action prcgram. In June 1985, the Cc?pany filed with the IRC and the AS G a cm prehensive Program Plan khich will te utilized by the CPRT to address all outstaniing design and construction concems. This Plan, which was substantially revised ard reissued in January 1986, calls for the inspection, on a sampling basis, of numerous safety related systems in the plant, for the detemimtien of root causes and generic irplications of any safety significant deviations fcund in the inspection process, and for the development of a corrective action prcgram as reqaired. In May 1986, the Staff of the !mC issued a Supplemental Safety Evaluation Report (SSG) containing an evaluation of this Plan. The SSG concludes that the Plan provides an overall structure and process for addressirg and resolving all existirg construction ard design issues and any future issues that my be identified from further evaluations. The Canpany has mde several key mmgement changes in the nuclear prcgram for CcrMe Peak, including the addition of several ncw officers who bring substantial nuclear experience to the Ccrpany. This new mmgement team is responsible for oversight and irplementation of the reinspection and corrective action program. Also in June 1985, the Ccrpiny filed with the IEC and the ASG a Case Pamgement Plan (Pamgerent Plan) which recamended that the results of the CPRT effort be used to provide the ASG with reasomble assurance that Ccranche Peax has been safely constmeted and suggested that nunereus current issues before the ASG no longer need to be considered in light of the significant reinspection effort ncw underway. In August 1985, the ASG issued a Mc crandum and order addressire issues raised by the Pamgement Plan. The Pecrandum denied the Ccrpany's motion to adopt the Pamgement Plan statire that the ASG finds that it would not be proper to adopt such Panagement Plan as the sole basis for continued litigation of the ccepany's application for cperatirg licerses for the Ccranche Peak units. In addition, the Memorandum described other areas of the CPRT Prtgram Plan that concern the ASG. The Mercrandum indicated, hcwever, that if the CPRI Prtgram Plan is revised to address the ASG's concerns ard if it is appropriately irplemented, the CPRI Prcgram Plan my demonstrate the quality of the plant. The AS'.B further stated that it is difficult to forecast khen hearirgs in the case will be concluded but that the rulire my necessitate substantial proceedings that will delay the operation of CcrMe Peak. 13
Item 1. IUSINPdS (0:ntinood) . In June 1986, the ASG issucd a 1/morantam khich addressod "Doard Concoms" about the adequacy of the CFRT prcgram. The Pa c andum etated that, based upon the ASG's current knwledge of the prcgram, after having revi Wed the first results reports and the SSER on the CPRT prcgram, the ASG ccntinued to have the concerrs expressed in earlier rcroranda, as described alove. The ASG also raised additional concerns about how finiirgs in one area of the reinspection effort ray affoct the Ccrpany's programs in other areas, khether sufficient attention is being paid to problers of quality assurance and qaality control ngarding design, the adequacy of the CFRT sarpling program, and perceivcd oversignts in one of the results reports that had been issued. The Ccepany is addressing these I concems and has submitted c resporse. In August 1986, the ASG issued a rulirq conceming the scheduling of issues for hearing. Under the ruling, l the intervenor can and has initiated disecvery relatire to the cr/erall adegaacy of the CPRr prcgram. Within thirty days follwing the Ccrpany's ccrpletion of responses to the intervenor's discovery requests, the intervenor is permitted to file a ration with the ASG for sumuy disposition on the issue of the adegaacy of the CIRT program. Following receipt of such rotion, the ASG will detemine whether to proceed with detemining the cr/erall adegaacy of the CFRI pIVgram or whether to address the specific findings and results of the CERT prcgrar. In Pay 1985, the Ccrpany found a report in its file, relating to certain deficiencies in the QA program, khich it believed should have been provided in resporse to a 1980 disccvery regaest of the intervenor, and sent the report to the AS G. In June 1985, the Ccrpany irdicatcd that an error in judgment was rade in failing to prcduce the report earli+>r a/d took appropriate steps to assure that a similar sita tion does not recur. This ratter has been investigated by the NRC's office of Investigations khich concluded that the cnission was a raterial false statenent but that it was not intentional. This ratter has also been the subject of discovery requests before the AS G. In January 1986, the Ccrpany filed an application with the imC for an extension of the construction remit for Unit 1 to reflect a nes "latest date for ccepletion" of August 1,1988; previously such date had been August 1, 1985. In the application, the Ccrpany statcd that the reason the regaest for extension of the constmction permit was not filed at an earlier time was administrative cr/ersight. In February 1986, the IRC issued an order exterdire the "latest date for ccepletion" of Unit 1 to August 1, 1988. Subsegaently, the intervenor involved in the operatirg licerse ASG prcceedirg filed with the ISC a regaest to stay the effectiveness of the corstruction remit extension and to reqaire the Ccepany to file a nes application for a ecratruction pemit for Unit 1 or to order that hearings be held prior tr. any decision on khether to grant the corstruction remit extension. The request for a stay was denied by the IRC and the gaestion of khether to hold such hearirgs was reranded to an ASG, the re-bers of khich are the sam as the ASG for the cperating license. In l'ay 1936, the ASG issued a 14emrani:n ard Order in khich it accepted for litigation a new Contention, raised by two intervenors khich allegod that the delay in ccrpleting Ccr'anche Peak, which has cccurred and has necessitatcd the extension of the construction reI~lt by the fac, is the result of dilatory action on the part of the Ccrpany ard that, therefore, good cause did not exist for the extension of such perrlt. The Ccepny appealcd this rulirn to the !aC's Atcnic Safety and Licensing 14
i i i Itaa 1. HJSDESS (Oaritimed) . i Appeal Board (Appeal Board). In July 1986, the Appeal Board certified to ! i the imC Ccenissioners a question regarding the validity of the Contention ! ! khich had been accepted by the ASIBt and in Septed er 1986, the l j Comissioners issued a ruling supportive of the coupany's position and ;
- remnded this mtter to the Appeal Board. In November 1986, while such l
, a@eal was pendig, the ASLB, at the request of the intervenor, granted an ,
) amendment to an earlier Contention khich had previously been disallowed. 1 Se ameniod Contention also relates to the question of good cause to ' ) extend the construction pemit. We Ccmpany has appealed this action to >
; the Appeal Board. In thrch 1986, the intervenors also filed a motion to l stay the effectiveness of the February 1986 Imc order and a petition for ;
q review thereof with the U.S. Court of Appeals for the District of Columbia ;
- Circuit. ne rotion for stay was denied in April 1986, and the petition i J for review is still pending before the Court.
) j In June 1986, the Cm pany decided no longer to contest, and ; therefore paid, a civil y nalty of $40,000 khich was part of an aggregate of $120,000 in civil penalties previcusly proposed by the Staff of the imC r l relating to allegations of harassment and intimidation at Ccnanche Peak. t he ccrpany regaested the Staff to revisit the other alleged violations to l
- detemire whether they did in fact occur and to consider mitigating the !
) amount of the penalties. In August 1986, the Ccrpany decided to no longer ! contest, and therefore paid, a civil penalty of $200,000 previously i protm ed by the Staff of the IRC relating to the findings of the TRT, , j described above. Se Ccrpany at the same time requested mitigation of l 1 another proposed civil penalty of $50,000, relating to two alleged ! violations in the Ccrpany's reinspection and corrective action effort, l' ! khich request was denied; and this penalty has also been paid. In December 1986, a portion of a report was released by the Office , l of Inspector and Auditor of the imC (OIA Report) containing the results of i ! its investigation of allegations of misconduct by the mnagement of Region -
- IV of the NRC with' respect to Ccranche Peak. Se CIA Report expressed i concern about allegations of harassment and intinidation by Region IV
1 mnagement to pressure Region IV inspectors to downgrade or delete ; j proposed inst.ection findings at Ctranche Peak. In addition, the OIA l l Report concluded that it would not be possible to rely on the Region IV QA ; ! inspection as evidence of the safe construction of Ccnanche Peak.
- Consegaently, it stated that it will be necessary for the imC to rely '
l largely on recent detailed technical inspections conducted by the }mc at t Ccmnche Peak. S e CIA Report also indicated that the data contained in ' I an internal Imc report on inspection procedures was inaccurate and i unreliable due to a lack of understanding by imC inspectors of the proper ! methcd of corpleting a certain imC form. ImC officials have indicated that a thorough assessnent of the results of this investigation will be ] mde. Se CIA Report's finiings are restricted to activities in the NRC's I a Region IV and do not gaestion other IRC regulatory activities with respect j to Ccranche Peak, inchding the detailed technical inspections twoantly l
- conducted by the 'IRT as discussed above. Se Ocmpany is unable to predict j the irpact, if any, tha
- the OIA Report might have on future NRC i
] inspection and regulatory activities with respect to Ccranche Peak. , l 1 l The imC has .innounced that it is creatirg a new Office of Special ; i Projects to mnage all aspects of the IGC's licensing and inspection : efforts for Ccranche Peak and certain other nuclear power plants, and has ; i ! 15 ' ! i a ;
. _ - , _ _ _ _ _ _ . - - - - _. _ _ -.-._-~ - _ - - _ .
l Item 1. LUSINESS (Ctntinnd) . I The lEC named a current regiomi aininistrator to head this team. this office is expected to be operational by FLsrch 1, announced thatCcepiny cannot at this time prcdict what effect, if any, this 1987. The reorganization will have on the Ccnsncho Peak licensing process. Unit 1 at Ccranche Peak is virtually carplete, but ConstInction of uncertainties in the licensing process, no assurance because of numercus can be given that the estimted ccreemial operation dates of these units estimtcd ocepletion costs thereof will not be can be met or that2,theProperties - Construction Prtgram) . Failure to exceeded (see Item and faverable regulatory approvals or further delays secure timely additioml reanalysis, reinspection or rework will increase occasioned by e the cost of the plant and will likely increase fimncing rrgairements. DWIR2NDirAL MATTERS The System Campanies are subject to various federal, state ard with air and water gaality and related local regulations dealing environmental matters. (See Item 2, Properties - Construction Program for schcduled expenditures.) Air Clean Air Act, the Texas Air Control Board (TACB) Under the Texas the pemissible level of air contaminant emissiers has jurisdiction over In fram generating facilities located within the State of Texas. addition, the nea sourre perforrance standards of the Environmental Protection Agency (EPA) promulgated urder the fcdcral Clean Air Act, khich have also been adopted by the TACB, are applicable to such generating units, the construction of which camnenccd after FLsrch 5, 1972. The Ccrpany's generating units have been constructcd to operate in ccrpliance with regulations prcr.ulgated parsuant to these Acts; however, due to variations in the sulfur content of the lignite fuel, operation of certain of the lignite-fuelcd generating units at rcduced loads is reqaired fram tire to tire in order to mintain ccrpliance with these stardards. Generating facilities presently under construction have receivcd state and federal pernits and are designcd to cm ply with applicable statutes and regulations. (See Item 3, legal Proccedings.) Hater The Texas Water CctrJssion (IE) and the EPA Mve jurisdiction over all water discharges frcn generating stations and mining areas. The Ccrpey's generating stations presently in operation have been constructcd to operate in ccrpliance with applicable state and fcderal stmMards of dischsryes of water. The Ccrpany ard Mining relating to the gaality Ccrpsny have obtained all reqaired liqaid waste control orders frce the IWC for facilities in cperation and have applied for or obtained all such Permits have toen receivcd fram orders for facilities under construction. the EPA under the t'atiomi Pollutant Discharge Elinimtion System (IGDES) for the discharge of waters frcn units at the generating stations currently in creration. All !GOES pemits reqairtd for units under lignite mining areas have toen applicd for or cbtaincd. construction and Minirg i The Ccrpiny ard Ccm' telieve they can mtiefy the regairements necessar'( to cbtain any required renewals. 16
It m 1. DUSINESS (Ctmitrkd) . Diversion of water by the Ccepany for coolirg aM other p.trposes is subjoct to the jurisdiction of the BC which is crpcserod to allocate such waters anon; users. The Ccrpany possesses all necessary pemits frcn the BC for the use of surface water reqaired for its present operations ard ; plants under construction. Other Federal logislation Irgulatirg surface mining was enacted in August 1977 ard regulations irplerenting the law have toen issued. Minirq carpany's lignite nining cycrations are currently rcgulated at the state icvel by the Railroad Ctr.nission of Texas. Surface minirg pemits have , been issued for current minire crorations that provide fuel for the Big Brcun, Monticello, Martin Lake and SaMcs generating stations. Treatrent, storage ard disposal of solid waste is regulated at the state level urder the Texas Solid Waste Disposal Act ard at the federal level under the Rescurre Corservation and Roccr/erf Act of 1976 (PCRA) . The EPA has issued regulations urder the RCRA and the BC has issued rcquiations urder the Texas act applicable to the Ccrpany generatirg units. The Carpiny has registercd its disposal sites as requircd by such regulations. (See Item 3, Lcgal Prceecdings.) In August 1982, The D% issucd its final rules on the use of plychloriruted biphenyls (PCBs) in transformers, capacitors ard other types of electrical eqaipment. Under the rules certain PCB capacitors will have to be phascd crat by October 1988. The (,crpany does not expect these regulations to have a ratarial adverse effect on its cperations or financial condition. 17
Itcn 2. mDm<ms. At Decerber 31, 1986, the Ccrpany cuncd and cperatcd sixty-nine electric generatirn units at twenty-three stations having a total net capability of 17,804 megawatts. W e lccations of the principal electric generatirg stations aM trarsmission lines of the Ccrpany are irdicatal on the rap included herein. Forty generating units with a nct capability of 8,506 mcgawatts use natural gas as the prinuy fuel and are designed to use fuel oil for short pericds khen the gas supply is interrupted or curtailed; two units with a net capability of 750 mcgawatts can use natural gas only; five units with a net capability of 2,680 megawatts use natural gas as the prinny fuel and are designal to use fuel oil for extended pericds; nine units with a net capability of 5,845 megawatts use lignite as fuel; and thirteen units with a net capability of 23 rajawatts are diesel units. In addition, at Decerter 31, 1986, the Ccrpany had available 950 megawatts of fim twer frcn other sources ard expects to purchase additional capacity during 1987 frca various sources. Se principal generating facilities and load centers of the Cceparry are connected by 3,815 circuit miles of 345,000 volt transmission lines and 8,773 circuit miles of 138,000 and 69,000 volt tran cission lines. Se Ccrpany is connected by six 345,000 volt lines to Houston Lightire & Power ccrpany; by throo 345,000 volt, five 138,000 volt ard nine 69,000 volt lines to West Texas Utilities Ccrpany; by two 345,000 volt, seven 138,000 volt and one 69,000 volt lines to Imer Colorado River Authority; by four 345,000 volt and eight 138,000 volt lines to Texas Manicipal Power Agency; and at several points with maller systers operating kholly within Texas. Se Ccrpany is a member of the Electric Reliability Ccmcil of Texas (EROCTI), an intrastate network of six mjor investor-cuned and sixty-nine public entities. ERCOT is the rcgioml reliability ccendimting onJanization for rerber electric power systers in Texas. We generating stations and other irportant units of prcperty of the Ccrpany are lccated on lands cuncd prirarily in fee sirple. Be greater portion of the transmission ard distribution lines of the ccepmy, and of the gas gatherirg and transmission lines of Fuel Ccrp ny, has bce constracted cuer lands of others pursuant to easements or alorg public highways and streets as permitted by law. Be rights of the Systen Ccepanies in the realty on which their prcperties ara 1ccated are considercd by them to te adegaate for their use in the contact of their business. Minor defects ard irregularities custcrarily fcurd in titles to properties of like size ard character my exist, but any such defects and irregalarities do not mterially irpair the use of the properties af fectcd thereby, he Ccepany and Fuel Ccepmy have the right of er<inent d: ruin whereby they my, if necessary, perfect or secure titles to privately held land used or to be uscd in their crerations. Electric plant of the Ccepany is generally subject to the 1iers of its rertgages. During the perici from January 1,1984, to Dccerber 31, 1986, the Ccepany mde gross preferty additions of approximte l' $3,599,445,000 and retirenents of preperty avJregating approximtely $154,252,000. Such gross additions arountcd to 28.6% of electric plant at Docc-Ecr 31, 1986. 18
l INa 2. PIOPIRFIES (Ctritinued) . CIDEIEDC1'ICH PIOGRAM Construction expenditures for the years 1987 through 1989 are estimated as follows: 1987 1988 1989 Thousands of Dollars Production ....................................... S 733,000 $ 539,000 $ 517,000 fransmission ..................................... 84,000 120,000 119,000 D i s t r i tut i on . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260,000 272,000 279,000 Generat ...................................... ... 37.000 32.000 36.000 Total ..................... ...... .......... 1,114,000 963,000 951,000 Mt.CC ................................ . ......... 411.000 509.000 _ 282,000 Total construction expenditures ............. $1.525.000 $1.472.000 $1.233.000 Such expenditures do not include nuclear fuet..... $ 23,000 $ 28,000 $ 4,000
'Ihe Ccepany is subject to federal, state and local regulations dealing with environmental protection (see Item 1, Business -
Environmental Matters). Construction expenditures for additional items of equipment contributing to the protection of the environment for lignite-fueled generatirg units (included above in Production) are estimated to be approxirately $1,600,000 for 1987, $4,100,000 for 1988 and $13,100,000 for 1989. Similar such experriitures approximated $4,800,000 for 1986, $6,900,000 for 1985 and $7,900,000 for 1984. 19
{- 1 I Ital 2. PROPERTIES (CCritinued) . Additional generating units in design or under corsiiuuction, the - peak season in which each is scheduled for service and the estimated ocupleted cost, including, for those units being constructed by the ccupany, allowance for funds used during corshuction (AEUDC) associated therewith, are as follows! l Peak Coricany's Share I Season Expenditures Estimated Schechled Unit Net Through Estimated Ccrnpleted Untt for Capability Decerter 31, ccrpleted Cost Per Station (a) Fuel A Service (rneaawatts) 1986 Cost Menawatt Thousands of Dollars Cortustion turbines (b) ... Gas /Oll 9 Units 1988 585 S - S S - ! Comarche Peak (c) . . . . . . . . . Nuclear 1 1989 1010 q 4,509,734 6,700,000 3,300 2 1990 1010 1 Corbustion turbines . . . . . . . Gas /0lt 6 Units 1990 390 - 160,000 410 Twin oak (d) .............. Lignite 1 1991 750 316,856 - - Twin oak .................. Lignite 2 1993 750 18,487 720,000 960 Forest Grove .............. Lignite 1 1994 750 214,297 1,235,000 1,647 (a) Stbject to approval of various regulatory agencies, including the NRC in the case of Comenche Peak. (b) The Ccepany is negotiating an operating lease with a lessor covering these facilities to become effective concurrent with the expected in service dates. Plans call for the facilities to be owned ard constructed by a third party and sold to the Lessor on the in service date; and, therefore, estimated construction experditures for 1987 through 1989 do not include the related costs. (c) Comanche Peak is net of the participation of Texas Mtrif cipal Power Agency (6.2%), Bretos Electric Power Cooperative, Inc. (3.8%) and Tex La Electric Cooperative of Texas, Inc.(21/6%). (See Itern 1, , Businese Comanche Peak Nuclear Generating Station and Item 3, legal Proceedings.) { (d) Estimated construction experditures for 1987 through 1989 do not incitde amounts for the coripletion of Unit 1 ard the ccrrion facilities at the Twin Oak station. The Ccepany is soliciting bids for the turnkey construction ard cw pletion of the generating mit which will be purchased by the cccpany on ccepletion in 1991 providing the facility meets required standards and conditions. The Corpany will continue to retain an ownership interest in Unit 1 e<pivalent to the expenditures incurred through Decerter 31, 1986 plus AFUDC. If no acceptable contract can be arranged pursuant to the solicitation, the facility may be delayed frcre its expected in service date. As a result of the Ccmpany's regular annual review of its construction program, in November 1986, the Ccrpany estimated that all reanalysis, reinspection, rework ard testing activity prerequisite to the loadirq of fuel in Unit 1 of Ccmanche Peak will be ocmplete in early 1988. Based on this estimate, the Ctmpany estimated that camercial operation of this unit will be achievable in early 1989. The Ccmpany also I estimated that Unit 2 will not be ready for ccumercial operation until after the 1989 summer peak season. If licensing approvals are obtained so as to permit ccamercial operation of these units at these times, the total cost for the ccupany's share of the plant, excluding AEUDC, is estimated to be $4.63 billion. The Ccupany's estimated cost for its share, including AEUDC, is $6,70 billion or about $3,300 per kilowatt. The total coct of the plant, excluding AEUDC, is estimated to be $5.27 billion. Because of uncertainties regarding payments by the other owners of Ccuanche Peak of their share of the remaining construction costs, no estimate of the amount of AEUDC that may be attributable to their interests in the plant has been made. (See Itzn 3, Legal PrMings.) 20
Itan 2. PIOPERTIES (Ocmtirmed). We cmpany had previously estimated in November 1985, that cxaumercial operation of Unit 1 of Ccenanche Peak would be achievable by mid-1987 and Unit 2 by the end of 1987 if the n = =n y licensing approvals were obtained. We total cost of the cmpany's share of the plant was estimated at that time to be $4.640 billion, including AFUDC, or
$2,297 per kilowatt. However, in April 1986, the Ompany announced that such schedule was no longer achievable and in July 1986, announced that the reanalysis, reinspection, corrective action program, aM the hearing process before the ASIB could not be cmpleted in time for commercial l operation of Unit 1 for the 1988 summer peak season and that, therefore, l it was making other arangements to obtain additional capacity in the )
I interim. 1 As a further part of the Ccupany's regular annual review of its construction p w am, changes have also teen made regarding three of the Company's lignite-fueled generating units. We Cmpany's resource plan f now provides that Unit 2 of the Twin Oak Plant will go into service in 1993 instead of 1992 and the Forest Grove Unit will go into service in 1994 instead of 1993. Se Ccrpany will not build a fourth unit at its Martin Iake Plant, which had previously been scheduled for operation in 1994 (see Notes 11 and 12 to Financial Statements). Se effects of inflation on construction costs, the reevaluation of growth expectations or additional regulatory requirements may result in changes in estimated completed costs and in-service dates for certain generating units in design or urder construction. Actual expenditures and dates of cmpletion may further vary because of other uncertain factors such as weather conditions, licensing delays, changes in peak load requirements and cost and availability of fuel, labor, materials and capital. Ctenitnents in connection with the construction program, principally for gere. rating stations and related facilities, are generally revocable subject to reimbursement to manufacturers for expenditures incurred or other cancellation penalties. Of the funds required to finance the construction program in 1987, present estimates indicate that approxirately 20% of the funds will be provided frca interml sources. For information regarding financing of the construction prcgram see Management's Discussion and Aralysis of Financial Condition and Results of Operations. 21
Itan 2. PEOPERI'IES (Ocncluded) .
'IU FrPr'TRIC CIMPANY SYSIEM December 31, 1986 e
\ ,, . . l l j
! ==
> i I
'~
mus F' A
- Set L Al &#f &
i
. % s-I
,, t **,
_ . y _. #f, s%-. , '* .,
)'
f
.* /
=
s% f..2, =#' 9 m. i j O- th ) , Ar. p. I .A. 4
. -r ,.
s 4_ & . _ '_. , m I (
-_ 1 -~, = g>
,y ,
_' = s(.Q -' - s y' - -. . l * ~ ~ . , ,, *
- -- s g s rrs
- s. _
> s
- 4. .
k ~ --
% -~ S s
- e l M f.::.:-
.- = ;
\ a.-*
A. ,4
** , 0
-J .
,[
m v i *= _ 54 7lV*Y e ef' , e
;I **'
4-b Tj J, sr); l I. )
. ,v 22
Itan 3. LEAL PROCEEDDES. Regulation and Rates In February 1984, the Texas Municipal League (DE) filed suit in the 200th Judicial District Court of Travis County, hxas and Texas Electric, as a division of the Campany, filed suit in the 299th Judicial District Court of Travis County, Texas for review of the WC order granting '1bxas Electric Service Campany its Decerber 1983 rate increase. Se T E suit asks that the order be declared void and that excessive rates be refunded. De Texas Electric suit seeks judicial review and a reversal of certain aspects of the order. In March 1984, Tex-La intervened and counterclaimed in these suits complaining of certain aspects of the order. In Septeder 1984, Texas Electric, as a division of the Company, filed suit in the 250th Judicial District Court of Travis County, Texas for review of the June 1984 WC order arising out of the appeals frcrn various municipal ordinances in connection with Texas Electric's 1983 rate proceeding. Texas Electric's suit seeks judicial review and a reversal of certain aspects of the order. In March 1984, the O NC filed suit in the 250th Judicial District Court of Travis County, Texas and Dallas Powr, as a division of the Company, filed suit in the 345th Judicial District Court of Travis County, Texas for review of the WC order granting Dallas Power its rate increase placed into effect in February 1984. In June 1984, the OWC filed suit in the 200th Judicial District Court of Travis County, Texas and Dallas Power, as a division of the Company, filed suit in the 58th Judicial District Court of Travis County, Texas for review of the WC order granting Dallas Power its rate increase placed into effect in February 1984 in the cities of Dallas, Highland Park and University Park. De ONC suits complain of certain aspects of the orders ard ask that excessive rates be refunded. The Dallas Power suits seek judicial review aM a reversal of certain aspects of the orders. An order dismissing these suits was entered in January 1987. In June 1984, Dallas Power, Texas Electric and Texas Ruer, as divisions of the Canpany, filed suit in the 201st Judicial District Court of Travis County, Texas, and Tex-Ia filed suit in the 250th Judicial District Court of Travis County, Texas, for review of the April 1984 WC order fixire fuel factors. Both suits canplain of certain aspects of the t order and Tex-La's suit asks that excessive fuel charges be refunded. In Decenber 1984, the Conpany filed suit in the 98th Judicial I District Court of Travis County, Texas, the O NC filed suit in the 147th Judicial District Court of Travis County, Texas, U E filed suit in the 200th Judicial District Court of Travis County, Texas, and Texas-New Mexico Power Conpany (nc@) filed suit in the 353rd Judicial District Court of Travis County, Texas, seeking review of the WC order of October 12, 1984 in the Ca pany's 1984 rate proceeding. Se Campany's suit seeks judicial review and a reversal of certain aspects of the order. We OWC, TE and D0@ sdts complain of certain aspects of the order and ask that excessive ra+ es' be refurdad. In Lace 2er 1984, the Conpany filed suit in the 250th Judicial District Court of Travis County, Texas, and in January 1985 certain municipalities filed suit in the 126th Judicial District Court of Travis County, Texas for review of the WC order of October 31, 1984 in the appeals from various municipal ordinances in connection with the Cmpany's 1984 rate proceeding. S e Company's suit seeks judicial 23 l
Itan 3. IBGAL PROCEEDDOS (Ctmtirmed) . review and a reversal of certain aspects of the order. We municipalities' suit complains of certain aspects of the order and asks that excessive rates be refunded. In April 1986, the Attorney General of Texas, on behalf of several state agencies, filed suit in the 345th Judicial District Court of Travis County, Texas, against the WC aM several utilities, including the i Campany, challenging the validity of the WC's emergency rule, adopted in February 1986, relating to the method of making refunis of over-recovered fuel revenues. h e suit seeks to enjoin the application of the rule and additional refunds of the difference between the amounts that the State agencies were overcharged and the amounts of the refuMs they received uMer the rule. ) In June and November 1986, the Attorney General of Texas filed suits in the 98th and 331st Judicial District Courts of Travis County, } Texas, respectively, on behalf of several state agencies against the WC l and the Campany seeking reversal of the WC's orders authorizing the refund of over-recovered fuel revenues implemented in the May and October 1986 Campany billings, respectively. Rese suits seek additional refunds of the difference between the amounts that the state agencies were overcharged aM the arounts of the refunds they received pursuant to such PUC orders. (hnanche Ibak Nuclear Generating Staticn he Campany, Texas Municipal Power Agency (T@A), Brazos Electric Power Cooperative, Inc. (BEPC), and Tex-la Electric Cooperative of Texas, Inc. (Tex-la) are the owners of 87-5/6%, 6.2%, 3.8% and 2-1/6% interests, respectively, in Cananche Peak under the terrs of a Joint Ownership Agreement (Agreement) which provides that the Campany is the Project l Manager for Comanche Peak. BEPC has failed to make numenus payments of its portion of the costs of Comanche Peak. BEPC has been experiencing difficulty in obtaining additional financire for Cananche Peak from the Rural Electrification Administration. In addition, since May 1986, Tex-Ia l has failed to rake payments to the Ccopany for its portion of Cmanche l Peak aM 'IMPA has been raking payments under protest. In May 1986, the Cotrpany filed suit in the 14th Judicial District Court of Dallas County, Texas against T@A, BE W and Tex-la because of controversies which exist under the Agreement with respect to the obligations of the parties. Se l Campany asserts that each of the defendants has either claimed that it has no further obligation to pay its share of the reraining costs of construction of Cctranche Peak, or has claimed that the Company has failed to properly construct Cmanche Peak or otherwise has breached its obligations under the Agreement. Se Campany seeks recovery of darages against Tex-Ia for its anticipatory breach of the Agreement and asks for a declaratory judgment against Tex-La, BEPC and T@A declaring among other things that they are obligated to pay their share of the remaining costs of construction of Cananche Peak and that the Campany has not failed to use prudent utility practices in constructing Cmanche Peak in accordance with the Agreement. T@A, BEPC and Tex-Ia have filed cross-actions in such suit against the Cmpany and Texas Utilities asserting various causes of action, including a number of alleged breaches of the Agreement by the Ccmpany and violations of the Texas Deceptive Trade Practices Act (DTPA) . In September 1986, the Court in the Dallas County suit ruled in favor of the Cmpany with regard to a plea of the defendants attempting to change the venue of such suit. 24
Itaa 3. IKE IFmFnTNGS (Otocluded) . In June 1986, 'IMPA aM Tex-I2t filed suit in the 98th Judicial District Court of Travis County, Texas against the Cmpany and Texas Utilities. 'Ihe petition asserts various causes of action, including a number of alleged breaches of the Agreement by the Ccrapany and violations of the DIPA. 'IMPA and Tex-la ask for rescission and modification of the Agreement and payment for damages, including treble damages based upon f violations of the DIPA. 'Ihe Ccznpany and Texas Utilities inteM to vigorously contest this suit, which has been stayed as a result of the ruling in the Dallas County suit. ! Also in June 1986, BEPC filed suit in the 345th Judicial District Court of Travis County, Texas against the Ccrnpany, Texas Utilities aM Mining Campany and Service Company, also subsidiaries of Texas Utilities. BEPC alleges that the defendants have breached the Agreement, certain implied warranties aM fiduciary duties, and have been grossly negligent, acted with willful miscoMuct and have violated the DTPA and Texas and federal securities laws. BEEC asks for an injunction against efforts by the defeMants to recover additional payments, rescission and reformation of the Agreement aM payment for damages, trebled pursuant to the DTPA. BEPC alleges actual damages to date of at least $216 million. 'Ihe defendants intend to vigorously contest this suit, which has been stayed as a result of the ruling in the Dallas County suit. Envim-dal Matters In July 1979, a suit was filed in the 4th Judicial District Court of Rusk County, Texas against Texas Utilities Generatig Campany (now Mining Capany), Service cmpany, and the former electric utility subsidiaries of Texas Utilities, by the State of Texas on behalf of the TACB. 'Ihe petition alleges that Texas Utilities Generating Cmpany (now Mining Cctnpany) , and Service Campany, acting as agents for the electric utility subsidiaries, violated regulations issued uMer the federal Clean Air Act, provisions of the Texas Clean Air Act, aM pemits issued by the TACB, in allowing the start-up of Unit 3 at the Martin Iake station before the completion and operation of its associated air pollution cx>ntrol equipment. 'Ihe State seeks an injunction against further violations aM penalties frcan each of the defendants of $1,000 for each day and each act of violation. (See Item 1, Business - Environmental Matters.) In June 1980, various electric utility campanies and Texas Utilities Generatig Ccr pany (now Mining Company), intervened in a suit pending in the United States District Court for the District of Columbia, challenging the validity of the EPA regulations issued uMer RCPA. (See Item 1, Business - Environmental Matters.) Itan 4. SUIMISSICH OF MNITERS 'IO A VOTE OF SECURITY IDIIIRS. None. PART II Itsa 5. MARKET EUR REIIISIRANT'S CDEN D2UITY AND REIATED STOCNDIIER MATIERS. All of the Cmpany's comon stock is owned by Texas Utilities. Reference is made to Note 4 to Financial Statements regarding limitations upon payment of dividends on common stock of the Ca pany. 25
l Itan 6. NN'HD FINANCIAL DA'IA. Ma SDLTISTIB Year Ended December 31. 1936 1985 1984 1983 1962 TOT AL ASSETS end of year ( thousands) . . . . . . . . . . . . . . . . . $11,276,886 $9,800,753 $8,782,507 $7,897,421 $7,196,507 ELECTR IC PLANT erd of year ( thousands). . . . . . . . .. . . .. . $12,543,249 $11,154,092 $10,082,063 $9,108,056 58,268,898 Accunulated depreciation end of year. . . . . . . . . . . . . 2,174,441 2,011,061 1,348,146 1,687,098 1,539,486 Construction expenditures (including allowance for funds used during construction)............ 1,475,177 1,057,057 878,581 854,307 858,683 CAPITAll2ATION end of year (thousands) long term debt................................... $3,748,931 $3,048,329 $2,798,105 12,592,152 52,496,773 Preferred stock: Not subject to mandatory redeeption., .. . .. ... 811,418 811,418 727,911 629,779 600,109 Subject to mandatory redenption..... .... .... 232,424 34,696 34,6 % 34,696 Conmon stock equity.............................. 4.282.405 3.793.118 3.319.729 3.040.710 2.664.888 Total.............................. 59.075.178 S7,687,561 56.880.441 $6.297.337 55.761,770 EMBEDDED INTEREST COST ON LONG TERM DEBT end of year.................................. ..... 10.0% 10.3% 10.1% 9.7% 9.5% EMBEDOED DIVIDEND COST ON PREFERRED STOCK end of year...................................... . 8.1% 8.2% 8.3% 8.0% 7.7% kET INCOME (thousands)............................... 5712,292 $654,417 $590,765 $520,901 $482,739 CASH DIVIDENDS DECLARED ON COM%N STOCK (thousands).................................... ... s395,430 $354,752 $317,638 $282,376 $241,381 RATIO GF EARNINGS TO FlxED CHARGES....... ........... 3.7 3.9 4.0 3.9 3.9 SUPPLEMENTAL RATIO OF EARNINGS TO FIXED CHARGES *..... 3.3 3.4 3.5 3.5 3.4 ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION AS PERCENT OF EARNINGS TO CCMMON ST0CK................ 47.9% 39.1% 32.4% 33.8% 31.2% RETURti 04 AVERAGE COMMM STOCK EQUITY................ 15.7% 16.5% 16.7% 16.5% 17.4% NET FUNDS FROM OPERATI(NS AS PERCENT OF CONSTRUCTION EXPENDITURES (exclL. ding allowance for funds used
& ring construction)............................... 28.1% 44.4% 54.6% 48.8% 53.6%
- The si.pplecental ratio of earnings to fixed charges includes interest billed the Ccepany on senior notes of af filiated corpanies which provide services to the Corpany. (See Note 2 to Financial Statenents.)
26
Item 6. SEIJ!CED FINANC:IAL Dh'm (Otocluded) . OPERATDG SETISTICS Year Erded Deceber 31. M 1985 M M M ELECTRIC ENERGY GENERATED AND PURCHASED (mhfi) Generated . net station output.............. 75,467,871 76,355,3 % 72,582,637 67,706,594 64,224,726 Purchased and net interchange............... 4.712.082 2.057.490 382.651 343.581 371.190 Totat generated and purchased......... 80,170,953 78,412,886 72,965,288 68,050,175 64,595,916 Corgany use, losses and maccomted for..... 4.925.178 5.042.990 3.839.517 5.340.248 4.215.774 Total electric energy sales........... 75,254.775 73,369,8 % 69,125,771 62,709,927 60,380,142 ELECTRIC ENERGY SALES (mdi) Residential................................. 24,604,109 24,300,788 22,693,290 20,162,506 19,945,087 Corne r c i a l . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,453,435 20,349,334 19,026,267 17,366,563 16,475,253 Industrist.................................. 21,013,278 20,921,530 20,343,558 18,690,077 17,526,412 Gove rnment and mmi c i pa l . . . . . . . . . . . . . . . . . . . . 2.385.168 2.324.785 1.920.420 1.790.476 1.730.273 Total general business................ 69,455,990 67,896,437 63,983,535 58,009,622 55,677,025 other electric utilities.................... 5.798.785 5.473.459 5.142.236 4.700.305 4.703.117 Total electric energy sales........... 75.254,775 1 369,8 % 69,125,771 62,709,927 60,380.142 CFERATING REVENUES (thousands) Residential................................. $1,530,258 $1,673,378 $1,546,081 $1,306,912 $1,237,632 Coreer c i a l . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,137,944 1,207,784 1,127,766 998,362 911,487 , f rd;s t r i a l . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 822,831 935,849 893,531 808,016 745,243 Gove rreent and mmi c i pa t . . . . . . . . . . . . . . . . . . . . 134.927 145.256 117.793 104.730 95.673 Total general tusiness................ 3,625,960 3,962,267 3,685,171 3,218,020 2,990,035 other electric utilities.................... 222.644 250.857 233.296 202.387 190.727 Total frca electric energy sales...... 3,848,604 4,213,124 3,918,467 3,420,407 3,180,762 Other operating revenues (inclWing over/ under recovered fuel revenue)............. 78.795 (48.744) 7.271 67.219 56.902 Total cperating revenues.......... ... $3,927.399 $4,164,380 $3,925,738 $3,487.626 53,237.664 ELECTRIC CUSTOMERS (end of year) Residential................................. 1,820,381 1,764,346 1,669,735 1,556,760 1,477,097 Cornerc i a l . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217,232 214,386 208,477 198,548 187,065 I nd;s t r i a l . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,912 24,148 24,058 22,761 21,478 Gove rnment ard mmi c i pa t . . . . . . . . . . . . . . . . . . . . 13.180 12.080 11.455 10.210 10.148 Total general tx;si ness. . . . . . . . . . . . . . . . 2,074,705 2,014,960 1,913,725 1,788,279 1,695,788 other electric utilities.................... 61 63 66 68 75 Total elec t ri c cus terners. . . . . . . . . . . . . . 2,074,766 2,015,023 1,913,791 1,788,347 1,695,863 RESIDENTIAL STATISTICS (excludes master metered customers, mwh sales and revenues) , Average kwh per custceer. . . . . . . . . . . . . . . . . . . . 12,749 13,002 12,887 12,073 12,320 Average revenue per kwh..................... 6.318 6.994 6.934 6.604 6.34 l Industrial classification inctWes service to Alcoa Sandow: Electric energy sales (mwh)................. 3,092,6 % 2,861,454 2,989,272 2,660,564 2,316,308 Operat ing revenues ( thousards) . . . . . . . . . . . . . . $65,664 $68,946 $70,825 $68,121 568,035 27
Itan 7. MANAGEMENT'S DISQESICH AND ANALYSIS OF FINANCIAL CI2iDITICH AND RESUIES OF OPERATICHS. Liquidity and Chpital Resources he primary capital requirements of the Ccanpany for 1986 and as estimated i for 1987 through 1989 are as follows: ! 1M6 192 19.!!!! 19e9 Thousands of Dollars l l Construction expenditures (excluding AFUDC)... $1,171,000 $1,114,000 $ 963,000 5951,000 Nuclear fuel.. ............................... (3,000) 23,000 28,000 4,000 Maturities of long term debt ard sinking fmd recpirements (incitdes early redecptions in 1986 of $232,000,000). ... ..... . .. ..... .__g73.000 22.000 24.000 19.000 Totat....... ..... ............. ... .. $1.441.000 $1.159.000 $1.015.000 $974.000 For detail concerning rajor construction work now in progress or contemplated by the Cmpany and coautitments with respect thereto, see Item 2, Properties - Construction Program. 1 he Ccxtpany generates fuMs from operations sufficient to meet operating needs, pay dividends on capital stock and finance a portion of capital l requirements. Rese funds are derived frcn net inccme, depreciation, deferred taxes and investment tax credits. Factors affecting the ability of the Company to continue to fund a portion of its capital requirements from operations include adequate rate relief and regulatory practices allowing a substantial portion of construction work in progress in rate base, adeqtute depreciation rates, nomalization of federal income taxes, recovery of the cost of fuel and purchased power and the opportunity to earn cmpetitive rates of return required in the capital markets. For 1986, approximately 28% of the funds needed for construction was generated fram operations. External funds of a permanent or long-tem nature are obtained through the sales of common stock to Texas Utilities, preferred stock and long-tem debt. < 2e capitalization ratios at Decerber 31, 1986, consisted of approximately 41% long-tem debt, 12% preferred stock and 47% ccrmen stock equity. Similar ratios are expected to be maintained in the future. To provide for immediate cash requirements during periods between long-term financings, the Ccarpany obtains short-tem loans from Texas Utilities, which had lines of credit with commercial banks aggregating $600,000,000 at Decerber 31, 1986. he Company does not raintain separate credit arrangements with banks or other lenders. 28
Itan 7. MMOGEMENT'S DISQJSSICE AND ANALYSIS OF FINANCIAL OCNDITICH AND RESULTS OF OPERATICNS (Ocsitinued) . Ligiidity and Ospital Resources - (Otzitinued) l Financings in 1986 by the CCaupany included the following: Long Term Debt l Principal Month Amnt Descriotion l March $200,000,000 9 3/8% First Mortgage and coltateral Trust Bonds due 2016 April 200,000,000 9 3/4% First Mortgage and Collateral Trust Bonds due 2016 October 70,000,000 7 3/4% Collateralized Pollution Control Revenue Ref tnding Bonds due 2016 Decec6er 200,000,000 81/4% Cottateralized Pollution Control Revenue Bonds due 2016 Decerber 300.000.000 91/2% First Mortgage and Collateral Trust Bonds &e 2016 Total $970,000,000 1 Preferred Stock: Month Shares Net Proceeds Description February 1,000,000 S 98,878,000 $ 9.48 Ctrulative Preferred; SLbject to Mardatory Rederption July 500,000 49,413,000 $10.00 Ctrulative Pref erred; Subject to Mandatory Rederption July 500,000 49.437.000 $ 8.92 Ctrulative Preferred; Stbject to Mardatory Rederption Total $197,728,000 Cocoon Stock: Month Shares Am nt Description June 3,750,000 $150,000,000 Without Par Value Deced>er 2,400,000 100.800.000 Without Par Value total $ 250,800,000 Early rede:gtions of long-tem debt by the Ccxpany in 1986 included the followirg: Principal Rederption Month Amunt Cost Descriotion May $ 50,000,000 $ 54,265,000 113/8% First Mortgage Bords due 2010 June 50,000,000 56,000,000 15 1/8% First Mortgage Bonds due 2011 Septecber 12,467,000 14,156,000 171/2% First Mortgage Bonds due 2011 Nove-ber 70,000,000 71,400,000 131/2% Coltateralized Pollution Control Revenue Bords due 2011 Decerber 50.000.000 56.270.000 15 7/8% First Mortgage Bords &e 2011 Total $232,467,000 5252,091,000 29 c_ - _ _ _ - _ _ _ _ _ _ _ _ - _ _ _ - _ _ _ _ .
Itan 7. MANAGEMENT'S DISCUSSICH AND ANALYSIS OF FINANCIAL CINDITICN AND RESUIIIS OF OPERATIWS (Ocotirmed) . Liquidity and Capital Resources - (Cbncluded) Financirgs to date in 1987 include the sale by the Ccupany in February of
$250,000,000 principal amount of 9-1/4% first mortgage and collateral trust bonds due 2017. We Campany anticipates the issuance in March 1987 by the Brazos River Authority of $100,000,000 principal amunt of pollution control revenue bords to be collateralized by the issuance of an equal principal amunt of the Campany's first mortgage and collateral trust bonds ard the issuance in April 1987 of the Campany's common stock to Texas Utilities for approximately $199,750,000. In addition to the maturities of long-term debt during 1987, the Campany's Board of Directors authorized in February 1987 the redemption of $32,531,000 principal amount of its 16% first mortgage bonds due April 2012 at 112.27% of the principal amount thereof plus accrued interest. Additional early redemptions may occur from time to time in amounts presently i
urdetermined. S e Campany expects to sell securities as needed, including the possible future sale of up to $350,000,000 principal amunt of first mortgage and collateral trust bonds and up to 1,000,000 shares of cumulative preferred stock, both currently registered with the Securities ard Dcchange Ccanission for offerirg pursuant to Rule 415 urder the Securities Act of 1933 and sales of additional securities from time to time, in amounts ard of types presently urdetermined. Se Tax Reform Act of 1986 was enacted in October 1986. W e Act, among other things, repealed the investment tax credit, lengthened depreciation lives, created an alternative minimum tax ard lowered the corporate tax rate subject to certain transition rules. Other tax accounting changes were required including the capitalization of items previously expensed ard a change i in the timing of income recognition for certain items. Substantially all of the tax changes, with the exception of the rate reduction, will result in the campany paying more taxes currently, will eliminate sources of internally generated funds for the Campany and thereby increase financing requirements in the future, he Act did not have a material effect on the Ccepany for the year ended December 31, 1986. Although the Campany cannot predict future regulatory practices, the extent of any further delays in the licensing of Comanche Peak or any changes in economic ard securities market conditions, no changes are expected in trends or cammitments which might significantly alter its basic financial position or ability to finance capital requirements. McNever, the Ccepany has irdicated that it does not currently plan to include any additional Ccananche Peak costs in a rate increase request until Unit 1 is ready for commercial operation and has stated that it believes the initial rate increase that will be n w m y to place Unit 1 into base rates can be held to abcut 10%. Berefore, prior to the ccarpletion of Comanche Peak and its inclusion in rate base, a lesser percentage of capital requirements may be generated internally. (See Item 1, Business - Regulation ard Rates and Notes 10 ard 11 to Financial Statements.) See Item 6, Selected Financial Cata - Financial Statistics for additional information. 30
Itan 7. MANAGDENT'S DISCUSSICH AND ANAIXSIS OF FINANCIAL CNDITICE AND RESULTS OF OPERATIONS (Continued). F R mults of Operations Operatirq revenues decreased $236,981,000 in 1986 and increased
$238,642,000 in 1985. 'Ihe followirg table details the factors contributing to the decrease and increase:
Increase (Decrease) Factors 1986 M Thcasands of Dollars Fuel and purchased power reveroe... ...... S(299,261) 5103,598 Increased energy sales.................... 29,904 135,051 Other............. . . ........... ...... (7.624) (7) Total........ .... ...... . ......... $(236,981) $238.642
'Ihe decrease in operating revenues for 1986 was the result of decreased fuel revenue partially offset by increased energy sales. Iower cost of fuel had a significant impact on the decrease in revenues, despite an increase in energy sales of 2.6% attributable to a 3.0% growth in custcmers. Milder than normal weather and a softness in the service area's econcey have also affected sales.
Operating revenues for 1985 increased as a result of increased energy sales due primarily to a 5.3% increase in custcrers and a fairly stable economy, despite milder than normal weather in the service area. (See Item 1, Business - niel Supply and Purchased Pcuer ard Regulation and Rates and Item 6, Selected Financial Data - Operating Statistics.) Fuel and purchased power expense decreased $305,814,000 in 1986 and increased $113,859,000 in 1385. Io.er fuel expense for 1986 reflects the decrease in the unit cost of gas from $3.41 per million Btu in 1985 to $2.77 in 1986 offset in part by increased purchased power. 'Ihe increase for 1985 was due primarily to increased purchased pcser and increased consumption of gas. (See Item 1, Business - Fuel Supply and Purchased Ptser ard Item 6, Selected Financial Data - Operating Statistics.) Operation expense increased $33,069,000 and $27,141,000 for 1986 and 1985, res p ively. Operation expense was affected by increases in the cost of labor, materials ard services. Increases in kheeling costs and liability ard property insurance had a significant irpact on operation expense for 1986.
'Ihe increase for 1985 reflects increases in kheeling costs ard costs associated with reroving and resetting line transformers.
31
Item 7. MANAGEMENT'S DISCUSSION AND ANAIXSIS OF FINANCIAL CDIDITICH AND RESULTS OF OPEPATICNS (Otmcluded) . Results of Operations - (Cbncluded) Maintenance expense for 1986 aM 1985 increased $18,881,000 and $30,295,000, respectively. W e increase in maintenance for 1986 was the result of increases in power production expenses associated with lignite and gas plants ard programs to improve a d ensure the availability of all generating units. Increased distribution maintenance also added to the increase for 1986. W e 1985 increase was the result of increased power production expenses of gas plants to ensure the availability of all gas units and increased tree trimming and distribution raintenance. Taxes other than incme increased $5,014,000 and $28,984,000 for 1986 and 1985, respectively. Se increase for 1986 resulted primarily frca increases in franchise and properly based taxes offset in part by decreased revenue based taxes. Se 1985 increase was due primarily to increases in revenue and property based taxes. Allowance for fuMs used during construction (AFUDC) increased as a result of the ongoing construction program and the resultant increase in the level of construction wrP. in progress of the Caqany not included in rate base. Other inccme and deductions - net for 1986 increased $14,529,000. Se increase in 1986 was primarily due to a sale of certain prcperties at a gain. We decrease for 1985 was attributable to the write-dcun of certain property to estimated rarket value and a decrease in interest inccre. Interest on first nortgage bords increased in 1986 due to new issues sold during the year and annualized interest of issues sold during 1985, partially offset by the retirements and redemptions of certain high interest rate issues. For 1985, the increase was prirarily the result of new issues sold during the year. Other interest charges increased $6,360,000 for 1986 and $1,654,000 for 1985. Se increases in other interest charges for both 1986 aM 1985 reflect increased interest costs on over-recovered fuel revenue. Net income increased $57,875,000 in 1986 and $63,652,000 in 1985 khich represents a culmination of the factors described above. Included in net income were increases in AEUDC of $74,114,000 in 1986 and $57,952,000 in 1985 which represents non-cash earnings to the cognny. Preferred stock divide,nds increased for 1986 and 1985, $12,099,000 and
$5,618,000, respectively, due to new issues sold during these periods and the full year's effect of prior pericd issuances, offset in part by lower dividend rates on the adjustable rate series.
32
1 ) t [THIS PAGE INTENTIONALLY LEFT BLANK] t t x 1 l l l l 1 l
?
l 1 l 33 l 1 _ _ _ - -
Itan 8. FINANCIAL SIATIMENIS AND SUPPIDENINE DMA. TEXAS UfILITHS ELECIRIC CIMPANY SIATDENT OF INO:ME Year Erded Decenter 31. I!M 1.!M M Thousands of Dollars OPERATING REVENUES........................................ 53.927.399 S4.164.380 $3.925.738 CPERATING EXPENSES Fuel and purchased power............................... 1,594,174 1,899,988 1,786,129 0peration.............................................. 511,720 478,651 451,510 Maintenance............................................ 316,118 297,237 266,942 Depreciation....................... ................... 209,152 195,959 192,276 Federal income taxes (Note 7)................ .. ..... 264,584 279,012 286,313 T ax es o th er than i ncome . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272.771 267.757 238.773 Total operating expenses....................... ... 3.168.519 3.418.604 3.221.943 OPERATING INCOME.................. .................. ... 758.880 745. 776 703.795 OTHER INCOME ALtowance for egalty funds used during construction.... 231,880 173,846 129,988 Other inecme and deductions net........ ............. 9,574 (4,955) 4,995 Federal income taxes (Note 7).................... . ... (3.091) 2.136 (2.483) Total other income............... .... . .... ..... 238.363 171.027 132.500 TOTAL INCOME.......... . .............. . ...... ......... 997.243 916.803 836.295 $ INTEREST CHARGES I nt er es t on mor t g age bords . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317,978 285,693 256,397 Interest on other tong term debt.... . .. ...... ...... 10,484 10,484 10,484 other interest...................... .................. 28,435 22,075 20,421 , Allowance for borrowed furris used during construction.. (71.946) (55.866) (41.772) Total interest charges............................. 284.951 262.386 245.530 NET INCOME......... ............ ..................... ... 712,292 654,417 590,765 PR E F E R RE D ST OC K D I VI DE ND S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78.375 66.276 60.658 NET INCOME AFTER PREFERRED STOCK DIVIDEh05................ $ 633,917 _ 5 588,141 S 530.107 See accc:rpanying Notes to Financial Statements. r 34 ,
Y 5
' /
'IEXAS UPILITIEE ELECIRIC CCMPANY -
STATEMENT OF SOUR 3 OF FUNDS PIR CCNETIBDCPICE f Year Ended December 31. M M M Thousands of Dollars FUNDS FROM OPERATIONS t Netincune................................................... S 712,292 $ 654,417 $590,765 Depreciation......................................... ........ 209,152 195,959 192,276 D ef er red f ede ra l i ncome t ax es ne t . . . . . . . . . . . . . . . . . . . . . . . . . . . 121,086 99,834 92,056 Federal investment tax credits net.......................... 64,243 67,867 60,543 Allcwance f or f mds used duri ng const ruct i on. . . . . . . . . . . . . . . . . (303.826) (229.712) f171.760) T ot al f mds f rom opera t i ons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 802.947 788.365 763 880 Less - dividends declared: Preferred stock............. ............................... 78,375 66,276 60,658 C arron s t oc k . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 395.430 354.752 _3_1,7.638 Total dividends declared........ ....................... 473.805 421.028 378 296 Net f mds f rom opera t i ons . . . . . . . . . . . . . . . . . . . . . . . . . . 329.142 367.337 385.584 FUNOS FRCN FINANCING > Sales of securities: First mortgage bonds................... . .................. 970,000 475,000 250,000 Other long term debt........................................ - 4,856 Preferred stock............................. ............... 197,728 83,513 98,200 c cmon s t oc k . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,800 240,000 65,550 Retirement of long term securities (Note 6)............. ... (273,312) (225,676) (46,787) Increase (decrease) in notes payable to parent.......... ... . (99.300) .(55.400) 117 130 N e t f mds f rom f i nanc ing. . . . . . . . . . . . . . . . . . . . . . . . . . . 1.045.916 517.437 489.949 OTMER SCURCES (USES) 0F FUNDS Changes in working capital, excluding notes payable, long term debt due currently a d over-recovered fuel revenue: Cash in banks and t ernpora ry cash inves tment s. . . . . . . . . . . . . . . . (183,965) 3,209 7,3 74 Accounts receivable net................................... 7,824 (39,649) (36,319) Inventories......................... ....................... 10,314 (2,932) (105,388) Accounts payable....................................... .... 66,884 ?8,888 39,327 Taxes accrued.... .......................................... (32,186) (14,068) 15,354 Other net......... ....................................... (17.447) 9.140 25.968 Net change.............................................. (148,576) (16,212) (53,684) Nuclear fuel.................. ............................... 2,760 (54,803) (43,833) Purchase of electric plant (Note 9). . ....................... - - (92,671) Over/mder recovered fuel revenue (net of deferred income taxes)....................................................... (12,309) 52,301 13,441
- Unacertired toss on reacquired debt - net (Note 6)... ........ (23,398) (32,021) -
t other net.................. . ... ........ ................. (22.184) (6.694) 8 035 N e t other sources (uses ) of f mds. . . . . . . . . . . . . . . . . . . (203.707) (57.429) (12.712) Total........... ..... ............... .... ... $1.171.351 S 827.345 $706.821 CONSTRUCTION EXPENDITURES Electric plant................................................ 51,475,177 $1,057,057 5878,581 l Allowance for funds used during construction.................. (303.826) (229.712) (171,760) l CONSTRUCTION EXFENDITURES (excluding allcwance for j funds used during construction)...................... ......... $1,171.351 S 827.345 5706.821 See acconpanying Notes to Financial Statements. 35
'IEmS UTILITIES EIECIRIC (IMPANY BAIANCE SHEETf
, , N M TS December 31. M M Thousands of Dollars ELECTRIC PLANT in service: Production..................................................... $ 2,980,395 $2,878,212 T r ansin 1 s s i on . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,166,066 1,111,704 Distribution................................................... 2,543,163 2,331,764 General........................................................ 328.575 283.722 Tota!.................................................... 7,018,199 6,605,402 i i construction work in progress (Notes to and 11). . . . . . .. .. .. .. .. .. . 5,266,729 4,288,525 j Nuclear fuet...................................................... 251,964 254,724 l Held for future use............................................... 6.357 5.441 Total electric plant..................................... 12,543,249 11,154,092 ' I Less acew utated depreciation..................................... 2.174.441 2.011.061 i Electric plant, less acetrut ated depreci at ion. . . . . . . . . . . 10.368.808 9.143.031 I WEST ME NT s . at c os t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.122 6.236 f CURRENT ASSETS ( Cash in banks..................................................... 4,769 5,004 1 T erpora ry r uh i nves tsent s a t cos t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184,200 - fpeeial deposits.................................................. 30,203 19,822 i Accounts receivable i l Cus*cmers...................................................... 212,153 276,766 l Minori ty omers of Comanche Peak (Note 10). . . . . . . . . . . . . . . . . . . . . 58,826 16,310 0ther....................................... .................. 27,029 13,930 Al lowance f or mcol lect i ble accomt s . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,817) (15,011) Inventories . at average cost! Haterlats and supplies......................................... 107,570 104,318 Fuel stock..................................................... 100,437 114,003 l Deferred federal income taxes (over. recovered fuel reverue)....... 29,253 39,739 l Other current assets.............................................. 48.340 22.970 l Total current assets..................................... 788.963 597.871 DEFERRED DEBITS Unamortized loss on reacquired debt (Note 6).................... . 55,419 32,021 Cancelled lignite unit costs (Note 11)............................ 36,810 Other deferred debits............................................. 20.764 21.594 Total deferred debits.................................... 112.993 53.615 Total............................ ................. $11,276.886 $9,800,753 l ? l l 1 See acccupanyirq Notes to Financial Statements. l 36 l
.- g. ~ . - - - - - = - ,. -
-n-
'IEXAS UFILITIES EIECIRIC ONPANY BMAN3 SHEETI' CM7ITATJ7ATICH AND LTARTT.TTIIE Decenter 31.
M M Thousands of Dollars CAPITALIZATICN Comon stock without per value (Note 3): Authorized shares - 180,000,000 Outstanding shares - 1986, 105,150,000; 1985, 99,000,000......................... $ 2,665,800 $2,415,000 Retained earnings (Note 5)........................................ 1.616.605 1.378.118 Tot a l comon s t oc k egJ i t y. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,282,405 3,793,118 Preferred stock (Note 4): Not subj ec t to mandatory rederrpt ion. . . . . . . . . . . . . . . . . . . . . . . . . . . . 811,418 811,418 subj ec t t o manda tory rederrpt i on. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232,424 34,696 Long term debt, less amounts d>e currently (Note 6)............... 3.748.931 3.048.329 Total capitalization..................................... 9.075.178 7.687.561 CURRENT LIABILITIES Notes payable parent............................................ - 99,300 Long ters debt d;e currently...................................... 22.000 40.000 Total (to be refinanced)................................. 22,000 139,300 Accounts payable: Affiliates................ ................................. .. 122,700 153,436 0ther.......................................................... 201,331 103,711 Dividends declared................................................ 21,b9 17,297 Customers' deposits............................................... 44,877 37,934 Taxes accrued..................................................... 150,716 182,902 Interest accrued......................................... ........ 96,755 86,785 ove r recove red f uel r evenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,594 86,389 other current liabilities......................................... 9.052 11.524 Total current liabilities......................... ...... 732.184 819.278 DEFERRED CREDITS AIC OTHER NONCURRENT LIABILITIES Acci.riut at ed def erred f ederal income t axes . . . . . . . . . . . . . . . . . . . . . . . . . 781,890 660,804 Unarror t i zed f eder a t inves tment tax credi t s . . . . . . . . . . . . . . . . . . . . . . . . 678,102 616,099 other deferred credits and noncurrent liabilities................. 9.532 17.011 Total deferred credits and other noncurrent liabilities.. 1,469,524 1,293,914 ComlTMENTS AND CONTINGENCIES (Notes 2,10 and 11) 's Total.............................................. $11.276.886 $9,800,753 l See a w aying Notes to Financial Statements. l l 37
7 _ l-l
'IEXAS UTIIJTIES EIECIRIC CMPANY SIATDENT OF RETIAINED EARNDK:S Year Ended December 31.
M 19E M Thotmards of Dollars BALANCE AT BEGINNING OF YEAR...................... ....... 51,378,118 $1,144,729 5 932,260 ADD NET INC0ME....................................... .. 712.292 654.417 590.765 Total............................................ 2.090.410 1.799.146 1.523.025 DEDUCT Dividends Preferred stock:
$ 4.50 series ($ 4.50 per share per anntn). . . .. .. 334 334 334 4.00 series ($ 4.00 per share per arrm). .. .. .. 280 280 280 4.56 series ($ 4.56 per share per arrm)..... . 609 609 609 l 4.00 series ($ 4.00 per share per anntn). .. .. . . 440 440 440 4.56 series ($ 4.56 per share per anntn). .. .. .. 296 296 2% l 4.24 series ($ 4.24 per share per arrm)... .. .. 424 424 424 4.64 series ($ 4.64 per share per anntn). .... 464 464 464 4.84 series ($ 4.84 per share per anntn)....... 339 339 339
)
4.00 series ($ 4.00 per share per arrm). .. .. .. 280 280 280 4.76 series ($ 4.76 per share per anrm)... . . .. 476 476 476 5.08 series ($ 5.08 per share per anntn). .. .. . . 407 407 407 4.80 series ($ 4.80 per share per anntn)... .... 480 480 430 4.44 series ($ 4.44 per share per anntn). .. .. .. 666 666 666 7.20 series ($ 7.20 per share per anntn). .. .. . 1,440 1,440 1,440 7.80 series ($ 7.80 per share per anntn)... ... 2,339 2,339 2,339 8.92 seri es ($ 8.92 per share per arrm). . . .. .. 1,784 1,784 1,784 6.84 series ($ 6.84 per shne per anntn)....... 1,368 1,368 1,3t4 7.24 series (S 7.24 per share per arn n)... .. . . 1,809 1,809 1,809 7.44 series ($ 7.44 per share per airm). .. .. .. 2,232 2,232 2,232 7.48 series ($ 7.48 per shars per arrm). .. .. . . 2,244 2,244 2,244 8.20 series ($ 8.20 per share per arrm)....... 2,460 2,460 2,460 8.44 series ($ 8.44 per share per arrm). ...... 2,532 2,532 2,532 9.32 series ($ 9.32 per share per arym). .. .. .. 2,796 2,796 2,796 9.36 se r i es ( $ 9. 36 per sha re per anrm) . . . . . . . 2,808 2,808 2,808 8.68 series ($ 8.68 per share per anntn)... .... 2,604 2,604 2,604 8.16 series ($ 8.16 per share per arrm)... .. .. 2,444 2,444 2,444 8.32 series ($ 8.32 per share per anntn). . . .. . . 2,496 2,496 2,496 8.84 series ($ 8.84 par share per arrm). . . .. .. 2,652 2,652 2,652 9.48 series ($ 9.48 per share per arrm)....... 8,032 - - 8.92 series (S 8.92 per share per anntn). .. .. . . 1,995 - 10.00 series ($10.00 per share per arrvi)... .... 2,236 - 10.92 series ($10.92 per share per arrm)... .... 3,276 3,276 3,276 t 10.12 series (510.12 per share per arrm)... .. .. 3,542 3,542 3,542 10.08 series ($10.08 per share per arr e ).. .... 3,528 3,528 3,528 11.32 series (S11.32 per share per arre)... .. .. 3,396 3,396 3,396 Adjustable rate series A........................ 6, M2 8,713 7,413 Adjustable rate series B........................ 6,205 4,318 - Corre stock (per share: 1986, $3.76; 1985, $3.68 1984, 53.44).................................... 395.430 354.752 317.638 total dividends.................................. 473.805 421.028 3 78.2 % BALANCE AT END OF Yt p (Note 5)........................... S 616,6M 1 $1 378,118 51.144,729 See acxxrpanyirq Notes to Financial Statements. 38
'IEXAS UlTLITIES EIECIRIC CKEPANY NOIES 'IO FINANCIAL STNIDENIS
- 1. SIGNII'ICA?C ACCUREING FOLICIES l Electric Plant - Electric plant is stated at original cost. 'Ihe cost of property additions charged to electric plant includes labor a M raterials, applicable overhead and payroll-related costs ad an allowance for funds used during construction.
Allcuance for hnds Used During Construction - Allowance for funds used during construction (AIUDC) is a cost accounting procedure whereby amounts based upon interest charges on Lorrowed funds and a return on equity capital used to finance construction are charged to electric plant. 'Ihe accrual of AFUDC is in accord with generally accepted accounting principles for the industry, hit does not represent current cash inccrae. In January 1984, the Campany began capitalizing AFUDJ at a net of tax rate of 9-1/2%, compounded semi-annually, of expenditures incurred, except for that portion of construction work in progress allowed in rate base by regulatory authorities. 'Ihis rate was determined on the basis of, but is less than, the cost of capital used to firance the construction program. Depreciation - Depreciation is based upon an amortization of the original cost of depreciable properties on a straight-line basis over the estirated service lives of the properties. Depreciation as a percent of average depreciable property approxirated 3.2% for 1986 and 1985 and 3.3% for 1984.
& venues - Revenues include billirgs under approved rates (including a fuel cost recovery factor) applied to meter readings each month on a cycle basis and an amount for under or over recovery of fuel representing the difference between actual fuel cost and billings on the approved fuel recovery factor. Pursuant to a rule adopted in January 1984 by the Public Utility Commission of Texas (IUC) , the Canpany had been required to request reconciliation of any over-recovery of fuel costs and ray request reconciliation of any under-recovery of fuel costs no less than twelve months after irplenenting a charge in fuel cost recovery. ' nder the current rule .
adopted in July 1986, the Cmpany is required to refund over-recovered fuel revenue if the arount of over-recovery, includirg interest, is the lesser of
$40 million or 4% of its annual known or reasonably predictable fuel costs most recently approved by the IUC. Reconciliation of fuel costs is to be rade in a general rate case or a reconciliation proceeding. Reconc4liation ray be requested if the utility has raterially under-recovered its kncun or reasonably prailctable fuel costs.
Federal Incoro Taxes - 'Ihe Campany is included in the consolidated ; federal income tax return of Texas Utilities Campany (Texas Utilities) and subsidiary ccrpanies, and federal incone taxes are allocated to all subsidiary companies based upon taxable income or loss. Deferred federal income taxes are currently provided for timing differences between book and taxable incone; such differences result primarily from the use of liberalized depreciation and accelerated cost recovery allcwable under the Internal Revenue Code and the under or over recovery of fuel revenue. Cumulative timing differences in earlier years for which deferred federal income taxes were not provided approximated $237,000,000 at Decerber 31, 1986. Investment tax credits are being amortized to incone over the estimated service lives of the properties. 39
'IEXAS UITIITICS EIECIRIC (IMPANY NDIFS 'IO FINANCIAL STA'IDENIS - (Ctritirmed)
- 1. SIGTIFICA!TT ACCCUlTTING ICLICIES - (Concluded)
'Ihe enactment in October of the Tax Refom Act of 1986 included, amorg other things, the repeal of the investment tax credit effective January 1, 1986, subject to certain transition ntles. S e Act did not have a material effect on the firancial statements presented herein for the year ended Del 31, 1986.
- 2. AFFILIATES Texas Utilities provides common stock capital aM short-term financing to the Cctrpany. Texas Utilitie.s has three other subsidiaries which perform specialized services for the System Ctxqpanies, including the Ccxnpany: Texas Utilities Services Inc. (Service Ccepany) furnishes financial, accountirg and other administrative services; 'Itxas Utilities Fuel Ccxnpany (Fuel Ctspany) owns a natural gas pipeline system, acquires, stores and delivers fuel gas aM provides other fuel services for the generation of eleccric energy by the Campany; and Texas Utilities Minirg Cttpany (Mining Ccxnpany) owns and operates fuel production facilities for the surface mining and recovery of lignite for use at the Ccanpany's generating stations.
Se Ccrapany has entered into agreements with Fuel Ccanpany to procure certain fuels and related services and with Mining Campany for the procurement and production of lignite; payments are at cost for the services received aM are required by the agreenents to be "at least equivalent in the aggregate to the annual charge to ino:xne on the books" of Ibel Ctrnpany and of Mining CcxTpany. Se Ccanpany is, in effect, obligated for the principal, $567,340,000 at December 31, 1986, and interest on long-tem notes of Fuel Ccxnpany and of Mining Ccupany through payments described above. Such notes mature at varicus datos through 1999 and have interest rates rangirq frm 8.50% to 12.20%.
- 3. CCt?ON SIOCK Sharts outstandirg Asumsit Deceder 31. Dec h 31.
l M 1985 12M 12M l Thousards of DotIars I Cornor) stock without par value; authorized 180,000,000 shares....... 105,150,000 99,000,000 $2,665,800 $2d15,000 he Canpany issued aid sold shares of its authorized cct::en stock to Texas Utilities as follcws: December 1986, 2,400,000 shares for $100,800,000; June 1986, 3,750,000 shares for $150,000,000; December 1985, 2,600,000 shares for
$101,400,000; February 1985, 3,600,000 shares for $138,600,000; ard March 1984, 1,853,000 shares for $66,550,000.
No shares of the Ccupiny's ccraten stock are held by or for account of the Ccripany, nor are any shares of such capital stock reserved for officers ard crployees or for options, warrants, conversions ard other rights in connection therewith. 40
'IEXAS UITLITIES EIECIRIC OCMPANY NDITS 'IO FINANCIAL SIKIDIENIS - (Contirmwd)
- 4. HerumED SIOCK (cumulative, without par value; entitled upon liquidation to $100 a share; authorized 17,000,000 shares)
Redemption Price Per Share (before Shares outstanding Amomt acMing acctmaJlated Decstzer 31. Deceatier 31. dividenk) l Eventual M M 1986 M Current MinimJn Thatsards of Dollars not Stbiect to Mushtory Redraction 74,367 74,367 s 7,440 $ 7,440 $110.00 $110.00 S 4.50 series...................... 70,000 70,000 7,000 7,000 102.00 102.00 4.00 series ..........:.......... 13,371 112.00 112.00 4.56 series ................ . 133,628 133,628 13,371 110,000 110,000 11,000 11,000 102.00 102.00 4.00 series . ... ............... 64,947 64,947 6,561 6,561 112.00 112.00 4.56 series ... ................. 100,000 100,000 10,081 10,081 103.50 103.50 4.24 series...................... 100,000 100,000 10,016 10,016 103.25 103.25 4.64 series...................... 70,000 70,000 7,000 7,000 101.79 101.79 4.84 series.................... . 70,000 70,000 7,049 7,049 103.56 103.56 4.00 series ..................... 100,000 100,000 10,000 10,000 102.00 102.00 4.76 series.......... .......... 80,000 80,000 8,004 8,004 103.60 103.60 5.08 series.......... .......... 100,000 100,000 10,009 10,009 102.79 102.79 4.80 series....... ........ .... 150,000 150,000 15,061 15,061 102.61 102.61 4.44 series............. . ..... 200,000 200,000 20,044 70,044 103.21 103.21 7.20 series................ ..... 2W,875 299,875 30,021 30,021 103.25 103.25 7.80 series................ ... . 200,000 200,000 20,076 20,076 103.60 103.60 8.92 series............... ...... 200,000 200,000 20,022 20,022 103.05 103.05 6.84 series.............. ....... 249,800 249,800 25.100 25,100 105.23 103.42 7.24 series............ ......... 300,000 300,000 30,006 30,006 104.26 102.40 7.44 series............. ........ 300,000 300,000 30,073 30,073 104.82 102.95 7.48 series..................... 300,000 300,000 30,108 30,108 105.34 103.29 8.20 series...... .......... .... 300,000 300,000 30,046 30,046 105.29 103.18 8.44 series...................... 300,000 300,000 29,625 29,625 104.66 102.33 9.32 series...................... 300,000 300,000 29,625 29,625 104.63 102.34 9.36 series............ ......... 300,000 300,000 29,550 29,550 104.09 101.92 8.68 series...................... 299,475 2W,475 29,616 29,616 106.12 102.04 8.16 series. .......... ......... 300,000 300,000 29,655 29,655 105.88 101.00 8.32 series.......... .. ........ 300,000 300,000 29,591 29,591 106.13 102.05 8.84 series...................... 300,000 300,000 29,670 29,670 108.19 102.73 10.92 series..... . ..... ....... 350,000 350,000 34,615 34,615 106.75 100.00 10.12 series.......... . .. .. ... 300,000 300,000 29,670 29,670 111.32* 100.00 11.32 series................... .. Adjustable rate series A... ...... 1,00J,000 1,000,000 98,200 98,200 (a) 100.00 Adjustable rate series B.......... 850.000 850.000 83,513 8},51) (a) 100.00 8.172.092 8.172.092 1311.418 1811,418 Total......................... Stbject to Marditory Rcdrvotion (b) 350,000 350,000 $ 34,6% 5 34,696 5110.08* S100.00 l $10.08 series...................... 1,000,000 98,878 - 109.48* 100.00 9.48 series...................... 500,000 49,413 110.00* 100.00 10.00 series............ ....... . L _,9.437 4 108.92* 100.00 8.92 series......... ............ 500.000 Total.................. ..... L350.000 3502000 $232,424 $_31 696 l
'Redeeption enay not be ef fected currently through certain refedirg operations. ,
I 41
TEXAS UTILITIES ELECIRIC CDtPANY NCTIEE 'IO FINANCIAL SIATEMENIS - (Ortinued)
- 4. PREFERRED SIOCK (cumulative, without par value; entitled upon liquidation j to $100 a share; authorized 17,000,000 shares) - (Concluded) !
(a) Adjustable rate series "A" bears a dividend rate for the period ended January 31,1987 of 6.50% per annm. Adjustable rate series "B" bears a dividerd rate for the period ended Decenter 31,1986 of 7.00% per anrun. The series are not redeemable prior to June 1,1989 and Jme 1,1990, respcctively, ard are based on the fixed liquidation price of $100.00 per share. i l (b) The Carpany is recpired to redeem a specified mininn ruter of shares annually correncing on the effective dates shom below, except for the $8.92 series Witch does not Fave a sinking fund provision. The Ccepany may amually redeem, at its option, an aggregate of up to twice the ruter of shares shown for each series. All such redecptions are at a price of $100.00 per share plus accmulated dividends: 1 Minimia Redcamble Initial Date of Series Shares Mandatory RM huption
$10.08 14,000 annually 4/1/89 9.48 66,700 annually 4/1/92 10.00 20,000 annuatty 7/1/92 8.92 All outstanding shares 7/1/96 he Capany issued and sold shares of its authorized preferred stock as follows: July 1986, 500,000 shares of $10.00 series cumulative preferred stock, subject to randatory redemption, for $49,413,000; July 1986, 500,000 shares of $8.92 series cumulative preferred stock, subject to mandatory redemption, for $49,437,000; February 1986, 1,000,000 shares of $9.48 series cunnlative preferred stock, subject to mandatory redemption, for $98,878,000; June 1985, 850,000 shares of adjustable rate series B preferrod stock for $93,513,000; and May 1934, 1,000,000 shares of adjustable rate series A preferred stock for $S?,200.000.
No shares of the Canpany's preferred stock are held by or for acccunt of the Ccanpany, nor are any shares of such capital stocks reserved for officers and enployees or for options, warrants, conversions and other rights in connection therewith.
- 5. RETAINED EARNDIGS RESTRICTICtJS Re Cmpany's articles of incorporation, the mortgages, as supplemented, and the debenture agreements contain provisions which, under certain conditions, restrict distributions on or acquisitions of its common stock. At December 31, 1986, $123,613,000 of retained earnings were thus restricted as a result of the provisions of such articles of incorporation.
Se articles of incorporation restriction provides in effect that the Company shall not pay any commn dividend which would reduce retained earnings to less than one and one half times annual preferrcd dividend requirements. Se mrtgage restrictions are based primarily on the replacement fund requirements of the mortgages. We restriction contained in the debenture acreements is designed to raintain tho agg m gate preferred and common stock l equity at or above 33-1/3% of total capitalization. 42
TEXAS UTILITIES EIECIRIC CDG%NY NDIES 'ID FINANCIAL SIKIDENIS - (Ctmtimed)
- 6. IONG-TERM DEBT, less amounts due currently Maturity Grotes Interest Rate Grams December 31.
llc 5 19 LOM 19 M M Thusards of Dollars First mortgage bonds: 1987 1991 4 1/2% 4 3/4%........ ............... S 34,500 $ 50,500 1996 4 1/4 5 1/8 ........................ 142,000 142,000 1092 53/8 9 3/8 ........................ 304,000 304,000 1997 2001 2006 71/8 10 1/8 ........................ 750,000 750,000 2002 2011 8 1/4 17 1/2 ........................ 275,000 437,467 2007 2016 93/8 16 ........................ 1,757,531 1,057,531 2012 Pollution control series: 2016 73/4 13 1/2 ........................ 310,000 110,000 2011 Sinking find debentures: 1989 4 1/2 4 5/8 ........................ 18,454 24,5 % 1987 1993 1994 6 5/8 7 3/4 ........................ 32.448 33.151 Total...................................................... 3,623,933 2,909,245 Pollution control reverue bonds: 2009 5.70 7 5/8 ...................,.... 160,000 160,000 2004 Unamortized prercita and discount.................................. (35.002) (20.916) total long term debt, less amount due currently. . .. .. .. .... S3.748.931 $3.048.329 Sinkirs fund and naturity requirements for the years 1987 through 1991 under lorg-term debt instruments in effect at December 31, 1986, were as follows: straire mini = = cash Fted(a) Maturity RessJiraumt(b) leer Thasards of Dollars 1987.................................. $13,870 $22,000 $22,000 1988. ................................ 15,731 22,500 23,549 1989.................................. 15,070 13,000 18,700 1990................................. 14,976 700 1991.................................. 4 ,976 12,000 12,700 (a) Dcluding reqJitements satisfied prior to Decert>er 31, 1936: $2,433,000 for 1937, $571,000 for 1988,
$320,000 for 1989, $320,000 for 1990 ard $320,000 for 1991.
(b) Other reg;irements may be satisfied ty certificatters of property additions at the rate of 167% of such reg;irements, except for sixteen issues at 100%. 43
'IEXAS U1'ILITIES EIECIRIC CIMPANY NtTIES 'IU FINANCIAL SIMDMENIS - (Otritinmd)
- 6. IDNG-TERM DEBT, less amounts due currently - (Concluded)
In Febnlary 1987, the Ca pany sold $250,000,000 principal amount of 9-1/4% first mortgage and collateral trust bonds due 2017. In 1986 and 1985, $232,467,000 and $180,003,000, respectively, principal amount of first mortgage bonds were rMaamM by the Cmpany prior to maturity. Pursuant to eWM regulatory treatment, the net losses on reacquired debt have been deferred ard are being amortized over the remaining lives of the bonds retired.
'Ihe total amounts of sinking fund debentures authorized in the debenture agreements have been issued. 'Ihe capany's first mortgage and collateral trust bords ray be issued in additional arounts, without limitation as to the maximum thereof, but limited by property, earnings ard other provisions of the nortgages. None of the long-term debt is pledged, held by or for account of the issuer, or held in its sinking or other special furds. Electric plant of the Capany is generally subject to the liens of its mortgages.
44
TEXAS UTILTTIES STmIRIC CG4PANY NDIES 'IO FDUM IAL SDtITNENIS - (Ckstirmand)
- 7. FEDERAL DKDE TAXES
'Ibe details of federal incxxne taxes are as follows:
Yeer Ended Lecember 31. 1996 1965 1994, Thousands of Dotters Charged to operating expenses: S 67.320 $155.864 $146,$1} Current................... ............................ Deferred net: Differences between depreciation methods and lives.. 70,451 70,342 66,264 19,428 19,080 17,801 Cert a i n capi t a l i z ed cons t rta: t i on c os t s . . . . . . . . . . . . . . 11,935 (44,553) (12,899) over/mder recovered f uel revenue. . . . . . . . . . . . . . . . . . . - Canc e t t ed l i gni t e m i t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,293 - E arl y rederpt i ons of t ong term debt . . . . . . . . . . . . . . . . . 10,763 14,730 - 8 151 (4.318) 7.991 0ther............................................... 133,021 55,281 79,157 Total......................................... 6424} 67.867 60.543 l I rwes tment t ax cr edi ts ne t . . . . . . . . . . . . . . . . . . . . . . . . . . . Total to operating expenses................... 264 584 279.012 286.313 Charged (credited) to other incore: 4,541 (2,136) 1,033 Current................................................ (1.450) - 1.450 Deferred net......................................... Total to other income......................... 3.091 (2.136) . 2.483 Total federal ineme taxes. . .. . . . . . . . . . $267.675 $276.876 S288.796 l Federal inccxne taxes Wre less than the amcunt ocmputed by applyiry the l federal statutory rate to pre-tax book incczne as follows: l Yeer Erded December 31. , 1996 1985 1984 l l Thousands of DotLars i Federal income taxes at statutory rate of 46%............. $4}0,78} $428.395 Er. 598 S Reductions in federal income taxes resulting f ren: f 139,760 105,66S 79.010 A l l owance f or f eds used it i ng c onst ruct ion. . . . . . . . . . . 23,770 25,168 24,143 Depletion allowance... ................................ 13,347 12,410 11,561 Anort i z at i on of i nves tment tax cr ed i t s. . . . . . . . . . . . . . . . .
.... _6E 6.273 1,084 0ther.............................................
T o t a l r edx t i ons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18},11Q 151.519 115.802
$267.675 S276.876 S288.796 Tot a l f ederal i ncere t ax es . . . . . . . . . . . . . .
27.3% 29.7% 32.8% Effective tax rate......... .............................. 45
1 TEXAS UlTIZrIIS EIECIRIC CCEPANY i NCTIES 'IO FINANCIAL SIKIDtENIS - (Contirued)
- 8. Rt.Twir!DE PIANS AND OIHER PCbmTmtt!DE BDIEFITS
'Ihe Campany has retirement plans covering substantially all employees.
We benefits are based on years of accredited service and the employee's average annual earnings received during the three years of highest earnings. The costs of the plans are detemined by independent actuaries. Contributions to the plans were detemined using the frozen attained age method which is one of the several actuarial methods allowed by the Employee Retirement Income Security Act of 1974. During 1986, the Company adopted the Financial Accountirq Stardards Board's Statement of Financial Accountiry Standards No. 87, "Employers' Accounting for Pensions." 'Ihe new standard requires, among other things, the use of the projected unit credit actuarial method for determining pension cost for financial reporting purposes. 'Ihe difference between pension cost as determined uMer the new staMard and contributions to the plans in 1986 is recorded as prepaid pension cast and included in other current assets. De adoption of the nes accounting standard did not have a material effect upon the Carpany's financial position or results of operations. The following table sets forth the plans' furded status aM amount I
- recognized in the campany's balance sheet
Deember 31. 1986 Thousarris of Dollars 1 Actuarial present value of acetrulated benefits: Acetrulated benefit obligatim, incitding vested benefits of $354,2 N................ .... ........ ........ $(403,227) Projected benefit celisaticn for service rendered to date............................ . ............. ..... . $(575,947) Plan assets at felt value, primarily equity investments, gove rnrent bonds and corpora te bcnds . . . . . . . . . . . . . . . . . . . . . . . . . 631.997 l Plan assets in excess of projected benefit obligation....... .. 56,050 Unrecognized net gain f rom past experience , dif f erent f rcn tht asstred and ef fects of changes in a s s trp t i on s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (44,474) Prior service cost not yet recognized in net pericdic pension expense.................. .. .............. ... ...... 16,292 Unrecognized plan assets in excess of projected benefit obligation l ai u nmary i, i m .. ........ ...... ... ................... . 0 3 e6 > Prepaid pensico cost incttded in other assets. .................. $ 14.372 L Assurptions used for 1986 included a discount rate of 8.0%, an expected ! long-tem rate of return on assets of 8.0% and a 6.3% increase in compensation levels. Net periodic pension cost for 1986, including amounts capitalized, was
- comprised of the following corponents
Service cost benefits earned during the pericd........... $ 26,2^4 l Interest cost on projected benef it cbligation. . . . . .. .. .. . . . 40,921 A c tua l r e t ur n on p l an a s se t s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (87,306) ' N e t ror t i z a t i on and de f e r r a l . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44.904 I N e t pe r i od i c pens i on c os t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . _24227 1 ) The costs of plans, including amounts capitalized, approxirated $39,708,000 for f 1985 aM $37,927,000 for 1984. L 1 46
'IEXAS UTILITIES E2CIRIC 03(PANY PUIES 'IO FINANCIAL SIMDENIS - (Ctritimed)
- 8. feamlMDE PIANS IND OINER BDenmwDER BDIEFI'IS - (Concluded)
In addition to retirement plans, the ccanpany offers certain health care and life insurance benefits to active ard retired employees. We costs of such benefits are generally recognized as claims are paid. m e costs of providing such benefits to retired employees, net of employee contributions, approximated
$6,570,000 for 1986, $4,551,000 for 1985 a M $3,944,000 for 1984.
- 9. WRCHASE OF EIECIRIC PIA!E In Octct:er 1984, the Campany purchased Alcoa's 30% interest in the partially ccrrpleted 'IVin Oak generating station ard associated lignite reserves, and Minirg Ccrapany purchased the associated lignito miniry facilities aM equipment. 'Ihe purchase price of Alcoa's interest in the station ard related lignite reserves was $92,671,000.
- 10. CCHAIGE PEAK NUCLEAR GDIERATING STATION
'Ibe Ccrpany is constructiry two nuclear-fueled generating units at Comanche Peak Nuclear Generatiry Station (Ccananche Peak). he Company is subject to the jurisdiction of the Nuclear Regulatory Ccanmission (NRC) with respect to nuclear pcuer plants. NRC regulations govern the grantirg of licenses for the construction and cperation of nuclear power plants ard subject such pcuer plants to continuing review ard regulation. Pursuant to such regulations, a review is being corducted by the NRC of the Cc.Tpany's application for licenses to operate the Cernanche Peak units. As a part of that review, a prWing was initiated before an Atcznic Safety ard Licensirq Board (ASIB) ard hearings on various issues have been ongoirq since December 1981.
After ccr:pletion of the ASIB prWing, the ASIB will make recommendations to the NRC regarding the issuance of operatirq licenses for the Ccananche Peak units. An intervenor is actively involved in this ASIB proceedire.
'Ihe one remaining Contention before the ASIB in the operatire license proceeding relates to the Campany's quality assurance / quality control (QA/QC) program for the design and construction of the plant. In December 1983, the ASIB issued a mercrardum questionirq the QA program for design of certain 4
portions of the plant ard requested that the Cct:pany offer additional proof of adequate design ard design review procedures. S e ASIB is also reviewing several other related issues and has inlicated its intent to review the results of the NRC's Technical Review Team (TRI) investigation discussed belcu. In July 1984, a separate ASIB, including two of the three me:rbers of the original ASIB, was convened to receive testirony on allegations that OC inspectors at the plant have been subjected to an atrosphere of harassment ard intimidation I which is alleged to have affected the implementation of the ccrpany's QA l program. In January 1986, this separate ASIB was disestablished With all i issues thereafter to be resolved by the original ASIB. 47
l TEXAS UTILITIES EIECIRIC CIMPANY NOIES 'IO FINANCIAL SIKIDENIS - (Otmtirued)
- 10. COMANGE PEAK NUCIIAR GENERATING STATION - (Continued) i As a separate part of the NRC's review of the Ccmds operating license application, in March 1984 the NRC established a task force to consolidate and carry cut the varicus reviews necessary for the NRC Staff to reach its decision regarding the operating licenses. This effort involved the )
establishment of the TRT khich began an intensive onsite investigation in July 1984 ard subsequently has issued reports requesting additional information frtxn ; the cmpany with respect to several functional areas of the plant's construction program. The Cmpany then fenned a special team, the Ctnanche Peak Response Team (CPRI), khich includes a number of independent experts in each area addressed by the TRT, and submitted a Program Plan to respond to the questions raised. Such Plan, which is described further below, is presently being irplemented ard has been expanded to address the design and other ASIB issues described herein. In January 1985, the TRT issued a report on its review of the QA/QC programs at Ccnanche Peak. The report stated that although the QA prcgra documentation met NRC requirements, the implementation of the QA program denonstrated that the Ccrpany has lacked the ccmitment to aggressively implement an effective QA/QC program in several areas. The TRT indicated that j it has found evidence of faulty construction and ineffective QA and QC inspections. Questions were also raised concerning the training and qualification of QC personnel and in the reporting of deficiencies. The IRT further found that prior to July 1984 problems had existed in the control of documentation. In addition, deficiencies in several other areas were described. The Cm pany was requested to subnit to the NRC a program and schedule for empleting a detailed ard thorough assessment of these QA/QC issues presented by the TRI. The Capany also was asked to consider the use of ranagement personnel with a fresh perspmtive to evaluate the TRr findings ard irplement corrective action, and to consider the use of an independent consultant to oversee the corrective action program. In June 1985, the Conpany filed with the NRC ard the ASIB a caprehensive Program Plan khich will be utilized by the CPRT to address all outstanding design and construction concerns. This Plan, which was substantially revised and reissued in January 1986, calls for the inspection, on a sa::pling basis, of numerous safety related systers in the plant, for the determination of root causes and generic implications of any safety significant deviations fourd in the inspection process, and for the developnent of a corrective action program as required. In May 1986, the Staff of the NRC j issued a Supplemental Safety Evaluation Report (SSER) containing an evaluation I i of this Plan. The SSER concludes that the Plan provides an overall structure and process for addressing and resolving all existing construction ard design issues and any future issues that may be identified frcn further evaluations. The Ccepany has made several key management changes in the nuclear program for Conanche Peak, incitding the addition of several new officers who bring substantial nuclear experierce to the Carpany. This new ranagement team is responsible for oversight and irplementation of the reinspection and corrective action program. 48
TEXAS ITTILITIES EWCIRIC CMPANY POIES TO FINANCIAL SINIDOf1S - (Otmtinued)
- 10. OCHANGE PEAK NUCI. EAR GDIEPATDC STATION - (Continued)
Also in June 1985, the Caq:any filed with the NRC aM the ASB a Case Management Plan (Management Plan) khich recmmended that the results of the CPRI effort be used to pmvide the ASG with reasonable assurance that Comanche Peak has been safely constructed and suggested that nunerous current issues before the ASB no longer need to be considered in light of the significant reinspection effort now underway. In August 1985, the AS G issued a bhmorandum and Order addressing issues raised by the Management Plan. S e Memorandum denied the cmpany's motion to adopt the Management Plan stating that the ASG finds that it would not be proper to adopt such F*anagement Plan as the sole basis for continued litigation of the Cmpany's application for operating licenses for the Comanche Peak units. In addition, the Memorardum described other areas of the CPRI Program Plan that concern the AS m. Se Memrandum indicated, however, that if the CPRI Program Plan is revised to address the AS G's concerns and if it is appropriately irplemented, the CPRI Program Plan may denonstrate the quality of the plant. We ASG further stated that it is difficult to forecast khen hearirgs in the case will be concluded but that the ruling may necessitate substantial proceedings that will delay the operation of Comanche Peak. In June 1986, the ASG issued a Memorardum which addressed "Board Concerns" about the adequacy of the CPRT prcgram. The Memorardum stated that, ba.ed c upon the ASG's current knowledge of the prcgram, after having reviewed the first results reports and the SSER on the CPRT program, the ASB continued to have the concerns expressed in earlier mercranda, as described above. The AS m also raised additional concerns about how firdings in one area of the reinspection effort my affect the Cmpany's progrars in other areas, khether sufficient attention is being paid to prcble:rs of quality assurance ard quality control regarding design, the adegaacy of the CPRI s=pling program, ard perceived oversights in one of the results reports the.t had been issued. Se Ccepany is addressing these concerns and has subtitted a response. In August 1986, the ASG issued a ruling concerning the scheduling of issues for hearing. Under the ruling, the intervenor can ard has initiated discovery relating to the overall adequacy of the CPRT program. Within thirty days following the Cmpany's ccepletion of responses to the intervenor's discovery requests, the intervenor is permitted to file a ration with the AS G for su:::rary disposition on the issue of the adegaacy of the CPRT program. Following receipt of such ration, the ASIB will determine whether to proceed with deternining the overall adequacy of the CPRI program or whether to address the specific firdings and results of the CPRI program. In May 1985, the Cmpany fould a report in its file, relating to certain deficiencies in the QA program, which it believed should have been provided in response to a 1980 discovery request of the intervenor, ard sent the reycrt to the ASG. In June 1985, the Campany indicated that an error in judgment was made in failing to produce the report earlier and took appropriate steps to assure that a similar situacion does not recur. This mtter has been investigated by the NRC's Office of Investigations khich concluded that the l caission was a mterial false statement but that it was not intentional. This ! matter has also been the subject of discovery requests before the ASG. 49
'IEXAS UTILITIE3 EBCIRIC CIMPANY NL7ITS 'ID FINANCIAL SIXIBGNIS - (Omtinued)
- 10. COMANOE PEAK NUCIEAR GDERATING STATICH - (Continued)
In January 1986, the Cmpany filed an application with the NRC for an extension of the construction permit for Unit 1 to reflect a new "latest date for empletion" of August 1, 1988; previously such date had been August 1, 1985. In the application, the Ccripany stated that the reason the request for extension of the construction permit was not filed at an earlier time was administrative oversight. In Febnlary 1986, the NRC issued an order extending the "latest date for ccepletion" of Unit 1 to August 1,1988. Subsequently, the intervenor involved in the operating license ASm proceedirq filed with the NRC a request to stay the effectiveness of the construction permit extension and to require the Ccupany to file a new application for a construction permit for Unit 1 or to order that hearings be held prior to any decision on whether to grant the construction permit extension. Se request for a stay was denied by the NRC and the question of khether to hold such hearings was mnanded to an ASE, the me:ters of khich are the same as the ASG for the operating licenset In May 1986, the ASG issued a Memorandum and Order in khich it accepted for litigation a nea contention, raised by two intervenors khich alleged that the delay in completing Ccxnanche peak, khich has occurred and has necessitated the extension of the construction permit by the NRC, is the result of dilatory action on the part of the Campany and that, therefore, good cause did not exist for the extension of such pemit. Se Company appealed this ruling to the NRC's Atomic Safety and Licensirg Appeal Board (Appeal Board) . In July 1986, the Appeal Board certified to the IRC Ccumissioners a question regarding the validity of the contention khich had been accepted by the As m; and in September 1986, the Ccumissioners issued a ruling supportive of the Cmpany's position and remanded this matter to the Appeal Board. In November 1986, khile such appeal was perding, the ASE, at the request of the intervenor, granted an amendment to an earlier Contention khich had previously been disallowed. me amended Contentien also relates to the question of gocd cause to extend the construction pemit. We Ccepany has appealed this action to the Appeal Board. In March 1986, the intervenors also filed a motion to stay the effectiveness cf the February 1986 NRC order and a petition for revied therof with the U.S. Court of Appeals for the District of Colu:rbia Circuit. We motion for stay was denied in April 1986, and the petition for review is still pending before the Court. In June 1986, the Ccepany decided no lorger to contest, and therefore paid, a civil penalty of $40,000 khich was part of an aggregate of $120,000 in civil penalties previously proposed by the Staff of the imC relating to allegations of harassment and intimidation at Ccnanche Peak. S e Ccepany requested the Staff to revisit the other alleged violations to determine whether they did in fact occur ard to consider mitigating the anount of the penalties. In August 1986, the ccupany decided to no longer contest, and therefore paid, a civil penalty of $200,000 previously proposed by the Staff of the NRC relating to the findi.~Js of the TRI, described above. Se Cmpany at the same time requested mitigation of another proposed civil penalty of <
$50,000, relating to two alleged violations in the Campany's reinspection ard corrective action effort, which regaest was denied; and this penalty has also been paid.
50
l ] TEXAS ITTILITIES EIECIRIC CG4PANY NCTIES TO FINANCIAL SIKIDtENIS - (Cbntirmed)
- 10. CQaNCHE PEAK NUCIIAR GDIERATDiG STATION - (Continued)
In D w mhar 1986, a portion of a report was released by the Office of Inspector aM Auditor of the NRC (OIA Report) containing the results of its investigation of allegations of misconduct by the ranagement of Region IV of the NRC with respect to Comanche Peak. The OIA Report eypressed concern about l allegations of harassment and intimidation by Region IV ranagement to pressure ! Region IV inspectors to downgrade or delete proposed inspection fiMings at Comanche Peak. In addition, the OIA Report concluded that it would not be possible to rely on the Region IV QA inspection as evidence of the safe construction of Ccnarrte Peak. Consequently, it stated that it will be necessary for the NRC to rely largely on recent detailed technical inspections conducted by the NRC at Cmanche I%ak. The OIA Report also indicated that the data contained in an internal NRC report on inspection procedures was inaccurate and unreliable due to a lack of understaMing by 1RC inspectors of 4 the proper method of completing a certain Imc form. Imc officials have indicated that a thorough assessment of the results of this investigation will ; be rade. The OIA Report's findings are restricted to activities in the IRC's Region IV and do not question other IEC regulatory activities with respect to l Cananche Peak, including the detailed technical inspections recently conducted by the TRI as discussed above. The Company is unable to predict the impact, if any, that the OIA Report might have on future IEC inspection and regulatory activities with respect to Cmarrte Peak. The IRC has arzmnced that it is creating a new Office of Special Projects to manage all aspects of the IEC's licensing and inspection efforts for Comanche Peak and certain other nuclear power plants, and has named a current regional administrator to head this team. The NRC announced that this office is expected to be operational by March 1, 1987. The Campany cannot at this time predict stat effect, if any, this reorganization will have on the Cmanche Peak licersing process. s The Company, Texas Municipal Power Agency (TMPA), Brazos Electric Pcuer Cooperative, Inc. (BEPC), and Tex-la Electric Cooperative of Texas, Inc. (Tex-la) are the owners of 87-5/6%, 6.2%, 3.8% and 2-1/6% interests, respectively, in comanche Peak under the terms of a Joint ownership Agreement
- (Agreement) khich provides that the Ccrpany is the Project Manager for Comanche l Peak. BEPC has failed to rake numerous payments of its portion of the costs of Caranche Peak. BEPC has been experiencing difficulty in obtaining additional financing for Ccranche Peak from the Rural Electrification Administration.
l In addition, since May 1986, Tex-Ia has failed to rake pa> Tents to the Cmpany for l l its portion of Cmanche Peak and TMPA has been raking payments under protest. Accounts receivable at Decerber 31, 1986 incltxied $55,736,000 of amounts due frcn BEM and Tex-Ia. The portion of future construction expenditures due frcn BEPC and Tex-Ia are estirated to be $44,745,000 in 1987, $25,526,000 in 1988 , ani $6,401,000 in 1989. In May 1986, the Ccgany filed suit in the 14th Judicial District Court of Dallas County, Texas against TMPA, BEN and Tex-Ia because of controversies which exist under the Agreenent with respect to the obligations of the parties. The Ccrpany asserts that each of the defendants has either claimed that it has no further obligation to pay its share of the reraining costs of construction of Cmanche Peak, or has claimed that the Campany has failed to properly construct Comanche Peak or othuvise has , 51
'IEXAS UTILITIES EIICIRIC CQ4PANY IETIES 'IO FINANCIAL SINIHtENIS - (Omtimed)
- 10. CQiANOE PEAK NUCIEAR GDIERATDJG STATICN - (Continued) breached its obligations under the Agreement. Se cmpany seeks recovery of damages against Tex-la for its anticipatory breach of the Agreement and asks for a declaratory judgment against Tex-la, BEPC and 'IMPA declaring among other things that they are obligated to pay their share of the remaining costs of ws. a ction of Comanche Peak and that the Cornpany has not failed to use prudent utility practices in constructing Cmanche Peak in accordance with the Agreement. DGA, BEPC and Tex-la have filed cross-actions in such suit against the Ccmpany and Texas Utilities assertig various causes of action, including a number of alleged breaches of the Agreement by the Ctznpany and violations of the Texas Deceptive Trade Practices Act (DIPA). In September 1986, the Court in the Dallas County suit ruled in favor of the Cmpany with regard to a plea of the defendants attempting to change the venue of such suit.
In June 1986, 'I!@A and Tex-la filed suit in the 98th Judicial District Court of Travis County, Texas against the Ccepany and Texas Utilities. he petition asserts various causes of action, including a nu 2er of alleged breaches of the Agreenent by the Cmpany and violations of the DTPA. 'I!@A and Tex-Ia ask for rescission and modification of the Agreement and payment for damages, incittiing treble damges based upon violation of the DIPA. We 0:mpany and Texas Utilities intend to vigorously contest this suit, which has been stayed as a result of the rulirg in the Dallas County suit. Also in June 1986, BEPC filed suit in the 345th Judicial District Court of Travis County, Texas against the Ompany, Texas Utilities and Mining Ccunpany and Texas Utilities Services Inc., also subsidiaries of Texas Utilities. BEPC alleges that the defendants have breached the Agreement, certain implied warranties and fiduciary duties, arri have been grossly negligent, acted with willful misconduct and have violated the DTPA and Texas and federal securities laws. BEPC asks for an injunction against efforts by the defendants to recover additional payments, rescission and reforration of the Agreenent and payment for damages, trebled pursuant to the DTPA. BEPC alleges actual damages to date of at least $216 million. W e defendants intend to vigorously contest this suit, which has been stayed as a result of the rulirq in the Dallas County suit. As a result of the ccrrpany's regular annual review of its construction program, in Noveder 1986, the Ccrpany estimted that all reanalysis, reinspection, rework and testing activity prerequisite to the loading of fuel in Unit 1 of Cmanche Peak will be cceplete in early 1988. Based on this estimate, the Ccepany estimted that ecx=ercial operation of this unit will be achievable in early 1989. We Cmpany also estimted that Unit 2 will not be ready for carnercial operation until after the 1989 summer peak season. If licensing approvals are obtained so as to permit commercial operation of these units at these times, the total cost for the Ccepany's share of the plant, excluding AIUDC, is estimted to be $4.63 billion. Se Ccrpany's estimated cost for its share, including AIUDC, is $6.70 billion or about $3,300 per kilowatt. Se total cost of the plant, exclixiing AIUDC, is estimted to be $5.27 billion. Because of uncertainties regartling paymnts by the other owners of Omanche Peak of their share of the remining construction costs, no j estimate of the ancunt of AIUDC that may be attributable to their interests in 1 52 1
'IEXAS UTILITIIS EIECIRIC CIMPANY NOITS 'IO FINANCIAL fnWIDEENIS - (Ctmtimed)
- 10. CCHANGE PEAK NUCLEAR GDERATDC STATICH - (Concluded) the plant has been made. We Campany had previously estimated in November 1985, that ccumercial operation of Unit 1 would be achievable by mid-1987 and Unit 2 l by the erd of 1987 if the necessary licensing approvals were obtained. 'Ihe total cost of the Ctmpany's share of the plant was estimated at that time to be
$4.64 billion, including AFUDC, or $2,297 per kilowatt. However, in April 1986, the Ccupany announced that such schedule was no longer achievable and in July 1986, announced that the reanalysis, reinspection, corrective action program, and tne hearing process befor's the A5:3 could not be ccmpleted in time for ccmmercial operation of Unit 1 for the 1988 summer peak season and that, therefore, it was making other arrargements to obtain additional capacity in the interim. Failure to secure timely and favorable regulatory approvals or further delays occasioned by aMitional reanalysis, reinspection or rework will increase the cost of the plant and will likely increase financing requirements. At Dece:tber 31, 1986 ard 1985, the Ccupany's investment in Ccnanche Peak was
$4,600,000,000 ard $3,615,000,000, respectively, of which $1,284,000,000 has been allowed in rate base by regulatory authorities. 'Ihe Oxpany has irdicated that it does not currently plan to include any aMitional Ccuanche Peak costs in a rate increase request until Unit 1 is ready for camercial operation and has stated that it believes the initial rate increase that will be necessary to place Unit 1 into base rates can be held to about 10%. Such rate application may be subject to challenge with respect to the prudence of certain costs, for khich an estimate is not presently determinable. (See Note 12.)
53
'1EXAS 17FIIlTIIS EIECIRIC CCMPANY NOIES 'IO FINANCIAL SIMIDENIS - (Cbntimed)
- 11. CDtErDENIS AND 00tTTINGmCIES Cbastruction ProJram :
For major construction work now in progress or conterplated, and camitments with respact thereto, see Itan 2, Properties-Construction Program. Cboling Water Cbntracts
'Ihe Campany has entered into contracts with 1.s..e agencies to pnh cooling water for use in the generation of electric energy and has agreed, in effect, to guarantee the principal, $49,130,000 at Decerber 31, 1986, and interest on boMs issued to finance the reservoirs frtxn which the water is supplied. 'Ihe bonds mature at various dates through 2011 and have interest rates ranging from 5-1/2% to 9%. 'Ihe Ccx:pany is required to rake pericdic paynents equal to such principal and interest for the years 1987 through 1991 i as follows: $4,387,000 for 1987, $4,387,000 for 1988, $4,396,000 for 1989, $4,423,000 for 1990 and $4,435,000 for 1991. In addition, the Ctepany is obligated to pay certain variable costs of operating and raintaining the reservoirs. Total payments, incitriing amounts capitalized, under such contracts for 1986, 1985 aM 1984 were $4,833,000, $4,779,000 aM $4,766,000, respectively. In July 1983, the Ccepany received regulatory approval of an agreement with a municipality for that municipality to assume all contract rights ard obligations in connection with $102,950,000 remaining principal anount of bonds issued for similar purposes which had previously been guaranteed by the Ccepany; the Ccupany is, however, contingently liable in the event of default by the municipality.
Capacity and Enemy Purchase
'Ihe (%rpany entered into an agreement in 1982 with Tex-Ia, a 2-1/6% ,
cuner of Ccnanche Peak, whereby the Ctrpany agreed to pirchase an assignnent of portions of Tex-Ia 's entitlement to capacity and energy frczn Ccaranche Peak in declining amcunts over the first eight years of ccamercial operation of each generating unit. Under the agreenent, the Ccrpany is reqaired to make annual
> payments to Tex-Ia cwprising a pro rata share of operating costs plus a
! capital charge on Tex-Ia's net investment applicable to the portion of Tex-la's j entitlement assigned. (See Note 10 concerning litigation proceedings regarding Tex-Ia's participation in Ccranche peak.) Martin Iake Unit 4 Cbnstruction Cancellation In Neverber 1986, the Ccrpany announced that it was not econcnically feasible to construct a fourth unit at the Martin Iake Steam Electric Station (Martin Iake Unit 4) and cancelled the project which was scheduled for service { in 1994. Pursuant to expected regulatory treatment, expeMitures through
- October 1986, of approximately $36,810,000, includirg contractor temination !
j costs, have been recorded as a deferred asset to be amortizM as approved by ; j regulatory authorities. (See Note 12.) 54 ; l
TEXAS ITTILITIES EIECIRIC CGtPANY 3 DIES TO FINANCIAL SIMIDENIS - (CXmcludad)
- 11. CIEKrDECS AND CONTDCDiCIES - (Concluded) f General In addition to the above, the ccupany is involved in various legal and administrative pr W ings khich, in the cpinion of the ccrpany, should not '
have a material effect upon its financial position or results of operations, i
- 12. FINANCIAL ACCCUlEING STANDARDS BOARD STATDEE No. 90 In W har 1986, the Financial Accounting Standards Board issued l Statement of Financial Accounting Stardards No. 90 entitled "Regulated Enterprises -
Accounting for Abandonnents ard Disallowances of Plant Costs" khich b e n effective for fiscal year 1988. j The Statenent requires that when it is probable that an operating asset or an asset under construction will be abandoned that the cost of the asset be removed frcen plant in service or construction work in progress. At that time, the present value (derived by usig the cmpany's incremental borrowing rate) of future revenues expected to be allowed by regulatory authorities for
- recovery of such cost would be recorded as a separate asset and any difference would be recognized as a loss. Such calculation would require estimatea of l
khen recovery would begin ard the length of the recovery period. Application ; of the Statement to the acccamtirq for the abandonment of Martin Iaka Unit 4 is not expected to have a material effect on the Ccupany's financial statements. h Statement also requires that khen it becomes probable that part of ; the cost of a recently ccupleted plant will be disallowed for rate-making ! purposes and a reasonable estimate of the amount of the disallowance can be F made, that amount shall be deducted frcrn the reported cost of the plant and recognized as a loss. The final provision of the Statement requires that an allcuance for funds used during construction be capitalized only if it is probable that those costs are allcuable for rate-makig purposes. i f i i i r r r 55 l
OPINICM OF INCEPDHNr ORfIFIED IUBLIC ymWmNTS Texas Utilities Electric Ccmpany: We have examined the balanco sheet of Texas Utilities Electric Company as of December 31,1986 and 1985 and the related statements of incxxne, retained earnings and source of funds for construction for each of the three years in the period ended December 31, 1986. Our examinations were made in accordance with generally accepted auditing standards aM, acmrdingly, included such tests of the accountin; recortis and such other auditing procedures as we considered necessary in the cireurstances. In our opinion, the financial statements referred to above present fairly the financial position of the Ccmpany at December 31, 1986 and 1985 and the results of its operations and the source of its funds for construction for each of the three years in the period ended December 31, 1986, in conformity with generally accepted accounting principles applied on a consistent basis, our examinations also cmprehended the supplemental schedules listed in Item 14 (a) 2. In our opinion, such supplemental schedules, Wen considered in relation to the basic financial statements, present fairly in all material respects the information shown therein. DEIDITTE HASKDIS & SELIS Dallas, Texas February 23, 1987 / 56
Itma 9. DISAGtEEMENIS CN A000LNTING AND FINANCIAL DISC 10SURE. None. l IRRP III l Itan 10. DIRBCIGS AND EXEXITTIVE OFFICERS OF 'IHE REGISIRANT. l Identification of directors, business experience and other directorships: Other Positions and Offices Presently Held Present Principal Occtpation with the Corpany Date First or Erploynent and Principal (Term Expites Elected as Business (preceding ? yrs.), ! None of Director in May 15. 1987) Director other Directorships Erle Wye 49 Chairman of the September 17, 1982 President of Texas Utilities, the Board and Chief parent corpany of the C&pany; Executive prior thereto Executive Vice President of Texas Utilities; other directorships: Toas Utilities. l R. K. Caepbelt 60 Division Presioent Septerter 17, 1982 Same. E. D. Searth 59 Division President May 20, 1986 President of Texas Electric, formerly a subsidiary of Texas Utilities; prior thereto V!;e President of Texas Elec'; % . Michael D. spence 45 Division President septerter 17, 1982 President of Generating Division; prior thereto Executive Vice President of Texas Utilities; prior thereto Vice President of Texas Power, form rly a sub-sidiary of Texas Utilities. W. M. Taylor 44 Division President May 20, 1986 President of Dallas power, f ormerly a stbsidiary of Texas Utilities; prior thereto Vice President of the Corpany; prior thereto Ylee President of Texas Electric. T. L. Baker 41 Senior Vice President February 20, 1987 Senior Vice President of the Corpany; prior thereto Vice President of the Cw pany; prior thereto Vice President of Dallas Power; prior thereto served in other managecent positions with Dallas Power. J. S. Farrington 52 kone septenber 17, 1982 Chairman of the Board and Chief Executive Of ficer of Texas UtiLi-ties; prior thereto President of Texas Utilities; prior thereto President of Dallas Power; other directorshipst Texas Utilities. E. L. Watson 5E Senior Vice
- resident February 70, 1987 Senior Vice President of the Corpany; prior thereto Vice President of Texas Electric.
57
i Itaus 10.- DIRBCIGE AND EXBCUTIVE OETIQRS OF ' DIE RBGINIRANT (Oantirmed). Identification of executive officers and kusiness experience: Position and Of fices Presently Held (Current term Date Elected to Business Experience i Ne w of Officer in ereires May 15, 1987) Present Office (s) (Precedino Five Years) Erle Nye 49 Chairman of the Board February 20, 1987 Executive Vice Presidw? of and Chief Executive Texas Utilities, the parent corpany of the Ccrpany. R. K. Carpbell 60 Division President January 1,19% Same. E. D. Scarth 59 Olvision President May 20,1986 Vice President of Texas Elec-tric, formerly a sdnidiary of Texas Utilities. Michael D. Spence 45 Division President January 1, 1984 Executive Vice PresiJent of Texas Utilities, the parent corpany of the Company; prior thereto Vice President of Texas Power, formerly a sub-sidiary ot Texas Utilities. W. M. Taylor 44 Division President May 20, 1986 Vice President of the Corpany; prior thereto Vice President l of Texas Electrie, formerly a s Wsidiary of Texas Utilities. l T. L. Laker 41 Senior Vice President May 20, 1986 Vice President of the Corpany; prior thereto Vice President of Dallas Power, formerly a l subsidiary of Texas Utilities; l prior thereto served in other j management positions with Dal, I las Power. E. L. Watson 52 Senior Vice President May 20, 1986 Vice President of the Corpany; prior thereto Vice President of Texas Electric, formerly a subsidiary of Texas Utilities. T. R. Locke, Jr. 49 Vice President Jaruary 1,1984 Vice President of Service Com- , pany; prior thereto served in other managenent positions with Texas Electric, formerly a subsidiary of Texas Utili- , ties. T. Michael 02ymy 46 Vice President May 20,1986 Served in other management post- ; tions in the Ccrpany. i l 58 f l [
-. -y .. . . - - , ~Itaul10. DIRBCREW AND EXECIfrIVE ORTICERS OF ' DIE REGISIRANT (C%mcluded).
Position and Offices Presently Held (Current term Date Elected to Business Emerience Name of Officer & exofres May 15. 1987) Present Officed u (Precedino Five Years) G. V. Sellar 53 .Vice President January 1,19% Vice President of Dallas Power, formerly a stbsidiary of Texas Utilities; prior thereto ser.ed in other managerent r.ositions with Deltas Power. S. S. swiger 51 Vice President ard January 1,19% Controtter of~ Texas Utilities, Controtter the parent -corrany of the Corpeny. Paul D. Williams 47 Vice President Decenber 17, 1986 Vice President of Texas Electric, i formerly a s ssidiary of Texas Utilities; prior thereto served in other management positions ; with Texas Electric. , M. Jarrell Gibbs 48 Treasurer and Assistant January 14, 1986 Served in other management posi- l Secretary tions in the Corpany ard Ser- , vice Cw pany. Peter 8. Tinkham 42 Secretary Septerber 24, 1982 Secretary and Assistant Treasurer ; of Texas Utilities, the parent corpany of the Corpany; prior j I thereto Assistant Secretary of ; . lexas Utilities. J. D. Karney - 53 Assistant Controller Decerter 17, 1986 Controller of Dallas Power, i formerly a subsidiary of Texas [ Utilities; prior thereto Treasurer and Assistant Secretary of Deltas Power. f Gary L. Price 42 Assistant Controller January 1, 1984 Treasurer and Assistant Secretary I of Texas Power, formerly a s @- ; sidiary of Texas utilities. ! J. P. Knierim 44 Assistant Treasurer January 1, 1984 Treasurer and Assistant Secretary } of Texas Electric, formerly a { ! subsidiary of Texas Utilities; [ prior thereto served in other managenent positions with Texas ; f ( Electric. ,
^
C. E. Layton 57 Assistant Treasurer January 1, 1984 Secretary of Texas Electric, [ formerly a subsidiary of Texas , Utilities. ! j I
'Ihere is no family relationship between any of the above named executive officers, l
i i I ! 59 ; I
- - - . . - - = - ,-r *.e ,. - , - - - , _ - - - --,n. --,..w-.-r.- -,---m,ne - - - - - -------s e ,
Itemt 11. EXEQTI'1VE GMPENSATICN. I i me Ccmpany paid cash cmpensation during 1986 to the following executive offi rs for services in all capacities: l I Name of indivl&at { and ruter of Capacity in sich Cash l cersons in occup__ ecerensation was received ecs'oensation J. S. Farrington .............. Chairman of the Board and S 332,500(1) i Chief Executive Erle Xye ...................... President 263,333(1) l Michael D. Spence ............. Divisicn President 249,000 i R . K . CarTte l l . . . . . . . . . . . . . . . . Diviaion President 230,000 { W. G. Marquardt ............... Division President, Chairman 204,167 All executive of ficers of the Corpany as a grow (14), not [ f nc i t.d i ng t hos e named above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,385,211(2) (1) Consists entirely of corpensation paid by Texas Utilities. (2) includes corrensation paid by the Ccrpany, Texas utilities and the service Coripany. Does not in-clude payments for any portion of the period & ring $ich any irdivf&ol was not an executive of ficer of the Corpany or a division of the Ccrpany. Urder the Employees' 'Ihrift Plan of the Texas Utilities Ccmpany System, all employees with at least one year of full time service with any of the System Ccznpanies may invest up to 12% of their regular salary or wages in commt.n stock of Texas Utilities, a United States Government Bond i a fuM, a guaranteed fixed inocxne fund, an equity nutual fund or a ;
- percentage in each. Employer-corporations make a contribution to each t
participant's account of 40%, 50%, or 60% of the anployee's savings, up to ; l the 6% level, depeMing upon length of service, which amtunt is invested in the ccanman stock of Texas Utilities. During 1986, enployer contributions uMer this Plan made for all executive officers of the r Ccmpany as a group (19) axunted to $90,763, including contributions made i for Messrs. Farrington, Nye, Spence, Canpbell and Marquardt in the amounts ! of $11,970, $9,480, $7,470, $8,280, and $7,350, respectively. l' 1 Under the Employee Stock CNnership Plan of the Texas Utilities Cmpany System which covers substantially all System employees, Texas ! Utilities aM its subsidiaries, incitxiing the ccmpany, have elected i additional federal inccxne tax credits to the extent that anounts equal to such credits have been contributed to the Plan. 'Ihe Plan Trustee uses . contributions frcxn the ccrpanies aM their eligible enployees to purenase l cxx1 mon stock of Texas Utilities khich is allocated to participating employees in proportion to their ocmpensation. Dcrirg 1986, enployer ; contributions made for Plan year 1985 for all executive officers of the i i Ccmpany as a grcup (19) amounted to $8,587, including contributions made !
; for Messrs. Farrington, Nye, Spence, Canpbell ard Marquardt in the amounts l of $360, $500, $500, $500 and $500, respectively. ;
i i k l i l i l 60 i l
1 'l Ita 11. EXECUTIVE CIMPENSATI(W (Otocluded) . We capany maintains a retirement plan qualified under applicable provisites of the Internal Revenue code. Annual retirement benefits are caputed as follows: For each year of accredited service prior to age 65, 1.3% of the first $7,800 plus 1.5% of the excess over $7,800 of average annual earnirgs received by the participant during his three years of Such benefits are not subject to any reduction for highest earnings. Social Security payments. Anounts reported as salaries for specified L officers approximate earnings as defined by the retirement plans. As , of January 31, 1987, years of accredited service urder the plans for Messrs. Farrington, Nye, Spence, Canpbell aM Marquardt were 27, 24, 20, ; i, 34 and 40, respectively. 'Ihe table below illustrates the annual benefit t payable at retirement after age 65 under this formula: 1 3 year average 20 years 30 years 40 years enessat earninos service service service _ S 25,000 5 7,188 5 10,782 5 14,376 50,000 14,688 22,032 29,376 100,000 29,688 44,532 59,376 { 1 200,000 59,688 89,532 119,376 i 300,000 89, e43 134,532 179,376 ; i 400,000 119,t48 179,532 239,376 Benefits payable in 1983 and subseqJent years fran a qualified retirement plan were limited by the Tax Equity and Fiscal Responsibility i ! Act of 1982 (TEFRA). We Capany maintains an unfunded Supplemental [' Retirement Plan to prcnide for the payment of retirement benefits
! calculated in acccrdance with the foregoirq retirenent plan formula khich i would otherwise be limited by the provisions of TETBA.
1 i I t I l i i l 61
Itcsn 12. SECURITY O@ERS! IIP OF CERIRIN HENEFICIAL 04ERS AND MAlRGEMENT. Security ownership of certain teneficial owners at January 31, 1987: I A m t and Nature Percent Nane and Address of Beneffefal Title of Class of of Beneficist Owner CWr eio Class _ Corron S t oc k, Texas utilities Ccmany 105,150.000 shares, 10().0% without par value, 2001 Bryan To er sole voting and of the Corpany callas, Texas 75201 investnent power Security ownership of management at December 31, 1986: NJFt>er of Shares Title of Ctest Baneficietly C W d* Percent of Ctess Preferred Stock, without par value, of the Corpany .. 4 Less than 1% Ccrron Steck of femas Utilities (parent) . ...... .... 104,332 Less than 1%
- Amount of shares with acquire beneficial ownership: respect to which such pe m ns have the right to None.
Item 13. CERIAIN REIATIOZSIIIPS NID REIATED 'IPNISACTIGIS. None. l l l l l 62
< PARr IV Itaal 14. EXKIBITS, FINANCIAL STAIDENT SOD 31 TIES AND , REPGUS CN IGN 8-K. j a) M= ants filed as part of this Report. Ens
- 1. Financial Statements (included in item 8, Financial Statements and Selecentary Data):
Statement of inecme for each of the three years in the period ended Decerter 31, i 1986 .............................................................................. . 34 , Statement of Source of F m ds for Construction for each of the three years in the period ended Decerter 31, 1986 ...................................................... 35 Baterce Sheet, Decerber 31, 1986 and 1985 ............................................ 36 Statement of Retained Earnings for each of the three years in the period ended December 31, 1986 ................................................................... 33 Wotes to Financial Statements ........................................................ 39 Opinion of Independent Certiffd P etic Accomtants .................................. 56
- 2. Firancial Statement Schedules:
2 V* Electric Plant for each of the three years in the period ended Decertrar 31, 1986 ... 70 VI..Accurulated Depreciation for each of the three years in the period erded r Decert>er 31,1986.................................................................. 71 V111*. valuation and Dualifying Accounts for each of the three years in the period ended j Dececber 31, 1986 .................................................................. 72 X Sgtementary Information for each of the three years in the period ended Decerber 31, 1986 .................................................................. 73
'Ihe following financial statement schedules are cuitted because of the absence of the corditions uMer khich they are required or because the required information is included in the Financial Statements or notes
- thereto I, II, III, IV, VII, IX, XI, XII aM XIII.
1 . (b) Reports on Fonn 8-K: " Reports on Form 8-K filed since September 30, 1986, are as i follows: i
! ..Dete of Rerect Item Reoorted 1
4 hovecber 2$,1986 Item 5. OTHER EVENTS. !
) Dececter 15, 1986 Itarn 5. OTHER EVENTS. ;
Decerter 16, 1986 Item 7. FINANCIAL STATEMENT 3 AND EXHIlits. t February 10, 1987 Item 7. FINANCIAL STATEMENTS AND ExN! BITS. I f l l t i l I I l l > i ! 63 l ! l r
7 Itan 14. EXHIBITS, FDOHCIAL SIK1 DENT SOEIIIIES AND RERRIS CN FGM 8-K. (c) Exhibits:
*3(a) -Articles of Incorporation of hxas Utilities Electric Carrpany (filed as Exhibit 3(a), File No.
2-80537).
*3(b) -Bylaws of Texas Utilities Electric Ccmpany filed as Exhibit 3(b), File No. 2-80537).
*4(a) -DEIAS POWER & IlGfr CCMPANY Mortgage and Deed of Trust, dated as of February 1, 1937, between Dallas Power & Light Cterpany and Old Colony Trust Ccmpany, Trustee ('Ihe First National Bank of Boston, suwwacnr Trustee), filed as Exhibit B-2, File No. 2-2801.
--TEXAS EIECIRIC SERVICE CDIPANY Mortgage ard Deed of Trust, dated as of March 1, 1945, between Texas Electric Service Ctmpany and hxas American Bank / Fort Worth, N.A. (formerly The Fort Worth National Bank), Trustee, filed as Exhibit 7(b), File No. 2-5609.
- 'IEXAS POWER & LIGfr CDIPANY Mortgage and Deed of Trust, dated as of May 1, 1945, between Texas Power & Light Ccmpany and RepublicBank Dallas, National Association (formerly Republic National Bank of Dallas),
Trustee, filed as Exhibit 7(c), File No. 2-5718.
- 'IEXAS UTIIEfIES ELECIRIC CIMPANY Mortgage and Deed of Trust, dated as of % 2 1, 1983, between Texas Utilities Electric Ctmpany ard Irvirq Trust Ctrpany, Trustee, filed as Exhibit 4(a), File No. 2-90185. , l i
l 64
i Itant 14. EXIGBI'IS, FINANCIAL SDGEMENT SOEIIHES AND RERRIS CM PGM 8-K (Otritimed)
*4(b) -Supplemental Irdentures to }brtgage and Deed of Tntst.
DMIAS PCMER & LIGir CIMPANY Wwter Qgtd File eeference Ezhibits first April 1, 1949 2 7855 7(a) Second June 1, 1950 2 8466 7(a) 2 ' Third March 1, 1953 2 10071 4(b) 3 Fourth February 1, 1956 2 12200 2(b) 1 Fifth Decenter 1,1956 2 77857 4(b) 5 - Sixth Deccenber 1,1959 2 77857 4(b) 6 Seventh February 1, 1963 2 20997 2(b) 7 Eighth January 1, 1966 2 77857 4(b) 8 Ninth February 1,1%7 2 25805 2(b) 9 Tenth J me 1, 1970 2 37161 2(c) ; Eleventh Weverter 1,1971 2 42043 2(c) Twelfth Septenter 1,1972 2 45403 2(c) Thirteenth March 1, 1975 2 52708 2(c) Fourteenth May 1,1977 2 77857 4(b) 14 i Fifteenth Jee 1,1981 2 71621 4(c) Sixteenth Neverber 1,1981 2 77857 4(b) 16 , Seventeenth July 1, 1982 2 77857 4(c) Eighteenth November 1, 1982 2 81476 4(b) 18 Wineteenth February 1, 1983 2 81476 4(c) Twentieth J me 1, 1983 2 90185 4(c) 1 Twenty first January 1, 1984 2 90185 4(c) ? , Twenty second April 1, 1984 2 90185 4(c)-3 Twenty third Severter 1,1984 2 92738 4(b) 1 Twenty fourth Septerber 1, 1985 2 99940 4(b) 1 Twenty fifth October 1, 1986 33 11326 4(b) 1 i TEXAS EIEC'IRIC SERVICE CIMPANY Nwber Dated File Ref erence Enhibit i First October 1, 1947 2 7186 7(b) Second April 1, 1948 2 7423 7(c) Th{rd April 1,1949 2 7894 7(d) Fourth Jme 1,1951 2 8982 7(e) Fifth May 1,1952 2 9547 4(c) sixth April 1, 1953 2 10118 4(c) Seventh March 1, 1955 2 12227 2(c) , L Eighth March 1, 1956 2 60449 2(b) 1 Ninth July 1,1957 2 60449 2(b) 1 Tenth Novecter 1,1958 2 60449 2(b) 1 J Eleventh April 1, 1963 2 21105 2(b) l Twelfth February 1, 1965 2 23056 2(b) I Thirteenth February 1,1966 2 24384 2(c) 1 Fourteenth May 1,1967 2 26297 2(c) Fifteenth March 1, 1969 2 31474 2(c) I sixteenth October 1, 1970 2 38358 2(c) Seventeenth April 1,1971 2 39627 2(c) i I Eighteenth January 1, 1972 2 42552 2(c) Wineteenth April 1,1974 2 60449 2(b) 1 ,. ( l : I 65
Itcun 14. DOIIBITS, FINANCIAL SIATDDTP SOEULES AND uuunu CH IUM 8-K (Cbntinocd) . h;rter Med File Reference fuhibit twentieth Decerter 1,1974 2 60449 2(b) 1 Twenty first Ane 1,1975 2 60449 2(b) 1 Twenty seccod March 1, 1976 2 60449 2(b) 1 , Twenty third February 1, 1979 2 63425 2(c) ! twenty fourth March 1, 1980 2 66633 2(c) l Twenty fifth hoverter 1,1981 2 74809 4(c) 1 Twenty sixth Decerter 1,1981 2 74309 4(d) 1 Twenty seventh April 1,1982 2 76675 4(e) Twenty eighth Nov&ter 1,1982 2 &C329 4(c) Twenty ninth Decerter 1,1982 2 80329 4(d) Thirtieth Ane 1,1983 2 90185 4(d) 1 i thirty first January 1, 1984 2 93185 4(d) 2 thirty second April 1,19% 2 93185 4(d) 3 Thirty third Septecter 1,19% 2 92738 4(c) 1 Thirty fourth August 1,1935 2 99940 4(c) 1 Thirty fifth March 1, 1986 33 9583 4(b) 1 Thirty sixth Cececter 1,1986 33 11376 4(c) 1 Thirty seventh February 1, 1937 Form 8 K, File No. 0 11442 (February 10, 1957)
'IEXAS ICWER & LIGff CCMPMN Nat+c Dated File eeference hhibit First Octcter 1,1947 2 72C4 7(a)
Secced April 1,1948 2 7446 7(a) Third April 1, 1952 2 9474 4(c) Fourth May 1, 1953 2 10204 4(c) Fifth October 1, 1954 2 11162 2(b) Stath hoverter 1,1956 2 12856 4(c) Seventh Decerter 1,1958 2 14555 2(b) E i gh th January 1, 1961 2 19452 2(b) 1 Nirth February 1, 1963 2 21021 2(b) Tenth .ivuary 1,1965 2 24326 2(c) Eleventh February 1,1966 2 24326 2(d) Twelfth February 1, 1967 2 25885 2(c) Thirteenth January 1, 1968 2 27853 2(c) Fourteenth F ebruar y 1, 1970 2 35941 2(c) Fifteenth Septterer 1, 1970 2 33171 2(c)
$lattenth February 1,1971 2 39083 2(c) seventeenth February 1, 1972 2 42763 2(c)
E i gh teenth February 1, 1973 2 46740 2(c) N i re t eenth February 1, 1974 2 73790 4(b) 19 twentieth Oc t eter 1, 1974 2 73790 4(b) 20 f.enty first Aor i t 1, 1975 2 52865 2(c) twenty secced January 1,1976 2 55210 2(c) twenty third February 1, 1977 2 57963 2(c) Twenty fourth Feervary 1, 1979 2 63369 2(c) Twenty fifth May 1, 1980 2 67594 (b)(2) 2 Twenty sinth Septerter 1,1931 2 73790 4(c) Twenty seventh hoverter 1,1991 2 77733 4(b) T.enty ei 95th Jme 1,1982 2 77733 4(c) Twenty ninth hovecter 1,19?? 2 90185 4(c) 1 Thirtieth Jme 1,1983 2 90185 4(e) 2 66
Item 14. E10GBIT5, FDENCIAL SDmMENT SOG211I13 AND REREU5 CN FGtt 8-K (Ocritinued) . g N Q113d File Reference f Alb_t Thirty first Octcber 1, 1983 2 90185 4(e) 3 Thirty seccnd January 1, 1984 2 90185 4(e) 4 Thirty third April 1,19M 2 90185 4(e) 5 Thirty fourth Septertyer 1,19M 2 92733 4(d) 1 Thirty fifth April 1, 1985 2 97185 4(d) 1 Thirty sixth Dececter 1,1985 33 01774 4(d) 1 Thirty seventh May 1, 1986 33 9583 4(d) 1 Thirty eighth Decerter 1,1986 33 11376 4(d) 1 TEXAS UPILITIIS EIECIRIC 03(PANY Nster patgd File Ref erence E Albit First April 1,1984 2 90185 4(b) Second Septerter 1,1984 2 92738 4(a) 1 Third April 1, 1985 2 97185 4(a) 1 Fourth August 1,1985 2 99940 4(a) 1 Fifth Septerber 1,1985 2 99940 4(a) 2 l Stath Decerter 1,1985 33 01774 4(a) 2 l Seventh March 1, 1986 33 9583 4(a) 1 tighth May 1, 1986 33 9583 4(a) 2 i Ninth October 1,1986 33 11376 4(a) 1 tenth Decerter i,1986 33 11376 4(a) 2 illeventh Decerter 1,1986 33 11376 4(a) 3 Twelfth February 1, 1987 Fore 8 K, File ho. 0 11442 (February 10, 1957)
*4(c) --
Debenture Agreement, dated as of February 1, 1964, between Dallas Twer & Light Ccepany and Ibrgan Guaranty Trust Ccrpany of New York, Trustee, filed as Exhibit 2(b)-10, File lio. 2-22020.
*4 (c) First Supplemental Agreement, dated as of June 21, 1983, between Dallas Power & Light Ccepany ard Ibrgan Guaranty Trust Ccrpany of lies York, Trustee, filed as Exhibit 4(c)-1, Texas Utilities Ccrpany 1983 Fom 10-K, File lio.
1-3591.
*4 (c) Second Supplemental Agreemnt, dated as of January 1, 1984, between Texas Utilities Electric Ccrpany and Morgan Guaranty Trust Ccepany of liew York, Trustee, filed as Exhibit 4(c)-2, Texas Utilities Ccrpany 1983 l Fom 10-K, File lio.1-3591. ;
l
*4(d) - Debenture Agreenent, dated as of February 1, 1968, between Dallas Pcuer & Light Ccrpany and Ibryan Guaranty Trust Ccrpany of liew York, Trustee, filed as Exhibit 2(b)-13, File lio. 2-28016.
*4 (d) First Supplemntal Agreement, dated as of June 21, 1983, between Dallas Power & Light Ocrpany and Ibrgan Guaranty Trust Ccepany of !Ie4 York, Trustee, filed as Exhibit 4(c)-3, Texas Utilities Ccrpany 1983 Tom 10-K, File 11o.
1-3591. 67
Itma 14. EXHIBrIS, FINANCIAL SIKIDtENT SOIEDUI25 AND l RERRIS CN 10Ett 8-K (021tinued).
*4 (d) SecoM Supplemental Agreement, dated as of January 1, i 1984, between Texas Utilities Electric Capany and MortJan Guaranty Trust Certpany of New York, Trustee, filed as Exhibit 4 (c)-4, 7Wcas Utilities capany 1983 i Tom 10-K, File No.1-3591. !
*4 (e) - Debenture Agreement, dated at of February 1, 1968, !
hetween Texas Electric Service Capany and The First ' National Bank of Fort Worth, Trustee, filed as Exhibit 1 2(d), File No. 2-27908.
*4 (e) First Supplemental Agreement, dated as of June 29, 1983, betwen Texas Electric Service Cunpany aM The First l Natioml Bank of Fort Worth, Trustee, filed as Exhibit 4 (d)-3, Texas Utilities Carpany 1983 Form 10-X, File No.
1-3591. t
*4 (e)-2 -- SecoM Supplemental Agreement, dated as of January 1, 1984, between Texas Utilities Electric Cterpany and ,
InterFirst Bank Fort Worth, N.A. (formerly The First ! National Bank of Fort Worth), Trustee, filed as Dhibit 4 (d)-4, Texas Utilities Cctrpany 1983 Form 10-K, File No. . 1-3591. ! i
*4(f) - Debenture Agreement, datM as of January 1, 1962 between Texas Power & Light Ctepany aM First National I Bank in Dallas, Trustee, filed as Exhibit 2(c)-2, File !
No. 2-19452.
*4 (f) First Supplemental Agreement, datM as of June 28, 1983, !
between Texas Power & Light Ctrnpany and InterFirst Bank ' Dallas, National Association (fomerly First National Bank in Dallas), Trustee, film as Exhibit 4(e)-1.
*4 (f) Second Supplemental Agreement, datM as of January 1, 1984, betwen Texas Utilities Electric Ccrtpany and InterFirst Bank Enllas, National Association (formerly l First National Bank in Dallas), Trustee, filed as .
Exhibit 4 (e)-6, Texas Utilities Octnpany 1983 Fom 10-K, I Fila No. 1-3591.
*4(g) - Debenture Agrecuent, dated as of January 1, 1964, between Texas Pcuer & Light Ctrpany and First Naticnal Bank in Dallas, Trustee, filed as Ddlibit 2(c)-3, File j No. 2-21962.
*4 (g) First Supplemental Agreement, dated as of June 28, 1983, between Texas Pcuer & Light Ccrnpany aM InterFirst Bank Dallas, National Association (formrly First National Bank in Dallas), Trustee, filed as Exhibit 4(e)-3, TV.xas Utilities Capany 1983 Fom 10-K, File No.1-3591.
68 l
Itaut 14. EXKIHFIS, FDENCIAL SIKIDENT SO{E!1IIES AND REPGUS CM PGtt 8-K (0:ncluded) . , 4(g) Second Supplemental Agreement, dated as of January 1, , 1984, between 'I4txas Utilities Electric Conparty ard InterFirst Bank Dallas, National Association (formerly First National Bank in Dallas), Trustee, filed as Exhibit 4(e)-4, Texas Utilities Ocatpany 1983 Form 10-K, File No. 1-3591.
*4(h) - Debenture Agreement, dated April 1,1969, between 'Ibxas ,
Power & Light Cottpany ard First National Bank in Dallas, Trustee, filed as Exhibit 4(c), File No. 2-31966. i Supplemental Agreenent, dated June 28,
*4 (h) First 1983, between Texas Power & Light Ccrnpany and Ir.terFirst Bank Dallas, National Association (formerly First National Eank in Dallas), Trustee, filed as Exhibit 4(e)-5, 'Itxas Utilities Ccmpany 1983 Form 10-K, File No. 1-3591.
*4 (h) Second Supplemental Agreenent, dated as of January 1, 1984, between Texas Utilities Electric Ccmpany ard InterFirst Bank Dallas, National Association (formerly First National Bank in Dallas), Trustee, filed as .
Exhibit 4(e)-6, Texas Utilities Ccmpany 1983 Form 10-K, File No. 1-3591. ; 4(i) - Agreenent to furnish certain debt instruments. 12(a) - Ccmp1tation of Ratio of Earnings to Fixed Charges and , Preferred Dividerds. 12(b) - Cornputation of Supplemental Ratio of Earnings to Fixed Charges ard Preferred Dividends. J 24(a) - Consent of Deloitte Haskins & Sells. 24(b) - Consent of Ccunsel.
- Incorporated herein by reference.
d i i r i , i ! l 69 l
'IEXAS ITI'II2 TIES Em3RIC CGGENY r
Sdwble V - Electric Plant [ l 7 i Coltsel A Coltse B Coltse C Coltsel D COLlagd E COLLSW F Other Salwre at theses- Balance 9egimire A Mitions Add at End j Classification of Year at Cost Retirements (Dodact) of Year l Thousands of potters I Year Ended December 31, 1966 ; Electric plant in service: P rod;c t i on. . . . . . . . . . . . . . . . . . . . . . . . . . . . S 2,878,212 S 111,519 8 9,336 S - S 2,980,395 l Transmission........................... 1,111,704 60,686 6,324 - 1,166,066 ' Distribution...................... .... 2,331,764 246,151 34,752 - 2,543,163 General................................ 283.722 52.980 8.127 - 328.575 , Total electric plant in service..... 6,605,402 471,336 58,539 - 7,018,199 ' Construction work in progress.......... 4,288,525 1,007,842 - (29,638)(a) 5,266,729 huc' ear fuet........................... 254,724 (2,760) - - 251,964 Electric plant held for future use..... 5.441 916 - - 6.357 Total electric plant................ $11.154,09] S1,477,3M $58,539 S(29,633) S12,543J4_9
- i Year Ered December 31, 1985 ,
Electric plant in service: Production............................. S 2,808,488 $ 77,726 5 8,002 S - S 2,878,212 l Transmission........................... 1,042,821 71,050 2,167 - 1,111,704 ; 2,331,764 ' Distribution........................... 2,125, % 2 235,343 29,541 - Generat................................ 249.124 40.105 5.507 - 283.722 Total electric plant in service..... 6,226,395 424,224 45,217 - 6,605,402 Construction work in progress.......... 3,650,889 637,636 - 4,288,525 N uc l e a r f ue l . . . . . . . . . . . . . . . . . . . . . . . . . . . 199,921 54,803 - - 254,724 Electric plant held for future use..... 4.858 583 _- - 5.441 Total electric plant.... .......... 510 0822 063 S1.117,216 545,217 S - $11,154,092 l 2 Year ErsW Deccaber 31, 1964 Electric plant in service: , P r odJC l i on. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2,759,413 S 60,563 511,488 5 - S 2,808,488 Transmission.... ...................... 1,014,929 30,243 2,351 - 1,042,821 D i s t r i tx;t i on . . . . . . . . . . . . . . . . . . . . . . . . . . 1,917,418 233,415 29,871 - 2,125,962 ' ) 249.124 General.............................. . 215.216 40.M8 6.760 - f I ! f otal electric plant in service..... 5,906,976 369,889 50,470 - 6,226,395 Ccnstruction work in progress.......... 3,037,817 520,401 92,671(b) 3,650,889 l Nuclear fuet........................... 156,083 43,833 - - 199,921 [ l Electric plant held f or f uture use..... 7.1 75 (2.291) 26 - 4.!58 ' Total electric plant................ S 9,108 g 5 931,83_2 550,496 $ 92,671 510,082,063 . ! I (a) Cancelled li9 nite unit. (See Note 11 to Financial Statev nts.) l , (c) Furchase of a 3M interest in the f ain Oak station. (See hote 9 to Financial Statements.) l i, I 70 l
b i
'11!lXAS UTILITIES KTFr':RIC GMPANY ;
Schach11e VI - Amelated Depreciaticrt ! l I i coltsu A tottaa e coltsu c Coltsef D mtas E COLlam F i Aelities other l Selance at charged to tharges. Begimine Costs and met Add (a) satance at [ Description of Year Empensee Retiresunts (Dedst) End of Year Thesanch of Dollars , Year eW Deceber 31,19tM Acetrulat ed deprec i at ion. . . . . . . . . . . . . . . . . 52,011,061 S209,152 $53,622 S7,850(a) 52,174,441 i l ! Year ended Decenter 31, 1985 Acetrut it td deprec i at ion. . . . . . . . . . . . . . . . . $1,848,146 S195,959 S39.831 $6,787(a) 52,011,061 Year erdni Decuber 31, 1964 ,
, AccLrut at ed deprec i a t i on. . . . . . . . . . . . . . . . . 51,687,095 S192,276 S41,078 $9,850(a) $1,848,146 1
,I L
(a) Depreciation of transportation and work equipwnt, based on the estimated lives thereof, is charged to a clearing secomt and allocated on the basis of the use of swh equipwnt, and deptetton of tignite is charged to fuel. I t i I s 79 i f 5 ! J J r j p i .i [ i > i 71 l
, _ , . , , -m-y- 9 ~n -.m - - y _ _ _ _
'ITXhS UTILITHE E[ECIRIC CEMPANY Sche &11e VIII - Valuatice ard Qualifying Wwits Mt3W A OXt981 5 Colt 30f C (X14381 D COLLSSI _ E Addities Salarge at Charged to Charged Balarre BWiming Cost and to Other at Erd
')escriptinn of Year Empenses Accomts DedJctiws(a) of fear Thomards of Dollars valuation account, deducted fren related asset on the balance sheet +-
Tear Eidad December 31, 1986 Attowance for uncollectible accounts $15,011 S20.326 S - $21,520 $13,817 Teer Erded D1uster 31,1985 Attowance for uncot tectible accounts $12,360 $21,299 8 - $18,648 $15,011 Year Erded Decaster 31, 1904 Allowance f or wcollectible accounts S 8,999 515,149 $ -
$11,788 S12,360 (a) Deductions f rca the attowarte represent meottectible accounts written of f less recoveries of amounts previously writtee off.
s 72
'5lXhs UFII2TMS EUX3RIC CCSEPNft ik:hath11e X - Siglemardary Infatuaticm l
l l l CIMag A Q1LSW 5 Charged to E;ipsroes arud Other Acca mta Year Ended h W 31. 1986 19E5 1984 Thousards of Dollars Taxes other than income: Ad v a l or em . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . t 69,534 5 63,594 1 56.236 Local gross receipts....................................... 102,017 104,724 90,596 State gross receipts....................................... 56,494 58,965 54,461 State franchise............................................ 26,523 22,106 17,177 loc i a l s ecur i t y and mappl oyment . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,286 31,363 30,037 Public utility Coreission assespent ...................... 6,085 6,630 6,126 M i sc e l l aneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.962 8.211 6.686 1302.921 $295.593 I YotaL................................................. 5261.52} charged to Operating expenses......................................... 8272,771 $267,757 $238,773 E l ec t r i c pl ant ard s urdry ac comt s . . . . . . . . . . . . . . . . . . . . . . . . . 30,150 27,636 22,750 Maintenarce and repairs, depreciation, depletion, amrtitaticri, rents vd lease cornittents, royalties, research and development, and advertising, other than amcunts set out separately in the finarcial statements, are not poteriet. 73
l SIGNATURES , Pursuant to the requirements of Section 13 or IS(d) of the Securities Eschange Act of 19M, the ! registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly j authorised. ; TtxAs UTtuitis Ettc1Ric CourANY l 4 DJtC: FChruary 23,1987 By /s/ Eatt Nyr O~rle Nye, nal maa t of the 16oard and nief Isecuthe) , Pursuant to the requirements of the Securities Eschange Act of 19M, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. ' i hignature Title Dale
/s/ Entt N" Principal Esecutive Orficer '
t Irle N)e, nairman or the Board } j and Chier Isecuthe) and Director
- i ,
- /s/ T. L. IhkiR _ . _ _ Principal Financial Officer
! i ( T. t. sater, senior Yke President ) } and Director ' l
/s/ S. S. SWtGI R Principal Accounting j
f (s. S. Sniger,4 ke President and Controller) Ottcer
- 1 j /h/ R. K. CAMPat t t-Director i
- ( R. k. CampbellI
; /s/ J. S. F ranisGTON Februa ry 23,1987 ,
Director j t J. S. }'arringtoa ) ;
- /s/ E. D. STAR 111 j Director '
- 01. D. Scarth ) ;
}
/s/ MicH Ai t. D. S PE M I Director
( %t k hael D. Spence ) l L
/s/ W. M.1 Ait OR Director (W.%t.Ts)hw) t i
/s/ E. L W Al w N _ Director !
{ o.t M alwal i i i : a l i ! 3 1 i i J i ll i I i
*., ;',{,..._. n
,' f . '
. - : - l '_ a
'M %
,_.- ' : ., ,. [ ' . . , - '- s.; .3--- . , . . , .,. m s S" ,' <. .:- - x -b 2 - "
.E.p. ;..i.y '
n
=.'. " ' , ~' - .-Q
<. a
., -;;ff..-_- . . , , ' [. .,,);
- 1. . -"w ..N_ 1. - 4. '
~
'#.9 f.g 'l ' ' ' k . f. % -
- - i s- ','.c N ..
+ y '
.' . /.1 :. +
e
,e'.
. . . . f.2
,E g
3- ' .471% -6t v. .; . . s .. - , . f. 3 , *
, - . . s
. y:,
. .4
. .v .
f., c. g 7- . .. of
,- ~.' .s
'V l 8 e a +_ u . . . -j ; g ._ ; . : .
.,g. _<, ., g : 4 9
',,.s. ,"
g ; . s ; Q _W - 6 . y,j. L ?_, - F. : ...p. : s .c . _ % ,j -
.- ;..,...~,.s . q . ~ ..
,,.. ..- ..- .. .,.a '
. c. ,,. .
[:~.
.. e , . .4 %
.' 4 4. '4 . .y .s , -. , S t., ,- , -,, , . . , - , c )-
,gv ',q ,7 . s'. o.- -
, ,7 .p.7. 4,
; j 4
.s jt -r .r , , * *. -
e - >
* .v . Lr . s .. %. * , , . ,.
.\+v' M. . ;, ;
..l'".' ~ , , - . ' - .-
,9
- f. . ..
g
'y
- a
-.t '
e ' . .v'*h - 5 ,.'
'e A.*-
. .. _.f y . .
.- . c ;. y ,, .. :
~
. .- 9. . .:
, *( - ,e . .m w.s'.r: -+
-~
, i v.
, -j { ' . , .. ". .;. 4 ",. ',.,, ., ,. / .,, ',.y :
f R jy .t, e m , .;q~ ; _ , c,,,.R-_,. _. 'G,
. ,% 7- ,
. e. . +.
n m.,-
.e. .
- n. . . ..
;.. , . . v ,y-
> . , ...).
i j .
,. , . 2. -
%,. n' , ; e..
s ., . .. . . - n. 7 .
,t 7.s ;, . g. . e.. , . - .. g pm 1 -
s.3,1
- :w ww ,: >.-
. ~ .
. ... - + .
,h g
t , ,t . - - 4
- g. \ "- -
[ . . .' . . .- . ..e , .',y., . .? . o
%* ., n, , oc g.'.r.
m'
+.
(, , 4. . . _ ., ,
- :g ,.r.
. '_ ._ y ; -
,- <;_ < p. ,,% - ; ., . .
., - 2
's (.
Q J f -( .i. . - ' m 0. ' $ .T - .. ., M t 7 6 :. .E Q
.*. %.3,Q;l f,QQ.. . .s ,Q.&. y; l,jQ
. . ^Yl N b-: .;
m ;- ,.x c .. v p.
.v v J. . -
- v. k.p : -. .N., . u..;4 . .
,._v .g g .o : c. ~ry<.. ..
(. sg:, g ; >; 9'-: .
).~
e.9 . .
.p e ; .~.; . s - -
+ :... ., : c g -
3; .s, . . x,'.. . ' . 1 ;, . -
~- -
+
,; n.. ~ - ..-
L.y :y
- j. ' % ~'I3 .'.'s....,w . . .. -
/ e 4_ g -
,A q
,4 - . -
g4
~
,c
.::',:. . t .
gu., 4 . g-
. J -
8"
, a. f.- ., i. . . .
.y
. .. , , . , ., .g. 3.+ a 4 . ,. ,
Q .. _~&: ;pq }
. lk. _. f ..-
; ,z qG' ,'" y ',
l, .
. ; g; ; -, . _; w - - . ~ t .
y - .; , . fl ' ,'
, f .j. l j ) l} -
l .;, E ;l_ . p.. , , y,.- -.' .
. . . .r; . . . m .;,.;w .
,,4_.,,
.:~.3.y . . ,; y :, y. y ; < v. <, , . . , .
g .,. 7 .
; u.p .
' ~
[' _
- l ,l w>.. ~9 .
- , :. y-L- .-@. s- . . ~ . Ly
- - . 3. . . ,1, .e : .. .. ~ t :. - .
rn.-
. n sc
.. ~' . . . .
3 . u, .
- - ).- .a
,s =
4,
. .r. ;
- s. .
y-
; , +.r.:'. .
;.:..;M;4..y--
( e. k. :
. .3,. 5,= ,.'. .u.a..-: ,; . ., _ .y , ..c -
u -
,. , $, n . '
.e .... af < - ,e e .. . a 3 . -
;t . .
,yfy
, , ,4 a - w. vc h}.. ;Q. . . ,g. > 4w. m.s.<f .. 8 3 q < c .,
.. ] :. :
f yn Q .
- y.. n . ~.sr y,f G, _
. [ fs,. W -
Y.g,}., u,,(.;.} s ,,,., .:.. ;
-._v,~ .;jQ.;y
' - p- .W .e e s;.%, z a:.
;%.,.n - J, W. .
qi-.. &~. yQ w.g ,c d; _ .;.m.] % . . .- 2,.
;:*-.5, . 7. ".
8 ,
._.. g,-. ' ~ .~ ,.
,.. 4 +%'.0 a.Qt" % h, .;
qf _ ,' ., ..
.- .-- *. j. . y . s . , , :- .. w -
i f
.h %f.h[h$glMM fd .!~ N . a#
J-hf. c.'b5; d Q "^ 6 % v s +. h L' l R ~ n L . / z L- - d[5.f N r N1 f . 9 h:h - Y: ,
.h A.h .Y bkffh ..
I .~ - 7
.ffh 49 g
fN$fh '
.' ,' & I
- - tf ,~ u p? -. . . . < .
'.fA Vn.qS Q r.
> +, n
'e. .
c
;; w, ,r
.- n -
a q*4+ c
~,
.y ;.
> . . y/
,o.'
, , ' . Qe.s . a,g ,,> ,g p 3,
.o
%p& 4 'g
, ,. y. , , ; *;.7 . .;;L l.P, fg . : -
-f
.I 7 f,.
s g x,}. 9 - ,. - .%- 4 .v ,'*4 , f a.3. .
.. h g' vf . < -:h.. g
- 8 n/ "
ar
'Y :q :., ,Ns-
, '- T t f,
^?
&W 3-
- 3- .- -7 y- 3 n
', i e =
g.
\, +., * ' %'
.; , i '4
.c- :# j _ f, ok .
- 1s
#:. %.7 t, 1 y.yt .v.Q
?.s'e 4 5 ,,,a'
'ks. t x y s a. _.- g ,
%. ..#t g )t
.- av -+ . . ';(, , u. . - *b, ' 5 gy.5V t ** . , I 4 b -
4 f.
,N ;
_ , l .j-..
-< / ' ..' .;.4 '~
k.. g
- a. <t. .
= , ,
.."i- ? .
~
m ^ r % .' ; * '
' ' g ..?
s- ' %:.' *' ' r,lj2 - - J' . . s i: % ., . - - _V 4 y-* d-
, . j ', , . .
[' '.\ - / /Y[- -i ( - ' E l "' N, .]'[- !.' ~
~4 -.. -(.l ; L t, . j-[ .,k '3
- 4,"
+ c. $ "
- 2. , . ' ' ' . . y ' ,, . . . *M. .
U-
.s -
..y,.
3 2. 4. .
. ,,s '
.r' .:- y-
- - ,-. ,*c.,, _ r # 3: .w s
< , t.'.5 g. p. y,s i r,. g.
;.. +.' .. . e . g --
--(.-L c
th. -- , -
.m
.,...n. . 4 e
*y, ', . < - .
g .-
.s - - -
-.i <9
',.,.,..._ 4 'l4 j.
. . %. . . h .' " j _
. # . ~._ .. .. .
*+ w ,
? ,.
w' _n_.,r TQ
- :-3
,d .r
._:. _ o c'3 . ,., y ' .' / 4<
my s
'5g. .. . . e',_.{--."w E # -._1 p A 4
'l
< t
[ fm'
. g_ .
i g.' 8 #f-,8#a y r
-l2 .,-
E'
*', ~ , '
s t <,s = T '
'[
h ,-.,/ h
,t-j 'l s 5.'
Iei - 'e' i w $[
$ f,e , p .5
._-t
< ,'3 n,..
-'k- #
;..i ;' y ',n% . ,.p l "r 1 -g, .-&--
A J o" -, ,V'r t-'r / . ,
,. (
-: ,n,i_, a-
- . py, . :v' -t,:h'c ',
s ff-' ". . 4* b ) [. f.3.'. - M. o y c>>
==
, ,i g g ' ' <
'o
,* , -A
>-'- (3' . ;. -
^i~ m*
- y ,;f'
~
j,g , y --g f'.' ,,, T
+
f * .
, 3 ,t.
i ..f! u_ . 7.. ' s- % e - '
,y'v'p-,
, ., j - c ( ., 'k7
...v
, ~
t . g ' s g 3 s n
.f
,v g
- k .
- u. g, g
f; N _. E
. , - s
- t,
.ms.
, G. :, -
"-2 .-f*I 1 m_ -I t ;d c, **/.F
- v. , , ,
- v. g -24i.
f ~ g ,
>r)6 sk Pi i~ * - '
, E I 9 9 i
e r . '- #- 8. I^ , ' , . _,
,<3,.. .
, r s g f fL S'l
. b ,b,, *,, 3 , . , / y 4
g 3 r- [,, 1
. ., 9 . : -
3L , . L - j.i. a"'l, ' ^\, .-'eL 1,c*'F. T I N
,~,. s* ,c u,t , ~( )., g 4 p 3 4 .
4'i y ,_k.,
.=3 1 me
. -, ( '4 i - ,-
ff'r'4 m.4_~'
. r . ";y> ,
{_L4 ,
.t[
.s 3,7,?
,.s. <
g. c.m
,,,; .3.v - .
.; ' /_s<
1,e 1 ;b
# f Y "[}a% ,
t e - p
~ ,' '
5.- h. v. y j, *'
."$.'%6 t , ,.s_y"'l',.[
& k
+s
.- s - , s 5 ,s o .- - , . ) . . , .
s .' .-k. %N
# . - e + s e .?#
- t. '
-_e.
n4 C
- 1
- i. u3;y A. 'g ' 3 jp,.g
- g...".
s'
)
, f.-
E' 2,
< +
q l r- -J* u ' ,.*
'. , it
-pu /
N. e,t'-4
- r. .e- , r,d . 2
,5
,s#r~S. ' (..#,.. W'
, 2.c , s _: ,
4.. i
.s. ' .,
n , o
- . , , ,n ., ;
y' - - ,, 'f ( /.
*4 " .} a *
., .w k 4 i '
, , , l .'l ~,; l ,f[t ,r g -' ~ t q, *
'Q.m.5q#, %) y 'r,*} T_, #;m..
.+. , V ' \g m - - %u .. ,,.g * i .j' .'s M. ; U, f ' ' ' ' , g uv..
.' , 4
.* ) e ,'as. g , < 'a , >
j- [ - m (. } -- f,.*~' ,s .g ij). ~yn ,r, t -
,4;; }',q g] ;
l l';s i.- :mj n~ _n}
>t , !, s d
-- q* ,p., . _ , .
- , 2 , . '
1 h" ',,ia 4
..I.
7
-e
.b:
f, .N m{ a[g :., z+h_
, ../' h-s
. : , y
., e%-. -C f . _ w' gg.J. ' -k IN h..k,'h. _
t p2 -'
. n * . , , ; . . is / s
=
g, >
" ~ ' , .. t h h' ) 3 ),' -
t . $.
~
' , -'^ #
-'# f w.If vs - lf, . , -.
,3 ss&4.,.3~..rr'w - . t.g - 9 r- 4. . ,v.n .n{ fy,h. b i1 '.d3. y- q. .1.. b n'w- . e m,
-ena d t' , ,' i f 2 ?P yg,
,s ,.)f p ,,
f ' . r 9 d*,m.,.g;7 4 # d i , j 1
/5 Y t
Mj c4,, yN3. n j..
.4, ~- ^ ' , [t ,,
.4*
4* w' A, s g'* 'g
-{ %*_ , , ) j T'..
w ,< A;q,>sw9EMj ~ 3 , a. , g, .
,' ' , t y ..
~Q*.w . '.1 qi ,,.T'. 3 t.,
-,; ;' Qp', ~l .,s.' c,t j.
f-.,i,i y.
+ j, -
- . , -7 ,,4 ' i, I
>b y
a,
~,r i .
j,,.e$._}..., *f
" . . ",',s_. 1 ; ,1" "Q' (' h ,,-
50,. '
.9 '
-g, . ,
.,; w.. t f -i" F
u 8. ' . .- *,!-
,,*. _ Y;>;' .-Wo 7. ,s n. ,:,.'.- -
; '%' y" . , Jl.% .
.'ti-# ; ' h , , _. i,'.}4 .g-t c 2 <^. m yu-
. g )y_. + ,'s .p .7 p-.l,;. R n %. 1
, *. i
- g i s - ] . * ' ;- } 6 #
} \Z
'*gr.,.
*.i G. n p,m, 7
,4 'g- '.' F ' e <
--4
..,. a 1 t
.,,m,,"(
s r,.. g ,, ,, , g.. ny ' . . ij 4{,$, 9,
,,7, ;
t / M s
'4' '
3 s. t
- o^ ,. i! 'j -.7- m 4,/ ^ e.
w,w- .,
3. -
s M, y . F;3 /s, > y ? ~t e ?
-
- T
>C9 ,' ; i ,. -
) - ~q r f,AS' y ,
f *. g , m,,,
's s.v
^
rp m; wycY f
> ' z 4 m >
.4
- 1 g
- %' s a g4#
k ,[e. ; O L. 5[a. ' *, ' g i i'b,/," i I ' s r ;_/ l.+ .. . ..:e,w - , , . - - ,
,. e <r , ~ +
f p' c;. -- . m"m s . e n, g. 3 ,"'.3 a:.- i -t' y t j
.p.
y< 'W< ,g uW
- t,, , ~ ..;4--
l \. 4 ,J m, v
.t' i
< -,) 2, h.f- .
j F. ' - , > n.6 gA.
-#- . .,r ' f.e
.6 , - '.' Y .
"c g ',a 3 t
a)ii h~ * [ 1 ,- ,
^..,r..3r..'
, ,,? E,- ,
e.g y-1
, ; y$
4
,'z ,
.'f.'*' , g k'h ~, t" *(^
y'N'l'.. .<g :-L 'R' "d r a x r v s = 43 5'
}r ,
- > .$ 5 '%
1 g [,' s
-q ,f
, yq e y, s l yA .1 n; p ';, , '-r n... s - ,;
t. c' fn;- % <> 1 as _r<, cp, _ g.
,h u. ~h Mg-I
- ~
41x a m:m w_ ,e, , m} {:.
, 3g . -.
m,
,,r k. .'T,,'g:q 4, , , . .
i .,.
, ;- * . / , 4 r e #
, s, ,
i. 7,. . -
)r m,j g.
y
. . . ,I.*-
',Jm',
iSt>k>
4 , + f- , .:4'- f 5 - ,, -- q a-3 - b .a - 't- b =p,y
* ~'.
j 4 g y.. g-l [ J y s
],'. ; *Qqg 6 (. r e E
3 g t,+ c wwqm.3< - 4, e ,- J A- .,4, b ~,; i '1
,.n 1
' "1' {-5 r
.r
,qe g 6 , ,
s ,; n.y ' , g ): ;-t>. . , . .g s - p ;.s m.. ' n 1 n ' ,. l
.g "l ,, -
7 e. ,%
.,-.= , l y*) y .
3- - s aia'n" 544 7 # y[> $..s~< _ ( # 1
';W<ag.%.h .,g
- Q q f j i ,' ' f': , --n , ' , 7.'.
1 _a'
'/%: ;s d,'
- %fu ~ r sQ t - ig', ,
$ c.-s-6a ,;c s
, , . c .~,
.m .3. -,. ,; 45. q-s w -
.(#
s
+ "' :*
' - m '3 A " . . . S,,,- y'g } -
,E. . , >. 1h > 9. ,.94 A\ - '
"I
[ s d, ~j -.', %
# # 'f,,,.'#.8g f*
2 r..i,
,* - __ f.-
c=-," .-'I
$ fy ,
. , Wy
.'(,
e , ae N. .. $ . 3,, ,"Qq vs 3 - _ ,, ^ v_
- v.+
b, m'}^' ' , " -. ., , - e p9 a_...n: Qi ' ' 4 h 4
}h-Q 3.l }_%
';7:.
a 1 s '
,E 3 .
e,% ;"
._s.- :"*r,r.-,y:
,y
~% 1 :L.'G m
,Tur }1%' sw.n -
/
- " h '
} ' e, n ,f .,. . ,s,t:t %h m%
..e r . /,7m # '5-f r_,. y
?
e{ . . ,A, f,-* s -[', 'z' f 3'- d d-g / i ',- % i", ' ['j --f'+ j
- h. A >y'
.c_ J'
, b Ti .,.
=~+ a <q z .,, m . .~,~
" y $ :-- e<
s ph ^k .
- l. , ;
s ' (->- 4
? ' a.
e .';m. -
.sg J ,y T-%'~L1' f '* .
QQ-%..,_lfi4 p-r r e
+ , .. :,
.p"'-
y m~.+, .. 4
-- ' ,."' h* 1 + 4 8
'._'") 1y'N s$
3 y . %, . , ; ( s s h, .Q <w, d' [' i , 5 -
'2 n' l ..n-f [l ^{;].Q 4m* ' ",(.
,3 p,., .~e_y i& -
t g'y .-
,. N Q-p
(,v p y ._ g w '. f '
+y g A
[*
* . b !' l
- i
., , .ms .. - qJi& - i t
s M (p
/ 1:- - -2'? -
5.. Y
- }
.K t & e 5., , __ f I
Y h S
- I, t
,.?
SN
.6,
- ,_ , c D.
A b-4*10"
- g - -.~.J
1 1986 19S5 Change Utility Plant * . . . ... . . . . . . . . . . . .... $13,566,133,000 $12,144,563,000 11.7 % Construction Expenditutes... . .... . . . . . . .. $ 1,519,619,000 $ 1,108,861,000 37.0 Electric Energy Sales in Kilowatt hours (000's) . . . 75,254,775 73,369,896 2.6 Peak Demand (Kilowatts)t . . ..... . .. .. .. 16,537,000 15,893,000 4.0 Operating Revenues. . . . . . . . . . . . . . . . $ 3,932,045,000 $ 4,170,157,0tV (5.7) Fuel and Purchased Power . . . . .. . . . . . $ 1,479,213,000 $ 1,788,8S4,000 (17.3) Operating Expensest. .. . . $ 1,643,272,000 $ 1,5SO,325,0tN 4.0 Conmlidated Net Income . . . . . . . . . . ...... $ 626,851,000 $ 587,758,000 6.7 Earnings per Share. .. . . . . . .. $ 4.45 $ 4.35 2.3 Dividends Declared per Shan. . . . .. . . . $ 2.68 $ 2.52 6.3 Book Value per Share * . . .. . .. . . . . . $31.24 $29.46 6.0 Customers *. .. . . . . .. . 2,074,766 2,015,023 3.0 Employees * . . . . . . . . . .. 16,927 16,528 2.4
- Ed of .wr t 1956 and 19S5 nide 130,0tU ard 129,000 luhans of irAmp& danard, regundy t Estdc3 f.el and pedasaf pw Contents Management's Letter 2 System Companies . . 4 System Report 5 Operations 5 Fuel . . 7 Remurce Plan . . 9 Comanche Peak . I1 Rates and Regulation . 13 Research and Development 15 Financial Report . 16 Shareholder Information 40 Directors and Officers 41 i
l r 1
To the Sha holders: - year. To facilitate the operation operation in time for the 1988 of the Electric Company as one peak season. In order to better While the Company company and to encourage manage capital requirements, continued to face obstacles in further efficiencies, the name construction of Twin Oak Unit 1986, primarily in matters "TU Electric" was adopted I and the combustion turbines related to nuclear licensing, the throughout the Electric will be financed by others. TU year was one of progress. Company in early 1987. After a Electric will purchase Twin Oak Advances were made in the period of transition, public use after it is built to specifications. Company's operating efficiency of the division names will be After construction, the and in the technologies used to phased out. combustion turbine units will provide electric service. These technological be leased. Additional The Company's commitments innovations and operating combustion turbines and lignite to providing low-cost, reliable improvements are helping the units, the Comanche Peak electricity and a fair return to Company adapt successfully to nuclear plant, cogeneration, and investors depends on employees' today's rapidly changing load management programs are dedication to serving customers, business environment. Electric other elements that will help as well as developing and utilities are operating in an provide the flexibility needed to adopting technologies that will increasingly competitive climate control cost and assure our improve efficiency and and must think and act customers reliable electric service economy. Improvements to accordingly - as low-cost in a changing utility increase lignite mining suppliers of reliable electric environment. productivity, to better monitor service. Comanche Peak remains a and control delivery of natural The Company demonstrated cornerstone of our resource gas to power plants, and to that competitive instinct in plan, and we made progress allow earlier detection of 19S6. Falling market prices of during 19S6 in the reinspection potential plant operating natural gas presented an and corrective action effort to problems are recent opportunity to lower costs, and resolve all concerns about plant technological achievements. our employees respor.ded by safety. Because of expansions in In addition, the Company aggressively seeking lower-priced the program, TU Electric continued to build on the fuel supplies and renegotiating announced in mid-1986 that its efficiencies brought about by existing contracts. Also, previous cost and schedule the System reorgani:ation of productivity of the lignite estimates, made in November 1984. The reorganiration began generating units was improved, 1985, could not be achieved with the merger of Dallas increasing lignite's share of total and that Unit I would not be Power & Light Company, fuel requirements to 54% As a available for the peak season of Texas Electric Service result, overall customer rates 19S8. Company, Texas Power & have been reduced more than Since that time, the Light Company, and Texas 10% since the first of 1986 and construction adequacy phase of Utilities Generating Company about $319 million in fuel cost the program has been as divisions of a new utility, savings has been refunded to essentially completed, and the Texas Utilities Electric customers. design adequacy phase is well Company. Flexibility continues to be a along. The flaws found to date The consolidation of key goal of the System's can be corrected, and the
- functions and elimination of resource plan for providing likelihood of finding serious l duplication continued during reliable service to customers in problems diminishes as the 1 1986, with the reorganization the future. Construction program progresses.
having achieved millions of accelerated during the year on dollars in direct savings per the Twin Oak lignite generating plant, and plans were announced to place nine combustion turbine units in 2
in November 1986, the customers. Earnings per share of Continuing to provide Company estimated that the common stock were $4.45, customers reliable, low-cost reinspection and corrective compared to $4.35 in 1985. The service remains a priority, action, plus all related plant Company's summer peak whether through productivity modifications that are necessary, demand increased 4% in 19S6 improvements and the use of should be complete in time to and electric energy sales were new technologies to hold down support commercial operation in up 2.6% costs or through the direct day-early 1989, assuming the Construction expenditures to-day contact between licensing process has been during the year totalled about employees and customers, completed. Unit 2 is not $1.520 billion. Funds from Success in serving customers expected to be in full operations provided 32.9% of and in providing results commercial operation until after 1986 construction expenditures. expected by shareholders is due the 1989 summer peak season. During 19S6, the System to the continuing loyalty and if this schedule is met, the raised about $1.3 billion hard work of our employees. Company's share of the project through long-term financing, Their efforts are appreciated, will cost $6.7 billion, or $3,300 including about $145 million and so are the interest and per kilowatt. The cost is about from participation in the support of shareholders as we average for nuclear plants dividend reinvestment and continue to adapt to a scheduled for service in the employee savings plans. A changing operating i same time frame, portion of these funds was used environment. Concerns about the licensing to retire $232 million of high-of Comanche Peak and interest debt. hiarch 9,1987 uncertainties about the During 19S6, Perry G. responsiveness of state Brittain, chairman of the board p-- - regulation led to further and chief executive officer, ! negative actions on the credit announced his plans to retire in ratings of TU Electric during the year. hiajor agencies the spring of 1937. hir. Brittain's 37 years of valued p lowered their ratings of service to the Company and company bonds to Single A the industry are deeply levels and, in one case, a high appreciated. Triple B. In August 19S6, the Board of Economic conditions Directors elected Jerry , permitting, we hope to avoid a Farrington chairman and chief rate increase request until executive officer to succeed hit. JERRY FARRINGTON Comanche Peak Unit I can be Brittain. hir. Farrington had chairman of the Board included in rates. Programs to been president and a director of improve productivity, as well as the Company since 1983. Erle efficiencies brought about by Nye, executive vice president, consolidating functions, are was elected president. Both helping hold down increases in appointments were effective at . out operating costs. Growth in the February 1987 board x the service area, while still meeting. 4 healthy, moderated to a more In February 19S7, the Board . comfortable level in 19S6, with almost 60,000 new customers raked the regular quarterly dividend from 67 cents per . ( being added. share to 70 cents. The new quarterly rate is payable April 4' Operating results for 1986 reflect the effects of cost 1. Dividends declared on the controls and continued growth in the total number of common stock have been increased for 40 consecutive
~
l ERLE NYE years. nmam _O._. 3
e 1 city-and Fort Worth, Texas Utilities Fuel hiidland OJessa, Wichita Falls, Company owns a natural gas Texas Utilities Company is Arlington, Irving, Plano, pipeline system; acquires, investor-owned and is a holding Waco, Tyler, and Killeen. The stores, and delivers fuel gas; company for an electric utility economy of the service area is and provides other services for system. The Company provides highly diversified. hiajor the generation of electric its six wholly owned subsidiaries industries include defense, energy by TU Electric. with common stock capital and electronics, aerospace - . short term funds required for manufacturine, and oil and gas t ex s Utilities M. .ining their construction programs. At development.'In addition, the Company owns and operates year-end, the common stock of area is a center for banking, fuel production facihnes for the Company was owned by insurance, commerce, the surface mining and some 91,300 registered distribution, farming and recay of lignite for use as shareholders. The Company's ranching, and recreational and fuel for TU Electnc s principal subsidiary is Texas cultural activities. Dallas-Fort generating stations. Utilities Electric Company, now Worth International Texas Utilities Services known as TU Electric. Airport-the world's fourth- Inc. furnishes financial, busiest airrurt-has helped accounting, and other Texas Utilities Electric inake the Dallas + ort hrth Company (TU Electric) is adminigrative services at cost engaged in the generation, am third in the nation in to the System companies. purchase, transmission, concentration of coriurate . Basic Resources Inc. is headquarters. distribution, and sale of engaged primarily in the The Generating Division is electricity through its four development of energy res;unsible for the planning, divisions. rmurtes, related technology,
., engineering, construction, and ,TU Electnc s three operating operation of all generating and services.
divisions-Dallas Power & stations; for p nning tile Ch c Energy Company is ' Light, Texas Electric Service, uansnicion man; and for organi:ed to own ar.d operate and Texas Power & ng the Apata and facan,es for the acquisition, Light-provide electric energy to about 5,110,000 mntyp of the nanunivion , pmJuction, sale, and delivery facihnes of TL1 Electnc. of coal and other fuels. people-about one-third of the state's population. The service territory extends 600 miles - c.,,a n - from far West Texas eastward ;. A " to near Louisiana, and is about 250 miles deep, from M^ce ["4S!L the Oklahoma border southward into Central Texas. Service is provided in S, gp.gm c, counties to 353 incorporated #' cities, including Dallas-the .-
#xbn a]wa%
r D"h E nation's seventh largest
-4
]l 'a G~NERATING STATIONS E Lienite Clunne unJer wnstruenon A God O Nuclear under con (truc tion 4
OPERATIONS higher than the peak set in Employees of System August 1985. System capability companies and divisions earned TU Electric provided at the time of the peak xas recognition for numerous safety customers a record 75 billion 18,S54,000 kilowatts; this achievements including kilowatt hours of electricity in included 850,000 kilowatts of prestigious national honors. 1986, an increase of 2.6% over short term cogeneration . - 19S5. The company was again contracts. Cosnpany_ announ,ca first in the nation in energy sales among investor-owned A new daily usage record was set on July 31 when customers ["'WCO'PO' k k L, -2 Early in 19S7, a new utilities. used 315,567,000 kilowatt-hours corporate identity, "TU yq754 g - - of electricity, surpassing 1985's Electric," and logo were spurs customer growth. ., *"*I'""* Y3 ' nn unced for all of Texas
-- "*"8" hBecause weather .
cond[itions Utilines Electne Company. for Although the economy of the the summer of 19S6 were System's service territory stored comparable to 1935's summer, in 1986 from the feverish pace the increases in peak demand of the past few years, its and iergy usage were primarily m ummmer ammmmme diversity continued to make it the n sult of customer growth. m m attractive for relocation and Meeting the demands of the - -
~ """"
growth. Almost 60,000 hot July weather was customers were added during accomplished through the 19S6. Over one-half of the new efforts of System employees, residential housing from customer-service autheri:ations in the state were representatives who fielded syggc/ NLLLv c(v7 I I c)IU//m \ granted in the System's service inquiries to distribution, Public use of division names area. In fact, the D.allas-Fort transmission, and power plant M orth area ranked third in the and identities will be phased employees whose work started out over a period of time. The nation in housing starts and.- long before hot werther hit to use of a sm.gle identity will help second in the amount of office ensure equipment woulJ be space leased. the company serve customers as available when needed. a more efficient, low-cost At the end of 195,6, the Spring storms also demanded unemployment rate in the area supph.er. Substantial savings that emplovees respond m. an have already been achieved the S,ystem serves was 6.6no, around the-ckxk efiort to - considerably lower than the from the reorgani:ation at the restore service after tornaJoes . . q n state-wide rate of v., u. company, and this is a further and thunderstorms played step toward obtaining additional
. @. - ,{yo ,,,r me,g ,-G havoc w.it h System elettrical nomia
' record peak j facihnes m North Central and _ . _ __
u_ .ma aJ West Texas. : Consolidation for efficiency El Customers set a record peak - , - - - , - - - , demand for electricity on tulv ,! Employees'safetwork' habits j S
' ove5 *h _eadwm - d' 30, the sixth consecutive day of [ contribute tgproductivityj Since reorgani:ation in 19S4, temperatures above 100* The The safety ethic System the dystem has continued to new hourly peak of 16,537,0N employees have incorporated conmlidate certain functions in kilowatts, which included into their jobs produced order to serve customers more 130,000 kilowatts of another year of distincuished efficiently and at a lower cost.
interruptible demand, was 4"o safety records and contributed This conmlidation has already to high productivity. In 1986, achieved significant savings. I the safety performance of employees placed the System in the top ten percent of the electric-utility industry. l l 5
ll' l? ,'uff[?$3,j.f[, I:h; + %%i;j.e, TW
^* L '
," , '1 5 , -
?
blle g?' ) bhhb; Y @ij'= .M_.,gi, l4;^;,j:;; f llllll , lf@ , LA l l ll l l e: -
~
k- E hM
,em sa "'
t yn$24 9+ gy My . yu
. E hE -
n ,,,,,,, : ; a! g:_ l
,\
w s 4 i
' 5
.,...ms**
y.- Y ,
,2 4 } . y ,
y
;;- ~. 1 j{%;2;:f%@NMWi Ji ;.
.q s
N.B.~'Did!f]$h$~ i!)g[', .!s/$f(f;/," . peu..g_.;
+; .
; ,'j I+ '
w" '-' ~ w. ,. y:i mie ,
._ O__ _ . - - - - - - - - - - _ - - - - - - - - - -
The merger of the System's Declining fuel costs have y g { y g g y' ] four data-processing allowed the System to lower organizations into one was total rates by 10.3% since
! operation ^"' a-
~~~
completed in 19S6, eliminating hiarch 1986. These reductions The hiining Company's duplication of hardware, have rolled the System's rates newest innovation, the cross-pit software, and personnel. On back to about where they were spreader, completed a 240-hour January 1,1987, realignment of in 1982. From hiay 1986 production test in October 1986 accounting and treasury through February 1987, that proved its capability as an operations in TU Electric went customers received about $319 economical and safe excavation into effect, providing savings million in refunds because of and conveyer system. In the and improved management and lower fuel costs. test, the spreader system accounting information to the During the year, lignite surpassed expectations by organi:ation. supplied 54% of the System's excavating more than 2,000 Additional organi:ational total fuel requirements and cubic yards of dirt per hour consolidations that will improve natural gas supplied 46%. and being operational more efficiency and bring adJed .:- deh. very. sets recor than 80% of the test period. rLignite d,1 This one-of-a kind technology economy were announced in L late 1986. During 19S7, System in 1986, the hiining helps recover deep lignite communications and personnel Company delivered a record 30 deposits more economically and l efficiently than other methods. i functions will be centrali:ed. million tons of lignite to System Planning is underway to power plants - two-thirds of t . - - - l the total amount mined in the r Expansion:of gas pipeline consolidate purchasing efforts as well. state. That production kept the pgincreasespibuity_ hiining Company the fourth- The Fuel Company provides largest coal miner in the all of TU Electnc s natural gas Customers continued to nation. requirements through various benefit in 19S6 from declining Even with the record pipeline contracts, its 2,200-mile natural gas prices and the Fuel production, proven recoverable pipeline system, and its Company's success in lignite under System ownership underground facilities with a renegotiating contracts and or lease totalled 760 million usable storage capacity of about making favorable spot market tons at year-end. Those reserves 28 billion cubic feet of gas. gas purchases. This situation are adequate to provide fuel for The 380 billion cubic feet of resulted in natural gas that the lives of existing System natural gas supplied to System averaged $2.77 per million Btu lignite plants and those planned power plants in 1986 was down in 1986, down 19% from 1985's for the future. from 1935 because of increases in purchased power and greater
$3.41 per million Btu. [OakHilfmine begins da production from lignite power The expertiw of the hiining [ production Company kept the cost of u - -# J plants, lignite coal low at $0.9S per In h1 y 19S6, an electric- A new 58-mile natural gas p wered kromotive delivered pipeline, completed in early million Btu. Use of lienite has Oak Hill mine's first 1,500 tons 1987, gives the Fuel Company saved System customers more than $4 billion compared to f lignite about 11 miles to the better access to East Texas nas what they would have paid for h1artin Lake power plant in supplies and enhances the '
the same amount of generation East Texas. The new mine will company's operating flexibility over the years usine hinhet, provide about ha'f of the and utili:ation of storage plant's fuel supply by the priced nrtural gas. facilities. This 36-inch pipeline The composite fuel co<t for mid-lm About 129 million 19S6 was $1.84 per million Btu tons of lignite will be produced l compared to $2.25 in 1985. from this mine over the next j l 1 30 years. 7
~
y9, .e. R , :.>:, ' i?!* '
. ' ' *,; j;;
'X7R";:ki
, i;j A, .
.E fil
; ' %;:g c Fr-tum N' k.'
.Tilg ![hj{y, <
.. : 'ylllYM,
. f,
,/, . f hh
/,/ -
. ifj .
.jki
, ,. . , M
^
.fy , k: ? *
;' Mi 4 ) .
? cs f M,"
\ 4 *I' , .
..u
,*/em"
-.g i
fii ll ' -': .
+
Yl 1 l
connects the Fuel Company's underground storage facility east uneconomical. The suit seeks to have the agreements declared "QGE~E"' essential for future needs of the Big Brown lignite plant void and unenforceable and "------ to the North Texas pipeline also seeks damages and other The plan continues to near Ennis south of Dallas. It is relief. provide fuel diversity with jointly owned by the Fuel In January 1983, the lignite and nuclear units, which Company, with a 39% share, Company and Chaco settled all " C*PCCted to supply 36% of and two other gar. companies. claims against Thercol and the additional energy needs. Pe body. He settlement did The Comanche Peak nuclear U LNE "ftiel # E E [" l' not affect the claims asserted plant wd,l contribute 17% and Nuclear fuel assemblies against Santa Fe Industries and the Twin Oak and Forest needed for the initial operation its subsidiaries. Grove lignite plants, now under of Comanche Peak's Unit I are construction, will provide the RESOURCE PLAN, stored at the plant site. other 19%. In the new resource Assemblies needed for the start- The 1987 resource plan, plan, the service dates for Twin up of Unit 2 are in storage at announced in November 1986, Oak 2 and Forest Grove have the vendor's fabrication facility. details the way TU Electric been delayed one year to 1993 Fuel for the first 17 years of plans to meet its service area's and 1994, respectively. A fourth the plant's operation is under increasing electricity needs unit planned at the h1artin contract, and the System is through 1996. Under this plan, Lake facility will not be built. planning for the purchase of . the company estimates that [m. Combustion turbine ' j future supplies. without load management it Spent fuel for more than 20 would need 11,783,000 kilowatts [' schedule acQted- J years o,c plant operation can be in Niarch 19S6, the Pubh. c of new generating capacity to . . safely stored on site. This Utility Commission approved serve its customers over the , storage capacity can be next 10 years. TU Electnc s request to build increased if needed until the This estimate, adjusted for c mbustion turbine generating federal government opens a load management, provides for units t three of its power permanent disposal facility. an annual growth rate in firm PI "
- S ' E" """Il E'"""' 'S '
-v fuM by gas or M, am y-,__ .. Chacolitigation continues~1,.
demand of slightly less than 3% relatively low in cost, easy to and far the replacement of install, and well-su.ited 7or Discovery is being conducted expiring purchase power on an escalating basis in contracts, the retirement of paiods f peak demand because litigation involving Chaco older gas-fired generating units, they can be started quickly. Energy Company, a nonutilitY and the maintenance of an
" '""P""Y PI "5 '" PI "'
subsidiary of tl.e Company, and tmal f 975,000 kilowatts of adequate generating reserve trial is expected sometime in cmnbuuion turbine generating margin. 19SS. capacity in operation by 1990. Chaco signed agreements in Of the total, 300,000 kilowatts 1977 for more than 320 million Resource plan 1987 1996 at the hforgan Creek power tons of coal in northwestern CWh plant anJ 195,000 kilowatts at New hiexico. In December "2" *",*""N Pm the Permian Basin facility are 1981, the Company and Chaco Na, in planned to be in service for the 1988 summer peak load. In filed suit against Santa Fe "g " m " Industries, Inc., and two of its subsidiaries and against Thercol N"3*r w mm in addition, another 390,000 kilowatts is scheduled for 1900. Energy Company and Peabody '""""""' WM HL Under the 1937 resource Coal Company, alleging, amone w nNw in plan, combustion turbines are other things, violation of federal """"**"*"~ expected to meet 16% of the and state antitrust laws and adJitional needs by 1996. other unlawful conduct involving these agreements, which have made the commercial mining of this coal 9
3 o p t (> qgym
., - m- g:1 - mywns,
-a s N5bY{NE d$ a $
.; yy,l .-
r.pg . gyig g; wgen&zem%p
- g> .. .
.. . fine . ; . . : .K. .-m;
;, f y* ..- .
9 w xn p4 i, y
., y .
3 y y w. ,
; _. q -
yyyz ;= g i L7d
- . 7 _ i ,l Q _ y . ~
+-
L.: ie
.: e b_d[
~
- w. meamippasiehe of% '
(agein!dirh(pts; . J:
.. z., '
wy .[ L..: " '
, l,.- 3 < ' ininese, hat,
.i' w
Of 1 . E d , g, as .4 f. w :n..
; n.s .. fler
- .l' !S) 4 g y.y l -ey ; ::-
y gyry n[ei.
' j. ; T, ( .g ,,,;,
y ?R !
) ,lg 5{ '
$?
t .
, [, e bE!I$2 - '
= 3 4 g ,y .n~ ts m p
~ ' '
- 4. .
n ,. r .g g ~
'_ Yg
$' l l.
'N~
~
., -Q w ,.
c
~#
p,"lkff.*yl$;bjf.- % SY qr j _ [. p , f , 'l - ~-
^
fh
!.4 ',f i .-
_ 2 2 ;w. _
. .M
( } WQ N
. e , ,y : '. ,-{**' ^[
w wwmL
. ..asmAc . n g,.7,ye .cx. .g . g;g
* ?N
;..;?:f&w?f?f~;WWT.?(qq&"=O wj:p:g;
'Q y ":r
&: n :. "
~
- s ~ . ' k.6 s 7, f
$leMM'VMP,N 7
. .- - - : < r .p Nqpf_rti
%$@' i ..
- nis unique simpiator a che ?,'
2 o
. 4. -
.h 2a.Mb A @2
' m Cy 8.v w +
E x a. System's Athens Training i ['
.wy h'
. . . , , J, .t.
';* i
. . i operators to impmw their j! g .
3f,93 . 1. 1i M$; skills and efficiency. The . g ,. , - . .c . . m .w'v" l ; em dupwe che i-2
, . . - .'W
~
~'
e
. .. ei.' - ' @ Q Q ./.c.4
~ ' -: . ;j ' $lectric's 56 gas or lignite-
"'- f
~ , ~: s aa ,
j & g.. f_ n [.}~.. ; . 7
,_ - l
.a . e.a .. .f. ei a ,ia ,. ~ h
~
i . , . , 1 > q % u. . s
?.i-' 7 .-
g
- ?
' , . $ **. ",.%. - '
- gror -
^- c < y;
. .ly' n'A G.y. . .V)L. - . . y('- . . . . . .
* .: j
' \.e.; .ga ..
(- N':,l.l. .f f'* . l :e [~ '- { .g
... 92 qc -
. g. . - s. . ; . :..
.1 gJun.- .g';: : - .
1 /a# '. si -,.l 't T l '; A ; _ ,
';. f. ; . ; .._ -{
g .- . ;- .n- ^,y- **'.'
^
l' s . g * - 3: : ' g
.ty ( my 3, . ; .
- - ..L
. 4 .v .
..l*' ; .
. g. .. % '. %
..a.,._- ,s .
..s $
e4
> , . M a.; .
.c . . ,
' l. ' .
,~ * '
av . pp.. .
** *.,, - ;'n ,; , . ~ . .f. ;, ~.";. 4 . . ' . ' 2 w
. . . . . . . - ,.a .
h '*f. 4 l' . . .,' ,
I 7 *
. , ' } - i(
. .#./; , e
...._eh,-A;'e.1
.'.. d@pqc, . _
*3 , c- - .. . :
.. / . % . 9/ v
. 4; s e '
k~s
. - ~ .
i e .1 -
$h ^j . .
~
I.h.y!w. 8Q . . ~ - 6 ;; q .
. o ...h; ;
, [.
..., , .,; .!. , 5f , h. %. _. g ..
bN Q ,N) f ' -L , . y.3 _ g ,9 nj. ' p ; r <*, ; gw., , __ 4.( .q.- .;, .. . A .,. , . . . ..y. -
.,....,.,... s .. . . , . . .
.-. ,J.v. ..: 'i- ,
?
. c g M: pg.w.n:: . n.?; .. t
- ) r. - / i,.: .. . .. , -
. ' \.. .~ .. - [ . . ;.;. .. .
e-3r.
, yc,,g
.:; j , n:. ,3. :; p. e.z" ;..:,.-;'
.n.3 z y s ,; . . :. ;.
. ~. t .. . . 9.+,,Q.
..e1
. yup.g y - ) s: ;
r
.[-
;,..3.p'*( .c ;
_ g[. . , ,7 . r
.;.9 : - ; ; e .
^ '
1 g !: . . - J8' ~ 4 .&' .
'T. . , , .
...s..
. . ........s_.,........
,?..? .'s ,. . : -
a -
1 Ccastruction schedule COMANCHE PEAKg The reinspection program is designed to be selfexpanding, ceasic Un At the end of 19S6, and it has been expanded when eng mno smw Comanche Peak Unit I was f ndings in an area have had cesuwnraram w.w 1* raore than 99% complete and cw.amh rok i 1.cic.e !" . implications for design or cem s rot 2 i.cic.e tw U nit 3 was <g ua , ma ing t}le construction work in at}aer areas. cmbm.n nahm mm 1" entire project 94% complete. (" y jn @$ Major emphasis during 1936 The corrective action program has included rework of some Fr.res Grm i Wm im was on TU Electric s
.w .hMy m TU E',ettrw installed hardware. Two reinspection, reanalysis, and examples of rework begun in
" Company takmg a~ r dvantagqe corrective action program. 1986 are modification of about
; Through this effort, which 40% of the Unit 1 pipe L 0f C?segeragni. E began in late 19S4, the supports and the replacement of The 19S7 resource plan call' Comanche Peak Resp 3nse Team containment electrical for TU Electric to increase its has tven addressing all concerns use of cogeneration and other penetrations.
about the plant's construction f3y the end of 1986, the purchases over the next 10 and design adequacy raised by construction adequacy phase of years to provide approximately the Nuclear Regulatory 19% of the additional electricity the reinspettion program was Commission's Technical Review essentially complete. Twenty-needs. TU Electric now has Team and others. four long-term contracts for nine of 51 action plan results In January 1986, TU Electric reports Jetailing findings had cogeneration, two of which filed a third revision of its been completed by early 1957, were negotiated in 1956. When CPRT program plan. In May, the facihties are all in service, with the remainder scheduled the NRC staff issued a for completion in the third they will provide a total of Surriemental Safety Evaluation 728 000 kilowatts. In addition, quarter of 1987. The reports i Report expressing substantial generally focus on the adequacy TU Electric has short-term agreement with the plan. of construction and the quality contracts to purchase up to 850,000 kilowatts of cogenerated auurance program. electricity durine 1957 and 198S. Construction expenditures
~
[12Af madgenient lowers ] [ cepacity needs 1986 1087 1 1089
~ - ~,- - -.w Milliam of Dollars Load management Programs Electric Property:
will be used to off et IS% of ProJuction S 840 5 733 5 539 5 51; the 11,783,0N kilowatts of new Transmiwinn 53 S4 120 110 capacity requirements projected Distribution 248 260 272 279 over the next 10 years. load General . 30 32 36 37 management Programs, which include energy conservation, are Other utility pro;wrty 28 45 75 67 aimed at reducine the amount $ 1,216 51,189 5 991 51,0lS Total . of expenqve new generatme capacity that would have to be built by holJine dow n growth AFUDC* 304 411 500 282 in the use of electricity durine Total construction expenditured $520 (l y $1J00 51 300 7 reak perioJs. Through Such expenditures do not include: incentives and information, TU Nuclear fuel S(3) 523 528 54 Electric's Enerey Attion Nonutiltty pre;u n 21 34 36 47 programs help entourage the w -~ vo#-a; .. m, ef6tient use of electricity anJ m , a- . ,o +-n-a. ca1- u,*- the builJme et enerev<tticient <"T.o4mim'<auo< a . e- >- ma:a, .m ona g-a,. . . o4 _ n nn, e a,, %. , y, structures .4 iw }'. a ,. srses i i t id l 5 ,I s , <1 J ]l , . .1 3, , , . ,,;h r- .r.s n i,i 11
Construction schedule The reinspection program is CQMANCHE PEAK p,a designed to be self-expanding, cmwy se - n At the end of 19S6, and it has been expanded when una sk-to senke Comanche Peak Unit I was findings in an area have had U E "re Y i i.c$.g Z rn re than 99 6 complete and implications for design or c-he ra 2 1.cie. e i n Umt 2 was 83"6, making the construction work in other arcas. l grgayha" g[ entire project 94oo complete. The corrective action prog, ram l mncu2 :se.m im Major emphasis dunng 1986 has included rework of some R res Orme 1 750.c00 im was on TU Electric's
% oraNhty to TU Ehtnc . . -
nstalled hardware. Two reinspection, reanaj3. sis, anJ examples of rework begun m. , ~ Q Ey M idd~s W alrt p c rrective action program. 19S6 are modification of about I wof cogeneration -----mJ1 Thmuqh this effort, which began in late 19S4, the 40 e of the Unit I pipe i supports and the replacement of I The 1987 resource plan calls Comanche Peak Response Team containment electrical for TU Electric to incream its has been addressing all concerns penetraticas. use of cogeneration and other about the plant's construction I3y the end of 19S6, the purchases over the next 10 and design adequacy raised by consuuction adequacy phase of years to provide approximately the Nuclear Regulatory th< reinspection program was looo of the additional electricity Commission's Technical Review essentially complete. Twenty-needs. TU Electric now has Team and others. nine of 51 action plan results four long-term contracts for In January 19S6, TU Electric reports detailing findings had togeneration, two of which filed a third revision of its been completed by early 1987, were negotiated in 1986. When CPRT program rian. In Ma3, the facilities are a!! in service, with the remainder scheduled the NRC staff issued a for completion in the third ! they will provide a mtal of Surplemental Safety Evciuation 728,000 kilowatts. In aJJition, quarter of 1987. The reports ) Report expressing substantial generally focus on the aJequacy l TU Electric has short term agreement with the plan. of construction and the quality contracts to purchase up t assurance program. 850,000 kilowatts of cogenerated electricit3 during 1987 and iggs. Construction expenditures E,stimated load mana._ I. _ .
, lowers ,l gement 1986 1987 19SS
. capacity needs 1 -1989
.-__- . A Millions of Dollars Load management programs Electric Property:
will be used to offset IS% of the 11,783,000 kilowatts of new Production $ 840 5 733 $ 539 5 517 Trannicion 53 84 120 119 capacity requirements projected Distribution ' 248 260 272 279 over the next 10 years. Load 30 General . 37 32 36 management programs, which include energy conservation, are Other utility property 28 45 75 67 aimed at reducing the amount Total . $ 1,216 51,189 5 991 51,01S of expens,ve i new generating capacity that would have to be built by holdine down growth AFUDC* 304 411 509 282
$1,520 - 4600 bl,W 31,300 in the use of electricity during Total construction expenditurest - - - - - - - - - - - - -
peak periods. Through Such expenditures do not include: incentives and information, TU NuJear fuel $(3) 523 528 54 Electric's Encrev Action Nonutility property 21 34 36 47 i prourams help encourage the
- Ah a u MJ o J J w s s wrm cfficient uw of elettricity anJ wnJ e r.. - , wJs - + n-e m - u 'u r < 4- mh e -
the building of energy-efficient '4 f* h 2 U# I E' ' """ " " " st ruct ures. ow n ca o, :.- m m - Jm R M,
, e Ai6As a Te[
, ,, ,n , ,4 7, n g ,; ( , } . ;; ,1, ,.J n:De a p. a. dx n e on a s ;4 r, ,
eiy + nu i 1 "1 11 ; \ b _ . _ . _ _ _ _ . _ . _ _ . _ _ _ . _ _ _ _ _ _ _ _ _ _ _
gr . ',. ' vg . .
- 1. y;g.n.t;':, ' ~[, ..s b',.
.y
~. ,
i
.e .
- '*^
.'[ '.f it '. .'.
~
h j '.+',
' { $,' tj'
. . > . . e., . ,
w.. w' p.m,g. %. m Wy g ^ ;
. /n .. r. .3. . Q?"I. : . .
G Qe.... :g. . R f(. .'A Ap m m m ;
!l,j .: [AQ hc ,r . . ..
1 jg ,4dic8** g
- n. .. .
N?I$ l:.n,. . . . .
; ., ; . -:>. :( , . . .
,; ~sy
_;. . . ~
. ;. ' . ., ,; ;.}
, v _
.q.., f._. ,..a.>d } lsi WW ?e ; L
=
u
.g.4
.? *c t ;
, , y . . . , .. .
'%;., -;. . , ;., :.. . , ? . "m, . emw.! w
?,
f '~5 . ~ "9; *a ::5~ f. s ". W
.'g. . .w,s;gwig. . m.:[ O
[l.
- Nejp(ry,$[Q .:
? +
.I ' , ,
w e: . b. :.4* . : ** -L .. . .. I, ,, 4 ; y L.> g Z w; ( . .* gz.g.. g ; ::u._ }. [,-. ..[f , } .k','. .ly- t . $?Ok. ,;L **
- . 3 _c ; a T::
th / .ggs* .m. k. .: . j*i; w' .
- .' .. [ lUl' .Y..
, h lv ,.,] V. )?:p ,, q. .. p.. .,.
- r * ? ;_ .
-^
+ ~ . , .< ' -
gk{ l?h. Yf:#Yv% .v:. y c.g)?g
..,j .
- m. t 3?
janShiEE y - . L, USML Jh. f . NE , h, ,' > . s, f_ . y. :, p .,; ) #7 . SSB?!' .,~,,.g. a. ' o.. k; p. w J.:'3. -:g L '.5',uMv, #g.s s.,.-*~,'J..,_~.,
...., y ?, ....
. ,. k 5,,
K
^ .,
q. r{ t. b.s
;y J.t y *
~ ,(.
e <
,..,.* *e
~
.s. .
\.,,,' f.
$" .- <- e..
s =*
-lc l [.2m ..,'.
s.. . y47$g f
...'$,;, *
- R Y ,'-
g 1 ,% w
.,.,. +- ..,
'l '
l# Q:Oj N ' ':[ ;. l
.s m, .4+.
,e,
.,e' s ,,,,
" ?f l , } ' . c.
.~
,,,, . . , , i
. ss.(. .. {. 5, +.". .- * %, * .'
,,?
g *k
, . -r
* :\* ,./ g g.. ,
y,
- ~, k. .s 4
3}, . .p. s ( 3~^
. . p- -,, ,c-
-.{..
2 *' s )'. .,. .
- a. t**
;g'
* +T7 - ,
%,' .-e,
.e sf .f n
h_ [- ; 3 a. p,.9 ma
. .9 v:9 < . ,_ .. e
, _ _N k M.~M . .
37 .
;A g
_ DMh_,k_ _h)M mr 1
~yi ,
- i
* ~
L
.. .% s*
+ .
?[, w 1 3 .
. ' ,'%ss y V, , J.N h l.% ' '
'pw N. , 4 m ,% n-Ac%,8A&.,s
~
- %-_.,; 'a in a L#.8y%phgg%g%,
'^' '
.. f {&.'in* ,. f N ;l'y'::$._;
s. Q. y. 4: p,
. y; y . . s
. ; :% + ' [ y. %y. .. '. .
v:~ .' J;;K.MJ .M; i gc ., ..o f :. i ' i, .
' . y,,,,% ~Y'. %j:s,,s. s 44.>
4<.,. b' p y
- 1. . g .3. ,p. 's,*f'p,'hV.C- M . ,, ;. ,
......-.6
.4 c .-- g
,~' ' . ' '. .-
I. x
<'> f , , ,q. . .,
*. al
- ; J %.
. 't ' - * , * :
' ;g -. - - .
4,. f - .
^
), ,,,r.
.,, e . * .
q-4 , r,
*s,.,*
t ..
-.- ,. . ' , , g"
,- . ~
g....~.
.[. .+ , .
4 -
, ,<v.- -
r ll 1
..3
. # * .... ' * .e 'N
' .- [-
,,? -
.'- y w
.y
,.y
(, -*
~ .- ,
' 1 '
.e M , . . . , . ,
g
's f ^~' .
. +-
~ . , ,:~.? ..
.~.
., , ' r *
= .*~ :,
e O
+
g q.. i . . . q(
The design adequacy portion the Comanche Peak units can in October, the ASLB admitted of the program is well be met or that their estimated an amended version of the underway and is expected to be completion costs will not be contention. The amended finished by the fall of 1987. All exceeded. contention also was appealed by the company and NRC staff. anticipated corrective actions needed for fuel load and {--]gjyg} ----- As of early 19S<, the Appeal identified rework are scheduled Hearings on an operating Board had not ruled on the for completion by the end of license before the Atomic Safety appeal. l 1987, and Licensing Board were In addit:an, in hiarch 19S6, l The company is committed suspended in January 19S5 so the intervenor filed a lawsuit ! to resolving all problems and to that the Comanche Peak against the NRC in U.S. l the safe operation of Comanche Response Team could address District Court for the Distcict l Peak. concerns that had been raised of Columbia challenging about the plant's design and extension of the construction pgg7g y,q u_..m .m.m__ a construction. permit. Oral arguments were Because of expansions of the In hiarch 1986, TU Electric heard in December, and a reinspection and corrective filed a proposed schedule with ruling is pending. action program, TU Electric the ASLB under which * -q announced in April 19S6 that hearings would be resumed and 28"$.m&ad in hiay 19S6, TU Electric the cost and schedule estimates conducted on CPRT action made in November 1985 were plan results reports in the order filed suit in State District Court no longer achievable. In July, in which they are filed. in Dallas County against the the company further announced Subsequently, the NRC staff minority owners of Comanche that Unit I would not be and the intervener in the Peak-Texas hiunicipal Power available for the peak season of hearing process filed alternate Agency, Brazos Electric Power 1988. proposals for resuming hearings. Cooperative, Inc., and Tex-La Revised cost and schedule As of early 19S7, the ASLB Electric Cooperative of Texas, estimates were announced in had not decided which proposal Inc. The suit asks the court to November 19S6. TU Electric to adopt and had not resolve disagreements over the estimates the reinspection and scheduled further hearings. Comanche Peak Joint corrective action effort, plus all Through an oversight, TU Ownership Agreement. related plant modifications, and Electric did not apply for an In response, cross-actions and the licensing hearing process extension of the Unit I lawsuits against TU Electric and should be complete in time to construction permit before the the Company were filed in June support commercial operation of permit expired on August 1, by the minority owners, asking Unit 1 in early 1989. Unit 2 is 1985. After notification by the that the Joint Ownership not expected to be in full NRC staff that no application Agreement be rescinded, that commercial operation until after had been receiveJ, the all amounts paid on account of the 19S9 summer peak wason. company applied for the Comanche Peak be refunded, if this schedule is achieved, extension in January 1936. In and that other damages be TU Electric's share of the total February 19S6, the NRC considered. plant cost will be about $3,300 extended the construction per kilowatt of capacity, or $6.,< permit for Unit I until August RATES AND ~ hillion. Even at the higher 1, 1988. REGULATION estimate, the cost of the plant Subsequently, the intervenor TU Electric filed no requests is still about average for nuclear in the operating license for increams in operating plants schedulcJ for operation proceeding and a former plant revenues in 1956. The l company's current rate levels, during the same time period. ernployee filed contentions Because the company has challenging the extension of the excluding fuel charges, were set only limited control over the permit. In hiay, the ASLB by the PUC in November timing of the licen'ing process, accepted one contention and 1984. Future rate filings will no assurance can be given that admitted the petitioners as depend on economic conditions. the presently estimated intervenors in hearings on the TU Electric, however, does not commercial operation dates of issue. TU Electric and the , NRC staff appealed this action. i 13 , t _ _ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
4.y Q 2 '
g ,, }.; .*
. _ = * .- .
~*
.' }Q _&. < !' ' ' . ,% ; [~._b" .' ** lc); . ,' ?
- ~
. , . . 9 l { [' qR s.
- s. . :6 o, 2 %$.,a -'. , '; + . e -Q3y'-{q .
p : r; 3 4:.,.
.A m: .<*
b : , ; . g:, . .f: : ' K . , .,,, y. . . .f>p _,:s_ . .: g; 2:J; ." .y #. ' q y , _. , ' f) * ' , . . . '.
^
,.. n- -
, . * ; * . 'e <q,1{ '* :..R
, ,. ) - .
.. . f M *.' < * - ,.;,
~~ y : .- 4,
- .*.)
10 '-
. f
; .cqtoringsinem; wendy. ^
-..". ^
QS { . - ,, , .
~?
_ , . . T ,I - e fWl $, R$hW$$ $ ll' ' 9 ; t. .. . 1 4 '
, 7.ppp' pipang,,lks operarots.e; .; :3 * ~
) ?: : ' '. - ., . .h g -
*i..* l} :
' - . {" ' ', i ; . ,i } * ' #., ;;. h ,.
j - 5 .' !. , t . -
' t g.
l- N
- .f h , .
{ [ :'[ ' $,.,. 14 _ h;, ,_
+;"-
M-)
' * ~
E ^l;
; :; . . , l '? -
e .- ' y * ,_.
- r .
y .-;.:
?-
d . . , . ,
. -[ ,.,_
.......,_ y.' .t g.. - - 1 3.- V yf ~ ',J_ ,,-;l ' ' , . . ,' l. _*';
l. _ _ ', 5_
- y , .
~ A-( .
^? -5.-' *; +
.c, I
y[gg - .
;.g :.
R..p g h . 4 ,..-
...v.. :: .. , ,_.?Q :
i ; -1 ;-
'.s
* + [ ,,
. ', *[.. .. ';:*~ . - , -
; ,.. lf6, ,
. .y .
fi . ~ -- - . .
- . .- _.v. ._
4.5 ..g. < .:,' ? l~q%Yl@. ;. . 9,:, _ \g'. "~
-d,-
'- [.. . ..
..r
. W .s ', '
%* :''*-- .1%V'-.{.
g*;q - _ _ . _ .
;p $'
. . 5. w.? . ;v,q b . ,. . 3 .. .. .
' ~i 'j
$. (:.".jk...gg,\
. t-- -
..- /'Q.
. . y .4.e ;. c -. -~. - -
[ l [r- [ r- = k s. 3m 7 Y'"' s.
~
E.
.[ '.[ , b
.s f' '
~k^
. Mi*['WM[,7',P b s[' . . 2gJsk
.: ' O ,i. - , yJ~
s
.n 17a - - y ;. . Y. '.J,,, at . '. J ,:f.,j ' .
,v -
. ' ?..
. ., . _. : :=. , . % . s. ., ,, r ; c .
.. u. - e ,
c.. . : , . . . .
; . .=9 t==
...-/'
e *
. ' , . u y. .[ '; m '
; s;. . . , j
. ,_ ., 'g 3[I" Q ' <,' ? > YQ Y( 'f_: ~.' [ L'f,A -(.' 'A ; --;p_,., j
_y 4-j,D y *.
- 3.a:f. i.'M . I . * . ?.,
c.
- %, l . .. %; :l -{ ,m..m _
[ M _ .,6.}. ,q:k s:a. q . q .g . .
;- . ?, - _ *
, ==* ' l _ ff . . '
5J .l.f l ' . '.f _. s, p : g4 l
< .y m f; y
. y - g b y .:3 -
. s. &
.;.y. y< g v g. qwmg:.v..h n i.e y. w . ,
x 1 ,
, N,. by N.
~ h j h ~
~ ~
$x MM , hk . .. .
Ek lf.
~
unnum
~
.' - f,.
L .
- ,, y f
-9
, gg in =
c "., . -
' .~. ' . " '
. N- . _
- 3. ' .,-
7 ;.; ., .. 5.
.. f^ -
; ; ';*l .l .~ . %.- -
? :j . Y hf. .
. . t g } ]i I yy.g
, . ,. ;.. n w -- g 1- +.my 3._
llp pp - - g g., g k;.g c. ,.M g ' '
~ ~
;,j 3 g.
r.. .. 7 .- m . .
;. p, . .
7 .
. u.n a m..,u
- c
.. e , 3
_ f.: 7 Ry f,.
- f..;W
^
_5 . Q $ '.l l . h , ' .J.'
- A. -
. '_....v v.
.s .v..g. < m.
. _; , . m., . . u -, #, ._.3_ - . ..
. . , . >- .g , . .. . ;. . . . = >
[;, .) '
':' r , - ' *'"
*y% .I e"*."
- J f.
- a. e . .
l _
?)f? -
J .l
. n ww : a y mm as x +
plan to include Comanche Peak T g e V p M "'~t W ] In 19S6, the System Unit 1 in a rate increase [a-lower costs ,
; intnxiuced the research program request until it is ready to -
- " , - " " LOADSHIFT to determine the operate. The Company believes One of the System s most technical and economic the initial rate increase that will ambitious research projects feasibility of large-scale w of be necessary to place Unit I moved out of R&D and int direct control to reduce peak into base rates can be held to commercial application during demand. About 1,000 customers about 10%. 1986. At the Martin Lake have volunteered to allow Because of the Fuel plant, a waste hyproduct from control over some or all of Company's aggressive program burning lignite, scrubber sludge, their major electric appliances, to obtain lower-priced gas is being converted to a which include air conditioners, supplies and the greater use of synthetic gypsum and sold to a water heaters, furnaces, and lignite, TU Electric was able to wallboard manufacturer with a swimming pool pumps. These apply twice during 1986 for facihty adjacent to the Martin appliances are beine turned off authori:ation to reduce the fuel Lake plant. The fin:shed and on for short periods of charge portion of its rates, product exceeds every industry time, especially when demand is TU Electric received standard for gypsum wallboard high. The key is to control the authori:ation from the Public and can sell for a lower price appliances without lessening Utity Commission to reduce than natural gypsum because convenience or comfort.
the fixed fuel charge in March there are no mining costs and - y_.__ transportation costs are minimal. 19S6 and again in February {timproves ArtiGcalplagperbmanceg mtellisence 1987. Le overall rate reduction The System and its customers was 10.3% benefit because the disposal cost Since the summer of 19S4, Declining fuel costs ako of unwanted scrubber sludge is engineers a thousand miles allowed TU Electric to make avoided, saving about 52 for away have used artificial four refunds of fuel charges to every ton sold. The sale of the intelligence to monitor seven of customers totalling $319 million ProJuct is expected to produce the System's turbine-generators between May 1986 and about $1 million of revenue a and diagnose conditions as they February 19S7. These refunds year, thus saving castomers develop-in seconds or minutes were made in accordance with even more. instead of the days it would PUC rules and approval. The System has already been take by conventional methods. succes'ful in markering Predicting potential problems RESEARCH AND substantial amounts of lignite before they become acute and DEVELOPMENT fly ash and bottom ash, two cause damage can save millions additional waste byproducts, for of dollars and days of down Research and development ther commercial applications. time for the unit. Pl ays a key role in meeting the fi,6ADSEliS M ie g g The artificial intelligence System's everall objectives. i system ako helps plant R&D is instrumental in r peak demand preserving and improving the
'-""""" " J personnel plan maintenance by On very hot or cold days, telling them if a problem must performance of the System's when the demand for electricity be corrected immediately, existing assets, in protettine the ghm, all the System s environment, and in providinu s at in requirine an unscheduled unit eenerating facilities are calleJ outage, or if the repair can wait technological options for the into wnice hal wan aco, future. The System meets its until a scheduled outage.
the System recogni:ed that the Monitoring systems such as unique R&D needs throuch con of building new generating the one beine tested make projects it plans and manages. It aho supports R&D of uma to e thm mak availab'e knowledee from the N'i" "" ' """ ""d he't rower riant experts in the interest to a broad spectrum of o becan researching ways to worlJ-utilities as a member oc the Elettric Power Research
- b Fu M save customers money. One y
method invoked remote control by the Sv tem over lu>usehold appliantes that use large amounts of elatricity. g
,. ,r, ws s..- s, c: - .< - r , , ,
, m. . -
-- , - s e.r .,m,,3, ..
'-s? / c s- 3
,42'r, A
% fT ,
, w,
, - - .' .t ' _ -
.,9 " s <
, e . - r7 :.. .
k _p '- f 'J, 4
~
, : . J. ; n
~ ~, ;* ' .
i , : f. & f,. .
,tg t#." '4- Q r-
',g
;w ng , i
- e. n ,
.fa
.'-? --.7,..
1 - 4 f 'J
'f
, I, b '-,@,-'
*
- a
- 5 1 ,
{d,r:"7
.. e c . . f i &
.T !
!*-4 ,. .
- < 2
- p. s . .
ll h * ( / 1 .a
.'.A*
p 7
".3, < , o 7-+Q =)_
n* >, .,
,, a ..
p' ".t,y .-. ?.' :-. .[< _ ' ",<
?_ , e
' _4
', - j
v L m t ,
-. ,7; .
-w-'*
w-'.,
. s%.".- \, ;;r
_ , 2,.v.'. ' , c' ,% u;,
.s g..
.n r "-
.'y,: a j
.,*%'c
, _ 9 ,'
5 ) ' 4s ywsg d' -.J [ -j ) , 4
, ,1yg,
' f < -i i _' ;__ , -
~
'%; Tj% - A }" Y.W ] Lf ' a
%O - <
,-* / % . * *. . <'
+ .
#a p1
-3. ./
,;,'.* , , 4 , <
. ;. = : .13(
5,
.F
,,,g ,V. h -
,.g m o r* m, yy j {_,rys - Q, ,
w<s, _f, ys' 4 -
,i ,,r,,
t 'g ,.a' .. --;-n
*'.,ef-
/Jx P
, e'.]O h (
- j I
h .-
- s. 4.f
- g s f ,W ;T
$r'?y wm .me n e ,.,-
.1 ._(_
v"
. ;- > > a
< = ,
v...-y , a,): >-
- e. .<m ^ .
,~.ut
> ;#~ v,s'_ ^ '
- p. , , ,, : v? - -. .
4 ,s 4;.-
. & 4 h. 7 iA l' k-f.; f k ; & [nh ~'& Vl- hu1m'i s N,.
., i+ . e ., .- .
,, . + ,',9
. . * , -
- u c
> 3 . + -a f*T.-.*
-a , ,
...g g f ep3 -f ( Au '.^'g, ./ . N 3 v
4 . bat.%fj s f g:-:C$2.xl'3 x.n
' Q,T+*p,.R . ,.- r f nf rio,%.- .? 3*s c 3.. .w.
- f. s
, -? -.s -
.n
,2
./.
; t
- , . J, . /. > . . n, ,
t n
, g; a ,. ,',
.l.y-m:
c , , . 3 { s, f;? . f n sg % s
- 6r f - * /.Fs,,5 -: , ^ ++' A- - Q Q
>b < ,t 3. ; . , n ;. y -
L 3s ; fe, -- ~%q; ., , J 2,. &' f nw a
,~ 3, . ' "a p ~* . *m :, ~
-- en e. ; g-']e a- u'g &e
, , eu -
wjr.w _f' .g- 4- 4 =n '41 - m / 9.o~ ^f',' .- 4'i. 4' N',.
.--1' C 'c' ? #
T
,C * -. .
% s ,
a [ " q' %3 y q * . #N .;,,y^,1 9
- - %' j dJb g'f2 4 . *' i . W
.f k.J g :,'l i~.4]>
4 '- e-
< =- .
f
.,.' g.--aa < . '
',e'
+
- e p
v!
.d n% ' .sy'\* / u, . . ,
3 g ; - h- ^Vi c
, .L . . - <.'
1 y TQ - ~ s ss,,- J.. b x, 9 ; j g. 5a ,3 s. .~3' 2wf;h 'p a i?n.-@'. #3 y . g r
+ ; _ , R. s' ,' .w, s ,-
.. \.,'3 , p 4' s
- s'- '
~ ~
r ;
-,', {. .4> , ,
- i. v ,
7-
. , ....z.
ews% - -. # %e,t , p , y,pp y e . ., +.r- -
- r f; ..,sr. , tx
> . n- =
se e s - ~ e c, m.J -, ,
<. 6,- - . Ay<f S ; . q; s.mq ,. s ...! w.-
i ..a g >.4 1
.. .c ..E.j,a-A.,.,. , - M 4- c
-1 i ;.,,
f
- Az .__;4 , . - . .
e y;p u >- , .3 .g s, . ., : e- 4 ., <.: 9n3.:g -
- . ,4 p~.7 p
-_ y. , tV.
r . c. t
~;m q %s-*ss- o ,9 u %.. - -
m
> e i % .. ., {; ,. n , . p m , s.
^+ , ,8 ,~ w .;-w . ,. _ - n. ., ,
kl&+ Q;.:f.;. ps [ ' j ' j ; nc .e, . ;
*T -- Q , ~Lu .16 .' l})N. :qv7h '.k L)2~ % =. ,s ,344 -v.. . ;J t+.-..e,r, (u -
e s g u ~ s -
,~~.m <i+,clf ; . a:
y f4 a. l.a[ ".,N.L,#.,, W, ., n s i >g e !'~ L.4 % ^9 &q u z L.$ f,.( a i ' r Q:
; . 'J'_ -
\ ,.a i< * & *
,. , 3, +3., &.n g p.$.) g 3, w aA, .n*
s .c.,, y e _ . .n . e
~ .
g
;~ x,. p'd,h, w w '
- s. m m . , . , ..; n
- i
,,+,- ..
- s. y, , ..
+ Qi~ > <,, . . .< ,,.~n se
- '- ,r s y z - Myw: ,,A,~ax r t W:yt f u v. +i.
r,.y g j$ y%9' ( .;hng) :y,>? t v M-> g.y., m' 1
; o
. m .: .-
s, z m,;;m. p; 3,,M, y y -(ar-.sp .h. .,. a y4-/ ",. + + 1
; -- -Q : > . .
r.g $ a"',,g ypy y;;g.e; s , . 47 a s , 7 y , 48 ,:
* E **W- 4 y-*,7,_ g j+
,;* -p if; ; g..
g .og ay a nw - 4 _, , g g7g , , r '+ ' ' s h-?k ':d hMW Tf y ;;RF4
- 1 +y n.n, .
. 3 ,,, y .c--rq,
' ,e '; o.,& ,%w&*X;vJ >, .g m$ ,g . m x e: #:f.y
+,s.4_.ww,~ <, s. s c ue--s 4
>3 , .
- ph . .. , n sm3s em r.w d *~,s vyJ,f.>= ,w :t rs%/,x r, . -se
< wsty c . c *, - :q
< s e , & ,
6... ,. 4~-> > n.,- <- ny ,x .- <
.-..-..t U A h w; .yf (
8 . .
#y ^; ~W'.. e p.
h ~~E .; .,,
, i' i , { "u, -Otw ' ,(( h
^ 'x, . N ' y !- + s P {- [>
f f ' )~d f 4f- /g %, k!.47g / g :z /L- -; ,';4 a/.-
.'t"w,-W, r .
+ p -w ns =%- s, ;-r r.;sV-- p g e n v, ;;w p - .
a
.{-
> r,: ,' , u
- s . &- .,p 2 e*
x2 6
.t
; L -> e x
-1 ;-- q v s y...
a w y3 ey , .; - .g ;a ;ap%.. m; . , . a.,.e , no sp ,.y j y4_ y_._ q.g sv, , ,g .g. b y,. ? ,a ;n .,1 > c yyypqu _; n u a ~ 2.
, c ,a y <>
- 3 - r . e , .
v. se.w. s. t .t>.
- m. 4
.. em y
~e ..g-. .-
r -M; z,,- t ,s ,g.
+
e : 4 q._ - A.e-t4,. >x s, - i,Q , %.g ny,m, M;t .,sk yp ) - &6. 3 p--g. .. .s 4 .m. ' y w f' ,.a.p.
. q~i sg4;; * . -
- w. __ m; y. qy Kn. . _ w;; ,;;p'tuS-> .-
. , , .y; ..
~-
.s.- '
+! -
~.m , ' - , - - - , .s m , L ty: p+:q x -ey a* , w,e y w<.x_
u , er. n.. p r"-
._.rz, L,1,n.
. f,. >
'.. 5:k,Q; . , . ~ . . ,
%M --. 'r.Y w.'..c.$.).-
g4t{l.~ <,(.~.. '- m J r a!-b_-FL. d 9 8 %.4 ,1gQM&. =4?,*g3 a h.[ -+ g'-.r 3y ,
-.J e "".M 4 'Ti9 d A'
- 4
- . _f, - >[f -
.,# 4.' r
. p.
.m . i L .4 $ / 4_.--g at'/ 4Ate
+mc- ~7r -J .<. g- e.#g .T.-Oo . gZ 4d
, ~
,- .', / -q q q y gc .,. , d p.;^ s g .g .M,A. c
, g 3
-yi , ; y ; - - r q.; ,p'+ p y#9y-l.(a g y
f m-v*
;ywg i
e _ f
.x,c ., ,
- u. , a. n n,. p f' e~P. -
+ -- , ,
.e s f
- ,4.'~ , f 9 n-
,t -Qps:ea4.i $. m .a ,'.vxm .- y
. u-r.- . .~p%- ,,r + c' N,
, > r ; .;y eu y< - 9a ,4 i- 1,g,srm V L;%q%.p ,3 +m, v. - y u'- n
& 4 s
,+ , _ iy. . .
%w .,. m. .,% y' u, m cp A e Am,,.n,fp
. 9 y 9. - i + y xu+g. u 7
z.y w?
'.p.g..
. p ,m -:m i .: ..-=s .e t. p. .. . ;4 s g= s ,:':s p *:. .
.m -
ne- , /
-ind c a~
W V
% s s 8 pn
's - qa s
- mp ' + - * ,w d-t_..>.A.. , ,
;;.3g Q y' Q p y m f , ,^,C }%'< v y y . f' l ,
I
,O .,,
b
'.v ~.
e
q. [*. .1 n.,l'
. ,A;-L a. - *, + e, hh.
e-. .y a w*oNu.s -
.t?
Y oky .;;p,h (,a-
,, c_.. .
,mth- ,,\._
~
h
$i . g 3 v' _ - ~f +~r '3+ic
."f' .'+r. i ey'-4,+ 'i _
ms. y,,. 7 s e. y. n ." , ,.. ; 4 '.4 .:w p._- i;_ 4
,'. p 'y.w * ,t B.'- >F -
'e .
;. ~
I _; z. '.
, , .g g g O * -'
k,
,3"v*4"
_' . Y [. t
.:g r:.
m
,2 c+ y. p. ++ n g.y(, p+. e 17 g,c 8
'
- 4R ,, r, -* n. t- -<3 m b e
.c 3 y (:'
sAA -
s
- n. 3 7 A,A ( x,-'yl(u aa
', y *A
- e
# ' -a ' ( yII e r
- >j "
4... .'g,, - % w ,._ ~ ,n ; g .<: . cs,; ~. p.s>L.
. . r -
g . . _ ,
.r ,,. , . v ,c , .s 7 ,.us if h: -
s
,s 34 1 , q i ,- " ".js>u' y ,.s 3
i g % a eL.Q l. Q . .
, c- -
,f ( - p ,
_) ,
+ J p_
7 p( M % , g;y
. ..; i.
g * -r
-u, e -. , v ;=,,$g c > . ,; b. - i , s ye4*, ' '
g h j , _ .a,{. t M
, a . m- -s
- e.q- 4[+ 3 1}q u
a .f -I* %-
+
1 . qwg 4& 3 9' - 1 4 -'. ' 'f n ,
.._.;, e
.s *
,,' ..1 y (i.
z.)y -r'
,a
ll sv 'i!! !: :l. ' t < Ui N . \ VI) M M!1 GRil \ MANAOEMENT'S: DISCUSSION AND ANALYSIS . OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS T Liquidity and Capital Resources The primary capital requirements for 19S6 and as estimated for 1987 through 1989 are as fo!!ows: 1986 1987 1988 1909 Thmnis of Dum Construction nd:ture (exdudng AFL'DC).. $1,216,000 $1,lS9,M $ Wl,M $1,018,000 Nudear fuel an[nonsnl:ty property..... 18,000 M,000 61,000 51,000 Matunties of long-term debt and sinking fund requirements (includes early redemptions ,, in 1956 of $232,000,000). 306,000 n,000 56,000 5LOOO Tocal. $1540 r000 Sl 301 M 511 111,M Shl22,000 For detail concerning major construction work now in progress er contemplated by the System Com-par.ia and commitments with respect thereto, see Remurce Plan. The System Companies generate funds from operations suincient to meet operating netds, pay l daidends on capital stock and fmance a portion of capital requirements. Thew funds are derived from consolidated net income, depreciation, deferred taxes and investment tax credits. Factors affecting the ability of TU Electric to continue to tund a portion of its capital requirements from operations include adequate rate relief and regulatory practices allowing a substantial portion of construction work in pro-gre% in rate base, adequate depreciation rates, normali:ation of federal income taxes, recovery of the cost of fuel and purchased power and the opportunity to earn competitive rates of return required in the capital markets. For 19S6, approximately 33% of the funds naded for construction was generated from operations. External funds of a permanent or long4crm nature are obtained through the sale of common stock by the Ccmpany, and the sales of preferred stock anJ long-term debt by the System Companies. The capitali:ation ratios of the Company and its subsidiaries at Dmmber 31, 1956, consisted of approximately 44% k,ng<erm debt,11% preferred stock and 45% common stock equity. Similar ratios are expened to be maintained in the future. For information rn;arding bank lines of credt and short<erm borrowings of the Company, we Note 2 to Financial Statements. Finandngs in 1950 by W Electric induded the folk, wing: lavTerm LW Pnrugul
%meh Anuunt thrpen _, _
Mmh $2XAYAV %% FN htcge ard Gheral Tra had Jue 2J!e A;W X,AYAV %% Fu htcgu ard Gam.4 Trs ha dx lC16 Ckt M ? CAY.AO !\% GLm4xd Man Gorral Romr Refurdre Bd Jr ??!6 CmrM 2X,AY.AY 6% CEmalatd Ihn GntnJ Rome Brd dx 20!o Nmk kr.ACAV %% hre Nicgw m3 Gutral Trs huh Jr 20!o Ta2! $ C0AC.AY 5 l i rWJ % d
%cth % ns M Pnmds Dmpen h4 rm 1.arAr 5 +.' v AC 5 4e Cumulow IMnnt Mnt to Marderv Paqo n JJv WAV 4 J.413.XO 5l0.N Cumbne PrdneJ, Mvt to Mnir;ev Rakqnn J2v W.3T 44 4 7,3T $ U Cumdew IWred. M nt to Atnto ev FM3rm a Ta2 il f.7:7,XC Early redemptians of long<erm debt by W Elcetric in 19S6 included the folkming:
l Pnncind Raktnnon Mmth Armwit , Gw Dt .:rpim Mn i YAY,Ar $ MMaY I15% in Ntceu ned Jx :T
);ric WAT.3V V.XCAO 19 % hre Nicce Red Jr 20l!
Sperk 12.&73 0 14.1 V ,30 175% in htcee h<d de 2'!! Nek 7:Arar 71,WC AU 1%% C amnad fwin Gun d Rnm* h ed d e :Cll Duv M _YATAV 4.270Ay IF,% hre htce e B d dr :011 Tad 1: \:.4 7,NC 5:\:ff?v 17 l l
Financings to date in 1957 include the sale by TU Electric in February of $250,000,C00 principal amount of 9%% drst mortgage and collateral trust bonds due 2017. The Company anticipates the sale to the public of 5,000,000 shares of its authori:ed but unissued common stock in hfarch 1987 and the is- i suance in Niarch 19S7 by the Bra:os River Authority of $100,000,0C0 principal amount of pollution con- i trol revenue lunds to be collaterali:ed by the issuance of an equal principal amount of TU Electric's first mortgage and collateral trust bonds. In adJition to the :nadties of long-term debt during 1987, the Board of Directors of TU Electric authori:ed in February 1987 the redempnon by TU Electric of 532,531,000 principal amount of its 16% 6rst mortgage bonds due April 2012 at 112.27% of the principal amount thereof plus accrued interest. Aditional early redemptions may occur from time to time in amounts presently undetermined. The System Companies expea to wil securities as netded, including the powble future sale by TU Electric of up to $350,000,000 principal amount of first mortgage and collateral trust bonds and up to 1,000,NO shares of cumulative preferred stock, both currently recistered with the Smurities and Exchange Commission for otTering pursuant to Rule 415 under the Securities Act of 1933, sales of aJarional shares of common stock of the Company pursuant to various plans described in Note 3 to Financial Statements and sa!cs of aditional securities from time to time, in amounts and of tygs pre ently undetermined The Tax Reform Act of 19S6 was enacted in October 19S6. The Act, among other things, renaled the invesonent tax credt, lengthened Jerreciation lives, created an alternative minimum tax and lowered the corporate tax rate subject to certain transition ru!es. Other tax accounting changes were required in-dudng the capitali:ation of items previously expenwd anJ a change in the timing of income recognition for certain items. Substantially all of the tax chances, with the exception of the rate reduction, will result in the Company paying more taxes currently, will eliminate sources of internally generated funds for the Company and thereby increae 6nancing requirements in the future. The Act dd not have a material ef-fect on the Company for the year ended December 31, 1956. Although TU Electric cannot predict future regulatory practices, the extent of any further delays in the licensing of Comanche Peak or any changes in economic and wcuritin market condtions, no changes are expected in trends or commitments which might sieni6cantly alter its basic 6nancial position or ability to 6 nance capital ra;uirements. However, TU E!cetric has inacated that it does not currently plan to in-clude any aJitional Comanche Per' cests in a rate increaw request until Unit 1 is ready for commercial I onration and has stated that it beneves the initial rate increaw that will be necessary to place Unit 1 in-l to bue rates can be held to about 10%. Therefore, prior to the comrletion of Comanche Peak and its inclusion in rate base, a lee nnentage of capital rajuirements may be generated internally. (See Notes 10 and 11 to Rnancial Statements.) See Financial Stat!< tics for aJ1tional information. Results of Operations l Operating revenues dareawd 5238,112,000 in 1986 anJ increasd $237,922,0N in 10S5. The following l taHe details the factors contributing to the Jecrease and increaw: l IncreaselP 'ereme) Factors 1986 1955 ThwbofDhs Fuel and purthased pwer revenue S 299,261) 5103,5 % In<reasd enerev saks . 69,9N 135,051 Other (8,755) G2D Total . 5(2 (8,112) 12RQ The decaw in operatine revenues for 1956 was the result of Jecreawd fuel revenue partially offwt by in-creaseJ caerev saks. Lower cost of fuel haJ a sieni6 cant impast on the detreaw in revenuts, de'pite an increaw in energy sa!cs of 2h% attnbutaNe to a 3.0% erowth m cu<tomers. hiilJet than normal weather anJ a softness in the wnice arcai etonomy have ale affetted saks. Operatine revenues for 1%5 increm-ed as a result of increawJ energy <aks Joe primarily to a 5.3% increaw in customers anJ a fairly taNe etonomy, tk'pite mi!Jer than normal weather in the senice area. See Operanne Statrna 18
+ .
7
.. ,a . ,
; . , e a .i , _
ss - Fuel and purchased power expense decreased $309,671,000 in 1986 and increaad $106,185,000 in 1955. Lower fuel exgnw for 19S6 re0cet. the decrease in the unit cost of gas from $3.41 per million Bcu in 1985 to $2.77 in 1966 oEwt in part by increased purchawd power. He incream for 1985 was due primarily to increawd purchased power and increased consumption of gas. See Operating Statistics. Operation expens increawd $38,901,000 and $25,Il7,CR) for 1956 and 1955, respectively. Operation expense was affected by increases in the cost of lakr, materials and services. Increases in wheeling costs and liabihty aad property insurance haJ a significant impact on operation expense for 1956. The incream for 19S5 redects increws in wheeling costs and costs aveciated with removing and resetting line transformers. Maintenance expense for 1986 and 19S5 increased $19,MO,000 and $29,590,000, respectively. The in-creaw in maintenance for 1986 was the result of increaws in power pnduction expenws awxiated with lignite and gas plants and payrams to improve and ensu e the availabihty of all generating units. Increas-ed distribution maintenance alm added to the increase for 19S6. The 1985 incream was the result of in-creased pc,wer pnduction expenws of gas plants to ensure the availability of all gas units and increaxd tree trimming and dimibution maintenana. Taxes other than income increawd $4,117,000 anJ $31,769,000 for 1486 anJ 19S5, respeaively. He incream fm 19S6 resultal primarily from increa<cs in franchiw and property bawd taxes offwt in part by dwreased revenue bawd taxes. The 1935 increase was due primarily to increaws in revenue and property bawJ taxes. Allowance for funds used during con >truction (AFUDC) increased as a result of the ongoing con-struaion pnyram and the resultant increa<c in the level of construaion work in progress of TU Elearic not mcluJul in rate base. Other income and deductions net for 1956 increawd $11,5S5,000. The increaw in 1986 was primarily due to a sale of certain properties at a gain. Tne decreaw for 1955 was attnbutable to the write-down of certain progrty to estimatal market value anJ a decream in interest income. Interest on first inortgage bor.ds increawd in 19S6 due to new issues mld during the year and an-nuali:ed interest of iuues mld during 19S5, partially ofiwt by the retirements and redemptions of certain high internt rate issues. For 1055, the increaw was Primarily the roult of new issues mld during the year. Other interest charges increawd 59,570,000 for 1986 and decreawd $2,221,000 for 1985. The increaw for 1050 redats increawd interest costs on over-revovered fuel revenue offset in part by dareawd interest I on short-term borrowine. The decreaw for 1985 was primarily the result of a decrease in interest on federal income tax wttlements in the prior year. Pref.rred stock dividends increased for 1986 and 1955, 512,099,000 and $5,61S,000, respwtively, due ! to new issues so!J during thew periods and the fall year's etiect of prior priod issuances, offet in part j by lower diviJend rates on the aJjustable rate series. Consolidated net income increased $39,N3,@ in 1986 anJ 561,717,000 in 1085 which reprewnts a culmination of the faaors dewthd above. Included in conelidated net income were increaws in AFUDC of 574,ll4,0N in 1056 and $57,952,@ in 1985 whish reprewnts non-cash earnings to the Company. 19
~
TI AAs t ~lIl H1F\ ( ( NPAN Y ANI) si INI)IVIIs -- STATEMENT .OF CONSOI.lDATED INCOME. . t *
. 'k ,
Year Ended thxember 31, ' l 1986 1985 1984 l Thuund of Dnn l l OPERATING REVENUES. $3,932,045 H,170,157 53,932,235 OPERATTNG EXPENSES Fuel and purchasal pour 1,479,213 1,75S,SS4 1,632,6W OgTation 557,938 519,037 493,920 hiaintenance 319,070 299,530 269,H0 Dtyreciation 220,381 207,592 202,755 Federal income taxts (Note 7) . 2 % 311 276,711 279,S58 i Taxes other than income 281,572 277,455 245AS6 Total operating exnnees 3,122,485 3,369,209 3,174,858 OPERATTNG INCOhtE . 809,560 800,MS 757,377 i OTHER INCOhtE I Alk3wance for equity funds uxd dunng constructon. 231,880 173,S46 129,9SS Other income and deductions-net 5,012 (6,573) 2,026 Federal income taxcs (Note 7) . 3,G34 2,165 (403) Total other income . 239,926 169,433 131,611 TOTAL INCOhtE. 1,049,4so 970,W> Sss,9ss INTEREST CHARGES Interest on mortgage lunds . 317,978 285,693 256,397 Interest on other long*Tm dt4x . 71,073 69,4 0 67,858 Other interest 27,155 17,555 19,506 Allowance for borrowed funJs usd durine con <ruaion . (71,946) (55,865) (41,772) Total interest charges 344,260 316,352 302,259 PREFERRED STOCK DMDENDS OF SUBSIDIARY 78,375 (6,276 (0,658 CONSOUDATTED NET INCOhtE . $_626,851 j__557 M i 526,0M Average sharts of common stock outstandng (thousand) . 140,982 135,267 126,(26 Earnings ard daidends nv share of common stock: Earnings (on auvage slurer outstaning) . 54,45 505 $4.15 Dnidena dalarol 2.68 2.52 2.36 STATEMENT OF CONSOLIDATED RETAINED-EARNINGS-hr Ended December 31, _ 1986 1985 19M Thotcani of D4m BAIANG AT BEGINNING OF YE AR . $1,931,307 51,6 %,913 51,459,73) ADD-Cone! dated net income . 626,851 587JM 526,N1 Tcxal . 2,558,158 2,274,M 1 1,955,791 DEDUCT-Dmiena Jalarni on crunun mk (for amounts per share, w Scarement of Consohdated Income) . _377p65 M3,V4 2 % ,578 BALANCE AT END OF YEAR (Nete 4) . 52,1y0,29 3 51931,M 1 51,te6,9].] N h 6- 6 4 E & 4 - 20 f
O C S LhbNTEb. SOURCE OF FUNDS Year 1:nded 1)ecem wr 11. _
'E 1986 19S5 19S4 Thanis of Ddbrs FLtNDS FRONi OPERA 110NS Conx>lidated net incone $ 626,851 5 587,758 $526,(M1 Depraiation (indudmg anuunts charged to fuel). 248,329 231,711 226,177 Deferred federal income taxes-net . 140,479 124,325 113,685 66,302 77,255 59,635 Federal investment tax uedits-net .
Allowance for funds ue.1 dunng construction . (303,826) (229,712) (171,76?) Total funds from operations 778,135 791,367 753,778 377,865 343,3M 208,878
- 1. css-Dividends Atlared on common stock 400,270 4
_ 43,003 454,RV Net funds frora onrations FUNDS FRONi FINANCING Sales of svuritie: l First mortgage hinds . 970.000 475,0LV 250,0LV Other k>ng<erm debt . - 75,0LV 50,856 Preferred stock . 197,728 83,513 98,203 I Common stock 145,171 249,167 110,565 Rairement of long4c m munties (Note 6) . (305,792) (258,156) (65,067) Inaeaw (Jecreaw) in ocxcs payaNe -commacial paper . I1,300 (59 2 ) 33,200 Net funds from f.nancing 1,018,407 5M,824 476,S54 OTTIER SOURCES (USES) OF FUNDS Changn in wrking cantal, exdudng note pavane, lone term Ah due currently and ounttowred fuel revenue: Cash in banks anJ temporary cash invesments (129,345) (39,613) (3,300) Accounts receivaNe-na . 10,944 (37,4S4) (32,623) Inventenes . 9,397 9,795 (75,433) Accounts payable 43,034 18,777 S3,435 Taxo raued (41,209) (18,420) 29,+42 Other-nd . (25,(M9) 5,408 (2,281) 1 1 Na change. (132,228) (61,537) (7(t) Nonethty prepert3-net (20,S80) (19,925) (19,443) Nudear fuel . 2,760 (54,503) (43,833) Purcha< of unhty plant (Note 9) - - (119,944) Over/under remvend fuel revenue (net of deferred mcome taxts) (12,309) 52,301 13,441 Unanurtbed km on reacquind dth-ne (Note c) . (23,398) (12,021) - (16,829) (17,693) 1S,354 Other-net Ne other wnts (ue) of funds . (202,884) (133,678) (152,191) Total . $1,215,793 5 679,149 5779,553 CONSTRUCDON EXPENDTTURES Utihty plant . $1,519,619 51,10s,551 5951,323 Albwance fer funds uni Junna construaion . _ 303,826) ( (2N,712) (171,763 CONSTRUCDON EXPENDilERES texdudne albwance for fands uw! dunng constnxton) $1,215,793 pf_N,149 {7N,%3 svmu ,mm x u,Em m m - a 21
1986 _1955 TManh of Ddm l ASSEIS UIlllTY PLANT in wnice: Praluaion 5 3,902,898 $ 3,779,008 Tranimisen . 1,166,066 1,111,7N Distnbutkin . 2,543,163 2,331,764 General . 343,347 297,649 Total 7,955,474 7,521,025 Construmon work in pnwess (Notes 10 anJ 11) . 5,351,565 4,M2,615 Nuclear fuel 251,964 29,724 Held for future uw . 7,130 6,197 Tetal util:ty plant 13,566,133 12,144,563 12ss accumulated Apretiation . 2,522,016 2,331,753 Uttlity plant,less accumulateJ Aptnaaton 11,N4,117 9,S12,7 &) INVESBIENTS-at uwt Nenett!:tY Property (Note 11) - 206,615 1S5,735 Other invntments (Note 1) . - 15,113 15,4tN Tetal inuments 221,728 201,144 CLTd'sENT ASSETS Cash in banks (Note 2) 6,494 6,N4 Temporary cash inverments-at etwt 184,200 55,W Snvial dpwits . 35,299 19,836 Accounts nuivaNe: Cuaomers . 212,153 276,7M Nlinent; esmers of Ceman<he Peak (Lee 10) . 58,826 16,310 Other 33,847 23,% S Alkm ante for unco!kstHe auounts . (13,817) (15,011) Invatono-at avera,x ctwc: hiatenals anJ supp: es . 126,865 123,S91 Fuel stak 177,665 100,0 % Ddmd EtkTal income taxes (over.ntovend fuel rewnue) 29,253 34,734 Other arrent ams . 76,586 _ H,155. Total current aswts - 927,371 7N,059 DEERRED Debris Unamortetd kws on reaupad ik (Lte c) 55,419 32,021 Cante!:eJ lignite unit costs (Lee 1l). 36,810 - Other Jefernd Jehts . 32,747 40,11S Total Jdrnd Jehts 124,976 72,134 Total . $12.318,192 510,4 7,022
= , - = = . = = =
. .c sk%I! ks * [d4 (k Al bbYk N k ab, 1
22 l [ _____ -
a 1986 _1985 Dexnds of Dans CAPITALIZATION AND LIABILITIES CAITFALIZATION Common stock-without par value We 3): Authori:ed shares-2tT,0T,000 Outstanding shares-1956,142,805,206; 1955,13S,N3,162 $ 2,280,528 $ 2,135,357 Retained earnings We 4) . 2,180,293 1,931,307 Total common stock equity 4,460,821 4,066,f64 Preferred stock We 5): 811,418 811,418 Not subject to mandatory redemption . Subject to mandatory redemption 232,424 M,606 4,283,791 3,615,f69 long<erm d:1<, less amounts due currently (Ncxe 6) . 9,788,454 8,528,447 Total capitali:ation CURRENT LIABILmES Notes payaHe-commercial paper Ne 2) . 11,300 - long<mn debt due currently 54,480 72,480 65,780 72,430 Total (to be ref.nanced) . Accounts payaNe . 305,775 262,741 116,821 IN,258 Dividends atlared . 44,877 37,9M Custonwrs' &pwits Taxes accrued . 142,297 183,506 107,707 49,206 Interest accruai 63,594 M,369 Over<trovered fuel revenue . Other current hahttics. 23,856 30,018 Total current liabihtin 870,707 875,532 Dr.FERRED CREDirS AND OmER NONCURRENT LIABILEES Accumulattd deferred federal income taxes . 931,938 791,473 712,193 6B,743 Unamortetd federal inettnent tax crtdts . Other deferrtd credits and noncurrent habhies 14,900 _ 22,827 1,659,031 1,463,N 3 Tc<al deferred citdts and other noncurrent !iahhties COhihtID. TENTS AND CONTINGENCIES (Sc<c 10 and 11) Total $12.318,192 $ 10,%7,022 See aur.pmt .g Nact to Fmund Sucments. 23
- 1. Significant Accounting Policies Cauolidation-ne conmlidated 6nancial statements include Texas Utilities Company (Company) and all of its subsidiaries; all signi6 cant intercompany items and transactions have tren eliminated in convlidation.
Uti!its ftmt-Utility plant is stated at original cost. Le cost of property additions charged to utility plant includes labor and materials, applicable overhead and payroll-related costs and an allowance for funds uwd during construction. Allotumce Tvr fimds Used Doing Cautnction-Allowance for funds used during construction (AFUDC) is a cost accounting procedure whereby amounts bawd upon interest charges on borrowed funds and a return on equity capital used to 6 nance construction are charged to utility plant. He accrual of AFUDC is in accord with generally accepted accounting princip!es for the industry, but does not reprewnt current cash income. In January 19S4, Texas Utilities Elect-ic Company (TU Electric) began capitali:ing AFLDC at a net of tax rate of 9%%, compounded semi-annually, of exnnditures incurred, except for that portion of construction work in progress allowed in rate base by regulatory authorities. His rate was determined on the basis of, but is less than, the att of capital used to i; nance the construction program. Depnxianon-Depreciation is bawd upon an amortization of the original ccot of depreciable properties on a straight-line basis over the estimated service lives of the properties. Depreciation as a percent of average depreciable pro;rrty approximated 3.4% for 19S6 and 1985 and 3.5% for 19S4. Other Intestmmu-The dierence between the amount at which the investment in a subsidit cy is carried by the Company and the underlying book equity of such subsidiary at the respective dates of acquisition of 514,439AV is included in other investments. Retmacs-Revenues include billings under approved rates (includmg a fuel cost recovery factor) applieJ to meter readings each month on a cycle basis and an amount for under or over recovery of fuel representing the d$erence betwwn actual fuel ccwt and billings on the approved fuel recovery factor. Pur-suant to a rule adopted in January 1954 by the Public Utility Commiwion of Texas (PUC), RJ Electric had lven required to request reconciliation of any over-recovery of fuel costs and may request reconciha-tion of any under-recovery of fuel costs no less than twelve months after implemennna a change in fuel i cost recemy. Under the current rule aJopted in July 1956, TU Electric is required to re;and over- , recovered fuel revenue if the amount of over-rwovery, including interest, is the leser of 540 million or 1 4% of its annual known or reawnably predictable fuel costs most recently appoved by the PUC. Recon-l ciliation of fuel costs is to lv made in a general rate caw or a reconciliation pnxeeding. Reconciliation l may be requested if the utility has materially under-recovered its known or reasonably predictable fuel cost s. Federal hwe Tmes-The Company and its sub idiary companies file a consolidated federal income tax return, and fsJeral income taxes are alkrated to all subsidiary companies based upon taxab!e income or km. Deferred federal income taxes are currently Provided for timing dferences between huk and taxable income; such diffbrenses result pnmanly from the uw of hberaliad depre iation and accelerated cost I recovery a!!owable under the Internal Revenue Code and the unJer or over recovery of fuel revenue. Cumulative timing dierenas in carher years for which defernd federal income taxes were not proviJai approximated $239AVAV at December 31, 1956. Investment tax cadits are being amorti:cd to income over the estimated wrsice lives of the properties. He enactment in October of the Tax Reform Act of 10S6 indoJed, among other things, the repeal of the invtstment tax cadt cEcctive January 1,1956, subject to certain transition ruks. The Act dd not have a material effect on the 6nancial statements rnwnted herein for the year ended December 31,19so. i 24 i
W
/\
se
- 2. Bank Balances and Short Term 13orrowings At December 31,1986 and 1955, the Company had lines of credit aggregating 5600,000,0tV under a credit facility agreement with several commercial banks, he lines of credit may be used for either backup lines far commercial paper or for bank loans. His facility, for which the Company pays a fee, will tv raiuced ratably each year hminning in IW1 by 5200,RV,0tV. He tetal amount of borrowings authori:ed by the Ibard of Directors of the Company from banks or other lenders at Dwember 31,1956 was 5650,000,0tV.
3, Common Stock ne Company issued and old shares of its authori:ed but unissued common stock during the years 1956,1955 and 19M as follows: Automatic DividenJ Reinvestment and Emrloyees' Thrift Plan Common Stock and Employee Public Offering __ Purchase Plan Stock Ownership Plan Total Year Shares Amount Shares Amount Shares Amount Shares Amount 1056 - - 3,826,657 5115,145,RV 935,357 $M.03,RV 4,762AM4 5145,171,000 1955 5,RV,000 $10,6Y,RO 3,431,M6 00,1W.RV 1,025,M7 25,315,000 9,457,443 247,167,000 1454 - - 3,875,7W %450,0tV 1,024,812 24,115,000 4,000,611 110,565,000 l At December 31, 1456, 5,919,663 shares of the authori:ed but unissued tommon stctk of the Com-l pany were reerwd for issuance and ule pursuant to the above plans. l The Company has ;0,RV,000 authori:ed shares of wrial preference sto<k havmg a par value of 525 a share, none of which has been issued,
- 4. Retained Earnings The articles of incorporation, the morteages, as supplemented, and the Jebenture agreements of TU Ekstric contain provi< ion < which, under certain coninans, restrict dianbutions on or acquisitions of its common stock. At December 31, 1056, 5123,613,000 of retained earning of TU Electric were thus restricted as a result of the Provisions of such artides of incorporation. Retained earnines at suth date ale inJuJed 5431,243,RV, representing the Company's equity in undistnbuted earnings since acquisition induJed in transfers by TU Ekttric from its retained earnings to stated value of common stnk, making a total of retained earnings which wa, restricted of 5554,856,000 at December 31, 1956.
l i 25
- 5. Preferred Stock of TU Electric (cumulative, without par value, entitled upon liquidation to $100 a share)
Redemption Price Per Share (before aJJing Shares Outstanding Amount accumulated disidends) December 31 December 31, Esentual 1986 1985 1986 19s5 Current Minimum Thwds c,/ Da'la s Not Subject to Mandatory ReJemption 5 4.50 senes. 74,367 74,367 $ 7,440 5 7,440 $ 110.00 5110.00 4.00 senes. 70,000 70,'00 7,000 7AY 102.00 102.N 4.56 enes. 133,628 133,628 13,371 13.371 112,00 112.00 4.00 senes . 110,000 110,000 11,000 11,000 102.00 102 00 4.56 senes . 64,947 64,947 6,561 6,561 112.00 ll2.C0 4.24 senes. 100,000 IN,000 10,081 10,051 103.50 101.50 4 64 senes . 100,000 IN,000 10,016 10,016 103.25 103.25 4 54 senes. 70,000 70.000 7,000 7,000 101,79 101.79 4.N senei . 70,000 70AY 7,049 7,047 103.56 103.56 4.76 wnes IN,000 IN,000 10,000 10,000 102.00 102.00 5.08 senes. 80,000 80,000 8,004 5,004 103.60 103M 4.50 senes . 100,000 100,0N 10,009 10,N9 102.79 102.79 4.44 senes 150,000 150,000 15,061 15,0e l 102.61 102.61 7.20 senes . 200,000 2NAV 20,044 20,044 103.21 103.21 730 series. 299,875 299,575 30,021 30,021 103.25 103.25 8.92 senes. 200,000 200,000 20,076 20.076 103.60 103 R 6 54 senes 200,000 2N,000 20,022 20,022 103.05 103.05 7.24 senes. 249,800 249 AY 25,100 25,100 105.23 103.42 7.44 senes 300 000 3N,000 30,006 30,00e 104.26 102.40 7.45 sene$ . 300,000 3N,000 30,073 A,07 3 104.82 102.95 8 20 senes . 300,000 3N,000 30,108 30,105 105,34 103 29 8 44 *enes . 300,000 3N,000 30,046 30,046 105.29 103.18 4.32 senes . 3N,0N 3NAV 29,625 29,625 104.66 102.33 9.36 u nes . 3N,000 3NAY 29,625 29.f 2 5 104.68 102.34 5 ta senes 3N,000 3N,000 29,550 24,5 M 104.09 101.92 ilosenet 299,475 2 M,475 29,616 29,e 16 106.12 102.04 132 senet 3N,000 3NAT 29,655 29,e 55 105.88 101.N 534 senes 3N,000 3N,NO 29,591 29,591 106.13 102.05 10.92 senes . 300,0N 3NAV 29,670 29,670 108.19 102.71 10.12 senes 350,000 350AY 34,615 34,615 106,75 I N.00 11.32 senei . 3N,000 3N,000 29,670 29,t 70 111.32' 100.00 l AJustaHe rate senes A . 1,000,000 1 AY,000 98,200 95,2 N (a) 100.00 AJpaHe rate senes B 850,000 5 YAY 83,513 M,ill (a) IN 00 l Tet al 8,172,092 M72,09; $811._418 }t11,418 Subject to Mandatory RcJtmrtion (b) 510.05 senes 350,000 3 VAY $ 34,696 5 34t * $ 110.08' ilN.N 9M senei . 1,000,000 - 98,878 - 109.48* IN 00 10.N .cnes 5N,0N - 49,413 - 110.00' IN N
$ 92 senes. 5N,0N - 49,437 -
108.92' 100.00 Tet a! . 2,350,000 3 Y.CtY $ 2 32,4 2 4 5 14 f -+
- Fwp c r .a. n e te eso d er. A tw en n%by neci o.
w AJuhi ese er. *A* N .cs a kWJ ree 6 < t'e mid enkd An 41. l e? .4 e W p s,r um. At.er A k .re m *h* h e a led rse s e the irn d rrad [b rNn H, I * < d T h pv awan De m se r, e ndrm.d k m e e.s ta. 1. I m ud La L 2 4. nwrM , anl re ha*d s o t e b,d i pdo m m e i s 5 0.0 ne 4.w
&) n ' Ekon r m.i.nd s , nd,* a m ead r en 4m neh, of 4 m mA o m a u s ,n de ri me .im V, e h t *, es ce s e tN k < m a h 3 == n e L..e a dr u trd rm. c D ' E km r' ,$ ammA re H, at n qe,v% an e ne , d w e , ru c e6e ue d o , d 4 cm di e s e r.d m M ,u.5,sdme,n se.a,i pse441;1 X nt J"tb nu@ed J.M Minimum RcJam44c InaJ Ih of w _ _ _ Aare. Mnhem Redenn,n HJ .
- 14 w aa.A 4l*
- 4' N ,' O a w 5 4]
12 Y X,M ,rn d. ,d
* .M . oru d ,,: 4m +
26
~
s - l u - TU Electric issued and sold shares of its authori:ed preferred stock as follows: July 19S6, 500,000 shares of $10.00 series cumulative preferred stock, subject to mandatory redemption, for $49,413,0C0; Ju-ly 1986, 500,000 shares of $8.92 series cumulative preferred stock, subject to mandatory redemption, for
$49,437,000; February 19S6,1,000,000 shares of $9.48 series cumulative preferred stock, subject to man-datory redemption, for $98,878,000; June 19S5, 850,000 shares of adjustable rate series B preferred stock for $S3,513,000; and May 19S4,1,000,000 shares of adjustable rate series A preferred stock for
$98,200,000.
l 6. long Term Debt of Subsidiaries, less amounts due currently l December 31, l Maturity Groups Interest Rate Groups 1986 M5 l From To From To hanh of Dhs l First mor* gage bonds: 1957 IW1 4\% 4% % $ 34,500 5 50,5tV IW2 IN6 4% 5% 142,000 142,R10 1997 2N1 5% 9% 3G4,000 3N,000 2002 2006 7% 10% 750,000 750,000 2007 2011 5% 17 \ 275,000 437,467 2012 2016 9% 16 1,757,531 1,057,531 Polluten control <enes: 2011 2016 7\ 13b 310,000 110,N0 Sinking fund debentures: 1957 19S9 4\ 4% 18,454 24,596 1993 19M 6i 7% _ 32,448 33,151 Total ....... 3,623,933 2,9N,245 Pollution control revenue tends: 2tW 2tw 5.70 7% 160,000 161,000 Senior notes:
- 170 14 S.50 12.20 534,860 567,M0 Unamorti
- ed premium and dxount . (35,002) (20,916)
Total bng<erm debt, less amounts due currently $4,283J91 53fl5,669 Sinking fund and maturity requirements for the years 1987 through 1991 under long-term debt instru-ments in effect at December 31, 1956, were as follows: Sinking Minimum Cash Year Fund (a) Maturity Requirement (b) kamls of DLm 1 1957 546,350 5 22,000 5 54,49 l 195S . 49,211 22,5N 56,029 l 19W . 47,5M 18,000 51,180 l Im0. 47,456 IN,0N 133,lM IW1 47,456 12,000 45,1M (a) Exdudmg requirements satis 6ed prior to December 31, 1956: 52,433,000 for 19S7, 5571,000 for 195S, 5320,000 for 1989, 5320,000 for 1990 and 5320,000 for 1Wl. (b) Other requirements may be satis 6ed by certi6 cation of pronrty aJJ:tions at the rate of 167% of such re-quirements, except for sixteen issues at 100 %. In February 19S7, TU Electric sold $250,000,000 principal amount of 9% 6rst mortgage and collateral trust bonds due 2017. In 1086 and 1985, 5:32,467,@ and 5180,003,000, respectively, principal amount of 6rst mortgage h>nds were re&emed by TU Elettric prior to maturits. Pursuant to exntted rtyulatory treatment, the net low on reacquiral debt have twen &ferred anJ are being amorti:ed over the reinaining hves of the bonds retired Uttlity play of TU Elatric is generally subject to the liens of its mortgages. r
~t
1 l
- 7. Federal Income Taxes The details of federal income taxes are as follows: Year Ended December 31, 1986 1985 1984 Amnh of DEm Charyd to operating expenses:
Current . $ 55,545 5127,114 5128,393 Deferred-ne:
- Dttferences betuwn dertriation mahods and liws . 79,148 85,950 78,274 l Certain capita! ed construction costs. 19,320 19,300 IS,415 Over/under-rttowred fael revenue. 11,935 (44,553) (12,8W)
Cancelled lignite unit.... ........ 12,293 - - Early redemptions of long4erm delt . 10,763 14,730 - Other.. 9,005 (3,205) 8,035 Tot al . . . . . . . . . 142,464 72,312 91,S25 Investment tax crtdts-na . 66,302 77,2S5 59,635 Total to operating expenees . 2M,311 276,711 279,S58 I Charged (credited) to other income: ! Current .. (11,535) (9,625) (10,CO,' Deferred-nu.. 8,501 7,4M 10,410 Tcital to other income.. (3,0 34) (2,165) 403 Total federal income taxes.. $261.277 5274,546 5280,261 Federal income taxes were less than the amount wmputed by applying the federal statutory rate to pre-tax book income as follows: Year Ended December 31, 1986 1955 1% hmnb of Dan Fakral income taxo at statutory rate of 46%.. $444,591 5427,147 i348,802
! Reductions in federal income taxes resulting from:
( A!!owance for funds uxd dunng constructk>n . 139,760 105,e48 79,010 Depletbn allowance.. . . . . . . . 24,006 25,442 24,534 l Amorti:ation of tnvestment tax cred:ts . 14,982 13,781 13,826 Other . 4,.566 7,710 S71 Total redstions.. 183,314 152,9 1 118,9 1 Total federal incomc taxes.. $ 261,277 5274,546 52fo,261 Etiative tax rate. 27.0% 29.6 % 32.3 %
- 8. Retirement Plans and Other Postretirement Benefits The System Companies have unifonn retirement plans covering substantially all employees. The Irnents are basd on years of accredited wrvice and the employee's average annual earnings rneived during the three years of highest earnings. The costs of the plans are determincd by independent actuaries. Con-tnbutions to the plans were determined using the frozen attained ace method which is one of the several aauarial methods allowed by the Employee Rairement Income Strurity Act of 1974. During 1086, the System Companies adopted the Financial Accounting Standards BoarJ's Statement of Financial Account-ing Standards No. 87, "Employers' Accounting for Pensions." The new standard requires, among other thines, the use of the projeacd umt cred:t actuarial method for determining pension crt for finanaal reparting purposes. The d$crence between pension cost as determined unJer the new standani and con-tnbutions to the plans in 19S6 is recorded as prepaid pension cost anJ induJeJ in other current assets.
The adopt on of the new accounting stanJard did not have a material etint upon the Company's Enan-cial position or results of operations. 28
The following table sets forth the plans' funded status and amount remgni:ed in the Company's con-solidated balance sheet: , TheJ3 <( Dh Atuanal ynsnr vdx <( ammulattd hnfrs, Amneted hsafa (Hvon, nidng weed hnfts if $b7,775.. $4%1M Thettd huft dQnn it mse rtTdnd to dire.. htM.lO Ibn anu at fas s4x, inmnh equity inwcratn. prnnxn hna aal arprate hed.. 7N.X1 Ibn aws in esev. (( rn9tued haft (Nunn.. 74.Tl Unrtuwnd rxt pn invn tw ex;mne J.dertmr inen tLr rumad ard ekn t( Av. In av.um;n u .. (5lt3D Pn t mse og ru ytt reucceJ in rat pn& pmm egrar.. 17.N2 Unrtug.cedi hn awts in cm ((rr yttd hnft tHwn n at ja uary 1.1M .. C2.M
$ 17,725 fytp d pmn uw n!udtd in cths ae ..
Assumptions used for 1956 included a discount rate of S.0%, an expected long<erm rate of return on i assets of S.0% and a 6.3% increaw in compensation levels. Net periodic pension cost for 1966, induding amounts capitali:ed, was comprised of the following components: Stme uw . hufts earnn) &nng the pnd.. $ 32,752 u c,-. u n m r u ucJ h uet a k n n.. *.N5 l ! ArJ nturn m dan awn - tlT.M
&t arn et. .n o a:xi Abral . 51.Y1 l M pn a pun us .. $VM i The costs of plans, including amonts capitali:ed, approximated $4S,2S3,0tV for 19S5 and $45,KO,000 for t
1954. In adition to retirement plans, the System Companies offer certain health care and life insurance benefits to active and retired employers. Le costs of such benefits are generally recogni:ed as claims are paid. The costs of providing such benefits to retired employees, net of employee contributions, approx-imated 56J59,0tV for 1956, 54,S31,0tV for 19S5 and 53,W3,(XO for 1954.
- 9. Purchase of Utility Plant In Oaober 1954, TU Ekttric purchaxd Alcoa's 30% interest in the partially completed Twin Oak generating station and asociated lignite rewnes, and Texas Unhties Mining Company (Mining Company) purchased the aswiated lignite mining facihties and equipment. The purchase price of Alcoa's interest in the station, related lignite rewrves and mining facihties and equipment was $119,944,0tV.
- 10. Comanche Peak Nuclear Generating Station TU Electric is constructing two nudear-fuckd generating units at Comanche Peak Nudear Generating Station (Comanche Peak). TU Electric is subject to the jurisdiction of the Nudear Regulatory Commis-sion (SRC) with resntt to nudear power plants. NRC regulations govern the granting of licenses for the conuruction and operation of nuclear n>wer plants and subject such power plants to continuing review and nyulation. Pursuant to such regulations, a review is being conducted by the NRC of TU Electric's application for licenses to opvate the Comanche Peak units. As a part of that review, a pmcadmg was initiated before an Atomic Safety and Licensing Peard (ASLB) and hearings on various issun have been onung since December 1481. After completion of the ASLB pncadmg, the ASLB will make nrom-mendations to the NRC regarding the issuance of operating bcenses for the Comanche Peak units. An intervenor is actively invohed in this ASLB protenimg.
The one remaining Contention before the ASLB in the operating li<ense procadmg relates to TU Ekttric's quahty assurance /quahty control (QA/QC) pnyram for the design and construction of the plant. In Dttemkr 1983, the ASLB tssued a memorandum questioning the QA payram for design of 29
- 10. Comanche Peak Nuclear Generating S*ation conund certain n>rtions of the plant and requested that TU Electric ofler additional proof of adequate design and deign resiew procedures. Le ASLB is ale resiewing several other related issues and has indicated its in-tent to review the results of the NRC's Tahnical Review Team (IRT) investigation discu sed below. In July 1984, a separate ASLB, induJing two of the three members of the original ASLB, was convened to receive testimony on allegations that QC inspectors at the plant have been subjated to an atmosphere of harassment and intimidation which is alleged to have affected the implementation of TU Electric's QA program. In January 1986, this wparate ASLB was dietablished with all issues thereafter to be rewhed by the original ASLB.
As a separate part of the NRC's review of TU Electric's operating licenw application, in March 1984 the NRC estabhshed a task force to conelidate and carry out the various resiews necnsary for the NRC Staff to reach its decision regardmg the operating licenws. This effort invohed the establishment of the TRT which Man an intensive onsite investigation in July 19S4 and subwquently has iuual ren,rts re-questing additional information from TU Electric with resntt to several functional areas of the plant's construction program. TU Electric then formed a special team, the Comanche Peak Response Team (CPRT), which includes a number of inJependent experts in each area aJJresed by the TRT, and sub-mitted a Procram Plan to responJ to the questions raisd Such Nan, which is dewribed further below, is prewntly being implemented and has been expanded to address the design and other ASLB issues descrihti herein. In January 1085, the TRT i+ual a rep >rt on its resiew of the QA/QC prcgams at Comanche Peak. The rep >rt stated that although the QA pnpam documentation met NRC requirements, the implemen-tation of the QA pnvam demonstrated that TU Electric has lackn1 the commitment to aggressively im-p!cment an effective QA/QC program in several areas. The TRT indicated that it has found evidence of faulty construction and inefkttive QA anJ QC invections. Questions were ale raisti concerning the training and quali6 cation of QC nrmnnel and in the up,rting of dc6ciencies. The TRT further found that prior to Ju!y 1984 problems had existed in the control of documentation. In adition, de6ciencies in several other areas were devribed. TU Electric was requested to submit to the NRC a program and shalule for compkting a detaikd and thorough assessment of thew QA/QC iwues prewnad by the ET. TU Ekttric alm was askal to consider the uw of management permnnel with a fresh nrsnttive to evaluate the TRT nnines and implement correct ve action, and to consiJer the uw of an indepen. Jent consultant to overwe the corrative action pnyam. In June 1955, TU Ekttric 6ku with the NRC and the ASLB a comprehensive Pavam Man which will be utiliad by the CPRT to address all outstanding design and construction concerns. This Man, which was substantially revisd and reissued in January 1956, calls for the inmeetion, on a sampling basis, of numerous safety reland systems in the plant, for the deermination of not cauws and generic implica-tions of any safety signifcant desiations founJ in the insnttion pntess, and for the development of a corrective action pnwam as required. In hiay 1956, the Staff of the NRC issual a Supplemental Safety Evaluation Ren,rt (SSER) containing an evaluation of this Man. The SSER concluJes that the Man pro-vides an overall structure and paress for adJnsing anJ remhing all existing construction and design issues anJ any future issues that may be identi6ai from further evaluations. TU Ekttric has made several key management changes in the nudear pnwam for Comanche Peak, induding the aJ1 tion of several new of6cers who bnng substantial nudear exnrience to TU Elatric. This new manacement team is resp,nsible for oversicht and implementation of the reinsnttion and cornttive a tion pnvam. Ale in June 1955, TU Ekttric 6kd with the NRC and the ASLB a Caw hianagement Man (Manage-ment Man) whish recommenJed that the results of the CPRT effort be uwd to Provide the ASLB with reasonable awurance that Comanche Peak has been safely construaed anJ suggesad that numerous cur. rent ivues before the ASLB no longer nad to be consiJered in heht of the signi6 cant reinsnstion efiart now underway. In Aucust 1955, the ASLB iwued a NiemoranJum and OrJer aJJressine issues raisd by the Nianaeement Man. The hiemoranJum denieJ TU Elatric's motion to adopt the Management han stating that the ASLB nnJs that it woulJ not be proper to adopt such hianagement Man as the mie basis for mntinued htication of TU Elatnc's application for operaung hcenws for the Comanche Peak units. In aJinon, the hiemorandum Jexnbed other areas of the CPRT Procram Man that con <ctn the ASLB. The hiemorandum inacatcJ, howeser, that if the CPRT Pnwam Man is resiwd to addnss the ASLB5 con < erns and if it is appropriately implementcJ the CPRT Pnvam han mav Jemonstrate the quahty of the plant. The ASLB further stanti that it is if6 cult to fonvast when hearines m the case wdl N wnJuJai but that the ruhne may neuwtate substantial pnxcahngs that wdl delav the on-ration of 30 Cemanche Peak. l . _
In June 19S6, the ASLB issued a Memorandum which addtcswd "Lbard Concerns" about the ade-quacy of the CPRT program. Le Memorandum stated that, based upon the ASLB's current knowledge of the program, after having resiewed the 6tst results ren,rts and the SSER on the CPRT program, the ASLB wntinued to have the concerns expressed in earlier memoranda, as dewnki ahwe. Le ASLB aho raised additional concerns about how fmdings in one area of the reinsnttion effort may affect TU Elatric's programs in other areas, whether sutTicient attention is being paid to problems of quality assurance and quality control regarding design, the adequacy of the CPRT sampling program, and perceived oversights in one of the results ren,rts that had been issued. TU Electric is addressing thew concerns and has submitted a resomse. In August 1956, the ASLB issued a ruling concerning the scheduling of issues for hearing. Under the ruling, the intenenor can and has initiated discovery relating to the overall adequacy of the CPRT program. Within thirty days following TU Electric's completion of responws to the intentnor's hovery requests, the intenenor is permitted to 61e a motion with the ASLB for summary disposition on the issue of the adequacy of the CPRT program. Following raeipt of such motion, the ASLB will determine whether to proccal with determining the overall adequacy of the CPRT program or whether to address the specific findings and results of the CPRT program. In May 1985, TU Electric found a rqurt in its file, relating to certain deficiencies in the QA program, which it believed should have been provided in respone to a 1980 discovery request of the intenrnor, and wnt the report to the ASLB. In June 19S5, W Electric indicated that an error in judgment was maJe in failing to produce the report earlier and took appropriate steps to assure that a similar situation does not recur. His matter has been investigated by the NRC's O& ice of Investigations which concluded that the omieion was a material falw statement but that it was not intentional. His matter has also been the subject of di<overy requests before the ASLB. In January 19S6, TU Elettric 61ed an application with the NRC for an extension of the construction permit for Unit I to reflect a new "latest date for completion" of August 1,1058; previously such date had been Aucust 1,1955. In the application, TU Electric stated that the reaen the request for extension of the construction nTmit was not fikd at an earlier time was administrative oversight. In February 19S6, the NRC issued an order extending the "latest date for complenon" of Unit I to August 1,195S. Subse-quently, the intentnor invohtd in the oprating licenw ASLB proccuiing fikd with the NRC a request to stay the effettiveness of the construction nimit extension and to require W Electric to file a new ar-pheanon for a construction nrmit for Umt 1 or to order that hearings be held prior to any decision on whether to grant the construction permit extension. Le rmuet for a stay was denied by the NRC and the question of uhether to hold such hearings was remanded to an ASLB, the members of which are the same as the ASLB for the onrating licenw. In May 1956, the ASLB iuued a MemoranJum and Order in which it accepted for litigation a new Contention, raised by two intentnors which alkved that the delay in completing Comanche Peak, which has occurred and has necessitated the extension of the construction permit by the NRC, is the roult of dilatory action on the part of TU Elatric and that, therefore, good cause d:d not exist for the extension of such permit. W Ekttric appeakd this ruling to the NRC's Atomic Safety and Licensing Appeal Board (Appeal Ibard). In July 1956, the Appeal Ibard certi6ed to the NRC Commissioners a question regardmg the validity of the Contention which had been l accepted by the ASLB; and in Septemhv 1056, the Commi+ioners issued a ruling surn,rtive of m Elatnc's position and remanded this matter to the Appeal IbarJ. In November 19S6, while such appeal was penJme, the ASLB, at the request of the intervenor, granted an amenJment to an earlier Conten-tion which had pre iously b rn disallowed. He amenJal Contention ale relates to the question of good cause to extend the construction nTmit. TU Ekstric has apnakd this action to the Appeal Ibard. In March 19%, the intervenors ale fikd a motion to stay the effectiveness of the February 1086 NRC order and a petition for resiew thereof with the U.S. Court of app:als for th Ibtrict of Columbia Cir-cun. The motion for stay was denitd in April 10%, and the petition for renew is snll nnding before the Court. In June 10%, TU Elettric duiJed no longer to wntor, anJ thtrefore paid, a tiul nnalty of S40,000 which was part of an aggregate of 500,0@ in tiul penaltin prenously prop ~d bv the Stati of the NRC relanng to alkvations of harassrntnt and intimidation at Comanche Peak. TU ELvtnc requestal the Staff te revisit the other alkved violations to tkteimine whether they did m fa<t oaur and to wn-sider mitigating the amount of the nnalties. In August 1% TU Ekstric duukd to no longer mntnt, and therefore paid, a ciul penalty of E00,0N preuously pronxd by the Staff of the NRC relating to the 6ndine of the TRT, Jesnbed above. TU Elattic at the same time aquestal mitigation of ancther prepad ciul penalty of M0 000, relating to two alkved violations in TU Elatrid reinsnttion and wr-31 rative astion effort, which request was Jenied; and this nnalty has also been paid.
- 10. Comanche Peak Nuclear Generating Station unnnud In December 1086, a portion of a re;urt was releawd by the OMee of Inspector and Aultor of the NRC (OIA Report) containing the results of its investigation of alkmations of misconduct by the manage-ment of Region IV of the NRC with resntt to Comanche Peak. Le OIA Ren>rt expressed concern ah>ut a4egations of harassment and intimidation by Region IV management to pressure Region IV in-sntters to downgrade or delete proposed insnttion 6ndings at Comanche Peak. In adition, the OIA Rep >rt concluded that it would not be possible to rely on the Region IV QA insnttion as esidence of the safe construction of Comanche Peak. Consequently, it stated that it will be necessary for the NRC to rely largely on recent JetaileJ technical insnttions conducted by the NRC at Comanche Peak. The OIA Ren3rt ale indicated that the data contained in an internal NRC ren,rt on insnttion procedures was inaccurate and unreliable due to a lack of understandmg by NRC inspectors of the proper methcd of completing a certain NRC form. NRC of6cials have indicated that a thorough assessment of the results of this investigatic,n will be made. Le OIA Report's 6ndmgs are restricted to actisities in the NRC's Region IV and cb not question other NRC regulatory actisities with respect to Comanche Peak, in-ciudmg the Jetailed technical inspections recently conducted by the TRT as discuswd aluve. TU Ekctric is unable to predict the impact, if any, that the OIA Report might have on future NRC insnttion and reculatory activities with resnect to Comanche Peak.
He NRC has annound that it is creating a new Of6ce of Special Projects to manage all asntts of the NRC's licensing and insnttion etTorts for Comanche Peak and certain other nudear tuwer plants, and has named a current regional administrator to head this team. The NRC announced that this o$ce is exnvred to be onrational by hiarch 1,1937. TU Electric cannot at this time prelct what effect, if any, this norgani:ation will have on the Comanche Peak licensing process. TU Ele tnc, Texas hiunicipal Power Acercy (ThtPA), Bra:os Electric Power Gunrative, Inc. (BEPC), and Tex L Ekttric Cooperative of Texas, Inc. (Tex La) are the owners of 87\%, 6.2%, 3.S% and 2(% interests, resnttivelv, in Comanche Peak under the terms of a joint Ownership Agreement (Agrw-ment) which prosides that TU Ekttric is the Project hianager for Comanche Peak. BEPC has faikd to make numerous payments of its portion of the costs of Comanche Peak. BEPC has been experiencing if-6eulty in obtaining aditional fmancing for Cc;manche Peak from the Rural Ekstn6 cation Administration. In aJ1 tion, since hiay 1956. Tex La has faikd to make payments to TU Electric for its portion of Com-anche Peak and ThtPA has been making payments under protet. Accounts receivable at December 31, 1%6 included 555,730,0N of amounts due from BEPC and Tex La. Le portion of future construction expenitures Joe from BEPC anJ Tex La are estimated to be 544,745,000 in 1087, 525,526,000 in 1958 and 56,401@0 in 1980. In hiay 1056, TU Electric fikd suit in the 14th Judicial District Court of Dallas County, Texas, against ThtPA, BEPC and Tex-La becauw of controversies which exist under the Agree-ment with remect to the obhgations of the parties. TU Electric aswrts that each of the defendants has either daimed that it has no further obligation to pay its share of the remaining costs of construction of i Comanche Peak, or has claimed that TU Electric has failed to properly cranstruct Comanche Peak or l otherwiw has breached its obligations under the Aentment. TU Elatric weks ntovery of damages l against Tex 12 for its anucipatory breach of the Aereement anJ asks for a dalaratory juJgment against l Tex La, BEPC and TNtPA Jedaring among other things that they are obbgated to pw their share of the I remaining costs of construction of Comanthe Peak and that TU Ele tric has not fa:ku to use PruJent unhty prastices in congructing Comanche Peak in auordance with the Aercement. ThiPA, BEPC and Tex La have fikd tn+ actions in such suit aeainst TU Ekttric and the Company aswrting various causes of action, incluing a number of alkyed breaches of the Acreement by TU Ekttric anJ violations of the l Texas De ept ve TraJe Practites Act (DTPAL In September 1956, the Court in the Dallas Ceunty suit rukd in favor of TU Ekttric with nvarJ to a plea of the defendants attempnng to change the venue of such suit. In June 1%, ThtPA and Tex-La 6kd su:t in the %th Juicial Dotrict Court of Trans County, Texas against TU Electric and the Company. The pention asserts vanous tauws of astion, indulng a number of alkved breaches of the Agreement by TU Ekttric and uolations of the DTTA. ThtPA and Tex-La ask for rescission anJ mo16 cation of the Agarment and pavment for Jamages, inJulng treble damages basd upon violation of the DTTA. TU Ekstric and the Company intenJ to ugorously contest this su:t, whith has bwn stayed as a roult of the ruhng in the Dallas County suit. Al,o in June 1%, BEPC 6kd su:t in the 345th fulaal Dutrict Court of Travis County, Texe again-t TU Elatric, the Company anJ himme Company and Texas Unhnes Serut e Inc., ale subsilaries of the Company. BEPC alkves that the Jefendants have breached the Aentment, certain implied warrant es P ,nd 6Juciarv Juties, anJ have been grossly ntyhgent, acted with wEul misconJu t and base uolated the
DTPA and Texas and federal wcurities laws. BEPC a<ks for an injunction against etiorts by the defen-dants to recover adJ;nonal payments, rewission and refonnation of the Agreement anJ payment for d.unages, trebkd pursuant to the DTPA. BEPC alkves actual damages to date of at least 5216 million. The defendants intend to sigorously centest this suit, which has been stayed as a result of the ruling in the Dallas County suit. As a result of the Company's regular annual review of its construction pn> gram, in November 1956, the Company est; mated that all reanalysis, reinsnttion, rework and testing activity Prerequisite to the loadmg of fuel in Unit 1 of Comanche Peak will be complete in early 1058. Ihd on this estimate, the Company etimated that commercial onration of this unit wdl be achievable in early 1989. The Com-pany ale estimated that L' nit ! wil' not be ready for commercial ontation unnl after the 1959 summer nak scawn. If licensmg approvals are obtained e as to permit commercial operation of thew units at thew nmes, the total cost for TU Ekttric's share of the plant, excluding AFUDC, is estimated to be 54.63 bd! ion. TU Elearic's esumated cost for its share, incluJmg AFUDC, is 56.70 bdlion or about 53,kV nr Likwvatt. The total cost of the plant, exclud ng AFUDC, is etimated to be 55.27 bdlion. Because of uncertainties nyard:ng nayments by the other owners of Comanche Peak of their share of the remaining construction conf, no estimate of the amount of AIUDC that may be attnbutaNe to their in-terests in the Pl ant has been nuJ The Company had presioush estimated in November 1955, that commercial operation of Un:t I wou1J be achievaNe by miJ-1097 and Unit 2 by the end of 1957 if tb necewarv heensmg approvals were obtained. The total cost of TU Electric's share of the plant was esimatal at that ume to be Hr4 bdhon, incluJmg AEUDC, or 52,297 per kdowatt. However, in April 19x, the Company announced that such schedule was no loncer amhievaNe and in July 1956, announc-ed that the reanalysis, rein-nttien, corrective action procram, and the hearing pntess tvfore the ASLB could not tv completed in time for commercial operation of Unit I for the 19ss summer peak secc.on and that, therefore, it was making other arrancements to obtain add;tional capacity in the interim. Fadure to secure umelv and favoraNe nyulatory approvals or further delays o<ca<ioned by aJJ:tional reanalv+, rem <nttion or rework wdl increase the cost of the plant anJ will hkely increase financing re-qu:rements. At DecemNr 31,1056 anJ 1055, TU Elatric's invntment in Comanche Peak was H,000,AY,dV and 9,615,000,RY, resnttively, of which $1,29,000,AY has hrn allowtd in rate base by avu!atory authonnes. TU Ekttnc has indicateJ that it does not currentiv plan to inJude any aJJ:tional Coman<he Peak costs in a rata increase request until Unit 1 is ready for commercia! operation and has stated that it believes the initi d rate increase that wdl be necessary to piace Unit 1 into base rates can be held to about 10"e. Suth : ate appheation may be subject to cha!!cnge with rentt to the Prudence of certain tosts, for uhish an es imate o not presently determinaNe. (See Note 12.) 11, Commitments and Contingencies Gundm IWn-For rnajor constructen work now in Procress or contemplated by the System Companies, and tommttmen:s w:th resavt thereto, see IWurce Plan. Qu'm h Cew-TU Elatric has enteral into contrasts with puH.c agencies to purchase conhne water im use in the cenerat on of c:atnc energy and has areeJ. m effat, to guarannt the pnnciral. H a,l k M Y at Daember ;1, lov, and intenst on bonds ksueJ to 6nante the nwrvoirs from whi<h the w ater n suppheJ. The im s mature at various dates throuch 2011 and have interest rates rangme from 59 to un TU Elearic w required to make perioJ;c payments equal to such rnnapal and interest for the veau le7 throuch 1* I a< fouows H,M7,N0 for 10S7, H,57,000 for 10+, H,3+,000 for 1080, H,423,AV &>r IW and 9,435,000 for IW1. In aJJ. tion, TU Elatnc is obhgateJ to pay <crtain variaHe costs of operaung anJ mai nainmg the rewrvoirs. Total payment , induJmg amounts car:tahad, unJet su< h co:,traas 6,r 1%, IN and lum were 9,9 3,AY, H,7N,AV anJ H,7tc,000, n~pativelv. In Ju!v 109, TU Elatric raciud nvulatory arproval of an aercement unh a mun!apahty for that muniurahtv to assume a:! tontract nd ts anJ obbeations of TU Ekttne m connanon wah 5102,%%Y remainme pnnapal amount of h >nd, mueJ for smular purms whish haJ previously hrn cuaranteed by TU Ela-tn< , TU Elatns is, howe,er, connneentiv haNe in the event of Jefault by the mutuopahtv. C!w Gul 14lct-Chmo Encrev Company (Chamo) entend into an aentment m 1077 for the nghts to oser 2N mhr, tons of surface mmeaHe coal Lated in New Meuca The aantment provuks, subject to t ertain hmitatuns, for aJvante ros alty payments pavaHe oser a pen <d of appnwimmeh H s cars, w hish are baseJ upon annual quannnes rangme from appreumatelv 4.5 mLn tons m 1+7 to a maximum of approximately s.3 mdhon tons m IW1. Such payments approxunaud 50.10 per ton m 10m and are subjett to es alation in the future due to intlatiott In connation w:th tlic 6 srtvoine, the 33
OTES TO FINANCIAL STATEMENTS (conciudedi - E
- 11. Commitments and Contingencies - konhM Company entered into a surety agrwment pursuant to which it has undertaken to assure the performance by Chaco with resmct to this agreement. Non-utility property at December 31,1986 and 1985 includes
$114,400,000 and 590,700,0N, respectively, of minimum advance royalties paid by Chaco under the terms of this agreement.
Gyuats and Ence Purchase-TU Electric entered into an agreement in 1982 with Tex La, a 2% owner of Comanche Peak, whereby W Electric agreed to purchase an assignment of portions of Tex La's entitlement to capacity and energy from Comanche Peak in declining amounts over the first eight years of commercial operation of each generating unit. Under the agreement, TU Elatric is required to make annual payrnents to Tex La comprising a pro rata share of operating costs plus a capital charge on Tex-La's net investment applicable to the n>rtion of Tex La's entitlement assigned. (See Note 10 concerning litigation proceedtngs regardmg Tex La's participation in Comanche Peak.) Manin Lake L7mt 4 Cmsmaion Gmccl!ation-In November 1986, TU Electric announced that it was not economically feasible to construct a fourth unit at the Martin L,ke Steam Electric Station (Manin Lake Unit 4) and cancelled the project which was scheduled for wnice in IW4. Pursuant to exgced regulatory treatment, expenditures through October 1956, of approximately 536,S10,000, including contrac-tot termination ccsts, have been recorded as a deferred aswt to be amorti:ed as approved by regulatory authorities. (See Note 12.) General - In aJd: tion to the above, the Company and its subsidiaries are irwolved in various lecal and administrative proceedings which, in the opinion of the Company, should not hace a material etTect upon its financial position or results of operations.
- 12. Financial Accounting Standards Board Statement No. 90 In December 19S6, the Financial Accounting Standard 3 Peard issued Statement of Financial Accoun-ting Standards No. W entitled "Rn;ulated Enterpriws - Accounting for Abandonments and Disallowances of Plant Costs" which bea aes effective for fiwal year 1958.
The Statement requires that when it is probable that an operating asset or an awt unJet construaion will be abandoned that the cost of the asset be removed from plant in wnice or construction work in progress. At that time, the present value (Jerived by using the company's incremental borrowing rate) of future revenues expected to be allowed by regulatory authorities for recovery of such cost would be recorded as a wparate aswt and any ddierence would be recogni:ed as a less. Such calculation woulJ re-quire estimates of when recovery would begin and the length of the recovery period. Application of the Statement to the accounting for the abandonment of Martin Lake Unit 4 is not expected to have a material effect on the Company's financial statements. The Statement aho requires that when it twomes probaNe that part of the cost of a retently com-pleted plant will be d sallowed for rate-making purpows and a reawnable estimate of the amount of the disallowance can be made, that amount shall be deducted from the reporteJ cost of the plant and recogni:ed as a loss. The final provision of the Statement requires that an allowance for funds usai dur-ing construction be capitali:ed only if it :s probaNe that thow costs are allowaHe for rate-making purpows.
- 13. Supplementary Financial Information (Unaud:ted)
In the opinion of the Company, the following information induJes all aJjustments (constituting only normal recurring accruah) necessary to a fair statement of su<h amounts! quarterly rou!ts are not naessanly indicative of expectations for a fall year's ogrations lwauw of wasonal and other faaers, in-cludmg rate changes and variations in maintenance and other operating expene patterns. Eamings l'a 5 hare of Gm4&kd Gmumn qmnng Rnenua Amnng trwnw StInmnw __%L_ Qu.no Edd 1* 1M 1* 1+s _1 % .I >; 3% 1+; _ T%s a DC.r. am te Ln sww hhM $ m)0,29N i T7.! N $ 169.aml $170 N $ 119,167 illf# S0an PT Ja Y 942,e l W r; 173.711 !!431 122/c2 121,171 0.m CT wht V 1,24%119 U:ON 297,0 % :o.13 249,2W 2 V ,W l.76 17; tb mh3 U. _ 911,147 . L-U t : _169,712 :V2 _135._701 l i tl e 0.95 <N T4.. $ \912.045 $ 4.171l 57 M.W ne+ %26,M 1 W'- 54.45 9H N
STATEMENT OF f}ESPONSIBII.ITY P The management of Texas Utilities Company is responsible for the preparation, integrity and objatisity of the consolidated 6nancial stamments of the Company and its subsidiaries and other information in-dudai in this report. He consolidated 6nancial statements have hen preparai in conformity with generally accepted accounting principles applied on a consistent basis. As appropriate, the statements in-i duJe amounts based on informed estimates and judgments of management. He G,mpany's system of internal accounting control is designed to proside reaenable assurance, on a cost <ffative basis, that assets are safmuar&d, transactions are executed in accordance with management's authori:atien and 6nancial records are reliable for preparing conelidated 6nancial statements. Manage-nent believes that the system of control provides rea<onable assurance that errors or irrmularities that could be material to the conchdated 6nancial statements are prevented or would be detated within a timely irriod. Key elements in this system include the eEcctive communication of established written policies and procedures, wlection and training of quali6ed prwnnel and organizational arrangements that prosiJe an appropriate daision of responsibility. This system of control is augmented by an ongoing in-ternal audit program designed to evaluate its a&yuacy and edettivenns. He Ibard of Directors of the Compmy aJJtesses its oversight responsibility for the con <olidated 6 nan-cial statements through its Audit Committee, which is compowd of directors who are not employas of the Company. He Audit Committee meets regularly with the Company's management, internal aud; tors and in& pendent certi6cd public accountants to review matters relating to 6nancial reporting, auditing and internal controts. To ensure auditor in&pendence, both the internal auditors and independent certi6ed public accountants have full and free access to the Audit Committee. The independent certi6cd public accounting Rrm of Deloitte Haskins & Sells is engaged to examine, in accordance with generally auerted aud: ting standards, the conelidattd 6nancial statements of the Com-pany and its subsidiaries and to express an opinion thereon.
~
' ~
ACCOUNTA. ' OPINION' ~ . I DELOITE HASKINS & SELLS CERTYlED IUBUC ACNUNTANTS To the Shareholders of Texas Utilities Company: We have examined the conelidated balance sheet of Texas Utihties Company and subsidiarin as of December 31,1956 and 1%5 and the related conelidated statements of income, retained earnines and source of funds for construction for each of the three years in the period ended Dwemher 31,1956. Our examinations were made in accoidance w,th generally accepted aud: ting standards and, accordmgly, in-luJed such tnts of the accounting records and such other auditing pnudures as we considered i nwessary in the circumstances. l In our opinion, the coneliJared fmancial statements referred to above prewnt fairly the 6nancial pwi-l tion of the companies at December 31,1%6 and 1955 anJ the results of their operations and the vurce i of their funds for construction for eash of the three years in the period ended Daember 31,1086, in conformity w,th generally acarttd aaount ng principles applied on a consistent basis. DELATE HAWIN5 & SELIS Dallas, Texas February 23, 1987 35
1986 1065 1434 TOTAL ASSETS end of year (thusab> . $12,318,192 510,S67,022 59,759,148 UHIIIT PLANT enJ of year (thusah). $13,566,133 512,144, % 3 511,031,t*N Accumulattu Ayrtuanon end of year . . . . . . . . . . . 2,522,016 2,331,783 2,143,S63 Construaion exnniturts undulng a'Jowance for funa uxd danng construtton) . 1,519,619 1,106,S61 951,323 CAPITAUZAT10N end of year chu nb) lo ng4crm l h . $4,283,791 53,615,t69 53,322,925 Preferrtd stak: Not subjett to mandatory redemption 811,418 Sl1,418 727,911 Subjett to manJatory redempton . 232,424 34,eV 14,eb Common stock etpty 4,460,821 4,0M,tt4 3,573,103 Total $9,788,454 5S,52S,447 57,eM,635 CAPTTALIZAT10N RATIOS enJ of year longem lh 43,7% 42.4 % 43.4 % Prefe red stak . . 10,7 9.9 10.0 Common stak upty 45.6 47.7 46.6 Total 100.0 % IN.0% 100.0 % EhiBEDDED IN'TEREST COST ON LONG-TERhi DEBT end of year . 10.0 % 10.3 % 10.1 % Eh! BEDDED DIVIDEND COST ON PREFERRED STOCK end of year . 8,1% S.2% S.3% CONSOLIDATED NET INCONtE ev.anL) . 5626,851 5 % 7,7 54 55:6,041 DIVIDENDS DECL\ RED ON CONtNtON STOCK eWab) $377,865 5 4 3,N 5:95,578 CONihiON STOCK DATA Shares outstand.ng-averace . 140,981,671 135,:te,54 126,6:6,241 Shares ournand.ne-end of scar 142,805,206 1 E,tM 3,16: 1:S,5S5,tc9 Eamine per averxe share 54.45 54.35 54.15 D.uJena Jetlartd nr share 52.69 52.52 52. 4 Fwk sa:ue per < hare-end of year $ 31,24 5:4.e 5:7.79 Rcturn on averaec tommon stock uptv . 14.7 4 15.4 % 15.5 % ALLOWANCE FOR FL'NDS USED DL' RING CON 9EUCDON AS PERCENT OF CONSOUDATED NET INCONtE . 48,5% Mi% 32.7 % NET FUNDS FRONT OPERATUNS AS PERCENT OF CONSTRUCMON EXPENDffERES (cwlud.nc aban<e fo funds uxd Junne construanni 32,9 % 51.0 \, %.4% G twtna tm n i pshtuns as a lstunt d ih a km Gndna ta,n l ynbruns 1. sal Captalc.atin 15 , m . ... - _ _,
==. . .
9 6 j
- i. .
40 be N
- M a w n i ( . ,
i 1953 1952 1951 1980 1979 1978 1977 1976
$8,72,9M 56,0:1,407 57,kY,655 56,552,972 55,521,933 55,161,&Y $4,%3,Rb $ 3,878,12 $9,47,653 H,051,42 $9,194,803 $7,4 V,577 5c,631,618 55,N2,0b $5,111,037 $4,349,t45 1,9 %,103 1,7 %,1;6 1,5cV,7 M 1,378,6M 1,213,927 1,057,003 917,637 813,837 RV,9M d91,W 792,:65 dO7,00S 872,416 737,353 7M,282 671,70S 53,103,452 52,973,253 52,713,9c3 52,;27,71o $2,W,612 52,0 %,6M 51,850,057 51,627,403 t,:0,770 t@,1N (@,1N nY,1N 535,S:4 5 %,233 476,578 446,923 34,t+ - - - - - -
l 3,235,375 2,510,195 2 A21,M4 2,00,520 1,S30,472 1,024,295 1,432 S10 1.2t6,0s 1
$7,003,302 fe,IM,5;7 55,735,5 % $ 5,2lS,H 5 $4,7 4,RY $4,104,155 $ 3,7t6,465 53,MO,412 i
44.3 % 46.6 % 47.3 % 454% Y.0% 45.9 % 49.3% 4i7% 0.5 9A 10.5 11.5 11.3 12.I 12.7 13.4 46.2 M0 42.2 40.1 E7 39.0 M.0 37.9 100.0 % INJt 100.0 % IN.0% 100.0 % 100Pb IN.0% IN.0% 9.7% 9.5% oft S.3% 7.9) 7.5% 7.3% 7.2% SPb 7.Tb 7.7% 7.7% 7.4% 7.3% 7.2% 7.1%
$41,4f 6 9:3,t4e 5359.3 % $297,944 $211,151 52N,7 M 5175,919 $147,4:0 52e2,o59 i::7,07e 5192,D, 51t4,527 5142,2o: 3119,H 5 5103,2;0 $ d5,iV llSA54/(c 111,3;e,815 102,:42,239 93,719,257 M,319,3+ 79,026,757 73,194,444 e4,625,0N 12 3,te 5,0% 114,132,319 105,2 k,k'l 4,0v,t45 87,%$,M W,te5 SN 75,0N,0N 70,0N,NO 53.00 i3.55 53.51 i3.15 52.45 52.M 52.40 $2.29 52.20 52.04 ilM 51.76 il.t4 51.52 51.40 51.32 5:6.10 i:4.61 523.01 521.76 $20.2 520.14 $19.10 ilS N 15.3 % 16A% 15 9 % 15.:% 12.2 % 13.1 % 13ft 129b M 4% 31.7 % 26.1% 26.2 % 25.2 % 26 9 % 3 3.Yb 31.7 %
539 % W 0% V.5% 52.7 % 40.3% RI% E4% 29.Tb No Fwa Fnen %m m a hens id AFL'IC m a h ene 64 Guwrwtne Emshrum Gend&wd Na bwcw j - -
). L M .
a e m e, a er a g a e og e, se e, es
~
I l 1986 1%5 1934 ELECTRIC ENERGY GENERATED AND PURCHASED hapuu: thin) Generated-net station output 75,467,871 76,355,396 72,582,63: l Purchased and na interchange . 4,712,082 2,057,4(O 392,65:1 Taal generated and purchased. . . 80,179,953 78,412,86( 72,%5,25 l Company use, kwes and unaccounted for . 4,925,178 5D4?PO 3,839,51? Taal elatne energy sales 75,254,775 73J69,906 69,125,77: EECTRIC ENERGY SAES maut: thin) Residennal . . 24,6N,109 24AVN 22,693,2W Commercial . 21,453,435 20,349,334 19,026,267 Indusmal ..... ... 21,013.278 20,921,530 20J43,55" Government and municipal 2,385,168 _23:4,755 1,920,42i Taal general businns . 69,455,990 67,896,437 63,953,539 Other elatnc utities . 5,798,785 5,473,459 5,142,23e Taal ehtne energy sales 75,254,775 73,369,806 69,125,77: OPERATING REVENUES (Manio Resdennal . $1,530,258 51,673,378 $1,M6,06 : Commercial . 1,137,944 1,207,7M 1,127,76 Industnal ..... ...
'322,831 935,M9 893,53:
Government and muniapal 134,927 145,256 117,79 Total general busmess . 3,625,960 3,% 2,267 3,6s5,17: Other elatne utaties . 222,644 250,557 233,3 Tual from ehine energy sales . . . ...... 3,848,6N 4,213,124 3,918,46' Other optanng revenues bnclud:ng owr /under<novered fael revenue) . 83,441 (42,%7) 13,76-Total operanng rntnun . $3,932,045 54,170,157 53,932.23 ELECTRIC CL'STOMERS end of year ResiJennal 1,820,381 1,%4,M6 1fe9,73 Commercial . 217,232 214J% 205,47 Industnal ... ... 23,912 24,145 24,05-Government arti muruc: pal 13,180 12.00 11,45-Toral general bus: ness . 2,074,705 2,014,0t 0 1,913,72-Other eleetnc utitin . 61 63 6 Total ehtnc custamen . 2,074,766 2,015,023 1,913,79 RESIDENTIAL STAT 15 TICS (excluJo mastermetered cu'.tomen, ( nwawatt-hour sab anJ revenue') 12,749 13,0t'2 12 F Aurage kilowatt-hours per customer Average revenue per Ltkm att hour . 6,31c 6.94 6.91 InJustnal da+!1 cation trxluJo wrsice to Akmsandow unterrupnble pnor to May 1%1): Elaine energy do (wauer be) 3,092,696 2,MI,4 % 2N\27. 0;rranna rntnues cbanid . $65,N4 W,N6 570,52 l ss ( - _ - - - - - - - - - - - - - - - - - ------
1083 1982 1951 1450 19N 1978 1977 1976 67,70e,544 N,2:4,7:e 62,447,411 e2,Ses/41 V,051,4N 57,10,077 0 53,1%,235 47,573,M6 34 3, % 1 371,1N 91,N1 %,V6 75,t45 79/6s 72,945 40,6 0 es,053,175 64,545,91n el,5 b,;N 62.922,0N 55,127,124 57,275,7t 5 53,2N,0t0 47,6 0,51 5,90, 45 4,215,774 4,lte,127 4,4:2,762 4,0'1,6 54 4,N 1,4% 3,M9,7td 3, 3 0.124 62,7N,027 t0, k0,142 V,372,177 58.4W,267 9,125,H0 ----- ----53,242N 44,6N,312 44,3 V,Ve
= = = = = ===_ == = == = = = = = ==== = = = = . = .--- ==
20,162,ib 10,N;,037 15,67e2O 14,M4,4N 17,N4,402 17,9 3,224 16t42,V2 14,MS,07 17,3c6,;e3 le,475,25 3 15,b3,le2 14,653,1N 132t4,4b 13,117002 12,M7,755 l l,3 V,UI 15,6 0,077 17,526,412 17,W2,261 17,%1,265 17,275,554 16,409,6 % 15,67S2 9 13,917,b8 1,7T,476 __1,710,273 1,t42,10e 1,7%,%8 lted,7:e 1.728,056 1,565,518 1,4:5tc5 M,0N,622 5;,e77,025 53,74 3,7H 53,uC5,7te 4 % M,423 44,2V,lls 46,233,RN 41,2 0,031 4,70',V5 4,703,1 _17 4,e25,40S 4,593,;01 4,521.017 3,976,161 3,445,403 1,100,357 62,7N,927 (0. h',142 % ,372,177 55,4 4 ,267 -54,125,440 53,:4,2N 44,6N,312 44,3 30,h8
= = = = = ===== ===== ==== -
= - = = = =_= == = - = = =
51,\b,91: 512 37,63: 51,044,761 5 577,555 i 672,9 0 5 (@,e 11 $ 552,331 $442,204 Ws,le: 411,457 778,0M 5'O,021 4 6,170 434,14e 375,522 V3,765 hY,0lb 74;,:43 e54,673 432,914 4142:4 373,4;6 310,511 2 V,4:6 IN,i 'O 4; e73 5 3,077 to,3% 54,;e5 44,e 3 40,331 32,3 @ 3,21r,0:0 2,m0,0 3 5 2,5e5,524 2,014,N1 1e40W 1,502,3 4 1,2N,N5 1,016,805 202,b7 l'O,727 lel,WS 123,155 105,\b 57,542 (4,975 ;3,05: 3,420,407 3,ls',Te: 2,727,5:2 2,142,9N 1,7 34,t05 1,5T,4:5 1,4 4,270 1,0N,557 e?,5N 57,263 10,355 31,574 lete4 13,425 18,ih 12,473 53,487,916 53,2V,02; i ,7b,U7 52,174,553 51,7;6,:S 51tW,3;6 51,47,778 51,032,3 V 1,5;e,7t0 1,477,N7 1,4:1,273 1,3 ;et '" 1,267,701 1,221,4ee 1,19,95 1,122,W 1 +,m 137,005 177;N 171,4e it4,N1 It0,170 153,6 % 146,237 22,7e1 21,478 20,N: 14,5T 18,e9 17,953 17,21e letco 10.210 10,143 10,:63 10,4v 11,257 ll,:t0 11.274 11,121 1,7mjN lte,7m 1,6N,447 1,5%,2:4 1,451,u0 3 1,410,551 1,42,033 1,2+,4 M ts 75 73 $ 9 e t0 54 1,7-6,47 lN;N3 I,e:4,;75 1,5V,kN 1,4 1,vs 3 1,410,913 1,M ,N 3 1,:ve,513 12,073 12,3:0 l l .v 13,125 ll,N7 12,747 12,213 10,W e.tce e. ;4 e ;.7:e 4.Me 3.ux 3,70e 3.45e 3.20e l 2 tv0,94 2,31e,0, 2,96,W7 2,915,7 4 3,070,3 4 2.91,:59 2,7 % ,027 1,522,4v Re,1:1 5<6,035 9 4,0' e 9 *,813 H%V 9 1,572 5 4,878 520,05: l W
i ggat ngs 1987 Annual Meeting Quarterly Market I3 nee Ranges s, 30 The Annual Meeting of , i
.eharehoiJers of the Company n '
Pst Ray__._ 4m n;'i 01 i ! will be held at 900 a.m. on Friday, May 15,1987, at the Quarter Endal 19so 1+5 (7Mlill;l Fairmont Hotel, Ross Avenue High Low li gh low 3m ! ' f j ' ' ' ; and Akard Street Dallas, Texas. Shareholders are htarth 31. Jane M .
$ W. $295 5:6 $ 5, 35% 29% 31% 27( 300 t1 ;
l fl b f !: liiiheidl}!? cordially invited to be present Spremht 30.. 37% 30 % 31 ', 2 5'. at the annual meuing. Those thma,n. m. 3i% 3 D, :e, gftl: [ j j,
;i j t3C
- r. : -
g; i< unable to attend are urged to 2m - .. .ie. f l E' exercise their r;ght to vote by
,m . ;, ,,
I'y proxv. Notice of meeting Dividends Paid per Share of Common gtock. 2mh14 l,iI!IlI,ld,El 1 = < and proxv statement and form i i 7i of proxy will be mailed shortly 4 . t. t :! ~ after March 27, the record date 150 i' .
--IMiend. I, aid--
for th4 meeting. Following the Quarter EnJeJ _19 6 _IM n'ectir.g, a report of the l priueJings will be prepared stanh u . 50.63 se.o and distributed to all June U.. 0.67 Ott m .
<hareholders.
NpttTrht V. 0.67 0 63 Dnemhr 11. 0.67 Ot1 3 gg3 oo 3 __ 7 hc An m; gep. t tu hy, pyggd f;,,
$2p 3; e 77 78 79 m 81 82 M 84 85 86 the piep* of tm dmc 4.an ho!Jen io:h
-=
l 1 F.sfunp Pur $% m!"r' nan.m 7.cnnmc the Co nom and r..t g n oncet: m turh uns salt or picAuc e!, The Lmpany he Adarnt mmnun stak o, a+n once or vlu: arum of an ot!c ta bu.s , J.nlena pvaNe in ceh in ca.h year wrx e scl! en memo it, inu >rp ranon in l A5 ard he tonnnued Directory a rnord if annual ludend inacae. Tcw Urino Cenm Jar +iacs a l w hk h o vrwrxeJ in !W At it. February TRAN9FER AGENT 9 AND L i:< t a nrame Jcra cJ Nrm ma I
. 1+7 rnnnng, the IbarJ <i hrnwrs agxn RLGlsTRARS J , ;< ne du 4 u k h La e hcn a w rami the quarterh luirJ h thar cent- hiBank Da:!e, N A BhJ pr rt. e cw.a d f.r r a J ena.un. '
per hare. from o7 tenn to 70 cens E D Mas Tex.o a eps tall N fr.,hd ulv n g. cst avular quarterh duknJ n pv4Ne AprJ 1, htman 5hareholir in m Trow le?. to sharch, Lien il raorJ on hianh conf ny A o.psofthe Annw: R
rt :o tkc D. Duden1 a e rud m ash to sc, yo,i, New Y rk k" hc' ' nl Edn a C rn,wm, f< nn shanh Uen w ho are tot pruapt.ng in 10 K u , l he fr.M.d h tkc C. .gm the Auroran Dinard Renwernt and DIVIDEND DlSBUR51NG AGENT "P " " Por Comnvn 5rak Pur,ha< Man: a dulna ht rg m 5hanho!Jer Sen ucs Tru t are np .naHe far iederal t:> on* rax pur- Com pa ny EC P"" p m a urinary luderd irwrne. Reference e g cq gn .3 3 y Mw - 6u ! J" P" ' ' ' J# c' N bc, r cA'.d"l' r rnal to Nse 4 to F.narual %temem Nm York , New York IX15, N'Mc' Rd " ny iring Lmaarer - up ,n pas ment (i To.a L hl n< i G - nm loJena on mmrn ,n sta k. M I h ", T.+ c AGENT FOR PART'CIPANTS AUTONtATIC DIV!DLND U"""'. 7 w M I ) '210 M 4 4D RE!NVE3TNtLNT AND C0\ tnt 0N i 5TOCK PURCHA5E PLAN N1,ron Shan h lJer 5en w Tru r , Co crau I t h\ i ferJ Re:ns t tnient M. ins P.O. K m M, Chors h Strert Sta % n N(w York , Nr;w Yerk 1M' l 'TOCK EXC HANGE Ll311NG5 4 New Yor k Sta k Lw L,nge. In
- Ntw Yerk, New Yori
; N1J m e % k Ew b , hw p .ra eJ q ( L u n IM - T I.( Pc '
- t , .s k [ w h a : 4 la rp e t'eJ
! 14 Ard s iJN, fro , - 1 G ,. . o u r 11 ! c r 3 s !' f
- 3 hl. '
l 4 O I b M ? i L k E ? Y l 5 m' M L h[ m b , d E-a b = L = m E E m imi e . - -- - -- si-- mim------- 5 e TEXAS - 4 UTILITIES 1 COMPANY - 2tT1 Bryan Tower Dalu, Texas 75.N1 . (214) 6534tV = E E - b ]. i' E ! ,. = I P E - E E L E k' E T ~ L I E' E}}