ML20151G643

Annual Rept 1987,Stategic Planning

ML20151G643
Person / Time
Site:	Fort Saint Vrain
Issue date:	12/31/1987
From:	Brey H, Hock D, Walker R PUBLIC SERVICE CO. OF COLORADO
To:	NRC OFFICE OF ADMINISTRATION & RESOURCES MANAGEMENT (ARM)
References
P-88129, NUDOCS 8804200079
Download: ML20151G643 (52)

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PuNie Senice Company of Colorado and SubsiJiaries h F I N A N C I A L A N D O P E R A T I O N S III G il L I G II T S Financial 1987 1986

% Change Earnings Per Share:

Before Extraordinary item and Cumulative Effect of a Change in Accounting Slethod

$2.49

$ 2.06 20.9 Extraordinary item

$ (1.93)

Cumulative Effect to January 1.1987 of Accruing Unbilled Resenues

$0.56 Total

$3.05 5 0.13 Dividends Paid Per Share

$2,00 5 2.00 Return on Aserage Common Shareholder Equity Before Extraordinary item and Change in Accounting hiethod 15.7 %

12.7 %

23.6 Return on Aserage Common Shareholder Equity 19.3 %

0.8 %

j Cc,mmon Shareholder Equity -

"r of Capitalization () ear-end) 39.8 %

39.4 %

l.0 i

Operating Resenues (000)

$1,657,435

$1,657,863 Operating Expenses (000)

$1,426,475 51,419.156 0.5 income Before Extraordinary item and Cumulative Effect of a Change in Accounting Niethod (00th

$ 143,679

$ 123,821 16.0 Extraordinary item (000) 5 (101,393)

Cumulative Effect to January 1.1987 of Accruing Unbilled Resenues (000)

$ 29.589 Net income (000)

$ 173,268

$ 22,428 i

Capital Expenditures (000)

$ 127,610

$ 195,660 (34.8)

Grms Plant insestment (000)

$3,591,770

$3.538.439 1.5 Number of Employees 6,476 6,503 (0.4) 1 Common Stock Shareholders 62,124 64.916 (4.3)

Common Stock Shares Outstandmg (900) 52,457 52.399 0.1 Operations Electric Revenues (000)

$1,075,753

$1.045.590 2.9 Kilowatt Hour Sales (N1illions) 18,357 17,928 2.4 Electric Customers

% 7,083 958.037 0.9 Gas Resenues (00())

$ 563,307 5 596.584 (5.6) 51cf Deliscries (OtXh 179,271 176,311 1.7 Gas Customers 831,973 819.742 1.5 Earnings &

Year End Stock Price Sales Growth -

Dividends Per Share

& Dividend Yield Electric and Gas D Earnings Per Share B Common Stock Market Price-S E Electricity Sales Growth Rate-Kmh D Dnidends Paid Per Share 5 Cornmon Stock Dnidend Yield-4 5 Natural Gas Sales Growth Rate-Mcf

$3 00

$22/12 %

12 %

$2.50

$21'l 1 %

8%

$2 00

$20r 10%

4%

$1.50

$197 9%

O E.

$1.00

$18' 8%._

(4)%

$0.50

$1717% _

(81%

77 83 M 83 86 87 77 83 84 85 86 87 77 83 M 85 86 87

l T O O U R S II A R E ll O I, D E R S a

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-9 In both financial and nonfinancial terms,1987 was a successful year for the Company. As we began the year, we faced the difficult task of increasing earnings from $0.13 per share to a level in excess of our $2.00 annual dividend. We are pleased to report that we met and exceeded our goal with earnings of $3.05 per share. As a result, we were also able to meet our conunitment to continue paying a $2.00 dividend.

While a change in the method of accounting for unbilled service to our customers increased carnings by $0.56 per share, effective cost containment programs along with a workforce reduction implemented in late 1986 were also major factors in the achievement of our goal.

Recognizing the increasingly competitive nature of our business, we continued to take

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I advantage of every opportunity to keep our prices as low as possible. During the year, electric rate reductions were implemented for small commercial, industrial and all-electric residential customers.

In early 1988, we also entered into an agreement with Colorado regulators to reduce electric rates for one and possibly two years. This action came as a result of 1987 earnings being in excess of 4

the level established in our last rate case in 1983. We believe this agreement to be particularly signifi-i cant in that it leaves the presently authorized rate of return on common equity at 14.4% until March 31,

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Another imponant aspect in the attraction of visitors to Colorado is adequate convention facilities. We are pleased that construction will begin this spring on a new converition center in down-town Denver. When the facility is completed, the dollars it will generate will contribute greatly to the city and state economies. The convention center will also be a catalyst for promoting tourism in the state on a year-round basis. We will continue to assist the government and business leaders in the state in the economic development arena. As Colorado's business climate improves, new opponunities will be created for all of us.

Even though there is an all-out effort to improve Colorado's economy over the long term, there is no question that we are currently facing a sluggish economy in our service territory and shon-term growth is expected to be lower than the national average. This slow growth, combined with the reduction in electric rates noted earlier, will make it difficult for us to equal in 1988 the financial results achieved in 1987. However, we are confident that through our cost management and marketing effons, we will be able to meet our goal of carning in excess of our current dividend.

Our theme for this report is strategic planning. We believe this is clearly appropriate for a company in the gas and electric utility industry. Both segments of our industry are in the midst of dramatic change in terms of competitive markets and potential structural changes. In order to be prepared to meet the challenges of this new environment, the executive management of the Company spent considerable time and effon this past year in assessing every aspect of our business. As a result, we have developed a strategic framework which will enable us to deal effectively with the increasingly competitive environment of our business and to take full advantage of the many opportunities available to expand our business now and in the future.

The positive accomplishments of the past year are due primarily to the dedication of our employees, and we thank them for their effons. We also thank you, our shareholders, and want you to know that we will continue the emphasis begun in 1987 to enhance shareholder value. We will do everything possible to insure that the true value of this Company is recognized in the financial markets so that you can realize appreciation in the value of your investment as well as future dividend growth.

h UtAbV~

R. F. Walker D. D. Hock Chairnun of the ikurd and President and Chief Executive Of0cer Chief Operating Officer

h YE AR AT A GL ANCE EARNINGS: Now at a FORT ST. VRAINI Nuclear POLLUTION CONTROL record high of $3.05 per power piant experienced EFFORTS: Natural gas share of common stock.

two unexpected outages was bumed in metro-(Previous record was during 1987, and was politan Denver power

$2.55 per share in 1984.)

unable toproduce enough plants during part of the 1987 cost containment electricity to coverits winter to detemiine to efforts produced intemal costs. Outlook is that what extent the use of savings of about $35 the plant willbe operated coal is polluting the air, million, or about $0.38 at cost-effective level Company is also market-per share, compared to in 1988. A plan for its ing Compressed Natural 1986. Also, a change in eventualdecommission-Gas as a means by which the accounting method ing is being developed.

fleet operators can pertaining to unbilled combat the problem.

revenue produced a one-time enhancement of ELECTRIC RATES CUT:

earnings of about $0,56 a Faced with earnings that GR01\\Til \\'IA "BRIGilT share in 1987. On the were going beyond the SPOTS": \\\\ith natural downside, the Company rate ofreturn on common growth in the service terri-took an after-tax write-equity allowed by state tory forecast at inodest down of about $l1 mil-regulatory agency, the levels, the Company is Ilon, or $0.21 a share, for Company has agrad to a searchingfor business op-real estate investments 2.73% reduction in retail portunities to enhance which have dec)ined in electric rates starting April growthpr thefuture.

market value.

1,1988. However, agree-These include pivgrarn of ment with regtdators per-supportjbr state gover-mits retention of14.4%

nors' business goals. Bright OlVIDENDS: Were rate ofreturn, and allows spotsprthe next decade nuaintained during this the sharing ofsome cost include a new convention recovery year at annual savings with shareholders center, a new international rate of $2,00 per share.

as wellas customers.

airport, and the possibility 1988 goalis to produce ofa "Super Collider"atom earnings in excess of smasher:

that dividendleveland seek ways to enhance shareholder value.

l h PERFORM ANCE INDIC ATORS Customer Growth -

Return on Equity Conunon Equity Ratio Electric and Gas O Elettric Cuuoiner Growth Rate a - To N PSCo D Ntural Gas Cuuonwr Growth Rate a InJaury Awrsge (1987 c4 )

W Industry Aser. ige (1937 ca) u n 41 iss ins as Jos iss 4n 2 $4 l2%

39 1 204 o g 3M 1.54 64 39%

lui 31 311 U

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kn 87 77 li)

M lti A7 77 83 u si sw 87 Prmur) trkhats of profaab lity, nwawnng SharcNekicts' inscwnerd as a pert'ent of the 52 as tual retvin im durrN Akr equay.14 44 h Nilem msNed un the Genpun.

tutstruly authwed by regu atm Debt Ratio Pretax Coverage of AFDC - % of Earnings Interest Expenses a esco a esco a rsco O Induury Aurage s1987 est i E Industry Ascrage (1937 estl W Induury Ascrape t1987 et) s4 'i 4 Ss ro1

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h F I N A N C I A L D I R E C T I O N: E N II A N C I N G S il A R E ll O L D E R V A L U E Hy nearly any nicasure, principalfinancial objec-einotherfactor al]i*cting IUM' n'as a financial tityfor IUS' u hich n'as to earning uas a change in success for l'uhlic Service carn in excess of that the accounting niethod per-Onnpany of Gilorado dit idend.

taining to unbilled rete-

• Gnnpany carnings heteral unusualfisclors nues.1his provided a one-rose to a record high of af/ccled the letel of 1987 tirne Ixiost in earnings SJ 05 per sharefront a carnings and nnist he ecpuvaient to 50.56 per record loir of SU 1.3 the considered u hen evalu-share.

prior year. u hen there tias ating the Gunpany,'s On the dotrnside, the a nutlear-related ter*te-perfonnance.

Gnnpany recorded an l

dotrn equit alent to 5I U; On the positive side, cost after-tax teritedoten of ap-per share.

contaitunent progrants proxintately St I inillion,

• 1he i alue of the reduced 198' operating or aix>ut SO 21 per share, c'ontpany's connnon sica k and nialntenance expenses o,t its real estate intchl-dipped durnig the stock

- exdusit e of incenne pnent leidings of iktnnock inar ket dedine in < h toher.

taxes and the cost of G>nter Corp, a it h<>lly-but recovered quickh in energy - by almut Sj 5 otened subsid:ary.1he jact. it < losed the year niillion front 1986 let vis trriledotrn u as in recog-nearly U% l lRher than it 7 bis enhanced earnings by nition of the detline in opened. one vl thejetr the equit alent of alxntt ntarket value of real estate utdtty stoch to uain SoJSpershare.

in the Denter area.

ground durnty loM' 1he success of this phase Earnings trere also

• Retanied caruntyv.

of cost wntrolis a credit to

!!ccted by morne unantici-recha rd a year ago by the Onnpany's entployees pated problerns at the l' art alxius SUM rui!!n n.

u ho trere able to accons-St. Vrain Nudear Gener-he aan ed back by ainut p!ish their %ks n'tth lotter ating Station, ulvre a S% niillion htalgets, and trith a stal) rnechanicalJitilure and an

• lhe ( t onpany snant-reduced by the early retire-oilft re pret en!cd the plant latned tis anittud o annunt nient HI late 1986 of alxnti fnnn generating enough stock dividend of S !on per

%U entployees.\\ lost of electricity to coler iis costs share and at bicred tir these i acancies. u hich alsr>

during IUX' helped to reduce costs in IUM' trere not filled and Ibc n urk load tras abwrbed by sty rentatililly entl>lt syves

Q FIN A N CI A L DIR E CTION: E N il A N C I N G S il A R E ll O I, D E R VALUE lth sking ahead, the Ctun-clet tric nites tof apprtW-n'arrtant such action.

Junty's strategy is to intalcly $2' niillion, or liv agnentent also pn).

enlunice sbarchtdder value.

alvut 2. 5"i lhis actient t ides stone cconfortfor lhis nicants pn>t iding for a us acctnnphshed Izy a sbarclu dders. It perntits the future dividend secunty unatual agreentent reached ci>*njunty, under sul estab-and gn>u th by at hierin;l li'h 1, l'>HN. ftdiotring lisivdfornnda, to sl\\tre earnings consistently tilxn e extenaire discuvions it ith Irrth Ih >th t u>torners cutd liv t terrent chridend ll tie CI'lY: staff and the slutrelvdders a portton of also sneans careftd atten-Colorado i!/ lice of Lint-any cost sat utgs n hieved lion to t t >>ts and the intple-sittner Ctutn\\cl. lhe rethic-by its ernployees it udso nientation of prognuns lion takes ef]NI.\\pril 1, leares liv pre \\ent rulle of and long-tertn strategies to l')NN subject to Ci'l'C return on contnton equity increase sales tutd n'ttnue.

appnri'td utidjina' adjust-at 1 i I% for at least tuo Eten a trivrut varsidernig yatrs \\\\ hile then' is no the one-tunegain of St) in a guaranter fluit liv Cont-

> hare restdtnig inint unbilled junty tidi carn at that reternies ut IUN' at trill be letel, the opportunity to do 10 shlisctdt to snalt h IUN~s so is inoportant.

carntnqs in IUNN 1hus njulpped trith th It 's lwituse IGNN tegit!ation that lxoth finnts earnings on ultitty nitest and IWdds pnnnisefor its nients - to hi< h n ere trend-nient entfuly 1,1988. lhis Jonant tal future, tiv Cont-nty higher than du let el ago centent also pnit ides lktny trt!I pur>ue its goal of antlert:ed 17 the c idorado for a cut in elet tric rates In enhant Ing sharcin dder l'u bht l'Idilles (innntInton IUNU - If IUNN canungs I ahte by:

(Cl'l *C) in fly ( k anpany 's

• Re extinuning Its oper-last ntle utse in IUMi -

ational strtit titres, finan-It til IV atlet ted by a t ote-ciallhdicies. and snar-Vear redut(to on In relatl kettng strategies tt Ithnt a

frcuneuvrk of n>neued can hemfit shareix>lders itiorud J!b.nur 1.1pe. There comunisment to its existing cnut custorners alike.

uvre tuv reasonsfor this:

nuijor lines of Intsiness.

As these jx>ints illustrate, First, the intenst rate on

• Staying ahead of com-financial gn>teth Ji>r the tivJiiv-year lxnuls at the petitit e tretuls in the elec-future is a mot ing tatyet.

time of issuance tras alxnti tric arul natural gas ll reifuires a flexible 1% louvr than the 30-year iminstries.

strategyfor retaining and rate, ami trill sate appn>x-

• Renetring its effort to attracting crostomers by imately S i million in inter-knou' and sene the cus-paying attention to com-est costs. Second. ichile tumer better, petilit e pricing and sert ice-there is some risk that rates l

• Redirecting short-tenn Flexibility tras also used could be higivr in 1992 if cost containment into long-in the O>mpany's ap-nfinancing is necessary, tenn, comprelensite cost pnxich tofirutncing in the Gunpany concluded management. This means thatfinancialflexibility m

going bennut simply con-and liv near-tenn reduc-Insthng costs in livfuture, tion in intervst costs tras by making sure that the the more pnutent course.

costs u hich are incunvd

,5 --

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+

produce a positite p

duced its needfor capital economic el]i>ctfor the

hA -

in theJ'uture by pushing

>hareholder.

batk to the late 1990's the

• Erpanding the discus-1.43' With no needJi>r in-service date of a second sinn trith regtdatory large amounts of constnic-ctud-fired mat at liv agencies alxnitfurtivr tion capitalfor the next Pau nee Generating Station.

trays in u hich cost sanngs set eralyears. the Gompany for thefirst time chose to issue $ '5 million userth of

~

Juv-vearJirst mortgage Ixnuls rather flhm the trad-i, j

a U

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h G A S S E R V I C E A N D T R A N S P O R T A T I O N: ST A YIN G COM PETITIVE Gas transportation is an fixir ou'n stipply andfind Wbeller the custonters e.unnple offnnilline utility an allertrate utly to Inup ntattufiKlure bricks or contpetition trhich has port it.

brete heer they are allpart sprungfront the clintate of 7 hat's trhy the Onnpany of a grou ing class: large clerecultition in recent is agqnvitvly pinsuing the contntervial and inditstrial 1rars. Utvr the past tu o gas translx>rtation busi-users tt bo can nou' con-decades. the naturalgas ness. It non' constitutes sider the option of' huying imiustry u asjragntented alxna one-sixth of all the their gas directlyfront pro-by a deliterability sh<>rt-gasflotting through the ducers, brokers or other age. by seqineittalion of Gnnpany's systent.

pipelines inslettd of buying interstate and intrastate Wben customers can it directlyfnnn the Gun-markets. and by separate shop aroundfor otherfuels p<nty. lhese custonters niay regtdinory treatnient ql orfind their ou'n source then use the Omtpany's customers according to si:e for nattaal gas, it reifuires pipeline and distrthution and claw the Gunpany to hx>k at its systems to transju>rt their this et ohaionarv pne customers trith a nen per-gas. I'cesJhr the transpor-ceu produced a ntarket in spectit e. 7his requires the lation sert ice take the place U

u hit h the Company noir Gnnpany to step into the pf income formerly reali:cd competes against some qf shoes qfits customers One fnnn the resale of gas.

its ou'n gas suppliers in of the clearest e.unnples of As a result of aggressive prolIdnty gas transpor-this lies trith the e.n=culity pnnt otion in this nutrket, lation verr:ce for large risit program, under a hich the G>mpany trillprovide end users Gnnpany executives meet gas transjx>rtation sert ice In the nete comjvtitive regidarly trith custinners to to the Anheuser flusch climate any raility that recien' and tanderstand breuery ocar Fort G>llins.

d >esn't modily as old u ay their needs.

Odorado. tchen it begins of doing husnieu is likely operations in the spring of to lose that businea -

IOM lhe breuery's citivr to otherfuels. or to annual gas cintsumption is the enterprime of those cuv estunated at alksut I tomers u ho are ahic to huy hillion cubic JVet.

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l h G A S S E R V I C E A N D T R A N S P O R T A T I O N: STAVING COMPETITIVE Elvn th ough gas trans-hitth factics position the its s) stern. Jh> Contjkuty

]>ortation tvptvsents cut Corn lkuty to pnnnote esiintates tlkti this category eMsting netr ln mtter, It is gnnt th during int two-of gas sales to residential net erthele.s just vue part nconically slote perit ut in cristanters u Ill rise to third of the business In all. the Its service territory. liar behind slktce and n'aler G ompany sert ed H)2.txx) 108X, gnneth in liv Ivating gas custorners ut IUM" an Huntivr <!/ custont"rs is lit a*totivr case, liv nh rease of 1 % oter IUNO.

Jonrast at alkutt J'n,.

Onnlkiny is extending

.\\ < ontpetitit e gas supply Ionger range, that grvtrlh naturalgas settice to the strillqr det eloped in IUMn 1% e.\\pected to Ik' til / % to ntountain resort toten of it as a herJar for ut attrat 1-2 % per year.

Grand f.ake, It here lntI-Ing neu g< ts t itsforners.

In IlvJcice of sut h slott l kine lkas Evert the vnain that >trategyjustered grott th. Jouvr prices snake beatingfuel. il pijvline is I

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suppiters as the ( hmpany to prontote bn wider use of' in liv spring of 1988 du vorital tis gas ss >ttn es natural gas Situslar marketing opln or-1Jurin_q l OS' lie c iimpan y l'or extintple, trith the tunistes are being sought s e untutued t< > expand the enat ttnent in IUM" of anti-through<nts tiv Contjunty's ntonier < >l its gas sonn es l < >lltitu m lau s In metn >l>ol-Sert' ice letTitory.

<tud ntiu gets its pas Jt < >m ilan coreas u htch restrit t als lktrl q{ its residettttal

>>t, 't e th us 5 0 < hilcrent the burntng of u t u niin fire-Inarketing plan for IUMM, surf lien Iht% < ht t 'otlt place %. Ma% ltred artificial lic Company is Itvnktng t aln at has nu reased liv re h og Installations Ivu ome al-tlosely trtth inalInime hahrht) < >l gas delu rry by tras in e alternatives and htalders and anhitetis in j n,i tdmg a balans e lv liv i hmpany is lating detvioping modelIkomes 1

luven u nt and suplQ adt antage of tht\\

that incorporate the use of through h.!b limy term snat keting opportunity naturalgas in their design and she art ter ni t eintrat is i)toing the year. It added itnd Jet ttltres.

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h E L E C T R I C S E R V I C E: CREATING OPPORTUNITIES Traditionally, ilx electric to reinain price <ornyetilite ready Ints apprnrirnately side of the business has in the electric market.

92JXX) kilau atts of co-Iwn thought of as isolated Aloranvr, this supply stir-generated pouvr connected fnnn competition, but that plus delays the needfi>r the to its system.

is no longer Inte. Onnpe-Gunpany to intest in costly flou ever, in 1987 the lition is still in its forma-additionalgenerating pro]>osalsfor nete cogener-tile stages, but the inchtstry facilities.

ation projects gren' to such slunrs signs of segmenting Cogenerated electricity pn> portions that they i:self into the specialties of u as intended byJhleral represented colla tit ety generation, transmission late to be afuture source more capacity llum the and distribution.

of]>ouvr. Under that lau,

Ganpany conhl realisti-Company management entrejneneurs are encour-cally absorh. lhe Gunfany spent a great deal of time aged to bushi their on'n estimated that Ifit trere to w*

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' INI examining such thanges poner supplies and utilities inty the output of the most during 198' and urighmg are required to buy the ex-probable pnjects during strategies at alfable to meet cess electricity at costs no the peak period of them. The capability to higlwr than u hat might he 1941-1944 at the prices retain existing electric proruledfnnn large nele currently required. cus-markets and espand into plants.

tomers u unid be paying netc markets by <gli' ring l'nfortunately, due to the apprnvimately $230 the lutrest punible price fi>r required regulatmy pricing nullion morvforponer j

lwnier is vital.

ma hanisms, such cogene,-

than if supplied under the l'urtunately, the Com-ated pon er in most cases Osmpany's existing pany's service terntwy is costs more than pouvr resource plant at the center of a n'gton from the Onnpany's l'a prata l Hs t u stomers.

s tchere there is an excess of presem system. or potrer arul to resultv the question pon er arallable for pur-j>urthasedfnnn other ulti-of func to ining cogener-cha\\e at attractive prices.

Ilies. lhe Contpany al-ated electricity into the lhis enables the (ltanpany system in an orderly and

h E L E C T R I C S E R V I C E: CR E ATIN G O PPO RTUNITIES cost spn lite nunnter liv electric ctestanters li> n'si-t u >mputer njttigntent not L't anpint_\\' I t >lnesteil t uhl cierttial t tutanterx this l'of to!cntle etrit fly I a r n et/lsu nt !) v Ll'l C HI niet nis pn >l filitt,q liffi >r-

\\lt.qhtest llticIttalion tif eft \\ -

late l'W a jutrtial inora-Inathnt tiesignal to he!jo tric jvn vr. Il>ts antall init ten unn on the pun'hase t>l Ilent Inale tiet istons aluut gn nt. In pint of the elet toic sitt h pou cr. lhe Linnpany the it isest use of ein trictly.

Int rines (in >chter there ha s pn if wn! nete r egn.

li> conunercial t uhl tniluv t us:orner s n ith liv iufor-lations, nicludnty a trial t ustanters It nicans snation :) q nent to rncel htildinq ststent to assstre sitgqestions jnn:t the Liont-their sps t h el ciet'Iric ths t! lhe cost t ll n gerier tital pany o!!ItalA to rnhts e injunernents p<>tter18 t < >rn.f otiln e it 'Ith o nts thn >ttgh li k hl control

\\\\ htle the Li>rh,' in t st us the < sther < >l tions in in!able l'ly (imipany has alst u refot nrnig its hurtnt :s to the (iang,nty arkt cort inspiernentetl a pilot pro-itiont the ps ain! of t' ten' of

. n it Ith e!a lric grinn tu > pn >t file 'prentnant its t ustoniers In l'8 It

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l rem atrce neetis poteer t e atritlting sert It es sale tut a >ppe or tunity to l

.11 liv 'arne tinte, the for custanters it in ne

<,ffer nete lott er nite

( i.ntpany is ait >.s tej 'pt ng t :ption s h > rntall cionnner-p, tip Ils ejpirls le a le resjon-t tal. Inslustrh t! an.] all su e to the nents of 11%

ein tric residcnthtl cus

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m (G:ners lhis action shottid custorner5, serves the terri-liv nyfitired titles.

enah!e as many as JX.otx) t<ny nor! beast of />enver la the incantime, the custorners to select an tt here lle city pliUls to ottlic u skfor electric grotrth, s

alternacit e rate Statt fure build a nete international like liv regit>n's econorny, that niay sat e them airport.

is inodest. ht 198' liv momy.

In an e]l ort to resolte a Contpany prot ided electric As part of an on-gonly lon,q -statuhng sert ice terri-sert ice to W,tkk) cris-effort to capand its elet tric forr clispute, tiv Company tomers. an incrertse of market through strategic negotiated on agreentent O ')% oter 19Hh lhose aujuisitions. the Company callingfor an eAchange of customers used IM.-l billion in 1U8' spent consideruhle service territory u hich kilorratt-Inntrs, an increast

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fune in its atteinpt to buy asstnres flutt Ilv Cennpculy of 2. 2% ot er luso. Fc>r the i nion Rural Fit 1tric trill >erte the netr airport I98M. the Onnpany pno.

. i nt cialit al of !!rightort, an.] the area around it. At jects an increase of ahtntt O dorado lhis.1ssociation.

liv same time an oJJi'r to l% in kilouatt inur sales.

Ichit h has alk out I l.1xto buy the.1vociation tras put hnfore its menthers in a special election. but the proposal l ailed to nreire N

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Q C 0 5151 U N I T V D E V E L O P 5t E N T: G R O W I N G T O G E T il E R Tic suarss of a utility is stintulate hwulgn>u th number of such < lays intil clirectly linkett to the eco-thnsugh area cletelopnient the lock ey extensit v scien-nomic riainlity of the cont-and increased totorism.

tilic clata, tiv results of this nutnities it series alul in Cons /rtxtion at liv situly uvre inconclustav.

JUN' the Ginipany con-dolentot."n Ih'nt er site is Tien, lore, liv Conijuuly I

finned to take a leculership expwted to start in IDMS_

rolunhered to lhirtilipate n>le in that nyant. liv Unly by seeking out and in a more extensive situly Gnnpany is an actit e par-creating stich economic during the n' inter of ticipant in liv efforts ty the

' bright spots" and by co.

1UN'-1988 by burning governors of holh G>lorado operating trith t/c eco-natural gas for up to and \\Qx>nung to brmy netr nomic derch>pment gtxtis d clays. Results of that ln:Siness to livir states.

of' the t onununities It situly - intended to <fuan-

. inttutg liv most intpor-serns. can liv Contpany lify all statnvs ollxillution tant pn>lects on thisjoint blinndale its otrn gnarth.

inchuhng ininsportation -

agenda ft >r grotrth is liv in keeping trith its long it ill not le knotrit 10llll multi-Inflion dollar atomic tradition of cennnuntity in-niid JUMM.

p< trlicle aarlentfor t \\ujer I oh entent, liv O anp<iny in if study results ilulit die Gillider) A c.olonuto site IGM' <onlinued to take a that the it<e of < < uti as a ts one of set en seletled as leadership n>le in trorking j8 nrer />lantJuel Is a lInalists liv cianpany tofind sohnions to the air major t ontributor to exi<!-

and 1ri %Iate Generatuni

</ttality pn shlems 111 liv ing clir polhtfunt. the and Tnnisminir ni, ihn.ttyh Ik mer nivtrolx>litan arest Gunp<nty it ill take ap-the.\\lorgan (.idolly Ritnti ht Ile Erniter of propriale at(i.nl h1 any lllectric.1ssociation utathi lONG-JUS' liv (Itnnpany aire, ;be Contpany u Ill fotnlly supply liv chtfric tt>luntarily burned natunti confittlle h> insist that liv i u tdfor liv pn >lect. esti-gas in its I)ent er metro-ntununended solutions to maled at 2nn niegauatts politan electric generating this ch/ficult pnshlem are ht adehtion. et nutjor ehr-plants on high pollutunt based ul"at a fininaugh tric huul is assochtlcd trith days.1)ne to tiv linnled analysis of all liv Co<ls the nett Ih'nt er anport alnt Ivnefits inul that the and its surnauhhng terri-unpact on all ><yntents <>l lury ni liv next det ade st z iely are gtt en (noper

\\b ureuter, fly Gnnpany v nistderation.

IIIM > e.\\ pet is tI nen' t t nt!VII-ttt al ce*ller in Ih'!!!vr (t>

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h C O SI SI U N I T Y D E V E L O P M E N T: G R O W I N G T O G E T il E R In tic rneantime. the ht an (JJort to onitur liv lh a anse tiv ( hinpany Cornp<nty is installing ail-polluti<nt create <l hvfl<vis has leen using nat:tritt gas I ancal polluti< nt t t uttrol of littses, frut ks inhl < ars, nt nunty of its ou n service cituipnient usnig liv latest tle Onnpany is:

tehtcles for sercralyears, ta hnology at its outiftral e li>rnting business ar-I'v ellort for this hinct v!

Chercitee pl<ntt in Iknier rangeniettis It ith cont-lHel unurrsion of nietro-Centstrtiction is notr unclet

[htnies interestect in helping

[*ditart fl< cts can niote u ay ort <t Sin nullion supply the e<juipntent, let h-tiheatl ejuickly systern that trill uwJahric nology anciJuel to ajuip filters to colla tfly ash if attfornobiles for hurning rapural. tiv st stent can C<nnpressect.Valural cias l

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tuh'ct ti itr\\' se n11 tint t'c Int-((..V(5).

i p<ntnci into lleflue gases

• Assisting Irish the ant-b > Julther rahn e oxicles of tvraion of huses in liv sulfur ut plant erntuicats Ikut er se hool cli:,trict. anil r chit les vt I>cntvr's city fleet to <lemonstrate stu b

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h A F F I R 51 A T I V E A C T I O N: PROG R ESS CONTINUES Eifual ojsporittntly aphi a

?g-attakal for the Company s

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plurtilisitC ttinkll ort e al all cittrut,q llv sitnimer of

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let vis is es<culiai for JUN' anci oneformer stu-

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the Company's lon,q ternt f

dent intern has hten aJull-It vil-hent,q lime employee since iUHn Althou,qh the Company I'rtqqress continues in liv macle intprottntents in tls emplo) ment arulpronto-1US' allfrmatu r <tt fit un el-L lion of fentales and niinor-i.. ce. Tc at. Im W rtru 5 m fort <. more remains to be tiles ht IUN' livre Itvre actomplished it Is dom,q l 5) management oppor-this by u orkin.y clurely malir e. h tion At hier vment timities 1n enty-four. or teith its Equal opjn a tmuty

.1u ard by the Fdisol. Elec-1 i '", et vre Jilled u ith lash } brt e. nh nle tip of a frit his!stutefor 'stren,qth-ethnic motortlies. Turnly-prniel of nunorHV and

< utn;! the >pnll of affirnt e ole postlion%. or Ij lo.

female employees atu e at tion throu.qh spet tal trereJilled trith non-ethnic Percentage of State, Female and 311nority Employees at Year-End 1986 and 1987 Public Senice Company of Colorado and Subsidiaries mote: some numbers may not add up due to rounding.)

y Man Padrk Amerkan Total 3fale %

Female %

Blad %

islander %

Indian %

Hispank %

%finorknes %

Year-Fnd Year End

) ear End Year-End Year 4nd Yearind Year End 1986 1987 IW 6 1987 1986 1987 1986 1987 1986 1987 1986 1987 1956 1987 Management 11.7 12.2 1.1 1.4 0.2 0.3 0.1 0.2 0.0 0.0 0.5 06 0.9 1.1 Non-Management 67.5 66.4 19.7 19.9 4.8 4.9 0.8 0.9 0.3 0.1 11.0 11.1 17.0 17.0 Total Company 79.2 78 e 20.8 21.4 51 52 0.9 1.0 0.3

').1 11.6 11.7 17.8 18.1 l

l ht rn ogitttion < >l this cl preshlential nutiallt es females The, qual for both Jt tri. (H t > presttGn sus 1h ne Inilh ttu es ilh lude t alegories tea \\ / 5;o atl anir H ere jovrenla l to ra rinl ment of ethnic ht addllioli, the Com-the (i anfany p or as t o an m o n>rtiler al caret rJn tirs paHYN gruti uses to mtthe fli\\bHh 'nl% i n l ' 'M ~

nh nh lqt'inellt [h tritt llh tlt< H1 Stilt til lett\\1 JII"o I >l all ll*e ( id*lln ot s I t *t en t i i til p{ura!!stil u s n hsht s/h.

nele bilv\\ ht IUM' uviv llh' N % ia! JO %pt % \\!E!!!tlY n elh i M ? tit flittle di ( *l htt>nh'\\ %

in Ott ortlit 's (litt of.l~l An aid f or ongoing cl/m t, u tth muturar cohlfemale employees hirni durtn,q the to prom te t uitma! p!tua!

on nnl t omju mies year. Ui or B l'o are is m lhe an ant, staten hic lhe t < anjs mv is at in ely ethnic mmortties in nature. n as prewnfal al un u >lt ed u uh inn >ady an in IUN'llv ( hmpan) lle.\\lartin / utlh r King. fr orgaru:att<in that be!]n to

\\pe*u appn oxnnatell' S 1 1

( i >!< iraul > llo!nl< t1 c.omnu v l lat e mmo n tlY r!udenf 8 ut mt! hon u tlh hu\\nteres bit di i tilh het in ni i h 'ni A'r 3ttnoth Y tit!t J n f orr \\Grtlin%.

Iill th hl h\\ lh 01 ethnic forllv M'tidhi _\\ t\\ tr ni <l ginsielsstst\\ it tllI ll h 't r f etth tle\\.11 llh

• Minh' liene, nell'.lheil'nlfhnty14nts j rls it t'nh 4tf t illt t < s!!n 'ge ll \\l>Cnf Int >Te lih nt 5 l -l T

,qlt en (lY.1?crtle arts su s. i(lt r

\\c \\'n birt or t.ls in tern s tinflit at it ilh nitIlt rYtf } ltrnis

1%bbe se%c comrany of Colora.ead SubuJuno h I' I N A N C I A L A N D S T A T I S T I C A L D A T A 1987 1986 1985 19S4 1983 19S2 1977 Total Awets (millions)

$2,934 2.918 2.995 2.867 2.716 2.607 51.576 Common l'quity (millions)

$ 858 801 89S 894 821 785

$ 460 Preferred Stock (millions):

Subject to manJatory redemption at par 54 67 79 57 XS 69 M

Not subject to mandatory redemption 140 140 140 140 140 140 140 I ung-Term Debt (millions) 909 835 928 883 886 891 M7 Short-Term llorrowings (millions)*

196 191 13 21 44 54 30 Total Capitalization (millions)

$2,157 2.034 2.058 2.025 1.979 1.959 51.341 Capitalization llatim - Year-l'nd:

Common equity 39.8 %

39.4 43.6 44.1 41.5 40.1 34.39 Preferred stock (incl. due within 1 y r.)

9.1%

10.5 11.0 11.3 11.6 11.7 15.27 Long-term debt (incl. due within 1 y r.)

42.2 %

42.7 45.3 44.4 45.9 45.6 49.2%

Notes payable anJ commercial paper 8.9%

7.4 0.1 0.2 1.0 2.6 l.35 Gross Construction Espenditures (millions)

$127.6 195.7 237.s 196.6 195.5 2300 S132.8 9 of Total capitalization 5.9%

9.6 11.5 9.7 9.9 11.7 9.99 l'unds Generated Internally unillions) 168.1 132.6 145.0 5 50.7 9 of Net construction espenuitures 90.0 71.0 M.9 41.65 Cash Generated Internally (millions)"

$ 48.7 131.7 160.9 9 of Gross construction expenditures 38.1 %

67.3 67.8 Itates of Return Earned:

Total capitalizanon (Oper. income) 10.7 %

i1.7 9.0 10.4 9.2 9.9 6.77 Avg. common equity before estra-ordinary item and a thange in uecounting method (Net to common) 15.7 %

l'.7 10.5 15 0 11.2 13.1 8.69 Asg. common equity (Net to common) 19.3 %

0.8 10.5 15.0 11.2 13.1 869 y

Pretas Cmerage of Interest Espense 3.93x 2.53 3.47 4.35 3.42 3.67 2.54s Effectise Income Tas Rate 46 %

33"*

4s 49 47 47 24 9 Payout Ratio on Disidends Paid 65.6 % 1.538.5 109.4 74.5 97.8 80.2 93.0 4 I)isidend Yield - Year-End 9.8%

10.7 9.5 9.9 9.9 10.1 7.79

. larket Price Per Share:

T liigh

$ 22%

2 2 ',

242, 10%

19 17%

$ 20ij Low

$ 17%

16 15%

16i, 16',

13 %

$ 17 Year end close

$ 20%

lx%

212, 19%

18 ',,

17 ',

s 18',

lhmk Value Per Share

$16.35 15 N 17.15 17.31 16.70 16.69 517.77 Common Stock Volume:

Daily aserage - Hoh 229.2 213.6 118.3 133 l

!30.0 84 5 21.5 Annual - @U) 57,761 53.820 29.823 33.670 32.912 21.19s 5.414 Number of Employees - Year-End 6,476 6.503 7 N4 6.894 6.857 6.794 5.977 Islo ' s am am a u ere mr. r, o n, Ne una - mer. a r.c r. ca punca e a.+ea o me. aery nam;w.n e o e y ear

"

• Cash prm McJ Trem.p r aa e net of 6.nh oscJ 1.>r da t t, N

• ' ik t..r e c u r,s ir d n r y e c n

my pubbe Serske Company of Carado and Sutwkhanes h O P E R A T I N G R E V E N U E S, I N C O AI E A N D E A R N I N G S D A T A Year Ended Dec. 31. atalkins of Ibuaro 1987 1986 1985 19M 1983 1982 1971 Operating Resenues:

Electrie

$1,075.8

!.N5.6 1.022.3 999.6 853.7 843.4

$362.1

% Change 2.9 %

2.3 2.3 17.1 1.2 13.7 12.4 %

Ga 563.3 596 6 714.3 790.I 761.6 732.3 246.0 4 Change (5.6)%

(16.5)

(9.6) 3.7 4.0 25.7 24.6 %

Other 18.3 15.7 10.9 12.3 13.3 14.3 5.2 Tidal Resenues 1,657.4 1.657.9 1.747.5 1.802.0 1,628.6 1,590.0 613.3

% Change (5.1)

(3.0) 10.6 2.4 19.0 17,4 %

Operating Espenses: _.

I uel used in Feneration 162.8 176.3 171.4 188.9 172.8

! M.4 105.0 Purchased power 227.7 211.6 203.1 161.9 99.0 101.7 4.7

_Ga purchased for resale 381.6 423.3 532.6 606.6 611.3 587.2 176.2 ~

Total Energy Costs 772.1 811.2 907.1 957.4 883.1-873.3 285.9

% Change (4.8)%

(10.6)

(5.3) 8.4 1.1 17.1 30 6 %

% c'T Resenues 46.6 %

48.9 51.9 53.1 R2 54.9 46.6 %

Pay roll charged to operating espenws 192.8 202.7 1%.8 183.1 174.4 153.3 81.3 4 Change (4.9)%

3.0 7.5 5.0 13.8 22.0 12.6 %

% of Resenues 11.6 %

12.2 11.3 10.2 10.7 9.6 13.3 %

Other operating espenses (ewl. pay roll) 84.2 87.2 W.9 M.3 86.3 73.6 24.1 Write-down of real estate investments 19.5 Maintenance 71.8 86.6 95.4 72.5 M.1 58.4 27.2 Depreciation 105.0 IN.8 101.3

%.9 91.6 86.4 46.1 Tases (other than income tases) 59.0 66.8 M.8 60.0 55.8 53.6 44.4 Income tases 122.0 59.9 101.3 137.5 _

93.8 _ _ 103.2 16.1 Total Operatmg Evenses 1,426.4 I,419.2 1.561.6 1.591.7 1,449.1 1,401.8 525.1

% Change 0.5 %

(9.1)

(l 9) 9.8 3.4 17.5 20.9 %

% of Revenues 86.1 %

85.6 89.4 88.3 89.0 88.2 85.6 %

Operating income 231.0 238.7 185.9 2 !0.3 179.5 188.2 88.2

% Change (3.2)%

28.4 (11.6) 17.2 (4.6) 31.9

- 0.7 %

4 of Revenues 13.9 %

14.4 10.6 11.7 11.0 11.8 14.4 %

Other Income and Deductions 1.5 1.1 7.4 15.3 5.8 5.7 2.8 3

Interest Chargtw 88.8 116.0 E2.6 80.3 78.9 77.4 39.9 income liefore Estraordinary item and Cumulatisc Effect of a Change in Accounting Method 143.7 123.8 110.7 145.3 106 4 116.5 51.1 Estraordinary item Cumulathe EITect to 1/1/87 of (101.4)

Accruing Onbilled Restnues 29.6 Net tacome 173.3 22.4 110.7 145.3 106.4 116.5 51.1 4 Change (79.7)

(23.8) 36.5 (8.7) 15.6 (6.6)%

4 of Resenues 10.5 %

1.4 6.3 8.1 6.5 7.3 8.3 %

Preferred Disidend Requirements 13.2 15.7 16.6 16.7 16.7 16.7 13.5 l'arnings Asailable for Common SimL

$ 160,1 6.7 RI 128.6 89.7 99.8 5 37.6

% Change (92.9)

(26.81 43.4 (10. I) 18.7 (14.4)%

9 of Resenues 9.7 %

0.4 5.4

7. !

5.5 6.3 6.1 %

Earnings Per Share:

Before estraordinan item and cumularise effect'of a change in accounting method

$2.49 2.06 1.81 2.55 1.86 2.17 51.57 Estraordinary item (1.93)

Cumulatise effect to 1/1/87 of accruing unNiled resenues 0.56 Total

$3.05 0.13 1.81 2.55 1.86 2,.17 51.57

.. ~. = =.

.=

Disidends Per 5 hare:

..======-

v =.;. =. = = = = = = = =.

.:=:=

Paid

$2.00 2.00 1.98 1.90 1.82 1.74 51.46 Dnlared

$2.00 2.00 2 00 1.92 1.M 1.76 51.46 Common Stock Shares Outstunding:

Aserage diUOJ 52,414 52.349 52.114 50.440 48,135 45.W8 23.976 Year <nd wuoi 52,457 52.399 52.333 51.e 32 49.182 47.020 25,8M

= = =.

=.= :==.-- --

= =

...}

Y

Pubis Service Compny of Colorado ard Subsaharies Q SI A N A G l: AI E N T ' S Il l S C U S S I O N A N D A N A l. Y S I S Results of Operation compared to the respective preceding years, were adversely Earnings per share in 1987 were $3.05 compared to $0.13 in alfected by reduced sales to industrial customers due to direct 1986. The substantial increase in earnings was primarily at-purchases of gas by them from other suppliers. The Com-tributable to two factors. First, the 1987 carnings were posi-pany transports such gas for a fee over its distribution tisely affected by $0.56 per share resulting from a change in system. The reduction in revenues due to direct purchases the resenue recognition method to include revenues for largely reflects the corresponding reduction in the amount services delis ered to customers but not y et billed at the end of and cost of gas purchased for resale. The Company's earnings aa accounting period (see Note 1. Summary of Significant per Mcf from the gas transponation sers ices are approximately Accounting Policies in the Notes to the Consolidated Finan-the same as earnings per Mef from industrial sales, cial Statements). Second, the 1986 earnings were adsersely Electric and gas operating revenues reflect the effect of affected by an extraordinary loss of $1.93 per share, which rate increases and decreases and cost adjustment clauses on was recognized in conjunction with the settlement of regul-prices of units sold. Operating resenues also redect the atory and legal issues associated with Fort St. Vrain (see solume changes in unit sales and deliveries. The foregoing Note 2. Fon St. Vrain Nuclear Generating Station in the factors contributed to annual changes in revenues compared Notes to the Consolidated Financial Statements).

to revenues for the preceding year as indicated in the The moderate increase in 1987 electric res enues, w hen com-following table; pared to 1986, was primarily attributable to increased elec-6 tina,n of Ibnuo 1987 1986 tric sales solume. Colder weather and total custon.er growth Electric resenues:

of 0.9% contributed to the 2.4% increase in electric sales. In Base rate decrease 5 t 22.1i 5 (6.0) addition, but to a lesser degree, electric revenues were posi.

Electric cost adjustment Itn 41 5.7 tisely affected by the cessation of the Public Utilities Com.

Sales solume and other changes 29.2 21.1 mission of the State of Colorado (CPUC) mandated penalties CPUC mandated refunds.

pursuant to the Fon St. Vrain Stipulation and Settlement

'~

Agreement (see Note 2. Fon St. Vrain Nuclear Generating

- - -Net inerease 5 30.2 5_23.3 Station in the Notes to the Consolidated Financial State-Gas resenues:

ments). As part of this agreement, effective October 1,1986, Gas cost adjustment S A S) 5 (31.5) electric rates charged to customers were reduced, w hich had Meries s lume and other changes 15.2 (86.2) a negative effect on 1987 and 1986 electric revenues of ap-Net decrease Sf 33 3( 5(117.7) 7 3

proximately $29 million and $6 million, respectisely. The 1986 electric resenues were also negatisely alfected by The increases (decreases) in operating expenses from the

$29.5 million in CPUC mandated penalties for the non-prece ng year wm as Moww operational status of Fort St. Vrain. The increase in electric resenues resulting from higher sales and the settlement of k"[![j *[("#'3"""

S[

5 48 Fon St. Vrain issues was offset, in pan, by declining electric g

Gas purchased for resale (41.7)

(109.3) energy costs which are passed on to customers through the Other operating expenses (12.HI (1.8) electric cost adjustment (ECA). The minimal increase in Wnte-down of real estote imesiments 19.5 1986 revenues oser 1985 was the result of a 2.2 % increase in Maintenance i14.Hi (8.8) electric sales solume due to customer Frowth of 1.8% and Depreciation 0.2 3.4 increased recoveries of energy costs through the ECA. How-Taxes mther than in ome lates)

(7.M) 2.0

• 1. I b

U eser, these factors were offset by the adjustment in 1986 electric rates and the CPUC penalties discussed above.

-- N#'.inereascJJecrease) __ _ ____ _ _._ $ 7.3_ _ 5(142J)

Despite an increase in gas deliveries, which include trans-Fuel used in generation expense decreased in 1987 pri-poned gas,1987 gas resenues decreased when compared to marily as a result of a decrease in the generation of energy 1986 primarily due to the continued decline in gas costs from along with the effect of monthly adjustments to fuel expense, suppliers, which are passed on to customers through the gas w hich are made to more closely match the total of cenain fuel cost adjustment (GCA). Colder weather coupled with cus-costs with the amounts currently recovered from customers tomer growth of 1.5% were the major reasons for the 1.7%

through the ECA. Howeser, these decreases were offset, in I

increase in gas deliseries. Gas resenues in 1986 were also pan, by a slight increase in the per unit cost of coal and the

{

lower than in 1985 as a result of a 7.9% decrease in gas de-increased use of natural gas, a higher cost fuel, in certain j

liseries. In addition, both 1987 and 1986 gas revenues, w hen steam generating plants. Natural gas was the only fuel burned 1

at certain plants during specific time periods of 1987 as part of a study of air pollution in the Den er metropolitan area.

]

Increased generation during 1986, when compared to 1985, j

w as the primary factor contributing to the increase in fuel used in generation expense.

Pubhc Senice Compny of Colornio and Sutmaarm h 31 A N A G E 31 E N I ' S 1) I S C l's S 17) N A N 1) A N A 1. Y S I S liigher 1987 purchased power expense was attributable to 1986. Ilowever, a provision for the after-tas cost of such in-an increase in the amount of energy purchased. Tois increase, terest had been recognized in presious years. Consequently, however, was minimited due to lower per unit costs for the 1986 income tax expense was lower due to the reversal of the energy purchased in 1987 than in 1986. Purchased power ex-after-tax effect of this interest (see Note 10. Income Tas Ex-pense also increased in 1986, when compared to 1985, as a pense in the Notes to the Consolidated Financial Statements).

result of increased energy purchases and higher unit costs for The replacement oflong-term det4 with low er cost debt re-the energy purchased. The Company continues to take ad-sulted in the decrease in the 1987 interest on longterm debt, vantage of the availability of relatively low cost power, when compared to 1986. Other interest expense has declined The decreases in gas purchased for resale expense in both in 1987 when compared to 1986, as a result of the 19861RS 1987 and 1986 were primarily due to decreases in the per tax settlement discussed above. However, this decrease was unit cost of gas purchased from suppliers and in the solumes offset, in part, by increased short-term debt interest expense, of gas purchased. In addition, the 1987 decrease is also the which resulted from increased short-term borrowings.

result of monthly adjustments to gas purchased for resale ex-pense, which are made to more closely match total gas costs NC""'D I"ued Account.mg Standards Not Yet Adopted with the amounts currently recovered from customers In December 1987,the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 96-through the GCA.

Cost containment efforts throughout the Company, which

" Accanting for Income Taxes" w hich is effective for fiscal include a significant decline in expenses related to Fort St.

F. cars begm, m,ng after December 15, 1988, with early adop-t n 11 wed. The Company has not yet determmed when the Vrain, were the primary factors contributing to the lower other operating and maintenance expenses in 1987. Total standard wiIl be adopted, how it will be implemented or nuclear operating and maintenance expenses were $50.3 mil-quanu0ed its Snancial impact. However, the Company lion, $84.8 million and $56.2 million for the years 1987, belieses that its Gnancial position will be adversely affected 1986 and 1985, respectively. However, a portien of these at the time of adoption (see Note 10. Income Tax Expense m nuclear costs ($23 million of'1987 and $30.3 million of 1986) the Notes to the Consolidated Financial Statements).

were renected as a component of the 1986 extraordinary Hate issues loss. The decrease in 1986 other operating and maintenance Effective Nosember 14, 1987, as a result of Advice Letters expenses, when compared to 1985, resulted from the redec-Gled with the CPUC on October 15,1987, the rules and ap-tion of certain nuclear costs as part of the 1986 extraordinaO plicability of various rate classifications were revised. 'Ihis 3

loss discussed above, and the adoption of Statement of Finan-change gives cenain customers the opportunity to change i

cial Accounting Standards No. 87 "Employers' Accoun-rate classifications and could result in a potential annual ting for Pensions" This accounting change resulted in a resenue loss of approximately $12 million.

reduction in pension expense of approximately $12 million On February 4,1988, the Company, the Office of Con-(see Note 9. Postretirement Bene 0ts in the Notes to the Con-sumer Counsel (OCC) and the staff of the CPUC reached an solidated Financial Statements).

electric rate reduction agreement in response to the Company's During the fourth quarter of 1987, the Company reassessed earnings in excess of regulatory authoritation. Effective its strategy for real estate investment and development in an April 1,1988, upon CPUC approval, the Company's electric area adjacent to downtown Den er, in light of the sustained rates will be reduced 2.'5% or approximately $27 million decline in Den er real estate market values. As a result, for a one year period. An additional reduction, to be effective properties which are owned by Bannock Center Corporation, July 1,1988, could result upon completion of a regulatory the Company's real estate investment subsidiary, were wiit-cost of service study based on 1987 results. Other provisions ten down by $19.5 million ($11.0 million after-tas), or 21 of the agreement include: (1) retention of the Company's

~

cents per share, to their estimated net realizable value.

14.4% return on common equity authorized in the most The decrease in 1987 taxes other than inceme taxes ed recent rate case; (2) a possible additional rate reduction for pense can be attributed to a decrease in property tases. Prior the period April 1,1989 through March 31,1990 (dependent to 1987, the assessment of utility property was based on the upon 1988 earnings); (3) $1 million contributions in 1988 1981 level of value whereas the assessments of all other and 1989 to a foundation to provide for the coergy needs of properties w ere based on the 1977 level of s alue. In 1987 this low income customers; and (4) a stipulation that the Com-non umformity in base lesels was eliminated and all proper-pany will not seek an increase in total gas and electric base ties were assessed on the 1985 lesel of value. This change revenues to be effective before April 1,1990, and the OCC coupled with the resulting decrease in the mill levy had the and the CPUC staff will not seek any further decrease to be effect of decreasing 1987 property taxes by approximately effective before this date.

$7.9 million.

The primary factors contributing to the substantial increase Impact of Innation and Changing Prices in 1987 income taxes espense were: (1) increased 1987 in-Capital intensise industries, such as the utility industry, are come before income tases; (2) the implementation of the particularly affected by signincant long-term innation. Very requirements of the Tax Reform Act of 1986 that more than simply, depreciation on utility property, plant and equip-offset the reduced tas rates; and (3) the settlement of a long.

ment, which is charged against earnings for assets acquired standing dispute with the IRS in 1986. As part of the IRS set-in the past, does not redect the innated cost of acquiring tiement, substantial interest expense was incurred during similar assets. Consequently, higher proSts may be reported

on a continuing basis with no accompanying gain in real pur-with PSCCC will vary minimally from year-to-year although chasing power or economic value. However, the recent stabi-seasonal fluctuations in the level of assets will cause cor-lization of inflation at relatively low levels has minimited responding fluctuations in the level of associated financing.

this impact on the current operating results of the Company.

Early in 1988, PSCCC converted approximately $50 million of its short-term debi to intermediate-term debt (maturities of I.iquidity and Capital Resource' up to three years) thmugh a medium term note program.

At December 31, 1987, the Company and its subsidiaries lhe Ccmpany and its subsidiaries anticipate raising exter-estimateJ the cost of their construction program, including nal funds in 1988 through the issuance of $50 million in First AFDC and other capital requirements, in 1988,1989 and Mongage Bonds and $1.6 million in unsecured long-term 1990 to be as follows:

subsidiary debt. The financing plans are subject to change (huunds of Dollars) 1988 1989 1990 depending on market and business conditions and changes, if any, in the construction plans of the Company and its subsi.

Company, Electric diaries. Plans for sales of securities beyond 1988 have not Production 5 50.575 5 59,187

$ 49.387 been formalized at this time.

Transmission 24,240 28,7M 12,146 The Company's Indenture permits the issuance of addi-Distribution 61.232 67,784 65.3M tional first mortgage bonds to the extent of 60% of the value Gas 31,075 31.257 25,173 o net additions to the Company's utility property, provided r

General 29.258 37.082 24.403 net earnings before depreciation, taxes on income and inter-Subtotal 1%.380 224,094 176.493 est expense for a recent twelve month period are at leas' 2.5 Subsidiaries 20,730 20.408 30.4M times annual interest requirements on all bonds to be out-Total construction 217,110 244.502 206,957 standing. At December 31,1987 the amount of net additions s: F 3.882 7.661 6.680 would permit (and the net earnings test would not prohibit) 5.331 25,455 9.719 the issuance of approximately $366.0 million of additional debt matunties bonds at an assumed annual interest rate of 10.5 %. Coverage Total capital requirements

$218.559 $262.2% $209,996 at December 31,1987 was 7.%.

The Company's Restated Articles of Incorporation pro-The consolidated capital structure at December 31, 1987 hibit the issuance of additional preferred stock without pre-consisted of $1.1% debt (including short-term obligations),

ferred shareholder approval, unless the gross,ncome ava,l-i i

27 9.1% preferred stock and 39.8% common equity. The Com-able for the payment of interest charges for a recent twelve pany expects that the consolidated capital structure will re-m nth period is at least 1.5 times the total of (i) the annual in-main approximately the same over the next three years.

terest requirements on all indebtedness to be outstanding for At December 31, 1987 the Company and its subsidiaries more than one year and (ii) the annual dividend requirements estimated that their 1988-1990 capital requirements would be n all preferred stock to be outstanding. At December 31, met with funds provided from the following sources:

I987' gross income available under this requirement would permit the Company to issue approximately $1.6 billion of Sources (Nusards of tbilaro 1988 1989 1990 additional preferred stock at aa assumed annual dividend rate External

$71,749 5 56,719 5 49,943 of 9.1 %. Coverage at December 31,1987 was 4.54.

Net change in The Company's Restated Articles of incorporation pro-short-term borrowings hibit, without preferred shareholder approval, the issuance and iraestments (1)

(40.997) 35.247 (8) or assumption of unsecured indebtedness, other than for Internal (2) 187.807 170.330 160.061 refunding purposes, greater than 15% of the aggregate of(i)

Total sources

$218.559 $26_2.2% $20 M9 the total principal amount of all bonds or other securities (1) includes changes in shon and intermediate-term borrowings by Psccc.

representing secured indebtedness of the Company, then out-(2) These esumates are bawd in pan upin the auumpion that an operaung standing, and (ii) the total of the capital and surplus of the mm of Fort St. Vrain mil be offet by resenues recened from cuemer' Company, as then recorded on its books. At December 31, for energy generated from t5e plant.

3937 g At December 31,1987, the Company and its subsidiaries including subsidiary indebtedness with the credit support of had temporary cash in estments of $22.9 million. In addi-the Company, in the amount of $71.2 million. The maximum tion, PSR Investments, Inc. held investments totalling $70.8 amount permitted under this limitation was approximately million.

$278 million at December 31, 1987.

As of December 31, 1987, PS Colorado Credit Corpor-Arrangements for bank lines of credit totaled $150 million ation (PSCCC) had borrowed $147.1 million in short-term in committed lines and $220 million in uncommitted lines at debt, down from $148.5 million at December 31,1986, for December 31,1987, at which time $328.5 million was avail-use primarily in the purchase of the Company's customer ac-able to the Company and certain of its subsidiaries. The cour,ts receivable and fossil fuel inventories. The level of fi-Company may generally borrow under uncommitted pre-nancing of PSCCC is tied directly to daily changes in the approved lines of credit upon request; however, the banks level of the Company's outstanding customer accounts re-

. have no firm commitment to make such loans. (see Note 7.

ceivable and month $y changes in fossil fuel in entories. The Bank Lines of Credit and Compensating Bank Balances in Company expects that the amount of financing associated the Notes to the Consolidated Financial Statements).

~

~

Public Sernce Company of Colorab ad Subsidkries O co s s o tina r e n n A L ^ s e x sii t e r thember 31,1987 and 1986 dhouunds of Dollars)

Assets 1987 1986 Property, Plant and Equipment, at cost:

Electric

$2,451,042

$2,3%,487 Gas 657,928 632,709 Steam and other 65,909 83,623 Common to all departments 259,511 257,882 Construction in progress 58,393 68,499 3,492,783 3,439,200 q

Less accumulated provision for depreciation 1,184.231 1.100,530 2,308,552 2,338,670 Nuclear property, plant and equipment 97,133 93,655 Nuclear fuel 45,634 45,634 Less accumulated provision for nuclear depreciation 28,646 26,586 Less reserve for nuclear impairment (Note 2) 43,780 40,050 l '

70.341 72,653 Total Property, Plant and Equipment 2.378,893 2,411,323 Investments, at cost 94.266 88,829 i

Current Assets:

Cash 9,890 6,911 Temporary cash investments 22,942 40,102 Accounts receivable, less provision for uncollectible accounts (1987-55,379; 1986-55,168) 138,340 144,263 Accrued unbilled revenues (Note 1) 58,324 Recoverable purchased gas and electric 28 energy costs-net (Note 1) 48,128 19,649 Fuel inventory, at average cost 33,506 47,388 Materials and supplies, at average cost 65,292 65,130 Gas in underground storage, at cost (LIFO) 15,611 17,0$0 Prepaid expenses 8,172 10,392 Other 320 Total Current Awets 400,525 350,885 Deferred Charges:

Debt espense (being amortiied) 8,552 8,183 Recoverable nuclear plant and decommissioning costs (Note 2) 25,125 31,825 Other 27,018 27,363, 60,695 67.371 4

Total Assets

$2,934,379

$2.918,408 See accernpanying notes, I

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December 31,1987 and 1986 (Thousands of Dollars)

Ccpital and Liabilities 1987 1986 Common Equity:

Common stock (Note 4)

$ 709.703

$ 708,548 Retained earnings 147.944 92,428 857,647 800,976 Preferred Stock (Note 4):

Not subject to mandatory redemption 140,008 140,008 Subject to mandatory redemption at par 54,096 66,672 Long. Term Debt (Note 5) 909,052 835,271 1.960,803 1,842,927 Noncurrent Liabilities:

Decommissioning liability (Note 2) 95,404 95,4N Accrued pension liability (Note 9) 19,062 20,254 114,466 115,658 Current Liabilities:

Notes payable and commercial paper (Note 6) 191,225 150,957 long-term debt due within one year 2,286 32,329 Preferred stock subject to mandatory redemption within one year (Note 4) 2,576 7,576 Accounts payable 131.043 2N,029 Dividends payable 29,458 29,950 Customers' deposits 11.353 10,682 Accrued taxes 64,109 58,591 Accrued interest 18,966 19,516 Rate refund liability (Note 2) 19,679 55,685 i

Accrued unrecoverable nuclear costs (Note 2) 23,000 Refundable customers' advances for construction 68,100 Other 33,411 18,210 Total Current Liabilities 504,112 678,625 Deferred Credits:

Customers' advances for construction 29,206 22 201 Investment credit (being amortized over the productive lives of the related property) 156,207 160,973 Accumulated deferred income taxes (Note 10) 162,273 91,017 Other 7,312 7,007 354,998 281,198 Commitments and Contingencies (Notes 2 and 8)

Total Capital and Liabilities

$2,934,379

$2,918,408 I

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Punk Scrue Ccapany of Colormb ad Subsidtries O c o s 8 o i i" ^ r o n 8 T ^ r e si s s t o r i s c o si x Years ended thxember 31.1987.1986 arkt 1985 thsands of Ibtlars Except Per Share Data) 19M7 1986 1985 Operating Resenues:

Electric

$1,075,751 $1,N5,590 $1,022,283 Gas 563.307 5 %,584 714,252 Other 18,375 15,689 10.W8 Operating Espenses:

l.657.435 1,657,863 1,747,483 Fuel used in generation 162,759 176,254 171.407 Purchased power 227,702 2 ' 1,M4 203,(M7 Gas purchased for resale 381,586 423,340 532,621 Other operating expenses 277,048 289,865 291,71I Write-down of real estate investments (Note 3) 19,505 hiaintenance 71,859 86,610 95,386 Depreciation 104,963 IN,740 101,302 Tases (other than income taxes)(Note i1) 58,983 66,776 M,802 Income taxes (Note 10) 122,070 59,927 101,277 1.426.475 1,419,156 1.561,553 Operating Income 230.960 238,707 185,930 Other Income and Deductions:

Allowance for equity funds used during construction (Note 1) 781 1,088 3.621 Miscellaneous income and deductions-net 762 65 3,791 232.503 239,860 193M Interest Charges:

Interest on long term debt 73,294 79,123 78,193 50 Amortization of debt dhcount and espense less premium 1,180 921 472 Other interest 15,598 39,455 6,600 Allowance for turrowed funds used during

_ construction (Note 1)

(1,248)

(3.460)

(2.616) 88,824 116.039 82 M9 Income Hefore Estraordinary item and Cumulatise Effect of a Change in Accounting Method 143.679 123,821 110,693 Estraordinary item (less applicable income tases of $101,45N)(Note 2)

(101,393)

Cumulatise Effect to January 1,19N7 of Accruing Unbilled Resenues (less applicable income tases of $22,779) (Note 1) 29,5M9 Net Income 173.268 22,428 110.693 Disidend Requirements on Preferred Stock 13,165 15.762 16.592 Earnings Agallable for Common Stock

$ 160.103 $

6,666 $ 94,101 Shares of Common Stock Outstanding (thouunds):

Year-end 52.457 52.399 52,333 As erage 52.414 52,349 52,114 Earnings Per Ascrage Share of Common Stock Outstanding:

Before estraordinary item and cumulative effect of a change in accounting method

$2.49

$ 2.06

$1.81 Estraordinary item (1.93)

Cumulative effect to January I.1987 of accruing unbilled revenues 0.56 Total 53.05

$ 0.13

$1.81 Disidends Per Share of Common Stockt Paid

$2.00

$2.00

$1.98 Declared 52.00

$2.00

$2.00 see awmp.nnns mes

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Public Service Company of Colorado and Subsidiaries h C O N S O I,l D A T E D S T A T E Sl E N T O F R E T A I N E D E A R N I N G S Years ended December 31.1987.19% and 1985 Ohousands of Dollars) 1987 1986 1985 Retained Earnings at Beginning of Year

$ 92,428

$190,257

$200,573 Net Income 173.268 22,428 110.693 265,6 %

212,685 311,200 Dhidends:

On cumulative preferred stock:

. $100 par value:

4.20% series 420 420 420 41/4% series 744 744 744 4-1/2% series 293 293 293 4.64% series 742 742 742 4.90% series 735

-735 735 4.90% 2nd series 735 735 735 7.15% series 1,787 1,787 1.787 7.50% series 2,025 2,115 2,205 l

8.40% series 2,601 2,716 2,832 2,292 3,125 i

12.50% series

$25 par value:

8.40% series 2,940 2.940 2,940 13,022 15,519 16,558 On common stock:

$2.00 per share in 1987,1986 and 1985 104,856 IN.732 1N,345 1

117,878 120,251 120,903 Other Deductions (Additions) - Net (126) 6 106

)

117.752 120,257 121,009 i

Rettined Earnings at End of Year

$147,944

$ 92,428

$190,257 See accompanying nmes, 1

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Pubik Senice Company of Cokvado ad Subsfuries O c o s s o i i n a r r o s t ^ r t si r s t o r c ^ s ii r i o w s Years ended thember 31,1987.1986 and 1985 Ghouunds of Dollars) 1987 1986 1985 Operating Actisities:

Net income

$ 173,268

$ 22,428

$ 110,693 Adjustments to reconcile net income to cash flows:

Estraordinary item 101,393 Write-down of real estate investments 19,505 Depreciation and anortiration 122,719 122,937 115,770 investment tax credit-net (4,766)

(1,889)

-13,136 Deferred income taxes 71,256 143 17,428 Change in accounts receivable 5.923 40,231 (14,127)

Change in inventories 13,720 9,358 (5,759)

Change in other current assets (83,464) 10,980 (5.558)

Cnange in accounts payable (71,252)

(45,577) 50,0N Change in other current liabilities (73,233)

(25,844)

(366)

Change in deferred amounts 14,354 (13,867)

(707)

Change in noncurrent liabilities (1,191) 31.950 Net Cash Prosided by Operating Aethities 166,839 252,243 280,514 Ingesting Actisities:

Capital expenditures (127,610)

(195,660) ~

(237.508)

Proceeds from disposition of equipment 4,259 11,756 2,214 Purchase of other investments (34,848)

(1%,623)

(16,292)

Sale of other investments 29,386 129,199 Net Cash Used in Insesting Actisities (128,813)

(251,328)

(251,586)

Financing Actisities:

Proceeds from sale of common r,tock 1,155 1,111 14,lM 32 Proceeds from sale of long-term notes and bonds 94,877 113,311 114.126 Redemption of long-term notes and bonds (54.788)

(167,202)

(83,359)

Redemption premiums (9,693) l Proceeds of short term borrowings 865,399 584,857 29.225 l

Repayment of short term borrowings (823.030)

(435,750)

(30,250)

Redemption of preferred stock (17,654)

(12,576)

Dividends on common stock (104,827#

(IN,698)

(102,963)

Dividends on preferred stock (13.339)

(15,883)

(16.609)

Net Cash Used in Financing Actisities (52,207)

(46,523)

(75.666)

Net Decrease in Cash and Temporary Cash Insestments (14,181)

(45,608)

(46.738)

Cash and Temporary Cash Insestments at Beginning of Year 47,013 92,621 139.359

-- C_aa.h and Temp _orary. Cash Insestments at End of Year

$ 32.832

$ 47,013

$ 92.621 See accompanying nmes.

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Publie Service Company of Colorado ord Subsidictics Q N O T E S T O C O N S O I I D A T E D F I N A N C I A I, S T A T E SI E N T S

1. Summary of Signincant Accounting Policies Depreciation policy:

Consolidation:

The Company and its subsidiaries, except Fuel Resources The Company follows the practice of consolidating the Development Co. (Fuelco). use straight line depreciation for accounts of in significant subsidiaries.

accounting purpses. Composite rates are used for the various classes of depreciable assets.

Statement of cash Dows:

Depreciation rates incluoe provisions for disposal and re-Accounting policy: For purposes of the statement of cash moval costs of property, plant and equipment. Total depreci.

Hows, the Company considers all temporary cash invest-ation expense in 1987 approximates an ant.ual rate of 3.60%

ments to be cash equivalents. These temporary cash invest-on the average cost of depreciable properties. Fuelco uses the ments are securities held for cash management purposes, unit-of produ: tion hpreciation method for accounting pur-having maturities of three months or less or having longer poses. For income tax purposes, the Company and its subsi-maturities and put dates of three months or lest diaries use accelerated depreciation and other elections pro-Income taxes and interest (excluding capitalized interest) vided by the tax laws.

paid:

Prior to October 1,1986, the composite depreciation rates included a provision for the cost of decommissio.:ing the twusawsof tunam 1987 1986 1985 nuclear plant after its service life, as prescribed by an order Income taxes

$71,360

$67.216*

$77,942 of the Public Utilities Comm.ission of the State of Colorado interest

$S8.194

$111,057

$81.619 (CPUC). As a result of the settlement of Fort St. Vrain

%ctuaes 5:o.52t.ono for settlement of rnor years' income taxes.

Nuclear Generating Station (Fort St. Vrain) issues in the Stipu-lation and Settlement Agreement (see Note 2), the remaining Non-cash transactions: No material non-cash investing or estimated decommissioning costs were included in the extra.

financing transactions were recorded during 1987,1986 or ordinary loss and are no longer included in depreciation cal.

1935 which should be reported in accordance with Statement culations. An independent trustee holds and manages the of Financial Accounting Standards No. 95.

funds collected before October I,1986 as well as subsequent Change in method of resenue recognition:

deposits made pursuant to the Stipulation and Settlement Effective January 1,1987, the Company adopted a change in Agreement.

accounting method which provides for the accrual cf est.

Replacements and betterments representing units of prop-mated unbilled resenues. Unbilled revenues represent the erty are capitalized. Items that represent less than units of 33 estimated amcunt customers will be billed for service property are charged to operations as maintenance. The cost delivered from the time meters were last read to the end of of units of property retired, together with cost of removal, the accounting period. Customer meters are read on a cycle less salvage, is charged in full against the accumulated pro-basis and, prior to the change in accounting method, reve-m n f r depreciation.

nues were recognized concurrently with customer billings.

Income taxes:

The new accounting method results in a better matching of The Company and its subsidiaries file consolidated state and expenses with the related revenues. The aiter-tax effect of federal income tax returns. Income taxes are allocated to the the accounting change for the tuelve months ended Decem-subsidiaries based on separate company computations of tax-ber 31,1987 is an increase in net income of $31.3 million (60 able income or loss.

cents per share). This increase is a combination of an The Company and its regulated subsidiaries provide for increase of $29.6 million (56 cents per share) attributable to deferred income taxes to the extent allowed by regulatory the cumulative effect of the accounting change to January 1, agencies, including deferred taxes arising from the use of ac-1907, and an increase of $1.7 million (4 cents per share) in celerated depreciation, accelerated cost recovery, qualifying the current results of operations. The pro forma effect of this accelerated amortiration and timing differences due to un-change for the twelve months ended December 31,1986 and billed revenues w hich include deferred gas and electric costs.

1935, as if this method had alway s been utilized by the Com-In addition, the Company prosides for deferred taxes on pany (excluding any one-time cumulative ef feet), is show n in book-tax timing differences arising from items associated the table below, with Fort St. Vrain (see Note 2), from customer refunds not Pro forma effect of unbilled resenues Tweise months ended Twebe months ended December 31,1986 December 31.1985 As reported Pro forma As reported Pro forma income before extraordinary item (thousands) 5123,821

$121,902 5110,693

$112,407 Earnings per comrnon share

$2.06

$2.02

$1.81

$1.M Net income (thousands)

$ 22,428

$ 20,509

$110,693

$112,407 Earnings per common share 50.13

$0.09

$1.81

$1.M l

PuNw Scr.Ne Comrunj of Cokvdo and S6sidunes h N O 'I E s T G C O N s o l. l D A T E I) F. N A N C I A I.

s 'l A 1 E 31 E N 1 5 meeting the ceonomic performance test required by the Tax

2. Fort St. Vrain Nuclear Generating Station Reform Act of 1984 and for all book-tax timing differences Insc+tment in Fort St. Vrain; included in Federal Energy Regulatory Commission (FERC)

During the quarter ended September 30,1986, the Company junsdictional rates. In accordance with the requirements of recorded an extraordinary loss which resulted ' rom writing-the Financial Accounting Standards Board.1480 Welton, down a substantial portion of the total imestment in Fort St.

Inc., Fuelco, Bannock Center Corporation, PSR Ins estments, Vrain, recognizing estimated future decommissioning ex-Inc. and PS Colorado Credit Corporation (PSCCC), provide penses and recognizing estimated unrecoverable operating for deferred taxes arising from all book-tas timing dif ferences, and capital expenditures. The extraordinary loss at Sep-Insestment tax credits are na longer assilable to the Com-tember 30,1986 was $93.7 million (net of $89.4 million in pany as a result of the Tax Reform Act of 1986. Presiously related income taxes) and wrs subsequently increased to recorded insestment tax credits base been deferred and are

$101.4 million (net of $101.5 million in related income being amortired to income oser the productive lises of the taxes) at December 31,1986 due to revised estimates. The related property.

amount of the investment in Fort St. Vrain w ritten down was Amortiration of debt premium, diwmmt and exp(nse:

based on the assumption that the plant would remain oper-Debt premium discount and expense is being amortized by ational until all existing fuel in the reactor and on-site was chstges to iner,me os er the respectis e original lis es of the ap-utilized (approximately 3-4 years, assuming a continued plicable ies or as directed by the CPUC.

average annual capacity factor of ebout 45%) and that the reactor would then be decommissioned and the plant con-

\\lbmance for funds uwd during construction tAFDO:

serted to a fossil fuel burning plant. Howcier; various other AFDC. which does not represent current cash earnings, is alternatives regarding the operation of Fort St. Vrain, which denned,m the systern of accounts prescribed by the FERC are discussed below, are being explored.

and the CPUC as the net cost during the period of construc-Realitation of the Company's remaining in estment in tion of borrowed funds used for construction purposes, and a Fort St. Vrain (approximately $70.3 million at December 31, reasonable rate on funds derived from other sources. In ac-1987), and the adequacy of provisions for estimated future cordance with such system of accounts, the Company capi-decommissioning expenses and unrecoverable operating and talites AFDC as a pan of the cost of utility plant, with a capital expenditures, are dependent on future events, credit to nonoperating income for the portion of AFDC attri-inclading sustained operations at levels signi6cantly greater 1

butable to equity funds and a reduction ofinterest charges for than in the past, achieving and maintaining a cost-effective y

the portion of AFDC attributable to borrowed funds. The relationship between expenses and revenues from Fort St.

l capitalitation of AFDC results in the melusion of AFDC in Vrain and satisfactory resolution of various alternatives rate base and the recovery thereof through future bill.ngs t regarding Fort St. Vrain after the on-site nuclear fuel is I

customers. In an order dated hosember 1977, the CPUC utilized. If it becomes probable that all or a portion of such directed that the Company is to capitalize AFDC at its nsestment will not be recosered, or that the provisions for authorized rate of return, but not to exceed the amount such expenses or expenditures are not adequate, the Com-allowed by the formula prescribed by the FERC. Accor-pany would be required to recognite a loss in the amount of dingly, the rate used by the Company for 1985 and the first the portion of such investment that is not recoverable, or in nme months of 1986 was 10.219. This rate renected the an amount equal to the extent to which such prosisions are Company's authorited rate of return. Smee that time, the nadequate, less any awociated tax benents.

Company's authorized rate of return has exceeded the rates Because of operational difGeulties discussed below under

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calculated by the FERC formula. The rates determined under

.. Operations", Fon St. Vrain did not produce revenue ade-the formula for the fourth quarter of 1986 and for the Grst quate to offset expenses in 1987. Unrecoverable operating through the fourth quarters of 1987 were 9.37%, 9.49%

• and capital expenditures of $24.5 mil: ion were recorded 8.314, 8.714 and 8.68%, respectis ely.

during the year. The after tax effect of these unrecoverable IM mrabic purc han d gas and elect r ic entre (mts - not; costs was $13.3 million or 25 cents per share.

The Company, Cheyenne Light, Fuel and Power Company The Company is progrewing in its analysis of various (Cheyenne), and Western Gas Supply Company recoser cer-alternative remedial actions regarding Fon St. Vrain after the tain purchased gas and electric energy costs, in excess of nuclear fuel in the reactor and on-site is utilized (appros-amounts recosered through base rates, from their retail cus-imately 3 years, assuming a continued aserage annual cap-tomers through sarious pas and electric cost aJjustment acity factor of a' out 45% ). Such alternatise actions include, tariffs. These cost adjustment tariffs, which include a pro-but are not limited to, continuing nuclear operation of the sision for the collection of deferred purchased gas and elec-plant with Gnancial suppon from third parties which may be trie energy costs, are resised periodically as prescribed by interested in utilizing Fort St. Vrain; decommissioning the the appropriate regulatory agencies. The deferred costs are reactor and com erting the plant to a fowil fuel burning plant; the difference between actual costs incurred and the amounts and decommissioning the plant and selling the useful assets.

currently recosered from customers. A substantial portion of The Company has not yet determined the technical or eco-this deferred amount rmats the costs incurred to proside nomic feasibility or the ultimate Gnancial impact on the gas and electrie enray which customers base used but for Company of these alternatives.

which they hase not yet been bdled.

Third party Support:

Company's im estment in Fort St. Vrain assets; recovery over In an effort to procure Gnancial support from outside Ove years of $33.5 million of plant and deccmissioning costs; sources, the Company has proposed to the United States refunding to customers of $73 million in penalties previously Department of Energy (DOE) the use of the Fort St. Vrain incurred by tic Company; a provision for the sale of energy reactor to produce Plutonium 23E, a non weapons grade produced at Fort St. Vrain in the future to customers at 4.8 material used in the Space program. Interactions with the cents per K Ah with possible limited increases; contribution DOE staff on this issue are continuing and, to date, no final of $2 milhon to a foundation to provide for the energy needs decision has been made. At this time, the DOE is the only of low income customers; and a stipulation that the Company third party identified by the Company which may have en will not 6te for any rate increase to be effective before July interest in utilizing Fort St. Vrain.

1,1988. As a result of these actions agreed to by the Com-The Company does not intend to hase any additional pany, all legal and administrative proceedings relative to the nuclear fuel fabricated without some form of financial ratemaking treatment of Fort St. Vrain were terminated.

supprt from third parties.

Operutions:

Decommiuloning:

Fort St. Vrain did not generate electricity for most of 1984 The Company is preparing a comprehensive decommis-through the first quarter of 1987 due to a scheduled re-sioning plan, which it intends to file with the Nuclear fueling, engineering modifications and environmental quali.

Regulatory Commission (NRC) in the latter half of 1988, to fication activity mandated by the NRC. All such work has enable it to proceed with decommissioning in an orderly been completed. On April 6.1987, NRC approval was manner at such time as it becomes appropriate. The con-received to restart the plant and operate at up to 35% of full tinuing validity of the 1982 decommissioning study, dis-power. Subsequent to the restart, the NRC staff completed cussed below, will be addressed in connection with the prep-their review of certain steam piping modifications, which are aration of this plan.

discussed below. On July 2,1987, the NRC authorized oper-The estimated cost of decommissioning Fort St. Vrain, ation at up to 82% of full power. The plant was operated at which was based on a study prepared by the Company in levels up to 70% until July 29,1987, when it was shut down 1982, is approximately $95.4 million. A primary assumption due to indications of vibration in one of the helium circu-of the study was that decommissioning (dismantlement) lators and a minor leak of punfied helium inside the circu-would take place in 2008 and that, at that time, facilities lator. This helium circulator is one of four which are used to would be available for the storage of spent nuclear fuel. At circulate helium gas which transfers heat from the reactor to n

the present time, the DOE has an interim repository which the steam generators. The inoperative helium circulator has will accept the Grst eight fuel segments, but the DOE will been replaced. However, additional modifications to the require additional facilities for subsequent segments. Al-helium circulators, which will require the plant to be non-though some temporary storage of spent fuel presently exists operational for approximately 12 weeks, have been sched-on-site at Fort St. Vrain, additional temporary storage may uled to commence in May 1988. The Company currently be required prior to establishment of the permanent DOE re-does not anticipate incurring any unrecoverable nuclear oper-pository. In addition, to the Company's knowledge, no com-ating and capital expenditures during 1988 as a result of this mercial nuclear plant of comparable size in the United States plant outage.

has beerd decommissioned. Also, a rulemaking proceeding On October 2,1987, after restarting the plant and during v>ith respect to nuclear industry decommissioning require-the normal ascension process, the reactor w as shut dow n due ments is pending before the NRC, but a final ruling has not to an oil fire in the turbine room. The fire, which did not yet been issued. Due to these uncertainties, it is possible that involve the reactor, resulted from the failure of a thermal the cost of decommissioning Fort St. Vrain could ultimately relief valve on a high-pressure hydraulic supply line. High acced the current estimate. Any such excess cost would be oil flow through the failed valve exceeded the capacity of the recorded by the Company as an expense in the period in w hich collection / confinement system and led to spillage of hy-such escess could be reasonably estimated. The total esti-draulic fluid which ignited upon contact with hot reheat mated decommissioning cost or $95.4 million is reflected as steam piping. The fire burned for approsimately fifteen a noncurrent liability on the consolidated balance sheet.

minutes damaging two cable trays, valves, piping restraints and control cables located in the immediate area. All Regulatory Matters:

required repairs were completed prior to restarting the On September 24,1986, the Company entered into a Stipula-reactor in December. The plant came back on line in late tion and Settlement Agreement with the CpUC, the Colorado December and, with the exception of a two-day outage in Of6ce of Consumer Counsel and other parties invohed in mid February, has remained on line since then generally litigation and administrative proceedings related to Fort St.

operating at power levels between 28% and 78%.

Vrain that resulted from the plant's historically reduced lesels of generation. Significant prosisions of the Agreement on the Company's part include: a reduction in its annual re-tail electric resenues collected through rates of $29 million effectn e October 1,1986; the remosal from rate base of the P

NNie krse Company of Cohmki and Subudianes Q N O T F. s t o c o N s o l. I D A I i: p i I N A N C I A I. s i A i E st i; N T N Temporary Configuration Repons:

million per single nuclear incident with each nuclear reactor From September 10,1987 to December 10.1987, the NRC licensee potentially liable for $5 million in retroactise pre-

)

statf had restneted Fort St. Vrain to 359 of full pmer miums per incident (prosided that not more than $10 million because of conecrns oser the nature of unresolsed Tempor-would be payable in any one year), continues for esisting ary Contipuration Repons (TCR's). TCR's are used to init-licensees until new legislation is pawed. Proposed legit tation ially report minor equipment nuhfications and must ulti-is currently pending in Congrew. One sersion, pawed by the mately be,uperseded by pennanent design changes in the flouse of Representatises, would raise the publie liability plant. The Company presented plans to resolse the TCR limit awoeiated with any nuclear incident to $7 billion. The iwues and subsequently submitted the required documents sersion further prosides that each reactor licensee would be for resiew by NRC statf. This resiew has been completed, liable for approximately $66 million per incident, provided the Company has committed to an action plan regarding the that not more than $10 million would be required to be paid TCR backlog. and the 359 limitanon has been hfied, per year. The Company is unable to predict w hat action Con-I"EIC" gress might ultimately take regardmg the Price Anderson

$ '"ingress of water into the I.

Act and what ef fect such action or espiration of the Price-Ihe ort St. Vrain primary system Anderson Act might hase on the Company's pitential has been a recurring proNem that has occurred under certain hW4 plant upset conditions, presenting operations at lesels aJe-quate to generate electricity. lingineering modifications as In addition to its liability insurance, the Company main-w ell as imprm ed operator attention to potential w ater ingress ta ns $1.06 billion in nuelcar property insurance. Cmerage has c elfectis ely minimited this problem. The C ompan> cannot of the first $620 million of potential liabdity is provided by predict to what estent thn probler :nay recur in the f uture.

private insurance with the remaining $440 million being provided by a mutual insurance company, Nuclear !!!cetne Other loues:

Insurance 1.imited. Under this insurance policy, Niill II, the The Teshnical Specifications and Final Safety Analysis Company is subject to retrospectise premium awessments if Report for Fort St. Vrain presiously required the steam gen-lowes eseced the accumulated funds available to the insurer.

crator reheat modules to be one of the methix!s of achiesing The present masimum awessment for incidents occurring safe shutdown coohng of the plant following cenain plant during a policy year is approsimately $6.3 million, upset condition or design basis esentt Based on a reanalpis An NRC order dated October 5,1987 raised the required 3

of the sprem h the Company, it appears that the reheat level of on site property damage insurance to $1.06 billion.

mottules may be unaHe to perform this intcoded function The order funher requires that proceeds of this imurance be unlew their esisting configuration is moshfied. Iloweser, used to first make the reactor safe and stable, and then to de-etfectne July 2.1987, the Company obtained NRC authont.

contaminate the reactor site. No later than October 4,1988, ation to remme this requirement from the Technical Specifi.

all nuclear on site property damage in urance policies must catiom and Final Safety Analpis Repon. As a result of a prmide that in urance proceeds subject to this decontami-related study, the Company has completed cenain steam nation priority be payable to a separate trust acceptable to the piping moJitications to the economircr-esaporator-super.

NRC. Such depwits in the trust would not be released to pay heater section of the steam generator in order to suppon safe for other property damage until the Director of Nuclear Re-shutdown cooling of Fon St. Vrain from 824 power. The actor Regulation detennines that decontamination and NRC has reuewed and apprmed the mixhficationt remmal of radioactise debris is complete.

Nudcar in uranu:

3. Write-lhmn of Real 1: state imestments The Pnce-Anderson Act, w hich deals with the Company's pubhe liabihty for a nuclear incident, espired on August 1.

During the founh quaner of 1987, the Company reawcwed 1987. The protection prmided by the Act, currently $720 its strategy for real estate in estment and deselopment in an area adjacent to downtown Demer in hght of the sustained decline in Demer real estate market salues. As a result, propenies w hich are ow ned by llannock Center Corporation, the Company's real estate imestment aubsidiary, were w niten down by $19.5 million ($11.0 milhon after tas), or 21 cents per share, to their estimated net realizable salue.

4 Capital Stock 1987 1986 Sharts Amount Shares Amount t h una (Thiusana of Lbilaro ef Ibilars)

Cumulatise preferred s:ock, $IDO par salue:

Authorized 3.000,000 3,000,000 Issued and outstanding:

Not subject to mandatory redemption:

4.20% series 100,000

$ 10,000 100,000

$ 10,000 4 % % series (includes $7.500 premium) 175,000 17,508 175,000 17,508 4-%% series 65,000 6,500 65,000 6,500 4.M% series 160,000 16,000 160,000 16,000 4.90% series 150,000 15,000 150,000 15,000 4.90% 2nd series 150,000 15,000 150,000 15.000 7.15% series 250,000 25,000 250,000 25,000 Total 1.050,000

$105,008 1,050,000

$105.008 Subject to mandatory redemption:

7.50% series 264,000

$ 26,400 276,000

$ 27,600 8.40% series 302,720 30,272 316,480 31,M8 12.50% series 150,000 15,000 566,720 56,672 742.480 74,248 Less: Preferred stock subject to mandatory redemption within one year (25,760)

(2,576)

(75.760)

(7.576)

Total 540.960

$ 54,096 666,720

$ 66,672

~

Cumulatise preferred stock ($25), $25 par salue:

Authorised 4,000,000 4,000,000 1ssued and outstanding:

Not subject to mandatory redemption: 8.40% series

_ l.400,000

_5 35g)0 1,400,000

$ 35,000 Common stock, $5 par value:

Authorized 80,000,900 80.000.000 1ssued and outstanding 52,456,570

$262,283 52,399.168

$261,996 Premium on common stock 447,420 446.552 Total 5709,703

$708.518

twiec senkw c%ny of ch mi sahane.

@ NOTES T O C O N S O I. l D A T E I) F I N A N C I A l. S T A T E.\\l E N T S Changes in comnmn stock and premium on comnon stock for the three years ended December 31,1987 are as follow s:

Premium Price Common on comnum per share stock stock (Thwands of Ibilars)

Italance, January 1,19tl5

$258,162

$434,998 700.166 shares sold under Disidend Reinvestment plan

$19.00 to 21.25 3.501 10.768 -

Italance, December 31,19065 261.663 445,766 66.551 shares sold under Employee Stock Ownership Plan

$16.81 333 786' Italance, thember 31,19166 261,996 446,552 57,402 shares sold under Employee Stock Ownership plan

$20.13 287 868 Palance, IWemb w===_er 31,19187,----

== =_,===_$2 62._2 8 3

$44

==_7.4 20

=

During 1988, the Company must offer to repurchase 12.000 The preferred stock may be redeemed at the onion of the shares of the 7.50% cumulatise preferred series and 13,760 Company upon at least 30, but not more than 60, days' notiec shares of the 8.40% cumulative preferred series subject to in accordance with the following schedule of prices plus an manoatory redempion at $100 per share plus accrued divi.

amount equal to the accrued dividends to the date lhed for dends to the date set for repurchaw. Consequently, this pre-redempion:

ferred stock to be redeemed w as classified as preferred stock subject to mandatory redempoon within one year on the

$100 m M m December 31,1987 consolidated balance sheet.

M mlM N mand 4ory redemption:

During 1987, the Company repurchased 12.000 shares of 4.20% series: $10lt 4 l/4% series: $101; 4 l/2% series:

the 7.50% cumulatpc preferred series ;nd 13,760 shares of

$101; 4.N% series: $101; 4.90% series: $101; 4.90% 2nd the 8.40% cumulatne preferred senet subject to mandatory series: $101; 7.15% series: $101.

redempion. at $100 per share plus accrued dividends to the Subjest to mandatory redemption:

M date set for repurchase. Additionally, the Company purchawd 7.50% series: $1N on or prior to August 31,1988, reducing all 150,000 outstanding shares of the 12.50% eumulative each year thereafter by 50.25 per share until August 31, preferred series at $100 per share in accordance with the 2003, after which the redempion price is $100; 8.40%

original purchaw agreement. During 1986, the Company re-series: $1N.25 on or prior to July 31,1988, and reducing purchased 12.000 shares of the 7.50% cumulative preferred each 3 car thereafter by $0.25 per share until July 31,20N, series,13,760 shares of the 8,40% cumulatise preferred after which the redempion price is $100.

series and 100,000 shares of the 12.50% cumulative prefer-In 1988 and in each year thereafter, the Company must of-red series, of which 50,000 shares were subject to mandatory fer to repurchaw up to 12,000 shares of the 7.50% series at redemption at $100 per share. As part of the repurchase of

$100 per share, plus accrued dividends to the date set for re-the 12.50% cumulative preferred series, the Company eser.

purchase, and up to 13,760 shares of the 8.4'l% series at cised its option to repurchase 50,000 shares in addition to the

$100 per share, plus accrued disidends to the date set for scheduled repurchase of 50,000 shares. During 1985, the repurchase.

Comp.my repurchawd 12,000 shares of the 7.50% cumul-I #

d' '"I"'

atise preferred series and 13,760 shares of the 8.40% cumul-P atise preferred series subject to mandatory redempion at Not suldect to mandalon ndemption:

i

$100 per share. No other changes in preferred stock occurred 8.40% senes: $25.75 prior to December 1,1991, and $25.25 in the three > cars ended December 31,1987.

on or after that date.

f S. Iong Term Debt (Thmaah of Douan) 1987 1986 Public Service Company of Colorado:

First mortgage bonds:

4 5/8% series, due May 1,1989 5 20,000

$ 20,000 41/2% series, due October 1,1991 30,000 30,000 i

4 5/8% seri:s, due March 1,1992 8,300 8,800 l

8.95% series, due May 1,1992 75,000 41/2% series, duc June 1,1994 35,000 35,000 5 3/8% series, due May 1,1996 35,000 35,000 5 7/8% series, due July 1,1997 35,000 35,000 6-3/4% series, duc July 1,1998 U.000 25,000 l

8 3!4% series, due September 1,2000 35,000 35,000 71/4% series, due February 1,2001 46tMO 40,000 71/2% series,due August 1,2002 50,000 50,000 7 5/8% series, due June 1,2003 50,000 50,000 9-3/8% series, due October 1,2005 49,500 49,500 8-1/4% series, duc November 1,2007 50,000 50,000 l

9-l/4% series, due October 1,2008 50,000 50,000 i

13% series, due March 1,2015 36,500 36,500 Pollution Control Series A. 5 7/8%, due March 1,20(M 24,000 24,000 i

Pollution Control Series B:

71/8%, due December 1,1990 2,000 2,000 7-5/8% due December 1,1995 2,500 2,500 8%, due December 1,20(M 35,000 35,000 Pollution Control Series C:

71/4%, duc October 1,20(M 15,000 15,000 M

7 3/8%, due October 1,2005 1,960 1,960 J

7 3/8%, due October 1,2006 2,105 2,105 4

7 3/8%, due October 1,2007 2,260 2,260 1

7 3/8%, due October 1,2008 2,425 2,425 7-3/8% due October 1,2009 26,250 26,250 Pollution Control Series E. 9-1/8%, due May 1,2013 42,000 42,000 Less amounts held in construction fund (13,391)

(13.367)

Pollution Control Series F,7 3/8%, due November 1,2009 27,250 27,250 Unamortised premiuta 846 928 Unamortized discount (11,553)

(12,251)

Ccpital lease obligations, 10.88% 18.25%, due in installments through April 1,1995 3,490 3,812 1

7M6,942 711,672 Cheyenne Light, Fuel and Power Company:

First mortgage bonds:

)

5-1/2% series, due April 1,1990 1,178 1,203 7 7/8% series, due April 1,2003 4,000 4,000 4

10.70% unsecured notes, due September 1,1995 8,000 8,000 1

i i

PuNw Sen ke Company of Coloraki and Sub6dianes Q NOT ES TO C O N S o l. I I) A T E I) F I N A N C I T I S T A T E 51 E N T S

5. I.ong-Term Debt (continued) chousands of tuan) 1987 1986 Western Gas Supply Company:

Unsecured promissory notes:

7 3/4%, due December 1,1997 20,000 20,000 10.35%, due December 1,1999 6,667 7.333 11.60%, due hiay 1,2015 5,000 5,000 12.875%, due htay 1,2025 10,000 10,000 Unamortized discount (342)

(354) 1480 Welton. Inc.:

4 3/4% secured notes, payable in equal quarterly installments of

$168,388 to June 1,1992 cosering principal and interest 2,160 2,714 12.50% secured promissory note, due hlarch 1,1998 11,266 11,876 13.25% secured promissory note, due in installmems through October I,2016 33,129 33,237 Fuel Resotirees Deselopment Co.:

Unsecured note, due June 30,1989, interest rate fluctuates with the New York Federal Funds rate 1,000 3,000 8% unsecured note, due January 2,1989 227 Bannock Center Corporation:

Unsecured note, due June 30,1989, interest rate fluctuates with the New York Federal Funds rate 19,475 16,925

_8.0% mortgage note. due in installments through January 1,1992 350 665

$909,052___

$835,271 The Company registered $150,000,000 in First hiortgage The aFgregate annual maturities and sinking fund require-Ikmds with the Securities and Etchange Commission in No-ments during the five years subsequent to December 31, vember 1986. In 51ay 1987,the Company issued $75,000.000 1987 are: $5,821,000 (1988), $25,661,000 (1989).

of such bonds at 8.95%, due hiay 1,1992. The Company

$7.724,000 t1990), $35,491,000 (1991) and $89,280,000 may issue the remainder of such bonds from time to time dur-( 1992) for the Company; and $2,552,000(1988), $22,899,000 ing 1988, based on market conditions and other factors.

(1989), $3,460,000 (1990), $2,461,000 (1991) and Substantially all propenies of the Company and its subsi.

$2,442,000 (1992) for its subsidiaries. The Company may diaries, other than expressly excepted property, are subject satisfy its sinking fund obligations through the application of to the liens securing the Company's First Stortgage Bonds or property additions, and Cheyenne try satisfy $60,000 of its the mortgage bonds and notes of subsidiaries.

sinking fund obligations annually through the application of property additions.

6. Notn l'z,ahle und Commercial Paper Infaiination regarding notes payable and commercial paper for the years ended December 31,1987 and 1986, is as follow s:

aw,usana of Douani 1987 1986 Notes payable to banks (weighted aserage interest rate 7.53% at December 31,1987 and 6.81% at December 31, 1986)

$ 42,125

$150,957 Commercial paper (weighted aserage interest rate 7.83%

at December 31, 1987) 149,100

$191.225

$150.957 Ntatimum_ anmunt outytanding at any_ month-end during the period

$230.775

$150,957 Weighted aserage anmunt (based on the daily outstanding balance) outstanding for the period (weighted average interest rate 6.93% for the > car ended December 31,1987 an! 6.72% for the year _ ended _ December 31, 1986) _____ $1NS.125

$42,303

7. Ilank IJnn of Crtdit and A comparison of the actuarially computed benefit obliga.

Compensating Itank llalanen tions and plan net assets at December 31.1987, December Arrangements for bank lines of credit totaled $150,000,000 31,1986 and January 1,1986, the effectis e date of the adop-at December 31,1987 and $140,000,000 at December 31, tion of SFAS 87, is presented below. Plan assets are stated at 1986, and were maintained entirely by fee payments in lieu fair value and are compnsed primarily of corporate debt and of compensating balances. The unused committed lines of eqmty secunties, a real estate fund and government securities credit at December 31,1987 and 1986 w ere $150,000,000 and held either directly or in commingled funds.

$74,500,000, respectively. These bank lines of credit are pri.

%>uunds of tularii 12/31/87 12/31/86 1/1/86 marily used to support the issuance of commercial paper by Actuanal present salue of the Company and PSCCC, but also allow for direct borrow ins benent obligations-thereunder, Vested 5 216,8M $227,536 $154,160 Arrangements for uncommitted bank lines of credit totaled Nomested 17,638 19,415 15,854

$220,000,000 at December 31,1987, and $188.000,000 at 234,522 246,951 170,014 December 31,1986. The unused uncommitted bank lines of Effect of projected future credit at December 31,1987 and 1986 were $178,450,0lX) salary increases 55.810 73,013 77,7m and $105.000,000, respectis ely. The Company and its subsi-Projected benent obligation diaries generrily may borrow under uncommitted pre-for senice rendered to date 290,332 319,9M 247.774 approved lines of credit upe, retpst, however, the banks Plan awets at fair salue (328,553) (339.320) (301,628) have no firm coramitment to taab such loan?

Escess of plan awen oser projected

8. L,ummitments and Contingencies benet.t obligation 38,221 19.356 53,854 Commitments made for the purchase of various items of Unrecognized net loss (pain)

(12,698) 19,170 plant and equipment aggregated approtimately $94 million at Pnor senice cost not yet December 31, 1987.

C"S"Id I" "

See Note 2 for certain contingencies relating to Fort St.

g,7,'[g n'i,{d net tr$sition

Vrain, asset at January 1,1986, being

9. Postretirement llenefits regnized ur 17 years (55, % t58, m (62, M penu.n liability--- $(19.062)- - - - - - - -

- - ~ - - ->(8.m 0)

Accrued

$420,254)

The Company maintains a noncontributory defined benefit

- - - - ^

pension plan covering substantially all employees. The bene-Effectise June 1,1987, the pension plan was amended re-fits are based on the employees' years of service, up to a quiring the use of two sets of assumptions in the calculation masimum of 35 years, and aserage final compensation-of the 1987 net periodic pension cost. Significant assumptions Pension expense (ccedit) included in net income was 5(1.2) used in determining net periodic pension cost and the pro-million in 1987 $(3.5) million in 1986 2nd $8.6 million in jected benefit obligation were:

1985. The Companf s policy is to fund pension cost accreed, subject to the IRS funding limitations rule. The net pension 12/31/87 6/1/87 12/31/86 t/1/86 credit m 1987 and 19S6 was comprised of:

Discount rate 9.9%

9.3 %

8.5 %

10%

m,uurai of tt nari) 19N7 1986 Expected kmg-term mereaw m Senice cost

$ 9,033 $ 8.068 compensation leset 5.5 %

5.5%

5.5 %

7%

Interest cost on projected benefit obligation 26,681 25,877 Espected weighted Return on plan anets (11,178) (46.122) aurage long-term Amonitation of net transiten awet at rate of return on adoption of SFAS 87 (3,674)

(3,674) assets 114 11%

11 %

11 %

Other items (22.054) 12.381 Net pension credit 5 (1,192) $ t3,470)

Variances between actual experience and assumptions for costs and returns on awets are amortired os er the average re-During the third quarter of 1986, the Company imple-maining senice lives of employees in the plan.

mented, retroactise to January 1,1986, the requirements of During 1986, the Company offered to employees, age 55 Statement of Financial Accounting Standards No. 87 -

snd older with 20 years or more of senice, a special incen-

"Employers' Accounting for Pen ions"(SFAS 87). The ef.

tive for early retirement in the form of increased pension feet of this accounting change was to reduce 1986 pension benefits, to be paid from the Company's pension trust fund, espnse and increase net income by $12.3 million (24 cents arid a one-time cash bonus. Approtimately 550 employees pr share).

elected to retire under this program. The cost or this pro-

1%Nw Serue Company of Colorab utJ $ubuharica Qs<>l l s I o e o N s o I. I I) iILD F I N \\ N C I A 1. s 1 A 11: %1 I. N I s gram, determined in accordance with the prosisions of State-if they reach either early oi normal retirement age while ment of Financial Accounting Standards No. 88 "lim-working for the Company. The cost of prosiding health care ployers' Accounting for Settlements and Cunailments of and life insurance benefits to actise, retired and disabled I)efined llenefit Pension Plans and for Termination llenents",

employees, which is cwensed as either claims or insurance was approsimatelv $25.2 million. This cost is being amor-premiums are paid. amounted to 523.2 million. 521.8 mil-tired to pension, ense oser 4.3 > cars in accordance with lion and 521.4 million in 1987,1986 and 1985, respectisely.

Statement of Fmancial Accounting Standards No. 71 "Ac-The cost of prosiding these benents for the retired employees counting for the litfects of Cenam T) pes of Regulation" (2.281 in 1987,2.238 in 1986 and 1.M4 in 1985)is not sep-In addition to prosiding pension benefits the Company arable from the cost of prosiding t ments for the artise and and its subsidiaries proside certain health care and life insur-disabled employees (6,574 in 1987,6,582 in 1986 and 7,171 ance benefits for retired employees. A significant ponion of in 1985).

the Company 's employees become eligible for these benefits in. Inwme las I'sprnw income tas espense censists of the following:

abouunJs of Muu 1987 1986 1983 Income before estraordinary item anJ cumulatise effect of a thange in accounting method:

Current income tases:

Federal 5 70.482 5 57.186 5 63,806 State 7.914 4.487 6.907 78.396 6I.673 70.713 I)eferred income tases:

GAC capacity replaecment pay ments - IRS settlement (32,744)

Accelerated depreciation 23,976 33,171 31.346 Other book-tas timing differences 6.189 (968) 2,431 I on St. Vrain customer refunds 18,263 682 (16.349) 4, 48.428 143 17,428 Charge equivalent to reduction in income tases due to deferred insestmem tas credit, net of amomiation 14.754)

(1.889) 13.136 Total income tases on income before extraordinary item and cumulatise ellect of a change in accounting method 122,0?n 59.927 101.277 lisiraorJinary item.

Current income tases:

lederal

( 14,M 3 )

State (1.675)

(16,318)

!)elerred income tases (85.140)

. - - _. - - - _ ~. - -

Total income las bene 6t from estraordinary i. tem. -. - _ _

Cumt.latise e!!cet to January 1.1987 of accrumg unbilled resenues: ---_ --__.

(101.458)

Deferred income tases:

22,779 Total mcome tases from cumulatise elfeet of a change m accounting method 22,779 Total income tases (benefit) 5144.x49 5 (41.531) 5101.277 I)eferred tas prosisions are not recorded on certain book-such costs being charged to customers when the timing dif-tas timing dillerences. As of Desember 31,1987, the cumu-ferences rescrse and the las ef fect, are paid.

latis e net amount of such timing dillerences was The Company has state insestment tas credit carryosers of

$445.317.(xia lhe tas ef fect of this amount is not recorded

$393.883, expiring in 1993 and 1994, available to off set currently as regulatory commimon pnxeJurcs w di result in future state income tases.

A reconciliation of the statutory U.S. income tas rate and the effective tax rates is as follows:

muanan of Ibnan) 19M7 1986 1985 Tax computed at statutory rete on pre-tax accounting income before extraordinary item and cumulative effect of a change in accounting method

$106,167 40.0 %

$ 84,524 46,0 % $ 97,506 46.0 %

increase (decrease) in tax from:

Difference between tax and book depreciation 3,890 1.5 8,842 4.8 6,496 4.0 Allowance for funds used during construction (811)

(0.3)

(2,085) (1.1)

(2,834) (1.3)

Amonization of investment tax credit

('/,04N)

(2.7)

(7,113) (3.9)

(6.776) (3.2)

State income taxes, net of federal income tax benefit 6,600 2.5 3.068 1.7 4,949 2.3 Customer contributions in aid of construction 9,709 3.7 4,809 2.6 4,625 2.2 Amortization of bond call premium 265 0.1 (5.287) (2.9)

Income tas accrual adjustments - IRS settlement (21,431) (11.7)

Other - net 3.298 1.2 (5,400) (2.9)

(4,689) (2.2)

Income taxes on income before estraordinary item and cumulative effect of a change in accounting method 122,070 46.0 59,927 32.6 101,277 47.8 Income tas benefit from extraordinary item (101.458) (50.0)

Income taxes from cumulative effect of a change in accounting method 22.779 43.5 Total income taxes (benefit)

$144.849 45.5 "r 5 (41,531) N/A

$101.277 47.8 %

i in December 1986, the Company reached tentative settle.

In the fourth quarter of 1987. the Financial Accounting ments with the IRS and the Colorado Department of Revenue Standards Board issued Statement of Financial Accounting y

on the tax liabilities for the calendar years 1970 through 1979 Standards No. 96 "Accounting for income Tates"(SFAS and partial settlements for the calendar years 1980 through 96). The Company is required to adopt the new accounting 1984. Bised on these settlements, the Company has paid and disclosure rules no later than 1989, although earlier additional tases of approximately $24,354,000 and interest implementation is permitted. Adoption of SFAS % will of approximately $30,800,000. We additional tates are due result in a catch-up adjustment that may be reponed in in-principally to the inclusion in taxable income of a portion of come in the year the rules are implemented or in an earlier the General Atomic Company (G AC) contrece refundson Fort year if the Company elects to apply SFAS % retroactisely.

St. Vrain which were previously recorded as a reduction of The Company has not decided when it will adopt the new plant cost, and part of the amounts received from GAC as a standard or if it will restate prior periods. The Company is result of the 1979 contract settlement for this plant. Total currently analyzing the provisions of SFAS 96 and, while the 1986 income tat expense was reduced as k result of these set-effect has not tven quantified, the Company anticipates that tiements due to the net effect of reversing estimated tax the application of the new statement will decrease the Com-liability amounts accrued in previous years and recording the pany's reported net worth in the year it is adopted. The im-l tentatise settlement amounts.

pact on net income in the year the new statement is first ap-plied will depend on the method of adoption,

11. Tates (Other Than income Tates) awandwr Ibtlan) 1987 1986 1985 Real estate and personal property tates

$34.860

$41,609

$38,598 Franchise taxes 1.180 1,619 2,628 Scrial security tates 16,094 16,650 15,698 City and state use tates 4,286 5,367 5,478 Miscellaneous taxes 6,415 6.057 5,981

$62.M35

$71,302

$68,383 Charged:

Directly to income:

Operating expenses

$58,983

$66.776

$64,802 Gaher 1,036 1,5N 495 To propennplant and equipment and various clearing accounts 2.816 3,022 3,086 562,W

$71,302 M_8,383

=. _ _. _ =. = - - -

_ _ _ _ = _ _ _

letw senu emtens or cokvaao trJ sus ijer.c.

Q N O 1 E s 1 o e o N s o 1.I D A i r D r i N A N r i A 1. s l' T 't' 1: s1 I: NIs 12, Segmtnis of liusincu Segment information for the year ended Ikecmter 31,1987 is as follows:

Ohmah of tumo Electrie Gas Other Totat Operaung resenues

__ _ _ __51g]S 753 _5563,307 _ $18,375 51,657,435 t

Operating espenses, escluding uepreciation 701,177 493.298 4,967 1,199,442 Ikpreciation 79.816 21,979 3,168 1(M.963 Total operating eypenses 780,993 515,277 8,135 1,3tu,405 Ope,ating income'

$ 294.7t()

$ 48,030

$ 10,240 5 353,030 Plant construction espenditures" 5 86,386 5 38,993 5 2.131 5 127,610 identifiable auets, Ike mber 31, 1987:

Utihty plant"

$ 1,835,M 3 M51,740 591,810 52,378,893 Materials anJ supphes 5 55,673 5 9,583 5

36 65,292 Fuel ins entory 5 33,327 5

5 179 33,506 Gas in underground storage 5 15,611 5

15,611 Other corporate aucts 441,077 52,938,379 Segment informanon for the ) car enJed Ikeemtvr 31,1986 is as follows:

dh m mh ofIs,ituo Eltrtric Gas Otler Total Operating resenues

_ _ _ _51,(M5.590__._ 5596.584 _

5 15,689_ _ 51,657,863 Operating espenses, escluding depreciation 718,342 534.056 2,091 1.254,489 ikprecianon

__ ____.81,095

._ 20,999 _ _2,M 6_ _ llM,740 u

Tots' operaung expenses

_ 799.437 _ _555,055 _ _ _ 4,737 _ 1,359.229 Operating income' 5 246,153 5 41,529 5 10,952 5 2 #,634 Plant construction espenditures" 5 138,761 5 40,550 5 16,349 5 195,te0 ldentifiable aucts, Ikcember 31, 1986:

l'tihty plant"

$1.855,351 M43,485 5112,487 $2,418.323 Materials and supplies 5 56,219 5 8,485 5

426 65,130 Fuel msentory 5 47,193 5

5 195 47,388 Gas in underground storage 5

5 17,050 5

17,050 Other corporate auets 377,517 52,918,408 Segment information for the year ended Ikeember 31,1985 is as follows:

Gas Other Total ohemh or ts.uco l lestric- - -.--

Operating resenues 51.022,28' 5714,252

$ lo.948 51,747,483 Operating espenses, culuding depreciation 715,117 639,445 4,412 1,358,974 Ikpreciation 79,265

_20.071,_

1,9t A 101,302 6,378 1,460,276 Total operating etrenses 794,382 659.516 _

Operaung meome' 5 227,901 5 54,736 5 4,570 5 287,207 Plant construction espen htures" 5 166,500

$ 46.372 524,636 5 237,508 Identifiable aucts, ikcember 31, 1985; Utihty plant" 51,941,328 M33,169 599,551 52.474,(M 8 Materials and supplies 5 51.818 5 7,891 5

26 59,735 Fuel ins entory 5

61,446 5

5 195 62,141 Gas in underground storage 5

5 16,NO 5

16,790 Other corporate aucts 382,144 52,9'4,M58 a tu a n,m inc. " trw imw. ali,s

..n or umur.. unnry pn,pern

13. Quarterly Financial Data (Unaudited)

Summarized quarterly data (dollars in thousands except for per share amounts) for 1987 and 1986 are as follows:

1987 Three Months Ended March 31 June 30 Sept. 30 Dec. 31 Operating revenues

$5N,094

$382,052

$351,089

$420,200 Operiting income

$ 74,747

$ 53,409 5 48,038

$ 54,766 Income before cumulative effect of a change in accounting method

$ 53,515

$ 29,370

$ 25.577

$ 35,217 Net income

$ 83,104

$ 29,370

$ 25,577

$ 35,217 Earnings available for common stock

$ 79,714

$ 26,089

$ 22,313

$ 31,987 Average common shares outstanding (thousands) 52,399 52.399 52,399 52,457 Earnings per average common share before cumulative effect of a change in accounting method (1)

$0.%

$0.50

$0.43

$0.61 Earnings per average common share (1)

$1.52

$0.50

$0.43

$0.61 1986 Three Months Ended March 31 June 30 Sept. 30 Dcc.31-Operating revenues

$510,993

$376,676

$344,522

$425,672 Operating income:

Before adoption of SFAS 87

$ 54,329

$ 40,347

$ 40,253 After adoption of SFAS 87 (2)

$ 56,333

$ 42,351

$ 40,440

$ 99,583 Income before extraordinary itcm:

Before adoption of SFAS 87 5 34,948

$ 17,630

$ 19,869 After adoption of SFAS 87 (2)

$ 36,952

$ 19,634

$ 20,056

$ 47,179 Net income (loss):

l Before adoption of SFAS 87

$ 34,948

$ 17,630

$ (73,809)

After adoption of SFAS 87 (2)

$ 36,952

$ 19,634

$(73,622)

$ 39,4M y

Earnings (loss) available for common stock:

Before adoption of SFAS 87

$ 30,834

$ 13,516

$ (77,593)

After adoption of SFAS 87 (2)

$ 32,838

$ 15,520

$ (77,406)

$ 35,714 Average common shares outstanding (thousands) 52,333

$2,333 52,333 52,399 Earnings per average common share before extraordinary item:

Before adoption of SFAS 87

$0.59

$0.26

$0.31 After adoption of SFAS 87 (1) (2)

$0.63

$0.30

$0.31

$0.83 Earnings (loss) per average common share:

l Before adoption of SFAS 87

$0.59

$0.26

$(1.48)

After adoption of SFAS 87 (2) 50.63

$0.30

$(1.48)

$0.68 (1) Due to rounding, quarterly figures do ra add to annual total.

(2) In 1986 the Cornpany adyed the principles of Staternent of Financial Accounting Standards No. 87 pertaining to accounting for pension costs (see Note 9) requiring restaternent of reported operating results for the first three quarters of 1986.

1%Iie Smke Comp.my of Colorcio sci S#skleries Q R E P O R T O F SI A N A G E NI E N T The accompanying financial statements of Public Service auditor independence, both the independent public accoun.

Company of Colorado and subsidiaries have been prepared tants and internal auditors have full and frec access to the Audit by_ Company personnel in cor.formity with generally ac-Committee.

cepted accounting principles consistent with the Uniform pg System of Accounts of the Federal Energy Regulatory Com-g"'

mission. The integrity and objectivity of the data in these financial statements are the responsibility of management.

Doris M. Drury, Chairman

(

Financial information contained elsewhere in this Annual Audit Committee Report is consistent,with that in the Gnancial statements, February 9,1988 The Company mamtams and enforces a system of internal accounting controls, which is designed to provide reasonable pg gy y,

ppg assurance, on a cost effective bas,s, as to the mtegrity, objec-i ACCOUNTANTS tivity and reliabihty of the financial records. This system m-cludes a program of internal audits to assure management The Ikiard of Directors and Shareholders that proper procedures and methods of operation are used to Public Service Company of Colorado implement the plans, policies and directives of management.

We have examined the accompanying consolidated balance The accounting and internal control procedures of the Com; sheets of Public Service Company of Colorado and subsi.

pany are reviewed by the Audit Committee of the Ikurd ^

diaries a. December 31,1987 and 1986, and the related con-Dnectors.

solidated statements of income. retained earnings and cash The accompanying financial statements have been examined Dows for each of the three years in the period ended by Arthur Young & Company. certified public accoununts.

December 31,1987. Our examinations were made in accor-whose report follows.

dance with generally accepted auditing standards and, accor-j#

dingly, included such tests of the accounting records and

) (p such other auditing procedures as we considered necessary in R. C. Kelly the circumstances.

As discussed in Note 2 to the financial statements, reali-Vice President and ration of the Company s mvestment m its Fort St. Vram 46 Principal Accounting Officer Nuclear Generatmg Station (approxhnately $70.3 milhon at December 31,1987), and the adequacy of provisions for esti-h MMt./'

mated future decommissioning expenses and unrecoverable R. F. Walker perating and capital expenditures are dependent upon future events, meludmg sustamed operations at levels sigmficantly Chairman of the Ikiard and Chief Exe,utive Officer 8*.r than in the past, achievmg and maintaining a cost-effective relatmnship between expenses and revenues from February 9.1988 Fort St. Vrain and sausfactory resolution of various alterna-tives regarding Fort St. Vrain after the onaite nuclear fuel is R E P O H T O F T 11 E A U D 1 T C O 51311 T T E E utillied. The eventual outcome of these matters cannot be O F T 11 E in O A R D 0 F D I R E C T O R S determined at this time.

In our opinion, subject to the effects on the financial state-The Ikiard of Directors of the Company addresses its over-ments of such adjustment, if ariy, as might have been required sight responsibility for the consolidated financial statements had the outcome of the uncertainties referred to in the pre-through its Audit Committee, he Audit Committee, com*

ceding paragraph been known, the statements mentioned posed entirely of non-employee directors, meets regularly above present fairly the consolidated financial position of with the independent accountaats and the internal auditors to Publi? Service Company of Colorado and subsidiaries at discuss results of their audit work and their evaluation of the December 31,1987 and 1986, and the consolidated results of adequacy of the internal controls and the quality of financial operations and cash Hows for each of the three years in the reportmg.

period ended December 31,1987, in conformity with gener-In fulfilling its responsibilities in 1987, the Audit Com-ally accented accounting principles applied on a consistent mittee recommended to the Board of Directors, subject to basis d. ring the period, except for the change in 1987, with shareholder approval, the selection of the Company's in-whie'. we concur, in the method of revenue recognition as dependent public accountants. ne Audit Committee review ed devribed in Note I to the financial statements and the change the overall scope and specific plans of the independent public

,1986, with which we concur, in the method of determining accountants' and intemal auditors' respective audit plans.

pension costs as described in Note 9 to the Gnancial state.

discussed the independent public accountants' management ments.

letter recommendations, and reviewed and approved the in-b[ w - & be depenoent publicaceountants'generalaudit fen andnon audit I

d services.

The committee meetings ar,e designed to facilitate open Arthur Young & Company communications between infernal auditing, independent Denver, Colorado public accountants, and the Audit Committee. To ensure February 9,1988

l Public Service Company of Colorado and Subeliaries O s ii ^ n t ii o e n e n i s r o n u ^ r i o s The Company's common stock ($5 par value) is listed for amount of money need not be sent with each payment, and trading on the New York, Midwest and Pacific Stock Ex-there is no obligation to make an optional cash payment each changes under the ticker symbol "PSR." Quotes may be ob-month. Optional cash payments must be received by the 20th tained in daily newspapers where the common stock is listed day of the month. Such payments received after the 20th day as "PSvCol" in the New York Stock Exchange listing table.

of the month will be deemed for reinvestment purposes to Yetr Total Volume Aserage Daily Volume have been received in the next month.

1987 57.761.200 229.211 The purchase price of shares acquired with optional cash 1986 53.820.300 213.573 payments in the opea market is the average cost of such 1985 29.822.800 118.344 snares, including brokerage commissions. The investment Common Shares

%sreholders period generally begins on the 22nd day of the month and Yetr Outstanding Common Preferred ends when sufficient shares have been purchased.

1987 52.456.570 62.124 4,871 A prospectus describing the DRP and enrollment infor-1986 52.399.168 M.916 5,062 mation can be obtained from the Shareholder Services 1985 52.332.617 72.8M 5.M3 Department by writing or by calling (303) S71-7514.

Three series of cumulative preferred stock are actively traded Transfer Agents (see chart below). All oiher series are not actively traded and market prices are not published.

The Company is the principal transfer agen' and registrar for its common and preferred stock.

series where usted For additional convenience in transferring stxk, Morgan 4 H ($100 par value)

American Stock Exchange Shareholder Services Trust Company of New York is retained '

7.15% ($100 par value)

New York Stock Exchange as co-transfer agent and co registrar.

8.40% ($25 par salue)

New York Stock Exchange Iknton Stock Exchange flow to Traitsfer Stock Where to lhy Stock A transfer of stock is required whenever the registration of a The Company's common and preferred stock may be pur-stock certificate is changed. A change in registration gener-chased through a brokerage firm. A shareholder of record ally occurs w hen stock held in other than "riominee or street holding the Company's common stock in his/her name may name" is sold. Changes of name, co-owners. tenancy, etc.

purchase common stock through the Company's Automatic also require a transfer.

Dividend Reinvestment and Common Stock Purchase Plan A transfer can be accomplished by properly Giling in the 47 (the "DRP") (see section entitled "Dividend Reinvestment stock assignment form on the reverse side of the stock certifi-Plan" for details).

cate and endorsing the assignment form exactly as the regis-Where to Sell Stock tration is shown on the face of the certificate. The The Company's common or prefeired stock held in certificate signature (s) of the transferor must be guaranteed either by a form may be sold through a brokerage firm. Shares held in commercial bank or a brokerage firm that is a member of one the DRP by the Company for a participant may be ordered of the major stock exchanges. The certiGeate with the properly out in certificate form by the pamcipant and sold through a completed assignment can then be sent to the Compar.y or to brokerage Grm or may be sold through the DRP by sending in the co-agent for transfer. It is recommended that certificates the appropriate form. Shares held in the DRP for a partici-be sent registered or cernfed mail, pant will not be sold for that participant between the record Stock Registration date for a dividend and the time when the records have been The purchaser has the choice of having the stock delivered or updated to redect the reinvestment of such dividend.

leaving it with the broker. Stock left with the broker is gener-Dhidend Reimestment Plan ah np age m s name and referred to as street name stock. The purchaser is generally referred to The Company's DRP provides common shareholders with an

[. " *I#

ent me fo urchasing additional h

o ts to take physical possession of the

, gf C

's Dividends reinvested through the DRP are used to pur-st ek receives a certificate (s) representing the number of chase shares of common stock in the open market, at the shares purchased. The stock is registered on the Company's average cost of such shares, including brokerage commis-books in the name of the purchaser who becomes a share-holder of record.

sions, incurred in connection with the purchase of shares during the applicable investment period. Common share-Safekeeping of CertlGcates holders w how shares are registered in names other than their When stock ceniGeates are received, it is recommended that own may participate in the DRP for the reinvestment of divi-the certificates be safeguarded by placing them in a secure dends, provided the broker or Gduciary who holds such stock place such as a bank safety deposit box. A separate certificate in nominec name is willing to participate in the DRP.

record should be maintained including each certificate Participants may also invest optional cash payments number, purchase date, date of issue, amount paid and the through the DRP in amounts ranging from a minimum of $25 exact registration. 7he Company does not safe keep certl-per payment to a maximum of $5.000 per month. The same fcates for shareholders.

l.ost or Stolen Certificates cumulathe If a stock certificate is lost or stolen, notification should be Preferred stock 4th 3rd 2nd ist sent immediately to the Company so a "stop" can be placed 4%% series on the missing certificate. The letter should contain as much 1987 ljgh 47 mformation as possible desen,bmg the certificate; in parti-cular, certificate number, date issued, and registration. Once 19861 gh 6'

50%

8%

4 a "stop" has been placed on the missing certificate, an affi-7 davit will be sent which must be completed, signed, notar-1987 High 73 77 82%

83 %

ized and returned before a replacement sertificate can be low 66 %

76%

69 80 issued. An irrevocable indemnity bond for the lost stock cer-1986 High 83 84 90%

85 tilicate is also required. The cost is about 2% of the market tow 77 %

76%

75 66%

value of the missing certificate, calculated at time the in-s.40% series n29 cemmty bond is issued.

1987 liigh 22 23 %

24 %

25 Information regarding lost or stolen certificates should be low 19 %

21%

21%

23%

sent to Shareholder Services Department, (Room 160B),

1986 High 24 %

24 %

26 24%

P.O. Bot 840. Denver, CO 80201.

tow 22 %

21%

21%

21 Disidends Dhidend Heimestment Plan Statistics Dividends on common stock, as declared by the Board of Di-rectors, are generally payable on the first day of February, Shareholder

% of Shares

% of Year Participants Total Participating Total May, August and Novemberofeach year.The Company pays regular quarterly dividends on its preferred stock on the first 1987 25.068 40.4 6.857.258 13.1 2

248 of March. June, September, and December of each year, y

5 Dividends paid on stock held in "street name" are paid to the holder of record, generally a brokerage firm or bank nominee. The dividends are then redistributed to beneficial owners by the brokerage firm or bank in accordance with the beneficial owners' instructions.

48 Shareholders of record receive dividends directly from the Company unless such shareholder has elected to reinvest dividends through the Company's DRP.

'g

' g g933 Disidends Not Recelsed Place: Public Service Company of Colorado Dividend checks are mailed so as to reach shareholders on Corporate Headquarters the dividend payment date. Shareholders who do not receive 55015tfi Street their dividend check on the appropriate dividend payment Denver, Colorado date should contact the Shareholder Services Department.

12th Floor Auditorium However, it is suggested that such contact be delayed about Time: 2:00 p.m. (MDT) seven days after the dividend payment date to allow for any Notice of the Annual Meeting proxy statements ano cards delay in mail delivery, are mailed approximately 30 days before the meeting date.

The accompanying tables show the ranges of closing common FOR INFOR51ATION and preferred stock prices as shown on the consolidated tape

\\\\, rite or call:

and dh idends paid on common stock by quarter for 1987 and 1986.

Public Serv,ce Company of Colorado i

Common Stud 4th 3rd 2nd Ist 55015th Street lingh 21%

22%

22 %

21%

Denver, Colorado 80242 tow 17 %

19%

184 17%

(303) 571-7511 124 Trade 20%

21%

22 4 21%

Dn. Dalared

.50

.50

.50

.50

[Nygg79g ggg,A7]ggg Dn. Paid

.50

.50

.50

.50 Susan G. Pollack Michael D. Pritchard Il 19%

21%

22 %

22 %

low 16%

16 17 %

20 tag Trade 18%

17 20 21%

SilAREllOI. DER SERVICES Da. Dalared

.50

.50

.50

.50 Roger C. McClary Div. Paid

.50

.50

.50

.50 Marjorie Murray

)

1

Your opinion is sdued. Please take a few minutes to complete arti return the pastage-paid, self-addressed cards below. Ihis in-formation will help us serve you better. It is kep2 confidential.

Q S il A R E ll O L D E R C O SI NI U N I C A T I O N S S U R V E Y 19 8 7 A N N U A L R E P O R T QUARTERLYREPORTS

1. How much of PSCo's 1987 Annual Report did you read?

5. Ilow much of PSCo's Quarterly Repons do you read?

O all O % to %

O all O less than %

0 % or more O less than %

O more than %

O none O % to %

O none

6. Were the 1987 Quarterly Reports easy to read and under-

2. Is the 1987 Annual Report easy to read and understand?

stand?

O very readable O somewhat difncult O sery readable O somewhat difncult O somewhat readable O very dirneult O somewhat readable O very difncult

3. Pleaw circle the number which represents your feelings about

7. Please rate PSCo 1981 Quarterly Reports by circling the the quality of information. presentation, and readability of the number below which best describes your overall impression:

following:

Outstanding l\\nr Outstanding Poor Oserall. I felt the 1987 Financial liighlights 1 2 3 4 5 6 7 8 9 10 Quarterly Reports were -

1 2 3 4 5 6 7 8 9 10 l

j l C 0 5151 U N I C A T I O N S P R O G R A AI S 7

a aa anx Performance Charts 1 2 3 4 5 6 7 8 9 10 Finrncia! Direction 1 2 3 4 5 6 7 8 9 10

8. How would you describe PSCo's shareholder and investor Gas & Eledric Sersice 1 2 3 4 5 6 7 8 9 10 relations programs?

Comraunity Deselopment i 2 3 4 5 6 7 8 9 10 0 very good O adequate Nuclear Iwucs 1 2 3 4 5 6 7 8 9 10 0 good O inadequate Shareholder Information i 2 3 4 5 6 7 8 9 10

9. Are you being adequately informed about PSCo actisities?

4. Please rate the oserall 1987 Annual Report by circling the O yes O mostly O not entirely 0 no number which best describes your feelings on the following:

10. Is there any information you would add?

Outstanding Poor Candor 1 2 3 4 5 6 7 8 9 10 Completenew 1 2 3 4 5 6 7 8 9 10 Os erall Imprewion i 2 3 4 5 6 7 8 9 10

11. What is your Zip Code?

a S 11 A R E II O L D E R P R O F I L E AdditionalInformation and Duplicate Alailings Pleaw circle one answer to each question.

Shareholders interested in receiving the publications or addi-llow is your stock registered?

tional information listed below. or those who receive duplicate

1. To you or a family member mailings of the Annual Report. are asked to check the appro-

2. In nominee or street name priate box. Fill in account number, name and address and mail Age category?

this postage-paid card.

1. Under 25

3. 45-M O Statistkal Rolew 1977 1987 O F,onn 10-K 3 3 5 -14

4. 65 or oser O Disidend Reinsestment Plan Information PSCo shares owned? (include disidend reingestment)

O Currently receise more than one copy of Annual Report. Please

1. Under 50

4. 501 1,000 climinate repon mailings for (fill in account number (s) from Annual

2. 50-100

5. 1.001 2,000 Report mailing label):

3. 101 500

6. Oser 2.000 llow long hase you been a PSCo shareholder?

1. Less than 1 year

4. 6-10 years 2.1-2 years

5. Il 20 ) ears

3. 3-5 years

6. Over 20 years Principal reason for holding PSCo stock?

1. Disidend income

3. Income plus growth

2. long-term growth

4. Other Whkh most influenced you to acquire PSCo stock?

M a u M ru:

1. Personal research

4. Gift / inheritance Name

2. Stockbroker

5. Financial nublication

3. Friern! or relative

6. Other Street and Number What most concerns you almut PSCo?

City What is your Zip Code?

State Zip

NO POSTAGE NECESSARY IF MA! LED IN THE i

UNITED STATES l

l BUSINESS REPLY MAIL nRSi ctASS PERva nO as DENvEn COLORADO t

POSTEE Witt BE PAID BY ADDRESSE E I

Public Sersice Company of Colorado investor Relanon3 Room 850 P.O. Ikn 840 Denser. CO 80201 9958 l

I i

I NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES BUSINESS REPLY MAIL FIRST Ct. ASS PERMtT NO MS Of NVER COLORADO PO4 TEE Witt BE PAID BY ADDRESSEE Public Sersice Company of Colorado insestor Relations. Room 850 P.O. fkw 840 l

Denser, CO 80201-9958 I

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$ Public Scrvico'

'kh['f,[

1%lD N!RMi r NO.14 DI.N VI.R. CO PL'HI IC SEM) ICE l-------~

CO\\tPANY OF Col.OR Al)O PO BOX 840 1

DI NN I R.COI OR AIX)lu1MI 4m4 >

i N131571 7511 l

j

a

@ Public Service ~

= / a _,.

2420 W. 26th Avenue, Suite 1000, Denver, Colorado 80211 i

i April 15, 1988 Fort St. Vrain i

Unit No. 1

,f' P-88129 j

U. S. Nuclear Regulatory Commission ATTN: Document Control Desk Washington, D.C.

20555 l

Docket No. 50-267

SUBJECT:

Annual Financial Report Gentlemen:

Enclosed are ten (10) copies of the 1987 Annual Report for Public Service Company of Colorado, including the certified financial statement for 1987.

This document is submitted for your information and use in accordance with Title 10, Code of Federal Regulations, Part 72.55(b) and Regulatory Guide 10.1.

Very truly yours, h

f H. L. Brey, Manager Nuclear Licensing and Fuels Division HLB /JW:dvd Enclosures cc: Regional Administrator, Region IV J

Attention: Mr. T. F. Westerman, h0]

Chief Projects, Section B j

Mr. R. E. Farrell j /D Senior Resident Inspector Fort St. Vrain J