ML20151M689
| ML20151M689 | |
| Person / Time | |
|---|---|
| Site: | Waterford  |
| Issue date: | 12/31/1987 |
| From: | Cain J LOUISIANA POWER & LIGHT CO. |
| To: | |
| Shared Package | |
| ML20151M663 | List: |
| References | |
| NUDOCS 8804250109 | |
| Download: ML20151M689 (52) | |
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Inuisiana hmcr & light Companyis IIIGIII.lGIITS a mcminr of one of the largest imestor. .
owned public utihty holdhig companics As of Asof in the l's sited Natev sliddle N auth l'tihtics. Dec. 31,1987 Dec.31,1986 Inc. ( NP.I') RJnked fourth among the rution% c!cet ric and gas utihtics in 198' Plant incestment 54.395,545,000 5 6.269,519JKM)'
the \N' S) stem is the leading clectric $ 1,3 40,902,000 $ 1,339.211 JM X)
Res enue energy supplier to the sliddle N >uth, .i region wmprised of Arkansas,louisiaru, Net Income $ 115,649,000 5 1 6 3."6*J M H)*
Alis ,issippi. and southeastern slissouri Peak Inad (owurred 8 '21 8' ;
Gas senice is pn nidcd in New Or' cans .ind " 30 86) 4,552,000 KW 1603JNN) KW and portions of Arkansas arxl \limuri.
Generating Qipabilits 5,665,000 KW s.665J xx) KW
.I he M Al' Sy stem utili/es a cast.
interconnected transmission and Cu , toners 569,663 569.229 dntribution network and a lulanced <M- mnual Luontt&oun sp tem iif fi rssil fuel arxl ntxlear generating -u W d r WM 1W' plants to mect the electric needs of 1.68 million customers in the 9 l J H H Njuarc- A'crage annual restnue per residential kilowatt-hour 7.0H 6 "9(
mile \ liddle N>uth arca, cocompassing l.3t x) communitics with an ag .regate Population in area sened 1,672,000 1.6 01MM) population of fire million
'Re tated to refica the adoption of Natcment of Iinandal Accounting Standards No. 90.
At the heart of the System are the (See Note 13 of Notes to linuncial staten ents) operating companics working together:
Ark.uwn Power & light Company ( AP&l.).
IouisiJnJ l\m er & l.ight ( ompan) Wrious tel hnical. adminnt rath e, and Middle N>uth region economical.
(I P&l.). Missi sippi Powcr & Ught o>rperate scnices tlut benclit all of the dependable senice llut can be taitond Com[un) ( M P&ll. New Orleans Public Mst ' %) stem companics in common, to meet sprofic energy requircinents.
Senice Inc. ( Nol51), and Spicm i nergs Sptem l'ucis Inc. ( SI'l ). a f ucts subsidian and to strengthening the ngional l Resou,es Inc. ($1 RI k which is and I tottec. Inc (l I). a uhsidian that economy through economic and responsible fi>r the nurugement and aurkch the commercial capabilitics educ.itional dcs clopment initiath es operation of the Grand Gulf Nuclear expertise. and trsources of the Sptem Station. companics
( Additional subsidiaries intlude. \N' 1hc combined conqunics of Ihe \N' Sptcm Scnicts Inc. ( SSI L whit h pn nides sptem are commiited Io pnniding the l
1 I
C4 n er Photos. I rom its carbest l> m er station at Stcrhngton (inset ) to the
\\ atertord 3 nuclear plant at laf t, l.i .
l.P&l. tor 60 >c. irs has gent rated the cncrys to Lecp Iouisiana gnming 1
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198" nurked an imimrtar t, )ct Net inconw liv 198'slipgd to $115 6 'llwre were a ntunbcr of other i perplexing,92r for Inuisiana l'imcr & nullion from 51 U 8 million in 19Ma IP&l. important eu nts imuhing regulator) l 1.ight Coripany it was. of course, our alm resitnni paynwnt of nnir4 o>ntmon agencies and the courts during 198'-
(oth anniscrun of hcipmg wne our stoc k dnidends in 19h' to its parent 'the i ederal I nergy Regulatory I state's cledric needs Yet it was much company. .\ liddle N >uth l ~tihties Inc. C(>mmiwion (11.RC) on Nosembcr 30, i nure than simply an anniwrurv lien Comnnn stock disidends had been sus- 198' reaffirmed (in Order 292) its though 198' turned out to be muth bl.e p11ded since the second quarter of 1985 origitul percentage a'.h> cations to the !
1986, at least in the regulatory and On January 25,1988. the Company's 5ptem operating comp.inies of System fina xial arenas, it we also a time tlut lloard of 1)irectors approved a reduc tion 1:new lb nirecs hwMm of tlw ctivs vw our nurugenwnt and enployees join in presiously a ported net income for capacity and energy of the Grand Gulf 1 together to imp lcment programs and fiscal ) car 1985. ~Ihc reduction totalled ntk k2r gu crating plant (inchnling IP&l:s I innovations (lut will not only improse 5185. i million and (ame in rcMwnse to 1 n,. ) On January 29,1988, the IIRC senice to our customers but a!so s.nc (lunges in the rules of the financial mdlions of dollars in co ts both immedi- Accounting Standards ikurd (1 A511) and atcly and in the long rim A perplexing a %nember 19H5. agreenwnt between scai) Yet llut one ilut pr ncs "(o Years the Company and the Inuisiaru Public of N nite & Pride" really means scnice Ncmcc Commiwon (l.1% ) regarding the , 3i to, and pnde in, I ouisi.uu' \\ aterford .4 rate sctilement (l'urther -
- hxheations are llut the statch cuinonn det.uls on this nutter nuy be found in ,
nus tuse bottomaiout in 1987 and that the Notn to Iinancial 5tatements ) s our region will twgin the climb luck Il'\lN linanting actnitics in 198" toward prosperity in 19xx in the inchkied retireux nt ot' 520 milhon of da regulatory arctu. we are optimistic that first \longage ik nxis dueJamur) 1,198' some of the sexing iwuo faced by the and the renurketing of 5220 mdhon in Compan) nu) he acceptabh resohrd N. ( harles Parish Polhition Control Restnue lionds ( Comprehensis c infor- .
nution aim the Companyi financial ctonhtiiin nuy tw tomx!in tlw finaixial 4 Natements of this annual report.)
Various regulatory iwucs and challenges arc of concern. One of the more important imuhes htigation in the l A Nipreme ( ourt hetucen our siMer James \.1 C.iin President & Cl O t.umpany. \liwiwippi 15 mer & light Company. tSc \hwiwippi \ttorne)
Generals ottitc. ud the \hwiwippi Iegal N n n es ( oahhon A remlution of this case will reminc much of the fuunt ul and regulaton uncertainty als ait t. rand (iulf I \\ c cxpet t a duien
] hs the end inf June.1988 I
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i also denied the tvquests for rebearing As patt of the Gry Giuncil's ongoing in May 198',I.P&L l'nited and tlut had tren filed by dr New Orkam l Occitkutal agnxsl to a tentatiw settlenwnt e.xaminatkvi.of the merits of munici 4
'_ City Omncil and ettwr regulatory bodie- _ palintion of IJ'&l's sister company, New ' of litigation with these is> punisionv
- rod intened partks. Appeals Inun Onlcr ~ Orleans Pubiie Senice Inc. (Nol51), the (1)IJ'&L would receiw 5120 million
-292 lute twcn fiks! with the U.S. G>urt Council lus indicated il it it would also (which wuuld ultimately trnefit the 4
of Appeals for the lharkt of Columbia mmider expnpriating i Pats aswts Company's ratepa>vrs), and (2) another Circuit by nest of the same parties that in Algiers. % Occidental sub3idiary. Occidental
' requested a relwaring by the il RC. . In anotint significant dorbpment, Owmical Company (LP&Cs largest
'lhe New Orleans City Onuxil the Council. in Nmemtwr 198', rejected custonwr).wuuk! agree to rennin on the onlcred a prudence imestigation of the an Offer of Nettk1nent prewnted tw IP&L
- I P&L Sys:em 'or at lemt five more years. .,
<xts! for atxt mnstnation of Waterferd . and NOI51 (the Companics) in July in liut in Nmendwr 1987, the IJSC in a 2 2 3 su the afternuth of a filing by 11'& L for - an attempt to settie the oustaryjmg vote failed to approve the scr flement.
a rate increase for custamers residing in iwucs twtwwn tlx G>mtunies and the A wrics of rate ortlers was akpted by
. the city % 15th Ward ( Ahkrs). Gamcil umncil. The pnposed settlement oder the LPsC, certain of which impact _ LP&l's hearings on luth the prudetx e inwsti - contahwd a numtwr of mncewions to current and deferred collection of gation and the rate case are sdask.ksi in ratqu)ers atxl an conumic dorkvment Waterford 3 rdated msts and the
- the r pring of 1988, with a decidon set padcige for the City of New Ork2rw. In accounting for lj%Cs "phaw in plan" A for late sprit;g or early summer. Octolwr 1987 the Oxuxit submitted a distlict ourth revAution of a dispute mer muntervlTer of settlement tlut the these orders was appealed lxah bfthe ',
Companics still have under study. Company am.! the G>mmiwion to the 1he settlenwnt propo als wtre part famisiana Suprenw Court And onJ.muary of twpgiations twtween the Companies 29, F)HM, the state Supreme Gert refused and the Oxuxil to reach a mmpromiw to grant a stay requestnl by the IJ50, onswwral out4anding regulatory and then by athming 1J% L to place an k gal ipsues, induding municipalintion additional 510 million in haw rates in and prudence. effed Ichruary 1.1988 (subject to With regard to the contit i.ing refund). Oral argtmwnts on tlw hwrease litigation betwren the Company and = wrre held Manh 2.1988. (Further (k tails i nited Gas Pipe line Gunpany, along on this nutter may be lound in the Notes with Unite l% [urent mnquny t )ccidental to financial statements.)
litroleum Ot, the louisiara f ourth Circuit Omrt of Appeals, m Apri! 198' incrrased the r. mount awarded to the Gunpany in a 1)istr:st ( ourt judgnvent ,
to a total of ocarly 590 million Mhen ludicial interest is induded. the ngal n
amount awankd to i PM L wuuld be note tiun 5I80 million.
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9 Internally. I P&l. wurked sigoniusly 'the Cunpanyi fossil gn nrp performed 'the Compan)\ perfornun(c at its and succewfully to ruluce u>sts inpnn e infrared senices on plant Imiters,150 Watertord 3 plant uas impressisc. Ihr
- ettkicng, and complete inportant substations and 12tx} miku t transmission capacity factor it the plant for the Scar l construction senice pn> grams lines to identity potential trouble spots u as "h M t, cv ceding the goal of "i '.
Mme highlights in the IP&l. sptent Significantly. the f issil it achh ,cd a number of dif ficult goals in
'!he Company w.a under budget for group in 1987 completed its implemen- the antas of unit capautt budget the Scar on our <pcr.ition and mainten- tation of the ibwcr Plant "roductisity pertonnance, reduting enpk n ee tum n er, ante expenws as wcil as on construction impnn ement Program ( PPPIP ) w hich is plant perfornunce and luuug its training expcoditures w hile romplcting nuny proiccted to sne the Spteni customers progr.uns fully actredard by the Institute nuior proiccts We finished 16 < on- more llun $500 million ar.vt the next of Nuclear twcr Operations nuking sinKtion pn yuts, hKTeasing and tpdJting dcGKle thn ugh impn nni plant ctlit icoq I P&l. the 2 ith utilit) n.itionwide to our powcr transmision and dninhution auitability, training and nuintenance. Ni become a member of the National flexibility whik sning sahstantial nnocs significant is the PPPIP ctiort tlut Sptcm kademy for Nt.cicar Training.
veral of the proiccis used a design president and chief executive officer ! P&l. aim accomptnhed inportant des cloped by our 1:ngineerig; section I duin 1upherger presented the oncted efficiencies regard.r.g it s General Ottk e which has already saved ostr a million "l:agls Aw ard" to thme in the Company staf f in New Or! cans by consolidating dollars for the Company w ho played a sital role in LSc programi emplo>ces in three hications Major As a rc' ult of rccommendations by desclopment. 'lhc "!.agle Award"is improvements were made to dntrict consultants and an intenul ad hoc t.nk syminlie of the 5ptemwide Teamwork ottices throughout the state, intluding tortc, the Company has also begun the effort. rcro~ations to nearly lulf the of fkes in in house ny.ur of hpiraulie equipment f n lux; the Company conputcri/cd the Northern Dnision 'the largest usnt by the (nmpany A facdity to handic its storcrooms in an important mosc renination job, though, was the com.
this t>1v of npair work lus been < pencd toward improsing ;smdusing cificieng piction of a 28 000 square foot addnion and statit d and began operating la 19S8 in nurketing. the Cumnany athirval to Ihe Northern Disision office whith the (nmpany antK parcs significant cost gml results wmc 921 of all new smgle features a new Control Ct nter operation sasings inen this in bouw scnice, as util famd) homes and a w hipping 915. of as bring ahic to prolong equipment life multi family dweihngs chose all clettric thn ugh impnncd maintenance. seni(c. Of new commenial buddmgs
- v. ( hose all clettric.
Many pmitisc signs came from the industrial .uwt a nnmercial sections dunng the > car Among them was completion of tir 33 ston orlke oinplex in 1.tkeway Ccoter and Phase 1 of the Galleria in icticrwn Parish hur industnal untomers alu o inpletut expansions dunng the 3 car 4
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4 IW was anodwr lunner >rar for the lhe Company's economic doch,p- As I trgan this sisit withS uu,I nude
. onphi enotunteer senic: organization, nwnt c'llorts are paying off in tangible it a point 10 refer to our "60 Years of the l'amily of Comnmnity and Dility wap A firm that responded to one of Scnice & Pride" theme in this report.
Supporters (11XTS). l(XTS, witii their i P&l?> ind ntrial development efforts. Norr before tus a program hke Pride emplo)te members and families, hell wd began ope cating in Ikigatusa, la in July 1hrough liamwork lud such a profound their communities h) par 0cipating in an anJ is already planning to expand. rhe imp.!ct on a company so qu,ickly. We are cxtraordinary 7,500 hours0.00579 days <br />0.139 hours <br />8.267196e-4 weeks <br />1.9025e-4 months <br /> of voluntr1+ other i er inesso h.nr alv) kicated in a'l part of the clTort to beconw a great chie and cluritahic wurk on 26 nujor our og nting area, bringing sorely onapany We're proud of the technical
. proints. Sw h contributions of time a.J neededpus. inn <nutions, the construction programs talent no doubt pla>ul a role in a f.nurable IW also saw a recammanx nt to and otrer mmes made with our inuge held hv i P&L anxmg its untonwr the prid( tlut, through the 3rars, nude antomers, stakholders and employres in fact. an auitudinal sunty of nuckor IP&I. a racesetter among utilities for in mind And with the foundation now utilitics indicates IP& L cintomers rate it inr.nvations. custonwr wnice and cost firmly in place for more of the sanw in among the hest in the rution. ocrol. The progrant called Pride the future, hmer costs and lxtter wnice in the economic dnrhyment and rhnogh leamwork, brought together will be a hallnut k of I P&L enrr the next chic avas, IP&l. continued to work hundr- ds of employces w ho combined 60 years.
diligendy to pnnule kmk rship in nculed their tah 7ts in mapping out a plan to in chning, alkm me to imite you to areat A key stumbling bhick to business push the Unmpany into a future of twtter ,
rniew 60 exciting > chts. These next few rekrations in tuuisian.i has twen the senice to the customers. Numerous pages will not only ', " % - %cre we've educational and literacy Inrh of its programs came from this effort, as w cll been as a company. but will aho ght Suu uurkforce. ~lhe Ocmpany's General as new ctforts to meet the challenges of an indication of where v,e hope to he in rdocatloral Dorhyment (GE:D) on 1Y the future through quick response to the future. And that h right here, giving progr;un inonnn! the skilk of timunands changes in the businew environnwnt: wnice to, and sluting pride in. Inuisi.uu?
of citizens last year. In 1987, apprw twtter wnice to ur tomers at a conpcti-inutely 8000 [wrsons signed up for GI D tise price and in. proved tvnetary sincerely, in response io IPM L ads controh to get the nxnt out of dollars we spend m we can continue to be a / '
tough o>st competitor. \
tot nw cophase that thew objeches James Al Cain are more tlun simply a oncqcar etfort. President & Cl O lhey are only the fotniation upon which will come ocn more long term efforts designed to keep IP&l. the nxnt effkient compan) in the 5151' System 5
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1 It b di10mit to inugine today tlut The story of the grsmth of the Aluit a nw> nth after Ouries lindbergh ;
I'dnoniimention of the first successful nimpany m er the past 60 3 cars is in large Ocw the .\tlantic alone and non-stop in incandescent cichric light bulb in 18~9 measure the story of the development of May 192", i P& L w as incorporated. The g.nc rise to angry Ictters such as this to a Louisiana, for o nuny of the nwxlern fornution of IP& L initiated an etfort Phila&tphia n,:vauper; exnh and comeniene taken for granted Out was to spread rapidly the countlew "No resident west of liroad Nrect today ham lxen nude pnsible by the benefits of electrical senice throughout desires the electric light. Would any one availability of safe, reliab!c electricity. large se tions ofInuisiana. Ilow was this of the niitors or owners of the d.uly papers initially louisiaru, like most other rural accomplished? Well, the Cornpany was a ,
f like one in front of his private duciling) ' state, of the South. lagged considerably merger, so to speak, of six relatiwly large Wott!d Af ayor King or any member of behind the rest of the tution in the dort- ~ and numerous other anullt r companies.
Cnuncih be delighted with one in front opment of electric powcr. New Orleans. I' rum this unique mix came die exprewon of his sie ping cham! wry There is no as ihe cate largest city. mis the logical "I.ucky ' for Inuisiana".1he old saying cir/ ni the wurid where it would be site for Grst efforts at bringing electricity literally desented the een wnices IP&I tolerated in a street occupied alnwat to Inuisiana. then offered its customers: electric, entirely by prhute residences as West in 1882, the Southwestern Brush clu tric railway, nunufacturn! and natural Chestnut Street is Do Suu admire the six Electric light and Pimvr Cumpany gas, telephone, w~ater and ice wnices. r red poles in each squarer installed i2 generators in the city 1 hey Key 6gures in the organiiation of the ,
I The writer of the letter wuuld no senrd 480 of the brilliant electric are Cnmpany wrir llancy Onuch, a builder doubt be more than'a little surprised to lights imented by Ourles E lirush nearly of eledric sp.tems in 1; uisiana, Miv.iwippi ,
l l see how electricity in a little mer a all of them for street lighting and Arkan e who sentd as president of l hundred > cars has transformed bdh in 188 i, the company illuminated LP&L from 197 to 19.%, and Sidney l Philadelp!n and the entire wurid Most world-famed Catul Street uith additiorul Muchdl, president of Electric Ilond and j' Americans today would rank electricity are light s. Slure Company, then one of the largest I
chne bchind the ewentiah of food. utikty holding companies in America.
] The 20s The Early Years l clothing and shelter in its irr.p >rtance to G och and Mitchell o>nmlidated dicir ,
' By 19N nwnt Americans had at least nte.csts into a single cmrdinated i
[ n.odern life.
wcn the datric light, but wry little of system owned by Electric Ptmu & !.ight i lhough not ner>une acctpted or rural Amenca was cledrined and this was g,rpiration, from which Middle South i wantal electricity initially. w e are certainly the case in Inuisiana. I t litics was later formed fatunate that enough far. sighted peoplc ,
How ewr, hundreds of small electric I P&l s first nujor generating station poswwed the wisdom. inginution and plants nd sptem31:ad begun operating was k>cated at Sterlington, la, near th(
entrepreneuri;n spirit to ce the throughout the nation. and luuhiaru tud center of a newl) diwowred natural gas tremendous potential for hununity nw nr dun a snunenog of Oxn aMw> ugh Deld, at tlut time the wuridilargest.
enunating from 1:dnoni new ly illumined ;
electricity was still unavailable to most Placed in senice in 19T, the l Menlo Park laboratory.
In the Deep South. Inuisiana Power I""i'i d"i d "' Nerlington station initially twusted twu ,
& light (nmpany was among the carbest 12.%0 kilowatt turlw generatort fly pk nrrs in bringing clednHeath m to luth 1929. twu additiorul turMgenerston lud the cities and the rural areas of louisiana. been added, making Nerlington one of a the largest producers of electricity in the N >uth.
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in 1927, IP&L wnrd 15,250 electric As America geared up for a possihic IP&lfs growth in the los was ontomers in 65 communitiesin m area war in 19 40, the nation seemed to wnw spectacular, and it was dif0 cult for mos,t j uith an estimated population of itK000.- the end of the depression. !!y year end, of those associated with the Compmy to 1he roaring 20s ended on a v3ur txxe the Company wnrd 50.212 electric fornec that an orn more phenomerul l fos ti e l'nitul Stain as the stock market customers decade lay imnxtliately ahead. !
crash of October,1929 plunged the !
The 40s: A Ilusy I)ecade The flourishing iifties !
tution into a wrenching depression ilut was to test the wry Ghcr of the free 'the onslaught of World War !! 1hc start of the Korean War in 1950 enterprise sprem and America's imuhrd nmch of the Qinpany's rewiurces again put the nation on an cmcryemy
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! democratic institutions during the early -10s IP&l. answ cred the status and wt tir stage for iniuhksi tinrs call to sent three hintling Army cam [w in America. Ilut ! P&lk strong emplusis {
The .h Deprewton Years Growth in the state while mote t!un 200 ofits on indu trial darlopment contributed !
IP&L fared far better than nwnt emplo)tes senrd actively in the Armed greatly to surging industrial gnmth in ,
i utdities during the depression >rars as it l'orces the state in the 50s. ;
continued expan ion ofits wnice to new The Company coniinued to grow 1he fint three units of Ninemile Point 1 a>mmunities prmiding light amid the modotly in the war years, limited by star.cd up in the Orst fulf of the decade, I drv.try darknew of the ea)nomic nulaise, restrictions of resouren needed for the addtag i i5.000 kilowatts of capability.
1 P&lls emphasis on building rural hostihtin. One accomplishnwnt, nujor at later,a 221.000 kilowatt unit wrnt on <
clettric hnn was not uniwnally acupied tlut time, was to atki a rxw geterating unit line at verhngtuit 1he importmce of hv other utilities. hut it was the Gimpanyi of 14Ju kilowatts at Sterlington, chic 0y this unit, though, was that it was wmi- i firm commitm^nt to extend its senice to sent military needs automated. It was a pioneer umt, pasing [
facilities into new territory "as rapidly as lhe w ar's end in 19 65 bn>ught with the way for wlut wuuld later become cconomitally pmible" it a need to replace nulitary loads the world% tirst completely autonuted ,
in 1936 McGregor Smith succeeded with peacetime uses 'Ri till this uni. steam electric generating station: > ct !
llanry Omch as president of the IP&l. ttyped up its emphasis on rural another engimrnng Gr*.t for IP&l,which l Company and in 1939 W. O. lbrner ekttrineation was rapidly gaining a nyutation as a
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sucurded $nuth. Turner had 10 3rars while rnuming construction of new leader in 2thunced utihty technok egs j carlier launt hed a distinguished career transmiwion lines and substations, IP& L in 195 s. I P&l. hcgan using aerial ,
at i P&I. that was to lead him to a 28 lear abo reduced b electric ratn for the hydraulie equipment for wnice, con- f tenure as chief executive othccr. More righth time since 192' struction and trer trimming work, a mow ,
tiun any other person. lbrncr i credited Gnmth was rapid. A ppular which gained recognition for the l with molding the dewhoment of I PM. n.arketing pn> gram called "lle a l' ort). Company as e leadd in such met tuniia- t through a combination of extraordmary Nirtr' a(kkil tlw neands of rxw custonrrs tion. as wcil llut the dewh pment of the ,
leadership and pisonal integnty lie was m 19 69. Ily the end of the > car. IP&l. industn's first "husLet truck" was not
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to head the Gimpany until his rt tirenrnt had grown to l' t.1 l9 customen and the last nujor innovation do chped h3 in 19T average annual rnidential electric I P&L lluge transmiwinn tourn lud to [
lhough I P&lls grow 1h during ihe etntomer consumption tlimbed to 900 t nm swumpy Nunh InuisianJ lb get the l tkprewion ycar was diffictJt, by 1939 kihmatt boun from 6'l in 1939. ph donc, Company plannen turned to the awrage r(wdential untonrr was using Other important ornts in 19 49 hclinpters i P&l then became the tint i M1 kihmatt houn a 3rar, more tlan in(luded the irginning of construction utihty to put the "wurk horw of the air" f twice the .ntrage in 1929. Whats more, on the new Nincmile Point generating on the ph in c rowmg the h.notn with
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than his 1929 a>unterpart lxcause of nulution of I Pa t as an operating reduust rates suh*idurv <,f the newly formed Middle [
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1 Ily 1955,IJ'&L atkled its 20Wn>th Despite the hurricanes the 60s were The 70u New Challenges l
clectric ctotomer. I.ucr in the decade great Scars for the Company with recortl IP&L entered the wientics with the
- the Cum [uny was required by federal law growth and important technohigical news tlut it planned to build a giant l
to dispne ofits gas operatioits. In 195K advancc5. r.uclear generating unit to be kn<mn as IP&l.ogani ed Inuisiana Gas Scnice 1.ittle qpy No. I came on line in Waterford 1 Alvi planned w ere two, l Comgunv. 'the Company transferred to 1%1 as the wurid\ first generatmg unit a 1 t t u n) Lih nvatt, fossil fuelal units at the Inuisiana Gas its non electne properties capable of fully autonuted operation- Waterford sitc.
at net book cost. I)unng the decade Company rtwtuo Another significant ornt in 19~0 i W. O Turner was clouted to cluirnun wred to $136.5 million from 5 66M was the elettion of floyd W. Iewis as l of the board and chief ewcutive oHicer million, a jump of 292 percent. The cluirnun and (hief executis e officer and [
in 1959 and G C. Rawls sice president number of customers increased to IL A. Rodrigue as president. Rodrigue in i in durge of operations was tumed 33 j Nil from 216.239 and astrage annual ;9 I was nanwd chief exennise o!&cr president. residential use of cledricity more than after I.cwis had twen elevated to the
'the Company's ahicwments in the doubled - from 3,ilI to 8 5'9 kilowatt g,sition of president of Middle south fifties nurked the most notable progrty lxaux A nujor acquisition of IP&L in n i;;;cs I
in its history with rapidly expanded 1966 wn l'eople Ctilitws, Inc., a utilitF 1horough study iryhcated a ddinite ;
o in umption, eternun industrial gn mth. based in Ituras I;t sening most of rural, need for the nuclear plant at Waterford and an optimistic organintton, wcil. and coastal, Plaquemines Parish 'Ihe but varh an gintrnnwnt ay.cncies delaytd I
pnitioned to take full adsantage of the purcluw of the snuller comluny not onh rtpcatedly the start of work. forcing costs j promising etiet increased IPal:s senit e area, but also to escalate dranutically. especially with [
r sened as an important testing gnumd the added effects of innation. ;
1he 5tormy 51stles !
for new technology llJsing to cross the Meanuhile, fuct supply problend ,
Repair and nuintenance crtws yjw;4p; pg.r and its Dcita region with wursened as wpplies of natural gas for probably remember the sistits mint for transmiwion and dntribution faciliticN generation ucre curtailn!, causing the f the three dnastating hurricancs that IP&l. pirtd m rience t!ut nude it an rumpan>% fuct costs to dirnh bm er. f savaged the southern end of the scnice ndugleadct in wning areas faust with hating an already ditticuh situation was terntory 1 hough Ihlda we nasty and problems unique to electric utilitics the imp >sition of the Arah oil embargo ;
Camille was sicious it w2s licts) w hose W. O Turner took wcll-carned in 19%
blustcry path through louisiana lef t an retirement in 196". lie was succeeded it) the mid wsentics IP&l slipped indelible imprewion as the worst omiral as Wf cwanist omccr by G C. Raw 1% mto declining financial health. forcing -
dnaster in i P&l s history president of the Company since 19W the Company in 19 6 to file ior its first f itety darupted wnirt to all 2tMttut gpgg, yg.d to the sornties with ntr retail rate inc:ene, after 29 rate IP&l ontomers in south louisi.uu. mandence Mid h Ni9 annual rtport. a.cwm in ih GN 50 p' The f inth(t ng $10 millain danuge to Compam-
~1hc future of1P&I will take PLRe withm Company citinutely was granted an facilitics li> this day,Itets) n blanwd for an emironment that should be excionM~ increaw of Icw tiua 2% perunt of the ,
the worst wrather caused danuge ocr t hallenging and estremely prot'uctiver anutnt mught. nuimg twawrv a wmxl [
sisited on a uttht) company. At one point. lhe statonent was pn phetic on all o *ints. r.nc rchef appihation in 19~8 f the recoscry ctrort engaged more llun ;
2 th M) workers from as far away n Penns)hania. Nome 90 gwrcent of I P&l.
untonwrs were back in wruce within 10 l days, a renurlable feat especially in siew i of the wstre th uting whah nude acum to sonw areas sirtually impowble.
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' in 1976 onJack 51 W)2tt who was , particularly harsh recewion in Inuisiana in describing a companyi rewarth etYorts dected president and chkf executiw contributed to sewre financial pn>blems llut for if&L 1: , a accurate description otticer of LP&L for the Omipam;causingIP&L to sicnd of industry firsts ake: using M) kiknuit 1 hough the decade had seen severe ' = paynrnt of its quarterly common dnidend (kV) transmiwion, designing a teew hardships for the O)mpany,it nunaged from the third quarter of 1985 until the monitoring (umputer for plants like the to umtinue increasing mice, coruroing third kl uarter of 1987 Waterford 3 nuclear unit; comtrting 115 its $00 moth customer. The Gampany' Other rotewurthy events in the LV substatioits ,230 kV using existing otraually alw receiiut rate relief eighties includal the election of James truoutes; irtstalling fiber optic pilot wire amounting to $59In million from the St. Cain as president in 1982 and chief relays; denloping theJarraff tree-trimming invWana public Senice Gimmiwion 1he executive officer in 1983 and the machine; using 500 kV gas insulated amount was far Icw than the Company settlement with Texaco in 1982 of a substations; designing and doeloping a considered to be essential but it was dispute over disruptett natural gas new substation battery alarm; using tap-no crthelew quite welcome. supplies lhe settlement brought icw pole top distribution tr'ansformers; payinems totalling a $1.087 bilhon to and designing and developing the 1he 80s: Nuclear Era if&l, which has resulted in annual "rocket ship" steel foundation for swamp The Waterford 3 nuclear plant, then nfunds to IP&L natoners since that time. constructiott called "tir largest single bdustrial project Plans wrre announced in 1981 for %me engineers nuy consider a in tvuisiana history" beg.tn commercial IP&L and its sister uimpany New Orleans diflicult situa.lon as a problent At IP&L
. operation in 1985 with a 1101 twgawatt- Public Senice Inc., to consolidate wr u>nsider it a ciullenge, another oppor-rated capnitt -
' operations Public Senice pnnides tunity to impnnt senkt and reliability A few mondts earlier, the 1250-ekcnicity to 16 of N.ov Orkarts' 17 wurds for our nNome rs while sasing money at meg.rwatt Grand Gtdl 1 nuclear plint wtmt .
and gas senice to the entire city the same time.
into q1eration in Port Gibwirt Sliwissippi. Pionecr? T,es, m, dced 15ut with each 1.unctional consolidation was virtuahy IP&l's artiliate, Sp, tem linergy Reviurces, mmplete by 1985 but legal (uroolidation day of innmation and new technoh>gy '
Inc. ($1 RI), owne>O pmnt of the plant comes orn more reasons for IP&!. to is pending before state, kwal and frderal artlIPal.pwcluses 14 percent of sf RI's regulatoi y agencies use the wurd proudly Inuisiana Power partion of the pimrr.
The I uture Challeoges and & IJght Company: 60 Years of N nice to, We Waterford 3 and Grand Gulf 1 ar.d Pride in luutaiana. And hmking projects signal major auumplishments opportunities forward to 60 more Sears of the same in the fuel diverstfication program of Ihe lhcre is no question that IP&l:3 first tspe of etTort and spirit.
Company and $1'RI. awuring reliable 60 years wcre filled with expansion, dectricity for decades excitement and engineering firsts Our next 60 yean will be equally challenging on nuny fronts, induding both the legal and regulatory arenas I s en diough these fautmf the Gimpan>% future nuy require much attention. IPAL will continue to ny nr fonwrti as a pioneer of innin,tions to better sene its customers while holding costs dou 12
4 I
1he nunagement ofInuisiana powcr the intcgrity. olyectisity, and rchability of financul npirting matteri 1he
& Upht Company has pnpared and is the fituncial records ar.1 as to the independent public accountants and the responsible Ior the financial statenwnts protection of assets.1his sptem includes intertu! auditors have free access to the and related financial intornution iix tuded communication through w ritten policies auJit committcc at any time.
in thn annual aport.1he financial and pnitedures as w cil as an organization 1he inikpendent public accountants datements are based on gerrrally structure that prosiJes for appnpriate prmide ;m ohntive awessment of the acctpted accounting principles, applied disision of responWhility and the training degree to w hith matugement ncets its on a co nistent basis, after restatement of personnel.1his system is alw tcsted by responsibility for fairness of financial for the clunge in the method of a comprehensise internal audit program nporting 1 hey regularly cealuate the accounting for disallowed plant costs as The ikiard of Directors pursues its sptem of intctnal accounting controls dewribed in Note 13 N Notes to l'inancial responsibility for rcported financial and perform suth tests and other Statements. l'inancial ireirnution infiirnuti< ir) thr ough its audit committee, procedur(s as they deem necewary to included elsewhere in this report is oimposed of outside directors lhe audit reath and exprew an opinion on the consistent uith the financial statements committee meets periodically with fairnew of the firuncial statements To meet its responsibilitics with nunagement, the int ernal auditors, and Management belieses that these respect to financialinfornutim, the independent public Ncountants to policies and procedures proside nunagement maintains and enfor ces a discuw auditing. internal control. and reasonable awurante that its operations sptem of internal at counting (ontroh are carried out with a high standard of that is designed to pruside reasonable businew conduct.
awurance, on a cost effectnr basis, as to
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" /# # linancial position of the Company at December 31,198~ and 19x6 and the results of its operations and its cash Inuisiaru ptmtr & l.ight Company: k M dm p m dr We hast cumirrd the balarxt heets pernid ended butmher 31,198' in of luuisiana Dmtr & light Compam as conformity with generath aucpted of I)ct embcr 31,198' and 1986 and the . . .
accountmg prinoples apphed on a related statements of income, retained consistent basis. after restatement for c.irnings and cash flow s for cat h of the thange. with w hah wc concur. in the three Scars in the period ended the nrthod of at ounting for dnallowed Dc(cmtwr 31,198'. Our cum',utions plant costs .n descrthed in Note 13 to wcre nude in atcordance with generath -
the h.aantui statements acupted auditing standards and at cuidmgly. int haled sin h tests of the ,
auounting ruords and sut h other [g auditing pn sedures as we toroideral rwtcwars in the circumstantes New (1ricans I ouisuna in L41r tpillH Hl. the ahtnc mentHnned lchru.trs 29 IoS8 1s
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l l
l 1987 1986 l (In 1 b t N nds) l A % cts j 1
(TilllY PLANT (Notes ! I and 13) $ 4,282,263 $ 1,I4M,??2 I lectrie 120,74" 113,282 Construdion work in progrew __
115.323 20A95 Niw! car furt 4,510,M68 4.290.014 Tota) 1 ew accumulated depreciation (H2 4,465) (*21.544)
I'tihty plant - net 3E03 3.56M -471 01111 R PROPl R'lY ANI)INVIKl3tiXIX tar .tnxnt in udisidiar) comguny - at equity (Note MI) 49.524 19.524 662 611 _,
Other 50,186 50,135 Total
(.I'RR1 NT A% lith CA and special deposits 11,803 16"$6 Tengwrary imestments - at cost, w hich alyrosinutes nurket:
6,040 t1,1(M)
Awitiated companics ( Note 1)
Othcr % 560 M2.9t x)
Total cash arxl cash equivalents (Note 1I) 74 5')3 I lil ~ %
Notes receivaNe 310 336 Accounts ret civable:
Cuvomer a:W other (Irw allowance for doubtful customer accounts of S I M M) t W MI in 198' arkt $ 1.3M5.t M M I in 1986) C.W %. I Awai.ited companies __
I*534 .
982 50,936 54.973 ;
A(crued unbilled rarnues ( Note Ilt)
Irwume tases re(civable (Note 3 ) 5,933 20h40 10,320 14a04 Ntat;ruls and upplies - at astrage cost 6,658 7,093 Preiu)ments . _ .
I2 918 12 328 Odwr .
yog,]
210,M4 2"(ih 49 i)! I1 RR1 !) I)1 lilI s
?i7,200 226,s20 1)cferred Waterford 3 cspenws ( Notca. IG. 2 and MG )
27,094 2MJ21 l'namortiicd debt espen .c (Note (i)
Other 12 Mi2 '90 I 2M7,106 258,131 ,
~lotal __ f
$ a,23 6,3 49 ) 4.1 **).386 TOI Al ___ _
lim tu trt n rtNati ti to rt tkt t Ihe M p a wi a d Si U. N 'a l ( a t N gr I ' I sr % at s 1., i own tal $dstrue nh 0
l 1987 p>u, CapitalizatlOn alid Liabilities GPITAll/ATIOS Comnw>n stmk, no par ulue, authorital I401oup) slurcs; $ 903,'M $ 903300 iwoed and ouistanding i3',110MK) Aires (Note 5) _
- 660 Paid in capital 16.0*6 ( -i0.201 ',
Retained carnings(dcIlot)(Notes ? and 13) 919,976 86 i,3 av lbtal mmraon shan;1mideri equity _
145,882 16M2 hel'errtd vou, without sinking fund (Note 5) 241 3 61 2'2.129 Prcierred Mock, with sinking f und (Note 5)__, . . _ __
1,'72,261 inng term debt (Note 6) 1.'83032 _
3,079,4M3 3 m5.392 lbtal _
0:'lil.R NONCl'Rki'NT ll \llli-ITith 56,363 -
Obligations undct capital leases ( Notc 11 ) 7,912 6.983 Accumulated prosision for propcrty insurance 5,326 3.398 Auumulated prinision for injurns t.nd damages 69,601 10.381 lbtal C1'RRI.NT 11AlllllTilA 2,M32 22," s Currently maturing long term debt (Note 6) __
Auuunts payable: 59,409 68,902 Awitiated cotogunics 67,592 60A1M
()ther 31,168 29.828 Customer deposits 16,597 16.938 Taves ac~ rued __
3,936 1 e. 82 Accumulated deterred inmme tnes (No:e 3 ) 44,505 6,363 laternt accrued 12,095 13.1 i i Dniderwh declared (Note 5)
Gas contr.nt settlement - habilin io customers 56,403 %6 60 (Notes 2 and 12) 21,31i 16.3~6 Dctcrred fuct cost . (Note 111)
Obligations under capital lea cs (Note 11 ) 45,5,o _
l 4,002 t o 200 Other__ _
365.393 3Wl'2 lotal DITI RRI D CRI DITs 251,426 211.030 Accumulated deferred income ta xes ( Note 3 )
308 5'i 109 ~~'
At cumulated dcferred im estment tas credits (Ni.tc 3 )
Gas contract setticment - liabilits to customers 2MI 61 l 338.0~6 (Notes 2 and f 2) . _
18,261 20.558 Other
' 19,M' 2 w i41.
Total CO\l\llDll N'l s AND 0 )NTINGl NCll 5 (Notes 2, M. I 1, and 12 ) _ ___ _.
-$ 6,23 4,3 49 54.
1 0 TAI --- - - - .l so. %_ _ _ _ _ _ _
h ! , (
N r N dn h,Iirwm ut dairns na
,s
p ,, d 6
e,-
STAITMNr% OF 11% OME '
(IDSS) .. -
I AND RFTAINED EAltNINGS l
. (DF$tCIT) ,,
j l
1 1
f or the 3r. irs cruled December 31. 1987 1986 1985 (In lhotNixb)
Statements of Income (Inss) - I
$1,340,902 51.~4 49.211 51.259.?'O l OPilullNG RlYI NL lA (Note ill) '
()PI LUTING ITPIMl:S 569,119 595.012 ~67.820 l'uct and pun based ptmer (Notes 1il and MD) 206,612 219.129 16i,'85 0:bcr opet ation espenws
\l nmciunte 88,611 88,198 50(40 ,
118,769 116.125 (6 586 Deprecl2 tion 46,106 -12.393 3', e 12 %
' lases other tiun income tases __.
26,70? 11,#32 (2,965) income tases (Note 3 ).__
Rate dcferralv
( 21,0M0) (2% 000) (20,120)
Dcferred Waterford 3 espenses (Notes 1G ar.d 2) 94 1 _ 103.659 10.12 e frwome t.ncs (Notc 3) gmg 1,044,27M 99'A9 8 1.O'3.'10 OPl it\11NG INCOill 2Wi,62 6 339.233 1WiM 01 til R IN( Oill: (Di DI (.TIONs)
Allowance for equity funds used during construction ( Note il ) I'9 0 IN 90 3'I
\lm citaneous inco<nt and dedudions - net .
7'I92 A'I' I 3 99~
fr,come lases (Note 3) (2,04 O ( l.15' ) ( '.101 )
gogat ,
7.093 6.110 9' . 2 6' APP 1l cal'l()N Ol' SI As NO 90 (Notc I3).
DNllimed plant costs ___ ___
i 6.tM )
_ _ ggyg9) intomc t.ises ( Note 3)_
_ , g Total i IN'll H151~ ( ll ARGI 5-Intercst on long term debt gg .,66 18'.516 IM58' y gg., pg3 g uther intcrest - net (Notes -i and 12) g.g.3 gggy3y3 Allimante thr turrimed fund 3 u .nl durirN' construt tion ( Note 11 )_ 18M,0bH
.l .otal lo l N Mi 150 510 NI i IN( O\li: (! oss) -
I II ' ' '
1 l
Statements of itetained lilrnings (Deficu) -
Ri l slNI D I:ARNING5 ( Ul l lCl l').
January 1. as ptcsiously npirtett $ 142,029 5 51.500 5 51.. W
( umulatne tilat of retroactncly app!png 51 A5 No 90 ( Note 13)_ (185494) -
.lanuan 1. as adjusted (IM'g' ' 40) ,493, 5 1 9 I d'6' ( 5 LM21)
ADD Nct income (low) -
liital __
,, ,pg D11)l CI:
Dnidcuds ( Note 5 )
Pn4ctred stot k -
50,"'21 53 W 2(i.91 H i n tctred stin L arrearages _ .
_ _ y.gg
( omny >n stin k g _ ,a 645
( 'apital sti % k cs[TOscs _ .
g3 ,
g.
10:21 __ _
RI 'l \lNI D 1 ARNhGs ( D1 i1( lI ).
Ik tcmic 31 ( Note ')_ , ,6 5 t U .'01) HIAR894)
% ni W u tu n , wW ta n ni u o= aa pm a 9 w %i a u u %.a m
%1 s 'Hg s le s IIlhfh aJI \I AM Dit ill4 1b
a i.
l l
l a l
I l , ,
l 3
/,
Ibr the Scars endal Dettmhcr 31. 1987 1986 1985
! (in huunds) i
! OPIluTING ACT15TI113 l Net income (loss)___ $ 115,649 5143'6" $ (53.H21)
- Advistments to nwncile rx1 inmme to nct c,te pnnidcd by operating adnitics J Disallowed plant costs (Note 13) - -
2'63)(X) 118,769 116,125 66,58i !
l Derociation DcferrcJ income tauw (Note 3) 29,550 156.82* (60,30- )
I Dcferred Waterford 3 expenses (Notes IG. 2. and 8G) (21,080) ( M dxx)) (20.120) l Allowan(e for funds uwd dur:ng tonstruction (Note IF) (3,087) (2647) (12*,283)
Amortintion of nuclear fuct aswmblics 1,353 2.16( 6.179 ,
imestment tax credits - net (Note 3) (1,203) (l.254) (451s Changes in Receivables 25,413 3.316 ( 35.0'7 )
l Accounts payable 17,681 (35.890) 19,124 Defer n d fuel costs _
4,938 ( l 33>93) 13,513 Tates and interest accrued . _
(1,199) 56 10.309 Other current assets and liabilitics (530) (2.371) 3. f l8 Pimer parthaw advance papnents ( Note 8D) - -
(37'*6) s
- 11,434 M8,719 Pimtr purchase adwnce rep.nments ( Note MD)
Refunds to customers - gas mntract wttlements (Notes 2 alxl 12) (56,512) ( 56,3'4 ) (62/X> s)
( '
(16,434) (lH0 6) 11,594 Other Net cash providu! by operating artisitics 213,30M 9'.081 128.53N !
INVI STING ACTIVITIL5-.
l _ _ g 2,3 0 3 Imestment in mbsidiars (Note 81)
Construction expenditures (126,792) (l15,121) (329.803) t Nuticar futl cywnditures _ _ _ _ ___
(2H,663) ( 56. 4 2 a ) ( 12,* 16 )
Pnsceds from sale and lea,chatL of nutlear fut1 21,205 4H.605 2r f 3,087 2.60 Allowance for fwxh used during mnstrt ction ( Note Il') 12*.283 i j '
Net cash uwd in imrsting actisil.cs (131,163) (l20a931 (21 uo3) i i llNANCING ACTIVITil3
- I Pn x ccds from iwunce of:
l l'irst mortgage hmxh ._
- % 501M) -
i 1,45' ;
Other long term dcht 134.952 Comnmn stmL I00.000 l j Retirement of first mortgage binh (20,000) (3%JMM)) - !
Rctirement of other long term debt (5,722) (4369) (2.549)
{ .
(32,591) (6.'4i) (6.510) 4 Redemption of profctred sto(L _.
l Clunges in short term hornmings (133H59) 143.H59 ;
l Dnidctwh paid on common stot L (M,315) -
(109.86')
j Dniderwh paid on prtferred ,tmL ($ 1,"0) (66 632) ( 40.4'3 ) t i Net cash prouded by (used in) financing actisitics (1 I M,398) 12 4.14 M '5.91' Not increase (dcercase) in cash and cash equivalents (36,2f3) 99 ".e ( 9.9 i8 ) l j
C#h and cash equnalents at begmning of scar 110,'56 11.020 20.9 M i 5 7i307 5 1IT C i Cash and cash equiulents at end of') car 5 110.*56 l l
F i
si'PPlf MI .NT51. DisCIOst R13 Ol' CAsti il()W INI OR51 AllON. l 4 Cah paid (rcccised) dunng the scar lor i 5 186,54H 5 19 040
! Interest 5 185.033 j l Income tases 5 (4,630) 5 ( 4,'0 4 ) 5 (3.961)
M Pl'lLMI N~l Al M 111 Dt 'll 01 NONCAsil INYl AllNG AND iINANCING ACIIVITil s Capital leaw obligations rnurdeti ( Nate 1 I ) I I 43'2' - -
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EUnthtARY Oy ., . to accumulated depreciation %14inten. Deferred incon,; taxes are prosided l I ance and repairs of pnperts and the for differences betwren book and taxable
~
MGNIPN' ANT
,' ACDIntN11NG replacement of items determined to he income to the ext: nt permitted by the NN less than units of pnperty are ch. aged regulatory bodies for ra enuking purpoo
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to operating expenses. Principally all of Wrstment tax credits allocated to the the utility plant is subject to the lien of Company are deferred and amortized A. System of Accounts the Com,unys first mortgage indenture. base'l on the average useful life of the l in addition, certain aswts of the 03mpany related property in a Lunner consistent The accounts of the Company am are subject to th e liens of second with ratenuking treatment.
nuintained in acconi.uxr with the system nx>ngages of accounts prescribed by the Inuisiana F. Allowance for Funds Used During thblic Senice Commiwkm (IM),which Depreciation is computed on the straight line basis at rates based on the conforms to the l'niform 5ntem of To 'he extent that the Company is estimated senice lives of the various Accounts as prescribed by the federal not permitted by its regulae bodies to clasws of pnperty Depreciation rates for Inc rJy Regulatory Commiwlon ( F ERC). munrr b wrrent rates the ming msts Waterford 3 include a pro'ision for f funds uwd for constrtntion,it H. Hevenues and Deferred Fuel Cost $ nuclear pland decommissioning costs. {
capitalizes as an apprtpriate cost of utility The Company recognlics rtwnacs as Depreciation pnnisions on astrage plant AFDC, which is calculated and hilk d to mstomen on a otte hilling basis depreciable pnpr.rty amounted to recorded as prosided by the regulatory in addition to an accrual for estimated a;proxinutely 2 H t in 198',2 Yt,in 19M, sprem of accounts l'nder this utility unbilled rtwnues t nhdkd rtwrnies axilt and 3 0% in 1985.
industry practice. construction work in from energy deinered since the period D. Pmtretirement Benefits progrew on the bahnce sheet is or.tred by the latest billings to m tomen.
The Company has pmtretirement charged and the income statement is lhe rate schedules of the Company plam antring sulnantially all empkign cre<lited for the approximate net indude fuel adjustment (lames under i lhe Company's polig is to fund pens.on mmpnite interest cost of horrtsrd funds J whkh fuel cmts are hitled to customers msts in acmedance with guidelines and for a reasonable return on the equity 1he Company defers under, oser established by the Emplo>re Retirement funds used for comtructiort This reo Arnes of fuel o rsts tlut ocmr through Income N curity Act of 1974. The costs procedure is intended to remove from operation of the fuel adjustment clauses Ipmtretirement welfare benefit plans the inmme statement the effect of the until these costCcredits are reflected in are funded a inwrrui o nt of financing the mnstructi(m pryam hillings to customers and results in treating the AFDC charges C. I'tility Plant and Depreciation L Inmme Taxes in t!x same nunner as construction labor i The Cornpany joim in parent, Middle and material costs. As non-cash itcmt i hhty plant is recortled at original South l'tilities, Inc. (Mst ), in filing a these credits to the income statement ont Panial disallow 2nces of plant mnvilidated federa! income tax returti have no effect en current cash earnings msts ortlerni by the regulator h.nr hern )
rrmrtksi as an adttNment to utihty phnt- Income tms are aHocated to the After the pnperty is placed in semcc, l ampany b pnponion to its omtnbutum the AFDC charged to cou truction costs (see Note 13. Statements of Iinancial Aco>unting Nandards ($ FAN) No. 90") to the conv>hdated taxable income. is recoverable from customen through 1he ont of atklitions to utility plant inmue taws n an ahle indude estinuted depreciation pnnwions included in rates inducks mntracted wurk, direct labor, anmn due under the tax alhication (turged for utihty senia The cumposite agmemem AIDC rates for the Company wrre 8 73%
nutcruls alh > cable mrs heads. and an allowanor for the mnposite mst of funds and 9'70 for 19M' and 19M, re pettnely used dunng mnstruoion ( AIDC) 1he for the >rar 1985, the effecthe AFDC msts of unih of pnperty rttired are compwite rates were 9.'9 L and 4 6H L rvnuni fn un utibty plant, and such ona for non-Waterfon.13-relatn! and Waterfortl p!tn rrmie.d ms5 km sahage are durgni 3 construction co'ts, respectively The is
~_
i I
Company ceased accruing All)C on that 7.re deferred in the early 3rars of 11. Other Noncurrent 1. labilities Waterford 3 as of its in sersice date of ammrreial operation wtxdd tr wucced 1he Company pnnides for uninsured
$cptember 24,1985. Lilatu 3rars fnm mstonm th deferrinH pnycrty rids and for clainn for injuries The Q>npany's policy is to continue amounts to the future when they wuuld arvi damages through durges to oper-to capitailie All)C on projects during be collected through increawd rate' ating expenses on an accrual basiv periods of imerrupted mnstrucion wirn billed t. customers, the imtuct of the such expenses hast tWen allowed for 3uch interraption is temporary, the deferral aspect of the phase in plan on ratemaking purpwes.
continuation can be Justified as being the income statement has been remined
- 1. Statements of Cash Flon reasoruble urn'er the cirmmstances, and liccause the actual collection of rornues to recosvr the deferred amount was not During 198', the Fint.n-ial Account.
it h probable such costs will be recmtr.
to occur until the future, the Company ing St.usdards Board (FAsil)iwued $1 A5 able through rates.
recorded a deferred awet representing No. 95, "Naiement of Cadt flow (" The G. Rate Deferrals the amount of the deferral arxi, at the Company has adopted SFA5 No 95 and Pursuant to the Narmber 1985, Apnl same time, incurred additional capital replaced the statements of Chatyes in 198', and June 198' LP5C rate orders, requirements to firunce this deferral. Financial Position with statements of the Company has deferred, for future for further discuwions of the abost C.tsh 110ws in the current and prior )rars' rec (nrry, a portion of its onts aw,ciated mentioned rate orders and related financial statements prescnted herein.
with Waterford 3 ($247 million htigation, and the Conpami pluw in plan, f or purpows of the $tatement of Cash accumulated as of January 31, y g,7..K.tte Mat'ers", and Note 8, flows. the Company consideis all highly 1987). The deferred cents are to be G>mmnmems W Gamgenoes - New liquid debt instruments purchased with phawd in on a m.hedule to be determined Accounting standards". a maturity of three rnonths or less to be
- by the USC. L'nder this plan, those costs cadi equ ems I
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a its retail customers, $28 4 milhon ci it, Neam ilettric Generating station
' - - - imestment in Waterford 3. h1 addition, (nuctrar)(Grand Gulf 1). of which 90i the Company agreed that the UNC nur is ownt 1 hs Systcm Fncrgy Rcw urces, in Nntmber 1985, the IJM' issued an dnallow on a prospectist b.on. sub- Inc (51 RI). The consultano concluded ordct (Nntmber 1985 Order) granting wqucnt to a prudence imestigation and that 514 4 milhon in expenthtures the Company an emergency interim rate subint to appeal. any 4 aterford 3 awociated with the construction of increase of $10C nulhon (nct of fuel expenditures found imprudent, l'ut only Waterford 3 were imprudently incurred s.nings), after apphcation of certain to the estent th.it such imprudem it is the pwition of the ( ompan3 that conditions and xttnairng the Company expcshtures excco.1 $28 4 nulhon none of the costs were imprudently in connection with the Nntmher incurred Moroner, sinte the consultants to dcfer on an annual basis for future reoner) approxmutely 5200 milhon 19xi Order, the i PsC. retained an attributed an amount to imprudence of (amtmulated to 5 2 4' mdlion through independent consulting firm to cotxtuct icw than the 528 4 mdhon prcuoud)
January 31,198') of 4 aterford 3 costs a pnkkar in tstigation of the Companyi agrccd up,n, the Company txbcm tlut As part of the Nnernber 1985 Ocdct, tonstrucuon of Waterford 3 and par- no additional finandal dnallow ante h the O>mpany agreed that it wuuld tiopation in the pun h2w of capauty and anttried lhe nport abo contluded that pernunently absorb, and not recarr from encrgs from !' nit No 1 of the Grand Gulf the dcenions to build 4 aterford 3 and
f ao ent(r into a contract for Gratx! Gulf I an add:tiatul rate ins Traw of 5'6 2 nullion On Slay 6,1987, the Company filed powcr w cre reasonable A3 of !)ct emfwr annually;( 4 ) ordered tSat there he no with the iIN: a Slotion for Rehcanng 3 L WC the 11N:lud not in:lwated its furtix r or future phwins and no and Cbrification of Order in order to tondusions on the pmdcrxe iwucs in adththwul rconenn of Watertord 3 costs obtain cianfication of certain prtnision December 190 the Company imple- arx!(5) stated tlut the pruden(c iwue of the April 1987 Order. An ong other nwn.cd 2 ccw aco>unting standard tlw would not be resobed in this order. things, the April 1987 Order, a wTitten, requned rt o rt!mg. as a low, the LIN:\ Motions for relwanog were filed by (vrtain did not on its face panide adequate jun datuul portion (approsinutcl> intenenort and on Starch 21,19M*, ti.e awurance of future reonrry, through a Sr6 9 milhon) of the 5281 million of 11N! gramcd a reheanog but dxl not grant phase.in plan, of pt esiously defet red, but ihsdhmul tnwstnwet in V aterfard 3.1hc a suspension of or stay with respect to unrcontred Waterford 3 expenses.
oimukthe durge to I)ecember 31,1986 theJanuary 198* Order or the rates in re ponw to such nution the UN' retained earnings as a revdt of the low therein authori/cd. in its order dated June 26,198* (June I
was %1822 nv1on. net of tat (See Note Iollowing hearings the IJN: iwued 198' Order). among other things, ( I )
- Retahx d i arnings", and Note 13, an order datn! Apnl 29,198' ( Apnl 198" found that, except as to the January 198' "Statenwnt of Imanual Aicounting Ordcr) tlut ( I) detenhitwd that a 1983 Order, the Apnl 198" Ord(r was not s.tandards No. 90.") order of the IJ tt requiring annual rtfursLs intended to change any of the iBCs
- 11) order dated Janum 30,198' to custonwrs of funds revilting from the oiders iwurd in tlk rate pnx ceding (January 198' Order ), tlw I IN:, anmng aNncmentioned wtt!cnwnt agreenwnt (w hith wudd intlede the Nmrrnher other things ( 1) ruled tlut the intrall with a gas suppher (and the refund 19M5 Order pnniding for th< deferral l fair rate of retam on rate base appnipriate w bedule therrin adopted ) simuld tw and future reontry of apprusinuttiv 52 4" for ratenuking pt: pm for the Company remstated and, accordmglv ordered tlut niillion of Waterford 3 onts inotrred (utduing a rate of return on comnun the 198' refutxt of 5% 2 milhon to IJN: through January 31,198'), ( 2 ) cenied equity of 121) is Id 'M :( 2 ) ordered lunshctional custonwrs be nude within the Om1parni Mion for Rc!wanng. and the Conpany to forego further rctunds 30 dan of the ellectist date of the April ( 3 ) as ta the rcqtwsted clanticath wt stated to its junshttiosul custonwrs presiousl> 198' Order and ( 2) determined, on the that, by inc April 198' Order, the IJN:
ordered in connedion w th the proceeds basis of the phaw in of Waterford 4 cmts (a)lud abandoned the January 198' of a wtticment with a gas suppher (see rtcommended by its o>nsultants tlut the Order, ( h ) had rcJuced the rate increase Note 12, Nttlement Agreement with Gas Compan)\ rate increase should x 5 6H of 5'6.. rilu.1,snnided by theJanuary Supphcr") and to use these funds, ap- nulhon anntully rathcr tlun l'6 2 m.lhon, 198' Oitk r, to 5 68 rni!iion, and (c ) had proxinutcly 1380 milhon as to llN: and ordered that the Compa w redure reinstated . .c rtfmwhng program in fasur kirishdional ontomers (a ) to he appbed its rato accordugly h) 528 2 milhon on of 11N: pnshdional utstonwrs proiously against (uwd to reo ner ) the auumulatco the ctlt une date ol ',he order the iJN: ordered in o>nrntion with the aNnr.
Waterford 3 costs approsinuting 52 F further stated tiut it espected the nwntioned wtticnwnt agreement with a nult i on as of Januan 31.198' that had Compan) to rtk furt!wr rate rchef in gas vippher 11w rc tuuiou in the tv.n dctirred purvunt to tlw Nintmht r the future purwunt to unh pfuw-in. but Compa1yi ratc increase from 5 6.2 1985 Order and (h) to reduce its rate that the ! PE thd toq by its t.rdec appnne Nihon to f sH milhon was pl/ced into tuw in,cstnwnt in Watertont 3 with the any future rate increaws aad w di grant c}ci sn Ju') 6,198' Additionall). Ilx ren'a.iung 5139 nulhon. ( 3) granted tlx ' an incrt aw to unt r anmnts the Company nude the rcquired 5% 2 Company. in additui t, the rate increase Company n required to defer om) d d,' nm ' in rctund to the i.IN: junslictional risatung from the Ninemhcr 19x% t trtk r. rate increases are sim n to bc fust ant < omers on thit same date reasotuhle af ter a he nng 2n
4
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A p liy its Nncmber 1985, April 1987, 540 millk m in increasal anntui rornnes not reonern! thsough January 31,198' andJune 1987 Orders, the LMC tui T1r Company ait the LP5C lust appeaksi and will not, during this perhxi, he 4 prtnided adequate awurance to the the Nntmber 1987 Judgment to the required to write of f (i e.. record as a
%, Company as to the future reuntry of Inuhlaru R preme Court. 'the nutter h h,w) any suth ctots. On the other hand, approxinutely $2 67 million of deferred pending. althougl the Nt. scriber 1987 Judgment Waterford 3 costs accumulated through With respect to the accounting for wuuld luse allowrd the Company to January 31,1987, twt not with resprt dderred Waterford 3 arts the proious tycord as aa awet an addi*ional 119 to certain addithmul Waterford 3 costs orders of the LPSC in the dune rate mithiof Waterforu 3 untsincurred but incurred but not twostred subseqtKmt pn act eding lus e pnAided adequare not reuntred fn>m August 12,198" to July 6,1987 (estimatril by the LPSC's awutmec Cth respect to the reonrry through January 31,1988, the Company 4
- omsutiants eo approximate $40 millior, of $2 4? mdlion it such unts anumulatol h.n rmt, in 1 ght of the omding appeal of on 2n annual basis). OnJuly 8,1987, the anJ defer td thnn.yh Januarv 31,1987 the Nntmher 198' Judgment, recorded Company appeakd to the Nineteenth and, inkler generalb acuptu! accounting on its lux >Ls any additional dderrah Judicial Dktrict Court for the Pariu of principles in effect prior to adoption of swic hted with such onts twt rather has fast flaton Rouge,Inuklaru (District SI AS No. 92 (see Note M. "Commitments retuidal wxh onts as current operating Court ), anx mg other things thove aspsts and Cnntingencies - New Accounting exmmws Toe To>rding of these of the IP5C orders that faikd to pnnide Standardi), the Compa'iy has been additioral onts as expenws has tud an adequate awurance of future reontry of pernutted to record stNb tieferred com adwrw effect r;a m the Cun pany's Waterford 3 ctnts incurred but twa o an asw' Ihme.or, the ad ption cf si As earnings rectnrred subsequent tojuly fi,1987 NL 92 will require, anong other things Onfcbruary 19.1988, the Corpany On Nntmber 10,1987, the Distrwt Cnurt that the iPSC agree to a fornul phaw in fik - with the IPSC an applicatioa for hsued a italgirxmt (Nowmher 1987 plan that spaifin the timing (and meets retail rate relief (February 198Fe Rate ,
Judgment) that, among other things tbc timing requinmous) of rectnrry of Filing) rtquesting a net trwTraw in annual would haw alkmrd the Conpany to onts proiously deferred in order to rewnues of $38 2 milhonathkct to the recurd approxinutely $19 mdlion in permat the G oguny to actinue to rtu nt firul outconr <4 appeah of the Nncmber !
adQrional defer rak awiciated with six h ants as an aw t. Accontingly. the 198' Judgment,in a ta frenide the Waterford 3 onts incurred but not Company has nude an appiiration to the Company witn an I L41% rate of return rectnrred from August 12,198* thnugh LPsC in compliance with the innsithm on rate base. Mou'd the Inuisiana Jantury 31,1988 in ackhtion, the pnniGins of SFA5 Nt 92, for appnnal Supnmic Coart cirrturn the Dhtrict Nntmher 198' judgment authoriicd the of a fornut plan for the future reonerv Court's Nntmb r 198* Judgmcmt, the i
Cnnpany tc inplement rato for snices of rpproximately $266 million ( $2 4* Company b requoting an alternate net rrrxlered on and aftei rebnury 1,1988 mJlon nu akd aukferr h aw January increase in aanual tornues of l'8 2 pnnidmg ilm Company a 540 mdlum 31,198" and 614 million of additional million in order to achine the i1.4l'A, increase in anntul base ra'e rntmuch o ots incurred. but not reonvred. or rttur a on rate haw. As part if the rttmury subject to refund This annunt b in deferred, from Augtot 12,198* through 1988 Rate hhng. the Conpany has ,
add tion to the 5 48 million annu21 rate Jmuary 31 lWM) Perwhng the outonne submitted a fornul pluse-in plan for the irxTease prinidtd by tir Apnl 198" Ort ier of that pn= reding, the Company will be The Company on h-bnury 1,1988, permitted. under applicable generally ,
inpkmxmted rato to pnnid;it with wh accepted aco>unting principles to 7 continue to rtuird as an aswt the 52 4' mdN m of Waterford 3 onn irwurred but
.)'
_ _ , --, , . _ _ __ . _ _ - _ - - - _ _ - , +
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a-L15C's consideration that allows for the 15th Ward of the City of New Orleara, hearings on the remaining issues not renncry of approximate @266 million a general retail rate increase application irlated to the Waterford 3 prudence pluse in Waterford 4 costs. as described atxnt, (1) to reflect costs associated with are now scheduled to commence on April oser a sestn >rar pedud beginning in Grand Gulf 1,(2) to reflect the in senice 27,1988. The deadline for the Councifs 1990. Such plan, if nprmxt and adopted status of Waterford 3, and (3) to produce decision, in both the prudun and by the L15C, would comply with SFAS a just and reasonable rate of return. non-prudence phases, is now set for.
No. 92. (See Note 8, "Commitments and . On February 19,1987, the Council by May 31,1988.
Contingencies - New Accounting resolution initiated a prudence imesti- The Companyis a party to certain Standards.") gstion with reg A to the construction of agreements and proceedings concerning On July 11,1986, the Company filed Waterford 3. Ilearings wncerning the $ERI and the Grand Gulf Nuclear Station.
with the Council of the City of New prudence of Waterford 3 are scheduled (See Note 8, "Commitments and Ot kans (Council), with respect to the to commence on April 4,1988, and Con'9gencies.")
. v s
4 3 ?INCOME TAXES l
Income tax expense (benefit) consl3ts of the following-1987 1986 1985 (In Thousands)
Current:
Federal $ 9,838 5 4 658 5(13,140)
State (10.683) (2.101) <
Total 9,838 (6.025) (15.241)
Defured - net:
liber Ilied depreciation 62,064 135,959 49,850 Deferred fuel costs ,
(1,299) 7,041 (7,120)
Unhilled revenue ._
(7,054) 1,112 11.131 Deferred Waterford 3 expenses 9,434 103,659 10,125 i Adjustment of prior years' tax prtnisions 6,587 - (14,113)
Prosision for estimated lows - (8,113) (8,929)
Reduction due to tax low carryfornard '(31,568) (94,019) (14,073)
Disallowrd plant costs (Note 13)_
- 3,760 (89,629)
Nudear fuel (4,630) 10,506 (703) !
Alternatist minimum tax (3,248) - -
3 (736) (3.078) 3,154 .
Other Total 29,550 156.827 (60.307)
Imtstment tax credit. J,ostments - r.et _
(1,203) (1,254) (451) 1 Recorded income tax expense $38,185 5149.548 5(75,999) l Ourged to werations_. $ 36,141 5145,041 5 7 159 2,044 4,457 7,101 Charged ta other income Charged to auJ10wed plant costs (Note 13)
(90.259) !
Recorded income tax expense 38,185 149,548 (75,999)
Income taxes applied against the debt component oi AFDC 925 777 33.225 htal income taxes $ 39,110 5150 325 5(42.774) 22 j i-u.r arw - + - - we v -.,.,.u ,f+,,,. , ,-,,e,, e,,..,,-.-,.%., ew,,w-e--,,.e,%,-,,--.wew_.- , w .&, y3- . - , .--%.www.~,e -y,-..-.--w, , , , , , , . , --
.y~
(g ; _ L;
- e:
Total income taxes differ from the amount computed by applying the statutory federal income tax rate to ina>me before taxes.
The reasons for the differences are as follows (dollars in thousands):
1987 1986 -1985
% of % of % of '
Pre Tax Pre Tax Pre-Tax Amount Ina>me Amount income Amount income Computed at statutory rate $ 61.534 40.0% $134,924 ' 46.0% $(59l:'18) 46.0%
increases (reductions) in tax resulting from:
Allowance for funds used during construction _ (777) (0.5) (865) (0.3) (57,850) 44.6 State income taxes net of fed (ral income (430) (0.3) 13,539 4.6 7,362 (5.7) tax effect Write off of state deferred taxes related to depreciation timing differences * (23,828) (15.5) - - - -
6,951 4.5 7,530 2.6 4,076 (3.1)
Depreciation
- - - - 36,88I (28.5)
Disallourd plant costs (Note 13)
Impact of change in tax rate (3,127) (2.0) - - : -
Other - net (2,138) (1.4) (5,580) ( 1.9) (6.750) 5.2 Recorded income tax expense 38,185 24.8 149,548 51.0 (75,995) 58.5
. locome taxes appikd against debt compenent of AFDC 925 0.6 777, 0.3 33.225' (25.6) !
S 39,110 15.4% 5150.325 51.3% 5(42,774) 32.9%
Totalincomo taxes
- Results from an LPSC order to write otT all predously prmided deferred state income taxes related to depreciation timing differen(es.
The tax effect of the portion of the million,573.2 million, and $103 million deferird income taxes for ill temporary 1985,1986, and 1987 federal tax losses as of the end of 1987,1986, and 1985, differences that are reporteilin one 3rar that are carried forwuni lus tren reconkd trmecthriy The alternathe minimum tax for financial reporting purposes and a as a reduction of deferred income taxes. (AMT) credit at December 31,1987 is different year for tax purposes. This will lhese losses totalling 5303.7 million are 83.2 million. This AMT credit can be require the recognition of de ~ erred tax antilable to offset taxable income in future carried forward indefinitely and will balances for certain items not presiously years and, if not utilized, will expire in reduce th Company's income tax reflected in the financial staten ents, such the }rars 2000 through 2002. L'nused liability in the future, as a defermi tax liaNiity relating to AITX'.
Imestment tax credits at December 31, in December 1987, the FASilissued it is expected that reductions in 1987, amounted to $67.4 million after SFAS No 96,"Accounting for Income deferred taxes resulting from th:lowrr the 35% reduction required by the Tax Taxc=", which is effectiw for yrars corporate federal tax rates will be p
Reform Act of 1986. 'these credits may beginning after December 15,1988. reflected as liabilities to customers since be applied against federal income tax t?nder the liability method adoped by the Company's ft gulators may require any e liabilities in future )rars. If not used, they SFAS No. 96, deferred tax balances will such sasings to be passed on to the will expire in 3rars 1992 through 2002. he bawd on enacted tax laws at tax rates ratepa>rrs. The impact of SFAS Na. 96 Cumulatiw income tax timing that are expected to be in effect when on the financial position or resits of differences for which deferred income the temporary differences res erse. SFAS operations of the Company lus not yet taxes have not been provided are $69.7 No. 96 expands the requirement to record been deternui&d.
23
(
At December 31,1987, the Gimpany (approximately 5% of the commitment under the Ibblic Ltility lloiding O)mpany ,
lud $50.3 million in lines of credit with anx>unts) or equimlent fees are required Act of 1935 to haw outstanding at anf l inuisiana banks and 590 million in lines by certain of the non-senice area lending one time short term lx)rrowings aggre- ;
cf credit with banks outside the Sliddle banks. Additionally, the Company gating not more than 10% of the I "outh Sptem fxa of senice 'lhe lines participates with certain odwr mmpanies Company's capitalization as defined. At I
of credit with Inuisiana banks include of the St.ddle South Sptem in a money December 31,1986, the Company had
$10 million that is shared uith New pool arrangement whereby those 538 4 million in lines of credit with Orleans Public Senice Inc. (NO151). companies with available funds make Inuisiana banks and 5110 million in lines lhe lines of credit with Inuisiana banks short-term loans to other companies in of credit with banks outside the Sliddle I 1
and $30 milhon uith banks outside the the Sprem hasing short term lx>rrowing South Sptem senice area, all of whi.h j Company's senice area expire on June requirements.1he Company may bornnv remained available at that date.
30,1988. As of I ebruas y 29,1988,590 from the money pool and other available lhe short. term tx): rowings and the million in lines of credit with banks sources subject only to its maximum applicable interest rates (determined by outside the Company's senice atea autix>rized lew! of shottterm bornmings dniding applicable interest expense by remained available for boreowing by the and the availability of fmxis.1hc 0)mpany the average amount borrowed) for the Company Comlwnsating balances has received authorization from the Gimpany were as follows:
l Securities and Exchange Commission 1987 1986 1985 i (in lhousands) l Staximum br rrowing $20,000 $ 168,360 5229,710 l
Year end borrowing: I Ilanklo.ms - - 5 99,160 Aw>ciated companies - - 5 31,700 l Ascrage borrowing:
llank loans $ 2,615 5 77,656 5 75,998 .
Aw>ciated companies - 5 15,787 5 95,176 )
Awrage interest rate during the period. l Ilank loans _ 8,2% 86% 9.9% l Aw>ciited companies ".6% 82%
Awrap interest rate at end of period I ikink loans - -
9.9% I Aw clated companies - - 8.5%,
4
\
2t
l i '
)
l i
Preferred stock at Dewmber 31,1987 and 1986 consisted of the following:
1
(
4 h res Authorized at Shares OutstandinM Current l
December 31, at Decemtwr 31, Call Price i
d Cumulative, $100 Par Value 1987 1987 1986 Per Share
%1thout sinking fund.
60,000 60.tXX) 60,0(X) $104.25 f.96% Series 70.000 70,000 70,(XX) 101.21 1.16't Feries 70,000 70,000 70,000 101.06 (M 1% Series. 75,000
< 5,000 75,000 101.18 5.16T Series 80,000 i
80,t X'0
> 80,000 103.00 I 5.40T, Series 80,(XX) 80,000 n0,(XX) 102.92 f 6 Il% Series 70,000 70,000 70,000 104.20 9.521, Series 100,(XX) 100,000 100,(XX) 103.78 f 7 84% Series 100,000 100,000 100,tXX) 103.36 i "'.36% Series 103,000 100,(XX) 100,000 105.28 8 56T, Series 300,000 300jXX) 300/100 106.72 9.41% Series 350,000 350,000 111.I1 ;
350 (XX) 11.48% Series _.,
1,455,000 1,455jXX) 1,455jXX) lbtal
['nissued 3.045.000 - -
_ 4,500,t X)0 1,455J)00 1.455,(XX) 1btal i
Cumulative, $25 Par Value With sinking fund: 1,559,850 1,559,850 2.039,850 $ 27.01 10.72% Series 1,152,511 1,152,511 1,355,000 27A6 13.I7% Serie3 955,010 955,040 1,075,000 27.85 15 20% Series .
1,633,316 ],633,316 2.000,000 27.76 14.72% Series 2.865,500 3,000,000 28.16 12.6 4't, Series 2.865.500 i 2,000.000 2,000.000 28.20 2.fXX).000 l 19 20% Series 10,166,217 10,166.217 11,469,8 91 li>tal 9.800,000 - -
i'nissued 11,469.850 19.966.217 10 166.217 li>tal 1987 1986 (in 1housands )
Without sinking fund: $145,500 5'.45,500 l
! Stated at 5100 a share 382 382 I
Premium $145,882 . 5145.882 li>tal preferred stock and premium without sinking fund With sinking fund: $254,156 5286,746 Stated at $25 a share _
(12,795) (l4.617) issuance expense $241,361 $272,129
'li>tal preferred stock and isse mee expense, with sinking fund
- 25 :
. - -._ - - _ _ - . _ - .. _ _ _ _ . - . _ . - _ . . - - _ _ _ = . . - . _ . . . - _ _ _ _ _ _ . -
,c n l
\p h
Cash sinking fund requirements for %c 0)mpany has continued to remain stock since June 1985. In Febmary 1988, preferred st<d outstanding at Decemixr cur.ent with respect to payment ofits the Company paid 54.6 million in common
- 31,1987 for the }rars 1988 through 1992 qua-terly preferred stock dhidends since stock dhiderxts to $1511 ..
are as follow s (in thousands); 1988, the elimination of arrearages in Stay 1986. The changes in the number of shares 52,825:1989, 512,750,1990, 522,750; in I$87, the Company paid $8.3 million of common and preferred stock !
1991, S22,750; and 1992, 522,750. De in common stock dhidends to SISU, Prior outstanding during the yrars 1987,1986, 1988 amount reflects earlier rrtirements to these dividends, the Company had not and 1985 wrre as followw 1 ershares of preferred stock that will be paid quarterly dhidends on its common applied against 1988 cash sinking fund requirements. In addition, each3 rar the Number of 5&.res Company has the nan-cumulathe option 1987 1986 1985 to ruicem additional amounts of prefertrd Common stock shares sold - - 15,152,000 stock outsta:4 ting in accordance with its $25 Preferred stock shares articles of incorporation. retired 1,303,t .,3 269,750 260,400 l
S IDNGTERM DEBT -
K 1987 1986 long-term debt at December 31,1987 and 1986 consisted of the following:
(in Thousands) l'irst Alortgage Ik>nds:
4%T, kries due 1987 - 5 20,000
$ 45,000 45,000 10%'t Series due 1989 5 T. Series duc 1990 20,000 20,000 14 T. Series due 1992 60,000 60.000 200,000 200,000 10M't Series due 1993' 12 't kries due 1993 100,000 100.000 4%'t, Series due 1991 25,000 25,000 16 T, Series due 1991 100,000 100,000 14%T, Series due 1995_ 15,000 15,000 35,000 35,000 5L't Serics due 1996 ShT, Series due 1997 16,000 16,000 18,000 18.000 {
6H't Series due 1997 35,000 35,000 7%'r Series due 1998 .
25,000 25,000 9%'t Series due 1999 9%'t, kries duc 2000 20,000 20,000
?3T, Series due 2001 25,000 25,000 25,000 25,000 7H% Series due 2002 25,000 25.000 7h't Series duc 2002 8 'b Series due 2003,, 45,000 45.000 45,000 45,000 8%'t Series due 200 L__
40,000 40,000 8%% Series due 2006 10 % kries due 2008 60,000 60,000 100,000 100,000 13%% Series due 2013 50,000 50,000 13 't Nrics doc 2013 55,000 55,000 14M'b Series due 2014 35,000 35,000 15%% Series due 2014 280,000 280.000 10h% Series due 2016 1,499,000 1,519 000 Tr,tal First Stortpge Ikinds 26
/
l l
l j 1987 1986 (In Diousands) f Other:
i St. Charles Parish Pollution Contnil Rewnue Bonds, Series 198L
- 115,000 ll5An) 5.25% due 2011 St. Charles Parish Pollution Contrd Revenue Ikmds, Second Series 1984, 105,000 105.000 7.625% duc 2014 ,
Other pollution control and industqal revenue bond obligations. 16,300 16.300 l 6A0tH% due 1988 2009
' Principal amount of municinal reser, e bond obligations,1K%8% due serially 29,118
~
26,344 1988 2004. and other future oblig'tions under operating agreements 28,058 25,110 Purchase obligations under an imrnt ary supply agreement _ _,
287,754 293A76 lbtal Other (11,658) (6.670) t?namortlied premium and discount on i >ng-term debt - net l
1,775,096 1.805,806
! Total Inng-Term Debt 2,832 22,774 ,
less: Amount due within ene war. 51,783,032
$1.772,2M long Term Debt Excluding hmount Dut Within One Year
'In Apill 1986, the Company sold 5200 n illion principal amount of intermediate term secured notes at an annualinterest rate of 10%%
On August 28,1986, the Company coVat *ralized thew outstanding intermediate-term semred notes by depositing first mortgage bonds in that arnount with the trustee for such notes effecthcly making such notes of equal rank with the outstanding first mortgage bond
- of l the company.
l In August 1986, the Conpany obtained results in a net sasings to the Company ~
s approximately $30 million under an due to reduced interest costs.
The St. Charles Parish Pollution 1 imentory supply agreemu with a non- .
affiliated entLy, with respect to spare parts Control Revenue Bonds Series 1984 and ;
! for Waterford 3. Additionally, on the Second Series 1984, which are semred '
RETAINND '
November 6,1986, the Company sold by letters of credit, currently bear 8ARNINGS 5280 million aggregate principal amount interest at 5.25% and 7.625%, retectiwly, ,
of Hrst Alortgage Bonds,10M% Series and are adjusted annually not to exceed due Nowmber 1,2016. Die Company an interest rate of 15% per annunt In Die Company's Restated Articles of used the net proceeds from the sale to December 1986, upora participation of Incorporation, as amended, and certain redeem an aggregate of $280 million of sewral banks in the letter of credit, the of its indentures cantain prosisions sewral series of its outstanding First Company receiwd the faond Series 1984 restricting the payment of dividends or j 51ortgage Bonds bearing interest at rates bond proceeds of $105 million presiously other distributions to common stock-ranging from 13M% to 16%% As a result held in a cash collateral security account. holders. At December 31,1987, all of such refinancing, the Company realized Sinking ftmd requirements on fir 9 atained earnings urre free from such
(
t an 518.7 million loss on the reacquired mortgage bonds and maturities under restrictions.
debt.1he loss is being amortized owr long-term debt instruments in effect at in accordance with the I.PSC's i l the life of the new issue as permitted December 31,1987 for the years 1988 November 1985 Order, the Company for ratenuking purpon 1his refinancing through 1992 are as follows: acorded as a loss its I.P5C jurisdictional ,
portion of the 5284 t illion of the l 3
! Taterford 3 disallowance (approxi-u nwe m on) recdng an Year (In )
a a nt w o w to N N h M $12.240 12.240 5 2,832 48,016 13. "Statement of Iinancial Accounting 1989 1990 ._
11,790 23,202 Standards No. 90.")
1991 __. I1.590 2 68' l
'1,590 62,333 l
1992 I " Nriing fund requiremenn nuy be utisfied by certification of property additions at the rate of 16 1, of suth requirements 2'
i
- _ _ _ _ _ - _ _ _ _ _ _ _ _ _ - _ . - - - _ . . - . - , . _ . , _ _ - , . , . - - , - . . - - - - . - ~ . _ . . . - . - ~ - - . - . _ _ _ - . , , ~ - . - -
A. General to SERI for Grand Gulf I capacity and February 22,1988. The case is expected At December 31,1987, the G>mpany's energy is approxinutely $11 million per to be decided b" the end ofJune 1988.
most significant commitments and month. On l ebruary 4.1988, the G)uncil adopted f contingencies related to (I) the firul lhe credit line awiciated with the a resolution ( Resolution), as its formal rev>lution of certain other Middle South G>mpany's nucicar fuel lease has findings of fact, conclusions, and onler 4 Sptem operating companies' (sprem tenninated, and the Gimpany is in the in its prudence imrstigation, under which operating companies) rate orders and process of attempting to arrange for a NOISI is to absorb, and not reonvr from related nutters (see "Potential Debt new line of credit. Without replacement its retail electric customers, $ 135 mil' ion Acceleration, llankruptcy, and Middle of the credit line, no additional fuel may ofits FERC-allocated Grand Gulf I owts.
South Sptem Viability"), (2) the etTect be leased. lhe Company will continue This $135 million disallowance is in on the Gimpany of a new accounting to make pa)ments under the lease until addition to the $51.2 million of such costs standard relating to the accounting for the lease terminates on June I,1991. that NOPSI had agreed to ahvirb in a phase-in plans (see *New Accounting The G)mpany will be required to March 1986 rate settlement. NOPSI has Standarth"), ( 3) the outcome of the repurchase any unburned nuclear fuel applied to federal and state courts for pending appeal of the Nmtmber 1987 linanced under the leaw when the lease reversal of the Councifs Resolution and Judgment and any resulting potential expires onJune 1,1991. As of December continues to press for a judicial stay of lon, term efkct upon the G>mpany's 31,1987, the unreantred cost base of the Resolution. Ihe matter is pending.
carnir., s. liquidity, and financial condition the nuclear fuel lease was 588.7 million. Without adequate rates to rvemtr Grand (we Not 2,"Rate Matters"),(4) the final It is assumed that the credit line will be Gulf I charges, NOPSI and MP&I. could resolution of the ll5C prudence imrs. replaced during the [wriod 1988 1989. sufTer such liquidity constraints that they l tigation (see Note 2,"Rate Matters"),(5) C. Potential Debt Acceleration, """ '"* ""* #
the outcome of challenges to the FFRC '""*" *"'"""*'" " " ' "
11ankruptcy, and M*ddle South allocation of capacity and energy from System Vlability
" "P##' '" "* * * ' ""
Grand Gulf 1, w hich could have a signi- .
Station and could be rendered insoh ent.
"P U"8 Certain of SFFs financing agreements ficant impact on the G>mpany (see Tnit n uth nyed unp ud d and leases may require pa)ments by the INmtr Sales Agreement"),(6) the future status of Unit No. 2 of the Grand Gulf Company and the other Sprem operating Steam i lectric Generating Station "E d Y '" NYh " companies, MSI', or SFRI in the event duuengnt wrwd bWeial desions, SFFs obligations under such agreements (nuclear)(Grand Gulf 2),of which 9m, o haw been, or wntndy areau@ct to is owned by SFRI and the powible are acaleratal as a resalt of the inmhrnq p dence unndganons or disaHowmces allocation to the Company of costs of a Sptem operating company and SFI On February 25,1987, Mhsiwppi Power .
is unable to meet these obligations or awxiatal with t!ut unit (see "Grand Gulf n Company,s (W&L) G.and M otherwise to satisfy these obligations 2"), and (7) the ultimate outcome of o s d on appeal by disputes related to a certain Sprem I ucts. through the sale of the mitateral securing the M.iwssppi Supreme (ourt (Fehnury (
Inc. (SF1) coal supply agreement (see ..
mch obliptions. In addition, insobrnc).
9 nd remandal to the "Sptem fuels,Inc? ) [ n)
Miwwppt Public Senice Commiwion of a Sptem company uvuld affect the terms of financing by including an j B. Caphal Requirements and (MISC) for reconsideratiort Subwquentiv.
increase in the cost of financing, or could Financing MP&l. filed an appeal of the February Mh for other Middle %uth lhe G>mpany's construction program 1987 Decision with the l'.i Supreme Sntem companies.
contemplates expemiitures (intluding Coun amion October 5.1987 the G>urt Fa lure of any Sptem operating All>C but excluding nudcar fuel) of decided to hear full argument of MP&I:s company to maintain its current rate approxinutely $14 2. i million in 1988, appeal. Oral argument was held on structure or to meet its contractual 5119 6 million in 1989, aml 51% mil- obligations to Si RI in resped of the Grand lion 11.1990. The Company's obligation Gulf Station could cause acceleration l 28
c- -- - ,3 - - - , __
t ( sy - y O
.yc, e i .
q _
e a
N, h i
J of SERrs indebt'edness under certain circumstances or such a decrease in ' ^ securities may not be abic to recover any
- agreements (but only upon further action liquidity as to nuke it prudent for one or abstantial amount on their imrstment.
. by the requisite percentage of SERrs more of the affected Middle South Sptem 51oreover, it is uncertain w hether the
,- creditors) unless (1) wahrrs were companies to file a petition for twrgar bankrupt entity or entities could be obtained, (2) the debt was restructured, 17ation tmder Chapter 11. Stany of thes successfully reorganized in their present
}- form, whether the current relatiortships t or (3) other arrangements could be future cents are bc>und the control of negotiated. In add; tion, in the abwnce the Middle South Sprent betwren and among various Middle South - ,
of such waivers, debt restructuring, or lhe eficas of a bankruptcy proceeding Sptem companies would be significantly other negotiated arrangements, mvohing one or more Middle South . altereu cr whether the Middle South -
acceleration of such indebtedness could Sptem companies and the extent of Sprem would continue to exist in its occur if a Sptem operating ampany were jurisdiction of the SEC under the Public present form after bankruptcy of one or rendered insohrnt as a result of a Utility lloiding Company Act and of other more Middle South Sptem compariies.
reduction in rates. Ghrn the substantial federal and state regulatory txxiies mrr D. Unit Power Sales Agreement amount of its obligations, SERI, with its the bankrupt entity or entities and mer finuncia' resources currently limited. any other Middle Nuth Sptem conpanies lhe Unit i\nver Sales Agreemeat wuuld not be able to meet these not in bankruptcy cannot be prulicted. (UIM), as appnnn! by the I'RC onJune in any ornt, semrity holders and crniitors 13.1985 (June 1985 Decision), obligates obligations,if accelera'ed. Under SERrs
= financing agreements, the Sptem of the company or companies imuhui the Sptem operating companies to operating companies would not be in bankrtrptcy proceedings could be purchase from SERI, at SFars full cost of sersice, all of SERrs 90% share of the
. responsible to pay SERrs accelerated significantly alksted by sudi proceedings.
obligations if 5ERI could not meet thent The proceedings could last for years, and capacity and energy from Grand Gulf I MSU, with its financial rtwurces currently there are many uncertainties as to how in accordance with the following per-limited, wuuld not, at this time, he in a prodslons of the law would be applied. centage alk> cations: the Company,14%
Rights and remedies of wcurity holders Arkansas Rmtr & light Conpany(AP&l.),
position to satisfy SERTS ob1gations if and crnlitors may be altered, denkst, or 36% MP&I,33% and NOPSI,17% On accelerated.
in the ornt of any of the foregoing limited under such laws.1he obligations January 6,1987, the United States Court adstrse dnrkpments, the continuing of the Sptem operating corr.panies under . of Appeals for the District of Columbia siability of the Middle South Sptem would the Asui! ability Agreement and the Cirmit (D C. CirmA) amrmed the FERC's assignments thertof could aho be litigated June 1985 Decision. After subsequently be placulin je pardy, and it could be i
dimmit to asoid a bankruptcy filing by and possibly reduced or eliminated. (See granting rehearing of twu issues raisti "Availabilityand Reallocation Agreements in theJanuary 6,1987 dccision. the D.C.
one or more of the affected Middle South below for a discussion of the Sprem Circuit, caJune 2^.1987, re rrsed,in Sptem companies. In this connection, MSU, M P&l, and SERI hast each retained operating companies' respecthe obliga. part, theJune 1985 Decision and tions to make papuents or otherwise renunded theJune 1985 Decision to the ;
[ indmemient special counsel experiencal FERC(June 1987 Renund) for recon-in bankruptcy matters and have been support SERI under the Asailability Agreement and the Reallocation sideration of its decision to equalize the ,
studying the relief and protection that Agreement.) There could be no assurance capacity costs of all Middle South Sptem .
might be available to them under Cuptet f 1 I of the United States llanknytcy Cale. dut any creditors wuuki be able to recurr nuclear plants and for an explanation of the full amount of their claims, and the criteria used to determine wlut
%hile no decisions with regard to securities and stock with inferior rights ontstitutes "undue diwrimination" under bankruptcy fil;ngs haw 3rt been made,it the federal INmtr Act and why theJune must be recognized,in light of the risks could be substituted for those with 1985 Decision is not unduly discrim.
dtsmssed herein, that future ornts, either priorities. Further, holders of equity i inatory In reversing. in part, the June singly or in combination, may result in 1985 Ikcision the DC Cirmit did not 4 such adwrw changes in business i
r .
1 i
~ change that part ofitsJanuary,6,1987 System operating companies, or SERI, (which does not cmtr a rett'rn on equity):
decision upholding the FERCs authority including posible refunds,if any Any nxxi- accordingly, no payments haw ewr been to resiew and modify the alk) cation of ification of the allocation established by made under the Anilability Agreement.
purr from Grand Gulf 1. Various parties the June 1985 Decision, as affirmed by Jf, as a result of an adwrse decision
. filed petitions for certiorari with the the FERCs Nowmber 1987 Order, cmk' in the SIP &L Supreme Court litigation United States Supreme Court seeking giw rise to additional litJgation, displites. discussed above or other devek)pments, redew of the principle underlying that and challenges in the affected jurixlictions. a S)3 tem operating company other than prtion of the D.C. Circuit'sJanuary 6, in addition, the System operating the Company becomes unable in whole 1987 decision that affirmed the FERCs companies haw initiced a study, currently or in part to continue making payments jurisdicion to allocate Grand Gulf I costs. scheduled to be cornpleted in the near to SERI under the l'PSA, and SERI w re On December 14,1987, the United States future, to deterndne whether a more urable to procure funds from other Supreme Qiurt denied without comment equitable method of a' locating costs. sources sufficient to cowr any poten'!al these petitions, thereby leaving in place including those relating to Grand Gulf 1, shortfall Irtwrm the amount owing under that part of theJanuary 6,1987 decision would be appropriate in thc future. the AnilabiFty Agreenent and the amotant upholdW the FERCs jurisdiction to of continuirig payments under the UPSA '
E. Availability and Readlocation alk>cate Grand Gelf I costs. plus other funds then anilable to SERI, On November 50,1987, die FERC ^#"**"* the Company may become subject to issued an order (Nowmber 1987 Order) Tae System operating companies are claims or demands by SERI or its creditors in response to theJune 1987 Remand sorrallymbligated, monthly, to SERI under for payments or admnces tinder the reaffirming and re instating theJune 1985 the Availability Agreement, as amended As- ilability Agreement or the assignments Decision, thus maintaining the predous to date, to make payments or subordinated thereof. he amount,if any, which the alk> cation of Grand Gulf I capacity and advances adequate to emer all the Companywou!d become liable to pay or encryy among the System operating operating expenses, including depre* adunce over and abow amounts it conpanies. In Iwuhig the Nmember 1987 clation and interest charges, of SERI.1he currently pays under the UIM for capacity Order, the FERC found that the allocation Company's percentagg share of these and energy from Grand Gulf I would obligations is 26.9%. SERI has, with the depend on a vanety of factors (especially in theJune 1985 Decision was not undu!).
discriminatory Requests for rehearing of consent of the Systern operating the degree of any such shortfall and SERF 5 the FERCs Nmember 1987 Order were companies, awigned its rights to payments access to other funds). The Company filed by wrious parties (other than Sliddle and adunces from the 5 33 tem operating cannot predict whciber any st.ch claims South System companies) and by order companies under the Anilability or demands; if made, could be satisfied.
dated January 29,1988 (January 1988 Agreement to the holders ofits long-term lhe Sptem operating companies in Order), the FERC denied such requests. debt. Payments or advances under the November 1981 entered into a Reallo-IN;titions for roiew of the Nowmber 1987 Anilability Agreement are only required cation Agreement that would haw andJinuary 1988 Orders were filed with to be made to tl e extent SERFS receipts allocated the cepacity and energy anilable f the D C. Circuit by urious parties. from all sources, including the CPSA to SERI from the Grand Gulf Station and it is not possble at this time to predict approwd by the FERC (of which the the related costs to the Company, MP&L the ultimate outcome of this matte , Company's current share is 14%), are less and NOPSL 1hese companies had agreed j including the possible realloc ation, if any, than the amount required under the to awume all the responsibilities and of Grand Gtdf 1 related costs or the effect Availability Agreement. Since commercial obligations of AP&L with respect to the thereof upon the Company or the other operation of Grand Gulf 1, payments Grand Gulf Station under the Availability under the CPSA (which are based on Agreement with AP&L relinquishing its Grand Gulf l's full cost of senice, including a return on equity) haw been morr than sufficient to cmtr the amounts owing under the Availability Agreemerit 30 m
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not intend to make an application to the Sptem operating companies and related rights with respect to capacity and energy -
FERC during the period of suspension filings by the Sprem operating companies fhum the Grand Gulf Station. Each of the with respcct to the recovery through Irfore state or local regulatory authorities Sprem operating companies, including rates of SERFS imrstment in Gr.:nd to recognize the FERC allowed charges AP&l,indhidually would hast remained Gulf '2. in retail rates. In siew of the conturrsies primarily liable to SERI and its assignees Durirg the period of continued mrr the Grand Gulf Station,inclading for papnents or adunces under the Availability Agreement and assignments suspension, SERFS expenditures on Grand the athrrse reaction of wrious rate thereof. AP&l was obligated to make its Gulf 2 will be limited and it will continue regulatory bodies to allocation of costs;
" not to accrue AFDC on its investment in and regulatory uncertainties, including share of the payments or advances only if the other Sptem operating companies the unit. During the suspc mion period, rate making, attendant to a delay in the SERI will continue to evaluate various decision as to the future of Grand Gulf 2, were unable to meet their contractual obligations. Ilowever, the FERC'sJune ahernatives for the future of Grand Gulf there can be no ssurance that the full I 1985 Decision supercedes the Realloca- 2 and will also continue to assess whether . cost of Grand Gulf 2 will be nunrtrd certain equipment or facilities should ' or as to the timing of any recovery. As f tion Agreement irtsofar as it relates to continue to be carried at their full cost. was the case with Grand Gulf 1, such Grand Gulf 1.
Any determination that the nlue of SERik proceedings before the FEhC. and, with
! F. Grand Gulf 2 investment should be reduced and de respect to recognition in retail rates of As of December 31,1987, SERI had amount of any such reduction written FERC-apprmrd rates, before state or k) cal imested approximately 5890 million in off could a&rrsely affect wrious com. rtyulatoq authorities, ctoki be protracted Grand Gulf 2 (including approximately panics in the Middle South Sptem, includ. and strongly contested on n ious grounds, 5392 million of AFDC), which was ing the Company. SERI beliews, howewr. ine;uding imprudence. If costa associated approximately 34% complete based on that it ts justified in carrying Grand Gulf with Graed Gulf 2 were allocated to the the estimated man hours needed to 2 at its full ulue lxcause the prolyrty Company and it were unable to recover umplete the unit. In September 1985, surrently comprising Grand Gulf 2 is of these costs from its customers, the following an order of the MPSC, SERI the same design as that of Grand Gulf I Company's financial condition could be suspended construction acthities on and is being properly maintained and is materially, adwrsely affected.
Grand Gulf 2 and ceawd accruing AFlX: therforr suitable for its intended purpose.
on the unit. Since that time, SFR) has Certain issues relating to the mue of
' ** ^ "" " N I# "
lhe accounting standards relating limited expendimres to only thme SERFS imrstment in Grand Gtdf 2 also aethities that are absolutely necess.try for exist in connection with an audit by the specifically to public utilities and certain demobilization and suspension. In other regulated enterprises are set forth R RC of SERI and the Grand Gulf Station.
by the FASB in SFAS Nos. 71,90, and December 19% SERisik>aniof Directors While SERI believes that all of its imrstment to date in Grand Gulf 2 has 92. In Dcccmher 19% the FASB issued (with the MSU Board of Directors SFAS No. 90, as an amendment to SFAS comrnng) adopted the trcommendation been prudent,in connection with any of a special group of Middle South Sptem No. 71. (See Note 13,"Statement of subsequent decisions as to the niue of Financial Accounting Standards No. 907) officials and outside consultants that Grand Gulf 2 or the ultimate decision in August 198?, the FASB issued SFAs suspension of constmction be continued iegarding the future of Grand Gulf 2, SERI and that a further decision be made by will, at an appropriate time, make a No 92,"Regulated Enterprises -
dett rmination as to the appropriar Accounting for Phase.in Plans", an 1990 on the future status of Grand Gulf 2 in light of alternatiws available at amendment of SFAS No. 71. $FAS No. 92 re.uwry of its inwstment. Any action by that time. As a result of SERIs Board SERI to seek recmtry of Grand Gulf 2 of Dires tors deciding to cuntinue cmts would likely imuhr a filing with suspension of comtruction, SERI doe % the FERC requesting a.uch recovery over a period of 3rars through charges to the M
____ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ J
7,,-
s I
requires the following conditions for froin August 12,1987 throughJanuary including the O)mpany, fikx! a motion
' deferral of etnts relating to a newly 31,1988)in accordance with the to' dismiss or, in the alternative, a motion mmpletal plant: ( I ) the msts are deferred prmisioni of SFAS No. 92 as discussed for sumnuiy }vdgment. On January 12, pursuant to a formal plan that lus been alwnr If the LPSC does not approve a 1987, the District O)urt entered a
> agreed to by the regulator,(2) the plan - phase in plan tlut a>mplies with $FAS judgment granting defendants' motion for -
speafics u hen reon cry of costs will No. 92, the Company will be required to the sumnwy judgment atxt dismis4ng occur. (3) the msts deferred are write off the deferrn! Waterford 3 costs. the mit. On Febnury 6,1987, dr plaintiffs
! ' cheduled for recovery within ten }rars s (See Note 2,"Rate Statters", for further in the consolidart-d .etton hied a Notice of the date when deferrais begin, and discussion of the Omspanyi plu3c in plan of Appeal ia the l'.S. Court of Appeals for (4) the [wrcentage increase in rates for and related rate filing ) the Fifth Circuit. Oral aqtument was each future year is no greater than the held on Nmrmber 5,1987.1he II. StSU Shareholder Litigation percentage hwrease m. rates for each defendants intend to oppose vigorously immediately preceding year. 'the new in 1985,3151', certain other Aliddle dx ama! of dr D.urict OM dubion.
statemeniis effective fer fiscal ) ears South $ptem companies, including the in dx ornt the dismiwal is roersed on beginning after December 15,1987 and Gunpany, and certain indisiduals and appeal, the orntual outcome and impact requires that amounts proiously deferrtti odwrs became defeixlants in a purportal on the Company's financial condition under plans that do not meet the require. claw action suit. 'lhe initial complaint cannot be predicial ments of the statement be written off. "us filed in August 1985 by an NINU durcholder (purporting to represent 1. System Fuels, Inc.
SFAs No. 92 has transition rules designed so allov A r. affected mmpany to delay a class tlut purchased Abu comnxm 'lhe Company has a 33% interest in applicax i of the new statement atxl to sto(k) and was followett by four similar SF1, a jointly owt ed subsidiary of the continue dcferral of costs under its complaints filed by SISU shareholders in Company, AP& L, SlP&L and NOP51. $FI existing phase-in plan prmided flut twh August and September 1985.1hc five operates on a non-profit basis for the of the following conditions are met:(1) actiom were consolidated in the U.S. purpose of planning and implementing the cotr.pany has fiksi a rate application District Court for the Fatern Divrict of programs for the procurement of fuel to have the plan amended to meet the Inuisiana. lhe consolidated, amended, supplies for all of the Sptem operating utluirenrnts of the sta'emt.W or it intends and supplemental complaint alleged companics and SFRI. Its costs are pri.
to do so auopri as practicable and ( 2) it siolatiom of the disclosure requirements nurity recmcred through charges for is reason;bly possible that the regulator of the Secunties Fxchange Act of 193i fuel delhrred will change the terms of the phase-in and the Scarities Act of 1933, comnwn lhe parent companies of $1I had plan so that it will meet the requirenrnts law fraud, and a mmon law misreprewn- agreed to nuke loans to 5FI to finance of the statement. tation in connection with the financial its fuel mpply business under a loan As part ofits February 1988 Rate (ondition of Abu and pra>cd for com- agreement dated January 1,198 L as Filing with the !.PSC, the Company pensatory and punitive danuges, tegal amendedJanuary 1,198'.which prmided ,
submittal a formal phasc>n plan to onts and fees, and other pmper relief for 5FI to borrow up to 551 mi!! ion from ,
reontr a to'al of approxinutely $266 against 5151', various other Sptem its parent companies through December companies, inclu ling the Company, 31,1987.1his loan agreement was not million of Waterford 3 costs ( $ 217 million recorded as deferrals as ofJanuary 31, certain ofilcers (and former officers) amenda! m 1988 and. consequently, no 1987 and 519 million of additional onts and directors of $15U the Company % future loans nuy be made to S1i f om /
incurred but not reontred, or deferred, outside auditors, and certain under. the nrent companies at this time. As of writers of 515U comnwn stock. In April 1986. N15U and the other deferxlants.
32
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December 31,1987, the G>mpany had approxinutely itM million tons of cual certificate should be denied. It is Sii s loaned SFI 5 69.5 million under the alwnr for use at the Conpany's propowd Wilton o>unsers opinion that a refusal by the l and proious loan agreements. Notes Station with an option to purchase an I.P5C to grant a certificate on a reamnable mature in 1992,2002, and 2008 under additional 50 million tons Hy separate basis will constitute the existence of a pnnisions of these loan agreements. agreement, the O npany guaranteed $FTs force majeure which wuuld relieve the ,
in connection with certain of SITS performance of the contract and agreed Company and SFI of a substantial part, if.
borrowing arrangements, SITS pawnt to purchase the a>al from SFl. $FI, alter not all, of their obligation under the coal ,
i companies, including the Osmpany, lust having kept the coal supplier adsised of supply agreement. In an effort to resolve Es antnanted ar,d agreed, sacrally in pnsible dela)3, adsiwd the suprlier in the abovementioned dispute, the Com-accordance with their respective shares Angust 1985 that, based on the System's pany, SFI, and the coal supplier entered g
of ownership of $FFs common stock, latest appraisal for planning purpnes, into witlement discussions; as a result a that they will take any and all acthn the $)3 tem \ requirement for additional thereof, the Cor,1pany and the coal necessary to keep SFl in a sound firuncial coal capacity is now forecasted to be in supplier have agreed in principle to a f
i condition and to place 5FI in a position a time frame that nukes the' existing 25->rar natural gas supply arrangement.
-[ to discharge and to cauw $11 to disch,uye contract in fact nonaiabic. I'pon receipt 'Ihe dennitist agreement is expected to
/
[ its obligations under these arrangements. of the August 1985 notification, the be completed in 1988. Unsatisfactory resolution of this matter could expose At January 1,1988, the total loan cond supplier fded a Demand For Arbitration mitment under these arrangements under the coal supply agreement to the Company and SFI to claims for amounted to 5105 million,of whith 597 establish that the agreement renulas in signifiant damages in the event SFI is ,
rt.i' lion um outstanding at tlut date Alm, full (brce and effect and that $FI is not unable to negotiate a new arrangement 2 SITS parent companics,inc!uding the excused from performing its obliga: ions with the c(ul supplier, $FI does not O>mpany, have made similar ancrunts and, alternatively, tlut 5FIs actions ultinutely prevail in asserting that and agreements in connection with long- mnstitute anticipatory apudiation of the events of force nujeure have excused term leaws by SFI of oil storage and coal supply agreement. ~lhe parties agreed perfornunce, or other etTorts to mitigate handling faciities and aul hopper cars. to a potponement of the arbitration on ar.y possible significant damages are At Decen% 31,1987, the aggregaic tl:e basis that it can be restarted by either unsuccessful.
discountt d nlue of these lease arrange- party on ten di)s notice. *lhe Companv '
J, Nuclear Insurance ments wm 573.5 million. In connection filed with the I.PSC an application for a As of December 31,1987, the Price-wid, an $F1550 million wcured Gnancing certi6cate authorizing the construction Andermn Act ( Act) limited the public of nudear fuel inventories, the O)mpany, of the first generating unit for the Wilton AP&I, ad SERI hast egreed to purchase Station, with an in scrsice date of 1995 liability of a Ucenwe of a nuclear pnver or earlier and hearings wrre held thereon plant to 5720 million for a single nuclear such inventories in the ornt that SFl is unable to fulfill its obligations under the on April 18,1986 and Nowmher 12,198, incident. 'lhe Act in its current form in siew of the reduction in projected pnnides that this limit will increaw by Imrnming arrangement. At December 31, 55 million for each additional operating 1987, them were no borrewings out- load requirements within the Company's wrsice area since the time the mal supply license issued by the Nuclear Regulatory standing under this arrangement.
In July 1980,5FI executed a coal agreement was entered into ad in siew Commission (NRC). Insurance for this of other factors relating io the Gimpany, exposure is pnnided by private insurance supply agreement for ihe purchaw of the !.P5C may not g ant such a o -tinate, and an indemnity agreement with the On October 30,1987, consultants to the NRC. Eve:y Ucenwe of a nuclear powrr IP5C Oled a report concluding that such 33
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December 31,1987, the Gnnpany had approxinutely 100 million tons of coal certificate should be denied. It is SFrs loaned SI 1519.5 million under the 5xnr for uw at the G>mpany's propowd Wilton munsefs opinion slut a refusal by the ardi preyk us loan agrecments. Notes < Station with an option to purctuse an o IPSC to grant a certificate on a reaswrble nuture in 1992,2002, and 2008 under additional 50 million tons. Ily wparate basis will constitute the existence of a pnnisions of these loan agreements. agreement, the Coropany guaranteed SFfs force majeure which wuuld reliew the In connection with certain of $1Ts perfornunce of the contract and agreed Company and $FI of a substantial part, if .
bornming arrangements,5FFs parent . to purcluse the coal from 511. SFI, after not all, of the'r obligation under the coal L, _ ' companies, including the Company,luse tusing kept the coal supplier advised of > supply agreement. In an effort so resohr the abowmentioned dispute, the Com-Q ontnanted and agreed, severally in accord;r ec with their ropecthe stures possible delap, advised the supplier in August 1985 that, based en the Sprenis pany, $11, and the coal supplier en'ered Q into settlement discussions; as a result
!? of ownership & SF1 s common stock, latest appraisal for planning purposes, that they will take any and all action the Systenis requirement for additional thereof, the Q>mpany and the coal i
necessary to Letp 51 I in a w>und financial coal capacity is now forecasted to be in supplier have agreed in principle to a h
condition and to place SFl in a position a time frar se that nukes the existing 25->rar natural gas supply arrangement.
s to disclume and to caur $11 to disciurge contract in fact nonaiable. Upon receipt 1he dennitiw agreen'ent is expected to
~
b its obligations under these arrangements. of the August 1985 notincation, the he completed in 1988. Unsatisfactory At January 1,1988, the total loan com- supplier fikxl a Demand For Arbitration resolution of this n atter could expose mitment under thee arrangements inter the coal supply agreement to the Company and SFl to claims for f establish that the agreement remains in significant camages in the ennt SFl is I
annunted to $105 million.of which 59' million was outstanding at that rLuc. Also, full force and ed'ect'and that 51 I is not unable to negotiate a nav arrangement SFFs parent evnpanies, including the exmsed from performing its obligations with the coal supplier, SFI does not O)mpany, tuve nude similar a) tenants. and, alternathrly, that 5FFs actions ulumately prevail in awerting that ano agreements in mntwction with long omstitute anticipatory repudiation of the events of force majeure have excused term leases by $1 I of oil storage and out supply agreement. The parties agreed gwrfornunce, or other efforts to mitigate lundling facilities and coal hopper cars. to a postponement of the arbitration on any possible significant danuges are At December 31,1987, the aggregate the basis tlut it can be restarted by either t nsuccessful discounted n!ue d these lease arrange- party on ten dap notice. The Company '
J. Nuclear Insurance ments was 573.5 million. In connection fik'd with the IPSC an application for a As of December 31,1987, the Price-with an SFl $50 million semred unancing certificate authorizing the mnst'ruction AndcNn Ad (Act) limited the public of nuclear fuel inwntories, the Company, of the first generating unit for the Wilton station, with an in-senice date of 1995 liability of a licensee of a nt; clear pimen AP&I, and 5FRI luw agreed to purchase or earlier and hearings wrre held thertun plam to 5720 million for a single nuclear such imentories in the event that $1I li incident. The Act in its current form tuuble to fulfill its obhgations under the on April 18,1986 and Nmember 12,1987 In siew of the reduction in projected pnnides that this limit will increase by lurnming arrangement. At Dewmirr 31, 65 million for each additional operating
- '1987, there were no borrowings out- load requirements within the Company's wnice area since the time the coal supnly license iwtnil by the Nuclear Regulatory standing ui.dcr this arrangement.
agreement was entered into and in siew Commiwion (NRC). Insurance for this in July 1980, SFl exemted a coal of other fadors relating to the Gimpany, exposure is prtnided by prmate insurance supply agreement for the purchase of and an indemnity ag* cement with the the IPSC nuy not grant such a wnificate.
on Octoler 30,198', consultants to the NRC.11ery licensee of a nuclear p<mer IPAC Okd a report concluding that such h
a
/
- i. . . _ _ _ _ _ . _ . _
I plani is obligand to pay retrospecth e assessments of up to 55 million per addition, the Com}uny is a member.
incident for cath licensed reado i operates or up to a nurimum per r insured under NIR ll, an excess pn necessary to d rt t.perations eactor insurance program, whkhperty pnnid ou ned of 5 to million in any cal es$~75 the reactor sufficiently topen iecontaminate endar million of cts rage for property d.tnugeofigwrationsntthe resunption or to(um
> car in the event of a nuclear sustained incident by the insured in ex m nce e
imuhing any commercial ac ty nuclemillion 2r f ili cau cd by radio.icthecessof $500 con deo>mmissioning. Anypropertyin rance u
in dr l'nitedStates dut in excess of the pris ate insuran uges resuksin dan pecifiedd tamimtionorother anuge. The proceeds not already expended c to pti e ce.The Company has an additional the 5I20 mdt reaoorin a safe and e condition stabl Comium lus one hcenwd ertain reador of excess C pn>perty and decont/minati on must he used first to comp lete thme prosision;of the Act expired on Augu t 1 on decontammation gerations that a s
inwrance 87 and Cogrew h considering(AN1)andTlutual Atomic 1:n with American nsurers Nuclear I ordered by the NRC. Propertyimur re sestralpropuh to amend and ance extend Underw riters a pool ofprivate procttsh insucrgy suhicct to the deo,ntandnatio liability n thesepnnivans of the Act In thi rance priority must be payable to a separate s con- carricts, thus ghing the Company a nection, the United States flouse of wtal trust established for the sole p Repraentath es onJuly 29 198' of $895 million of excew :md propery paying for (osts incurred urp>se of in deron-
, pawd a bill which would, amonggs,other$500 decontamination thin million priman amount insurance e
lh alxnr tur.iruting thethreactor a nd re mming ranc the public liabilitylimit c am iated , e Company's primary pn>perty and radioactise debris. lhe NRC further
\ with any na car inddent toon.$7 billi decontamination damage insuranrequires that the decontamination prio i r ty lhe l'nited hates Senate luspnnided underby ANI. As a member ceis and insured trust requirements set e forth ta th mnsideration a similar bill rcLning to th regulation be incorporated in on sit e with these industry muttui insurers th - e b; both the sextensionof ethe ActCompanyis l'ntilahdiisadopt d suNect to assessex
, e pntpcrty nts if k damag~ insurance o policies n t sws later dun October 4.1988 py and ap l sentatis es and signed y the into esteedlaw bcrute the and flousea ed Repre-accumulated fumh avail bl uniformlytoallrtsluindon siteprop t fYesident. thepn nisions of the A to the insurer.1hc Compan %
y present er y ct width danuge p<mer plants insurance policies c ear for nu l expired August 1. W87 willcontinue nuximum t awcwment for incidents o occurring during a p>licy 3 car is apply 1o all currently liceused ors react approxinutely 510 million. lir Company's insuranceasecarriers h (inc:uding all Middle south stem sy announced that, ctrectist as ofJanua ry reactord the Companyis unahic o
' 1.ffcont Octobcr 5.198' the ,
1.198R NRC the aggnpte amount of predict w hat action Cnngrew might anuided its regulations to nxtuire nu i property c car and demntamination expense inwr ance uhinutcly take riprding the Actinsurance and wiut ontrage a
in the minip available for merplant nudcar generating ns licensees pla t to olv in effect sut h action might has e on the munt Company 's potentialliability amount of 51m billion.1he regul ti willincrease to 51325 .
t s billion Oth hi f urther pnhide that ihe proceed increaw, the cintrage availah!c ah a ons m tthe softhis amount trquired by the NRC to be
! of Nuclear l{tettric insurance insurano shallbeunitirst Iimitedlhe re that Company toensu aside for reactor is a staNiization member-insured set and ck (N1:ll), an industry mutualinsur the licenxd readoreis in a saf anup erdut and stable would be 5 M million.1he Comp pnnides its members with insurance condition a and can be utnuintained unable inpredict to d wiut any is effect the NRC' nplacemconthtion m s toprescnt any signific s oncrage for trrtain costs of ent ant amended regdations nuy hast at the tim pm tr incurred due to certain30 risk to the public health and prolongui safety Wi'hi e putages days of stabili/ation, the licensee n wheni insurance proccethe wutdd be nud of nuclear units (Ni (L I). Innxluired to pnpare and submit toavailable to the Companys eeor the tru t s
the NRC a deanup plan for approval lh for the bondholders pany of the Com
. e i
plan is required to identify all deanup
\
4
\
I 4
I s
' l.' t 4
i f'
a plant is obligated to pay retrospecthe addition;the Company l's a member- operations necessary to decontaminate assessnw als of up to 55 million per : insured u'nder NI{ll. II, am excess property the reactor sufficiently to permit the incident for each licensed reactor it insurance program, which pnnides $775 resumpti m of operatkxw or to o>mmence operates or up to a nuximum per reactor nullion of untrage Ibr pauperty danuge decommissioning Anypnspertyin3nrarxv ow ned of 5 to million in any calendar sustainn! by the insured in excess of $500 pnutsis not already expendal tp place j Star in the cient of a ntwlear incident million caused by radioactive con- the reactor in a safe and stable condition imohing any commercial nuc! car faality tamination or otirr specified danuge. The must be used first to complete thov in the United States dut results in danuges O>mpany has an additional 5120 million decontamination operations that are
> in excess of the private insurance. The of excess property and decontamination ordered by the NRC. Property in urancq Gimpany lus < me licensil reador. Certain insurance with American Nuclear Insurers procents subject to the decontamination pnnisions of the Ad expired on August ( ANI) ant! Aluttul Atomic Energyliability priority must be payable to a separate I,1987 and O>ngress is etnisidering Ihierwriters, a pool of prn ate insurance trust established for the sole purpose of mvral pn>posals to amend and extend carriers. thus ghing the Q>mpany a total paying for costs incurred in decon-these pnnisions of the Act. In this am- of $895 million of excew pn> pert) and taminating the reactor and remming nection, the t'nited States llouse of deamtamination insurance alxne the radioactiw debris.1he NRC further Representatiws, on July 29,1987, pawil $500 million primary amount. The irguires tlut the decontamination priority a bill which wuuld. among other things, Gimpany's prinury property and and trust requirements set forth in the raise the public liability limit awxiated deamtamination danuge insurance ts regdation be incorporated in on-site with any nuclear incident to 57 billion. pnnided by ANI. As a memlwr insured propect r danuge insurance policies not 1he t'nited States Senate has under with these industry mutual insurers, the later than Odober 4,1988 and apply consideration a similar bill relating to the O xupany is sulvst to asoment s if losses unifmmly to all ruluiral on site property extension of the Act. Until a bill is adoptal exceed the accumulated funds auilable danuge insurance policies for nuclear by lxith the Setute and flouse of Repre- to the insurer.1he Onnpany's present p(mer plants.
sentathes and signed into law by the nuximum assessment Ihr incidents the Company's insurance arriers luw President, the pnnisions of the Ad which occurring durbr. a polig year is announced that, efTectiw as ofJanuary
- expired August I,1987 will aintinue to approximately $io million. 1,1988. the aggngate anumt of property apply to all currentiv licensed reactors I frectiw Octobcr 5.198", the NRC and decontamination expense insurance (including all aliddle South Sptem ameixled its nplations to require nuclear available for nuclear generating plants
- reactors).1he Company is uaable to pimer plant licensees to obtain property willincrease to $1.525 billion With this
. prtdict wiut action Congrew might insurance antrage in the minimum increase, the anvrage anilable alxnr the
'dtinutely take reganling the Ad and wiut amount of 51.06 billion. lhe regulatit nt amount required by the NRC to be set effect such action might haw on the further pnnide tlut the proceeds of this aside for reactor stabilitation and cleanup Q)mpany's potential liability insurance slull be med first to ensure tlut would be 5 465 million.1he Company is lhe Gimpany is a member insured the licensed reactor is in a safe arW stable unable to pratict wiut etTect the NRC's of Nuclear lictric Insurance IJmited a>ndition and can be nuintained in that amerwied regulations nuy haw at the time (NI'll.), an indust ry mutual insurer tlut condition so as to prewnt any significant when mmrance procusts wutdd be nude pnnides its members with insurance ri4 to the public health atni stfety WitNn auitable to the Company or the trustec owerage for certain a>sts of replacement 30 dap of stabilization, the licensee is fbr the lxnstholders of the O)mpany pnwr irxurrnt due to cenain pn>tongul rajuirnt to prepare and submit to the outages of nuclear units (NI:ll. I). In NRC a cleanup plan for appnnal.1he plan is required to identify all cleanup 31
7 It. )
l l
l l
l K. Spent Nuclear Fuel and in addition to the cancty of costs l'nder the propowd arrangement, subject j Decommissioning Costs asweiated with the disposal of spent to receipt of necessary regulatory and nuclear fuel, the Q)mpany is pre.sently other appnnals the two companies would L'nder the terms of its nuclear fuel recovering a total of approximately $2.1 tw ainsolidated into a new company to lease, the Q)mpara is responsible for the million annually for decommissioning be called Inuisiana Power & IJght disposal of ment nuclear fuel. 'lhe l a)sts for its nuclear unit. The G)mpany Gimpany SN1, which currently owns a!!
l Grp.tny considers all wsts incurred or to IE inoirred in the use and disposal of airrent!" projects total estinuted nuclear of the outstanding common stock of the
( Q)mpany and NOPSI, would oan all of nuclear fuct to be proper components of plant decommissioning assts to be $140f>
f million, exclusiw of the effects of inflation the comnmn stock of the new company
- l. nuc! car fuel expense and pnnisions to
- "" " *"" """I'""
reanrr such cons luve been accepted I. Consolidation with NOPSI of Q)mpany management and personnel.
by the LPSC. The Company has executed he intet of m.cread econonde has already twen achieved in a number I a contract with the ikpartment of Energ-i efticiency, the Company and NOPSI have of areas legal consumnution of the '
(IX)E) whereby the DOF will furnish I I dark 5wd a long term plan to consolidate . .
mnwlidation is not expected to be 1 disposal senice for the Company's spent I the two companies and their opc ariens. achiewd in the near future. I nuclear fuel at a cost of one mill per kihnvatt-hour of net generation.
T) r f PONTitFTiltFyFNr j f itFNFFIIT 1hc companies of the Middle South an independent actuary performs the 198' pension costs by appnninutely 5ptem luw suriousintretirrnwns benefit necessary auuarial suluations for the 52.192.nlxUlhe tkuraw in 1986 expense i
plans antring substantially all of their individual company plant comgured to 1985 resultui prinurity from Total pension cost (credit) of the inclusion of 51,510JMM)in 1985 for a employees The pension plans are noncontributory and pnnide pension Company for 19W',1986 and 1985 was special early retirenrnt program tlut was benefits that are based on the emplo)tes' 5( l.9 Es u)). S'.C.txx). and 51.2213xx). offered for a limited period and was not credited senice and awrage compen- respectively. The Company adopted SFAh available in 1986 lhe Gimpany's total sation, generally during the last fne Stars No. 8","Employers' Accounting for 198~ pension cost (credit), including before retirement. The policy of the Pensions" effectiveJanuary 1.198' amounts capitali/cd. included (Se Company is to fund [wnsion costs in Adoption of 51AS No. 8" reduced following component...
accordance with contribution guidelines established by the Employee Retirement (In 1housands)
Income Scairity Act of 1951. 5 w cost - benefits earned during the period Pension plans , re adminhtenV by a Interest cost on projected benefit obligation trustee who is responsible for gwnsion (53'95)
Actual rctum on plan assets IIU WI pa)ments to retirees Various inwstmcut Net amorti/ation and dcferral .
8 IINWI nusugers haw teensibility for nun. Net pension cattit agement of Ow plani assett in addition.
35 s _a--,-._~---_ . - - - .-____._---__n-, -
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i l
s
' The assets of the plan ainsist primarily of o>mnxd and preferred stocks, fixed 'the Company buys electricity from inconw securities, and insurance ointracts. and/or sells electricity to the other j 1he funded status of the O>mpany's pension plan at December 31,1987 is as operating subsidiaries of MSU, including follows SERI, under rate schedules fikx! with the
' (In lhousands) fERC In addition, the Osmpany purcluses <
Actu. trial present value of accumulated fuel from 501 and receives technical and pension plan twncfits: adsiviry senices from MSU System Vested 5 83;283 Senices, Inc. During 1987 and 1986, the Nomested ' 3IS 8 90 59g Company pa.d i $rl approximately 523 Accumulated be iclit obligatien million and 5 47 million, r(spectiwly. for
$ 114,968 nuclear fuel pn> cessing senices.
Projected twncfit olfgation Plan assets at fair val'u c 155.710 Operating rewnues include rewnues Plan assets in excess of projected benefit obligation 10,772 fnim sales to aflitiates amounting to 55.9 1:nrecognized prior senice o>st 970 million in 1987, 518.5 million i,i 1986, l'nrea>gnized transinon asset 1 (3M M )
Unrecognized net (gain) loss (1.686) and 513.6 million in 1985. Operau.ng Accrued pension asset (liability) 5 (l.042) expenses includc charges from affiliates for fuel cost, purchased ptmtr, and technical and adsiv>ry senices totalling The weighted awrage discount rate health care and life insurance benefits
$381.5 million in 1987. 5379.4 million and rate of increase in future compen-for retired employees. Substanti.Wy all sation used in determining the actuarial empk))res may become eligible for these present value of the projected benefit , twncfits if dry reach retirenwrit age while obligation wrre 9.0% and 5 6%, retec. still working for the Company.1hese tiwly.1he c>greted long-term rate of benefits and similar benefits for actiw return on plan aw ts was 8.5% Transition employees are pnnided through various assets are being amorti/cd (ner 153 rars. means including payments of premiums lhe actu.uial prewnt nlue of acunnulated to insurance o>mpanics and. or accruals plan benefits at Janum; I,1986 was for selfinsurance policies managed by 576,5633)oo (of wnich 51.36 4 JHM) was insurance companies.1he cost of nomrsted). compared with net assets pnniding thew benetits for retirees is available for pemion benefits of not separable from the cost of pnniding 5139,4581xW).1he awimed rate of return twnctits for actiw employees. The total used in determining the actuarial present cost of pnniding these benefits and the value of accumulated plan betwfits at that number of active employees and retirees date was 9.0% for the last three fiscal 3rars were as lhe G>mpany also pnnides certain folkmx 1987 1986 1985 Total unt of health care and life insurance (in thousands) 510.454 57,995 56.523 Number of actiw employres 3.300 3.054 2,985
)
650 Number of retirees 638 539 l
3a
l Prior to 1987, the Conpany acanmted applicahic to capital leases in accordance 'lhe Comptny has a nuclear fuel lease
(
! for leases on the same basis as that used with $FAS No.13. "Acoxinting for Iraws?' pursuant to which 588.} nullion of
- by its regulatory authority in the rate- the recording of capital kases does not nix kar fuel nuy be leawd as ofikrember making process tlut determines the afkst amounts rtported as either expent 31,1987. The credit line associared with l
or income. The assets and liabilities
' the nuck 2r fuel kaw has terminated, and rnrnues utilized to reaner the lease costs. In 1987, SEAS No. 71 required aw>ciated with thew k ases at December the Company is in the process of that the Company record on its books 31,198', are presented below. attempting to obtain a new line of credit.
the assets ,nd related obligations if a new line of credit is not obtained, fuel presently under leaw nuy continue U" "" to be leased untilJune 1,1991, but no
$ 26,578 nm fuel may tw leawd unM thh I ty plant 13.398 arrangement. When the lease terminates Acaimulated amortiration
$ 13.180 the Company will be required to Net properties under capital leaw I rqurchase any unburned nuclear fuel ,
i Ilabilities: financed under the leaw. Icase payments, t l 810 i Non nitrent c51igations under capital leases which are tot included in the tabulations :
33
, Current obligations under capital leaws aNnt, are based on nuclear fuel uw.
I lbtal obligations under capital leases 8M 380 =
Nuclear fuel lease expense consists 6f l
I w hnled from the atur annunts at Decemtwr 31,1987 is approximately 588.7 mdlion which amortization of the nuclear fuel lease and has been recorded in connection with nudcar eu.1 Ictses. interest on the lease obligation. Amorti-ratio 1 recorded in connection with the I
auclear fuel lease for 1987,1986,and future minimum lease payments, by period and in the aggregate, of the Company's 1985 was 550 million, $56 6 million, and capital leaws (exchwiing nuclear fuel leae) and noncancellable openuing leases o>nsisted 513.1 mihk$n, respectively. Interest of the following at December 31,198?.
expenw related to the nuclear fuel lease for 1987,1986, and 1985 was $7.9 milliott C.ipital Operating 56A million, and 50.8 milliot rrspeanth lhe unrecovered cost base of the lease nh M 5 1,418 5 -1,51I was 588. million. $116.3 million, and 1988 - $ 120 milliim at lXxrmber 31,198",1986.
3.996 4hlt '
1989 and 1985, respecthrly.
3.651 4411 1990 s in 1980. the Company enteralinto a 2'5,907 sale and leaseback of certain office 768 For )rars thereafter E87' buildings and related real pnperties. A Minimum rental commitments _
546.364 _ ~
gain of $13 4 cnillion has been deferred 5.69- and is now being amortized osvr the life lessIAnmunt reproentinginterest of the lease. the lease is for a primarv l lYesent value of future minimum
$ 13.180 m of ,g lease payments Rental expense fo capital and operating kwes (exc!uding nuclear fuel l
leases) anmuntal to approximatch 58 3 million. 56
- milliort and $6.3 million in 198",1986, and 1985, respectnrly l
s
- as
A dipute betwren a gas surv Ser and SIM.No. 90 requires that any partial to the Corr 4)any's agreement to certain the Company arising f rca the gas diullowances ( for ratemaking purpows) onlitions. lhe order prtnided, among i supplier s claimtti inability to delis er the of recently completed generating plants other things, for the Company to per-full quantitics of fuel gas due the Company be ree ignized as a loss. 5Eb No. 90 is nunently absorb and not reonrr from under seseral natural gas contracts w as effective for fiscal years beginning after its rrttil utstonrrs $2M million (of whidi settled by the execution of a wttlement December 15,198' with earlier appli- the Ll5C's jurisdictional portion is agreement onJune i,1982. 'the settle- cation encouraged. The Company has approximttely 5276.9 million) of the nrnt agreement prmides for the payment di(wen to adopt the prosisions of 5Eb 52.8 6 billion estinuted cost of Watmord 3 of 51087 billion in cash (of which 5587 ' o. 90 in 198'. Prior >cari financial regardless of the outcome of a prudence million. 5250 million, and $250 millior, statements have been restated to reflect rtsiew of the o>nstrtn16n of Waterford i were recci ed by the C mipany in juo the app!kation of the new statement. 'the followir.g table illustrates the 1982, January 1983, and Janu;nT 19M, On Nmember 1-1.1985, the I.PSC cffects of doption of 5fAs No. 90 fer respectively) plus a guaranty of sai mgs iwued an order on the Company's th > cars ended December 31.1966 of at least $585 million in certain gas Waterford 3 rate application granting an and 1985:
acquisition costs betwren 1982 and 19(Xt emergency interim rate increase v$ lect in Starch 1983, the I.P5C orJered,in genetal. that refunds of tiv settlement pnuuts he nude to utsunrrs as folkmx s .
(In Thousands) the 558' million rtu+ ed on June 4,1982 1986 1985 plus interest or a to;al of 5637 million m Nct income, as presioush' rtported 5140 006 5 131. % 9 be refunded in 1983; the 5 ?% million Adjustments to operating income:
reccised inJarm ry 1983 to be tcfunded I A preciation presiously taken I in ten cyual annual installment s beginning Related income taxes _
in 198i, and the 5250 mi!! ion received Adjust ents to other income:
in January 1981 to be rtfunded in nine Related income taxes II 5 equal annual installments beginning in Div!! owed ontv 1985. In addition, in l'ebruary 198 4. the Direct disallow 2nce -
(2 6.900)
Related income taxes -
1.lSC onlered the Cnmpany to refund IIMIII--
.lotal ~
$!.2.6 million. representing interest not CJunge in net income' bIY R13V I I8D95) already oncred in its Niarch 1983 refund Net income (loss), as rtstated 5 (53.824) ort!cr. to G"tomcr3 in equal installments
. Restatement of 19M and 1986 net income resulini in a cumulatne redactimi in December 31.
oser a nine ) car period beginning Mth t986 retained carnings of 8182 rmlhon.
the 1985 refund. As a result of the 1.15C orders, the Company accrued in 1985 Dcferred taxes related to the the plant is depreciated ( MG in 1985 net interest expense in the amount of Waterford 3 disallow 2nce base been and 1986. -60% in 198". and 3 rb diere.
50.2 milhon No accruals wcre required pro,ided at rates that, under current tax atier) to determine tir net rtWahle value for 198' and lu6 ~1hrough December law. a re etlective when the tax basis or of the tax frnclit.
31,198'. the Company had refunded a total of approxinutcly 5826 million to its customers With respect to certain rate orders twued by the IJN:in IW affecting the alwne mentioned settlemcnt, see Note 2,"Rate %Iatters" for further discuwion.
N 38
l l'n.tudited operating results for tir 6,ur quartcrs of 1987 and 1986 follow:
Operating Ol xrating Net Qturter ' Revenues Income Ino>nx i Ended '
(Inss)
(in 1housands)
- 198~-
52(Xi.806 5 71,716 > 28,~61 3f a. ch ( 1 )
333,318 71.633 26.232 June (l) 108.625 64,042 styrember (l ) 415.783 291.995 41,653 (3,386)
December (2) 1986:(1) 5297,517 528.159 Wrch 5 75.663 332,296 88.998 40.379 June 409,"57 113,091 Nytember 63.610 199,611 61, t 81 11.589 i)eecmber t 3)
(1) Revated to refin1 the aikption of SFAs 'vi 90 (2)llupurter coded December 31.19H irwtua3 a 52 4 e million. not of tas. deucaw attntxit2 hic to the etrects of the disuntinuance of Waterford 3 rate deferral = otTset in a 5M million decreaw in Iases dne to the amortintion of prttiously pnnidal accumulated deferred 4 ate inconw tases related to Aprnlation timing differcoces.
(3)'the quarter ended Ikccmher 31,19Wiincludes the etrcct of an $M 4 million reduuien. net of tas,in <perating inmme and net inconw due to the pontuons for evinuted Imses of tir Conpanyi share of certain cmts aw wiated with indefinitely dela>td future fossil fuel generating facilities Ilrlxtsinessof tir Osmpanyissuivit to x asonal fluctintion . with the peak period occurritig during the summer montlw Accordindv. carnings infornution i
for the interim period should not be considered as a basis for estimating the results of operations for a full year.
I
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, 15Mft1 M gT2io
> M F-CUSTOMERS FINANCIAL CONDITION 'these included the final remlution of I II#""'D certain other Middle Sou:n 5ntem 19N N SO' lhe following analpis renects the operating companics' rate orders; the 197 78 79 Ho Hi H2 H3 Hi HS H6 H* r(Ndulit n of a permanent rate relief of financial Accounting Statxiards(5I AN)
"" regnest pending hcfore the I.1%; the No. 90. "itegulated 1) . yiws -
WM a unting standard 9n Accounting fi>r Abandonments and
] ,
Disallowunces of Plant Costs", w hich
, , gg , , ,
resulted in the rest.itemcet of the 1985 ,
im estigation al the (.nmpam s dca. .sion vu and 1986 financial statement . the g ,.
W M ord A b @ 's H"
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]
Company's financial condition declined in 1987 despite rate rclief granted by the Inuisiana Public Senice Commission (II5C) in January 198~, which was
- n m% W k Mp's decision to huv powcr from Unit No I of the Grand Gulf 5tcam Ilectric n@deudWGodM subwquently reduced in April 198 . Net I ) of w hich 90 L is owned by Sptem income decreased $28.1 millies or 2nl. .
g .
due to tlw reduction in the thmul return OPERATING REVENUFS o W did o M p u d k on common equity to ! M as .cquired l'mns Retail Customers 528 e nnilion disallowance of Waterford 3 hv the).inuarv .A0. G8' rate ordct and imestment n accordance with 51 A5 (Millions of/Ad/ars) pp = s f,J fj .; the discontinu.We on Ichnury 1,198~
d a ulW N of.idditiona! Waterford 3 os.'errals. The 19-- H '9 Ho HI H2 H3 Hi H5 H6 H- the allocation of capacity and energs Compani has remained current with from G. rand Gulf 1; the uncertain si pn nw to its preferrn) stock sinking fund of I*nd h 2 M k M M'
- pe,nxmts arxi the dedaration and p.iynxmt , ,
g, of preferred sta k daidends lhe p.i) ment (nuclect)(Grand Gulf 2) and the io0 of common stock dnidends resmned in oundy mmm W pihle m the third quarter of 198" fi>r the first don in k e hdh time since the second quarter of 1985. .
"" 8. Commitments and Cnntin-Common stock dnidends totalling 58 3
}b- gencies - Grand Gdf 2"), and the mo nulin >n utrr paid to .\bddle N uh 1't9 tics, di utcome at disputes related to Inc. ( Nist ') in 198" and common u a k's W M gly dnidends of 5 i 6 million wcre paid in 0 c 1 Ichniary 1988 nm N N'e R Gmbm W Wndngne - Wm NA im'"t 1)uring 198', the Company faced Ahhough some of these issues have been continued uncertainties and dullcuges d miMb an d FW and cot.li hase a nuterial adscrse cifcct I on the O mpanyi future thunual l
(undation. I;quiditv and capital resource s.
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4
).
Ittte Helief pn> gram in omncetion with the gas Rate Deferrals OnJanuary 30,1987, the IJM: issued contract wttlenrnt. The reduction in the By its orders of Nowmher 14,1985, a permanent order for rate relief (January Company's rate increase was placal into April 1987, and June 1987, the IMC has effect on July 6 1987. The 1987 gas pnnickxl adequate awurance to the 1987 Onler) that wuuld allow the Company a base rate increase of 5 6 2 omtract settlement refund of approx. Q3mpany as to the future rectnery of i' million annually Additionally, theJanuary imately $55.2 million wu nade on that the approximately $217 million of
'.987 Order required the Gimpany to same date. On Ju!) 8.1987, the Company deferred Waterford 3 costs acasmulated tetain appmunutely 53S6 milli 6n of the appealed, among other ihings Ihose as of y.nua y 31,1987. On the odwr hand, tulance of pn>cceds of a gas contract apects of the Janu.try 1987, April 1987, the IJMA actions did not apgrar to haw witlenrnt and to use these funds, among andJune 1987 Orders tlut failed to pnnided adequate assurance as to the other things to recover Waterfe-d 3 pr nide adequate assurance of future future reemery of tiue aMtional deferred ex[wnws acnimulated through reanery; through a phase in plan, of Waterford 3 c ists ir.eurred subsequent January 31,1987 (approximately $247 Watertbnl 3 costs incurred but not to Augttst 12,1987, that, in the O)mpanyV million). Ilowcwr, on April 28,19g7 recowred subsequent toJuly 6,1987, opinion, b>uld be deferred for future
( April 198' Onler) the IJM: nnhfied and not permitting the Company to earn rec ntry Although, the Nmember 1987 its January 1987 Order by reducing the an adequate rate of return on its Judgnwnt stated, among other things, that investrent. On Nowmber 10,1987,the Company's rate increase from 576.2 the Company,coulo record as an asset million Io 5 i8 million on the bnis of the Nineteenth Judicial District Court for the Waterford 3 amo u.ts deferred from pluse-in of Waterfoni 3 costs recom. Parish of East I aton Rouge. Inuisiana August 12,1987 throughJantury 31.1988 mended by its consultrots. The April issued a judgment (Nowmlwr 1987 totalling approximately $19 million 198 Onler al so reinstated the pnnisions judgnrnt) pnniding. auong oder things (approximately 515 million in 198'), the of a 1983 onter requiring tl.e gas o>ntract the authority to implement an auditional O)mpany has not donc so pending the settlement proccals to be refunded to rate increase of 5 to million annually for outcome of a ppeals to the Supreme G atrt I15C jurislictional customers in annual sersices rendered on and aher fchruary '
of Inu siani Iherefore such additiosul I,1988. 'lhe Company has implemented W,nedord 3 ants luw not been defctra payments.
such rate increase effective february l- but lure tren recorded as current On Alay 6,1981 the Company filed with the iIN: a Motion for Rehearing 1988, subject to refund.1he IJN: and operating expense, adwrsely affecting and Clarification of Order to obtain the Company haw appealed the carnings l
clarification of certain prosisions of the November 198' Judgment to the it is the Company's opinion that a I
April 1987 Onler. In resptmse to stnh lnuisiana Supreme Court. The nutter is total of approximate;y $266 million of l
motion, the fMC. by onler of J'ine 26, pending Waterford 3 costs should h.'ve tren 1937 (June 198' Order), found, among On February 19,1988, the Company deferred as ofJanuary 31.1988. As part l
other things tlut exapt as to theJantury likd with the ilN', an application for of the fchr ury 1988 rate tiling. the 198 Onler the April 198' Order was retail rate relief requesting a net increase Cnmpany submitted to the IJSC for not intended to change any of the ll5C\ of 538.2 mdlion in anniul revenues appnnul a fornul phase in plan that will (Ithruarv 1988 rate filing). Sinh request allow for the reonervof the 52 47 milhon onlers laued presiously, in the rate case, and stated that by the April 198 Onter, pnnides for adjustment subject to the of Waterford 3 onts deferred through
- the Ilwr lud abandored the January finaloutconrof appeahof tirNowmbcr Jantury 31.198' as well as the $ 19 milion 1987 Order,lud ndt nl the rate increase 198* Judgment. Specifically, should the of Waterford 3 costs subject to deferral Inuisiana Supreme Court owrturn the of 5*6.2 million to 5 48 million. and had DtsuM Coinfs Nmunber 198" lodgment.
reinstated the melli.> ear refunding the Company is requesting an alternate net increaw in annual rnenacs of 5*8 2 million (See Note 2. "Rate Matters'~ )
61
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ENERGY SALES for the period August 12,1987 through As of I)cccmber 31,1987, the 1.PSC lud j 7h Reta/I Osstomers_ January 31,1988. 'the pnase in plan not indicated its conclusions on the j
(/li / orts /Ai/ornitt1/ours) enM if ad@d by the 1.PSC, will prude.1ce issues. j
^
o>mply v.ith the pnnisions of SFAS No Plant Disallowance 1977 TH 79 Ho Hi H2 H3 N. 85 N6,Hi 92,* Regulated Enterprises - Aco>unting
- litrnings haw been and will a>ntinue
, y3 5
for Pluse in Plans" (SFAS No. 92)/and alknv the G>m[uny to reonrr tir apprux- to be adversely affected by the O)mpany's
., 20 inutely 52(6 million d Waterfont 3 ansts agreement to gwrnunently absorb the l over a deven > car period beginning in dommentioned $28i million of its ts ,
l 1990. If the LPSC does not appnne a investment in Waterford 3. In this l phase In plan that complies with SEE amnect on, the O>mpany implemented j 5 No. 92, the Company will tw required to SFAS No. 90 in 1987, therchy recording wTite'off the deferred Waterfi)rd 3 costs. the low in respect of such partial dis-o .
(See Note H TOimmitments and Osnti.i.
aHowance of Wataford 3 imtstment by l 4 way of a writeoff. Accordingly ! ;and
[ '
gencies - New Accounting Standards",
for the specific requiremeats of SEM 198I' unancial statements have Ire.. j AVERAGE KWii USE restated to redect the write +)ff. Such j No. 92. )
IW Reshhwiki/ Gestormr restatement resulted in a net low of 553 8 l 1M7 = /J,r" Prudence million in 1985, the first low recorded '
19n H '9 No HI H2 H3 Hi H5 86 H, o en an net $adon M in tk Gngnp Woy We .h U, connection with its November 1985 "Statement of I'inancia: Aco>unting 19 M Onler w hich in effect required the Standards No. 90.")
uqio G>mpany to pernunently ahvirb, and not d CMf I frontr from retail ctNomers, the I.IN' I" # We Companpugreement, as part of jurislictiotul pirtion (apprminutely
' . 500 9"'.5%) of the $281 million disalkmunce. A Nnuht1 , to panuncndy
'the 1.lWs omsultants concitxkd tlut wtain W. of its slure of Grand Gulf I 2S '" I the Company's decisii,ns to build Waterford 3.md to enter into a contract am continues to au ersely affect the Ginqunis( .rn5 H awun, the (upa(ity and energy relating to the Companys n to purcluse capacity and energy from Grand Gulf I wrre reavnuble. They also retainul percentage of Grand Gulf I costs a>uld he auitable for sa;c to non-affiliated a>ncluhd tlut 5113 million of the total Waterford 3 ce wruction costs wrre panies, suW to IM approul.
imprudent!v incurred. It is the position of the Gimpany that none of the Waterford 3 construction ONs were impnklenth-inwrred Monurr, since the Ondings are icw tlun the 52N miUion disdkmance flut the Company prt%>usly
.igreed to absorit the Gimpany fccis llut no additional disallowance is justified ,
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i l'ederal Energy Regulatory mer the next threc } cars, the $10 million tlut is shared with %w Comnhlon (ITRC) Allocation of O)mpany pn>jects that capital will be Orleans 1%hlic Sersice Inc. As ofIebruary Grand Gulf I required for construction expenditures 29,1988, 590 million in lines of credit During 1987, the ! ERC reaffirmed its (inclushe of Al1X: but excluding nuclear with banks outside the O>npany's sersice June 13,1985 allocation of(; rand Gulf I fuel) of 5142A million in 1988, $149.6 area remained available for bornming msts, cpacity arxl energv to the Gimpany million in 1989, and 5156 trillion in 1990 by the Company IWrowings esu also be The Company projects that other p.im2ry effcc4d through the Sliddle South $3 stem furtl er challenges to the MWC's juris.
Gional authonty to allocate Grand Gulf capital requirements for the next thice 51oney Pool, subject to the antilability of 4
i kapacity ar i energy have thus far been lears are as follows the funding of 515 funds, which at any particular time may million ark! 520 mdlion principal amount be litaited.
unsucussful. Should currently unresoh eti or future challenge > force changes in the of maturing first nut igage lynxis in 1989 1he O>mpany ltts a nudear fuel leaw ITRC% allocation. the O impanyi carninp, and 1990, respectively. and the funding gwant to whidt $887 million of nuclear of other maturing long term debt and fuel may be leaxxl as of December 31, liquidity, and financi d coulition could be materially adstrsek af nuett ( See Note preferred stock retirements (including 198'. lhe credit line aswciated with the ,
- 8. "Gimmitments an<l Contingencies - anticipated early retirements of preferred Company's nuclear fuel lease' has 1 nh ;%rr Sales A;treement.") stock) aggregating 595. ' million in 1988, terminated, and the O>mpany is in the 517.9 million in 1989, and $18.8 million pn> cess of attempting to obtain a new in 1990 In 1988 and 1990, the O)npa.,y line of ctrdit. If a new line of crtslit is LIQUIDITY AND intends to finance substantially all of the not obtained, fuel presently under leaw CAPITAL lirSOL J{CES alwnr capital respairements with internally may continue to be leased until luie 1.
generated fumh 1he Ompany anticipates 1991, but no new fuel nuy be leased During 1987, the Gimpant'sprimary that its capital needs for 1989 will be urxler this arrangement. lpm tcrndnatio1 <
capital requirements included construe, satiVitti through int'.rnally generated of the leaw, the Ompany will be nyuired thm cxpcalitures, inchxling an alknvance funds and the iwuance of, anmng other , to repurchase any unbumed nuclear fuel for the composite cost of fumis used thinp. first mortgagelx>nds Additionally. tinanced under the lease. It is currently during construction ( AIDC). of $ 127 (he Conpmy nuy enter into arrangements awumed that a rvw line of credit will be million, payment of preferred and for the sale and leawback of pnper~ secured.
omimon st<d dnidends of 5%~ million in which the pnareds from such 1he Qiny.my's earnings untrages ti>r and $8 3 million, respecthcly, the dansactions could be used to a vtire debt its first mortgage bomb decreawd to 2.11 irfunding of 555.2 million to customers at par. times the annual mortgag? fx)nd interest in connection with a gas o niract in order to pnnide interim financing. requirements for 1987 from 299 times lt settlement. the redemption of 532.6 the Company is arrently authoriecd to for 19% f or 1985, the carnings antrage
(
million of preferred stotL. the financing effed shon term hornminp of up to 10% for first mortgage l>>nds u as 1.3' times l of dcferrn! Waterford 3 espenses of (appruxinutely 5301 million at year end) the amual mortgage nond interest rtspritt-l appnnimately 521.1 million, and the of capitalization as defined subject to the ments Ear nings ontrages for p.eferred tetiremer.t of 520 million of first mongage autilability of slurt. term credit resourcts 40tk decreased to 1.28 times the annual
- bomh the Cony.my's cash needs for 1he Company ha unsect rol bank Imes interest charges and preferred stock 1987 were primarily satisfied thnogh of ardit of appnninutely 5140.3 million disidend rtspiirements for 198' fnxn 13' internally generated funds at December 31,198', none of which times in 19% 1he preferred stock was utilized at that date. Such unwmred bank lines of credit include 590 million 4h non. territorial banks of which 530 milhon expires on June 30,1988 and
$50 3 million with louidana banks all of whi(h expires on June 30.19881he Inks of ensht with Iouisiana lunks inchxk-ii
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CONSTRUCI10N EXPENDITURES earnings cmtrage for 1985 mts 1.32 H13ULTS OF, OPERATIONS
(,l/illirms oflMlars) times 'lhe carnings antrages for 1985
/ M = 8 /*TS
- and 1986 do not reflect the effects of Net income amountn! to 5115.6 1977 73 79 80 8182 83 34 85 86 My the restatement of such3 rars' financial million in 1987, a decrea .c of $28.1 statements for implementation of 5FAS ' mill.un er 20% from 1986. and net dicome No. 90. (See Note 13, "Statement of increased 5197.6 million in 1986 when t 9n l'inancia: Accounting 5tandards No. 90.") mmpared to 1985.'the dnTease in 1987 gg 1he minimum earnings coverage net locome was principally ilue to, as nytdrenxnts for issdng first inortgage required by theJanuary 30,198"' rate 3* -
lants (oder than for refundirig purposes) order, the it duction in the allourd rate 1
2m _
and preferred stock are 2.0 times and of return on common equity to 12% and 1.5 times, re+.pecthrly, on a pn> forma the diswntinuance on February 1,1987 h,tsis ILrrd upon 1987 camings, the of additional Waterford 3 deferrals. The n I.I Company is preclutk d from raising capital 1986 increase was due prir'urity to the through the sale of preferred stock.1he w rite off in 1935 of $1854 million, net anuunt of additiotul first nortgage twmds of tax,of disallourd Waterford 3 costs. I tlut i, .uld lust been issued bawd upon 1btal operating revenues increased TOTAI, UTILITY PIMT asud. a bk property additions at year.cnd 51." million in 1987 and $79A million I (excludi.rg nuc/mrfuel)
"us approxinutely 5593.8 million. or 6% in 1986 when compared Io 1986 (Millions ofDollars) 1987 = 5U955 Ilowrstr, based upon mortgage earnings and 1985, respectistly The increaw in unerages and an assumed interest rate 1987 was principally due to an increase 1977 78 79 80 81 82 83 84 85 86 87 of 13%, the Company could hast issued in base rates as a result of the ! PM7s 5090 only up to $70 million of additional first January 30,1987 rate order (subwquently f g mortgage trnds at year end. reduent by the April 28.1987 rate order)
In the third quarter of 1987, the mainly olYset by rate a ncessions granted
+
M* Company resumed payment of modest to iixttistrial custonrrs and a decrease 3 000 comnon stock dnidends to M5U, lhe in fuel adjustment rornues due to kmtr Company renuins current with respect fuel msts Sakuulunr remained triatnvly topreferrn!unckdisideixtsandprefuTed testl in 1987 as compared to 1986 sales.
2J5M stock sinking fund pa>Tirnts. 'lhe 1986 inaraw was primarily the result
- gym of rate increaws impk mental in late 1985 partially otiset by a decrease in fuel I.
U*"
adjustment tornues eauxd by kmer fuel 4
9e g
I o nts.
l'uct and purchasedt wmrr costs decreased $25.9 million or 4% in 1987 and 51 2." million or 22% in 1986 as .
I om1 pared to the j' receding year in each caw. 'lhese decreases were the result of k mer per-unit fuel wsts and the inarasul uw of nacicar geirration at k mvr astrage unit costs.
f 5
_ - _ _ _ _ _ _ _ _ _ _ _ _ _ . _ . _ , _ _ _ . _ . _ . _ _ . ~ _ ~ . - . . . - _ . . _ . _ _ . , _ . _ , _ _ _ __ -
V
.4 - ,
4 4
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7 Maintenance expenws renutr,cd lort 198 decreased 511.7 million or 36% SU3 DIARY in 1987, compared to 1986 atxl mcreased and for 1986 increased 5 i-4. i mil! ion as
$38.2 milhon or ~6% in RM ampared comparn! to tlw precedmg year in each in 1987, the Ovppany experienced caw. lhe 1987 decrease was prinurtly decreases in net inconw and indenture to 1985. Approxinutely 5.01 atillion of attributable to the discontinuance on - and charter carnings emtrage ratios the 1986 increase riflected .he impact January 31,1987 of nornuli/ing state Ilowner, the Gimpany ha3 continu(d to of a full year of nuinte.1anc: expenses income taxcs related to depreciation rerr.ain current with respect to the awwiatal with Waterfont ', which was ti nirgdifferenors the writc< Hof all such payment o. crs ferred su d dhicends and placed into comnxroi.il operation in prc'.iously deferred amounts, and a has resu.. ed the payment of common Mpt(mber 1985 '
reduction i t, the federal corporate tax sto(k dhidends. The 0 >mpany's future Depreiation expenw irwreased slightly rate for 198'. Partially of fsetting these financial condition will be affec'rd by in 198~ and 'aercawd 5 69.5 million or
%t % in 198a as compard to 1986 and decreaws in 198' was an increase in pre. the tim! rtmluth a of ceruin other Mid!!e tax book income. 'lhe 1986 increase wa.s N>uth S: stem operatiry wmpanies' rate 1985, regwtthtly 11w 19% increaw was due to increased pre tax book income. orders and related maners. the effect on ,
due prire.ipally to an inaraw in Waterford Al'lX: increased slightly in 198" and the Company of a r.v .'ca7unting
< 3 apreciation renecting the Hrst ft;!! year decreased in 1986 by 512 i 6 million or standard relating to the accounting for of comnwrcial operation of Waterford 3 Deferred Waterford 3 expenses 98% when compared to 1986 and 1985, phewin plans, the outuinw of the pending respectively Since Rptember 1985, the appealof the % ember 1987 Judgment, decreasul 51809 millim or 90% in 198' Gimpany has ceased to accrue A11X:in the linal resolution of the 1IN: prudence 4 and increawd 5185.9 million in 1986 ;.s amciation with Waterford 3 thereby im ntigation, the ultinute outcome of the comparnt to 1986 and 1985, respettiwly 1he do; tease in 198' deferrah was due greatly rnlucing A11X: for 198' and 1986. appeal of the iI RC's reconsideration of 1 Interest on h>ng term debt decreawd the alheation of capacity and energy from to the disayntinuan(c, pursuant to the by $5.8 million or 3% in 1987 and Grand Gulf 1 the future status of Grand orders of the IJN'. of additional Wr.tcrford increased 520.9 mi'ilion or 13% in 1986 Gulf 2 and the possible allocation to the 3 deferrah on lanury 1,1987.71r 19#a mmparnt to 1986 and 1985. respectinly Company of costs amciated with tlut increase was the result of rate deferrah The 1987 decrease was due to the unit.and the ultinute outoime of diTutes implemented in 1.;te 1985.
- ncoine t.o rs inc haled '.n opcrating rotunding in late 1986 cf certain series related to Syvem fuels Inc?s auf supply of high interest bearing debt.1hc increaw agreement (sce Ete 2 "Rate Matters",
expenses (cwlusiw of tiv,c taxn relatal to deferral Waterford ) expenses) for in 1986 intern expenses was mainly and hte 8 ' Commitments and attributable to the Company's h%nce Comingencies").
of additional debt.
Other interest nct dcen ased 5".1 million or 50% in 198 and $6 million
> or Nb in N86 as mmpared to 1986 and 1985. respcctiwly ~1hese decreases were prinurily the re ult of loact leveh of short term borrmvings.
s ob
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' f, e o
k RECORD OF PROGR15S 1977-1987
$1 IICII.D 1:lN ANCIA1. DAYA (DoP1rs in Mil! ions) 1987 ,1986 1985 1986
'Ibtal I'tilitv Plant ( Excluding Nuclear l'uel) ( 1 ) $4.395.5 s4.269.5 54,162.6 54,116 8
$ i,23 4.4 $ i,! 50. i $3,819.3 $3,8 i9.1 lbtal Awct's(l)
Capitali/.ition -
long-Term Dcht (I Actuding Ct.rrent Mainritics)_ $1,772.3 51.'83 0 51.470.1 $ 1, s'l 8 Prefet red Sam k with Sinking iund 241.3 272.1 2 84 284.5 Preferred Auck wittmu: Sinking fund 145 9 3459 I i5.9 145.9 Common Equity (I) , 920.0 86i.4 771.I 855.9
'Ibtal ( 1 ) $3.079.5 53M5,j, 52N)8.5 $ 2.758. I
~Iotal Operating Resenues $1.340.9 $ 1.339.2 51.259.8 51,245.7 Operating Income f 1 ) $ 296 6 5 339.2 3 186 1 $ 3W.7 Nct income (low)(l and 2) 5 115.6 5 143M s (53 8) 5 201.0 Empi >>ces - Year I:nd 3,373 3.09' )998
. 2.973 l ifCIRIC OPilhTIONS Opat ating Resenues (Dollars hi Millions):
$ 411.-
~
f.csidential $ 476.0 $ 473.3 5 406.F Comnwrcial, 274.i 265.5 '226.9 215 4 Industrial 525.8 512.9 528. 562.1 Government and Municip.il. 37.5 346 30.7 30.2
, Othcr 27.5 52.9 62.1 ~342 fbtal _
$1.3 40.9 51.339.2 51.259.8 51,245.7
.r= -
Mies (Millions of KWil L 6357 6.9's Residential 6.981 6.630 Co.nmercial _
3,770 3,773 3708 3.410 Industrial 13,102 12.341 12,668 12,168 Genernment and Municipal 620 593 583 553 Other 582 1.459 7-16 529 Tbtal 21.831 25.1 -i i 24.186 24.290 Customers - Year End ('lhouunds):
Residc.1tial . ___
502.3 501 6 .499.8 495.4 Comrxrcial _
57.3 57.3 '
.1 55 8 Industrial 6.1 6.4 '1
. ?, i i Government and .Vunicipl_ 4.0 3.9 38 3.7 lbtal 569.7 *69.2 _ _ _ _
56'.8 562.3 ,
Residential ( ustumcr Data Ascrage Annual l' .e (Kilowatt !!ours) 13.4 7 13.92~ l4.013 13,I"9 Ascrage Annual kcwnon per Kdomut-flour 7.0it 6.r SAhk 6. l(x iP&l. 5)Mem Irput ( Mil- of KWil; Net Generatrou , 17,658 20.286 16.478 14.100 Purchased h mer and interchange.in 8.9 il 6.'25 9905 10.931 Intal __ 26.599 2".011 26.3,83- 25.03 l
-:= ,
Peak IK mand ( MW) _
4,552 1.603 1.3 % i.200 Gener.iting capalwlity (Mw 1 5.665 iM5 5M5 4.605 t 1) tvm amt itM haw been n%unt to n11cci the aoipim of statemcnt of 1inant ul u oiuniing sivs1 nh No 9u ( xe Note 13 cf Niges to i man (ul N atenxt.ts )
(2 ) Net irmix 6e 19M e iin le ntes tik cueuuieint tifett to Januan 1. WM 4 of au ruing unhilot rts t nues in (f.c any uni < 4 51" 6 million af te r hxome taso
e 0
1 1984 1982 1981 1980 19"9 1978 1977
$2,319.2 $2J)69.1 - $ 1,793.0 $ 1,509.8
$3fn8.1 $3.131.5 $ 2.631.0
$ 1,298.8
$3,565.3 $2,330 2 $2,0~8.-i $1.8 6 2.1 $ 1,557.2
$3fd)2.1
$ 1,173.5 $ 9 47.6 $ 1,001.2 5 829.0 $ 827.4 5 728.7 $ 566.3 240.9 169.I 121.4 121.-i 93.0 .- -
145.9 1159 1159 l 15.9 110.8 110 8 l 15.9 778 8 6 19.9 6153 564.I 487.J 417.2 363.8
$1.884.6 $ 1.(4d) , a l, m. ? $ 1,256.7 $ 1.010.9
_. ; $2.339.1 $ 1.912.5
$1,1 i 1.7 $1 195.6 $ 1.117.8 853.5 $ 557.5 54%4 $ 379.0
$ 167.2 5 133.0 $ M1 $ 79.7 5 69.0
$ 172 5 $ 187.3
$ 117.5 5 121.5 $ 1 &.).7 5 65.1 5 53.7 $ 41.4 5 131.5 2.I29 2,756 2,721 2,499 2,312 2,329 2.216 9 361.0 $ 3 i1.6 5 265.t $ 180.i $ 146.3 $ 12i 5
$ 358.8 55.4 186.8 183.0 16i.' I23 6 86 0 68.3 5' l.1 525.3 358.2 212.8 1 i 1.d i I4.9 529.6 -
26 2 22.8 17.2 11.7 8.5 7.I T.2 63.4 89.4 (it6 91.5 '7. !
42 3 48.3
$1,14 4.7 $ 1.195 (- $ l . I 1".8 $ 853.5 5 557.5 5 456.4 $ 3'9.0 [
6,398 53)96 5,862 5.331 6.T 6 6aiv 6.405 3,140 2.M'6 2,721 2,624 2.268 4.I68 3.016 12,99' l3.06' I IJXi3 I I .388 9.645 9.028 1iA91 518 46f 445 394 359 525 i'9
'80 86' 1.I85 2.215 2,~02 4.I17 3%3 23.252 22.71) 20.952 22.238 23.9i1 26.I52 ) 4.9 n 5 I.0 i . "$ e . . .
'h. , 8k ~k ') ) .
48 6 46 8 4 f.9 10. !
53.8 52 0 50.6 66 6* 68 '.2 7.5 '.6 7.5 28 3.3 33 3.2 3.1 36 3.4 4 66.0 515.9 5007 483.4
%20 5 04 530L ____
13,'91 1/
~~
l3.758 14.063 13fiMO Y)(. 13.545 $
566, 4.18 3 Olc 2 SG( 2.33c
'2e 5.3 3c 18.629 21.251 20.206 82 2 14,510 15 l'1 16.410 9.424 6.83' 3.813 2.931
-84 11.138 t h369 25.860 25.8 M 25.260 25.064 23.135 Joh ]5.6'F b
i,256 4/r8 anal 3.852 3.515 4 20' 4.259 4.603 4,i47 1.62 ', 4625 1.612 i.6 I8 4.625 s'
L._. ' e - - , -, ,_ _
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DIRECTORS OFFICERS W.J. I.tNNFS HI
' JANIES M. CA N ce Prnident -
JASIES St. CAIN President of ilw Q>mpany Sptem Engineering Prnident & CI:0 President DIO5tAS 0. LIND 2 New Orleans Public Senice Inc. DONALD IILINTER y; , p ;g ,
. TEX R. KIIPATRICK4 - Regulatory Cou tsel, and Secretary President ' R. DRAKE KEIDI Executhv \, ice Proident U1 V. mal'RIN 3 Central American Vi P m-life insp+ance Company D. I. ASWELL fossil Operations JOSEPilJ. %RERS,JR.
- knior Vice President -
Energy Suppl).I'owil JA51ESJ. McCLOSKEY,JR.
Cluirman of the Ikurd y. ;g ,
' J.J. Kretw & Sons. Inc. JOIINJ. CORDARO Dhision Man'ger c EDWIN Ll*PHLNGER Senior Vice President -
I.EE W. IMNDALL
- Cluirnun and President External Aflairs Vice President -
Aliddle South Utilities. Inc. S. G. CL'S NINGil A%1,JR. Accounting & T casury.
II. DlIKE 511ACKE110RD 4 A11ior Vice President - and Awistant lreasurer Agrimitural Internts SI'fkCli"R & N'ICS CARL C. SMITil WM. CLIITORD SMIT 11 g JERROlD G. DIMTASE Vice President -
President kniot Vice lYesident - Division Manager T. llaker Smith & Son Nuclear Operations RollERTJ AllADIE JACK St. MYA1T SIALCOLM L. IIURSTE11 Controller lormer Cluirnun of the ikurd and knior Vice Paesident -
Energy Delhrry JAMES C. AIACK Chief Executi,e Omcer of the O>mparrj Awistant Controller (Retired August 1.1983) M. II. McLliFClllE Senior \ see President - T. W. BOATRIGitT S Accounting & l'inance. and Treasurer Awistant Controller A Members of Audit Gimmittee RICilARD 1. ML*RLOWSKI JOWH CAPAROUA,JR.a Senior Viec IWsident - Aw ant Omtroua Administration & Fianning R. N. GARRETT,JR.
Awistant ComroUa TilOMASJ. WRIGilT 3 Group Vice Pinident S. F. Olll3tEYER Awistant Treasurer ROSS P. HARKitCRST Vice President - N.J. HRILEY Nuclear Awistant iccretary JOSEPil Q. CIPRIANO CARYJ. DUDENilEFER Vice Prnident - Awistant Secretary Dhision Maruger G. F. DELEFY
\ ice Presdent - II t d effeuiw 10/12/87 M'IkCd"N 2
Elo.d RmW'ethnr U20'H" 3 Retired effectne 10/1/M7 ROllERTJ. Dt.'NN
- Resigned cf teeth e 3 ' '/88 Yiw President - S Resigned as Awistant Controller Administrathy Senico etYective 10'l/M*
RICilARD C. GUT 11RIE
- Elected effecthe 10/1/H"'
Vice Prrsident -
Public Affairs 48
1 GENERAL OFFICE This 1987 Annual Report is prepared AREA SERVED BY IP&L 142 Delaronde Street for the hiformation of stockholders, toutsiana Power & Ught Company P.O. Box 6008 employees, and other interested persons operetes in 46 of the 64 parishes of New Orleans, louisiana 70174 1he Company's 1987 Annual Report louisiana - a 19,500 square mile area to the Securities and Exetange which, as of December 31,1987, had an (50 0 366 2345 estimated population of 1,672,000. At
" " "" *(
REG 15TRAR AND TRANSFER AGENT 3rar-end 1987, IP&L w2s serHng FOR PREFERRED STDCK '
. approximately 37% of touisiana's Bank of MontrealTrust Ccmpany Stockholders can obtain a copy by population. 30 Wall Mreet The area sened by LP&L trcludes New idrk, New York 10005 most of North louisiana, a small portion imestor Relations Department of East Central loulslana, and most of 11tUST1EE FOR louisiana Fower & Ught Company Southeastern toultiana, including the FIRST MORTGAGE BONDO Post Office Box (6 Bank of Montreal 1 hist Company L360 rnettopolitar* aca around tl.e City of New Orlearu arv'. the 15th Ward in dw City of ho Wall Street N(w Orleans, louisiana 70174 New York, New York 10005 Telephone:(504) 363-8526 New Orkans Ifat's sprem .s part of, and is interconnected witlt the other operating companies of the Middle South Utilities Sprem. This arrangement prmides more dmendable electric senice fcr emtomers, and also results in the greatest economy in the generation of electric power, with resultant saungs to customers.
Bulk Rate U.S. Postage PAID
' M b5 M Permit No. 540 Inuisiana Power & Light Company Ne.v Orleans, LA It O. Ikn (dx)H New Orleard, tvuisiana 7017 4 Addrew Q>rrection RequcMed t