ML20155A219
| ML20155A219 | |
| Person / Time | |
|---|---|
| Site: | Peach Bottom, Limerick, 05000000 |
| Issue date: | 12/31/1985 |
| From: | Joseph Austin, Everett J PECO ENERGY CO., (FORMERLY PHILADELPHIA ELECTRIC |
| To: | |
| Shared Package | |
| ML20155A208 | List: |
| References | |
| NUDOCS 8604080331 | |
| Download: ML20155A219 (48) | |
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Ph.lodelphia Electric Company Annual Report 1985 Financial Highlights 1933 1994
. Chonge Operatig Revenue
$3,013,704,000
$2,9,017,000 1 *.
Operating Expenses
$2,598.751,000
$2,526.758.000 3*.
Taxes Chorged to Opero+ ions
$443,347,000
$453.612,000 (2*.)
Operating income
$414,953,000
$454,259 000 (9*.)
Earn:ngs Applicable to Common Stock
$434,724,000
$409.707.000 6*.
Earnings per Average Common Shore
$2.56
$2 70 (5*.)
Cash Dividends Poid per Common Shore
$2.20
$2 20 Average Shores of Common Stock Outstonding 169,784,471 151,803,698 12 *.
Construction E= pend.tures
$864,700,000
$1063,630,000 (19*.)
Total Assets
$10,165,314,000
$9,555.729,000 6*.
$ENeTt Ssur IPPN$$E
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pursued vigorously during 1986 and until com-The counties that we serve in southeastern pletion. These items comprise our top priorities Pennsyivonia and northeastern Maryland are for 1986.
rich in history, culture, scenic beauty, recrea-The Company's accomplishments in 1985 are tional activeties and economec opportunity. We 1
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the result of the continuing effort of a dedicated have ottempted to capture some of these e4e-and talented group of employees. Their commit-ments in the photogronhy of tnis year's report.
ment to efficient operation, high-qualrty rus-As we foce the future, we recognize the sup-tomer service and innovative technology serves port of our investors that has made this year's l
l our Company well. They are alsc ottively in-significant achievements possible. Thank you volved in our local communrties, leading and for your continuing support.
participating in a wide vanety of octivities that f
cc,ntnbute to the quality of life withm ttie Com-James L. Everett Chairman of the Board pony's service area. Ixomples of our employees' octivities are highlighted in this report.
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o Our Shareholders weather during the hooting season. Steam soles 1985 was a year of solid occomplishm3nts for the were also down.
Company.
O A 28.2% eiectric rateincrease request,the a Umorick Unit No. I received its full-power op-largest in the Company's history, was filed in eroting license on August 8. After the unit was Z:.--1;r to bring Limerick Unit No.1 into rate exhoustively tested while lprodually being base. To moderose the impact of the increase on raised to full topocity, it was placed in commer-customers, the Company proposed to phase in ciel operation on February 1,1986, the increase ever o three-year period in three c Umerick Unit No. 2 received Pennsylvania equalstepsof 9.4%each.
Public Utility Commission (PUC) permission in
. Gas ton #s were reduced by opproximately December to be completed under a cost contain-
$28 million per year in several reductions that ment and operationalincentive progrom which took effect during 1985.These reductens match includes o constructen cost cop, operating and comparable reductions in supphers' prices to the maintenonce cost controls and performance in-Company ond did not offect Company earnings.
contives and penotties. Full construction re-c The PointMoosentWaterProW,whichisde-sumed in February 1986, with a targeted signed to provide permanent supplemental completion date oflate 1990.
cooling water for the operation of Umerick, was fornings per shore were $2.56, o decline of ordered completed by the Court of Common 14 cents from last year. A PUC disallowance in Pleos of Bucks County in Febroory, which was October of opproximately $73 million of prior offirmed by the Commonwechh Court in Octo-years' deferred costs reduced earnings per ber. Buck s County and the Neshaminy Water Re-share by 20 cents. The Company has appealed sources Authority have petitioned the Supreme this disallowance to the Commonwoolth Court Court of Pennsylvania for allowance of an
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oppeal.
a flectric sales to retail customers remained es-1986 will be another year of challenges os the sentially flat compared to last year as milder Company attempts to put its investment in Lim-weather offset growth in customers. Gas sold erick Unit No. I into base rates. Construction and transported declined slightly due to warmer work has begun ogain on Unit No. 2 and will be 2
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ToOurth?E*ie weather during the hooting season. 5 team sales
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1985 was a year of solid occomplishments for the were otso down.
ie Company.
a A 28.2% electrk rateincrease request,the o Umerkk Unit No. I received its full-power op-Borgest in the Company's history, was filed in eroting license on August 8. Ahor the unit was E;^:-i to bring Limerick Unit No. l into rate eshoustively tested while gradvolly being base. To modorose the impoct of the increase on raised to full copocity, it was placed in commer-customers,the Company proposed to phase in ciel operchon on February 1,1986.
the increase over a three-year period in three o Umereck Unit No. 2 received Pennsylvania equalstepsof 9.4%each.
Public Utility Commission (PUC) permission in a Gas tori #s were reduced by opproximately December to be compseted under o cost contain-
$28 million per year in several reductions that f
ment and operationalincentive program which took effect during 1985.These reductions match includes o construct 6on cost cop, operating and comparable reductions in suppliers' prkes to the maintenance cost controls and performance in-Company and did not offect Company earnings.
contives and penotties. Full construction re-c The Point Moosent Water Project, which is de-sumed in February 1986, with a sorgeted signed to provide permanent supplemental completion date of lote 1990.
cooling water for the operation of Umerick, was a fornings per shore were 5 j.56, a decline of ordered completed by the Court of Common 1
14 cents from lost year. A PUC disallowance in Pleos of Bucks County in February, which was October of approximctely $73 million of prior offirmed by the Commonwealth Court in Octo-years' deferred costs reduceI earnings per ber. Bucks County and the Neshominy Water Re-e shore by 20 cents.The Comp ty has appealed sources Authonty have petitioned the Supreme C
this disollowance to the Com onwealth Court Court of Pennsylvania for allowonce of on of Pennsylvanio.
D oppeal.
a flectrk so' as to retail customers remained es-1986 will be another year of challenges os the I
sentially firFcompared to last year as miider Company attempts to put its investment in um.
weather c[ set growth in customers. Gas sold erick Unit No.1 into base rates. Construction and transported declined slightiy due to warmer work has begun again on Unit No. 2 ond will be 2
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pursued vigorously during 1986 and until com-The counties that we serve in southeastern pletion. These items comprise our top prioritees Pennsylvania and northeastern Maryland are for 1986.
ruh in history, culture, scenic beauty, recrea-The Company's occomplishments in 1965 are tional activities and economic opportunity. We
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the result of the contins ng effort of a dedicated have ottempted to capture some of thesa eie-and talented group of employees. Their commit-ments in the photography of this year's report.
ment to efficient operation, high-quality cus-As we foce the future, we recognize the sup-tomer service and innovative technology serves port of our investors that has made this year's our Company well. They are also oc*ively in-significant achievements possible. Thank you volved in our local communities, leading and for your continueng support.
participating in a wide variety of activities that contribute to the quality of life within the Com-James L Everett Chairman of the Board Ex m hve M ecer pony's service area. E memples of our employees.
octivities are highlighted in this report.
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he S-huylkill River traverses our service tern-tory from above Pottstown along the Chester County and Montgomery County borders and through Philadelphia and provides many recrea-l l
tional activities for area residents The Temple University varsity crew completes a workout s
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I Re Green 6ekt Elementan 5 in 1 at 22n.1 ami Chr-inut Nn,t i< nm re dun th enter < its imahl..r. l'E a.i..peil i
Green 6cl.1 un.ler the 1%lailrlplua w h...I I h-rn. ti Mg.t. b5 fu I l'n.pam thn ugh whu h the C..rrpans i
pna i.le fa. ilitie an.1 rm. e* i. Irlp the -.19..I 4
The number of electnc customers grew 1*. in 1985 1985 Mmor financ ngs M#0"5 totolhng nearly 14 mAon at year-end The number of Month of Dohc s j
gas customers also grew increas.ng 2*. to 311,700 g,
Common Stock-4.000.000 y
s es ~, $15 43
$ 61 9 Add.t!onal information on sales. revenue and cus-Ma y Pollut on Cortrol Bonds-10,*,
tomers con be found on pages 42 and 43 due 2015 2450 Financ ng Oct Pouon Co,*ol Bonds-10' :.
due 2014 41 0 The Company rorsed over $10 6 II.on in new cop.tol Nov Mortgop Bonds-
.l dunng 1985 to provide funds for constructon, debt re.
10'.*. due 1995 150 0 115?. due 2014 2500 fund ng and other needs. As a resul of lower interest Jon -Dec. Common Stock Purchase P:ans t
Dnridend Pe,nvestment.
I rates, the Company sold $250 mdhon of 11-3/4 *. mort-Employee, P AYSOP-gage bonds due 2014 and $150 mill.on of 10-7,8%
7,990.000 s ores h
Ave < age Pnce of $15 77 126 0 mortgage bonds due 1995 m November for the pur.
Common Stock cononvous oNe'mos
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pose of repurchasing, through a tender oHe r, certoon of 3,387,100 sha es Average Pnce of $15 65 53 0 the Company's outstand.ng bonds consisting of the 18 Sub Total 5 9269 3/4*. Senes due 2009, the 18*. Senes due 2012 and the t,rrenck Cred,t Agreement-
,kd ow ng 17 5/8*. Senes due 2011. As a result of the oFer, $217 g5 $550 n
rnA n) 50 0 mdhon of bonds were tendered enabhng the Company to reduce its annual interest payments by approo-ma+ely $9.6 mdhon per year. Funds not needed for the Construct.on Expend tures tender oHer wdl be used for construction and ot er h
Inves+ meet en new plant and equipment amoun'ed to
$865 rrAon in 1985 w th appros.mo.ely 70'e spent on i.
L menck and rela +ed transmrssion facil't es Ou+!ays for 1986 ore espected to amount to opproeote'y $771 million enclud ng $304 mAon for Limerrck Unit No 2 I..-Inu to.n. rane*.l..rmnate the el..w nr.,w n 1%L fr.phu
-k s knr. brk..n liiW, L..rnn -n e siuare...nnnue-a Jarne-I:. Ul:nen..I \\rra i Wel..t.nrne an.1 l' J.hn l'ohiri.4 holo-Inal.an.lI...torners ul Vn u e-1.m k..n.
The H a t nuth..n iw ni-i...er..th. r i..rnplrs pn.ir t i-I. armi al ll t an 1 Orket Nreet..
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5 a Sedli) million ll..u,e a be sair.ilesel.5 nent. De
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gwtert mill ini luile two.& c towers a D An==n lusun luel, tw lesel of retail we armi a pulms garage.
N hniulnl to le nwngdeteil in the fati of 1%7. Orw i A-em lh e mill n-e edhtorw, al Ne gn< nut lesel, higher I
than tlw tomer arul satw of Elham IVnn at.1 City IIall j
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i Ra'es and Regulat:on recovered oNr the third or final step is eMective, but j
EHectae January 25,1985, the PUC odopted on Order m+out m'erest The PUC suspended the rate increase
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grontng 'he Company a net mcrease in onnvol electnc untd June 27,1986. ond ordered full pubhc beanngs.
j ues of $49 mdhon, compnsed of a base rate m.
In December, et e PUC issued on Order en the timer-reven 1
i creaseof $150mdhon, reflect:ngthe nclusionof Solem eck Un t No 2 Show Couse proceed ng thof opprowed the Unit No. 2. less 5101 mdl.on ;n fuel cost sovmgs Tbc complet on of construction of Umt No. 2 provmed the Company ogreed to guarantee that solem Un t No. 2 Company agreed to o cost containment and opero-4 would produce 5116 moon of fuel sowngs for the pe-toonal mcent4ve prog-om This program mciudes o 53 2 l
nod from February 1,1985 to March 31,1986.
bdhon cop on the to'o! cost of the unit for rote.moking In Sep+ernber, t'e Company fJed o 5671 mdhon elec-purposes and two plant performance requwements eth i
tric ro*e ;ncrease to beg:n corning a cash return on the incent>ves and penalt.es. Aher core 41 cons.deration, the l
53 8 bdhon invesw nt in timenck Una No.1 and 100*.
Company's Board of Directors unanimously accepted the e
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of common plant and to recover the costs of operot ng terms of the PUC Order and full construcdon resumed on I
j the vn.t. The request reflects on est<mo+ed $207 moon Unit No 2 m February 1986. Unet No. 2 is needed by the i
4 m onnvol fuel cost savings resulting from the operchon early 1990s to provide odd &tional capooty for new lood I
of Unit No.1. The Company proposes to phase m the growth and to replace old oil-fired generation. The 28.2*. increase over three years in three eq.ol steps of Company hos scheduled the unit to be comple'ed m lote 1
9.4% each and thereby lessen the impact of the in-1990 of a total cost of 53 2 bilhon, indud>ng the 5901 i
crease on customers. In add, tion, the Company pro-million spent through December 1985. The Company m - -v
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In October, the PUC issued on Order denymg the g
Company recovery of opprowmotely 573 mdhon of the
$101 m&on of deferred replacement fuel costs associ.
f oted primerJy eth Salem Unit No.1 outages en 1983 and b
3 1954 and costs mcurred durmg operat,on of the Com-y.
pony's magnesium ouede (MgO) regeneronon equ'p-Ji ment in 1983 (The MgO regeneration equipment is port T
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he Brandywine Battlefield Park in Delaware County is one of many historic sites located in the county Both Washington's and Lafayette's headquarters are located in this sceme park which dates back to the mid-Uth century This cemetery, which is still in use, has gravestones dating back to the Revolutionary War era a
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l orld famous Longwood G wdens in seeme Chester County consists of 350 acres oi outdoor gardens and woodlands, glassed conserva-g
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Bucks Courty pet ooned the Supee Coud of Penas,h The Limenck Unit No. I test program weat eeemely i
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completed m January 1986, and the unit was placed in has been ha'ted since early 1984.
j commerc of operofoon on February 1,1966 Dunng 19BS. m order to provide on imer m surD v of i
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Water Requiremen+s suppiememol toolog wa'er recessary for % br-er<k l
A critical component of the permorert supplemen+ol U-t No I test ng progeom, me Company oppled to t e h
coohng water system for Limenck rs the Pomt Pfeoso-t Delo*are Rtver Bosin Corrm ss.on lDRBC; and ob.
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i Water Project, wk.ch was des,gned to be corstruc'ed and to ned opprovais for +e mod f!cohon of restnoons or I'
operated by the Nesbommy Water Resources Authony f* e use of the Schuy:k 11 Raer and t*e rechoco, on of l
KNRAi, o mun.cpoi author +y crea'ed by Bucks Courty.
cooleg wo'er to bmend f.om +wo o*er fossMeed f
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under a contract omcog NWRA, the Compory and Buck s power rloms on the Schuykli R ver The DEBC approv -
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of substant al oppos.fion from vonous groups, ecl d-tions and reo4ocat.ons were e ectve tbrcup Decemter d
u ing a rnojor+y of the current Commissioners of Buds 31.1985. and the Company has orpn Ued reovess
- th m i cootng wo'er nrefs Counh and a maionn of t e new members of the boo d the DRBC for its 1986 supo;eme a
of NWRA, which has resulted m m'erruptson of con-pend,ng resolut.on of the Po nt Pleasant pro!ect struction and en htigo+,on in March 1985, opreols were in September Governor Thomas Keon of Ne* Jersey i
fded by Bucks Counh and NWRA w:th the Common-and other d.gn tones part.c po'ed.n ground breakmq
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weoith Court of Pennsylvaneo from the dec s-on of the ceremomes for fFe Mendl Creek Pro,ect This $217 md-Court of Common Pleas of Bucks County wb.ch found the bon reservoir facd.ty, abech w.li be owned somtiy by PE n
Point Picosant contract to be vol.d and enforceab;e and and snt other electnc utAt'es. is scheduled to be in ser-f l
ordered completion of the Protect in October 1985, the vice by May 1988 ond *d! provide water for power plants Commonwealth Court off rmed the deasion of the Court along the Delowme Rwer os well as L> mend Pti shoe l
of Common Pleas of Bucks County,and NWPA and of the protect cost udt be $96 mdhon I.
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(;.emmutuh un..h enrnt In Ilm ( dopun arwl it-J emi.l..s ees are an imi.i.itant n.nt u hori..n i....nr -.-ru..-
j area. It.Jett R. kaer..I I nern Inf.nman..n an.1 l 10 anon s..lunteers hi- -eru. r-i.. ihr -en. lent.m.I - el
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.c luirman of liin k.4 kamtis 1% l'rutnl 4 as Cam-reign. She 6 im n u itmg ihr fio L. Count, b o u-ti.e f.e Itcianini 8.ituen. I're-hoi.1 Cer.ser m Una.l.c, a l' mini % as apsn Located near Ph.il psburg, New Jersey, obout 50 miles Marketing north of Philodelphia, Memil Creek is a s,all tr:butary The Company cont nved e aggressively modet p+o-of 'he Delaware River which is being dommed to create groms des,gned e encouroge the use of high-eH+ency a 15 bill;on gallon reservoir. Water will be stored there equ pment and oppl. onces and to promote greater on.
when it is plentAA, then, donng times of e*eme low flow peak use of our energy services.
on the Delowore, this stored wo'er will be reNrned to the Much of our markehng eHort.s duected to electric Delowore R,ver to replace the water the project oweers space heating Our temtory e=penenced a record level use e' operahng their power p;onts This will ensure that of commercial const vct.on *n 1965--16 m.!!.on squore the region's electric generobon needs will not be cu.
feet of new space underwey Over 65* will be beo+ed toiled due to lock of water Constructron of a water stor-electricolly, while 18% well be beo'ed by Company gas, age facil.ty was ordered by the DRBC m connection with resulting in a total Company penetration of 83*. m th s its authorgotion to take water from the Delcrwore R.ver important rnorket for certain generating units, sncluding lamen(k.
The residentiol motket was also unusually Oct ve w;th 12.200 new units connected Electnc space heateng was ir stalled in 65*. of these un1ts Hea' pumps, which are octively promoted by the Company because of their ef.
-A f ciency and economy, will heat and cool 58*. of tFese 4;
new dweiling un.ts. Another 23*. will have gas beat, so R-18 that over 88*. of new homes in the serv.ce terntory will
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be heated we PE's effic.ent, clean energy products.
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Southeastern Pennsylvanio is on the move and Philadeh O
phia Electoc Company cononves to play a leading role in promoting economic development in the area. Copi-talarng on the successivi theme, "We Know the Te.-
tory", Area Development's radio and pnr't advertis.ng Curti. N limielle. Jr. ed La-tern Ihu-o.n msk e-an.rr.al conhnues to promote the many benefits the Greater en-pe, ti.in.I ilm I h;:bl.ual. a ir re-i leniul rianrnu-l mn..f appn,6masch 1 18 sO=cr. In aini m 8. half..ni.
Philadelphro metropol, ton area hos to offer.
I?in L. 4 kamn, tie h..ne are pu1..f I'lJ. Lu r Ilen, e m b.ern Ltfu icin il LF il'n.r.am an.l mill hee I,cas pun p.
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ucks County offers abundant visual wealth and has attracted a community of artists and craft-men. Noted furnrture designer George Naka-shima inspects wooden slabs at his studio in u.
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l illow Grove Naval Air Lanon in Montgomery County is one of several major military installa-tions in the Company's service territory Major I W.,. e -,
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l sixth refuehng as well as major pipe replacement.
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An entensive restort testing progrom sim for to that re-Libam G. Got hall of Nfen ihmimsurrenth aenmg i
qwred for a new plord was corned wt to assure that no
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1 Iw en cil a. a solanteer 6mfighter f.w 2h earv Cond%ns or syi'em choroCterist:Cs were created dur-i l
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o schedu'e3 re8 ehng and p.pe inspecton in My 1985.
der of the year. However, os a result of bv er o,I prices, f
e Weld crack s were found in the stomless steel p o ng the u t d d not fully och. eve its contempic+ed fuel sov.
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+-g a weld overlay techmoue. The un t is expected to be ing on $8 meon charge agoiast 1985 pre toi income i
returaed to serv <e in February 1986. A p:pe repwce.
The Compo,y owns 42 59*. of the Sa'em Geaerat1ng recet p,ogrom s,mlor to that perf or~ed on Umt No 2 is Stat on which es operated by Pubhc Serv.ce Electoc and be ng stud ed for +e ne=t schedu'ed rei ehng ou+oge,a Gas Company t
early 1987 Eddystone Sto+ on celebro+ed ets 25th anniversary m in l935, Sa'em Umt No 1 es'obLsbed a new Un ted October when f rst completed in 1960. tFe wo sup--
l States record for elec6 col p-oduc?>on n a cofendor year cnt col. high-pressure, cool-fired un s were me most ef-a j
by a single vr t, operam / 'Jl cooocay 95 3*. c8 *e f:c.ent in the world. The stot.on has more than doub'ed t.me. So!em Un. No 2 ret rned to full operof on in May es generot.ng copoc3y since 'he nt ol operot on of these u
pioneenng base load un ts w th total copoc,ty now equoi.ng 13 mdhon k dowoes, enough to serve a cay of 650.000 people The station ocb.eved oncther eago neenng mJestone n 1983 by.nstoi' ng a port.culo*e and ti su!8 r d oude removal system. or scrubbers, which uto i
v 1 ze o un.que rnognesium code regeneroton system to i
remove in excess of 90*. of the sulfur d,on.de from the
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The Company's new magnesium oode regeaerot on Benhhne un.ler o.n-in, ti..n m ihr lihr lui..itu r e umpin ty.ih tiw trong ultice enmih m the n.nt,l r-mont, Delowore, and Essei Chemical Company in CI f-up.wme,.. \\n a,l.loional it, milk,,n -.tiur. I. ei.,t 8 n, New Jersey, continued 'o perform well dunng 1985.
netw e o= e mere un.lcrwa, en Uni, pati,.dnh m 6 4.he-ter an.l II. ntgonen G.onts area-of Gwat \\ alls-The regenerat on eqwpment at these sites separates the kme ni1% -u. I!br iteIL l%nonih Wetme. an.1 Lil... Gn.w.
suflur d: code fecm the magnes um sulf:te by-product of the flue gas scrubbing sys' ems of the Eddystone and l
Cromby cochburmng stations and recovers the mog-l.
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I Philodelphia Electric Company and Subsidiary Companies Management's Discussion And Analysis Of Financial Condition And Results Of Operations General. The revenue growth of recent years hos been accomponied by substantial increases in operating costs and carrying charges on increased investment in plant and equipment. Any future increases in such costs and charges may be expected to odversely offect fuNre net income and eornings per overage common shore unless periodic rate relief is obtained to offset them.
The cop;tal carrying charges associated with the construction of Limerick, which ore capitolized by creditmg income with on ollowance for funds used during construction (AFUDC) and recovered through future depreciation, continued to represent a major portion of net income during 1985. These charges will decrease os the commercial operohon of Limerick Unit No.1 is reflected in revenue. On September 27,1985, the Company filed with the Pennsyhronio Public Utility Commission (PUC) for on additional $671 million per year in electric revenue, net of fuel sovings, to recover the costs ossociated with placing Unit No. I and one hundred percent of common plant in rate base. The PUC is expected to issue a fino' order in late June 1986. The Company hos PUC opproval to utilize on accounting treatment which synchronizes the expense occounting for Limerick Unit No. I with rote recognition of the unit.
On January 25,1985, o $150 million per year base rate increase for electric service was put into effect to recover the costs
_ ossociated with placing Solem Unit No. 2 in rote base. Output from the unit had pr eviously been sold to Jersey Centrol Power &
Light Company under o contract which expired on December 31,1984. Desp:*e the increase in electric rotes granted in Jonvory 1985, the return on investment is still below that allowed by the PUC as a fair return in the Company's lost rote order Electric Operating Revenue. Increased electric revem.e in 1985 over 1984 is primarily ottributobte to higher base rates. Revenue ossociated with Salem Unit No. 2 output, formerly sold to Jersey Centrol Power & Light Company, is now reflected in the base rotes for retail customers. The increase in 1984 compared with 1983 reflected higher base rotes and higher fuel.related revenue.
Kilowatthour soies of electricity to retail customers were essentially the some in 1985 and 1984.
Electric Revenue Increase /(Decrease) Millions of Dollars
'b5 vs '84
'84 vs. '83 Rote Increases
$141.4
$140.0 Fuel.Relo+ed Revenue (2.8) 1040 Salem Unit No. 2 (67.0) 36.5 Other 8.9 47.3 Total 5 80.5
$327.8 Gas Operating Revenue. Decreased gas revenue in 1985 compared with 1984 is attributable to o decrease in sales and lower fuel-related revenue resulting from reductions in the price of gas purchased from suppliers Gos operating revenue net of fuel costs increased 6.7 percent in 1985 over 1984.
Fuel and Energy interchange Expense. For accounting purposes, fuel and energy interchange costs are deferred until billed as fuel odiustment revenue. In 1985, gross fuel and e..argy interchonoe costs were $212 million lower than in 1984 due primarily to the excellent nuclear performance of Salem Station. Fuel and energy interchange costs deferred in previous years and charged to expense in 1985 omounted to $135 million, resulting in net fuel and energy interchange expense remoi sing essentiall;4he some in 1985 os in 1984. Included in net fuel and energy interchange enpense in 1985 was opproximately $73 million of replacement energy costs ossociated primon!y with Salem Unit No.1 outoges in 1983 and 1984 and costs incurred during the operation of the Company's flue gas scrubbinj systems at cool. burning stations in 1983. Recovery of these costs was disollowed by the PUC in on order whkh the Company hos appealed. Also included was on $8 million charge in recognition that Salem Unit No. 2 fuel savings were not expected to reoch the minimum guaranteed to the PUC when the unit was included in the rote base. The $73 milhon write.
off and the $8 million Salem charge reduced 1985 earnings by opproximately 23 cents per shore.
In 1984, gross fuel and energy interchange costs were essentially the some os in 1983. However, electnc fuel costs deferred were lower by $104.2 million, resulting in a net increase in fuel and energy interchange excense compored with 1983.
Other Operating and Maintenance Espenses. Other operot ng and maintenance expenses have increased in the lost two years due to inflation, growth in uhlity plant, and increased costs ossociated with the Company's nuclear generohng units and with operating the new flue gas scrubbing systems of the Company's two cool-burning stations.
Depreciation. Increoses in deprecichon in the lost two years reflect odditions to plant in service.
Income Tones, income taxes charged to operchons decreased n 1985 compared with 1984 os a result of lower operating income.
Income tax credits, net, included in other income, have increosed in the lost two years as a result of the higher allowance for borrowed funds used during construct on.
Other Tomes. Other tones have increased primorily due to higher capital stock and recity taxes.
A#owance for Funds Used During Construction. The increases in AFUDC for the lost two years have resulted pnmanly from increases in construction work in progress.
Interest Chorges. Interest charges on debt increased in the lost two years due to odditional debt outstonding. The rotio of earnings to mortgage interest, which is one measure of the Company's ability to issue additional mortgage bonds, was 1.98 times at December 31,1985.
21
Capitol Expend #wres and Changes in Financial Position. The Company is carrying on a construction progrom which is estimated to require expenditures of $771 million in 1986 and $2.9 billion from 1987 to 1989. A majority of these expenditures relates to the construction of the Company's second 1055 mW nuclear generating unit at Limerick. Successful completion of this program is dependent on the Company's obihty to obtain external financing, pnmarily through debt arrangements and soles of equity securities which are subject to market conditions and to meeting certain earnings tests. The program otso is subject to the licensing requirements of the Nuclear Regulatory Commission,to financing opprovals by the PUC, and to change due to litigation. The Company connot predict the outcome of such regulatory reviews, but believes the safety requirements have been or will be met, the economic desirobility of the program has been demonstrated, and that the program will be successfully completed and approved.
Interim financing of the construction program is provided by commercial poper borrowings and short ond intermediate-term bank loans, which also are dependent on the Company's finoxiot position.
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3 si e2 sa s4 as si s2 s3 s4 ss Accountants' Report To the Shoreholders and Board of Directors Phinodelphia Electric Company We have examined the consolidated bolonce sheets of Philodelphia Electric Company and Subsidiary Componies os of December 31,1985 and 1984, and the related consolidated statements of income, retained earnings, changes in common stock, preferred stock, and other paid-in capital, and changes in fmancial position for each of the three years in the period ended December 31,1985. Our enominations were rnade in accordonce with generally accepted auditing standards and, occordingly, included such tests of the accounting records and such other auditing procedures os we considered necessary in the circumstances.
In our opinion, the financial statements referred to above present fairly the consohd,ted financial position of Philodelphio E'xtric Company and Subsidior) Companies os of December 31,1985 and 1984, and the consolidated results of their operations and changes in their financial position for each of the three years in the period ended December 31,1985,in conformity with generally accepted accounting principles opplied on a consistent basis.
1900 Three Mellon Bonk Center Philodelphia, Pennsylvanio Febrvory 3,1986 hY 1
Philadelphio Electric Company and Subsidiary Componies Consolidated Skdoments ofincome Forthe Year Ended December 31 1985 1984 1983 (Thovsonds of Dollars)
Opemnog Revenues Electric
$2,516,191 $2,435,731 $2,107.897 Gas 428,984 462,966 417,042 Steam 68,529 82,320 71,111 TomiOpwonny Revenues 3,013,704 2,981,017 2,596,050 Opemang Expenses Fuel and Energy Interchange 1,139,553 1,122,177 986,634 Other Operating Expenses 565,713 527,060 449,101 Mointenance 265,173 745,583 222,640 Depreciation 184,%5 178,326 165,327 income Taxes 201,823 246,749 200,026 Other Taxes 241,524 206,563 178,615 TomlOperonngExpenses 2,598,751 2,526,758 2,202,343 Operonngincome 414,953 454,259 393,707 Orherincome andDeducsons Allowance for Other Funds Used During Construction 176,310 134,485 108.126 income Tax Credits, Net 133,415 116,423 87,912 Other, Net (3,464) 739 (3,125)
To#al04erincome onde:iiss 306,261 251,147 192.913 income 8efore Inserest Charges 721,214 705,406 586,620 Interest Chorges Long-Term Debt 435,373 402,475 330,200 Short-Term Debt 17,721 30,917 35.199 Allowance for Borrowed Funds Used During Construction (257,181)
(220,370)
(167,868)
NetIn#erest Charges 195,913 213,017 197,531 Netlacome 525,301 492,389 389,089 Preferred 5#ock Dmdends 90,577 82,682 67,384 fornegs Applicable so Conwnon Stock
$ 434,724 $ 4U9,707 $ 321,705 Average Shores of Common 5#cck Outsvondmg (Thovsonds) 169,784 151,804 133,852 fornings Per Average Common Shore (Dolfors)
$2.56
$2.70
$2.40 Devidends Per Common Shore (Dollars)
$2.20
$2.20
$2.12 See notes to financial statements.
23
i' Philadelphia Electric Company and Subsidiary Companies Consolidated Bolonce Sheets ASSETS December 31 1985 1984 (Thousandsof Dollars)
Utility Mont.ot oronalcost Electric
$ 4,982,099 $4,806,496 Gas 474,599 443,946 Steam 54,138 53,846 Common,used in oil services 132,323 129,649 5,643,159 5,433,937 Less: Accumulated Depreciation 1,824,420 1,726,321 Net Utility Plontin Service 3,818,739 3,707,616 Construction Work in Progress 4,929,093 4,400,166 Leased Property, ne, 338,141 352,133 Net UtirreyMont v,085,973 8,459,915 g,,,,,,,,,,
87,670 80.871 CurrentAssets Cosh and Temporary Cash investments 188,785 30,357 Escrow Deposits 13,301 88,076 Accounts Receivable Customers 348,233 346,018 Other 22,687 38,284 inventories,at overage cost Fossil Fuel 63,594 93,004 Materials and Supplies 60,152 57,532 Deferred Energy Costs 101,655 229,895 Compensoted Absences 46,370 41,478 Other 12,101 7,392 TotalCurrent Assets 856,878 932,036 DeferrW h 134,793 82,907 Toto; 510,165,314 $9,555,729 See notes to financial statements.
24
CAPITALIZATION AND LIABILITIES December 31 1985 1984 (Thousands of Dollars)
Capholaenon Common Shoreholders' Equity Common Stock
$ 2,601,989 52,360,948 Other Poid-in Copitol 7,331 6,727 Retained Earnings 583,728 523,300 3,193,048 2,890,975 Preferred Stock WithoutMondotory Redemption 572,472 572,472 With Mondotory Redemption 318,309 326,235 Long TermDebt 4,309,131 3.777,961 TomlCopitolirofion 8,392,960 7,567,643 CurrentUobaks Short-Term Debt Bankloans 1,000 20,000 Pollution Control Notes 240,000 Long-Term Debt Due Within One Year 30,800 50,361 Capitol Lease Obl@otions Due Within One Year 76,326 68,332 Accounts Poyable 144,407 156,245 Taxes Accrued 58,509 40,314 Deferred Income Taxes-Energy 51,814 117,729 Interest Accrued 93,008 91,110 Dividends Declored 40,698 43,796 Compensated Absences 46,370 41,478 Other 25,583 85,749 TonalCorrent Uobiltties 618,515 955,114 Deferred Credets and Other Gobilities Deferred income Taxes 502,621 373,343 Unomortized investment Tax Credits 302,409 299,419 CapitalLease Obligations 261,815 283,802 Other 86,994 76,408 Total Deferred Credets and Other Dobilus 1,153,839 1,032,972 Total 510,165,314 59,555,729 l
25
Philadelphia Electric Company and Subsidiary Companies Consolidated Statements of Changes in Financial Position FortheYear Ended December 31 1985 1984 1983 (Thovsonds of Dollars)
Sources ofFunds Funds FromOperations Net income
$ 525,301
$ 492,389
$ 389,089 Principal Non-Cosh Chorges (Credits) to income Depreciation 184,965 178,326 165,327 Nuclear FuelDisposalCosts 5,601 13,201 -
12,166 DeferredIncome Taxes 66.281 76,197 175,307 investment Tc.x Cr edits, Net of Amortization 3,567 49,927 (46,064)
Allowance fc,r Other Funds Used During Construction (176,310)
(134,485)
(108,126)
Total from Operations 609,405 675,555 587,699 Funds from Fi.mncings Sales of Securities CommonStock 241,041 250,445 284,305 100,000 150,000 Preferred Stock Long-Term Debt 686,000 258,700 175,000 240,000 Short-Term Pollution Control Notes Net 8orrowings Under Revolving Cred;t Agreements 150,000 200,000 200,000 Sole of Mcanesium Oxide Regeneration Focilities 55,928 37,679 increase in Capitol lease Obligations 46,364 12,690 72,514 202,800 Increase in Short-Term Debt Total from Financings 1,123,405 1,117,763 1,122,298 TofolSources
$1,732,810
$1,793,318
$1,709,997 Uses ofFunds Additions toUtility Plant
$ 826,609
$1,053,133
$1,030,321 Additionsto Leased Assets 46,364 12,690 72,514 Allowance for Other Funds Used During Construction (176,310)
(134,485)
(108,126)
Dividends on Preferred and Common Stock 464,003 418,098 352,553 Retirement of Long-Term Debt 273,394 11,194 41,573 Premium on Retirement of Long-Term Debt 48,589 Redemption of Preferred Stock 7,926 8,628 7,427 Redemption of Short-Term Pollution Controf Notes 240,000 Decreasein Short-Term Debt 19,000 247,500 Net Change in Deferred Energy Costs (128,240) 80,649 234,625 Net Change in Nuclear Fuel Escrow Account (51,816) 32,160 7,113 Net Change in Other items of Working Copital 153,528 50,340 71,451 Other, Net 9,763 13,411 546 TofolUses
$1,732,810
$1,793,316
$1,709,997 See notes to financial statements.
26
Philadelphia Electric Company and Subsidiary Componies Consslidated Stat:m:nts of Ratainsd Earnings For the Year En :ed December 31 1985 1984 1983 (Thousands of Dollars)
Bolonce, January I
$ 523.300 $452,964 $423,596 Net income 525,301 492,389 389,089 1,048.601 945,353 812,685 Cash Dividends Declared Preferred Stock (of speofied onnvol rates) 90,524 83,820 68,970 Common Stock (per shore, $2.20 in 1985 and 1984. $2.12 in 1983) 373,479 334,278 283,583 Expenses of issuing Preferred and Common Stc,ck 870 3,955 7,168 464,873 422,053 359,721 Solonce, December 37 5 583,728 $523,300 $452,964 Consolidated Statements of Changes in Common Stock, Preferred Stock and Other Paid-in Capital Other Common Stock Preferred Stock Poid-in Shores Amount Shores Amount Capitol (All Amounts in Thousands)
Solonce, Jo.,uary 1,1983 125,767 $1,826,198 6,648
$664,762
$4,641 issuance of Stock Public Sales 11,000 186,055 1,500 150,000 Employee Stock Ownership Plans 1,256 21,054 Dividend Reinvestment and Stock Purchase Pion 4,788 77,196 Redemptions (75)
(7,427) 1,215 8clonce, December 31,1983 142,811 2,110,503 8,073 807,335 5,856 issuonce of Lock Public Soles 11,613 144,548 1,000 100.000 Employee Stock Ownership Plans 914 10,563 Dividend Reinvestment and Stock Purchose Plan 6,965 95,334 Redemptions (86)
(8,628) 871 Bolonce, December 31,1984 162,303 2,360,948 8,987 898,707 6,727 issuonce of Stock Public Sales 7,387 115,008 Employee Stock Ownership Plans 873 15.294 Dividend Reinvestment and Stock Purchase Plan 7,117 110,739 Redemptions (79)
(7,926) 604 Solonce, December 31,1985 177,680 $2,601,989 8,908
$890,781
$7,331 See notes to financial statements.
27
Philodelphia Electric Company and Subsidiary Componies Notes to Financial Statements 1.SIGNIFICANT ACCOUNTING POLICIES General. All utility subsidiary componies of Philadelphia Electric Company are wholly owned and are included in the consolidated financial statements. Nonutihty subsidiaries are induded in investments and accounted for by the equity n,ethod.
Accounting policies are in accordance with those prescribed by the regulatory outhorities having jurisdiction, principolly the Federal Energy Regulatory Commission (FERC) and the Pennsylvania Public Utihty Commission (PUC).
Revenues. Revenues are recorded in the occounts upon billing to the customer. Rote increoses ore billed from dates authorized or permitted to become effective by the regulatory authorities.
Fuel Expenses. Fuel expenses, which oi e recoverable under energy odiustment clauses, are recognized when the related revenue is billed to customers. Nuclear fuel used in the Peach Bottom and Salem Generating Stations is leased, and the costs of such leased fuel are charged to fuel expense on the unit of production method. Nuclear fuel disposal costs are being charged to fuel expense os the related fuel is burned.
Depreciofion. For financial reporting purposes, depreciation is provided over the eshmoted service lives of the plant on the straight. fine method ond, for tax purposes, generally, over shorter lives on accelerated methods. The estimo'ed decommissioning costs of nuclear plants, totaling opproximately $181,862,000 of December 31,1985, are being charged to operations os permitted for rate.moking purposes. The omounts charged are deposited in on escrow occount and invested for funding of future costs. The Company believes that any increase in the estimated costs would be recoverable through odiustments of rates chorged to its customers. Annvol depreciation provisions, expressed as a percent of overage deprecioble utihty plant in service,were opproximately 3.35% for 1985,3.29% for 1984 and 3.20% for 1983.
Income Tores. Deferred income taxes are provided for differences between book ond taxable income to the extent permitted for rate.moking purposes. Investment tax credits, other than credits resulting from contnbutions to employee stock ownership plans, which do not offect income, are deferred and omortized to income over the estimated useful hfe of the related utihty plant.
Allowance for Funds Used During Construction (AFUDC). AFUDC is a non. cosh item which is de6ned in the uniform systems of accounts as "the net cost for the period of construction of bon owed funds used for construction purposes and a reasonable rote on other funds when so used." AFUDC is recorded as a charge to Construction Work in Progress, and the equivotent credits are to
" Interest Chorges" for the prefox cost of borrowed funds and to "Other Income" for the remainder os the allowance for equity funds. The rote used for capitalizing AFUDC, which overaged 9.5% in 1985,9.4% in 1984, and 9.3% in 1983,is computed under o method prescribed by the regulatory authorities. The rate is a " net ofter.tos rote" and the current income tax reductions applicoble to the interest charges capitalized are recorded in "Other income." AFUDC is not included in toxoble income and the depreciotion of capitalized AFUDC is not tax deductible.
Gas hplorefron and Development Joint Ventures.The Company hos invested in several joint ventures for explonng and drilhng for natural gas. Costs are capitalized under the full cost method and charged to operations commensurate with production.
- 2. JOINTLY OWNED ELECTRIC UTILITY PLANT The Company's ownership interests in jointly owned utihty plant at December 31,1985, were os tollows:
Transmission Production Plants Plant Peach Bottom Solem Keys'one Conemough, Merrill Creek Operator Philodelphio Pubhc Service Pennsylvania Pennsylvanio Jersey Centrol Vonous Electric Electric ond Electric Electric Power &
Componies Company Gas Company Company Company Light Company Porticipating Interest 42.49 %
42.59 %
20.99 %
20 72 %
44 24 %
21% to 43%
(Thousands of Dollars)
Company's shore of:
Utihty Plant
$510,652
$903,473
$60,683
$62,186
$68,658 Accumulated Depreciation 120,522 145,577 23,464 23,520 13,991 Construction Work in Progress 12,717 19,936 7,791 2,469
$18,458 The Company's porticipating interests are financed with Company funds and, when placed in service, all operations are occounted for os if such porticipoting interests were wholly owned facihties.
78
3 COMMONSTOCK At December 31,1985 and 1984, Common Stock, without por value, consisted of 240,000,000 shores authorized and 177,679,977 and 162,303,390 shares, respectively, outstonding. At December 31,1985, there were 8,394,449 shares reserved for issvonce under stock purchase plans.
4 PREFERREDSTOCK At December 31,1985 and 1984, Preferred Stock $100 por, cumulative Shores Amount Current Refunding Redemption Restricted Outstanding Price (a)
Prior to (b)
Authorized 1985 1984 1985 1984 (Thovsonds of Dollars)
Seiies (without mandatory redemption) 14.15%(c) 5114.15 2-1-90 500,000 500,000 500,000
$ 50,000
$ 50,000 13.35?& (c) 113.35 2-1-89 750,000 750,000 750,000 75,000 75,000 12.8?. (c) 112.80 5-1-88 750,000 750,000 750,000 75,000 75,000 9.50?.
103.50 750,000 750,000 750,000 75,000 75,000 8.759.
104.00 650,000 650,000 650,000 65,000 65,000 7.85*h 103.00 500,000 500,000 500,000 50,000 50.000 7.80 a 103.00 750,000 750,000 750,000 75,000 75,000 7.75's 103.00 200,000 200,000 200,000 20,000 20,000 4.68*i 104,00 150,000 150,000 150,000 15,000 15,000 4.4 *e 112.50 274,720 274,720 274,720 27,472 27,472 4.36 102.00 150,000 150,000 150,000 15,000 15,000 3.8*.
106.00 300,000 300,000 300,000 30,000 30,000 5,724,720 5,724,720 5,724,720 572,472 572,472 Series (with mandatory redemption)(d) 17.125 %
5117.13 5-1-87 300,000 300,000 300,000 30,000 30,000 15.25*6 110.00 5 1-90 500,000 500,000 500,000 50,000 50,000 14.625?.
108.70 (e) 5-1 90 500,000 500,000 500,000 50,000 50,000 10?i 104.44 5-1-90 220,000 220,000 220,000 22,000 22,000 9.52 *.
106.25 5-1-86 500,000 393,690 401,650 39,369 40,165 8.75?.
105.15 5-1-88 500,000 433,400 466,700 43,340 46,670 7.325*.
103 81 750,000 540,000 570,000 54,000 57,000 7*s 101.00 400,000 296,000 304,000 29,600 30,400 3,670,000 3,183,090 3,262,350 3:8,309 326,235 Unclassified 605,280 TotolPreferred Stock 10,000,000 8,907,810 8,987,070
$890,781 5898,707 (o) Redeemoble, of the option of the Company, of the indicated dollar omounts per shore, plus accrued dividends.
(b) Prior to the date specified, none of the shores of each series indicated may be redeemed through refunding of an interest cost or dividend rate which is less than the dividend ro+e of such series.
(c) Ownership of these series of Preferred Stock is evidenced by Depository Preference Shores, each representing 1/10 of a shore of Preferred Stock.
(d) Sinking Fund requirements (por value) in the penod 1986 -1990 ore os follows: 1986-514,599,000,1987-515,230,000, 1988 517,530,000,1989 517,530,000,1990-527,530,000.
(e) Not redeemoble prior to May 1,1990.
29
n Philodelphia Electric Company and Subsidiary Componies Notes to Financial Statements (Continued) 5.LONG-TEltM DEBT At December 31,1985 ond 1984 Series Due 1985 1984 (Thousands of Dollars)
First and Refunding Mortgoge Bonds (a) 3-1/8%
1985 5 50,000 4-3/8%
1986 5 50,000 50,000 4-5/8%
1987 40,000 40,000 3-3/4 % 14 %
1988 52,500 52,500 5 % 14 %
1989 62,500 62,500 14 %
1990 11,000 11,000 4 1/2 % 14 % 1991-1995 508,225 359,700 6-1/8%-15-1/4% 1996-2000 608,684 610,817 7-3/8 % 12-1/2*6 2001 2005 480,000 480,000 6 % 18-3/4 % 2006-2010 447,369 523,500 10-1/2 %-18 % 2011-2015 745,283 350,000 Total First and Refunding Mortgage Bonds 3,005,561 2,590,017 Notes Poyoble-Bonks (b) 1987-1989 225,000 225,000 Notes Poyable-Other 17*6 1986-1987 20,000 20,000 Revolving Credit and Term Loon Agreements (c) 1988-1991 550,000 400,000 Pollution Control Notes 5-In%-13% 1997-2013 272,685 274,190 Debentures 4.85 %
1986 20,800 21,161 Debentures 14 1/8 %
1990 50,000 50,000 Debentures 14-3/4 %
2005 100,000 100,000 Debentures 14 5 %
2009 150,000 150,000 Sinking Fund Debentures-Philadelphia Electric Power Compor.y., o Subsidiary 4-1/2*6 1995 15,325 16,397 Unomortized Debt Discount and Premium, Net (19,440)
(18,443)
Total Long-Term Debt 4,389,931 3,828,322 Due Wrthin One Year (d) 80,800 50,361 Long-Term Debt included in capitalization (e) 54,309,131 53,777,961 (c) Utility plant is subject to the lien of the Company's mortgage. Proceeds from the November,1985 sole of $250,000,000 principal amount of 11-3/4*6 Series due 2014 and $150,000,000 principal amount of 10 7/8% Series due 1995 were used in port to repurchase 576,131,000 principal amount of 18-3/4% Series due 2009,562,621,000 principot amount of 18*4 Series due 2012, and 578,096,000 principal amount of 17-5/8% Series due 2011. Premium on the repurchase of 548,588,515 wns charged to Deferred Debits. The Company,in its currently pending electric rote cose, will request the PUC to allow recovery in rates of this omount over the weighted overage life of the new debt,opproximately 21 years. Amortization of the premium will be charged to interest expense over the period of recovery.
(b) At interest rotes ranging from prime rote to prime rote plus 1/2%.
(c) The Company hos a 5550 million revolving credit and term loon agreement with a group of banks which provided the financing required to complete Limerick Unit No.1. The revolving credit arrangement converts into a term loon in August 1987. The borrowings are due in eight semi-annual installments with the first payment due 6 months offer the conversion into the term loon.
Interest on outstanding borrowings is based on specific formulos selected by the Company involving yields on several types of debt instruments. There is on onnual commitment fee of 1/2% on the unused amount. At December 31,1985,5550 milhon was outstanding under this agreement.
g The Company also has a 5400 million revolving credit and term loon ogreement with a group of banks which expires in 1987, but which may be extended through 1990 upon opproval of the banks. There is on annual cornmi' ment fee of 3/8% on the unused amount. There were no borrowings under this agreement during the year.
(d) long-term debt moturities in the period 1987-1990 ore os follows:
1987-5187,844,000;1988-5281,775,000;1989 5241,850,000;1990-5215,350,000.
(e) The annualized interest on long-term debt of December 31,1985, was $455.7 milhon of which 5309.3 million was ossociated with mortgoge bonds and $146.4 million was associated with other long-term debt.
30
6.SHORT-TERM DEST 1985 1984 1983 (Thousands of Dollars)
Average Short-Term Borrowings
$127,392
$166,713
$164,429 Average interest Rates, Computed on Daily Basis 6.38 %
9.88 %
9.06 %
Maxirrum Short-Term Borrowings Outstanding
$360,000
$302,500
$340,000 Averoge Interest Rotes on Short-Term Borrowings of December 31:
Bank Loans 9.50 %
9.95 %
10.53 %
Commercial Paper-Tox Exempt 5.61 %
CommercioI Poper-Toxoble 10.64 %
Pollution Control Notes 6.44 %
At December 31,1985, the Company had borrowed $1.0 m;ilion under formol and iniormal hnes of credit with banks oggregoting approximotely $371 million. The Company generally does,ot have formal compensating balance orrongements with these banks.
- 7. RETIREMENT BENEFITS The Company and its subsidiories have noncontnbutor y trusteed retirement plans applicoble to oli regular employees. Pension costs include normal cost for the year and omortization of unfunded pnor service costs over ten to twenty years. Approximately 80% of such costs were charged to operating expenses and the remainder, ossociated with construction labor, to the cost of new utility plant. Retirement plan costs, which are funded as occrued, were $46,700,000, $42,000,000 and $41,000,000 in 1985,1984 and 1983, respectively.
Pension Plon dato os of the dotes of the most recent octuorial voluotions is os follows:
January 1 1985 1984 (Thousands of Dollars)
Actuarial present value of occumulated plan benefits (7.0% assumed rate of return)
Vested
$512,639 $447,994 Nonvested 60,990 54,174
$573,629 $502.168 Net assets available for benefits
$645,726 $573.372 Changes in plan provisions, effective January 1,1985, increased the octuorial present value of occumulated pion benefits by opproximately $16.3 million and increased pension erpense by opproximately $2.8 million. The octuarial methods and assumptions, os well as the accounting policy, ore the some os those in the prior year.
The preceding tabular disclosures are required under opplicobte accounting principles. However, the Company is of the opinion that comparing the octuorial present value of occumulated pion benefits with the net assets available for benefits moy be misleading. The plan is of a long. term nature and is funded on a basis consistent with this concept. The octuarial value of occumulated plan benefits is, essentioily, o hypothetical plan termination calculation which does not toke into account future solaries or future service. Net assets, which are measured at fair value at January 1, are subject to fluctuations in the securities markets and therefore, may not be indicotive of the plon's long. term funded status, in December,1985, the Financial Accounting Standards Board issued Statement of Financial Accountmg Stondords No. 87 (FASB 87), Employer's Accounting for Pensions. FASB 87 supersedes existing occounting principles for defined benefit pension plans and becomes applicoble to the Company in 1987. The Company has not fully evoluoted FASB 87, but it believes it would not have o material negative impact on the financial statements.
In addition to providmg pension benefits, the Company provides certoin health core and life insuronce benefits for retired employees. Substantially all of the Company's employees may become eligible for these benefits if they reach retirement oge while still working for the Company. These benefits and similar benefits for active employees are provided by on insurance company whose premiums are based on the benefits paid during the year. The Company recognizes the cost of providing these benefits by charging the annual insurance premiums to expense. The cost of providing benefits for opproximately 2,400 retirees during the years 1983 to 1985 is not seporable from the cost of providing benefits for approximately 10,000 octive employees for the some period. Total premiums amounted to $29.3 million, $26.6 million, and $24.3 million,in 1985,1984 and 1983, respectively.
31
Philadelphio Electric Company and Subsidiary Componies Notes to Financial 5totements (Continued) 8.INCOMETAXE5 1985 1984 1983 (Thousands of Dollars)
Includedin operatroas:
Federal Current
$106,994
$ 96,915
$ 54,495 Deferred 59,837 49,770 151,259 investment tax credits, net 3,567 49,927 (46,064)
State Current 24,981 23,710 16,288 Deferred 6,444 26,427 24,048 Included in other income and deductrons (principally current):
Federal (109,580)
(93,818)
(70,902)
State (23,835)
(22.605)
(17,010)
Total 4 68,408
$130,326
$112,114 investment tax credits and income tox credits resulting from contributions to employee stock ownership plans reduced Federal income taxes currently payable by $12 million in 1985 and $58 million in 1984. Approximately $244 million of such odditional tax credits generated from 1982 through 1985 have not been uhlized due to limitotions based on taxoble income. These credits may be used to reduce Federal income taxes in future years and expire at various times from 1997 to 2000.
Effective with the PUC's electric rote order dated Jonvory 24,1985,the Company began flowing through the state income tax benefits associated with occelerated depreciation onributoble to its electric operations. This change reduced operating revenues and operating expenses by approximately $1.8 million but had no effect on operohng income and net income.
For o number of years the Company hos used occelerated depreciation for income tax purposes and stroight inne depreciobon for financio! reporting purposes. Deferred taxes were recorded only on those timing differences recognized for rote-making The cumulative net amount of such timing differences for which deferred tones were not recorded was opproximately $ 790million of December 31,1985. Since the Company expects to charge customers for tones paid whet ihe timing differences reverse, the tax effect of such timing differences is not recorded currently.
Provisions for deferred income tones on operating income consist of the fox effects of the following timing differences:
1985 1984 1983 (Thousands of Dollars)
Depreciation and amortization 5 34,417
$ 33,965 5 38,792 Nuclear waste dispusal costs (5,932)
(7,355) 24,281 Deferred energy costs (65,915) 41,212 119,867 Precommercial operation of Limerick Unit No. I 97,867 Premium on retirement of long-term debt 24,731 Other (18,887) 8,375 (7,633)
Total
$ 66,281
$ 76,197
$175,307 The total income tax provisions differ from amounts computad by applying the Federal statutory tox rate to income and od ustr'i i
income before income taxes for the following reasons:
Net income
$525,301
$492.389
$389,089 Totalincome tax provisions 68,408 130,326 112,114 Income before income taxes 593,709 622,715 501,203 Deduct-allowance for funds used during construction (nontoxnble) 433,491 354,855 275,994 Adiusted income before income tores
$160,218
$267,860
$225,209 income taxes on above at Federal statutory rate of 46%
73,700 123,215 103,596 increase (decrease) due to:
Depreciobon timing differences not normalized 7,297 7,247 7,941 State income taxes, net of Federal income tax benefits 4,099 14,867 12,577 Amortiration of investment tax credits previously deferred (8,265)
(7,752)
(6,210)
Other, net (8,423)
(7,251)
(5,810)
Totalincome ton providons 5 68,408
$130,326
$112.114 Provision for income ta xes os o percent of:
Income before income taxes 11.5 %
20.9 %
22 4*5 Adjusted income before income taxes 42.7 %
481 %
49.8 %
32
1
- 9. TAXES, OTHER THAN INCOME 1985 1984 1983 (Thousands of Dollars)
Gross receipts
$128,346 $122,881 $108,211 Capital stock 28,246 13,240 19,198 Realty 62,296 48,030 30,975 Other 22,636 22,712 20,231 Total
$241,524 $206,863 $178,615
- 10. ESCROW DEPOSITS Escrow deposits are stated of cost plus occrued interest, which approximates market, and consist of cash equivalent secunties held in trusteed accounts which are restricted as to withdrowol pending the Company's incurring qualified costs. Below is a summary of such escrow deposits at December 31,1985 and 1984.
1985 1984 (Thousands of Dollors)
Pollution Control Focilities Under Construction
$ 5,415
$31,305 Other Facilities Under Construction 7,886 4,955 Nuclear Fuel Disposal 51,816 Total
$13,301
$88.076
- 11. INVESTMENTS At December 31 1985 1984 (Thousands of Dollars)
Gas Expioration and Development Joint Ventures
$44,743
$46,406 Real Estate Developments and Other Ventures 15,433 12,120 Nonutility Property 13,931 13,441 Escrow Deposits for Decommissioning Nuclear Plants 12,563 7,792 Other Deposits 1,000 1,112 Total
$87,670
$80,871
- 12. LEASES Leased property included in Utility Plant of December 31,1985 and 1984.
1985 1984 (Thousand4 of Dol' ors)
Nuclear Fuel
$445,699 $424,721 Electric Plant 48,342 48,342 Common Plant 3.116 3,702 Gross leased Property 497,157 476,765 Accumulated Amortization (159,016) (124,632)
Net leased Property
$338,141 $352,133 The nuclear fuel obligation is cmortaed as the fuel is burned. Amortirotion of leased property totaled $40.9 million, $39.1 million, and $28.8 million in 1985,1984 and 1983, respectively Other operating expenses include interest on cop;tol lease obligotions of
$18.2 million, $22.0 million, and $19.0 million in 1985,1984 and 1983, respectively. Minimum future lease payments os of December 31,1985, ore:
Year Ending December 31 Capital Leases Operating Leases Total (Thousandsof Dollars) 1986
$103,780
$ 30,700
$134,480 1987 89,861 29,502 119,363 1988 91,072 26,917 117,989 1989 56,851 27,327 84,178 1990 45,790 26,483 72,273 Remaining Years 32,047 108,324 140,371 Total Minimum Future Lease Payments 419,401
$249.253
$668 654 Imputed Interest (rofes ranging from 6.5% to 17'/.)
(81,260)
Present Value of Net Minimum Future Lease Payments
$338,141 Rental expense under operating leases totaled $43.9 million, $29.2 million, and $19.3 million,in 1985,1984, and 1983, respectively.
33
Philadelphia Electric Company and Subsidiary Companies Notes to Financial Statements (Continued) 13.SEGMENTINFORMATION 1985 Electric Gas Steam Total
{Thousandsof Dollars)
Operating revenues
$2,516,191 $428,984 $68,529 $ 3,013,704 Operating expenses, excluding depreciation 1,974,222 375,399 64,165 2,413,786 Depreciation 168,208 14,841 1,916 184,%5 Total operating expenses 2,142,430 390,240 66,041 2,598,751 Operating income
$ 373,761 5 38,744 5 2,448 $ 414,953 Utility plant additions
$ 793,195 5 32,896 $ 518 $ 826,609 December 31:
Allocoble ossets Net utility plant (*)
8,675,701 389,396 20,876 9,085,973 Inventories 100,793 22,745 208 123,746 Deferred energy costs 109,244 (4,766)
(2,823) 101,655
$8,885,738 $407,375 $18,261 $ 9,311,374 Nonollocable assets 853,940 Totolassets
$10,165,314 1984 Operating revenues
$2.435,731 $462,966 $82,320 $ 2,981,017 Operating expenses, excluding depreciation 1,858,505 413,938 75,989 2,348,432 Depreciation 162,959 13,474 1,893 178,326 Totol operating expenses 2,021,464 427,412 77,882 2,526.758 Operating income
$ 414,267 $ 35,554 $ 4,438 $ 454,259 Utility plant odditions
$1,022,496 $ 30,613 $ 135 $ 1,053,244 December 31:
Allocoble ossets Net utility plant (*)
8,068,233 369,239 22.443 8,459,915 inventones 116,775 32,572 1,189 150,536 Deferred energy costs 227,524 4,147 (1,776) 229,895
$8,412,532 $405,958 $21,856 5 8,840,346 Nonollocable assets 715,383 Totolassets 5 9,555,729 1983 Operating revenues
$2,107,897 $417,042 $71,111
$ 2,596,050 Operating expenses, excluding depreciation 1,592,027 377,624 67,365 2,037,016 Depreciation 150,898 12,694 1,735 165,327 Totol operating expenses 1,742,925 390,318 69,100 2,207,343 Operating income
$ 364,972 $ 26,724 $ 2,011 5 393,707 Utihty plant additions
$1,004,219 $ 26.020 $
82 $ 1,030,321 December 31:
Allocoble ossets Net utility plant (')
7,257,594 353,979 24,599 7,636,172 Inventories 98,391 32,350 343 131,084 Deferred energy costs 116,661 29,359 3,226 149,246
$7,472,646 $415,688 $28,168 $ 7,916,502 Nonallocable ossets 627,962 Totalassets
% 8.544.464
(*) includes construction work in progress, leased property and allocated common utihty property.
The Company is considering a proposal for the sole of its steam operation. Ultimate sole of the steam operation is subject to many factors,includir,g acceptance of the proposol by the Company's rnanagement and Board of Directors and approval of the sole by the PUC. The Company estimates that a sole of the steam operation would result in no significant gain or loss.
34
lt LIMERICX GENERATING STATION The Company's Limerick Unit No. I commenced commercial operotion on Fel,rvory 1,1986. Construction of the second of the two nuclear units of Limeick resumed in February 1986, following o suspension of opproximately 2 years. Unit No. 2 is scheduled to be completed in late 1900. As of December 31,1985, the Company had invested opprouimotely $4 61 bilhon in the Limerick Generating Station, consisting of $2.48 bilhon in Unit No.1, $901 m;llion in Unit No. 2 and $1.23 billion in common focihties.
On September 27,1985, the Company hied with the PUC for on electric rote increase designed to yield $671 million onnvolly, net of fuel savings. The increose, designed to recover the costs ossocio'ed with Limerick Unit No.1 ond 100 percent of common plant was requested to become e fective November 27,1985. On November 1,1985, the PUC issued on order which suspended the f
effective dote of the increase until June 27,1986, pending hearings and investigation into the reasoncbleness of the requested increase. In order to lessen the impact of the increase on customers, the Company has proposed to phase in the increase in three equal steps over three years and to collect from customers the omounts unrecovered by the phase-in plan, without interest, ofter the lost step is effective. in addition, the Company hos announced that it does not intend to file for another electric base rate increase prior to September 27,1987, unless,in the Company's judgment, o foilure to file such o request would jeopordire its financial viabihty. In the post,the PUC's practice hos been to include in ony rote increase with respect to one unit of a two-unit generating station only one-half of the costs of the common to. 'ities. On Jonvory 21,1986, the PUC entered on order stating that the prudence of the Company's 1976 ond 1978 construction deferral announcements would not be enomined in the rate proceeding, because o fir ding of imprudence had olfegedly been issued in on earlier PUC proceeding. The Company intends to f
appechhis decision to the Commonweo!th Court of Pennsylvonia. As a result of these construction deferrol onnouncements, the PUC staff and the Off ce of Consumer Advocote contend that certain omc unts of construction costs should be excluded fro n rote base. The Company maintains, however, that the 1976 and 1978 construction deferrols were prudent and that rate base should not be r educed.
The unavoitabihty of sufficient supplemental cochng water would hmit or prohibit operot;on of Limerick during certain months of the year. Until the pionned supplemental cochng water system is completed and in operation, the Company must obtain intenm supplemental cooling wate< for the operatoa of Limerick during such months. The Delowore River Basin Commission (DRBC) opproved, for a portion of 1985, two Company requests for mod.fication of restrictions on the use of the Schuylkill River for Limerick cooling water and for a reallocation of cooling water to Limerick from t.ro other power plants on the Schuylkill River.
The DRBC's opprovals were effective through December 31,1985. The Company filed one similar modification request and the some recifocation request with the DRBC for its 1986 supplemental coohng water needs. If only the request fu reallocation were granted, supplemental cooling water is expected to be available to permit Unit No. I to operote at apprommately 25 percent of its copocity. Based on historic river condehons, even if both the modification request and the reallocation request were granted, it is unkkely that there would be sufficient water to operate Unit No. I of 100 percent capacity throughout the year. Therefore, the Company is investigating other possible sources of supplemental coohng water for 1986, all of which would require regulatory opprovol.
One component of the supplemental coohng water system for Limenck is the Point Pleosont proiect to be constructed and operated by Bucks County and by the Neshaminy Water Resources Authority (NWRA), o municipal authonty created by Bucks County, under o contract omong NWRA, the Company and Bucks County. The Point Pleasant proiect has been the subject of substantial opposition from various groups, including a majonty of the Commissioners of Bucks County and a maionty of the members of the Boord of Directors of NWRA. This opposition has tesulted in disruption of construction ond in htigation. During 1985, the Court of Common Pleas of Bucks County ordered completion of the Point Pleasant project, this decision was offirmed by the Commonwealth Court, and NWRA ond Bucks County petitioned the Supreme Court of Pennsylvania for on allowonce of on oppeal from the decision of the Commonwealth Court. The Supreme Court of Pennsylvania has not yet octed on the petition.
l 35
Philadelphio Electric Company and Subsidiary Companies Notes to Financial Statements (Continued)
Following a lengthy investigation, on December 5,1985 the PUC determined that the Company could complete construction of Unit No. 2 subject to o cost containment and operational incentive program ("Progrom"). The Company ogreed to the Program on December 23,1985. Principal elements of the Program are a construction cost cop of $3.2 bilhon,which would represent the maximum allowed rate base for Unit No. 2 throughout its hfetime; on operating performance incentive / penalty related to the unit's copodty factor; and operating and maintenance ex pense stondords. The construction cost cop of $3.2 billion includes AFUDC, but does not include any costs related to common plant. The cost cop includes capitol odditions ofter commercial operation, net of occumuloted depreciohon. Any expenditures in excess of $3.2 bilhon connot be recovered from rotepayers or included in rote base. Adiustment of the cop for inflation, regulatory scope changes, or any other factors is not permitted. The estimated total cost of Unit No. 2 does not exceed the cost cop.
In 1984 the Commonweoith of Penrmyivonio enacted a low which requires the PUC to compare the octual cost of construction of on electric generating facility with the ett mote submitted of the commencement of construction. The low provides that if the octual cost exceeds the estimated cost. % PUC must exclude the excess cost from the utihty's rate base unless the utihty con show that some or all of the excess cost wc,s necessary and proper. in 197 8 the original estimated cost of construction of the Limerick Generating Sto+ ion was in the range of $1.7 to $2 bilhon. Estimates of corher stuges were significantly lower but the Company does not beheve that such earher estimates are opphcoble to determine the excess cost opphcoble under the low.
On December 19,1985, the F;noncial Accounting Standards Boord issued on exposure droft of a proposed amendment to the occounting principles opphcoble to rate regulo*ed enterprises, such as the Company. The proposed omendment,if odopted in its present form, would become oppbcoble to the Company in 1987 and would offect, principally, occounhng for phase.in plans and disallowances of plant costs. In generol, this amendment would occelerate the timing of recognihon of expenses in the Company's financiol statements. Under the exposure draft, allowohle costs could be deferred in connection with a phasedn plan only if the regulotory outhority ogreed to the plan ond all amounts deferred were recovered within ten years, otherwise, no deferrols would be allowed. lf the PUC disollowed a portion of Limerick's construction costs through either o reduction in rate base or rote of return, or if the Company estimated that the total construchon costs of Unit No. 2 would exceed the cost cop, on immediate wnte.
off of portions of Limerick's construction costs would be required Such a wnte.off could be mo'erial to results of operations or retained earnings of the Company in the year of wnte.off and could offect the Company's obihty to pay dividends and to finance its construction program. Under existing accounting principles,it is unhkely that the aforementioned arcumstances would cause the Company to write off immediately any amounts of timerick's construction costs.
- 15. COMMITMENTS AND CONTINGENCIES The Company hos incurred substantial commitments in connect on with its construction program. Construction expenditures are estimated to be $771 milhon for 1986 and $2.9 bilhon for 1987 through 1989. These estimates are reviewed and revised periodically to reflect changes in economic conditions, revised lood forecasts and other oppropriate factors Plant fooht es under construction, particularly the Limerick Generating Stahon, require numerous permits and hcenses, which the Company connot be assured will be issued at completion of the foohhes.
The Price. Anderson Act places a " Limit of Liabilty" presently of $650 milhon, for claims that could onse from on incident involving any licensed nuclear facihty in the notion. All nuclear utihties, including the Company, have covered this exposure through a combination of private insurance and mondatc,ry portiopohon in a secondary financial pe otect on pool. In the event of such a nuclear incident at any hcensed nuclear facihty in the nahon, the Company could be ossessed up to $13.5 milhon per incident, with a maximum amount of $27 million in ony one year.
The Company maintains property insurance, including radiation contamination coverage, for loss or domoge to its nuclear facilities. Although it is impossible to determine the total amount of the loss that moy result from on occurrence of these facilities, the Company maintains the monimum omount of insuronce presently ovoilable, $1.1 billior, for each station. Under the terms of the various insurance ogreements, the Company could be ossessed up to $35 million for losses incurred of ony plants insured by the insurance componies. The Company is a member of on industry mutual insurance company which provides replacement pr wer cost insurance in the event of a major outoge at a nuclear station. The premium for this coverage is subject to on ossessment is odverse loss experience. The Company's maximum share of any assessment is $13 million.
The PUC has conducted severol investigations involving the Company's managemer t of maior plant outoges dunng 1983 and 1984 and the resulting impoct on energy costs recoverable from customers under the electric energy cost rate. On October 24, 1985, the PUC issued its final order in on investigation which oddressed the prudency of outoges of certain base lood nuclear and cool units during 1983 and 1984. As a tesult of this order, the Company was denied recovery of opproximately $73 m;ll,on of energy costs. The disollowed energy costs were charged to ex pense os of September 30,1985, and reduced operotng income and cornings opphcoble to common stock by $34.7 milhon ond cornings per overoge commen shore by opproximately 20c. On November 26,1985 the Company filed a Pehtion for Review with Commonweo!th Court appechng the PUC order.
The PUC is holding heorings in connection with $47 milhon of replace-ent energy costs related to other outo ges of nuclear units during 1984 ond 1985. The Company beheves es management of those outoges was prudent and that it should not be precluded from recovering the replacement energy cos's Ultimate resolution of this matter will not have o matenol adverse effect on the results of operations or financial position of the Company. A finol decision by the PUC is not empeded until mid 1986.
On October 9,1985, a low was enacted in Pennsylvania granting the PUC statutory authonty to modify or holt construction ti ony ganerating unit if the PUC determines that such construction is not in tne pubhc interest. The low provides that a utihty may r ecover o return of, but not a return on, prudentf y incurred costs of any partiolly completed focihty, the concellation of which is found to be in the public interest.
The Company is a no ninol defendent in a class oction and derivative suit ogoinst certoin of its directors and officers, brought by four shorehciders owning in the aggregate 202 shores of common stock. The suit crises out of the construction of the Limenck Generating Station and seek s to cause Unit No 2 to be abandoned, its cost to be wntten off as o loss, dividends on common stock to be terminated until certain cornings levels Fove been met, and the shares outhonted under the 1983 Amendment to the Articles ofincorporatic,n to be declared <ohd. Addihonal domoges also ore sought While the outcome of htigation connot be predicted with certainty, monogement.eiieves resolution of the suit will not have o matenal offect on the Company's financial position.
The defendants have filed a motion to dismiss the complaint.
i 37
Philadelphia Electric Company and Subsidiary Componies Notes to Financial Statements (Continued)
- 16. QUARTERLY DATA (Unoudited)
The data shown below include oli odiustments which the Company considers necessory for a fair presentation of such amounts.
Operahng Revenues Operating income Net income Quarter Ended 1985 1984 1985 1984 1985 1984 (Thousands of Dollars)
March 31
$852,299
$818,031
$126,892
$128,942
$151,166
$134,838 June 30 683,519 703,219 98,153 100,680 118,859 108,151 Septamber 30 750,904 755,619 93,240 121,524 124,163 132,339 December 31 726,982 704,148
%,668 103,113 131,113 117,061 Ectnings Apphcoble Average Shores Earnings Per to Common Stock Outstanding Average Shore Quarter Ended 1985 1984 1985 1984 1985 1984 (Thovsonds of Dollars)
(Thousonds)
(Dollars)
March 31
$128,422
$115,451 162.859 143,044
$.79
$ 81 June 30
%,212 87,098 168,723 150,266
.57
.58 September 30 101,569 111,340 171,993 153,519
.59
.73 December 31 108,521 95.818 175,401 160.274
.62
.60 1985 third quarter results include o charge of opproximately $34 7 milhon (net of related income tones) resulting from the PUC's denial of recovery of oporoximately $73.0 milhon of energy costs (see Note # 15).
- 17. 5UPPLEMENTARY INFORMATION TO DISCLOSE THE ESTIMATED EFFECTS OF INFLATION FOR THE YEAR ENDED DECEM8ER 31,1985 (Unaudited)
The following supplementory inf ormation is supplied to show the eshmoted effects of inflation under the current cost" method The techniques required to develop th s informohon ore opprouimate and complex, and may not necessarily reflect the true effects of inflation on the Company Under ex;shng regulatory law, the Company is permitted to recover actual operating and capital costs incurred to serve customers and a reasonob!e return on investment, and the Company beheves it will be oHowed to recover cost increoses caused by inflohon as such increoses ore octually incurred.
E#ect of fn#ction on Repwifed Income. In odiushng the Consohdated Statemants of income, os shown below, only depreciohon expense was odiusted for the effect of inflohon. Depreciotion expense was determined by opplying the Cc mr>ony's depreciobon rates to restated 1985 overoge depreciable plant in service. Other Operahng Espenses were not required to be odiusted.
If the Company had to replace its entire utehty plant of this time, the costs to do so would greatly exceed the original costs incurred when the focihties were built because of the comJutive effect of inflohon. These plant replacement costs, net of occumulated depreciation,are estimated at $14 2 bilhon. The effect ($496 melhon) of generalinflohon in 1985 nn net uhbry plant was greater than the mcrease ($456 milhon) in specific prices by $40 milhon.
Consolidated Statements of income Adius;ed for inflation for the Year Ended December 31,1985.
As Adiusted As Reported (Average 1985 0 ohms)
(Thousands of Donors, encept per shore amounts)
Operahng Revenues
$3,013.704
$3.013.704 Depreciation 184,965 477,987 Other Operating Expenses 2.413,786 2,413,786 Operoting Income 414.953 121,931 306.261 306,261 Other income Income 8efore Interest Chorges and Preferred Stock Dividends 721,214 428,192 Interest Chorges and Preferred Stock Dividends 286,490 286.490 Earnings Applicable to Common Stock
$ 434,724 5 141,702 Earnings Per Average Shore 2.56 0 83 38
^'L
_-:of Selected Five Year FinancialInformateon.
In order to reflect the impact of general inflonon on selected financiol information for each of the years 1981 through 1985, the following table shows actual dato compared with dato odiusted to 1985 dollars.
Five Year Summary of Selected Financial Information and Current Cost Dato (Thowsonds of Dollars, except per shore amounts) 1985 1984 1983 1982 1981 Cu'y r:of ^tt:Foctors Consumer Price index Average During Year 322.2 311.1 298 4 289.1 272.4 YearEnd 327,4 315.5 303.5 292.4 281.5 Consumer Price index Multiplier A = Average (322.2 + 1ndex) 1.00 1.04 1.08 1.11 1,18 8 = Year End (327.4 + Index) 1.00 1.04 1.08 1.12 1.16 Actual and A4usted Historical FinancialInformateon Dividends Per Common Shore Actual Poid
$2.20
$2.20
$2.12
$2.06
$1.90 Ad usted(Actual x A)
$2.20
$2.29
$2.29
$2.29
$2.24 i
Market Pnce Per Common Shore ActualYear End
$17.38
$14 87
$14.38
$17.00
$13.63 Adjusted (Actual x B)
$17.38
$15 46
$15 53
$19.04 515.81 Operating Revenues Actual
$3,013,704 $2,981,017 $2,596,050 $2.644,753 $2.433,425 Ad usted (Actual x A)
$3,013,704 $3,100,258 $2,803,734 $2,935,676 $2.871,442 i
Earnings Applicable to Common Stock Actual
$434,724
$409,707
$321,705
$278 623
$223,761 Adjusted (Actuoi > A)
$434,724
$426.095
$347,441
$309,272
$264,038 Earnings per Averoge Common Shore Actual
$2.56
$2.70
$2 40
$2.39
$2 25 Adjusted (Actual x A)
$2.56
$2.81
$2.59
$2.65
$2.66 Common Shoreholders' Equ;ty ActualYear End
$3,193,048 $2,890,975 $2,569,323 $2.254,435 $1,963,527 Ad usted(Actual x 8)
$3,193,048 $3,006,614 $2,774,869 $2,524,967 $2,277,691 i
Current Cost Data Excess of increase in General inflation over increase in Specific Prices on Utility Plant Cost ActualCurrent Cost
$39,973
$296.690
$147,379
$(9,011)
$186,585 Adjusted (Actual x A) 139,973
$308,558
$159,169
$(10,002)
$220,170 Purchasing Power Goin on Net Amounts Owed Actual Current Cost
$199,010
$190,521
$165,235
$148,672
$307,972 Ad usted (Actuol: A)
$199,010
$198,142
$178,454
$165 026
$363,407 i
Earnings Applicable to Common Stock Actual Current Cost
$141,702
$113,662
$51,049
$48,471
$23,044 Adiusted (Actual x A)
$141,702 5118,208
$55,133
$53,803
$27,192 Earnings per Average Common Shore Actual Current Cost
$0.83
$0.75
$0.38
$0.42
$0.23 Ad usted (Actuoi x A)
$0.83
$018
$0.41
$0.47
$027 i
39
Philadelphio Efectric Company and Subsidiary Companies FinancialStatistics
SUMMARY
OF EARNINGS (Millions of Dollars)
Forthe Year Ended 1985 584 1983 1992 1981 1980 1975 Operahng Revenues (fcr details see pages 42 and 43) 53,013.7 $2,981.0 $2.596.0 $2,644.8 $2.433.4 $2.123.4 $1,134I Operahng Espenses Fuel and Energy interchange 1,139.6 1,122.2 986.6 1,128.5 1,187.6 1,090.5 457.8 Labor 370.8 345.3 317.2 291.1 256.8 232.1 152.2 Other Materiots, Supplies and Services 460.0 427.3 354 6 320.5 260.9 184.5 72.6 Total Operation and Maintenance 1,970.4 1,894.8 1,658.4 1,740.1 1,705.3 1,507.1 682.6 Depreciation 185.0 178.3 165.3 143.8 130.3 122.9 91.2 Taxes 443.3 453 6 378.6 372.2 274.8 227.4 163.9 TovolOperahng Expenses 2,598.7 2,526.7 2,202.3 2,256.1 2,110.4 1,857.4 937.7 Operating income 415.0 454.3 393.7 388.7 323 0 266.0 1Y7.1 Otherincome Allowance for Other Funds Used Du<ing Construction 176.3 134 5 108.1 65.7 65.0 50.5 23 3 Income Tax Credits, Net 133.4 116.4 87.9 75.8 63.2 49.0 22.3 Other, Net (3.5)
.2 (3.1)
(0.7) 2.5 3.4 2.0 TotolOtherlncome 306.2 251.1 192.9 140.8 130.7 107.9 47 6 income Sefore interest Charges 721.2 705.4 586 6 529.5 453.7 368.9 244.7 laverest Charges Long. Term Debt 435.4 402.5 330.2 308.9 266.7 225.0 136.5 Short. Term Debt 17.7 30.9 35.2 32.0 33.2 13.9 7.9 Allowance for Borrowed Funds Used During Construction (257.2)
(220.4)
(167.9)
(147.6)
(123.8)
(97.1)
(43.6)
Netinterest Charges 195.9 213.0 197.5 193 3 176 1 141.8 100.8 Netincome 525.3 492.4 389.1 336 2 277.6 227.1 143 9 Preferred 5tock Dividends 90.6 82.7 67.4 57.6 53.8
$2.2 36.0 fornings Applicable to Common Stock 434.7 409.7 321.7 278.6 223.8 174.9 107.9 Dmdends on Common Stock 373.5 334.3 283.6 240.5 189.5 157.4 95.4 fornings Retained
$61.2
$75.4
$38.1 538.1
$34.3
$17.5
$12.5 Earnings Per Average Common Shore (Dollars)
$2.56
$2.70
$2.40
$2.39
$2.25
$2.00
$1.86 Dividends per Common Shore (Dollars)
$2.20
$2.20
$2.12
$2.06
$1.90
$1.80
$1.64 Common Stock Equity (Per Shore)
$17.97
$17.81
$17.99
$17.93
$18.10
$18.72
$19.05 Average Shores ofCommon Stock Outstanding (Millions) 169.8 151.8 133.9 116.5 99.6 87.3
$8.1 Ratings on Philadelphia Electric Company's Securities Mortgoge Bonds Debentures Preferred Smk Agency Rating Date Established Roting Date Established Rating Date Established Duff and Phelps,Inc.
9 3/80 10 3/80 11 2/83 Fitch investors Service BBB 9/82 BBB-9/82 BB +
9/82 Moody's investors Service Boo 3 1/83 B01 1/B3 bol 1/83 Standard & Poor's Corporation BBB -
9/82 BB+
9,82 BB 9/82 40
SUMMARY
OF FINANCIAL CONDITION (Millions of Dollors)
December 31 1985 1984 1983 1982 1981 1980 1975 Assets Utility Mont, of ongmoleost
$10,572.2 $9,834.1
$8,864.2 $7,905.7 $7,044.7 $6,415.7 $4,445.6 Less: Accumulated Depreciation 1,824.4 1,7263 1,592.0 1,450.1 1,330.6 1,235.7 775.8 Leased Property, net 338.1 352.1 364.0 299.1 270.0 139.3 91.0 Net Utility Plant 9,085.9 8,459.9 7.636.2 6,754.7 5,984.1 5,319.3 3,760.8 investments 87.7 80.9 99.4 91.4 77.8 58 1 123 CwrentAssets Cash and Temporary Cash investments 188.8 30.4 57.2 50.0 30.7 6.7 17.4 Escrow Deposits 13.3 83.1 8.0 Accounts Receivoble 370.9 384 2 338 6 342.2 342.4 300.3 139.8 Inventories 123.7 150.5 131.1 143.0 132.2 121.1 88.0 Deferred Energy Costs 101.7 229.9 1493 (85.4)
(31 3) 11.0 17.9 Other 58.5 48.9 44 3 40.2 35.1 31.8 19.2 De(erred Debits 134.8 82.9 80.4 24.9 31.5 18.5 13.8 Total
$10,165.3 $9,555.7 $8,544.5 $7,361.0 $6.602.5 $5,867.4 $4,069.2 Capitalization and Uebilities Common Stock
$ 2,602.0 $2,361.0 $2,110.5 $1,826.2 $1,572.4 $1,377.4 5 916.6 Other Poid-in Capitol 73 6.7 5.9 4.6 3.9 2.6 1.5 Retained Earnings 583.7 523 3 452.9 423 6 387.2 353 6 304.7 Common Shorcholders' Equity 3,193.0 2,871 0 2,569.3 2,254.4 1,963 5 1,733.6 1,222.8 Preferred Stock Without Mondatory Redemption 572.5 572.5 522.5 372.5 372.5 372.5 372.5 With Mondatory Redemption 3183 326.2 284.9 2923 266.9 2743 113.4 Long. Term Debt 4,309.2 3,778.0 3,381.8 3.028.5 2.745.7 2,371.9 1,776.9 Tctal Capitolirotion 8,393.0 7,567.7 6,758.5 5,947.7 5,348.6 4,752 3 3,485 6 Current Uebilities Short-Term Debt 1.0 260.0 267.5 64.7 54.2 52.6 108 0 Current Maturities of Long. Term Debt 80.8 50.4 21.3 36.1 130 8 60.9 Capital Lease Obligations due within one year 76 3 68 3 61.5 32.5 53.9 18.5 12.4 Accounts Payable and Dividends Dectored 185.1 200.1 179.9 188.5 188.9 187.6 80.1 Taxes Accrued and Deferred 110.3 158.0 1023 22.6 51.4 77.8 44 2 Interest Accrued 93.0 91.1 91.8 99.8 82 3 64.9 37.8 Other 72.0 127.2 54.1 24 7 18.1 17.4 20.2 Deferred Credits and Other Uobilities Capital Lease Obligations 261.8 283 8 302.5 266.6 216.1 120.8 78.6 Other 892.0 749.1 726.4 692.6 552.9 444.7 141.4 Total
$10,1653 $9,555 7 $8,544 5 $7,361.0 $6,602.5 $5,867.4 $4,069.2 41 1/
Philadelphia Electric Company and Subsidiary Companies Operating Statistics ELECTRICOPERATIONS 1985 1984 1983 1982 1981 1980 1975 Ouspot(Millionsof Kilowatthours)
Steam 9,455 11,085 10,457 8,598 9,931 11,234 12,814 Nuclear 8,359 6,462 5,520 10,743 7,464 7,333 4,387 Hydraulic 1,484 2,085 1,739 1,581 1,397 1,240 2,275 Pumped Storage Output 1,235 1,100 979 1,126 1,101 1,050 1,275 Pumped Storoge input (1,754)
(1,579)
(1,427)
(1,665)
(1,624)
(1,526)
(1,785)
Purchase and Net Interchange 10,252 11,975 12,181 11,120 11,173 9,973 7,363 Internal Combustion 178 425 491 178 283 442 914 Other 1,254
$28 TotalDe<tric Ouspot 30,463 31,553 29,940 31,681 30,253 29,746 27,243 Sales (Millions of Kilowotthours)
Residential 8,440 8,515 8,467 7,877 8,014 8,341 7,424 Small Commercial and Industrial 3,731 3,543 3,284 3,142 3,115 3,065 2,624 Lorge Commerciol and industnol 14,920 14,881 14,478 14.178 14,916 15.056 14,060 All Other 1,044 1,061 1,003 1.012 1,005 1,159 1,227 Service Territory 28,135 28,000 27,232 26,209 27.050 27,621 25,335 Jersey Centrol Power & Light (Salem #2) 1,395 346 3,352 1,218 Totalflactric Soles 28,135 29,395 27,578 29.561 28,268 27,621 25,335 Number of Customers, December 31 Residential 1,245,481 1,230,883 1,217,635 1,206,944 1,200,238 1,190,312 1,120.981 Smoll Commerciol and !ndustrial 124,719 121,676 119,292 118,407 117,016 116,808 114,896 Lorge Commerciol and industriol 4,881 5,100 5,437 5,616 5,790 5,820 5,719 All Other 773 751 751 762 746 736 2,305 Totof Electric Customers 1,375,854 1,358,410 1,343,115 1,331,729 1,323,790 1,313,676 1,243,901 Operotmg Revenues (Millions of Dollars)
Residential
$923.9
$854.9
$7440
$694 4
$643.7
$607 8
$3641 Small Commerciolandindustrial 388.7 360.2 316 6 310.6 285.9 249.8 138 9 Large Commercial and industrial 1,061.8 1,008.5 877.4 922.3 917.1 813.9 418.3 All Other 141.8 145.1 137.4 118 3 109.5 95.4 56 5 Service Territory 2,516.2 2,368.7 2,077.4 2,045 6 1,956 2 1,766.9 978 4 Jersey Centrol Power & Light (Solem #2) 67.0 30.5 135 4 45.9 TotolElectric Revenues
$2,516.2
$2,435.7
$2,107.9
$2,t 81.0
$2,002.1
$1,766.9
$978 4 Operating Expenses (Millions of Dollars)
Operating expenses exclud;ng depreciation
$1,974.2
$1,858.5
$1,592.0
$1,688.4
$1,586 5
$1,414 0
$717.6 Depreciot;on 168.2 163.0 150.9 130.2 117.3 111.1 81.6 TotolOperotmg Empenses
$2.142.4
$2,021.5
$1.742.9
$1,818 6
$1,703.8
$1,525.1
$799.2 Electric Operatingincome (Millions of Dollars)
$373.8
$414.2
$36) 0
$362.t
$298 3
$241.8
$179.2 Average Use per Residential Customer (kilowotthours)
Without Electric Heating 6,034 6,160 6.319 5,875 6,022 6,411 6,354 With Electric Heating 15,923 17,293 15,523 16,813 18,054 19,482 18,916 i
Total 6,820 6,960 6,990 6,544 6,699 7,058 6,645 Electric Peak Lood, Demand (thousands of kws) 6,034 5,925 5,879 5,691 5,731 6,095 5,530 Net Electric Generating Capac+f-Year End Summer roting (thousands of k ws) 7,599 7,765 7,974 8,006 8,006 7,698 7,186 Cost of Fuel per Million Btu
$1.72
$2.22
$2 25
$1.57
$2.10
$1.90
$1.23 Btu per Net Kilowotthour Generoted 10,843 10,920 10,906 10,918 10,930 10,787 10,523 4;
GAS OPERATIONS 1985 1984 1983 1982 1981 1980 1975 Sales (Millions of Cul,;c Feet)
Residential 1,810 1,941 2,168 2,442 2,446 2,461 2,334 House Heating 23,227 25,429 22,981 24,237 24,675 23,671 20.817 Commercial and industrial 36,254 41,145 39,043 41,660 45,670 42,890 30,012 All Other 1,209 1,282 672 422 127 92 74 TotalGos Sales 62,500 69,797 64,864 68,761 72,918 69,114 53,237 Gas Transported for Customers 10,262 3,794 789 TotolGos 5sles & Transported 72,762 73,591 65,653 68,761 72,918 69,114 53,237 Number of Customers, December 31 Residential 69,632 70,794 72,501 76,638 78,426 81.346 90,117 House Heating 217,840 211,984 206,443 198,910 193,038 182,246 162,914 Commercial and Industrial 24,234 23,442 22,810 72,324 21,578 20,197 19,874 TotolGos Custome,s 311,706 306,220 301,754 297,872 293,042 283,789 272,905 Operating Reve.,ves (Millions of Dollars)
Residential
$18.7 519.0
$19.1
$18.1 515.4
$14.0
$8.1 House Heating 214.1 243.7 227.3 221.1 209.7 166 7 54.5 185.4 191.7 165.8 147.1 128.5 108.5 54 8 Commerciol and industr o' All Other 5.2 56 30 1.8 0.5 0.3 0.1 Subtoto!
$423.4
$460.0
$415.2
$388.1
$354.1
$289.5 5117.5 Other Revenues (including Transported for Customers) 5.5 3.0 1.8 2.3 2.3 1.2 0.5 TotalGos Revenues
$428.9
$463 0
$417.0
$390.4
$356.4 5290.7 5118 0 Operating Expenses (Millions of Dollars)
Operating expenses excluding depreciation
$375.4
$413.9
$377.6
$354.1
$322.0
$258.0
$931 Depreciation 14.8 13.5 121 11.9 11.3 10.2 8.3 Totoloperating Expenses
$390.2
$427.4
$390.3 5366.0
$333.3 5268.2 5102.0 Gas Operating income (Millions of Dollars 1
$381
$35 6 526.7
$24.4 523.1
$22.5 516 0 STEAM OPERATIONS 1
Sales (Millions of Pounds) 4,229 4,735 4,552 5,086 5,484 6,044 7,117 Numberof Customers, December 31 487 540 545 571 593 618 689 Operating Revenues (Millions of Dollors) 568.5
$82.3 571.1 573.4 574 9
$65.8
$38.5 Operating Expenses (Millions of Dollars)
Operating expenses encluding depreciation
$64 2
$76.0
$67.4
$69.8
$71.6 562.4
$35.3 Depreciation 1.9 1.9 1.7 11 17 11 1.4 TotalOperating Expenses
$66.1 577.9
$69.1
$71.5 573.3
$64.1
$36 7 Steam Operating income (Millions of Dollars)
$2.4
$4 4
$2.0
$1.9 51.6
$11 51.8 ag % UM No Z At TfD t% n t":tt,0 25 15
~ ^
20 60 15 45 10 30 5
15 81 82 83 84 85 81 82 81 84 85 aim hiem UM No 2 Sales 43
Philadelphio Elec*ric Company ord Subsidiary Componies ShareholderInformation Seock Exchange Listmgs provide information. Please address your comments to Mrs.
L S. Binder, Secretary, Philodelphio Electric Company,2301 Most Pt securities are listed on the New York Stock Exchange Market Street, P.O. Box 8699, Philodelphia, PA 19101.
ond the Philodelphia Stxk Exchonge. Philodelphia Electric Power Company debentures are listed on the Philodelphia Inquiries relating to shoreholder accounting records, stock transfer and change of oddress should be directed to Stock Exchange.
Philodelphio Efectric Company, Devedends 2301 Market Street, P.O. Box 8699, Philadelphia, PA 19101, The Company has paid dividends on its common stock Ann: Stock Transfer Section.S6-4.
continvolly since 1902. The Board of Directors normally considers common stock dividends for payment in March, Tolf Free Telephone Une June, September and December.
Toll. free telephone lines are avoiloble to the Company's The Company estimates that 4% of the $2.20 per shore shareholders for inquiries cornerning their stock ownership.
dividend paid to common shareholders in 1985 represents a Whu colling from outside Pennsylvonio, dial 1 -800 223 return of capitol which is not toxoble os dividend income for 7326.FromwithinPennsylvaniodelI-800 242 7326. Local Federal income tax purposes. All dividends on preferred Philadelphia calls should be mode to B41 5795.
stock are toxoble.
AnnualMeetmg Dividend Reinvestment ond ssock Purchase Plan The Annual Meet ng of the Shoreholders of the Company will Shoreholders moy use their dividends to purchase additional be held on Apnl 9,1986, at 10:30 AJA of the Adams Mark shores of common stock through the Company's Dividend Hotel, Monument Rood & City Line Avenue Philodelphia,PA.
Reinvestment and Stock Purchase Plon. Ph:lodelphio Electric Common stock shareholders of record of the close of pays all brokeroge and service fees.
bainess on Febroory 28,1986, are entitled to vote of this Customers of the Company who are not shareholders may meeting.
enroll in the plon by making o one-time purchase of common Notice of the meeting, proxy statement, and proxy will be stock directly from the Company.
mailed under serarote cover Prompt return of the proxies All shareholders have the opportunity to invest additional will be oppreciated.
funds in common stock of the Company, whether or not they form 10.K have their dividends reinvested - olso with oll fees borne by Form 10.K. the onnvol report filed with the Secunties and the Company.
Em change Commission, is avoilable, without charge. to Over 35% of the Compony's common shareholders were shareholders upon written request to Philodelphio Electric porticipants. In 1985, they invested more that $110 million Company,2301 Market Street, P.O. Box B699, Philodefphia, through the Plon, including cash payments. information PA 19101, concerning this Plan may be obtained from M.W. Rimermon, Attn: Financial Division,S21-1.
Treasurer, Philadelphio Electric Company,2301 Morke' Shareholders Street, P.O. Bcx 8699, Philodelphia, PA 19101 -
The Company has 302,097 shareholders of record of Comments Welcomed common stock, a 13% increase in 5 years.
The Company olways is pleased to answer questions and Trans4er Agents and Registrars PHILADELPHIAELECTRICCOMPANY-PHILADELPHI A ELECTRIC COMPANY-Debentures Preferred and Common Stocks PHILADELPHIA ELECTRIC POWER COMPANY Registrars:
Mellon Bank (East) N.A., Four Mellon (A Subsidiory)-Debentures Bank Center, Philodelphia, PA 19102 Trustee:
The Philodeiphio National Bank, Morgon Guaranty Trust Co.of NY, Broad & Chestnut Sts., Philo., PA 19101 30 W. Broodway, NY, NY 10015 Transfer Agents: Philadelphia Electric Company, NewYork Agent. Irving Trust Co,One Wall Street, NY, 2301 Market St.,Philo., PA 19101 NY 10015 Morgon Guaronty Trust Co. of NY, 30 W. Broadway, NY,NY 10015 yMr S reet, P.O. Box B699, Philo., PA 19101.
PHILADELPHIA ELECTRIC COMPANY-(215)841 4000.
First and Refunding Mortgoge Bonds Trustee:
Fidelity Bank, National Associotion, Brood & Wolnut Sts.,
Philo., PA 19109 New York Agent: Morgon Guaranty Trust Co.of NY, 30 W. Broadway, NY, NY 10015 NYSE-Composite Common Stock Prices, Earnings and Dividends by Quorters (Per Shore) 1985 1984 Fourth Third Second First Fourth Third Second First Quarter Quarter Quarter Quorter Quorter Quarter Quarter Ovorter High Price
$17%
$16%
$16%
$16%
$15P.
$13 v.
$14F.
$16 Low Price
$14
$14
$13%
$14%
$124 59
$11%
$14 Earnings 62c 59c
$1c 79c 60e 73e 58e 81c Dividends
$5c 55<
55<
55c
$5e 55e
$5e 55e 44
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l PO Ebox 8699 Philodelphia PA Philodelphia PA 19101 Permet No. 378 1
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