ML20155A230
| ML20155A230 | |
| Person / Time | |
|---|---|
| Site: | Peach Bottom, Salem, Hope Creek, 05000000 |
| Issue date: | 12/31/1985 |
| From: | Sonn H Public Service Enterprise Group |
| To: | |
| Shared Package | |
| ML20155A208 | List: |
| References | |
| NUDOCS 8604080336 | |
| Download: ML20155A230 (56) | |
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Financial Highlights Contents r g i PSE AC Profile (Thousands of Dollars where apphcable) a Message to $hareholders 1985 1984 r I Electnc Sales - Megawatthours 32,320,508 31,597,401 2 7 A Company m Transition Gas Sales - Kilott.erms 2,125,674 2,147,315 (Il e The hnancul Picture Total Operating Revenues $ 4,409,054 $ 4,196,124 5 if Review of Operations Total Operating Expenses $ 3,781,268 $ 3,597,986 5 se Fmancul Statement Earnings Available for Common Stock Responsibility
$ 484,550 $ 429.808 13 27 Financial statements Shares of Common Stock (Thousands!
Average 122,344 108,913 12 3f Independent Accoununts' Year-end 131,699 112.563 17 Orimon Earninxs per Average Share of Common Stock $1.96 $3.95 c oun n P cs Dividends Paid per Share of Common stock $2.81 $2.70 4 as Notes to -mancial Common Stockholders - Year-end 231,732 234,156 (II 5 '"C "" 43 Managemert's Discussion Coverage Ratios and Analvs iof Fixed Charges 3.76 3 61 , Fixed Charges and Preferred Dividends 2.91 2.76 Rcsul (f [ffni Return on Average Common Equity 14.03 % 14.43 % 48 Operatmg Statt ascs ikx>k Value $28.04 $27.17 3 de Financul 5taustics Year <nd Market Pnce lite 26 % IN sf Directors Cross Additions to Utihty Plant $ 1,220,089 $ 967,365 26 se Otficers Total Utihty Plant at Original Cost $10,977,321 $ 9,870,429 1I sa Corporatc Information Atee#f the Coverr Pubhc Servne Electnc and Gas Company ioms in celebrating the Centennial of the Statue of Liberty in 1986. The Company is proud to provide the electrioty to hght ; the torch that has been a beacon of hope and a sign of welcome for milhons of Amencans. And it is proud to have pnxluced a 27-minute fdm hononng the l many immigrants who pmed , through Elbs bland. l Ilarold W. Samn, bl &G's chairman of the board, serves anhairman of the New lency 5 tate Campaign for the Liberty Centennul, to raise funds for the restoration of the Statue of l 1 bcrty and Lihs bland
Today, the financial conununity tends ## to perceive the utility business as an in- TM ",, ,,cp , ce" r,en ' creasingly uncertain investment. However, wpre n ,
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conditions of the rest of the 1980s and, / # . l for that matter, of the 1990s and beyond / . / must not be viewed with trepidation-if a / 'h eM ., company is active, flexible and adaptive. / y pe During the 1980s, pSE&G has con-j I centrated on completing the Hope Creek ~-. ' Generating Station, its last major con- fr','$s 5" .- 3' ' struction project in this century. We will c,o r .. s - continue focusing on Hope Creek until it is ,,,,,,,a p-l placed in service, which is expected to be $ $ "s"" # " gp 4 later this year. Once this maior milestone is reached, , f pSE&G will be ready for the future, and the holding company will fit this need. WM'*
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Our service area is relatively mature, ' I #f , with only modest growth projected. pSE&G, f' g gGYl like the utility industry,is confronted with m
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formidable, unregulated competition. For gi d i example, changes in federal regulation en- 'Y; ' j
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able natural gas consumers, especially large
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de ed users, to buy the fuel privately and make l ! i their own arrangements for pipeline de- [' d 53 " l l w
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Diversification would provide the 3Cs%g ' Company with the opportunity for growth in earnings without increased rates for electric and gas customers. We feel that the holding company structure offers the best way for diversification and provides a basis for insulating customers from results of s '" unregulated businesses. It allows also for '" gI greater freedom for innovation and initiative. Common stockholders would par- ' l ticipate in the benefits and the risks of the l Company's investment in non-regulated j, ,, l businesses.The formation of the holding p ia.nda i company is described in much greater depth ,,,nine *"# .- in the Company's proxy statement, and you ,-G l are encouraged to read it carefully. ' "M
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, o Assuming we garner all the necessary mercial operation sometime in the second approvals, including the endorsement of half of the year.
our holders of Common Stock and $1.40 Hope Creek's cost has been increasing, Dividend preference Common Stock when partly because of scheduling adjustments we meet in April, the Company would and partly because of higher labor and other undergo restructuring in May. construction charges. We are concentrating While 1985 was a year m which we on placing the plant in service as quickly as sharpened our focus on the future, it was possible, without sacrificing quality, for the also a year in which we paid careful atten- benefit of our customers and . stockholders. tion to the present. The cost of the plant is now expected to be Eamings per share of Common Stock between $4.15 and $43 billion, which is were $3.96, compared with S3.95 in 1984 about $400 million in excess of the cost cap wlren1here were 13.4 million fewer shares. contained in the 1982 cost containment , In May, we raised the quarterly divi- agreement for the plant. The final figure i dend by three cents to 71 cents a share. will not be known until Hope Creek begins it marked the tenth consecutive year we operation, because of numerous clean up increased the dividend in line with our items and testing which must be completed. pol (cy to raise it on a regular basis. The in- llased qn our present estimate, the cost dicated annual rate is now S2.84 per share. overruns will result in a reduction in earn. New Jersey continued to hold world- ings pu slure of between 5 cents and l wide appeal as a place to do business. Many 8 cems in 1987 under the camings penalty foreign firms have found the state to be in the cost containment agreement. The an ideal home, and thpy now account for a reduction would be less in subsequent years. sizable portion of its workforce. Developers in December, we petitioned the New have excitedly pursued plans along the Jersey lloard of Public Utilities (llpU) for Hudson River waterfr6nt-New Jersey's a $6M6 million, or 14/2% increase in Gold Coe,st-and in other key regions from annual revenues. Nearly 90% of the total is the Mea @ wlands to Iturlington County. in elceiric revenuer,, mostly attributable to Milestones marked the year at both the completion of Hope Creek. our Salem and Hope Creek Cencrating The rate increase request also reflects Stations. hi December, Salem I broke the anticipated savings in the cost of fuel, national record for annual electnc genera- stemming from Ilope Creek's operation. Ily tion by any type of unit-nuclear, coal, oil the time we receive a ruling on our appli-or gas. Its 277 consecutive days of service cation, our existing base rates will have was a Company record!$alem 2 returned been in effect for over two and a half years. to operation in May after a long outage We helieve, therefore, that the amount of because of a problem with its generator, and increau in our petition is reasonable. We it performed well for the,halance of 1985. anticipate a decision in September when Ily the end of the year, Hope Creck's we expect Hope Creek in service. construction was virtually completed. The With the completion of Ilope Creek, plant began undergoing a series of tests the Company will end a period of heavy in anticipation of fuelloading in 1986. construction expenditures. We do not plan plans call for the unit to be placed in com- any new large genciating units for at least 4
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A Company In Transition l In 1985, PSE&G took several steps to meet the subsidiary. The corporation will serve as a vehicle challenges anticipated in the near future. The action for investing available funds so that they cam a reflected the Company's concern for its financial reasonable return that will enhance the overall strength and its high-quality service to customers. fmancial strength of the Company. PSRC, along with a consortium of other util-Holding company proposed ities, invested in a communications satelhte On July 16, the Company's Board of Directors launched by NASA from the space shuttle Atlantis authonzed the formation of a holding company n November 27. PSRC mvested 512.9 milhon for which would own all voting stock of PSE&G, subject its share in the satclhte, and it will receive rental to the approval of the New Jersey Board of Public payments and tax benefits. Utilities (BPU) and the Company's stockholders. Under the proposal, which was endorsed by the Atanagement assessments inunched BPU in early 1986, a company, to be named Public During the year, there were actinties on several Service Enterpnse Group Incorporated, would be fronts that will figure in any restructunng the established. The present company, PSE&G, would Company may underga become a subsidiary of the new holding company A strategic management group was formed to and would continue as a regulated electne and gas develop a process which will provide semor man. ige-utshty under the laws of the state.Two present ment with early identification and effective analysis subsidiaries of PSE&G-Community Energy Alter- of strategic options available to the Company. The natives Incorporated, and Public Service Resources strategic process wil! enable PSE&G to seize thase Corporation-also would become subsidiaries of the opportumties which will improve its core business holding company. and defme its role as a highly visible Part c: pant in Details about the restructunng appear in the directing the future management and use (,f energy Company's proxy statement. All stockholders are m New Jersey. encauraged to read the statement. Holders of Com- A separate program was launched to create a mon Stock and $1.40 Dividend Preference Common leaner, more efficient organization by reducmg levels Stock will be asked to vote on the proposal at the of management and broadening the span of control. Annual Meeting on Apnl 15,1986. Nearly 200 management positions will be ehminated
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Cogeneration subsidiary begins activities in addition, a management audit of all Com-Community Energy Alternatives incorporated (CEA), pany operan ns was conducW dunng tk year by formed as a subsidiary of the Company in 1984, began formal operations in 1985. It will participate
#* #' '"I"""' ' '""" * 'N top m nagement c nsultmg firms. The audit was in the development of cogeneration and small power done in line with a 1982 law which requires the BPU production projects on an unregulated basis.
to u onze auhs of au pnntely owned ekctnc CEA's headquarters is in Ridgewood, in Bergen and gas utihties in the state. County, and Arthur S. Nislick took office as its first president and chief executive officer on October 1. Since its formation, CEA has been exploring g,sicx isy: opportunities to participate in economically sound, t of U technically efficient projects designed to help supply ,, first P' y the energy needs of industries, commercial establish-ments and large residential complexes. CEA intends
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A,,,,netivd' # ,, to consider proposals to join with developers and fi-nancial institutions in launching qualifying projects. t***" ,,,r e t ica' dia' 1985*s ,,,pi investment subsidiary formed
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- In 1985, the Company formed Public Service Resources Corporation (PSRC) as an investment 7
The Financial Picture i bespite adverse pressures from various fronts Forthe 1985-87 period, clectric sales were during the year, the financial tesults in 1985 placed forecast to increasc. nn an average basis,13% w hile
- the Company on firm ground. Throughout the gas sales were anticipa:ed to grow, on average,2.1%
-year, the Company sought to provide a solid capital Thereafter,through the nrst decade of the 21st structure and strong credit rating, century, growth is expected to remain modest-generally in the 1%to 2% range-for both electric
#" '# #5' Eamings available for Common Stock rose to S484.6
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milhon in 1985, up from $429.8 million in 1984. ""#""#5
- I985' Eamings per share of Common Stock were S3.96 in New Jersey gross receipts and franchise taxes rose to 1985, compared with S3.95 in 1984, when there were 5557 million from 5530 million, an mcrease of 5.2%.
13.4 million fewer average shares outstanding. olvidendincreased
. The increase of 0.3% in eamings per share, or The Board of Directors in May increased the quar-12.7% in overall camings, was attnbutable to the terly dividend on Common Stock to 71 cents per base rate increase, effective March 23,1984. higher share, up from 68 cents. It marked the 10th consec.
electric sales, and greater Allowance for Funds Used utive year the dividend has been raised. The annual During Construction (AFDCl. Operating expenses rate is now $2.84 per share, up from S2.72. rose at about the same rate as the previous year, The increase in the dividend, effective with i to $3.8 billion from S3.6 billion, or 5.1% payments in June,1985, was in ime with the Com- .
. Reported eamings for the year were reduced by pany's policy of raising dividends on a regular basis a wnte-eff, after taxes, equal to 10 cents a share, of a and paying a dividend that is sustainable. . portion of replacement energy costs which stemmed e,,,,,,,,,,,,,,,,,,,,
from outages at the Peach Bottom and Salem gen-Construction expenditures, including AFDC, pay- 4
- erating stations and for which recovery was disal' ments for nuclear fuel and advances to subsidianes lowed by the New Jersey Board of public Utilities increased to $1.22 billion in 1985 from $964 million
- (BPU). The results also include a write-off, equal t ! n 1984. about 3 cents a share, from losses associated with ' Expenditures in 1986 are expected to drop to the abandonment of three uranium supply agree-5739 million, as the Company bnngs to an end a ments, which were no longer economical. period of heavy construction spending. ! Total revenues increased 5.1%, to S4.4 billion In the five years through 1990, total construc- ' from S4.2 billion. Electric revenues accounted for tion costs are estimated at $3.0 billion, including 68% of the total, rising to S3.0 billion from $2.8 ' approximately 5240 million of AFDC.Much of the billion, or 6.5% Cas revenues made up the other amount will be used to upgrade existing facilities. I
- 32% of the total, rising to St.41 billion from $1.38 Hope Creek has had a targeted cost of $3.795 billion, or 2.1%.
billion stemming from a cost containment incen-The higher revenues were buoyed in large tive agreement approved in 1983 by the BPU. The measure by an upswing in electric sales to the ex-agreement had been reached in 1982 with the New _ panding commercial sector and to servicemriented Jersey Departments of Energy and the public Ad- i and high-technology facilities. Overall electric sales vocate and also designated December,1986 as the ' rose 2.3% in 1985 over sales recorded a year earlier. target date for Hope Creck's operation. Total gas sales, however, declined 1%, an outcome There will be an camings penalty if Hope of the switching from gas to oil by some customers Creek is completed in excess of the cost cap. Under ' with dual-fuel capability and a slowdown in manu-the agreement, the Company's revenue requirement
- facturing activities.
related to rate base, as determined by the BPU, According to the Company's latest financial fore-would be based on the exclusion from rate base of cast, electric and gas sales will show modest gains 20% of costs incurred in excess of the cost cap. If the 1 through 1987. The brightest spot will remain the overrun exceeds 10% of the cost cap, the approved ccmmercial sector, as development unfolds in cer-rate base would be based on the exclusion of 30% tain regions of the state, such as the Hudson River of those expenditures in excess of the 10% overrun. waterfront and the Route I corridor in princeton. 1 8
The agreement also provides for the exclusion of market and cancelled a total of more than S70 cocts relating to certain extraordinary costs from million of high coupon debt to help reduce interest the penalty provision. costs. Additional retirements of high cost debt and The Company's current estimate of the cost of preferred stock are anticipated m 1986 through the plant is between S4.15 and S43 billion. Based on open-market purchases and early redemptmns. that estimate, the cost in excess of the cap could During the year, PSERG ventured for the first result in a reduction of camings in 1987 of between time into the European debt market to take advan-5 cents and 8 cents per share of Common Stock tage of lower interest rates. On December 10, the under a formula in the agreement.The reduction Company negotiated the sale of 575 million of 9%%, would decline in subsequent years over the depreci- 10-year First and Refunding Mortgage Ikmds, w hich able life of the plant. were sold in Europe. Entry into the Eurob(md market It is difficult to predict the final cost of the will save the Company an estimated $1.5 milhon project as it nears completion because of numerous in interest costs over the hfe of the bonds, when pre-operational items and imprecision in the timmg compared with the domestic market. of tests and power ascension programs which must In July, the Company issued $125 mdlion be adjusted to meet proolems as they arise. principal amouut of 30-year First and Refunding Costs at the completion of the project, after Mongage Bonds. Interest will be 9h% in each of the fuel is loaded, wil! include the accrual of AFDC at first three years, and then the rate will be reset or about $18 million per month and direct costs of the bonds will be redeemed at par. about $5 million per month, untd the plant is de- The Company raised S177.8 million thmugh clared in commercial operation. the public offenng of 7 million shares of Common The Company's first priority is to get the plant Stock in January. Dunng the year,it raised $1653 completed and operating as quickly as possible million from the sale of 5.9 million shares of Com-without sacrificing quality. Delays would further mon Stock through its Dividend Reinvestment and increase costs. Stock Purchase plan and employee benehts plans. A goal of the Company has been to raise in. The Company also generated $159.9 milhon temally at least half of its total capital requirements. by selling 6.2 million shares of Common stock in a That aim has been met generally in the 1980s. rights offering. More than 88% of the shares were Now that Hope Creek will be coming on line purchased through subscription. Holders of Com-and construction costs will drop signifi nntly for mon Stock were issued rights to subscnbe to one new the remainder of the decade, the Como.ny's goal is share for every 20 shares they owned as of October to generate all funds intemally. This will reduce 16. The subscription pnce was $25.75, and the offer pressure on the ratio of earnings to fixed charges ended on November 6. asscciated with debt and preferred stock financings, proceeds from the sale of the stock and bonds and willlimit the need to issue additional shares of were used pnncipally to pay short-term debt incurred Common Stock. as a result of the Company's construction program. Capitalstructure shows balance Changes allect reinvested dividends The principal financial objective of the Company Major modifications of the Dividend Reinvestment continues to be a conservative capital structure that and Stock Purchase plan became effective with the reflects the increased risk in the utility business. start of 1986. About 92,000 or one-third of the Com-Maintaining this posture will enable the Company pany's stockholders participated in the plan in 1985. to pmtect its high credit rating and take advantage First, taxes on dividends reinvested in quahfied of financial flexibility. utility reinvestment plans can no longer be deferred. The Company hopes to achieve interest cov- Congress did not extend the deferment granted
. erages, before taxes, of at least 4 times. Another through 1983 by the Economic Recovery Tax Act.
objective is to continue reducing its long-term debt The change should be considered in tax planning for ratio, which dropped from 45.8% at the end of the year. The Company urges each participant to 1984 to 42.4% in 1985. consult the intemal Revenue Service or a pnvate 111985, the Company purchased on the open advisor to detennine individual tax consequences. 9
Second, the Company has eliminated the 5% The reduction is based on estimated decreases discount on shares purchased with reinvested divi- in the projected cost of gas, increased purchases of dends. The change, made only after considerable lower-priced gas on the spot market, anticipated deliberation because of the discount's popularity,is refunds from pipeline suppliers, and general changes in line with steps taken by other utilities. Since the in a business that is becoming increasingly deregu-Company's construction program is winding down, lated. These conditions have meant good news for the need for new equity capital has diminished. customers, esp-cially homeowners, whose bills are The Company is contimiing the plan, however, now about 4% less :han they were in late 1982. so that stockhelders can conveniently purchase . Electric custemers'bilit rose 5137.4 million on shares without paving brokerage commissions. The an annual basis, commencing in July, under a Company is atssa now accepting Common Stock revision of the levelized energy adjustment clause certificates, held by stockholders, for deposit and approved by the BPU. It was the first increase in safekeeping in their reinvestment accounts; future more than three years. As af the end of 1985, the dividends on those shares will be reinvested under underrecovered electnc energy costs under the the plan. clause were 5283 million.
, , , ,, ,, when it app oved the 1985 change in the energy adjustment clause, the BPU deferred-until The Company filed a petition in December with the the Company's next application for a revision- . Board of Public Utilities (BPU) for an increase of c nsiderati: n of $70 million of replacement energy ' 5633.6 nillion, or 14.2%, in annual revenues. The c sts ass c ated with certain outages at the Salem request includes an increase of 5569.2 million, or Generating Station. The outages involve failures of 18.8%, in electric rates, and S64.4 million, or 4.5%,
the electric generators at Salem I and 2.One of the
. in gas rates.
utages is n w the basis of pending lawsuits against The filing is sizable because it asks that 100% Westingkuse Electnc Corporation, the supplier of of allowable costs usociated with the construction the station s turbine-generators. of the Hope Creek Generating Station be included ; In addition, tne BPU disallowed $19.6 million in the rate base. . m replacement c sts relatcd to certain outages at The Company believes that the amount of the Peach Bottom and $2.9 million at Salem. These dis- . filing attributable to Hope Creek will not be un-all wances reduced net income, after taxes, by $12.2 t reasonably burdensome on customers because im-milli n; the subsequent effect on camings of the - mediate benefits are derived from the savings in the wnte-off was 10 cents per share of Common Stock. cost of fuel once the unit begins operation. Nuclear fuel is less expensive than fossil fuels, such as oil, and the petition reflects those savings. The filing was timed so that a decision by the ' BPU would coincide with the start of Hope Creek's commercial operation. Generally, the BPU takes about nine months to decide a rate case. About $81 million of the requested amount would be used to pay additional New Jersey gross receipts and franchise taxes. Adjustneont cieueen are revloed Gas customers' bills were reduced, starting in
-. October, after the BPU approved a $35 million t
decrease under the raw materials adjustment clause. The Company had originally sought a S16 million reduction, but entered into an agreement with the BPU staff and the New Jersey Public Advocate for a larger decrease as the cost of natural gas continued to decline. r t 10
Review of Operations ciectric operations Dunng 1985,2.3 million tons of coal, and 3.4 million barrels of ml were purchased and 394 milhon A 2% increase in electric output was recordea in therms of naturai gas ,ere usca ror pStaG s new 1985,largely as the result of a growing demand Jersey electnc production facilities. The natural gas in the commercial sector. Total megawatthours pro- displaced the equivalent of 65 mdhon turrels of oil, duced, purchased and interchanged amounted to representing a $19.9 milhc,n savings. Additional 34.9 million, up from 34.2 million a year earlier. savings of about S3.4 milhon were realized through Records sie eer spot market purchases of coal and oil. Steamy weather in mid-August resulted in shattered The average delivered cost of coal purchased peak load records An all-time, one-hour peak of in 1985 to generate electncity was $53.05 per ton, 7,721 megawatts occurred on August 15. Only the 4% lower than in 1984, due to more favorable day before, Auzust 14, the peak load had reached a market conditions and lower contract prices. The new high of 7,549 megawatts, breaking the previous average cost of low-sulphur heavy oil to pnxtuce mark of 7,422 megawatts on June 11,1984. Also electncity was 52850 per barrel 8% lower than in 1984, because of soft market conditiocs which
- on August 15, the maximum day's output reached la9.457 megawatthours, up more than 4% from the rcsulted m lower contract and spct prices.
previous record of 143,558 megawatthours on June The diversity of the Company's energy output 11,1984. by fuel sources in 1985 is illustrated as follows: When the new peak kiad record was estab. nuclear-24%, coal-32%, natt.ral gas-9%, ml-5%, lished, the Corrpany had an installed generating and purchased and interchanged-30h capacity of 8,999 megawatts, providmg a reserve uranium suppfles are adequate margm of 16.6% The Company has sufficient uranium supplies i The table below shows the Company's forecast under contract with pnxlucers in the Umted States for generating capacity, in megawatts, over the next and Canada to meet the fuel needs of both the Salem decade, based, in part, on normal weather conditions- and Hope Creek Generating Stations through 20W. The installed capacity, in megawatts, reflects the Dunng 1985, uranium prices stab:lized at Hope Creek Generating Station starting in 1987 around $16 a pound, after declining from a high of w - ~ . , , - - - - - , 524 a pound in mid 1983. Uranium pnxluction m I
$ the U.S. dropped off as the availabihty of lower <ost, g higher-grade Canadian supplies increased.
in September, the Company terminated a con-g tract with Sequoyah fuels Corporation, a subsidiary
- -~ -
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.E the contract price. Sequoyah was to have dehvered
,. 2 four milhon pounds of uranium.
.E in December, the Company terminated its m-G terest in two other uranium ventures, one of which was a pmject of philadelphia Electric Company for Eccnomical fuelmix is sought the peach Bottom umts.
The Company continued to reduce its dependence As a result of these three abandonments and on high-cost oil to produce electricity, reaching in pr or to regulatory approval, the Company's aggre-1985 the lowest amount used since 1948. It rehed gate net losses of S21.7 million after related tax instead on more economical fuels-nuclear, coal and savings were deferred and are being amortized over natural gas. a seven-year penod commencing in 1985.This Comparative fuel costs in 1985 per million Bnt. amortization reduced net income by approximately l ish thermal units were: nuclear-50.82, coal-S t.99, $3.1 million in 1985.The reduction in camings l natural gas-54.05, and oil-$4.73. per share of Common Stock for 1985 amounted to 1 l 1I l
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3 cents after taxes. The Company is seeking regula- sesan f highlightsnacieergeneration tory approval to recover these losses in its current With Salem Generating Station's Unit I leading the base rate case. nation in electric generation, the Company's nuclear Future regulatory action may require a change performance showed significant improvement in in the level of annual amortization, or could require 1985. The results manifested the Company's basic the immediate writeeff of any remaining unamor- goals of maintaining safety, demonstrating reliability ti:ed balance existing at that time. Any amount not and upgrading the economic competitiveness of recovered, in the opinion of management, would not nuclear energy. have a material effect on the Company's position or Nuclear generation came from four eperating results of operations. units, the ownership of which the Company shares. At year's end, there were reports that the Two units are at the Salem station, which the United States may consider imposing in port quotas Company operates, and two are at the Peach Ibtrom - on uraniu'm, which could lead to higher prices in station in Pennsylvania. which Philadelphia Electnc the futurec Company operates. PSE&C has a 42.%% interest in The Company continued, however, to focus on Salem, and a 42.49% interest in Peach IWttom. Its cost-saving' measures. An incentive price provision share of tota! output was 8,352,592 megawatthours.
. in a new t;ranium enrichment service contract will II cil had been used to generate this electricity, there lower enrichment costs by an estimated $50 million weald have 1 cen an additional cost to customers of through 1990.The amount is on top of an estimated about S3o0 milhon.
- S65 million savings stemming from con:olidation of Dunng one period of the year, Salem I was on a number of previous agreements under the contract, line for 277 consecutive days, breaking its previously which the Company signed last year with the U.S. longest run of 88 days and establishing a new mark Depr.rtment of Energy. In September, a federal judge for all PSE&G generating units, regardless of fuel.
in a case to which the Company was not a party On December 16, Salem I became the record ruled that these new contract forms of DOE for the holder for a year's gross electric power produced in - enrichment of uranium are null and void.The par- the United States when it reached 8,969,747 mega-
- ties involved in those proceedings have appealed, watthours.The 1079 megawatt unit won the distine-and the Company has joined a group of other utili- tion by surpassing a record held by a 1300-megawatt, ties in seeking to have the decision overtumed. coal-fired plant, Mountaineer Unit 1 in West By the end of 1985, the Company had paid the Virginia. By year's end, salem I had prtxluced Federal govemment $79.7 million in fees to fund the 9,379,960 megawatthours.
eventual transportation and permanent disposal of The new record for power pnx!uced by any type
, spent nuclear fuel. The fees were paid in accordance of generating station-nuclear, coal, oil or natural with the Nuclear Waste Policy Act of PS2, which gas-came three days after Salem I had established . requires utilities to fund the program at a rate of a new record for generation by a nuclear unit. In one mill per kilowatthour of nuclear energy pro- reaching 8,892,300 megawatthours, it bested a record ' duced.The cost to the Company is for its share of set by Peach Ibttom 2 in 1979.
energy produced by the Salem and Peach Bottom Salem 2 was returned to service in April after generating stations. its failed generator was replaced with one that had been purchased for Hope Creek Generating Station's Unit 2, the construction of which had been can-During 1985,30% of the Company,s energy output celled in 1981. came from the purchase of relatively low-cost power Peach Bottom 2 was returned to service in July from neighboring electric utilities, mostly through
*""""*""'"''"" E'"# "E I the Pennsylvania-New Jersey-Maryland (PJM} Inter- lems Peach Ibtrom 3, the other unit at the station, - connection and the Allegheny Power System. The operated well before it was removed from service in purchased energy was generated primarily by coal bde ing work. It was scheduled and thus replaced more costly od, - and gas-fueled to retum in the first quarter of 1986.
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y , - The results of :he audits were favorable and vdi' peak may be helpful in the Cor,ipany's effons to obtain ned./ an operating license for Hope Creek. p;- ~ p- In the Sargent & Lundy audit, Hope Creek's
- design was considered techmcally adequate and m p 39 hne with licensmg requirements and standards In the Rirry report, the proicct was descnbed j as well-managed, companng very favorably with other projects m the nuclear mdustry.
.I Nuclear operation s are improved Hope Creek approaches completion Dunng the year, the Company's Nuclear Depan- ! By year's end, constmction work on the Hope ment, which oversees t'ie Salem and Hope Creek I Creek Gencrating Station was essentially completed. Generatmg Stations, inst tuted a series of measures
~ ! while startup, testing and tumever of the pl mt to improve controls and reJuce costs.
l systems were about 93% completed. The loading The steps included a reAgnment of the organ-l of fuel was planned fe- A first quarter of 1986 iration for increased accountability, a reduction m and the commercial or aion scheduled for the budgets and projected staffmg levels, a decrease m second half of the year. the use of outside services. and the implementation The present schedule for commercial operation of a fixed-bid approach to betterment projects to in the second half of 1986 should precede the tar- diminish cost increases associated with plant mod-geted operation date of December,1986 which was
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tfication activities. established in the cost containment agreement. The Department also mitiated measures to Achievement of the current schedule will enhance long-temi planning The measures are aimed require a continuing dedication to quality and cost at improving performance of the Company's nuclear control, as well as aggressive licensing, constmction units through the reduced length of outages and and testing schedules. The Company recognizes that the elimination of delays in the return to service. there are uncertainties, such as completion costs, Nuclear training accredited with any large construction project, particularly in the nucIcar field. The license for a nuclear plant is Major traming programs for the Salem Generatmg solely within the discretion of the Nuclear Reg- Station received accreditation from the Institute of Nuclear power Operatmns in 1985. Salem is only ulatory Commission (NRC), and hinges on scisfying NRC requirements. the second nuclear statmn m the natmn to wm full accreditation. In February 1985, the Company reached accord with the New Jersey Public Advocate to withdraw INpO's accreditation is based on ngorous intervention in proceedings before the NRC,s scrutiny of a nuclear plant's traming program. All 55 Atomic Safety Licensing Board for the issuance of nuclear utihties in the nation are committed to gam-an operating license for Hope Creek. ing full accreditation for training operations, wluch In 1985, the first group of Hope Creek's nuclear is in line with INpO's mandate to develop and mon-operators underwent training and received operator tor high-level standards to make sure the industry operates its plants safely. licenses from the NRC. A total of 14 reactor operator and 21 senior reactor operator licenses was issued. .The Company.s trammg of nuclear personnel s based at the Nuclear Training Center in the The Company agreed to two maior mdepen-dent audits of the Hope Creek prucct. One was an do of sak h @ & b & h ad Hope Creek stations. Operators are trained on full-independent design venfication program conducted by Sargent & Lundy, and the other covered gen- scope simulators that duphcate the control noms at Salem and Hope Creek. eral management practices and was performed by 14
Distribution systems are improved Ila daas tap.h ts o r ht nns w.r J n il J .r thiring IM the t ompain mstailtd 2! ntw iltxWi n Dws re lun naturalc.r i > s t- t H w i h va r h J s tdt pilw Cr Illles 2h lh KI stdt g rs ites (si thrte new (4 pct fii:L u m I'd1ldH' itI ca s s .' ' iH4! s !I c\panding t usti,mers and a luch sidtacc substati in rht t a natar i: ea , ' i .' t ei n ; .a ut n t : r u r s c i-In addithin the Compans mstalicd ncaris 4tilk 4) 11 k i l k M ) new sicctrit Inctcis the most in a s t ar si..u .+o Supplies are stable I ht sonstrut t!un (if a 4 s, mih H Ki(X 4i si tt i I( ( ( 4n pJIi' ti dit illut d It ' I;a s . bit y tiai t <ipPilt s t ransmissitin [ luc (171411' tlllX at tht k b ipe ( r ,JL k < !t ce a s n b;i k t. ' !t s t .ot t 'n u t - alhit ! q i c ( t i l l', c;cne ratin4 Ntat hai w as t i>Inplcitd lli Mart li I h-t tltrJtts w it !) 1rit t ist .a t t ';)x ; is !! ol.wt wth d ucw inn strcncthtns powtI h st n! .u t: m rt nan .ts !
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interstate pipeline transportaton. As a' result, there sewer construction project in Camden.The Company may eventually be substantial changes in the negotiated an agreement with the Camden County way natural gas is marketed, which would lead to Municipal Utilities Authority to be reimbursed a incres. sed competition. - total of $1,12 million, essemially the overall cost of The Company introduced,in August, a new the Company's work.
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rate that it will charge for the transportation of gas 3 ,,,,, which large volume customers purchase directli The Company announced that all employees in-from third parties. A number of customers have volved in gas appliance servi <.e will under7,o specially made such purchases, arranged for interstate pipe' lires to transport the gas to pSE&C, and used the dMMbhwemmhb work on advanced gas-fired cquipment that is now Company's transportation sewice to deliver the gas on the market. The program was launched after a - to tneir facilities.These airect purchases may result pilot study completed in May showed a considerable m substantial savings to the customers, largely improvement in service capability among employees. through the partial avoidance of gross receipts and franchise taxes which represent nearly 14% of the cost of regular gas service. Coc's sevels remain high n 1985, the Company demonstrated repeatedly its Energy Development Corporation (EDC), the deep concern for the New Jerseyans it serves, as Company's exploration and production subsidiary, the number of customers reached 2 million for the supplied 8% of the total gas purchased by the first time. Company in 1985. During the previous year, EDC Employees meet the test accounted for 6% of the Company's supplies. Electric service to more than 239,000 PSE&G cus. Revenues from the sale of natural gas and oil tomers was interrupted by Hurricane Gloria dunng were S94.3 million, up 19.6% from the 1984 figure. its rampage through the state on September 27. Net income fell 8.1% to 59.5 million, due to in- Crews worked around the ck)ck and restored all creased amortization charges. power within 48 hours. In 1985, EDC drilled 45 wells,13% less than The Company then responded to appeals for last year. Twenty-eight were onshore and 17 were assistance by dispatching 68 crews to areas of 12mg offshore. At year's end,13 were still being drilled. Island, Connecticut and Massachusetts to help Onshore operations took place in the Gulf utilities there restore service to their customers.
- Coast regions of Texas, louisiana, Mississippi, On Labor Day, electnc and gas crews cooperat-l Alabama and Florida. Fourteen wells were success- ed with firefighters battling a bla
- e that destroyed l ful, and 14 were abandoned Offshore activities in- 40 acres in the heart of Passaic's industrial section.
l cluded exploratory drilling on 14 lease blocks and One volunteer, William Koenemund, who worked in ! development drilling to delineate pnor discoveries. the Company's electric transmission and distribu-l Six wells were successful, and 11 were not. tion headquarters in Secaucus, died of a heart attack i About 48% of EDC's 1985 gas sales was dehv- while fighting the fire as a member of the Secaucus cred through Casdel Pipeline System Incorporated, Fire Department. Later, the Company offered bill-an EDC subsidiary. paying assistance to customers who were left home-CI:tribution expends less and jobless by the blaze. The Company continued in 1985 to install new gas In midOctober, eight gas distribution crews mains and services at record levels. Nearly 300 miles and 20 service personnel answered an appeal from
. of mains and nearly 275 miles of services were the Bmoklyn Union Cas Company. Water from a placed throughout the Company's service territory. broken main had entered the gas distribution system, In addition, some 30,000 new gas meters were in. causing widespread outages over a 100-block area stalled, the most since the 1950s. and forcing Brooklyn Union to seek restoration A maior project involved the relocation of assistance fmm other utilities.
18,000 feet of mains and 500 services as part of a ouefity and efficiency emphasind The Company maintained its aggressive approach 1 16
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in instituting programs and projects to improve the ation for its oil-to-gas conversion campaign. The quality and efficiency of service to all customers. Company was honored for its direct selling, adver-The hallmark of the effort remaine( its " Challenge of tisirm, and personnel training actisities and for its Caring" program that was begun in 1983 to emphasize cooperation with plumbing and heating contractors. to employees the importance of good customer re- Electric heating was promoted, in large measure, lations. And pSE&G continued to stay tuned to the for new construction. Heac pumps were installed thoughts and ideas of customers by supy>rting, for a in 2,884 new dwellings. Electric heating installed in thini year, three consumer advisory panels. industrial and commercial buildmgs resulted in In 1985, the Company started sending bills in additional h> ads of 70,236 kilowatts, compared wnh Braille to blind customers. It made arrangements 52.427 kilowatts in 1984. with a number of additional financial institetions to Sales of efficient high-pressure sodium and accept bill payments from customers. And it ex- other vapc,r lights set a new all-time reconi, as a pedited receipt of payments through the mail by result of the Company's dusk-to-dawn lighting pnv adding bar-coding to reply envelopes. motional activities.There were 10,937 units rcrorted The Company's ongoing effort to assist low- sold, compared with 7,373 m 1934. income customers took a creative turn when the _ , _ Company purchased discounted natural gas from New Jersey's residents continued to exhibit their Citizens Energy Corporation (CEC), a Boston-based enthusiasm for conservation as a means of saving energy cooperative headed by Joseph P. Kennedy II. energy and money. CEC's profits were then donated to the Salvation
. Seal-Up and Save" served again as the central Army, which administers Project Volunteer For thema as the Company carned its message to cus-Energy, the Company's matching fund program t tomers in a variety of ways. For example, some 10,000 help qualified needy families pay their utility bills. Iow- neome electric and gas customers attended Intense collection activities during the year special workshops at 80 h> cations.The workshops resulted in a sharp reduction in late and unpaid were held in cooperation with h> cal community bills. The net write-off of uncollectible accounts in acion agencies to outline the benefits of conserva-1985 was $27.6 million, down 31% from the 1984 tion and demonstrate energy-saving measures such amount of $40.2 million. as home weathenzation.
The Company expanded its efforts to prevent Under the low-income pmgram,9,500 weather-energy theft by increasing its investigative staff ization kits were distnbuted, while the homes of throughout its service territory. in 1985,4,20* cases 17'000 customers were weathen:ed free. In addition, were completed, producing billings of $2.1 million, $250000 was given-for the third consecutive year-compared with 3,793 cases completed in 1984, to community action agencies for low-income con-yielding billings of $1.5 million. servation efforts. During 1985, marketing activities concentrated Home energy audits increased to 39,850 in 1985 on sales mvolving minimal capital investment by from 27,250 in 1984, while commercial energy audits the Company and emphasized the benefits of electric totaled 1,300, compared with 100 a year earlier. and gas to meet energy needs. Overall, the efforts The Company's energy conservation center in will mean $42 million in additional revenues annu- Newark handled more than 180,000 telephone ally for the Company. inquiries and 380,000 letters as interest in the sub-An aggressive advertising campaign encouraged ject boomed. Dunng a stretch in August, the center homeowners to switch from oil to natural gas for received about 1,100 customer calls daily conceming heating purposes. There were 12,306 residential the Company's offer of free home energy surveys. conversions reported during the year, compared with . Conservation on Wheels," the Company's 11,160 in 1984. Residential gas heating installations mobile energy van, visited vanous locations during in new homes totaled 17,238, compared with 12,190 the year, rangmg from shopping centers to large in the previous year. in addition,2,154 industrial and companies that gave their employees the time to commercial customers changed to gas' tour the vehicle. The van attracted 62,000 visitors in April, the Company received a marketing in 1985, traveling some 6,000 miles. achievement award from the American Gas Associ-19
- New activities in 1985 enabled customers + The Great Falls hydroelectnc project, on the having difficulty paying their bills ar.d customers passaic River in paterson It will produce 11 megawatts eligible for lifehne credits to take advantage of con- and has a startup schedule planned for late 1986.
servation installations, valued at up to $200, in their A turbo-expander power generating system, homes. About 4,500 have participated. located at a gas metering and regulating station in The Company also effered for the first time,in Hamilton Township. The installation, set for op-
.1985, S15 Jiscounts on clockthennostats, and, by eration in 1986, will produce 2.9 megawatts by har.
year's end 78/X10 citstomers had requested coupons. nessing the energy that results from a process to The discount program complemented the Company's reduce the pressere of pipeline natural gas to the continuirg offer of rebates on the purchase of high desired pressure of the gas for utihty distnbution. efficiency heat pumps and air conditioners. More On June 18, the Company began receiving than 26,000 rebates totaling $2.9 milhon were made power generated by a 2.6-megawatt methane gas to customers in 1985. recovery project at Kinsley's Landfdl in Deptford. In addition to its own conservation programs, The landfdl gas, composed pnmarily of methane and the Company budgeted $140,000 to help underwrite carbon dioxide,is produced by the decomposition of a state-sponsored, cost-benefit study of conservation solid waste. The recovered gas fuels four diesel efforts, and supported, through a S360,000 grant, engines from which the electricity is obtained. the newly established New Jersey Energy Conserva- By the year 2000, the Company anticipates that l -. tion Laboratory at Pnnceton University. about 500 megawatts of non-utility generation will
~ The quality of the Company's conservation be mstalled throughout its service terntory. This activities and efforts was widely recognized in 1985. will help offset the need to build a new generating Both the United States and New Jersey Departments unit by then.
of Energy honored pSE&G with awards for energy conservation innovation. On the local level, the i be n d m e h is s w : The Company continued its investigation of new and Union County Urban Ixague cited the Company for developing coal-based generation technologies for its low-mcome conservation programs. poss ble use in its electric power system beyond the year 2000. Studies indicate that coal gasification and :
" '"* C'N N fluidized-bed combustion technologies, currently In 1985, pSE&C engaged in a number of activities being developed for large scale electric power produc-tion, can offer pSE&G future energy alternatives.
to keep pace with rapidly developing and chang. ing technologies that will very likely figure in the Fossit units to be upgraded Company's future responsibilities as one of the Extending the life of fossil-fired generating units is nation's largest electric and gas utilities. the subject of an ongoing study that was given in-creased attention by the Company in 1985. plans are Non utility generation planned in the making to maintain the reliabihty of the fossil During the year, the Company signed four agree-steam umts m the Company's system and to extend ments to purchase electricity from non-utility generation developers. The contracts will bring to their operating life. The hfe extension program is essential since 109.6 megawatts the Company's total supply of non. no new generating capacity is planned for the utility generation.The new projects are: balance of the century. The program will involve the i
.The Essex County resource recovery facility, located adjacent to the Essex Generating Station in development of turbine / generator ultrasonic mspec.
tion nd analysis techniques to help determine Newark. It will have a maximum pnxiuction capacity the remaining operating life expectations of costly of 79 megawatts and be fueled by municipal solid cmnponenn m a generaung una
. waste.The Company expects to begin receiving electricity in 1988. Work begins at MerrIII creek The Dundee Dam hydroelectric project, on the Construction of the Merrill Creek Reservoir was passaic River in Clifton. It will produce 2.1 mega- started in September after the acquisition of a watts, with the first delivery of energy to the Com- number of permits. When completed, the reservoir pany set for 198i 20
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\ch 't ru \ s iarecst pin att nn :ti d i t. h h s Int t The rescrToir is a pro ttt of sc\ cn utihtics m on u Unkd h tb t m'rn m Ms New Jersi and Penno hania w hah draw pe>wer unda a spct u! hu m in.m tin statt I ht pn'nm tri)m ctnerattnc statuito on the in ct w d a c the (i mpa:n th( : r.m d : rJ ! as e Lth; The pracct was dotaned m rept nse to a l'&
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- Construction Work in Progress 3,997,772 3.25;,914 l Plant Held for Future Use 36,112 41.818 j I Nct Utihty Plant 8,474,727 7,550.2M9 I Other Property and Investments Nonutthty Prcperty, net of accumulated depreciatmn - 198;.5670, 1984, 5831 13,672 12Mx9 investments m and Advar.ces to subsihanes
- note 21 250,598 234,799 Total Other Preperty and Investraent5 261,270 247,688 Current Assets Cash ; note 3 13,667 4.702 l Workmx Funds 24,716 27.481 ;
- Thousands of IMim! for the Years inJed Ikembtr 31 I 1985 i 1984 { 19x3 Cclance January f l $1,098,219 l 5 9td617 l 5 888,262 Add Nct Income ! 544,552 l 4W1029 ! A9.779 p s Total I 1,642,771 ;
- 4. t KB 249,942 IRUX) 24,994 24.994 4 3(h. 24)fXX) 102 75 15,000 151XX) 505% 250ftX) 1(LUX) 25,000 2;fXX) 52S% 250JYX) In3 (X) 25,000 2;JXX) 6 Mni 2;0(XX) 1021X) 25,000 ( 25fX10 9.62% , 3WXX) 1D1.50 ] 35,000 i 35JX10 7.40% 5(X1/XX) 10111) 1 50,000 1 50 011)
- , I 7.52% 5(X)JX X) 10l fX)- . 50,000 M)JX)0 8.0% 150JXX) 10111) { 15,000 151XX) 7.h(7 0 750fXX) 10l j X) ! 75,000 7;J1X) 7.70 4 t NX1J X X) In164 60,000 N)JXX) 8.16% 3X11XX) 1()6 K6 30,000 3)JX X) r l Preferred
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- I h" """ '" '"d "" '" 3 8 "" *"J t he tra u d4 mor a +1 to ri nna c commtrtu! Papa whnh we outuaning at licumNr 11. Wn and rulawraJ ro 9% i November I,2006 100,000 100fYX) tong Tom txoi to row,iht imun e a ibo, s.,J.
- oro"n. mto thru mr tenn han T he Gmrans o rcuamd i" rn a wmmamini tu on an, unaJ n>nion iha...mrinv to ibe nxht .nh the 9% R July 1,2015 125,000 wnx nt W the FA to on nd the mumi nt i.n a mr to sur bois 9% S January 14,1996 (note B1 75,000 a
- s. Ihe aurcoir rnior am"unt of tramrom no for mkme runds amt maiun 8% June 1,2037 7,463 7,463 on b r ath or iht tiu u an tobw mg i ku mba .41. N6 arc as taows 5% June 1,2037 7,538 7,538 ,_
- 1. r ,.,, _ r.s.s u msuh onmernai Revenue Sm,oRsl aua,,,[e,,,,
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- 4. DesserestNenes Future regulatory action with respect to the abandonments of the LNG and Uramum projects may require a change in the level Abandonment of Atientic Project of .mnual amortization, or could require the immediate wnteuff in December 1978, the Company cancelled the Atlantic nuclear of any remaining unamorti:cd balance existing at that time, plant project.The BPU authon=ed the Company to recover a Any amount not recovered,in the opinion of management, would portion of the costs of the project over a penod of 20 years com- not have a matenal effect on the fmancial position or results mencing in April 1980. Such costs are being recovered at the rate of operations of the Company.The recovery of the losses and any of $15.1 million annually,less related taxes of $6.3 milhon.No retum on the unamorti:cd balances will be determined in the retum is being camed on the unrecovered balance, current rate proceedmg.
- 5. u -c , , Zc , - c ,, u Bank h)ans represent the Company's unsecured promissory notes coe.strsection. .,.ar Fs,.i supp# des issued under credit arrangements with vanous banks and have a The Company has substantial comnutments as part of its con-term of cleven months or less- struction program. Construction expenditures of $3.0 bilhon, in-Commercial paper represents the Company's unsecured ciudmg about $240 millon of AFDC, are expected to be incurred bearer promissory notes sold to dealers at a discount with a term dunng the years 1986 through 1990. In addition, the Company of nine months or less. Certain information regardmg short-term has commitments to obtam sufficient sources of fuel for electnc debt follows: generation and adequate gas supphes.
- 38
- 10. .i.:,,,,,.o r u-uias The Company has an ow nership interest and is ressmsible for of cath iomily owned roicct T .md the correspondmg direct ex-providmg its share of the necessary fmancmg for the follow mg pcnses are included m the statements of Income as an operatmx lointlyowned facihties. All amounts reflect the Company's share cypense.
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- 8,999 M.99; i 9.101 ( 9.242 H.7;6 7,244 7f)12 I 7,(114 7,!59 6,270 17,262 12,15; I;494 i 16.;26 iA612 5.602 5, t 56 9.26I i i,443 l ; 34s 1,757 1,746 1,739 l 1,732 ! I ,(> x 9 I I
- S 1,392,475 5 1310.7x; S 1.149/11() { S 910.158 ! S 417417 i
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- 77 % ; 7H1 940 j 7.ll, tit l 76 %
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