ML20155A242
| ML20155A242 | |
| Person / Time | |
|---|---|
| Site: | Peach Bottom, Salem, Susquehanna, 05000000 |
| Issue date: | 12/31/1985 |
| From: | Feehan J, Huggard E ATLANTIC CITY ELECTRIC CO. |
| To: | |
| Shared Package | |
| ML20155A208 | List: |
| References | |
| NUDOCS 8604080342 | |
| Download: ML20155A242 (92) | |
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FIN ANCI AI. IIIGilLIGil FS Results of Op< rations 1985-19N3
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% Chai ge 1985 19 6 1984 1984 1%4 1983 in?
Electric Operating Revenues t000 s)
$ 579,733 5.5
$ 54),531 6.3
$ $ 17,142 Operating bpenus (000's)
$ 490.327
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$ 458,1 to 80 5 124.(40 Net income t000's)
$ 40,519 (4.46 5 t 3,27 7 (4.3) 1 66.152
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Emings Ier Common Shaic 3.00 lb.3) 3 20
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DnidenJs Paid Per Common Shr.re 2.53 45 5
2.42 5.2 5
2.30 Total Aw:ts (OiM)
$1,299,633 6.5 31.220,503 7.1 51.139.97 A Cash Construction Expenditures (000's)
$ 94,017 11.1 5
R4,630 13.7 5
74,457 Gates cf Electraity (KWIP (OCO's) 6.199,672 2.4 6 03),791 5.5 5 A51,4.24 Price Paid Per KWli--
(Ail Cuetorrers) 0.481e 5.4 5 trNe 7.6 h Jode Total Customer Service Installations (Year end) 117,625 2.5 407,277 2.2 398,526 Number of Shareholders--
Common Stock thar-end) 48,635 25 47,146 (I MI 48,299 Number of Emploges (War ende 2,099 43 2,012
.9 1,995 Book Value 24,76 2.0 24.27 2.9 23 Sh F.arnings & Dliticodi Per Shcre of Common Stock on Mont l
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$63.3 million, to reflect more current And, we have taken a closer look at we have under construction is a 59 cost levels; and the second phase, li>r our businew environment, observing interest in the llope Creek Nuclear a net amount of $28.5 million, to that deregulation, competition and Generating Station. Construction of recover costs associated with the changing technology are having eser the unit is virtually finished. Fuel forthcoming operation of flope greater ef fects upon our industry.
loading and testing are yet to be Creek. We anticipate a decision by Almost a century ago, the filectrie completed, and Public Service filee-the llPU on the tint-phase request in Light Company of Atlantic City and tric and Gas Company, which owns the tint quarter of 1986, and are the liridgeton lilectric Light Com-the other 95% of the unit and is re-seeking to have the second-phase pany were limned. Customers sought sponsible for its construction, has increase timed to coincide with the out these corporate predecewon of advised the Company that ilope commercial start up of the llope ours for the senice and consenience Creek should be operational in late Creek unit.
that electric lighting could provide, 1986. A cost containment agreement The legislature in New Jersey has and not the electricity that was pro-for the llope Creek unit was approsed mandated periodic management audits duced. As we celebrate a centennial by the New Jersey lloard of Public of ciectric and gas utilities in the of service, we do well to remind Utilities in 1983. It estabhshed a State, and the Company was among ounches of that fact, and to find in it targeted in-senice date of December the first to hase a comprehensive the essence of succew which lies 1986 and a targeted cost for the plant management audit completed in 1985.
ahead. We beliese that the years to at the time it would begin commercial On balance, the findings of the inde-come are tilled with challenges and operation. The agreement provided pendent auditors wntirmed the opportunities for the Company. Our for incentives and penalties based effectiveness and efficiency of the future progrew will be built upon a upon the final cost of the unit. Our Company's operationt competitive spirit, with renewed portion of the originally targeted emphasis on service, pertonnance and amount was approsimately $198 mil-The audit report mited that decisi<ms the ettectise management of costs.
lion, and at December 31,1985 we and actions by corporate management The Company's comnutment to be had recorded approximately $204 haw sawd customers hundreds of alert to the opportunities of the million of costt Our cost of the unit millions of dollars, future, and its ability to respmd to at completion is currently espected them and manage them, will guide it to be approsimately $226 million.
Audit recommendations suggested the toward the succew of a new century flased upon developments to date, we potential ti>r a modest reduction in do not currently espect that the cost oserall expenset Many corporate Ibr the lloard of Directon, containment prosisions will hase a projects designed to cut costs and significant negative impact on impnne efficiency had already been earningt underway at the time of the audit, and p
4 Improsement and support of corpo-other citi>rts based urim the audit
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rate carnings depend upon receising findings and recommendations have V
adequate base rate relief. We are been started.
J. D.Iechan continuing our ef tirts to obtain the In large measure, we would charac-Chairman of the lloard needed increases in base ratet Our terize 1985 as a year of reflection and appeal from the llPU's denial of rate assessment of future opportunitiet relief in August 1984, and the atfir-While othen evaluated us in a man-mance of the llPU's action by the agement audit, we took a closer look bN New Jeney Superior Court, hase now at ourselves and set out to enhance
~d been taken to New Jersey Supreme our operating and planning practicet E E U"FEdk
. becuthe Omccr heudent and Wel Court. Last April, we filed requests We have worked to better undentand with the llPU for rate increases in two our customen' needs, making phases: a lint phase, in the amount of changes within the organi/ation to January 3L 19x6 moie ef fectisely meet those needt
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hold charactenstics and energy use easier tor t ostomen to selet t our Although smgle tanuly homes remain consenation sen n es. and to pros ide H I K
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the donunant ty pe of housmg. there greater mientnes for them to do so s
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has been a shif t m new housmg umts We inuoduced sber at home conse The contmumg success of Atlantic to multiple tanuly dwelbrp. such as mente hv t ostmners desinng our Electne depends on its abihty to condominiums and apartments l'here Seal-l'p program sen ices in addi measure md mterprtt customers-has also been a shif t f rom the use of tion. we ottered to mstall elettnc needs, and then to dedicate resources oil to electncity for central heatme.
water heater msulation w raps at no to meet those needs while chnges in the use of natural i harge. gn mg us the oppintunity to in early 1985. the Company s gas base saned shghtly oser a tne otter other quisk and mespenme ettorts to awew customeri needs was year penod Electncity currently (onsen anon measures In 19Ms. oser l
supported by means of a residential appean to be the predonunant 2.t kit) reudennal t ustomen took l
customer attitude sunes Itprosided heatmg source in dupleses.
adsantage of sanous Scal-l p ser important mt'omiation on pubhc per.
condonumums and tow nhouses Sur uces More than ~' (R NI home energs ceptions of energy use. consenation ses intonnation w a i respett to audits were performed. and more than and the Company Customen said thanges m appliance usage helps us 2m other s ustomen took adsantage thes preferred coal-hred generation to address customer needs. forecast of energs audits asailable through a and consenation as the means of f uture energy requirements and iden new Conunercial and Apartment asoidmg f uture energy shortages tily additional opportumties for
( ~onsen ation Program Although customer indicated an marketmg consenation programs lur the Ont time m sescral scars.
mereased awarenew of the impor For 1985. the Company sought to the ('ompans t onduc ted a sunes of t
tance of consenation, there was no greatly espand customer parthipation
< omawrt ial s ustomers to esanune the mcrease in the reported lesel of m its s anous tonsen ation programs relationstop of energs use at sanous action taken by them to sase energy Some improsements oser the 1954 t yrs of busmesses to I.h ton wh h as The sunes results suggested that lesels of participation were noted.
Moor spas c. hghtmg. heating and more immediate economic inctntnes although 1985 results did not meet all toohng needs A twiter undentand may be needed to encourage conser of our goals I)unny the sear. the ing of these relationships will.nsnt sation ettorts Generally. customen Company made changes to make it the ('ompany in foret asting the f uture appeared to hold a more tasorable opimon of the Company than in the past Howeser. sur,e> results mdi-
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cated that we mas be able to impn-customeri peruptions regading < ir-porate profits and the salue of M p.
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The Atlantic City skyline has become a familiar scene of America's most visited city.
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Opening of two pilot < tntollier t out tess centers tri l'ie t he results of a spet 'ai telephorie pilll had i s et w heliii i
ingl) Indicated that [wnonali/ed <in torner sers ice at remote lot ations could colnplenient the ('innp. ins s centrall/cd cintollier sers it e i pet a i
i tion \\ nitors to thesc s enten hase accew to a f ull range of sen h e -
trom help with energs tonscr s.ition to bill pay mert assntanse I he es pe riente with these two trial hi ations t
w ill hC ust.'d lti guide det isniris < >fi t he potential opening of adilitional s us tonier (tiurtess t enters
()ltering s.uious rate w hedules enables the ('iimpans tii meet spct ith t ustomer needs Re< cnils the ('oni RoaddJe stands have become a trademark of the southern portion of the " Garden State."
pans re estahlnhed a street ly htine taritt w hh h eises <iiminunitics the t he.ilh w af n in, t < har ce s ti'i cics tri t hi ni cd I.
it h int o st inici s a, hi in i t hi>h e iit retilitig i r iiw iiiine crict e s ser s 1s t
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- me f.mptotees of the Safett Department solunteer their time tu esplam high initaer hasards
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l the Conip.un work torce went to r adio equip lwl ( oinp.ui) s cha les 5tatnins set new ictords for plant help restore setsice to I ong Island hase helped sununon hic s,n ing sci output ( onipareil u uh the use of oil Lighting Conipany t ustoiners sho s hcs and awistant e in ciner een tued power gcnciatnin. ihe use of t ies sut h as t.o.h t hie nt s.ohl t u e s relatncis low < osi t oal and nut Ic.o were more seriously hit by ihe I
hurricane through as Rasho \\\\.itt h Progi.un luel sned lhe ('ornpans and its t us I or the ('iinip.iny. tiliitniunit y in lair <ustiiners w ith liinited tin.iih ial ti *iik i s riii ne th,iri % I Iti iinilo in ni l9ss i
solsement has long been an esten r esourt et the ( ornpans has p.u t h i l ints I anil ' at the 11 1 I neland slon of custorlici sers h e In IW.the psicd w tim n meetines tii ih w uss statnin are the jaret st iit the ( iim Speakers llureau inade oser 240 pre the as.nlabiht s iit tice or low t osi panss t oal tuct! units I heic are sentations to conunumty oigam/a weatheri/ anon sei s a cs s er t.nn unusu.il w aiher s ondaions flolls arki schilois iiii sus h tiiph s.is w h h h t.iii < reatc a ili w siw.ish ist pl.iiit i
energy t onser s ation. elet trh al safet s ennsuons m the nc.ubs.uca in otiler and CHs triintnental tiencerns \\ l si, in til anule ti4nplialb c w lih icculanit s l
l9h5. the ('on)pJn) began supptit tlilp requiretilents niaris,iltCr nalis e tijk :
Chihtwatt h. bs thstributmp mtor ma aimp uinligurations were esaluated.
tion on nuump t hildren m monthis I or lue tth ( i mpans s ost al luci and the ( ~ompans Jct hied that t on i
s customer rnallings I he ( nn si Neigh alki puis haw il p >w e r pei k ili m ati f;h-4 p
bor l und now m its thud ye.u. helps hour hs f ar the lar ecst unc' ~ cicment J
desers mg Nouth Jerses tewlents meet of the t int or sci s a c shtuned bs
( iutput liom iiur mh ic u 8 gj "
h w mter heatmp t osts In the sununct 5 i, months the ('ompans has opened as sour, e s of encr es unpt. s ed substan i
thiors at the 11 1 I ngland ( scih rat tialk durme rht sc.o and l u c e r 'ic t mg 5tatin i to let s iutor s Tce cle;Ir h w dh our s oalincd m urscs hel k J e
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I rur ' m I chr au s I har inm i' i The Company's open house tours at dm pM fioIhcmi%i pi iw c i B. L. England Station prmide an r
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add o n in hi it h. il r ht n onth im ned oal tucd kcs sti m.
uni ( ionnunch The new customer courtesy centers provide an estra opportunity for personal contact out in the service area ti
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Opportunities to provide friendly, personalised ser ice may be found at every customer location.
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l Growth in the Company's ser ice territory includes the construction of modern and efficient public buildings, such as the Atlantic County Office Building and Atlantic City Free Public bbrary.
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i operation of the radio-controlled sy s-EP NERGYSYSTEM tem will begin in 1986. and results a $ V" from the trial program will be used to l-A N N 1 N G 4
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determine the value of otfering the ip in effect. our customers are buying service to more customers.
necessities and conseniences such as Cogeneration insohes the produc-tion of electricity and other forms of lighting, heating and air conditioning.
Some of these "end-uses" can be energy, such as hot water and steam.
I provided by other means. The poten-Successful applications of cogenera-l tial for substitution, together with tion may help reduce the need for deregulation and technological devel-One of our custorners. Airwork other more costly forms of generating Corp ration. is an industry icader in capacity. For more than 50 years, the opments, present many challences and opportunities liir the Company.
" [ra Company has provided cogeneration rt>i e s 3r ai and Our planning process has been devel-industrial applications.
sersices to DuPont. Additional oped to enable us to recognize the cogeneration opportunities in the ser-options created by this changing busi-Different techniques for controlling sice territory are dependent upon ness environment.
demand and energy usage from the customers' use of steam and hot customer's side of the meter can hase water. In 19S5. the Company sup-a wide range of ef fects upon the costs ported cogeneration feasibility studies and forms of customer service, as at more than 20 mid-sized conuner-well as the financial well-being of the cial and industrial facilities. The Company. A special study to insesti-Company also hciped fund a major gate demand-side management was study of the cogeneration potential i
completed in late 1985 and the of a district hot water heating system results will aid us m developing in Atlantic City. Such a system effective strategies for managing appeared to be feasible, and the growth and delivering services Company is insohed in more desired by customers at the lowest detailed negotiations with the project reasonable cost.
sponsor. Major cogeneration oppor-g"c One of the methods which should tunities with certain large industrial be helpful in controlling costly customers are also being evaluated.
growth in peak demar.J is the direct One of the more promising future control of appliance load. In 1985, alternate energy technologies is the Company enlisted more than 500 photosoltaie generation. This means
./
residential customers in its " Peak of conserting solar energy directly
- ^
Saver Club." to test the ef fectiveness into electricity may prose to tv cost-l K-Tron Corporation. a rnajor of radio-controlled switches for air ef fective by the early 1990's. For s h7s foun conditioners and electric water heat-years, the Company'has been collect-t e Co p ny's te service area ideal for espansion.
ers. When demand approaches a peak ing local solar data and resiewing l
lesel, the Company will be able to turn these appliances of f and on tiir short periods without perceptible dis-comfort or inconsenience. Test 9
deselopments m solar tec hnoloes in
--: %ws mwy-M p ero v4%WMrv /
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for turther researt h in solar encrey.
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mercial Iceihihty of photosohoh l _. ;
s generatier: in our sers he area bs
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The Company has also studied the
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Personalized shareholder service has been enhanced this year by bringing all transfer agent I'ransfer agent and rechtrar sers kes and registrar functions int-house.
were brought tompletely m-house m late lux 5 to proside more tmiely and tion of the statei hmited tas esempt the espiration of I cdcral tas benefits et heiCnl turnartiund iit sharchi lder finant i
ing capacit s ti r finant ing Ibipc atti rded dis iJerids re in s t'sted iri new i
i tran sat t h ins basi ) Ca r. a t ri m sec-('reck piljutnin tiinttid f at ilities in s h a re s i t sti>t k. t he ( iniipan s i
llon of shareholders participated m a pas. but we are vintmump to seek amenJed the Plan m 1.ne 196 wrsey w hhh he helped us know the net cuar s ahot atiiin m lush Hegmnmg in Poh remscsted dn i j
them better. understand their mscst 1)urmg 190 we mued a total of Jends are beine apphed to the ment obiet tnes and eet feedh h k on 421. W5 shares of ('onman 5 tot k for purthec of shares in the open shareholder publh ation' approsimately s ll 2 mdhon thriiuer market i
I nc Company 's Ph4 finant mg the linidend Remsestment and stot h i hc f ust phec of an Integrated priigrJW mtluded the nsuante of Purt hec P!an and the I mphiyce
( ~ustiimer Nen h e 5s stem w e unplc biith hing-terrn debt and (lininliirl Stis k ()a nership l'lan ( )s cr the last nientcJ in l'W6 % heiluied tiir Slik k I n ( It tt iber. w e stild VI m!I l(I scars. the { hs idend Rcmsestment t iimpIct h in in l'h" It h dc4pned tii hon of 4 Lycar Hrst Mortgace Honds and %(k Purt hase Plan has been aihia quh kcr response to tu stomer s with an annual interest rate of ll ettet t n e m r.usme more than % 2 h bdhng mqumes unprose retiird Ne wCrC unablC tii sCt uTC an Jlb N J-millhin ist eqmt) t apitJI. w hile kCcpme at t urJs s. and pros IdC tt 4 pros idme a tonsement means for more f unch responses to scr s h e sharchiilders ti) bus additninal shares inder requests of ('onunon 5 tot k W ith the ( i m i
pah) \\ redth ed needs It d JpitJl alld
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This past year, the Company com-promote self-confidence, healthful improvement, and will also be used pleted its evaluation and selection of lifestyles and general well-being.
as a benchmark for comparison with a new automated general ledger Voluntary skill refresher courses future suneys.
accounting system. When imple-proved to be a source of accomplish-The President's Award was estab-mented as an integral part of the Cost ment and incentive for many of our ished to recognize outstanding Center Management System currently employees to pursue more advanced achievement by employees. The being developed, it will provide more education. The Company made avail-award for 1985 was presented to one detailed budget information, and help able its facilities for a program of the Company's customer service establish clear-cut lines of cost con-promoting good eating habits and trol responsibility.
sensible weight control, and an after-L Company-wide performance indi-hours aerobic exercise program was cators were established in 1985 to started by employees at Company
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if keep track of progress in achieving headquarters.
p long-term goals. Approximately 20
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- M' indicators were selected to measure 1
performance in such areas as service p
reliability, safety and dividend growth. The use of performance indi-cators is now being expanded to The productmn of reports to shareholdus and membus of the include measurements at the deIart-financial community invohes a mental level.
coordinated team effort of Snancial, Atlantic Electric's promotion of accounting and pr~*uction skiiis.
safe work habits involves not only formal training, but also informal employees for the interested, car-recognition, encouragement and ing approach she has demonstrated to l
g oup incentives. One of the most far-customers lier spirit of thought-reaching safety training programs in fulness and dedication to customer l
the Company's history, the Conti-service were cited as the strengths, dence with Chemicals Program, shared by all of her fellow employees, briefed more than 1.400 employees in upon which the future prosperity of the safe handling of potentially haz-Atlantic Electric's customers and ardous chemicals. Dinners have been shareholders will be built.
used by the Company to honor employees working together to set Laser scanning techniques permit l
new safety records. In 1985, several rapid, accurste gathering ef operating groups celebrated more information for meter records.
than ten years without a lost-time accident, with one of them setting a A comprehensive employee attitude record of more than sixteen years.
survey was conducted by the Com-Throughout 1985, the Company pany in 1985. Almost 1,800 physical has sponsored and encouraged vari-workers and office personnel ous employee programs designed to responded to the survey, which cov-ered such matters as work relations, l
communication, pay and opportunity for growth and advancement. The results have suggested some areas for r
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l OUR SERVICE AREA l
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Atlantic Electric's service territory, commercial and light industrial cus-representing the southern one-third of tomers are situated in the western part the State of New Jersey, is situated of our territory. Farming and agri-near such major cities as New York, culture continue as a significant Philadelphia, Baltimore and Washing-customer base in the central and ton, D.C. The majority of our custo-western regions of our sersice area.
i mers are residential and commercial.
Tourism plays a major part in the economy of the eastem shore, while i
P l
l 12
CUSTO51ERS AT-A-GLANCE average 4d RESIDENTIAL
- M" d (000 ksh)
The average number of Atlantic Electric residential cus-
8' qm A
tomers increased 2.6% in 1985, while average use per i -
7.8 44 customer declined 2.8%. Over 9,100 new dwelling units
,,,, 9 7^4 were connected in 1985, of which 36% were electrically 9
heated. The majority of 1985 new home construction 1983 7.7 43 occurred in the eastern part of the service area.
q 7.9 44 1984 Est.1985-2000 1985 3-I 7.6 43 Annual Growth 1985 2000 Rate 2000 7.5 44 Energy (billion kwh) 2.638 3.473 1.85 %
0 1
2 J
billions ofkwh Peak (Mw) 680 874 1.69 %
CO.\\tMERCIAL Sales to commercial customers increased 6.9% in 1985.
,,,, q g
42.8 33 Eleven casino-hotels were in operation at year-end. Sales to 9
h 44.2 34 that segment increased almost 19% from 1984 and
,,,2 represented almost 6% of total energy sales. Approx-9 E
46.8 35 imately 1,700 of the 44,256 commercial customers 1983 r
engaged in farming and related activities during 1985.
1984 h
49.3 35 9 '-
b Est.1985-2000 i,g5 51.9 37 1985 2000 ae 65.0 40 2000 Energy (billion kwh) 2.299 3.094 2.00 %
0 1
2 J
billions ofkwh Peak (Mw) 562 765 2.08%
INDUSTRIAL & OTIIER The Company's 1,020 industrial customers are located 1981 q g
1240.0*
23 primarily in the inland and western portions of the service area. Industries include the manufacture of chemical, 9
b i197.0" 23 j,,2 glass, plastic and rubber products. Sales to this segment 9
b 1200.4*
22 increased slightly in 1985.
1943 II 9' Est.1985-2000 Annual Growth 9
b 1181 3' 20
,,g 1985 2000 Rate l
Energy (billion kwh) 1.263 1.282 0.10%
yoon 9 2
i;(u,9-16 1
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l Peak (Mw) 190 198 0.28 %
billions oj kwh
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MANAGEMENT'S DISCUSSION AND ANAIXSIS OF Arm ric cirY FINANCIAL CONDITION AND RESULTS OF OPERATION t u cTaic couiwsy
'9"'""'"*"
GENERAL The nature of the Company's operations is capital inten-h"[os7 i,si 4mM h
sive. We invest a significant amount of our funds in property and plant to generate, transmit and distribute
" [^L,,,
EE electric energy service to our customers. At December 31, Reqmreann l
1985 our gross investment in property and plant was over
= grg
,,y qMMlMg
$1.4 billion. As a utility, our business is generally subject
.no sinking rios to regulation by the New Jersey Board of Public Utilities q
(
(BPU). including regulation of the rates which are charged 4"";"*'.
for providing electric service. The Company's ability to q
gg ceaers =
h, nance its construction program, maintain service reliabil-i l
0 301 60 901 120 150 ity, meet its working capital requirements and provide a fair rate of return on investment to its shareholders is dependent upon adequate rate relief.
Year End Capitalization I
I l
I i
"" P"N"o
, g, '
l I
LIQUIDITY AND CAPITAL RESOURCES
= Cornmon Eqmiy E
.Preferrea sioa i,s2 i
I Construction Program
.tongie-new E
During 1985, cash constmetion expenditures aggregated shori tem ock 19u
- I I
$94 million, which is an 11% increase from the $85 million expenditure level experienced in 1984 and a 27% increase 1934 from the $74 million level in 1983. Included in the above amounts are cash construction expenditures associated with g
g g
g g
the Company's 5% interest in the Hope Creek Generating Station, the only additional generating capacity of the through the DRP and $2.6 million of Common Stock sold Company under construction. Such cash construction through the ESOP. Interim financing of our construction expenditures amounted to $31 million m 1985, and $23 program and working capital needs was provided by the milh,on in each of the years 1984 and 1983. The hve-year issuance of short term debt.
(19fs6-1990) cash construction expenditures are currently Approximately 41% of the cash requirements for con-projected to be $388 million. The construction program struction, debt maturities and sinking fund requirements has been developed m, response to the need to improve or during the period 1983-1985 was generated from operations replace existing production plant, upgrade our transmission after deductions for dividends and working capital needs, and distribution system and provide for projected growth.
but exclusive of changes in temporary cash investments.
The current forecast of peak load growth for the period The Company estimates that with adequate rate relief, 1986-1990 is 2.1% per year.
more than 70% of its total cash construction requirements, Financing Program debt maturities and sinking fund requirements will be in 1985, the Company's external financings totaled $81.2 generated internally during the five-year period from million, represented by $70.0 million cf First Mortgage 1986-1990. Additional cash requirements will be satisfied Bonds, $10.8 million of Common Stock issued through the through external financing. Capitalization ratios at Dividend Reinvestment and Stock Purchase Plan (DRP)
December 31,1985 are 47% long term debt,45% common and $.4 million of Common Stock issued through the equity and 8% preferred stock. The Company will Employee Stock Ownership Plan (ESOP). In 1984, $54.4 continue to use short term debt financing on an interim million was raised in the capital markets, with three basis and currently maintains aggregate lines of credit of pollution control series of First Mortgage Bonds totalling
$115 million.
$42.2 million: $11.4 million of Common Stock sold Provisions of the Company's charter, mortgage and through the DRP and $.8 million of Common Stock sold debenture agreements can limit, in certain cases, the through the ESOP. In 1983, $64.3 million was raised in the amount and types of additional financing which may be capital markets from the sale of $50 million of First employed. Estimated additional funding capacities at Mortgage Bonds, $11.7 million of Common Stock sold December 31,1985, giving effect to such provisions, 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION <cennnuea would amount to more than $400 million for First revenue increases, changes in Levelized Energy Clause Mortgage Bonds, or $150 million for Preferred Stock or revenues and changes in kilowatt-hour sales. The effects of
$140 million for unsecured debt, and may not necessarily the above factors on 1985 and 1984 revenues are shown be additive.
below:
RESULTS OF OPERATIONS (Thousands of Dollors) 1985 1984 The tabulation on page 36 includes key historical indicators Base Rewnues
$ U,142 4.4 % 512,971 2.4%
which are helpful in evaluating the performance of the Levelized Energy Clause (7,039) (1.3) 1,972
.4 Company over the past five years.
Kilowatt-hour Sales 13,099 2.4 17,446 3.5 Earnings increase
$30,202 5.59 $32.389 6.3%
Earnings per share of Common Stock, based on the weighted average number of shares outstanding, were Future changes in operating revenues will reflect the
$3.00 in 1985, compared to $3.20 in 1984 and $3.48 in timeliness and adequacy of rate relief, general economic 1983. The decrease in earnings per share in 1985 and 1984 conditions in our service area and the results of load is attributable to increases in operating expenses without management and conservation programs.
corresponding rate relief. In addition to rate relief, our Sales earnings are sensitive to other changes in revenues and Changes in kilowatt-hour sales are generally due to expenses as discussed below.
changes in the average number of customers and average Rewnues customer use, which is also affected by weather Operating revenues increased by 5.5% in 1985 to $579.7 conditions.
million compared to $549.5 million in 1984. The 1984 Energy sales statistics, stated as percentage changes level of revenues represented a 6.3% increase compared to from prior years, are shown below:
1983. These overall increases reflect the net results of base Increase (Decrease) from Prior Year 1985 1984 Total Energy Sales h
9M b
Customer
- of
- of r
rs) fpgi Class Sales Use Cust. Sales Use Cust.
NEEkMh Residential
(.3)4 (2.8)9 2.69 4.0%
2.0% 2.0%
1982 qg g3g Commercial 6.9 5.4 1.5 6.5 5.4 1.1 Industrial
.6
,t
.5 (2.3)
(1.8)
(.5)
,,y 9M M
Other (2.4)
(4.2) 1.8 (3.0)
(2.2)
(1.1)
Total 2.4 2.5 3.5 1.6 1.9 1985 b
The 2.4% and 3.5% increase in total kilowatt-hour sales in o
4.5 s.o s.s 6.o 6.5 1985 and 1984, respectively, is largely attributable to the um o Mw customus aMed to th Company's system Average Annual Price Per Kilowatt-Hour in those years, and increased commercial activity m the m cears) f,si q service territory. Sales to residential customers in 1985 p. --
remained virtually unchanged from 1984 which, in turn,
,,,,qhygg had increased 4.0% from 1983. In 1985, mild weather conditions and a lower average use per customer acted to i,gy 9
.u offset the effects of an average of 8,700 new residential customers. In 1984, the effects of 6,500 new customers, f,u together with an increased use per customer, resulted in
. - _ 7-_.. q._._
. -~
g increased kilowatt-hour sales. Sales to commercial custom-1945 q ers increased 6.9% and 6.5% in 1935 and 1984, o
21 41 61 81 10 respectively. Business activities related to the expansion of the hotel / casino industry contributed to this commercial sales growth in both years. Sales to industrial customers increased by.6% in 1985 and declined 2.3% in 1984 as the result of changes in the number of customers and changes 16
ATLANTIC CITY LLECTRIC COMPANY Pre-Tax Interest Coverage Ratio At December 31,1985 $4,466,000 is shown on the balance sneet as Deferred Energy Revenues associated with the 9
b current energy clause.
f,gi The Company's a nual fuel, interchange and purchased 9
b power costs reflect change < in availability of low-cost 19a2 1983 q g
generation from Company-owned and purchased sources, as well as changes in the needs of other utilities
- '8# q g
participating in energy interchange. Certain costs associ-l ated with purchased power are deferred on the balance
,,,,9M.
M sheet since rates are levelized to collect these costs over the 17-> ear life of the PP&L Agreements (see Note 3 to the il 2
al 4
5 o
Financial Statements).
. Power production operation and maintenance costs AFDC as a Percent of Net Inco.nc melude the cost of maintenance of both wholly-and f,,, "4 Jointly-owned generating units. In addition, the Company
_ _ _l _
has embarked on an aggressive program to upgrade our
,,gy 94M ""8""'"
M E
production and other facilities to insure efficiency and extend service life. Other operation and maintenance costs 9
consist of the price of materials, supphes and services, as 19s3 well as wages and employee benefits.
1984 q Changes in depreciation expense generally represent p
g 1985 q changes in the amounts of electric utiFay plant in service sl tol 15]'
~20 and the respective in-service dates.
25 o
The components of federal ince.ne taxes are detailed in the notes to the financial statements.
effects of the chrIge. Overall, however, the combined Interest charges before the <.ilowance for borrowed funds in the use of enerry s in our sales and rates have resulted in used during construction ose to $41.6 milhon m 1985,
an increase in 'evenues per kilowatt-hour of 2.3% in 1985 C mPared to $40.3 mi' anon m 1984, and $37.0 million m compared to '.984 and 4.2% in 1984 compared to 1983.
1983. The increase of $3.3 million in interest expense in Costs and Expenses 1984 from the 1983 level reflects a full year's effect of Total oprating expenses increased 7.0% in 1985 compared interest on the Company's 11%% First htortgage Bonds to 1984. The 1984 operating expenses represented an which were issued in November 1983, the issuance in 1984 increase of 8.0% compared to 1983. Excluding deprecia-of an aggregate $42.2 million principal amount of seseral tion and taxes, operating expenses rose to $332.8 million pollution control series of First hfortgage Bonds, and in 1985, an increase of 6.9% over 1984, which had higher average short term borrowing rates, offset by the increased 13% from 1983.
retirement and maturities of First hlortgage Bonds and by Net Energy Costs reflect the amount of energy pro-lower average short term debt outstanding. The increase of l
duced, as well as the various fuel and purchased power
$1.3 million in interest expense in 1985 from the 1984 level sources used to produce it. Information on the sources and reflects a full year's effect of interest expense associated i
costs per kilowatt-hour of energy are set forth in the with the pollution control series of First Afortgage Bonds l
accompanying graph. In 1984, Net Energy Costs were issued in 1984, the issuance of $70 million principal reduced by $6,969,000 reflecting the deferral of fuel costs amount of Ilh% First htortgage Bonds issued in October incurred in excess of revenues collected under the fuel 1985 and higher average short term debt outstanding, offset clause effective for that year. For 1985, Net Energy Costs by the maturities of First hfortgage Bonds and lower include $5,865,000 of previously Deferred Energy Costs average short term borrowing rates. Interest rates on our representing fuel costs recovered under our energy clause.
debt offerings are sensitive to the timing at which such financings are undertaken. Pollution control series of bonds and variable rate debt have been used to moderate the general upward pressures on interest rates. The embedded cost of our long term debt at December 31,1985, was 9.6%, compared to 9.2% in 1984 and 1983.
17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF yi,33,c cin FINANCIAL CONDITION AND RESULTS OF OPERATION <connnuca n a cinic COMPANY l
f l
The Allowance for Funds Used During Construction Total Sources and Costs of Energy I
(AFDC) including both the Borrowed Funds portion,
,m,y l
which is used to reduce interest charges, and the Equity Funds portion, shown under Other Income, was $11.2 3,
j, million in 1985 compared to $10.8 million in 1984 and u=rt-her
=
$9.2 million in 1983. The increases are due to increases in
~7 52 l
the average balances of construction work in progress.
3
(
AFDC as a percent of net income for 1985,1984 and 1983 i_
\\
was 18.5%,17.0% and 13.9%, respectively.
455 2n 205 45 95 Inflation Supplementary unaudited financial information showing M
the estimated effects of inflation on the Company's 5
operations is shown on pages 34 through 36. These data, a
3, which should be viewed as estimates of the approximate g g =-f, x
effects of inflation, rather than as precise measures, 1982]
[
m demonstrate the need to control costs and the responsibility g
m for regulatory agencies to provide timely and adequate rate relief.
Accounting Standards N
5o %
The Financial Accounting Standards Board has issued an i
Exposure Draft of a Proposed Accounting Standard 2,0 entitled "itegulated Enterprises-Accounting for Phase in g -
, mc g
Plans, Abandonments, and Disallowances of Plant Costs" 1983
+ = =
- 03 en ies 2n a
which is a proposed amendment to existing accounting standards for regulated enterprises, including electric utilities such as the Company. This proposal, if adopted in y
its present form, would modify current accounting stan.
5e dards for the types of events enumerated. While the
~
69 Company is still evaluating this proposal, it believes its 2g
\\
operating results and financial position will be impacted if
]
W g tJ. ~
i applied to certain past events such as the abandonment of g,
on 23
,, 3 Hope Creek Unit No. 2.
The Company intends to submit written comments to the Financial Accounting Standards Board concerning this
- 2. :
proposal.
3%\\
53
\\\\
Y io 1985 m-wuan~ &
49%
32%
iO4 24 7%
0 1
2 3
4 5
6 7
in billions of kilowatt-hours o Coal e Natural Gas s Nuclear a laterrhange e Oil 18
REPORT OF MANAGEMENT AUDITORS' OPINION The management of Atlantic City Electric Company is g
responsible for the financial statements presented herein.
gg These financial statements were prepared by management one worid Trade censer in conformity with generally accepted accounting princi-certmed Put$c Accountants NeN. New WW8 pies applicable to public utilities which are consistent in all material respects with the accounting prescribed by the To the Shareholders and the Board of Directors State of New Jersey, Board of Public Utihties and the of Atlantic City Electric Company:
Federal Energy Regulatory Commission. In prepanng the financial statements, management made informed judg-We have examined the balance sheets of Atlantic City ments and estimates relating to events and transactions Electric Company as of December 31,1985 and 1984 and being reported.
the related statements of income and retained earnings and The Company has established a system of internal of changes in financial position for each of the three years accounting and financial controls and procedures designed in the period ended December 31,1985. Our examinations to insure that the financial records reflect the transactions were made in accordance with generally accepted auditing of the Company and that assets are safeguarded. This standards and, accordingly, included such tests of the system is examined by management on a continuing basis accounting records and such other auditing procedures as for effectiveness and efficiency and is reviewed _ on a regular we considered necessary in the circumstances, basis by an internal audit staff that reports directly to the In our opinion, the accompanying fmancial statements Audit Committee of the Board of Directors.
present fairly the financial position of1.e Company at The financial statements have been examined by Deloitte December 31,1985 and 1984 and the resvits ofit.
Haskins & Sells, Certified Public Accountants. The operations and the changes in its financial tosition for each auditors provide an objective, independent review as to of the three years in the period ended December 31,1985, management's discharge of its responsibilities insofar as in conformity with generally accepted accounting princi-they relate to the fairness of reported operating results and ples applied on a consistent basis.
financial condition. Their examination includes procedures believed by them to provide reasonable assurance that the
' financial statements are not misleading and includes a Q%
4 9h review of the Company's system of internal accounting and financial controls and a test of transactions.
The Board of Directors has oversight responsibility for January 31,1986 determining that management has fulfilled its obligation in the preparation of financial statements and the ongoing examination of the Company's system of internal account-ing controls. The Audit Committee, which is composed solely of outside directors, meets regularly with manage-ment, Deloitte Haskins & Sells and the internal audit staff to discuss accounting, auditing and financial reporting matters. The Audit Committee reviews the program of audit work performed by the internal audit staff. To insure i
auditor independence, both Deloitte Haskins & Sells and the internal audit staff have complete and free access to the Audit Committee.
J e
i 19
ATLANTIC CITY STATEMENT OF INCOME AND RETAINED EARNINGS ELECTRIC COMPANY For the Years Ended Decernber 31 (Thousands <f Dollars Except IVr Share Amounts)
I985 l984 1983 Operating Rewnues-Electric
$579,733
$$49,531
$517.142 Operating Expenses:
Energy:
Fuel 133,437 178,681 167,988 Interchange 17,272 (15.558)
(1,697) '
Deferred Costs 5,865 (6,%9)
(15,055)
Net Energy 156,574 156,154 15!,236 Purchased Power-Exclusive of Fuel 42,636 28,905 12,435 Power Production-Operation and Slaintenance 55.329 56,124 48,794 Other Operation and hiaintenance 78,236 69,989 62,800 Depreciation and Amortization 41,985 38,318 38,383 New Jersey Gross Receipts and Franchise Taxes 71,100 60,769 55.324 Federal Income Tax Expense 36,308 41,227 48,728 Other Taxes 8,159 6,654 6.340 Total Operating Expenses 490,327 458,140 424,(M0 Operating Income 89,406 91.391 93,102 Other Income:
Allowance for Equity Funds Used During Construction 5,216 4,821 4,320 hiisc:llaneous Income-Net 1,502 1,424 833 Total Other Income 6,718 6,245 5,153 Income Before Interest Charges 96,124 97,626 98,255 Interest Charges:
Interest on 1 ong Term Debt 39,604 38,231 33,795 Interest on Short Term Debt 1.565 1,861 2,669 Other Interest Expense 416 204 535 Total Interest Charges 41,585 40,296 36,999 Allowance for Borrowed Funds Used During Construction (5.980)
(5.937)
(4,896)
Net Interest Charges 35,605 34,359 32,103 Net Income 60,519 63,277 66.152 Retained Earnings at Beginning of Year 161,629 148,454 128,825 222,148 211,731 194.977 Dividends Declared:
Cumulative Preferred Stock 6,282 6,949 7,171 Common Stock 46,220 43,153 39,352 Total Dividends Declared 52,502 50,102 46,523 Retained Earnings at End of Year
$169,646
$161.629
$148,454 Earnings for Common Stock:
Net Income
$ 60,519
$ 63,277
$ 66,152 Less Preferred Dividend Requirements 6.369 6,968 7,201 Balance Available for Common Stock
$ 54.150
$ 56.309
$ 58.951 Average Number of Shares of Common Stock Outstanding (in thousands) 18.069 17.581 16.923 Per Common Share:
Earnings 5 3.00 3.20 3.48 Dividends Declared
$ 2.555 2.45 5
2.32 Dividends Paid
$ 2.53 2.42 2.30 The accompanying Notes to Financial Staternents are an integral part of these statements.
20
ATLANTIC CITY STATEMENT OF CHANGES IN FINANCIAL POSITION ELECTRIC COMPANY For the Years Ended December 3I (Thousands ofDollars) l985 l984 1983 Source of Ibads:
Funds from Operations:
Net income
$ 60,519
$ 63,277
$ 66,152 Principal Non-Cash Charges (Credits) to income:
Depreciation and Amortization 41,985 38,318 38,383 Allowance for Funds Used During Construction (11,196)
(10,758)
(9,216)
Deferred Federal income Taxes-Net 16,865 20,3(M 18.359 investment Tax Credit Adjustments-Net 7,261 2.765 6,114 Other-Net 738 264 1,353 Total Funds from Operations 116,172 114,170 121,145 Funds from Outside Sources:
Long Term Debt 70,000 42,200 50,000 Pollution Control Funds (Held) Released by Trustees 7,718 (5,539) 7,885 Subtotal 77,718 36,661 57,885 Sale of Common Stock 11,515 12,487 15.060 Tofal Funds from Outside Sources 89,233 49,148 72,945 Other-Net 1,802 (2,517)
(1,978)
Total Source of Funds
$207.207
$160.801
$192.112 Application of Funds:
Gross Additions to Utility Plant
$105,213
$ 95,388
$ 83,673 Allowance for Funds Used During Construction (11,196)
(10,758)
(9,216)
Net 94,017 84,630 74,457 Dividends on Preferred Stock 6,282 6,949 7,171 Dividends on Common Stock 46,220 43,153 39,352 Retirement and Maturity of Long Term Debt 10,000 26,000 50,300 Unrecovered Purchased Power Costs 14,680 6,530 l1,450 Unrecovered Nuclear Fuel Advances 5,215 Conversion of Preferred Stock 353 267 711 Redemption of Preferred Stock 11,850 2,100 2,100 Increase (Decrease) in Working Capital
- 18.590 (8,828) 6,571 Total Application of Funds
$207.207
$160,801
$192.112 lacrease (Decrease) in Working Capital
- Cash and Cash items
$ 14,245 5
(751)
$ (11,616)
Accounts Receivable 6,247 6,576 6,858 Unbilled Revenue 3,076 (1,340) 5,671 Fuel (2,614) 10,657 (5,146)
Materials and Supplies (569) 597 974 Nuclear Fuel Disposal Costs 8,481 (8.481)
Deferred Energy Costs and Revenue (22,190) 6,967 26,626 Accounts Payable 630 (5,261)
(1,647)
Txs Accrued 6,850 (3,923)
(3,831)
Deferred Taxes 1,136 (2,589)
(7,557)
-Other 3,298 (l1,280)
(3,761)
Increase (Decrease) in Working Capital
$ 18.590
$ (8.828)
$ 6,571 l
8 Excludes Short Term Debt. Notes and Current Marunties of Long Term Debt and Cumularne Preferred Stock Subject to Mandatory Redemption.
The accompanying Notes to Financial Statements are an integral part of these statements I
21
~^
m
- + -
-.r
CALANCE SHEET December 31 (Thousands of Douars)
I985 1984 Assets Electric Utility Plant:
In Service:
Production 5 553,253
$ 515,637 Transmission 200,517 190, % 9 Distribution 345,177 326,466 General 63,590 52,987 Total 1,162,537 1,086,059 Less Accumulated Depreciation 330,895 300,037 Net 831,642 786,022 Construction Work in Progress 237,310 216,026 Land Held for Future Use 6,849 6,957 Nuclear Fuel 628 Electric Utility Plant-Net 1,075,801 1,009,633 Non Utility Property and Investments 4,298 5,901 Pollution Control Construction Funds 2,871 11,076 Current Assets:
Cash and Working Funds 5,379 5,234 T mporary Cash Investments 18,500 4,400 Accounts Receivable:
Utility Service 42,899 36,276 Miscellaneous 8,386 8,662 Allowance for Doubtful Accounts (1,600)
(1,500)
Unbilled Revenues 26,401 23,325 fuel (at average cost) 29,828 32,442 Materials and Supplies (at average cost) 17,223 17,792 Prepayments 8,382 5,066 Unrecovered Nuclear Fuel Disposal Costs 2,407 Deferred Energy Costs-Net 17,724 Total Current Assets 155,398 151,828 Deferred Debits:
Property Abandonment Costs 19,878 17,029 Unrecovered Purchased Power Costs 32,660 17,980 Unamortized Debt Expense 5,220 4.343 Other 3,507 2,713 Total Deferred Debits 61,265 42,065 Total Assets
$ 1,299.633
$1.220,503 The accornpanying Notes to Financial Statements are an integral part of these statements.
22
ATtANTIC CITY ELECTRIC COMPANY December 31 (Thousands ofDollars) 1985 l984 Liabilities and Capitalization Capitalization:
Common Shareholders' Equity:
Common Stock
$ 54,771 5 53,464 Premium on Capital Stock 229,287 219,078 Capital Stock Expense (1,607)
(1,660)
Retained Earnings 169,646 161,629 Total Common Shareholders' Equity 452,097 432,511 Cumulative Preferred Stock Not Subject to Mandatory Redemption 41,353 41,706 Cumulative Preferred Stock Subject to Mandatory Redemption 34,100 49,550 Long Term Debt 437,462 412.462 Total Capitalization 965,012 936,229 Current Liabilities:
Current Portion:
Cumulative Preferred Stock Subject to Mandatory Redemption 5,050 1,450 Long Term Debt 45,000 10,000 Accounts Payable 28,755 29,385 bes Accrued 5,372 12.222 Interest Accrued 12,865 11,721 Dividends Declared 13,224 12,757 Customer Deposits 2,945 2,737 Deferred Taxes 17,747 18,883 Nuclear Fuel Disposal Costs 10,888 Deferred Energy Revenues-Net 4,466 Other 5,681 7,482 Total Current Liabilities 141,105 117,'25 Deferred Credits:
Deferred Investment Tax Credits 65,412 58,151 Deferred Income Taxes 120,464 103,599 Other 7,640 4,999 Total Deferred Credits 193,516 166,749 Commitments and Contingent Liabilities (Note 11)
Total Liabilities and Capitalization
$1.299.633 51.220.503 23
NOTES TO FINANCIAL STATEMENTS NOTE 1.
SIGNIFICANT ACCOUNTING POLICIES Regulation Nuclear Ibel The accounting policies and rates of the Company are Fuel costs associated with the Company's participation in subject to the regulations of the State of New Jersey, Board jointly-owned nuclear generating stations, including a of Public Utilities (BPU) and in certain respects to the provision for estimated spent fuel disposal costs, are Federal Energy Regulatory Commission (FERC). All charged to Fuel Expense based en the units of thermal significant accounting policies and practices used in the energy produced.
determination of rates are also used for financial reporting F h lI Tms purposes. The financial statements are prepared on the basis of the Uniform System of Accounts presenbed The Company provides deferred Federal Income Taxes on by FERC.
all significant current transactions for which the timing of reporting differs for book and tax purposes. Imestment tas Operating Resenues credits, which are used to reduce current federal income Revenues are recognized when electric energy services are taxes, are deferred on the balance sheet and are recognized rendered, and include estimates for amounts unbilled at the in book income over the life of the related property.
end of the period for energy used subsequent to the last Retirement Plan billing cycle' The Company has a noncontributory defined benefit Electric Utility Plant retirement plan covering all regular employees. The Property is stated at original cost. Generally the plant is Company's policy is to fund pension costs as accrued.
subject to a first mortgage lien. The cost of property Costs of the plan are determined actuarially under the additions, including replxement of units of property and aggregate cost method.
betterments, is capitalized. Included in certain additions is an Allowance for Funds Used During Construction Property Abandonment Costs (AFDC) which is dehned in the applicable regulatory These costs censist principally of the Company's system of accounts as the cost dunng the period of unamortized in estment in Hope Creek Unit No. 2, a construction of borrowed funds used for construction nuclear generating unit which was cancelled in 1981, purposes and a reasonable rate on other funds w hen so offshore nuclear units which were cancelled in 1978 and used. AFDC has been calculated usmg a rate of 8.5% and unrecovered nuclear fuel advances associated with three was semi-annually compounded on Ilope Creek Unit No.1 uranium supply contracts which were terminated in 1985.
expenditures begmnm, g m 1984. Such rates are less than The Hope Creek Unit No. 2 investment is being the maximum allowed by FERC.
amortized over a 15-year period that began in 1983. The investment in the offshore nuclear units is being amortized Deferred Energy Costs and Revenues over a 20-year period that began in 1979. Unrecovered The Company has a Levelized Energy Clause which is nuclear fuel advances are being amortized, subject to BPU based on projected energy costs and includes a provision approval of their recovery, over 5 years, beginning in 1985.
for prior period under or over recoveries. The recovery of The unamortized amounts are $12,765,000, $2,745,000, energy costs is made through levelized monthly charges and $4,172,000, respectively, at December 31,1985.
over the period of projection. Any under or over recoveries are deferred in balance sheet accounts as a current asset or Unrecosered Purchased Iber Costs current liability as appropriate. These deferrals at These represent purchased capxity costs, relating to the recognized in the Statement of Income during the period m.
Com's WM Fwer agreements with Pennsylvania chich they are subsequently recovered through the clwise.
Power & Light Company, which are not being recovered currently, but for which recovery has been specifically Depitclation provided in a levelized component of future rates.
The Company provides for straight-line depreciation based g
on the estimated remaining life of transmission and distribution property and, based on the estimated average Deb premium, discount and expenses are amortized over service life, for all other depreciable property. Depreciation the life of the related debt. Gains and losses relating to applicable to nuclear plant includes amounts provided for reacquired debt are recognized currently.
decomm,ssionmg. The overall composite rate of depre-Certain 1984 and 1983 amounts have been reclassified to i
ciation was approximately 3.7% for 1985,3.6% for 1984 conform with 1985 presentations.
and 3.7% for 1983. Accumulated depreciation is charged i
with the cost of depreciable property retired together with removal costs less salvage and other recoveries.
24
ATI. ANTIC CITY ELECTRIC COMPANY NOTE 2, FEDERAL INCOME TAX Federal income tax expense is less than the amount computed by applying the statutory rate on book income subject to tax for the following reasons:
Years Ended December 31 (Thousands of Dollars) 1985 l984 I983 Net Income
$60,519
$ 63,277 5 66,152 Federal Income Tax Expense (as below) 36,317 41,876 49,061 Book Income Subject to Tax
$96,836
$105.153
$115.213 Income Tax Computed at the Statutory Rate
$44,544
$ 48,370
$ $2,998 Items for which deferred taxes are not provided:
Difference between Tax and Book Depreciation 2,801 (250) 1,8 %
Allowance for Funds Used During Construction (5,029)
(4,832)
(4,21I)
Capitalized Overheads (1,209)
(1,221)
(1,245)
I2 vestment Tax Credits (2,178)
(1,842)
(1,775)
Other (2,612) 1,651 1,398 Total Federal Income Tax Expense
$36.317
$ 41.876 5 49.061 Components of Federal Income Tax Expense:
Federal Income Taxes Currently Payable
$12,956
$ 15.512
$ 15.072 Deferred Federal Income Taxes:
Liberalized Depreciation 11,899 18,335 10.438 Unbilled Revenues 1,415 (616) 2,609 Unrecovered Purchased Power Costs 6,753 3,004 5,267 Deferred Energy Costs (2,551) 3,205 4.948 Other (1,787)
(1,034) 2,654 Deferred Investment Tax Credits 7,261 2,765 6,114 Employee Stock Ownership Plan Credits 371 705 1,959 Total Deferred Federal Income Tax Expense 23,361 26,364 33,989 Tot ^1 Federal Income Tax Expense 36,317 41,876 49,061 Less Federal Income Taxes Included in Other Income 9
649 333 Federal Income Taxes Included in Operating Expenses
$36.308
$ 41.227 5 48.728 In 1984, the Company filed amended federal income tax Service (IRS) and the Company's federal income tax returns for 1981 and 1982 reflecting the election of the liabilities for all years through 1976 have been determined Asset Guideline Repair Allowance. The effect of this and settled. The IRS has proposed certain deficiencies in election is included in Deferred Federal Income Taxes-tax for the years 1977 through 1981 The Company has Liberalized Depreciation and Deferred Investment Tax protested the proposed deficiencies and is of the opinion Credits.
that the final settlement of its federal income tax liabilities The Company purchased tax benefits on equipment for these years will not have a material adverse effec t on its having an aggregate tax basis of approximately results of operations or financial position.
$10,400,000 and $2,900,000 in 1983 and 1982, At December 31,1985 the cumulatise amount of respectively. These tax benefits include depreciation and deferred income taxes which have not been providen on investment tax credits.
timing differences, principally depreciation, amoun;ed to l
The Company's federal income tax returns for 1981 and approximately 585,000,000 computed at the curre'at prior years have been examined by the Internal Revenue statutory rate of 46%.
l 25
' NOTES aonuma NOTE 3.
RATE SIATTERS Base kale Case Decisions During the three year period ended December 31,19ES base rate case decisions of the New Jersey Board of Public Utilities (BPU) are s5own below:
Date of Amount Date Amount increase Test Petition Requested Effective Approved in Revenue Year (mdlions]
(mi k u)
January 1983 5 30.8 October 7,1983 5 24.5 4.59 September 30,1982 October 1983 25.3 August 17,1984 December 31,1983 October 1984
~24.1 February 13,1985 24.0 4.3%
September 30,1982 The October 1983 increase relates to the first half of the decision by the B PU was affirmed by the New Jersey purchase of 125 megawatts of capacity and related energy Superior Court. The Company has filed a request with the froin Pennsylvania Power & Light Company (PP&L) under New Jersey Supreme Court for review of the appellate two Capacity and Energy Sales Agreements (the PP&L ruling. The Company cannot predict the final outcorne of Agn ementst which commenced with the start of commer-the proceedings or the ultimate effect upon the Company.
cial operation of PP&L's Susquehanna Unit 1. The PP&L The February 1935 increase relates to the second half of Agreemer.ts provide for the purchase by the Company of the Company's angreements with PP&L and commenced capachy and energy from the Susquehanna Units through with the start of commercial operation of PP&L's Sasque-September 30,1991, and then from certain PP&L coal-hanna Unit 2.
fired units through September 30,2000. Through Sep-In April 1985 the Company filed a petition requesting a tember 30,1991, the estimated costs to be incurred by the net increase of $91,850,000 to be implemented in two Company for purchases of capacity and associated energy phases. The first phase request. for $63,316,030, is related from the Susquehanna Units will exceed the levelized costs to increased operations and maintenance costs and capi:a1 to be recovered by the Company from its customers. Such investment, and is based upon a test year of September 30, unrecovered costa will be accumulated and deferred. Such 1985. The Company anticipates a decision on this request costs are included in the balance sheet as Unrecovered in the first quarter of 1986. The second phase request, for a Purchased Power Costs along with related provision for net increase of $28,534,000, relates to the Company's 5%
deferred taxes. The level of rates approved by the BPU is ownership in the Hope Creek Generating Station, and designed to enable the Company to recover these deferred would become effective upon commercial operation of the costs and associated carrying charges during the balance of unit.
the 17-year period. The stipulation provided that any Energy Clauses difference between actual costs incurred by the Company under the agreements and the estimated costs on which the The Company's energy clauses are reviewed annually by the BPU and the most recent decisions are shown below; increased rates were based will be recognized i:a future base rue proceedings if such costs are found to be Date of Arnount Date Amount reasona: 'e. The BPU order prescribes a revenne reduction Pet tion Requested Effective Aprowd formula en the event that both Susquehanna Units fail to meet a combmed minimum performance standard estab-October 1983 5 28.1 Januuy 20,1984 5 28.1 lished by the stipulation which could subject the Company, October 1984 25.4 February 13,1985 4.8 under the most adverse circumstances, to a revenue September 1985 (37.1)
January 1.1986 (44.0) reduction not to exceed $15,000,000 per unit per year.
In August 1984 the BPU denied the Company's October As part of the February 1985 energy clause approval.
1983 request for the $25,300,000 increase in base rates.
$1,639,000 of the costs associated with an ettended outage The BPU, in denying rate relief, made several adjustments of Salem Unit I during 1983 were excluded from recovery.
to the Company's requested rate base, test year operating and $4,298,000 of Deferred Energy Costs were reclassified income and rate of return, providing for an metall rate of to Unrecovered Purchased Power Costs. The Company also return of 11.35% and a return on common equity of agreed to defer $7,500,000 of Deferred Energy Costi, 14.30%. Prior to the BPU decis; ion, the Company had been relatir.g to costs associa:ed with certam nuclear unit authorized to earn an overall rate of return of 11.7% and a outages in 1984.
return on common equity of 15.0%. In November 1985, the 26
Art. ANTIC C11Y tucmic coster As part of tt.e January 1986 energy clause approval, the These costs reprment the Company's pro rata impxt of Company agreed to expense $3.975,000 cf replacernent BPU fmdings in proceedings related to aher co-owners power costs associated with maimenance and r: pair with cpect to replacemeat power costs associated with outages at Peach Bottom Unit 2 end Llem Unit 2. Also, certam outages at the Salem Nuckar Generating Station
. the Company agreed to increase the deferral of $7,500,000 hee Note 11).
of Deferred Energy Costs to $12,179,000.
NOTE 4.
RETIREMENT BENEFITS The cost to the Company in providing a reti:rment plan for in addition to providing pension benefits, the Company its employees was $6,465,000, $7,555,000 and provides certain heal'h care and life insurance bene:its for
$6,563,000 in 1985,1984 and 1983, respectively. Appros-retired employees. Substantially all of the Company's emately 80% of these costs were charged to operating employ <es may become eligible for those benefits ifibey expense and the remaining 20%, which was associated reach ramal retirement age w' bile wwking; for the with construction labor, was charged to the cost of new Company. Those and similar benefits for active employees utility plant.
are provided through insurance companies ar.d other plan The weighted average assumed rate of return used in providers u hose premiums ar.d related plan costs are based determining the actuarial present value of accumulated plan on the benehts paid during the lear The Cotnpany benefits was 8% for 1985 and 7% for 1984 The Company's recognizes the cost of providing those benefits by expens-Plan is in compliance with the Employee Retirement ing the anrual insurance premiums and related plan costs.
Income Security Act of 1974 as amended.
The cest of providing ihme benefits for retirees totalled A comparison of accumulated plan benefits and plan net
$992,000 for 1985 and $845,000 for 1984.
assets (including purchased annuity contract amounts) for in December 19R5 the Firancial Accounting Standards the Company's Plan, as of the most recent actuarial Beard adopted an accounting standard which will require vabation dates, is as fcilows:
the Company to modify the financial accounting and reporting for its retiremem plan beginning in 1987. T he J'"7 3 Company belieses the adoption of this new standard will (Neands o/Dollan) 1985 19M not have a material advene effect on its reruhs of Actuarial present value of accumu.
Operations or financial pmition.
!!ated plan ben (fits:
Vested
$ 84,563
$ 86 753 Nonsesed 4,459 3,846 Tota!
$.89,.02.2 5 90BM Net Anets availatie h benefits
$121,778 5115.596 3
NOTE 5.
JOINTIX-OWNED GENERATING STATIONS The Ccmpany participates with other utilities in the The amounts shcwn represent the Company's share of construction and operation of several electric production each plant at December 31. and includes an alknvance for facilities.
funds used during construction.
Energy Company's lilectric Plant Construction Sation Source Share in Service Work in Progress Gercration 1985 1984 1985 1984 19H5 1984
(%usands afDollars) tMWil) l Keystone Coal 2.47%
$ 7,306 5 6,893 5
976 5
798 2.48,436 237,233 l
Conemangh Coal 3.83 12,355 11,684 210 332 400,790 423,653 Feach Bottom Nuclear 7.51 91,010 77,292 2,490 8,873 420,469 738,447 Salem Nuclear 7.41 160,977 154,806 2,605 4,751 1,039,420 395,037 Hope Creek Nuclear 5.00 203,656 162,676 l
27
NOTES amwcc The operators of the Salem and Peach Bottom Nuclear recovery of these spent nuclear fuel disposal costs is -
Genera:ing Stations entered into contracts with the United provided as part of the Company's energy clause.
States Department of Energy for spent nuclear fuel The Company provides its own fmancing during the disposal. These contracts require the payment of a one-construction period for its share of the jointly-owned plants time fee irlated to the Company's ow nership interest in the and includes its share of direct operatior.s and maintenance Solem and Peach Bottom Stations, which was made in June expenses in its Statement of Income.
1985.as well as ongoing quarterly charges. Current
?
NOTE 6.
INVEST 31ENT IN OPERATING SUBSIDIARY j
The Company's irarstment in Deepwater Operating Com-which the equity of the Company is fairly represented by pany (Deepwater), a wholly-owned subsidiary which its investment. The net production costs of Deepwater are j
operates generating and process steam units owned by the included in the Company's accounts classified as to Company, was 53,291,000 at December 31,1985 and 1984 operation, maintenance and taxes.
The principal asset of Deepwater is working capital in NOTE 7.
CONI.%10N STOCK l
As of December 31,1985 and 1984, the Company's Common Stock included 25,000,000 authorized shares of Common Stock ($3 par value).
f Shares issued and Outstanding:
1985 1984 1983 Beginning of Year 17,821,346 17,250,882 16,574,021 Dividend Reinvestment and Stock Purchase Plan 408,999 525,1IS 535,614
?
Employee Stock Ownership Plan 14,306 36,009 116,347 Conversion of Preferred Stock 12,358 9,337 24,900 End of year 18.257.009 17.821.346 17.250.882 I
At $3 Par Value
$54.771.027
$53.464.038
$51,752.646 Premium on Capital Stock was credited in 1985 and 1984 Stock authorized for issuance pursuant to the Employee with $10,209,000 and $10,799,000, respectively, repre.
Stock Ownership Plan and 47,375 shares of Common senting the excess of proceeds over the par value of shares Stock reserved for the conversion of 5%% Comert ble i
of Common Stock issued, sold and converted. At Series of Preferred Stock.
December 31,1985 there were 57,179 shares of Common NOTE 8.
CU51ULATIVE PREFERRED STOCK
~
t The Company has authorized 799,979 shares of upon issuance. In certain circumstances, if dividends on l
i Cumulative Prefeired Stock, $100 Par Value,2,000,000 issued Preferred Stock are in arrears, voting rights for the j
shares of No Par Preferred Stock and 3,000,000 shares of election of a majority of the Board of Directors becomes Preference Stock, No Par Value. Unissued shares may, or operative.
j may not, possess mandatory redemption characteristics i
t I
{
l t
i 5
i
-_ _ ~ -. _ _
-~
Art.ANrtC cf rY IIJCTRIC cOMi%NY NOTE E(AL Cumulative Preferred Stock Not Subject To Mandatory Redemption:
December 3I Curr
$100 Par Value-Cumulative and Non-1985 1984 Redemption l
participating shares issued and outstanding:
f Neamfr <fINilars)
Price ihr Share Series:
4%
77,000 Shares
$ 7,700
$ 7.700
$105.50 4.10% 72,000 Shares 7,200 7,200 101.00 4.35 % 15,000 Shares 1,500 1,500 101.00 4.35% 36,000 Shares 3,f,00 3,600 101.00 4.75% 50,000 Shares 5,n00 5,000 101.00 5%
50,000 Shares 5,000 5,000 10tl 00 1
5%% Convertible Series:
13.530 Shares (1985) 1,353 101,50 17,061 Shares (1984) 1.706 7.52% 100.000 Shares 10,000 10,000 1(4.89 Total
$41,353
$41.706 Cumulatie Preferred Stock Not Subject to Mandatory The 5%% Convertible Series, of which 3,531 and 2,668 Redemption is redeemable solely at the option of the shares were converted in 1985 and 1984, respectively, is
+
Company upon payment of the redemption price plus convertible, subject to adjustment in uttain events, into accumulated and unpaid dividends to the date fixed for Common Stock at the rate of 3.5 shares of Common Stock redemption. Premium on such Preferred Stock was for each share of Preferred.
$93,000 at December 31,1985 and 1984.
NUTE 8(H).
Cumulative Preferred Stock Subject To Mandatory Prdemption:
~
December 31 Cyrrent Refundmg Par 1985 1984 Prdempticn Restricted i
Shares issued and Outstanding:
Value (mmands <(Dollars)
Price Per Share Prior to
~
i Series:
8.40% 100,000 Shares (1984)
$100
$10,000 j
9.96% 104,000 Shares (1985) 100
$10,400
$106.06 120,000 Shares (1984) 12,000 l
$8.25 87,500 Shares 't 1985)
None N,750 106.56 November I,1987 90,000 Shares (1984) 9,000
$9.45 200,000 Shares None 20,000 20,000 ms.20 November 1.1939 39,150 51,000 e
_ ' 050 1,450 Less Portion due within one year l
Total 034.100
$49.550 l
On February 1,1985, the Company redeemed 8,000 shares fund at a zedernption pr ce of $100 per thare. At the option of the 8.40% Preferred Stock series through the operation of the Compar:y, en additiona' 8,000 shares may be of the sinking fund and optional redemption provisions at a redeerra or; a.y sir kmg fund date, without premium, up redemption price of $100 per share. On August 2,1985 the to 40,000 shares in the a,gpegate. The Company redeemed Company reacquired all of the then outstanding shares 16,000 shares at par in i985 and 1984 through the operation of tl e sinking furk! and optional redemption (92,000) of this series, with an aggregate par value of i
$9,200,000 for $9,177,000.
provisions. As of thember 31,1985 the Company had On August I of each year 8,000 shares of the 9.96%
redeemed the maximum 40.000 shares pursuant to the Series must be redeemed through the operation of a sinking optictial redemption without premium provisions.
29 l
. -. - ~
~
1 NOTES unt<,xo On November I of each year,2,500 shares of the $8.25 shares of the 59.45 No Par Preferred Stock Series must be No Par Preferred Stock Series must be redeemed thmugh redeemed thmugh the operation of a sinking fund at a the operation of a sinking fu >d at a redemption price of redemption price of $100 per share. At the option of the 515) per share. At the opt:on of the Cor.)pany, not more Company, not more than an additional 40,000 shares may than an additional 2,500 stnres may be sederr.ed on any be redcerned on any sinking fund date, without premium, sihking fund date without premtum. The Company up to 50,000 shares in the aggregate.
redeemed 2.$00 and 5,000 shares at par in 1985 and 1984, The annual mimmum sinking fund previsions of the respectively.
above series aspegate $5,050,000 each year from 1986 On November 1,1986, and annually th:reafter. 40,000 thmugh 1990.
)
i MyrE 9.
LO.NG TERM DEB 1 December 31.
I (Thownds of Dottarsf I985 I984 First Wrtgage Honds:
3%% Series due IMarch 1) IWS
$ 10,000 i
4h% Series due (January Ii 1987 5 10,000 10,000 3%% Setics dae (April Il 1988 10,000 10,000 4%% Series doe (Ap611) 1989 2,775 2,775 4%% Series due iMarch 1) 1991 10.000 10,000 4h% Series due (July !) 1992 19.3!G 10,350 4%% Series due (March () 1993 9.540 9,540 11%% Serirs due (Novernber 3) 1993 50,000 50,000 5%% St(ies due (February 1) 1996 9,9 861 9,980 l
8%% Series due (5:prenher 1) 2000 19,090 19.000 8% Series due (May I) 2001 27,000 27,000 7%% Series due (April 1) 2002 20,000 20.000 7%% Series duc Oune J J 2003 19,976 29,976 7%% Pollution Control 5eries de fJ nuary I) 2005 6,5S0 6,500 6%4 Pollution Control Series due (December j ) 2006 2,500 2.500 t
12%% Series due (January 1) 2010 63,750 63,750 l1%% Pollution Control Series due (May 1) 2011 39,n00 39.000 10h% Pollution Control Series B due (July i$) 2612 850 850 Adjustable Rate Pollution Control Series A due (April 15) 20I4 (7%% Until 4-15 87) 18,200 18,21n 10%% Pollution Control Series C due (July 15) 2014 23,150 23,150 II %% Series due (October I) 2015 70.000 r
Total 432,571 Il2.571 i
Debentures:
5%% Sinting Fund Debentures due (February I # 1996 2.267 2,267 7h% Sinking Fund Debentures due (May 1) 1998 2,619 2,619 Total 4,hh4 4,886 Notes-Wriable Rate Notes due (April 30) 1986 45,500 45,0tX) i
^
Unantortized Premiurn a.1d Discount-Net 5
l Total 4N2,462 422,462
- 1. css long Term Debt due within one year 45,000 10,000 t
Total
$437.462
$412.462 4
. -.. ~.. - _..
ATIANrlC CIrY l LE CTRIC COMPANY Deposits in sinking funds for retirement of dekmures are December 31,1985 the Company had reacquired and required on February I of each 3rar through 1995 for the cancelled $11,250,000 principal amount of the 12%4 5%% debentures, and on hiay I of each year through 1997 Series which may be applied toward its requirements fi>r for the 7%% debentures in amounts in each case sufficient 1986 and subsequent periods. On January 1,1986 the to redeem $100,000 principal amount plus, at the election Company redeemed an additional $6,000,000 of these of the Company, up to an additional $100,000 principal bonds through the operation of the sinking fund and amount in each year. At December 31,1985 the Company optional redemption provisions. Current sinking fund had reacquired and cancelled $1,233,000 and $1,081,000 requirements of $750,000 in connection with certain first principal amount of the 5%% and 7%% debentures, Stortgage Bonds outstanding may be satisfied by certifica-respectively, toward its requirements for 1986 and subsc-tion of property additions as provided for in the related quent periods.
mortgage indentures.
A sinking fund requirement of $3,000,000 each year The aggregate amount of debt maturities, in addition to relative to the 12%% First hlortgage Bonds begins in 1986 sinking fund reqairements, of all long term debt outstand-cnd continues through 2009. The Company also has the ing at December 31,1985 are $45,000,000 in 1986, option to redeem an additional $3,000,000 principal
$10,000,000 in 1987 and 1988, and $2,775,000 in 1989.
amount on any sinking fund date without premium. At No maturities of long term debt occur in 1990.
NOTE 10. SIIORT TER31 delit AND CONIPENSATING ll AI.ANCES As of December 31,1985, the Company had bank lines of ments. With respect to the remaining available credit lines, credit available for use of $115,000,000. The Company is the Company pays commitment fees (generally %9) for required, with respect to $15,000,000 of these credit lines, which charges amounted to $235,000 for 1985, $242,0(X) to maintain average compensating balances of $487,500.
fi>r 1984 and $269,000 for 1983. The Company had no These compensating balances are maintained in demand outstanding short term debt at December 31,1985,1984 or deposits which are not legally restricted. The Company is 1983. Additional infi>rmation regarding short term debt in compliance with such compensating balance arrange-fi>llows:
1985 1984 1983 (Thousands qf Dollars; For the year ended-hlaximum amount of total short term debt at any month-end:
Commercial Paper
$55,700
$35,000
$50,000 Notes Payable to Banks
$10,000
$ 7,000 Average amount of short term debt (based on daily outstanding balances):
l Commercial Paper
$19,905
$17,519
$23,954 l
Notes Payable to Banks
$ 4.239
$ 301
$ 2,567 Weighted daily average interest rates on short term debt:
Commercial Paper 7.99 10.6%
9.0%
Notes Payable to Banks 8.19-9.2%
9.3%
31
NOTES uontinunn NOTE 11. CONINIIT.\\lENTS AND CONTINGENCIES Construction Program construction and approximately 93% complete as to start-Total cash construction expenditures for 1986 are estimated up, and scheduled for completion in the second half of at approximately $86,082,000, which includes 1986. The cost containment agreement established a
$18,7%,000 forjointly-owned facilities. Current commit-targeted in-service date of December 1986 and a targeted ments for the construction of major production and cost of $3.7952 billion, and provides for penalties for transmission fxilities amount to approximately overruns based on the final cost of the unit. The
$12,380,000 of which it is estimated approximately Company's portion of the originally targeted cost is
$8,905,000 will be expended in 1986. These amounts approximately $198.1 million, including the Allowance for i
exclude allowance for funds used during construction and Funds Used During Constmetion (AFDC). However, the customer contributions.
targeted amount may be subject to adjustment on account Nuclear Insurance Programs f changes in the regulatory treatment of Construction The Company is a member of certain insurance programs W rk In Progress and AFDC, as well as changes due to which provide coverage for property damage to members, certain extraordinary events not contemplated by the nuclear generating plants. Facilities at the Peach Bottom p rties in 1983. At December 31,1985 the Company's and Salem Stations are insured against property damage e sts associated with Hope Creek amount to approximately losses up to $1.1 billion per site under these programs.
$204 million and the Company has recently been advised The Company is also a member of an insurance program by PSE&G that the estimated overall cost for Hope Creek which provides insurance coverage for the cost of replace-is expected to be between $4.15 and $4.30 billion. The ment power during prolonged outaces of nuclear units Company cannot predict the final cost of the Hope Creek caused by certain specific conditioins. Under the property umt, tk date of conuncement d conemal padon, and replacement power insurance programs, the Company r the ultimate effects thereof on its operations. However, could be assessed retrospective premiums in the esent the hian gement believes the final outcome of this matter will insurers' losses exceed their reserves. As of December 31, n t have a material adverse effect on the Company's 1985, the maximum amount of retrospective premiums the II"""#I*I P 'III "'
Company could be assessed for losses during the current Nuclear Plant Outages policy year was $8.2 million under these programs.
The BPU has deferred consideration of $12,179,000 of in the event of a nuclear incident at any of the facilities replacement power costs associated with certain nuclear covered by the federal government's third-party liability outages relating to generator failures at Salem Station indemnification program, the Company could be assessed pending the development of the record on such outages in up to $2.1 million per incident, but not more than the next energy clause adjustment proceeding of the
$4.2 million in a calendar year, in the event more than one operator of the station, Public Service Electric & Gas incident is experienced.
Company. The co-owners of the station have instituted Purchase Power Agreements litigation against the supplier of the affected equipment.
The Company has an arrangement for a limited term The Company cannot predict the outcome of this matter or purchase of energy and capacity from Allegheny Power its ultimate effect on the Company.
System which was effective for 1985 and subject to annual Nuclear Fuel extensions. The Company also has agreements to purchase The Company's contrxtual liability to purchase nuclear cert'in capacity and energy output from units of Itnnsyl-fuel from Itarl Fuel Corporation for Salem and Hope vani Pbwer & Light Company.
Creek Generating Stations as of December 31,1985 was Hope Creek Cost Containment app oximately $31,000,000.,Under certain conditions of The Company owns 5% of the the Hope Creek Nuclear term nau n, the C mp ny will be required to purchase all Generating Station, currently under construction by Public nuclear fuel then existing at a pnce which will allow Pearl Service Electric & Gas Company (PSE&G), which owns Fuel Corporation to recover its net investment costs.
the other 95% of the unit. In July 1983 the BPU approved Nuclear fuel requirements for Itach Bottom Generating an Agreement between the Company, PSE&G, the New Station are being provided by the operating company Jersey Department of Energy and the New Jersey Depart-through a fuel purchase contract. The Company is ment of the Public Advocate which establishes a program mp nsible for payment of its share of fuel consumed and to contain the continuing construction costs of Hope related operatir.g costs and interest expense. These costs Creek, which is currently 99% complete as to physical are included in fuel expense.
32 I
I ATI. ANTIC CITY ELifrRIC COMPANY NOTE 12.
- 1. EASES The Company has certain obligations which, in accordance not have a material effect on assets or liabilities, and would with criteria established by the Financial Accounting not affect income, since the total amortization of the leased Standards Board (FASB), are capital leases, but are assets and the interest on the lease obligation would equal accounted for as operating leases in accordance with the the rental expense currently allowed for ratemaking pur-ratemaking treatment. An accounting standard issued by poses. Rentals charged to operating expenses for the years the FASB requires that the Company record such leases on ended December 31 were as follows:
its balance sheet by 1987. Recording capital leases would (Thousands ofDollars)
I985 I984 I983 Nuclear Fuel
$II,N00
$ 8,457
$ 6.364 Other 4.511 4,759 5,268 Total
$16.311
$13.216
$11.632 The future minimum rental commitments under all non-cancelable lease agreements are not significant.
NOTE 13. SUPPLEAIENTARY INCOSIE STATEAIENT INFOlGIATION Operating expenses include maintenance costs of 1984 and 1983 respectively. Charges to income for royalties
$43,378,000, $39,247,000 and $35,066,000 for 1985, and advertising are less than 1% of gross revenue.
NOTE 14. QUARTERIX FINANCIAL RESULTS (UNAUDITED)
Quarterly financial data, reflecting all adjustments necessary in the opinion of the Company for a fair presentation of such amounts, are as follows:
Operating Operatir g Net Earnings For Earnings Quarter Revenues Income Income Common Stock Per Share (Tiwusands of Dollars Except lyr Share Amounts) 1985 ist
$140,491
$19,104
$12,658
$10,962
$ 61 2nd 134,214 15,683 8,866 7,176
.40 3rd I80,4I I 35,630 27,815 26,283 1.45 4th 124,617 I8,989 11,180 9,729
.53
$579.733
$89.406
$60.519
$54. iso
$3.00m 1984 r
ist
$133,649
$21,527
$15.360
$13,588
$.78 2nd 125,073 18,448 11,431 9,660
.55 3rd 163,929 36,275 28,330 26.586 I.51 4th 126,880 15.141 8,156 6,475
.36 i
5549.531
$91.391
$63.277
$56.309
$3.20 (HThe indmJual quarters may not add to the total due to the mcresung average number of Comnma shares outstanding at the end of cai;b quarter The revenues of the Company are subject to seasonal fluctuations due to increased sales and higher residential rates during the summer months.
33
r SUPPLEMENTARY INFORMATION CONCERNING Tile EFFECTS OF CllANGING PRICES wntourtn The following supplementary information about the effects certain recommendations it believes would simplify both of changing prices is presented in accor6nce with the presentation and understanding of the effects of standards issued by the Financial Accounting Standards intiation on a business enterprise. The effects of changing Board (FASB). The Company cautic,ns readers on using prices are calculated by adjusting the financial data for this information to draw any conclusions concerning the changes in specific prices of the components of the Company or its operations, since the Company's rates are Company's utility plant by applying the 11andy-Whitman subject to regulation. Additionally, this information is still Index of Public Utility Construction Costs to historical cost considered experimental in nature and under continuing by vintage years, reflecting the current cost of replacing review by the FASB. The Company has expressed its views resources actually used in the Company's operations.
to the FASB concerning these disclosures and has made y
a STATEMENT OF INCOME FROM CONTINUING OPERATIONS ADJUSTED FOR CilANGING PRICES (In Average 1985 Dollars)
Results of Operations:
(Thousands of Dollars)
Year Ended December 3l, l985 At Current Historical A
Cost Operating Revenues
$579,733
$$79,733 Operating Expenses:
Operation and Maintenance Expenses 412,034 412,034 Depreciation and Amortaation Expense 41,985 89,273 Federal Income Tax Expense 36,308 36,308 Other 28,887 28,887 Income from Continuing Operations 5 60.519
$ 13.231
p ATLANTIC CITY
(
LLI-CTRIC COMPANY Depreciation and amortization expense expressed in current Net Utility Plant Cents Recewrable cost amounts were determined using the rates and methods Under rate making prescribed by the regulatory commis- -
used for computing book depreciation and amortization sions to which the Company is subject, only the historical applied to utility plant balances re-expressed in terms of cost of utility plant is recoverable in revenues as deprecia-current costs.
tion. Therefore, the excess of the cost of utility plant stated Operating revenues and expenses, other than deprecia-in terms of current cost over the historical cost of plant is tion and amortization, were incurred ratably during the not presently recowrable. Due to this feature, the value of year and are, in effect, stated in average 1985 dollars, utility plant and its effect on income from continuing income taxes were not adjusted because the present tax operations adjusted for changing prices must be considered laws do not allow a deduction for depreciation and in terms of its net recoverable cost which is historical cost.
amortization adjusted for the impact of inflation. There-While the rate making process gives no recognition to the fore, the Company's effective tax rate rises from 37.5%
current cost of replacing utility plant, based on past under the historical cost basis to 73.3% under current cost practices the Company believes it will be allowed to cam a basis.
return on the increased cost of its net investment when This supplementary information should not be used to replacement of facilities actually occurs.
assess the probability of future cash flows when existing Current War Decline in Purcluping Power of Net utility plant is replaced. The estimates do not reflect the Amounts Dued effects of the regulatory process nor the specific plans of the Company for the replacement or modemization of The current year decline in purchasing power of net amounts owed was $28,980,000. During a period of utility plant. A meaningful estimate of the estimated lesel of future capital expenditures is set forth on page 15 of the inflation, holders of monetary assets such as cash and receivables suffer a loss of general purchasing power while annual report.
holders of monetary liabilities, generally long term debt, Current War EfRect of Increased Price Levels experience a gain because debt will be repaid in dollars
(%,anss qroonars) having less purchasing power. The Company's gain from the decline in purchasing power of its net amounts owed is Increase in General Price Levels on primarily attributable to the substantial amount of debt and Utility Plant Held
$63,61I cumulative preferred stock subject to mandatory redemp-increases in Specific Prices tion which has been used to finance utility plant. This on Utility Plant Held 29,406 gain, however, should not be considered as providing funds Excess of increase in General Price Levels Over to the Company, since the Company is limited under rate Increases in Specific Prices
$34.205 making procedure to the recovery only of its embedded cost of debt.
At December 31,1985 the co:,t of utility plant, net of
- accumulated depreciation was $1,835,324,000 on a current cost basis, while historical cost was $1,075,801,000. The accumulated provision for depreciation and amortization under the current cost method was estimated for each major class of utility plant (production, transmission, distribution and general plant) by multiplying the respec-tive cost data by a percentage representing the expired life
- of existing facilities of each class at December 31,1985.
Fuel inventories, the cost of fossil fuels used in generation, have not been restated from their historical cost. New Jersey regulation controls fuel costs, through the operation of a levelized energy clause, such that recovery is ultimately limited to actual cost. For this reason fuel inventories are effectively monetary assets.
l 35
FIVE-YEAR COMPARISON OF SELECTED FINANCIAL DATA INCLUDING UNAUDITED SUPPLEMENTARY DATA ADJUSTED FOR CilANGING PRICES tttc E Co E NS Thousands of Dollars Except Per Share Amounts-Current Cost Amounts Expressed in 1981 Dollars Years Ended December 31 1985 1984 1983 1982 1981 Operating Revenue
-historical
$ 579,733
$ 549,531
$ 517,142
$ 444,178
$ 469,683
-trended in 1981 dollars 490,128 481,016 471,925 418,231 469,683 Income frem Continuing Operations
-historical
$ 60,519
$ 63,277
$ 66,152
$ 49,055
$ 46,988
-at current cost (a)
I1,186 15,740 19,846 3,805 7,648 Income from Continuing Operations per Share of Common Stock (b)
-historical 3.00 3.20 3.48 5
2.76 3.03 h
-at current cost
.32
.55
.79
(.21)
.01 Effective income Tax Rate
-historical 37.5 '"e 39.8 %
42.6 %
35.5 %
36.8 %
--current cost basis 76.5 82.3 94.7 112.7 102.3 Exc',ss of increases in General Price levels Over increases in Specific Prices (a)
$ 28,918
$ 49,792 290 $
(6.724) $ (25,2M)
Decline in Perchasing Power of Amounts Owed (a)
$ 24,501
$ 26,795 16,948 5 20,401 5 39,572 Net Assets at Year End
-historical
$ 493,450
$ 474,217 5 448,894
$ 414,834 5 338,846
-trended in average 1981 dollars 410,179 408,270 402,895 386,460 327,892 Net income as a Percent of Operating Revenue (b)
-historical 10.44 %
11.51 %
12.79 %
ll.N%
10.00 %
-trended in 1981 dollars 8.83 10.07 11.67 10.40 10.00 Earned Rate of Return on Shareholders' Equity
-historical 11.98 %
13.02 %
14.49 %
11.20 %
12.21%
-trended in 1981 dollars 10.13 11.40 13.22 10.55 12.21 Totd Assets at Year End
-historical
$1,299,633
$1,220,503
$1,139,978
$ 1,077,969
$1,013,789 Long Term Debt and Cumulatin Preferred Stock S:bject to Mandatory Redemption
-historical
$ 521,612
$ 473,462
$ 459,366
$ 462,470 $ 447,389 Dividends Declared per Share of Common Stock
-historical 2.555 $
2.45 2.32 2.24 5
2.08
-trended in 1981 dollars 2.16 2.14 2.12 2.11 2.08 Market Price per Common Share at Year End
-historical 28.50 24.13 23.25 20.75 17.25
-trended in 1981 dollars 24.48
.21.47 21.56 19.98 17.25 Average Consumer Price Index 322.2 311.2 298.5 289.3 272.4 Certain comparative per share data trended in 1985 dollars (without adjustment of earnings for the pro forma effects of inflation on depreciation amounts) are as follows:
1985 1984 1983 1982 1981 Earnings (b) 3.00 3.31 3.76 3.07 3.58 Dividends Declared 2.555 2.54 2.50 2.49 2.46 Market Price (Year End) 28.50 24.99 25.10 23.26 20.08 (a) These amounts will differ from those shown in Stas-mM u(Income From Continuing Operations Adjusted for Changing Prwes because a different base year has bee used in the data presented above (1981) and in ik Iw eng pace information (1985)in order to illustrate the impact of changmg pnces in alternative forms.
(b) Income from Continuing Operations. Net fr# 4 as: wning o Per Share data for 1982 include the cumulative effect of a change in accounting method.
36
I INVESTOR INFOR51ATION ATLANTIC CITY urCTRIC COMPANY Where should I send inquiries concerning my insestment in is additional information about the Company available?
Atlantic City Electric Company?
The annual report to the Securitics and Exchange Commis-The Company staffs an Investor Records Department sion on Form 10-K and other reports containing financial which serves as recadkeeping agent, dividend disbursing data are available to shareholders. Specific requests should agent and also as Transfer Agent for Common and be addressed to hir. hl. R. hfeyer, Secretary, or the Preferred Stocks. Correspondence concerning such matters Investor Records Department, at the address shown above.
as the replacement of dividend checks or stock certificates, address changes, transfer of Comraon and Preferred Stock Who is the trustee and interest paying agent for the certificates, Dividend Reinvestment and Stock Purchase Company % Bonds and Debentures?
Plan inquiries or any general information about the First Stortgage Bond recordkeeping and interest disbursing Company should be addressed to:
are performed oy Irving Trust Company, One Wall Street, Atlantic City Electric Company New York, New York 10015. Debenture services are Investor Records Department performed by First Fidelity Bank, N.A., 765 Broad Street.
P.O. Box 1334,1199 Black Horse Pike Newark, New Jersey 07101.
Pleasantville, New Jersey 08232 When are dividends paid?
Telephone (609) MS-4506 or (609) MS-4507 The proposed record dates and payable dates for upcoming hfr. hl. R. hieyer, Secretary, is the Corporate Officer dividends on Common Stock are as follows:
responsible for all investor services-htr. R. E. hioeller is Record Dates Payable Dates hianager of Investor Services and hirs. hl. T. Lindsay ts Supervisor of Shareholder Recordkeeping.
h1 arch 20,1986 April 15,1986 June 19,1986 July 15,1986 Does the Company hase a Dividend Rein *estment and Stock Purchase Plan?
September 18,1986 October 15, 1986 December 18,1986 January 15, 1987 Yes. The Plan allows shareholders and employees t automatically invest their cash dividends and/or optional Th followin8 table indicates dividends Paid in 1985 and cash payments in shares of the Company's Common Stock.
1984 n Common Stock:
Holders of record of Common Stock interested in enrolling in the Plan should contact the Investor Records Depart-1985 1984 ment. See our address above.
First Quarter
$.62 5.59 Second Quarter 5.62
$.59 Where is the Company stock listed?
Third Quarter S.645
$.62 Common Stock and 5%% Cumulative Convertible Pre-Fourth Quarter
$.645
$.62 ferred Stock are listed on the New York Stock Exchange.
The Company's Common Stock is also listed on the Pacific Annual Total
$2.53
$2.42 and Philadelphia Stock Exchanges. The trading symbol of the Company's Common Stock is ATE; however, news-Dividends paid on Common Stock in 1985 and 1984 paper listings generally use AtCyEl.
were fully taxable.
The high and low sales prices of the Common Stock as reported in the Wall Street Journal as New York Stock Exchange-Composite Transactions for the periods indi-cated were as follows:
1985 1984 High Low liigh Low First Quarter 25 %
23 %
23 %
20 %
Second Quarter 29 %
24 %
21 %
19 %
Third Quarter 29 %
25 %
23 20 %
Fourth Quarter 29 %
26 25 22 %
37
STATISTICAL REVIEW 1985-1975 1985 1984 1983 1982
. Facilities for Service Total Utility Plant (Thousands)
$1,406,696
$1,309,670
$1,226,165
$1,153,321 Gross Additions to Utility Plant (Thousands)
$ 105,213
$ 95,388 5 83,673
$ 126,893 Pole Miles of Transmission and Distribution Lines 6,977 6,958 6,925 6,918 Generating Capacity (Kilowatts) (a) (b) 1,605,700 1.594,200 1,594,200 1,531,200 M:.ximum Utility System Demand-kw 1,432,000 1,298.800 1,346,700 1,264,200 Capacity Reserve at Time of Peak (% of Instal. Gen.)
10,8 c'c 18.5 %
15.5 %
17.4 %
Energy Supply (Thousands of kwh):
Net Generation 5,817,254 6,237,724 5,913,1 %
5,676,118 Purchased and laterchanged-Net 1,049,393 393,175 579,488 466,667 j
Total System Load 6,866,647 6,630,899 6,492,684 6,142,785 Electric Sales (Thousands of kwh)
Residential 2,638,121 2,646,813 2,545,351 2,415,292 Commercial 2,298,895 2,150,464 2,019,468 1,894,535 Industrial 1,204,971 1,197,392 1,225,637 1,218,520 All Others 57,685 59.122 60,978 63,770 Total 6,199,672 6,053,791 5,851,434 5,592.117 Ilesidential Electric Service (Astrage per Customer)
Amount of Electricity used during the year (kwh) 7,643 7,866 7,715 7,444 Revenue for a year's service
$ 778.77
$ 783.47
$ 735.66 5 644.77 Revenue per Kilowatt-hour 10.19e 9.%e 9.54e 8.66e Customer Data (Average)
Residential With Electric Heating 68,871 65,261 62,272 59,319 Residential Without Electric Heating 276,305 271,207 267,642 265.124 Total Residential 345,176 336,468 329,914 324,443 Commercial 44,256 43,615 43,152 42,885 Industrial 1,020 1,015 1,021 1,018 Other 554 544 549 627 Total Customers 391,006 381,M2 374,636 368,973 Total Service Locations 417,625 407,277 398,526 391,989 Population Served 1,142,000 1,112,000 1,092,000 1,069,000 Financial Data (Thousands of Dollars)
Energy Revenues:
Residential
$ 268,814
$ 263,612
$ 242,705
$ 209.191 Commercial 209,830 190,435 175,520 154,792 Industrial 80,392 79,123 76,109 71,255 All Others 10,315 10,405 10,133 9.255 Total Energy Revenues 569,401 543,575 504,467 444,493 Unbilled Revenues-Net 3,076 (1,340) 5,671 (6,795)
Other Electric Revenue 7,256 7,296 7,004 6,480 Total
$ 579,733
$ 549,531
$ $17,142
$ 444,178 l'.vestor Information Earnings per Average Common Share 3,00 3.20 3.48 2.76(c)
Average Number of Shares Outstanding (In Thousands) 18,069 17.581 16,923 15,116 Dividends Paid on Common Stock 2.53 2.42 2.30 2.20 Dividend Payout Ratio 84 %
76%
66 %
80%
Book Value Per Share (War End) 24,76 24.27 23.58 5
22.45 Price Earnings Ratio (Year End) 10 8
7 8
Times Fixed Charges Earned (before income taxes) 3,33 3.61 4.11 2.27(c)
Shareholders and Employees (War End)
Common Shareholders 48,635 47,446 48,299 48,790 Employees 2,099 2,012 1,995 2,022 (O Excludes capacity allocated to a large industrial customer (b) lacludes unit purchase of capacity under contracts with Pennsylvania Power & Light Company (commencing in 1983) and Delmarva Power & Light Company (from 1980 through 1984 (c) Earnings calculation includes the cumulative effect of an accounting change. l'inancial ratio is computed excluding the cumulative effect.
38
ATLANTIC CITY ELECTRIC COMPANY 1981 1980 1979 1978 1977 1976 1975
$1,064,928
$ %2,052 5 870,075
$ 802,473
$ 753,269
$ 710,343
$ 675,617 5 123,318
$ 97.330
$ 72,773
$ 58,073
$ 48,733
$ 41,702 5 46,745 6,910 6,879-6,831 6,786 6,735 6,6 %
6,645 1,524,600 1,431,600 1,384,700 1,414,700 1,414,700 1,334,700 1,334,700 1,263,800 1,261,700 _
1,192,600 1,177,400 1,176,000 1,030,300 1,069,400 17.1%
11.9 %
13.9 %
16.7 %
16.9 %
22.8 %
19.9 %
5,302,023 5,533,178 5,397,338 5,625,988 5,293,019 4,918,906 4.715,357 946,241 643,106 464,143 130.037 224,169 324,1%
190,852 6,248,264 6,176,284 5,861,481 5,756,025 5.517,188 5,243,102 4,906,209 2,480,225 2,514,738 2.411,732 2,377,202 2,221,250 2,070,766 1,938,724 1,849,863 1,769,208 1,580,384 1,586,097 1,478,559 1.392,029 1,346,216 1,279,724 1,286,205 1,255,3N 1,250,636 1,220.260 1,143,170 1,036,755 65,555 63,753 60,799 60,705 58,866 57,667 56,465 5,615,367 5,633,904 5,308,219 5,274,M0 4,978,935 4,663,632 4,378,160 7,751 8,003 7,849 7,951 7,653 7,320 7,018
$ 670.60
$ 536.99 5 439.92 5 406.18 5 378.36 5 349.64
$ 329.25 8.65e 6.71e 5.6t e 5.lle 4.94c 4.78e 4.69e 56,100 52,225 48,339 44,387 40,318 37,581 35,235 263,9N 261,988 258,941 254.592 249,927 245,2 %
241,019 320,004 314,213 307,280 298,979 290,245 282,877 276,254 43,219 43,267 43,219 42,672 42,033 41,170 40,608 1,032 1,041 1,048 1,034 1,047 1,071 1,100 634 654 667 673 676 681 684 364,889 359,175 352,214 343,358 334,001 325,799 318,646 386,046 379,242 371,362 362,131 352,205 343,147 336,105 1,056,000 1,037,000 1,015,000 990,000
%I,000 937,000 915,000
$ 214,614 5 168,733
$ 135,178
$ 121,440
$ 109,818
$ 98,904 5 90,956 156,624 115,973 88,819 80,539 73,354 66,354 63,544 82,908 60,512 47,590 42,185 40,885 36,438 34,974 9.700 7,836 6,624 5,973 5,630 5,406 4,881 463,846 353,054 278,211 250,137 229,687 207,102 194,355 5,837 5.337 4,895 4,921 5,308 4,925 4,724 5 469,683
$ 358,391
$ 283.106
$ 255,058 5 234,995
$ 212,027
$ 199,079 3.03 2.62 2.36 2.21 5
2.06 5
2.60 2.41 13,034 12.372 11,980 10,791 10,630 9,747 9,490 2.04 1.90 1.765 5
1.67 1.62 1,56 1.51 67 %
73 %
75 %
76%
79 %
60%
63 %
22.40 22.22 21.63 21.27 20.71 20.25 19.34 6
6 7
8 11 9
7 2.84 3.03 3.62 3.62 3.I7 3.I4 2.88 48,424 47,762 48,194 44,490 43,826 42,516 39,232 2,035 1,968 1.903.
I,797 I,739 I.714 I.74 i This Annual Report has been prepared for the purpose of providing general and stanstical information un~rning the Company an3 not in connect on with any sale, offer for sale or sohcitanon of an offer to buy any secunnes.
39
BOARD OF DIRECTORS ELEANOR S. DANIEL DIRECTOR A
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Self-employed, Vice President and director of COMMITTEES f+*
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['O RICHARD M. DICKE o
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3 Counselor-at-law, partner of the lawprm of Simpson Thacher & Bartlett Audit M
- M JOHN D. FEEHAN Chairman of the Board of the Company EE I
E JOS. MICHAEL GALVIN, JR.
op ent President and Chief Executin Offcer of Salem County Memorial Hospital g,,,g,,
GERALD A. HALE Operations M
&;M President of HHH, Inc., an innstment and
& Research management company MATTHEW HOLDEN, JR.
Finance
[QM M
M M
Professor of Gowrnment and Foreign Affairs, Uciwisity of Virginia E. DOUGLAS HUGGARD Pension &
p"q President and Chief Executhe Offcer Insurance of the Company I"'***'I M'
etired re 1 utin \\Tce President, RCA Corporation MADELINE H. McWHINNEY President of Dale, E!!iort & Company, a M
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management consultingprm providmg g,g,,;,,,
services to the banking industry JOHN M. MINER W.WW Committee Chairman Financial Consultant Committee Memsership En OfBcio Membership OFFICERS Years of Years of Years of Service Service Service E. DOUGLAS HUGGARD DAVID V. BONEY JOSEPH T. AELLY, JR.
President and Vice President-Customer Assistant Vice President-Chief Executin Offcer 30 and Community Services 31 Operations 35 JERROLD L. JACOBS JOHN E BORN HENRY K. LEVARI, JR.
Senior 17ce President-Vice President-Vice President-Operations and Engineering 24 Electric Operations 33 Corporate Planning 14 I
l MICHAEL A. JARRETT LANCE E. COOPER J. DAVID McCANN l
Senior Vice President-Vice President-Control Vice President, heasurer Corporate Services 10 and Assistant Treasurer 3
and Assistant Secretary 13 l
BRIAN A. PARENT THOMAS E. FREEMAN MARTIN R. MEYER 1
Senior Vice President-Vice Presider,t-Secretary and Assistant i
Planning and Rates 18 isuman Resources 5
heasurer 37 J. G. SALOMONE MEREDITH I. HARLACHER, JR.
HENRY C. SCHWEMM, JR.
Senior Vice President-Vice President-Vice President-Finance and Accounting 9
Engineering 20 Production 16 l
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t 3 + t t h P J 4 Or the Con!r 00nntown W6mngtog a &g m gy t I 1 1 I i 3 To Ot:n SrocKiiotntn.s t Our report this year Is desmned to ret!ect q y L 4 another year's good wod a4 contvJence i l gained Wrough sustamed performance. l E b ^ Tui: SloC Kilot Di Rs' Pi Rsi'i CilsT C:Imarva Etwer is a tmancially heaMy company wrth well running fxstities and a balanced fuel m:t . w b ?.< 0, 7 8 Tiii Ct:sf ositas' Ptnsii ciivi Competit.ve and tiemble pacing is the I cornerstone of Delmatya f%wer's plan to l Y l Q- _ _., meet an oncertam future ( 10 l Tui Esin os ti.s' Pi nsi'i ciivi. i l To seek innovat on. the company has developed i a method forinvoMng more employees a v l decisions affecung theirjobs. I I 12 l Tiii Cosisitmiry's Pi nsiiciivi j i Energy and employees work together to he!p im-l I prove the quality of bfe on the Delmarva Penmsula l i I 1 14 i Tin. Ft'r t:Ri. Earnmgs growth will require contmved sales i i improvemt;ht, cost control, productivity gains. l [ e a and supplemental outside investments ~ c i ltrcent Increase FINANCIAL HIGiluGins 1985 1984 (Decrease) Rrviseis S 722.8 million 702.6 million 2.9 Ntr1 scout 96.6 milhon S 92.1 million 4.9 EARNINGS PL R $11 ARI: 2.76 2.63 4.9 ' Divint sos DICI ARI.D l.945 1.83 6.3 Comtos Stocx OcisTAsmso Avi RAct Sti ARis 30,481,925 30.248,482 0.8 Comtos $ rock Boox Wirt 18.43 17.70 41 CoNstRcCrios ExcisnittRis 94.9 million 5 79.5 ' milhon 19.4 INTt RNAI tv GI Nt RAIL D FUNDS 151.3 million 110.5 million 36 9 Et ICTRIC $AU s 8.53 bilbon kwh 8.31 bilhon kw h 2.6 Et tciRic Cosrous R (average) 314.013 303,965 3.3 dvl RAGt Ristor s nAt. UsAct 8,059 kwh 8,283 kwh (2.7) G As SAirs 15.71 million mcf 17.24 milhon mcf (8 9) gas Cestout Rs (average) 75,103 74,319 1.1 dvlRAGI NislDINilAt UsAct 79.7 mcf 88 8 mtf (10 2) 2 To Oun SToci<itoi.orns l i \\ ,I i l .(% i ~ I i Tiin RitoRDsitows liiAT 1985 was ANoiiii.R Good, i i l solid, Ill?llDING IlloCK Yl:AR. Howixi R. tron Ri.i r i< tion,1985 was sioni: iiiaN iiiAT. Ir was a Yi AR j i will.RI 5tisTAINI.D i'l:RI oRslANci: GFNI RA TI D INLRl:Asl.D CONiIDI NLi: ANtoNG i N11'l oYi l_s. 1 Iliciniscitis ARi: Earnings incretised for the fifth consecutive year. There were no electric rate increases in the service territory.
- Customer approval ratings increased for the third consecutive year.
- Delmarva Power generating phnts performed ahove national averages.
- Employee safety records showed continued significant improvements.
Employee participation programs continued to mature and yield innovative ideas.
- New outside investments increased earnings.
. Our report this year is designed to reflect another year's good work and confidence gained through sustained performance. This performance and confidence is important to you now as a shareholder or Cttstomer heCause in 198)h. we Will hegin to make sonle decisions concerning energy supply for the mid 1990s.T hese decisions will be complex hecause of changing forces in the economy. Employees will be able to look ahead and focus on these challenges with the conhdence that they can perform their current johs well. 3 ai l l i t f i t l I t i f o l l 1 f i l] }- ) i t 4 1 ! ! i i', 'f i I!!I i i : } f i if i j I i ! l l ' I ! ff j r t w 1 !',!;!!l{ /, i O
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+ L l l l t a\\ \\ A-s s \\ 4 N e t I l l l i e Ws crews a caitrewle. Meyisd a However, management is concerned about com-has estabbshed one of the lowest average electne begm exn day etn 7atate~ sesses mitting to a new power plant now for several puces in the region through reducingdependence esoned tomecte safety ethcecy arnt reason (
- The construcnon costs uill be large on od froni 53% m 1979 to 20% in 1985. reducing partcoata Around the country, large building programs have workforce. consolidating facihties. and developing become financtil and emononal albatrosses for a parncipative workstyle which encourages mno-utilities. A new plant in 1996 is projected to cost vative ideas to contain costs without reducing
$ 3.800 per kdowatt u hich is more than six ames quahty Technology resicw
- We wdlinvest $50 the cost of the Indian River Unit 4 completed in m ; lion over the next ten years, to keep old plants 1980. Total costs are estimated to he three quar-runnmg longer than planned rather than replace ters of a bdhon dollars
- Also. for several years them with e costly new units investment ev in this letter. concerns have been expressed about pansion
- Earnmgs not now needed to fmance the lessons learned in the r.ulroad industry Large construenon are being used to upgrade facihnes Our report this year is designed to reflect capital Inustments can he devalued quickly by m advance of any major hmkhng program and anottler year's good wort and conhdence technology breakthroughs and structural changes to invest in related projects outside the unhty gauned through sustamed performance.
within an industry.
- linally, unhty harometers business which can athieve returns greater than are sending contradictory signals. Forces such as the pnncipal business Ihe next few years wdl increasmg summer peaks indicate budding whde he challengmg and escinng We must plan care-other forces such as whechng and wgeneration fully for the long-run needs of our tustomers At indicate delay.
the same time. we must hnd ways to mamtam
- M in 1986. we wdl be asking ourselves. do carnmg3 grow th m Iace of modest projected grow th we need another plant in 1996 or can it he post-m assets and no increase m authon:cd returns poned through a combination of various energy The 1983 performante shows that employees management techmques? What are the benefits if have the know-how and confidence to perform our assumpoons turn out to be correct? What are their current jobs well and take on these chal-the consequences if they turn out to be wrong?
lenges. I apprecute their efforts and huk forward
- Whde future capacity planning wdl be empha-to workmg wuh them as Deltnarva Iower con-si cd this year. the company has been prepanng onues to prepare for the next de ade for the 1900s in other way,indudmg Price con-m<crely.
s C trol
- Compennvc priang is truml for stayino
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I t I Saval ethts nee mat % thus year to prcwk businesses, as we,n mwntenn waeytat n:tnuseuenagy mtormatas llol D i nt ilNI oN l'Rlfl 5.
- In 1985, there were no rate increases through-sidered the improvements execlient or good out the service territory, and none are expected Ci siosti n Orisios 1siruosis
- Custonier tollow-in 1986
- Delmarva Power's average prices for up suncys wmpleted m l'>85 how th.n while energy rank low in the region. In cents /kWh:
there is always room I..r improvement. t ustomer New York,13 03; Newark, NJ. 9 21; 11oston. 8 70 servu e workers at Dehnarva Powu generally do Philadelphia. 8.79. Delmarva Peninsula. 6 00. and their job well and hnd waye to do better. 'n the Competitwe att tiemble prXsng is Itle llaltimore. 6 57. Rankings of natural cas pnees gas busmew for example. 074 of the custoiners Tre we cornerstor'e of Delmatya fkner's plan to bmflot custames Ort (In cents ecf) are New York. 79.95. Philadtlphia. surveyed rated the overall pettormance el the ser-ts oelmaralwuia meet an uncertain future. is a streryth Ihe atel 67 81; Newark, NJ. 67 3 3. Iloston. 60 81; and Wil-vicemen u ho sistred their home as excell, m or emay mes at fanns. cas tees. anc! mington, 6016.
- These achievements are im-goal Cunoners m the Wilmmgton area were resa prwe mlance to ino systan ain portant to face devel0 ping Competition 5tich as more hkely to reath a representative the hr't ome ess winnacility eniv Utter 99 fluctuat'CF3 tra wheeling. w-generanon. and imported power.
they telephoned t00'u than m 108h7 W
- As v nanonalocawy Thes custama s farm is Ihti Foust Riusin
- In 1085, the company com-a resuh of these and other ellorts m pnte and r certo/ O !sware pleted a key proicet designed to improve customer customer servitc. 71 ivreem of a ton:ers gr.c Linder5tanding o[lts prodllLt and Cost T he format Delmarva Power a lawrable rannr. in the losi of the monthly clettne and gas bills was reused c ustomer suncy comp ned to t o pei< ent m 108 i to include new inforntition and highlight other and 30 perc ent in 108 3 Information that would he of most tise to the otte I
tomer. Customers partiapated m the development l of the new hill format and contnhuted <creral l
- m. gor sugge4 ions u hith were used In the losi Lllstomer sursey,8l percent ol those polled (sin-8
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l! ', p ?i t lij ggy e E j r _ _. _ ~. _ _ _ _ _ _ _. _ _ _ _ i l 4 I I l t a i. l i The comery 5 2.570 employees i AtXk to prcWe energy at the l L. .Lt Icwest renonacie orice l l Dracups I coeu w sto a w re out a lost-nme aaident-a significant achiewment training and had undertaken more th.m 1100 lk? Cit % JIthe Dt'INare Ctf!twwPlaar e m this work enviranment.
- Ihis is an example mnovanve projects u nh the techmques they had Oc* antr 585. Tetra and t*c torp'y ; geed of the exallent 1085 sa!cty record Recoidabb learned
- The longacrm goal of this program is l
10 t tw ear O:cr>- Are ct Toc! WlO Injunes decreased 12% to 50; lost-time m!unes to encourage the ideas of the mJividual and to laprtre theDeuva e D!y gregg unr decreawd t'4 S to 5; and lost workJays decreased reuigm:c the henchts of teamwork. The 9 tm ganb!t cW: prwris sHm rard 8 % to 71
- In 1081 the company s saferv pro-lit RRirTN1 GloRin Ih sIVNsl
- lInployeesde crVC inctivtT) Tcaz s To seek mnovatsort. the corvarry has devekped l
tv t, offrrey and gram wJs strengthened m an effort to reduce acci-special commendation for their elfaris to restore etwtauty n at ni a method for Involvttig more employees M Ottaa Pm dents and to sparc employees and their famihes power and serve custorners ah r llurncane Glona OllS?lWIT DECISIONS at!CCtltty theirpts. the accompanymg p.un and anxiety 1 hen the dehvered a glanung but poucrlul punch to the company ranked near the bottom m safety per-Dehnarva reninsula l he lst of 50 000 customers l l formance among companies m the 5outheastern wahout cla tnaty v ere restored w uhin 51 hear, i f la tnc lhchange in 1481 Dehnarva Power .ifter the <torm Cu<tomer letters wmphmented rJnkCd [lr5t m its Rroup m the kafety perfolWJnic DelmJrvJ Iower emplo)ces on thcu high Ic\\cl of I and lleet v!cty wntests p;epai. mon for ths stonn Lustomer Icnos f rom l PtRilfirttidN, IN\\olsi\\iiNt, (IoNIRN
- in all 1.ong l< land. w here Delmarv.t Pow ( r emplo)ces I
1 i efIort to sCck mnovJthe Idc b and so!unon, m a .l!so Wof kcd. Wef C espt uallv apprn lanVC oI tbc (hanging business. the comp.my. dunne the last nme Delmarva Power workers sac nhted hom 4 three years, has developed and rehned a mohod their famihes to help them for mvolvmg more employees m the detnion-Pinso w :
- senior \\ ice I reudent and Dirn tor al[d fillg thcli jobs * \\\\ hile pro [lew can fl!l he I r, Ink d ( Ath renred altel 14 p ars ol dbon-l maJe m this a re.i. h) the end of insi 1.0 i ;
gunhed -ervnc with the wmpany. Ils tu hnnal employees had rnemd at least the last inc! o! c s pe r n sc mJ locodly support uill be nus rd J 11 ~ i j Tiit Comiuxin's PERsercnvt 3 I 1 i 1 l ENVIRONill N TAL PROIICllOs
- Os Jtu lo, help people in trouble through the Radio Watch l
1 program
- While Delmarva Power employees i
1985, En LaiarOu. Vn sNA pow i n ri.Asi i.et ir-have aluys used their equipment to summon j 1 i j aid for people, in 1983 the company sought to j h cepary \\ll.N! Ort RAIOR. EllI Asl D Till 1Iro a 01 26,000 intrease awareness of this service by developing tres prmore area s l ecw>me awcmes l a logo and advertising it In 1981 the company ty pamcoatg eith ) State aM MCal QMY0-j 5rRirI D IM 11NGI RllNGs INIO lill N AN ilcOKi-hegan Informing children about Radio Watch ceits ttravnout me l nwunsu:a e tier l l throuch a campaign m the schools Dispatchers awtome ettats l l amacaarm tax rate Rivl R Ni w Vil ssa. NI Anit Aso. also broadcast descnprions supphed by pohce of stextaes echiep r l wsinesses mamtam j missing children
- People in the community a cirnver,tw Mge Energy aM employees work togemer to help un Tre comancialsutrx
- He parncipated in the hrst harvest from a fish use this service about twice a day to call for help is grewm as symooive j
j pteve tfle quattty at Rfe on the Delmarva Etnmsula by the row wMing of t i brooding pond built by the company and main-m situanons rangmg from a flat are to senous cnase umnattan san * \\ WSA1NA ethis 1 tained by employees on their own ome h was accidents
- In other acnvines the Good Neigh-nsg ty wemtms TaMy Emscopal Chach one of many efforts where Deboarva Power em-bor Energy Fund. rased more than SIM000 in i
ployees went beyond their job, to help improve customer and stockholder contnbutions to help the quihty el hfe on the Delmarva Penmsula. people having trouble paying their energy hills (
- In keepmg with its commitment to provide
- Employees agam exceeded their goal m contn-f energy wth as hule intrunon into the environ-butions to the Unned Way and volunteered count-ment as posshle. the company mainta!ned its less hours to wmmunity acounes schedule well ahcad of the 1988 federal deadhne l
to remove capacitors contJinmg PCfk from dis- \\\\ tnbution hnc3 So far. 98b of th;m have been removed. l I Cmnit suv Ac nuto s
- In Aprd.1981 Delmarva Power emphyees who dispareh work and who the i*mahle targe nomrry am eresayit nonata neagan prestnt M.rty Dutty maw /s consunn a" airs with a mMal drIVC company \\ehteles were honored a( a tuning DNmdrya (twa emplores tw RMJ MIch lunc heon in the East Room of the Whne House by President Ronald Re.igan fer their elfiirts to 12
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'A 'A1 / I I 18 Fixasci.u Ri:vitw Asn As snsis 22 Riiout on hlasacisiisi 23 QUARii:RiY CosisioN Stock DIVint Nos AND l'Rifi lhW13 23 Rii'oni or isnii'i sni si Acc ot si tsis 24 CossorinAt :n 1 im iai ist iu u,is 3, Nori.s.:o fossois.)A si n Fis AsciT' S r sii sin s is 12 Cosses inA:n n hi At S e li!. l NY l Oli t< i ns, lhui t inas ssii.iie w'lioi n: a Isleusi t itos l t - - - - -. ~ -,. _ ~. -, _. g Ikimaru lher 6r larbt Gimpmy l Surcun FisasciAt. Data i i t <Ibitars m limrxia I for Mean ML,1 rwember 31 1985 1484 1983 1982 1981 h ..Ori ctiNo Operating lhennes 5 722,8 H $ 702393 5 649.799 5 636b66 5 608304 i Operating income 135.515 133.209 129.l38 116.57.3 107.325 Net income 90.638 92.I10 85063 73371 58.711 1 i fSRNINGS AND DDTDt.Nih IUrnlup erNure 2.7D 2o3 2.45 213 1.78 p } Dtude.,ds ikdared en l Comava Sta k 1.945 183 1 68 1 395 1535 { h erap ib.ucs Oustanding(000) 30,492 30.248 20.541 28.489 25,747 I hat Awts 1 674.770 1341030 1.533,203 1.504,771 1 400,529 i t:enstmeion l lipenJinuw ' ' 94.o.'1 70.48n 70 0 % 110640 84.200 i Itr;ctna! Generadon j ol limd., 131 M0 110. # 1 117.582 77Ah! 72.340 l' l CAri rrun iios long Tenn tAvr ' 6'M so 5n7 701 % 7.9 15 592t15 506.219 i hefened 'sto, k vrJion? l mmdatt ry redetyrion 105.000 1(n *W 105 tw 105000 1031W l l'n ferred f twk wnh j itur.J.m ey re&mpnon ' 5 402 47Mo 40.383 ~0a w O tw ( Common Equity %) 81 )
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Delmarna Ptver & IJght Com;uny FiNasctat. Rtvitw ANo ANatysis a
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Rtsctrs or Orr naiioNs Eaxsisos Delmarva Pow er & IJght Company's hnancul perfornunte and strencth wnnnued to un-prove in 1985 Eaminp per share of common stotk were 52 70 for 1985. an inacase of 13e or 4 0% from 1084 Contnbunng to the higher 1085 eammp level w cre hidier electnc i
sales addnio ul amortcanon of the credit ansmg from the sa!c of contratts (Summut and mcreased inve>tment inwme 'I he 1984 merease of 18e in carnmp per slure to 52 63 w as pnmanly annbut&le to inacased sales whwh resulted from a strong economy m the scivne temterv and t old-winter weather conditions i
I D!VIDI sns 1
In December 1983. the ikurd of threctors increawd the quacerly dnidcod i 2% to 50 Te per share the nmth,consecutne annual mcrease Ihe aurent udamcd annual diudend rme has increased to 52 02 per. hare from 5102 per share. Ihts mcrease refletts a dindend polay which is to graduaHy mcrea3e diodend, oa an..nnual luss carnmgs pcimating and thus proude 3ns khokiers with a imr and wmlxnnve rerum on the'r mvestment l
Elw na Riu stis u 'ni i s I arnings and Dividends Declared Electn.: revenue 3. net of fuel inacased 5121 mdhon or 3 M in 1083 and $10 4 milhon or 4 4% in 1084 The increases m both s cars are net of refunds na Delaw are ret.nl cietinc
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customers Refuntis of $14 7 milhon in 1085 and si 8 imthen in 1084 we c designed to bnng g
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camed rates of retum in hne wah authon:cd rmes of retum as sa!cs el ekstni n> w cre prmer 3 yQ than pnyct ted in both ye.us a9 a
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I!le increase In l0Ni and 1N84 ht.'t rc\\ enues w as atlilcVCd pn!!unty thn nic,h intre.iwd sales c
8% W d w nh the mmpany reathmg an au nme peak kud of 1.70i meniwatts in August 1985
.00 I!W litTc.lW In lNN_) volutne Wa4 pnfiunly a!!nbutable to ludict sales in the mmmel(Ul and rc u!c t lassr s A 4 h macase in mmmenut sales was partu!!) due to an expanston el the y
Q q b.mkm.pnd knanual scr.n es 3ccror in Delaware some aJdmonaliommercul customers l
D v cre also purol throng.h the npple elleu as% ured w nh macased rc3rdentul wnstnhuon in i so.
t!,e b.a.h arca< lim res ik tla-; eyrnenced a 7 n, sales gnnuh punapahy betause of a pow.ng n idercul nurket th,n is domuured by clean,al hear m the munhipahnes servet! by
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intre.lse in P)N 4 vi hunc rel.nrd c!cs trh to rinic, w J !.irdN thic to hichcr sites in the I h(
i i ic d ol the 'Inpiovetl 108 4 ioa.._.
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et of.omv and tnider u nut r a t mh+ r n inn.n, m the br't iputer of los I w -l l l
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Delnarva Power & lxht Company l
FisAscut. RIMW AND ANAM sts i
b ss Ri s i si t s un Sy t s (08hls revenuc5. nCt of tud costs. IndYecd 2 D% due to incTelsed rates % hah were partully oilset by an 8 % det rease in sales Industnal saks dethned 8 0% due to 3wnJung to altenute fuck and deurawd producnon levels Residentu! spate-heanng sales deuceed 0 3%.
pnnapa!1v due to mdder than nonna! wmter u cather conditions m the hrst yturier et 1985 1084 net ps tvenues intreawd 7 8% ductly due to lugher saks Residennal spue-heating sales increased 113% in 1084. reflectmg an merease in tustomers and the coki weather in early l
1984 (Iommert u! Ndes increased ll 0% reticL!ing an impros ed economy I
l Ra t t Ri i.t i ai u w l
The compar, is suhrett to icgulanon with rcSwt to us retad s. des of elettnary by the Delaware and Ntarvland Pubhc en xc Comnumons and the Vapnu State Corporanon s
Commnsion. w hk h hase broad pow ers os er rate nutters. accounnng and terms of wrne.
The I:ederal Encrev Reguluorv Commnsion tI I RO excruses junsdanon wnh respect to the company's at counung % stem, and p > hues and the transnusWon and sa!c at w holesale licNI!c)of elettrk CheTgv in Interstate u)fnmCrce i
Generation i
Fuel stix On Jantury 29.1085 the company annount ed a plan to solununty refund a nununum of
'l 57 5 m:! bon of 1084 revenues to Delaware detinc retad customers After revieu mg the knal
'rm m >
1084 tc3u!rs the DeLiware Pubht Senxe Cemnuwon (Diw ru!cd that an addinonal 57 2 nulhon shouki he refunded Also. the wmpany rewmmended and the Comnussion agreed im that Delaw are dettnc reud rates shouhl he reduted approunutcly 1% or 5 3 6 nu! hon an-f j
{;,y Q
{
ntu!Iy clicoive a, of June 2R 1081
, g,
y
[, g 2hhh R.nc mt reaws were bled m the wmpany'wther retad junsdations in 108 4 and w ere c
d 1 D 4 E structured to remver mcreases m operanngmst, and to unprove the retum on unhty gg y
a investment Dunng the fourth quarter el 1984 rate increers were granted in Viremu
(
for 544tw or 2 7% and m Maryland for 54 8 mdhon or 1% on Mart h i 1085 the DISC granted a 5 3 i mdhon or 3 7% rate mtrease in ps revenues 60 in December 1981. the company trat hed a tentarn e vttlement wnh all tesale ustomers to refund 5 3 i mdhon The tenunte apeement woukiluse prouded for a redusnon m tesale rates for the penod ws enng July 1083 tinough Detemhcr 10H6 On I chnurv 6.108n. the company wb Infairmed by 30t!R of the resa!c clhtoltiers that the tentJtive sett!cment Sias rh)t
.kccpuble Ihe wmpany 8 tunrndy ana4nng turther acnon on the put of the res.de unromers i
l h si Mn 20 In loHi generanon from uul. nuilear and od sourtes was hi%.1% and 2% respansely Nudcar generanon mi reced 20% due to lurJwr avxlahhtv el nudcar umts I he i tiet tn e t ustomer fuel w+ u ha h nxludes fuel inren lunge and purdu-cd power wsts renumed low at 104e: kWh m loHi and was I one LW h in los 6 and 10H 1 0
82 8) H4 85 80 G o!
O % i.w o os lo
Ddnun a IW cf N 1 ight Conpinv Fisssciu Ri vnw Aso Asuvus Ort R si tu. I W1 vi s Other operation and numretun< c expenses lus e int reased s:nte 1081 pnnunly as a resu!t of higher pa> Toll and twsixiated beneht3. the higher mst of jomdymn ned nuJear genii emg linth. and incre.lTd stCJW sen he expenses, w hlch are htiled and ictiected in steam revenues The 1085 :ncrea,es w cre p.irtuMy onset by an additional $2 5 mdhon amoiti:ation i4 the LTedit ansing hem the sa!C of (outt. hts 6amtmtl whah resuhed hom an out4 4-murt tan seti!s ment Dunng 1084. hoth Nt!cm Umts [ and #2 w cre reinos ed hom sen ke dite to cledne genera-toi kulures Ndem Unit 31 wM returned to servke In Ottober 1o84 and l'mt #2 wa-lef ulned to servite in apnl 1085 There w ts an extended ouuge at Peat h ik,ttom #2 inim apnl 1o84 to July 1985 due to piping upla.ement Peath Ikcom a l u as wmos ed hom sen x e m July 1083 for reluchng and a piping inspecnon and n antnipated to beg n operanng agun by the end el the hrst qu. uter of 1086 Isum 1 on ist taiios Supplemenury unaudacd hnancul mfoonanon show me the esumated ellet ts et inflanon on the wmpany's operanens is shown m Note 12 or the hnancul 5utements Ihis dau shouhl be viewed ad estimate 3 of th. apprournate etietts of m!!attori rather than as prease measures Ligt inity Asn Can rn huu N. no C wu u o u w.
Risotru ts lhe compant is comnutted to numuming as tuuncul sucngth and t!cuhday and beheses tlut it 8 tmportant to lus e a. strong upital stnkture I he wmpany's luunaal sacogth is evidented by :ts connntung high rano of cammgs to f ned tluigtx w hah was 4 3 in 1085 Ihe Ratio of Earmogs mmpany hnand hwy was danonarawd duuug, ik whnanang of W 4 nubon el n
to Hxed interest
(}ygges pic[etTed stock w nh lonctenn dcht 1 his refinanang wd! redthe the mmpany 's tost of capiul and Wdl enhante the <ompanys abihty to n'uc addinonal prefctred stotk in subsequent > c.u s N 1 "d^!
7 If nehlTV.
b U hH 40 In Det ember 1081 the mmpany tempiiranly borrow ed $ % nu! hon to redeem 100% ol the L
company's 12 50% preicned stotk senes and approunetelv o8% o! :ts 0% pretened totk y [j y q fj senes. d e rem.uning luna u oc uscit to tente 510 mdhon of 3' % senes I irst Mortege and g
d [1 01 Collateral I rust Ikinds in janaan 102 the wmpany im.ed 500 mdhon el 10 - S knes hrst
{h.S_JbL Mortpge and Collateral ku-t lionds u huh mature m Janu.ny 2010 1 he pntceds hem the gg 34gg ivnd munte were u-cd to mpay the $U mdhon hank loan. a ah the halance irmg apphed qggpq m geneal mywate cash mquacment, 9 f,l b b,
.i e
o h
p Q y Due to tonnnued impros ements in cash flow. anti to wntrol the int rea3mg equity pounon.
22 M ;f d j@
the company funhcr modihed as Dmdend Remvestment anil Common hare Punluse Plan s
4hhh (DRIP) Diectn e lanuary 1081 all icins c3ted dmdends are being used to purs base shares on kl k N N h the open nurket I
j m Mh 4 We Dunesi 5mnaae P~rs mer.~d d_p.mr pmim1ca <et k meth! mnngirom a.
y y8 i kq p m aa m Creaa mnnys on thc -meanyu ns monmana, mm.nnea at.uugh ies enn a
i io8uuc m the mmpany mnnnmca ong knanc.a perio,nunte ihe empanwna b3 y };;
j anng s the cqumaicm oi a,nong aa m die ungimec onhe uarnt r.nes da hu 0 -- e n n e a -
81 82 83 84 H5
IVlmana IWcr & Ight Cnmpiny l
FixasciAt Rixuw Asti ANAtssis I
IhAs m, no C.u u u i tu a r,6 Os.iN 1 IU in &ptember IM the (ompany issut d. through the Delaware Economic Development duthenty 533 5 indhon of Vanah!c Rate Demand Exempt l'auhties Res enue Ibnds-Senes 1985 lhe pnveeds were pnnunly u-ed to tvlinance 5 3 3 mdhon of tavexempt revenue notes, dassihed as a tenn hun agreement as of Decemher 31, b>84 Dunng 1085. Dc!marva Cipaal Investments. Inc, a subsahary. borrow ed $ 25 nulhon and mvested the pnweeds m satclhte and ancrah leveragd Icases xe the telated dscus ion s
under "laqtudayJ CAi11 Al BI) CO'ui M 'c 1 k W RI Qt M Yi N i s For the pcnod 1083-1085. the company had total capaal reqmrements of $403 milhon.
indudmg 5250 nulhon for constmttion icxduding AltDC) Dunne the same penod. 5 370 milhon was generated mtema!!y w hith represents 77% on the upaal reqturements and 151%
ol the constrtation requirements Cipital requirements for the penod 19801988 are estmuted Construction n> he 5474 nulhon. mduding SW nuHain for constmcnon testdudmg SIUDCl lhe wm-Expendnures pany prex ntly anttupates that. for the renod 10So 108n intenu!!y generated funds wdl he and internally 5 306 mdhon w hich eqtub 84% of the f.'tal capaal requirements and 08% of its construction Generated I unds trymrements T be higher !crel of esumated wnstruttion expendaures dunng 1986-1088 in
< m%n, chid, s int reased mvestment in environinental protection ladhties and upgradmg ol Un0us fadh!ies dLiltal wn<trtKlisin expendittires ritiy vary from the alxn c c-utes dtic to. among other g
facto!s. the rate el inflanon. regulation and legislanon. rates i a ;, id growth. htensing and
(]
constmetion delays. results of rate paveeding. and the cost and availahdity of capital 4
The company esiinutes that its annual energv and peak load grow th for the next 10 ye.us U
up wdl he at a rate of I 84% and O 6%. respettively I he comptny's present generannp cJpicny of
% @3 2.277 megm atts proudes a rewrve of 27% apunst its company peak of 1,705 mcpiwatts
] I p
expenenu11 m the summer ef1985 in 1984 the wmpany peak was lo24 mcpiwatts j
g dithough the company continues to plan for new generation it s actisely wasidenng altematived to J central pow er sL1 tion due to the high tost o! huikhng a iiew power pl. int The Q[
OTmpany ha3 a pul to develop a plan to delay. by ar icast tive years. the m-scruce d.uc ci ns
)
k next generation unit w hidi is eturcntly xheduled for the nud 10*Ys ~I hc wmpiny wntinues yh to be comtmued to maintuning a high degree el !leubihty as long as possih!c m its planning to g(
met't lu"Fe cap outy regairements w-J N h
Ibc company has the ahday to osue commeioal paper supported by adequate hnes ol uedit tg [r to meet t!uctuations m wor king apaal reqturements as well as the intenm financmg net c3sary lor wnstruttion projetix lhe wmpany }Lb hnes ol(redit with hanks in the amount of 5445 Int!llon 1hese hnes are av.idahle for bank loans and to sceure commeraal paper honowings as M
the need anses At Detember 31.1983. the cornpany had no wmmeraal paper outstandmg fl L.
l c
H4 HS 86 87 88 5 Intern 4y thrated Feds E Crmstnutim I eend;tures lenda.fmg AFUrK) 21
Delmam IWvr &ISt Cemruny Rtront or h1ANAca:Miwr os uit FiNAscmt SrAtutt.Nis Linctot ry The company's liquidity is atTected pnncipally by the constmcuon pnyam and, to a lesser degree, by other cipital requirements such as matunng debt and sinking fund requirements.
As a result of kwver constntction expenditures and improved financul condition, financial investments increased from 527 6 milhon in 1984 to 572 nulhon in 1985 with no short term debt outstanding at the end of either year.
In order to utihre cash gnerated from ongping operations beyond constructen requirements.
the company lus invested in both energy relauxi and financul opportunities. Dunng 1985, the company mvested 5321 milhon of eqwty capital in a w holly-owned subsiduty, Deinurva Capital Investments, Inc., which has arrangd borrow iam and generated cash intenully to panide an investment portfobo of $716 milhon On December 31,1985, these investments included 534 6 million in nurketable secunnes,59.8 million in a Boeing 747 aircraft leise and 527.2 milhon m satelhte leaus with GTE Corporation and RCA Corporation, both of whkh are currently in operation These investments are designed to provide yields hidier than those camed on the company's utthry business.
Rtroar or h1ANAGI MENT The consohdated fituncul statements of Deinun a Power & Light Company have been pretured by company personnel in conformity with generally accepted accounting pnnci-ples. based upon cunently available facts and circumstances and managment's best estimates and judgments of the expected elTects of events and transacnons. It is the responsibihty of management to assure the integnty and objectivity of such financui statements and to assure that these statements fairly irport the financial position of the company and the results of its Operations.
Delmarva Power & Lidit Company maintains a system ofintemal controls designed to provide reasonable, but not absolute, assurance of the rehabihty of the financul records and the protection of assets. The mternal control system is supported by wntren administranve pohcies, a program of intcrnal audits, and procedures to assure the selection and training of quahfied personnel These financial statements have been examined by Coopers & Ly brand, independent cerufied -
pubhc accountants lheir examination was conducted in accordance with gnerally accepted auditing standards which include a renew of intenul accounting controls to detennine the nature, aming and extent of audtung procedures, as well as such other procedures they deem necessaiy to produce rea3onable assurance as to the faimess of the companis financial state-ments and to enab!c them to express an opinion thereon.
The audit committee of the Ikurd of Directors, cornposed of outside Dirtctors only, meets with managment, internal auditors and the independent accountants to review accounting, audmngand financial reporting matters The mdependent accoununts are appointed by the fkurd on recommendation of the audit committee, subject to slurcholder approval.
Y W
T Nenus hl Curtis lugr D Campbell Chaimun of the Ekurd and Vice President, Treasurer and Chief Executive Ollicer Chief Financul Oflicer 22
ocInuna her 6r t$ comruny QoAurtaty Cosisios Cosmos Sun Stocx DIVIDENDS AND
. Paici RANats The company's common stock is listed on the New York and Muladelphia Stock Exchanges and has unlisted tradmg pndeges on the Cinannati. Midwest and Pacific St(xk Exclunges The company had 58.824 holders of common stisk as of December 31.1985.
The company's Cendicate ofincorporation and the Monpge and Deed of Tmst secunng the company's outstanding bonds contain testnctions on the payment of dnidends on common stock which would become apphcable ifits capital and retained caming fall below cenam speafied levels or if preferred stock dnidends become in antars The retained caming available for dnidends on common stock as of December 31.1985 were appmxurutely 5143.810.000 under the most restnctive of these provtsions 1985 1484 Dividend Price Dnidend Price Declared liigh hnv Declared thgh Low First Quarter S.48 237/
21 S.45 10 %
17 %
Second Quaner
.48 26 %
22 %
45 18 %
' 17%
j Third Quarter
.48 26 %
22 %
.45 20 %
17 %
Founh Quaner
.505 28 %
22 %
.48 22 %
20 %
Rtrour or IsotetsotNr To titt Boawn or DIRL cToks Asn Saunoint as Ci RTiiito PUnuc Dttsianva Powi n & lxair Costi'asy tkCOUNTANT S Wil silNG r oN, DE I AWARL We have examined the consohdated balance sheets and statements of capitalization of Delmarva Power & Ught Company as of December 31,1985 and 1984, and the related mn-sobdated statements of income. clunges in common stockholders' equity and sources of ftmds for construction expenditures for each of the three years in the penal ended December 3L 1985.
Our examinations were made m accordance wuh generally accepted auditing standants and, accordindy, included such tc<ts of the accounnng records and such other audaing pra-cedums as we considered necessary in the circumstances.
In our opinion. the financul statements referred to above present f.udy the consohdated financial posidon of Delmarva i ower & Ught Company at December 31,1985 and 1984 and the consohdited results cf their operanons and sources of funds for constmaion expenditures for each of the ihree years in the penal ended Deccmber 31,1985 in confonnity with generally accepted accounting pnnciples applied on a wnsistent basis Y
l 1900 Three Mellon Ibnk Center l
Philadelphia, Pennsylvama l
Fehnury 7,1986 l
l I
23
IVirnanu Iwcr 6r L@t Gwnpany Cossounart n S raitsitxi s oi Iscosti tiers in musanda I or the Years I.nded Dei cmkr 31 1985 1984 148i Onn.uisa Rixi stis Elecinc 5 605,581 5 584.163 5 541252 Gas 95.256 101,i78 94.358 Steam 21,497 16.852 13.180 722,834 702 503 649.740 Oi i narisu E. i i xsi-s Operation:
x Fuel for electne generation 240,001 278.474 275.117 Net interchange and purchued ptm er
( 63,962) (108 011) (108 654)
Purchased ps 69,84 e
< 4.082 71475 Defenni energy costs
( 2.549) ( 2.14 5) t 24,507)
Other operanon 121,105 108 001 107.490 N!aintenance 59,400 56.752 53.781 Depreciation 53,981 53.702 49,590 Taws on income 77,836 77.577 67.584 Taxes other than income 30,754 31.1i'
'7.771 587,319 569384 520 m l Onuansc Iscosit 135,515 133.200 120.138 OritinIxcosin Allowance for other funds used dunng con 3truction 2,428 17&T 2.447 Other, net 6.382 3 243 1440 8,810 6 023 4.887 INCo%il OLI ORE INT! RLsI Ciiapcts 144,325 139.232 134.025 INTERI.sT CIMRGE.S l.ong-temi deht 47,236 45.815 45697 Shon-term debi and other 1,059 1090 39)
Allowance far oorrowed Iunds used dunng oinstruction
(
608) (
783) (
7341 47,687 47,122 48.902 EAnsixas Nct income 96.638 02.110 85Ab3 Dividends on preferred stock 12,599 11002 11818 Eammgs applicable to common stock 5 84,039 $ 79.448 S 71245 CONiNioN $IoCK AVerap' shares outstanding (thousands) 30,482 30,248 29341 Eamings per average share 5
1 76 5 203 5 245 Dividends declared per share 1.945 5 1.83 5 l 68 sec.wwnpanpng Nous to ConMred i inanuaN.nements 24
. Delnurva ikver &r l@t Com;unv CONsouoATu> St Ali su N1% of SoCRCI s or FeNos i on CoNsi upc nos ENPLNDU Um %
(tutirs in hsando Ior the Yee I rx!cd Deccmitr 31 1985 1084 1983 Socuci s or FUNos Priwided from operations:
Net income
$ 90.638 5 92,110
$ 85003
- l. css-Preferred dividends detlared 12.599 12b62 12 818
-Common d.vklends dedared 59,287 51361 49e68 Eaming reinvested dunng the > ear 24,752 24.087 22.577 Items not requinng(pnwiumg1 funds Depreciation 61,183 58.464 56.509 Amom ation of cretht ansmg from sale of contracts (7.202)
( 4,702)
( 7f03)
Amont:ation of nuclear fuel 6,594 2 071 2.394 A!!owance for funds uwd during construction (1036)
( 1563)
( 3.181)
Investment tax credit adjustment 3, net 21,878 2.253 3.49i Deferred income taxes. net 47,462 31,u35 42.701 income from leveraged leases (2,307) loss on uranium mine advances 2.025 Funds pnwided from operations 151.349 110_485 117,582 Extemal finanang.
Iong-tenn debt Vanabic rate demand <nes 33,500 11500 Tenn loan (31000)
( 5 W) 11500 Other long-tenn debt 80 000 Common stock 11N21 12.863 Redemption el long-term debt (10,100)
(10.100)
(40.100)
Redempnon of pretened stock (44,387)
( 1,4181
( 617)
Extemally hnanced fund 3 26.013 10.403 (12,3M)
Other sourtes (uses).
Decrea;c (increase) in working capital *
(65,800)
(29.557)
(17.7001 Construction funds held by trustec 0.392
( 4.033)
( l.(H l) l Invesnnent in leverap d lem (36,959)
Refundable taxes and interest 32.322
(.L188)
( 2p03)
Creda arismg from sale of contraas
( 4,600)
( 92M 850 l
Cnher. net (11695)
( 3.70c i
( 81c0) l Odier sot.rces (usei (82,439)
(41 400)
(20. ' 72 )
Co ssmecT:os tenh.dmg allowance for funds us. d i
EN!'t.N Dil i'RI.s d' ring construcilon 5
$ 94.923 5 70488 5 76.05o DLCRrAst: (INc R1:Ast )
N!arketable secunties 5(32.308) $ (10.754) 5( 4.314)
IN WORKING CAP 11 Al.*
Accounts receivable 33
( 1050)
( 7,586)
Deferred fael costs. net
( 2,537)
( l.8 31)
(23,126)
Inventones 13.097 (15 114) 5.428 Refundahic t.ncs and interest (35,303)
Accounr3 payable 6,885
( 1865) 7 993 Taxes arrued
( 4,455) 6,842
( 4.488)
Interest accrued 2,532 008
( l016)
Other. net (14.653) 8.307 9 400 Total
$ (65.809) $ (29.557) $ (17.700)
'Orher dun lone tenn dcN due and prdi nul sta k nsktnuhic uhm one 3rar and 02ntro dclerred m(ome taes w Ammpinpng Note, to Condttired i mant ul N.irements 25
Ixtnana twer & ladu Guntny ComouoATim BAtasci: Sin us
<thn mmap Assia s Au Ixumber 31 1985 1984 UituTY PLANT-Ekxtne
$1.624.881
$ 1,555.174
- AT onictNAL cost Cas 90,956 83,104 Steam 24,389 24.143 Common 80,541 71.391 1.820,707 1,733.812 Less: Accumulated depreciation 535,873 488.087 Net unhty plant in senice 1,284.894 1,244.825 Plant held for Iuture use 15.297 15.022 Construction work in progress 33.184 36.372 Nuc! car fuel. at am3nized cost 19.7 %
24.055 1,353,171 1.321.174 NoNuTiuTY PROITRTY AND Net nonutility propeny, al cost 34,805 5,385 O ristn Issist utsTs Constniction funds held by trustee 9,186 15.578 43,991 20 963 CURRcNT Assets Cash 17,408 t o 673 N!arketable secunnes, at cost 59.956 27.648 Accounts receivable:
Customers 49,037 48.830 Other 24,337 24.568 Im entones, at average cost:
Fuel (oul. oil and ps) 55.694 6R364 hlaterials and supplies 20,648 21.975 Prquyments 4.236 3.776 Deferred fuel costs. nct 1,488 (1049)
Refundable taes and interest 35,303 268.107 210.704
~
DEFERRf D CitARGi3 AND Pelundable taxes and interest 32.322 Ornta Asseis Unamoni cd debt expens 5.368 4.827 Other 4.133 1.5 %
9501 3 Row Total 5 1.674,770 51.591.030_
see runninyng Notes m G,nwid.aca uun<ul soremenr 4 26
Ikhturva IWtr & laght Comptny Cowsounaii o IIAtasci: Siitt.rs (IMlirs in 1IMNndd CAPITAUZAllON As o( [hember.31 1985 1984 AsolaAi<iuiii.s CArfTAUZATION Common stock 5 102.876 5 102.876 (ne surements Additional paid-in capital 235,798 235,473 fcapi e mni Retamed earning 223,137 201.301 Total common stockholders' equay 561,811 539b50 Preferred stock:
Without nundatory redemption 105.000 105AW Wah nundatory ret!cmption 5,192 47,036 leneterm debt 637S40 557.661 1,309,943 1.249.347 Ct.'RRENT l lAlilllIILS l.onpcteml debt due anJ prefened stock redeenuble wnhin one year 950 10900 Account 3 payable 33.129 26.244 Taxes accrued 16,181 20A36 Interest acen ed 22,729 20,197 Dtvidends detLired 15,393 14bil Nudcar fuel dsposa! costs 10.888 Deferred income taxes. net 755 (lb61)
Other 10.440 15026 99.577 116fbl Derrnst n Cni.nirs Aso Credu a:iving fro *n sale of con:ra..ts 16,037 27944 O HiER llABa 'T113 DeftITed Income taxcS, Det 174,746 I28.444 Deferred mvestment tax credas 70,416 M.386 Other 4 031 3643 2M,250 2.!i.422 Onea Commitments and Contincencie4Ns s o aal !0)
Total 5ih74,770 51.591 b30 i.
se acompirrung wre, to u,n<.iditu! I nuncui N.umens 27
lbinurva Pwer & Ught Comptnv Coxsotnunn Sran:sitxrs or Carirauzanos d bibrs in &wnds)
And Dcctmber 31 1983 1084 Couuos Stoc Knou>t-ns' Common stock. par value 53 375 per share Egon authon:cd 3i000,000 shares. out3randmg 30,481,925 shares 5 102.87o 5 102.870 Aldatonal paid-in capital 235,798 231473 Retained camings 223.137 201.301 Total Common Stockholders' Equity 501,811 43%
534.o;0 43%
Cesictante Pnu t unt o Par value $25 per share. 3 000 000 shares authon:cd none outstanding Stocx Par value $100 per share,1.800 RU shares authon:cd Without slandatory Redempnon:
Senes Slures bsued 3.70 % 4 56 %
240 000 24.000 24WO 50047.84%
330 W 0 33,000 33000 7.88 % 8 90%
480 N O 48A00 48000 Preferred Stock wahout Ntandatory Redemption 101000 8%
105 000 8%
With Ntandatory Redempnon:
9 R)% Series
- 54.416 and 142AVO shares 5,002 19.AV 12.56% Series 0and 300000 shares 30.000 5.992 40.AV 1.ess: Reacquired preferred shares held in trea<urv (at owt) 1.3M 5,992 0%
47.836 4%
1 ess: Amount to be redeetned within one year 800 800 Pitferred Stock with Ntandatory Redempnen 5,192 47.036 Loxc.-Trnu Dun First Ntortpge and Collateral Trust 13onds:
Ntatunty Interest Rates liee.1,1985 3%%
10.000 Jun.1.1988 3%
25 000 25WO 19H-1947 4Wo%
30 W 0 iOAY l998-2002 7%-11 'M i58,100 158.100 2003-2007 6 6%!l%
i21,250 121.250 AV8-201 !
O 'i.% i 2%
111,000 111.000 460,250 176 250 Pollunon Con:rol Ne rc.,
Scnes,147 3 5 7% et eetice rate. duc 1086-10'h
/.,00 73V T
Senes.1976 7 3% elTecove rate. due 1992-2000 34,500 34.500 42,200 42.300 Variable Rate Demand Senes due 2014-2015 49M0 11500 i
Other Long-Tenn Debt 80,000 Term inan 31NO t'
I?namortized premium and discount. net 640 7Ii 6381)00 49%
567.701 4%
l_ong-tenu debt due within one year
(
l50)
(10.h10)
Total long-Tenn lTebt 637,940 557.bol Total Capitalization S t 30tA94 3 100% $ 1.249.347 100%
l ncacmenon prme.ii De,ents<< 3i i<m i, sio7 ve mowninving xores io t onsoiarca i nuncui s.11cments l
'28 L
Ih!ntana I\\wer & Udu Gmpinv i
I CONsOUDARD STATENtLN TS OF CHANGLS IN CONT \\ TON $MUHOLDLRs' Eat u y 3
(IMlars m lixwnda dddittotul for the lbrec icars i nJcti Common l'ar Paid-in Retamed l\\mnher ll. l@
$1Mre3
\\'a!Ue Capita!
Earnings Total BuANcii As Ot JANUARY 1,1983 29AM8.445 5 08 039
$215.347 5154 637 5468.073 Net income 85163 85.063 1
Cuh dividends declared Common stock ($168)
(49.t 68)
(40b68)
Preferred sawk i12.818)
(12.818)
Iwuance of common stock-Dividend Reinvestment and Common Sharc Purchase I'lan 792.737 2b75 10.526 13.201 Common saxk expenx
(
338)
(
338)
OA1ANCE A5 01 DLCi.NtBLR 31,1983 20 841.182 100.714 221585 177.214 501513 Net income 92.110 92.110 Cah dividends decLired Commoa sutk ($183)
(513o1)
(51301) l' referred stock (l2.662)
(l2.662)
Issuance ol common stock:
Dividend Reinvestment and Common Share Purch.de llan 640.743 2.162 9.888 12.0W G.un on retirement of preferred stock i25 125 Common stock expen<
t lli)
(
1251 UALANCE A5 OF DtcuintR 31,1984 30 481 025 102.876 231473 201 301 539b50 Net income 00.038 4 638 Cash d:videnh dedared Common sntk (51 G45)
(54.287)
(59.287)
Preferred saxk (123'N i i 12.5'N)
Net loss on retirement of preferred stock 325
( 2 of b)
( 2.541) bat ANci: As or Drcaista 31,1985 30.481 425 510287e 1231798
$22 3.137 S561.811 sv wmpnyng N.wcs m en<!xteni hnanm! wcrm.
29
- DcInurva IWer & lxht Comparw NOTis To CoxsouoArm FixaxctAi. SI ATI hn:NTS L Sicsn icaxi Famciu Suu ut us ACCOUNTING Poucn:s The consolidated financial statements inch"Je the accounts of the company and its totally-held subsidianes. Delmarva Energy Company. Deinurva Industries Inc., and Dclmarva Capnal Investments. Inc. and its subsidunes. In oinfonnity with generally accepted acmunung pnnaples, the acmuntmg pohcies reflect the econonue etTects of rate decisions issued by regulatory commtssions havingjurisd:ction over the company.
Certam recbssifications not atIcctmgincome have been nude to amounts reported in pnor years to conform to the presentations used m 1081 Rntsus Revenues are recorded at the time bdhngs are rendered to customers on a monthly cyc!c b.tso and indude rate increases pennated to be bdled subject to refund pendmg linal approval At the end of each month, there is an amount of unhd!cd electne and ps semce whah has tren rendered from the last meter readmg to the month-end Ft n Coos Fuel costs (electne and gas) are deferred and charged to operations on the basis of fuel costs induded in customer bdimp under the company's tantis, w hich are subject to penodic regulatory review and approval Drent cnnos.ssn MA.n mci The annuah.
aun for depicca: ion is computed on the straightAne has using compwne rates by dasses of depreciable proper *y. Pros is:on for die uwt< of decommasioningof nudeir plant is made to the exter.t ef the net cost of remaval a; towed fer rate purpwes tapprenautd7 20% of plant costl 1he relationship of the annual provmoo for deprecianon for financial accour. ting purposes to as crage depreciable property was 3 (A for 1085 and 3 4% for 1084: id 1083.
The cos. >l nointenarre and rep.urs, mdud.ng renewals of mmor nems of propeny. is charged to operating expenses A n placement of a unit of property is accounted for as an addition to and a retirement from uniny plant. The ongnul awt of the property ret red is charged to accu-mulated deprecution together with the net ost of removal I orincome tax purposes, the cost of re aovmg retired property is deducted as an expense i
Ni(i as Fru The company's share of audear fud awts rdatmg tojointly-owned nudcar generanng stations is charged to fuel expense on a umt of production basis which indudes a factor for spent nudear fuel disposal costs pursuant to the Nudcar Waste Pohg Act of 1o82 I he a mpany is collecting future storage and disposal costs for spent fuel as authonzed by the regulatory commissions in each jurisdiction and is paymg sut h amounts quanctly to the Department ofEnergy 30
Ddm.trya ihrt & l.@t Company L Norts to CoNsouoAnti FINANCIAL $1 AnanNFS INCOME Taxi s Deferred income taxes result imm timingditierences in the recognition of certam income and expenses for tax and financial xcounting purposes. The pnncipal items accounting for de-ferred income taxes are: (1) uw of the Accelerated Cost Recovery System and other aculerated.
depreciation methods for income tax purposes. (2) defened fuel and ps production costs deducted currently for income tax purpm.cs, and (3) other timing ditTerences involving the capitalization of cenain taxes and overhead costs.
Investment tax crvthts utih:cd to reduce federalincome taxes are defernxi and generally amor-tired over the useful bres of the rebted utthry plant. Additional tax cnxhts in 1983.1984 and 1985 related to an Employee stock Ownership Plan do not alTect net inwme and are n: corded as lubihties until the contnbution is made to the Man i
ALLOWANCE FOR Ft'NDs Usf D DlmG CON %1Rt'CTiON Allowance for funds used during construction (AFUDC) is a non-cdh item and is defined in the regulatory system of accounts as the " net cost for the penod of construction of bornwved funds toed for construction purposes and a reasonable rate on other ftmds so used " AIUDC is segregated into two components: (1) the interest on debt component (" allowance for -
bonuwed funds used during construcnon), which is net of taxes and classified as a enxht to interest charges, and (2) the common stock equity and preferred dividend component
(" allowance for other funds used dunng constmction') which is cLtssified as an item of other income. AITDC is considered a cost of utihty plant with a conemrent credit to income. It is excluded from taxable income for tax purposes. The rates toed in determining AFLW, which indudes semi-annual compc anding. were 9 2% in 1985. 90% in 1984 and 7 8% in 1983
- 2. TAxts oN INCOME Income tax expense for 1985.1984 and 1983 is as folicws:
(Ddtrs m Thou. ands) 1985 1984 1983 Operations:
Ecdual: Current
$32.557
$36.131
$16.557 Deferred.
28.638 27,380 36.654 State: Currem 6.320 6.560 4.345 Deferred 4,978 4.555 6AM7 Investmem tax credit adjustments, net 5343 2.951 3.981 Other income: Current (29,788) 1,528 816-Deferred 13,846 Investment tax credit adjustments. net 12.608 Total
$74,502 579.105
$68.400 Investment tax credits utilized to reduce federal income taxes payable amounted to
$24.9921V0 in 1985. $6.890NO in 1984 and $7.654.000 in 1983. The amounts for 1985.
1984 and 1983 indude Employee Stock Ownership Nan credits of $535AM $707.000 and
$360,000, respectively.
31
IMmrva twer & lxhi Conyuny Norts To Comumno FINANCIAL STAFBn.Nr5
- 2. TARS ON INcosni The following a reconciharion of the thtferenx between mcome tax expense and the tuunnten amount computed by mulnplying mcome before tax by the federal statutory raic:
me.mn muunda 1985 1984 1983 Amount R.ne Amount Rate Amount Rate S.atutory income tax expense 578,725 46 %
$78.758 46%
$70.594 40%
increase (DecreaseT in taxes resuhing from:
Exdusion of AIUDC for income tax purpo yees.
Sub3tantially all of the company's employees may become eligible for these benefits if they reach nonnal retirement age w hile snll workmg for the company. The company recegnces the cost of proudmg thc,se benefits by expensing the insurance cbims as they are paid These costs total:cd $2.tM000. $1.6a0,000 and 52.075 000 for 1985,1984 and 1983, respettively.
- 5. car TAuzAnos Rn waetmsac.s The current first mortyp bond indenture restnets the amoum of conddated reramed caming evaibble kir csh dn idend payments an common s:ock to 535.000 QM plus accumulations afterJune 30,1978, which avakb!c arr.ount at December 31 1085 was approximarcly $143.810ml Pur"rknioSrocx The annual preferred dividend requirements on all outstanding preferred stock at December 31.1985 are 57,761m11f preferred dindends are in arrears the company may not dedare common stock dMdends or acquire its common stock.
WITifoliT MAsnaiosy Ri or sieniW These vries may be redeemed at the opnon of the company at any time, in whole or in part at the vanous redempnon pnces fixed for cath senes (ranging from $103 to 5106 at December 31.1985).
33
Deltaarva 1%cr & IJeht Compu'r Noti.s To CossounAnn fixAxciat Starnums 3Ytin MANNA!ORY lh Di MPUON (1) The company redeemed 11900 shares of the 9% senes m December 1985 at $100 per share. Eight thousand of the 15.900 sharts were reqmred to be redeemed by the smkmg fund and the renuinmg 7,000 slu es were redeemed under an opnon of the sinkmg fund through a tender offer for the 0%enes the company purchased. at 5103 per share,90.834 shares in December 1985 and 3,150 shares in Jantury 1986. (2) The 300000 shares of the 1156% senes were called and purchawd by the company at 5108 38 m December 1081 i 3) 1 'nder cenain conditions the 9 benes may aim be teocemed at the opuon of the company. (4) Mandatory sinking fund redempnons are $800.000 per year dunngthe next fise years. As of December 31.1985, all slures pn viously hek! in the Treasurv were retired LoscrTiim Dt si (1) Sinking fund pmions with respet t to substantully all ssues of the First Monmge and Collateral Trust ik,nds require that there be deposned annually wuh the 1 mstec cash equal to one percent (1%) of the peatest aggrcgue pnncipal amount at any one nme outstandmg T here slull be crechted apunst such cash requirements (a)an amount not exceedmg snty percent (60%T of the bondable value of propeny addinons wluch the company then elects to nuke the lusis of this credit. and (b) the appte pnnapal amount of bonds whith might then be made the lusis of the authentication and dehvery of bonds and w hich the company then elects to make the basis of this creda. For the years 1983-1985 the rompany cleaed to temfy propeny addnions to satisfy its smking fund reqmrements equal to 1% of each senes as permated by the indenture. ( 21 Substantully all unhty plant of the company now or hereafte owned n subject to the ben of the related Monpge and Deed of Trust (3) Purstunt to a lunk hun agecment the wmpany has a S n000000 revolvmgcredit wmm iment through November 1.1989. cenvenible into a term kun due November 1. IN2.1 he kun agecment rec,uires a onnmitment lee of %% en any unu,ed ponion of the raolving aest conmn: ment and term kuns raay be pm;uid at any ume without penahy and would bear mterest at kY% of the pnme rate. (4) On kprember 26,1985 the wmpany muni through the Delawax Ewoomic Development Authonty. 33 k500 000 of Vanable Rue Demand 15 cmp: Facihne-Res enue Ikinds-Senes 1985 (Varable Rue Denund Senes 1985); due September L 2011 Th(
proceeds were pnmanly used to reiirunce 5 n000000 of taccxempt revenue notes. ljus sene3 was collucrah:cd wah S 37.000AYO First Monpge Ikinds due September L 2015 whkh secure rep, yment of principal and accmed interest. I he mterest races on the Vanab'e Rue Denund Senes i981 by elecnon of the company, are subject to thange duiy. weekly. or under spec:fied condaions annually. on the basis of prevaihng rates the vanable Rue Denund Senes 1985 and the $15.5001YO Vanable Rate Denund Gas Facihties Revenue ik,nds-9nes 1984 have put opnons for the lundhok!crs whereby the bonds can be presented for payment at specified times The bonds can be soki by the remarketing agent The company lus suffiaent long-term brancingarrangements available to redeem any bonds not renurketed in recognition of the long-tenn financing capabihty, both the 1985 and 1084 senes of these bonds l
luve been classified as kyng-tenn debra 5) Dunng 1981 a subsidury of Delmarva Capital Inve3tments. Inc. entered into a loan agecment to bom,w up to $ 25 0001YO at a rate of 10%
The loan nutures on Febnury 10.1980 and nuy be piepxd at anytime. in some instances subject to a penahy. At December 31.1981 S 231Y0 000 was out3tanang under this agecment. (6) Dunng December 1083 the company temporanly borrowed 551000000 hom a bank in order to redeem 544.711000 of preferred stock Oncludmg acquisioon costs) and retire $10 nuthon of Yo% ines First Monpge and Collateral Trmt ikinds On January 15.1080.
34
Ddnurva Ibwer & Ught Comp.uw NOTts To CONSOUDArm FINANCIAI STATDtENTS l_ONc-TE RNt Dr.BT (CONT 1WlD) the company issued $60,000.000 of10VA Series First Moitpge and Collateral Trust Bonds, ducJanuary 1,2016. The proceeds from the Innd isstunce were used to repay the
$55A10,000 bank loan inJanuary 1986, with the balance being applied to general corporate.
cash requirements _ As of December 31,1985, the bank kun was dassified as long-term debt in recogmnon of refinancing the kun through isstance of the bonds (7) Matunties oflong-tenn
' debt dunng the next fwe years are 1986-$150.000; 1987-$150 000,1988-$25.150.0tu 1989-$25J50AW 1990-$150,000 (8) The annual intettst requirements on all bonowings dassified as long-temi debt at December 31,1985 are $ 55,355AX).
Usavourizi.n Di nr DN otmT. Pai stit u axo Eart:ssr These amounts are amorti:cd on a straight-Ime basis over the hves of the long-tenn debt issues to which they pertain-i
- 6. Cousunusts The company estimates that approxmiately $125.689AR exdud ng AFUDC will be i-expended for construction purposes in 1986. The company also has commitments under long-term fuel supply contracts.
Under SFAS No. 71, regulated industries were required to adopt the lease accounting rec,uirements of SFAS No.13 for all capital Icases commencing on or af terJanuary 1.1981 The company's capital leases commencing afterJanuary 1; 1983. were not material and, therefore, were not reccrded All capital leases. induding leases commencmg prior to January 1983, were ticatcJ as operating lea 3cs. Ilowes er. il capitai feeses had been recorded on the balance sheet, related assets and Ivbihties would have increased by
$8,609.000 and $13.324 000 at December 3; 1985 and 1984, respectively.
Minimum commitments as of December 31.1985 under all nonsancellable ! case agrcements arc as foHows:
1986 5 4,202.000 1987 3,203.000 1988 2,503.000 1989 1,003.000 1990 507,000' Remainder 3.642.000 Totat
$15.060 000 The total minimum rental commitments are applicable to the followmg types of property: railroad coal cars, 51,387,000; distribution facilines, $4.792.000, other, pnncipally transportation ; nd computer equipment. $8.881.000. Rentals charged to 1
operating expenses aggrepted $6.634.000 in 1985, $6.213.000 in 1984 and $6.677.000 in 1983.
Nuclear fuel requirements for Peach Bottom Generating Station are being provided by the operating company through a fuel purchase contract. The company is responsible for
'I payment ofits share of fuel consumed and interest expense. Nudear fuel expense totalled $4,520,000 in 1985, $6.072.000 in 1984 and $4.283.000 in 1983.
35
y
}l tunarva twer 6t L* comruny
' Notts To CONsounArto FiNANciat SrAtt3ttN F5 l
i.
l
- 6. CosisuisitN r s The comp.my lus an agreement prmdmg for the avaibbihty of fud storage and pipchne nununuetp facthnes through 1990. L'nder the agreement the company must make specified l
mmimum payments monthly, which touled $1.682.000 m 1085,51,912.000 m 1984 and
$2.101000 in 1083 The amount of reymred payments is $2260.000 in 1986, $1749.000 L
in 1987, $1.206 LVO in 1088, $1.056000 in 1080, 5812 000 m 1990 and 511,435.000 I
between 1991 and 190tt I
t
- 7. SAu: or CONTRACTS The proceeds received by the company for the sale m 1975 of the contracts for a nudear l
ion Nt'cuan PLANT steam supply sy5 tem ($ummit) and related fuel, net of related phnt cApenditures w hkh are 5
l considered of no future value to the company, are dassified as a defened crecht in the lulance i
i sheet T he enxht has been reduced by apphcable income taxes and rebted interest (See Note 21 The company has obtauned regubtory approval for this accounting treatment. As a result of ratenukmg orders commencmg in 1082, the company is amortemg the net credit in all retad jurisdictions over approxmutely five years and is recordmg the crecht for financial repomng purposes as a reduction in depreciation esjw Amounts amortced in 1985.1984 and 1983 were 57.2021Y0,54,762 000 and $7.003000. respecovely w hich indudes, in 1985 and 1983 amortcation of 52,5001Y0 and $1818,000 for the resale junsdicnon i
i 3
- 8. Snour-Trus't Dtnr AND ds of December 31.1985. the company had unttsed bank hnes of credit ef $+f,500000 and is l
Lines or CRt DIT generally required to pay commitment fees for these hnes such hnes of credit are penodically reviewed by the company, at wluch nme they may be renewed or cancelled i
i b
I i
F l
9.JotNTLY-OwNto PiaNT Infornunon with respett to the company's share r I pintly-owned plant. indudmg nudear fud
[
for the Salem pbm, as of December 31,1985 is as follows:
r J& n Ihiiuund a
~'
Construction Ow nership Plant m Accumulated Woik rn Share Strvice Deprecianon Pn g ss Nuc'cr.
Peach P.ottom 7 51 %
s 90.530 526.384
$ 2.156 Salem 7.41%
100,486 52.820 11,381 Coal-Fired:
Keystone 3 70 %
10,701 4,158 1,109 Conemaugh 172%
11649 5,430 165 Total S305.416 588.792 S I4.001 The company prosides its own financmg for its share of improvements to jomt!y-owned pbnt.
In addition. the company is a jomt guarantor of kuns (5760000 propomonate share) advanced for operation of the coal mines that supply the Keystone plant Ihe company's slure of operatingand maintenance expenes of the.lom@-owned pbnt is mduded in the correspond-ing expenses in the statements of income.
36
r
- Delmarva P,mer 6r Idu Company Nous to CONsouoATro FINANCIAL $ FAmHNTS
- 10. CoxTINctNcir.s a)FERC Rm CAsl In December 1985. the company reached a tentative settlement with all resale customer 3 to refund $3 5 million, which would have reduced resale rates for the pened covenngjuly 1985 through December 1986 Accordmdy, a revenue reserve of $12 milhon was estabhshed as of December 31.1085. On Febnury 6.1986. the company was infonned by some of the resale customers that the tentative settlement was not acceptable. The company is awaiting further action by the resaic customers in the opinion of managment, the u!tmute disposition of this nutter will not have a nutenal effect on the mmpany's financial pminon or resuhs of operations.
b) PtaN r Hn o ron Feit nr. Ust In 1982.the company delayed the construction schedule for the coal-fired Nanticoke al (fonnerly Vienna 9) generanng unit the plant is now scheduled to begm commeraal operation in the mid 199Js The decision is based on the company's current load forecast wluch indicues a lower rate of gnmth in the commg decade than lud prenously been projected The net investment of $14.424.000 is classified as plant held for futuir use and is anticipated to be recoverable through the nonnal raremaking pmcess c) Neci r 4a Isst:xaso The company's insur.mcc coverages apphcable to its nudear power units are as follows:
t 0,whorts c4 nollarsi Maumum Maximum Retrospective Type and Source of Covemge Coverage Assessment for a Sinde incident Public laability:
Pnvate
$160 None Pnce Anderson Assessment' i >
480
$15m
$640 D Property Damage:"'
Peach Bottom"
$585 Salem *
$585
$28 All units
- 5525
$13 Repiacement Power Nudea Electnc insurance I.imaed (NEll# $3 0 S22 d 'Retrospuive prermum pnwam under the Prxe-Andermn luhhr) pnnisions of the Atomic I nerp e%1 of NM as amended wbpt to retnspectwe asesment w,th respu to 1% from an incden: at any herrud nudear re.uor m the (;n:ted sures "' himum usessment suuki he 511Wuo n the cwnt of more than one inodent m any > car
' Ubmu of hahhty under the Pnce-Andt wn M for cath nta k ar inadcru +The unnpmy is a self instm r. to dic cucat of its ou nersh:p interest for any pn>peny kxs m cxcess of the stated amounts 'M for pnpetty danuge i nhe Peat h Ik com nudcar plant bahnes, the company ard us nummers lure pnvare insurance up to W6 mdhon
"' Nudear Mutu.d bmacd. a unhty4mmed mu tuhn:.ur.mce compant w uh w hsh the mmpan) and die Sa!cm nudear faahry co owners are members Nttumum retnwpune asmsment is ten amcs annu.d pretmutn vath respu to kws at any nu&ar gneranng stanon msured by the munuhnsurance compey *All unas are insured by Nudear Electne insurance bmned (NIIL lh kir losws m eness of $500 mdhon Mmmum retnwpuive asesment is een and a h.df times the annu.d pretmums s tinht) owned munuhnsurance mmrany w,th w huh the company n a member w hah pnn, des uweram ae,tnst extra expene usurred m obuming repbtement pmtr dunng pnJongd acadenuhuugs of nudear pmer uruts Ntmmum wetk!y mdemmry kir 52 wceks w hich commences after the 6rst 2n wreks of an ouuge Ako proudes slV01W wcrkly for an addmonal 52 wecks Mammum reinwpune awessment s fne nmes annua' ptrmiums.
d)Omta The company is involved in certain other lepti and administrative proceedings before vanous courts and got emmental agencies conceming rates, environmental issues, fuel contracts and other matters. In the opinion of management, the u!nmate disposition of these proceedmg3 will not have a material elicct on the company's financul position or results of operations.
37
Deinuna tWrr6:lida Gepany Norts To CoNsounAno FINANCI AL ST AIDilAT5
- 11. Socsuxr ist oastAnox Sepnent infornunon wuh respect to ch cine. pp and steanwperanons w as as follows:
(IMlars in Eusarda 1985 1984 1083 Operating Revenuts Electric 5 005.581 5 584.163 5 542.252 Gas 95,256 101378 44.358 Steam 21,997 10.852 13180 Total 5 722.834 5 702.503 5 040709 Operatingincome.
Elettne
$ 127,148 5 125.200
$ 122.003 G.ts 6.604 o o16 4.928 Steara 1,763 1.39 3 1.217 Total 5 135,515
$ 133200 5 120 138 Unlity Plant? m 8
Electnc
$1,284Ab2 51 257.728 51.242.145 Gas 64,067 59097 51.033 Srcam 4,142 4.349 4.924 1,351171 1.321.174 1.208.102 Other identifiable Assets:
Electnc 00.348 157.437 I N 347 Gas 20,985 42t85 12.361 Steam 413 440 471 129.746 2N.502 119.179 Aswts Not A!kicated 191.853
(*)804 115.082 Total Assets
$1,674.770 51301b30
$ 1,53 3.263 Depreciation Expense
- D Electnc 5
56377 5
54.255 5
52330 Gas 1699 1310 3173 5 eam 907 800 890 Total 5 61.183 5 58 404 5
56300 Construttion Expenditures:"'
Electne 5 86,073 5 04.233 5
70.927 Gas 8.382 10 109 5070 Steam 468 14o 54 Total 5 94,923 5
70 488 5 76 050 o :nc huks plant heki for future us. mnstnation mik in nopes,.ux! !ksan m oi umn,on urJay en 3wrt>
'> N.ued nct ef the respvrive.htumulated pnwi-ions tot dcpnxurnin
' 5 fhhkks amoitt:ation Arethi ansmg Inirn sale of conn.Ats
'
- I xtkah s a!kmante L r hitxis usti dunng mostrtation
]
Operaung income by segnents is reported in at mrdant e with genera!!y accepted acmunnng and ratemakmg pnnciples within the unlity mdustry and at cordmgly. mJude. c.wh sepnent's proportionate slure of taxes on income and general wrporate expenses 38
Deinurva twvr 6r bdu comruny Non:s To Com.ounmv FiNANcrat StAttutNTs 1
- 12. Serru utNTARY The following supplementary financial mfomurion. as presenbed by die FinancLll dCeounnng INI:ORMATION TO Standards lhlrd tu Statement No. 33. as amended, is supphed for the parlwe of prmdmg Disciost litt En rcTs infonnanon about the cflects of changmg pnces on the company 1s operations The mlonna-et CilANGING tion should be newed as an esnnute of the appteximate etkct of mflanon rather than as a PRICES (UNAUt ITW) precise measure.
Cur'vnt cost amounts reflect the change in speatic pnces of plant irom the date the pLmt was aapired to the present. The ainrnt cost of unhty pbnt represents the esumated cost of replacmg existing p! ant a, sets and was determmed by indexing exonng plant by the Handy-Whitman Index of Pubhc Utthty Construcuon Costs Con 3 tant do!bramounts repmsent htstorical costs stated in terms of dollars of equal purdusmg power. as measured by the Consumer Pnce Index for All Urban Consumers and ddler imm cunent cost awunts to the event that prices in general have increased more or less raptdly tlun spec:fic prices Supplementary Fmanaal Data Adjusted for the Etfects of Changmg Prices iDolbr, m musnM for the Yar ended twember 3L lhetor cal Gwt Cunent Cost vweraa lW IW1.no Operating Revenues 5722 834 5722.834 Operatmg Expenses:
Operation and NLuntettuice 424 74H 424,748 Depreciation 61.183 116.142 Amom:ation-Summit (7.202)
(7.202)
Taxes 10M 590 108,5W Other income-Net (8.810i (8,810) l Intettst Charges 47h87 47,687 l
NetIncome D 5 % 6 38 5 41,679 Eamings per common share (after prefened d videno requirementq 2.76 5
0.95 increase in current cost of enhty plant held dunng the year
- 5 26.308 Adjustment to net recoverable cost 61,394 Effect or increase in general pnce level (74.549)
Excess ofincrease in cunent costs after adjesanent to net recoverable awt over increase m general price level 8,153 Purchasing power epin on net amaunts owed 21,441 Net 5 29,594 Indudmg the adpstment to net reawerable mst the inmme en a current oh lusis for le would tus e been 5103 073
' 2 Euludingadpsrment to net reawerable (twt
' DAt December 31. IM. the wntnt awr of ntt urdity pbnt was 52 2t>5170 whde hrstoncal uwe was 5L351171 39
Delmarva Ptmer & taghe Gmpany NOTts to CONsOUDAIEu FisAxciAt_ StAnsitsis
- 12. StriuMLN~1 ARY
[upplemenury five-Year CDmpanxin of Selected hnancial Data INI ORM ATION Adjusted for the Eficcts of Changng Pnces (conunuaD W %<Nnd* " d Average lMi tb!1.d For the Yean en3chn h r H 1985 1984 1983 1082 1981 Opencing revenues liistonal cost dolbrs
$722,834 5702 503 5649.799 5636h60 5608,504 Constant dollars 722,834 727,428 70t h26 709,560 719,750 Net income Currai cests 41,679 40,331 34.128 25.005 17,774 lbmine,per e mmon share Cuntnt costs 45 1 20
.72
.41
.12 Net awers at year end a i hstonca! o>st da!!ars 666,811 644.650 608.513 573,073 542.080 Current costs 655,619 056.467 M6.db 031,478 620.455 Excess of incmase in cunent costs over increase in general pnce !ci cl "
8.153 t 10.515) 5 848 4.033 (71,210)
Purchanng pow-r gun on net amcunts owed 21,441 25.914 24,489 25.276 59.185 Cash dividends derbred per common sharc Histoneal cost dolbrs 5 1.945 183 5 1 08 5 1.595 5 1.535 Cons' ant doibrs 1945 1 89 1 81 1.78 1.82 htarket pnee per common share at year-end ihstencal cost dolbrs 27 88 22 00 19 25 16 38 1263 Constat,t dollars 27 41 2240 20 44 18 05 14 4n Average Consumer Pnce Index(1967 = 100) 322.2 311 2 298 4 289.1 272.4 o1xquedwrmma "W mt eem crAe mt
' CA!!Ca Ali$liYl! 4 ) DCI FO 4 FLrM'ke G *4 As requirtd by Statement L 31 the cuntnt pnndions for depreaation on the ct.mnt cost arnotmt, of unt y plant were dct rnmed by applymgthe company's dep,rcuGon rates to the it f
indexed plant amout ts. even though depreaation is hmced to nxovery of hisancal costs as further discussed belew Other operanng expenws w cre either not rquired to be adjusted or were not adjusted due to rate-mahng consideranons.
~1 he company, by hokhng moneury assets stsb as cash and receivabies. loses purdusing power dunng penods of intbnon becau w these items can purchase less at a futme date.
Conversely, by holding monetary lubaties. primanly long-term debt. payments in the fu-ture will be rnade with do brs havingless purchasmg power. For the years 1981-1985, the r
company's monetary habihnes exceeded monetary assets which resulted in a purdusing power g,nq on net amounts owed dunng the year The rate regulatory process hmits the company to the recovery of the histancal cost of plant.
Therefore, the exess of the cost of plant stated in tenus of current cost over the histencal cost of plant is not presently recoverable m rates as deprecution and is reflected as a reduction to net recoverable cost. Itased on past praaices, however, the company beheves it will be allowed to cam on the increard cost of its faahties u hen replacement actually occurs.
40
Dehrurva iher& L:dx Compinv l-Non.s To CONsoutuToo FINANCIAL brARsttNTS l
- 12. Serru.sitNiaay Since the gun from the det hne m putth.tsmg power is.etobutabk to !ong-tenn debt u ht.h INI oRstATION has been used to finann unh:y plant tbc xdutien of uil'ty p.uu to nei n cca eranl: a.aourit t
~
tmntmed is netted agunst the purdusing powt r gun on net amoun s owed dunng t e : ra h
- 13. QuanTtaty FINANCIAL The quarterly data presented below reficet all aopetments r(cessary in tbc op nion of the Isi ons ATios comruny for a fair presentanon of the mterim re.i111s Qtt.ited dar i oonn.tly rag s.zasnruib:y 3
(UNAUDIRrs) with temperature vanations. ditierenets between summer and wmter raw the nmirg e.f rxe orders and.he schedu!cd dowrmme anJ mumour.cc of ch tec p.rcianng umts liuisiO}h I' itTur gs Mphable heqe per Quarter Operaung Operaur.g Net ta Ccirmon 5tures heray Ended Revenue Iname Intome Nak Outsrandnig 9ua (IW.n Thu.@
Qi n oise 1985 March 31
$198,788 5 36,Wo
$27,l14
$ 23.964 30,492
$039 June 30 161,093 29c416 20,582 A7333 30 482 0 57 September 30 196,352 43,406 34,235 31,085 30,182 1.02 December 31 166.601 25.657 14,707 11,5'7 30ME2 0 38
$722.834 5135.515 596,618 581.030 30.482 5176 1084 i
March 31 5100.185 5 30823 525.u90 521800 30 003
$0 70 June 30 164,181 29.957 1R130 15,954 M 177
'53 September 30 188,901 42.802 33002 20S3/
30,337 0 94 December 31 159.32o 23.507 13842 ici?48 30.482 0.35 S702.593 $133 209 592.l k 0 579.4 m M14n 5203 In the fourth quarter of 1981. adjustment 3 for a vc lun'ary [Al.m et rarnae ie'und zad other retplatory itenu were recorded The ettcet of theve id;usunems iruercJ f ur h vurer r et incom, by approxmutely 54 200 000 (14e p sbare' in the second quaner of 1085, adjustments w cre reconico for the aude:u nal DJane dcctric reuil nxenue refuad for Ic,84 and addit:enal ame rituuon of the aedit.nsing hc m At sic of contra. ts which resuhed from an out-ofsourt tamtlarent The cRot of ttrrd ustments i
reduced second quarter net mcome by approumacly SI.hWW (4e re; saad in the fourth quarter of 1085. the compant u rote-et! i:ohare ef afcirce t nder eranaim supply contratts that were ternunated and a!m au rued for a resale rev.mc retund ~Ihe cfktt of these adjustments reduced fourth quarter net mcome by apponimately 510M 000 (7e per share).
i 1
1 I
I 41 q
Weum rd wr k 14 0 ev,+y
(
Comocitun n SrArisncs i
h % n nt h 1985 1984 1983 1982 i
. I'tict Ric RINI Nt i.s Residen:ial 5 212.254 S205.410 5143021 5183.258 nl. w,d,:.
Comme retal Ito 957 156.507 1a03N I37,434 Indusn.'al 135,141 128.H33 126.703 127.441 L
i_
Other unhner, ete 79,309 N 235 68.941 73400 Miscellancotn re, enues u 830 0 678 12.728 13,1o8 Total electne rn enues s 605,581 i N4.lo3 5542.252 5534.770 Eurime SAui Residentia!
2.2 % o22 2240.270 2.136.265 2.026.348
.i, w k,1,.m..n h. w 1 Cornmetaa; 2,163,683 2071437 1.844.324 1.724 863 Industrul 2,606,4M 2.569.572 2.600.402 2 255be >
+
Other uni.ncs. ctc 1,501.447 1.415 034 1.207.305 1.237 508 3
listai c!cc:nc %!cs 8 5?,0.520 8 ?08.231 7 B78,476 7,244.442 Eu cimc Costesti ns Residennal 283.ull 275.175 267,357 260 371 (ext.irma Commereu!
3klM 31 W 20.525 29.006 Industnal sol olo pig 741 Other unl.t:cs. etc.
492
'02 434 4 34 Total elettne customes 318.485 308.1 M 2M265 241.512_
GasEnr.stn Residential 5
W.224 5 40933 5 16 644 1 36305 t luts eds.
Commercial 17,901 18p63 16527 15.702 Industrial 19,762 22.940 73.232 20.112 invenupnh!e 17,414 18JN8 17 026 11.733 Other uohnn.cto 130 160 11) 13 Acrana2s revenoes 820 TM 704 552 45256 5101 T/8 _
't (H..t in 5 M.717 intal piy icu nut GAsSau#
Wb la.fial 1o22 n.211
')610 6 OS2 o a o oa tw v
( i.m m e m ul 2.742
- 2. 17 1 2.677 2.7t,8 Industmd 3.570 4.2 n 4.37M t108 Irci aonbte 1.7 34 1.764 3723 2650 Q he r Ede, etc.
31 41 31 10 li tal.w sale,
. LUC 8 17 2??
16 4 N
.I 5 60 i Gas Ct m mu as ResLier.t M 70f04 70!g3 69.(08 69 M2
.wndoren #
Gn merdJ 4,417 4,233 4.075 4,o57 Industrial Itd 163 1(O lt6 internipuble 15 14 10 18 Ohcr unhnes etc.
I I
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4 pal,ts custc mcrs 75,397
_J4r01 73863 73334 f
Ef ! tv PV St RvKt:
thncty delwered 335.260 2 M201 AN04T 122.801 0 m hn h...,a Steant dehvered n 138H29 6081335 69hNM 7 778 420
( l iW pnutla k
Aurar \\nrwi Orniel t 1981 1980 1979 19?b 1977 1070 1975 Rac hch
$164,919
$1 t4.637 5]Ii381
$105 237 8 97.001 5 8d41o 5 77 069 10 66 123019 11,1160 91,748 82,74n
,4 (41 60.111 58.1c9 11 25 129.601 116,401 98,023 93,972 70.801 64,458 64 141 7J74 j
73.602 63698 53f/82 4u.840 38,974 H.896 33p06 H 35 12.898 7.025 4 682 5.261 3.461 2.N8 4.370 3 44 SW 119 S H 3.927
$ 363 6cf'
$318106
$ 241.%8 5242 279 52H 355 9 73 l.W6.647 21 4,540 1.0n8.452 1.479 624 1,92 t 723 1,787b63
! 672W 3 04 1,660 147 1,648,770 1.508,299 1.568 600 I A95.796 1,412 259 1,359273 f77 2,454b85 2.429.642 2.624.438 2 418.527 1277.630 2.260 de1 2.i42.I 51 1W 1,283 845 1.3 15,21o 1,500 011 1.281.498 1.207.441 1.I99155 1.216.In3 2 11 7.395.324 7Ab0.380 7.491 800 7.248.249 e 906.090 cb59.7 'LS 6 342.784 293 255.646 24G M 7 242,745 237,925 233,106 2 M.579 221.7A) 2 50 l
29.450 28,162 27.003 28 421 29.648 28.3F5 27.345 1 96 7&M 821 874 858 421 1.002 923
(.33) 434 440 478 430 561 550 545 (1 02) 286.318 276.310 272.093 267384 24.236 250 476 250,593 2.43 5 31123
$ 26 325 325.71 a s 28.370 s 21,829 5 18,320 5 11%5 9 83 14,344 10.342 8 934 10.154 7.133 6 062 4tT6 14.37 22.259 12A04 9A94 10.191 6,950 5.984 4.34 3 16 %
11 71l 9.293 4340 71e 169 1.101 1.2 i l 10 55 61 46 55 93 49 4+
33 1470 572 430 270
!!6 101 31 45 33 68
! n s /0
$ 50040
$ 40.322 5 49A40 5 36 233 5 32.248 i 25b73 14 01 e,193 6 321 6.42i c.94i 6 711 6.9 %
(. 540 (130 2,7tM 2683 2A15 2.595 2.4 14 2 186 2.434 1 22 4 809 390
.s.338 3.2'M 2 811 3.2 M 2.849 2 31 11102 2 738 1.720 319 81 953 1,073 1328 12 14 le 29 17 20 18 5 59 16.520 1$ 693 13.962 11172 12PM 13774 12909 1 98
(
68h08 67.*/84 o6f,31 66.364 6h 231 07,754 68160 0F 3.967 3.846 3.712 1773 3.738 4.154 4.189 OM 167 155 1 31 103 (63 198 148 (2 11) 16 16 in 21 21 21 21 0 31) 1 1
1 1
1 1
1 72.75?
71.802 70.491 70.322 70,154 72.128 72.509 038 343 (VG 328.420 202 159 270.tM6 289.049 318.180 297.232 12l 7.6/1420 7.5 /0 9 H 6 378.705 6.0?6 095 4.888,3e6 1301.121 5.517FC 12t 43
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44 l
h L
ANNUAL MLETING The Annual Meeting will be held on April 29 at 11:00 a m.,in the Clayton Hall, University of Delaware, Newark, Delaware.
l AnomoNAL REPours To supplement information in this Annual Report, a Financial and l
l Statistical Review (1975-1985) and l
the Form 10-K are available upon i
request. Please write to Stockholder Relations, Delmarva Ibwer,800 King Street, P.O. Box 231, Wilmington, Delaware 19899.
I Amt Dinicnom an Disu.m: TiassA ZmuesuAN. Piumx,aAPHY jmN CARitt Ill.CtMR ht1%TRAikw PrunA PAren a lla.i%s
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