ML20198S348
| ML20198S348 | |
| Person / Time | |
|---|---|
| Site: | Beaver Valley, Perry, 05000000 |
| Issue date: | 12/31/1985 |
| From: | Rogers J OHIO EDISON CO. |
| To: | |
| Shared Package | |
| ML20198S250 | List: |
| References | |
| NUDOCS 8606100398 | |
| Download: ML20198S348 (44) | |
Text
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A E..
k OHIOEDISON Annual Report 1985 p
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Ohb Edison Cy:t:m The Ohio E<lison System is the 17th hrryest investor-orenecielectric system in the UniteelStates, basect on total kilouratt-hour sales. It in-clucles the Ohio E<lison Company, ,
heatiquarterect in Akmn, Ohio, anti the IVnnsylvania l\ncer Com-pa ny, in Neto Castle, IVn nsylvania.
7bycther; the Companies pmvicle electricservice to momIhan 937,000 customem tvithin an area ofup-pmrimately 9,000 square miles in central anct northeastern Ohio an<l trestern IVnnsylva nia.
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Financial Highlights l
For the Years Ended December 31 1985 1984 Change On innthons, except per st'a'e amounts)
Kilowatt-Hour Sales 28,985.7 26,764.2 +7.9%
Operating Revenues $1,754.7 $1,637.1 +7.2%
Fuel Expense 499.2 422.8 + 18.1%
Operating locome 380.4 342.7 + 11.0%
Allowance for Funds Used Dunng Construction, Net 287.7 256.9 + 12.0%
Interest and Other Charges 410.2 371.6 + 10.4%
Net income 370.7 339.3 +9.2%
Earnings on Common Stock 318.1 290.7 +9.4%
Earnings per Common Share $2.45 $2.50 -2.0%
Dividends per Common Share * $1.88 $1.84 +2.2%
Dividends on Capital Stock $297.1 $263.0 + 13.0%
Capital Expenditures:
Construction of Facilities $765.8 $800.4 Nuclear Fuel 52.8 60.8 Other Capital Leases 8.8 6.9
$827.0 $868.1 -4.7%
Internally Generated Funds 285.8 222.1 + 19.7%
Net Financing Activities 507.0 581.6 - 12.8%
Return on Average Common Equity 15.2 % 15.9 %
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EL"5 EMraontmary
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President's Message i
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] l" generation, which we expect effi ets on our sales, we are later this year, we will begin aggressively working to in-receivmg nearly $ 12 million crease our overall sales base.
i through electric rates to Pri"ing incentives and of her 7
cover a Ix>rtion of fitumcing programs, combined with
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.3 costs for our ownership some improvement in our
) o share. The Public Utilities area economy, added nwre
, Commission of Ohio estab- than $35 million of new busi
) lished this initial ree ery ness to our 1985 revenues.
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plan for us when i' s t.le 1 on our rate case in 0 aber 185.
The (,ommissioi. s decisi in p,,,,,,,g,,,g ,y ,,,,,
L,onsidering what was accom r-plished in a tough operating f, is an important first step in 7< A ,5 recovering our investmer t
, , .g ;
our performance .m 198a-
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through future electrie rates. .
- with some satisfaction. At (hy
.V - strong sales to other Utilities the same time, we know we imist focus our attention notl w\N '\.
( Selling power to other utilities on past achievements, but or was one of the key n asons for the futme Accontingly, this i ' \ our earnings performance in year's annual report empha-
! 1985. "Ihking advantage of sizes oldectives we intend tc j In 1985, earnings per share these sales opportunities, meet for improving sales, ofcommon stot k came close to which represented $159.3 operations, employee develop matching 1981 s nmni n sults. tuillion of 1985 revenues, was ment mul service to customen I.anungs wen $2. la per shan' possible because our people Meeting these objectives ani compared with $2.50 m 198 have been getting good per-others requires that we stay i We achieved this near-record formance from our power on top of national and hical financial performance despite plant s. issues which couhl have lons
! an 18 cent-per share earn- Tlu 50.9 percent increase in term consequences for stod ings reduction in the secomt k lowatt-hour sales to utili. lu)lders and customers.
l half of 1985 when we stopped ties was especially important One issue that appears likeli meluding in net income the because it more than offset to become more sensitive is allowance for funds used lower sales to our own cus- the question of adequate during construction for Lmt tonu rs itesidential use was power supply. Although ou 2 of the Ibrry Nuclear Ibwer relatively flat as a result of sales growth'has slowed sind Plant. As we reported m the mild weather, and industrial the economic and energy past, the future of Ibrry Unit sales wen down .l.5 pen ent- turmoils of the 1970s, then 2 ts under review- mainly lx cause of lower is no question that the pow The good news at Ibrry was steel pnxluction. Energy us" from Ibrry Unit I and Beav l achieving that stage of Unit by commercial customers Valley Unit 2 will be neede I construction where fuel was up 3.2 pen ent, but not in the yeam ahead. Despitt loading and start-up is the enough to compensate for a slowed rate of growth in next step in the licensing the drop in sales to our other customer demand, that de process. When the unit customers mand is still increasinu.
reaches a 20 percent level of Wlule weather and the busi. What this continued growia ness swings of high consump. demami will be beyond thq tion industrial customers year 2000 is one of the ma can cause significant cyclical things being weighed in th review of Ibrry Unit 2.
While no one can predict 11 future wit h absolute certain 2
l we recognize that the eco- President Ronald Reagan and the scrubbers that were re-nomic health of the area we Prime Minister Brian Mulmney. quired at the Mansfield Plant.
serve must be considered in They inspected the plant's M've also teamed up with Imaking any decision about $370 million scrubber and other utilities in the Living energy supply. We want to waste removal system and Lakes Project. This program's make sure thenis enough were given appropriate cost aim is to mitigate acidic con-reliable power to sustain and operating data. ditions in up to 100 targeted growth in our area. After considering this and lakes and streams, reganiless omsting Messonable other important information, of whether the problem is nvirenmsntal solutions the envoys issued in January natural or man-made. Our
\nother issue of continuing of this year a joint report to belief is that this approach, uncern is Ihe " acid min" President Reagan and Prime which has been very success-untroversy. Electric utili- Minister Mulroney. While we fulin Sweden, may well prove les, particularly in the Mid- disagree with many of the to be the most cost-effective vest, have paid billions of basic assumptions made in way-at an estimated total follars to meet clean-air their report, we fully agree cost of $25 million-to treat wpiirements. Ohio Edison's with their conclusion not to lakes that are susceptible to westment alone is approach- recommend scrubbers for acidification.
ig $1 billion. But new legis- existing power plants. And, improved outlook itio i, if enacted, could cost we do agree with their as~
itilit(ies and customers manysumption of the need for Our financial performance is considerably better than it iillions more. devehypment of more cost- een in some time. Earn-
)ur nation is already suffering effectwe ways to burn coal ngs have been up from their te eflects of low-cost foreign cleanly. The report recom~ depressed levels prior to 1981.
ompetition. Widening that mends expanding and ac-Our balance sheet is stronger.
ompetitive gap with costs celerating research projects More of our construction pro-hat industry would have to smular to those we already gram is behind us. Financing
,ay to support more expen. haw under way at two of no longer presents the prob-ive controls doesn't make our power plants. lem it did several years ago.
'nse as long as there are One of these pmjects, in d, equally important, we oubts about whether the cooperation with the U.S.
have the people amt resources ew controls wouhl provide Department of Energy and to do the j.o b ahead-as well ie intended results. the Dravo 1.ime Company, as, if not better than. we have
> underscom the cost, com. mvolves a new process we n the past. That's important lexity and new environ. helped develop which adds because continmwl success ental problems associated lime to plant flue gas to re-
, des k Und of s@pon we
-ith adding scrubbers to all duce sulfur dioxide emissions.
have been fortunate to get
>al burning plants, I invited Another project involving loyees as well as te American and Canadian the U.S. Environmental Pro ~ stockholders, all of whom woys on " acid rain" to our tection Agency, the state of h- appmciation and ruce Mansfield Plant in Oluo and the Babcock &
sincere thanks.
igust. U.S. Special Envoy %ilcox Company is also m.
mw lewis, former Secretary progress. Successful results
~ Transportation, ami Cana. of these projects wouhl mean an Special Envoy William a better solution than costly '
{ h wis, former Premier of and complex equipment like Q ntario, were appointed by Justin T. Rogers, Jr.
president Mar h 3.1986 3
increasing sales through aggressive marketing programs i
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i Programs like these helped panies, which are investing Whrren and Lungstown areas us in getting electric heating $1 A billion in equipment to a teleconununications com-installed in 35 percent of and facilities, are miding pany. Ily the end ref the year, homes built in our service $35.3 million to our annual contracts for use of the cable area in 1985. This represents revenue. totaled $172,500 annually,
$15 million in new annual and mom were in negotiation.
luchiding new business gn>wth, our goal is to add a 'lb maximize new business Sales to Other Utlettles Economic Development total of $50 tuillion in new opportunities, we have formed un talli.e.t kW h) Efforts Get Results annual revenue in 1986. the New Ventums Study Gniup We have intensified our eco- which is evaluating additional 7.r, nomic development efforts ways to utilize our facilities
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One of serem! protnising to retain and attract busi- . and people to inemase mvenue ness to the area, with good "C# I",1siness opportunities Mi h bihm %b for us is fiber optics. Tlus ad' im results. An especially effee.
vanad technology improves
& hM wMid tive incentive is a five year sk lls and resources not pricing plan that gives new the transmission of data ami readily available to area busi-mice signals and, m addi~
_ _ _ gr, or gn> wing businesses a sig- nesses without significantly tion to our own use, has nificant savings in eney,y increasing our overhead ex-
- many appHeations for tf"' enses. For example, our costs.
an electronics and communica- n mn s s ping a Introduced in 1981, the plan tions industries.
e mpany analyze the effects is being used by 2< compames We began installing fiber- of emissions from its plants, which have added I,153 jobs lIl
~
ar,- optic cable along some of our while the people at one of to the area and about $5.1 distribution lines in 1985, our laboratories are running million in revenue from elec-and we are pnwiding use chemical analyses for several o tric sales. Another 33 com.
of the cable in the Akron, companies.
mst-19sr, panies have applied for the special pricing p!an.
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We also help state and kical ,
officials develop their plans to strengthen the area eco-nomy. In addition, our people work with hundreds of busi-nesses to offer technical as-sistance on elect ric systems and energy management.
In 1985,111 companies started or expandal operations in our service area. Tho,e com-5pecialeconomic development rates *
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helpedattract300 jobs and $800.000 _
in annualelectric O
s sales when Carriage Hillchose Salem, -
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Ohio, overIndiana forits meatproc- 3 y essing plant. >W 6
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for Minnesota-based
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- Simcote. Inc. . is one of 111 new or ex
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- $35 3 million to our s 9- annual revenues
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Improving overall performance, cost controls and use of our facilities t
Advanced technology, new our industry has projected e i
maintenance techniques atul generating units to last an ;.
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! better employee training avenige of 35 to 10 years. Ilut Il enabled us to improve gener- today the high costs of build- *!
ating unit performance. In ing new plants, plus regula- ..j 1985 an average of more tory uncertainties, may make ~ us
- than 79 pe reent of the gen. it practical to extend the E entting capacity we opemte lives of aging plants. -rs y '
! N'*nfe cosmoet w i
was available tbroughout the Emphasis or nellabuity year to pnxluce elect ricity.
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While the cost of achieving In 19S5 we spent $76-1 million %F C U
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' on new plant construction e this level of performance is sigmficant, we were able to d systein improvements k",'~
to hep maintain reliable keep our operating expenses service to our customers. [htt
$ 1 million utuler budget lidle 'rvim "I I takes more than new build-J 3 _ _ _ _ _30 We reduced fuel costs-our ings and equipment. It takes i
largest expenditure-by the efforts and know-how of tuaking timely purchases in thousands of employees.
20 the spot market Ihr coal mul A gm I measure of how our gaining greater flexibility in i'
le erform is their re-coal cont racts. Since .\ larch s onse to a major emergency.
____.1" 1983, Ohio Edison has had t ne lowest average coal costs e f On W 3L we had such an #
j ergency wb n a series of g all eh ctric utilitles m t he state. g,g struck castern Ohio insi.insr, We also expect to save more and western ibnnsylvania, than $1.8 million in annual leaving more than 120,000 operating costs by consoli- of our customers without dating some operations. 'Ib service and causing $6.6 mil-reduce the costs of coonli- lion in damage to our system.
nating k> cal distribution of Our employees mobilized electricity and repair work, quickly and worked around '
in 1985 we began combining the ch>ck to restore service nine area dispatching offices to nearly all of the affected into centnd h> cations. Work customers within 21 hours2.430556e-4 days <br />0.00583 hours <br />3.472222e-5 weeks <br />7.9905e-6 months <br />.
is also under way to consoli Another special measure of date our tueter testing ami erformance carne in late repair facilities Se temher when our people
'Ib determine the most eco- helped utilities on the East nomical mettuxis to keep our Coast Ibilowing Ilurricane existing power plants nmning Gloria which left 1.3 million efficiently up to the year customers without service.
2015, we initiated a life ex- We sent 200 employees to tension study. Tnulitionally, assist Inng Island 1.ighting Company, Boston Edison Company, and Northeast '
Utilities Service Company in Connecticut.
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gjyIHlHlll0 Company President Justin T Rogers. Jr.
tieft) gave Ohio Governor Richard F Celeste tright). U S Representative Douglas Applegate tcentert and other members of govern ment and the news media a hist-hand The company 8 look at the s438 new 59 milhon milhon air avality computer center Is project at the W H destqned to handle Saminis Plant the growing use of data processing for more efficient and rehable operations 9
of those who experienced an shares the electric industry's c; e L interruption of service said view that more fact-finding s y f',
!j\
they felt service was restored study is needed to pn>perly as quickly as possible. Of all identify the causes and ef- ? - [# 1.
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respondents,96 percent be- fects of " acid rain." L~'" '
lieved we provide satisfactory We are already involved in . At; service. And 97 percent of all two research projects that customers rated electricity a have the potential to reduce good to average value.
lant emissions more eco-In August, Ibnnsylvania cus- nomically. In August 1985, tomers gave e<pially positive the U.S. Department of Energy evaluations, with 97 percent selected Ohio Edison to test rating the value of service as a new technology we devel-above average or average. oped with the Dravo Lime Company to reduce sulfur-EnvirontnentalResearch dioxide emissions. Earlier, .- ,
Focuses on Costs -- > - ; - s Although all of our power plants comply with the Clean
""I",'gan working with the U.S. Environmental Protection ]o c'
.^--
Agency, Ihe state of Olu.o and '
Air Act, we (ire now faced gg g; gg with legislative proposals any to test the effectiveness that could further increase of another pnicess to reduce our costs drmuatically and .
both sulfur-d.ioxide and unnecessarily.
i -
ide Mssions. If The most significant and con- successful, either technology troversial issue is " acid rain." would be far less expensive Advocates of new " acid rain" than adding huge scrubber legislation claim that sulfur- systems to plants, which dioxide emissions from power would be re tuired by many plants in the Midwest are " acid rain" proposals.
causing acidification of lakes AMs ler, more cost-in the Northeast and Canada.
effect ve solution could be to What those people seem to simply add lime to lakes that ignore is mounting evidence are susceptible to acidity. %
that the new controls they determine the benefits of this are demanding would do option, we are participating little more than add further wit h other electric compa-financial burden on electric nies in a five-year, $25 million _, .
customers. An infhiential "Living Lakes" project to \
and growing lxxly of people select and treat hundreds of C in the scientific connuunity lakes in the Northeast. 6 Quick response and 'a \
strong support groups enabled em-playees to restore ,,
powerin one day to
- f nearlyallof the 120.000 customers u aflected by torna- if does that hit our '*
- area on niay 31. Cy'Er d .
10
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' computers and htqhly skilled employees like those at our System Drspatchinq Office.
A strong preventive play a key role in maintenatice pro our efforts to pro
. gram for our qen vroe customers the erattnq units has most reltable serv helped us achrew i sce possible 79 percent mu., vent K
dvailao Itt y r,4 f us q
~~~_ . - 4 percent mqhe M fhan w '48b goat 11
Achiaving ths most tim:ly and cost-effective complation of nucicar plant construction in cooperation with our utility partners With preparation for fuel n. mains muler n view The only I c
loading amt initial . start-up, significant work on the unit Unit I of the Ibrry Nuclear in 1985 was that necessary M hl D -t Ibwer Plant moved nearer to to place Ibrry Unit 1 in opera- a Ihe completion of construc- tion. As of.hily 1,1985, Unit '
tion. The Nuclear Regulatory 2 allowance for funds used '
Conumssion (NRC) has given during constniction was no Eat Mnancing Needs high marks to the effort taken to ensure that Ibrry is longer included in net income. 6 m F.
s h
Mnancing Weeds Declining I* D#' ^'1uai a well built, efficient plant. ,
tw u%,p,,,1 Ohio Edison and ibnn Iwn As our construction program #
-- own about 35 percent of the winds down, so does our ,
1,205 megawatt unit, wiuch need for new financing. With ,
,isbeing built by the Cleve. the completion of the $510 I
.33 million environmental im-land Ehrtric illuminating Corupany, provement prognun at the
_ror, _ g nn ng of the year and Providing for some of the Un t I nearing comple-costs of Ibrry Unit 1 in our tton, our construction costs
~37r,~-
electric mtes was an inq>or- now pn>jected to fall tant development. In October' from $764 million in 1985 to
, 2" the Public Utilities Conunis- n natid $444 million in sion of Ohio said Ihat we can 9. At the same time, our I<
insi-insa I,
" tar,-
begin n> covering nearly st")
million for financing cost 3 when ihe unit reaches a 20 percent level of generation' expected in Ihe second quarter of 1986.
need to raise ftuuis from in-vestors for new projects
" " I"""8097
- i" .lon m 1985 to $190 nuu.lon m 1989.
s downturn in con-The NRC also reported in sindmn will pnivide wek ome 1985 that Ihe qtrdity of con, n ef to Dnancing pressures, struction at Unit 2 of the we still face a sizable con-Ik aver Valley Ibwer Station struction amisystem impmve-was good and that indepen- ""'" E*N"""-
dent quality assurance audits and daily inspections were hi funding these projects, effective. Ohio Edison owns we will continue to pursue about 42 percent of the 833 options that will keep financ-megawatt unit, which is ing costs to a minimum. For about 91 percent complete. example, during 1985 we Duquesne Light Company is raised $50 million with the unit's builder. adjustable rate preferred stock that can take advan-The future of Ibrry Unit > nge of falling interest mtes about 41 percent comple[' and puts a ceiling on the rate we will have to pay. We also were able to re<htee financ-ing costs by redeerning $50 million of high-interest first mortgage bonds.
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- We have well under way a conunitment to equal oppor- reduce our annual operating
) comprehensive human re- tunities was recognized in and maintenance costs by isources program that places October with a citation from more than $130 000. For their
- major emphasis on strength- the Ohio Bureau of Vocational ideas, employees received l ening ove rail management. llehabilitation for our work cash awan!s of about $33,000.
- Through formal instruction, in hiring disabled individuals Employees further contribute
' job rotation and special as- in Akron. to pnxtuctivity and a better signments to pnsblem solving Programs improve w(,rk envimament by fully task force groups, we are ProductIrlty supporting our safety pro-b'tilding Ihe skills we believe Alany of our incentive and gnuns. Over the hist five yeam, are necessary to guido and benefit programs are aimed our accident rate was reduced speed our gmwth. at increasing productivity by 41 percent. Employees in Affirmative action ami equal among e ployees. Dmugh g;ir Springfield Division won employment opportunity also stock ownership and savings national and industry recog-bre important to our develop- plans, employees build retire- nition in June for working ment savings and become one million safe houm. In ment programs. We continue owm.m of Ohio Edison stock, September, Ibnn Ibwer em-
- o pursue every avenue in meeting the reIl uirements of ynabling them to participate ployees were also recognized bxisting laws and regulations in our financial performance. for reaching the one million overing the recruiting, hir- Employee suggestions also mark for the thint time.
ng, training and promoting help to increase productis ity.
>f qualified employees. This Suggestions in 1985 should
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employees on
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R: aching out to help meet social and community needs Mi. recognize that many cus-tomers need help in paying for their electric service during times of financial or medical difficulties. And we give special attention to the ,y needs of elderly, disabled and low-income customers.
(
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Pndect Reach, which was
,4 \ ,
' ~3 established in 1981 to pro- .
vide financial assistance to '
those customers in need, was awarded a Presidential Citation in Washington, D.C.,
in June. With our start-up funds of 570.000 and dona-tions by customers and em-ployees, Pndert Reach raised nearly $150JXX) to help 1114 families pay their energy (s .,9 bills for the 19S I 85 heating >
season. For the program's second year, we are matching
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of $100,000, donations made n, '
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by customers, employees and anyone else interested in giv- p 'q ing a helping hand.
In April, Thomas V. Chema, .
I chairman of the Public Utili- -1 ties Conunission of Ohio, s j gave special recognition to T Ohio Edison for an excellent ,
- c. g .
reconi of working out pay-ment problems with custom- l Computerprograms l ers during Ihe 198 I 85 winter that use games to heating season. teach students about electricity and energyissues are among the niany educationalre-sources we offer to area schools.
16
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M:nz:tnantb Di:curi:n cnd Analysis cf R: Cult 3 cf Cparcti:ns cnd Fincnci:IC;:nditi n Results of Operations increased kilowatt-hour generation from the Companies' 10 suits of o[erations continued to improve and strengthen the pnxluction facilities was resin >nsible for the increase in fuel O)mpanies' financial p>sition in 1985. Earnings available for consumption in 1985 ami 1981, and resultml in the 45.6% j common stock increasmi by 9.4% over 1984, although earn. raluction in purchased and interchangni power in 1985.
ings per share and return on average n>mmon niuity sin;wed Earnings were also affectml in 1985 by a $4.5 million nxlue-slight declines due to an 11.8% increase in the average numler tion in Irnsion costs, included in other operation expenses.
of shares of common stock outstanding in 1985. This increase As discussni in Note 1, this rnfuction was due primarily to a in earnings occurred, even though Ihe Companies stop[ed change in actuarial assumptions in the thin! quarter of 1985.
including allowance ihr funds used during construction The Companies' ongoing construction prognuns, requiring
( AFUDC) relating to Ibrry Unit 2 in net income as of.luly 1, the continuation of debt and equity financing, resulted in a 1985(see Note 7); inclusion of this AFUDC in the last half higher level of interest expense and preferred dividend n' of 1981 provided earnings of $. ISI er share. Ih sults for quin ments in 1985. During 1985, the Comiumies increasni 1981 also includni a $6.8 million noncash adjustment to their net long tenn debt outstanding by $85 million, consist-Ibnn Ibwer's depreciation n serve, which increased earnings ing of $214 million of new long tenu debt with an effective per share by $.06. Excluding the effect of this adjustment, mmual interest rate of 11.3% offset by long tenn debt ma-the n turn on average conunon equity in 198-1 wouhl have turitics of $129 million which carried an effective annual been 15.5%-
interest nite of 10.8% Partially offsetting the effect of this Operating revenues have shown steady growth over the past net increase was a decline in interest on longlenn obligations two years. The ibilowing sununarizes the sources of the in. resulting fnun lower interest nttes in 1985. The Companies crease in olerating revenues during 1985 ami 1984: also raised $85 million through the issuance of mklitional 1985 1984 [) referral stock. Except as noted above with respect to Ibrry gn ,n.ns, Unit 2, as the Companies' constniction projects proceed and Sales to Residential. Commerc!al tintil the projects are placed in service and or included in rate and Industrial customers Change in kdowatt-hour sales $ (11.3) $ 50 8 base, total AFUDC will continue to increase in onler to capi-hcreased base rates 37.8 87.6 talize those financing costs not being recovered through nites.
Change in fuel recovery rates 42 4 (44 3) w 68 9 94.1 nformation with respect to the estimated effects of innation Salei ta utit.es 41 9 41 2 upon the Companies is given in Note 9.
Sales to all other customers 68 (11 4)
Other revenues -
(26) Capital Resources and Liquidity Total increase $117 6 $1213 Capital requirements in 1985 for the Companies' construction prognuns, capital leases and nuclear fuel were appn>ximately
'Ibtal kilowatt-hour sales tbr 1985 were 7.9% higher than $827 million, of which approximately $507 million was IDS 1. This resulted primarily from a 50.9% increase in sales financed externally. Over the hist five years these require-to ot her utilities, reRecting t he Companies' continued success ments were approximately $3.8 billion, of which approxi-in the bulk sales market. Although kilowatt hour sales to mately $2.7 billion was provided from external sources. The connuercial customers increased by 3.2% in 1985, a 4.5",, 1986-1990 construction program and capital lease require-decrease in industrial sales offset that inen ase. ments are currently estimated to be $2.6 billion (excluding costs of nuclear fuel), the issuance of additional common The increase in fuel costs in the last two years is attributabl" stock and odier secunties will be necessary to fund a major ,
to the following factors:
portion of this new construction. The Companies have ad.
1985 1984 ditional cash n quirements of approximately $l22 million in ,
increased fuel consumption $ 49 7 $ 317 ami approximately $1. I billion for the 1986-1990 period l Reduced pnces (10 3) (11.1) to meet Inaturities of, and sinking fund requirements for, l Dif ference in net deferred fuel costs 37 0 081) long tenu debt, long term obligations (excluding nuclear l Totalincrease $ 76 4 $ 2.5 fuel), and preferred and preference stock.
Investments for additional nuclear fuel daring the five years 19861990 are estimated to be approximately $204 million.
During that same period, long tenn obligations related to nu- l clear fuel are expected to le reduced by approximately $339 mi, lion as the Companies recover such costs tbrough their ,
ein tric rates. l l
18
Manag:m:nt R pert The Companies' currvnt financing plans for 1986 include the The consolidatal financial statements were prepan d by the issuaruv of up to: 5. I ruillion shan s of comnuin stix k thn> ugh management of Ohio Edison Company, w ho take respmsibility the Dividend I?cirnrstment ami St<x k Purchase Plan; 'f.0 for their integrity uut objet tivity. The statements were pn' million adihtional shares of common stock thnnigh public panxl in conformity with generally accepted accounting sales; aml $180 million of of her long term debt. Additionally, principles and are consistent with other financial infornn-investroents in nuclear fuel of appn>ximately $35 million will tion app aring elsewhere in this rep >rt. Arthur Andersen &
be made in 19S6 through the incurrence of additional long- Co., indepatulent public accountants, have expressed an term obligations. opinion on the Company's financial statements, as shown ILised upni mirnings for 1985, and after giving effect to the "" U"N" sale of $100 tuillion of first nuirtgage lxnuls in January 19S6 The Company's internal auditors, who are respnisible to the the Coinpany would lx perinitted, muler its first inortgage Audit Committee of the Boant of Directors. review the results indenture, to issue, on the basis of pnip rty additions, at arul p rformance of op rating units within the Company for least $393 rnillion principd anu>unt of first mortgage lunuls adequacy, effietiveness ami reliability of accounting arul re-at an assurned intnest rate of 11.5"o, or under its Charter to porting systems, as well as managerial arul op rating contnils.
issue at least $69-1 million of preferred stock at an assumed
.. The Audit t,onunittee consists of four nonemployee directors divulend rate of 11.5,u, or to issue some lesser nunbm.ation . .
whose dutles include: consideration of the adequacy of the of both h.rst inortgage boruls arnt pn ferred stock. IfIbrry internal controls of the C,ompany and the objectivity of finan-
,, were to be tenninated, the nxiuction in available I.,m. t-cial n porting; inquiry into the number, extent, adequacy bondable prop rty would reduce the amount oflunuls the
.- . . . ami validity of regular arul special audits conducted by imle-(,ompany could issue against propert:, additions to approxi-pendent public accountants and the internal auditors; the matel>. $,3 h nu.llion. The Company is able to issue $ 136 reconunendation of .nulependent accountants to conduct the inillion principal amount of luwt mortgage bonds against normal annual aiulit and special purpose audits as may be previously n tinxilx.ruls without the nent to meet earnings required; ami rep >rting to the ik>ard of Dirn: tors the Com-coverage nxplirements: $1,a nu.llion of this amount is re-mittee,s findings and any recommerulation for changes m.
served for issuance pursuant to the (,ompany,s n volving scope. methods, or procedun's of the auditing functions. The en dit agn ernent referrnt to below. .
Audit Committee held three meetings during 1980.
At December 31,1985, the Companies had approximately
$128 million of cash and tempmtry cash .nvestments, ami appn>ximately $119 million of fututs held in escrow from previous pollution contn>l financings. The Companies also have $50 million of short term bank lines of credit, in addi- - -
tion to a $500 million revolving en dit agreement available to V. A. Owoe W A. Danieks the Company, which could be usal for interim financing Excentive Vice pn sident Compt roller Chief Financial Officer pu rposes.
On October 29,1985, the Company was granted a retail l base rate inenstse which will be implemented in two steps.
In November 19S5, rates were increasal by appniximately
$58 inillion on an annual basis. Subsequently, once Ibrry l' nit I achieve: rignificant positive nel generation (definnt as 20'h power generation fnnu the unit), the Corupany's rates u ill be itu n'ased to pn nioce additional annual n? venues of approximately $ 12 million. This additional inen ase, which is expected to be implemented approximately three months after fuel loading begins, repn sents the inclusion of Ibrry l' nit I construction work in pn>gress in rate base at the muimum level permit tni under Ohio law. The combined increase (approximately $ 100 million on an annual basis) represents about 'i5% of the Company's original $135 million rate inen ase request.
19
Salact:d Fin nci:ID:ta owo eoison 1985 1984 1983 1982 1981 (In thousands, except per shan amounm Operating Rewnues $1,754,749 $1 f237.104 $1.515.852 $1.429.626 $1.279.649 Operapng incarne 380,354 342.713 302.751 269.640 252.381 inc_ome _Before Extraordpary items 370,685 339 333 272.400 195.571 183.020 tM inc_ome__ ___ _
37_0,685 339 333 272.400 215.729 197,062 Earnings on Common Shck 318,073 290,694 227.843 181.496 163.892 Earnings per Share of Common Stock (twaf on weighted average nun.ber of sh res outdanding dunng the War)
Before Extraord: nary items 2.45 2.50 2 22 1.89 2.10 )
Earner gs on Common Stock 2.45 2 50 2 22 2 13 2.30 i Dyq]nds Declargj per__ Share of Common Stock 1.88 1 84 1 80 1.76 1 76 Total Assets at December 31 7,290,417 6.690.098 5.960.374 5.247.138 4.460.274 ;
Preferred and Preference Stock Subyx:t to l Mandatory Redem@on 176,694 158.483 158.112 152.560 151.141 Long grrn._Ded 2A91,615_
2.449.502 2.132.137 2.005.436 1,759.771 Long Term Obhqatons 739,291 822 234 759.843 656.655 447.484 Common Stock Data The Company's Common Stock is hded on the New York and Mdwest Stock Exchanges and is traded on other regidered exchanges Price Ran9e of Common Stock 1985 1984 First Oua.rter Hi gh Lou 14 7/8 1 3-118 13 3/4 11-3/4 Second Quarter High low 1 5-518 14 12 9-3/8 Third Quarter H igh; Low 1 6-118 14-3/8 12-1/8 9-7/8_
Fourth Quarter High_ Lou _ 1 6-112 1 4-112 14-1/8 11-5/8_
Yearly High low 1 6-112 1 3-118 14-1/8 9-3/8 Prws are bawl on reports pMr. hat in The Wall Srmer Journal for New Yr>rk Skx k E acharge Corqxnto Trssumons Classification of Holders of Common Stock as of December 31,1985
\
Holdors of Pecord Shares Held Number % Number % 1 Indivduals 182.086 08.57 57.799.915 42.16 Fducianes 19 665 9 57 4.599.496 3 36 Brokers 81 0 04 1.289 012 0 94 Nominees 340 0.17 70.547.087 51 46 Banks & Financial Inst,tutons 20 0 01 31.083 0 02 Insurance Companies & Other Corporatons 1,54 7 0.75 1.663.776 1.21 Chantable. Rehgous & Educational Institutons 411 0.21 238.946 0 18 Pensions. Profit Shanng & Other Inwstment Trusts 1.3% 0 68 919.956 0 67 Total 205.576 100 00 137.089 271 100 00 As of January 31.1986, there were 204.5G3 holders Quarterfy divdendi of 47c and 46C per share were pad on the of 138.248.854 shares of the Comparys Common Stock Company's Common Stock dunno 1985 and 1984. respectively loformaton regarding retained earnings available for payment of cash divdends is gwen in Note 4b 20
Cana:Iidst:d St t:m:nt cfInc:ma omo eoison For the Years Ended December 31 1985 1984 1983 sin thousanas escent por shee amounts Operating Revenues $1.754,749 51.637.104 $1.515.852 Operating Expenses and Taxes:
Operation-Fuel 499,159 422.805 420.336 Purchased a,id interchanged power. net 30,802 56,659 50.026 Other eperation expenses 271,142 267.288 234.526 Total operation 801.103 746.752 704.888 Maintenance 129,295 129.313 121.544 Provision for depreciation and arnortization 143,377 131.340 124.572 General taxes 136,206 136.880 126.818 Income taxes 164,414 150.106 135.279 Total operating expenses and taxes 1,374,395 1.294.391 1.213.101 Operrting income 380,354 342.713 302.751 Cther income and Deductions:
Allowance for equity funds used dur:.1g construction 176,471 152.567 121.814 Miscellaneous net 27,458 28.928 20.812 Income taxes-credit 85,365 82.383 64.923 Total other income and deductions 289,294 263.878 207,549 Totalincome 669,648 606.591 510,300 Net Interest and Other Charges:
Interest on long term debt 321,017 267.391 233 626 Interest on long term obhgations 74,207 89.780 73 177 Allowance for borrowed funds used during construction, i net of deferred income taxes (111,240) (104.351) (81.901)
Other interest expense 4,962 5.473 5.702 Subsidiary's preferred stock dividend requirements 10,017 8.965 7.296 Net interest and other charges 298,963 267.258 237.900 i Net income 370,685 339.333 272.400
! Preferred and Preference Stock Dividend Requirements 52,612 48 639 44.557 Carnings on Common Stock $ 318,073 $ 290,694 $ 227.843 lVeighted Average Number of Shares tf Common Stock Outstanding 129,926 116.171 102.414 Carnings per Share of Common Stock (based on weighted average number of shares outstanding dunng the year) $2.45 $2.50 $2 22 Dividends Declared per Share of Common Stock $1.88 $184 51.80 The accompanyng ^ tores tu consoinJared Finanaal St.,tements are an enteryal part of these swements.
21
C:n: lid:t:d Cd:nco Sh::t on:o coison At December 31 1983 1984 UtMty Plant, Assets Un thwsands) in service, at onginal cost $4,248,800 $4.043.391 Less - Accumulated provision for depreciation 1,279,373 1,161.565 2,969,427 2.881.826 i Construction work in progress-Electnc plant (Note 7) 3,349,998 2.785,977 Nuclear fuel 289,771 277.746 3,639,769 3,063,723 6,609,196 5.945,549 Other Prope_rty and Investments 41,104 69,560 Current Assets:
Cash 2,051 5,147 Temporary cash investments, at cost, which approximates market value 126,382 115.930 Receivables-Customers (less accumulated provisions of $1,319.000 and
$1,310.000, respectively, for uncollectible accounts) 147,875 135.322 Other 31,722 20.169 Matenals and supphes, at average cost-Fuel 58,117 87,499 Other 45,953 44.822 Prepayments 50,635 46,990 462,735 455,879 Deferred Char 9es:
Deferred Quarto coal and other energy costs (Note 7) 12,741 38,542 Property taxes 56,064 57,601 Unamortized costs of terminated construction projects (Note 2) 73,783 84,378 Other _
34,794 38.589 177,382 219.110
$7,290,417 $6.690.008 Capitalisation and Liabilities CapitaNastion (See Consohdated Statements of Capitahzation)-
Common stockholders' equity $2,234,156 $1.947,357 Preferred stock-Not subject to mandatory redemption 376,035 363.585 Subject to mandatory redemption 72,000 56,000 Preference stock-Not sub i ect to mandatory redemption 50,000 50.000 Subject to manda.ory redemption 34,032 45,922 Preferred stock of consohdated subsidiary-Not subject to mandatory redemption 41,905 41.905 Subject to mandatory redemption 70,662 56.561 Long term debt 2,691,615 2,449.502 5,570,405 5.010.832 Lon9-71erm ObN 9 ations:
Construction energy trust (Note 5) 400,000 500.000 Nuclear fuel (Note 5) 284,740 290.323 Capitalleases (Note 3) 54,551 31,911 739,291 822,234 l Current LiebNtles:
Currently payable preferred and preference stock, long term debt and long term obhgations 157,543 79,124 Notes payable to banks (Note 6) - -
Accounts payable 147,212 171,796 Acrued taxes 55,590 52.915 Accrued interest 94,627 83.107 Other 48,137 61,975 503,109 448.917 l Deferred Credits:
i Accumulated deferred income taxes 181,247 178,440 l Accumulated deferred investment tax credits 201,345 145,409 i Property taxes 56,064 57,601 i Energy costs recovered in advance 24,618 9.094 l Other 14,338 17,571 i
i _ . . _ _ _ _ _ . . _ _ _ ___ _ _
477 612 8 408,115 Commitments, Guarantees and Contingencies (Notes 3 and 7)
$7,290,417 $6.690.098 the acavnparyng tues to Conscwsnnanval statements are an or wral pan or these bame shwts 22
Ccnsclidct:d Statamonts of Capitalization owo wison At Decernber 31 1985 1984 Common stockholders
- Equityt fin thousands)
Cornmon stack. $9 par valua autherved 155.000.000 shares-137.089 271 and 122.236 636 shares outstanding, respectMHy (Note 4a) S1,233,804 $1.100130 Other p,bd en capital 609.117 529.596 Reained earrungs (Note 4b) 391,235 317,63I TrAal common stockholders' equity 2,234,156 1.947.357 Optional Redempton Pnce Numter of Shares Outstanding Aggregare 1985 1984 Per Share (In thousands)
Preferred Stock (Note 4c)
Cumulat ve $100 par value- Authon/ed 6000000 stares Not Sub i ect to Mandatory Redemphon-390%-724% 973.350 973.350 $103 38-108 00 $102.034 97,335 97.335 736%-820% 800 000 800.000 $104 68-105 35 84.046 80,000 80.000 864%-912% 850 000 850 000 $106 48106 84 90 670 85,000 85.000 Total not s_ub te.c_t t_o mandat.o_ry redempt on 2 623.350 2 623 350 $276.750 262_,3_35-26 _2.335 1 j
Sub i ect to Marxtatory Redemy on (Note 4d) I 10 48 % -1350 % 737.970 576 810 $105 38113 50 $ 80 081 73,797 57.681 Redemption within one year (1,797)
~
(168 t)
Tutal subtect to mandatory redempt:on 72,000 56 000 Cunwative. $25 par value - Authonfed 8000000 shares Not Substmt to Marulatory Redemption
$3 50 Senes 2.000 000 2.000 000 $28 75 $ 57.500 50,000 50.000 Senes A 548.000 2 050 000 125 00 13 700 13,700 51.250 Senes8 2.000 000 -
$25 75 51.500 50,000 -
4 548 000 4 050.000 $122.700 113,700 10 t .250 9tsforence Stock (Note 4c)
Cumulatrwe no par value - Authonted 8.000.000 shares Not Sub#ect to Mandatory Redemption
$392 Senes 2.000.000 2 000.000 $3142 $ 62.840 50,000 50.000 Subtect to Mandatory Redempt on (Note 4e)
$9500-$102 50 Senes 23 400 26. t 00 $1061001070 00 $ 24 973 23,400 26.100
$180 Ser'es 981.491 1.589,096 $15 58 15.287 14,845 24.035 Redempon wthen one par -
(4,213) (4 213)
Exal su_bpct to ma_nyta,toryfedempoon t 004 891 1 615 196 $ 40 260 34,032 45.922 Preferred Stock of ConseNdated Subeldiary (Note 4c)
Cumular ve $100 par value- Authorved 950.000 shares Not Subt ect to Marwtatory Redemption 424%-916% 419 049 419 049 $102 98106 87 $ 43 954 41,905 41.905 Sutyct to Mandatory Redempt:on (Note 4d) 8 24 % -1500 % 714 528 570 616 $103 29114 42 $ 77 888 71,453 57.061 Redemp00n wthin One year (791) (500) k Aal subp!ct to mandatory redemption 70,642 56 56i Long-Thrm De64 (N<te 4f)
First mortgage boruts Oheo Edison Company -
7 87% weighted average enterest rate due 1986-1990 94,114 170 829 l
t 4 70% weeghted average interest rate. due 1991-1995 472,717 442 717 1017% we.ghted average interest rate. due 199tb2000 128,263 126.263 l
8 06% weghted a <crage interest rate. due 2001 - 2005 144,343 146 343 10 50% weghted .sverage interest rate. due 2006-2010 424,310 424.310
, t4 50% - . weight e_d average. -- - interes.t rate. due 20 t 1 -20_14_.- -_. _ . - - - - _ . - - - - . _ - - . 50,000 50.0_00
_ F*""sv'p.or Comeany: to 72% wegt!ni a rage intergratege 198t2m8 _ _ _ _ _ _ _ _ _25 9 22 _ _ 279 @0 kAal first mortgage borxts 1,547,349 1.639 462 Secured rw;tes and obligat ons Oh o Edison Company- 1004% neighted average interest rate. due 1986-2015 813,125 484 172 Amount he41 by Truwe (48,519) (106 138)
.---._-~._.__..---_.-._.-----_546,606 -.3_78. 0. 3_4
_ . . -Otuo Eden Financo N V - t 738% weighted awrage interest rata due- - - - - . . _ . - - _ - - _ _ - - . _ - . .1987-1988 150,000 150 000 Fbnnsylvania Puner Company - 1002% weghtrw1 asage interest rate due 1986-2015 134,411 80.311
_ _ . Amount h,4d ty Trust _m __ _ _ , _ , _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
(3, )_____ )
' ~ ~ ' ~ ' ~
5tNrhiAWAaN1oi5 $t7xis 0 ~ ~'827,425 595 040 Unswured rwWes at Ohio Eden Company 10 71% meghted awrage interest reo. due 1986-2014 376,000 402 000 Amount hekt tv fruwe (48,755) (114 823)
Titat unsecured notes at Ohio Edison Company 327,245 287177
_Not unamorteed dmcount an det A _ ._ . _ _ _ _ __
(20,343) _, _ _ 18 ( 987) long term detA due wt%n one var (10,081) (53 190) ligat lory term derA 2,491,415 2 449 502 7blelfspitessation $ 5,570,405 $5 0f 0 832 The accomgwyry Notes to Consekwnnnancut Sta'ements are an rtegral part et the.se starwmnts N
Can: lid:t:d Stat:m:nta cf R trined Ecrnings OH!O EDISON For the Years Ended December 31 1985 1984 1983 (In t!'ousands)
Balance at beginn.ng of penod $317,631 $241.314 $200.439 Net income 370,685 339.333 272.400 688,316 580.647 472.839 Deduct Cash div!dends on preferred and preference stock 52,573 49.100 45,468 Cash dividends on common stock 244,508 213.916 185.309 Captal stock expense - -
748 297,081 263.016 231.525 Balance at end of penod $391,235 $317.631 $241.314 1 Consolidated Statements of Capital Stock and Other Paid-in Capital Preferred and Preference Stock Not Sub i ect to Subject to Common Stock Mandatory Redemption Mandatory Redemption Number Par Other Pa<d- Number Par or Number Par or of Shares Vatue In Capoal of Shares Stated Vatue of Shares Stated Value (Dollars on thousands)
Balance. January 1,1983 96.081.844 $ 864,737 $423.195 5.042.399 $354.240 2.887.762 $155.023 Safe of Common Stock 5.000.000 45.000 33.350 - - - -
Diedend Reinvestment Plan 7.138.575 S4 247 33.056 - - - -
Conversion of $180 Preference Stock 239.635 2,156 1.332 - -
(239.635) (3.624)
Sale of $350 Senes of Class A Preferred Stock - -
3.140 2.000.000 50,000 - -
Sale of 115% Preferred Stock - -- - - -
150.000 15.000 Preferred Stock Sinking Fund Redemptions-8 24% Senes - - - - -
(5.000) (500) 10 48% Senes - -
270 - -
(24.630) (2.463) 10 76% Senes - -
160 - -
(20.000) (2.000) 1100% Series - -
17 - -
(4.243) (424)
Balance. December 31,1983 108.460.054 976.140 494.520 7.042.399 404.240 2.744.254 161.012 Sale of Common Stock 3.673.400 33.061 13.599 - - - -
Dividerd Reinvestment Plan 10.067.071 90.604 23.333 - - - -
Employee Stock Ownership Plan 2.661 24 12 - - - -
Conversion of $180 Preference 9tock 33.450 301 187 - -
(33.450) (506)
Captal Stock Expense - -
(2.548) - - - -
Sale of Senes A Class A Preferred Stock - - -
2.050.000 51.250 - -
Saie of 13% Preferred Stock - - - - -
100.000 10.000 Preferred and Preference Stock Sinking Fund Redemptions-8 24% Senes - - - - -
(5.000) (500) 10 48% Senes - -
252 - -
(18.190) (1.819) 10 76% Senes - -
218 - -
(20,000) (2.000) 1100% Senes - -
23 - -
(4,092) (409)
_ _$102_50 Senes (900) (900)
Balance. December 31,1984 122.236,636 1.100,130 529.596 9,092.309 455.490 2.762.622 164.878 Safe of Common Stock 6.076.659 54.690 37,846 - - -- -
Dividend Reinvestment Plan 5.102.413 45.922 31,098 - - - -
Conversion of $180 Preference Stock 549.403 4.945 3.080 - -
(607.605) (9.190)
Conversion of Senes A Class A Preferred Stock 3.124.160 28.117 9.433 (1.502.000) (37.550) - -
Captal Stock E xpense - -
(2.427) - - - -
Safe of Senes B Class A Preferred Stock - - -
2.000.000 50.000 - -
Sale of 135% Preferred Stock - - - - -
200.000 20.000 Sa'e of 1150% Preferred Stock - - - - -
150,000 15.000 Preferred and Preference Stock Sinking Fund Redemptions-8 24% Series - - - - -
(5.000) (500) 10 48% Senes - -
259 - -
(18.840) (1.884) 10 76% Senes - -
221 - -
(20.000) (2.000) 1100% Senes - -
11 - -
(1.088) (109) i
$9500 Senes - - - - -
(1.800) (1.800)
~~
baned b 31 3955 1577d 2 71 $ 1.2'3 804 $609 17 9.5 i0 59 $467 40 2.457 $183 The acconwym Notes to consoudred Fmamat Srxevents am an mmw per at those strements N
C:nacIldet d St:t:tn:nts of Sourcos of Funds for Prcporty Additions OHIO EDISON For me Years Ended December 31 1985 1984 1983 Internally generated funds- fin thwsands)
]
Net income $370,685 $339.333 $272.400 l Pnncipal noncash items- !
Depreciation and amortization 174,107 142,260 139.978 I Deferred income taxes, net 97,287 113.551 80.814 '
investment tax credits, net 55,936 38.026 53.670 Allowance for equity funds used dunng construction (176,471) (152.567) (121.814)
Deferred fuel and energy costs, net 41,325 4.471 23.009 562,869 485.074 448.057 Less-Dividends on common stock 244,508 213.916 185.309 Dwidends On preferred and preference stock 52,573 49.100 45.468 265,788 222.058 217.280 t
Financing activities-Common stock 169,556 160.633 175.653 Preterred stock 85,000 61,250 68,140 Long term debt 328,316 375.154 252.800 Long term obhgations 69,124 82.329 88.224 Repayment of preferred and preference stock, long term debt and long term obligations (145,017) (97,790) (88,191) 506,979 581,576 496.626 Net change in currerit assets and current liabilities excluding currently payable preferred and preference stock. Iong term debt and long term obligations-Cash and temporary investments (7,356) (5.303) (51.462)
Recewables (24,106) (3,107) (11,475)
Matenals and supplies 28,251 (17,617) 22.446 Accounts payable (24,584) 17,069 20.951 Accrued interest 11,520 15.216 10.155 Miscellaneous. net (14,808) 12,448 13.912 (31,083) 18.706 4.527 Other. net -
Allowance for equrty funds used dunng construction 176,471 152.567 121,814 Deferred income taxes on allowance for borrowed funds used dunng construct:on (98,316) (92.502) (76.982)
Miscellaneous, net 7,155 (14.306) 7.866 85,310 45.759 52.698 heals:urces of Funds fir Property Additions $826,994 $868.099 $771,131 Property Additions-Electoc plant $763,727 $799.572 $689.646 Nuclear fuel 52,762 60,842 55.751 Other caprtal leases 8,657 6.855 24.614 Nonutility property 1,848 830 1,120
$826,994 $868.099 $771,131 The accomnnryng Notes to Cc:skwed Financra! Statements are an mtegralpart of these statements 25
Ccn:clidct d Statements cf Taxas owocaison 1985 1984 1983 For the Years Ende1 Decemtwr 31 U"**'*
General Taneat S 71,369 $ 71,044 $ 65.495 State Gross rece#s 47,099 Real and personal property 47,415 48.717 Social security and unemployment 12,545 12.649 10.097 4,877 4.470 4,127 Miscellaneous Total general taxes $136,206 $136.880 $126.818 Provlelon for income Taxest Currently payable-Federal S 19,546 $ 5.778 $ 10.119 4,382 2.616 2,507 State 214 254 228 Foreign - -. . - - - - - _ _ - . . _ . _ - . - . __. . . . - . _ _ . - - - - _ - _ . - _ _ - - - - - . - _ . . - - - _ _ _ - _ _ - _ _ . -
24,142 8.648 12,854 Deferred, net (see tielow)-
Federal 93,585 108.154 75.947 State 3,702 5.397 4.867 97,287 113.551 80,814 Investment tax cred<ts, net of amortization 55,936 38.026 53.670 Total provision for income taxes $177,365 $160.225 $147.338 income Statement Classification of Provision forincome Taneat $135,279 Operating expenses $164,414 $150.106 Other income (85,365) (82.383) (64,923)
Allowance for borrowed funds used dunng construction 98,316 92.502 76.982 Total provision for income taxes $177,365 $160.225 $147.338 Sources of Deferred Tan Espenses Altowance for borrowed funds used during constructron, which is cred ted to plant S 98,316 $ 92.502 5 76.982 Excess of tax over txiok depreciation. net 29,814 25,045 23.081 Pensions and taxes charged to utity plant, net 3,530 4,923 4.153 Deferred fuel and energy costs, net (19,055) (1.805) (10.202)
Deferred interest on leased nuclear fuel, net (5,488) (5.824) (3,165)
Cost of terminated canstruction projects, net (4,075) (3.952) (3.258)
Other. net (5,755) 2.662 (6.777)
Total deferred tax expense, net S 97,287 $113.551 $ 80,814 Reconcillation of FederalIncome Tan Espense at Statutory Mate to Total Provision for income Tanest Book income tmfore provision for income taxes $548,050 $499.558 $419.738 Federalincome tax expense at statutory rate $252,103 $229,797 $193,079 increases (reduct ons) in taxes result ng from Allowance for equity funds used dunng construction, which does not constitute taxable income (81,177) (70,181) (56.034)
Excess of t>nok over tax depreciation 14,534 10.163 9.115 Other, net (8,095) (9.554) 1.178 Total provison for income taxes $177,365 $160.225 $ 147.338 1he amenvyy wtos to Consemarannanoat Statomvers av avrmyat ner o r these sr.wments i
26
Notes to Consolidated Financial Statements 1
1-Summary of Significant Accounting Policies: Common Ownership of Generating Facilities-The consolidatni financial statenients ini lude Ohio l'alison The Cominu.ies azul other Central Area Ibwer Owinlination Corn uty (Coniputy) and its w holly ow nett subsidiaries, Group (CAPCO) conipulies own, as tenants in anunu>n, var-Ibnnsylvania Ibwer Company (Ibnn Ibwer) ami Ohio Edison ious iniwer generating facilities. Each of the companies is Fin;unv NV All significant intenumpany tnmsartions have obligatni to pay a share of the constniction nists of any jointly tw+n eliminatnl. The Company azul Ibnn Ibwer (Comixtnies) ownnt facility in the saine pniportion as its ownership inten st.
Ibliow the armunting g xilicies ;uul pra< tires prescribal by The The Corapanies' portions of operating ex[w nses associatal Public l'tilities Commission of Ohio (PlTO), the Ibnnsylvania w ith these jointly ownni facilities are includal in tiu corn' Public l'tility namnission (PPI'C) and the Fnleral Energy sl# >nding oingrating expenses on the Consolidated Statentents IL gulatory Commission (FERC) of Income. The amounts rethrtal on the Consolidatal Rdance Slurt under utility phmt at I)ecember 31,1985, inchule the Nmnyes- .
7ugjuw ng I,he ( e allpinies' D'sidelltlal alul colnliten ial nistorners are meten d on a cyt le basis IL venue is nrognizni for ehrtric ucumuiateo conwucron companes Service h,11,nl on nu ters read throligh the elui of the Illonill. U%ty Ptart Provson for Work in OwnerWo in Semcn Decreciar on Progress Herest
_G.Wnq Un<ts Deferred Fuel and Energy Costs- Unt w N W H sunrns #7 $ 2M351 $ 38 m $ 581 68 80 %
The CornIiany rnuvers fuel relatal msts from its n tail cus Bruce Mance!d tomers thnnigh an cln tric fuel comixinent (EFC). The EFC is #1. #2 and #3 707.138 160.242 731 50 68 %
an estimatnl fisnl rate in r kilowatt hour includal on customer Beaver Vaney #1 M 604.738 151.734 33.820 52 50 %
bills for a six inonth peri <xt and is basnt upon fuel relatal 5 - -
t2 n O49 o 88 %
nists for the pntnhng six luonth perunl. Any over or under Perry #1 and #2 - -
1 956 748 35 24 %
n elln tion n sulting from the oin ration of the EFC is includni Total $1.541.227 $350.466 $3 261.929 as an adjustment io the EFC rate in a subnplent six Inonth o es common faes appocatw to Beaver Vavy #2 perii=1 Acconhnglw the Company defers the diffen nce le ,
All nuclear fuel in process relates to the CAPCO units but is tween m tual fuel relatal costs inburnst and the amounts not segn gatni mnong tiuun.
curn ntly nx ovenst fnun its customers.
Ibnn Ibwer nrovers fuel mul energy mists from ' , n tail Nuclear Fuel-customers thniugh an annual "levehzn!" ener) cost rate The Cominmies ainortize the cost of nuclear fuel basal on the rate of consumption. The Companies' electric rates include (EURt The E( R. w hich includes adjustment for any over or utuler collection fn un customers, is nralculaint each year. mnounts for the future disposal of sp nt nuclear fuel hasnt upon the funnula usni to annpute payments to the i nital Arcontingly, Ibnn Ibwer defers the diffen no betwn n actual States I)cpartment of Energy.
energy costs and the amounts curn ntly nrovernt fnnn its custoiners. Reference is made to Note 7 with resprt to Ibnn Allowance for Funds Used During Construction (AFUDC)~
lbwer's annunting for the cost of coal nreivnt fnun Quart" AFl'l)C represents the net linancing costs capitalizni to Mining Company (Quarrot mnstniction work in progress during the constnietion perio 1.
AFl 1)C is not capitaliznl on Ihat portion of any constnietion Utility Plant and Depreciation-projn t inchaled in rate base. The borrown! futuis portion l'tihty plant n lin ts the original cost of constnietion, including rethrts capitalizniinten st payments aint the niuity fututs payroll and n latnl costs such as taxes, pensions ami other P'fli"n repn sents the noneash capitalization of imputal fringe benefits, administrative and general costs and allow .
oluity costs which are charged to nmstniction. The Com ance for fiuuls usnt during construction (see AFI'l)C).
pany also chargni AFl'I)C to certain projects which were The Companies pnivide for depnviation on a straight line ounpleted hut not yet included in rate base during 19S3 mal basis at various rates over the estimatni lives of property in- 1pS 1, in anuntance with a PUCO onter. AFl!!)C varies ac-ciudnl in plant in servint The annual mmp> site rates for mnhng to changes in t he level of mnstruction work in progress cln trie plant wen 3M. in 1983 aiul 1981, and 3.1" in 19S1 The Company's depn viation rates include Univisions for the est imat a l dn un u nissioning msts for it s only n uclear generat ing mut in service. Ibim ibuer pnivides for the mst of derom missioning rmhoa< tive nunpinents only, consistent u ith the rate tivattnent.
27
f Notes M. mn 1 ami in the cost of capital. Tim Cornp;uties nunpute AlTlK: Retirement Benefits-j utihzing a net of tax rate, which is n>nsistent with the rate The Coinpanies' trustied, noncontninitory pension plans l In atinent. The aft 'IX' rate relatnl to assets finannsi only cover ahnost all full time employees. ll lum retin nient, em-I thniugh the incurn nn of long term obligations (see Note in ployers nsvive a montbly pension basal on length of service is based on actual inten st an runt on the obligations during and com[n nsation. Ibnsion costs ancrueilin 19ST), 19S4 arul Ihe in ri< nl The annual rates usal by the Company for all other 19S3 were $14,986.(MM), $20AS3.(xW) and $16,1K)l,(HM), re l runst nu tion proj"ets approximatol I l't during t he t hn e years sirrtively. Of tiu>se amounts, $9,S29,tHX), $14,369,(NM) arul j endal Ihxvinber 31,19STi. Penn Powvr's rates applicable to $ 11,913,( N N ), respect ively, wvre chargni to opentt ing expenses;
, sin h pnijn-ts rangni fn un 9.2T>19.r,1% during that geri< nt. the balances were chargni primarily to <unstruction. Such l rosts include tim amortization of unfundal past service costs j income Taxes- on an actuarial basis over 30 years.
', Ih tails of the total pnivision for innune taxes are shown on a the (,onsohdaint Statements of Taxes. The defern d inuume Prior to.luly 1,198 the >, U, nnpanies fimded gension costs
. an rued using t he fnizen uut ialliability actuarial funding mellu.w l.
t taxes n sult from tiining thffen nres .in the nxugnition of t i
E,ffective ,luly 1,198a., the (,om[xmies changed to the pro- 6 1
' revenues and expenses ihr tax and arrounung purposes.
Jertn! unit enxlit meth<xt for funding purposes. Ammhngly,
- The Cornpanies alkrate the income tax benefit which n sults the Companies are not nsininst to make pension contributions l fnnu interest expense n laint to ninstruction work in pnigress during the 19S6 plan year. Contributions of $10,31X),(WM) were to innnne taxes-on th' includal under other inmune arn! inade during the first six months of 19ST). Ibnsion costs in j deductions on the Consolidaint Statements of Income. 19ST> were nxtumi by approximately $6,r>00,000 due pri-marily to a change fnnu 7.0% to S.r>"o in the assumni average j For utrome tax putpws, the (,ompanies claim hloralized depnriation arni, ninsistent u ith the rate treatment, generally annual earnings rate of phm assets and other assumptions.
pnn ide deferred income taxes. The Companies exprt that A onuparison of arrununatal plan benefits and plan net assets j deferred taxes u hit h have not inrn providnt willir collertal (nun the two latest actuarial reports is as follows:
fnim their rustomers w hen the taxes triume payable, based upon the establishnt rate making practices of the PlTU. Ihe At June 30, 1985 1984
. PPIT arnt the FERC As of Ihsvnder 31,19S5, 'he runnila Actuanal present value of l li\e net intume tax tuning diffen turs for w hit h defern d accumulated plan t;enehts ,
i Vested $209.898.000 $194 518.000 innone taxes haw tiot inrn providal were approxiniately Nonwsted 22.466 000 20.987.000
$0i N } t M N I,4 H N L
$232.364 000 $215.505.000 PDnonts fnun the sales of certain tax lonefits m anunfance het assets avadaue for benefits $407.4 76 000 $316.537.000 with provisions of Ihe Economic thuwry h Act of 1981 an. Assumed rate or return for actuanai Iring amortizol over the life of the n latnl property. Pnments attnhutable to investment tax enxhts wen nwunini as addi
[N"'"* ' '"*"'"*d" 8% 8%
tis mal defern11 irivesttornt tax rivdits; the tvinainitig amoiillts 2
The above total actuarial present value of accumulatal plan wen nwuntni as n~lurtions to utility plant in service.
I rnef.its renects pension Irnefits apph.rable toeligibleemployees The Companies defer investment tax en dits utiliznl and basnt upon present salary levels and past years of service ac-l ailH u ttle il e se Un1\lts til i!H1ane <Wer the estiniated life <>f IIH' emmilat<4l t}in nigh the vahlation date. The Cennparties' Inist n latnl pnyerty. As of t h vmber 31,19xTi, then were no un omtributions to the plans, however, nmsidenst estimate 1 usal inwstment tax en, lits available to offset futun fnleral ultimate salary inen ases due to inflation and other factors l'
innnur taws payable. and the estimatnl total service expectml to be arrunudated l
by employn s. This is omsistent with the new Irnsion ac-j nomting stamlani adopini by the Financial Anuunting Stan-I dants lloant (FAbil) w hich will le eflirtim for the Companies i
4 l
k i
I i
j
)
(
28 '
I
in 1987, tuiless the Cornpanies eint to adopt the standant 3-Leases:
carlier. it.nni upin the new standanl, the Cornpanies' n' The Cornpanies lease a pirtion of their iniclear fuel nxpiin' ported p nsion nists willin signi0rantly redurnt. inents, n.rtain transniirsion facilities, roniputer npiipnient.
offin spin and other proix rty and niuipinent un Ier cancel-The Conipinies provide a niinirnuin arnount of noncont nbutory '
able :uul nonouarlable leases. Consistent with the reguhitory hfe insuntnre to n linst ernployers in addition to optional in atnu nt, du rental ptyinents for capital and operatuig contributory insurance featun s. Ib alth can benefits, w hk h leases an chargni to olunting ex1x nses on du Consohdatal int lude certain einployee dnlurtibles arnt copayinents, are Statenients of Innune. Such (usts for the thnv years ended also available to n tin d einployees, their dep tufents and.
U"*'"I" r :ll,19ST are t siunniarizni as follows.
under <vrtain rircuinstaru vs, to t heir survivors. The Coinpanies 1985 te4 1983 piy insunuuv pn Iniuins to cover a pirtion of these benents in excess of set lunits; all ainoonts up to the liinits an paid by Interest on captahzalleases $ 9 909 $ 13.524 $10 325 the (,ornpanies. Exp nses ass x iatnl w iih health care arul lit." Amortizat:on of captallemes 12,704 15.283 12.808 insunuuv In nefits for n1invs ainointtni to $3,7ST>JH N)iri All other leases 10.764 12.120 11 645 IUSTi and $3,Ti97,IN N) in 19S 1, and an rhargai to inn ane Total rental paymeres $33 377 540 927 $14 778 during the applicable payinent p ritwis.
Certain lea 3es entenst into prior to,lanuary 1,19S3, w hich 2-7trminated Construction Projects: would be n derted as rapital leases on the Consolidatnl in ,lanuary IDSO, the Coinpanies aint all of her CAPCO nun- Italainv Sheeta, have not yet been rapitaliznl as permitted by panies tenninatal plans to constna t four nuclear generating SFAS Nn 71. If they haulInvn rapitalizni, total assets and imits. Costs (iin luding settlernent of all assertni claiins n sult - liabilit ies wouhl have inen asal by $3T>.T>TilJ m and $37,66Tij m ing fnun tennination) unnxusenst by the Company aint Ibnn at Ibvmber 31,19ST and IDS 1, resprtively.
Ibwer as of Ikvinber 31,198Ti, applicable to these units ,l'he futun inininnun rental ninunitments as of Dnember ,11.
amountni lo appnnimatelv $60,6S0jN N) and $13,203JMN),
198a., for leases repirtnl as capital leases mul nonrancelable n sprtively. The (,ompmy is rnuvering these rosts fnun its operating leases an :
PU(,0 juristirtional customers thniugh an .merenient to the allown! rate of return in rate cases arul ibnn ibwer(and the cwo- oi. %
Company with n stuvt to its FEllC jurisdirtinnal customers) % ,s n_
is rnuvering Ihese nists as an opatmg "xp nse allowarice. 19a6 $ 19 570 000 $ 7.715000 1987 20 695 000 6 953 000 Then, is presently an appeal by the Office of Consumer Advo rate before the Ibnnsylsania State Supn me Court reganhng [a ) 2b 6
the nvovery of neis of tenninatal projects thnnigh rates Inun 1990 6 27.000 6 249 000 years thereaNer 71 456 000 90 254 000 l'PI'C jurisdirtional rustomer' Ahhough managernent cannot lotal minimum icase paymer#s 146 761.000 $ t 33179 000 pn dict Ihe ontoime ofIhis al iwv it Iw lieves the PPl C onter pernutting nxuvery of sut h n sts is law fut ami shouhl Iw- E notory cous 21 931 000 Net minimum lease paymenh 124 830 000 allown! to starut. Neither annpany is earning a n turn on Ihe " UUU unamonizni investment. The tvmaining p rials of rnusery """"*"""
for the Company and Ibun Ibwer an appnnimately 7 and S "["" # *'"'""* '"" $ 68 830 000 years, nwpttively. liefen niv is inade to Note 7 with resprt toa pnipisnt ainendment to Statement of Financial Annunting r
Statulants Nu 71 (SFAS Nu 71)in ninnn tion with tenninated ainstniction pnijects exchnini Innn rate tw e 29
a Notes 1i ^ ~n C-CapitsNaation: Tin Convertible Adjustable Series A Prefernst Stock is ron.
(a) Common Stock- vertible into the Conipany's n>nunon stock only during a Thnsugh the Ihvideralib investinent and Stwk Pun hase N'"5"I I" riini cach <piarter anil will be convertn!, basnt Plan, holdr.3 of nunnion, pn fernwl arul pn ference stwk can "I"'" I""Ik"' PII'" at t he titue of ninversion, to not inore ampiin arbhtional shares of the Cornpany's aniunon stot k dan R 1r> dmn s nor less duin 2.08 shares of coininon stock by ;nitornatically n investing all or a twirtion of their dividends for carh slutre of prefernwl stock surrendenst for conversion.
and by inaking optional cash payrnents. Pun bases are niade The Conipany ruay, at its option, elect to pun base for cash, at a price e<ptal to 100% of the average closing price for the in hen of delivery of coimnon stmk, any Convertible Adjust-Cornpany's conninon sin k for each of the five New York Stock able Series A Pn fernwl Stock surrendenn! for ninversion, Ihrhange trading days cruhng on the investinent date. At subject to n'rtain liinitations.
Darmber 31,19Mri, the Company had 723,73Ti shan s of (d) Preferred Stock Subject to Mandatory Redemption-niminon st<x k reservnt for issuann under this plan (subse Annual sinkitig futui provisions for series of the Companies' ipiently itu reasni by 8,1MM),000 shares in January 1986), pn fernwl stak, w hich are retirnt at $ltH) per share plus 1,2T,0,1M W) shan s resermi for issuance under a continuous accrunt div,dends, are as follows:
shelf registration progr:nn, 981,191 shares reserved for tw>s senes shares Date B+nnn no sible conversion of Ihe $1.80 Preference Siak, l,S7T>,810 gyg gg,sog _
shan s reserved for possible conversion of the Convertible 10 4a% 20.000 Decemtier 1 0)
Adplstable S ries A Pn ferrn! Stak atul 197,2SO shares 10 76 % 20.000 January 1 0) n ser\ed li>r issilance through the payroll based employn- 13 50 % 40.000 June 1 1991 Penn Pm -
sim k ownership plan- a 24% 5.000 December 1 0) 11 00 % 4 000 January 1 0)
(b) Retained Earnings- 15 00 % 3.200 July 15 1988 l'nder Ihe Company's indent ure, t he Company's consol 11 50 % 15 000 July 15 1989 idatal retained carinngs unrestrictal for payinent of j $ h,'mber 1 19 rash dividends on ihe Company's aumnon stak were 10 50 % 100.000 Apnl 1 2040
$3I9,1M8,1xN) at Decemher 31,198It p.r,mments or tms senes n-mim (c) Preferred and Preference Stock- The sinking fimd nspiirernents for the next five years are:
At the Companies' option, all preferrni arnt preference sin k may be rniermni in w hoh , or in part, at any time upon not 19a6 $2.588.000 less Ihan 30 nor more than 60 days notire, unless of herwise 1987 4 900 000 5 000 notnl. Ibwleinption of all pn ferred aru t preference stot k issued $8, gog within the past five years is subjnt to certain restrictions 1990 7.220 000 n ganling n futuling operations. The optional nwfemption prices show n on I he Consolidated Statements of Capitalizat ion (e) Preference Stock Subject to Mandatory Redemption-w ill .in line io esentual Inininnims per share ;p vonhng io The $ 102.To S ries arul $97>.00 Series each incliule provisions Ihe Charter provisions that estabhsh earh seras for a matulatory sinkmg futui to retire a mininnun of 1MM) and 1,800 shares, n spectively, on ,hily 1 in em h year at $1,1MW) per share plus arrnied divideruls. The $1.80 Series inchules a provision for a niatulatory sinking futul to n tire a mininnnu of 100,(NMI shares on October I in each year at $lft 12T> per share plus arrrtini divideruls. The annual siriking futui re-spiiretnents are $ 1,213, TMH) for 1956 through 1989 and
$2, ll3,t H H) for 1990.
The $1.80 Series is convertible at any time into cominon sin k at a price of $ lit 12r> per share. Iloiders receive one share of nmunon stock for each share of $1.80 l'refen nce Stak ronvertni, subject to adjustment muler certain rotulit ions.
30
(f)inng Term Debt- 5-Long Term Obligations:
The inortgages arul their suppleinents, which strure all of Ohio Edison Energy Trust (OEET)-
the Coinpanies' first niortgage bonds, serve as din et fRst UEl'T, w hich finances part of the Company's investnient mortgage liens on substantially all property and franchises, in ik. aver \idley (" nit 2, luts tuu lines of revolving en dit otiu r than sirrifically exceptal proivrty, ou nni by the available to it for $ lon,(H H),t H M) arul $ltH),tH H),t H Hl. The latter Companies- en dit also serves as a standby facility in connection with lla. sol on the amount of bonds authenticatnl by the Trustees UEET comnien ial paper sales; total borrowings inuter fluit ernlit and connuen ial paper outstanding may not exnssi through I)errmler :ll,198T>, tiu Companies' aninial sinkirig
$ltH),tHH),(HM) at any time.
and impnivement fund nwptin ments for all bonds issunt inuter the mortgages anuiunt to $:io,:17Ti,1H M). The Company The Compmy luts transferns! its interest in ik aver \idley ex;ww ts to deinisit fiuuls in 1986 w hich will be withdrawn Unit 2 (exclusive of conunon facilities and transtnission upon the surrender for rancellation of a like principal amount facilities) to OEET, when the assets are usnt to secure OEF'T of la nuts, w hit h an'specifically authenticatnl for such pur- borrowings. l'nder the agieement, the Company presently pises against unfundni pnyerty adihtions or against pn' anticipates piyments of $ltHUNHUHH)in 1986, $80,(H HU H H) vimtsly n tinst innuls. This methat can result in minor in in each year 1987 through 19S9 and $160,tHHUH10 in 19tH).
en ases in the amount of tim annual sinking fund n quire The Cornpany accrues interest applicable to OEET which is ments. Ibnn ibwer experts to satisfy its n quirements in subntuendy capitahzn!, net of income tax effed. Interest 19S6 by certifying unfutuhst proirrty additions at 166 2-:l"o on Inirrowings muler the $ itHMHHUNH)line of ernlit inchules of the requirnt amount.
a ronunitment fee of 1.2'L on the unusal portion of this line.
As of I)eremier l11,198T>, the Companies' sinking fmul No direct borrowings have been or are expectni to be made rnp irements for certain series of first mortgage inimis mal
. against Ihe $ltHMH HUN)O line of ernlit, but OEF7I' has issuni maturing long term debt for the next five years anM amt has outstamling conunercial paper suppirtnl by this facility. 'Ib the extent that inirrowings an less than the 1986 $ 10.081,000 $ ltH U M M U H Hl available muler t his litm of ernlit , t he Com pany 1987 111.087.000 nmst pay a commitment fee of 1/2"n. Umler the standby
',$ $fi[ suptwirt, an irreveu able bank letter of enslit has been issuni 1990 119 896 000 tyion which OEET pays a fee of I S't of the amount of com-mercial paler outstamling. The elfa tive average annual in-ten st rates on OEE'I' borrowings were 9.S'L I1.S't arnt The weightni average interest rates shown on the Consoli.
10.7't during 198T,19Si I amt 198:1, respectively.
datal Statements of Capitalization relate to long term debt outstamhng at flerember 31,19STr Nuclear fuel Financing-oo son url Corpiration amt ibnnsylvania Ibwer l'nel
'Ibtal securnt and unscrurni notes outstatufing at I)erember C"'P'f"'i""("'fP' rations in w hich the Companies have no
- ll,1985 amt 1981, exchule $118,S66,(H)O mut $2:ll,266,tH M),
ou nersNp interest) pnivide funds for the pnrurement of respectively, of certain pollution nintrol notes, the pnrents innlear fuel on behan of the Cornpan:es. The Companies of w hich v ere then in escrow lotuling their disbursetuent "h" participate in arrangements u herein the Cent ral Area for const ruction of pollution cont rol faciht les. The Companies' Energy Trust (CAET) finances the acquisition of nuclear obligations to repay certain pdhition nintnd revenue inaufs inaterial that will ultimately be usnt to fuel various CApCO are snwinst by several series of first inortgage botuts A pir generating units. Under onlinary circumstances, the com tion of the unscrurni notes outstanding are entitlo; to Ihe p,mies will make payments Ihr the nuclear fuel as it is con lonefit of irrevorable bank letters of crnht of $21:1 SSTU N H )
'lh the extent that drawings an made utuler Ihose letters of N""" E U"# "i"N "" I " +"E "I U "' C"'" P""I"* "I " P I" rn,ht to pay pnnripal of, or interest on, the pillution nin trol resenue lu nals, the Company is entillnl to a ernht on the notes. The Company pays an annual fee of 6 81 to 7 8 L of the amounts of Ihe letters of enslit to the isaumg banks and is obligatnl to reimburse the banks for any draw ings thereunder.
Jf j
Notas m "m-n
$3n3,000,(H H)is rurn ntly available thnnigh Ihe fuel nir 6-Bank Lines of Credit and Revolving Credit Agreement:
[w> rations, either thniugh revolving on, lit arrangements or The Companies have lines of crnlit with domestic banks that the issuan<v of conunercial payr, which is suptu>rtni by pnivide for bornnvings of up to $r>0,(HHLotH) at the prevailing b mk letters of onwht, or a combination of in>th. Financing of prime or similar inten st rate. Short tenn born > wings may be up to $137,000,tH H)is available to cal?l' on Iw half of the made under these lines of enslit on the Companies' unse-Companies, subject to certain limitations. runxl notes. All( f t he curr"nt lines expin 1)en mber 31,19S6; however, all um.s, a lines tuay be canceled by the banks.
The nimp;mies wrnie inten st apph.rable to the nuclear fuel tbhgations (for fuel w h!ch is not inchidal in utility plant in Ibim ibwer manitains a cash balance on deposit with a bank service) w hirh is subsnpiently rapitalizni, net of innune tax to pn ivide operat ing funds, to assure availabilit y of a $3,( k H ),l H H) I ef fn t. No dinrt twirrowings have been or an expectal to tw- Une of enslit arnt for other banking arnmgements. This com-made against the hnes of ensht available to the fuel corgora pensating balance is expectal to be maintained at an average lions; the fuel < orgorations have issue <l and have outstand- of approximat ely $2t H U H H ) at u l is not subject t o any cont ract ual ing < ommercial paper supportal by Ihe lines of enslit. To the restriction against withdrawal. Ibnn Ibwer is required to pay extent that borniwings are less than the $303,(HHLtHH) avail ronunitment fees that vary from 3 8% to 1/2% to assure the
! able mujer these ornlit lines, the fuel rorlorations must pay availability of $27,tHHUHH)of the lines of enslit.
conunionent fees of 1/S1 to 1,2% on the available gortions of the hnes of rnslit. ,They also pay fees of T> S.L to c8mo for
,fhe Company has a bank revolving ernlit agreement provid-the letters of rn,ht on the aggn gate amount of outstanding ing for borrow ings of up to $500,tH H UHH). Interest rates on borrowings under the agreement vary depending upon the ronunen ial paper. Interest rates on (,Al?1, purchase commit -
amount ofIhe current borrowing, total borrowings then out-ments vary fnnn i 1:S% to 1-l<2% over the .mterest rate stamling mul, at the option of the t,ompany, may be hasnt applicable to certain dealer placed ronunercial paper. ,The elfertive average aminal interest rates apph.enble to nuclear uluni the prevailing prime rate or restain other . mien st fuel obligations were itn%, i 1.9% ami lot,on during 19So, measurements. 'I,he (,ompany must pay conunitment fees of l'2% on the average daily unused [ortion of the ernlit
. 19S I and 1983, respectively.
agreement. In certain circumstances, borrowings muler the i
The Companies presntly exiart to make payments applic- agreement are nwpiired to be secured by the Company's first able to Ihese obligations during Ihe next fise years as follows: nuirtgage bonds. At the Company's option, all obligations outstaruling at Ihvember 31,1987, may be omvertnl into 1986 $26.382.000 an muortizable three-year term loan. The Company has not 1987 33 370.000 made any lorn > wings under this agreement.
1988 40 443.000 3llj 7-Commitments, Guarantees and Contingencies:
! Construction Program-I The Companies' rurrent budget forecasts rethrt expenditures of approximately $2,GNUHH),000 for prolu rty additions mut improvements fnnu 1986191H), of w hich approximately l $719,tHHUHN)is applicable to 1986. In addition, the Com.
panies exiw rt to invest approximately $20 U H H U N Hlfor nuclear fuel during the 19S61990 peritx1, of w hich approximately
$35,(HHUHH)is applicable to 1986. A inajor lortion of the n unpanies' const ruction activities during Ihis five year peri < xl relates to the CAPC() companies' program for the joint devel.
opment of lower generation aint transmission facilities.
Ikference is made to " Common Ownership of Generating Facilities" included in Note I with restwrt to the Companies' investments in Ikaver Wiley I' nit 2 and Ibrry I' nits 1 ami 2, all CAPCO nuclear units. Ibrry I' nit 1 is substantially complete 32
i ami Ik aver Valley Unit 2 is alx)ut 91 % complete; the status effect. The Company does not presently anticipate that a 1 of Ibrry Unit 2 is discussed below. The Cominmies will be write-off of even this magnitude, if mquir x1, would affect its
- rnluesting in rate cases ntuvery for their respective invest- ability to pay common stock dividends at current levels, and
! ments in Ibrry Unit I and Heaver Valley Unit 2, but they studies indicate that the magnitude of any such write-off cannot predict with any degree of certainty the outcome of couhl be much smaller. If, despite its best current infonna-
- the regulatory process. tion, a much larger write-off were required, depending upon
- the timing involved, such a write-off couhl temixirarily affect The CAPCO n>mpanies are n>ntinuing to review the status
) the Company's ability to pay common stock dividenda at cur-
! of Ibrry Unit 2. The only sigruficant work tiiat had recently been Iwrfonued on Unit 2 was that necessary to enable Ibrry 1 h -
Mm Ih N Id e cet to ren>ver its investment in Unit 2 hrough its rates Unit I to be planxi in service. That work was essentially 3 completed in the senmd quarter of 1985. As of July 1,1985, if dm Ud m msM dm@ % ie is W h ununs in nns am @m $ us is ak dui case for the Companies stopped including AFUDC relating to Unit 2
. t he Com pany wit h respect to its FERC junsdict ional customers.
in net income azul .mstead began ernliting AFUDC capitaliznl i .
I Refen nce is made to the proposed amendment to SFAS h.o.
- to Unit 2 t<y a reserve anuunt established for that purpose. 71 discussed below.
- Pnor to this (hange, the Companies AFUDC related to Unit 2 had imen included in net income at the rate of appmxi-mately $3,700,(MX) per month. Quarto Profect-The Companies, together with the of her CAPCO companies, l Until review of the status of Ibrry Unit 2 has Imen com- have enterwl into a long-tenu coal supply mut met with Quarto.
! pleted, therv will be no definnt schedule for the completion The CAPCo mm panies have also agreed to guamntee sevemlly, l of Unit 2. Ibssible altentatives being reviewed with res[ met and not jointly, t heir pruportionate shares of Quarto's debt j to Unit 2 include indefinite suspension of constniction on the and lease obligations incurnxi while developing and equip-i unit, resumption of work on the unit and termination of the ping the mines. As of December 31,1985, the Companies'
) unit. In accordance with the CAPCO arrangements, none of share of the guanuitee was $2O3,795,000.
i these alternatives may be implemental without the approval Uruler the tenus of the coal supply contract, which expires j of each of the CAPCO mmpanies. Micr 31,1999, the Companies must reimburse Quarto I As of December 31,1985, the Company arul Ibun Ibwer for their shares ofIhe cost of ogwrating the Quarto mines, j had investnl appmximately $370,000,000 and $tio,400,1M)0, including those costs associated with mine construction, j respectively, applicable to Ibrry Unit 2. Delay in the com- whether or not they receive coal fnnu Quarto. These pay-pletion of the Unit can im expectni to increase its total cost ments will permit Quarto, over the life of the contract, to by arnounts which are not presently detenninable. If a deci- meet the debt arul lease obligations it incurral while develop-sion werv snade to tenninate Unit 2, certain costs which are ing and equipping the mines. The Companies' total payments currently assignni to Unit 2 would be reassignal, where under this contmet, including amounts relatal to mine con-appropriate, to Unit 1. Ilowever, cancellation charges pay- st ruction costs, amountal to $92,532,0tM), $ 103,464,000, and able to contractom arul other costs of termination coukt be $92,644.0tM)during 1985,1984 and 1983, respectively. Under incurred. Ibnding cornpletion of the CAPCO review, the the coal supply contmet, the Companies' future minimum Company is unable to pnslict whether the omstruction on payments related solely to mine c<nistruction costs are:
l Unit 2 will continue or, if continuni, on what inisis such ,
continuation will procent- 1986 $ 24.749.000 1987 23.994,000 i If construction ofIbrry Unit 2. tstennm.atni, the (,ompany 1988 23.238,000
' wouhl seek Io recover its investment but cannot now prnlict 1989 22,483,000 whether its investinent in Unit 2 applicable to its PUCO 1990 2t72720
. . Years thereafter 165.785,000 Junsdictional customers willle nxuverable. If no tucans of rnuvery of the costs of Unit 2, m the case of tennination, wem available to the Company from its PUCO jurisdictional Following Ihe end of the development ivriod, Ibnn Ibwer customers and no of her basis for recovery muld le fomul or was ontered by the PPUC to defer recovery of the cost of anticipatal, the Company would be requirnt to write off the Quarto coal in excess of generally prevailing tuarket prices, portion of its investment applicable to its PUCO jurisdic. pending further pmceedings. As a result, Ibnn Ibwer began tional customers. As of December 31,1985, the Company esthnates that the maximum amount of such a write-off would be approximately $215,(MN),00(), net ofinonne tax 33
, Notes o a-.m l l l
deferring a portion of the cost of Quarto <ual, rather than plaitust of excessive particulate and sulfur dioxide (soy int huling such (usts in its ECit Although the PPUC issuni a emissions from a ntuntw r of sources in Ohio arul other subsnpmnt onler which fi>und that Ibim Ibwer was not im- states, including potentially all of the Companies' Ohio j prudent m initiating and continuing the Quarto project, it plants. Sewn northeastern states have appealni the EPXs l prescritusi a inethad for n covery of the current cost of Quarto decision to the l'.S. Court of Apleals for the I)istrict of j coal ami t he Quarto coal costs Ibnn IWor had deferrnt which Columbia, asking that the decision lu reviewn!, n versn!,
- coubt result in a substantial urulerrecovery of Quarto coal modifini or set aside. The CornKmy, along with ot her ein t rie l costs As of Dnvndier 31,1985, Ibnn lu er's defi rrni Quarto utilities and ot hers, has intervened in t he case. The Company
[ n eal costs arnounted to $5,10S,04 HL lbnn Ibwer has appealed is unable to pnxlict the outcome of these pn>cnxtings.
the onter io the Commonuvalth Court ofIbnnsylvania. Al-On March .,10,19S I, a nutuber of states, together with Ibough unable to prnliet the f.nal n solution of this matter,
. . .. . Various envinmnmntal organizations and inth. vu. luals fibul nuinagement believes that its ultimate disposition will not M M d l!.S. D strict Court for the District of Colutubia have a material adverse effn t uguin the ( ompany s n>nsoh-asserting that the E,PA has v.iolated a matulatory dut3. to de-datal n sults of operations.
termine w hich states are nintributing to air palution which
( )n Octoirr 23,1985, the Ohio Supreme Court denied the is aUegni to endanger [mblic health mul welfare in Canada Company's motion to dismiss an app al by the Office of and to onter cutbacks in SO2 emissions in these stater under i Consumers' Comiset of a PI TO onter relating to recovery the section ofIhe Clean Air Act dealing with intemational air through the EFC of a portion of the capitalizal development p>1hition (Section 115). On .hily 26.19E Se Court granted costs w hii h me inchulni in Ihe price of Quarto coal. Although sununary judgment to Plaintif fs on their Section 115 claims
- management cannot pn,lict the outcome of the appeal, it and onterni the EPA to begin a pnress that couhl eventually believes Ihe PCCO onter is bot h law ful mul reasonable mal lead to more stringent emission standants being applini to therefon believes the onler shonhl be allowed to stmut. the Companies' generating plants. The Court's decision has been appealed by t he EPA as well as the Company, along with Environmental Matters- other electric utility companies and of her parties. In addition Grious federal, state arul kical authorities regulate the to its appeal of the District Court's decision, the Company, Companies with regant to air mal water <pmlity mut other on September 21,1985, reinstated an app al filnl in 1981
- environmental matters. The Companies estimate that com- in the ti.S. Circuit Court tbr the District of Cohnnbia to chal-l pliant e rnpiires ailditional capital expetulitun s of approxi lenge the validity of the documents which form the basis for
! mately $13S,000,000, w hich is includal in the construction the District Court's decision that the EPA had a duty to im-
) estimate given above muler "Const niction Prognun" fbr plement Section 115. In any event, the impisition of tuore i
19S6 through 1990, stringent emission simulants einihl only happen after exten-s e miministrative pnreedings at both the state and federal (in December 5,1981, the federal Environmental Protection levels. The Company is unable to predict the outcome of Agency (E.PA ) dem.ni a petition I. nun the (,ommonwealth ef l lbuns3Ivania mul the states of New Wrk and Maine, w hich U " *" D" *""d I"M*-
i sought to force the EPA to make findings muler Section 126 As a part of the reauthorization of the Clean Air Act, legista- l j of the Clean Air Act. Section 126 provides a remedy for a tion has been intnnluced in Congress to aihiress the so-
- dow nw ind state that can show mlverse impact because air callnl " acid rain" problem. Various bills intnxlured thus far pdlution in an upwind state causes nonattaimnent of air uonld nspiin rnluctions in SO 2emissions fnun utility power l
<piality standants in the downw ind state. The petition com- plants arul ot her sources located in several states, including l
, Ohio arnt 10nnsylvania. The Company is unable to prnlict
- whether the prop >snl bills Will be enacInl and, if so, to What extent, if any, the SO2 enussion limits at the Companies' l' plants wouhl be affectal. Substantial changes in the SO2 emission limits could result in the nent for changes in coal l
I I
i l
34
supply, significant capital investments in flue gas desulfuriza- S-Summary of Guarterfy Mnancial Data (UnausNeed):
tion equipinent or the ch> sing of some coal fired generating The following surmnarizes certain consolidatal operating capacity to assure compliance. If flue gas desulfurization results for Ihe four quarters of 1985 and 1984.
equipment were to be installed on all of their generating Maren June segember oecernber lirlitS to achieve colupliance, a ciretinistarxv that itiay be Three Months Ended 31.1985 30.1 % S 30.1985 31. 1985 physically impossible because of space limitations at certain #n thasands except per share arnanm Oper Ung Rewnues $453.354 $418.498 $438.%1 $443.%6 of their plants, the Companies estimate that the capital costs Operating Expenses asswiated wit h such installation could exce xl $ 1,(X M),t NX),lXX). and Taxes 353.444 330.808 342.433 347.710 The Comparties expn:t that any stich capital costs, as well as Operating Income 99.910 87.690 96.468 96.286 any increased ojentting costs associated with such equip. Other income and ment, wotth! ultimately be ren)vered fnim their customers. N e and In October 1983, Ihe U.S. Court of Appeals for the District of Other Charges 73.780 73.467 7&169 75M7 Nedncome $ 9&782 $ M806 $ M476 $ M621 Columbia reversed several significant portions of the EPNs regulations on the methals used by Ihe EPA to detenuine Earnings on Common Stock $ 85.866 5 77.888 $ 77.188 $ 77.131 the amount of stack height credit for establishing individua] Weighted Averaqe Number
' Common sourre etnission limits. In July 1981, the U.S. Supreme Court
[Sh,ek a 123.502 127.486 133.026 135.691 denini a utility industry re plest to review the Court of Ear n Appeals' decision. On July 8,1985, the EPA issual new stack height regulations to conform with the court's decision; Ihe new regulations have also been appealed to the U.S. Court March June senernber Decernber of Appeals for the District of Columbia. The Ohio Environ. Three Months Ended 31.1984 30.1984 30.1984 31.1984 Inerital Protection Ager cy and the Pennsylvania Departruent On thousands except ser snare amounts) of Environmental Resources must review the emission limits Opsahng Remnues $420.453 $391M8 $41&794 $408 309 Operabng Expenses under their respective State huplementation Plans and submit and Taxes 330.524 309.150 326.981 327.736 to the EPA for approval any revised limits necessary to con- Operating income 89.929 82.398 89.813 80.573 form to the new regulations by April 1986. Such review couhl Other income and result in more stringent emission limits for some existing Net Yand plants and increased capital costs and operating expertses. Other Charges 62.729 64.386 66.820 73.323 The Companies are studying the new regulations and are Net income $ 83.957 $ 79.344 $ 97.134 $ 78.898 cunvntly unal'le to prnlict their ultimate effect- Earnings on Common Stock $ 72.429 $ 67.827 $ 84.563 $ 65.875 Weighted Average Number Statement of Financial Accounting Stendards No. 71- et Shares of Common The FASil recently proposed an amendment to SPAS No. 71 Stock Outstanding 110.539 115.164 117.938 121.044 which, among other things, would reqtlire the tycognition of Eamings per Share a hiss in connection with the tvcovery of terminatal construc- of Common Stock $ 66 $ 59 $.72 $ 54 tion projects ifit is probable that the unamortimi investment wouhl be excludal Imm rate base. If adoptal as proposed, it wouhi be applini retroactively to include the four units ter-minated by the CAPCO companies in 1980 as described in Note 1 The proposed amendment also imposes stricter stan-danis reganling the capitalization of costs associated with rate phase in plans, disallowances by regulators of the costs of newly completal generating plants and other related matters, none of which wouki have required a retniactive adjustment by the Companies as of December 31,1985. llecause the pnr posed amendment is subject to revision and a public comment prwess, the Companies cannot pn dict the ultimate impact which may result fn>m any amendment eventually adopted.
36
tht:s o i nr+ an 9-Supplementary Financial Data-Financial Reporting and fituuteial infonnation to disclose the estirnatett effects i f itt-Changing Prices (Unaudited): llation arul < hanges in prices on prope rty, plant and equip Staternent of Financial Accounting Stamianis No. 33, nient. This data is presented in acconlance wit h SFAS No. 33; Tinancial Ikporting and Changing Prices" (SFAS No. 33), however, it is not intended as a substitute for earnings re.
as aniended, provides for the preparation of supplernentary portal on a historical cost basis.
Resu:ts of Operat2ons Adjusted for the Eftects of Chanq+no Pnces for the Year Ended December 31.1985 (Thousands of average 1985 donars)
Hstoncal income from continuing operations $ 318.073 Inflationary E"ects on Common Equity Capital Invearnents ENcts -
Increase in specific pnces (current cost) of property held dunng the year (i) 270.749 Change .n general pnce level on property held dunng the year (393.511)
Ahustment to net recoverabie cost 58822 Afd.tional proveon for deprec ation (167.538)
(231.478)
Afvantage from the decrease in purchasing power of net mor etary liabines 160.872 th4 erosion of common stockholders' equ,ty (70606)
Income from continu;nq operations adjusted for chanainq prices (n) $247467
(,) At December 31.1985, net property. plant and equ:pment, aupsted for changes in specific pnces (current cost) was $11039977.000, white histoncal cost (nt4 recoverable cost) was $6615.704000 (n) incorne from cont nuing opera!,onn. adjusted for change in spec $c poces (current cost) would be $150.535000 af only rhe amount reportable as add.tional provson for deprec atton was included in the adjustment Companson of Supplementary Finanoal Data For the Years Ended December 31 1985 1984 1983 1982 1981 (Douam in thousand1 encept per share amourn Operating Revenues-Hstoncal $ 1.754.749 $1637.104 $1,515 852 $1.429 626 $1279 649 Abusted to Average 1995 Collars $1.754.749 $1695.549 $ 1.636.848 $1.593.400 $1.513 681 Income from Continuing Operations-Hstonca! $ 318 073 $ 290 694 $ 227.843 $ 161.338 $ 149 850 A1;usted for changing pnces (Average 1985 Dollars) $ 247.467 5 231.786 $ 182.575 $ 124 654 $ 64 357 Income from Continuing Operations per Common Share-Hstoncal $2 45 $2 50 $2 22 $189 $210 Ad i usted for chang!ng paces (Average 1985 Dollars) $190 $2 00 $t 78 $146 $ 90 Return from Continuing Operations on Average Common Equity-Hstoncal 152% 15 9 % 14 2 % 12 3 % 13 5 %
Ahusted for chang.nq poces 11 8 % 12 2 % 10 5 % 83% 49%
Ettective Income Tax Rate-Hstor cal 32 4 % 32 1 % 35 1 % 32 1% 33 5 %
Ahusted for changng pnces 37 1% 37 0% 40 8 % 38 1 % 49 4 %
Escess of Increase in the Specific Level of Prices on Property, Plant and Equipment Over General Price Changes (Aserage 1985 Dollars) $ (t22.762) $ (253 283) $ 115.191 $ 372 254 $ (43 556)
Advantage Resulting from the Decrease in Purchasing Power of Net Monetary Liabilities
( Average 1985 Dollars) $ 160 872 $ 150 812 $ 131,315 $ 119 238 $ 255 526 Year End Common Stockholders' Equity-Hstoncal $2 234156 $1.947 357 $1. 711971 $1.488 3 71 $1,229 044 Af iusted for chanyng pnces ( A,erage 1985 Duuars) $ 2 204 834 $ 1991.918 $1.816 743 $1.640 739 $1,408.700 Cash Dividends Declared per Common Share-Hstancal $188 $184 $180 $176 $176 Adiosted to Avoage 1985 Dottars $188 $191 $194 $197 $2 07 Year End Market Price per Common Share-Hstoncal $16 3 75 $1350 $12 25 $14 00 $11625 Aliusted to Average 1985 Dottars $ 1611 $13 79 $13 00 $15 43 $13 30 Average Consumer Price Inden 322 2 311 1 298 4 289 1 2724 36
The increase in specific prices of property held during the depreciation. No inflation adjustment has been reflected for year attempts to measure increasing asset values which incoma taxes, in confonnity with the reporting requirements appronimate dollars that would have to be spent today to of SPAS No. 33.
acquire property, plant and equipment identical to assets During periods of inflation, the Companies' net monetary currently owned. The Companies use the llandyM hitman index of Public Utility Construction Costs and the lhimau of liabilities (principally long-term debt, long-term obligations Labor and Statistics engineering indices to calculate the cur-and pmferred stock) will be repaid with dollars having less purchasmg lx)wer than dollars had when the origmal liability rent cost of those assets. The indices are applied to actual was meurred. This economic benefit is portrayed on the dollars spent on large construction projects according to the summary as du a@antage fun We dn:rease m purchasing year of expenditure. For all other plant facilities, the current cost is determined basal upam the year the facilities were Ixnver f net monetary liabilities, which serves as an offset to ,
placul in service. the mflationary effects of replacing the Companies' property, I plant and equipment.
Mditional depreciation expense adjusted for the change in spreific prices was determined using the same rates and methals usal for computing the historical cost provision for AudNors' Report
'Ib the Stockholders ami Hoant of Directors of Ohio Dlison currently being reviewed by the CAPCO companies. Ibssible Company: alternatives being considered include indefinite suspension, resumption of work and termination of the Unit. Because the We base examinni the consolidated balance sheets and con-solidated statements of capitalization of Ohio Dlison Com pany Company is unable to pmlict the results of the review, it (an Ohio corporation) and subsidiaries as of December 31, cann t now predict if construction ofIbrry Unit 2 will be 1985, and 1984, and the related consolidated statements of terminatal, and if terminated, whether the investment income, mtainni earnings, capital stock and other paid in applicable to its PUCO jurisdictional customers will be recoverable, capital, sources of funds fbr property additions and taxes for each of the three years in the periaxi ended December 31, in our opinion, subject to the effect on the 1985 consolidated 1985. Our examinations were made in acconlance with financial statements of such adjustments, if any, that might generally antptal auditing standants and, accontingly, have been required had the outanne of the imcertainty included such tests of the accounting records and such other referrni to in the second paragraph been known, and auditing procalures as we considered necessary in the subject to the effect on the consolidated financial statements circumstances. of such adjustments, if any, that might have been requinvl had the outcome of the uncertainty in the thin! paragraph itegulatory commissions are examining the impact on h'en known, the Snancial statenwnts afmal to alxwe customers' rates of nuclear generating units and are raising various concerns, inchiding the prudence of mnstruction present fairly the financial position of Ohio Edison Company and subsidiaries as of December 31,1985, and 1984, and the costs of such un:ts and the possible existence of excess msults of their operations and the sources of funds for generating capacity, These concerns are likely to be prolerty additions for each of the three years in the period addmssal by the nunmissions regulating the Companies emini December 31,1985, in conformity with generally with respect to units in which the Companies have an accepted accounting principles applied on a consistent basis.
ownenship interest. As discussed in Note 7 to the consolidatal financial statements, the Companies will te requesting recovery for their respective investments in Ibrry Unit I and lleaver Wiley Unit 2 in future rate proceedings. 4 .
The Companies cannot predict with any degme of certainty AlfrilUlt ANDEllSEN & CO.
the outcome of the regulatory process, and accontingly, we are unable to form an opinion as to what extent the N.w wrk. N Y M>nury 17, IN Companies' investments will be recoverable.
As discussal in Note 7 to the consolidatal financial statements, the continunt omstruction of Ibrry Unit 2 is R
Ccosclid tod Financial Statistics 1985 1984 1933 1982 1981 1980 1375 General FinancialInformation (Dows n thousands, except per shve amounts)
Tdal Operating Rwenues $1.754,749 $1.637.104 $1.515.852 $1.429.626 $1.279.649 $1.080.869 $ 593.324 Operating Income S 380,354 $ 342.713 $ 302.751 $ 269.640 $ 252.381 $ 169.383 $ 89 663 Earnings on Common Stock 8 318,073 $ 200 694 $ 227.843 $ 181.496 $ 163.892 $ 101.403 $ 67.641 Ratio d Earnings on Common Stock to Operat:ng Remnues 18.1 % 17 8 % 15 0 % 12.7 % 12 8 % 94% 11.4 %
T.mes interect Earned Before locome Tax 2.34 x 2 34 x 2 31 x 202x 2.11 x 2 05 x 2 34 x Net Utilit/ Plant at December 31 $4,609,196 $5.945 549 $5.206.134 $4.522.733 $3.867.757 $3.4352C7 $1.850,490 Property Additions S 826,994 $ 868,099 $ 771.131 $ 774.233 $ 568.044 $ 515.020 $ 282.892 Capitak/aton at Decemter 31.
Common Stockholders' Equity S2,234,154 $1.94 7.357 $1.711.974 $1.488.371 $1229.044 $1.067.524 $ 546.271 Preferred and Preference Stock Not Sub ect to Mandatory Redempon 447,940 455.490 404.240 354 240 304.240 306.905 213.905 Preferred and Preference Stock Suty>ct to Mandatory Redempton 176,694 158.483 158.112 152.560 151.141 156.450 88.000
' Long Term Det A 2,691,615 2.449.502 2.132.137 2.005.436 1.759.771 1.594.384 920 932
~
Total Capitakzaron 85,570,405 $5.010.832 $4 406.463 $4.000.607 $3 444,196 $3,125.263 $ 1,769.108 Capitah/aton Ratios at Decemtmr 31 Common Stockholders' Equity 40.1 % 38 9 % 38 9 % 372% 35 7 % 34 2 % 30 9 %
Preferred and Preference Stock Nd Sut>yrt to Mandatory Redempton 8.4 91 91 89 88 98 12.1 Preferreni and Preference Stock Subject to Mandatory Redempton 3.2 31 36 38 44 50 50 Long ierm DetA 48.3 48 9 48 4 50 1 51 1 51 0 52 0 Total Capitahzaton 100.0 % 100 0 % 100 0 % 100 0% 100 0 % 100 0 % 100 0 %
Longterm OtAgations at Decemt>er 31 3 739,291 $ 822.234 $ 759.843 $ 656.655 $ 447.484 5 265.000 -
Cost of Preferred A Prefemnce Stock Outstanding at Demnt>er 31 10.00 % 9 87% 9 63 % 9 17 % 8 37% 8 38 % 7 70 %
Cost of Long Term DetA Outstanding at December 31 11.45 % 11 52 % 10 82 % 10 69 % 9 99 % 916% 7 27%
Common Stock Data Earnings per Amrage Common Share $2.45 $2 50 $2 22 $2.13 $2 30 $152 $195 Return on Amrago Common Equity 15.2 % 15 9 % 14 2 % 13 5 % 14 6 % 97% 13 1 %
Divujends Paid per Share $1.88 $184 $180 $1. 76 $176 $176 $166 Common Stock Dividend Payout Rato 77 % 74 % 81 % 83 % 77 % 116% 85%
Common Stock Otvidend Ydd at Decomtmr 31 11.5 % 13 6 % 14 7 % 12 6 % 15 1 % 14 8 % 99%
PricuEarnings Ratio at Decemter 31 S.7 54 55 6C 51 78 86 Shares d Common Stock Outdanding at De&mter 31 (000) 137,049 122.237 108.460 96082 78.676 68.526 35 695 Book Value per Common Share at Demmter 31 $14.30 $15 91 $15 78 $15 49 $15 62 $15 58 $15 30 Myket Pnce per Common Share at Decomtwr 31 S16.375 $13 50 $12 25 $14 00 $11625 $11875 $16 75 Rat o of Market Pnce to Book Value per Share at Daemter 31 100 % 85% 78 % 90 % 74 % 76 % 109 %
1 i
38
C:ncolldat:d Cparatin3 Stati:tico 1985 1984 1983 1982 1981 1980 1975 Rmenue From Ekstnc Sa!es(Neru H+sdermal 8 600,441 $ 571878 $ 540.167 $ 497.941 $ 442.267 $ 398.832 $221.230 Cornmeraal 433,445 400 291 385.277 356.325 308.599 268.788 149 268 Irxjustral 476,257 469.112 421.736 383.535 381.162 330.717 180 086 Oher 64,708 57.921 69.278 67.828 53 993 50.420 27.253 SutAotal 1,574,891 1.499.202 1.416.458 1.305.629 1.186.021 1.048.757 577.837 Sales to UtAt;es 159,242 117.385 76 220 101.688 73.966 12.381 6.307 Tdal 31.734,153 $ 1.616.587 $1.492.678 $1.407.317 $1.259.987 $1.061.138 $584.144 Renuo Frorn Ekrtrc Sales-%
R<sdertal 34.8% 35 4 % 36 2 % 35 4 % 35 1 % 37 6 % 379%
Cornmeraal 25.0 24 7 25 8 25 3 24 5 25 3 25 5 indu .2ral 27.5 29 0 28.3 27.3 30 2 31 2 30 8 Oher 3.7 36 46 48 43 47 47 SutAcAal 90.8 92 7 94 9 92 8 94 1 98 8 98 9 Sales to Utilttes 9.2 73 51 _ _ _ .
72 -_
59 .
12 . - - _ - - - .
11 liAal 100.0 % 100 04o 100 0 % 100 0 % 100 0 % 100 0 % 100 0 %
Kikmart Hour Sale s thN Fh 9 dent.al 8,791 6.836 6.735 6.733 6.747 6.801 5.808 Commeraal 5,268 5.101 5 096 4 996 4.917 4 812 4.169 Indu ,tnal 8,751 9.161 8.386 7.708 9.352 8,909 8.514 Oher 1,149 1.075 1.211 1.227 1.181
~
1.370 1.133 SutAotal 21,957 22.173 21.423 20.664 22.19 21.892 59 624 Sales to Ut+tes 6,929 4.591 2.917 3 361 2.465 502 357 Ti Aal 28,888 26.764 24 345 24 025 24 662 22.394 19.981 Cu 20mers Served at Deumtn 31 Revdertal 888,107 885 376 878 949 873 877 872,303 867.447 813.308 Commeraal 98,044 90 810 90.072 89.706 89 231 88.505 83.710 Irxfo'Jnal 2,021 1.757 1.003 1.048 1 068 1.059 1.132 Oher 892 721 736 724 711 704 676 lidal 987,088 978 664 970.760 965 355 963 313 957.715 898 826 Awrago Annual Re9 dent.al Wdi Usago 7,642 7.762 7,695 7.723 7.760 7.870 7.204 Amrago Remdent al Prce per bWh S.844 8 37c 8 02c 7 40C 6 56C 5 86c 3 81c Co9 of Coal per M.!Lon Bru $1.53 $159 $162 $175 $181 $150 $105 Generat.nq Cambilty at Demntxe al Coal 89.1 % 89 1 % 89 2 % 86 2 % 86 3 % 861% 90 3 %
G1 3.0 30 30 63 62 04 97 Nuclear 7.9 79 78 75 75 75 --
liAal 100.0 % 100 0 % 100 0 % 100 0 % 100 0 % 100 0 % 100 0 %
Sources of Ela tre Generat on Coal 89.3 % 90 4 % 89 8 % 938% 89 9 % 98 7 % 96 640 01 - -- -
01 02 06 34 Nuclear 10.7 96 10 2 61 99 07 -
l lidal 100.0 % 100 0 % 100 0 % 100 0 % 100 0 % 100 0"b 100 0 %
Peak load - MegawatM 4,084 4.091 4.148 4 073 4.148 4 210 3 682 Numte of Emphyees at Decomter 31 7,498 7.611 7.702 7.885 7.669 7503 6.184 39
Stockholder Information Clockholder Proille Dividend Reinvestment Plan Tolf Free Telephone Afanagement Developments At Ihe end ofIhe year,20Ti,T17ti At the erut of IDST), nuin than Numbers Available Tlu Coqig s ik> ant of st<M klH8hlers owned 137. I 72,(HH) stockhohlers, repre. F'or the n>nvenience of our I)irectors electal two new vice inillion shares of Ohio Edison senting 33 penvnt of all sten k- shxthoklers die Cornpany presidents in August 198T>.
common stock. Appn>xinuitely hoklers were ennillnl in the I""'"Il fn e telephene num- II. IUter llurg, treasun r, atul 39 penvnt an women,37 Company's Dividend Ib imvst. in rs to pniviih infortnation David I,. Yeager, assistant to penvnt men arul 33 gw ntnt nient and Sto< k Purrintse mul assistinnt Shulhoklers the pn sident, wen both joint hohlers. The n nutining Plan. They n investal $T16.2 an eru ouragni to call I 800 elected vice pn sident.
12 gw nvnt n pn sents Inists million in divideruls amt made 321 0168 in Ohio, or 18(H) ,
rorg uirat ions, instit utions, optional cash payments of 6331766 outside ()hio, on brokers arul of her investinent $20.8 million to acquin T>.1 Monda3 thniugh F rnlay, ex-gniups. Inillion shares of conunon "'pt holidays, fnnn 8J M) a.in.
to 1:30 p.m., eastern time. E Struck,11, fonner director o sten k durmg the year.
N,early 7 I in ntnt of ninunon Akn>n area ami threign callers nirlwirate planning owmlina- ) ,
st x khohlers ow n 3no shares Most participants in the Plan tion, was electml to succeni j stundd m> (316) 38 i T>~m or less. They live in all TAl states roubi luive excludal Inim du ir St<x khoklers may also write Mr. Clark as assistant treasurer l and numy fon ign rountries annual innime up to $7T,0 din "dy to Storkl$ older Ser Clyde W. E'nsterickson, vice l
($1,Tino on a joint return) of v n s, Ohio FMison Coq >any, president since 1980, retin,i Common Stock Dividend taxable dividends they rein- '
46 S.outh Ma.in Street, Akron, in May 198a after 3< years E,ffertive the first rinarter of vestal in 19ST>. llowever, this Ohio 4 l'108. of m im 1986, Ihe Company's lloani of exclusion has expired for ikn rtors increased the spiar divideruls n imested after Addtflonallnformation We were saddennt on Man h 7 terly ronunon stin k dividend December 31,1981 19hT>, by the passing of D. llruca Ohio lMison Company nnunu en frorn 17 rents per shan to 18 stock is listol on the New Wrk pn ,pn ent ome Aibi t onal nformation about rents, or $ 1.93 on an annual Lompany between 1964 arul d P1 M P> mal Miers Mmt ewbges basis F'or e ich epiarter of 19sT,' 197T3. lie servnt the ( ompan3 ran be obtainni by < ontai tmg arul t raded on of her registenst t he lloani declan wl dividemis of 47 rents per shant Ohio IShe's SM MW ewhanges muler the "OEC" ticker syrnhol. Newspapers I" " "
""#* Y"k" S vns Mansfiebt was well known for generally use the symbol Cividend income Tan Stafus his countless contributions to Annual Afeefin9 "Oh.ioEd" m. shx k listings.
All nimmon, pn fernwt alul of stocAholders the Company, the utility m-prefen tire sh u k divideluts Stor kluiblers are irivitnl to nn 10 dH 198In Af tnual dustry ami our community.
paid in IDST> were taxable for af terni the 19X6 Annual Meet Rein hwhange >d to( die Sn(urities onunmon wWaint p, ,3 gg w fnleral income tax purposes ing on Thursday, April 21, at 11. Sammis also passed away.
No Iw n tion of IDMT, dis i,lernts 10 a.m. in the Company's be sent uithout charge to President of the Company l representnl a n turn of rapital General Ulfire muhtorium in sunWoMers upon nxlued fnnu 19 ll to his retirement ir
( bermhe ofi hanges in fnlern! Aknin, ()hio. Tinise not at Por a nipv, ph Gregory F Lal;ase gg g j tax laws affertmg how a cor teruhng can vote on the items lame, hernwrite tary, to ,
gg
, luiration determines return of or business by fillmg out and goo Dhson ( ornpany, s 6 aml guide d du early gniwth rapital It is also unkkely that Sonth Mam Sireet, Akron, i
n turning Ihe pnixy cant mailni E&m futun didderals u ill be con to e:u h st a khobier approsi ' *I" 4IU"*
sidensi return of rapital- mately 30 days befon the New Board Afember Transfer Agents inect ing. i\t the 198T> Annual Meeting Ohio E,dison (,ompany of Stockholders, William it i
a6 h,outh Main Sirect A k ron , ( )h .io 18308 Millei w as elected to Ihe lloar of I)irectors to succeed W.illias Attention .l'ransfer Agent A. Derrick, who retirmi after Registrart serving as a director of Ohio National City liank, Akron U b""I"II3F""IS Mf MIII
( >ne ra3r; ole Plaza is vin pnmulent of govern Akron,(lhio 113nx inental personnel relations at The (h ulycar Tire and Rubb<
Uompany in Akron.
40
Ohio Edicon Dircctora and Management l
l Board of Directors Officers Division Afanagers Donald C. lilasius Justin T. Ih>gers, Jr Anthony N. Gorant t chairn.,sn of ths ll.nni arni Ch uf nnutent Ak ovn 1Jn asion Entnto e offin rof 114 7qvive n i h"" Victor A. Owoc Denver G. l?losser pat < q. .\la nsticht. Oh n.>(nntwnaor g ,,g , g .,g 9,, ,g( , , fy,, g, 1.r vus, applos o ,s a niffu rn o.sh r u y)
.tfen,her, hint,. ,nitin g (ino nattve, Doilglas W. Thchappat .Ialues E. Markle Fina rrre i nn naittee En't'stiw \
- ire l'n".irb nt l Jake Erie 1)n ision Dr.1 ucille G. Ford. 1 ynn Firestone Malcolm E. Cash Voce 1% lent for Anulenne .1Dans. Senior Dre nrsident .\la nsfielil !)ivision
,tshiand i hlby, <tshlarnl. ol"" David it. Gundry Robert I.. Kensinger (lonorrnan honantating hnunittov; . . , .
.\ fender; f unsno e i ont unttw IL)hert l.. Ihughhead lh>bert J. McWhorter N. Ihx! Monahan Chairrna n of the lh us ol. nnidenl a nd Senior ..ur l'h 'n t S dinufuM M^io" i
(2nef Enrutire rMficer et \lbirton I{ussell J. Spet rino lh>bert E. Dawson Stort t hrjvration, \\brrton, \\hst Vice nrsedent o rni Star k ih rision Vinjiein (steel pn niurts). ( 7tairina n. Genens! I hu usel U'V10 L, IliXIV d'-
t huopensation < nnonista r; .\ tender, Audit t inn un tree ltonald D. Ilest \fis errn I>ivision
\ ire a vsident Ibter A. Fetterolf Glenn 11. Meadow s nrsident. Chief Enrntis e ntficer et nel II IU'V'I3"'A I"." "U"" " I'I'ixi""
I"' W "I'"I l>iirctor of.\lchi d C<.rp untinn.
Ak rvn, ohio (nsrion, naarnstartunt! Frank C. Derry podarta) .\lemter; ihrnjensation Vice nrsident t '< nn tn ottes Andst Cenn untim John A. Gill William it. \liller rire avsident Vice nrside,; t of Goverranental iHso. nel lhations. The (iorulycar James D. Wilson Vi'" D"id""I Tore .d Rn!Jer t kunping. .\kuun, Oh n (ruhler a nd relatal pnnlurts). DavidI,.Yeager
.\fember; Connjensation Gnnnative. yore nysident John Nelson Mark T. Clark Chairman of theltruant arniChi*:f Turasurer f:n rntire 0]Jorer of Onn unesrial .
Shearing, Inc., lin' t nyston n Ohin Y.5IIIdW N UdWPI*
(engirteerni nietal turnpenrents). 0 ""l'I"NU T
.\ tender; nonsensation nanonittee. Gregory y 1,aylame Victor A. Owoc S r"1"'7' f:ncutn e Vuv nrsnient of Chin Warren G. youch Edison .\b rnber, Frnaner Gan orattm .tssistang nanpragter Justin T. Ih>gers. Jr. Joanne Martin nrsident of Ohio Edison a rni ,tssista ng S caja ry t'hairman qf thelhwini qfits subsid-tarrj. lVn nsylra rt.'a lbu er. f lan s rrna n, Theodore V Struck, il Ft rutnre i nn tnittee; .\femkr. hinn- '\%S5^I"hl I M IX"f"Y inating f hmnattm l{arypy L, \\1ggg;pp Douglas W. 'lhchappat Asista ut n,mptnller Ennatiw Vue nmient nfohio Edison.
Frank C. Watson nrsident a nd l>inrtor qf 71re
}innqtstuu n \\bidingarniEngirnenny rurnptn!I. }iningsteurn, Ohio (non-frnnas allotts) t 'hainnart, Audit
{ hunnittee; h!cmler, Nominating
( hrn rn ottee.
William C. Zekan Charnnan of the lhini and nrsident of A Selodwton, Inc.. Aknot, Oh n >
(rustom plastic cennpmrids) .\ lender; Audit non nattee.
Director Etneritus Fred 11. Zuck
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