ML20204G389

Annual Financial Rept 1982

ML20204G389
Person / Time
Site:	Oyster Creek
Issue date:	03/03/1983
From:	Dieckamp H, Kuhns W GENERAL PUBLIC UTILITIES CORP.
To:
Shared Package
ML20204G379	List: ML20204G375 ML20204G389
References
NUDOCS 8305020465
Download: ML20204G389 (40)

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General Public Utilities Corporation 100 h.terpace Pa:kway Parsippany, NJ 07054 t

NEW YORK OHIO PENNSYLVANIA

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NEW JERSE MARYLAND WEST VIRGINIA VIRGINIA tomers live in about half the land System's nuclear faci!!!ies.

GPU - A Profile of the area of the two states.

About 34 percent of the electri-System and the The operating companies of the city distributed by the operating Customers it Serves System are Jersey Central Power &

companies is used by resirjential Light Company and,in Pennsyl-customers,26 percent by commer-vania, Metropolitan Edison Com.

cial accounts,34 percent by indus-pany and Pennsylvania Elec;ric try and 6 percent by other custo-The General Public Utilities System Company. The GPU Service Cor-mers.

companies provide some 31 billion poration provides a broad range of The peak load periods of the kilowatt-hours of electricity for professional services to the operat-operating companies are in bal-about 1.6 million customers (more ing companies and a fifth subsidi-ance with winter peaks in Pennsyl-than 4 million people)in New Jer-ary, GPU Nuclear Corporation, is vania and summer peaks in New sey and Pennsylvania. These cus-responsible for operation of the Jersey.

Operating Companies' Statistics - 1982 Sales Mix Residential Electric Peak l

Revenues Total Assets Commercial Customars-Sales Load Number of l

($000)

($000)

Industrial Year-End (MWH)

(MW)

Employees Nn

$1,163,120 $2,277,487 39 % 30 % 2800 724,444 12,985,841 2,657 3,559 N'1

$ 550,147 $1,308,677 33 % 24 % 38 %

367,522 7,426.089 1,581 2,433 M

$ 698,223 $1,594,508 28% 24% 38%

518,623 10,941,351 2,204 4,053

$2,405,527 $5,180,661 34 % 26 % 34 % 1,610,589 31,353,281 6,442 12,420'

' includes employees of GPu Nuclear and GPu Servce Corporatons

l 1982 FinanClal Summary 1982*

1981*

Net income Before Extraordinary items (000) 33,734 20,544 Net income (Loss) After Extraordinary items (000) 37,507 (15,904)

Per Share (Before Extraordinary items)

.55

.33 Per Share (After Extraordinary items)

.61

(.26)

Common Shares Outstanding, Year-End (000) 61,264 61,264 Number of Stockholders 122,884 135,933 Megawatt-Hour Sales (000) 31,353 32,012 l

Operating Revenues (000)

$ 2,405,527

$ 2,065,487 Construction Expenditures (00'))

240,G15 263,960 i

1 Cost of Fuel and Purchased Power (000)

$ 1,020,681 934,425 Total Assets (000)

$ 5,180,661

$ 5,054,021 Generating Capacity (megawatts)*

• 8,251 8,251 Peak Load (megawatts) 6,442 6,215 Customers Served at Year-End 1,610,589 1,597,557 Number of Employees at Year-End 12,420 12,030

• See Notes 1 and 3 to Consolidated Financial Statements and Report of Auditors.

" Includes both TMI Units rated at a total of 1,706 megawatts.

Inside GPU's1982 Annual Report Page Administration 10 Statement of Management 11 1982 FinancialSummary 1

Management's Analysis of Letter to Stockholders 2

FinancialCondition and Operations 11 The FinancialReport 3

Reportof Auditors 14

)

The Regulatory Scene 4

Consolidated FinancialStatements 15-18 L

Major Regulatory Actions:

Notes to FinancialStatements 19-32 A Chronology 6

Operations 7

Effects of Changing Prices 34 Three Mile Island 7

Oyster Creek Station 8

Directors and Officers 36 LegalMatters 9

Shareholder Notes inside Back Cover

L DurirT the past year, the Unit 2 those of neighboring utilities. Addi-ggg cleanup program accomplished tionally, we have been able to put 1982 saw an end to the series of severalimportant objectives,in-in placn long-term, economical pur-near-term cash crises experienced cluding 120 entries into the contain-chased power agreements that, by your Company since the Three ment building and TV examinations together with one of the nation's Mile Island accident. Nevertheless, of the damaged core.These actions leading programs of conservation earnings remain severely de-lead to the important step of remov-and energy management, insure pressed. Major portions cf the ing damaged fuel from the reactor, GPU's capability to continue ade-Company's capital assets associ-projected for two to three years quate levels of service while ated with the two TMI units and the from now.

minimizing future construction, unamortized balance of the Forked The total cleanup task is an ardu-We firmly believe that this dem-River project remain excluded from ous and expensive job. A new onstrated ability to serve our custo-our rate base.

cleanup schedule now indicates a mers, while we make progress Extensive internal cash control completion date of1988 at the toward the financial recovery, is not measures in effect since the TMI previously estimated cost.

only in the interest of customers, accident, along with the cumulative We have continued to work hard but also contributes significantly to effect of regulatory rate action, im-to bring together an equitably the ultimate recovery of the share-proved GPU's cash flow. This was funded cleanup program. Regula-holders' investment value.

essential to enable the Company to tory actions during 1982 brought Your management recognizes not only rneet its day-to-day cash the customers of all GPU operating the impcrtance of establishing a needs, but to provide sufficient companies into that program. After dividend policy for the Company as cash to pay oft maturing long-term federal legislation mandating parti-soon as all of the factors debt securit:es. Earnings, however, cipation by the nation's electric util-associated with financial recovery will rot show majoe improvement ities was not obtained in the 97th are either in place or can be pro-unless and until Unit 1 at TMIis re-Congress, the siectric utility indus-jected with prudent business fore-turned to service and the plant in-try's major trade organization acted sight. Although we have taken san-vestment and operating expenses in January 1983 to recommend a stantial steps toward that goal and are again recognized m the rates of voluntary program designed to expect further progress in 1983, we the three operating companies.

yield $150 million toward the clean-have not yet reached that point.

As this report is wr2 ten, we be-up effort. The U.S. Department of Before a dividend policy can be im-lieve that TMl Unit 1 will be physi.

Energy contir.ues to meet its fund-piemented, TMI-1 must have cally ready to return to service by ing commitment for the cleanup returned to routine operation, the mid-year. The primary uncertainty and has agreed to accept the dam-funding of the cleanup program in the timing of its retum to service aged core and high level radio-must be assured and the ability to remains the question of whether or active waste for disposal off-site.

access the capital markets must be not the Nuc! car Regulatory Com.

We are hopeful that by the end cf available.

mission (NRC) must consider the this year, the funding available The continuing efforts of your impact of restart on the psychologi-from all sources identified under management, and the GPU Sys-calstresslevelof peopleliving near the plan of Govemor Thornburgh of tem's employees, are pledged to the plant. The Supreme Court is Pennsylvania will provide an effi-the full recovery of your Ccmpany.

expected to rule on this question cient annual cleanup spending this summer.

level of about $100 million.

An important step forward in the GPU and The Babcock & Wilcox restart effort will be the completion Company (B&W) announced in late J/ j

/

of repairs to the plant's steam gen-January that a settlement had been erators, scheduled for mid-March, reached in the Company's suit W.G.Kuhns If the NRC decides that hearings against B&W. That agreement will Chairman and Chief Executive are required on the repairs, restart provide rebates of up to $37 million er could be appreciably delayed.

in proportion to GPU purchases of Other issues - emergency plan-services and equipment from B&W

/

ning, plant modifications and man-over10 to15 years. The Company d_

~~~

agement-received favorable expects to apply the net rebate pro-recommendation in July by an coeds to the cleanup of TMI-2.

H. Dieckamp NRC Atomic Safety and Licensing During this difficult period, we Presidentand Chief Operating i

Board. They are still under review have continued to provide our Officer by the NRC and by an NRC Ap-customers with reliable electric ser-peals Board.

vice at rates that are in line with March 3,1983 2-Iu h.

w

retire maturing securities in 1983 tions, including a major upgrading The F,nanc,ial Report and 1984. Small borrowings by and overhaul of equipment at the i

them for working capital are antici-Oyster Creek Nuclear Station. The Earnings Still Impaired, ated from time to time in 1983, but remaining $116 milion will be used l

a s hwn we expect to be at zero short-term to pay long-term debt issues matur-GPU's 1982 net income before debt for those companies at year's ing this year.

extraordinary items was $33.7 mil-end. However, a delay in the return Future Fmancial Planning lion, up from $20.5 miliion in 1981.

to service and to rates of TMI-1 Earnings per share were 55 cents, would require some additional The most critical factor in the im-again before extraordinary items, short-term debt.

provement of GPU's financial posi-compared with 33 cents for 1981.

tion continues to be the restert of (The extraordinary items are dis-Revolving Credit Agreement TMI Unit 1. Jt will return the capital cussed in Note 3 to the Financial Renewed and operating costs of the Unit to Statements, page 27).

the rates of each of the three Sys-The severe constraints placed on Contributing to the modest earn-tem operating companies,improv-the GPU System as a result of the ings increase were higher reve-ng both income and interest cover-TMI accident have precluded rais-TMI-fs restart is crucial to any nues from rate increases received ing capital from the securities mar-major progress in GPU's ability to during 1982, and a lowering of in-kets. Thus, the System's only terest expenses.

return to the capital markets. Addi-source of outside funding has been ly, TMbrs output v.ill reduce Earnings in 1982 were still ad-short-term borrowings under a versely affected by(1) the lack of g

g g

Revolving Credit Agreement (RCA) return on the TMI units and the PM M'sete-M with a number of banks.

cancelled Forked River project;(2) h;gher operating and maintenance

1) a I Syctem-wide cash equilibrium expenses and the absence of pro-Sy tem was to r pay ssen through tight controls on expenses, its bank debt by the end of 1982.

vis;on in rates for the bulk of such Those terms were set at a time expenses for TMl; and (3)a when it was expected that TMl Unit recession-related decline in e'ec-1 would restart in 1982 and would tricity sales compared with 1981.

e be contributing to earnings and Electricity sales were 31 billion overall financial resources. As a I

kilowatt-hours in 1982, about two part of a renewed RCA for 1983, percent below 1981, reflecting a the banks extended, through June nearly seven percent decline in in-1983, final repayment of the GPU dustrial sales. Revenues for 1982, not including those related to bank debt with interim pay-down Net income (millions) energy costs, were $1.3 billion, up requirements.

22 percent from 1981 because of Borrowings by the GPU operat-

$138.8 rate increases granted during 1981 ing companies, but not GPU, under and 1982.

the amended credit agreement are permitted up to an aggregate of

$125 million, with individual sub-l Turnaround in Cash Position limits for each operating company.

$95 8 i

l The cash position of the GPU operating companies was signifi-cantly improved during 1982. The Capital Expenditures bankdebtof allthreecompanies in 1982, the GPU System had was retired, dropping down from a

$320 million of capital expendi-peak of $326 million in 1980 and tures, with the bulk of these funds, leaving at 1982 year's end only a some $249 million, going to plant parent company debt of $36 million improvements, modifications to

$33r which should to retired in 1983.

existing stations, and power lines.

This significant accomplishment The remaining $71 million was

$20 6

$20.5

• was achieved mainly through strict used to retire maturing debt.

spending limits, favorable regula-For 1983, the System expects ex-tory actions, lower interest costs penditures of $406 million, of which and the sa'e of excess uranium.

$290 million will provide System The operating companies expect improvements and modifications to 1978 1979 1980 1981 1982 to have sufficient funds available to both coal-fired and nuclear sta-

• Excluding effect of extraordinary iterns 3

Earnings Per Average Share Penelec would be receiving $38.5 that this new law precludes the in-million and $15.4 million annually, clusion in rates of amounts to respectively, for that purpose. In amortize investment in a plant that

$2 3c 1982, Met-Ed and Penelec received was abandoned prior to comple-about $57 million and $29 million tion. The PUC has not yet ruled on respectively for such amortization.

that motion. (See Note 1 to Finan-In a key action by the Pennsyl-cial Statements, page 20).

vania PUC in August, the rate set-3'33 tiements reached in January 1932 Pennsylvania Companies File for with Met-Ed and Penelec were 1983 Rate Changes revised at the Companies' request Met-Ed and Penelec filed base to permit ecrlier participation by rate increase requests in January Pennsylvania customers in the TMI 1983 for $60 million and $75 million Unit 2 cleanup effort.

respectively. In both filings, the This changs did not provide any companies asked for rate actions increase in customer reveques and related to current levels of cost, S s5-does not provide a basis for in-together w2h TMI-2 cleanup and in-s 34 3.33 p

creasing the current level of vestment recovery.

L8 cleanup activity at Unit 2. However, Among those provisions, the two

[

. hl customers of a'l three System companies are seeking the bal-

, ayd operating companies are now par-ance of customer participation in ticipating in the TMI-2 cleanup. We the TMi Unit 2 cleanup as outlined 1978 1979 1980 1981 1982 perceived this step as critical under Governor Thornburgh's plan.

E Dmdends Paid Per Share before other participants identified The PUC has been asked to pro-

• Excluding effect of extraordinary. terns in the Thornburgh plan would be vide that additional recognition wi' ling to take part in the cost-prior to the restart of TMl Unit 1.

sharing program.

Additionally, the companies are re-unit) the Company willlay the fi-Late in the year, Pennsylvania questing amortization of the TMI-2 nancial groundwork for generating enacted a law which bars electric investment in a way that reflects capacity expansion in the 1990's, utikties from charging customers the cost of senior capital. Both when economicalpurchased for the ccst of construction of companies are also asking that power contracts may be less facilities until such time as such their base rates be changed to available.

facilities are presently providing reflect increases in costs resulting actual utility service to customers.

from the impact of inflation on ex-The Pennsylvania Consumer Advo-penses not related to the Three The Regulato7 Scene c tuecently fHed aynotion wjth the MHe Island situation. In the January Pennsylvania PUC m a case involv-filings, Met Ed and Penelec also re-Rate Actionsin Pennsylvania ing another electric utility, urging quested an updating to current in January 1982, the Pennsyl-opU SYSTEM BANK DEBT vania Public Utility Commission (PaPUC)and our two Pennsylvania subsidiaries agreed to rate case I

settlements to provide, in three steps, Met-Ed with $112.1 million in M

I I

additional base rate revenues and L

Penelec with $64.8 million. The set-L I

tiements included rate recognition h

for TMI-1 if and when it returns to N

service and customer participation D

in the TMI-2 cbanup program upon o

restartof Unit 1.

L 100 The orders made provision for k

amortization of theinvestmentsin R

TMI-2 in varying amounts at each S

step so that, on the completion of 0

the three steps, Met-Ed and 1979 1980 1981 1982

i P

levels of TMI-1's capital and time. Energy under these contracts While portions of the request operating costs of $22.7 million will replace the Ontario Hydro were comprised of operating and 1

and $10.2 million, respectively, energy at estimated savings of investment costs not related to when Unit 1 restarts.

more than $100 million a year over TMl, the filing does update the I

On March 1, both companies that available through the cable operating and capitalcosts of Unit made filings to adjust the energy project. In December the BPU 1 and the costs of improvements

- =

b cost portion of customer rates. Met-ruled that JCP&L cannot recover leading to its eventual return to dd is seeking an increase of $12.9 through its rates its $6.8 million in service. The customer impact of million in energy cost revenues destn, engineering and cancella-the base rate request will be largely

=

6 while Penelec willlower those tion costs for the cable project.

offset by a company-requested, charges by $62.8 million, effective JCP&L has requected reconsidera-

$102.9 million mduction in energy

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with April sales. Customers of both tion by the BPU. (See Note 3 to charges.

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companies will see significant Financial Statements, page 27).

When TMI-1 returns to service,

[

reductions in their energy cost customer energy charges will again rates when TMI Unit 1 retums to JCP&L's Future Explored in be reduced and base rates slightly commercial operation.

Hearings increased for a net reduction of p

The combination of the January costs to customers.

Dunng the year, the BPU con-9 base rate requests and energy cost The total net effect of the Janu-ducted a series of public hearings c

h adjustments, together with rate on the findings of an Arthur Young ary fdings and the rate actions changes granted in the January

& Company eport, tssued in April anticipated with Unit 1's return will (4

g 1982 settlaments upon TMI-1's 1981, outlining options to guarantee be t n overall average increase of j%

y return to service would result in an kss tan 1 percent for JCP&L 7

continued electric service to gQ P

overallincrease of less then 8% in customers.

JCP&L's customers.T hese options 3

k Met-Ed customer charges and no include the continued ownership of L

latl

}

overallincrease in Penelec

[f7[j O JCP&L oy GPU, the formatior cf a charges.

regionalor state powerauthority in 1983 the New Jersey Leoisla-E_

and consolidation or merger with ture adopted a bill (which at this f. ' j.

JCP&L Receives $81.8 Million another pubiic utility.

date has not been signed by the g

p r[

Rate increase The BPU also sought comment Governor) that would requ're the

' g sq E-In July, the New Jersey Board of on cost-savings to the Company BPU to establish special hearing i

Public Utilities (BPU) granted and the state-wide economic im.

procedures for the purpose of de-j.

JCP&L an increase of $81.8 million pact'of a moratorium on new cus.

termming fault for mishaps result-p '

.]

in base rates. This action brought tomer hookups by JCP&L.

ing in accident-related utility rate increase requests of $10 million or cq. g the company's customers into par-Although the BPU has not reached more. The bill would require hear-

4* ;;

ticipation in the TMI-2 cleanup by a final determination, the Company ings to determine whether or not, e

s providing $13.6 million annually for believes that the proceedings have or to what extent, JCP&L was at h

that purpose over each of the next demonstrated that customers and fault in the TMI-2 accident and pro-

[;<

five years, thus meeting the levels investors will be best served by vides the BPU authority to impose q

outlined for JCP&L's customers in GPU's continued ownership of penalties. We do not know what ef-

,.3 the Thornburgh plan.

JCP&L and that a moratorium for fect, if any, this bill would have on pm ;'+

In September, the BPU granted new customer hookups by JCP&L JCP&L's operations and f_nancial Q; :

i JCP&L a $95 million increase in its is unnecessary and undesirable.

condition. (See Note 1 to Financial g{.y m

6 Levelized Energy Adjustment Although JCP&L is the only New Statements, page 21).

Clause (LEAC) rates.

Jersey utility affected by the TMI-2 accident,its rates today are com-

l s Ontario Hydro Project parable to those of other utilities in n

m the state and in neighboring states.

h,[

Cancellation The project to link the GPU Sys-im<

5 tem with Ontario Hydro of Canada JCP&L Files 1983 Rate Request p

-Q ;

g(.;}.

by means of an underwater cable JCP&L filed a $123.4 million was dropped in mid-1982 as signifi-base rate increase request with the t

cant costincreases and potential New Jersey BPU in late January, construction delays made the ven-primarily to cover the increased ture less desirable than the long-cost of doing businass since the term domestic power contracts period covered by the last base F

1 which became available at that rate increase.

1 reducing not charges to customers Penetec asked for $75 million in in-Chronology of by $6.4 million.

creased base rates and an addi-I ~-

Major Rate Regulatory tional $10.2 million when TMI-1 Actions in July 1......

returns to service.

1982 and 1983 Met-Ed and Penelec reduce their March 1......

tax adjustment surcharges based Penelec and Met-Ed filed for ECR on legislation exempting TMI acci-Rate Actionsin Pennsylvania:

changes effective with April sa~.as.

I dent-related costs from collection 1982 p

,s filing wou'd reduce cus-Hhe state gross Mpts tax.

January 1......

tomer energy charges by $62.8 Aupst 27. -...

mMon annuah, wMG has g

Met-Ed and Penetec were gramed requestod an ECR increase of 3-increases in their Energy Cost PaPUC approved modifications of U2.9 mMon a year.

p Rates (ECR)of $23.7 million and the January rate case settlements

$76.8 million respectively.

to allow $16.2 million for Met-Ed Actions in New Jersey:

&g and $4.5 million for Penelec to be 1982 January 8......

accounted for annually as TMI-2 January 29......

_2 A

The Pennsylvania PUC (PaPUCJ cleanup funding-JCP&L filed for a $97.5 million 3

formally approved three-step Met-retailincrease in its Levelized Ed and Penelec rate case settle-November 16......

gy s

so p) ments filed in1981 provioing:

PA Commonwealth Court hears to become effectivo March 1,1982.

• Step 1 - an immediate $71.7 appeals of Met-Ed and Penele; million anr:ual base rate from 1981 rate orders of PaPUC. As February 11......

increase for Met-Ed and for this report went to press, no deci-The NewJersey Board of Public Penelec, $49 million.

sion had been rendered.

Utilities (BPU) ordered hearings to begin in Marcia on the Arthur eStep 2 -when TMI-1 resumes Federal Rate Action......

Young & Company study of strate-substantial gereration, Met-Ed's and Pene:ec's energy cost rates in June, Penelec requested the gic options for the franchise area decrease.by $77.5 million and Federal Energy Regulatory Com.

now served byJCP&L.

s

$36.2 mi' lion, respectively, to be mission (FERC)to increaseits March 10......

h partly offset byincreases in wholesale rates $9.3 millien. The 1

BPU approved a base ratein-annual base rate revenues of FERC subsequently,ssued an order crease,to begin with the start of 3

i

$24.2 million (Met-Ed) and $11.3 granting, subject to refunds, $0.9 construction on the project, to help million (Penelec).The second million of the increase effective ay for the proposed Lake Erie phase was to resultin net de-August 10,1982, and $8.4 million transmission cable intended to

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creases in annual revenues of effective January 10,1983. In bring power from Ontario Hydro.

d

$53.3 million and $24.9 million December, Met-Ed filed a two-for Met-Ed and Penofec respec-phase rate increase request with July 1......

tively, reflecting TMI-1 energy FERC to increase its wholesale BPU authorized JCP&L's

~_,

cost savings and providing for rates by $1.84 million. A February cancellation of the Lake Erie C

customer participation in the 1983 order granted a $1.74 million transmission cable project.

cleanup. Additionally, TMI-1's annualincrease. An additional $0.1

~

capital and operating costs will million annualincrease nas been July 16......

{

I-be recognized in base rates.

approved effective July 1983.

JCP&L granted $81.8 million in re-These increases are subject to tailbase rate increases, to become

• Step 3 - reduced annual reve-refund and final determination.

effective July 21, including TMI-2 T

nues for Met-Ed of $34.6 million cleanup funds of $13.6 million. (The and for Penelec of $10.9 million 1983:

base rate increase request had

{

upon expiration of deferred energy charges and increases in January 21......

annual base rate revenues of September 2......

-=

Met-Ed and Penelec filed for

$16.2 million for Met-Ed and $4.5 BPU allowed JCP&L a $95 million million for Penelec.

changes in retail base rates.

retailincrease in its LEAC, effec-5 s $60 mMon in-Y March 26......

tive September 2.

crease in retail base rates prior to I

PaPUC approved Penelec's TMI-1's return to service and an ad.

November 4......

tariffimplementing Step 3 of the ditional $22.7 million when the unit BPU ordered two hearings on the January settlement agreement, resumes commercialoperation.

issue of possiblyimposing restric-

d a

h h'

6 a

4 tions on future electrical connec-ant system before initiating the pro-5 tions by JCP&L as part of the Operations gram of functional testing in April to BPU's continuing inquiry into the Three Mile Island Unit 1:

verify the integrity of the fix.

The cracks in the tubet which options open to the company fol-Steps to Restart lowing the TMI-2 accident.

resulted from corrosion during the The Company continued its ex-shutdown of the Unit after the tensive efforts to bring this uait, un-TMI-2 accident, were discovered in The Superior Court of NJ (Appel-damaged in the TMI-2 accident, late 1981. Confined predominantly

~

late Division) consolidated the back into service. This involved to the upper tube sheets, the dam-appeal:and cross-appeals of considerable physical activity at age was corrected by expanding m

JCP&L and the Public Advocate of the TMI site to implement the "les-the upper portion of the tubes,

[

three rate orders of the BPU with sons learned' from the accident, to-creating in each tube a new seal respect to JCP&L rates: the July gether with the important regula-below ine point of corrosion.

1981 base rate decision, the July tory actions to gain restart approval.

The ultimate pacing item on the 1982 base rate decision and the in mid-year, the Atomic Safety restart schedule may be the issue it September 1982 LEAC decision.

ar.d Licensing Board recommend-of psychological stress now before included in the appeals of the Pub-ed that the Nuclear Regulatory the U.S. Supreme Court. The Court lic Advocate are his position that Commissior:(NRC) authorize the of Appeals directed the NRC to de-the BPU could not authorize base unit's return to service.

termine whether significant new in-rate or LEAC increases veithout first later in the year, the Company formation or circumstances con-determining whether JCP&L TMI-2 asked the NRC to lift its earlier cerning psycho!ogical health im-accident-related actions were pru-shutdown oroer, stating that the pacts of operating TMI-1 have dent and,if not, what actions concerns involving emergency arisen since the time TMI-1 was should be taken by the BPU.

planning, plant modificaticns and I certsed in 1974. If so, the Court re-December 2......

management have now been favor-quired the NRC to prepare a sup-

'8 T8 BPU rules that JCP8L cannot re-piemental EnvironmentalImpact

. i

""". yncing that it would mach a Statement cons:dering both psy-cover through rates about $7 mil-decision befom the end of 982, chological health effects and the lion in design, engineering and ter-s bseqwntly defermd that action.

effects on the wc!!being of sur-mination costs connected with the In a a a rtain rounding communities. The Su-

- T cancellation of the proposed Lake sws wer ppealed to an NRC preme Court agreed to review the

=-

Erie Transmission Cable Project Atomic Safety & Licensing Appeals Court of Appeals decision. Oral On December 17, the Company Board, which scheduled hean.ngs arguments before the Supreme filed a motion for reconsideration that began March 7,1983.

Court were held on March 1,1983 b the BPU-Whatever the NRC's ruling may and a decision is expected by mid-Y Federal Rate Action......

be, two issues beyond the scope of summer. Should the Court's action the earlier shutdown order must be be unfavorable, this could signifi-JCP&L filed with FERC in March resolved before Unit 1 can begin to cantly delay the Unit 1 start-up for a two-stage wholesale rate in-crease of $5.6 million. In June, again generate power; the efficacy timetable.

FERC ordered a summary reduc-of steam generator repairs and re-tion of $0.8 million in the proposed lated NRC proceduralissues increases and allowed, subject to (which could involve lengthy hear.

Three Ml!e island Unit 2:

refund, an increase of $4.6 million ings) and whether and how the Major Steps Toward effective June 1,1982 and effective NRC must consider psychological Cleanup stress issues in connection with This past year, the accident November 1,1982, a further in-restart.

cleanup program resulted in two crease of $1.3 million. JCP&L has appealed the FERC's summary re-major steps forward:(1) completion Steam Generator Repairs of the removal, decontamination duction order to the U.S. Court of are Essentially Complete and on-site storage of some e

Appeals for the District of Columbia.

With the completion of the 650,000 gallons of radioactive

~,

1983*

kinetic (explosive) expansion of the water previously held in the con-January 28......

Unit 1 steam generator tubes in tainment buildings;(2) the collec-A $123.4 million base rate request late January 1983, the repair pro-tion and evaluation of important is filed by JCP&L. At the same gram has moved into a phase of visual evidence on the condition of time,the company asked to reduce cleaning and testing those tubes.

the damaged reactor core.

customer energy charges by Analysis indicates the need to The examination of the core was

$102.9 million.

chemically clean the reactor cool-conducted using a specially de-7 L

V-

signed, miniature underwater tele-lined in the Thornburgh plan.

Oyster Creek has been a reliable vision camera lowered into the re-The DOE has agreed to take re-performer with a lifetime capacity actor. The video tapes were con-sponsibility for the disposal of the factor since entering service in De-sistent with earlier estimates of the damaged fuel core and high level cember 1969 of about 62 percent, extent of damage and provided val-radioactive wastes.

comparing favorably with that of all uable data necessary for develop-Afterenactmentof authorizing commercial U.S. nuclear plants.

ing the procedures ano equipment legislatinn, the State of Pennsyl-The planned investment in modifi-for fuel removal.

vania has agreed to make contribu-cations and upgrading is expected A large-scale effort in the contin-tions to cleanup as contemplated to result in a plant economically uing decontamination of the con-by the Thornburgh plan. New Jer-competitive with any other alterna-tainment building is underway,in-sey Governor Koan has recom-tive available to JCP&L for generat-volving the washing of ceiling, wall mended comparable legislation in ing the same amount of power.

end floor surfaces.This program New Jersey which has not yet reduces contamination levels and been enacted.

increases worker safety ar:d pro-The utility industry, having previ.

Power Purchases Meet ductivity. The next major step will cusly endorsed their financial parti.

Demand, Defer Construction be the removal of the reactor ves-cipation, sought Corigressional leg-The System has positioned itself sel head, new scheduled for later islation during 1982 that would to provide firm and adequate elec-this year.

mandate their contributions. Con-tricity at competitive prices through A revised cost and schedule esti-gress failed to take final action on long-term power purchases for the mate for the entire cleanupjob was bills sponsored by New Jersey and remainder of this decade.

completed early in 1983. This up-Pennsylvanialegislators. Earlyin GPU announced in middune the d;ted estimate, which incorporated 1983, the Board of Directors of the signing of a contract with Detroit techni:alinformation gained to Edison Electric Institute, the trade Edison Company for the celivery of cate, together with revised coct es-association for the investor-owned 650 megawatts of capacity through timates and realistic funding ex-cegment of the electric utility indus-1990, putting into place, with provi-pectations, showed that the total try, recommended a voluntary pro-sion for extension by mutual agree-cl:anup cost since the accident re-gram of financial participation by ment, a. substitution for part cf the mains at about $1 billion. However, both nuclear and non-nuclear 1,000 megawatts of power cancelled th) time schedule for completion of members of eel under a formula with the termination of the Ontario tho work stretches out by about two that, if fully implemented, would Hydro interconnection. Unlike the yrare, to 1988.

raise $150 million for the cleanup proposed link to Ontario Hydro, the over a period of six years. That soli-agreement with Detroit Edison citation program is in process at does not call for the construction of TMl-2 Cleanup Fund.ing the time of this report. Additional further transmission capability but Essential to the pace and pro-funds are expected to be available instead routes the power over gress of the cleanupitselfis the for cleanup as a result of the settle-existing lines in Michigan and Ohio ability to put in place all of the com-ment of the litigation with B&W and to the GPU System's lines in ponents of an equitable funding possibly from foreign utilities.

western Pennsylvania. Energy program for the job.

began flowing under this agree-The past year produced some ment in early September.

v:ry encouraging moves, and a Oyster Creek Modifications in October, the Company put into f;w disappointmentsin the effort to Following a period of " Coast-place a long-term power agree-bring together financial participa-down" power operation as it neared ment with the American Electric tion under the overall plan earlier the end of its fuel cycle, the Oyster Power (AEP)and Allegheny Power proposed by Governor Dick Thorn-Creek Nuclear Station was shut (APS) Systems for some 560 mega-burgh of Pennsylvania.

down in mid-February 1983 for watts of AEP-supplied power to be Regulatory actions, discussed major system modifications, over-delivered through the APS trans-carlierin this report, resulted in haul and refueling, which are sche-mission network. This power began provision for GPU customer contri-duled to require most of this year, flowing in that same month and will butions to cleanupin both Pennsyl-This entire program at the thirteen-continue through the end of 1990 vania and New Jusey at the level year-old plant is estimated to cost with a provision for a possible five-contemplated by the Thornburgh about $155 million this year. An-year extension.

plan.

other extended outage is planned in addition to solidifying power The U.S. Department of Energy for1985 for work on emergency supplies and providing about (DOE) program funding continued, core cooling systems, but this work

$540 million in customer energy tithough at a lower level than out-may be done earlier, if necessary, savings since the TMI accident, 8

purchased poweragreements made program will start with design and plants, will be invested in such since that accident will also provide environmental qualification of a energy-saving devices as storage the company time to improve its standard coal-fired unit, probably hot water heaters that use electri-

.- < : s

~

financial position before seeking to to be located in the eastern portion city only at night, storage home re-enter the capital markets to of the service territory because of heating installations and horne

~

finance additional generating transmission considerations. To weatherization projects. These pro-capacity for completion in the this end, a limited preliminary plan-grams are predicated on the con-mid-1990's,if needed.

ring effort is scheduled for 1983.

cept that it is less expensive to in-The construction program is obvi-vest moneyin energy saving tech-ously depondent upon regulatory niques and equipment than to build Reaching a Balance on support and the System's financial generating stations.

Environmental Concerns ability to undertake such an effort.

Maintaining a proper balance Legal Matters between the System's desire to

-[.y protect the environment and the Energy Programs Reduce As the text of the Annual and g[y.

on-go'ng costs associated with en.

Capital Needs Quarterly Reports and the footnotes Q,i[$

to the financial statements issued vironmer tal equipment and tech-The Energy Management and niques is a continuing concern.

Conservation programs of the CPU since the accident amply demon-Negotiations are in progress by System Companies have saved strate, the GPU companies have

(-p(54

'f g -

Penelec and New York State electricity usersin New Jersey and been involved in a great deai of

%g$

1 Electric & Gas Corporation with the Pennsylvania several hundred mil.

litigation since the TMI-2 accident.

Fennsylvania Department of Envir-lion doliars over the past decade Some of the potentialliabilities onmental Resources for an while, at the same time, limiting the involved are not insured and deci-

' ? gg amended consent decree which need to finance and construct cost.

sions adverse to the GPU com-My

[F; will essentially average tne sulfur ly new generating facildes.

panies could have a material ad-dioxide emission levels from all GPU continues to pioneerin the verse impact on their financialcon-

? +(.f, t - >.

three coal-fired units at the Homer field of energy management and dition. Progress was maae in 1982 y

k j.N Citystationinwestern Pennsyl-conservation through a major initia.

and early1983 in bringing some of vania. Under the amandment, tive predating the OPEC oil embar.

that litigation nearer to resolution.

=

Unit 3 would be permitted to ex-go of 1973, which triggered energy For those matters not discussed in

,A.;

ceed its stricter sulfur dioxide limit consciousness throughout much of the text of this report, see Class Ac-

p. ;.,

emit less than regulations allow.

tem companies have developed Statements, page 23 and Nuclear

.,, j slightly because Units 1 and 2 will the U.S. Since that time, the Sys.

tion Suits in Note 1 to the Financial Pennsylvania Governor Them-and implemented conservation Fuel Litigation, page 24.

,,y, burgh has joined the Company in practices that have reduced electri-e.

asking the Federal Environmental city use and shifted the demand for i" 7 B&W Suit Settled g-y a

Protection Agency to accept the electricity to the lower-cost night terms of such a consent decree.

and weekend hours. These pro-On January 24,1983, GPU and ff J c

This will enable the Station to con-grams are being steadily expanded B&W jointly announced a settle-g.'

tinue to burn Pennsylvania coal for further customer savings and ment that will provide the System

,B ; ;

and thus avoid increasing both investor benefits, with up to $37 million of rebates for

?'

operating expenses and customer services and equipment through I'N y energy costs. Resolution of the sit-the next 10 to 15 years. The net V-J.

uation is anticipated later this year.

GPU's Energy initiatives proceeds from such rebates are

/%.

In line with its Master Plan for expected to be applied to the TMI-2

..q. -

Energy Management and Con-cleanup.

Projecting Future Capacity servation, announced in 1980, GPU Both GPU and B&W agreed that

' k Additions plans to make major investments neither party had established that A

4 Recognizing the possible need over the next decade in conser-the other was the cause of the TMI J f7;#

to resume a construction program vation and energy management Unit 2 accident and that it would be r.-

r-sufficient to meet customer re-programs that will avoid financial counter-productive to incur the a'A f[.,;-$

quirements from the mid-1990s on, construction costs for 1,000 mega-substantial costs of further litiga-w$

and taking into consideration con-watts of generating capacity while tion to resolve that issue.

struccon lead times, the Company helping shelter customers from The settlement agreement fully

( M. P is projecting a new generating some of the burdens of rising elec-preserves the rights of GPU to pur-i plant construction program to be-tric rates. This money, rather than sue any and all claims that the

', 6.1 gin within the next five years. The being applied to new generating Company may have against others, f.;

j;.:

2-as

including GPU's claims against the As part of the System's continu-Adm.. trat. ion mis federal government alleging negli.

ing commitment to community in-gence and omissions by the Nu-volvement and consumer con-clear Regulatory Comraissian in Cha09'8 in GPU Board of the performance of its duties, dis-elected two prominent men from cussed below.

the company's service area to the Donald J. Bainton, Director and JCP&L Board. On November 12, Executive Vice President and the Board elected Stephen B.

Operating Officer for the Continen-Wiley, of Morristown, and, on Janu-GPU Suit Against NRC tal Group,Inc., and President of ary 25,1983, Stanley Van Ness of Passes Challenge the Continental Packaging Ewing Township.

On November 30, the U.S. Dis-Company, Stamford, Connecticut A partnerin the Morristown law trict Court for the Eastern District of was elected to the GPU Board on firm of Wiley, Malehorn and Sirota, Pennsylvania denied a motion of July 1st.

Mr. Wiley served in the New Jersey tha U.S. Government to dismiss With sincere regret, the Board of Senate from 1973 to 1977. Mr. Van ths suit filed by the GPU compan-Directors accepted on September 2 Ness completed service in Febru-its in December 1961 anainst the the resignation of Val B. Diehl, re-ary1982 as Commissioner of the Government under the Feoeral Tort tired Nabisco President and Chief NewJersey Departmentof the Claims Act to recover damages in-Operating Officer, as a Director.

Public Advocate, a post to which curred by them as a result of the he was appointed in 1974. He was TMI-2 accident. The Government's Management Changes the state's first Public Advocate.

motion to dismissthe suitwas based Recognizing 46 years of service, angesin on its argument that that Act is not the Corporation accepted the re-applicable to the compan:es' tirement on Jantary 31,1983 of Employment Levels claims under certain provisions of Hef an M. Graydon. Corporate Sec.

The total number of System em-that Act. The District Court held in retary for the parent company, the pinyees increased by 400 during its ctder that these exceptions do GPU Service Corporation and the 1982 to 12,420 through additions to not bar the utilities' claims. At the GPU Nuclear Corporation.

GPU Nuclear staff. Employment same time, however, the District William B. Murray, Vice Presi-

!cve's were lower among the Sys-l Court allowed an interlocutory dent-Communications for GPU tem's operating companies. On-rppeal of its decision to the Court Service Corporation, was elected going attention to the administra-of Appeals for the Third Circuit, to the additional post of Corporate tion of Affirmative Action programs cnd that Court has authorized such Secretary, succeeding Miss Gray-centinued within the GPU System an appeal.The District Court don. Mr. Murray joined the Service companies during 1982, increasing hilted any further proceedings Corporation in his present post in employment levels of women and pending such an appellate review.

1974.

minorities.

k

[

10 I

14, refers to the contingencies and Island accident in March 1979, the uncertainties resulting from the nu-state regulatory commissions in M,'.,

,m Statement of

.d(M Management clear accident at Three Mile Island.

New Jersey and Pennsylvania took f

~.J Reference is made to Notes 1 action to exclude from customer M

The management of General and 3 to the accompanying finan-rates about $1.5 billion of assets Public Utilities Corporation is re-cial statements and to Manage-relating to TMI-2, TMI-1 and Forked N.-?

sponsible for the information and ment's Discussion and Analysis of River.

sh*

representations contained in the Financial Condition and Results of The New Jersey and Pennsylva-Yk financial statements and other sec-Operations below for further dis-nia commissions issued rate orders

%p Q. [ R tions of this annual report. The cussion of the effects and impact to the GPU subsidiaries in 1982 R 2 f

financial statements have been of the accident, which included restoring to rates prepared in conformity with gener-the capital and operating costs

[M h aily accepted accounting principles associated with TMI-1 upon the ya consistently applied. In preparing unit's return to service and opera-G'~ y' the financial statements, manage-Management's discus-tion at a specified level. Such ment makes informed judgments Sion and analysis Of return to se vice is contingent upon I

and estimates of the expected ef-financial Condition and decisions peading before the NRC to aHow fc the restart of TMM (see fects of events and transactions reSultS Of Operations

<l Note 1 to hnancial statemer.ts).

that are curreatly being reported.

To fulfill its responsibilities for the Also as pa t of the 1982 Pennsyl-l reliability cf the financial state.

Liquidity and Capital Resources:

vania Commission rate orders, ments, management has developed Liquidity o' the GPU System has GPU's Pennsylvania subsidiaries and maintains a system of internal improved substantially from its were permitted to amortize tneir accounting control. This system is position following the Three Mile investments in TMI-2 but were nct intended to provide reasonable island accident. Short-term debt at permitted to earn a return on such assurance that assets are safe-December 31,1982 was $19 million investmeaw. Such amortization guarded and transacticns are compared with $60 million at year-has significantly improved the executed in accordance with man-end1981 and a peak of $326 million Pennsylvania subsidiaries' cash agement's authorization and in August 1960. The $19 million of posit lons but does not improve net recorded properly to permit the short-term debt, together with $18 income. (see Note 1 to financial preparation of financial statements million due under a term loan with Gtatements),

in accordance with generally ac-certain of the revolving credit As a result of a1981 rate order cepted accounting principles.

banks is expected to be paid by issued by the NJBPU, GPU's New The Board of Directors, through mid-1983. Moreover, at December Jersey subsidiary is recovering its Audit Committee, consisting 31,1982 the subsidiaries held most of the original investment in solely of outside directors of the about $80 million of funds for retire-the abandoned Forked River proj-Company,is responsible for re.

ment of bonds due within one year ect through rates but is not eaming viewing and monitoring the Com.

and $103 million of temporary cash a retum on the unamortized invest.

investments.

ment and therefore there is no im-pany's financial reporting and accounting practices.The Audit Nevertheless, the GPU com-provement in net income (see Note Committee meets with manage-panies' sole source of outside 3 to financial statements).

ment and internal auditors periodi.

financing remains a revolving Current projections provide for cally to review the work of each credit from a group of 45 banks the cleanup of TMI-2 to be com-and to monitor the discharge by (desenbed more fully in Note 5 to pleted in 1988 at a cost of approxi-each of its responsibilities. The financial statements). The com-mately $1 billion (including Audit Committee also meets peri.

panies will not be able to access post-1983 escalation). It is the odically with the independent audi.

normallong-term capital markets Company's objective to fund the tors who have free access to the until earnings are restored suffi-cleanup in a manner consistent Audit Committee, without manage-ciantly to provide the level cf with the plan proposed by the Gov-ment present, to discuss inteman interest and preferred dividend emor of Pennsylvania, Dick Thom-accounting control, auditing, and coverage required by bond inden-burgh. While substantial progress financial reporting matters.

tures and preferred stock charters, has been made in 1982 toward this Coopers & Lybrand, independent and until remaining uncertainties objective, all elements of that plan public accountants, are engaged to concerning funding of cleanup are not yet in p! ace. For additional examine and express an opinion costs and recovery of investment in information see" Cost of TMI-2 on the financial statements. Their Three Mile Island are resolved.

Cleanup"in Note 1 to financial opinion, which appears on page As a result of the Three Mile statements.

11

setting these increases to income Other major factors contributing Results of Opesations:

we6 an increase in operating,d to the decline in eamings between maintenance expensesincluding 1978 and 1982 include an increase 1982 netincome before extra-expenditures to repair TMI-1 and a in operating and maintenance ex.

ordinary items, was $33.7 million or decline in kilowatt hour sales.

penses, resulting primarily from 55 cents per share which increased Although 1982 net income before inflation and additional expendi-from the $20.5 million or 33 cents extraordinary items increased over tures at the nuclear stations and per share for1981. Although1982 1981, earnings levels continue to be increased interest exoense from net income increased over1981,it adversely affected by the regula-increased borrowings at high6r was $105 million or $1.75 per share tory treatment of the subsidiaries' rates. Partially offsett;ng the de-below 1978.

investments in TMI-1, TMI-2 and clines to net income were base rate Forked River, as discussed above increases granted the subsidiaries 1982 vs.1981 and under

• Rate Proceedings"in by the New Jersey and Pennsylva-The increase in netincome, Note 1 to financialstatements.

nia commissions.

before extraordinary items, of $13.2 For a discussion of extraordinary million over 1981 resulted primarily 1982 vs.1978 items and for further discussion of from rate increases received by the The decline in net income of events subsequent to the TMI acci-subsidiaries in1982 and a decrease

$105 million from 1978 is primarily dent, see Notes 3 and 1, respec-in interest expense resulting from the result of regulatory response to tively, to financial statements.

lower levels of short-term debt out-the TMt 2 accident as discussed standing during 1982. Partially off-above.

Quarterly Financial Data (Unaudited)

In Thousands Except Per Share Data First Quarter second Quarter Third Quarter Fourth Quarter 1982 1981 1982 1981 1982 1981 1962 1981 Operating Revenues $647,831

$523,877

$559,325

$4 76,159

$599,962

$538,724

$598,409

$526,727 Operating income

$ 70,215

$ 62,641

$ 50,180

$ 50,206

$ 66,679

$ 66,979

$ 49,447

$ 53,844 income (Loss) Before Ex:raordinary items $ 18,446

$ 7,825

$ (1,246)

$ (2,357)

$ 14,951

$ 14.050

$ 1,583

$ 1,026 Extriordincy items (Note 3)

$ 7,636

$ (24,313)

$ (3,863)

$ (12,135)

Net income (Loss)

$ 18,446

$ 7,825

$ 6,390

$ (26,670)

$ 14,951

$ 14,050

$ (2,280)

$ (11,109)

Ecrnings (Loss) per sture Before Extra-ordinary items S

.30

.13

(.02)

(.04)

.24

.23

.03

.01 Extriordinary items (per share)

.12

(.40)

(.06)

(.19)

E;rnings (Loss) per share

.30

.13

.10

(.44)

.24

.23

(.03)

(.18) l Average Shares 61,264 61,264 61,264 61,264 61,264 61,264 61,264 61,264 Se* Notes 1 and 3 which contain information with respect to rate orders and their effect on quarterly earnings.

12

Consolidated Financial Statements and Notes to The Financial Statements l

l l

I 13

Report of Auditors T2 the Board of Directors and Stockholders tion's subsidiaries. These actions include allowing the Generrl Public Utilities Corporation recovery of the TMI-2 investment by the Pennsylvania Pasippany, New Jersey subsidiaries, receipt of some financial assistance for the cleanup cost required for TMI-2 and continued recovery of We have examined the consolidated balance sheets of replacement power costs. Accordingly, the Corporation's Gener:1 Public Utilities Corporation and Subsidiary Com-cash position, supported by the amended revolving credit panies as of December 31,1982 and 1981, and the related agreement, has been sufficiently improved to serve as a consolidated statements of income, retained earnings and basis on which to reasonably project the short-term changes in financial position for each of the five years in viability of the Corporation and its subsidiaries even the period ended December 31,1982. Our examinat;ons though eamings levels remain inadequate for raising long-wera made in accordance with generally accepted audit-term capital from external securities markets. However, ing st ndards and, accordingly, included such tests of the because of the sensitivity of such short-term viability to the accounting records and such other auditing proceduies as possible unfavorable resolution of one or more of the we considered necessary in the circumstances.

contingencies and uncertainties set forth in the preceding As me.e fully discussed in Note 1 to Consolidated Finan-paragraph and the resultant material adverse impact on cial St tements, the Corporation is unable to determine the financial condition of the Corporation and its subsid-the ultimate consequences of the accident at Unit No. 2 of laries, their ability to continue as a going concern cannot th] Three Mile Island Nuclear Generating Stauon (TMI-2) presently be assured.

cnd of the responso of rate-making and other regulatory As more fully discussed in Note 1 to Consolidated (genci's to that accident. Among the contingencies and Financial Statements, the Ccrporation's New Jersey sub-uncertainties which have resulted as a direct or indirect sidiary is engaged in litigation with a nuclear fuel supplier consequence of this accident are questions concerning:

involving the pricing of nuclear fuel. At this time, the out-

c. The recovery of the approximately $755 million invest-come of the litigation and the rate-making treatment of any j

m:nt in TMl-2; increased fuel costs which might result from an adverse

b. The recovery of the indeterminable amount of unin-legal determination are uncertain.

sured costs yet to be incurred in connection with the in our opinion, subject to the effect, if any, on the 1982, enticipated cleanup of TMI-2; 1981,1980 and 1979 consolidated financial statements of

c. Th3 recovery of the approximately $449 million such adjustments as might have been required had the investment in Three Mile Island Unit No.1 Nuclear Gen-outcome of the uncertainties discussed in the second erating Station; through fourth paragraphs been known, the afore-j

d. Th; recovery of the excess, if any, of amounts which mentioned statements (pages 15 through 32) present fairly might be paid in connection with claims for damages the consolidated financial position of General Public l

r:sulting from the accident over available insurance Utilities Corporation and Subsidiary Companics at l

proceeds; and December 31,1982 and 1981 and the consolidated results

c. Any action of rate-making agencies with respect to any of their operations and the consolidated changes in their portion of the replacement power costs for which financial position for each of the five years in the period i

recovery is now permitted.

ended December 31,1982, in conformity with generally The accompanying consolidated financial statements accepted accounting principles applied on a consistent h vs been prepared in conformity with generally accepted basis.

tecounting principles applicable to a going concern which cont mplates, among other things, the realization of assets and the liquidation of liabilities in the normal course COOPERS & LYBRAND of business. As described in Note 1, the Pennsylvania Public Utility Commission and the New Jersey Board of March 3,1983 Public Utilities have approved rate increases suificient ta 1251 Avenue of the Americas r:asonably project the short-term solvency of the Corpora.

New York, New York 10020 l

14

Consolidated Statements of income (Note 1)

General Public Utilities Corporation and Subsidiary Companies (in Thousands)

For the Years Ended December 31, 1982 1981 1980 1979 1978 Operating Revenues

$2,405,527 $2,065,487 $1,831,741 $1,490,154 $1,326,644 Operating Expenses:

Fuel 429,067 437,931 401.922 347,079 326,083 Power purchased and interchanged, net 591,614 496,494 42S 393 268,210 133,741 Deferral of energy costs, net (Note 2) 106,495 74,157 25,058 (69,832)

(17,916)

Other operation and maintenance (Note 13).

522,539 452,755 390,797 309,653 305,400 Depreciation (Notes 2 and 3).

202,725 145,962 147,086 141,224 109,505 Amortization of propertylosses(Note 16) 26,547 11,312 1,265 1,168 1,186 Taxes, other than income taxes (Note 13).

_ 218,507 189,260 172,565 149,445 129,862 Total 2,097,494 1,807,871 1,568,686 1,146,947 987,861 Operating income before income taxes 308,033 257,616 263,055 343,207 338,783 Incometaxes(Notes 2 and 11) 71,511 23,946 18,460 65,905 84,354 Operating Income.

236,522 233,670 244,595 277,302 254,429 Other income and Deductions:

Allowance for other funds used during construction (Note 4).

6,663 7,486 12,014 24,744 49,888 Otherincome, net.

15,838 15,913 7,462 8,937 3,682 income taxes on other income, net (Notes 2 and 11)

(7,726)

(6,411)

(4,513J (5,146)

(2,461)

Totalotherincomeand deductions 14,775 16,988 14,963 28,535 51,109 income Before Interest Charges and Preferred Dividends 251,297 250,658 259,558 305,837 305,538 Interest Charges and Preferred Dividends:

Interest on long-term debt.

171,770 178,226 176,754 168,325 155,320 Otherinterest.

13,594 31,122 41,786 24,387 4,527 Allowance for borrowed funds used during construction-credit (netof tax)(Note 4).

(7,960)

(15,229)

(15,226)

(18,296)

(22,255)

Income taxes attributable to the allowance for borrowed funds (Notes 4 and 11).

(1,583)

(6,432)

(7,404)

(7,977)

(14,758)

Preferred stock dividends of subsidiaries.

41,742 42,427 43,057 43,615 43,930 Totalinterest charges and preferred dividends 217,563 230,114 238,967 210,054 166,764 income Before Extraordinaryitems.

33,734 20,544 20,591 95,783 138,774 Extraordinary items, Net of Taxes (Note 3)

_ 37,507 _ (36,448) 3,773 Netincome(Loss)

$ (15,904) $ 20,591 $

95,783 $ 138,774 Eamings Per Average Share Before Extraordinary items.

$.55

$.33

$.34

$1.56

$2.30 Extraordinary items Per Share.

.06

(.59)

Earnings (Loss)PerShare

$.61

$(.26)

$.3_4

$1.56

$2.30 Average Common Shares Outstanding.

61,264 61,264 61,264 61,218 60,217 i

Consolidated Statements of Retained Earnings (Note 1)

General Public Utilities Corporation and Subsidiary Companies I

(in Thousands)

For the Years Ended December 31, 1982 1981 1980 1979 1978 Balance, beginning of year.

$ 490,258

$ 506,162

$ 485,571

$ 463,173

$ 430,823 Add, net income (loss)(Note 3).

37,507 (15,904) 20,591 95,783 138,774 l

Total 527,765 490,258 506,162 558,956 569,597 Deduct, dividends on common stock 73,385 106,424 Balance, end of year (Note 10)

$ 527,765

$ 490,258

$ 506,162

$ 485,571

$ 463,173 The accompanying notes are an integralpart of the consolidated financial statements.

15

Consolidated Balance Sheets (Note i)

General Public Utilities Corporation and Subsidiary Companies (in Thousands)

Dec:mber 31, 1982 1981*

Assets Utility Plant (at original cost):

In service

$3,846,108

$3,689,536 Less, recumulated depreciation (Note 2).

1,165,724 1,072,150 Net.

2,680,384 2,617,386 inv:stment in Three Mile Island:

Unit 1 490,560 469,462 Unit 2 783,932 745,490 Less, accumulated depreciation and amortization (Note 3) 164,430 97,347 Net.

1,110,062 1,117,605 Constructionworkin progress.

153,582 120,495 H;ld forfuture use 42,735 47,074 Nucl:ar fuel, net of amortization (Note 2).

172,740 201,346 Net utility plant.

4,159,503 4,103,906 Investments:

Oth:r physical proporty, net.

5,284 5,482 Lo nstonon-affiliatedminingcompanies(Note 12).

15,575 16,575 Oth:r, atcost 774 740 Total.

21,633 22,797 Current Assets:

C:sh.

5,392 8,251 Tcmporarycashinvestments.

103,047 42,294 Funds held by subsidiaries for retirement of bonds due within one year.

79,800 Funds held in special deposits for TMI cleanup.

13,895 9,277 Accounts receivable:

Customers, net (Note 5) 174,613 147,001 Other(Note 11).

11,629 8,457 inv:ntories, at average cost or less:

Materials and supplies for construction and operation 76,971 71,149 Fuel..

62,299 66,446 Def:rred energycosts(Note 2).

(35,961) 70,554 Def rred income taxes (Notes 2 and 11).

28,541 20,942 PrIp yments.

12,803 14,391 Other 6,851 3,775 Total 539,880 462,537 i

Deferred Debits:

Unimortized prcperty losses (Note 16) 344,808 376,807 Def:rred costs-nuclear accident, net cf. ecoveries (33,800)

(6,635)

Dif rredcosts-healthandsafetyandrestartof YMI-1(Note 3).

9,059 Def;rred income taxes (Nc'es 2 and 11)..

78,957 45,956 Oth:r 60,621 48,65_3 Total.

459,645 464,781 Total Assets.

$5,180,661

$5,054,021

• Reclassif ed to conturm to 1982's presentation.

The accompanying notes are an integralpart of the consolidated knancial statements.

16

(in Thousands) 1982 1981*

Liabilities and Capital Long-Term Debt, Capital Stock and Consolidated Surplus:

Long-term debt (Notes 5 and 6)

$1.998,700

$2,109,336 Cumulative preferred stock-mandatory redemption (Note 7).

74,350 79,700 Less,capitalstock expense.

2,076 2,365 l

Total.

72,274 77,335 l

Cumulative preferred stock-no mandatory redemption (Note 8) 423,391 423,391 Premium on cumulative preferred stock 1,348 1,348 Less, capital stock expense.

328 Total.

424,739 424,411 Common stock and consolidsted surplus (Notes 5,9 and 10):

Common stock 153,229 153,229 Consolidated capitalsurplus 773,946 773,473 Less,capitalstock expense 18,056 18,056 Consolidated retained earnings 527,765 490,258 Total.

1,436,884 1,398.904 Less, reacquired common stock.

70 70 Total.

1,436,814 1,398,834 Total.

3,932,527 4,009,916 Current Liabilities:

S9curities due within one year (Notes 5,6 and 7).

128,567 80,567 Notes payableto banks (Note 5).

19,000 60,300 Accounts payable 178,529 139,418 l

Customer deposits.

8,507 7,587 Taxes accrued (Note 11).

93,870 64,884 Deferred income taxes - energy (Notes 2 and 11).

(18,311) 33,274 Interest accrued.

43,165 41,962 Accrued costs-Forked River abandonment (Note 3) 11,371 13,090 Other 60,485 51,021 Total.

525,183 492,103 Deferred Credits and Other Liabilities:

Deferred income taxes (Notes 2 and 11).

502,165 432,662 Unamortized investrnent credits (Notes 2 and 11) 131,073 63,393 Reservecapacity(Note 2) 51,832 23,160 Other 37,881 32,787 Total.

722,951 552,002 Commitments and Contingencies (Note 1)

TotalLiabilities and Capital

$5,180,661

$5,054,021 17

Consolidated Statements of Changes in Financial Position (Not) 1)

G:ne al Public Utilities Corporation and Subsidiary Companies (in Thousands)

For the Years Ended December 31, 1982 1981 1980 1979 1978 Source of Funds:

Operations:

Income beforeextraordinaryitems

$ 33,734

$ 20,544

$ 20,591

$ 95,783

$138,774 Principal non< ash charges (credits) to income:

Depreciation (Notes 2 and 3) 202,725 145,962 147,086 141,224 109,505 Amortization of nuclear fuel and spent fuel costs (Note 2) 10,307 9,908 7,260 21,314 21,443 Amortization of property losses (Note 16) 26,547 11,312 1,265 1,168 1,186 Investment tax credits, net (Notes 2 and 11) 76,444 (4,104)

(53,155)

(11,830) 41,733 Deferred income taxes, net (Notes 2 and 11)

(32,211) 25,093 77,406 67,882 58,285 Allowance for other funds used during construction (Note 4)

(6,663)

(7,486)

(12,014)

(24,744)

(49,888)

Totalfrom operations 310,883 201,229 188,439 290,797 321,038 Extraordinaryitems,netof taxes (Note 3) 3,773 (36.448)

Extraordinaryitems(non-cash portion).

(3,773) 36,448 Long-term debt (Note 6) 3,964 32,848 15,783 153,800 154,082 Common stock,netof expense (Note 9) 4,771 22,273 incr:asein bank borrowings(Note 5) 87,400 24,625 Dei:rred energy costs, net (Note 2).

106,495 74,157 25,058 R: serve capacity (Note 2).

28,672 23,160 Saleof nuclearfuel 34,193 16,558 15,798 Decr:ase in othei working capital items (excluding debt) 26,581 17,954 Oth:r, net 20,718 7,634 1,957 Totalsource of funds.

$484,207

$395,251

$252,712

$554,722

$523,975 Application of Funds:

Construction expenditures-Utility plant

$241,632

$239,627

$191,980

$281,912

$376,812 Nuclear fuel.

6,983 24,333 53,760 69,114 30,878 Allowance for other funds used during construction (Note 4).

(6,663)

(7,486)

(12,014)

(24,744)

(49,888)

Decrcase in bank borrowings (Note 5).

41,300 95,700 15,000 incr:ase in funds held for retirement of bonds.

79,800 R;tir: ment or redemption of long-term debt and pr:ferred stock 71,828 29,677 32,602 54,463 32,908 Divid:nds on common stock.

73,385 106,424 Def;rred energy costs, net (Note 2).

69,832 17,916 Def rredcosts-nuclearaccident, net.

12,045 15,100 (46,108) 24,373 Deferred costs-health and safety and restart of TMI-1 (Note 3).

9,059 Loans to non-affiliated mining companies (Note 12).

(1,000)

(1,700)

(1,100) 625 incr:ase in other working capital items (excludinJ debt).

18,494 18,592 8,300 Other, net 10,729 6,387 Totalapplication of funds

$484,20_7 $395.251

$252,712

$554,722

$523,975 The tccompanying notes are an integralpart of the consolidated financial statements.

18

Notes To Consolidated Financial Statements

1. Commitments and Contingencies ings, the ASLAB issued an order on December 29,1982, directing that hearings be reopened with respect to certain THREE MILEISLAND NUCLEAR ACCIDENT:

questions it posed concerning the unit's emergency cool-On March 28,1979, an accident occurred at Unit No. 2 of ing systems and operations in the case of small break loss the Three Mile Island nuclear generating station (TMI-2) of coolant accidents.

resulting in significant damage to TMI-2, and a release of On April 2,1982, the U.S. Court of Appeals for the some low level radiation which published reports of gov.

District of Columbia issued an amended judgment order-ernmental agencies indicate did not constitute a signifi-ing the NRC to determine whether, since the preparation cant public health or safety hazard. TMI-2 is jointly owned of the initial environmental impact statement under the by the Corporation's subsidiaries, Jersey Central Power &

National Environmental Policy Act (NEPA) for TMI-1, "sig-Light Company (JCP&L),25%; Metropolitan Edison Com-nificant new circumstances or information have arisen pany (Met-Ed),50%; and Pennsylvania Electric Company with respect to the potential psychological health effects of (Penelec),25%. At December 31,1982, totalinvestment, operating

• TMI-1, and that if such were the case, to net of $66 million of amortization and $29 million of prepare *a supplemental environmental statement which depreciation, in TMI-2 was $689 million.

considers not only effects on psychological health but also Three Mile Island nuclear generating station Unit No.1 effects on the well-being of the communities surrounding (TMI-1), which adjoins TMl-2, was out of service for a Three Mile Island." On May 14,1982 the court issued opin-scheduled refueling and was not directly involved in the ions in support of its amended judgment. The U.S.

accident. TMI-1 is jo ntly owned by the Corporation's sub-Supreme Court has agreed to review the Court of Appeals' sidiaries in the same percentages as TMI-2. At December decision and oral argument was held on March 1,1983. If 31,1982, totalinvestment, net of depreciation, in TMI-1 the Supreme Court affirms the action of the Court of Ap-was $449 million.

peals, compliance with the amended judgment could pre-vent or result in a substantial delay in the restart of TMI-1.

TMI-1 Restart: By orders dated July 2,1979 and August 9, In late 1981, it was discovered that tubes in the TMI-1 1979, the Nuclear Regulatory Commission (NBC) directed steam generators had experienced cracking. A program to that TMI 1 remain in a shutdown condition until resumption repair substantially all the tubes and to test the tubes as of operation is authorized by the NRC, after public hear-so repaired is in process. At this date, the NRC has not ings and the satisfaction of various requirements set forth determined what further proceedings before it will be re-in such orders. Hearings before the NRC's Atomic Safety quired as a result of such repairs. The subsidia'ies are and Licensing Board (ASLB) on the restart of TMI-1 com-unable at this time to ascertain whether such proceedings menced on October 15,1980. During 1981, the ASLB will prevent or delay the restart of TMI-1 or whether the issued two partial initial decisions, in which it found, results of the repair will prove satisfactory. The subsidi-among other things, that the licensee "has demonstrated aries are currently charging the cost of repairs to main-(its) managerial capability and technical resources to tenance expense. The Corporation intends to pursue the operate Unit 1.

• and recommended that, subject to recovery of the cost of such repairs through insurance various conditions, short-term operation of TMI-1 should contracts and/or rate proceedings. If successful, such re-be permitted. The ASLB reopened the record in these pro-coveries will offset part or all of these charges to expense.

ceedings to consider incidents of cheating on, and test ad-ministration procedures used in connection with, operator Cost of TM/-2 Cleanup Current projections provide for the training examinations given to TMI-1 control room opera-cleanup of TMI-2 to be completed in 1983, at a cost of tors. On July 27,1982, the ASLB, in a third partial initial approximately $1 billion (including post 1983 escalation).

decision, reaffirmed its recommendation to the NRC that The cleanup estimate is subject to major uncertainties, TMI-1 be allowed to resume operation. It also proposed including (a) the regulatory environment, (b) the full scope that the subsidiaries be fined $100,000 for their failure to of the challenges in decontaminating the reactor, (c) the I

safeguard the integrity of the examination process and effect of government regulations on the issue of waste dis-failure to instill a proper attitude in their operators toward posal, and (d) the availability of funds.

the examination process, and that certain additional con-The subsidiaries, as of December 31,1982, had spent f

ditions be imposed on the restart of TMI-1. The subsidi-

$283 million (net of $39 million which has been added to aries advised the NRC that they did not propose to appeal the plant investment) on costs associated with the cleanup to the Atomic Safety and Licensing Appeal Board and recovery process of which $241 million has been (ASLAB), appointed by the NRC to hear appeals to the deferred on the balance sheet. The remaining $42 million ASLB's partial initial decisions, the matter of such fine or has been charged to maintenance expense. Insurance to object on procedural grounds to NRC consideration of a proceeds of $261 million and cleanup revenues from cus-monetary penalty up to the amount proposed by the tomers of $14 million have been offset against deferred ASLB. The ASLB's partialinitial decisions are pending costs. Current excess recoveries will be applied to future before the ASLAB as well as the NRC. In connection with cleanup expenditures.

consideration of certain appeals by parties to the proceed-The subsidiaries'first mortgage bond indentures pro-19

vide for insurance proceeds to be held by their respective End development funds r:!:ted to TMI-2 (a portion of trustees for reimbursement to tt.e company for cither which would directly offset enticipat:d cleanup cxpenses) expenditures on repair of damaged property (including de.

for certain activities engaged in during the course of the contamination) or construction of other bondable property.

cleanup. The U.S. Department of Energy (DOE) has insutnce proceeds of $2 million were on deposit with the agreed to take responsibility for the disposal of certain subsidtries' trustees and cleanup revenues from custo-wastes and the damaged fuel core. The Corporation and mers of $12 miiiion were in escrow accounts at December its subsidiaries do not now know the total amounts of such 31,1982. Such amounts are recorded on the balance assistance to be realized from the Federal government.

sheet as funds held in special deposits for TMI cleanup The Commonwealth of Pennsylvania has enacted and cr3 included in the proceeds mentionec above.

legislation providing $5 million for certain cleanup expen-Tha subsidiaries carried the maximum insurance ditures in the current year, and it is anticipated that similar coverage then available ($300 million) for damage to the legislation will be enacted in subsequent years, which unit gnd core and for decontamination expenses. It is the would be consistent with the Governor's plan.

Corporation's belief that the recoveries from the insurance On January 24,1983, the subsidiaries entered into a set-companies will approximate the amount of the insurance tiement agreement with The Babcock & Wilcox Company carried, as estimated cleanup expenditures are expected (B&W) which sold the TMI-2 nuclear steam supply system to cxceed significantly the available insurance coverage.

to them. Under that agreement, B&W is to pay the subsidi-The subsidiaries are seeking financial assistance from aries rebates of up to $37 million on anticipated future pur-the Federal government, the utility industry and others.

chases of about $270 million of services and equipment M:nagement believes that any loss suffered by the sub-made from B&W. It is the intent of the subsidiaries to seek sidiaries for which they do not receive financial assist-to apply such rebates to cleanup costs.

cnca, or reimbursement from suppliers or others, should The NRC has proposed certain revisions to the be recoverable in rates. Moreover, it is management's in-technical specifications or license conditions governing 1:nt to seek to recover such costs in rate and/or judicial the maintenance of TMI-2 in a safe shutdown condition.

proceedings. Under these circumstances, the amount of Two individuals and one organization have intervened in a loss, if any, suffered by the Corporation and its subsidi-hearing to contest the adequacy of the proposed technical aries resulting from damages to TMI-2 is not presently specifications. A hearing on this matter before an NRC determinable and, therefore, no provision has been made licensing board has not yet been held. The NRC has in their accounts.

directed that the hearing should focus on the technical A plan has been proposed by the Governor of Pennsyl-specifications and not on the TMI-2 cleanup or whether vania providing for the ostimated remaining cost of the TMI-2 should be allowed to operate again.

cle nup as of January 1,1982 ($760 million) to be shared as follows: The Corporation's subsidiaries, $245 million; Repair and Hestoration of TM/-2: While it is the sub-the Federal government, $190 million; the nuclear indus-sidiaries' current plan to return TMI-2 to service, a final try, $190 million; insurance, $90 million; the State cf New decision must await completion of a major portion of the Jersey, $15 million; and the Commonwealth of Pennsylva-cleanup, assessment of the useability of the major com-nh, $30 million.

ponents, and an evaluation of the economic appropriate-Th3 rate settlement agreements approved by the Penn-ness and licensing feasibility of restoration.

sylv nia Public Utility Commission (PaPUC) on January 8, 1982 cnd amended on September 3,1982 and the rate Accounting for the Investmentin TMI:

orders issued by the New Jersey Board of Public Utilities Investmentin TMI-2:In April 1981 rate orders, the PaPUC (NJBPU)in July 1982 allowed for collection of cleanup directed Met-Ed and Penelec to cease the accrual of revenues at the level called for by the Governor's plan depreciation effective approximately when the operating described above, namely $49 million per year. However, in and capital costs of TMI-2 were eliminated from base the case of the PaPUC settlement, collection of a part of rates,(January 1,1979 for Met-Ed and April 1,1979 for such cleanup revenues is not to begin until restart of Penelec). Met-Ed and Penelec ceased the accrual of TMI-1, so that the aggregate annual amount currently depreciation as more fully described in Note 3.

being collected is $33 million.

The settlement agreements approved by the PaPUC on I

Th) Edison Electric Institute (EEI), the national trade January 8,1982 provide for the amortization of Met-Ed's association of investor owned electric utilities, in January and Penelec's investment in TMI-2 based on the unrecovered 1983, recommended to its members that they make volun-original cost of the facility, the nuclear fuel in the reactor at tary contributions to cleanup funding in connection with the time of the accident in March 1979 and capital addi-the Governor of Pennsylvania's plan. Such program,if all tions from that time to the date of the settlements. Effective members of eel contribute in accordarice with this recom-January 14,1982, Met-Ed and Penelec began amortizing mendation, would contribute $150 million ($25 million per their investments in TMI-2 by amounts equivalent, after year for six years) to the TMi-2 cleanup. To become effec-consideration of the related tax consequences, to the tiv2, $100 million must be committed by the association's revenues being collected for such purpose. Such amorti-members. Solicitation of the eel membership is currently zation, which totaled $66 million through December 31, underway.

1982, is being included in depreciation expense and is in-The Federal government is providing some research cluded in accumulated depreciation at December 31,1982.

20

A recent cmendment to the Pennsylv:nia Public Utility J:rs;y Suprema Court, Appellit3 Division, primirily on Ltw prohibits the inclusion in r:.tes of eny P nn ylvanis th ground that tha rata incr:ases cuthorized by those electric utility for the cost of construction or expansion of orders do not meet the criteria for just and reasonable facilities until such time as such facilities are presently rates as set forth in applicable judicial decisions. The New providing actual utility service to customers.

Jersey Public Advocate and severalintervenors have also in February 1983, the Pennsylvania Consumer Advocate appealed these orders and another NJBPU order granting filed a motion with the PaPUC for reconsideration of the JCP&L an increase in its levelized energy adjustment PIPUC's rate order for another electric utility on the clause (LEAC) charges on various grounds. These include l

grounds that this amendment precludes the recovery their assertion that the NJBPU should not grant JCP&L through charges to customers for amortization of its in-base rate or LEAC increases until it has conducted pro-vestm:nt in an abandoned generating station that was ceedings to determine whether the TMI-2 accident was und:r construction. The PaPUC granted a rehearing but caused by JCP&L's imprudence or negligence and that h s not yet rendered a decision on that motion.

TMI-2 accident-related costs, such as replacement power M:t-Ed and Penelec do not know what effect,if any, the and TMI-2 cleanup costs, should not be recovered through t

tbova will have on their investments in TMI-2.

rates to the extent that JCP&L's imprudence or negligence

(

Th3 NJBPU has not issued a directive to JCP&L with contributed thereto. In an order, dated April 23,1981, tho l

respect to the accrual of depreciation on the TMI-2 plant.

NJBPU rejected this position of the Public Advocate and j

Accordingly, JCP&L has continued to accrue depreciation such intervenors, and they have also appealed that order on TMI-2, which has accumulated to about $24.6 million at and this rejection has been raised in the above mentioned Dec:mber 31, 982, appeal,.

Th3 January 8,1982 orders of the PaPUC and the July The New Jersey Legislature has passed a bill, now 1982 orders of the NJBPU provide for the partial recovery befoie the Govemor for signature, which if enacted, could from customers of the portion of the TMI-2 cleanup costs require the NJBPU to determine the issue of fault in con-allocated to the companies by the plan proposed by the nection with the TMI-2 accident prior to the NJBPU mak-Govemor of Pennsylvania. The cleanup costs contem-ing any rate determination in excess of $10 million for plated by this plan incluoc ongoing normal costs of main-accident-related expenses, including replacement power taining the facility. Accordingly, the subsidiaries, effective costs.

January 1,1982, began deferring all such maintenance JCP&L is unable to predict the outcome or impact of the costs, which totaled $13.3 million for 1982 and are included in pending appeals from the NJBPU orders or of the pro-d;f;rred costs-nuclear accident.

posed legislation referred to above.

Inv:stmentin TMI-7 In April 1981 rate orders, the PaPUC The July 1982 base rate orders of the NJBPU make pro-directed Met-Ed and Penelec to cease the accrual of vision, upon TMI-1's return to service, for an increase in d:preciation effective when the operating and capital base rates to cover TMI-1 operating and capital costs at costs of TMI-1 were eliminated from base rates (June 1, the then anticipated level and for a decrease in LEAC 1980). Met-Ed and Penelec ceased the accrual of depreci-charges, after further review by the NJBPU and satisfac-ation as more fully described in Note 3.

tion of certain operating criteria.

The settlement agreements approved by the PaPUC on On January 28,1983, JCP&L filed petitions with the January 8,1982, make allowance for the future recognition NJBPU seeking a base rate increase of $123 million an-in Mat-Ed's and Penelec's base revenues for the operating nually and a decrease in LEAC charges of $103 million and capital costs associated with TMI-1, contingent upon annually, The petitions are pending before the NJBPU.

that facility generating power at a specified level.

The July 1982 rate orders of the NJBPU directed JCP&L Rate Proceedings-Pennsylvania;In April 1979, the PaPUC to c:ase the accrual of depreciation effective April 1,1980, removed from base rates, the capital and operating costs (tha date its operating and capital costs were removed associated with the investments made by the Pennsylvania from base rates) on that portion of its investment in TMI-1 subsidiaries in TMI-2 and prescribed lower temporary rates.

subject to NJBPU's jurisdiction (98% of JCP&L's 25%

In June 1979, the PaPUC ordered that the temporary rates ownership). The reversal of previously accrued deprecia-become permanent. In May 1980, the PaPUC took similar tion has been accounted for as an extraordinary item (see action to remove TMI-1 costs from customer rates and to i

Nota 3). The NJBPU rate orders provide for further hear-prescribe lower temporary rates. Also in the May 1980 ings on the appropriateness of future base revenues for order, the PaPUC allowed for full energy cost recovery tho operating and capital costs associated with TMI-1, con-from June 1 to December 31,1980 and permitted recovery tingent upon that facility's generating power at a specified of the then outstanding post-accident deferred energy 1: vel.

costs in the form of a surcharge. In this regard, the R:t3 Proceedings-New Jersey: In June 1979 and April PaPUC stated:"Those amounts are subject to audit and 1980, the NJBPU issued orders removing from base rates review by the Commission and to a later determination th3 capital and operating costs associated with JCP&L's that specific amounts of energy costs were imprudently or investments in TMI-2 and TMI-1, respectively.

unreasonably incurred. If the courts and/or the NRC in July 1981 and in July 1982, the NJBPU issued orders should ultimately conclude that Met-Ed was imprudent or grtnting part of the base rate increases that JCP&L had negsgent in its operation or management of Three Mile requested. JCP&L has appealed such orders to the New Island, then this Commission will take notice of such 21

determinations cnd their relevance to cny portion of the 1980'end July 1980, r:spectiv ly. Their conclusions with replacement power costs for which curr:nt recovery is r:spect to thess m:ttirs wers simi!ir to those of th) permitted today."

Kemeny Commission. In January 1980, the NRC imposed in 1980, the Pennsylvania subsidiaries filed complaints civil penalties against Met-Ed of $155,000 for safety, main-with ths PaPUC against the temporary rates prescribed by tenance, procedural and training violations at TMI. The the May 1980 order and filed proposed increases in base NRC has also stated that, depending upon the findings of rit:s. In May 1981, the PaPUC denied the complaints continuing investigations into the TMI-2 accident, it may cgainst the temporary rates and granted part of the rate take additional enforcement action such as assessing incr:ases sought by the Pennsylvania subsidiaries. The additional civil penalties or ordering the suspension, modi-P:nnsylvania subsidiaries appealed those orders to the fication or revocation of the license to operate TMI-2.

Pennsylvania Commonwealth Court primarily on the In March 1980, the NJBPU requested an independent ground that the rate increasos authorized by those orders analysis of strategic options for JCP&L in response to the do not meet the criteria for just and reasonable rates as extreme financial pressures experienced by JCP&L follow-set forth in applicable judicial decisions. Briefs have been ing the TMI-2 accident. The intent of this study was to filed cnd oral argument has been held before the court identify options that would minimize additional costs to end the appeals are awaiting decision.

JCP&L's customers and continue to prowJe an adequate in Janua.ry 1982, pursuant to PaPUC orders approving supply of power. The report was completed in April 1981 settlements reached by the parties in rate proceedings, and submitted to the NJBPU. It recommends, in part, that ths Pcnnsylvania subsidiaries placed in effect increases in (i) a Regional Power Authority owning and operating TMI bass rates. Such rate increases made provision, among would best provide the financing capability to fund the oth:r things, for amortization of the Pennsylvania subsidi-cleanup and reduce its cost to the ratepayer and (ii) some cri s' investment in TMI-2 and for a part of the TMI-2 form of public ownership of JCP&L has the greatest likeli-cl :nup costs. The settlement agreements also provide hood of significantly moderating the growth in electric for further base rate increases, and for the recognition of rates. The other options, as stated in the report, including TMI-1 operating and capital costs, at the 1982 anticipated

" merger, divestiture, bankruptcy and a state-owned gener-lov:1, when TMI-1 retums to service and meets certain ating company would provide limited long-term benefits to operating criteria. Such costs would oe more than offset the rate-payer and involve substantial legal, economic and by a reduction in the Pennsylvania subsidiaries' energy political risks." Regardless of the option selected, the cost rate charges as a result of lower-cost TMI-1 genera-study further indicates that immediate and consistent rate tion.

relief is necessary to restore JCP&L's eamings, improve On January 21,1983, the Pennsylvania subsidiaries filed its cash flow and begin to restore its access to capital proposed annual increases in base rates of $60 million for markets to ensure that needed construction and cleanup M t-Ed and $75 million for Penelec and on March 1,1983 programs continue. During 1982, the NJBPU held 14 for changes in energy cost rates (a $62.8 million decrease public hearings to receive comments on the report's in th3 case of Penelec and a $12.9 million increase in the recommendations. In February 1983, JCP&L filed with the case of Met-Ed). The filings also make provision for in-NJBPU its comments on the hearings, stating its view that crnsing to 1983 cost levels the allowances made in the the hearings had demonstrated that customers and invest-1982 settlements for TMI-1 operating and capital costs ors would be best served by continuation of JCP&L as a wh:n that unit returns to service.

subsidiary of the Corporation with a level of revenues that will permit the provision of safe, adequate and reliable ser-vice. JCP&L does not know what further action, if any, the Rite Proceedings-Federal: In 1982, the subsidiaries filed NJBPU may take in this proceeding.

with the FERC for increases in thei* wholesale for resale Other investigations and inquiries into the nature, r:t s cggregating $16.7 million, annually. The subsidiaries causes and consequences of the TMI-2 accicent com.

\\

h va collected $2.6 million at December 31,1982, subject menced by various Federal and state bodies are continuing.

to r: fund. All filings include an amount for the participation The Corporation and its subsidiaries are unable to deter-in funding of the TMI-2 cleanup.

mine the outcome or consequences of these investigations.

The Corporation is also unable to determine the impact, if Inv:stigations: On October 30,1979, the President's any, the results of such investigations may have on (i) the (K:meny) Commission on the Accident at Three Mile proceedings to retum TMI-1 to operation, (ii) the efforts to Islind issued its report. The report states, in part, that its clean up TMI-2, and (iii) the rate regulatory agency deci-

"inv stigation has rev6aled problems with the ' system' that sions with respect to the ultimate recoverability from rate-f m:nufactures, operates and regulates nuclear power payers of the replacement power costs necessitated by pl:nts" and the short-comings which turned the incident the unavailability of TMI-1 and TMI-2.

in:o a serious accident "are attributable to the utility, to suppliars of equipment and to the Federal commission Utigation: As a result of the accident, the Corporation, th t regulates nuclear power."The NRC's SpecialInquiry and/or its subsidiaries, have been named as defendants in Group (Rogovin) and the U.S. Senate Subcommittee on various lawsuits. The suits include (i) individual suits as Nucl:ar Regulation (Hart Committee) issued the results of well as purported and actual class actions for a!!eged per-th:ir investigations of the accident at TMI-2 in January sonal and property damages (including claims for punitive 22

damages) resulting from the accident and (ii) suits to en-ity. In May 1981, the court entered an order striking certain join the future operation of TMI-2.

of the defenses asserted by the insurance company.

The suits described in (i) above involve questions as to Negotiations for the possible settlement of this litigation whether certain of such claims, that are materialin are being pursued.

amount and arise out of both the accident itself and the On December 14,1981, the Corporation and its subsidi-cleanup and decontamination efforts are (a) subject to aries filed an amended comp laint against the supplier limitation of liability set by the Price-Anderson Act and (b)

(and its parent) of the nuclear steam supply system and outside the insurance coverage provided pursuant to the associated services, training and procedures for TMI-2, for Price-Anderson Act. These questions have not yet been damages suffered by the Corporation and its subsidiaries

resolved, and their customers as a result of the accident. The de-In February 1981, the insurance companies and repre-iendants answered the amended complaint denying liabil-sentatives in the class actions reached an agreement for ity and seeking approximately $4 million, plus finance the proposed settlement of the class action claims for charges, from the Corporation and its subsidiaries for economic losses and claims for the costs of medical services rendered and equipment allegedly provided detection services resulting from the TMI-2 accident for under the contract for the TMl-2 nuclear steam supply sys-persons, businesses and entities within a 25 mile radius of tem. The trial of this matter, dealing with issues of liability TMI-2. The settlerrent, which was approved in September only, commenced November 1,1982. On January 24, 1981 by the court in which class action claims are pending, 1983, the Corporation and its subsidiaries and the supplier provide for the insurance companies to establish a fund of (and its parent) entered into a settlement agreement termi-

$20 million for economic loss claims and a separate fund nating the suit and the claims against the Corporation and of $5 million for public health purposes. Earlier, the court its subsidiaries. Under the terms of the agreement the had held that personal injury claims (other than for medi-supplier will provide rebates of up to $37 million on antici-cal detection services) could not be pursued in class ac-pated future purchases of about $270 million by the sub-tion proceedings and the February 1981 agreement does sidiaries for services and equipment over a period of ten to not deal with such claims. Purported class action com-fifteen years. The Corporation's subsidiaries will seek to plaints (including claims for punitive damages) for (i) al-app!y the net rebate proceeds to the cleanup of TMI-2.

leged economic injury by reason of increased charges for in December 1981, the Corporation and its subsidiaries electricity, (ii) alleged costs incurred by municipalities in filed a complaint against the U.S. Government for damages response to the accident and (iii) alleged personal injury and losses, estimated at about $4 billion, suffered by the and economic loss as a result of venting of certain gasses Corporation and its subsidiaries and their customers as a from TMI-2 (effected pursuant to NRC authorization) as result of the accident. The complaint alleges that the NRC well as individual complaints (including claims for punitive violated its statutory and common law duties to wam plain-damages), for alleged personal injury and for alleged eco-tiffs of defects and hazardous conditions in equipment, nomic losses of persons, businesses and entities outside analyses, procedures and training in use at TMI-2. The the 25 mile radius area, are pending.

complaint also charges that, following a similar incident at

=

Class suits for alleged damages on behalf of purchasers a nuclear power plant operated by a non-affiliated utility of GPU common stock during the period August 25,1975 which the NRC had investigated, the NRC failed to take through April 1,1979 have also been instituted against the and recommend appropriate action and to warn Met-Ed Corporation and certain of its directors as a result of the and other licensees of similar reactors of any defects. The accident.

complaint seeks to recover the cost of cleanup and The plaintiffs claim, among other things, that the Cor-restoration, replacement power costs, lost revenues and poration failed to disclose in its prospectuses and reports increased financing costs. A motion filed by the U.S.

the severe financial consequences it might suffer in the Govemment to dismiss the complaint on the grounds that event of an accident at one of its nuclear plants. The Cor-the court lacks jurisdiction and the complaint fails to state potation does not have insurance with respect to its own a cause of action was denied by the District Court in potential liability in these suits, which are presently November 1982. The Government has appealed this deci-scheduled for a jury trial later this year. The Corporation is sion in the U.S. Court of Appeals for the Third Circuit unable to estimate the likelihood of an unfavorable out-where the matter is pending.

come in these suits, and its total financial exposure with r

respect thereto is uncertain; an unfavorable judgment Insurance: The property damage insurance, and the $300 could have a material adverse impact on the Corporation's million limit of coverage, was applicable to both TMI-1 and financial condition.

TMI-2. This property insurance had been reduced by These suits have also raised questions, which have not claims paid. The insurance carriers have reinstated the m

yet been resolved, as to whether certain claims against coverage for the TMI site, but with regard to property the directors are beyond the $30 million insurance insurance for TMi-2, such coverage has been reinstated coverage for directors' and officers' liability carried by the only for possible damage which might result from a non-Corporation and its subsidiaries. The directors filed a nuclear accident during the unit's cleanup and restoration third-party complaint against the insurance company pro-period. Effective January 10,1983, on a prospective basis, viding such primary insurance coverage. That insurance the primary property damage insurance coverage was company filed an answer to such complaint denying liabil-raised to $500 million on the site.

23

Effective April 1981, JCP&L became a m:mber of NUCLEAR FUEL LITIGATION:

Nucle:r Mutu*l Limited (NML). Such m:mbership pro-In 1971, JCP&L entered into a contract for the purchase of vides JCP&L with $500 million of primary property damage three nuclear fuel reloads for the Oyster Creek station, insurtnce for its Oyster Creek station. As a member of w th an option for five additional reloads beginning in NML, JCP&L is subject to annual assessments of up to 14 1976. h 1974, the supplier offered an extension of that times its annual premium, or approximately $27.8 million' contract to cover five additional reloads beginnirig in 1981.

in the event that losses as the result of an accident at a JCP&L believes that it effectively exercised the option in nucleir plant of any member company exceed the accu-the initial contract and accepted the offer to extend the mullted funds available to NML.

contract to cover the five additional reloads. The supplier Effective January 15,1982, the subsidiaries increased disputes this position and, in November 1978, submitted their property damage insurance for damages in excess of bills for material and services in the aggregate amount of

$500 million at each of their nuclear generating sites. The apimW33 millig m@ reWs sWid M policies currently limit coverage to $483 million for losses 1977,1978 and 1979. The supplier stated that its objective jn excess of $500 million up to $1 billion. This excess was to establish revised prices and other terms and condi-insurance is provided by Nuclear Electric insurance tions rather than to diminish supplies and, without pre-Limited (NEIL), a mutualinsurance company, and Amen.-

judice to its legal position, provided the 1979 annual fuei c n Nuclear Insurers / Mutual Atomic Energy Liability reload. Of the $33 million claimed by the supplier to be Underwriters (ANI/MAELU) and provides that expenses for due, JCP&L has paid approximately $3.8 million and is of decontamination and debris removal shall be paid before the opinion that the balance of approximately $29 millionis any payments in respect of claims for property damage.

not payable by it and so informed the supplier. On January Und:r the NEll portion of this coverage, the subsidiaries 26,1979, the supplier filed suits against JCP&L, the Cor-cra subject to a retrospective premium of up to $15.2 oration and GPU Service Corporation (GPUSC). JCP&L million in the event of an accident at a nuclear plant of any f led a counter-claim in this action for a declaratory judg-m mber company.

ment confirming its view of the supplier's contractual com-Th3 Price-Anderson Amendments to the Atomic Energy mitments and damages suffered by reason of the Act currently limit liability to third parties to $560 millhn for suppliefs repudiation thereof. On March 5,1982, following c;ch nuclear incident. Such coverage of the first $140 a trial on the issues of liability (but not the amount of any million (raised to $160 million following the accident) of damages) the court issued a memorandum opinion up-such liability is provided by private insurance. The next holding JCP&L's position that a binding contract exists for

$400 million is provided by assessments of up to the limit the sale by the supplier to JCP&L of the nuclear reload of $5 million per nuclear reactor per incident, but not more batches that are the subject of the litigation. The amount thin $10 million per reactor,in any calendar year. Based of damages to be recovered by JCP&L will be determined on the ownersh,ip of three nuclear reactors, the subsidi-in further trial proceedings which have not been conclud-ari:s' maximum potential assessment under these provi-ed. JCP&L does not know whether the supplier will appeal sions would be $15 million per incident but not more than the court's decisions. JCP&L believes that any additional

$30 minion per calendar year for claims covered by this amount that it might be required to pay if the supplier is insurance.

successful in any such appeal would be valid costs and Effective September 15,1980, JCP&L, with respect to should be recognized for ratemaking purposes. However, incrImental replacement power costs resulting from an there can be no assurance that this will be the case. If the cxt;nded accidental outage at its Oyster Creek nuclear suits were to be ultimately resolved in the suppliefs favor, g;n: rating station only, became a member of NEIL. Such JCP&L would incur $17.9 million in additional fuel ex-cov: rage under NEIL provides for a weekly indemnity of pense, based on the amount of fuel consumed through

$2.5 million, beginning 26 weeks after an accidental December 31,1982.

out;ge, for the incremental cost of replacement power.

In 1975, GPUSC, as agent for JCP&L, entered into a Th3 policy limits covered outages to 52 weeks at 100% of reprocessing agreement with Nuclear Fuel Services, Inc.

tha weekly indemnity and 52 additional weeks at 50% of (NFS) providing for the transportation, storage and toe weekly indemnity. As a member of NEIL, JCP&L is reprocessing by NFS at the West Valley, New York sy oject to a retrospective premium adjustment limited to Nuclear Fuel Receiving Facility (Facility) of spent nuclear

$".5 million, which is five times its annual premium, in the fuel discharged from JCP&L's Oyster Creek nuclear gen-cv:nt that losses exceed the accumulated funds available erating station. During 1975,224 spent nuclear fuel to NEIL. The subsidiaries expect to obtain similar assemblies discharged from the Oyster Creek station were cov: rage with respect to TMi-1 upon that unit's return to shipped to the Facility for storage pending reprocessing.

operation.

In 1976, however, NFS announced that due to regulatory Some potentiallosses or liabilities to which the Corpora-impediments, it was withdrawing from the reprocessing tion and its subsidiarl3s may be subject are not insurable business and notified GPUSC that it was terminating the or the amount of insurance carried may not be sufficient to reprocessing agreement. Pursuant to that agreement, meet potential losses and liabilities. Under those circum-however, NFS continued to store the Oyster Creek spent stances such lossas or liabilities could have a material fuel at the Facility. In 1978, NFS and GPUSC entered into rdv:rse effect on their financial condition.

an additional storage agreement. That agreement provided, among other things, that NFS would continue to store the f

24

Oyster Creek spent fu:1 ct the Facility for a stor ge chirge chise minimum amounts of ths stations' coal requir:-

of $134,000 per yeIr end GPUSC cnd JCP&L (greed to m:nts from thess mining compani:s. Th3 prica of th3 r: move the Oyster Creek spent fuel from the Facility, but delivered coal is established by formulas described within only under certain specific circumstances as provided for the contracts and provides for the recovery by the mining in the agreement. Through December 31,1980 storage companies of their costs. Coal purchases under these chirges were paid to NFS in accordance with this later agreements amounted to $101 million, $84 million, $87 i agreement, but NFS submitted no invoices subsequent to million, $79 million and $61 million for the years 1982,1981, thIt dits (although JCP&L continued to accrue such 1980,1979 and 1978, respectively.

chirges on its books). In April 1982, however, the New GPUSC has entered into agreements with other utilities York Stite Energy Research and Development Authority for firm delivery of an aggregate of 1,210 megawatts of (Authority), the owner of the Facility, which had leased the capacity through 1990. The price of the energy delivered is Facility to NFS, invoiced GPUSC for storage charges for established by formulas described within contracts and th3 period January 1,1981 through March 1982 in the provides for recovery by sellers of their costs. Total annual tmount of $1.3 million or a more than eight-fold increase in payments are estimated to aggregate $215 million for ex-the agreed upon storage charges. Additional invoices for pected capacity, energy and transmission services, Other the period of April 1982 through December 1982 have possible long term purchases are the subject of pending sinco been received amounting to $1.1 million. GPUSC negotiations, cnd JCP&L refused to pay such increased chargos and in Since the TMI-2 accident the subsidiaries have sus-M:y 1982, the Authority commenced an action in the U.S.

pended or delayed construction on various proposed gen-District Court for the Western District of New York against erating projects. Investments in such projects at December l

(

the Corporation, GPUSC, JCP&L, NFS and its parent and 31,1982 aggregate about $31 million of which $18 million is two non-affiliated electric public utilities which also have primarily related to land and site engineering costs which sp:nt nuclear fuel stored at the Facility. In its amended will be assignable to a future site. The remaining $13 compliint the Authority has alleged, among other things, million is not assignable to future projects and therefore thit the defendants have failed and refused to remove the subsidiaries are seeking amortization of such costs spent nuclear fuel from the Facility, and that continued through their current rate filings.

storige of such spent fuel at the Facility is unlawful. The The Oyster Creek nuclear generating station, owned by suit requests a court order directing the defendants to JCP&L, is expected to experience two extended outages r:mov3 their spent fuel from the Facility as well as for over the next few years. The first outage began in d anages (for which all the defendants are claimed to be February,1983 and is expected to last about 11 months.

jointly cnd severally liable) allegedly sustained by the JCP&L, in its current rate proceeding, is seeking amortiza-Authority in the amount of $20 million for unpaid storage tion of the incremental operating and maintenance costs chirges and use of the Facility and $1 billion for loss of over normal levels as well as increased capital costs which vilue to the Facility and interference with the decon-are expected to be substantial. The second outage is ex-timination and decommissioning thereof. Additional pected to begin in 1985 and JCP&L expects that the damrges are requested from NFS. A motion for partial capital costs of this outage will also be substantial.

summiry judgment filed by the Authority is pending The subsidiaries ue engaged in negotiations with vari-befora the court. It is management's position that the GPU ous suppliers relating to the latters' claims for delay or ter-def endants have no liability to the Authority other than for mination charges or increased fees which such suppliers r;asonable storage charges.

assert result from the subsidiaries' revisions of their con-struction plans and schedules and/or from the increased GTHER:

scope of supply. The subsidiaries' managements do not The subsidiaries' construction programs, which extend expect at this time that such negotiations will result in any material increase in costs that would not be valid costs over several years, contemplate expenditures of approxi-mitaly $290 million during 1983. In connection with these properly recognizable through the ratemaking process.

construction programs, the subsid; aries have incurred Claims for damages arising out of the operation of the commitments.

Oyster Creek station have been asserted. Two suits are l

The staff of the FERC conducts periodic audits of the pending, one of which was a class action which was accounts of electric utilities subject to the Federal Power decided in favor of JCP&L on the liability issue and the Act. In the course of its current audits of Met-Ed, Penelec plaintiffs are presently seeking review by the U.S.

cmd JCP&L, the FERC staff has raised various questions, Supreme Court. The other suit is presently inactive pend-the most significant of which concerns the issues of ac-ing the outcome of the class action. JCP&L does not know crual of allowance for funds used during construction if Supreme Court review will be granted or what action the (AFC) cssociated with nuclear fuel. Discussions with the Court might take. JCP&L is unable to estimate its financial FERC to resolv9 these questions are being held.

exposure in the event of unfavorable Supreme Court action Th) subsidiaries have entered into long-term contracts or the likelihood that additional suits might be commenced in such event.

with non-affiliated mining companies for the purchase of coal for certain of their generating stations. These con-Suits for damages have been commenced against Pen-tracts, which expire between 1997 and the remaining life elec by four dairy farmers claiming damages for losses as of th3 generating station, require the subsidiaries to pur-25

l e

o result of neutrtl to ground voltage. Panelec is unabis to AMORTlZATION OF TMI-2 INVESTMENT:

estimate the likelihood of an unfavorabis outcomo of thrs3 The Corporation's Psnnsylvania subsidiaries, pursuant to I

actions or its financia! exposure with respect thereto.

a settlement agreement approved by the PaPUC in Janu-The subsidiaries may own (or may have previously ary 1982 (see Note 1), began amortizing their investments owned) inactive waste disposal sites which may be subject in TM!-2 in January 1982. Such revenues for amortization i

to certain regulatory requirements under the Resource are for the recovery of the original cost of the facility and Conservation and Recovery Act and the Comprehensive nuclear fuelin the reactor at the time of the accident in Environmental Response, Compensation and Liability Act March 1979 and capital additions from the time of the acci-(Superfund legislation). At this time, the subsidiaries are dent to the settlement date. The settlement did not provide unable to estimate the extent to which they might be sub-for a return on the investment in TMI-2.

ject to such regulatory requirements or any uninsured i

costs of compliance therewith.

AMORTIZATION OF PROPERTY LOSSES:

Property losses are amortized and recovered through rates as prescribed by the NJBPU and the PaPUC (see

2. Summary of Significant Accounting Policies Note 16).

GENERAL:

NUCLEAR PLANT DECOMMISSIONING COSTS:

The consolidated financial statements include the ac-JCP&L, in accordance with rate determinations, is charg-counts of all subsidiaries.

ing to expense and crediting to a reserve amounts in-It is the general policy of the Corporation's subsidiaries tended to provide over their service lives for the cost of to record additions to utility plant at cost, which includes decommissioning nuclear plants at the end of their useful material, labor, overhead and AFC. The cost of current lives (estimated for purposes of the ratemaking determina-repairs (except those related to the nuclear accident tions to range between $27 and $36 million per unit prior d: scribed in Note 1) and minor replacements is charged to July 1982 and $36 million to $51 million per unit subse-to appropriate operating expense and clearing accounts quent to July 1982 in then current dollars assuming in-and the cost of renewals and betterments is capitalized.

place entombment). During 1982, such charges to ex-The original cost of utility plant retired, or otherwise dis-pense for TMI-1 were discontinued as a result of a NJBPU posed of, is charged to accumulated depreciation.

order directing the cessation of depreciation accruals discussed in Note 3.

Met-Ed and Penelec, prior to the cessation of deprecia-OPERATING REVENUES:

tion accruals discussed in Note 3, were charging to ex-Revenues are generally recorded on the basis of billings pense amounts intended to provide over their service lives rendered.

for the decommissioning of their shares of the radioactive components of their nuclear units (approximately $24 million per unit in then current dollars). During 1981, such DEFERRED ENERGY COSTS:

charges to expense were discontinued retroactive to the Ensrgy costs are recognized in the period in which the dates that the TMl units were removed from base rates in related energy clause revenues are billed.

Pennsylvania. The subsidiaries believe that any additional cash requirements with regard to nuclear plant decommis-sioning should be recovered through the ratemaking RESERVE CAPACITY CREDIT:

process.

Effective April 1981, Met-Ed and Penetec began recogniz-ing future possible payments to other members of the Pennsylvania-New Jersey-Maryland Interconnection as a charge to current expense equivalent to the revenues pro-vided for that purpose.

DEPRECIATION.

The Corporation's subsidiaries provide for depreciation at annual rates determined and revised periodically, on the basis of studies, to be sufficient to amortize the original

)

cost of depreciable property over estimated remaining s:rvice lives, which are generally longer than those em-ployed for tax purposes. The subsidiaries use depreciation rates which, on an aggregate composite basis, resulted in an approximate annual rate of 3.24%,3.21%,3.18%,

3.17% and 3.07% for the years 1982,1981,1980,1979 and 1978, respectively. Reference is made to Notes 1 and 3 regarding the accrual of depreciation on TMI-1 and TMI-2.

26

AMORTl2ATIOM OF NUCLEAR FUEL AND WASTE

3. Extraordinary items DISPOSAL:

Amortization of Nuclear Fuel: The amortization of nuclear As a direct or indirect consequence of the nuclear acci-fuelis provided on a unit of production basis. Rates are dent at TMI-2, consolidated net income for 1982 and 1981 determined and periodically revised to amortize the cost reflect the following extraordinary items net of any related over the usefullife.

income tax effects:

Waste Disposal; JCP&L is providing for estimated future handling costs for the spent Oyster Creek nuclear fuel, in Maons and similar treatment will be provided for future handling 1982 1981 costs for the spent TMl nuclear fuel when it returns to ser-(a) Wnte-off of Ontario Hydro Project

$(3.9) vice. Previously accumulated estimated residual credits, (b) Reversalof TMi-1 depreciation 3.0

$ 2.7 net of previously accumulated estimated costs of reproC-(c) Reversal of expenses incurred for public health essing, for the Oyster Creek station nuclear fuel are being and safety and restart of IMI.1 46 j

amortized to fuel expense on a unit of production basis.

(d) Abandonment of the Forked River project (28.9)

The Pennsylvania subsidiaries, effective with the 1982 (e) Reversalof TMI-2 depreciation 18.6 settlement agreements, are amortizing prior years dis-(f) wnte-off of the excess of mvestments in posal costs associated with TMI-1 spent nuclear fuel over subsidiaries over related net assets (30 8) a sixteen year period. Estimated disposal costs for the cur-Net

$ 3.7

-(36.4) rent and future periods will be provided for currently as the

~-

I fuel is consumed, Current forecasts of nuclear waste disposal costs as outlined by the Nuclear Waste Disposal (a) In November 1981, JCP&L entered into a long. term contract for the Act of 1982 may be as much as $54 million in excess of purchase of large quantities of electncity from a major Canadian sup-pher. In June 1982, the NJDPU approved JCP&L's request to cancel the those now be,ing provided. The subsidiaries are seeking project due to uncertainties of cost, scheduling and financing and the recognition of such costs in current rate proceeding 3 and availability of economic alternatives. !n a decision in November 1982, believe that they are recoverable.

the NJBPU has directed that JCP&L may not recover from customers the costs associated with the project. As a result, JCP&L wrote-off $3.9 milhon ($6.8 milhon of costs less $2.9 milhon for income taxes) as an extraordinary charge. In December 1982, JCP&L filed a motion with the INCOME TAXES:

NJBPU requesting reconsideration of its November 1982 order and has The Corporation and its subsidiaries file casolidated filed with the NJBPU for recovery of the investment over 15 years in its Federalincome tax returns. All participants in a consoli-C""*"7,,P'"gd E ote 1 the N' BPU issued rate orders in Jufy 1982 g)g, c

J dated Federal income tax return are severally liable for the directing JCP&L to cease the accrual of depreciation on TMM retroac-full amount of any tax, including penalties and interest, tively to Apnl 1,1980. For the hve months ending May 31,1982, which may be assessed against the group.

depreciation expense for TMI-1 in the amount of $1.6 mEon was charged to current operations. The adjustment to reflect the reversal uf The revenues of the Corporation's subsidiarios in any the previously accrued depreciat:on in the amount of $7.7 milhon for period are dependent to a significant extent upon the TMI-1 for the period April 1,1980 to May 31,1982, net of related in-costs which are recognized and allowed in that period for c nw tax charges of $4.7 million, has been accounted for as an extra-ordinary item.

ratemaking purposes. In aucordance therewith, the Corpo-As desenbod in Note 1, Met-Ed and Penelec, pursuant to the Apnl 9, ration's subsidiaries have employed the following policies:

1981 orders of the PaPUC, ceased the accrual of depreciation on their Tax Depreciation: The Corporation's subsidiaries gener-investment in TMl-1 subject to the PaPUC's jurisdiction retroactive to June 1,1980. Met-Ed ano Penelec, during the five months ended May ally utilize liberalized depreciation methods and accelerated 31,1981, charged to operations depreciation expense for TMI-1 of cost recovery allowances and the shortest lives permitted

$4 milhon. T he adjustment to reflect the reversal of $9.3 milhon of by the internal Revenue Code in computing depreciation depreciation accrued from June 1,1980 through May 31, t 981, net of

$6.6 million of related iricome tax charges, was accounted for as an deductions and provide for deferred income taxes where extraordnary item in June 1981.

permitted in the ratemaking process. However, in 1980, (c) The Ju (,1982 NJBPU rate orders also directed JCP&L to defer cer-with respect to TMI-2, the subsidiaries elected to utilize tain operating and maintenance expenses incurred for TMI-1 related to restart, pubhc health and safety protection due to the extraordinary stra. ht-line tax deprec. tion.

levels of expense and to the nature of the items. The adjustment in the ig ia Investment Credits: Investment credits (l.T.C.) are being amount of $8.6 million to reflect the reversal of expense incurred for the amortized over the estimated service lives of the related peri d April 1,1980 t December 31,1981, net of related income tax charges of $4.0 million, has been accounted for as an extraardinary j

facilities.

stem. The rate orders also indicated that these expenses would be charged to cus'omers over an eight-year period commencing with the restart of TMI-1.

(d) in Novemc" 1980, as a result of regulatory, cost and other uncer-l tainties follow;r g the accident at TMI-2, JCP&L abandoned its effort to proceed with t'le construction of the Forked River nuclear project. Sub-sequent to this decision, the investment of $413.7 milhon in the project was reclissified to deferred debits (unamortized property losses). The NJBPU, on July 31,1981, issued a rate order which permitted JCP&L to recover, in part, over a 15 year period, its investment in the Forked River project. The order provided for JCP&L to recover $225.4 milhon of its net investment of $252.3 milhon after giving effect to S142.2 milhon in anticipated income tax benefits and $19.2 milhon in anticipated salvage value. However, the order excluded the recovery of AFC ac-crued dunng the penod Apnl 4,1979, the date of the suspension of con-struction activities at the project, through March 31,1980, the effective date JCP&L ceased the accrual of AFC on the project. In view of this 27

order, in June 1981, JCP&L recorded c.n extraordincy charge of $26.9 for e Syst:m limit of $125 million, which could be

($A incr ased to $200 million with the approvil of the binks e be i ot pu su t to the January 8,1982 rate orders of the PaPUC, Met-Ett and Penelec have ceased the accrual of holding 85% of the outstanding notes. Individual borrow-deprecttion on their investment in TMI-2 subject to the PaPUC's juris-ing sublimitS are applicable to each company as follows:

diction retroactive to the approximate dates the unifs operating and capital costs were removed from base rates (in Met-Ed's case January The Corporation-An $18 million sublimit which is to be 1,1979 and in Penelec's case April 1,1979). Met-Ed and Penelec, for reduced under an amortization schedule designed to the eleven months ended November 30,1981, charged to operations deprechtson expense for TMI-2 of $15.5 million. The adjustment to provide for full repayment by June 30,1983. The Corpo-rifact the reversal of $45.6 million of depreciation accrued by Met-Ed ration may not make additional borrowings under the fr m Jwary 1,1979 through November 30,1981 ar'd by Psnelec from afnended credit agreement

• April 1,1979 through November 30,1981, net of $27 milhon of related income tax charges, was accounted for as an extraordinary item in JCP&L-A $45 million sublimit subject to the further December 1981.

(f) Sinca 1946, in accordance with appi: cable regulations of the restriction that outstanding borrowings may not exceed Securities and Exchange Commission (SEC) under the Public Utility 60% of JCP&L's customer accounts receivable from the Holding Company Act, the Corporation had carried its investment in its sale of electricity to Customers

• subsidiaries at amounts that were $30.8 milhon in excess of the related net assets. In December 1981, the Corporation concluded that. in light Met-Ed-A $25 million sublimit subject to the further.

of present and proposed ratamaking, the investment in the subsidiaries intxcess of related net assets had no realizable balue and wroteeft restriction that outsanding borrowings are limited to the such cxcess as an extraordinary charge-sum of (a) 80% of Met-Ed's customer accounts receiva-The cffective tax rates apphcable to the reversal of depreciation on ble E ed9ed to the banks as collateral and l

TMI-1 f.nd TMI-2 (stems (b) and (e) above) are greater than the statutory rab, since deferred income taxes are currently being providad on the (b) 50% (but not in excess of $5 million) of the costs of rortion of the excess of tax over book depreciation on both units vrhich Met-Ed's coal inventories pledged to the banks.

was previously flowed through to net income. In addition, investment tax credits associated with TMI 1 and Tui 2 that were previously amor-Penelec-A $40 million sublimit.

tized have been reversed items (d) and (f) above do not result in any in-com3 tax benefits.

The notes issued by the Corporation and its subsidiaries evidencing borrowings under the amended credit agree-

4. Allowance for Funds Used During ment bear interest at 107% of Citibank's prime rate, as in Construction (AFC) effect from time to time. The agreement provides for a commitment fee of 3/4 of 1% per annum on the unused The applicable regulatory Uniform System of Accounts portion of tl e banks' total commitment.

provides for AFC which is defined as including the net cost in connection with the amended credit agreement, the during the period of construction of borrcwed funds (allow-Corporation has entered into an amended loan agreement enca for borrowed funds used during construction) used which provides, among other things, that the Corporation's for construction purposes and a reasonable rate on other

$18 million of outstanding borrowings will bear interest at funds (allowance for other funds used during construction) 107% of Citibank's prime rate, and will be repaid in full by when so used. While AFC results in a current increase in June 30,1983.

utility plant to be recognized for rate-making purposes and The Corporation has guaranteed all borrowings by its repr:sents current compensation, AFC is not an item of subsidiaries outstanding under the amended credit agree-curr:nt cash income; instead AFC is realized in cash after ment. As collateral for such guarantee, the Corporation's the r: lated plant is placed in service by means of the

$18 million of borrowings under the amended loan agree-tilowance for depreciation charges based on the total cost ment referred to above, and the guarantee by the Cor-of the plant, including AFC.

poration of $4.4 million of certain mortgage loans of To the extent permitted in the ratemaking proceedings GPUSC, the Corporation has pledged the common stock of tha subsidiaries, the income tax reductions associated of JCP&L, Met-Ed, Penelec and GPUSC.

with the interest component of AFC have been allocated to Met Ed has pledged as collateral for its indebtedness reduce interest charges and, correspondingly, have not under the amended credit agreement,(i) $40 million of first reduced income taxes charged to operating expenses.

mortgage bonds (ii) its customer accounts receivable Pursuant to such rate orders, the Pennsylvania subsidi-($31.8 million at December 31,1982) and (iii) its coal crins employ a net of tax accrual rate for AFC. JCP&L is inventory ($13.3 million at December 31,1982).

employing a net of tax accrual rate for AFC on certain con-The amended credit agreement, amended loan agree-(

struction projects while using a gross AFC rate on others.

ment and the purchase agreements for certain bonds sold The subsidiaries have accrued AFC using rates which, by JCP&L ($97.5 million) and Penelec ($50 million) sub-on an aggregate composite basis, resulted in annual rates sequent to the accident at TMI-2 contain provisions for the

)

of 11.03%,10.64%,8.91%,8.60% and 7.99% for the immediate payment of the indebtedness involved upon the ye rs 1982,1981,1980,1979 and 1978, respectively.

occurrence of an event deemed by specified majorities of the lenders or holders of an issue to have a materictly

5. Ghort-Term Borrowing Arrangements adverse effect on the borrower.

On December 22,1982, the Corporation and its subsidi-aries entered into an amendment to their revolving credit agreement with a consortium of banks. The amended agreement, which expires on December 31,1983, provides 28

~

6. Long-Term Debt

7. Cumulative Preferred Stock - Mandatory Redemption At December 31,1982, the Corporation and its sub-sidiaries had long-term debt outstanding, excluding At December 31,1982 and 1981, the subsidiaries had l amounts due within one year, as follows:

outstanding the following issues of cumulative preferred stock which are subject to mancatory redemption (in Thousands)

Interest sares requirements:

Maturities 1% to 6%% 7% to 8h% 9% to 13%%

Total gg,,,,

g,,7,g y,,u, F Mongage

_ Outstanding (In Thousands) 1982 M81 1982 1981 1984-1990

$202,570 $

$125,000

$ 327,570 1991-2000 278,952 134.869 184.495 598.316 JCP&L:

2001-2009 25.120 392.742 399.698 817.560 13 5% Senes F 150,000 162.500

$15.000

$16.290

~

11% Senes G 200.000 212.500 20,000 21.250

$506,642

$527,611

$709,193 1,743.446 Bond sinking funds

~

Due within one year (12.500)

(12.500)

(1.250)

(1,250)

(3,990)

Penelec.

Total 1.739,456 11.72% Series J 162.500 175.000 16,250 17,500 Debentures:

10.88% Senes K 272,000 288.000 27.200 2e 800 1986 1990

$ 54,740 54,740 Due within oneyear (28.500)

(28.500)

(2.850)

(2,850) 1991 1998 13.600 126,140 19.000 158.740 Total 743.500 797.000

$74,350

$79.700 Total

$ 68,340

$126.140

$ 19.000 213.480 other long-rann JCP&L has had annual redemption requirements of l

debt 48.658 12,500 shares of the Series F preferred stock since 1975 l UdYsco nd 12,500 shares of the Series G preferred stock since t

(2,894) 1980. The 1983 Series G redemption requirement was met Tutal

.$1.998.700

~ - - ~

during 1982.

Penelec has had annual redemption requirements of For the years 1983,1984,1985,1986 and 1987 the Cor.

12,500 shares of the Series J preferred stock since 1976 poration and its subsidiaries have maturing long-term debt and 16,000 shares of the Series K preferred stock since of $127.8 million, $109.5 million, $81.5 million, $59.8 million 1980.

and $53.5 mil' ion respectively, including cash sinking fund All redemptions are at the stated values of the shares, requirements. As refiected in the balance sheet at Decem-plus accrued dividends. No redemptions of preferred stock ber 31,1982, the subsidiaries had $79.8 million held for may be made unless dividends on all preferred stock for retirement of bonds due within one year.

all past quarterly dividend periods have been paid or Substantially all of the subsidiaries properties are sub-declared and set aside for payment. If dividends upon any Ject to the lien of their respective mortgages.

shares of preferred stock of any subsidiary are in arrears On July 28,1981, GPUSC and the DOE entered into an in an amount equal to the annual dividend, the holders of agreement for the repayment of amounts owed DOE since preferred stock, voting as a class, are entitled to elect a 1979 by the Corporation's subsidiaries under certain urani-majority of the board of directors of that subsidiary until all um enrichment contracts. Such agreementwas subsequently dividends in arrears have been paid.

revised on October 4,1982 regarding the TMI liabilities.

The subsidiaries' aggregate mandatory redemption re-Interest on these amounts is accrued using the Current quirement for all issues of cumulative preferred stock Value of Funds Rate, as determined quarterly by the U.S.

outstanding at December 31,1982 is $5,350,000 per year, Treasury Depanment (average rate for 1982-13.46%).

through 1987.

The amounts due, and the schedule for their repayment, No shares have been sold during the five years ended are as follows:

December 31,1982.

(i) Oyster Creek related chargos of $13.5 million are to be repaid in 48 equal monthly installments, which began on January 29,1982.

(ii) Amounts related to the TMI units, $22.2 million, will l

be paid in monthly installments beginning on the earlier of(a) the last day of the month in which TMI-1 resumes commercial operation through 1986 or (b) January 1984 through 1986.

I As a result of the foregoing, amounts payable by the subsidiaries, due after December 31,1983, are reflected as other long-term debt on the December 31,1982 balance sheet.

1 29

8, Cumulative Preferred Stock-

10. Consolidated Retained Earnings No Mandatory Redemption Under the amended credit agreement, the balance of At December 31,1982 and 1981, the subsidiaries had consolidated retained earnings must be at least f

outstanding the following issues of cumulative preferred

$450,000,000.

I stock, which are redeemable solely at the option of the in accordance with JCP&L's supplemental indenture issuers:

dated June 1,1979, common dividends payable by JCP&L are limited, to the extent they are not matched by cash Shares Stated Value Capital Contributions from the Corporation, to an amount outstanding (in Thousands) equal to 25% of earnings for the years 1979 and 1980 and 4Ideries 100% of earnings thereafter. As of December 31,1982, 125.000 s 12,500 9.36% Series 250,000 25.000

$34.5 million of retained earnings of $97.5 million was 8.12% Series 250,000 25m0 available for declaration or payment of dividends on JCP&L's common stock. The NJBPU has requested prior 88 ries

.000 8.75% Series H 2.000.000 50.000 notification to it before JCP&L declares dividends on its M;t-Ed:

Common stock. In February 1983, JCP&L gave such notice

. %!It 332$

l$

and the NJBPU did not object to payment by JCP&L of s

3.85% Series 29,175 2.917 dividends of $25 million on its common stock prior to 3.80% Senes 18,122 1,812 June 30,1983.

lh00 1ll In accordance with Met-Ed's supplemental indenture S

1 7.68% Series G 3SD,000 35.000 dated March 1,1952, $3.4 million of the balance of Qgny Met-Ed's retained earnings is restricted as to the payment 2

2 of dividends on,ts common stock. At December 31,1982, i

8.32% Series J 150,000 15.000 Pertlec:

$12.5 million of retained earnings of $15.8 million was Ir s

$5 available for declaration or payment of dividends on Met-7 Ed's common stock.

4.05% Senes D 63.696 6,370 4.70% Series E 28,739 2.874 in accordance with Penelec's supplemental indenture

!Ir so N$

dated June 1,1979, the aggregate amount of any 73 declaration or payment of dividends on common stock 8.36% Series H 250,000 25.000 8.12% Series i 250,000 25.000 after December 31,1978 cannot exceed Penelec's 9.00% Series L 1,400,000 35,000 earnings available for Common stock for the period Total 6.783.912

$423.391 commencing January 1,1979 and terminating at the end of the last fiscal quarter preceding the dste of such restricted At December 31,1982 and 1981, the subsidiaries were payment. As of Decernber 31,1982, $6.9 million of retained ruthorized to issue 37,035,000 shares (JCP&L-15,600,000 earnings of $43.9 million was available for declaration or shires, Met-Ed - 10,000,000 shares, and Penelec -

payment of dividends on Penelec's common stock.

11,435,000 shares) of cumulative preferred stock, no par Uncer the Public Utility Holding Company Act of 1935, v11us. No shares have been sold since 1978.

the subsidiaries are prohibited from making any loans or extending any credit to the Corporation without first btaining authorization from the SEC.

9. Common Stoc!t and Capital Surplus Of the 75 million authorized shares of $2.50 par value common stock of the Corporation at December 31,1982 (nd 1981,61,264,000 shares were issued and outstanding end 28,000 shares were recorded as reacquired at $2.50 per share.

In 1978, the Corporation issued 1,250,000 additional shires of common stock for $22.6 million of which $3.1 f

million (par value) was credited to common stock and

$19.5 million (excess over par) was credited to capital surplus. In 1979,293,000 shares were issued for $4.9

{

million of which $.7 million (par value) was credited to ccmmon stock and $4.2 million (excess over par) was credited to capitalsurplus.

l 0

l

11, income Tacs (c) Unused I.T.C. tvailable for carryforward to futur2 yTJs tggregate

$62 million (which includes $9 million of credits rtiated to th3 Corpors-tion's Tax Reduction Act Employee Stock Ownership Plan) of which $15 Examin;tions of Federalincome tax returns through 1978 mahon, $23 million mi $24 million expire in 1995,19%, and 1997, have been completed.

respectively.

(d) Does not include $34 million (deferred income tax expense related to income tax expense for the years 1978 through 1982 hberahzed depreciation - $33 million and amortization of I.T.C. - $1 was different from the amount computed by applying the million) related to extraordinary items (see Note 3).

statutory ate to book income subject to tax as follows:

(e) DMs not include $c million (deferred income tax expense related to hberalized depreciation - $9 million and currently payable tax benefit relating to an aoandonment loss of $3 million) related to extraordinary (In Millions) items (see Note 3).

U82 1981 1980 1979 1978 The provisions for deferred income taxes, net, result befo ir, axes $308

$258

$263

$343

$339 Other income, net 16 16 7

9 4

from the following timing differences:

Total 324 274 270 352 343 Interest gxpense (185)

(209)

(218) J193)

(160)

(in Millions) 1 Boon income subject to 1982 1981 1980 1979 1378 I

income t x

$139

$ 65

$ 52

$159

$183 li iation income t'.x at (Note 2):

st:.tutory rate (a)

$ 64

$ 30

$ 24

$ 73

$ 88 Federal

$33

$42

$36

$50

$37 l Effect of difference State 2

5 bettaen tax and Deferral of energy costs book depreciation (Note 2):

for which deferred Federat (47)

(38)

(11) 33 7

taxis were not pro-State (5)

(1)

(1)

(2) 1 vided (Note 2) 7 2

(1)

(2)

(10)

Forked River abandon.

Amortiz; tion of TMI-2 ment loss (Note 3) 20 42 70 (Note 2) 11 Revenue taxes-energy Amorztion of I.T.C.

clause revenues (Note 2)

(5)

(3)

(4)

(5)

(4)

(Note 13)

(8)

(7)

(10)

(4)

Other adjustments 1

(5)

(4)

(3)

(2)

Reserve capacity credit income tax expense 3 78

$ 24

$ 15

$ 63

$ 72 (Note 2)

(15)

(12)

Effective income Total g)

_$24 y

j68 g

t+x rita 56 %

37 %

29 %

40 %

39 %

(:) Effectiva January 1,1979, the statutory rate was changed from 48%

12. Loans to Non-Affiliated Mining Companies

' 46*-

and Proposed Acquisition income tax expense is comprised of the following:

Penelec is providing financing to non-afiiliated mining (In Millims) companies supplying coal to the Homer City generating 1982 1981 1980 1979 1978 station under long-term Contracts. These loans bear in-Federd income tax

$10

$ (2)

$ (8)

$3 $(20) tereSt at a rate which is 1 %% per annum above the prime Statiincome tax 18 5

2 7

5

. terest rate. Penelec and a non-affiliated utility have filed in Income trxes on other income, net 7

7 6

5 2

petitions with regulatory agencies to acquire the Helen 8"C **g',s a Mining Company, a non-affiliated mining company. Such rJiowance for requests are currently pending.

borrowed funds (Nota 4)

(2)

(6)

(7)

(8) (15)

13. Supplementary income Statement Provisions for taxes cur.

r:ntly payable Information (refundable) 33 4

(7)(a) 7 (28)

Deferred income taxes.

net (31) 24 75 68 58 Maintenance and other taxes charged to operating Current 1.T.C. (c) 81 (1)

(49)(b)

(7)(b) 46 expenses consisted of the following:

l Amortization of I.T.C.

(5)

(3)

(4)

(5)

(4)

Income t:x expense

$78(e) $24(d) $15

$63 $ 72 1982 1981 M80 W9 W8 (1) As a r2sult of the abandonment of the Forked River nuclear generat-ing project, the Corporation and its subsidianes incurred a consolidated Maintenance

$175 $135 $120 $ 91 $108 net oper: ting loss for tax purposes of $299 million in 1980. At December Other taxes:

31,1980, $144 milhon of this amount was carried back to prior years re-State and local gross sutting in a Federal income tax refund of $9 million which is re':ected in receipts

$134 $114 $103 $ 87 $ 75 that year's Accounts receivable - Other and the balance was available Gross revenue and franchise 35 30 26 20 17 as a cirryforward. During 198 I and 1982, $102 million and $53 million-State surtax 15 13 11 9

7 respectivily, of such loss carryforward was utilized, resulting in a reduc-Capital stcck 6

5 6

11 11 tion of $47 million and $24 million, respectively, in Federal income tax F,aal estate and curren!9 p1yable which was offset by an equivalent charge to deferred personal property 15 13 16 12 11 income taxes.

Other 14 14 11 10 9

(b) Redetermination of prior years *l.T.C. resulting from net operating Total

$219 _$189 $173 $149 $130 Icsses. Thess amounts are reflected in unused I.T.C.

31 l

t

The liab";ty for N:w J:rsey St;ts franchise end gross

15. Jointly Owned Generating Stations rec:ipt taxes and surt:.x is established in cach y:ar of cxtrcise of such franchise based on the preceding year's The Corporation's subsidiaries participated, with non-gross receipts and no liability exists in a current year to affiliated utilities, in the folicwing jointly owned generating pay a tax based on that year's gross receipts. Prior to 1979, stations at December 31,1982:

JCP&L made provision in its accounts for such taxes on this basis. For ratemaking purposes (including the salance (in uitilons) operation of the en9rgy adjustment clause) the NJBPU in Accumulated computes allowable expenses as including provision for station

% ownership Service Depreciato such taxes based on the current year's gross receipts

(*,[ncy 67 5

rF th:r than those of the preceding year. Effective January 1, conemaugn 16.45 48.8 12.4 1979, pursuant to a recommendation by the FERC, JCP&L Yuds Creek 50 16.6 2.7 seneca 20 13.3 2.1 began recording state revenue taxes related to energy clause revenues in the period the revenues are collected.

Each participant in a jointly owned generating unit in July 1981, pursuant to an NJ BPU rate order, $300 finances its own portion and charges the appropriate million of energy clause revenues were rolled into the base operating expenses with its share of direct expenses. The rat s of JCP&L. Following the precedent set by the FERC dollar amounts shown above represent only those portions in 1979, JCP&L continued to record revenue taxes of the units owned by subsidiaries of the Corporation.

currently on the portion of energy clause revenues that w:ro rolled into base rates and also recorded revenue tax expense on the incremental base revenues resulting from

16. Unamortized Property Losses this order.

The Corporation's subsidiaries are amortizing costs

14. Pension Plans associated with the following properties for ratemaking purposes:

Th3 Corporation's subsidiaries have several pension plans Penod of Ba nc at applicable to all employees, the accrued costs of which Amortization December 31.1982 Effectrve Date Project (years)

(In Milhons) are being funded. Prior service costs applicable to all plans are being amortized and funded over 25-year mbdr'1.1977 j

2j U

v" 8

e oun pe periods.

April 1.1980 Atlantic Station 20 3.6 Total pension cost for the years 1982,1981,1980,1979, April 9,1981 Berne and Stoney

. and 1978 amounted to approximately $30.6 million, $25.9 July 31,1981 Fo l er million, $24.2 million, $22.8 million, and $19,6 million, (See Note 3) 15 335.1 mspecWeS The related Federalincome tax reductions are being Based on the latest available actuarial reports, the sub-amortized over similar periods. The above procedure does sidiaries plans had accumulated benefits and net assets not provide a return on investment during the recovery as follows:

perid (In Mdlions)

January 1,1982 January 1,1981 Actuarial present value of accumulated benehts:

Vested

$278.6

$246.5 Nonvested 40.1 36.5

$318.7

$283.0 Net assets available for tensfits

$315.2

$285.2 Th3 assumed rate of return used in determining the actuarial present value of accumulated plan benefits was 8 percent for both 1982 and 1981.

32

System Statistics Gener:1 Public Utilities Corporation and Subsidiary Companies 1982 1981 1980 1979 1978 Generating Capacities and Peaks (MW):

Instilledcapacity(atyesend)(a).

8,251 8,251 8,254 8,262 8,281 Annual hourly peak load.

6,442(c) 6,215(c) 6,161(b) 6,173(c) 5,898(c)

Reserve (%)(a) 28.1 32.8 34.0 33.8 40.4 Nat System Requirements (in thousands of MWH):

N:t generation 20,841 22,266 22,659 26,891 29,747 Power purchased and interchanged, net.

13,336 12,659 12,346 7,982 4,275 TotalNetSystem Requirements.

34,177 34,925 35,005 34,873 34,022 Load Factor (%).

60.5 64.1 64.9 64.5 65.8 Production Data:

Cost of fuel (in mills per KWH of generation):

Coal.

16.35 16.11 13.76 12.95 13.17 Oil..

58.16 62.29 62.49 39.01 28.62 Nuclear..

4.08 3.83 3.80 3.18 2.31 Other.

64.06 56.82 42.29 35.77 27.58 Average 19.80 19.06 17.17 12.48 11.17 G; aeration by fuel type (%):

Coal.

81 78 81 67 57 Oil 2

3 5

6 9

Nuclear 9

11 8

25 34 Other (gas & hydro).

8 8

6 2 ~

Totals.

100 100 100 100 100 Electric Energy Sales (in thousands cf MWH):

Residential 10,604 10,707 10,810 10,754 10,715 Commercial.

8,173 7,949 7,687 7,359 7,208 Industrial 10,752 11,535 11,520 11,974 11.447 Other.

1,824 1,821 1,821 1,908 1,900 Totals 31,353 32,012 31,838 31,995 31,270 Electric Operating Revenues (in thcusands):

Residential S 919,532

$ 793,056

$ 719,166

$ 597,757

$ 544,571 l

Commercial 661,910 548,367 470,123 360,859 328.081 l

Industrial.

694,291 609,177 531,369 431,104 365,456 l

Other.

101,712 91,591 87,535 77,512 67,421 Totals from KWH Sales.

2,377,445 2,042,191 1,808,193 1,467,232 1,305,5E9 Oth:r Revenues.

24,391 20,097 21,102 20,479 18,721 Totals

$2,401,836

$2,062,288

$1,829,295

$1,487,711

$1,324,250 Customers-Year End (in thousands):

RIsidential.

1,434 1,422 1,405 1,386 1,364 Commercial 164 163 161 157 154 L

Industrial..

10 10 9

10 9

Oth:r.

3 3

3 5

5 l

Totals 1,611 1,598 1,578 1,558 1,532 PriceperKWH-a!! customers (cents)..

7.58 6.38 5.68 4.59 4.18 (t) inc!udes the installed capacity of the Three Mile Island nuclear generating station Unit No.1 of 800 MW and Unit No. 2 of 906 MW for all periods. The reserve (%), excluding these units for 1982,1981,1980 and 1979 would be 1.6%,5.3%,6.3%. and 6.2% respectively.

(b) Sumrner peak.

(c) Winter peak.

33 i-

Supplementary Information Concerning inflation Effect](Unaudited)

INTRODUCTION: The following supplementary informaron o supp:;ed in tecordanw with the requir:ments of FAS No. 33 " Financial Repus ting at:d Changing Prices *, FAS No. 33 requires companies to explain the effects of inflation upon their operations by applying two methods to adjust conventional I

historcal cost financial statements for the effects of changing pnces. These methods are: (1) the " constant dollar" method, and (2) the " current cost" method.

Both methods employ a number of judgements and experimental estimating procedures prescobed by FAS No. 33 in an attempt to approximate the I

effects of inflation. Consequentty, the Corporation cautions readers to view these data..s estimates, rather than as a,1y precise measurement.

Consolidated Statement of income Adjusted for Changing Prices in Thousands Conventional in Average IPS2 Dollars Histoncal Constant Current For the Year Ended December 31,1982 Cost Dollar Cost income Statement Opersting Revenues *

$ 2,405,527

$ 2,405,527

$ 2,405,521 Energy Costs 1,127,176 1,127,176 1,127,176 Depreciation 202,725 406.111 427,132 Oth r Operatmg Expenses 767,593 767,593 767,593 income Taxes 71,511 71,511 71,511 Totti Operating Expenses 2,169.005 2,372,391 2,393.412 Ope,iating income

• 236,522 33,136 12.115 Other incorn and Deductions 14,775 14,775 14,775 int:r:st Charges, Net 175,821 175.821 175,821 Pref 1rred Dividends 41,742 41,742 41,742 Inceme (Lots) Before Extraordinary items 33,734 (169,652)

(190.673)

Extrudinary items: TMI-1 7,636 8,860 8.759 Other J3.863)

(3 863)

(3,863)

Income (Loss) Available for Common (excluding current year adjustment to recoverable cost)*

37,507_

$ (164.655)

$J185,777)

Ermings (Loss) per Common Share 0 61 (2 69)

(3 03)

E'fect(f Changing Prices on Assets and Liabilities Curr:nt Cost increase in Net Plant Held Dunng 1982

$ 343,127 Lcss: Increase in Current Cost Net Plant Attritsuted to General Inflation Dunng 1982 301,136 CurrInt Cost increase, Net of General infiation 41,991 Curr:nt Year Adjustment to Recoverable Cost 54,397 33,395 Reductions Due to Depreciation Differences

-Expensed (203,386)

(224,407)

-Capitalized (1,393)

(1,260)

-Extraordinary items: TMI-1 1,224 1,123 Totti 1982 Reduction to Recoverable Cost (149,158)

()49,158)

Giin from Decline in Purchasing Power of Net Amounts Owed 78.957 78,957 Net Erosion of Common Stockholders' Equity

$ (70.201)

$ (70,201)

• Rev:,nues, operating income, and income (loss) available for common have been adversely affected by regulatory disallowances of operating expenses and retum requirements associated with TMI 1 and TMI-2 (see Note 1).

CONSTANT DOLLAR BASIS: Constant dolbr amounts represent dollars of equal purchasing pnwer, as measured by the Consumer Pree index for All IAbin Consumers (CPI-U). By this method, histoncal investinents in physical plant items are restated, using the cpi-U, to amounts in present day dollars having the same purchasing power as the historical dollars had when originally invested.

CURRENT COST BASIS: Current cost amounts also restate historical physical plant investments to present day dollars. However, specife pnce j

indexes applicable to the various types of plant equipment are applied rather than the general inflation CPI-U index. Specific price indexes more closely reflect the changes in purchasing power of surviving plant investments from the dates these were originally acquired. The specifc prce indexes gmployed are individual company equipment cost indexes or the Handy-Whitman Indexes of Pubic Utility Construction Costs.

MONETARY AND NON-MONETARY ITEMS:A key concepMn understanding the data adjusted for inflation is the distinction between monetary and non-monetary assets and liabilities.

)

Mon tary items are those assets or liabilities which are or will be converted into, or paid by, a fixed number of dollars regardless of inflationary cttnges. Holding assets, such as receivables, prepayments, and inventories, during periods of inflation results in a loss of purchasing power because the imount of dollars received in the future will purchase less. Holding cash as an asset also results in a loss, similar to what happens to savings accounts, as these dollars will buy less in the future due to inflation. Conversely, holding monetary liabilities during periods of inflation results in a purchising power gain because payment in the future will be made with dollars of diminished purchasing power, similar to what occurs with a home mortgage.

Non-monetary assets and liabilit.es, such as property, plant, and equipment, do not gain or iose purchasing power solely as a result of general price level changes, but rather are affected by changes in specific pnces for the related physical property, For this reason, the Corporation considers the currInt cost method to be preferable to the constant dollar method which applies the CPI-U to all physical property investments without regard to specific property and equipment pnce changes.

1

PLANT, PROPERTY, AND EQUIPMENT: These investments are considered to be non monetary items. Estimated utility plant was determined under both the constant dollar and current cost methods by applying the indexes specified above to the histoncal cost of utility plant by vintages and to re:ated accumu:ated depreciation. Neither of these restatements of the purchasing power invested in surviving utility plant should be viewed as representing replacement cost or current value of existing plant productive capacity. The actual replacement of present facilities w!Il occur over many years as future facilities, different in kind frorn present facilities, are constructed and placed into service.

GAIN FROM DECLINE IN PURCHASING POWER OF NET MONETARY ITEMS OWED: Since the Corporation owed net monetary liabilities (pnmanly long-term debt) dunng a penod in which the purchasing power of the dollar declined, the inflation adjusted statements show the Corporation expenencing a net gain in purchasing power. This gain is stnctly an economic concept and unfortunately is not realized in cash. As a result this gain amount does not represent funds available for actual use or for distribution to shareholders.

DEPRECIATION EXPENSE: The current year's provision for depreciation for each inflation cost method was determined by applying the same methods and rates as used i.i the histoncal financial statements to the restated property, plant, and equipment investments.

OTHER ITEMS. In accordance with FAS No. 33, revenues and all expenses other than depreciation are considered to reflect the everage pnce level for the year and cccordingly remain unchanged from those amounts as reported in the Corporation's pnmary financial statements.

Energy costs, including fuel, power purchased and interchanged, and changes in deferred energy cost balances, have not been restated from their histoncal costs. Regulation limits the CorporaticWs recovenes of these items to actual histoncal cost through energy cost adjustment clauses in basic rate schedules, Consequently, energy and fuel costs, and related fuel inveatOnes, are effectively monetary items.

Income taxes included in the inflation adjusted statements remain unchanged from those amounts presented in the pnmary financial statements, since present tax laws do not allow deductions for depreciation adjusted for inflationary effects.

INFLATION EFFECTS AND RATE REGULATION: Present regulatery ratemaking firmts tne Corporation's recovery of plant investments and other expenses to histoncal cost amounts in charges for service to customers. Therefore, the excess of constant dollar or current cost utility plant over histoncal cost is not recoverable in rates. Sir,nificant non-recoverable amounts are included in the constant dollar and current cost depreciation figures for 1982. A further amount related to inflation during 1982 is shown as a Current Year Adjustment to Recoverable Cost plant. The Total 1982 Reduction to Recoverable Cost is indicative of the addit,onal cat *i flow from depreciation required to preserve the purchasing power of invested capital. While this effect is partialty offset by the gain from holding long-term debt, the Corporation has a net purchasing power loss that erodes common shareholder interests and which can be overcome only as a result of appropnate recognition in the rate regulatory proc'ss.

Five Year Comparison of Selected Financial Data

• In Thousands Except Per Share Data year Ended December 31, 1982 1981 1980 1979 1978 Operating revenues As reported

$2,405,527 $2,065,487 $1.831,741 $1,490,154 $1,326,644 in 1982 average purchasing power 2,405.527 2,192.116 2,145.690 1,981,617 1,962,808 income (Loss) before extraordinary items As reported S 33.734 $ 20.544 $ 20,591 $ 95,783 $ 138,774 in constant dollars (169,652)

(155.321)

(141,336)

(15,820) in current cost dollars' (190,673)

(176.976)

(169,737) 0 7,368)

Earnings (Loss) per share before extraordinary items As reported 0.55 $

0.33 $

0.34 $

1.56 $

2.30 in constant dollars (2,77)

(2.54)

(2.31)

(0.26) in current cost dollars" (3.11)

(2.89)

(2.77)

(0.94)

Cash dividends per common share As reported 0 00 $

0.00 $

0.00 $

1.20 $

1.77 in 1982 average purchasing power 0.00 0.00 0.00 1.62 2.61 Market pnce per common share at year-end As reported 6.750 $

6.750 $

5.000 $

8 625 5 17.500 in 1982 average purchasing power 6.674 6 932 5.594 10.846 24.935 Net plant assets (in 1982 year end dollars)'*

In historical cost dollars

$3,958,438 $3.871.243 $3,729,452 $4,084,619 $3,948.821 in constant dollars 7,742,510 7,850,117 7,874,990 8,688,208 in current cost dollars' 8,021,295 8.128.670 8,209,012 9,157,035 Net atsets at recoverable cost In histoncal cost dollars

$1,861,553 $1,823.244 $1,807,323 $1,785,556 $1,757,554 in constant collars 1,840,550 1,872,496 2,022,090 2,246,053 in current cost doll 3%"

1,840,550 1,872,496 2,022,090 2.246,053 Current cost increases, net of general inflation, after current year adjustment j

to recoverable cost"

$ 75,386 $ (154,804) $ (352,885) $ (484,353)

Gain from decline in purchasing power of net amounts owed S 78 957 $ 1N,789 $ 299,048 $ 374,473 Saiected balance sheet data at year end (historical costs)

Total assets

$5.180,661 $5,054,021 $5.042,972 $4,991,994 $4,612,683 Long. term debt 1,998,700 2,109.336 2,105.439 2,148,972 2,017,123 I

Cumulative preferred stock-mandatory redemption 72,274 77,335 82,376 87,396 92,403 Average common shares outstanding 61,264 61.264 61,264 61,218 60,217 Average consumer price index 289.1 272.4 246.8 217.4 195.4 December consumer price index 292.4 281.5 258.4 229.9 202.9

• All constant doilar and current cost amounts expresse3 in 1982 average dollars, except as noted.

'Pnor years' current cost amounts adjusted to 1982 by applying the CPI-U indexes. as required.

'" includes $5,284 for Other Physical Property and excludes $33,609 for the T Mi-2 damaged core. The latter is treated as a monetary item for FAS No. 33 disclosure purposes.

35

Directors Officers Louis J. Appell Jr.' 8 8 General Public Utilities Corporation President Susquehanna Broadcasting Co.

York. Pennsylvania 17405 William G. Kuhns (Communications and Chairman and Chief Executive Officer Consumer Products)

Herman Dieckamp Donald J. Bainton.2 Prasident and Chief Operating Officer t

Executive Vice President Verner H. Condon The Continental Group. Inc.

Vice President and Chief Financial Stamford. Connecticut 06904 Chr (Packaging)

WM 1 momh John F. Burditt.:

t Comptroller Chairman and Chief Execueve Officer ACF Industries. Inc.

John G. Graham New York, New York 10017 Treasurer (Equipment Manufacturing)

Wil!iam B. Murray Herman Dieckamp Secretary President and Chief Operating Officer Grace Wade General Public Utilities Corporation Assistant Secretary Parsippany, New Jersey 07054 Dr. David L. Grove.3 Subsidiary Company President David L. Grove. Ltd-Presidents and Chief Armonk. New York 10504 gggg g (Economic Consultants) r a

Robert C. Arnold William G. Kuhns Chairman and Chief Executive Officer GPU Nuclear Corporation General Public Utilities Corporation Herman Dieckamp Parsippany, New Jersey 07054 GPU Service Corporation John F. O' Leary' 8 James R. Leva Energy Consuttant Pennsylvania Electric Company Washington, D.C. 20015 Floyd J. Smith Dr. John W. Oswald' 8 Metropolitan Edison Company President William A. Verrochi Pennsylvania State University Jersey Central Power & Light Company University Park. Pennsylvania 16802 t

Paul R. Roedel.

President and Chief Executive Officer Carpenter Technology Corporation James B. Liberman Reading. Pennsylvania 19603 General Counsel (Specialty Metals) w.mber m Ao commm member a compen non commme.

aM.mber of Nomia.teng Commm

l l

SHAREHOLDER NOTES

$ $ g8 19 2 E

Price 1983 AnnualMeeting The Annual Meeting of Stockholders of First Quarter 51/2 37/8 l

General Public Utilities Corporation Second Quarter 53/4 41/8 will be held at 10 A.M. EDT, May 4, Third Quarter 53/8 43/8 1983 at the Birchwood Manor in Whip-Fourth Quarter 67/843/8 pany, New Jersey.

Too many reports?

1982 You may be receiving extra copies of the First Quarter 71/8 41/2 GPU Annual Report because of multiple Second Quarter 53/4 45/8 accounts within your household. To stop Third Quarter 61/8 43/4 the extra copies, please wnte to the Fourth Quarter 71/4 51/4 l

Conaacticut National Bank, P.O. Box 210.

Hartford, CT 06101. Please enclose the l

mailing labels from the extra r 3 pies.

GPU is listed on the New York Stock Exchange. At December 31.1982 there For further informattor were 122,884 registered holders of Copies of GPU's " System Statistics" and I

of the Corporation's 1982 annual report to GPU Common Stock. With respect to l

the Securities and Exchange Commission restriction on the payment of common will be available after March 31,1983. Wnte stock dividends by GPU, see Note 10 l

to Mr. William B. Murray, Secretary, to the Financial Statements, page 30.

l General Public Utilities Corporation.100 Interpace Parkway, Parsippany, NJ 07054.

j Transfer Agent and Registrgr-Common Stock Connecticut National Bank 150 Windsor Street, Hartford, CT 06115 Agent - Dividend Reinvestment and Stoch Purchase Plan -Common Stock Connecticut National Bann P.O. Box 210, Hartford, CT 06101 The General Public Utilities System Companies General Pub!Ic Utilities Corporation 100 Interpace Parkway Parsippany, NJ 07054 (201)263-6500 GPU Servi::e Corporation GPU Nuclear Corporation (Addresses and telephone numbers same as GPU Corp.)

Jersey Central Power & Light Company Madison Avenue at PunchBowl Road Morristown, NJ 07960 (201)455-8200 Metropolitan Edison Company 2800 Pottsville Pike Reading, PA 19640 (215)929-3601 Pennsylvania Electric Company 1001 Broad Street Johnstown, PA 15907 (814) 533-8111