ML20204H200
| ML20204H200 | |
| Person / Time | |
|---|---|
| Site: | Fermi  |
| Issue date: | 12/31/1986 |
| From: | DETROIT EDISON CO. |
| To: | |
| Shared Package | |
| ML20204H190 | List: |
| References | |
| NUDOCS 8703260581 | |
| Download: ML20204H200 (48) | |
Text
0 s
- ~ . yge eigp - i 4
[M,. 44-WiaW AW 'W-, EE g'tunaN -
, ,- , ' traw ,, tu aispa_,
L .-2 (d O'MbM.4 fab ~gqf ,u d'h%Wh,E ~ - .
w.. - , y .
'; . ys 3
'n' y4 j- -. - 4
!!J' IdjgLkgf/
- 2
- Q4.
' ?, 4,$Q he% ' '
Am@; " JWMM -
_sO , _0 ?e _? "s!;l
'*[
I '
i'
' +
w.-
g
?
<i+AW~
Weh w#wA9 mms 4 g
,. 4 uur -- sfM &d.A A 4 c
j 1 L~ , .. .,.s.o;as .
.1,'
$ ( , . . ~ s-_,,N
] ' b b)
IR . ai .,4.,k
, b k' h. k ,k - kCh
}!
1986AnnualReport u - ~ ~ .~- - -- __-_ ~ _ . . .. _ .
n,,.n_.,,_____ ___ _
Detroit on w wnni on e PI)H AIMIC K 0D000:141 cHienn L.%4IOvi i
] PDR
t 1
i
'a 4 .'
y e
.w.- __
s, _ Ad - w'. uw.&W 4e u.3wi y
j
- i. n w W
. unne.
Museholdus
- 8. Sesvese
- 7. CampsIIIIsa a inneesses b is. I m desship
- u. musennsme
- 17. finnastal seseemsees
- 25. Neessantle Finanstal Seassesses M. Mosestlaneous Carperste Data
- m. m=e d Officers ,
i L_
e - -
i ' ..N*) . f.
.'.,- g.l[ .
' . fgWl4 .ifl'iY n n '; . s , , :. . . ,
. , . ,7 7~,. . - E. ' -
~
i >- ,
.. '. i , -
y,. e . . . M .
I; ; .* _
l e
4 f . .o -
y:v(,.
.s .
- x 3 4.. .
g'
- hp . , e ' .; ' , .~ 4 i.
)
., w 4 . .; . .. gi.-
^
h 'N .- -
a c
[? 4 % *'% .
~
g 4,. ,/j 4 a4;%. , A. $,'- . , .
^
'p 8
e A. Sw< . .
+ . c, . - ,- .
a.y . .
.. : -3. . . . .- y. . . . , - .
. 3 * '- -
fn
- ~'
e fu. 4,j . ..h j s .;
> l.
- ~~
.a ,n,.
.. . e ,4 y .
- . .. =
e>
p g .
? ' Highlights
. Di ?....a
- ,. :. t
.. x.pt.n 3 .. ~ ,
. i .
1 v .
,t
, . ,,x
", s w , n. e,. -
-*+, ,. . .- . s -
, t, , ,6 '
, e .- -
. , o,a. e. . q..- .*.. . . . . ' .
y p
}/3 _
. . . , w..-... u . . . . . . , , . . . , . .
1 q
, , -
- m..a.....,_,....,,,,...-_..., : 1. ,
44 .. .
- g. - - '
-g,.- ' '
g
. MM M i MME , IS .,
. , ' 'neweedsilmpeshp ; . esas . ,
sus v' .
W Wl -
. ,' O.i
( ",
. 3
( apitalvation '
- . / .
S,W WM i g,$
- Salcs ot i ici ttii it y (kWh t housando N .
-@.- . k7-g .
Syste*m ( ahability at lime of IVak'(kW)
~
,' ' 9,199,000,, 9. %7.(MN)
N. .
7L ,'l g System IVak I h manti (k W). ' 8,050,000 $
+
[ . . F172.lMM( .
g-
'.- ( g- . ' . -
.- _ ,. y y . . .
,] fY \;(fl .) }l l'f:l . G l _ ~.l Q l l ' <j +KN li
. f. . ' ' ') l{ ' ' l., :l _. 5 _
- I
- f
Ilowever, when Fermi 2 achieves com-mercial operation, earnings will no longer be supported To Our by the Allowance for Funds Used During, Construction (AFUDC), a non-cash accounting credit in the income Shareholders: siaiement, which heiped suppo,i ou,,,co,a profit,in recent years during the company's major construction program, hiaintaining earnings at those level, in the The year 1986 literally was one futurefor will pose a significant challenge since the rate the record books for Detroit Edison. Our employes pro- increase will not cover the total cost of Fermi 2. Despite vided record levels of service to record numbers of cus- the shortfall, we are committed to maintaining our divl.
tomers that generated record sales and earnings. dend at its current level. We will file a new rate case in These historic achievements were ac- 1987 which covers additional Fermi 2 costs resulting in companied by other company milestones which took part from the delays in reaching commercial operation, considerable effort, resulted in significant pride and will Another factor af fccting future carning; positively impact the company's future. Yet, our pride and is the new accounting standard adopted in December 1986 progress were offset by disappointments in area s of by the Financial Accounting Standards lloard. This new primary concern to your management. standard requires the company to recognize certain losses For example, while the fermi 2 power related to abandonments and disallowances of plant costse plant produced electricity for customers for the first time As permitted, the company anticipates adopting the new in September, difficulties experienced in our testing pro- accounting standard in 1988, although the standard allowc gram and the resulting delays in commercial operation delayed application until 1989 in certain prescribed cir-were extremely disappointing. cumstances. This is discussed in detail in Note 3 on pages Also, although we adopted in 1986 a 28 to 30.
new strategic plan to position us effectively for the future, To bolster future carnings, and to help your company and the electric utility industry face chal- support the dividend, your company embarked upon lenges on a variety of fronts - regulatory, legislative, major programs to improve Detroit I:dison's competitive financial and competitive - which are truly historic and and financial positions by holding the line on costs, worrisome. Our plans for meeting these challenges are increasing sales and improving service to customers.
described throughout this report. Simply stated, the operating focus at in 1986, common stock carnings rose Detroit Edison - and the theme of this report -is to better '
for the eighth consecutive year, totaling a record $378.3 serve all residential, commercial and industrial customere million and up 13.2 percent from 1985. The record per- Advances in innovation, leadership, competition, service share carnings of $2.58 - despite more shares outstand- and performance w cre achieved in 1986 which will serve ing - were up 25 cents from the $2.33 for 1985. The your company and its customers well for years to come.
Comparative Results of Operations and Statistical Review Ilut the most important result - and one on pages 40 to 43 detail the company's long record of year- of which we are particularly proud -is that we held the to-year gains. During the past to years, earnings for line on the cost of producing cIcctricity for customers and, common stock increased a total of 345 percent, and per- in some cases, lowered the cost lor cumple, in 1986, share carnings increased 55 percent despite a 186-percent industrial customers, on average, paid 6.17 cents per increase in the average number of shares outstanding. kilowatthour sold,1 percent less than last > car.
I cilecting more aggreulve marketing Capital espenditures of $645 million, l and economic development elforts, along with 1986 im- primarily at f ermi 2, were down slightly from the 1985 prmements in Southeastern hitchigan's economy, record level of $711 million. New financing required to fund sales reached 38. billion kilowatthours, up 3.7 percent these espenditures and to refund maturing securities, as f rom a ) car ago.1 hese sales were primarily responsible well as to redeem early two high-dividend preferred stocli for our record operating revenues, which rme 2.9 percent Iwucs, totaled $609 million for the > car. We also have f rom $2.7H8 billion in 1985 to $2.869 billion in 1986. agreed to buy the remaining 13.6-percent shave of l ermi 2 I uture company earnings will be owned by Wolserine Power Supply Cooperative, Inc., for impacted w hen t ermi 2 goes into commercial operation, now sc heduled for hlay 1987. 't he company then will begin to collect rate incicases for lermi 2 apprmed by the Alichigan Public Service Commlulon (NIPSC) totaling
$175.H million tinduding interest) phased in mer fise
) cars. 'I he first ) car's increase will be $77.9 million.
_ - -,,,e# '
Iett to Huht:
I rnot I . Grove. fr.
l Charto \l. lichtel I t\ aller f. Als Carthy fr.
( - - .
i l
l about $550 million - a discount of $200 million from We also anticipate increased pressures
! Wolverine's cost. We believe the purchase, scheduled for for changing the regulatory structure of the electric utility j completion in 1990, is in the best long-term interests of industry. While many of the changes being proposed both Detroit Edison and Wolverine, are frequently called "de-regulation" in the name of in.
As indicated, progress toward commer- creased competition and lower costs, many changes which
, cial operation of I'ermi 2 was slowed by problems in 1986. occur are likely to be "re-regulation"-elimination of While low-power testing was completed and the plant was some kinds of rules and the imposition of others.
l operated at low levels during the year, it also was neces- These new facts of life for the industry
- sary to shut down the plant several times. and Detroit Edison require a new strategic mission state- l l Frustrating and discouraging as these ment developed by management in 1986: To meet the 1 1 developments have been - and as they continue to thrust energy and related service needs of our customers in order 4
us in the public limelight along with other nuclear util- to prosper as o financially sound business. You will be
< ities - they have not deterred us from maintaining our hearing more from us during the year about how we
! strict safety and operating standards, Many corrective intend to achieve this mission.
l measures implemented in 1986 to resolve these situations We believe we are prepared for what is i and improve overall operations already are showing ahead. We have the people, the resources and the plan.
results, 13ut most importantly, despite the setbacks experienced in
! Commercial operation of Fermi 2 is but 1986, we have the determination to become a stronger, I one of the hurdles we face in 1987. As a result of the 1986 more customer. focused organization which is confident
- Tax Reform Act, our cash payments to the Internal Reve- and prepared for the future, i
nue Service actually will increase substantially, despite l lower tax rates. fchruary D,19M 1
1 1 .
4,; j
- g
, a, "
l j gk
[ .\ /J s
tY '
4
'A g eneet L Grove, Jr.
Vice Cha emanof theBoar and Chiei finintialOffleer :
Char 6es M. Heidel <
P>seideasand :
, Chief .
Ordteer - j h
WahreJ. WCarthy, }t. i Chaleman af the Boardand i Chief i nesativeOffher {
h l
l I
s ~~
c._ .%,
1
[
['
g . . ...
m,. ,
j
(
- l Sonertimes being ~'
, ? "A Good Plert of Your l Life"menne being there
\
\ '
[ to arsuera question or % . . .
- ^-
l
- t two. Here, Linemen 4 :
'~ . '%
Ittrkk M. ngnety . .
- W 6# -
(left) and Gerald H.
Simon tright) confer ,
l with afuture customer, Q _
w~ ,
, .s ~ , .
N g 3 ,
>' Y l [ 'Y -
, ) ,
,i ,.. 9 . 4.,
l a% , 4 1
I W h -
o 4 p.W' O -
s s .
enum i
i j . . ,. -. .~ ,
1
~
- s. '
- s. 1%
I W.- [.- 3 5
( *e
...q,s%
l I
I
i
=
For Detroit Edison,1986 marked a spirited rededication to a principle that has guided the company since its founding in 1903:
serving customers in ways which effectively meet their needs to enable the company to grow and prosper. This resulted in intensified management attention, a rekindled and highly supportive employe spirit, revised priorities and aggressive To ensure adequate, reliable elec-new programs - all directed at serving customers tric energy to meet these customers needs, Detroit through leadership, innovation, competitiveness, Edison has spent much of the last 40 years building performance and helping improve the quality of life and modernizing one of the most advanced genera-in the communities Detroit Edison serves. tion, transmission and distribution systems m the The results of this re-energized c untry, using highly advanced systems and tech-service effort touched all of our major constituencies nologies. The successful startups in 1984 and 1985 in 1986. They also reinforced Detreit Edison's new "I It" '*" C"VI'"" *""'"II Y 'I""" UCII" RIV"' C""I' strategic mission to become a financially prosperous fired generating units, along with the completion company by ensuring shareholders a fair return on and test-operation of its Ierm 2 po ver plant, vir-their investments, providing employes with oppor- tually ended this massive construction job.
th Belle River and I erm: 2 tunities to grow and achieve professional goals, and ,
meeting customer needs with first rate service at the operating, the company will have nearly 10,500 lowest reasonable competitive price, while being a nwgawaus of capacity m place - enough to nwet We good corporate citi/en, area's present and foreseeable future energy needs.
The need for this additional gen-erating capacity was d( monstrated on two hot days in July 1986 when the a.nipany twin' hit new peak Service loads. These peaks came earlier than had been l The customers at whom the ser- forecast and with no interruption of service to vice rededication is directed are 1.8 million strong. customers. The record demand resulted not only They live, work and operate their businesses in a from the heat but also from a greater number of 7,600-square-mile area - roughly the si/c of New customers and increases in both basic and new uses Jersey. The company's service area includes metro- of electricity resulting from Southeastern Michigan's politan Detroit and stretches southward from the tip expanding economy.
of Michigan's " Thumb" to near the Ohio border and Kilowatthour sales reached an I westward from lakes Iluron, St. Clair and Erie to all time record in 1986, up 3.7 percent over 1985, northwest of Ann Arbor, encompassing the state's eclipsing the previous record of 37-billion kilowatt-most populous counties. hours in 1978. The company alsa surpassed the 1.8-Many of these 1.8-million cus- million-customer mark for the tomers are particularly demanding because of their first time. New construction growing and increasingly speciali/ed energy needs. orders from customers - sub-Accustomed to adequate supplies of highly reliable divisions, apartments, service electricity f rom Detroit Edison for more than 80 work and line extensions for years, they depend on this service not only for other buildings, hotels, factories T Q l everyday living and w orkin); but also for powering and retail shops - were 53 per-the continuing resurgence of Michigan \ economy. cent higher than in 1985, in two of the company % sis geographic t operating dis isions - Macomb and Oakland - this activity rose 141 percent and 82 percent, '
respectively, f rom 1981 w
.ry e + 3 mm w-*yy m e I
___ ,. . - - . _, _ , _ _ _ _ _ , - _ _ , - , _ , _ n - -. _ ,, - . . _
.a
. . - (-. , , . . ja L ; Tl. -g;.( .y.. t,.,.,. .y
.1.. ~.
,?
- q'l .. ..p g..t
.: / ip ;
'_ .y. ,A " ; . . . .,
yy:, _ ,.-_dj .. . .
.t
,;..,.,,,i
,..y * .a_ 3
"/; ,, '. , _
.n.,
g.
,O , *, ,, ,
, [ _~ _ , _d )'I 3&R( y ;
. ; ;; ..- -. .. : ;~ . .
. y
~
. . . - .;:. _ , . . .y ; _ t . . ,.. ,,
2Many customers art:. l
.;7.q;_ 3 - _
- . . . ., - ;y ,. . _
,q _ g,g;,g,gv,,,,g,,ygy,, / l
- s
..; ',; '- " : . . ,. s . } helpfulinformation x; +- 3 g: (.,
3.. . . . , . .. c. .... < titeyreceiveaspartof .
x x ,/ . . . . . . . . ,;, . ; .
.~: .. .
-c . . . i titecompany's security
,(7 .h_
} ,.
v . '. i.L . ; } . 4 . 4 -; . }l .
' ; i .
. _ Lligistingandproduct -
safetyprogram.
- 7. S P %
.-: ' Q3
.'- ., ' ; j. ;. .
- L
' e j y[- '
,$: &.Vi S..*.,. .._
l'
, j ~ l l ._
.?. .
t V. '
l.,
1:
0
.&:'*- $ .L' .I V p ;'. ' ] ; : {' :', e t
~ . . R:'. ..e.. ~' _ .. j]' '. ,. .-
- -:- ..h4 - '
. ,, . '} :_
.'T ..
~.;.%R . _ ' .: , . - !~-_.'-
. ! r. b ',p.g b :n. 4 : .7 .. ' . ' ' V: > * * '
- V _ : .. 'r,- ,.
1.f.3::n .Q i.,i ' g -E . ~ ;;- . - ' ' A: I p ' . , ' ~ ~ :'-
'$OR9 ** . .. .
.i:k';, '.y y' h '%( ,. . f: , { , ,
'.;g -: v ,'_ .', -' .'. ...'f ~l-
.3
- cN,. l'Ly~ ,. s uf:f. + ... a
- ' V ;. -
u U- c4 l ' *; ' . ' . .:'
.g y .s 7,:%";; .'.;
s
. , * * .-'. - f, '
~ . $ .(( .
b
. 7. ,x.;g( y.w 4, ..- -
M .'-[. J. .;.g .1, j. ;-
- v. . , . . . ; _.
- ,. . . _ c .,. ; . y . m..
'. ' ' , W..'
.L
- l'
[ . f.#f. . . - . -
k * -
, ' ' l f ,, . '
L, y,
- ] -., '- -
. .' '. , ;.,.., ,9 s-s '$. .; g'.g ..
jiA.. A: . .
.1A .; .. .;. _) g., ~ - . . -
, . - pe%. ~ 4+.
'.y ~ b :: m
. w, w.a w , . _ , + L'
,v.n+-. p$ . . -... .; :.s'- + q! ,"'..'; 'y . . . . : '.,-.e..D;. e
_ - o ..;;. _ . . .. .+;.>
,. l l'.'
.g ..?, c . f .' , ,
z ,, .y
'L; [;'
[,, _ .
V
- ' ' . ... .; '*.c; f . p: . '. , . _
6, - , _.."-.,,'f:', , ,,
- 9 . - ;
,9 -
... .y. 0.,',.- ', N . :. l '_' ,h , _y, l ,
J ,N : ^,'.'
f 3 .. . (.
';}. . t l
- p. -
< , ~
V } _ d'.. .
.,;.o .
j
"- } . j . , ,';,, .' ., % :l ' ,_
. .l ..
[e ,.
- , - t n f ~ .f . '... ; ' _
W..*'-',', .( ,
< :., [.f
- ,h? T. I ?
Y . k ' ,. '* c.;, c. , .o f :i5W mg .(c..
. , - . w . :. ,g y .
' ,. ~, . .
m..7 . . - '.g : ; .. ., s
,t_..
' ' ~ . .yp. .. .-.
. :.,, .. J .
g (#'.3 ' y / . , .
V _., ~*
k .i '4^ ;,.,,.
',j g .
s!;j '. ~ .g i 1 :
e s . .- '! ,. .t y..,* , .g .; .. .; ,,, s. : ,-, . #! 1., ,
' j . ( ,4A-
. b:hlc.
jQ;!w[j.zM.mcm
').f! .fY' gs ' - j'
.~
.' 3,.h, m .:
w'N:& .;}. .
Y.
f:nm. N.N ;.m. ; ' Y k, '
m
-Y r
, \
l l N / *? ' , '
.%' : l } _ j arf . , N f[ .
's .v.y j
. f q; h t_.e. ; .
F .; r;: .- :r,
\ .m V..y :%;.Q:;. '(&- ~. .y o
. . Qe,. ,. .
e, .;r . . r. . ...
w )L. p.4
- h. k lQ ik: . h; .. [. j. j. [A, - .,
. . :['. ..k h
_ _ m' he 9 ,.M' i( 'r hg. , s, .g. . ,-
1; D
.p.
-.4 3
- 7. 'A ' ' p . . ,f.. ? i ' 1;[
tJ, *d: 'W. - ' f,'4 ;' *'M s 'a u - . d.
.&, + , ~ .v s. ,.< . . .s y,. 7. 4.< 1. . . . e 2. 1 y r . ,- = ,
N *
lv.l ; ll. ' k. . ,.9 _ y :.f ' ; l ~ 1. f 's f:,._', '
.L .f hh$*;$*f
' Yls 7 w a , k,f mammc
.Y h.Y;N-b uk.m.p, m~ g ,uwls at
- . V' v
Yf y
\
w s n.
d e ,4 c A 3 tu13w.c. ,: 91~ .l q yi .
-d v g. /4 4Qe AyQ ;
. s.:.y. pn@
,A f [y;)n k5ffL5bQ) ,' w 4.N,$$,fhS 7n s??gs w' ,
aw . .l gn& ' od e" .*w ,
. .. p ,7. ., ; , ..
,,G ,.. , :yy . /
0 ' f l
eeping up with new service orders underscored the significance of our new employe motto: " Serving Customers...We're All a Part of it!" This dedication was further reinforced when floods - the worst in the area's history -
ravaged parts of Michigan in 1986. Detroit Edison employes played critical roles in meeting the emer- Responding to customers, desires gency. In 12-hour shifts, company safety teams f r brighter, safer neighborhoods, the company worked with individual flood victims and with intensified its home-safety efforts with new security police, fire and other groups to prevent injuries lighting and safety programs. These mcluded a from downed wires or flooded electrical equipment. c mprehensive marketing, customer relations and Meanwhile, repair teams labored - often around the C **"".icati ns program to provide helpful home clock - to restore electric service. suunty mformation for all customers.
Many new programs to serve customers were introduced during 1986. They included AfetaLine, an information and consulting Competition service for metal fabricators; a new cost-efficient Competition is growing daily in plasma-arc technology for manufacturers; and a the electric utility industry and is affecting all com-ride-drive demonstration of electric vans for pro- panies, including Detroit Edison. As a result, the spective customers who might use them for many company is anticipating and responding to these light-duty operations. Special incentive rates were challenges with a bold and competitive spirit.
used to help attract new businesses to the area and The company strives to be a pro-retain existing business, while special rates and ducer of low-cost electricity and steam for all of its services for senior citizens and people on fixed or customers - residential, commercial and industrial.
Iow incomes helped protect the quality of life for But now, more than ever, it is competing aggres-these important customers. sively with other energy sources and distributors, in 1986, the company's meter including independent cogenerators, natural gas readers began using hand-held devices to collect companies and other utilities. That competitive information from electric meters, which will lead to spirit also means seeking legislation and regulation increased accuracy and to lower overall billing costs. which are fair and beneficial to both the company All six company divisions were using the new and its customers. Many possible changes are likely system as of February 1987, following retraining of to be "re-regulation," rather than "de-regulation,"
more than 350 meter readers, or the elimination of some kinds of rules and the Beginning in 1987, the company's imposition of others. Because electricity has charac-entire electrical network will be controlled from a teristics different from other resources, new forms newly remodeled $6-million System Operetions of regulation in the electric utility industry probably Center in downtown Detroit, will be different ftom those that have been put into
( ., which was largely completed in effect for the natural gas, telephone, airline and
- ' 1986. When the center's state-of- other industries.
the-art Energy Management Sys- Nowhere is competition fiercer tem is put into service in early than in the manufacturing sector, which continues i 1987, Detroit Edison's ability to to dominate the economy of Southeastern hhchi-l maximile system reliability will gan. It is a big user of electricity, and the revenues
. be enhanced significantly. The gained and lost with changes in the auto, steel and I E, company's energy managers will other industries figure prominently in the econom-g ,
have greater control to meet vir. ics of utility operation.
y tually any contingency - from l storm induced power outages to seasonally high demands for electricity. )
i l
I J l
I
, _ - ~ _ _ _ _ - . _ . _ , _ _ _ . _ _ . _ - - _ _ . . _ . _ . _ __ _ _ _ . _ _ - _ . _ _ . . _ . .. _. ___,_.___ _ _ _.
e_
j Cogeneration - primarily larger industrial customers producing their own electricity and heat - poses another competitive challenge for Detroit Edison and other major utilities. The com-pany is working closely with customers to meet this l challenge. Detroit Edison was the industry leader in developing the technical standards required for suc-Chrysler Corporation, for cessfully connecting cogenerators. Also, the com-example, decided to close its old Jefferson Avenue pany's SYNDECO subsidiary will be a 50-percent assembly plant on Detroit's east side. This resulted owner of a planned new facility which will generate in intense competition for both a site and energy electricity by burning methane gas produced from sources for the planned replacement plant. In decomposing garbage at the disposal site.
response, a team of senior managers from Detroit Detroit Edison intensified in 1986 Edison joined similar groups from the city, the state, its program of demonstrating to customers the cost economic development councils and other organi- advantages of using electric equipment for planned zations. The outcome was a plan to build the new new or revised installations. These ranged f rom plant - and other facilities - right on the cleared major industrial process heating installations and Jefferson Avenue site. When the proposed new biscuit ovens for a new breakfast product for plant is completed, the electric energy it uses could Mcdonald's restaurants to heating, cooling, lighting result in more revenues for Detroit Edison than the and other equipment for a new all-electric national old plant provided. The plant also will keep thou- headquarters for Little Caesars Pizza. Similar suc-sands of jobs in Detroit. cesses were achieved with closed-loop heat pumps Another way of meeting-and and commercial and industrial lighting.
beating -competition is to better control the factors SYNDECO also continues to contributing to the price of electricity. Efforts con- work aggressively to provide services that support tinue throughout the company to operate more Detroit Edison's base business, as well as hone efficiently - and with good results: the company's skills for dealing successfully in E The Monroe power plant - its increasingly competitive environment. One of f Detroit Edison's largest generating complex, with SYNDECO's newest and most successful products -
a capacity of 3,000 megawatts - uses a complex mix- Powerscan - tests, inspects and even maintains the ture of three different types of low-sulfur coal with emergency battery systems supporting the critical the aid of computer-controlled coal-blending equip- back-up power needs of customers with large com-ment. This process allowed the company to save puter operations. Clients include hospitals, more than $6 million in 1986 alone through skillful municipalities, telephone com- .
fuel-purchasing and management - while still sur- panies, steel companies, univer- 'i . ,.
passing strict state and federal environmental sities, other electric utilities and :
e regulations. allof the "BigThree" automotwe --
'D E A newinventory practice- companies. lleadquartered in "just-in-time" delivery of coal to some plants - suburban Rochester Ilills, north . ,.
enabled the company to actually reduce its average of Detroit, Powerscan opened a fuelinventory in 1986, despite an increase in pro- second facility in Dallas early 1r duction of electricity. in 1987. '
E The company has developed )
one of the nation's newest and most highly auto-mated cash-management processing operations, em- .. "*t ploying state-of the-art electronic equipment. The j' results include reduced operating costs, better money management and improved service to customers.
r t
)*
l - . - - - - - - - - - -
l l
l
b %.? 3t.c:g ,1.#. h? fs .. ' G . .'h. )' ..Y:l!W:f.g#f,S,. N
.,'y.
. g&l.
..["f b. . l. .C
.. ,.,.? e _- ^ --y T ?.h.;?. g,.. ._ W Q. .n.:: % b. 4%; . ...;.,x_.
. ;;. . .. - .. j *: Jm r.ss. Q.g.D;g!.% :
.. g.Ld 'Q '
p ,~y. 2 ;.; , . , a.em. .g, .. . . . . . , .
.m . .. ....
yt..-
.s .
n .
- 7. .o.y;.;p.9. 3., -- .., ,. , _ . ..Wm. .w.a
. y n.. f. ; .. . .J. . , .._s.. . .. .... . , . .....y . . . - ..1..
- s. s . g ' .. ,. . . .' . . . . , -.- ,# _.e.;,m 2 w c.s % .
- ..,y- -
..9 .v ;_. . .s 4.c . .r. -.. . .
.. . . m. su . r m C $I}lOJ f.? ,..u Ws 5;.'] 9, '. O .N. N Z ,7 f7""f' W W '
.r.n :. : - e %. . / - 4.: .p . . . 'Ul is: . ,.:... S'. Oi'i . .. -;. ' ,; (.h 1. E ;,.' f l3 ;. . .U+
,- ~. . 2 > < To neert production .
.+m.-.v'...:
- .S .,'d :-..-,y.g&
. Vp .q s . ' . .. .m ~ 4s . . 3. ~ 4 & F . .';';'; -.i ),. ;. .:- x : schedules, Lamar
- ?. .. . ;uy
.. m _ Q.y "
+ Plastics, n Sterling *
(.V Q .: l n'.:. . . . v 'y:7.,._p.-..;h.Q'N yQ.*'*
j;p y : L/ ;. : : 'i ! y a ;. ? h K 25 }g._2. y;- :
L .";-;k ~ M y.,!'~ y f.ll:L.l . ~. .;t parts lHeightsautomotiveI supplier, needed n a ' b
/ 3 3 .:. y'. y. g :g .: ;g - .~, .. , . .
Y
. ? .a e ' f r }g, .; ; f ;newlew!ofservicesi hnif the normaltime.: 6
- - .4,h._.'
,8(.N:}L ; ; - 'g} y ).q'.
yi . W l.' ' - + ;;t. ; ., .
b -
LThe mission uws , /
....-* . ,. j@.t %q.
Af f.. . ..y ; + s U. ~ .
- ? f iaccomplishedinpartby:
mK .,S. .:V: i -Michael 1. Chriss,P i,
,. .?
.y.m
- 4. .~.s~ . ..
- g -
- ,. ~x'.h,Q::; . . .. ' , .
f .-.;'; Y: % - ..
LludustrialMarketing L L l 3;,.s %; e :... .L. ; . ; . . _7,_ . _ ., g, _ 2ngirwer,andLamar's '
%h' '[$&;. 'r.
df_;}k_
.s. _
' .:- G . ,. .: 5 ? Raymond S. Wangler. :
.: b.;,R wg n ,
y,:l4..m ..%. 9.: % 'w w mm,
.:;;:., - f ; e,. . ,; ,'?
?j. % '
r ju.,.,. : -(: ,;.,_
". _, ., -...m, d." ;4 f.:4 M. i
,ge
- s
.~.. . .
u
~
.f m .......,:
y ?. ,],:;.;,
.Q,..
,,.4f" , %l, $..I.: . '.l;, .,g,j;;.y* ~ f.e ,[.S (
., n . . . . + ap -
!g .' ), D a3%
- . mv-.g ;. ~
- - \a;g. g' ~ .,;3 ;
- , ' ' 4 7;. c.f .1 3 y .
r,.
,,. e . .
y - y
- : - g *e h-. .:., '.*.g V ,. ?> -
7 ?:l '
p : , y:L . . .
q;.f
..4*g ,
, 3 ::; .;;;,.j -[ ". '.[-'y).y ~. .f.
f- :'%
e s
. . g 7,3 s.. ' - , . w.. <
.*.- ,t s.. m #. g& . r
'4
- '_..[-. ,;e. ; .
..a. ." * *
- y > l-.' ' . ' \;. . . e , . . .
. , . . ,. .,.,; y r::. :_ $. .?'~
e : s n
's s , p.' $m - )i .I t'-
[a pI, .:..-- . . .' M " :-[f'. ; 97
$C y
..;. ,f :
- ' '\
j y- b a; ,..".' ,? ',
T
. . v, . .
,.%:r.io.
- :-- - s:P;. g, a- .K. ' 3 ,, . .... - . , ' p:. n.,. q. . . ;,. ,. ;
,, . n.%
f n . .+ ' ~
g, " : M' b 4'h:~'.'.
l g,.
's' '.. ~ ' ' ' 7 ' ' t /l M . ?'s., h
< . %'
- z* -
i-
.%. - 2-4,..s .
- . .c ,
yy -.+ h- #
. . , ' ' .. ** d, . , M..y' . 4 T#
m ..'...J'.4'-
l'.. . _ . . * . ' '- ' . - - **
.e y* ' N l'O 97.' w.
1*
f : , . g.'f' ', , *
. , ' ' _ .'"'t'l*
. y .
g 'l .,j'% *(l' L. . . v ' j. %
n n . + - ,-. . _ :
- - n . 4, ;.$.;..r..-> . ,, ( w.'
- - m y,.:L., .f _ 'c - - . . w . .,.
" j4...j$y. _, .c - ... ..-. .- .- .
' N..' xf. .y. ..
'.(. .~ c
.' . . y;}M,,(. y . ,.l.'.'
.' l. ' f ' . :.. l-x, .- y.
m;, 2 , *' .!.'.',,dd)V -
L; i %.
y c . .; ; . '.g.'- s,-
n.
] .;
,. [-(.l
.- :;5"
-e'.Gl, ?.
- i',-
.;. _&. }c ?..
. . ;f '. . . _ y . . . .:.< }.f: .. p .; . .
' ' y. . ;;,;. ..-.. -. ' ;.
.. ; .g , yb ' '. * . . " . : ,..- . :: . . . ,
c
. --i,:7 n', '. : ,j.ll:.,.;.,.,.,- l - -
~. ,
- s. . . .l .._ . ; -
'h' .L, . .' ' t ' ., ., [ 'u
".#f y..
i 4
~._4.Y t. : -
',;',. ' .f j,: ; ' .f ; . . A Q'y- . - [ ,. - 2
.4%T Ve,?r } ; ..f.," , ,. +
~;(*
- p
.- 4 9 - . 's ',. ..! e.
."[.,
_g, , ,
d y;' '
n' .a . ** * ' .Y . -[ , g [ '
. , w .1 ,r.....
4 , . ;, , . ; . .
7
. y$ hf
_ . . _ h.. f. .. . . . ..'..%.. ? f. ,. ..s .!$. . : :ll"}l.&.
. . .: '. ' -T j.
D"?W _-}. . . Y:-;;'. h. ;: ,.W: _Q;l:Qf 7 *..': } -l'l ~ :: ,f.A...:: .j:,.; :
Q.~,f ,,,a ., :- l$
3.
. ~ a - c.~ .-..: . .. .,. .
.. . . .- a
- ldldi %(*:' .; - . &"AI::fN: .
. ..W
'. ' '. y : . W: .lJ. W W . f . G . N l C j. ? l( . l l u. T R . V '
.' '. m ' ~ :c. , . .4 t T % Q.
, . . . . , . . L ' -; ~ -
. .,';:, .:;,, f.y j. . i Y. 3R.J, . i.n.t,W,9Q ? .:., . : .y., r.'lf.'.3 ,wp,:Y. .."3..:'. ; . . ., ':' w .:'.
- 9,. 9:< . ,. .+ 4. . .. i.. ,;,. Q,,
2-y 4 . ...,. 4 .. ..: . . .
. - c .r .. ,. , w ,
~
- A44 s.n .qQp A n . . b.u'%.g;:w:s WQn% :. .a.w.w e g.:.. a ~ g,-
, m; w .ylw:x. ,v y. ,jyy M fggz. : %m .:; _
. . c.mk.J 4.w$'"$.h. u
t4 ! ?, o.
hx w ? .";mn L h,J .a?V' w: :.f.%'&w
.s d R J; ' W:.
^ v:h %
- c. c- . : ' ' - -
-l . r&
h% mvb. - ,:
y.y~.u.n ' C , '\ 7 sc.
w.v
'. % L'W - <. f
{.5 w . v%'
M, ..
- fi:
.: .nl:.. y . l . . ?.&;;g& - c: ."'W.
o.
y -
..7 tf &) .,. 4.-
n*,'_
,+ - :
A * 'n
- f^.'ngri:
- <c F w- m;
- .. s :v.
- i . % . c..~ %e . gr.r .".
- m
-;j.i.:'- ' ^ : ?.m%
. i
. . y.
.. 't
'?
c 4, )
~-
. p ,g+g.g
- .x,;;ygg:.p;g.:c,y y. 3 '_j p
, +
.' h ,[ g . kl
,, e ,
- m. *..
. , , y <
~ ,
r.
p~. .; , . w .. ..,4, mfg u
i a
l L'
Innovative failure-analysis techniques were devised to determine the cause of 1 electrostatic precipitator failures at the River Rouge )
Power plant. This analysis and subsequent engi-Innovation neering design improvement resulted m reducing Terms which describe character- generatmg costs and improving the environment.
istics of the quality of electric energy - dips, surges in support of the company's and spikes - cre relatively new to many residential marketing program, research also is conducted for customers but not to commercial and industrial business customers to analyze and recommend im-customers with their high-tech applications of proved processing systems. Efforts to help hiichi-electrical power. These kinds of problems are of gan's economy include encouraging and assisting increasing concern, however, to any customer who state organizations to obtain research grants. In uses solid-state electronics: digital clocks and pro- 1986, more than $1.5 million of outside research grammable light controllers, microwave ovens, Iunding was awarded to hiichigan organizations as VCRs, personal or business computers, electronic a result of these joint activities.
process controllers and some robotics equipment. Because of research and develop-Evidence of the company's con- ment projects like these, high-tech has become a tinuing efforts to be truly customer-oriented - and way nf life at Detroit Edison. Fiber-optic telecom-innovative in meeting new service needs -is a two- mumcation systems provide an advanced method of pronged approach to help reduce customer prob- using light for voice and data transmission. Color lems caused by these occasional quality-of-service radar and sophisticated lightnmg-detection systems irregularities. First is an aggressive program to work track storms - well before tht y arrive - and improve with customers who are installing new equipment the ability to make effective use of field resources for to identify any special " quality of service" needs storm-related service restoration work.
they may have. Second, Detroit Edison power- Atanagers and specialists quality engineers are working closely with existing throughout the company are linked by highly customers to identify causes of any problems they advanced computer communication systems which might have encountered and then to develop prac- speed the transmission of information and efficient tical solutions. dispatching of electric energy to meet load demand, At the company's Engineering materials management, customer requests and Research Center, high-tech equipment and methods other operations. Infrared instruments are used to are combined to help reduce the cost of electricity; locate causes of possible equipment failure, further optimize production, transmission and distribution ensuring service reliability.
of electricity; and help customers make the most In 1986, a new computer-assisted efficient use of electricity. telephone-answering system was tested to help im-
.. .. State-of-the-art techniques prove the company's ability to respond to customer 4' .. were used in 1986 to evaluate the calls about power outages resulting from storms.
integrity of re-heat lines at the By early 1987, Detroit Edison
, $ hionroe, Trenton Channel and had conducted 250,000 home energy audits - a total y St. Clair power plants. surpassed by only one other electric utility in the d - . \ .
In conjunction with the Elec- country. In 1986, the company became the first util-tric Power Research Institute, ity in h1ichigan to offer these home energy audits to g advanced diagnostic techniques area residents without charge.
)- are being developed to monitor 4 the integrity of the company's j
W high-voltage, oil-filled cable 1 -
system through dissolved-
- , gas anilysis. Such techniques y ' ' l_ .
4 enhance preventive maintenance bv(, j . effectiveness and replace
_c; inate unplanned outages or elim-in the
,p / , company's extensive under-LiA ground transmission system.
m
r E.
l .. ;. y gf .
- y. .
= -
auu+ . , :- - u.pc - sg m y
=-
^
. ;m ; 3 xy ..
x +: u.x H ,g;h.;.. , .,:.:. _. .ug;4.
-g: :.}.wr. v.. . v ;:.,.v.'yg -
p ..:,
. :.. p. ? e.
3 y .Q.&r :.%a.c -
y _ _.
- %' w:: ., .
..~
.'wJ. .:}:y
? John W:Ault, Senior: * ..
f.h(X.. T" .x.g % ,. Ay;.f .
?. . .'. ; l ;.J Q j .1:3 : . F . ;; .. ' . ( g.'- .
,.i V ', ., ". Q '. . ,N
? : Engineer, now canget ; : ; - + :.[ . y ;, J :..... ? . a '~. -l'- Q .
Q , tithe root of aproblem " " ; '., ;' .[.i .; .. p l - ._ ,_: . ._' '. .;;:_2.. ':. p. , G ..L w .-y '- . - ...
'.6 b
c: R.7 *.Q::C *. .? $h:. .. : . ] :Q .,
'fasterand more. . .
,p f .: . . f . l.'+ ' ' " _ .,
, accurately with this l ?.. ' :0'b+ ; ~ . *an . L . - L. - 2
. 'i D
- j f ; .[ ]..C? / ,}
k ' highlysophisticated!; . . ~.'Y 'b-* h::L .k .
" ' :4L-<~ ~ . ~ .-. " . . ' -
device that separates a g. '.;. ~.s:.L. L ..M
- J -
- ' ~'
C ^{. _ :.2 s:.
. '" . M. . , :,5 h . . L. - .x-g-? '. **-%s- . . ,
...~.j
- lg?$ NilXture int 0 5t$ I ll f i. ' s -,". - : ;- 'j M l*, . 'l'i l L'~ i "'. . ;; : l .m ' b.? +
. f. .[ ;j . '.[. } } . [ }...y.. ,. . .. L. ~ ll .
b ;lndlvidualcompounds s ,
y '. -ge.
Q* ", .
.y .. : * . f.-
' . ,s .
4 - w : +-
.g
< *; *} l. [ ^' J.l 3 yl
- ..... .[;
-_7 k
- yp
- V;8*
gy .....$s-E *
- W -.Aeg . . .#*. ,
.s. . . .M* ..'.,i.t . ' 4/. D'- .t. 1
_.s
.c... !..
. ..- = *-*
O, g "' ..,.w
- .- {.. \ l , .'. . : '"
' E.' ,M. . .g --
.. -[ $ %
m
_ &.f. , V.f N.l^lQ* ; .. ! '-P/: ,;.
,y.
. - x l .< . - y .
. . . . s
. C-
- * . ?: ..;'.~ ' k.;7 .. : f' *wsa.-- h.' k ; ?. -:'l* &;;.l.:.-
. <' L :
.W p. - . '; . '
L ' -
.~ ~WW,'g,Y l." faAQ. M' 4, &ik lU p*L.,
-,^
^ 5'\,. y.
.+.- ' ' . . . .y : '
- g. ,h
-g p3 t
- i. .9 4 W .'. Y 3 . ..
.~.>
- P;.0\ ; .....r . ;;. %- .-.v;n,_-? . ; e.
..e g p -'.1,.- ( -,f'.- :h
. _ .k - - ..c. s L C
. .. , s 9 -
v
..,.-.;,..yl'..'. *'-1L,- .. **4 '.*
E .
7, c
q.,..,,'...t.. ,. c ,- -*..._'.5...j ,..- 3 . - ,,o y .. :,a 7,.g y. , . ,; c . f ,,- - .
w
- 2 ,m C . . * , .<..
..,. ~.:. .
- '.'*i . < 0, : .
. - .u y&.%.v.h-j
- ; ..c. ' .v.. . <
.....1.i... . . .s _::.. . .r .'-- - ,. EC.- e_ .s..
o 9.kl^
-l. %N-."n ' .. .,j.-S'~.... ;,. . * ' j ~ ' ?... ~,
Q2..Q. f '-0. , . }. .. ...ll ... ... , .. . .f......,.u..
2..: .
c;
_. -. .y,. ;f. , , . , . ., ,
&L
- f. ;.{' ' '.' . . ' L . . . g ..? L . . . K 2 . T. V .
- h. , ,
? [>.N.?;yW GQi . . . ; % %. ' '. .. .. _. l.,L:.'_i .:.
tv y U F ';8
.?.' \. '{[3}-}j '(. p, .,.-*
+ -
cp.. L.]:[:.g . 1. ' '{ .% ; *,,lc) . g.lO . .;..'s, l;r y.y QQ f L:L ' ^.* _
L.:. .
.,. f
' "' ' ':. , _ r; .l ,g-
=
j.h.p
% :. *?: :;. i .l.? . . .'.D,'.%h , N.S.'j.f % .e.. :. g; ? .[ l _
q' ,
a 1.sf;,lj'4 - , - ;. $ - s . / <.
. . - . 4 .. . i .
[ . yj
@ ;. . l. 3.. . - ln f ._ a
). -: _ ..
. '_ l,f.f;; C.h.< :~f.
- :(. 4$,Q.
c j' n . . .y
- . ..-s.,_g.:;}u n-t :: :.:. .x . : , g 7,,
}p . ;.. .n.. . .
, . . ... .. . ; ._f. ,.
y %$ .. ;0;.
. _ :y , .
.[c._:
w m 4, ;; 9.: y . ." : . . ;; . . .. ..._ .,,_
- -. .,~n...., ,v. . .s . :;. . . . s
. . .. c: a4 c) s..%;v.;:.: 1.,,.
- c<~.: .:
a ;; ;: . .:. . ..n.e :'- .g mm ....;, .1 : -
. . . 3. b ,y:.4 -,_ .p; . . . .. . .
g w.gi.. ..:: - . , o.p _. . .7 ; :y. g.3 5. ; .
- y. $ ~/ u.
E h(n,". .h^.._
-q . .
u
'h, .fL, .
7.j g .. . :* c ~r .
. . . '* ? . f y.
. ;.Y..m....
W :'... av, . ;:,n:'?M
.". m, y ;.;;; : .. ; ~ . . . . . . . -:. y[L .::. . ' *
- 9~%
. ,: ; p.jp c ?w
.L. -
r.-
kg ,.g-m
.a
.y-*e.;t g.L. .
+
_>p
..-p.. , v .. *. j .,c.....
1,. 3.:. aW
.
- e y"s y; -
g .p3 :%, - ;a,* t(j ./
- . . . ..- * ,, .*.. q;. f 4-
.*.::;'.:q'gy ,
e s y . ~ ::: w ~,; < .? .; ., a ;: n..-,*...[5,7,.ti .. s .
u._ , . n - :._ q.....
y .. n :. . , -
. . .,3. :-
9.,. ; ::, u 6 :i.y a ng .,
w g . eqk. a.
m p .. -
1 i.
l-l p-.<;
3f.
liL W .
-. M' .
' %u$.w.
am .5 g .
c ,?. .v. 1 '-
%, e vr.:. w
. . ^.
~ f ,c. .
Y; ,.? '? .1* . p;g
. q.. -.-
~ - - . .z . g.
. ;. w .. . .
a .. - ..
g; - .. .,.y e . 3 <
% ' . b.: ;.
=_
E
., .y k ' -
%.. % w. .
u3 .Sn : >y>.
% d~. ?N K.h a.p.;; w ' y u% g ;;; . ':'. . .'.'-.- .. . .y., i ;",
%&?.;.w e n .: g ..y y .. .
y i .. , u.
dA;;. s, . . . .
- u. . e .:
s
~
- g. y; 4f ,
e r
- 6. . - .
w e ..1 ,o ,.-.c.
. +, , . .
- .' . ~ . ,
4 1, .
- 3p .%.k. -. t. 1 .y^.e =. .:: <...:- .
1 Mh WM h' f I'J- - M h .I q j
') ' ^ -
a
&_ py:4.)J.
a.o.p.. p.. 'y g,l . .
- v. .,
g ys
. uf(if4:g;["v
.9, ,9;.p. -. :_s,* . f;.; .'.'-
.-[- ' O 4 . . e.
~ : w. . s .
s
- Qc
- x s
j, ~v,4 / ) y . %'
? ..
_. ;d ~,f ...,g.. ..
- ?.,
- v . . ' . ,p. . * .-'%':'.9 t < %+ . y ; ?^: ..'s m % l .'?.:-'):', l.: Q- % 1. %. Wl b.) O :l, *-
'.h . . :-T y, R,i .) +
.sp;_." .g
..y ,.,3; .. . . 9.y;;-l.;. ' _ 1;_e. :'
w . y + - Q, ::
g ,g} " # ' J - y r,;y5 c7ff- ,. .
.(<, ; l " ;y , ., . y .4'.3 q ' ('. g .,
E M
ef 4
k' .h .*. /J;L ::' % .-,5; J' ; >b W: '
- .C yy ., f. .
.s
- y t ' ?.
. i.' Q- . ... e,R. .fd ..
? i :: "
% '.*,i h.:. . . ;Q. . U n * , O i D h. . EN ' u.: 1. f.1i '. ;.,
E.
n n$. k.
?
t g.x -
b .
?Y. l,& f;,%.L.O
- c. ,
Q 4b h .
~;. gWW.y ' .mT $~4 i I.'. , ,
W&s/
r)y, :. g 1: g y .s k. n;):; p % m % u+ -:. 4 .
. % . D :.: >
. l4 MlQ }[:
.[ h..*
E ^
.)h [ .c ;.? .? "[+ :
?
E Q" T WI M. .
- t j je. W, , .- .i. AMI *
)' Wi n.>ZI ..e *['Oh 2d
- ? .
.'..,' . '.jM,.'p'.N Qm:.gl.hM.o.? <* 9."".,g. -.g
-f- 4 i.; '
. h Y.2].) eh g
h'h._
_}y, y 6
. 'j f l. '
s ., .;- n p ;;9.9 .3 .[...
- .w, w c w =
, n.- ;
,.. - c
- ' . r .
p;f. ,y.
W W 2 W .:.$ '_p' T [uM W
,h.
- ys '6 3,&'Q'.g" gy, - ,, . . . . ,. .- ..
1sa t c r g gt :
n m r1k1 d,aW'1. ,@t ~e
@_3<. .U . . ; , . - W E -
E=
h _ _ . _ _ . _ _
,k
~
M,yf;.-.f
- g. -,.,.p.
y ..w:t
. ,.k
. . , ;c
... . .? .. . . .h. . $ ,
y,. ' : y :.: , p 6. g., .,. ne,,,q.. .;
, ogw.n.. . . . g.g
.l
. ; % (* r,.Y. + Q .; ; ; ;-l'.:.:: 1yvg
^ hl;; d} .} ". .F..;-%,f .
%'4..>l-
.,,n .l.WQ t. .;
. ~ - , T:l.*} .::: :
,, Vfy ;e..... .. :;. .. . .- : '
. . /_ .: . N,....;
1 .. ,, .
. ...s
. 4:') ....:.
e 'Enthusiasticstudents C N.l ..,-:-k.: -~ ^ ' {.l g?'
~ [4f : l.,:f .).
{f.}.I:f'l..'..
N .>.. . v . .'. ~'; .[;, ,, ; s L ., ' , , : (X. ' . . ; ^.? . .learngood ata Detroitschool .-
~
._, safety habits :
gV;;y; .. .g,., x: . ;;.y.
' ; --;.,.; ;, . ._;c 3:.g. .
. . .. j'y:3 :?% : v'_ ; andtheimportanceof L saying "NO"to drugs : ;)\ '
-,,y g - -
,. y j _, ;- ~. i. . .
3- } . ;:....y_ _ . ._. . . - : . g. :. ...:'.. . . . .- l: !frorn Detroit Edison -
A
_ . , . :. .-' .:._ ; ;- l'
- x; '
- [ ;;;, y :: ;' safety spokestnan and -
$%;Y '
~
s . ' v.
q .y'Q.
p _. ;( _:[.;: ..c- -
- .-, [y* %
. f .;_ :f .;;lK Pistons basketballstar
~ isiah Thomas.
.;b? ~ b
- .: ;O
$ . *l, r . . ;. .. , 5 ; T: . ': ~1 1
- .%.a.t WY
- W. 1 .. %<;g;.# .'
'_ . W R- *.
j
.. f
_.QL .. s: .
~
. ,;,; ' ,,y_ . .;- _.:R .;;'.: : g [ y;y ; :;, ; ;. y; 3; __; . -
l.
[ ,* . . , .
. , . ... j _
. 5, ) , ' . . .; ' . N' "
T'
' . ..: .( . . '.,' ,,.
- ._ r ' h':
g$.S.f-E j.sggggg
Y CJ
..' . . ' , ' t-
..,<y.
- . . - 'l g
- .' gNW
~-
- ^.; .!'..
' "e ; . .., *.<.;-
. r;l *;. ,k'll' hr 7
. .' . . . - g .- e. - ~ .
j .
< g._
> L.c c . +
- V
'q f NU[., . * . , . 5,. . '
'.g , : . .f
'; *.' .:..,' i :; ' 5 " h **
. y: ;,.%f,h'fLt. ' . .. .,' . . . :; 9 .; -;. l:s...- ' T,{.g*k n Ay;.: ....*;*~ ';.:. g-~ % :.e 'r . _ = '. )
, .2. T. h,... . q. _ ' ' . , . ?f
,..!N. ..y :v ' t g.,': v. t 6 .
- Y *
- - " ; s_.
. *Y ,
,4 _.,c
'_ . -' [ ; f. .:._, ., , -
- e .'
$ J} f?:: Y;
.Y. _. .(; '. g . T ..; ;. * ' '
- ; . -- *
- L .- .,
. :.e
.h.A. ..
,,, : ~ '. ;./ , ,
v
. .& y ..
Q,5.,.' M Y .., e ' : v;'; p:_ . ;.,'... . .; Y . .. W; .V *
,.. .. v. ., ' .?' . 4{ .
'*
- Y . . , ';.3_: * : ' . . ,h , , t' , ' 'l: *:. . , ,
f.( .S ;5g .; . ,
~
- l. $ ' ? 'it . %,. *
.l.' ' ; -: s ^* Wf h .: .: ; $'( .k*f ', 2 N- ?
_ h .2 . . i :t '. 4 R: ,.f,
?.} l 7;' ' .'l*;.
, .f p,. c .i . . '~, \ , .. l.4 . . g l . ' l , .y
'i, f,* . F , ., . , .l y p. . , , , , , , , - .
4y :;+1t;; .jp c /j . 3 f
~.f ?. Y:h { ?;h
- .t . , yC. .*Y~ q .'r
- . ' ." $!.! r: . .'. _%;.:. '. .' .'l . ~ '- ' : ' (.?? s.l.[ _,.4
- y . . .Wl , n: ?.;. := b .7 \ . Q: y*.N *.5 h'&; .' ~;, ek. :9 . . . -p m; .
- . w M: b*g .::.. :p gi .._.y; i;**.% . W ;&, , , .;'_.3. ,
- ';.;~? .'". 7.
- _. q!- :{-;;
.. & ; 4 y Q ' - > .pt
- y.p;q -a n*) e: L
.s,..;.. , '-t f
. Q. (. . .. -*". ':J , .
J' ; - [- .
a w p a .t- . ~M.c 4 y; , p: .,hm..;; . ~pr. '. ::. . . . c.
v[ %. ~ ' n,I. . = . .'. m i ;
I!.
.&:e.Q.5jm ,.:3~. A.
F:h~ ;,.:B::.:&m w .,-
., a;
'.;,,g'.N.c:s c*'.& ;&:~ .
- . e .w . .
2-:j g.: - . ':.l.;)?v.g.6.,.
r- ,
2 nn c;i,W..
~
N. ,
- y 3a qgypygggggg%gda w gwyMMm 'y_ .: ,f ..w
[
M d. k j
- g. - :s h ,
~ .. ,, _
g . N - .
O Detroit Edison is recognized nationally for leadership in economic develop-ment - helping enhance the economic and social climate of its service area. This involves aggressive efforts to persuade existing businesses to stay in Leadership Southeastern hiichigar', as well as help them expand, modernize and diversify through inno-Detroit Edison has a long and vative new applications of electrical equipment.
proud tradition of leadership - technical leadership Emphasis also is placed on attracting new busi-in the industry, service leadership in searching for nesses from other states and countries - providing new and innovative solutions to problems, and special services to help them locate in hiichigan.
community leadership in helping to make the com- As part of this program, Detroit munities it serves better places in which to live and Edison has received approval from the hiichigan work. Leadership in all three areas significantly Public Service Commission for special " incentive benefits customers and shareholders over the long rates" for electricity to help companies locating or term. The company's leadership in 1986 focused expanding in Southeastern hiichigan. Efforts to increasingly on safety, operating efficiency, business diversify the local economy already have increased development, education and community service. the job and tax bases of the area and are expected to For example, a major goal of help cushion Southeastern hiichigan against future Detroit Edison is to operate its Fermi 2 power plant economic downturns.
with special attention to safety, for which the com- Detroit Edison also uses other pany has an enviable overall record among electric means to promote the area's basic well-being.
utilities. One step Detroit Edison has taken to help Through its loaned-executive program, the com-ensure the safe construction and operation of the pany works with local, regional and state govern-plant is an employe feedback and performance ments to strengthen their operations with the tem-evaluation system - SAFETE Aht - which has porary use of Detroit Edison people with special become a model for the nuclear industry. skills and experience. Also, a new entity, the Detroit The company also is a leader in Edison Foundation, was created for the company's its training program for nuclear operators. The pro- longtime charitable grant program for organizations gram resulted in one of the highest percentages of that conduct civic, cultural, educationJ health and operators in the country who passed the complex social service programs in Southeastern h&higan. It licensing test on the first attempt. Fermi 2 also helps avoid fluctuations in the . ,._
received accreditation by the National Academy for flow of funds to these organiza. I _., s -
I Nuclear Training, equivalent to independent cer-
~
tions resulting from changes in [ T tification of training excellence. business cycles. '#
Detroit Edison's concern for and g
It is in these kinds oflead- 1 ;
leadership in safety and efficiency doesn't stop ership activities that Detroit f
^
j N
inside the company. When a high-pressure steam Edison -in partnership with its q ae._ s pipe failure at the hionroe power plant caused an shareholders, customers and L 9i unusual emergency early in 1986, Detroit Edison employes - helps realize the j,, 1 l
identified its cause, fixeu the problem and later conducted a seminar to help other utilities avoid the same situation and its safety implications.
promise in its new corporate motto: " Detroit Edison.
A Good Part of Your Life."
jb
.( ,
k,!; i !
The company continues to show -
4 p 7 pnq4 ,
leadership in improving the efficiency of its generat- 4
.. w,.4 Mi ing plants. In 1985, Detroit Edison ranked seventh ,
m+- - - 'E!
among the country's top 100 utilities in " system heat rate"- the primary measure of efficiency for such f..e ~ - Mme
., n .- .
,, . . ,p facilities - and was well above the industry average pm y for " plant availability" - the time the generating Ws c.
.s. . md:j N% w gd,M units could actually be at work producing electricity rather than undergoing repairs.
]pp fgg H
E The numberof customers served by Detroit Edison rose 1.4 percent during the y ear to a total of more than 1.8 million at year-end 1986. Also reflecting improvements in the economy and new applications of electricity, all categories of
(" S ' *e'S - reside"'i l' ' **erci ; ^"d i"d"S-Perforinance trial- are using electncity in greater amounts for The performance of the company electronic equipment, security and outdoor light-can be measured in terms of the quality of its service ing, heat pumps, commercial cooking, process to customers, coupled with its competitiveness, in- heating and other equipment.
novation and leadership. Accomplishing these per- E Stringent efforts continued formance goals is essential for Detroit Edison if it is throughout the year to contain and, in the future to continue demonstrating its ability to meet an even substantially reduce costs. These included a more basic performance measure: prospering as a companywide complement-control program, a vol-financially secure company while meeting its respon- untary early separation program for management sibilities to shareholders, customers, employes people and across-the-board programs to further and other important groups. reduce operating and maintenance expenses in 1986 The year just ended saw remark- and beyond. Capital spending also continued to able accomplishments in all these areas. Detroit drop, totaling $645.2 million in 1986, down 9.2 Edison financial performance, in fact, set several peu nt from the previous year, reflecting the com-new company records. But these must be viewed in pletion of the company's power plant construction context with the major disappointment of not bring- program.
ing Fermi 2 into commercial operation, as well as in While these and other operations perspective with many anticipated 1987 internal and reflected positively on sales, revenues and earnings, external pressures. the company's earnings also were supported in Earnings for common stock were large part by a non-cash accounting credit unique to
$378.3 million, up 13.2 percent from 1985. Earnings the utility industry. Called Allowance for Funds per share of common stock increased 10.7 percent Used During Construction (AFUDC), this credit has from $2.33 in 1985 to $2.58 in 1986. Both total and accounted for a large part of earnings in recent per-share earnings set new records in 1986. Return years - from a high of 133.4 percent of common-on common equity set another record in 1986, and stock earnings in 1982 to a seven-year low of 65.1 total revenues of $2.9 billion rose 2.9 percent for still percent in 1986. Once Fermi 2 is placed in commer-another new high. Sales also set a record for the cial operation - expected in hiay of 1987- AFUDC year, increasing 3.7 percent to 38-billion kilowatt- will drop substantially, but the quality of earnings hours of electricity. There were several reasons for will increase as net income becomes more depen-these increases: dent on expanded sales and revenues and tighter E While sales to the traditional control of costs. The company has developed Southeastern hiichigan heavy industry market expanded marketing, customer service and cost-(steel, automotive and other manufacturing) were reduction programs to increase revenues and earn-up slightly from the previous year, sales to the ings that will support the dividend.
newer service markets (computers, banks, hotels and high-technology companies) increased even more dramatically. Thus, increased sales reflected 1986 Financing the continued resurgence of hiichigan's economy, w Eof security cross cost to successes in the continuing shift to a more diversi- & nth Sold ~
Anjount Cong fied economy, the increasing shitt to electricity in Alortgage lionds the overall energy mix and Detroit Edison's own April $200 9.53 %
aggressive marketing efforts. August 100 9.99 5 Ilot weather in Julv pushed December 200 m the demand for Detroit Edison electricity to two all. C ntrol Iyll time peaks - 7,840,000 and 8,050,000 kilowatts on July and November 9.2 8.36 July 17 and 18, respectively. Unsecured Term Notes Starch 100_ 8.24 Totat $609.2 J
H
Earnings for Common Stock (millions $)
378 Opcrating Revenues (millions 5) [
334 Earnings Per Share ($)
2,869 "
29s 2.58 m
2,788 ' ' <
' 2h6 *e "
2,498 , % 2.33 2,310 ) ~>
2.02 2.20 ,
2,054 2,123 , - '- 1 1.M 1,813 181 1.75 ' 3.75 '
1,699 - 377 - 7 133 338
! 4 k
i- .
h: c 4
> , W . E < a + r.: a 79 80 81 82 83 84 85 86 79 80 81 82 83 84 85 86 79 80 81 82 83 84 85 86 s ' B Actual l Capital Expenditures (millions 5) 3 Estimated 1,135 1,015 938 711 645 645 591 q e ..
s 373 259 275
- 229
,_u .
s,;
% M9.
, enr.o t ..
I h 79 80 81 82 83 84 85 86 87 88 89 90 91 a
.x..
, shh,)s
. 4:. ,
..i'y ...;,,.
/ l3 j .m wn. . .a,::'
MM- 1
. x y . ..g_ . W. . . :p+; , . . . .., , .
m 2 , y-
,j;):* *
- g. ;.
?'.. . .;..,
c Qy ' L*g..
g <t\ ,A . ?. -+,
- '"'?.
.t. ',%'?..:j;;
i; ., ; . / # :;.( 3'f ' ' y .' ;> 4
,+:q,f:y.:.:.s.:.p.,;:.
a; , .
j.s?. A '.;'.,
.[:' ! ; ,..'. 4 ..,.;,
y f . . . ,i
.. e&.. y s3, s.N Q Q "u. .'Q:..
- " .. -4) h lf, .1 +g. . . . .; I U..:i '.Y.%g, 6 t
- f. f i :::m g.) ' . ti' ' t.'. r.? ' .1.. ,.6'
- . ,, .,..,.,.?..:,
ss '. . . . .
- n. , y. ..:.. y .-
n ..,,..-:. .
k . .# .. Ig -
,<:,' ~. . ,
i:.h_ [)q. .;):l, .?,IH.. q'; l.l N y;>.:L._. Q ;.,_.* l! f:,: :?? %
- b ?. .
- i. : :,
knmqqww R;g4gy y e( ( - ~ 49 4
,e g:m.g;d:Ry%f g s .. g~; n . 7 A(.%* :
y &ma ;h9 o b e
-wa ~ .
! lg
_ y c. -
@f?@t f yg ,
- - 1 : ,._P ;-a .r. - ' '. \ V: n Q, ..
.% Q.: . . ?
, . b 1R ?. 't ; . .
. i' . '- f _
_.5MMAN$h4L ...
~ 1., . :.
' ^
x
m . -.-- - . .-,= .. .. The company willcontinue to In 1986, the Financial Accounting need adequate rate increases to reflect its investment Standards Board adopted a new accounting stan-j in its new generating plants - Belle River and Fermi 2. dard, which is another factor affecting future In rate cases involving both plants, the hiichigan Pub- earnings. As discussed in detailin Note 3 on pages lic Service Commission (MPSC) granted increases 28 to 30, this new standard will require the company of $686 million, the Fermi 2 portion of which will be to recognize certain losses related to abandonments phased in over a five-year period. But this was $283 and disallowances of plant costs. As permitted by million less than that requested by the company. the change, the company anticipates adopting the The h1PSC disallowed $96.9 million of the com- new accounting standard in 1988, although the pany's Belle River investment, including $60.9 standard allows delayed application until 1989 in million which the commission called an "impru- certain prescribed circumstances. dent" one-year delay in that project, and $313 mil- In a development which was lion of the company's investment in Fermi 2. The resolved favorably for the company, other hiichigan company has filed appeals in both cases. electric utilities and their shareholders, a proposal When Fermi 2 goes into commer- by the hiichigan Citizens Lobby for the November . cial operation, the first phase of an approved rate 1986 ballot was unsuccessful. The proposal had increase of $77.9 million will begin. A five-year many potentially harmful ramifications. hiost phase-in plan totaling $475.8 million, including seriously, it would have adversely altered the way in interest, was approved by the A1PSC in 1986. The which new and existing power plants are treated for h1PSC order was based upon a total cost for Fermi 2 rate-making purposes. As a result of appeals made of $3.075 billion. Thus, any costs in excess of that by Detroit Edison and Consumers Power Company, amount will have to be considered in a new rate the hiichigan Supreme Court upheld lower-court filing to be made by the company in 1987. The rulings that the proposal did not comply with state , current cost estimate for Fermi 2 is $4.23 billion, law regarding the timing of signature collection. j based upon a hiay 1987 commercial operation date. Later, an independent research firm - commissioned As a result of the 1986 Federal Tax by Detroit Edison and Consumers Power to study 4 Reform Act, actualcash payments to the Internal the signatures - submitted to the hiichigan Secre-j Revenue Service willincrease. Although there is a tary of State the results of a computer analysis of the reduction in the federalincome tax rate, the cash petition signatures. This analysis showed that more i requirements for the company's future income tax than 20 percent of the signatures on the petition liabilities are expected to increase significantly over could have been challenged as invalid - more than j the next few years due to an increase in taxable base, enough to have stopped the proposal from reaching j principally because of the new alternative minimum the ballot had not the timely court decision already I tax and the company's inability to use a substantial precluded that action. amount of its available investment tax credits. As this report attests, Detroit New financing in 1986 totaled Edison is committed to meeting its economic and r
$609.2 million, including $500 million in mortgage competitive challenges head-on. It will succeed in I bonds, $9.2 million in pollution control refunding this with better service to customers, increased and bonds and $100 million in unsecured term notes. more varied sales of electricity, maintenance of the This financing, when combined with internally gen- dividend despite a new accounting standard and crated funds, covered capital expenditures of $645 rate-making uncertainty, and assistance to and million, the refunding of various maturing securities involvement with the communities Detroit Edison and the early refunding of the 12.80-percent and serves - while also providing career-enhancing 15.68-percent series of preferred stocks. This opportunities for the company's loyal work force.
refunding enabled the company to take advantage of the lower interest rates available during the Distribution of Ownership of Detroit Edison Common Stock (Decemlvr 3L l#N year. The company has received Type of Owner: state and Country: approval from the A1PSC for Owners Shares Owners Shares about $2 billion of refinancing 103,157 45,310,273 Individuals 106,925 27,328,687 Michigan over the next several y. ears to Joint Account 3 100,760 33,007,744 Florida 17,415 6,660,878 allow additional refundings, both Trust Accounts 7,492 3,931,125 California 12,833 5,149.549 Nominees 184 66,305,693 New York 11,816 61,063,790 mandatory and optional. It is I expected that all needed funds E'On"I"'iSn#"d s N M blh"' 9'kl will come from the sale of general Brokers and 44 Other States 54,212 17,081,243 and refunding mortgage bonds. Security Dealers 31 537,016 Foreign Others 1,923 15,417,343 Countries 763 213,827 I6 Total 217,584 146,699,431 Total 217,584 146,699,431
Report ofIndependent Accountants 200 RENAISSANCE CENTEP DETROIT. MICilIGAN 48243 February 13, N87 Responsibility for Financial Statements The consolidated financial IHee Hitlerhouse & l To the Board of Directors and Shareholders statements of The Detroit Edison Company and of The Detroit Edison Company subsidiary companies have been prepared by man- We have examined the consoli-agement in conformity with generally accepted dated financial statements of The Detroit Edison accounting principles, based upon currently avail- Company and its subsidiary companies appearing able facts and circumstances and management's best on pages 18 through 36 of this report. Our examina-estimates and judgments of known conditions. It tions were made in accordance with generally is the responsibility of management to assure the accepted auditing standards and accordingly integrity and objectivity of such financial statements included such tests of the accounting records and and to assure that these statements fairly report the such other auditing procedures as we considered Company's financial position and the results of its necessary in the circumstances. operations. As discussed in Note 3, the To meet this responsibility, Financial Accounting Standards Board in December management maintains a high standard of record 1986 issued Statement of Financial Accounting Stan-keeping and an effective system of internal controls, dards No. 90 which amends an earlier statement including an extensive program of internal audits, and, among other things, requires losses to be written administrative policies and procedures, and recognized as a result of utility plant cost dis-programs to assure the selection and training of allowances and abandonments. Application of this qualified personnel. Statement will be required in most cases by 1988. These financial statements have As described more fully in Note 2, been examined by the Company's independent there are uncertainties regarding the recovery of the accountants, Price Waterhouse, whose report Company's investment in Fermi 2. The ultimate cost appears on this page. Their examination was con- of Fermi 2 will depend, in part, on the timing of ducted in accordance with generally accepted attainment of commercial operation status. Further, auditing standards which include a review of inter- the extent of recovery of the Company's investment nal controls, as well as such other procedures they will not be determinable until all appropriate pro-deem necessary to provide reasonable assurance ceedings (including court reviews) have occurred, as to the fairness of the Company's financial state- including the pending appeal of the April 1986 rate ments and to enable them to express an opinion order. The Company is unable to determine the thereon, effects, if any, that the resolution of these uncertain-The Board of Directors, through ties may have on its 1986 financial statements, its Audit Committee consisting solely of outside In our opinion, subject to the directors, meets with Price Waterhouse, represen- effects on the 1986 consolidated financial statements tatives of management and the internal auditors to of such adjustments, if any, as might have been review the activities of each and to discuss account- required had the outcome of the uncertainties ing, auditing and financial matters and the carrying referred to in the preceding paragraph been known, out of responsibilities and duties of each group. the consolidated financial statements examined by Price Waterhouse has full and free access to meet us present fairly the financial position of The Detroit with the Audit Committee to discuss its examina- Edison Company and its subsidiary companies at tion results and opinions, without management December 31,1986 and 1985, and the results of their representatives present, to allow for complete operations and the changes in their financial posi-independence. tion for each of the three years in the period ended December 31,1986 in conformity with generally accepted accounting principles consistently applied. N ! n Ernest L Grme, Jr. We Chairman of the Ibard and Walter 1. WCarthv, Ir. Chairman of the Ibard and aum _ Chief hnancialOf ficer Chief thecutiveOthcer I a'
e : FeF e 's a 'o F 0 Year Ended Decemtwr 31 1986 1985 1984 Uhsusank Operating Revenues 52,832,945 $2,738,356 $2,439,835 Electric (Note 1) Steam 36,339 49,801 58,370 Total Operating Revenues $2,869,284 $2,788,157 $2,498,205 Operating Expenses Operation Fuel 5 741,206 $ 785,110 $ 700,789 Other power supply 191,126 196,918 184,740 Other operation 459,534 422,133 403,616 hiaintenance 258,655 250,798 203,945 Depreciation (Note 1) 232,240 218,502 190,420 Taxes other than income 177,381 175,556 144,471 126,596 124,939 131,459 Income taxes (Notes 1 and 5) Total Operating Expenses $2,186,738 $2,173,956 $1,959,440 Operating Income $ 682,546 $ 614,201 $ 538,765 Other income and Deductions Allowance for other funds used during construction (Note 1) $ 117,069 $ 113,225 $ 130,350 Other income and deductions (16,869) (5,240) 1,829 income taxes (Note 5) _ 8,827 1,642 (112) Net Other Income and Deductions 5 109,027 $ 109,627 $ 132,067 Income Before Interest Charges S 791,.573 $ 723,828 $ 670,832 Interest Charges Long-term debt S 399,429 $ 401,272 $ 399,448 Amortization of debt discount, premium and expense (Note 1) 2,721 2,502 2,191 Other 41,410 15,642 30,592 Allowance for borrowed funds used during construction (credit)(Note 1) (129,082) (133,103) (163,336) Net Interest Charges S 314,478 $ 286,313 $ 268,895 Net income 5 477,095 $ 437,515 $ 401,937
; Preferred and Preference Stock Dividend
'{e Requirements
$ 378,292 98,803 103,264
$ 334,251 104,159
$ 297,778 Earnings for Common Stock Common Shares Outstanding- Average 146,643,377 143,183,133 135,230,827 Earnings Per Share S 2.58 $ 2.33 $ 2.20 (See aaompanymg Notes to Consohdated Fmantial Statements )
I 4,9:f: 4 , - , . u:- . .= - s-
% 'M.M, f7 _ .: g _ _
.1.,.
d.x . . .. s 'c4.. L h ._c m . m V4 . . , . . . . . . . . . . _ . . . . . _. . . . . . . . . . m A c.s . . . .)
*nSO i e' .emen 0 fiIgeSl
. .= **- ee Tear l'nded fles emlier 31 1986 1985 1984
<thow.a nkn Financial Resources Provided Operations Net income $ 477,095 $ 437,515 $ 401,937 Items not affecting working capital Depreciation 232,240 218,502 190,420 Deferred income taxes and investment tax credit - net 104,430 110,778 127,436 Amortization of extraordinary property losses and unrecovered plant costs (Note 7) 12,231 12,231 12,231 Allowance for other funds used during construction (Note 1) (117,069) (113,223) (130,350)
Other (1,999) 2,385 (5,286) Financial resources provided by operations S 706,928 $ 668,186 $ 596,388 External Financing Sale of common stock $ - 5 113,683 $ 112,040 Issuance of common stock on conversion of convertible cumulative preferred stock,5'Mb series 2,139 1,538 2,286 llelle River Project Financing (Note 10) - - 331,686 Sale of general and refunding mortgage bonds 491,696 84,728 - Funds received from Trustees: Installment sales contracts and loan agreements 16,591 187,091 40,170 , Issuance of unsecured promi3sory notes 99,988 309,870 344,754 Increase (decrease) in short-term borrowings 104,656 (2,000) 2,000
$ 715,070 $ 694,910 $ 832,936 Other Sources Change in obligations under capital leases (Note 11) $ 7,644 $ 48,490 $ 14,010 Increase (decrease) in accumulated rate refunds, with interest 12,345 (43,975) 32,215 Other - net 10,223 (4,224) (IF ,832)
Total $1,452,210 $1,363,387 $1,456,717 Financial Resources Used Plant and equipment expenditures $ 645,196 5 710,699 $ 938,004 Purchase from Cooperative - Fermi 2 (Note 2) 83,512 40,479 - Allowance for other funds used during construction (Note 1) (117,069) (113,223) (130,350)
$ 611,639 $ 637,953 5 807,654 Change in net property under capitalleases (Note 11) 7,644 48,490 14,010 Dividends on common, preferred and preference stock 344,767 344,621 332,344 Conversion of convertible cumulative preferred stock,5b"6 series 2,140 1,540 2,291 Repayment of long-term debt 485,975 376,185 370,070 Redemption of redeemable preferrcd and preference stock 79,613 10,015 6,221 Decrease in working capital * (79,568) , _ (55,4l7) _
(75 873) Total $1,452,210 $ 1,363,387 $ 1,456,717 Changes in Working Capital L ash and temporary s' ash insestments $(11,%0) 5 3,0To $(40 331) Ait ounts rean al'le 112,297) 10,0t,9 10.116 Ins entones 20,520 63,179) 42,414 Anounts pas atile 114,861) 37,572 ( T; e381) Propert y, general and ins ome ta ses 119,54 9 (34 220) (;,0849 Interest 3,027 5, t 4 (N.7;2) Other (44,3M2) (l.82h p ;;h llet rease in w orking t a pital' $(79,568) 5(;; 4]7) $C5,s73)
*! h !uding sbort-terIH klor rou In%%, L Lirient ITlattillltes eil long-term dt l't. t uTIent ol'llgattoils under c ipitalleases arid preferri d and pri'terens t-stot k due w ittun one y ear (see aicompans mg Notes to Consohdated I' mantial 5tatements )
x
Detember 31 1986 1985 alwasmdo Assets Utility Properties (Notes 1,2,4 and 11) Plant in service
$7,230,676 $7,107,569 Electric 58,816 58,569 Steam
$7,~289,492' $7,166,13i I ess: Accumulated depreciation (2,027,733)
~
(1,853,149)
$5,261,759' $3,312,98(T Construction work in progress (primarily Fermi 2) 3,772,957 3,299,901 59,034,716 58,612,890 Net utility properties 5 96,097 5 79,947 Property under capitalleases Less: Accumulated amortization (16,661) __(8,155)
S 79,436 $ 71,792 Net property under capitalleases Total owned and leased properties $9,114,152 $8,684,682 Other Property and Investments Non-utility property 5 12,098 $ 10,706 Investments and special funds (less allowance for decline in value of investments of $4,400,000 in 19S6) 24,543 27,238 5 36,641 $ 37,944 Current Assets 5 2,769 5 1,741 Cash (Note 6) Temporary cash investments (at cost, approximating market value) - 13,00S Customer accounts receivable (less allowance for uncollectible accounts of $32,000,000 and $16,0lX),000, respectively) 220,293 227,753 Other accounts receivable 29,297 34,134 inventories (at average cost) Fuel 246,474 236,626 N1aterials and supplies 132,260 121,588 Prepayments 9,957 6,980
$ 641,050 9 641,830 Deferred Debits Unamorti/ed debt expense (Note 1) 5 38,408 5 3;.301 Accumulated deferred income taxes (Note 1) 20,850 15,4ss Extraordinary property losses and unrecovered plant costs (Note 7) 47,131 39,3n2 Other 99,754 17,753
$ 206,143 5 127,004 Total 59,997,986 vu,492.3nd (see ao ompans mg Note, to L onsohdated I nunual statements )
Tl
.+
.) # ,
e' <d . : ,a ,
E0 i ) Io o i ,1 - December 31 1986 1985 t thausands) Liabilities , Capitalization Common stock -$10 par value, 160,000,000 shares authorized, 146,699,431 and 146,576,496 shares outstanding, respectively (682,766 and 805,756 shares, respectively, reserved for conversion of preferred stock)(Note 8) $1,466,994 $1,465,765 Premium on common stock 551,254 532,847 Common stock expense (47,680) (47,632) Retained earnings used in the business 745,835 617,045 Total common shareholders' equity $2,716,403 $2,588,025 1 Non-redeemable preferred stock (Note 8) 242,284 244,424 Redeemable preferred stock (Note 9) 124,885 197,805 Non-redeemable preference stock (Note 8) 287,406 287,406 Redeemable preference stock (Note 9) 87,698 149,862 Long-term debt (Note 10) 3,656,569 3,770,863 Total Capitalization $7,115,245 $7,238,385 Other Non-Current Liabilities Obligations under capitalleases (Note ll) $ 70,254 5 64.882 Accumulated rate refunds, with interest 26,778 14,433
$ 97,032 $ 79,315 Current Liabilities Short-term borrowings (Note 6)
Bank loans 5 19,000 $ - Bankers acceptances 18,905 - Commercial paper 56,751 - Trust demand notes 10,000 - Long-term debt due within one year (Note 10) 646,440 404,325 Preferred and preference stock due within one year (Note 9) 70,648 9,087 Obligations under capitalleases due within one year (Note 11) 9,182 6,910 Accounts payable 197,248 182,387 Property and general taxes 273,624 251,131 Income taxes 10,713 13,611 Interest 85,617 88,644 4 Dividends payable 84,764 87,267 E Payrolls 50,504 54,948 MPSC ordered refunds, with interest 10,631 Other - 72,90 ----_2_27-29, -i y'
$1,61_6,929-- $. _1,127,537 L?
Deferred Credits Accumulated defi cred income taxes (Note 1) $ 821,224 $ 774,715 a k Accumulated deferred investment tax credits (Note 1) 322,293 259,010 %, . Other 25,263 13,39s de - 1%
$1,168,780 51,047.123 s 2,
_ M Commitments and Contingencies (Notes 2,3,4,11,12 and 13) $ Total $9,997,986 $9,492.3no im
^2;;.
(Soc .hiompan\ ing %ites to Lotwolidate d l Inancial Slatt'ments )
~ ' "Q" Q -
~
- f** ' .. : .;
~
C =:= ,u' - ll' L' ' ~x, .T' .h. J' ,
4 t e e e _
.I e I e e 4 .=t 8 4
- O . 4 '
Prenuum Retuned Common Stot k on Common I arnings 510 Par Com mon Stixk Used in the Shares Value %totk I wense Business tJa!!am ut thousar:Jo Balance at December 31,1983 130,334,944 $1,303,349 $484,375 St-* 6,921) $454,558 issuance of common stock Dividend Reinvestment and Common Share Purchase Plan 7,577,594 $ 75,776 $ 22,612 $ (398) $ Employes' Savings Plans 1,037,720 10,378 3,672 Conversion of convertible cumulative preferred stock, S h% series 131,304 1,313 1,024 (51) Gain on preferred and preference stock purchased and retired 718 Net income 401,937 Cash dividends declared Common stock-51.68 per share (228,218) Cumulative preferred and preference stock * (104,126) Balance at December 31,1984 139,081,562 $1,300,816 $512,401 $(47,370) $324,151 issuance of common stock Dividend Reinvestment and Common Share Purchase Plan (Note 8) 6,307,762 5 63,077 $ 33,409 5 (227) $ Employes' Savings Plans (Note 8) 1,098,764 10,988 6,436 Conversion of convertible cumulative preferred stock, SS"a series 88,408 884 689 (35) Loss on preferred and preference stock purchased and retired (88) Net income 437,515 Cash dividends declared Common stock-51.68 per share (241,397) Cumulative preferred and preference stock * (103,224) Balance at December 31,1985 146,576,496 $1,465,765 $552,847 $(47,632) $617.045 issuance of common stock on conversion of com ertible cumulative preferred stock, 5%% series 122,935 $ 1,229 $ 958 $ (48) $ Loss on preferred and preference stock purchased and retired (Notes I and 9) (2,551) (3,538) Net income 477,095 Cash dividends declared Common stock-$1.68 per share (246,389) Cumulative preferred and preference stock * (98,378) Halance at December 31,1986 146,699,431 $1,466,994 $551,254 $(47,680) $745,835
= == := = = :== = 2 2 :. = ==
'dt estabIlshed Iale lof eat h st ries.
(see au ompanpng Notes to Consohdated i manual 5tatementd I. b l
, 7.- _ ; _ --
j _.
$ '~'
. nw a x 4%4% iam_ _ . . . n n 3- a
Conso e Date of Decemtvr 31 issuance 19f>6 1985 alwus.mk Cumulative Preferred Stock - $100 Par value
- A uthorised - 9,000,000 shares; Outstanding -
l 3,844,524 and 4,548,904 shares, respectively (3,539,827 shares unissued) Non-Redeemable Preferred Stock (Note 8) 5'd% convertible series, 121,464 and 143,344 shares, respectis ely October 1967 $ 12,146 5 14,334 9.32'b series, 494,080 shares October 1970 49,908 49,908 7.68'b series, 500,0thi shares Ntarch 1971 50,000 50,tXh) 7.45'% series, 600,0tX) shares Nos ember 1971 60,000 N).tKX) 7.36 % series, 750,000 shares Detember 1972 75,000 75,0tX) Non-redeemable preferred stot L expense (4,770) (4,818) Total Non-Redeemable Preferred Stock $242,284 $244,424 Redeemable Preferred Stock (Note 9) 9.72'% series, 449,150 shares December 1978 $ 44,915 5 44,915 9.72'b series,89,830 shares January 1979 8,983 8,983 9.N)'b series, 319,500 shares and 337,250 shares, respectively October 1979 31,950 33,725 9.60'L series. 265,500 shares and 280,2;0 shares, respectisely January 1980 26,550 28,025 12.80'% series,4th),000 shares (redeemed August 1986) Ntay 1480 - 40,0lk) 13.N)'% series, 250,thK) shares December 14N) 25,000 25,thK) 15 68'k series,250.0lX) shares (redeemed August 1986) June 1981 '5,000 Redeemable preferred stock due within one year (11,148) (5,250) Redeemable preferred stock expense (1,365) _ 2,593) ( liital Redeemable Preferred Stock $124,885 $ 197,805 Cumulative Preference Stock - $1 Par value Authorlied - 30,000,000 shares; Outstanding - 18,180,180 and 18,453,480 shares, respectively (II,819,820 shares unissued) Non-Redeemable Preference Stock (Note 8)
$2.28 series 2,00ll,0lK) shares December 1977 $ 2,000 $ 2,thk)
$3.42 series,3,000,0(M1 shares October 1982 3,000 3,0tM) 53.40 series, 2,2N),thX) shares December 1982 2,250 2,250
$3.12 series,750.tXR) shares I:ebruary 1983 750 750
$3.13 series, 2,NM),thX) shares Ntay 1983 2,600 2,600
$3 24 series,1,400,0tK) shares September 1983 1,400 1,400 Premium on non-redeemable preferente stock 288,000 288,000 Non-redeemable preference stot k expense (12,594) (12.594)
Total Non-Redeemable l' reference Stock $287,406 $287,406 Redeemable Preference Stock (Note 9)
$2.75 series, 1,180,180 and 1,380,180 shares, respectively lu!y 1975 $ 1,180 $ 1,350
$2.75 series 11,1,400,000 and 1,473,300 shares, respet tively December 1975 1,400 1,473
$4.12 senes, 2,000,000 shares January 1982 2,000 2,0(K)
$4 00 series,1,NX),tkM) shares April 1982 1,600 1,NK)
Premium on redeemable preference stock 148,324 154,884 Redeemable preference sta k due w ithin one year (59,500) (3,837) Redt emable preference stot k expense _(7,306) (7/f8) liitai Redeemable Preference Stock $ 87,698 $ 149,862 (ht 't' A t oll1[M11% Illg Nt ptt'% lsil ol1%OlldJlt d l Il1Jlh lJI bl.itt'llit'llt s ) gg_ ,-
.7
-,.!... .' ' , '~ , , . -~ l'
i-. i - .
...r,. ,,
'h gj ,,, '
1
$.k%t aM .. .a ...~ .-,: .. .- - 8 . .. . . . . . . . .. . . . . - - .. .- L'
ea Aemen . . > n' g; .. reran
. .: .. .e D gi
.A \
Interest Decemtvr 31 Rate
- 1986 1985 (llwsmds)
General and Refunding Mortgage Ilonds Senes P, due 8/15 87 47'i % $ 66,325 5 66,325 Series Q, due 6/1,89 4% 37,695 37,693 Series R, due 12!!;96 6 100,000 Itk),000 Series S, due 10/1/98 6.4 150,000 150,00l) Series T, due 12!!/99 9 75,000 75,00t) Series U, due 7/litk) 9.15 75,000 75,(kk) Series V, due 12l15 (X) 8.15 100,000 100,000 Series X, due 6/15 01 84 100,000 100,000 Series Y, due 11l15 01 7h 60,000 60,0lk) Series Z, duc ill5 03 7% 100,000 lik),(XX) Series AA, due 5i144 9% 100,000 100,000 Series EE, due 12!15 (X) 11h 35,000 37,500 Series I111, due 7/15 06 10 % 50,000 50,000 Series PP, due 6'15 '08 9h 70,000 70,00() Series RR, due 10'1508 9.8 70,000 70,(MK) Series SS, due 3!15 99 10 % 130,000 140,000 Series UU, due 9: 15 09 10 % 100,000 100,000 1980 Series 11, due 4!! 00 12 % 86,700 100,000 1985 Series A, due 5!1.92 11.9 35,000 35,000 1985 Series ll, due 6!192 11.21 50,000 50,000 1986 Series A, due 415'16 9C 200,000 - 1986 Series 11, due 81516 9% 100,000 - 1986 Series C, due 12/15'16 9% 200,000 - I.ess: Unamortized net discount (5,372) (2,tNo) Amount due within one year ._(85,475) _( 19,l_50)
$.1,999,873.-
5_1,595.,274__ - Ta16 Eitempt Revenue Ilond Obligations Installment Sales Contracts (Secured by correspondmg amounts of Geueral and Refunding Niortgage lionds) City of Detroit, due 3 l'87-bil 94 6.89 % $ 17,545 5 19,105 City of liarbor lleat h, due 3187-3'I 05 6.96 3,415 3,490 City of River Rouge, due 2'15 87- 10102 6.90 49,500 50,970 City of Superior, due 2:187-2'l 01 8.07 41,900 42,500 City of Trenton, due 3!!:87-3'1 Oi 7.02 6,215 6,3;0 County of Afonroe, due 3!187- 10 !!!4 9.32 60,310 61,590 County of St. Clair, due h 15 87- 3't!22 10.19 213,265 216,380 1.ess: Unamortized net discount 1537) (;71) I unds on deposit with Trustee (97) (839) Amount due within one year _(9,025) (8,235) Installment Sales Contracts County of Ntonroe, due 5'l 87- 12 !!!6 10.64 $ 318,110 5 320,050 1.ess: l'unds on deposit with Trustee - (7,076) Amount due within one year _ (1,940) _ _(l,940) . 1.oan Agreements Pollution llond Refundmg l'rojet ts, due 215 94 -6'l; 07 9.16 5 28,035 5 18,81;
$ 726,696 5 720.559 Unsecured Promissory Notes llelle Ris er Project i inancing. due 4 I 87- 10189 7.4% $ 825,000 $ 10;0.000
\'ariable intere4 rates, due 318 87 - 1 1; 40 7.27 125,000 1;0,t k k) ihed interest rate, due 10186 14 20 -
2th) thill thed interest rate, due 7.9 87 10.0; 250,000 2 W ikk) Iised interest rates, due 1 l 87-4 2; ul l1.77 280,000 lho.t K K) l ess: Amount due u ithin one s car (550,000) t 173.thki)
$ 930,000 51,4;T.Dik) total I ong-Ier m 1)cbt (Note 10) 51,6;6,569 53.770,861 - __ . . _ . . , ~ ~~~
k % _@tWF hitesseMat.Densember 3L usher Ten Enempt Bewaue Sied ONigathes andUnsecured Pinedesary NeensI ~ ' l,
'" o e s sie e ' I' Fr dH W e , ,
Note 1 l Significant Accounting Policies to construction work in progress in the balance sheet. This Indsorry Segment - The Detroit Eoison Company accounting procedure is intended to remove the effect of the cost (" Company")is a public utility engaged in the generation, of financing construction activity from the income statement. Under purchase, transmission, distribution and sale of electric energy current ratemaking practice, the cash recovery of AFUDC, as well Regulation - The Company is subject to regulation by the as other costs of construction, occurs only when completed Michigan Public Service Commission ("MPSC") and the Federal projects are placed in service and related depreciation is authorized Energy Regulatory Commission ("FERC") with respect to account. to be recovered through customer rates. (See Notes 2,3 and 13 for ing matters and maintains its accounts in accordance with Uniform pending rate matters) Systems of Accounts prescobed by these agencies. The Company capitalized AFUDC at 10 73% from January 1, 1984 through July 16,1985 and 10.3% thereafter, except for Principles ApplicJ in Consolidation - The Consolidated AFUDC related to the Belte River Project Financing for which the Financial Statements include the accounts of a!! subsidiary actualinterest and commitment fees were capitalized through July companies, all of which are wholly owned. 1984. (See Note 10.)In accordance with MPSC requirements. Revenues - Revenues are recorded when customers are bined on these composite AFUDC rates are equal to the overall rate of return a monthly cycle basis. Revenues include the recovery of fuel and authorized in e:ectric rate orders. purchased power costs, subject to annual reconci!iation heanngs in accordance with FERC accounting requirements, the Consob conducted by the MPSC. Any over or under recovery of these dated Statement of Changes in Financia! Position is not adjusted to costs is recorded in the Conschdated Batance Sheet pend:ng the remove the borrowed funds component of AFUDC of $129.1 results of such heanngs- mi:! ion, $1331 milhon and $163 3 milkon for 1986,1985 and Employes' Retirement Plan and Other Postrctirement 1984, respectively Total AFUDC for both borrowed and other funds Benc/its - See Note 14. amounted to $246.2 mithon, $246 3 million and $293.7 milkon for Property Depreciation, Retirement and Ataintenance- 1986,1985 and 1984, respectiiety AFUDC amounted to 65%, Uhhty properties are recorded at anyna! cost The annual provision 74h and 99% of Earnings for Common Stock for 1986,1985 and for depreciation is ca'culated on the straight hne rema!ning hfe 1984, respectively method by applying annua' rates approved by the MPSC to the Income Lves - For fadera! income tax purposes, the Compa,/ average of year begmning and year end.ng ba'ances of deprec:abte computes depreciabon using accelerated methods and shorter property by pomary piant accounts For major generatrng units, the depreciabie lives Deterred income taxes are prov:ded for timing first year's depreciabon expense is ca'cu'ated on a monthly bas's d,fferences bet Aeen book and taxab!e income to the extent commencing adh the month in which the un;t is O! aced into authonzed by the MPSC. Investment tax cred:ts ub'iled are commercW operaton. Annua! dep'ecahon pro /is;ons expressed deferred and amortzed over the est mated composite service hfe of as a percent of average depreciao'e property were 3 24h 3 28% the related property (See Note 5) and 3 31% for 1986.1985 and 1934 resoective'y in gener31 the Capitali:ation - Discount, Premium and Expense - The cost of p'opert es rel red in the norm 3! course of business is discount, prem um and expense re!a!cd to the issuance of 101] charged to accumu'ated deprecuton Excend:tures for made term debt is amortrzed over the k<es of the issues Capda' stock nance 31d rep 1rs are charged to expense, and the cost of net, expense related to that portion of preferred and preference stock Drocerty insta4eo. which reo'res property re red. Is chyged t3 redeemed is nn"en o!! first agrnst the accumu!ated net ga:n 01 Drape'l/ 3CCounts ' rea^qu: red Ca0;!f stock inc'uoed in prem;um on common 5:03 Allo:cance for Ennds Used Dn rm e Constructwn ano subsequenry ajanst retamed earnings used in the business i VMUDC"> - AFUDC. a non ooerat 1] nal casn ttem is Et traordnury Property l os,es and Unrecovered Plant det.ned n the FERC Unitarm System of Accmts t mdude ' tN cg;f s _ seg g);g 7 y net cost fy the penod of cc,structa, at cy-]<,ed f anos used for _g y-consPu ton parcases 3na a relsolao e rate 31 o'90' fBos del so used " AFUDC indves aa rcw$ng p'om1are cered / the , approx mate interest expense ano !N cast of cher (commn p'eterred and D'e'e'e1ce s5nnMr3 eM) fJ1d3 appicao e il -V-the Cost of Colst'uct ol a'e tr 31sfe"PJ f'am Fe n^nr"e strem1t , v J s9
., -+e - - . -
.l - - -- .,? Ab' I ~
w m_ ~ u m
Note 2 atl appropriate correchons and moditcabons were in place or were progressing satisfactony in September 1986, the NRC a0 proved power I'm/es t Costs - The project estmate for fermi 2, a nuctear ascension to lesels up to 20ro. The teshng required at 20% power has generahng unit having a nomina! capabikty rating of 1,100 MW, is been completed There are six testing stages and Fermi 2 has comp!eted
$4.230 beon (including $1299 b60n of AFUDC). based upon the first of such stages. Progression to the final testing stages normally anticipated May 1,1987 commercial operabon at a 90% power proceeds at an increased pace, since the first stage requires adjust level in an Apnl 1,1986 order, the MPSC imposed the requirement ments necessary for increased power to be attained in February 1987, that Fermi 2 may be declared to be in commercial operaban only the NRC approved power ascension to levels up to 50h when a 90% power level for 100 conbnuous hours is achieved from time to time the NRC may consider taking enforcement action (See " Rate Matters", herein ) The project estimate of $4 230 bAon against the Company as a resutt of technical and procedural violations at inc!udes the undivided ownership interest of Wolverine Power the plant. Any enforcement action may result in fines levied against the Supp!y Cooperahve,Inc (" Cooperative")of $427 mGon, but aces Company not include other costs of approximate y $315 mean (including l'u dase (if Cocperative's Omncrship inten st - In 1977, the interest on construtbon loans) capitahzed by the Cooperabve or an Company and the Cooperative entered into a Parbcipation Agreement eshmated $148 mAon ($124 milhon through December 31,1966. and under which the Company sold a 20% undivided ownership interest in an eshmated $24 mi! hon for the penod January 1987 to anticipated fami 2 to the Cooperahve. The Cooperative's investment in Fermi 2 was commercial operation) of expenditures by the Company for quarterly lim ted by a 1983 amendment to the Participabon Agreement to $426 9 purchases from the Cooperative of an addibonal ownership interest in muon for plant (excludmg other costs of approximate!y $315 mAon Fermi 2. (See " Purchase of Cooperahve's Ownership Interest", herein )
capdalved by the Cooperahve), $24 3 muon for nuclear fuel and $3 0 Through December 31,1986, actual project expenditures were $4 090 mno or matenals and suppbes, which hmitations were reached in buon (including $1.217 buon of AFUDC). The Company's porbon of 1984 Expend'tures to complete piant construction in progress at the the project estimate for Fermi 2 is $3 803 bacn (including $1280 buon time the plant investment hmitaban was reached in 1984 have been of AFUDC) and, through December 31,1966, the Company had made sotely by the Company with the Cooperative's participation in-expended, exclusive of purchases from the Cooperative, $3 663 buon terest decreasing through December 31,1985 as a result of the invest-(including $1.198 baan of AFUDC) for project costs apphcab!e to its menWMahon. undivided ownersh.p interest in this unit. The Company is currenUy . An August 1985 amendment to the Participaton Agreement betAcen Snding all Fermi 2 costs since the Cooperahve's obbgabons were the Company and the Cooperatree required the Company to commence hmited by an earher agreement. quarterly purchase payments equal to the Cooperative s quarterly Under current genera!!y accepted accounting princip!es, the Corn interest payments on indet,tedness related to its investment, and pany wdi continue to capita!ile all costs, incfudmg AFUDC, associated stopped the decrease in the Cooperabve's parbcipahon interest at with the unit unbl commercial operabon. ' December 31,1985 except for such quarterly purchases Through As discussed above, Fermi 2 has an anbcipated commercia! December 31,1985, the Company made such quarterly purchases operation date of May 1,1987. However,if ddtcu!bes detay power amounting to $39 8 mi hon for p! ant, $2.1 m@on for nuclear fuel and ascension, the commercial operation cate may be modibed to take into
$01 m@on f or matenats and supphes, which, together with the account the delay and each month of delay wou!d increase the project decrease caused by the investment kmitabon, reduced the Cooperatree's est mate by $30 40 m%on, of which approximately $21 moon wou!d be adjusted participation interest to 14.41% at December 31,1985.
AFUDC. In add; tion, the Company's obhgaban to purchase a porhon of Though it is agreed that the payments through December 31,1985 the Cooperative's interest in Fermi 2 wdi aserage appmximately $6 represented purchases, a dispute developed bet Aeen the Company and m@on per month and wdl cont nue unbl commercial operat on the Cooperahve relating to payments made thereaf ter. The Company Tcsting and Licensing - The Company is subject to the lunsdicbon made quarterly purchase payments on March 31,1986 and June 30, of the Nuclear Regulatory Commission ("NRC") weh respect to 1986 to the Cocperative in amounts totakng $39 6 mean ($37 4 mnon construct on, kcensing and operabon of Fermi 2. Power ascension at for pl ant. $2 0 maon for nuclear fuel and 50 2 mean for matena!s and Fermi 2 wdl occur in interva!s fo!!owing the comptebon of ptanned supphest Hoceser, due to the dispute betAeen the Company and the stages of test,ng Under a format proposed by the Company and agreed Coopcrate.e, the Company did not recerse ht e documentaban from the to by the NRC, the Company estabhshed an Inoependent Overview Cooperabvc nor re! eases from a mortgage he!d by the Un;ted Sta'es of Commdee, compnsed of recogneed nuc! car industry consu tants The Amenca (Rural Dectnhcation Administrabon) on the Cooperabwe's Commdtee must recommend each incremental power ascension at six ownersh:p interest in Fermi 2. This t t'e documentabon was p' aced in increasing power levels up to and inc!uomg full power poor to the time escron and Mi not be released unbl 1990 as a result of a subsequent , that concurrence is recerved from the NRC to increase power- agreement with the Cooperahve, discussed be!aw Therefore, the March In Juh 1985, the Company received a full power ocerahng kcense 31 and June 30,1986 quarterly payments aggregabng $39 6 mean for Fermi 2 from the NRC which permitted po Aer ascension at leie!s ha,e teen recorded as Other Dcterred Deb:ts in the Consokdated abose 5% power Dunng teshng a number of management. procedurat Ba'ance Sheet at December 31.1986 and techn: cal d tbcutes were espenenced In hght of these dJhcules, the C0mpany aTeed thallt Mu!d not ascend to po Aer le,'e!s in e* Cess c! 5% unbl such tre as the NRC and the Company were sabsted that
- - . . - - ~- , -- + ~ ' ~~~ ~
k-ffb alifEPu%n  A
' l I
The quarterly amounts due to the Cooperative for purchases on During the period from the receipt of rate relief associated with September 30,1986 and December 31,1986, totaling $36 3 million commercial operation of Fermi 2 through the January 1,1990 planned , ($34.4 minion for plant, $1.8 million for nuclear fuel and $0.1 million for purchase date, the Company will purchase 100% of the Cooperative's I materials and supplies) were not paid in 1986 These purchase Fermi 2 capacity and energy entitlements. The costs for the buyback of payments are expected to be made in 1987 and have been recorded as power will be based on the Cooperative's total debt service (interest and l Other Deferred Debits and Other Current liabilities in the Consolidated amortization of principa!) and certain other costs such as fuel and Balance Sheet at December 31,1986. operation and maintenance expenses. Buyback payments to the in March 1986, the Company and the Cooperative further agreed Cooperative are currently estimated at $66 6 million, $99.6 million and that the Company will make quarterly purchases of an additional portion $100 million for 1987,1988 and 1989, respectively. In addition, under of the Cooperative's ownership interest in Fermi 2, the amount of which the terms of the Letter of Understanding, the Cooperative will continue will be equal to the Cooperative's quarterly principal payments on to purchase caoacity and energy from the Company and such indebtedness related to its investment. The Company made payments purchases will continue on a graduated basis through 2025. for such purchases for the quarters ended March 31 and June 30,1986 Rate Afatters -In Jufy 1983, the Company requested rate relief from totakng $4.1 mdhon ($3.9 milhon for plant and $0 2 million for nuclear the MPSC with respect to Fermi 2 ($556 million coincident with fuel) and received title documents for such purchases. The quarterly commercial operation) On Apnl 1,1986, the MPSC issued a final amounts due to the Cooperative for such purchases on September 30 opinion and order with respect to the Company's request. The rate and December 31,1986 totating $3.4 mi!! ion ($3 3 million for plant and increase granted by the order is to be phased in over a five year period 50.1 milhon for nuclear fuel) were not paid in 1986. These purchase in 20% increments commencing with the commercial operation of payments are expected to be made in 1987 and have been recorded as fermi 2. Based on current generally rcepted accounting principles, the Other Deferred Debits and Other Current liabilities in the Consolidated phase-in plan would be accounted for by recording non cash items of Balance Sheet at December 31,1986 income, deferred depreciation and deferred return (at the overall rate of At December 31,1986, the Cooperative's adjusted participation return of 10.15%) totakng approximately $474.7 million (annual defer-interest in Fermi 2 was 13.56%, based on amounts paid to the rats of $189 9 md! ion, $142.4 mdlion, $94 9 million and $47.5 mdlion fcr Cooperative in 1986- the first four years of Fermi 2's commercial operation). The deferred On October 23.1986, the Company and the Cooperative executed a amounts would be amortiled to Operating expense as the cash recovery Letter of Understanding. subsequently approved by the Boards of of such deferred amounts is rea!iled through revenues over the life of Directors of both the Company and the Cooperative, providing for the plant. agreement as to the general terms of a purchase by the Company of the Based on the five-year phase in plan, the MPSC approved rate Cooperative's remaining undivided ownership interest in Fermi 2, which increases apportioned by year are as follows: is to be completed on January 1,1990. This agreement is subject to the receipt of appropriale regulatory approva!s.
- i 2 ' 4 '
The letter of Understanding provides that the Company will continue to make quarterly purchases of portions of the Cooperative's ownership ^ l interest in amounts equal to the Cooperative's payments of principal and interest (approximately $18 mdkon per quarter) on indebtedness related $, n" N [ $77 M $ h,5M $257AN $U4.714 $473,782 to its investment untd the Company receives MPSC authorized rate relief associated with the commercial operation of Fermi 2. The Cooperative The Company will fde proposed rate schedules on an annual basis will continue to furnish the Company wdh title documents with respect commencing with commercial operation of Fermi 2. Rates will become to purchases equal to pnncipal payments (approximately $2 milkon per effective upon approval of the rate schedu!es by the MPSC. > quarter) However, titte documentation related to quarterly purchases The Company has traditionally been allowed to determine the point in equal to interest payments, commencing with the third quarter of 1986. time at which a generating unit commences commercial operation and, wdl be held in escrow and wdl be released, along with escrowed according!y. placed into rate base for ratemaking purposes. However, the documents for the March and June 1986 purchases, upon the crder requires Fermi 2 to operate at a 90% rated output level for 100 completion of the final purchase in 1990 continuous hours before commercial operation may be declared in Subject to the receipt of appropnate regulatory approva!s, the addition, the Company must certify to the MPSC in writing that the unit Company will on January 1,1990, as final payment of the purchase has met the definition of commercial operation Within 15 days af'er the pnce, assume responsibikty for approximatelv $550 mdhon of the Company certifies the p! ant to be ready for commercial operabon, Cooperative's long term Fermi 2 related debt or, in the atternative, issue parties to the proceeding may review the Company's certificabon. other evidences of indebteoness for the purchase pnce The Company The order is based upon a 1983 total project cost esbmate of $3 075 has fded an applicaban with the MPSC seek ,q financing authonty for bdhon of which $2 648 bdhon ($2 552 bdkon MPSC iunsd1ctional and ' this transacbon It is anticipated that the ohnned purchase by the $0 096 bdkon FERC junsdictiona!) retates to the Company's portion of , Company wou!d resu!t in the Company repapng approximate!y $550 the plant The order grants recovery of $2 237 bdhon in MPSC .? mdkon of debt oier a 27 year penod including interest on the .. unamorbled debt balance 4
" ~~~ ' ~'
~l[ ',' ." I . r .$ - , - -- .-
LK s,
jurisdictional project costs for fermi 2. Based upon alleged imprudence Because the order discussed above does not provide for the return of certain expenditures, no return on or recovery of $313 mil l ion of the on and the recovery (from either current customer rates or phase in Company's MPSC jurisdictional project costs were allowed. The order revenues) of all the project costs and operating expenses (operation, allows recovery through depreciation of $2 mi!! ion of disallowed project maintenance, depreciation, property and other taxes) for F ermi 2, future costs, but a return on such costs is not allowed. total and per share Eamings for Common Stock will be adversely As discussed herein under ~ Purchase of Cooperative's Ownership affected when this unit commences Ommercial operation. Interest," the Company is obligated to purchase the capacity and energy Under current generally accepted accounting principles, if it is entitlements of the Cooperative until January 1,1990. The Cooperative's ultimately determined that a portion and/or the return on a portion of portion of the fermi 2 disa!!owance is reflected in the capacity buyback project costs is disallowed, total and per share Earnings for Common costs and, therefore, the Company expects that the MPSC may disallow Stock wi!! be reduced over the period of time the plant remains in the recovery of a corresponding portion of such capacity buyback costs service. A write off would be required under current generally accepted in Power Supply Cost Recovery proceedings. accounting principles only if, and to the extent that, anticipated future in order to recover all expenditures in excess of $3 075 billion revenues associated with the plant, including return, are insufficient to (estimated at $1.155 billion based on the current project estimate of recover current operating expenses and depreciation of all of the plant
$4 230 billion plus purchases from the Cooperative) incurred in investment, including the amount disallowed, plus associated ongoing constructing the plant, it will be necessary to request additional rate interest costs. While the Company believes commercial operation of relief from the MPSC. The Company plans to fi!e for such additional rate fermi 2 will commence Defore the point in time when the total plant relief in 1987. The April 1,1986 order contaMed language which costs and expenses would equal anticipated future revenues associated indicated that the MPSC might not allow recovery of costs in addition to with the plant, it is possib!e that delays in achieving commercial the $3.075 billion of costs presented in the record before the MPSC. The operation status may occur Should such delays occur and should Company appeated this specific portion of the Apnl 1,1986 order to the additional rate relief be insufficient to recover total plant costs and inpham County Circuit Court, and in a stipulation executed by the MPSC expenses, wnte offs may be required under current generally accepted 0:, January 13,1987, the MPSC stated that it would fairly review any accounting pnnciples. See Note 3 for a discussion of a change in subsequent request for a return on and recovery of fermi 2 costs that accounting standards for abandonments and disallowances of plant might be filed by the Company This stipulation has been approved by costs, and for capitalization of AFUDC.
the court I)nononissioning - The NRC has authonty to regulate the method by The MPSC also ordered that, once fermi 2 commences commercial which fermi 2 will be decommissioned The MPSC has junsdiction over operation, the Company is to remove its 795 MW oil fueled Greenwood the matters pertaining to the recovery of costs of decommissioning Unit No. I from rate base until it is determined in future proceedings to nuclear power plants. For fermi 2 this would include the manner of be necessary for reliability or economic reasons However, the Company funding the expenditures (which could cost in excess of $100 mirlion is permitted to recover through rates operat,ng expenses with respect to in 1987 dollars) and the recovery of these costs bv the Company f rom Greenwood Unit No.1, including depreciation, but may not earn a its customers. further return on the $283 milkon net investment. The Company has On August 26,1986, a Settlement Agreement providing for the appea!ed to the court the removal of this unit f rom rate base establishment of an external trust fund to cover future decommissioning The Company has appea!ed other provisions of the order to the expenditures for fermi 2 was approved by the MPSC. On January 13. Ingham County Circuit Court. The Company intends to seek recovery of 1987, the MPSC issued an order authorizing the estabashment of a a!I Fermi 2 costs disallowed, as well as those not yet presented to the $100 million External Trust fund (in 1987 dollars) to finance the MPSC, including purchases from the Cooperative. (See ' Purchase of decommissioning of fermi 2. The order approves surcharges on Cooperative's Ownership Interest," herein ) The Michiga l Attorney customer bills of both the Company and the Cooperative commencing Genera!("AG") has also appea!ed portions of the Comrnssion's order- with the commercial operation of fermi 2. including placing fermi 2 in rate base and allow:ng a re' urn on the amounts deferred under the phase in plan The matter hs been referred to the MPSC for further proceedings and additionai testimony has been Note 3 filed with the MPSC' Change in Accounting Standards in July 1985. the MPSC reduced the Company's return on common in December 1986, the financial Accounting Standards Board ("FAS6") equity to 14 5% and overa!! rate of return to 10 3% The fem 2 order issued Statement of financial Accounting Standards ("SFAS")No. 90, will further reduce the Company's authonzea rate of return 0,i common .. Regulated Enteronses - Accountmg for Abandonments and Dis equity to 14 0% and its authonzed osera!! rate of retum to 1015%, to be allowances of Plant Costs " SFAS No 90 is an amendment of SFAS No < effective when fermi 2 commencts commercial operation However, 7j, .. Accounting for the Effects of Certain Types of Regulation." such retums are not assured. but rather are dependent upon levels of SFAS No 90 requires the future revenue that is expected to result sales, resenues and expenses from the regulator's inclusion of the cost of an abandoned plant in al!awab!e costs for ratemahrg purposes to be reported at its present va!ce when the abandonment becomes probabic, using the enterpnse's g.. p}_' ' ~
.4._ ; .[-
.: ; , y . ..; ,, , .
. : ;;y7;. . . .~ .
~ . . - ;.~- ~ 1 n .t. 4,i. h i M M T *MN@dM&bsQdddy [
incremental borrowing rate. If the carrying amount of the abandoned On a pro forma basis,1986 has been adjusted for d'sallowances of , plant exceeds that present value, a loss would be recognized. Fermi 2 project costs (including AFUDC) of $305 million. Due to the SFAS No 90 also requires any disa!! owed costs of a recently insignificant pro forma effects,1985 and 1984 were not adjusted. On a
*~
completed plant to be recognized as a loss when such a disa!!owance pro forma basis, the removal of Greenwood Unit No.1 from rate base - becomes probable and a reasonable estimate of the disallowance can be would be recognized as a loss under SFAS No. 90 at the time Fermi 2 ., made. If part of the cost is disallowed indirectly (such as a disallowance achieves commercialoperation. of return on investment on a portion of the plant), an equiva!ent amount In order to recover and earn a return on a!I Fermi 2 costs in excess of cost shall be deducted from the reported cost of the plant and of $3.075 billion (the project estimate in the record before the MPSC recognized as aloss. compared to the current project estimate of $4.230 billion), it will be SFAS No. 90 specifies that AFUDC should be capitalized only if necessary for the Company to request additional rate relief from the s its subsequent inclusion in allowab!e costs for ratemaking purposes MPSC. The Company must request rate adjustments for additional is probable. Fermi 2 project costs of $1.155 billion plus quarterly purchases of As permitted, the Company anticipates adopting the provisions of ownership interests from the Cooperative of approximately $148 million , SFAS No. 90 in 1988, although SFAS No. 90 allows delayed application for purchases through April 30,1987. Under he provisions of SFAS No. until 1989 in certain prescribed circumstances. SFAS No. 90 permits 90 any project costs which are considered probab!E of disallowance retroactive application of the change in accounting to years prior to 1988 shall be recognized as a loss at the time such determination is made. lf ? through restatement or, alternatively, through recognition of the additional costs were disallowec o !! e MPSC, the Company would be cumulative effect of a change in accounting principles in 1988. required to recognize an additional net after-tax loss of up to a maximum in accordance with SFAS No. 90, the Company would be required to of approximately $1.0 billion. The Company believes that all costs record at the date of adoption, either through recognition of the associated with Fermi 2 have been prudently incurred and intends cumulative effect or by restatement, estimated aggregate net losses of to seek recovery of all Fermi 2 costs not yet presented to the MPSC , up to approximately $428 mill on as shown in the following table. The for review. amounts set forth in the table have been reduced by interpenod income The Company a!so intends to seek a rate adjustment from the MPSC taxes, v.here applicable, using the income tax rates in effect at the time to reflect (1) the anticipated January 1,1990 $550 mi' hon purchase of of the adverse event. the Cooperative's remaining ownership interest in Fermi 2 through the assumption or issuance of an equivalent amount of debt and (2)the htl $s , partial offsets to such rate adjustment by reduced billings through the Reference
- ne Recognved Power Supply Cost Recovery Clause upon termination of the 100% -
t md/m"-) buyback of the Cooperative's Fermi 2 capacity and energy entitlements ,.
- 1. Imalkmamesof f ermi2 projeti on January 1,1990, and the effect of additional purchases of capacity costs based on the $1073 bilhon and energy by the CO0 perative from the C0mpany (See Note 2.)
[t A required wnte off of abandoned plant costs, disallowances of plant rIIrIIteIEhr l . plus All'l)C thereon through May Costs and p0ssible additional disall0wances from rate base for fermi 2 1,tw7 Note 2 530; could have a matenal adverse effect on the Company's financial position
- 2. n4 a og o (t,uj and resu!!s of operations. These adjustments could significantly reduce base on the antnipated May 1 lW7 or eliminate retained earnings ($746 million at December 31,1986) and commer ial operation date of Iermi 2 as ordered by the MP5C Note 2 1 1
reduce total common shareholders' equity ($2.716 bilkon at December f 31,19861 and according'y could result in a substantial reduction in the r$It 2aIOl le) Note 7 4 aggregate amount of funds lega!!y available for the payment of H 4 lbanimances of Belle Rnct pro;ect dNijends. As a result, the Company may be requested to fund certain I costs m im Note 13 .__3 escrow accounts in an amount that may approach $130 million, undet .. Total $43 terms of Indemnity Agreements relating to insurance on tax exempt obhgations Also, the earrangs test pr0 vision of the Company's 1924 The fol!owing table shows pro forma amounts assuming that the Mortgage and Deed of Trust, as amended (" Mortgage") could preclude Company apphes SFAS No 90 retroactively in 1988 by restatement of the issuance of additional General and Refundmg Mortgage Bonds , financial statements for pnor years: (" Mortgage Bonds") on the basis of property additions for at least nine months. However, Mortgage Bonds could be issued on the basis of Tear i nded lietember 31 Mortgage Bond retirements. (See Note 10 )ln addition, due to the mnllm% mcpt per share awmus) Cust0 mary Conditions ass 0Cl3ted with extensions of new or renew 3l of Y - exist ng, Credit facihtles sucn as ccmmerciai paper, revocabie anes of Crecit and revolving Cred!t arrangements. Such facihties may be avadable
.rn t r Common Sta k I arnings lYr share 50 ;0 52.H 52 20
~
" ~~
. . ~; .g, .7 ./.g- ,, . . . . . y .7 , 7: s. . . a
;r ,. .
8
to the Company if at a!!, on the basis of less favorable terms. Fixed power is based on MPPA's plant related investment in the Belle River income quality ratings of tne Company's securities might also be project, interest costs incurred by MPPA on their original project adversely affected and the Company's abihty to obtain long term funds financing plus 2.5% and certain other costs such as depreciation and from the financial markets on favorab!c terms may be adversely affected operation and maintenance expenses. Buyback payments to MPPA were SFAS No. 90 did not address accounting for phase in plans. The $75.3 mdhon and 572.9 mi!! ion for 1985 and 1986, respectively, and are FASB concluded that additional consideration is necessary ") resolve currently estimated at $72.7 million, $71.9 million, $71 million, $70.1 the accounting issues related to phase-in plans. The FASB has indicated milhon and $62.4 mohan for 1987,1988,1989,1990 and 1991, l that it will consider accounting for phase in plans at a later date. respectively Ludington Purnped Storage - Operation, maintenance and other ..- Note 4 expenses of the Ludington Pumped Storage Plant are shared by the Jointly-Owned Utility Plant Company and Consumers Power Company (" Consumers")in proportion 1 The Company's portion of jointly owned utihty plant at December 31, to their respective interests in the plant. % 1986is as follows: v, I udmgton Note s M Pumped income Tnes 3 lermi 2_lielle Riser (2)_ storage _ Total income tax expense as a percent of income before tax was less In-serviie date - (3) 1973 than the statutory federal income tax rate for the following reasons: Undivided <m nership interest (1) (4) 49'% _ Im estment (milhong $3,713.4
~' '
$1.029 2 -
$16M.3 Percent of income liefore . n Aa umulated deprec iatien 1986 19 6 1984 (milhon4 5 - 5 83 1 5 444 tutory income tax rate 46.0'% 46.0'% 46.0'%
AIUDC (22.5) (21.3) ( 18.4) Indirect mnstruttion msts 0.1) (2 7) (2.4) (I) See discussion in Note 2. I"'""""""" d' I"^ h"""d"8 U II U #) (2) Intludes llelle Ris er Umt No.1, f atilities used in mmmon with Unit
' d' "
No. 2. facihties used lomily by the Helle Riser and St. Clair !\mcr l'lants and t ertam transmission hnes. "b Ab i Het tn e inmme tas rate 19.8'% _22 0'% 24 7'% (3) Umt No. I and fauhties used in mmmon with Unit No. 2 were 1 placed m sen sie on August 1. luS4. Umt No. 2 was placed m sen ite
; on July 9. lux;. Certain mal handhng faohties used pointly by the Belle Rn er and 5t. ( lair !\mcr llants were plated in sen ici lin ~1976 Components of ircome taxes were apphCable to the foi:owing-
$ and 1977. t he transmission hnes were plated in senite in various g( s cars between 19ho and 1981. 1986 19 6 1984 (4) Ihe Compans % undnided ow nership interest is 62 7W% in Umt No. g,ygg
~%
sj 1, M1.39'% of the pornon of the f as ihties applicable to Belle Rn er used jomtly by the Helle Rner and St. Clair Power Plants 49 59'% in operating es penses tertam transmisuon lines and at least 70'% in faohties used in mm. Current $_18,304 5. _11_. ;49 $_ 3.411
# Deferred - net mon u ith L'mt No. 2.
Dorrow ed lu nd
- com ponent L of Al UDC (20,609) (6,3u4) 36,724 Derreaanon 64,423 62Ja4 49.136 8ctle Riwr - In 1983, the Company sold to Michigan Pubhc Power d ' " " ' " "" "'"" "#
). Agency ("MPPA") an undivided owrarship interest in Bete River Unit Inlll,'i, , '"Uli'7,'l77an. ~
No 1 and facihties used in common by Be!!e River Unit No 1 and Befie proPert y lo"e' a nd River Unit No. 2, and certain other related facihbes. At December 31, unraou n d plani osts o,823i 0 323) o 817) other 199 4.1 01) 1986. MPPA's investment consisted of $343 4 mdhon for Unit No. I and gggy -,,y" ~ 4 common facihties, $28 mdhon for certain cod! handhng and transmis sion f acihtres and $17.2 mdhon for coalinventones and other non ins estment tau redit - net Caoitabled Costs. Utihud 71,790 5;,409 41.667
^"'"'""d j
MPPA is entitled to 18 6140 of the capacity and energy of the enbre plant and is responsib!c for the same percentage of the plant s operation
-{ y39
~ (2(([
and mamienance expenses and capital improvements. The Company is obhgated to provide MPPA with bacrup power when either un:t is out Q',l"",""" " "M"d "' """' og 73 of service Den tred - net 0,un (nla (n13) The Company began obhgatory purchases of MPPA's capacity and loial ts,82n (1.n42) _. u 2 energy enht'ements at the commercial cperation date of Unit No 1 and laial mmme taus $i: 7,769 $ 123. 2"7 $111.;71 wdi conhnue to do so for up to e'even years. inibaly at 1004 thrcugh 1990 %ah dechnmg amounts thereafter The cost for the buiback of The Company defers mccme taxes for the berrowed funds compo nont of AFUDC and ind:rcct ccnstruct:an costs which are deducted curren!'y fcr fcdcral mccme tax purposes in accordance with MPSC recuPCmcntS. diktred inCLme tax dCccunhng is n0t f olcwed f or suCh cCOstruchon Costs Ieiahro to formi 2. m! Crest Cn nuC: Car fuCi hnancmg V
~
, . .. .. . , n ; 4 , . . . % C W ' f . ;, ~ + ,
Note 7 (See Note 11) and certain other current income tax deductions. In July 1985, the MPSC ordered that, for accounting and ratemaking Extraordinary Property Losses and purposes, the accumulated deferred income taxes related to indirect Unrecovered Plant Costs construction costs and the borrowed funds component of AFUDC for Amortization of extraordinary property losses and unrecovered plant Belle River Unit No. I and common plant be amortized to income over a costs commences when recovery of such costs is authorized by five year penod rather than over the hfe of the plant. Such credits to accounting and ratemaking orders of the MPSC. A return on investment income amounted to $24 million and $12 million for 1986 and 1985, is provided only for the unamortized extraordinary property losses. (See respectively Note 3 )lnformation relating to these items is as follows: The cumulative net amounts of income tax timing differences for U "' "'"""d which deferred taxes have not been provided at December 31,1986 and 1985 are $2.2 bdlion and $2 billion, respectively The tax elfect of these I r 31 Amortiration amounts not provided for currently will be recorded when such taxes Period Total 19 % 198s become payable and are recovered from customers. uhoumN Investment tax credit carryforwards of approximately $198 mdlion ntraordinary are avadable to offset future years' tax liabikties as permitted by law. This Property losses
^
aggregate amount of credits has been reduced by 17.5% and will be further reduced by an additional 17.5% in 1988 in accordance with the
,yd[j""i Q[9] 5 '$ $ $ 5 [y$
provisions of the federal Tax Reform Act of 1986 ("TRA"). Such crecits,if I,"i$iY " unused, expire over the period 1997 through 2001. Enrico termi Unit No. 3 1977-1986 6,810 - 681 Greenw ood Note 6 Unit Nos. 2 and 3 1983-1993 71.282 44,531 S L6MO Compensating Balances and Short-Term Horrowings 5" 4 241 547r131- 5'9 3 2 As described below, at December 31,1986, the Company had total short term credit arrangements of $349.1 mdhon under which $104.7 Note 8 mdhon of borrowings were outstanding. Common Stock and Non-Redeemable Cumulative The Company had bank lines of credit of $300.1 million, of which Preferred and Preference Stock
$5.1 mdlion required compensating balances, $293.5 miUion had in the fourth quarter of 1985, the Company discontinued the issuance of commitment fees in lieu of compensating balances and $1.5 million did new shares of its Common Stock through the Dividend Reinvestment not require compensating balances or commitment fees. In support of Plan and the Employes' Savings Plans.
lines of credit requiring compensating balances, the Company main- The Convertible Cumulative Preferred Stock,5%% Senes, is hined bank balances which during 1986 averaged $0.5 mdhon. None of convertible into Common Stock. It c x nyersion pnce was $17.79 per these balances is subject to usage or withdrawal restnctions. Commit- share at December 31,1986. The numbers of shares converted during ment fees paid in lieu of compensating bank balances for 1986 were 1986,1985 and 1984 were 21,880,15,739 and 23,417, respectively
$1.4 mdkon. Substantially a!I borrowings are at rates below the banks' The number of shares of Common Stock reserved for issuance upon prime lending rates. conversion and the conversion price are subject to further adjustment in The Company has a nuclear fuel financing arrangement under which certain events. The Convertible Cumulative Preferred Stock,5%%
Renaissance Energy Company (" Renaissance"), an unaffikated company. Senes, may be redeemed at any time in whole or in part at the option of raises funds, subject to the satisfaction of certain condttions, to the Company at $100 per share, plus accrued dividends. purchase nuclear fuel and to lend to the Company, pursuant to a The fonowing series of Preferred and Preference Stock, which are not separate Loan Agreement, for general corporate purposes for penods redeemab!e pursuant to sinking fund requirements, are redeemable -[ not to exceed 270 days. Renaissance may issue letter of credit backed so!ely at the option of the Comoany at stated per share redemption f commercial paper (currently kmited to 180 days' matunty) or borrow from participating banks on the basis of promissory notes kmited to 270 prices, plus accrued dividends: 7 days' matunty To the extent the mammum amount of funds avadable to Deaeaung Pnor onand [f} Renaissance (currently $309 mdhon)is not needed by Renaissance f rom N"" *"'""bl*"in I roni lo to Ann Preterred Not k time to time to purchase nuclear fuel, such funds may be loaned to the lp Company pursuant to the Loan Agreement. At December 31,1986. $24 $ll, Z Z "ft i I'$ i $ md! ion was avadab!e to the Company under such Loan Agreement (See Note 11 )
- 7. 4 ;",,
7M 102 ;0 12- 1-M7 101 101 II. itsn 12- 1-M7
/
.i The Company has a $25 mdhon credit arrangement restncted to Ungr nooit j; bankers acceptances. A5 33 g 3g g.g w 33 gg, 51 la 2s 40 1 1; w 2; 3 1. lius 51 12 2% on 1 lixx 2; 00 11 % 4 s1 11 2s 11 7. n w 33 7. t w h.
% 2x 3 rn- 33 n, n- ,
- y. - ~ . -~ - ,- ~ m m w. m n w m m m m m w p nn .
.$ t
. .V.
N11.Dh .
f, . - .
%dM@ b None of the shares of the $3.42 Series, $3.40 Series, $3.12 Series, In the event that a payment due under requirements of a sinking fund
$3.13 Series or $3.24 Series Preference Stock may be redeemed for any series of redeemabie Preferred or Preference Stock is not made, through certain refunding operations prior to January 15,1988, January no dividend shall be paid (other than a dividend paid in junior stock) or 15,1988, January 15,1988, July 15,1988 and October 15,1988, declared or other distnbution made upon any junior stock (Common and respectively, at an effective cost less than that indicated by the original Preference Stock in the case of Preferred Stock, and Common Stock in dividend rate. the case of Preference Stock) until such payment is made.
Apart from MPSC approval and the requirement that Common, The following series of Preferred and Preference Stock, which are Preferred and Preference Stock be sold for at least par value, there are redeemable pursuant to sinking fund requirements, may also be no legal restrictions on the issuance of additional authorized shares of redeemed at the option of the Company at stated per share redemption such st0Ck. prices, plus accrued dividends: Note 9 Decreas ng I'nor on and
""""""'"'""" "'"' " " ^""'
Redeemable Cumulative Preferred and l'reterred Stock p' Preference Stock y yy,,, ggg, 3, 3 39 g ggi ,,gy94 y~' On August 15,1986, the Company redeemed 360,000 shares of 9 syg go7.co 1o.1589 toI 10-15-94 11Nrb 110 m) 1-1587 100 1-1; m 12.80% Senes and 250,000 shares of 15.68% Senes, $100 par value cumulat:ye preferred stock, constituting all of the outstanding shares of I' reference Stoc k C-5213 28.10 7-15 m 23 23 Liv 90 l both issues, at a price of $108 50 and $105 88 per share, respectively, 521; Senes n 26.10 1-1541 25 25 1-1591
%,4 plus accrued dividends. H12 nedeemed The following redeemable series of Preferred and Preference Stock 1 1587) 2913 1-1587 2123 1-1597 54 00 29 00 4-1487 2123 4-1597 are entitled to the benefit of sinking funds (provided that no dividend
.g arrearages exist) providing for the annual redemption of shares at t stated per share prices, plus accrued dividends, commencing on None of the shares of the Cumulative Preferred Stock,9.60% Series
; datesindicated:
may be redeemed through certain refunding operations pnor to October Non. 15,1989 at an effective cost less than that indicated by the original dividend rate. None of the shares of the Cumulative Preference Stock,
$, "((",T,"
Redeem $4.00 Senes may be redeemed through certain refunding operations 4 Annual the Addinonal prior to Apol 15,1987 at an effective cost less than that indicated by the (,ommenung Number l'er Shares in Onginal dividend rate. Redermable %enn ~On of Sharn Share ~~Anv Tear The combined aggregate annual amounts of redemption require-I' referred si L ments at December 31,1986 for all series of redeemable Preferred and 912'% l-158; muloo s100 Nuu)
'; 9 Nrt unsas 32.soo too 32.N w Preference Stock are $20.6 million for 1987 and $18 3 million for each 11Nr% 1. Is 87 Nuu) 100 -
of the years 1988 through 1991. I'reterence sti= k On January 15,1987, the Company redeemed 2,000.000 shares of IE
!bsenn n i t! $ ! i[ $4.12 Series, $1 par value redeemable Preference Stock constituting all of the outstanding shares at a price of $25 per share for the redemption H.12 tredeemed l-1; 87 2s iso.ott) of 250,000 shares and $27.85 per share for the early redemption of
<k 1 ts 87) totuu) p 54 00 4-Is 87 suu) 2; 12iuui 1,750,000 shares. A total of $50 million has been reclassified in the
+ Not io nceed 220,000 cumulahve addmonal sharn.
4 Company's 1986 Consolidated Balance Sheet to amounts due within one year. p { The following numbers of shares were purchased for app!ication to 7 sinking fund requirements: Note 10 Long-Term Debt 7 psn _19e _ius4 General and Refunding Afortgage Bonds - The Mortgage, the lien l' referred siisk,9 72'% senes - 31.020 NU"' of which covers substantially all of the Company's properties, limits the Ir i r it 12 l'refeiens e shs L. $23; Senn S 4) 20luul i 119 N1o 28.000 amount of additional Mortgage Bonds which ma/ be issued on the basis of property additions, an earnings test provlsion and Mortgage Bond I' reference shs k, $21s Senes B 71*n) 2nfoo 99 920 retirements At December 31,1986, approomately $3 6 bnon pnncipal amount of additional Mortgage Bonds could have been issued on the basis of property additions or the earnings test provision of the Martgage, assuming an iriterest rate of 9 25% on any such addmonal Mortgage Bonds In addMon. at December 31,1986. appronmately I
$3321 meon principal amount of Mortgage Bonds could have teen
,. _ ---~e_wn_ . g. - -
h :
,y >e
s w -c,is, y . W 6 *$ j L issued on the basis of Mortgage Bond retirements. See Note 3 for a to Renaissance to purchase such fuel. Title to the nuclear fuel is held by change in accounting standards, the effects of which could limit the Renaissance. The Company's obligation to make quarterly payments Company's abihty to issue Mortgage Bonds. under the heat purchase contract commenced on September 21,1986, I Tax Exempt Revenne Bond Obligations - Agreements have been with the consumption of nuclear fuel for the generation of electricity signed with certain municipahties and municipal agencies, under which related to the pre commercial testing of Fermi 2. Renaissance's l the municipakties and agencies issued tax exempt bonds to finance investment in nuclear fuel was $285 mi!Iion and $264.4 million at l certain Company projects and to refund maturing issues. The Company December 31,1986 and 1985, respectively. The increase in 1986 over is obligated to make payments sufficient to meet the principal and 1985 of $20 6 mdlion includes net additions of $22 mdlion due primarily interest due on the bonds. To secure the Company's obhgations under to capitalized interest on nuclear fuel, less $1.4 million for the certain ut these agreements, the Company has issued Mortgage Bonds amortization of nuclear fuel consumed in 1986. (See Note 6 ) with principal amounts, interest rates and matunty dates corresponding in accordance with SFAS No. 71, the Company has recorded capital to those of the tax exempt bonds Payments made on the tax exempt leases for which the inception date is af ter December 31,1982. Accord-revenue bond obligations secured by Mortgage Bonds automatica!!y ingly. balance sheet assets and liabikties at December 31,1986 and E discharge corresponding Mortgage Bond obkgations. 1985 include certain property and related obligations under capital leases. Belle River l'ivject Tinancing - The Company has an agreement C
- W ' #' S 9"# W # N Company will record capital leases for which the inception date was on with a group of commercial banks for a $1.2 bdlion project financing or before December 31,1982. Had all such eligible leases been relating to Belle River Unit No. I and facilities used in common with accounted for as capitalleases, assets at December 31,1986 and 1985 Belle River Unit No. 2. In 1985, the Company prepaid $150 mi!! ion would have included additional property under capital leases (including representing quarterly repayments due January 1 and Apnl 1,1986. In nuclear fuel),less accumulated amortization, of $379.1 million and 1986, in addibon to quarterly payments due July 1 and October 1, the on, respec% Mso, hanes at December 3L M6 and Company prepaid $75 mdlion representing the quarterly repayment due 5 wwb have included additional noncurrent habilities under capital January 1,1987. Quarterly repayments are due Apnl 1,1987 and leases of $85.6 mdlion and $98.1 million, respectively, and additional continuing thereaf ter through October 1,1989 with provision for current liabihbes (including nuclear fuel obhgations) under capital leases prepayment at any time without penalty The agreement contairs a of $ mMon nd $273.3 mmon, respechvely number of covenants, including an agreement by the Company not to pledge or sell any of its assets except in the ordinary course of business
, zaMn hasd ass @s mom s@at al dnM on me #gaMn aM amo@aMn He kasd asset and except for the sa!e or conveyance to one or more ubhties of is equal to the rental expense allowed for ratemaking purposes Net undivided interests in generating plants; and not to create certain liens on its assets' come b nd aMd WaMaVaMn of kases.
for ratemaking purposes, the MPSC has treated all leases as long-Tenn Del't Afaturitics -In 1987,1988,1989,1990 and operating leases. 1991,long term debt matunties consist of $646.4 mdhon, $479 8 mnon, $429 6 m@on, $92.1 muon and $94 0 m@on, respectively Note 12 Note 11 Commitments and Contingencies Corninitments - The Company has entered into purchase commit-Leases ments of approximate!y $314 mAon at December 31,1986. The Rental expenses were $41 1 milkon, $391 milhon and $38 0 milhon for Company has also entered into substantial long range fuel supply 1986,1985 and 1984, respectively commitments future minimum lease payments under long term noncanceliab! C niingencies - On May 13,1986, Quivira Mining Company (for-leases, consisting of nuclear fuel ($409 8 mean computed on a merly Kerr McGee Nuclear Corporation) fded a suit against the Com-projected units of produchon basis) lake vessels ($97.1 mMon), any claiming contractual damages in the amount of $60 mnon. The locomobses and coal cars ($971 mnon), office space ($54 I meon) suit aneges that the Company did not take nuclear fuel on a bmely basis and compu!rts, vehicles and other equipment ($72.7 moon) at On March 19,1986, the Company inibated htigabon in the U S December 31,1986 are as folfo,ss Distnct Court for the Eastern Distnct of Michigan against Dectier Coal inunmnq (nul6,nq Company (" Decker") seeking recovery of approximately $39 mAon of pc s%a rno sas overpayments of Montana sta'e coal taxes the Company claims were pns too s enI w7 improperly calcu!ated since 1973 On May 9,1986, Decker fJed a em 81 ; Rem.nmnman N1o countercla<m for breach of contract and demand for tnal by jury lout wil 4 The Company has a heat purchase contract mth Renaissance ech pruvides for the purchase by Renaissance for the Comoany of up to
$309 menn of nuc! ear fuel. suo;cct to the conhnued asadabnty of funds t
Vli? Q'
~
n.
' r$
m.. . L u.~ . -~ . .. r a- . .- . . a . %
^%
, _ h. .J m - , e ,u The State ci Montana has filed assessments claiming that additional The Jetferson School District (" School Distnct"), located in Monroe Montana severance and related taxes, plus interest, are due for 1980 County, filed three actions with the State Tax Tribunal (" Tribunal")
and 1981 as a result of costs incurred by the Company resulting from contesting the Companys 1985 property tax assessments for Enrico the renegotiation of a contract with Decker. These assessments have Fermi Unit N0.1 Fermi 2 and the Monroe Power Plant seeking been filed against Decker as the producer, and they have Deen formally reassessment which would result in an annual tax increase of protested. It is anticipated that Montana will file assessments for approximately $57 million for the Company. On September 30,1985, the additional taxes for 1982 through 1984. The 1980 through 1984 Inbunal ruled the School District did not have proper legal standing to assessments could amount to as much as $11-13 million plus interest. If appeal the Company's tax assessment before the Tribunal and the Decker is unsuccessful in its protest and appeal, the Company may be Tribunal's decis;on has been affirmed by the Michigan Court of Appeals. required to reimburse Deck er for all or a portion of the assessments. The School District requested a re hearing before the Michiga1 Court of (See Note 13) Appeals, which was denieo, and has filed an application for leave to Ownership of an operating nuclear generating unit subjects a appeal to the Michigan Supreme Court. The School District filed three company to additional risks. The Company is insured as to its interest in similar actions with the Tribunal contesting the Company's 1986 Fermi 2 under property damage insurance provided by American property tax assessments. No speafic assessment increases were Nuclear Insurers ("ANI") and Nuclear Electric Insurance Limited indicated in these filings. ("NEIL") Under the ANIinsurance policies, $500 million of composite On September 4,1986, the AG, acting on behalf of the people of the pnmary coverage and $120 million of excess coverage is pruvided for State of Michigan and the Michigan Natural Resources Commission, decontamination costs, debris removal and repair and/or replacement of filed a lawsuit against the Company and Consumers, as to owners of property The Company pays annual premiums for this coverage and is the Ludington Pumped Storage Plant, a!!eging violations of the Michigan not hable fcr retrospective assessments. Under the NEllinsurance Environmental Protection Act and the common law for claimed aquatic policy, $610 million of excess property damage insurance is provided. losses. The lawsuit claims past damages (including interest) of approx-The combined limits provide total property damage insurance of $1.23 imately $148 mi!! ion and future damages (from the time of the filing of bilhon ($500 million of composite pnmary coverage, $120 million of the lawsuit)in the amount of approximately $89,500 per day On excess coverage and $610 million of additional excess coverage) in September 25.1986, an answer was filed denying liability. The matter addition, the Company will obtain coverage for fuel costs associated remains pending before the Ingham County Circuit Court. with plant outages through NEIL UndeMb ' NEIL coverages, the in addiaan to the htigation discussed above, the Company is Company could be liable for maximum retro! uective assessments of up involved, trom time to time, in litigation dea!ing with the numerous to approximately $16 million per year if losses were to exceed aspects of its business operations. The Company believes that the accumulated funds available to NEIL outcome of all such htigation will not have a material etfect on its As required under the Pnce Anderson Act(which expires on August financial position or resu!ts of operations 1,19871 the Company maintains public habihty insurance for a nuclear See Notes 2,3 and 13 for a discussion of contingencies related to incident. The current hm.t of liabihty is $160 milhon of private insurance Fermi 2 and other rate matters. plus deferred premium charges of $5 milhon which may be levied against each nuclear unit licensed to operate (but not more than $10 Note 13 milhon per year per nuclear unit 10n December 31,1986, there were Rate Matters 107 kcensed nuclear units in the United States Thus, deferred premium General - The Company is subject to the general regulator / junsdic-charges in the aggregate amount of $535 mdhon could be levied against tron of the MPSC, which, from time to time, issues its orders pertaining all owners of hcensed nuclear units in the event of a nuclear incident. to the Company's conditions of service, rates and recovery of certain Accordingly pubhc habihty for a sing!e nuclear incident is current!y costs Orders of the MPSC are often subject to judicial review over hmited to $695 mdkon ($160 milhon of pnvate insurance and $535 protracted penods of time and such matters are often remanded to the milhon of deferred premium charges) MPSC for additional proceedings. This review process may result in the To the extent that insurable claims for replacement power, property development of new pohcy designed to take into account statutory and damage, d0 contamination, repair and rep!acement and other costs and regulatory changes expenses ansing from a nuclear incident at Fermi 2 exceed the pokcy hmits of insurance, or to the extent such insurance becomes unavailable em rate case mth the MPSC requesting an annua! re',enue increase of in the future, the Company adl retain the nsk of loss as a se:f insurer approximate!y $969 mdhon for general cost increases for the 1984 test Although the Company h3s no reason to antictpate a senous nuclear year and for revenues coincident wth the commercial ooera: ion of Belie inadent at fermi 2, if such an incident did happen it could have a River Unit Nos 1 and 2 and fermi 2. On August 1,1984, Bele River matenal but presently undetermmab!c adverse impact on the Compan/s Unit No. I commenced commercial operation and the Corrpany began fmancial position coMect.ng rates designed to produce annual revenues in the amount of
$182 9 mahon pursuant to an intenm order of the MPSC On July 9, 1985. Be"e Roer Unit No 2 commenced commercial coeralon and the pbh.AQ.
ed ]
y Company ceased to accrue AFUDC on the unit and began to record final opinion and order concluding that there was insufficient evidence to expenditures associated with plant operations and depreciation as support the collection of the additional $13.7 million of revenues. In current operating expenses. On July 16,1985, the MPSC issued a 1984, after a series of appeals, a final opinion and order of the Ingham partial final opinion and order designed to produce annual revenues in County Circuit Court was affirmed, thereby requiring a refund, with the amount of $99.3 million for the commercial operation of Belle River interest. In February 1985, the Ingham County Circuit Court ruled that Unit No. 2. On April 1,1986, the MPSC issued a final opinion and order the statutory interest rate should be used for the refund and remanded for the Company s Fermi 2 rate request. The April 1 order grants the the case to the MPSC to determine the method of refund. While MPSC Company rate increases effective with the commercial operation of proceedings continued as a result of the remand, the MPSC, the AG and fermi 2 totaling $475.8 million (including inter st), phased in over a five- the Association of Businesses Advocating Tariff Equity (" ABATE") year period. appealed the decision of the Circuit Court to the Michigan Court of in its July 16,1985 order, the MPSC allowed rate base treatment of Appeals. Pursuant to an MPSC order issued in August 1985, the the Belle River Project but based on its " reasonable and prudent" Company refunded approximately $28 million (principal and interestl On standard concluded there was unreasonable delay in the construction of Apnl 29,1986, the MPSC issued an order requiring the Company to this project. The MPSC disallowed approximately $96.9 million ($90.2 refund an additional $519,000 of interest, and the Company has l million of which is app!icable to the Company's rate base) including appeated this order to the Ingham County Circuit Court. On October 20,
$33 9 million for certain coal handling facihties, $2.1 million for certain 1986, the Michigan Court of Appeals issued an opinion stating that the other boiler plant equipment and $60.9 million due to what the MPSC Ingham County Circuit Court Judge did not have jurisdiction to make the termed an imprudent delay of twelve months The order denied both the interest rate determination and, according!y, remanded the matter to the return on and a recovery through depreciation of the $60.9 million MPSC for a determination of the interest rate. 0n January 5,1987 the disallowance related to the delay in construction and the $2.1 million Company filed an application for leave to appeal to the Michigan disallowance for boiler plant equipment. The order allows recovery Supreme Court. At December 31,1986, the Company has recorded $20 through depreciation, but denies a return on approximately $32.8 mi!! ion million for additionalinterest related to this matter.
of the $33 9 million related to the coal handling facihties, but the Defem d Tuct Cost Refund - In 1983, the Michigan Supreme Court Company is denied both the return on and a recovery through denied the Company's motion for a re hearing of the deferred fuel cost depreciation of the remaining $1.1 million of these expenditures. ~ matter, thereby requinng a refund of $23 5 million of revenues collected, The Company appealed the July 16,1985 order to the Ingham with interest. Pursuant to an MPSC order issued in Septcmber 1983, the County Circuit Court, which, on September 17,1985, issued an Company refunded approximately $47 million (principal and interest - injunction which a! lowed the Company to collect, subject to refund, rates preliminanly determined) In 1984, the MPSC :ssued a liral order in an amount designed to produce an additional $12.1 milkon in annual d:recting the Company to refund $191 triffm e' interest. In Janwry revenues to compensate for the $60.9 million of the Belle River 1985, the AG and ABATE filed an appea. mth t% ingham County Circuit disallowance. On December 16,1986 the Court ruled that the MPSC Court which chat!enged the MPSC's methsd d ceterminininterest. In had not met the substantial evidence standard for the $60 9 million Belle September 1985, the Court remanded the case to the MPSC for River costs disallowed due to imprudent delay The Court found that the consideration of T.dditlan31 evidence presented 10 the Court and d MPSC had properly disa!! owed costs of $36 million related to the coal decision with respect thereto On March 15 1986. the MPSCissued a handkng facihties and boiler plant equipment The matter has been finaf order directing that interest be refundec in addjon to the amount remanded to the MPSC for further proceedings consistent with the refunded in 1983. The order requires an additionai sefund of interest of Courtt decision. up to $8 mi' lion, which amount has been recorded at December 31, The Company's ana'ysis of the rate order indicates that the revenues 1986. Oq $3ptember C,1386, the Ingham County Circuit Court afbrmed allowed for the Belle River Plant are suthcient to recover current the decmon of the MPSC. The Company has apg3!Ld this decision to operating expenses and depreciation of a!! of the plant investment, thj M,chigan Court 01 Appeals. including the amount disa!! owed, plus associated ongoing interest costs - Recovery - The MPSC has taken up .*he propuaty of the Therefore, the Company believes that, under current generally accepted inclusion in a Power ' Supply Ccst Acovery plan of msts associatert J accounting pnnciples, a current period wate off of the amounts the deferral c! coal dekenes from Decker. Specifically involve la this disallowed is not required. roceeding is a porhon of the $33 8 milkon payment made be % See Note 2 for a discussion of the MPSC's Apnl 1,1986 orcer with Company to Decer reso.hng from renegotiation of the comract to coal respect to fermi 2 and Note 3 for a discussion of the apphcation at taken from 1970 to 1984 and oproximately $10 reornncurs d ever SFAS No. 90 to the disa!!owances contained in the July 16,1985 and Apol 1,1986 MPSC rate orders ~ current contract terms as a result cf the CompanyMcWon to deca 1se es annual tonnage reteived dunng 1984 The MPSC inn'cded dat thu l Rate Refund -In 1976, pursuant to a temporary orcer of the Inghlm resolution of the issues reWd to th! inclusion of kvsts 3ssociated c i County Circuit Court, the Company co!!ccted revenues of $13 7 mi!koc. the renegotiahon of Decker cral sht uld be addressed in a .ecnncik;' on
; subject to refund in 1981, the Ingham County Circuit Court ssued a i
proceeding The MPSC cite sectiov of Act No 304 o' r i 6che.a j Pubhc Acts of 1982 regycThe de wnce of coa Cis. addito. +al costs and pena lty charges utseven Q v :m,ntudcut!y incurred as a
.s
. .t .,_
basis for raising the issue of the Decker renegotiations. In 1979, the AG The change in interest rate from 10% to 9% resulted in an increase in requested orders from the Ingham County Circuit Court and the MPSC the total actuarial present value of accumulated Plan benefits of prohibiting the Company from charging its customers such costs under approximately $39.6 million at December 31,1985. the former fuel cost adjustment clause. In 1980, the Circuit Court denied in 1985, the FASB issued SFAS No. 87, " Employers' Accounting For the requested relief and remanded the case to the MPSC. In 1983, the Pensions" The Company will adopt these new pension accounting and MPSC issued a final order which dismissed the AG's complaint. The AG disclosure requirements prospectively in 1987. As a result of changes in appealed the order to the Ingham County Circuit Court which denied the actuarial assumptions effective January 1,1987 and the Internal appealin September 1985. In September 1985, the AG appeated this Revenue Service full funding limitation, no retirement plan contributions case to the Michigan Court of Appeals which on November 5,1986, are expected to be madein 1987. affirmed the Circuit Court decision in favor of the Company On Other Postrctirrinent Benefits -In addition to providing pension November 25,1986, the AG filed an application for leave to appeal with benefits, the Company provides certain postretirement health care and the Michigan Supreme Court. (See Note 12.) life insurance benefits. Substantially all of the Company's employes will Thx Reforn: Act of 1986 - The TRA reduces corporate tax rates become eligible for such benefits if they reach retirement age whiie still 4 eftective July 1,1987. The MPSC has initiated proceedings requiring the working for the Company These benefits, as well as similar benefits for Company and other Michigan public utilities to present information as to active employes, are provided principally through insurance companies the impact of the TRA. In an order issued December 17,1986, the and other Organizations whose premiums are based on the benefits paid MPSC indicated that the Company, as well as other Michigan public during the year. The Company recognizes the cost of providing these utilities, must substantiate why its rates should not be reduced to reflect benefits as the premiums are recorded.
' the effects of the TRA. The Company is preparing the requested infor mation. The MPSC has ordered that the submission be made by _1986 198s 1984
.i February 17,1987. nimusmda Cost to the Company of providing Note 14 health care and life insurance tenefits to emploves Active'employes 537,678 531,227 531,083 l Employes' Retirement Plan and Other 10,268 6,308 Retired emploves 7J12
/': Postretirement Benefits T"l 547 "4" 537 535 538 795
/,g Ernployes' Rctiternent Plan - The Company has a trusteed and
.J noncontributory defined benefit retirement plan covering all eligible Y ~ %, employes who have completed six months of service. The Company's Note 15
.4 po' icy is to fund pension cost annually as it accrues based on the Supplementary Quarterly Financial Information f,.m actuarial cost of the Plan, subject to the Internal Revenue Service full funding limitation, if applicable. Unfunded p:ior service cost is amortized (Unaudited) over forty years and thirty years (for costs relating to amendments to the 1986 quarter I:nded
,l .
> L, . Plan af ter April 1,1976), as appropriate, and net experience gains and star. 31 June 30 Sept. 30 Dec.31
't losses are amortized over fitteen years. Cost to the Company to fund the almusands, currt vr i sharc amounto
, ;j Pian was $27.0 million, $37.9 million and $35.7 million for 1986,1985 operating Revenues s74s.so2 5691,371 s738.0nl so90,990 3
' y <
ana 1984, respectively Effective January 1,1986, the actuarial interest rite used in deteiminLig pension cost was changed from 7% to 9%. operating income Net income 182.2;0 130,097 153,618 108.593 176,975 127,099 169,703 111,306 I"'"ynj,n stott j f ;st to the Ccmpany to fund the Plan was reduced approximately $10.6 104,443 82,954 0.57 102,753 88,142 0.60 redlion it 1983 as a result Of this change. rarnings Per Share 0.71 0.70
*- i A comparfsca of the actuarial present value of accumulated Plan ev, f benefits, determined using interest rates of 9% and 10% at December 1985 Quarter i nded u"A'- 31,1985 and 1984, respectively and net assets available for Plan benefits at Pecember 31,1985 and 1984. the latest dates for which star. 31 Jule 30 Sept.30 Dec.31
~ q N> uheusands, cuvi;vr sharc amounta aCluarial information is available, is as f ollowS: 5713,032 56;l.273 5722,297 s701,555 fs y Operating Revenues Operating income 149.512 131,101 170,904 162,684 j 4 December 31 Net income 108,421 94,608 121,042 113,444 g' p' 1 85 1984 _ i armngs for uhousmJd Common Stoc k 82,53; 68,749 95,242 87,725 Earnings Per Share 0.59 0.48 0 66 0 60 [ Aituarial presem value of accumulate' Plan twnerits Vested 54 4 215 5366,914 4' , Nons ested ' ' _ 2M99 _ 17,13' Total 560.914 s h4 mfI Net assets as ailaHe for Phn benetits 4612.8 % 54s3,891
, ).
j T . Qm4 g ; - y
): g , A A e 3 e4,. u . -
qMy;; 1~
l Managernent's Discussion and Operating revenues realized from rate increases are dependent upon actual levels of kWh sales and billing demands (requirements for l Analysis of Financial eiectricai power measured in kilowattst l Condition and Results of Operations Cnangesin kWh sales were as foiiows: A Increase (Decrease) From Prior Year This analysis should be read in conjunction with tne Consolidated 1986 1985 1984 Financial Statements and accompanying Notes thereto, contained herein. M"$ Industrial {* 3.8 71.8 7 7.7 s Total 3.7% 2.3% 4.6% ConsoHdated Statement of Income General-Improved business and economic conditions existed The increases in commercial and industrial sales were due primarily throughott the Ccmparys service area during the three year period to improved business and economic conditions throughout the Com-resulting in higher lfowatthour ("kWh") sales, particularly in the pany's service area, with increased sales to automotive and automotive-commercialand industnalsectors. related customers. Sales to steel customers increased in 1984, but
. Operating Rewnacs- Approxiraately 97% of the Company's ooerat. decieased in 1985 and 1986. The decreases in residential sales in 1984 ing ruequ'es are subjecf to the jurisdiction of the MPSC, with the and 1985 were due primarily to cooler summer weather. The increase in . remainirig 3% sublect to the jurisdiction of the FERC. residential sales in 1986 was due to an increase in customers and to Revenues increased in each year due to the fo!!owing factors: warmer summer weathe..
Operating Expenses - Operating expenses increased in each year. gdrMrIn"$r"i 7 Year Fuel expense increased in 1984 and 1985 due primarily to increased 1986 1983 1*: generation reflecting higher kWh sales to customers and, in 1985, to rmanms; higher costs of coal. The increase in 1985 was partially offset by a Rate mcmaws and the recovery of fuel reduClion in expulse for a reclamation settlement witn oecker Coai ME[hTr ) 1 Company. Fuel expense decreased in 1986 due to lower unit fuel costs Other-net 04) 7 18 and 10wer quantities Of steam sold 10 other companies, partially offset by T"3 5 81 52"" ** higher electric generation and a reduction of expense in 1985 for the Decker reclamation settlement. The average cost per ton of coal Operating revenues include the following MPSC authorized electric consumed for 1984,1985 and 1986 was $41.96, $44.34 and $41.67, rateincreases: respectively. Coal as a percent of total fuel consumed in 1984,1985 and 1986 was 97.8%,98.0% and 97.9%, respectively. Other power supply Annual Revenues - hlhon 8 ed50 increased in 1984 and 1985 due primarily to the purchase of Interim includingInterim MPPA's capacity and energy entitlements beginning in August 1984 and
$145.2 0uly 1982) 5203.4 (Mar.1983) lower sales of energy to General Public Utilities Corporation. The 182.9 Oune 19s4) 282.2 0uly 1985) increase in 1985 was partially offset by lower purchases of energy from other electric utilities. Other power supply expense decreased in 1986 The June 1934 and the July 1985 rata increases became effective due primarily to purchases of energy from other eieCJic utilities and with the commercal operation of 8elle River Unit Nos.1 and 2 in August MPPA at lower unit costs, partially offset by higher quantities of energy 1984 and July 1985, respectively. purchased. Other operation expense increasd due primarily to higher In April 1986, the MPSC granted $475.8 million (including interest) labor and employe benefit costs (which for 1986 included non-recurring of rate relief for Fermi 2, to be phased into the Company's rates over a expenses related to a voluntary separation plan for certain management five year period commencing with commercial operation of the plant. Employes)and the cost of operating Ede River Unit Nos.1 and 2, which (See Note 2.) commenced commercial operation in August 1984 and July 1985, Revenues include aq electric rate surcnarge ordered by the Ingham respectively The 1984 increase was partially offset by the write-off in County Circuit Court effective in Septemoer 1985 in the annual amount 1983 of fuel oil conversion projects at two peaker sites. The 1984 and cf $12.1 million. For 1984, revenues decreased by $13.7 million due to 1985 increases included participation in the Electric Power Research a court ordered refund of rever ues co!!ccted in 1976. (See Note 13 ) Institute which was suspended effective January 1986. The 1985 and 1986 increases included higher public liability insurance expense and I .I h h h4
the 1986 increase included higher uncollectible expense. Maintenance interest expense increased in 1986 due primarily to the accrual of expense increased due primarify to higher labor and material costs and additional interest on the deferred fuel cost refund and on the court continuing efforts to maintain or improve the availability and efficiency of ordered refund of revenues collected in 1976. (See Note 13.) The all generating equipment. These increases also reflect expenses average interest rate for short term borrowings decreased from 11.7% associated with the commercial operation of Belle River Unit Nos.1 and for 1984 to 8.8% for 1985 and to 6 7% for 1986. 2, while the 1985 increase included the costs of a severe ice storm in Earnings for Connnon Stock and Earnings Per Sharc - Earnings January 1985 and the 1986 increase included increased production for Common Stock increased in each year due to higher kWh sales and maintenance at Monroe Power Plant. Depreciation expense increased to rate increases, partially offset by increased operating expenses in due to increases in depreciable property including the addition of Belle spite of management's continuing stringent control of expenses. Despite River Unit Nos.1 and 2 in 1984 and 1985, respectively. (See Note 1.) the increases in Earnings for Common Stock, earnings per share Taxes other than income taxes increased due to higher payroll taxes, declined in 1984 and were reduced in 1985 and 1986 as a resu!! of higher property taxes in 1984 and 1985 and higher Michigan Sing!e ncreases in the average number of common shares outstanding. Business Tax in 1985 and 1986. Income taxes decreased in 1984 and Earnings for Common Stock include AFUDC, a non-operating non-1985 due to lower deferred taxes on the borrowed funds component of cash item, consisting of the nel cost of borrowed funds used for AFUDC resulting from commercial operation of Belle River Unit No.1, construction purposes and a reasonable rate on other funds when so partially offset by an increase in pretax income. Income taxes increased used. AFUDC increased in 1984 due to additional capital expenditures in 1986 due primarily to higher pretax income, partially offset by the and an increase in the AFUDC rate in April 1983 (in recognition of accelerated feedback of deferred taxes related to indirect construction ncreasing costs of capital) In 1984, the increase in AFUDC was costs and the borrowed funds component of AFUDC for Belle River Unit substantially offset by the commercia! operation of Belle River Unit No. No.1.(See Notes 1 and 5.) 1. AFUDC decreased in 1985 and 1986 due to the commercial operation Other Income and Deductions - Other income and deductions of the Belle River Power Plant, partially offset by additional capital after income taxes, decreased in 1985 due primarily to a low on the expenditures for Fermi 2. AFUDC amounted to 99%,74% and 65% of retirement of the Pennsatt Power Plant and additional expenses Earnings for Common Stock for the years 1984,1985 and 1986, associated with a court ordered refund of revenues collected in 1976. respectively Accordingly, earnings availab:e for dividends on Common (See Note 13.) 0ther income and deductions, af ter income taxes. Stock are dependent in part upon sources other than current operating decreased in 1986 due pnmarily to a contribution to establish a income. (See Note 1.) charitable foundation and the recording of a reserve for loss on an Return on average total common shareholders' equity was 12.9%, 13.3% and 14.1% for 1984,1985 and 1986, respectively, as compared investment. l with the 15.0% return authorized by the MPSC from April 1983 to July
'osts of Capital - Dividends on common stock increased in all ]
periods due to increases in the number of shares outstanding. Dividend 1985 and 14.5% thereafter for the electric business (with a further reduction to 14.0% when Fermi 2 commences commercial operation). 4 requirements on preferred and preference stock increasa . in 1984 due pnmarily to issuance of securities to finance the Company's capital Consolidated Balance Sheet expenditure program and decreased in 1985 and 1986 due to Other Deferred Debits and Other Current Liabilities increased due redemption of outstanding shares. Interest expense on long term debt primarily to the record,ng of purchases of the Cooperative's interest in increased in 1984 and 1985 due primanly to the issuance of securities Fermi 2 for which title documents are being he'd in escrow (See Note 2.) to finance the Company's capital expenditure program and, to a lesser extent, to refund matunng security issues. The increase in interest Liquidity and Capital Resources expense on long term debt was partially offset by lower interest rates in Funds generated internally provided 16%,40% and 59% of capital 1985. Interest expense on long term debt decreased in 1986 due to expenditures (excluding total AFUDC)in 1984,1985 and 1986, refunding of maturing secunties, early repayment of Belle River Project respectively The higher levels of intemal generation of funds in 1985 Financing obligations and lower interest rates (principally the Belle River and 1986 result from increases in net income and depreciation Project Financing), substantiaffy offset by issuance of new securities. combined with reduced plant and equipment expenditures. Other interest expense decreased in 1984 due to lower levels of short-Cash requinments for capital expenditures from 1987 to 1991 are term borrowings and the accrualin 1983 of interest on the deferred fuel estimated to be approximately S1.3 billion (excluding approximately cost refund, partially offset by higher interest rates and interest on the S106 million of AFUDC). In 1987, cash requirements for capital court ordered refund on revenues collected in 1976. Other interest expenditures are estimated at S286 million (excluding S87 mi!! ion of expense decreased in 1985 due primarily to the accrual in 1984 of AFUDC) These estimates assume the commercial operation of Fermi 2 interest on the court ordered refund of revenues collected in 1976. Other n May 1987. (See Note 2.) Cash requirements for the Company's ob!igation to purchase a portion of the Cooperative's ownership interest in Fermi 2 are approx-W ,ie f -f
ima!ely $18 million per quarter and will continue until the Company Inflation receives MPSC authorized rate relief associated with the commercial The Company has been and will continue to be impacted by an operation of fermi 2. See Note 2 for a discussion of the purchase in inflationary economy. Although the current inflation rate is relatively low, ! 1990, for approximately $550 million, of the Cooperative's remaining its compcund effect through time is significant, primarily in its effect on ownership interest. the Companyt productive capacity : Cash requirements for long term debt maturities and preferred and The regulatory process limits the amount of depreciatun expense h,i preference stock redemption and sinking fund requirements are approx. recoverable through revenues to the historical cost of the Company's imately $717 million (after prepayment in 1986 of $75 million under the investment in utility plant. Such amount produces cash flows which are y Belle River Project financing), $498 million, $448 million, $110 million, inadequate to replace such property in future years or to preserve the 4-and $112 million for 1987,1988,1989,1990 and 1991, respectively purchasing power of common equity capital invested. As a result, the % Pending the receipt of proceeds from unsecured long term bank Company must rely on the capital markets to provide necessary financial $ borrowings and the sale of debt and equity securities, short term resources to replace productive capacity, thus further exposing the N. borrowings are incurred to finance the Company's capital expenditure Company to the effects of higher inflation in the form of increased M. program, refund maturing long term debt, redeem secunties pursuant to financing costs. The Company, therefore, incurs a significant purchasing 1 sinking fund requirements, redeem outstanding secunties when eco. power loss which is expenenced by the common shareholder and can p nomic and meet interim cash requirements. The Company had short. be overcome only as a result of adequate rate relief in the regulatory term credit arrangements of approximately $349.1 million at December process. The cost of fuel used in the generation of electricity, the I 31,1986 under which $104.7 million was outstanding. Any material Company's single largest expense, is subject to increase due to price , disruption in the securities markets or any other circumstance that escalation provisions in long term coal contracts However, the impact might significantly delay or restrict the Company's access to long term on the Company is not expected to be significant, since regulation financing would increase reliance on short term borrowings which, provides for the current recovery of fuel and purchased and net depending on the circumstances, may not be sufficient and hence, interchanged power expense through operation of the Power Supply could adversely affect the Company's financial condition. Cost Recovery Clause. Recovery of increases in other operation and until fermi 2 goes into commercial operation the Company's maintenance expense is dependent on timely and adequate rate relief in objective is to achieve a capital structure with a minimum of the regulatory process. approximately 35% common shareholders' equity,10-15% preferred and preference stock and 5055% long term debt. The ratio of common shareholders' equity to total capitalization (excluding amounts of long-term debt and preferred and preference stock due within one year) increased from 35.8% at December 31,1985 to 38.2% at December 31, 1986 due primarily to the increase in net income in 1986 and the issuance of 122,935 additiona! common shares. The ratio of preferred and preference stock to total capitalization decreased from 12.1% at December 31,1985 to 10.4% at December 31,1986 due primarily to both early and scheduled redemptions of preferred and preference stock and the increase in common shareholders' equity The ratio of long term debt to total capitalization decreased from 52.1% at December 31,1985 to 51.4% at December 31,1986 due primarily to increases in amounts due within one year. Certain provisions of the TRA impact the public utility industry J k Although there is a reduction in the federal income tax rate, the cash requirements for the Company's future income tax liabilities are expected to increase significantly over the next few years due to an increase in taxable base, principally because of the new a!!ernative minimum tax, and the Company's inability to utilize a substantial amount .[~ of its available investment tax credits. (See Notes 5 and 13 ) See Note 2 for a discussion of the Apnl 1,1986 MPSC rate order
' j% , which will phase in the cash recovery of a portion of the net income ~
requirement associated with fermi 2. See Note 3 for a discussion of the effect on the Company of SFAS y No. 90. h pf See Notes 4,6,11,12 and 13 for other matters that may affect the Company's liquidity and capital resources k 3 3k hk . w
ee e : : s 9e e 1986 1985 1984 1983 Operating Revenues I lectric $2,832,945 $2.738,356 $2,439,835 $2.260,021 Steam 36,339 49,801 V,370 49,637 Total Operating Res enues $2,869,284 $2,788,157 $2,498,20; $2,309,6;8 Operating Espenses Operation Fuel $ 741,206 $ 785,110 $ 700,789 $ 676,409 Other power supply 191,126 196,918 184,740 128,921 Other operation 459,534 422,133 403,616 374,164 Maintenance 258,655 250,798 203.945 187,769 Depreciation 232,240 218,502 190,420 171,940 Tases other than income 177,381 175.556 144,471 142,743 Income taxes 126,596 124,939 131,439 145,559 Total Operating Espenses $2,186,738 $2,173,956 $1.9;9,440 $1.827,915 Operating Income $ 682,546 $ 614,201 $ 538,765 5 482.153 Other Income and Deductions Allowance for funds used during construction $ - Allowance for other funds used during construction 117,069 113,225 130,39) 92.750 Other intome and deductions (16,869) (5,240) 1,829 7,877 income tases 8,827 1,t42 _]I12) _ {;,487) Net Other income and Deductions $ 109,027 5 1(N,627 5 132,067 $ 95,140 income liefore Interest Charges _$ 791,573_ _$ _723 228_ _$ 670,8J2_ _$ 577,293 Interest Charges I ong-term debt $ 399,429 $ 401,272 $ 399.448 $ 351,8;4 Amorti/ation of debt discount, premium and eywnse 2,721 2,502 2,191 2,131 Other 41,410 15,M2 30,592 53,088 Allowance for borrowed funds used during construction (credit) _ _ (129,082) jl33,103) (163,336) _ 3 194,402) Net interest Charges 5 34,478 $ 286,313 $ 268,84; 5 212,671 Net income $ 477,095 $ 437,515 $ 401.937 5 364,622 Preferred and Preference Stock Dividend Requirements 98,803_ _ 103,264_ 104 159_ __ _ 9q14_ Earnings for Common Stock $_ 378,292 . $__334.251 $_ 297,778 $ 266,008 Common Shares Outstanding-Average 146,643,377 143,183,133 135,230 827 120,274,269 [arnings IYr Share $ 2.58 $ 2.33 $ 2.20 $ 2.21 Dividends Declared IVr Share of Common Stock $ 1.68 $ 1.68 $ 1.68 $ 1.68 Ratio of I arnings to Fised Charges (SLC Dasis) 2.29 2.28 2.19 2.22 Ratio of Farnings to Iised Charges and Preferred and Preference Stock Dividend Requirements (SEC IJasis) 1.81 1.7; 1.67 1.67 Y{?
~ "$$$ & L a . .. Mt
- c. - la- li .
im;.,,. Nw - a.ih f T, 1982 1981 19MO 1979 1978 197~ 1976 h.' UIwuwmh>
.k.,m $2,078,965 $2,011,217 $1.776,364 $1,667,679 $ 1.561,296 $1,423.909 $ 1,241,883 l"%
44,289 42,840 36,1;0 30,832 28,546 27,012 24,284 ggg
$2,123,254 $2.054,057 $1,812,514 $1,698,511 $ 1,589,842 $1,49),921 $1,266,167 g
,3,ff
- 2. s#%
$ 718,431 5 689,165 5 670,116 $ 647,620 $ 580,869 5 538,325 $ 477,231 74,6;4 139,981 107,767 %,502 158,098 108.648 88,3;0 3 372,767 333,440 290,;66 266,410 235,720 203,300 179.867 N' 170,974 1M,978 133,270 128.600 124,804 110,736 100,577 161,430 iN),240 141,448 129,644 115,323 102,304 93,875 118,537 117,224 115,520 99,552 91,488 4n,597 94,234 96,912 64,388 37,012 54 706 56,686 66,717 35,940 $1,713,705 $1,659,416 $ 1,496,199 $1,423,034 $1,362,490 $1,226,627 $1,070,074 5 409,549 $ 394,641 5 316,315 5 27;,477 $ 226.832 5 224,294 $ 196,093 5 -
5 - 5 - 5 19,833 47,99; 39,398 38,815 38,323 32,273 23.7N) - (4,820) (9, 9 11) 692 3,664 2.37t 4,H21 1,728 3.Iii 4 77I . __ !h"9) _ _ 11,554) _J1,223) (l.M) 4_3_1 5 44,310 $ 34,668 5 38.8 % $ 40,433 $ 33,416 $ 26,871 _5 52,012
$_43MH 1 423.309 $_333 13I.
$ 3_1_Ml_0 ) E 26H $ 25l.d 65_ )_21(l!n
$ 331,469 $ 2%tL45 5 211,857 5 167,585 $ 140,288 5 129,078 $ 124,992 2,006 1.h;3 1,776 1.M 4 1,403 1,339 1,084 59.779 37,025 19,662 13.823 5,298 1,959 2,404
._(194,g76) ._ jl T1,_M) _ Jyp08) j41 171) (33.590) (25,726) __ n 5 194,178 $ 194,9;n 5 lie,;57 $ 139,h81 $ 111,399 $ 106.650 $ 128,480
$ 234.701 $ 234.333 $ 188,566 $ 176,029 $ 146,869 $ 144,515 $ 119.623 73,24; 57, %n 51,037 43.437 3M 0% 34.093 14.5M9
$ 181,4 % $ 176,787 5 137,529 $ 132,572 $ 10N.813 $ 110,420 $ 8;,036 103,58; 91; 87,473,;81 7M,780.M63 69,848,484 61,898.763 55,202,974 51.277,789
$ 1.75 $ 2 02 $ 1.73 $ 1 90 $ 1.76 5 2.00 $ 1 66
$ I A8 $ l.64 $ 1 60 $ 1 60 $ 1.52 $ 1.4675 $ l .4; 1.8; I 84 1.90 2.17 2.28 2.4K 2.13 1.49 1 53 1.53 1.69 1.71 1.8; I 61 s
1 w mp .. .s . y_
<.! ;, e M ' a. ,L..
-< y ' ,, ,
.'.......m la .bLm m .........I.....
a -
... . . . . . . . , . m_ . a hs - '
w -
- r. s - i T ,-? ;,}s j .; s, g
~
c' .- M' ' Y: V W W'~W*W , f k)i-
?
$ b3[9 N 3 A(1 y:
b N,s I.,de4 > i ld?'E N * ' 4
.h uv e -e e -w m 1986 198; 1984 1983 Operating Revenues (thousands)
Residential-Electric $ 880,205 5 827,210 $ 758.124 $ 741,399 Commercial-Electric 693,071 651,559 570 082 513,292 Industrial- Electric 1,063,551 1,0M,374 919,490 818,660 Other 232,457 275,014 250,;09 236,307 Total $ 2,869,284 $ 2,788,157 $2,498,205 $2,309,658 Sales (millionsof kWh) Residential 10,492 10,077 10,lM) 10,2;6 Commercial 7,501 7,130 6.h9) 6,479 Industrial 17,240 16,613 16,324 15,162 Other _2,80? 2 875 1 2J63 2,402 Total 38,040 36,695 35,887 M.299 Electric Customers (year end) Residential 1,664,226 1,642,981 1,629,668 1,621,172 Commercial 148,987 144,942 142,395 140,403 Industrial 2,384 2,314 2,246 2,253 Other 1,896 1,883 1,885 1,878 Total 1,817,493 1,792,120 1,776,194 1,765,706
~
Average Annual Use Per Residential Customer ikWh) 6,350 6.165 6,253 6.332 ( Average Annual BillIYr ResidentialCustomer $532.74 $;06 lb $467.03 $457.74
, Average Revenue IYr kWh Residential 8.39e 8.21c 7.47c 7.23e Commercial 9.24 9.14 8.32 7.92
.. Industrial 6.17 6.23 5.63 5.40 Capitalization (thousands) long-Term Debt 5 3,656,569 $ 3.770,863 $3,845,272 ' M2 438 Preferred Preference 5ttwk 742,273 879,497 894.168 $3'907,;05 Lommon Shareholders' I quit y 2,716,403 2,588,025 2,379,998 2,195,36i Total $ 7,115,245 $ 7,238,385 $7,119,438 KelsyQ Capitalization (percent) long-Term Debt 51.4 52.1 54 0 53.3 Preferred PreferenceStotk 10.4 12.I 12.6 13.7 Common Shareholders' l'quity 38,2 3;.8 33.4 33.0 Total 100.0 100.0 100.0 100.0 1 Common Stock Data Farnings IVr Share $2.58 $2.33 G2.20 $2.21 Disidend Paid Per Share $1.68 $1.68 $1.68 $168 Pavout
~
65 % 72 % 76 % 76 % Shares Outstandmg- Average 146,643,377 143,183.133 135,230.827 120,274.269
.4 . Return on As erage Common I quitv '
14.09 % 13.31 % 12.87 % 13 03%
- v. Book Value Itr Share $18.34 $17.47 $16.91 $16.63 Ntarket Price
, 4, s . thgh $19 % $17 % $16% $16 <: . ' . Inw $15 % $14 Si t h $13 @'y Aliscellaneous f inancial Data e& Aserage interest Rate on long-Term I)cbt 9.2% 9.9% 9.9% 9. 5%
4: y Average Dnidend Rate on Preferred Preferente Sttsk long-Term Debt Obligations and Redeemable Preferrt J 11.5 % 11#% 11.6 % 11.6 %
,- and Preference Stot k Outstandmg ( Thousands) $ 4,600,917 $ 4,;;2,755 $4.34 3.674 $4.027,029 Total Assets (Thousands) $ 9,997,986 $ 9.492.3rd) $8,970,014 $%,201,418 Caoss Utihty Plant (Thousands) $11,062,449 $ 10,466.039 $9.752, M6 $8.84;,779
@@f '
. Net Utihty I'lant (Thouvnds) $ 9,034,716 5 8,612,89) $8.076,168 $7.320.570 Capital lipenditures ( t housands) $ 645,196 $ 710,699 $ 938,004 $ 1,014,;68 hliscellaneous Operating Data x}' System Capabihty at icar l'nd -hlW 9,070 9,296 8,848 8,162 4.; System Capability at Time of Peak-MW 9,199 9,367 9.271 7,810
/g . .
, ~~% .
W 3 , 1
, a 1982 19MI 1980 1979 1978 1977 1976 -
$ 676.370 $ 642,301 $ 583,701 $ 524,613 $ 497,988 5 4 M.906 5 408,828 -
473,49M 436,868 382,018 343,57n 313,673 291,220 2;4,363 754,238 763,167 658,051 647,438 611,404 539,469 463,174 - 219,14M 211,721 188,744 180,M84 166.777 15;,326 139,802
$2,123,254 $2,054,057 $1,812,514 $1,698,511 $ 1,589,842 $1,430,921 $1,266,167 W 9,940 10,134 10,394 10,274 10,386 10,3M5 10,105 6,232 6,310 6,265 6,251 6.073 6,027 5,h02 13,731 15,471 15,472 17,9N) IH,354 17,91; 17,253 2,052 2,107 2,104 2,
- b 2,335 2,287 2,16H 31,995 34,022 34,235 36,891 37,148 3n,614 33,328 1,619,369 1,624,161 1,623,162 1,622,768 1.600,988 1,579,N17 1,5N),669 13'),376 138,M30 136,983 13;,788 127,6M 118,942 11M,107 2,239 2,30; 2,293 2,264 2,201 2,126 2,01M 3 1,N27 1 M21 1,791 1,713 1,675 1,648 1,589 1,762,M i 1 1,767,117 1,7M,188 I,762,513 1,732.498 1,702,323 1,682,383 ;
6,133 6,243 6,
- N 6.402 6,529 6,616 6,518 R
$417.33 $395.66 $359.86 $326.92 $313.08 $296 20 $263.71 '1 6 80e 6 34e 5.62e 51le 4.79e 4.4se 4 05c 7.57 6.92 6.10 5.53 5.16 4 H3 4.38 5.49 4 93 4 25 3.60 3.33 3.01 2.68 q
$3,2 iM,649 $2,751,978 $2,491,457 $2,069,5 t M $ 1,841,036 $ 1,738,18; $1,6H 1,998 N02,423 N13,161 591,346 510,748 494.691 448.892 412,699 (l JH721H_1 _l,673,385 _1.,514,169 .__13ME76M ___l,241,401 _ l,11H 065 _l,(X)4,124 1
$;,893,251 $3,032,524
$4,535,972 $1,9nM,034 $3,579,12M
$3,30;,142
$1,09H.H21 Q.]
, g 3
54 6 54.7 53 8 52.1 51.5 52 6 54.3 W.h 11 6 12.0 11.0 12.9 13 8 13.6 13.3 W 31.M 100.0 33 3 100.0 33 2 100.0 33 0 100.0 34.7 100 0 31.M ItXI.0 32.4 100.0 Qd 3
,y
$1.75 $2.02 $175 $140 $ 1.76 $2.00 $166 . 6y
$1.6H $ 1.62 $1 N1 $ 1.58 $1.52 51 43 $1.4; '4 99% No'b 91% 83% 86'% 73 % 87% S 103,583,913 87,473,581 78,7MO,861 69,848.444 61,898,763 53,202,974 51,277,7M9 5 10 0l'b
~
10.I4'% 11.12 % 9 47'% 9.26 % 10.50 % 8.79'%
$16 N) $17.47 $17.85 $18.46 $1H 62 518 67 $1H 40 '5
$11% $12 % $13% $1;i $16 h $18 $15% -
$11 $10 % $10 $12% $13 % $1% $13 93% 9.4% 9.0% 85% 7.7% 7.5% 7.6'%
11.3 % 4.N% 9.5% 9 0'% 8.8'% N6% M.4% '
$ 1,792,9M2 $3,182.033 $2,809,976 $2.312,200 $2,Wh,540 $ 1.Mx8.740 $ 1,791,380
$7,M;.8% $6 617,901 $;,7;l.801 $;,1%,138 $ 4.M t .N12 $4,141,711 $1.838.969
$M 252,570 $7,1 N,790 $6,211,49; $3 6N1,023 $5,102,841 $4.481.8M; $4.209 699
$6,H2 4,0;s $;,M42,997 $;,026.24; $4,590,829 $4.140,521 $1.NN.9)9 $3,414 ;;8
$1,l R 045 $ 9M.261 $ M 4.;40 $ 591.389 $ M2.676 $ 3MT,4;8 $ 297,240 7,762 N,221 M 214 M,964 N.591 H.74; N,9n; 8,%9 N,4;8 M,;31 8 877 N 984 M.731 M.999 6 394 7,171 6.701 6.M29 7,312 7,381 6,613 34 0 % 17.9'% 27.3 % 30 0 % 22.9 % 1M 6% 36 1 %
61.7% 38.4 % 61 1% 66 2 % 62.3'% N17% 6;5'% l l 10 ON) 10,0N) 10.I40 10,280 10,310 10. 3no 10.2;0 191 He 1905e 178 3e 16T.4c 149 Oc 110.2e 120 Me ~! I l.2iN 11,024 10.7X9 10,90M 10.724 99;1 9.579 43
fx t6.&#@N b db [ 4 Market for the Company's Common Equity and Related Shareholder Matters The Company's Common Stock is listed only on ~ At December 31,1986,146,699,431 sharesof the the New York Sfock Exchange, which is the prin- Company's Common Stock were outstanding. cipal market for such stock. The following table These sh' ares were held by a total of 217,584 share-
~
indicates the reported high and low sales prices of holders. the Company's Common Stock on the Composite The amount of future dividends will depend Tape and dividends paid per share for each quar- upon the Company's earnings (which in turn are terly period during the past two years: dependent, among other things, upon levels of kWh g ,g,g, sales and timelv and adequate rate relief), capital frice F u3ae_ rud requirements, financial condition and other f actors. (f alen_dar Quarte _r Iligh _ _ I ow__l'yr Niyare 198h I trst 519's 515 % 50 42 Second 19 % li 's 0.42 J hird IMS l h "* 0 42 t ourth IM b 16 0 42 198; first 16') 15 0.42
%econd 17 % 16 0 42 Ihird 17 4 14 0.42 lourth 16 % 14 % 0.42 Miscellaneous Corporate Data Annual Niceting Scheduled for April 27 Corporate Address The 1987 Annual N1eeting of Shareholders will The Detroit Edison Company be held at 10 a.m. EST Ntonday, April 27, at the General Offices Macomb Center for the Perforining Arts in Mount 2000 Second Avenue, Detroit, Michigan 48226 Clemens. Shareholders will be asked to elect mem- Telephone: (313) 237-8000 bers of the lloard of Directors and ratify reappoint- Independent Accountants ment of Price Waterhouse as indepen fent accoun- Price Waterhouse tants for the Company. 200 Renaissance Center, Detroit, Michigan 48243 At the 1986 meeting, on April 28,15 members Form 10-K were re-elected to the Board of Directors for one- Copies of Form 10-K, Securities and Exchange r year terms. Commission Annual deport, are available.
Director Changes Retluests should be directed to: Malcolm Carron, S.J., a director since 1979, Kathryn L. Westman resigned f rom the Board of Directors effective secretary July 29,1986. I.illian Bauder, president of the The Detroit Edison C_ompany Cranbrook Educational Community, was elected by 2000 Second Avenue, Detroit, Michigan 48226
~ '
the Board to fill the vacancy. Transfer Agents Mellon Securities Trust Company, New York Off.icer Changes 67 Ilroad Street, New York, New' York 10004 Wayne i1. Jens, John W,. Johnson, Jr., h,illiam k,. TN Dmd Edidon Compm Pence, and Donald J. Pi//imenti retired as vice 2000 Sed h me, Dmoil Midip M6 presidents effective April 1,1986. Arnold J. Benes retired as General Auditor effective August 1,1986. Charles A. Babcock Sophia J. Ko/iatek Ronald J. Gdowski Kathryn L. Westman New Publications Elaine M. Godfrev Among thepeneral booklets and brochures pub- lle istrars of Stoc'k lished by the company in 1986, the followmg may y[lon Securities Trust Company, New York be of interest to you: 67 liroad Street, New York, New' York 10004 Tire Ihrtncr. ship Report. Describes the community- (Preferred, Preference and Common) ' related activities of the Company and its Comerica Bank-Detroit employes. 211 West I ort Street, Detroit, Michigan 48231 flome Security Provides tips for improving home (Common) security and a checklist to help you determine Nationalllank of Detroit improvements which may be made. 611 Woodward Avenue, Detroit, Michigan 48232 Copies of these publications may be obtained by ~ (Preferred and Preference) w riting to Public Altairs Department, Detroit Edi- Common Stock son, Dept.1006AR,2000 Second Avenue, Detroit, l.isted on the New York Stock Exchange Michigan 4822n. Symbol -- D I E s l 5. t$ M . ' ' lis i M
DirectorsandOfficers ' 130ard of Directors Wendell W. Anderson, Jr. Chairman of the Board and Chiet Executive Officer, ilundy Corporation (Nianufacturer of steel tubing, flexible hose and engmeered plastic products) Lillian Hauder President, Cranbrook Educational Community David Iling Chairman and Chief Executive Otticer, Iling Steel Inc. ( A steel sers ice center) Charles T. Fisher III Chairman and President, National Bank of Detroit David N1. Gates Professor of Ilotany, University of Ntichigan Edward J. Giblin Retired Industrialist Ernest L. Grove, Jr. Vice Chairman of the Board and Chief Financial Of ficer, The Detroit Edison Company _ Charles Nf. IIcidel President and Chief Operating Otticer, The Detroit Edison Company Patricia Shontz longe Economist; Senior Partner, Imeco - I onge Company ( An economic and investment consulting firm) Walter J. NicCarthy, Jr. Chairman of the lloard and Chief Executive Of ficer, The Detroit Edison Company Frank hierriman Dairy Farmer Dean E. Richardson Chairman of thelloard, Alanufacturers Nationalllank of Detroit I ouis 11. Roddis, Jr. Consniting Engineer Alan E. Schwartz Senior Partner, lionigman Nhiler Schwarte and Cohn ( Attorneys at law) Otis bl. Smith Retired Vice l' resident, General Ntotors Corporation Committees of the lloard of Directors Audit Executive Nominating Organization and Edward J. Giblin* Walter 1. AlcCarthy, Jr.'
~
Alan E. Schnart/* Compensation Patricia Shonte I.onge" I illian llauder Charles T. I isher til" Wendell W. Anderson, Jr.* I illian llauder Ernest L. Gros e, Jr. Wendell W. Anderson, Jr. Edward J. Giblin" David Iling Charles N1. Ileidel David N1. Gates Charles T. Fisher ll! Dean E. Rithardson Frank Niernman Chartes N1. Ileidel Irank Alerriman Otis N1. Snuth Dean E. Richardson Patricia Shonte longe Dean E. Richardson Alan E. St hwart/ Frank N1erriman Alan E. Schwarti I:ncrgy Resources Planning Otis N1. Smith I rank Alerriman* Finance Retirement fund Review Nuclear Review I'atricia Shontz Innge' Wendell W. Anderson, Jr.** Dean E. Rit hardson* Louis iL Roddis, Jr.* Wendell W. Anderson, Jr." " David Iling 1.illian llauder David NL Gates" Dasid N1. Gates \ David M. Gates Charles T. Iisher til - p i Charles N1. lleidel 1:dward I. Giblin d d ""I'I""8" I dward J. Giblin I
'd " *d" '
tvuis 11. Roddis, Jr. Ernest t . Grove, Jr. I rnest L. Grove, Jr. Patricia Shonti longe Otis N1. Smith
*C hairrna n Alan E. Schwarte "Vis e Ch.urman Officers Walter J. NicCarthy, Jr. Chairman of the lloard and Chief N1. Jane Kay Vit e l'resiJent - Administration Executive 01ficer J. Philip i enihan Vice President - Ntarketing and Charles N1. lleidel President and Chief Operatmg Customer Relations Otticer Vice l'residen t - i inancial Servit es John E. I obbia Ernest I.. Grove, Jr. Vice Chairman of the lloard and Clay bourne Niitchell, Jr. Vice President - Planning.
L hief I inancial Otticer Research and I ns ironmental Leon S. Cohan Senior Vit e President and General l' rot ection / Counsel James 11. Olis er Vice President -I mplos e ~ llurkhard 11. Sihneider Group Vit e President Relations
- 11. Ralph Syls la Group Vice l' resident William S. Orser Vit e President - Nudear llarry Tauber Group Viw President i nginwring and Serviws -$
Irank I:. Agosti Vice l' resident - Nut lea r Saul J. Waldinan Viw President -l'oblic Atfairs Operations Kath ry n 1. Westman Setretary Malcolm G. Dade, Jr. Vice l' resident - Commumtv and' I eslie L. Inomans treasurer Gosernmental Altairs Ronald W. Gresens Controller Willard R. Ilolland Viw I' resident - l'on er System Lloyd W. Coombe General Auditor i and $crviws t 4 JM y~ M' e m: -- s
,"+>i Q, ,)d %:,w,>.y ,
1 4 a. yv. 1 iL . p %jh, ' p'.,: g , Q f 4I
~
c , >; . : t ;%a.&y .g& Q ',, , , %,
., (Q f ; ; j% -
o
Detroit 2000 Second Avenue 1 Detroit, Mchigan 48226 A gxxl pirt of 3uurlife. F
/
s l}}