Text

Forwards 1986 Annual Rept for Philadelphia Electric Co
	ML20206A172
Person / Time
Site:	Limerick
Issue date:	04/02/1987
From:	Bradley E; PECO ENERGY CO., (FORMERLY PHILADELPHIA ELECTRIC
To:	Harold Denton; NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM)
References
	NUDOCS 8704070437
	Download: ML20206A172 (1)
	v • d • e

{{#Wiki_filter:_ _ ~ l e l 4 PHILADELPHIA ELECTRIC COMPANY l 23O1 MARKET STREET P.O. BOX 8699 PHILADELPHI A. PA.19tO! sow Ano a. mAuEn, Jn. l

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l f suoENE J. enAoLEv t l DON ALD mLAMMEN @di 2,1987 j nu oO L,w A. C"'"'"' i

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T. H. M AH E R COMM ELL PAUL Autre ACH ) sow A RD J. CuLLEN. J R. J AMES M. WHITE j 1 i J i Mr. Harold R. Denton Director Office of Nucicar Reactor Regulation i Document Control Desk U. S. Nuclear Regulatory Commission ] Washington, D. C. 20555 j Re: Philadelphia Electric Company l Limerick Generating Station, Units 1 and 2 Docket Nos. 50-352 and 50-353 l' (Construction Permit Nos. CPPR-106 and j CPPR-107) i I i

Dear Mr. Denton:

i I i j Pursuant to Section 50.71(b) of the Commission's Regu-4 lations, I enclose herewith for filing with the Commission a copy of the 1986 Annual Report of Philadelphia Electric Company. Very,truly yours, ,4c - ).1 w' .l EUGE BRADLEY r EJB/as ( Enc. 1 i i o 4

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V. Philadelphia Electric Company Annual Report 1986 1 0 Financial Highlights 1986 19Mi 't.(: lunge Ogwrating Res tnue $3,090,M69,0m) 8 2,9 4 5,1 ?i,tH HI Ogwrating ligiene $2.525,M99,000 $ 1532,6'O.t H H) Tats (:lurged to Operationis $521,$57,000 $ 6 60.861tHHI I M'b r Ogwrating lounne $$65,010,000 $ 4 i LiOS.tHH) 37't t l'Jrniti)@ Agil1licable to Onninoll Sten L $ 675,359,000 $ 43 4,72 6.000 9't [ l'arnings lwr Ascrage Gunnunt Slurc $2.60 $156 lb f (.nh I)n iticods Paid gwr Onnnunt Slurc $ 2.20 $2 20 I g As crage Slurts of Onnnu m Sim L Outstanding iM3,160.767 169,7M 6,6 71 M' b l OnNruction lagwniliturts $966,900,(H)0 SMo t,*00,000 lib lotal Awts $ 10,7 eM,020,000 $ 10.0 l l.M e 4,000 ?'b Coe, tents i l ence i.. Shan la l.kr. 2 f t.p.,t of linw I h-rainum Wnagement'. t h< u i.m aiul inal 4 liewswial rewnhinni avul lt.mli...I t h-c ti.wi. 21 i k l awie.l l.sini fleuns ial %tairnwnt. 21 %e. e. Fiewswial %uirnwne. 2n 4 lt.p.rt e.f leutrin-rul..nt firidenl l'ul.hc b n.ununi. 38 Sr.unins fieum ul am!Ih-r eing Sutt ew. 3's Sharrlwel.lre Inf..rnuthat il 4 Wh. cr. an.1 Ihrre t..r. li l I i t ARNINGS AND CONSTR,UCTION } OtVIDENDS Pt R SHARE EXPtND fURtl ..w 1 - -- T.=, 3.. - --

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I 1 To Our Sharehohlers cmiomers December 19H6 electric O>rp>raic Onumitmems and deal bills wcre h>wer than those for w ith current critical iwucs, cach ) car December 19Hi, due to reduced we naahlish specific goals at twith ahe fuelc m $. corp > rate and departmenul les cis. O IJmerick t' nit No. 2 comtruction 1his annual report proents our new pnicceded ahead of schedule, and Miwlon Statement, the Corporate 19H6 expenditures were within the O)mmitments and sgwcific Critical planned expenditurn of the Iwucs w hich ciurt the counc tlut our cominKtion cmt cap of $3.197 Company ha set. This rep >rth billion. photography depicts wveral aspects of i C lhe excclient perfornunce of our our Corp > rate Commitments. l We are pleawd to rep >rt slut 19H6 wa nutlear plants roulted in As we hok ahead to 19H7 and l a ) car of great pnigros for Philadelphia appnninutely 8 400 million of fuct tryond, wc will be addrewing thne i I:lectric O>mguny. liighlights for the savings for 19H6. key Critical luun; they are (I) ) car iraluded the folkming. C larnings per slure amounted to completing IJmerick Unit No. 2 ott I 82 60, an increase of four cents per time and w ithin budget; (2 ) achieving C IJmerkk I' nit No. I we placed into slure from a ) car ago. nundants of exccllence in our nu(Icar commercial operation on l'chnury 1, o I;lettric ulo were up 3't compared operatiom; (3) operating and 19H6 Ior ks cloen months of with let ) car, rcilecting more nuinuining our tuse hud generation commercial operation during 19H6, tmtomen, an improved rnidential capacity to achine a high inel of the unit performed flawinsly, homing nurket and fnurable weather perfornuncet ( 6) adapting to i a himing a capacity fxtor of Hi% On in 19H6. Ge sold and tramp >rted clunging competithe forco within jamury 26,19H7, t'm Na I wt a new dedined due almmt entirely to the our indmtry; and (i) achieving public world record for perfornunce of a redantion in ps tramp >rted for uthen recognition as a caring. resp >mhc and large pmcr rextor during its fint fuel C Ratn for natural ga wcre reduccd cifklent orpnisation. c)t !c, after operating omiinuumly for by appnninutcly 8 67 million, We continue to appreciate the 19H dap unut the unit w as removed refinting prudent purclusn of ga supp>rt of our ininton and pledge from wn k c for minor rcluin from supplicts and reductsom in our ncr) effort to ahin e our C 1hc Gimpany was authorised an pipelinc supplien' rain, Corp > rate Osmmitments for the annual clntric rate inacaw of $391 C the l'enmyltanla supreme Oniri genuine benefit of mir imniors, our milhon. ihe largot in the Osmpany% denied requnts for an appeal of the cmtomen and our fcthiw emplo)cn. Imtory, as wc plJced 83 H hillion of (!ct hion ofIhe Comnumwcallh Onurt, IJmerkk I' nit No I and awnlated affirming an ordct of the Giurt of [ t ommim plant into wn k c. Common Pleas of ihkks O>unty w hk h O lo nuiderate Ihe imgut t ofIhe threttrd Ihe completion of ahe l'oint JamnI INercit IJmerk k rate increaw on cmiomen, Pleaunt Pro}nt.1hh det'blon clean C/w/iman of thelhmt Ihe Osmpany w til phaw in Ihe the way for comanntion to rnume nnelCh/cfl'.tes ut/w O#ker ( gg~Z int reaw mer a threc.) car period in in 19H7 I equalamountsof 6 H% per) car. C 1hc Company sohlits ttcam heat Dopte ihe intreec,1)pk al spacm for 830 millkm inJ.amury 19H7 John 11. Amtin Jr. For nuny )can, Philadelphia l'inletent iIn tric Company lus tud luth a unet Ch/c/Operuttng O//kcr fornul Sliulon Sutement and Girp> rate Opmmitments During 19H6, wc reexamined and mothfied Ihem to better refletI current circumsur,tn 'lu hcip a hinc nur L

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1986 FINANCIAL REVIEW E ARNINGS RISE 1:arnings por slure of connutHI stot k in 19H6 announted to $ 2 60, J 21. in(traw front the $2 56 carned in 19Mi, w hile the average nuinhor of slurn otitstanthog inc reased HT. to ,3 lH.4 nullson slures Tin.il(onimon y stoc k r.arnings amounted to S 679 . [' nulhon, up $ 41 milhon or 91. Iront J y w+ m.r ~ ~ )rJr Jgo I he impnnement in por slure AshardG Wresterfle/tA Commitment to carmng, rnuhnlinnn increawa con, text, orm ud Our Cu$tomers cln inc Isw r.nn anti hupnn ni Aaymond m>lme (rvghti Mce elnIHr s.tlo lJrnings for 19H6 %rre Pres dent. General l,li 81 n>Inntillet$ in Ad***'** '*vww the rd d apprm nutrly Macn renh P'otrest o!(onst'va* 0n tM i prot ioling usfe, tviksfole prr slure as a rnult ol a slb milhon Me r*MCreek Arservoorrear nllel t'e'intornit til utility Vrnnsy hannLa Publk niht) P ompsburg NewJersey They see Conunswton WQ thuMonante for ,gy4,,,,, qs, go,,g,gy go, y.(yjopgngygy forl and other rosn winle the ty centralcor,o/th, twlonuers. IIe niillov u,,np,,,aaca,,,u,,,,na.,can,ca ,,,,,,,,, s,,, sa n,,,t s, f o*88'W8 Md " #'8I' IP3pollt/l t' (ts l/frir 19Hi rarnings by 2.4 6 ruts lwr sh.tre. ilt't'ilA rinti t tdi!!VtHIM ill ' U "' " noen lwgtn on p4.c 2.4 Infornution low look during ihe ) car, Pl: G, l nllfHorpul>lic tonlut!. on uln. rti rnur. riilwnsn and t outinural to rrpurt h.tw its utstinnrn t an Iw found on pign 21, otnuandmg high mirrnt rate twind

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the eithinig lowcr r.itn A total of Got Opvestone personnes myc t NLW FINANCING $ COMPLETED 8 46 9 milhon of Ihe 1"n1. Inortg. ige l tN Ingw/:cJ naturalgn (ING) lho (:omjun) ralwd snrr $1 l bdhon himd3 duc 20ll were t allrd for j nece,iers es storage tea at tv n, new y,,pn3; n, p;gn n, pn n We ior redempoon otM l. 'Ihk u>mplurd l %t Conshonor sen Gu rret. f ,ng,9gn,a g u.9 g,. 9,ga ,y, Ourmg presh of han,y den and l '#~' U " ' I'0 0 "" * 'h YA0""h" I m tM w.nten the nportiers are u,estaronvert#9tNGro 'dhlC "" luge 6 trnder ofkr in Nin tm!wr 19Hi. natu algo to surgsement regv/ar Not c Iturf ni rain frnuton!.at Iikew be, $ lH 9 inillnut of Ihe 1H9.1, r p rel.ae sure/* mottg. ige i= >ndi duc 2009 w rte l rt'llt rnwd ott Yptrentwr li, i e,mpi.he,,ht.,m,,rmm e,,81,,i29 nothon Iwue, aho twgun with a l

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"$g Nnrnder 19Hi tt oder offrr i ihniugh. %tnawr p>H6 temirr olkr. the ( omjuo) ri purt luwd I?6 9 j L nullknt of les $ 100 inilhott of lit =1. j enottg. ige ln emh duc J010 't hii l ti purs tuw and utly rt tirrmuis,4, wrli ai the two uth dist uswd alanc, t nabled I'l. Io rnlut r anmul intrrnt lI l pa)montib) apptminuedy flH l nnhn n 1 t

LIMERICK CREDIT AGREEMENT a REPAID I)uring 1986, the Company repaid in adgancr of nuturity the entirr $550 i million tulance under the IJmertok '. \\ Credit Agreement This tesoising p' credit /tcrm hun agrerment with a W /*,msi i, f group of 26 lunks was used Io finance e# 4% / the onts aw MiiJted with compIcting IJmerit k l' nit No I and common w s' plant. Ily using the limerit k Credit I / Agrrement from 19H 4 to 19H6 and refmancing at fasorahlc rates, the Work mers gu Je the steam &yer Comjuny wJs able to reall/c r anemMy for Lunerod Unot No. 2 l 1984 MAJOR FINANCINGS sulnt.intialintertst sitings Anntul a ot a lowered mto tse rescro, Internt ont* w ould luie l> con wuct this &roa. stadess steel s,ne... "I D""*"' apprminutely 5.40 nullion more lud anemNy a adout 19 reer A,ge a id 10 'c.i n sameter TAe pper 3, t> Ik twnturim - lo s. t. N nri long term del >t bron sold at slut time remo.es mo itwre from tw ireim iluc 199o s Ioo o to founn' hmrd e d,r re ts, steam a red ero (** o uar %,ikmg s un,i ix tirniuns - tortues totea"8W8*'t tit %rn,itur2 oil 440 0 LIMERICK UNIT NO l RATE INCRE ASE Mas la tu ntuns - 9 Mi t. GRANTED Prnair Ptn tmr"' OnJune 26. Ihe I'l'C adopted, b) 6. itur 199 4 Ji o two to otW % ole. A finJl ort!Cr KrJnting un unkmg t un.1 i= t= niurii - the Comgun) an.mmul not intre.tse in lui % Penale PlJt t intnl g n iinis an os trall ratc of rrturn of un ( ommon %. k - " "" " I" 4 ono oeHI uuris g,i. 9 gg, I i N 't he increaw will be pluwd 6n og rr a ihrer ) car penin!In ngual func Pouunon i onnot ts.n i. - n. t ilur 2n it. 4e o urps of apprmmuirly 6 H b per >rar, "'I"'d# F " % pt Pre frrrtil %.= k - 9 in k i9mo %,n, go nno roun try, without interrst, of dela)nt ownsy aton '9 o fulhngs under the pluse in pl.m t uon gwr is n i. - I m. i, A nupt swuc in the pn = rnhng % nts ituv 1o l t, 190 0 inwhrd destrmming the attibilotul oit uongue ts.o.ts - M u a apn il t osts w hk h were int urrnt as a % nes itur 199 e t uo o nints of a onurus tion delap in 19*6 [in aomnionunikPuntur and 19*11 'l he Conunission aswrted l%. Plans tin ute n 1 Ma 6 nit $sme rit i mploie t, ID st)P S 499 lHH1 uutes be twe Paler of B Ji n' ll4m a ommon vis k o nunuum 66 tit ringt $ GHHD $HlO uure s. ke ragr Prair of BJl JM fi t M

i 4 l CONSTRUCTION INVESTMENTS MADE The Comp.'ny invested $967 million in new plant and equipment in 1986, including $l89 million of carrying ciurges equivalent to the allowance for funds used during construction. j I:spendnurn for 1987 are estimated at $I 2 billion, including $$27 million for 1.imerick l' nit No 2. tlut it lud pro lously determined tlut STEAM SYSTEM SOLD he delay decisions wcre imprudent. OnJamury.40,1987, the Company sold Ilic Comguny argued slut the its secam heat $) stem to Philadciphia Commtwlon lud nude no sus h 'llwrnul Corporation for 8.40 million determinallon and slut. In an) cient. Ihc ule pnre is appnninutely otpul to (lue to financial constraints and ilw net lmk value of the facilitin twing t fungn in Ihe rrgulation and wogw of sold Philadelphia 11rrnul acquired all i j the l.imerk k proirts oser ihe of the prutludion and dntnlunion awets I t onstnn tlon gwnod. no adjustment ofihe sysicm w hkh suppliturcam to w as warramed. Nnerthelcw. the 690 t ustomen in center city Commtwinn tunt ludnt slut ihere Pluladelphia and areas of Wnt shouhl te a rate luw rnlut lon of Phda Irlphia through thiriy.threc 8.469 million for thne ticla)s 'Ilus miln of nuins The system has rnutted in a rnluulon of SHn nullion ngwrient'nt det kning ulo oser ihe g t in annual rn enue w hit h will not he past 1.4 )can truncredInim austomen the Philadelphia t hernul is a w holly Company has filed an apgwal of ilm ou ned solmidury of Caulpt thernul deusion wIth Ihe Commonw ralih I norg3 Coqwiranon w hk h owns and p, g,,g,y, y,,,7, ( ouri of Prnns)hanla olwrain steam heat sperms ill MarWadtr/Mlloterconnectw i hc PrC,nn trd,aneu, nt n, m him. .st inui,and soun r n m n. FM" MN' N'r l (Jp.at ity t ontrnisons nualc hy upghmitig Ohio Catal)st lhrritullia sulwidiar) 88 88' 80*"IPomb4 rost /W Its ~ partin and founti th. t timerk k l'mt of Catalpt I norgy l)tt rlopmeng Wmn wmW compamet, No I is norded to help mort the Corgwer.nion w hk h lus dn rnified "M"I#I'h*Md'"K*** U""#"## '"#'" Comp.inp t.yuut y rrquirrmenn holtimgs of mrr 8i J lullion in ihe ~lhe Commtwion follown! prn nirnt onrrg) Itrit! etear w s e a v mthetjM and dontnllhe t urfrnt trt mor) in ,,,,,,f,m rnrnue of the in t of abe(ommoti plJnt fatilitifs aW41.4tett with -i, limt fit k l' nit No J. Although thnc }~ ~ ' nonon are in wn a e imo). de aw n latnt rnrtnic t annot le in mored lintil littlerk k l' nit No 2 is plaint in wn h e in 1990 No t-ribrins. rartpng t f urgn - e nltlh alt It to Ihe allow Jnt c lor finhls uwd clunng t omenn tion are twmg au roi d on in t of Ihe ionunon plant fat iliun

{ l l t ! LIMERICK UPDATES I i LIMERICK H AS SUCCES$FUL FIRST YE AR in 1974), l.imeritk Generating 5t.ition. the Company's new state-of the art nudcar f.idlity, continued to pnn ide [ .in esemplary demomtration of ~ i d nudcar powcr as a s.ife, reliable and I crononucal source of cncrgy. H-Conuncrcial oper.ition of 1.imernk I'mt No I twgan on l'chnury 1. q l 'I he unit's perfornunce sci a world A ff securttres prospectus is record for a l.irge lwmcf rc.n tor during cheded whde on press by/oseph its hrst fuel (ple. After returning from D. 01os,g6hn (leftA rinancial a bntf out. ige onJul) I,4. Ihe pl. int ran t'mt No 2, which was approsinutely Omston, and Aobert/ McNamee ("t 'A /InJn('JI r'nter. h P continuously for 198 da)s until a late 493. complete on a nun hour b.asit J.inu.ir) 198* shutdow n for minor l repairs POINT PLE ASANT PROGRESSES t'mt No 2 comanntion is One (omlwment of the pl. inned pns cnhng on % hedule and supplemt ntal omimg w atcr *) stem for Commitment to esponthtures (ontinue to tw w illun 1.imern k is the Point Plc.iunt W. iter Our Investor $ 1 j the planneil in cis aw s taird w ith the Protest. w hich will thscrt alkw.ited j,/% ith'd to lis' I (ominntion ont tapof $319" w atcr from ihe Delaw. ire Hiser to Ihe afinnin'in/ly strong ., i,, lulhon Asof Dncmher 31 the s.t hu> lkill Rh cr. Comt nn tion lu, ~ Comgun) lud imnu d il 3 lullion in twen smgwnded win (c 198 4 w ben it instifulitan, looliing of w as apprminutely 3ni, a nnplcie. The gfy,long ternt unel i Pinnt Pleaunt Proicti lus trcn the i en tneling short-terns suh cti of substantial oplwnition Innu i funancat managemem vs o the Phdadriph,a $tod lachange and s anous gn eugn. causing ewnsh e cAf M yNn k N.' ub. g the ft trad.ng specahst. tlettto htig.nion and the smlwmion of upngjnngglly eg qqfugggge e.ght) Donald M $tantoa, trad>ng unNnn tion. In %tay andJune. Ihe JonantIng alternalitvs ereciahst, c^ ate wet 4 Morton W s,uprcn'c Coun of Penns)h.mu denicd to o ad]}nn/A ni A< merman, We Pres, dent. in usts for.tn JpjvJl of the daision !onane and Aaou tong. % nata M n $<ott, Trenu er; and Mrhard G r Gimore, $rmor he rres,Jent, attirming an ordet of the Court of y.gjp, pun j,jjpg f,nanc,. Common Pleas of ihn ks Count) w hn h I#"'#" ","" "8'"" thrntnlthe tumple ton ofIhe Pinnt Picaune l'ropa t In Os tolwr, a slwti.it uniM8'onHI8/P bn3InC51 nustcr w as apgwuntni to os crwe f j,fa, ifnpletncntJtion of the Court of Common Pleas Onicr. Cominn tion is Il f-cslwsiniIo tr$ume in 19H' with 5 4 uimploion ciiiwt int iti 19HH j ~b**'

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J n onomic tics clopment w ohm us terrnor) I nilcr the suu rwtul "\\\\c know the f erruors " theme usal m r.nlio.un! prmt.nh crtomg the s ( omp.ui) puhin i/cs the ni.ui) I gmeraplus al ant! n ononut.il l l .nh antages utIcrul h) t he (,rcater Plul.aftlpina metropoht.m area.\\itfal 1 I h\\ the sliengtli eit the n 4 yh un) Jiht the ltglit uklustr) allt! sen R c I).isal suu rw ol( onipan) promotional n ononn has enablat the region progr.u ns Pl i \\rea I)n clopin( ni sen nl h) the ( ompany Io hu ome a i k p.irtlitent.issistal il lien firms tt) Ic.hler lll hcJllli c.trc, pharnt h cllt h al h h alc nl the rt ghin in l9ho therch) rescJrt II intiirniath Hi prt K cwnig.ith! irc.n mg 2 200 ncu pohs \\lso 1 I busmcw sen a es I he local n onoon paria ipatul m suu cwf ul ( t! orts io was bolstcrn! t sen forther in the rciam.unt esp..nt! 59 csnt uig hrms tourth quarter of 19X6 h) I.ntni.in unok mg 8 os ai obs Amlaki(In nion to loc.nc its new i Prospn ts for the area rent.un Pharm.a cutical 1)n nu in i fcatiquarters priinusmg I he numhcr of nihs here n m ( hnter ( ounty hutial emplo) ment at an all tmic high.nul unemploy ment of 300 to 600 propic n espectral. has talk n to us fount in el m rn cut w nh full emplos mcnt to rc.n h s c.n* lh t.nl salo grow th n among the approsun.nch 2 200 w illun ten scars Nghnt m thc nation ( onuncrual anti ronientul sloclopment has rc.n hnl EDDYSTONE REH ABILITATION rt t ortl k s cis in (la ru nion n PROCEEDS Plul.utclplua alonc user t o nnlinin .\\tter 26 scars ut rehable sen n e. squarc tcct of new. nut rchabilu. uni I ah stone (,cnct.nmg stationi i nit a, -e,,-*,"y, .g o!!n c sp.a e n plannnt or um!cr No I in ennt a rew lease on hic m n::ew. c et cc :* v tn w uttn'n nrw .,e :+ c f, s 19 % apir upupmcin repl.n cua os c~e-e f c: ; e c m,res me.e. I he t ran it n en f rom a hr.n s w ere inu!crtaken.n part of a e,en r, e :e a s e, e,. m.unitat nirmg hasal n oniinn to a rchabihtation progr.un (!nignnl to Wm n.we"ce i allow *hr t ompan) to estetal the hic u. -e ct E ea e ofI mt No I mto the list t entury P-L :m ve c-:m c er c cru %,n, ey e et \\nlular wt irk h.hl aire.hh heen e "~r 1,eesl'!rmiej 'J*u J "e e - : ep s rJ <.co c es L "inplction ot thc rt habihtaln ui thne e as cet c tvcc,;2,eine liin u pst mal firt il umas rcm.un at atlahic ti tr l1.nc lt1.hl(.np.h it) pp... . sl "L s +,.+ .t .krs ' .[ { s., .} ,I -. - h. W 1 '( g %q b gs 4 fc 4 ~v- ,7 nm.w h +

TRAINING EXPANDED l During 1986, all the Companyh 4 nuclear operation and nuintenance training progams received accreditation from the National { Academy for NuclearTrainingof the j l Institute oi Nucles Power Operations. Excellence in nuclear training is a key element in achieving the highest g g stand.trds of operating nuclear plant g safety and reliability. The Company's Peach llottom Atomic Powrr Station became an early A nine-week spliang school branch of the Academy w hen the PJM INTERCONNECTION trainingprogram teaches station's fint five training programs CUTS COSTS employees theproperleadsplicing received accreditation in 1985. In 1986, PE eustomers saved $30 techniques for underground ) 1.imerick Generating Station personnel million in energy costs, thanks to the urban electricallines. SpliceNn-tr'ialat eroy Leit ty. L h worked in conjunction with Peach Penns)Ivania-NewJency-Maryland Transmissi nandDstnbution, l Dottom personnel to develop five ( Ppl) Interconnection. While less Ihan pours molten solderlead tojoin additional training programs at Peach in previous y ears (due to lower oil sleen toleadJacket cable while lkittom and ten pn> grams at I.imerick. prices and much lower purchases as ,,,,,,c,,7 37,,, g go,,, w hich resulted in IJmerick's entry into the result of the operation of Limerick fooA, on, the Academy. With the accreditation of Unit No.1), the annual savings all twenty training programs. the remained substantial. Company became one of the first The PJM Interconnection, the g multiple-site utilities to attain full world's first integrated power pool, memlwr status in the Academy. was created in 1927 connecting three Recognizing the need for a larger utilitics, including PE. The present training facility for 31aintenance Ppl structure was established in 1965 Division personnel, the Company has as a joint enterprise of II investor-converted its retired ILtrhadoes owned unlitin, w hich formally ag ced PEure trainingschoolin West Generating Station near Norristown to to operate as a single system to achieve Conshohocken has received the liarbadoes Maintenance Training the significant benefits to be realized community-wide recognition for Center. Ily putting the new training through providing reliable service at Its safe fire //ghtinginstruction, center into operation in 1986, the the lowot possihic cost. Using the particularly for fires involving electricity andgas, and hasI sped Company moved closer to its goal of latest computer technology, a staff of numerous fire compan,es with luving 775 trained maintenance PE employees operates the control their training. craftsmen by 1990. Nuclear power center in Valley I'orge, Pennsyh ania, plant nuintenance projects also have been incorporated in the llarbadoes training. Such projects allow trainees to work in a simulated radiation area. + PEh Maintenance Division uaft u programs were resiewed extensively hy the Institute of Nuclear Power Ogwrations and given formQ accreditation. j WT o _-.,.--__,.-,..,.,.-..,.._.___n._.,,

i TRAINING EXPANDED 1)uring 198h all ihe ('onipany 4 nut lear opcration and nuintenance tr.uning progrann recen cd accreditanon from the National Academy for Nuclear Irammg of Ihe Institute of Nut Icar Powcr ()perations lacclience m nucle.ir tr.unnig n a kcs element in at lucs ing the lughest standards ot oper.inng nut icar plant .g safet) and rehabihty l hc ( ompany i Peat h ik ittom "~ Aionuc Power station treamc an cath brant h of the \\cadcon u hcn the PJM INTE RCONNECTION tr2 nsegprcgram teaches stanonk hrst in c training pri>grano CUTS COSTS empio>ees t*e preper lead sphcing ret en cd au rnhtatu en m 1985 in IOSo Pl custorners s.ncd 5 W reeques for onde ground Iimera k (.cncratmg sution personnct nulhon in energs (ostv thanks to the a ea, electrica/ br'es Sphcer"n-r w orkul m coniunt non u nh I' cat h Pcnno hanu \\cw Jerses \\taryland "3 "'"ile'CY le'iF-ik ittom personnc! to des clop in e i Pl\\1 > Intert onna tion \\\\ lule Icw than .ukhtional tr.unmg programs at Prat h m pres ious )c. irs olue to low cr oil s.eeve to leJ3j1ck et C35e shole lionom and ten progr.uus at I uncra k pra es and mut h low cr purchases.a y g,g, w g,m wlut h resulted m I narra k. cntr mto the result or ihe operanon of lamera L tc3s on. the Acadcnn \\\\ uh the au rednanon of I nit No I > t he annual s.n mus all tuenn tranung progrann the rcm.oned ubstantul ( ompans bet.unc onc ot thc hrst t he PJ\\1 lnterconna tion the i< muhipic sitr unliocs to an.un f ull wor!d s hrst unegratul u m cr ]wiol l member sutus m the kadenn w as t rc.urd in 19T connu tmg three Raiigtu/mg the need for a larger utihun int luding PI 'Ihe pasent tr.uning I.a ihty for \\1.untenant c Pl\\1 strut ture w as estabhshed in 1965 I)n nion personnel. thc ( omp.un h.o as a iomt enterprnc ol 11 un estor. t om ertcd its retired liarbadi e ou ned unht es wlut h lornully agreed pg tre ry,.n,cg schochn West ( cncratmg sunon near Norrntou n to to oper.uc as a smg!c sy stem to at lues e Consho oc6 en has receoed s the liarbadie \\tamtenant c Ir.umng the signihtant bcnctits to be rc.th/cd comcssry-+ce recogmten for ( cnicr 113 putting the new tr.unmg through pros idmg rehable sen a c at 8e Ie I s "s '"S *"- (cnicr mio opcrathin m 19Mo the t he li M DI lh MlbIc W't Islugtbc particu!rly for f:res an olong electnc:ty 3od g2s, and has hel ed ( omp.un mi n cd t li her to its gi ul a it

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y,,,73,,re c w p n es e haung 5 r.uned numren.uu e Pi cmploy ns operates the control t c3e,r er, n,ng. t rattsmen in 1990 N ut icar lw m cr t enter m \\alk ) l orge Pennw h.nua. plant nlJiiltendute pD 7]n ts alvi h.n c been nu or]w >raicd m the liarludors ,E d" ^ tranung s t h proictis allow tramccs u to work in a sunul.ncd radution area f 4 Pl s \\t.untenant c Da nion t ratt progr.uns w cre reurw ed extensn ch 2, / ' ,p 5 E

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P w, 7 Commitment to Public /f /s ^ Communicat. ion f vg, PE trillbe open and constantly monitoring PJM and forthright in Thepmduction ofthe cwpware powergeneration and transmission, annualreportis one of the our cominunication Costs are reduced by sharing reserves Companyt manymajor icith our customers, and coordinating maintenance. Energy comnwnications e&wts Designer shareholders, needed to serve the joint s} stem load is Ge rge Coan(rightA assistedby l'*" ""###l'' # ' # produced by combiningihe most empimees and all Divisen reviewsphotographs. economical sources available from any o!hers intuhvd scith of the interconnected utilities. our business. We acill GAS RATES REDUCED under more favorable market seek and respectfidly During 1986, the Company reduced conditions and reductions in pipeline Consider constructire gas rates by 546.6 million for 318,000 suppliers' rates in 1986. publicinput gas customers in Bucks. chester, O cerninpr Delaware and Montgomery Counties. COST REDUCTION MEASURES Fora residential gas home heating REVIEWED 8 fen "P in customer, this reduction caused a ne Company always has sought to mnstructing and 7.7% decrease in a typical annual bill, control costs while continuing to operating thefacilities from $912 to $842.His decrease was provide reliable, quality senice to primarily due to the Company's ability customers. During the year, a review newssary to providm.g to make prudent purchases ofgas from was made of majorcost reduction sa[e, reliable and producers and pipeline suppliers actions PE initiated between 1980 and emnomicalutility 1986. This reviewindicates that the sen ice. Company saved customers $ 1.2 billion during this period. Actions taken should result in continuing annual savings of approximately $193 g g %g hosts many visitors. This Rber-optics displaypanelwith Over the 19801986 period, fuel-accompanyingsoundtrack related savings in the Company's explains the basics of boiling electric, gas and steam businesscs water reactor operations to rwo amounted to approximately $778 Reading SchooIDistrict teachers' million or 65% of the total 51.2 billion Nancee Ryan andMichael Herzfeld.

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l l i Vw Commitment to Public ~ y hbQ Communication PE trillbe open and constantly monitoring PJN! and surrounding systems and dispatching Theproduction ofthe corporate forth$ht in power generation and transmission. annualreport is one of the our minntunication Costs are reduced by sharing reserves Companyt many major tcith our custorners, and coordinating maintenance. Energy communications efforts. Designer shareholders, needed to serve the joint system hvad is George Coan(rightk assistedby l'"' N "###"lI' A *'"'' produced by combiningihe most ernpimves and all avision, reviewsphotographs. economical sources available from any others intulred tcith of the interconnected utilities. our business. We scill GAS RATES REDUCED under more favorable market seek and respectftdiv During 1986, the Company reduced conditions and reductions in pipeline consider mnstructit'e gas rates by $46.6 million for 318,000 supplietV rates in 1986. publicinput gas customers in Bucks, Chester, concerni p u. Delaware and Alontgomery Counties. COST REDUCTION MEASURES For a residential gas home heating REVIEWED stermrdslu,p s,n customer, this reduction caused a lhe Company always has sought to constructing and 7.7% decrease in a typical annual bill, control costs while continuing to operating the[acilities from $912 to $842. This decrease was provide reliable, quality service to primarily due to the Company's ability customers. During the year, a review necessary toprovidm.g to make prudent purchases of gas from was made of major cost reduction i safe, reliable and producers and pipeline suppliers actions PE initiated between 1980 and economicalutility 1986. This review indicates that the sertice. Company saved customers 51.2 billion during this period. Actions taken should result in continuing annual The Umerick Information Center iil5""* hosts many visitort This fiben optics displaypanel with Over the 1980-1986 period, fuel. accompanyingsoundtrack related savings in the Companyh explains the basics orbelling electric, gas and steam businesses water reactor operations to two amounted to approximately $778 Acading Schoolastrict teachers, million or 65% of the total $1.2 billion Nancee Ryan andMichael H+ zfeld. Ti ,,...N .n ~. -

j n s Predictive maintenance will allow plant operators to recognize potential problems and estimate in advance 1 ' Er w hen repairs will be required. 'Ihis '? 3ystem will climinate unnecessary maintenance and increase plant availability by decreasing the numtwr Electncilsafetyis emphasizedin of reactive or forced outages. It also the "Reddy andEdd Sho* ~ savings. The largest item in this will provide guidance to operators on Y whech travels to area elementary - - $6M million m~cd as a stresses to plant com[xments. schools. Edward L Dick '#"' O' Y' " "N ' ' E Y' ' ' ' demonstrates electricalpnnciples to student David / Gea as Robert purchase agreements between PE and Company demonstrated once again i Brown, the voice and animator of companies to the west with low-cost, that it is at the forefront of i Reddy Kilowatt, observes. coal-fired power. technological progress in the electric Innovative methods of financing industry. For example, oil-cooled the Company's capital projects, transformers at Peach Ilottom, which including 1.imerick Generating Station, ordinarily must be de-energized for have achieved savings approaching cleaning. were cleaned with a rolmtic 5195 million. Various innovative arm being developed and tested by the e productivity improvements and cost Company in conjunction with EPRI. saving measures account for the When perfected, the robotic arm will remaining $221 million of savings. provide a means to work safely on 'lhe savings figures include over $ 2.2 energized, high voltage equipment. million from employee suggestions that were submitted through the SAFETY IMPROVEMENTS REALIZED Company's Employee Suggestion Throughout 1986, the Company System. continued to reduce work-related accidents through an effective safety RESEARCH AND TECHNOLOGY ADVANCED i In 1986, the Electric Power Research Institute (EPRI) awarQd a $ 10 million contract to PE to derclhp an on-line diagnostic monitoring i enter for power plants. The program wdl involve a predictive maintenance diagnostic center and a technolo[S transfer 1 center for the utility iryjustry, both to be located at Eddptone Station. ] Currently, plant maintenance is either tjractive (repairs are made as parts fia) or planned (a prescribed cours,of work is followed w hether or not r? pairs are immuliately needed). 1 i l i

l q y, :. hih g program. In the past 24 months, lost- ? 4. -i time accidents have been reduced by g. over 55%. This exceptional I e improvement has been realized ] because of a program ofincreased {$ safety awareness, new and improved spe n s. _ training programs, employee interest g'd $ V b al and management involvement at %[4 - W'. A series ofradio and television messages addresses the topics of alllevels. , $9 ' service reliAlity, electricalsdery, home energy audits and REAculNa CusioMERs Ano customer assistanceprograms. COMMUNITY MARKETING HELPS BOOST CUSTOMER BASE inside and outside the Company. This Starketing programs in 1986 focused program assists applicants, employees, on providing information to customers customers and vendors. on the efficient use of energy. For Numerous programs have been example, working with the heat pump designed to help minorities and industry, a media program targeted women become better qualified as residential customers for conversion to applicants for employment. As a result, electric heat pumps from oil heat. the Company's minority work force Similarly, conversion to high-has grown from 4% in 1969 to nearly efficiency gas heating was promoted to 15% presently. PE also has created customers along existing gas mains. In programs to help high school students h l all market segments, PE continues to improve their skills, so that they may aid consumers to make energy be able to meet employment purchases that complement their standards. One such program is PREP lifestyles or satisfy their business (Program Resulting in Employment needs. Possibilities). PE has either created James L Everett. Chairman, 51 ore than 16.000 new living programs or joined existing programs a units were connected in 1986. In the in order to increase the availability of Phitaae/phia Secunties Association residential market, electric space minority and women engineering luncheon. The Company heating was installed in 67% of these graduates. These programs include communicates with many varied units, with efficient heat pumps PEEP (Pre Engineering Exposure groups chroughout the year as accounting for 92% of these new units. Program), PRIN1E (Philadelphia P I #^**' Another 22% will utilize gas heat. As a Regional Introduction of Slinorities to result,89% of new living units in the Engineering) and the liigh School Company's service territory will be using PE's clean and efficient energy g products. ~ j 'I MINORITY OPPORTUNITIES ENHANCED PE's Affirmative Action Program is designed to enhance the participation s-of minorities and women in areas i ,,_,n._.,-.

Academies Program (Academy of Applied Electrical Science). g PE continues to expand its support of minority businesses in the Philadelphia region through its .s materials and services procurement activities.The Minority Business Development Program has been

j recognized and is enthusiastically supported by PE and the whole local John H. Austin,fr., President, also business community. Contracts serves as a community mlunteer.

] awarded to minority businesses have the Company's efforts to renew and Heis President of the United Way

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) increased tenfold since the present strengthen its strong tradition of I program was formallyadopted in late service to the people of the Delaware 1982. Valley. It was designed as a personalized program to assist that PE CARES BENEFITS MANY segment of the customer population Comm,itment to l During 1986, the PT Cares program which, because of age or infirmity, l again served many v ca residents. PE may have difficulty coping with the Good Citizenship Cares was established by Philadelphia complexitics of today's world. To date, pg g,illbe a Electric Company in 1981 as part of more than 26.000 customers have W '# h been helped by PE Cares. This enthusiastic response has convinced citi en bycontributing l PE to continue this effort. Among the to the common gmxl I many services provided to the PE Cares kh in our mim snembers are help in establishing arm anh,n the nadon. special payment arrangements, including the change of due dates to a coincide with receipt of Social l i EarlK. Parker (left)and H. B. Winitsky(rightk both of Purchasing Department, accept the *Most VisibleIn-House Program" award from the h MinorityInput Committee of the New han-DelRegionalMinority Purchasing Council. he t

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Security or retirement checks and budget billing. The PE Cares representatives also can arrange for third-party notification of all matters pertaining to a customer's account, provide programs concerning safety and conservation and help direct the PE Cares participants to governmental and private assistance programs, as appropriate. the Company achiewd a nearly perfect AUTOMATED PROGRAMS IMPROVE record of reliab!c service with a SERVICE service availability index of 99.989% The Company continued to improve Another part of the Customer its Customer Communication System Communication System is the Field in 1986. An important component of Order Dispatch Sptem which allows I this overall system is the Trouble gas service calls to be electronically Management System, w hich sets transmitted from the call-taking.treas j priorities for scheduled work to the dispatch office. This great!y electronically and allows the status of enhances safety, since it assures l each job to be automatically updated prompe handling of gas emtrgencies. daily. During a storm, this system helps Finally, the third Customer to assign the correct work force and Communication System component, e equipment so that service can be the Service Applications Mann ement g restored as quickly and efficiently as System, permits efficient tracking of possible. This results in shorter new construction so tlut electric and interruptions for customers and gas service and installation of meters enables PE to maintain its high may be provided efficiently and standard of service reliability. In 1986, promptly. These modern systems give the Company the means to offer customers i Amanda L Coleman, Pubhc even better, more reliable service tiun Afrairs, serves on numerous in the past. With tnese systems. l community and drie committees, employees can utilize more efficient i including the new n=nnsylvania Convention Center Authority. "U "E WW " She is pictured next to a modelof the planned center. I j k g.~ i l 1

- =. l l l j Management % Discussion and Analysis of Financial Condition and Results of Operations I i General in December 1985, the Financial Accounting Total revenue increased in 1986 over 1985 as a result of Standards ik ard issued Statement No. 87, Ernploycri electric rate increases and higher electric sales. See Accounting Er IVnsions. This statement becomes " Electric Operating Revenue" below. effecth c in 1987. Statement No. 87 prescribes a method Operation and maintenance expenses decreased in for determining periodic pension awt which differs 1986 compared with 1985 as a result of lower fuel significantly from the method utilized by the Company in expense. The lower fuel expense was primarily due to the 1986 and prior years. Ilistorically the Company has uscd excellent performance of the Companyk nuclear units. the same method for determining periodic pension awt In accordance with the Declaratory Order issued as used for funding the pension plan. lleginning in 1987, by the Pennsylvania Public Utility Commission (PUC) on the method prescribed by Statement No. 87 for measuring 1 September 28,1984, the Company deferred all operating periodic pension cost will differ from the method utilized costs, carrying charges on invorment, fuel savings and for funding purposes. Accordingly, in 1987 and income taxes associated with Limerick Unit No. I and subsequent years, contributions to the pension plan might 50% of common plant from February 1,1986, the date of differ from periodic pension cost recorded in the commercial operation, untilJune 27,1986, the date the financial statements. The Company has determined tlut plant was included in rates. The combination of this pension cost for 1987, determined in accordance with i Declaratory Order and theJune 27,1986 rate order, Statement No. 87, will be appmximately $ 10 million less which permits continued accrual of an amount equivalent than 1986 pension cost. to Allowance for Funds Used During Construction In December 1986, the Financial Accounting (AFUDC) on the remaining 50% of common plant, Standards ik>ard issued Statement No. 90, Regulated contributed approximately 5221 million to 1986 Enterprises - Accountingfor A!xindonments and common stock earnings. Disallonunces ofr/ ant Costs. The Company is required OnJune 2',1986, the PCC modified the to adopt this statement by 1988. One of the provisions of i Companyk Energy Cost Rate (ECR) so that only 80% of Statement No. 90 requires the Company to recognize as a the difference between actual electric energy costs and loss regulatory disallowances related to plant investment. the amount billed to the customers is subject to after.the-Previously such amounts were included in the awts of the fact reconciliation for over/under collections. plant and depreciated over the planth life. This Statement On October I,1986, gas rates were reduced by may require the Company to record a loss equal to the approximately $ 47 million. This change was due $368.9 million of Limerick Unit No. I ant excluded from i primarily to lower fuel costs. rate base by the PUC in its order ofjune 27,1986. The 1 Periodic rate relief may be required in the future Company may apply the provisions of this Statement to offset increases in operating costs or carrying charges cumulatively in the year of adoption or it may in order to prevent any adverse effects on future net retroactively restate previously issued financial income, earnings per average common share and the statements. It should be noted that the Company has filed l Companyh ability to raise funds. a petition for review of the PUChJune 27,1986 order The Tax Reform Act of 1986 (Act) introduces with the Commonwealth Court of Pennsylvania sulwtantial changes to the corporate tax structure concerning the PUCh Limerick rate ha.se disallowance. beginningJanuary 1,1987. The rules under which Although Statement No. 90 would have significantly corporations compute their taxable income have been affected 1986 roults of operations if applied in 1986 (see I significantly changed. Some of the changes affecting the Note 2 to the Consolidated f inancial Statements), the Company are changes in the corporate tax rate, Company believes that, should its aforementioned l depreciation rates and repeal of the investment tax credit petition for review he denied, adoption of Statement No. (lTC). The Company is currently in the process of 90 will not significantly affect the Companyi future reviewing the specific impacts of this Act on its future tax financing plans or its ability to pay dividends. liabilities, liquidity and financing plans. In the long run, the Act may increase the Companyh awt of doing Electric Operating Revenue business. ITC and deferred income taxes have provided increased electric revenue in 19F6 over 1985 is significant sources of capital Although the Company will attributable to higher base rates snd increased sales. be entitled to certain ITCs afterJanuary 1,1987 because Kilowarthour sales of electricit} to retail customers of carryovers from prior years and portions of its increased 3 percent in 1936 over 1985. The increase of construction program qualifying under transition rules, electric revenue in 1985 and 1984 over the previous the benefits of that ITC will be reduced. Repeal of ITC corresponding periods are primarily attributable to higher (other than prior year carryovers and qualified transition base rates. property) and reductions in deferred income taxes roulting from reduced corporate tax rates will increase Electric Revenue %Ilionsof Dollars the Companyi external financing requirements. Although Increase /(Decrease) 86 n '85 Hs n 8 6 s6 n 83 the corporate income tax rates are reduced, these Rate Increases S 185.o 8141A s140 0 ruel Related Rcrenue ( 39. 4) (2H) to4 0 reductions are offset by the repeal of the ITC, imposition Sales and Other 37.6 (58. t ) H4M of the Alternative Minimum Tax and other changes which w s1842 s 80.5 s327.H will increase the Company's cash tax payments.

= _. Gas Operating Revenue tax credits, net, included in other income decreased as a lower gas revenue in 1986 compared with 1985 is result oflower allowance for borrowed funds used during attributable to decreases in large commercial and construction. Income taxes c! urged to operations industrial sales, gas transported for others and lower fuel-decreased in 1985 compared with 1984 as a roult of l related revenue resulting from reductions in the price of lower operating income and increased in 1984 compared gas purchased from suppliers. Gas revenue decreased in with 1983 as a result of higher operating income. Income 1985 compared with 1984 due to a decrease in sales and tax credits, net, included in other income, increased in k)wer fuel-related revenue roulting from reductions in 1985 and 1984 over the previous corresponding periods the price of gas purchased from suppliers. Gas revenue as a result of higher allowance for born >wed funds used increased in 1984 over 1983 due to higher rates and during construction. increased sales. Other Taxes Fuel and Energy Interchange Expense Other taxes decreased slightly in 1986 versus 1985 For accounting purposes, fuel and energy interchange due to lower capital stock and realty taxes. In 1985 and costs are deferred until billed as fuel adjustment revenue. 1984 other taxes increased due to higher capital stock and See " General" above, regarding after the. fact realty taxes, and higher realty and gross receipts taxo, reconciliation for over/under collection. In 1986, gross respectively. 4 fuel and energy interchange costs were $281 million i lower than in 1985 due primarily to the excellent Allowance for Funds Used During Construction performance of the Companyk nuclear units. Fuel and The decrease in AFUDC in 1986 compared with 1985 is a energy interchange costs deferred in previous years and roult of the commercial operation of Limerick Unit No.1. charged to expense in 1986 amounted to $ 189 million. In The increases in AFUDC in 1985 and 1984 roulted from 1985, gross fuel and energy interchange costs were $ 212 increases in construction wurk in progress. million lower than in 1984 due primarily to the excellent performanc< of the Salem Nuclear Station. Fuel and Interest Charges energy intuc sange costs deferred in previous years and Interet charges on debt increased in each of the last three charged to expense in 1985 amounted to $135 million, years due to additional debt outstanding. The ratio of resulting it. net fuel and energy interchange expense earnings to mortgage interest, which is one measure of remaining essentially the same in 1985 as in 1984. In the Companyh ability to issue additional mortgage bonds, 1984, gross fuel and energy interchange costs were was 2.82 times,1.98 times and 2.55 times, at year end, for essentially the same as in 1983; however, electric fuel 1986,1985 and 1984 respectively. costs deferred were hnver by $ 104.2 million, roulting in a net increase in fuel and energy interchange expense Capital Expenditures and Changes in compared with 1983 Financial Position The Company is carrying on a construction program Other Operating and Maintenance Expenses which is estimated to require expenditurcs of 1986 non-fuel operating and maintenance expenses approximately $1.2 billion in 1987 and $3.3 billion from increased over 1985 primarily as a roult of the 1988 to 1990. A majority of these expenditures relate to commercial operation of Umcrick Unit No.1. Other the construe:lon of the Companyk second 1055 mW i operating and maintenance expenses increased in 1985 nuclear generating unit at Umerick. Successful and 1984 over the previous corresponding periods due to completion of this program is dependent on the inflation, growth in utility plant and increased costs Companyk ability to obtain external financing, primarily 1 associated with the Companyh nuclear generating units through debt arrangements and sales of equity securitics and with operating the new flue gas scrubbing systems at which are subject to market con litions and to meeting ihe Companyh two w holly owned, coal burning stations. certain earnings tots. The program also is subject to the licensing requirements of the Nuclear Regulatory Depreciation Commission, to other regulatory approvals in connection increases in depreciation in each of the last three years with the planned supplemental cooling water system for reflect additions to plant in service. The 1986 increase in Umcrick, to financing approvals by the PUC and to depreciation over 1985 is primarily attributable to changes due to litigation. i Umerick Unit No. I being placed in service. Interim financing of the construction program is provided by commercial paper borrowing and short and J Income Taxes intermediate-term bank h>ans, which also are dependent Income taxes charged to operuions increased in 1986 on the Companyh financial position. 3 over 1985 as a roult of highrr operating income. Income 1 =' r - -= -g-- + -- --ww-' w -'~---y

Philadelphia Electric Company and $utmidiary Companics Consolidated Statements ofIncome For the Year Ended December 31 1996 1985' 1984* (lbousands ofik>llars) Operating Revenues Electric $2,699,365 52,516,19i s 2,435,73 i Gas 391.504 428,984 462,966 Total Operating Revenues 3,090,869 2,945,175 2,898,697 Operating Expenses Fuel and Energy Interchange 889,277 1,097,731 1,069,849 Other Operating Expenses 618,257 548,609 510,726 M.tintenance 274,200 262,419 242,675 Depreciation 222,568 183,049 176,433 IncomeTaxes 288,930 199,900 242,854 Other Taxes 232,627 240,962 206,339 Total Operating Expenses 2,525,859 2,532,670 2,448,876 Operating Income 565,010 412,505 449,821 OtherIncome and Deductlons Allowance for Other Funds (Aed During Construction 76,821 176,310 134,485 1.imerick Carrying Charges 188,679 Income Tax Credits, Net 102,462 133,415 116,423 Other Net 2,462 (3,464) 239 Total Other Income and Deductions 370,424 306,261 251,147 Income Before Interest Charges 935,434 718,766 700,968 Interest Charges Inng-Term Debt 458,885 435,373 402,475 Short Term Debt 12,512 17,721 30,912 Allowance for Borrowed Funds thed During Construction (101,617) (257,I81) (220,370) Net Interest Charges 369,780 195,913 213,017 income from Continuing Operations 565,654 522,853 487,95I Income from Discontinued Steam Operations 1,916 2,448 4,438 Estimated Inss on Disposal of Discontinued Steam Operations (1,250) Net income 566,320 525,301 492,389 Preferred Stock Dividends 90,%1 90,';77 82,682 Earnings Applicable to Common Stock $ 475,359 8 434,724 8 409,707 Average Shares of Common Stock Outstanding (Thousands) 183,141 169,784 151,804 Income from Continuing Operations Per Average Common Share (Dollars) $2.59 $ 2.55 $ 2.67 Earnings Per Average Common Share (Dollars) $2.60 52.56 $2.70 Dividends Per Common Share (Dollars) $2.20 $ 2.20 $ 2.20 'Retlassipestfar comparattee purposes. Se2 notes topnancialstatements.

Philadelphia Electric Company and Subsidiary Companies Consolidated Balance Sheets ASSE13 December 31 1986 1985* (Thousands ofDrdlars) Utility Plant, at original cost Electric $ 8,875,150 s 4,982,099 Gas 506,021 474,599 steam 54,176 54,138 Common, used in all services 128,733 132,323 9,564,080 5,643,159 Ins: Accumulated Depreciation 2,014,710 1,824,420 Net l'tility Plant in Service 7,549,370 3,818,739 Construction Work in Progress 1,652,615 4,929,093 Ir.tsed Property, net 281,346 338,141 Net Utility Plant 9,483,331 9,085,973 Current Assets Cas'i and Temporary Cash Investments 90,716 I88,785 Accounts Receivable Customers 345,432 348,233 Other 30,174 22,687 Inventories, at average cost Fossil Fuel 54,517 63,594 Materials and Supplies 75,219 60,152 Ikferred Income Taxes - Energy Costs 44,842 (51,814) Compensated Absences 50,800 46,370 h Other 27,681 25,402 TotalCurrent Assets 719,381 703,409 l Deferred Debits and Other Assets l'nrecovered Revenue 112,472 Deferred Limerick Costs and Carrying Charges 195,617 Investments 89,702 87,670 Inss on Reacquired Debt 76,783 48,589 l Other 70,734 86,204 l Total Deferred Debits and Other Asacts 545,308 222,463 Total $10,748,020 $ 10,011,84 5

Reilasssflevt)hr comparatitepurposes.
.W notes tofinancialstatements.
CAPITALIZATION AND LIABillTIES December 3I 1986 1985' ( Thousands of thdlars) Capitalization Common Shareholders' Equity Common Stock $ 2,832,967 5 2,60I,989 Other Paid-In Capital 7.787 7,331 Retained Earnings 653,127 583,728 3,493,881 3,193,048 Preferred Stock Without Alandatory Redemption 572,472 572,472 With 51andatory Redemption 374,956 318,309 Inng Term Debt 4,286,792 4,309,13I Total Capitalization 8,728,101 8,392,960 Current llabilities Notes Payable, llank 1,000 long-Term Debt Due Within One Year 108,570 80,800 Capital trase Obligations Due Within One War 69,379 76,326 Accounts Payable 182,498 144,407 Taxes Accrued 86,187 58,509 Deferred Energy Costs 88,215 (l01,655) Interest Accrued 90,701 93,008 Dividends Payable 39,607 40,698 Compensated Absences 50,800 46,370 g Other 29,153 25,583 Total Current Liabilitics 745,110 465,046 Deferred Credits and Other Liabilitics Capitallrase Obligations 211,966 261,815 Deferred Income Taxes 694,990 502,621 L'namortized Investment Tax Credit 3 320,107 302,409 0:her 47,746 86,99i Total Deferred Credits and Other llabilitics 1,274,809 1,153,839 Total $ 10,748,020 $ 10,011.84 5
Ptuladelphto Electric Company and Sutwidiary Companics } Consolidated Statements of Changes in Cash Flows I For the Years I:nded December 3i 1966 1985 1984 (Thouunds ofIMiars) ] Cash flow From Operations income from Continuing Operations $565,654 5522,853 s487,951 1 Non-Cash items included in income J Depreciation and Amortization 285,204 I83,049 176,433 Nuclear Fuel Disposal Costs 5,601 13,201 Deferred income Taxes 133,419 66,553 78,550 Investment Tax Credits, Net 29,041 3,582 49,941 Allowance for Other Funds Used During Construction (76,821) (176,310) (134,485) Increase in Deferred Limerick Cmts and Carrying Charges (179,592) Increase in Unrecovered Revenue (112,472) Amortization of trased Property 65,600 60,900 39,100 i Limerick Precommercial Fuel Cost 16,448 45,301 Clunge in: 4 Deferred Energy Costs 189,870 128,240 (80,649) Other Current Assets and IJabilities 39,869 45,395 (41,043) Other Deferred Debits and Credits (17,707) 6,948 (16,112) Net Cash Flow From Continuing Operations 938,513 892,i12 572,887 Net Cash Flow From Discontinued Operations 3,468 4,105 3,992 i Net Cash Flow From Operations 941,981 896,217 576,879 Cash flow From Financing Issuance of Common Stock 230,978 241,041 250,445 i Issuance of Preferred Stock 75,000 100,000 -I Retirement of Preferred Stock including Change in Other Paid-in j Capital (17,897) (7,322) (7.757) Dividends on Preferred and Common Stock (494,916) (461,003) (4I8,098) Change in Dividends Payable (1,091) (3,098) 16,585 Expenses of Issuing Preferred and Common Stock (2,005) (870) (3,955) l Issuance of b>ng-Term Debt, including Capital Irase Obligations 869,471 732,364 317,337 Capital trase Ohligations (48,471) (46,364) (58,637) Retirement of hing Term Debt (260,829) (274,391) (12,183) J Premium on Retirement of b>ng Term Debt (28,930) (45,450) Net Borrowings Under Revolving Credit Agreements (550,000) 150,000 200,000 i Change in Short Term Debt (1,000) (259,000) (7,500) Capital trase Payments (65,600) (60,900) (39,100) Change in Escrow Funds 2,872 74,775 (80,125) Transfer from Investments 19,656 Payment of Other Obligations (37,719) (61,813) Net Cash Flow From Unancing (330,137) (25,061) 276,668 Cash 11ow From investing 4 increase in Utility Plant, including Irased Property (771,998) (829.814) (1,084,414) Irased Property 48,471 46,364 58,637 Allowance for Other Funds t' sed During Construction 76,821 176,310 134,485 Cost of Property Retired and Cost of Removal (86,332) (86,866) (44,014) Transfer (to)/ rom Deferred Debits 25,157 (I I,923) f Sale of Alagnesium Oxide Facilities 55,928 increase (Iksres v) in Other investments (2,032) (6.799) (l082) Net Cash Flow From Irwesting (709,913) (712,728) (880.460) Net Change in Cash Flow $(98,069) 5158,428 $(26,913) ) ks notes taffnanckd statestwntt i 1
Philadelphia Electric Ownpany and subsidiary Q>mpanics Consolidated Statements of Changes in Common Stockholders' Equity and Preferred Stock Common Stock Paid in Retained Preferred Stock Shares Amount Capital Farnings Shares Amount (Allamounts in thousansts) llalance, January 1,1984 142,811 52,110,503 $ 5,856 $452,964 H,073 $807,335 Net income 492,389 Cash Dividends Declared Preferred Stock (at specified annual rates) (83,820) Common Stock (52.20 per share) (334,278) Expenses of Capital Stock issues (3,955) Issuance of Stock Public Sales 11,613 144,548 1,000 100,000 Employee Stock Ownership Plans 9I4 10,563 Dividend Reinvestment and Stock Purchase Plan 6,965 95,334 Redemptions 871 (86) (8,628) llalance, December 31,198 i 162,303 2,360,948 6,727 523,300 8,987 898,707 Net income 525,301 Cash Dividends Declared Preferred Stock (at specified annual rates) (90,524) Common Stock (52.20 per share) (373,479) Expenses ofCapital Stock issues (870) Issuance of Stock Public Sales 7,387 115,008 Employee Stock Ownership Plans 873 15,294 Dividend Reinvestment and g Stock Purchase Plan 7,117 110,739 Redemptions 604 (79) (7,926) Italance, December 31,1985 177,680 2,601,989 7,331 583,728 8,908 890,781 Net income 566,320 Cach Dividends Declared Preferred Stock (at specified annual rates) (91,393) Common Stock ($2.20 per share) (403,523) Expenses of Capital Stock issues (2,005) Issuance of Stock Public Sales 6,000 117,216 750 75,000 Employee Stock Ownership Plans 625 13,215 Dividend Reinvestment and Stock Purchase Plan 4,774 100,547 Redemt,tions 456 (184) (18.353) Balance, December 31,1986 189,079 $2,832,%7 $7,787 $653,127 9,474 $947,428 Ses notes tofinancialstatements.
Philadelphio ficaric Comp.my and Sulmidury Companics Notes to Financial Statements 1.Significant Accounting Policies for funding of future costs. The Company believes tlut any increase in the estimated costs would be recoverable General through adjustments of rates charged to its customers. j All utility sulwidiary companic of Philadelphia Electric Annual depreciation provisions, exprosed as a percent of Company are wholly owned and are included in the average depreciable utility plant in service, were consolidated financial statements. Nonutility sulwidiaries approximately 2.95% in 1986,3.35% in 1985 and 3.29% i are included in invetments and accounted for on the in 1984. I equity method. Accounting policies are in accordance with those procribed by the regulatory authorities having income Taxes jurisdiction, principally the 1 ederal Energy Regulator) Deferred income taxes are provided for differento Commission (FERC) and the Pennsylvania Public Utility between book and taxable income to the extent permitted - Commission (PUC). for rate making purposes. Investment tax credits, other than credits roulting from contributions to employee Revenues stock ownership plans, which do not affect income, are j Revenues are generally recorded in the accounts upon deferred and amortized to income over the otimated billing to the customer. Rate increases are billed from useful life of the related utility plant. dates authorized or permitted to become effective by the regulatory authorities. Allowance for Funds Used During Constructlon Pursuant to a rate phase in plan approved by the (AFUDC) PUC in its electric rate order ofJune 27,1986, the AFUDC is a non-cash item which is defined in the Company is recording revenue equal to the full amount of Uniform Sptems of Accounts as "the net owt for the i the rate increase approved, based on kilowatthours billed period of construction of borrowed funds used for to customers. Amounts included in revenue w hich will construction purposes and a reasonable rate on other not be billed to customers within one year are classified as funds when so used." AFUDC is recorded as a charge to j Unrecovered Revenue in the accompanying balance sheet Construction Work In Progress, and the equivalent credits (see Note 2). are to " Interest Chargo" for the pretax cost of borrowed I funds and to "O her Income" for the remainder as the i I Fuel Adjustment Clauses allowance for other funds. The rate used for capitalizing g Each of the Companyh classes of service is subject to fuel EDC, which averaged 9.55% in 1986,9.50% in 1985, adjustment clauso designed to recover or refund the and 9 A0% in 1984, is computed under a method differences between actual owts of fuel, energy procribed by the regulatory authorities. The rate is a " net 1 interchange, purchased power, and gas, and the amounts after tax rate" and the current income tax reductions of such ants included in base rates. Difference between applicable to the interest charges capitalized are recorded the amounts billed to customers and the actual onts in "Other income" AFUDC is not included in taxable i recoverable are deferred and recovered or refunded in income and the depreciation of capitalired AFUDC is not future periods by means of prospective adjustments to tax deductible. rato Generally such rates are adjusted annually. In itsJune 27,1986 electric rate order, the PCC Ilmerick Carrying Charges modified the electric energy clause to allow the recovery Under the Uniform Sptem of Accounts prescribed by the of only 80% of the difference between actual energy costs FERC, accrual of AIUDC ceases at the time utility plant and the amounts billed to customers. If the Company under construction is placed in service and 100% of recovers more than actual energy ants,80% of the excess common plant of a two unit plant is deemed to be in is refundable to customers (see Note 2). service with the first unit. Ilowever, the PCC permits only i 50% of the s ommon plant to be included in rate base Nuclear Fuel when the fira unit is placed in service. Nuclear fuel is capitalized and charged to fuel expense on Decause of the difficulty in synchronizing the 4 I the unit of pnx!uction meth4x!. Estimated ants of nuclear recovery of Limerick Unit No. th cost through rates with fuel disposal are charged to fuel expense as the related its commencement of commercial operations, the PCC fuelis burned. allowed the Company to record a carrying charge equivalent to AFUDC on the unit and common plant until l Depreciation they were included in rate base onJune 27,1986. In l For financial reporting purposes, depreciation is provided addition the PUC is permitting the Company to record a over the otimated sersice lives of the plant on the similar carrying charge on the 50% of common plant straight-line method and, for tax purposes, generally, over which was deemed to be associated with Unit No. 2 and shorter lives on accelerated methods. The estimated was not included in rate base under theJune 27,1986 decommissioning awts of operating nuclear 5,enerating electric rate order. Such carrying charges are recorded as a plants, totaling approximately 5287,801,000 as of charge to Deferred Debits and as a credit to Other December 31,1986, are being charged to operations as Income. l permitted for rate-making purposes. The amounts charged are deposited in an escrow account and invoted 1 2
Gas Exploration and DevelopmentJoint Ventures Deferred IJmerick Costs and Carrying Clurgo, the The Company tus invested in several joint ventures for Company had deferred a total of $155.2 million exploring and drilling for natural gas. Cmts are aw>ciated with the Declaratory Order. capitalized under the full cost method and ciurged to operations commensurate with pnx!uction. Prospective Accounting Change in December 1986, the Financial Accounting Standards Gilns and insses on Reacquired Debt ikvard issued its Statement No. 90, Regulatc<l Enterprises Gains and lowo on reacquired debt are deferred and - Account /ngfor Ahrm<lonments atulDisallonunces of amortized to interest expense over the period permitted I'lant Costs, w hich requires any disalknved costs of for rate making purposes. recently completed plants to be recognized as a hws. The Company is required to adopt his Statement by 1988.
2. IJmerick Generating Station The provisions of the Statement may be applied cumulatively in the year of adoption or may be applied General retnuctively by rotating previously issued financial The Companyh IJmerick t' nit No. I commenced statements. If the Company chooses to apply the commercial operation on February 1,1986. Construction provisions of Statement No. 90 by retroactive restatement of the second of the two nur fear units at I.imerick in the > car of adoption and the PUCh disalknv'nce of resumed in February 1986, folknving a suspension of
$368.9 million of Limerick l' nit No. I costs ft >m rate apprmimately 2 years. Unit No. 2 is scheduled to be base is not reversed, $368.9 million would be written off completed in late 1990. At December 31,1986, Unit as of 1986. This write-off would reduce 1986 income No. 2 was approximately 49 percent complete based on from continuing operations and net income, as reported, estimated nun hours needed to complete the Unit. As by $249 million and the related per share amounts by of Ikccmber 31,1986, the Comguny lud invested $l.36. At December 31,1986, net utility plant in service, approximately $1.9 billion in Unit No. 2, including 50% deferred income taxes and retained earnings would tr of common plant. reduced by $364.2 million, $115.2 million and $249.0 million, respectively. After giving effect to the write off, IJmerick Unit No.1 Rate Proceedings 1986 pro forma roults of operations and related per share On September 27,1985, the Company filed with the PCC amounts would be as follows for a phased in electric rate increase designed to yield $67I million annually, net of fuel savings, to recover the g costs associated with IJmerick Unit No. I and 100% of common plant. I y order enteredJune 27,1986, the PL'C As Reported Assumi t wtne Resiancment approved an increase of approximately $351 million pf,us,ms on>onars, nopt Nr wre Am<mnis> annually, net of fuel savings. The PUC authorized a rate of inwmc rnim j return on common equity of I 4.75%. The increase is oinunuingoperauons. s565 7 s3 63 l lxing phased in m er three years in equal steps, followed l'*' "6*3 '3 E3 by a three > car rec wery period, without interest, of inwmc rn>m oinunuing amounts recmcrable under the phase.in plan. In operauons. s2.59 s t.23 accordance with its prior practice, the PUC excluded Net inwmc s2 60 st 24 50% of common plant from rate tuse at this time, but permitted continued accrual of an amoant equivalent to IJmerick Unit No,2 Cost Cap AltlX:on the excluded 50%. Accordingly, the Company On December 23,1985, folknving a PUC investigation, is accruing a cairying charge equivalent to AIUDC on this the Company filed its response with the PUC accepting invntment. The increase also reflects an exclusion from the conditions of the cost containment and operating the Companyh rate tuse of $368.9 million due to alleged incentive plans set forth in the PUC's December 5,1985 i imprudent construction delays in 1976 and 1978. As order, which concluded that the Company could indicated behnv the Company has appealed this complete the construction of Limerick Unit No. 2 exclusion. The PI'C rejected allegations by various parties conditioned upon the acceptance by the Company of tlut ljmerick Unit No. I represents excess capacity. Ior a such cost containment and operating incentive plans, description of the effects of theJune 27,1986 electric including a maximum net rate base alh>wance for Unit rate order on the Company's accounting policies, see No. 2 (exclusive of common plant) of a prudent Note 1. investment of $3.197 billion. This order has been in accordance with the Declaratory Order issued appealed by various partics. Under Statement No. 90 by the PUC on September 28,1984, the Company described above, if the Company estimates the total cost deferred all operating costs, carrying charges on to complete Unit No. 2, including AIUDC, would exceed investment, fuel savings and awociated income tax effects the 53.197 billion cap, an immediate charge to expense of IJmerick Unit No. I and 50% of common plant from would be recognized for the exces. The Company February I,1986, the date of commercial operation, until otinutes the c wt ofIJmerick Unit No. 2 will not exceed the plant was included in rates on June 27,1986. The the 53.197 billion cap recovery of these costs will be addressed by the PUC in a subsequent c!cctric rate case. Of the 5195.6 million of
- - - - - - -. ~. ~ _ _ _ _.. ~ _. . - ~. -. - -_- - --_---- Ptuladc!phia ricoric Cornpany cod Sutwidiary Ozmpanin Notes to Financial Statements - Continued i f Execa Capaciay Standards Court by the Company appealing the excimion of $368.9 OnJuly 10,1986, the Governor of lYnm)lvania signed million from rate tuse and by a group of the Companyh into law legislation amending numerous provisions of the commercial and small industrial custom rs on the issue of itnmylvania Public Utility Code. Among the pnwisions excess capacity and on various rate doign and cost of of the legislation which affect rate regulatiom, one service issues. pnwision imposo standards on the PUC in determining whether new generating capacity is excess capacity. This Supplemental Cooling Water i pnwision requires a disallowance from rates of any 'the murailability o' sufficient supplemental cooling portion of new capacity w hich is determined to be excess water would limit or prohibit operation of Umcrick Unit capacity. The pnwisions relating to excess capacity are No. I and Unit No. 2 (when in operation) during certain i applicable to rate cases 'pending before the Commiwlon." months of ahe year. 'the Delaware River liasin Commission { OnJune 27,1986, the Office of Comumer Ahucate (DRilC) lus approved various Company requests for i (OCA) filed a Ittition for Reconsideration w hich sought modification of restrictions on the use of the Schu)! kill amendment of the PUCh order enteredJune 27, River for umcrick cooling water (which restrictions 4 1986 with respect to the finding tlut Umcrick Unit create the need for supplemental cooling water for No. I was not excess capacity. Additional Petitiom for Umerick), a reallocation of cooling water to Umcrick y Reconsideration on excess capacity and other issues were from uther power plants on the Schu} lkill River and the filed by certain other partics on July 1,1986, July 7,1986, use of water from an upstream municipal reservoir. The July 11,1986 andJuly 15,1986. OnJuly 10,1986 the DRinCh appnwals were cifective through December 31, ) OCA filed a Supplemental Ittition for Reconsideration 1986, and the Company tus filed similar requots with the [ which alleged that the Umcrick Unit No. I rate case was DRilC for its 1987 supplemental cooling water needs. pending at the time the legislation was enacted and One component of the planned supplemental sought application of the excess cap,nity provisiom of cooling water system for Umcrick is the Point Pleasant i i the legislation to the Umerick Unit No. I rate case. On Project. The Ibint Pleasant Project lus been the subject of l July 16,1986, a group of the Companyk indmirial substantial opImition from varium groups, including the i customers filed a Supplemental Ittition for majority of the Commiwioners of Ilucks County, and the Recomideration joining the OCAs Supplemental Ittition Neshaminy Water Resources Authority (NWRA). Petitions for Recomideration. By orders enteredJuly 25,1986, the for Allowance of Appeal were filed with the Supreme j $> PCC denied all Ittitions for Reconsideration and Court of Itnnsyh ania by the O>mmissioners of Bucks i Supplemental Ittitions for Reconsideration. The PLC O)unty, NWRA, and a taxpayer in Bucks County from the j held tlut the legislation did not apply to the Umcrick Unit decision of the Commonwealth Court of Penmyhania, j No. I rate case. I'urthermore, the PCC held that, even if af firming the decision of the O>urt of Common Pleas of the legislation did apply, Umerick Unit No. I did not llucks County ordering tl'c completion of the Puint I } comtitute exces capacity under the standards imposed Pleasant Project. On May 8,1986, the Supreme O urt of by the legislation. On July 25,1986, the OCA filed a Itnm) h ania denied the lYtition for Allowance of Appeal Ittition for Review w ith the Commonwealth Court of filed by NWRA. OnJune 23,1986, the Supreme Court of Penm)hania (Commonwealth Court) of the PUChJune Penmyhania denied the renuining two Petitions for s i 27,1986 electric rate order on the issue of excess Allowance of Appeal. Comtruction of the Ibint Pleasant j capacity and on a particular rate tuse iwue regarding Project lus not yet resumed. The G>urt lus appointed a J' whether certain utility plant was used and useful. On July special nuster to oversee the impicmentation of the court 28,1986,Ittitions for Review of the PUChjune 27,1986 order that the project he completed. electric rate order were filed with the Commonwealth 3 Sale of Steam Operations On June 30,1986, the O)mpany signed an agreement for the sale of its steam operatiom. The sale was completed on j January 30,1987. The Company recorded an estimated h>ss on disposal of $ 1,250,000, which includes 81,000,000 in income tv xpense associated with timing difference for which deferred taxo, in accordance with the rate. making treatment, sud not been provided. Operating results of the steam operations for 1986,1985 and 1984 are reported separately as disomtinued operations in the accompanying financial statements and are summarized triow. Income from Discontinued Operatiom I includes a $ 1.0 million Ims for the period fromjuly 1,1986 to December 31,1986. 19M6 19Mi 19H4 I (Thousands tiflMiars) l Steam Revenues $51,067 s68,529 582,320 ) Operating Expemes, Excluding Depreciation and Taxes (45,692) (61,680) (71,570) Depreciation (1,923) (1,916) (1,893) Income and Other Taxes (1,536) (2,685) (4,419) j Ino>me from Discontinued Operatiom $ I,916 $ 2,448 8 4,438 L l i s . - ~ - -
4. Common Stock At December 31,1986, aad 1985, Common Stock without outstanding. At December 31,1986, there were par value, con 3isted of 210,000,000 shares authorized 19,795,81H sharn recrved for issuance under su>ck and iH9,078,606 and 177,679,977 shares, ropectively, purchase plans.

5. Preferred Stock At December 31,1986, and 1985, Preferred Stock, $100 par, cumulative, 10,000,000 shares authorized; I
5 harts Arnount Current Rctundmg l Redemptum Restn(ted U"'"d *ll Pntr(s) Pnor to (h) 19M6 19M9 19M6 19HS ( Thousands ofIMlars) Series (without nundatory redemption) 14.I5'b(c) $ 114. I 5 2 I 90 500,000 500,000 $ 50,000 s 50,000 I 3.35'b (c) 1I3.35 2189 750,000 750,000 75,000 75,000 12.80% (c) i I 2.80 5188 750,000 750,000 75,000 75.000 9.50T, 103.50 750,000 750,000 75,000 75,000 l H.75% 101.00 650,000 650,000 65,000 65,000 i l 7.85% 103.00 500,000 500,000 50,000 50,000 ".80% 103.00 750,000 750,000 75,000 75,000 i 7.75% 101.00 200,000 200,000 20,000 20,000 668% 106.00 150,000 150,000 15,000 15,000 l 4A% i12.50 274,720 274,720 27,472 27,472 I l 4.3% 102.00 150,000 150,000 15,000 15,000 38% 106.00 300,000 300,000 30,000 30,000 5,724,720 5,726,720 572,472 572,472 j Series (with nundatory redemption) (d) j i7.I25'b $ 117. I 3 5 1.H7 300,000 300,000 30,000 30,000 l 15.25% 110.00 5190 450,000 500,000 45,000 50,000 } 14.625% (e) 5190 500,000 500,000 50,000 50,000 10% 103.33 5190 176,000 220,000 17,600 22,000 i 952% 103 00 375,360 393.690 37,536 39,369 i 'A50% 1986 Serin 109.50 11191 750,000 75,000 j H.75% 1978 Scrin 106.63 5t88 400,100 433,400 40,010 43,340 l 7.325% 103.51 510,000 540.000 51,000 54,000 7% 101.00 2N8,100 296,000 28,810 29.600 a j 3,749,560 3,IH3,090 374,956 3 iH,309 Total Preferred Stock 9,474,2M0 H,907,H10 $947,428 $M90,781 (a) Redeemable, at the option of the Company, at the evidenced by Depmitary Receipts, each reprnenting indicated dollar amounts per sture, plus accrued I/10 of a share of Preferred Stock. i dividendt (d) Sinking I und requirements (par value) in the period j (b) Prior to the date specified, none of the slurn of each 1987 1991 are as folltmr 1987 816,766,000; i series indicated nuy be redeemed through refunding at an 19H8 816,740,000; 1989 517.530,000; interest cost or dividend rate w hich is kss ilun ibe 1990 $27,530,000; 1991 $23.130,000. dividend rate of such serin. (c) Not redccmabic prior to May 1,1990. j (c) Oncrship of these scrin of Preferred Stock is 1 l I 1 .--.-___..____,._.m ..w ,__7 _-._.,m7y, _ -. ,__ _ __._ __. _ _., -. -. -. ~ - -
Philadciphia Electric Qumpany and Sulwidiary O)mpanics Notes to Financial Statements - Continued
6. Inng Term ikht
_ i Deccniber 31 Scrics Duc 1986 1985 ( Thousands ofIMiars) lirst and Refunding Mortgage ikinds (a) 50,000 j 4h% 1986 4h% 1987 $ 40,000 40,000 l 34%I4% 1988 52,500 52,500 5%-14% 1989 62,500 62,500 14% 1990 11,000 11,006 14 % 1991 11,000 11,000 4% %I54% 1992 1996 748,633 650,725 6%%1 Ih% i997 2001 530,939 535,IHI Hu%I2b% 2002 2006 500,000 500,000 6%184% 2007 201I 221.591 391,273 H %%18% 2012 2016 M82,379 698,379 Total First and Refunding Mortgage Ikinds 3,060,542 3,005,561 Notes Payable - H.mks (ti) 1987 1992 225,000 225,000 Noto Payable - Other 17% 1987 10,000 20,000 Revolving Credit and Term inan Agreements (c) 550,000 lbilution Omtrol Notes 5%%13% 1997 2013 272,420 272,6H5 Debentures 4H5% 1986 20,H00 Debenturn 14%% i990 50 000 50,000 Debenturn 9.85%Iih% 1993 201I 7M7,000 250,000 g Sinking Fund Debentures-Philadelphia Electric INmer O>mpany, a Sulwidiary 4h% 1995 14,5M0 15.325 l'namortised Debt Diwount and Premium, Net (24,180) (19,4 (0) 'Ibral Inng Term Debt 4,395,362 4,389,931 Due Within One Year (d) 10N,570 H0,H00 Inng Term Debt included in Capitalia:ation (c) $4,286,792 $ 1,309,13 I (a) titility plant is subject to the lien of the Companyh l_imerick I' nit No.1. In 19H6 the Company repaid the mortgage. InJuly 1986,the Company called $46,90 6,000 $550 million of tmtrowings, therchy terminating the principal amount of 17h% series due 2011 and in agreement. The Company alw lus a $100 million September 19H6, called $4H,H69,000 principal amount Remlving Credit and Term laun Agreement with a group of IHh% series due 2009. A portion of the proceeds from oflunks which expires in 1987, There is an annual the Companyi November 1986 sale of $ 150,000,000 commitment fee of h% on the unuwd amount. There principal amotmt of 104% series due 2016 and were no introwings under this agreement during the year. $100.000,000 principal amount of 84% werin due 1994 (d)long term debt maturities in the period 19881991 was uwd to repurchaw $76,909,000 principal amount of are as follows: 1988.$91,6H9,000; 1989 878,H63,000; i 15 h% series due 2010. Premiums on the repurcluws of 1990 877,850,000; and 1991577,H50,000. $30.878.322 were clurged to hws on reacquired debt. (c) The anmulized interest on long term debt at (h) At various internt rates. December 31,1986, was $ 113 8 million of w hich (c) At Decemtwr 31,1985, the Company had a $ 550 $ 301.4 million was awiciated with mortgage innds and million remtving credit and term hun agreement with a $ 139. I million was aw>ciated with osher long term debt. group of banks u hich provided financing to complete l 1 l w
i i 7.Sisoet Term Debt i l 19t06 1989 1984 l i (Mmsamis ofskalars) j Average Short Term ik>rrowings $ 233 $ I 27,392 $ 166,713 Average Interet Rato, Computed na Daily Ittsis 9,51% 6.38% 9.88% i Maximum Short Term ik>rrowings Outstanding $1,000 $360,000 $302,500 l ] Average Interest Rates on Short Term ik>rrowings at Ikccmher 31: 9.50% 9.95% t ILmk loans 6.44% l Pollution Control Notes At December 31,1986, the Company had no short term million. The Company generally does not have formal l dcht outstanding under fornul and informal line of compensating lulance arrangements with thew hanks. { credit with tunks aggregating appruximately $368 J i ) 8, jointly Owned Electric l'tility Plant j The Companyh ownership interests in jointly owned utility plant at Ikccmher 31,1986 were as folkmr i f Prixtuction Plants Trammmon Plant Peach MerrillCreck ikatum Micm Keptone Conemaugh Rewrvoir Oprrator Ptuladciphia Pubhc$cruce Pennsylvania Penn*)Ivania Jer cyCentral Variou Flettric Licctnc and Electric Electric Pbwer & Companics j Company Gas Company Company Cannpany Light Cmr any Pertitipaamg inactna 42 49t 42574 2n 975 20.72% 44.24% 21%:o43% l Companyh sharc of: (mmsamis ofiAstars) $68,456 { l'tility Plant $ 515,149 $914,589 $67,028 $6 6,457 I Accumulated ikpreciation 134,065 170,460 21,H24 25,205 15,985 h ] Construction Work In Progros 22,707 25,9 iH 2,006 6,008 $38,7I8 The Corapanyh participating interots are finar,ced with operations are accounted for as if such participating l Company funds and, w hen placed in service, all interots were wholly owned facilitio. i i j
9. Income Taxes i'
19866 19MS 19M6 (Wmsamis ofIkalars) included in Continuing Operations Federal j Current $ %,562 $ 105,165 8 98,769 j Deferred 132,23N 60,061 51,747 l i Invoiment Tax Credits, Nel 29,H 1 3,582 49,961 State Current 29,908 24,600 22,594 Ikferred 1,181 6,492 26,803 Included in Othee Income and Ikductions: ) Federal (M3,631) (109,5H0) (93,H18) l State (18,831) (23,835) (22,605) 1 Total $186,468 8 66,4H5 $ 126,431 i l Invetment tax credits (l'IC) and income tax credits Approximately $227 million of additionalITC j resulting from contributions to emphryce stock generated In>m 1983 through 19H6 has not been utilized j tmnership plans reduced federal income taxes currently due to limitations luwd on taxable income. Thoc credits j payable by $ 63 million in 19H6, $12 million in 1985 and which expire between 1998 and 2001 may he uwd to 1 SSH million in 198 6. l'nder the Tax Reform Act of 1986, reduce federal income taxes in future years; lumrver, ITC has tren repealed effeuh eJanuary 1,19H6 with the approximately $ 219 million of thee ITC carryovers may i exception of tran ition property. The Company twlievo tw reduced by 17b% in 1987 and by an additiotul 17h% tlut IJmeri( k l' nit No. 2 qualifio as tramition property in 1988 under the provl<lons of the Tax Reform Act of cligible for ITC, 1986. L..
Philadelpaia Flectric Company and Sutwidiary Companics Notes to Financial Statemen8 - Condnued for a number of) ears the Q)mpany has used which deferred taxo were not recorded was accelerate d depreciation for income tax purpose and approximately $730 million at ikccmber 31,1986. Since straight line depreciation for financial reporting the Company expects to ciurge customers for taxes when i purposes. Deferred taxes were recorded only on those the timing differcnco reverse, the tax effect of such l timing differenco recognized for rate making. The timing difference is not recorded currently. cumulative net amount of such timing difference for Provisions for deferrtd income taxes on continuing operations consist of the tax effects of the following timing differences: 1936 19Hi 1984 (1housands ofikdlars) Ikpreciation and Amortization $127,27N $ 34,297 $ 33,814 Nuclear Waste Disposal Onts (5,932) (7,355) Deferred Energy unts (95,383) (65,393) 43,76i Precommercial Operation of Limerick Unit No. I 10,210 97,86 Ikferred Umcrick Onts 11,004 bns on Reacquired Debt 14,305 24,592 Unrecoscred Resenue 55,040 Other 10,%$ (18,87H) H,330 Total $133,419 $ 66,553 $ 78,550 The total income tax pnn isions on continuing operations differ from amounts computed by apply ing the rcJeral statutory tax rate to income and adjusted income before income ines for the following reasons: Income f rom O)ntinuing Operations $565,654 $522,853 $487,951 Totallncome Tn Pnnhions 186,468 66,485 126,431 h incomeikforeincomeTaxes 752,122 589,33H 614.3H2 Deduct: Alknvance for runds Used During Cortstruction (non. taxable) 17N,438 433,491 351,H55 Umerick Carrymg Clurges (non.tnable) 18H,679 Adjusted Income Ikfore income Tan $ 385,005 8155,867 $ 259.527 Income Tao on Above at rederal Statutory Rate of 46% 177,102 71,689 119,382 increase (Decrease) due to: Depreciation Timing Differenco Not Normallied 19,230 7,062 6,975 State income Tnes, Net of Federal Income Tax Ilenefits 6,620 3,919 I4,467 Amortization of Investment Tax Credits (13,468) (H,250) (7,738) Other. Net (3,016) (7,935) (6,655) Totalincome tax provisions $1N6,46N $ 66,485 8126,43I pnnhion for Income Taxo as a Percent of: Income ikfore Income Tacs 24.8% 11.3% 20.6% Adjusted income Ikfore income Tacs 48.4% 42.7% 48.7%
10. Taxes, Other Than income 1996 19Mi 19H6 (Th>usands ofikdlars)
Gnns Receipts $132,46M $ 128,346 $ 122,H81 Capital $tock 25,511 28,091 13,160 Realty 49,110 62,222 47,923 l l Other 25,53M 22,303 22,375 Total $232,627 $ 2 60.962 $ 206.339
II. Investments As Det'emher 31 19 % 1985 (W>usaruls of thalars) Gas Exploration and ikvelopmentjoint Ventures $38,299 $44,743 Real IState Ikvelopments and Other Ventures 17,088 15,433 Nonutility Property 13.477 13,931 Escrow Depmits for Decommissioning Nuc! car Plants 20,278 12,563 Other Deposits 560 1,000 Total $H9,702 $H7,670 in 1986 the Company % investment in gas exploration and development joint ventures exceeded the full cost limitation ceiling by $7.2 million, which was charged to expense. j i
12. Irases Iravtl property in(ludest in l'tihty Plant at Detember 31 19 %
19Mi ( >>usarkis ofikdlars) Nuclear Fuel $484,536 $ 445,699 Electric Plant 10,953 4 H,342 Common Plant 156 3,116 Gnm Irased Property 495,645 497,157 Accumulated Amortiration _(214,299) (159,016) Net Irased Property $281,346 6338,I41 The nuclear fuel obligation is amortiied as the fuel is burned. Amortization of Icased property totaled $65.6 million, g $60.9 million, and $39.1 million for the ) cars ended December 31,1986,198% and 1981, respectively. Other operating expenws include internt on capital lease obligations of $ 16.4 million, 818.2 million and $22.0 million in 1986,1985 and 19H 1, ropectisely. During 1986, 540.0 million of electric plant held under capital lease was retired and the lease terminated. Minimum future lease p,iyments as of December 31,1986, are: Trar indmy Drtember 4 8 Capital lrae Operatmg tram Total (Thousaruls ofikdlars) 1987 8 89,396 5 33,H56 $ 123,252 1988 78,151 31,170 109,321 1989 71,629 31,477 103,106 I990 4 H,4 I H 30,596 79,014 1991 30,522 29,801 60,323 Remaining years 13,I HS 97,407 l 10,592 'Ibtal Minimum i uture trase Payments $331,301 $ 254,307 $ 5H5,60H Imputed Internt (rain ranging from 6.51, to 17%) (49,955) Prewnt Value of Net Minimum future trase Payments $ 2H1,346 Rental expense under operating leaws totaled $ 51.0 million, 813.9 million, and $ 29.2 million, in 1986,1985 and 19H 1, ropectisely.
xJ Philadciphia Elcaric Company and Sulmiduty Companies l Notes to Financial Statements - Continued I
13. Segment Information - Continuing Operations 19M 19H5 1984 (1housamh ofDollars)
Electric Operations Operating Revenues $ 2,699,365 5 2,516,19I 52,435,731 Operating Expemo, excluding depreciation 1,966,004 1,974,222 1,858,505 Depreciation 206,701 168,208 162,959 Operating income 526,660 5 373,761 $ 414,267 Utility Plant Additions 753,232 s 793,195 51,022,496 Gas Operations Operating Revenues 391,504 s 428,984 $ 462,966 Operating Expemes, excluding depreciation 337,287 375,399 413,938 Depreciation 15,867 14,841 13,474 Operating Income 38,350 5 38 744 5 35,554 l'tility Plant Additions 35,053 s 32,896 5 30,613 Identifiable Assets (') Electric $ 8,811,304 5 8,885,738 58,412,532 Gas 416,824 407,375 405,958 Nonallocable Awets 1,519,892 71H,732 737,239 'linal Aswts $10,748,020 510,0l1,845 $9,555,729 'Includo l'tility Plant los accumulated depreciation, inventorio and alh>cated common utility property.
14. Commitments and Contingencies available, 51.2 billion for each station. Under the terms of The O>mpany has i scurred substantial commitments in the various imurance agreements, the Company could be connection with its comtruction program. Construction assessed up to $34 million for losses incurred at any expenditures are estim.ited to be 51.2 billion for 1987 plants imured by the imurance companics. The Company and 53.3 billion for 19881990. Thoe estimates are is a member of an indmtry mutual imurance company reviewed and revised periodically to reticct clunges in w hich provides replacement power cost imurance in the co>nomic conditiom, revised hud forecasts and other event of a major outage at a nuclear station. The premium appropriate factors. Facilitio under comtruction and to for this coverage is subject to an assessment for adverse be comtructed, particularly Limerick Generating Station hm experience. The Company's maximum share of any and awociated facilitics, will require permits and licemo assessment is 516 million.
w hich the G>mpany has no awurance will be granted. On March 29,1985, the PL'C adjusted the The Price-Anderson Act places a "lJmit of Companyk February 28,1985, Energy Cost Rate (ECR) IJability" of $695 million for cl.tims that could arise from filing to exclude 545 million ofincurred fuel expense an incident involving any licemed nuclear facility in the from ECR reowery pending an investigation into outages n,ttion. All nuclear utilities, including the Company, luve experienced at Peach llottom Unit No. 2 and Salem Unit covered this exposure through a combination of private No. I in 198 6. On February 28,1986, the Company made imurance and mandatory participation in a secondary its annual filing with the PUC for a revision in the ECR financial protection pool. In the event of a nuclear w hich requested a decrease. On March 20,1986, the PUC incident, the Company could be awessed up to $13.5 approved the Companyh request to lower the ECR, million per incident, involving any licemed nuclear effective April I,1986, and the PUC permitted the facility in the nation, with a nuximum amount of $27 Company to reawer $35.25 million of the $45 million million in any one year. The current Price Anderson fuel costs which the PUC had previously excluded from legislation expires in 1987. Ilills to amend the Price-recovery. The remaining 39.75 million was written offin Anderson Act, including propmals to sulwtantially modify the quarter ending March 31,1986, or climinate the limitation on liability provisiom, have OnJanuary 25,1985, the PUC adopted an order been intnxtuted in Congros. gnanting the Company a net increase in annual revenues The Company maintaim property imurance, of 5 49 million reflecting the incimion of Salem Unit No. 2 in(luding radiation o>nt imination owerage, for km or in rato. The Company agreed to guarantee $ I16 million damage to its nuclear facilities. Although it h impimible of fuel savings from Salem Unit No. 2 for the perhxl from to determine the total amount of the loss that may result February I,1985 to March 31,1986. Due primarily to a from an occurrence at these facilitto, the Company combination of lower than anticipated fuel prices and nuintaim the maximum amount of imurance presently
lower than anticipated generation from Salem Unit No. 2, 'Ihe Companyh indemnification obligation also includes the the energy savings associated with the unit were less than payment ofinterest, at prime rates, on the indemnification the amount that the Company had guaranteed. As a result, amount and all associated costs of contesting an Internal the Company wrote otT 516 million of fuel expenses in Revenue Senice challenge. The Company has lxvn the quarter ended Starch 31,1986. advised that the Internal Revenue Service has asserted, in in December 1981, the Company sold the federal auditing the purchaser, that the sale was innlid. Although income tax benefits associated with Unit No. 2 of the the purchaser has protested the Internal Revenue Sen ice Salem Generating Station for 353,743,000 in a safe claims, the Company has no assurance that the protest hartmr lease transaction. Under the sale agreement, the will be successful. If the Internal Revenue Service claims Company agreed to indemnify the purchaser against the against the purchaser are upheld, compliance with the loss of the tax benefits resulting from any Internal indemnification provisions of the agreement could result Revenue Service claims which render the sale inwalid. in a significant charge to income.
15. Quarterly Data (Unaudited)
The data shown below include all adjustments which the Company considers necessary for a fair presentation of such amounts. Operating Revenues Operating income Net income Quarter Ended 19 % 19H5 19H6 1985 1986 1985 (7bousamis ofDollars) Starch 31 $868,635 $815,886 $124,446 $ 123,810 $166,261 5151,166 June 30 675,109 669,319 92,179 97,763 128,213 118,859 September 30 803,667 746,388 183,081 94,962 168,705 124,163 December 31 743,458 713,582 165,304 95,970 103,141 131,113 Earnings Applicable Average shares to Common stock Outuanding Earnings Per Average share Quartet inded 1986 1985 1986 1985 1986 1985 h (Thousands ofIMiars) (Wusamis) (IMlars) Starch 31 $143,699 s128,422 177,843 162,859 $.81 S.79 June 30 105,964 96,212 181,378 168,723 .58 .57 September 30 146,441 101,569 185,171 171,993 .79 .59 December 31 79,255 108,521 188,037 175,401 .42 .62 1986 first quarter results include charges of approximately 1985 third quarter results include a charge of $ 13.1 million (net of related incomes taxes) resulting approximately $34.7 million (net of related income from PUCh denial of recovery of approximately $9.75 taxes) resulting from the PUCh denial of recovery of million of replacement power costs and $ 16 million of approximately $73.0 million of energy costs. unrecovered fuel expenses guaranteed (see note 14). Operating Revenues and Operating Income for 1985 and the first three quarters of 1986 differ from the amounts previously reported due to the reclassification to discontinued operations of revenues and expenses associated with the sale of steam operations, as follon Operating Revenues Operatmg income Quarter Ended 1986 1985 1986 1985 (Thousands ofDollars) Alarch 31 $25,981 336,413 $2,865 53,082 June 30 10,106 14,200 51 390 September 30 3,161 4,516 (1,948) (1,722) December 31 13,400 698
Philadelphia Electric Company and subsidiary Companico Notes to Financial Statements - Continted l a . J f
16. Retirernent Benefits assets available for benefits may be misleading. The plan is The Company and its subsidiarics have noncontributory of a long-term narare and is funded on a basis consistent trusteed retirement plans applicable to all regular with this concept The actuarial value of accumulated employecs. Pension costs include normal cost for the year plan benefits is, essentially, a hypothetical plan and amortization of unfunded prior service costs over ten termination calculation which does not take into account to twenty years. Approximately 83% of such costs were future salar'es or future service. Net assets, which are charged to operating expenses and the remainder, measured at fair va de at January 1, are subject to associated with construction labor, to the cost of new fluctuations in the securities markets and, therefore, may utility plant. Rethtnent plan costs, which are funded as not be indicative of the plan's long-term funded status.
accrued, were $42J00,000, $46,700,000, and in December 1985, the Financial Accounting 5 42,000,000,in 1986,1985 and 1984, respectively. Standards Board issued Statement of Financial Accounting Pension plan data as of the dates of the most recent Standards No. 87, Employerk AccountingforIVnsions. actuarial valuations is es follows: This Statement supersedes existing accounting principles January i for defined benefit pension plans and becomes applicable 1986 1985 to the Company in 1987. The Company believes adoption Actuarial pre ent value oraccumulated (rbousands ofnottars) statement M. hm not he a maw hpaa on b plan benefits financial statements. Assumed rate or return 7.5% 7.0% in addition to providing pension benefits, the v ted $ 580,8:5 s5:2.639 Company provides certain health care and life insurance es ..,n m ed 7,t 27 60.99 benefits for retirci employees. Substantially all of the $587,942 5573.629 Companys emph@es may become eligible for these Net a. sets available for benefits $854,917 sMS.726 benefits if they reach retirement as,t while still working for the Company. These benefn3 and similar benefits for Changes in plan provisions, effectiveJanuary 1 active employees are provided by an insurance company 1986, increased the actuarial present value of whose premiums are based on the benefits paid during accumulated plan benefits by approximately $30.6 the year. The Coinpangcognizes the cost of providing million u hile the change in actuarial assumptir.as these beidfits by charging the annual insurance premiums decreased the present value by 579.1 million. The to expense. The cost cf providing those benefits for g actuarial methods and the accounting policies are the approximately 3,400 retirees during the years 1986,1985 same as those used to determine pension expense for the and 1984 is not separable from the cost of providing l ) prior year. benefits for approximately 10,000 active employees for l The precediny tabular disclosures are required the same periM Total premiums amounted to !)l.6 l under applicable acornmting principles. Ilowever, the million, 529.3 million, and $26.6 million, for 1986, Company is of the opidon that comparing the actuarial 1985 and 1984, respectively. present value of accumulated plan benefits with the nce f Report of Independent Certified Public Accountants To the Shareholders and Board of Directors Philadelphia Electric Company We have examined the consolidated balance sheets of Philadelphia Electric Company and Subsidiary Companies as of December 31,1986 and 1985, and the related consolidated statementsofincome, changes in common stockholders' equity and preferred stock, and changes in cash flows for each onhe three years in the period ended December 31,1986. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other a'iditing procedures as we considered necessary in the circumstances. In our opinion, the financial statements referred to above present fairld tt$e' consolidated financial position of Philadelphia Electric Company and Subsidiary Companics as of December 31 3986 and 1985, and the consolidated results of their operations and changes in their financial position for each of th6 three years in the period ended December 31,1986, in conformity with generally accepted accounting princ@S applied on a consistent basis. 2400 Eleven Penn Center Philadelphia, Pennsyh'ania j February 2,1987 -^& v ')
Philadelphia Electnc Cornpany and Sutwidiary Companics Securities Statistics Ratings on Philadelphia Electric Company % Securities ~ Mortgage ikinds Dchentures Preferred Stock Agency Rating Date Estabhshed Rating Date Estabbshed Rating Date Established Duff and Phelps, Inc. 9 3/80 10 3/80 11 2/83 Fitch Investors Service BBB 9/82 BBB-9/82 ISB + 9/82 Afaxxty's investors Senice Baa3 1/83 Bal 1/83 bal 1/83 Standard & Poor's Corporation IlBB-9/82 BB + 9/82 llB + 7/86 NYSE - Composite Common Stock Prices, Earnings and Dividends by Quarters (Per Share) 1986 1985 Fourth Third Second First Fourth Third Second First Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter fligh Price $24% $25% $20% $20% 517% $ 16% 516 % 516 4 lanv Price $21% $19% $17% $167. 514 514 5137. sl4b Earnings 42* 79< 58e 81< 62c 59c 57c 79c Dividends 55* 55* 55* S5t 55c 55c 55c 55c h RETURN ON AVERAGE RATIO OF E ARNINGS COMMON STOCK TO MORTGAGE EQUITY INTEREST Pment 1. Tunrs(mered 3 00 E 1 '"EBE 9_ '"E BER l io " 7 ~ l 00 i j 'EBREE
Philadelphia Electric Cornpany and Subsidiary Companies Financial Statistics Summary of Earnings (.wtions op>ottars) /br tbe hr fmtevi 1986 19H5 1984 19H3 1982 1981 1976 Operating Revenues (for deuits we pages 42 and 43) $3,090.9 52,915.2 52.898.7 $2.524.9 $ 2,571.5 $2.358.5 51,183.6 Operating Expenses Fuel and Energy Interchange 889.3 1,097.8 1,069.9 939.5 1,079.0 1,134.9 454.1 labor 417.2 370.8 339.6 311.2 285.4 251.3 161.9 Other Staterials. Supplies and Services 475.2 440.I 413.8 342.3 307.4 248.4 80.6 Total Operation and Alaintenance 1,781.7 1,908.7 1,823.3 1,593.0 1,671.8 1,634.6 696.6 Depreciation 222.6 183.0 176.4 163.4 142.1 128.6 96.5 Taxes 521.6 440.9 449.1 376.8 370.8 273.9 181.5 Total operating Expenses 2,525.9 2,532.6 2,448.8 2,133.2 2,184.7 2,037.1 974.6 Operating income 565.0 412.6 449.9 391.7 386.8 321.4 209.0 Other Income and Deductions Allowance for Other Funds lhed During Construction 76.8 176.3 134.5 108.1 65.7 65.0 30.1 1.imerick Carrying Charges 188." Income Tax Credits, net 102.5 133.4 116.4 87.9 75.8 63.2 24.2 Other. net 2.4 (3.5) 0.2 (3.1) (0.7) 2.5 2.6 Total other Income and Deductions 370.4 306.2 251.1 192.9 140.8 130.7 56.9 Income Before interest Charges 935.4 718.8 701.0 584.6 527.6 452.1 265.9 Interest Charges long. Term Debt 458.9 435.4 402.5 330.2 308.9 266.7 147.6 h Short. Term Debt 12.5 17.7 30.9 35.2 32.0 33.2 3.6 ) Allowance for Borrowed Funds t' sed During Construction (101.6) (257.2) (220.4) (167.9) (147.6) (123.8) (47.5) Net Interest Charges 369.8 195.9 213.0 197.5 193.3 176.1 103.7 Income From Continuing Operations 565.6 522.9 488.0 387.1 334.3 276.0 162.2 Income From Discontinued Operations 1.9 2.4 4.4 2.0 1.9 1.6 2.4 Estimated Inss on Disposal of Discontinued Operations (1.2) Net incorne 566.3 525.3 492.4 389.1 336.2 277.6 164.6 Preferred Stock Dividends 90.9 90.6 82.7 67.4 57.6 53.8 39.0 Earnings Applicable to Common Stock 475.4 434.7 409.7 321.7 278.6 223.8 125.6 Dividends on Common Stock 403.5 373.5 334.3 283.6 240.5 189.5 107.7 Earnings Metained $ 71.9 $ 61.2 $ 75.4 $ 38.1 5 38.1 $ 34.3 $ 17.9 Income From Continuing Operations Per Average Common Share $ 2.59 $ 2.5 5 $ 2.67 5 2.39 5 2.38 8 2.23 $ 1.88 Earnings Per Average Common Share (Dollars) $ 2.60 5 2.56 $ 2.70 5 2.40 5 2.39 s 2.25 5 1.91 Dividends per Common Share (Dollars) $ 2.20 $ 2.20 5 2.20 5 2.12 3 2.06 5 1.90 $ 1.64 l Common Stock Equity (PerShare) $ 18.47 $ 17.97 5 17.81 $ 17.99 5 17.93 5 18.10 5 19.13 l Average Shares of Common Stock l Outstanding (Millions) 183.1 169.8 151.8 133.9 116.5 99.6 65.6 l
SUMMARY
OF FINANCIAL CONDITION (MMons ofDonars) December 31 1986 1985 1984 1983 1982 1981 1976 Assets Utility Plant, at original cost $11,216.7 $ 10,572.2 $ 9,834.1 58,864.2 $ 7,905.7 57,044.7 $ 4,747.2 less: Accumulated Depreciation 2,014.7 1,824.4 1,726.3 1,592.0 1,450.1 1,330.6 860.3 leased Property, Net 281.3 338.1 352.1 364.0 299.1 270.0 91.6 Net Utility Plant 9,483.3 9,085.9 8,459.9 7,636.2 6,754.7 5,984.1 3,978.5 Current Assets Cash and Temporary Cash Investments 90.7 188.8 30.4 57.2 50.0 30.7 23.8 Accounts Receinble 375.6 370.9 384.2 338.6 342.2 342.4 168.0 Imentories 129.7 123.7 150.5 131.1 143.0 132.2 88.3 Deferred income Taxes - Energy Costs 44.8 (51.8) (117.7) (76.5) 43.3 17.0 (10.5) Other 78.6 71.8 137.0 52.3 40.2 35.1 20.8 Deferred Debits and Other Assets Unrecovered Revenue 112.5 Deferred Limerick Costs and Carrying Charges 195.6 Investments 89.7 87.7 80.9 99.4 91.4 77.8 13.2 Inss on Reacquired Debt 76.8 48.6 Other 70.7 86.2 82.9 80.4 24.9 31.5 14.7 Total $10,748.0 510.011.8 $ 9,208.1 58.318.7 $ 7,489.7 $ 6,650.8 $4,296.8 Capitalization and Liabilities Common Stock $ 2,833.0 5 2,602.0 $2,361.0 $ 2,110.5 51,826.2 51,572.4 51,002.8 Other Paid-in Capital 7.8 7.3 6.7 5.9 4.6 3.9 1.7 Retained Earnings 653.1 583.7 523.3 452.9 423.6 387.2 321.2 Common Shareholders' Equity 3,493.9 3,193.0 2,891.0 2,569.3 2,254.4 1,963.5 1,325.7 O Preferred Stock: Without Alandatory Redemption 572.5 572.5 572.5 522.5 372.5 372.5 372.5 With 51andatory Redemption 374.9 318.3 326.2 284.9 292.3 266.9 162.6 fong-Term Debt 4,286.8 4,309.2 3,778.0 3,381.8 3,028.5 2,745.7 1,936.4 Total Capitalization 8,728.1 8,393.0 7,567.7 6,758.5 5,947.7 5,348.6 3,797.2 Current Liabilities Short. Term Debt 1.0 260.0 267.5 64.7 54.2 7.2 fong-Term Debt Due Within One Year 108.6 80.8 50.4 21.3 36.1 36.9 Irase Obligations Due Within One Year 69.4 76.3 68.3 61.5 32.5 53.9 10.6 Accounts and Dividends Payable 222.1 185.1 200.1 179.9 188.5 188.9 83.9 Taxes Accrued 86.1 58.5 40.3 25.8 65.9 68.4 20.2 Deferred Energy Costs 88.2 (l01.7) (229.9) (l49.3) 85.4 31.3 (l9.9) Interest Accrued 90.7 93.0 91.1 91.8 99.8 82.3 43.2 Other 80.0 72.0 127.2 54.1 24.7 18.1 4.6 Deferred Credits and Other Liabilities Capital lease Obligations 212.0 261.8 283.8 302.5 266.6 216.1 81.0 Deferred income Taxes 695.0 502.6 373.3 346.5 290.5 273.5 110.8 Unamortized investment Tax Credits 320.1 302.4 299.4 249.7 296.0 204.0 88.0 Other 47.7 87.0 76.4 130.2 106.1 75.4 33.1 Total $10,748.0 $10,011.8 $ 9,208.1 58,318.7 37,489.7 36,650.8 $4,296.8
Philadelphia ucctric Company and Sutwidiary Compames Operating Statistics E1.ECTRIC OPERATIONS 1996 1985 1984 19H3 1982 1981 1976 Output (.tiditons of Kitonutthours) Steam 7,864 9,455 11,085 10,457 H,598 9,931 13,385 Nuclear 17,125 H,359 6,462 5,520 10,743 7,464 4,937 flydraulic 1,848 1,484 2,085 1,739 1,581 1,397 2,065 Pumped Storage Output 1,176 1,235 1,100 979 1,126 1,101 1,062 Pumped Storage lnput (1,661) (1,754) (1,579) (1,427) (1,665) (1,624) (1,506) Purchase and Net Interchange 4,258 10,252 11,975 12,181 11,120 11,173 7,666 Internal Combustion 269 178 425 491 178 283 792 Other 382 1.254 528 36 Total Electric output 31,261 30,463 31,553 29,960 31,681 30,253 28,437 Sales (stittions of'Kaouutthours) Residential 8,900 8,440 8,515 8,467 7,877 H,014 7,585 Small Commercial and Industrial 4,022 3,731 3,543 3,284 3,142 3,115 2,755 12rge Commercial and industrial 15,068 14,920 14,881 14,478 14,178 14,916 14,662 All Other 993 1,044 I,061 1,003 1,012 1,005 1,271 Service Territory 28,983 28,135 28,000 27,232 26,209 27,050 26,273 Jersey Central Powerand Light (Salem Unit No. 2) 1,395 366 3,352 1,218 Total Electric Sales 28,983 28,135 29,395 27,578 29,561 28,268 26,273 Number of Custosners, December 31 Resideatial 1,263,465 1,245,481 1,230,883 1,217,635 1,206,944 1,200,238 1,137,544 Small Commercial and industrial 127,797 124,719 121,676 119,292 118,407 117,016 115,422 12rge Commercial and industrial 4,668 4,881 5,100 5,437 5,616 5,790 5,747 All other 763 773 751 751 762 746 2,345 Total Electric Customers 1,396,693 1,375,854 1,358,410 1,343,115 1,331,729 1,323,790 1,261,058 Operating Revenuts (Stations of fkalars) Residential $1,023.6 $923.9 $854.9 $744.0 $694.4 $613.7 $373.2 Small Commercial and Industrial 437.0 388.7 360.2 316.6 310.6 285.9 119.3 Iarge Commercial and Industrial 1,103.3 1,061.8 1,008.5 877,4 922.3 917.1 442.9 All Other 135.5 141.8 145.1 139.4 118.3 109.5 59.4 Servicc Territory 2,699.4 2,516.2 2,368.7 2,077.4 2,045.6 1,956.2 1,026.8 Jersey Central Ibwer & Light (Salem l' nit No. 2) 67.0 30.5 135.4 45.9 Total Electric Revenues $2,699.4 $2,516.2 $ 2,435.7 $ 2,107.9 $2,181.0 $ 2,002.1 $ 1,024.8 Operating Expenses (. stations offkatars) Operating expenses excluding depreciation $1,966.0 $ 1,971.2 $ 1.858.5 $ 1,592.0 $ 1,688.4 $ 1,586.5 $750.2 i Depreciation 206.7 168.2 163.0 150.9 130.2 117.3 88.0 1 Total Operating Expenses $ 2,172.7 $ 2,14 2.4 $ 2,021.5 $ 1,742.9 $ 1,818.6 $ 1,703.8 $838.2 l Electric Operating Income (.itutions orixatars) $ 526.7 8 373.8 5 411.2 $ 365.0 $ 362.4 $ 298.3 $ 186.6 Average Use per Residential Customer (kih> watthours) ) l Without t'lectric licating 6,177 6,036 6,160 6,319 5,875 6,022 6,298 I With Electric licating 16,661 15,923 17,293 16,523 16,813 18,054 22,154 i Total 7,097 6,820 6,960 6,990 6,541 6,699 6,710 l'.lectric Itak Inad, Demand (thousands of kws) 6,134 6,034 5,925 5,879 5.691 5,731 5,346 Net Electric Generating Capacity - Year End Summer rating (thousands of kws) 7,M70 7,599 7,765 7,974 H,006 H,006 7,742 Cost of Fuel per Million Ptu $ 1.1M $ 1.72 $ 2.22 $2.25 $ 1.57 $ 2.10 $ 1.2 6 Btu per Net Kihnvatthour Generated 10,844 10,843 10,920 10,906 10,918 10,930 10,529
4 GAS OPERATIONS 1986 1985 1984 1983 1982 1981 1976 Sales (.ststons ofC sbic1kitJ Residential 1,856 1,810 1,941 2,168 2,442 2,446 2,342 Ilouse lleating 25,731 23,227 25,429 22,981 24,237 24,675 24,540 Commercial and industrial 33,834 36,254 41,145 39,043 41,660 45,670 33,390 All Other 578 1,209 1,282 672 422 127 89 Total Gas Sales 61,999 62,500 69,797 64,864 68,761 72,918 60,36i Gas Transported for Customers 3,907 10,262 3,794 789 Total Gas Sales & Transported 65,906 72,762 73,591 65,653 68,761 72,918 60,361 Number of Customers, December 31 Residential 68,590 69,632 70,794 72,501 76,638 78,426 89,459 Ilouse llcating 225,010 217,840 211,984 206,443 198,910 193,038 162,993 Commercial and industrial 24,884 24,234 23,442 22,810 22.324 21,578 19,669 Total Gas Customers 318,484 311,706 306,220 301,754 297,872 293,042 272,121 Operating Revenues (.vimons ofoonars) Residential $ 18.0 $ 18.7 5 19.0 s 19.1 s 18.1 s 15.4 s 8.7 Ilouse !!cating 189,8 185.4 191.7 165.8 147.1 128.5 73.3 Commercial and Industrial 177.7 214.1 243.7 227.3 221.1 209.7 76.1 All Other 2.0 5.2 5.6 3.0 1.8 0.5 0.2 Subtotal $387.5 5423.4 5460.0 5415.2 5388.1 5354.1 5158.3 Other Revenues (including Transported for Customers) 4.0 5.5 3.0 1.8 2.3 2.3 0.6 Total Gas Revenues $391.5 5428.9 5463.0 5417.0 5390.4 5356.4 s158.9 Operating Expenses (.vmions ofIAwars) Operating expenses excluding depreciation $337.3 5375A $413.9 $377.6 5354.1 5322.0 $ 1281 Depreciation 15.9 14.8 13.5 12.7 11.9 11.3 S.4 4 Total Operating Expenses $353.2 5390.2 5427.4 $390.3 5366.0 5333.3 5136.5 Gas Operating income r.umsons o/IAwars) $ 38.3 5 38.7 5 35.6 5 26.7 s 24.4 s 23.1 $ 22A ELECTRIC SALES GAS SALES eng Salem Unit & TRANSPORTED .-a kikmatinnws 30_ Cubic Fret 9tp 25 ~ ~ ~ ?$ 7 -. - 7. A2 #3 H 81 96 H2 R$ H 89 Mfs - klem L'ns M 2 hairs
Philadelphia Eintric Company and Sutwidiary Companics Shareholder Information Stock Exchange Listings Annual Meeting The Annual Meeting of the Slurcholders of the Company Most PE Securities are listed on the New York Stock will be held on April 8,1987, at 10:30 A.M. at the Exchange and the Philadelphia Stock Exclunge. Philadelphia Electric Power Company Debentures are Pennsylvania llall Auditorium, Philadelphia Civic Center, 3 (th Street & Civic Center Ik)ulevard, PhiladcIphia, PA. listed on the Philadelphia Stock Exchange. Common stock shareholders of record at the chise of business on February 27,1987, are entitled to vote at this Dividends
C#1I"8-The Company has paid dividends on its common stock continually since 1902. The ik>ard of Director, normally Notice of the meeting, proxy statement, and proxy will be con 3iders common stock dividends for payment in Marc'h, mailed under separate cover. Prompt return of the proxies will be appreciated.
June, September and December. The Company estimates that the $2.20 per share dividend Form 10-K paid to common shareholders in 1986 is fullv taxabic as Form 10 K, the annual report filed with the Securitics and dividend income for Federal income tax purposes. Exchange Commission, is available, without charge, to Dividend Reinvestment and Stock Purchase Plan shareholders upon written request to Philadelphia J Electric Company, 2301 Market Street, PO. Ik)x 8699, Slurcholders may use their dividends to purchase Philadelphia, PA 19101, Attn: Financial Division S21-1. additional sharcs of common stock through the Company % Dividend Reinvestment and Stock Purchase Shareholders Plan. Philadelphia Electric pap all brokerage and service fees. Customers of the Company w ho are not shareholders The Company has 291,715 shareholders of record of may enroll in the plan by nuking a one-time purchase of common stock, an i1% increase in 5 years. common stock directly from the Company. All slurcholders have the opportunity to invest additional Transfer Agents and Registrars funds in common stock of the Company, whether or not PillLADELPillA ELECTRIC COMPANY - Preferred and they have their dividends reimoted - also with all fees Common Stocks r3 bot C m anyh common shareholders were gg l r <3> participants. In 1986, they invested more than 5100 Philadelphia, PA 19102 million through the Plan, mcluding cash payments. Infornution concerning this Plan may be obtained from Morgan Shareholder Services Trust Co. D. P Scott. Treasurer, Philadelphia Electric Company, 30 W Ilroadway, NY, NY 10015 2301 Market Street, PO. Ik)x 8699, Philadelphia, PA TMr I' Agents: Philadelphia Electric Company 2301 Market St., Phila., PA 19101 Comments Welcomed The Company always is pleased to answer questions and Morgan Shareholder Services Trust Co. provide information. Picase address your comments to 30 W. Broadway, NY, NY 10015 Mrs. L S. Binder, Secretary, Philadelphia Electric PillLADELPillA ELECTRIC COMPANY-First and Company, 2301 Market Street, PO. Ik)x 8699, Refunding Mortgage ik)nds Philadelphia, PA 19101. Trustec: Fidelity Bank, National Association Inquiries relating to shareholder accounting records, Broad & Walnut Sts., Phila., PA 19109 stock transfer and change of address should be directed to . ) Philadelphia Electric Company,2301 Market Street, PO. Morgan Guaranty Trust Co. of NY. Ik)x 8699, Philadelphia, PA 19101, Attn: Stock Transfer 30 W. Broadway, NY, NY 10015
i""'
PillLADELPillA ELECTRIC COMPANY - Debentures PillLADELPillA ELECTRIC POWER COMPANY (A Toll-Free Telephone Line Sulwidiary) - Debenturcs Tb!!-free telephone imes are available to the C,ompany's Trustee: The Philadelphia National Bank, slurcholders for inquiries concerning their stock Broad & Chestnut Sts., Phila., PA 1910I ownership. When calling from outside of Pennsylvam.a. call 1800-223 7326. From within Pennsylvania, call New York I.800-242 7326. Incal Philadelphia calls should be nude Agent: Irving Trust Co., One Wall Street, to 8115795. NY, NY 10015 General Office: 2301 Market Street, PO. Ik)x 8699, Phila., PA 19101. (215) 8 Il-4000. 4
-~ ~. r,1 .i q m 3%. &, ; - Mrectors OfHeers OfHeers if: ~ - - 3uhn H. Austin,Jr. - ' James L Everett . Lucy S. Einder ' PersidrntandChirfOperudspgOpcer Chairman oftheBoartiand Chief _ Secretary Lofthe Conspany Encuuse09cer s. Donald R Scott, ' Oilliam T. Coleman,Jr., Esquire - John H. Austin,Jr. ' -7tensurer Srndorhurtneroftheinwprm of - PresidentandChief0pemting Opcer O'Melseny & Nyers : ? James D. Lynch y Richard G. Gilmore AssistantSaretary ' M. Walter D'Alessio Senkar IWe Pnsent, Mnanaand -_ J President arut ChiefE.necutise Opcer, ' ChiefMnancialOpcer -T. Robert Causton Latimer& Ruck,Inc. (Nortgage A331*!""I D'**N'tY . RankingarulRndEstate ' )*h* S* E'*PC'. geg,gop,nent) entor 17cr President, Engineering and ^ Jon A. Katherine - Pmdsections. - Assistant Dunsurer ' ' James L Everett Chairman oftheBoardand Chief Edward GAuer,Jr. William M. Irnnox,Jr. 17cePnsWntandM Cosonsd Execurite Opcerofthe Contpany. Assistant Dwnsurer i William S. Gaither. WChanges: "#' C"E 5 Preskient, Dir.xrf Unitersity On April 28,1986, the Finance and Communic <stions Accounting Department was realigned as -
Robert F. Gilkeson ChardFritz f lt w' Chairman oftbe EwecuHee Committee
. sy,,p,e,ggeng, g,,,onnegang Richard G. Gilmore was elected Senior ofthe CompanJ' IndustrialRda#ons Vice President, Finance and Chief 3 Financial Officer - Richard G. Gilmore - Joseph W.Gallagher Mwtm W. Rimerman was elected Vice Senior 17ce President, Hnance and 17cePresident, Nuclear Opemtions President, Finance and Accounting l ChiefHnanckdOpcerofthe Company ' Raymond F. Holman Raymond C. Williams was elected Vice 17ce President, Genem! ' Robert D. Ilarrismi Administration Donald R fcott was elected Treasurer 57ce Chairman.fobn husmaM Joseph F. Paquette,Jr. tendered his Pbikuicipbla (Nerrbandising) S.Joneph Kowalski - resignation as Vice President, Finance 17ce President, Engineeringand and Accounting, effective April 30, Paul R. Kaiser Resemrb 1986. Cbedrman Emeritus, Tasty Raking. Company (Dieersiped Kenneth G. bwrence On May 23,1986, Albert G. MMauskas Nanupcturing) 17ce President, Commercial w as elected Vice President, Transmission Opem#ons and Distribution, succeeding Thomas W. 'Jeeph C. bdd Coppock,who retiredJuly 1,1986. Chairman and ChiefEtecurite Opccr, Albert G. Mikalauskas On November 24,1986, the Engineering - FidelityMutundLifeInsurance 57ce President, Electric Transtnission and Rescatch and Electric Production Company andDistributfora Departments were realigned as follows: EditheJ. Irvit, M.D. Philip G. Mulligan John S. Kemper was elected Senior Vice President Emeritus and 17ce 57ce President, Gas Opemtions President, Engineering and Prixtuction Chairman ofthe Board, Nattorud Joseph W.Gallagher was elected Vice RoardofMedicedExaminers A. Irwis Parry,Jr. President, Nuclear Operations j 17ce Preskient, Purchasing and S. Joseph Kowalski was elected Vice GenemlSertices 'JonephJ. Mchughlin President, Engineering and Research l President and ChiefExecurite Opcer, ' RenefickdNutualSewings Rank Maton W. Rimerman b i y cQan M e & % 17ce Preskient, Rnanceand President, Electric Production Accounung Vincent S. Hoyer, Senior Vice President, William S. Fishmanh term expired Nuclear INiwer, and Shields L Daltroff, March 31,1936 AlvinJ Weigand Vice President, Electric Production, 17ce Preskient, Electric Production retired March 1,1987,
Nember oftheEsecut/te Committee On November 24,1986, Kenneth G.
C3'illins Imence was elected Vice President, { 17cePreshkant, Rates Commercial Operations, succeeding William B. Mork)k, who retired February 1,1987.-
Philadelphu Ekstrx Company BULK RATE 2.40t Market Street U.S. POSTAGE PAID E} b W Philadelphia PA PhilaJelphu PA 19101 Permit No. 378 s 1
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ML20206A172

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