ML20207D512
| ML20207D512 | |
| Person / Time | |
|---|---|
| Site: | Peach Bottom  |
| Issue date: | 12/18/1986 |
| From: | Jo Jacobs ATLANTIC ELECTRIC OF NEW JERSEY |
| To: | Harold Denton Office of Nuclear Reactor Regulation |
| Shared Package | |
| ML20207D495 | List: |
| References | |
| NUDOCS 8612310043 | |
| Download: ML20207D512 (144) | |
Text
T OATLANTICE Pecpie.'W."4ft;wsEnergyNeeds 4
JERROLD L. JACOBS SENIOR VICE PRESIDENT, UTiuTY OPERATIONS December 18, 1986 Mr. Harold R. Denton, Director Office of Nuclear Reactor Regulation U.S. Nuclear Regulatory Commission Washington, D.C. 20555 Peach Bottom Atomic Power Station, Units 2 and 3 Facility Operating License Nos. DPR-44 and DPR-56 Docket Nos. 50-277 and 50-278
Dear Mr. Denton:
Philadelphia Electric Company (PECo), Public Service Electric and Cas Company (PSE&G), Delmarva Power and Light Company (DP&L) and Atlantic City Electric Company (ACEC) (collectively, the Owners) are the holders of Facility Operating License Nos. DPR-44 and DPR-56, dated October 25, 1973 and July 2, 1974, respectively. The operating licenses authorize PEco, PSE6G, DP&L and ACEC to possess Peach Bottom Atomic Power Station (PBAPS), Units 2 and 3, and authorize PECo to use and operate the Units in accordance with the procedures and limitations set forth in the respective operating licenses.
On Auguct 7, 1986, ACEC's Board of Directors authorized the formation under the laws of the State of New Jersey of a holding company, Atlantic Energy, Inc., to hold all of the voting stock of ACEC. ACEC intends to secure all necessary regulatory approvals and then to consummate this reorganization as soon as practicable after approval by its stockholders at ACEC's 1987 Annual Meeting of Stockholders, presently scheduled to be held on April 22, 1987. ACEC submits that ownership of PBAPS, Units 2 and 3 and ownership of Facility Operating License Nos. DPR-44 "and DPR-56 will not be 'affected by the proposed reorganization.
ACEC hereby requests that the Commission either (a) determine that Commission consent to the proposed reorganization pursuant to 10 C.F.R. 50.80
]
is not required or (b) consent in writing to the proposed ownership of ACEC by Atlantic Energy, Inc.
The following information is submitted in support of this request.
1.
The proposed reorganization.
Pursuant to the proposed reorganization, Atlantic Energy, Inc. would become the sole holder of ACEC's common stock, and the current holders of Atlantic City Electric Company 1199 Black Horse Pilas Pleasantville, N.J. 08232 609-645-4413 8612310043 861229 PDR ADOCK 05000277 I
hrookMeetmgHufnergyNeeds Nuclear Regulatory Commission December 18, 1986 Page ACEC's common stock would become holders of shares of the common stock of Atlantic Energy, Inc. on a share-for-share basis. The proposed reorganization is more particularly described in the Petition to the State of New Jersey, Department of Energy, Board of Public Utilities, dated August 15, 1986, which is attached hereto as Exhibit A.
2.
Effect of the proposed reorganization on the management of PBAPS, Units 2 and 3.
Pursuant to Facility Operating License Nos. DPR-44 and DPR-56, only PECo is authorized to operate PBAPS, Units 2 and 3, and ACEC therefore plays no direct part in the operation of the Units. The Owners Agreement for Peach Bottom No. 2 and 3 Nuclear Units, dated November 24, 1971 (the Owners Agreement), also provides the PECo is solely responsible for the operation and maintenance of PBAPS, Units 2 and 3, subject only to certain oversight by the Owners. This oversight is provided through an Owners' Committee, created pursuant to the Owners Agreement, that consists of one representative and one alternate appointed by each Owner. The Owners' Committee is responsible for coordinating the administration of all matters pertaining to the ownership, operation and maintenance of PBAPS, Units 2 and 3.
The proposed reorganization will not affect the operation of PBAPS, Units 2 and 3 or the structure and responsibilities of the Owners' Committee, and the identity of the ACEC representative and alternate on the owners' Committee will not change as a result of the proposed reorganization.
In addition, it is presently contemplated that persons who are directors or officers of ACEC immediately before the consummation of the reorganization would continue in such capacities after the reorganization. The directors of ACEC who are elected at the Annual Meeting of Stockholders held on April 22, 1987 would become the directors of Atlantic Energy, Inc. The principal executive officers of Atlantic Energy, Inc. would be persons holding executive offices with ACEC and, at least initially, would continue to hold such offices with ACEC.
3.
Effect of the proposed reorganization on the funds available for the operation of PBAPS, Units 2 and 3.
Pursuant to the Owners' Agreement, ACEC is responsible for 7.51% of the costs of operating and maintaining PBAPS, Units 2 and 3.
Neither this responsibility nor ACEC's ability to satisfy it will be affected by the proposed reorganization.
Utility operations of ACEC will account for the foreseeable future for the dominant share of the consolidated assets, revenues l
and net income of Atlantic Energy, Inc.
The debt and senior equity securities of ACEC will remain within ACEC control, the common equity of ACEC will not be changed by the reorganization and the power to issue additional securities l
will remain with ACEC. The retail rates of ACEC will continue to be regulated by the New Jersey Board of Public Utilities and its sales for resale by the
(
Federal Energy Regulatory Commission. Thus, the proposed reorganization will l
l
r-MATLANTIC ELECTRIC PeposeMeetmg WEnergyNeeds
- e U.S. Nuclear Regulatory Commission December 18, 1986 Page not affect the sources of funds with which ACEC nay satisfy its financial obligations under the Owners' Agreement or its ability to obtain such funds.
4.
Absence of foreign control.
The proposed reorganization will not result in ACEC's becoming owned, controlled or dominated by an alien, a foreign corporation or a foreign government.
5.
Restricted data.
ACEC will not permit any individual to have access to Restricted Data until the Civil Service Commission shall have made an investigation and report to the Nuclear Regulatory Commission on the character, associations and loyalty of such individual and the Nuclear Regulatory Commission shall have determined that permitting such person to have access to Restricted Data will not endanger the common defense and security.
6.
Conclusions in summary, ACEC submits that (a) because it plays no direct role in the management of PBAPS, Units 2 and 3, the proposed reorganization will not affect the management of the Units, (b) its ability to satisfy its financial obligations with respect to the Units will not be adversely affected by the proposed reorganization, and (c) the proposed reorganization will not result in foreign or alien domination or control over ACEC. Thus, ACEC requests a prompt determination by the Commission either that its consent to the proposed reorganization is not required or that it consents to the proposed ownership of ACEC by Atlantic Energy, Inc.
Please advise us if the Commission requires any additional information.
We would appreciate it if you would send copies of your correspondence with respect to this request to:
Michael W. Maupin, Esq.
James M. Rinaca, Esq.
Hunton & Williams P.O. Box 1535 Richmond, VA 23212 Very truly yours,
,,$AM#Nd jlj/f
[
l
ExhiM t 0 b
STATE OF NEW JERSEY DEPARTMENT OF ENERGY BOARD OF PUBLIC UTILITIES IN THE MATTER OF THE PETITION OF ATLANTIC CITY ELECTRIC COMPANY FOR AUTHORIZATION PURSUANT TO PETITION Nm].S.A. 48:3-10 TO TRANSFER UPDTTITS BOOKS AND RECORDS ALL Docket No. @Yl %OT33(o OF THE ISSUED AND OUTSTANDING SHARES OF ITS COMMON STOCK TO ATLANTIC ENERGY, INC.
TO THE HONORABLE COMMISSIONERS OF THE NEW JERSEY BOARD OF PUBLIC UTILITIES:
1.
Petitioner, Atlantic City Electric Company, is a corporation organized under the laws of the State of New Jersey and is a public utility subject to the jurisdic-
. f; ion of the New Jersey Board of Public Utilities' (hereinafter referred to as the v
. Board'). Petitioner is engaged in the generation, transmission, distribution and sale of slectric energy for residential, commercial and industrial purposes within the State of N:w Jersey. Its service territory is principally all of southern New Jersey and covers all or various portions of eight (8) counties. Petitioner's service territory encompasses a population of approximately 1,000,000. The principal business office of Petitioner is located at 1199 Black Horse Pike, Pleasantville, New Jersey 08232.
2.
Communications and correspondence relating to the proceedings herein should be sent to:
Richard B. McGlynn, Esq.
Stryker, Tams & Dill 33 Washington Street Newark, New Jersey 07102
---ev
,w.,,---,------
,----n---
,---,---,_.,y
,---w7m.-,-,-,,--,
va-e se
,e,,
-+,-m
-~- - -. - - - - -
with copies to:
/3 Mr. Brian A. Parent V
Senior Vice President Atlantic City Electric Company 1199 Black Horse Pike Pleasantville, New Jersey 08232 Reynold Nebel, Jr., Esq.
Stryker, Tams & Dill 33 Washington Street Newark, New Jersey 07102 3.
On August 7,1986, the Board of Directors of Atlantic City Electric Ccmpany (hereinafter referred to as " Atlantic") authorized the formation of a holding company to own all of the voting stock of Atlantic, subject to obtaining the requisite approval from this Board. This restructuring would be accomplished through a new corporation organized by Atlantic, Atlantic Energy, Inc. (hereinafter referred to as the
" Holding Company") and a subsidiary of the Holding Company to be organized prior to consummation of the merger, X-Atlantic, Inc. (hereinaf ter referred to as the " Merger Company"), pursuant to an Agreement and Plan of Merger (hereinaf ter referred to as the lan"), which is attached hereto as Exhibit A and made a part hereof, the form of which has been approved by Atlantic for submission to this Board. The Plan would be formally adopted only after approval by this Board of the transaction contemplated by the Plan and which is the subject of this Petition.
Both new corporations are or will be incorporated under the laws of the St.te of New Jersey and will have only nominal assets and no liabilities prior to consum-m: tion of the Plan. For purposes of effectuating the Plan, a nominal number of shares of 4
H:llding Company common stock (100 shares) will be issued and held by Atlantic and sim-italy, a nominal number of shares of Merger Company common stock (100 shares) will ci-Issued and held by Holding Company. At the present time, Holding Company conducts no business and both corporations have or will have been formed solely for the purpose of effectuating the Plan. The principal office of both Holding Company and Merger Com-iny will be located at 1199 Black Horse Pike, Pleasantville, New Jersey 08232.,
_. _.. ~.
4.
As of the date of this Petition, the authorized capital stock of Holding ompany consists of 50,000,000 shares of common stock ($3 par), of which 100 shares are issued and outstanding and held by Atlantic for purposes of effectuating the Plan. At June 30,1986, the authorized capital stock of Atlantic consists of 25,000,000 shares of common stock ($3 par), of which 18,270,296 were issued and outstanding (hereinafter r:ferred to as the " Common Stock"); 799,979 shares of Cumulative Pref. erred Stock ($100 par), of which 516,495 were issued and outstanding; 2,000,000 shares of Cumulative Pr:ferred Stock (no par), of which 287,500 shares were issued and outstanding; and 3,000,000 shares of Preference Stock, of which no shares were issued and outstanding.
Included among the outstanding shares of Cumulative Preferred Stock at June 30, 1986 were 12,495 shares of 5-7/8% Cumulative Convertible Preferred Stock (hereinaf ter re-ferred to as the "5-7/8% Series") which are convertible into shares of common stock of Atlantic at the rate of 3.5 shares of Common Stock for each share of 5-7/8% Series surreraered for conversion. At June 30,1986, 43,753 shares of Atlantic's authorized and nissued shares of Common Stock were reserved for issuance upon conversion of shares cf the 5-7/8% Series. The 5-7/8% Series was issued in 1968 with the approval of the Board in the aggregate amount of 100,000 shares and Atlantic's election to call the r:maining outstanding shares for redemption does not require, nor does Atlantic seek by this Petition, the approval of this Board. In accordance with the Board's prior approval, a notice of redemption will be' filed with this Board at such time as Atlantic elects to redeem the 5-7/8% Series. All of such shares have since been surrendered for conversion cxcept for the 12,495 shares outstanding at June 30, 1986. During 1985 and the first 6 months of 1986, 3,531 shares and 1,035 shares, respectively, of the 3-7/8% Series were surrendered for conversion, and Atlantic expects that shares of the 5-7/8% Series will continue to be surrendered for conversion. The 5-7/8% Series is also redeemable at a r:d:mption price of $101.50 per share. Because of the small and continually declining gkj 3_
number of shares of the 5-7/8% Series, Altantic expects, prior to the merger, to call the 7/8% Series for redemption rather than to provide in the terms of the merger for the continuation of the 5-7/8% Series. Because the redemption price of $101.50 per share is ct present less than the market value of 3.5 shares of Atlantic's Common Stock and because the current dividends on the Common Stock are significantly larger than the dividends on the 5-7/8% Series, Atlantic expects that upon redemption of the 5-7/8%
Series, most of the holders of 5-7/8% Series will elect to convert their shares into com-mon stock rather than to receive the redemption price. In any event, none of the 5-7/8%
Series would be outstanding at the time of.the merger and shares of Atlantic Common Stock outstanding would be increased by any shares of Common Stock issued upon con-version of the 5-7/8% Series.
5.
Under the terms of the Plan, Merger Company, as a subsidiary of the Holding Company, will be merged into Atlantic, with Atlantic being the surviving cor-poration (as a subsidiary of the Holding Company) with Atlantic continuing as a regulated lectric utility under the laws of the State of New Jersey and subject to the jurisdiction cf this Board. On the effective date of the merger (hereinafter referred to as the
" Effective Time"), the shares of Atlantic Common Stock will automatically be converted into the shares of common stock of the Holding Company. The 100 shares of Merger Ccmpany common stock held by Holding Company will be converted into the number of shares of Atlantic's Common Stock outstanding immediately before the merger. The.100 shares of Holding Company common stock held by Atlantic will then be cancelled.
H:!ders of the 5-7/8% Series willi prior to the Effective Time, either have (i) tendered thair shares and been paid the redemption price; or (ii) converted their shares into shares of Atlantic's Common Stock. Cash payment would be made in lieu of the issuance of any frcctional shares. The shares of Cumulative Preferred Stock ($100 par) and Cumulative Preferred Stock (no par) issued and outstanding immediately before the Effective Time O
4-
will not be affected by the merger but will remain issued and outstanding shares of (O7tlantic cumulative preferred stock entitled to the same respective relative rights and pr:ferences as presently provided, except as such rights may be affected by the provi-sions of the New Jersey Business Corporation Act.
Following the Effective Time, Atlantic will also cause to be transferred to Holding Company the shares of common stock of Atlantic's wholly-owned subsidiary, Atlantic Housing, Inc. (hereinaf ter referred t) as " Atlantic Housing").
Deepwater Operating Company (hereinafter referred to as " Deepwater"),
which is also a who!!y-owned subsidiary of Atlantic, will remain as such. Deepwater operates the Deepwater Generating Station owned by Atlantic and therefore Deepwater is within the definition of an " electric utility company" for purposes of Section 2(aX3) of the Public Utility Holding Company Act of 1935 (hereinafter referred to as the "1933 Act"). Atlantic is therefore a " holding company" under the 1935 Act, although Atlantic is cxempted pursuant to Rule 2(aX1) of the Securities and Exchange Commission's (here-fter referred to as the "SEC") Rules under the 1935 Act from all of the provisions of the 1935 Act except Section 9(aX2) of the 1935 Act. The creation of a holding company by Atlantic will result in the Holding Company becoming a direct affiliate of Atlantic and an indirect affiliate of Deepwater. As a result, Holding Company will be required to obtain authorization from the SEC pursuant to Section 9(aX2)of the 1935 Act. Upon the filing by Holding Company of an application with the SEC, Atlantic will furnish a copy of such application to this Board.
Thus, following the merger, (a) Holding Company will become the parent of Ati:ntic and Atlantic Housing,(b) Deepwater will remain as a subsidiary of Atlantic,(c) ct! cf the holders of Atlantic Common Stock will become holders of common stock of the Hsiding Company, and (d) the holders of the 5-7/8% Series will have either converted th2ir respective shares into Common Stock of Atlantic prior to the Effective Time and Ob thus will have become holders of common stock of the Holding Company on a share-fer-hare basis as described above, or been paid the redemption price for their shares, in which case they will no longer be stockholders of either Atlantic or the Holding Com-Pany.
- 6. In order to consummate the contemplated transaction, it will be neces-sary to obtain the affirmative vote of two-thirds of the votes cast by the holders of Atlantic's Common Stock, provided that a quorum is present.
- 7. The rights and preferences of Atlantic's capital stock are set forth in the Agreement of Merger dated as of May 24, 1949, forming Atlantic, as amended, a true copy of which is already on file with this Board. The rights and preferences of the com-mon stock of Holding Company are set forth in the Holding Company's Certificate of Incorporation, which is attached hereto as Exhibit B and made a part hereof.
8.
It is Atlantic's goal to consummate the restructuring as soon as prac-ticable after approval by the stockholders entitled to vote thereon at Atlantic's 1987 hnnual Meeting of Stockholders presently scheduled to be held on April 22, 1987. A proposed time schedule relating to the implementation of the Plan is attached hereto as Exhibit D and made a part hereof. The number of shares of Atlantic Common Stock outstanding as of the Effective Time will be converted into shares of common stock of the Holding Company as of that date. At June 30,1986, Atlantic had 18,270,296 shares cf Common Stock issued and outstanding. The actual number of shares outstanding at the Effective Time will, in part, be dependent upon (1) the number of shares of Common Stock issued and sold prior thereto pursuant to Atlantic's Employee Stock Ownership P!:n; and (ii) the number of shares of Atlantic's 5-7/8% Series that, prior to the Effective Time, are converted into shares of Atlantic Common Stock (and thereaf ter into shares of c:mmon stock of Holding Company (to the extent they are not redeemed for cash at the option of the holders or in lieu of the issuance of fractional shares)).
p h
- 9. The Plan itself provides that it will be implemented subject to the satis-Caction of each of the following conditions:
G (a) The Board of Public Utilities of the State of New Jersey shall have issued an order, satisfactory to Atlantic, approving the merger; (b) the merger shall have received the approval of the holders of Common Stock of Atlantic and Merger Company as required by the New Jersey Business Corpora-tion Act; (c) the Internal Revenue Service (hereinafter referred to as the "!RS") shall have issued a ruling or rulings with respect to the merger, satisfactory in form and substance to Atlantic and its counsel, or counsel to Atlantic shall have rendered an opinion satisfactory to the Board of Directors of Atlantic with respect to the tax con-sequences of the merger and other transactions incident thereto; and (d) The SEC shall have issued an order under the provisions of the 1933 Act satisfactory to Atlantic, ordering, approving or permitting the merger.
y mutual consent of the respective Boards of Directors of the parties to the Plan, the Plan may be amended, modified or supplemented at any time before or after approval by the stockholders of Atlantic, provided that af ter any such shareholder approval, no such amendment, modification or supplement shall, in the sole judgment of Atlantic's Eoard of J
i Directors, materially and adversely affect the rights of stockholders of Atlantic. Also, the Plan may be terminated and the merger abandoned at any time prior to the Effective Time by Atlantic's Board of Directors for any reason.
t
- 10. Upon consummation of the merger, the persons who are Directors and/or l
Officers of Atlantic immediately prior to the merger will continue in such capacities as Officers and/or Directors of Atlantic as the surviving corporation. The Directors of Atlantic who are elected at the Annual Meeting of Stockholders held on Ipril 22, 1937 will become the Directors of Holding Company. The principal executive officers of J
1 7
, ~ - --~
n n,
e
--,,,m,e_
.m---,-.~,----,--,.
..,nwey-~
nm,-,
Holding Company will be persons holding executive offices with Atlantic and, at least nitia!!y, will continue to hold such offices with Atlantic. Initially, Holding Company will not have full time employees of its own, although it may in the future,
- 11. It is anticipated that if the merger is consummated, Atlanti,c will amend its Dividend Reinvestment and Stock Purchase Plan to provide for the purchase of shares cf Holding Company rather than shares of common stock of Atlantic, and Holding Com-pany will adopt a Dividend Reinvestment and Stock Purchase Plan providing that such purchases would be made by either new issue or market purchases. Further, it is antic-ipated that Atlantic will similarly amend its Employee Stock Ownership Plan to provide for the purchase of shares of Holding Company rather than shares of common stock of Atlantic and that such shares would be purchased either directly from Holding Company or on the open market.
- 12. As the surviving corporation of the merger, Atlantic will continue the cxisting pension plan covering its employees in full force and effect, and Atlantic will ntinue to assume and discharge such responsibility to fulfill its obligations to its cmployees with respect to pension benefits previously enjoyed, whether vested or con-tingent, as will be sufficient to provide that all such obligations to employees will be satisfied as they become due.
- 13. The purpose of the restructuring is to establish a more appropriate corporate structure for diversification on a limited basis into non-utility activities. A holding company structure is an appropriate means of achieving this goal. This organiza-tional structure will permit diversification by Holding Company into businesses which have the potential for enhancing the financial strength and operating results of the entire system. It is contemplated by Atlantic's management that Holding Company's diver-sification could possibly initially be into energy-related activities and activities which would complement the core utility business, such as cogeneration and other alternate p]
I w-
energy forms. At the same time, this structure will insulate Atlantic's utility ratepayers om the risks associated with potential business activities of non-utility subsidiaries of the Holding Company and enable utility managers to focus on utility operations in order to meet new challenges faced by the utility industry.
During the past decade, the utility industry has experienced substantial changes in virtually all aspects of its business. From a relatively stable industry in the 1960's with manageable capital and energy costs associated with meeting the energy demands of its custor.1ers, electric utilities in the 1970's to the present have been in-creasingly faced with, among other things, high and rising costs in meeting those energy needs and uncertainties as to future demand for electric energy. In addition, such util-itles must address con peting sources of energy and even the potential deregulation of certain segments of the energy industries. Each of these factors represents risks with which each utility, in greater or lesser degree, must deal in the best interests of its ratepayers and investors. As a result of these and other factors, the financial markets O
Qva perceived the utility business as an increasing investment risk over the last' decade, and this perception persists. In order to offset this increasing risk, many utilities in this State and elsewhere have diversified into non-utility businesses with differing risk ex-posures. It may be that the market may react positively to this strategy. Under these circumstances, it is only prudent for a utility to take action to posture itself for possible div:rsification into other businesses with differing risk exposures should such opportunity be presented.
It is Atlantic's opinion that a holding company structure is better suited to enable Atlantic to meet the wide-ranging future energy requirements of its customers at the lowest rates possible. The proposed corporate reorganization, providing for the creation e' Holding Company to own Atlantic and Atlantic Housing is intended to provide isng-term advantages of financial and organizational flexibility to meet those future O
9
energy needs. A holding company structure should also facilitate the development and ntegration of other cperations by providing a more clearly defined separation of utility and non-utility operations.
For example, this Board has stressed the importance of alter,nate energy development in the State of New Jersey with particular emphasis on cogeneration and small power production.
Atlantic is firmly committed to the implementation of measures which will foster the full realization of the potential for these technologies.
After the restructuring, it is contemplated that a subsidiary emphasizing alternate energy development may be organized by the Holding Company to participate in the development of cogeneration and other alternate energy projects. It is believed that development of cogeneration and small power production could best be achieved by a separate subsidiary operating independently of Atlantic. Successful development of cogeneration and small power production in New Jersey would clearly benefit both rate-payers and investors, as well as the entire State of New Jersey.
In addition, af ter the restructuring, management is contemplating the pos-sible organization of an investment subsidiary, the purposes of which would be to invest cv:ilable funds with the goal of earning a reasonable return and thereby enhancing the cv:rall financial strength of the Holding Company. Atlantic Housing, which already cxists and together with Atlantic will be one of the two initial subsidiaries of Holding Company after the restructuring, traditionally has been involved in business activi. ties r: lated to real estate. It is contemplated that Atlantic Housing's emphasis will continue to be in real estate activities involving non-utility properties, and is therefore more cppropriately the subsidiary of a non-regulated entity than a regulated utility. As dis-cussed earlier above, Deepwater will remain a subsidiary of the regulated utility --
At!:ntic.
_x
.to.
For the reasons expressed herein, it is believed that the proposed organiza '
ional structure maintaining the present business focus and' purpose of Atlantic and Atlantic Housing, retaining Deepwater as a subsidiary of the regulated utility, together with the possible contemplated addition of appropriate subsiciaries is the rnost prudent means of promoting the further development of cogeneration and other alternate energy forms and the financial integrity of the Holding Company in a manner that is not in-compatible with or detrimental to ratepayer interests.
Atlantic also believes that the new corporate structure would permit the use cf financing techniques that are more directly suited to the particular requirements, characteristics and risks of non-utility operations without any negative impact on the capital structure or credit of Atlantic. A holding company structure, moreover, has the potential of increasing and improving a company's financial flexibility. It is anticipated that it will facilitate the raising of capital on reasonable terms, resulting in benefits to r^tepayers and investors alike.
It should increase financing flexibility by allowing nancing to be done at the appropriate corporate level with securities tailored to the specific risks or investors' requirements. For example, financing of the utility operations for a utility subsidiary would generally have traditional utility terms, while financing of cogeneration projects or real estate ventures, for example, by a non-utility subsicliary such as Atlantic Housing or other potential subsidiaries could have different terms as required by the investors who may perceive a greater or lesser degree of risk in such endeavors. The holding company structure would increase financial flexibility by allow-ing the design and implementation of capitalization ratios appropriate for the risk of cach subsidiary.
The holding company structure is also intended to insulate the utility busi-ness from risks inappropriate to its nature and purpose. The use of separa'te corporate cntities will keep the risks and costs associated with non-utility enterprises away from o
y y
those involved in providing utility services and the ratepayers who pay for those serv-es. If the proposed restructuring is consummated, advances to and other investments in direct subsidiaries of Holding Company will be made by Holding Company rather than Atlantic, and the proceeds of any securities issued by Atlantic will be used entirely for its utility business. In brief, the proposed reorganization is intended to secure the bene-fits of diversification without having any adverse effect on Atlantic's utility operations or the rates charged by Atlantic.
Atlantic's electric operations have accounted historically for the dominant portion of its assets and revenues and will continue to do so for the holding company structure for the foreseeable future after the reorganization. The proposed structure elli allow Atlantic's management to continue to focus on utility operations while making tvailable the potential for development of separate non-utility managements which would be able to concentrate on non-utility matters with the flexibility to seize advan-tageous opportunities promptly. The principal benefit of a holding company structure hay best be characterized as being that of providing a means of continuing the effective operation of existing activities while at the same time providing greater flexibility to r:spond more quickly to changing economic and competitive circumstances by allowing more freedom for innovation and initiative. Accordingly, Atlantic believes that the holding company structure is designed to strengthen Atlantic and its affiliates and is wholly consistent with Atlantic's continuing commitment to providing safe, reliable and economic service to its public utility customers.
The holding company's structure will facilitate continued exercise of the Board's regulatory responsibilities over Atlantic, its financings, capital structure, rates and service. In particular, the separate delineation of non-utility activities provides for org:nizational and accounting separation of regulated and unregulated business, thus r:ducing the potential for objections to common cost allocations and capital structure p
/
determinations as well as claims of cross-subsidization by investors, ratepayers and ompetitors. The laws of the State of New Jersey governing public utilities in the State will further assure continued and effective regulatory control over the utility, including its dealings with such other affiliates.
The management and Board of Directors of Atlantic have no present plans for the acquisition or establishment of any specific non-utility businesses other than those possibilities which have been described herein. The initial corporate strategy of the Holding Company in this regard will be for Atlantic to continue to be the principal, or core, business of the holding company system, and for diversification to he through new companies or existing entities which show promise of earnings growth in a poten-tially developing market, but at the same time requiring modest capital investment and being capable of independent financing of a substantial part of their capital require-ments.
- 14. At the Effective Time, the Board of Directors of Holding Company wi!!
composed of the. same persons who are elected as directors of Atlantic at the 1987 Annual Meeting of Stockholders, and the principal executive officers of the Holding Company will be persons holding executive positions with Atlantic. At this time, it is not contemplated that there will be any change in the officers and active managers of Atlantic, and its policies with respect to its operations, financing, accounting, capitaliza-tion, rates, depreciation, maintenance, services and other matters affecting the public interest will not be changed as a result of the merger and corporate restructuring.
- 13. The merger contemplated by the Plan would become effective as soon as practicable af ter April 22,1987 and upon the execution and filing with the Secretary of State of New Jersey of an appropriate Certificate of Merger, which is anticipated to be accomplished as soon as practicable after April 22, 1987 following the approval of the PI:n by stockholders, the authorization of this Board, the receipt of the IRS ruling or opinion of counsel respecting the tax consequences, and the authorization of the SEC.
- 16. Attached hereto and made a part of this Petition by reference are the Pollowing Exhibits:
A.
Form of Agreement and Plan of Merger, including form of Certificate of Merger.
B.
Certificate of Incorporation of Atlantic Energy, Inc.
C.
By-Laws of Atlantic Energy,Inc.
D.
CPreliminary Time Schedule of implementation of Plan and Agreement of Merger.
E.
Resolutions of Board of Directors of Atlantic City Electric Company.
F.
Resolutions of Board of Directors of Atlantic Energy,Inc.
G.
Form of By-Laws of X-Atlantic, Inc.
H.
Form of Certificate of Incorporation of X-Atlantic, Inc.
I.
Annual Report on Form 10-K of Atlantic City Electric Company for the Year Ended December 31,1985.
~
3.
Estimated Expenses for Implementation of Agreement and Plan of Merger.
At such time as any of the Exhibits submitted in draft as part of this Peti-tion are modified or executed, Petitioner will forthwith file with this Board such mod-ified forms or certified copies of executed documents.
WHEREFORE, the Petitioner, Atlantic City Electric Company, prays that the Board of Public Utilities: (i) pursuant to N.J.S.A. 48:3-10 and N.J.A.C.14 1-6.14 approve the transfer by Atlantic City Electric Company on its books and records of all of the issued and outstanding shares of its Common Stock to Holding Company (ii) consider O
l this Petition in appropriate proceedings to be conducted before the Board; and (iii) grant i O
(,th other and further relief as the Board may deem to be lawful and proper.
Respectfully submitted, 1
ATLANTIC CITY ELECTRIC COMPANY
!!99 Black Horse Pike Pleasantville, New Jersey 08232
(
(
">\\
)
Y
- j (Q
/
i By:
t P/
Richard B. McGlynn, E Stryker, Tams & Dill 33 Washington Street Newark, New Jersey 07102 Attorneys for Atlantic City Electric Company f
l Dated: August 15,1986 L
l O l l
STATE OF NEW JERSEY )
eUNTYOFATLANTIC
) SS:
)
VERIFICATION Brian A. Parent, being duly sworn according to law, upon hio oath deposes and says:
1.
I am Senior Vice President - Planning and Rates, of Ati:ntic City Electric Company, the Petitioner named in the Cbove-captioned Petition, and I am authorized to execute this V;rification of the foregoing Petition on behalf of the Peti-tiCner.
2.
I have examined the statements contained in the f regoing Petition, and hereby verify that the statements and atters set forth therein are true and correct to the best of my owledge and belief.
3.
I further verify that it is the intention of the PCtitioner to accomplish and consummate the transactions de-scribed in the Petition upon receipt of all necessary approvals th reof.
. CL e,-
i Brian A. Parent Sworntoandsubsegbed bef. e me his /#
day Cf
, 1986.
dnen d.>DJ Notary Pdblic/of New Jefjso My Commission Expires yf/ y> /ff7 DC't'" / rt'.
AiT PTis If C JittU 4 MA: Wm ftl. f, less EIBIBIT A I
I f
i i
i i
t i-l l
l 4
1 J.
l i
1 i
r 1
i 1
i 4
l 6
l 1
i l.
I l
j i
1 t
,_,-,,w,
DRAFT - 7/28/86 05700081DB0012D AGREEMENT AND PLAN OF MERdER AGREEMENT AND PLAN OF MERGER (" Agreement") dated as of 198_ by and among Atlantic City Electric Company, a New Jersey corporation
(" Atlantic"), X-Atlantic Inc., a New Jersey corporation
(" Subsidiary"), and Atlantic Energy, Inc., a New Jersey corporation
(" Holding").
E 1 1 E E E E E E E8 WHEREAS, Atlantic has an authori:nd capitali:ation consisting of (i) 25,000,000 shares of Common Stock, $3 par value per share
(" Atlantic Common Stock"), of which
(~'N
(
) shares were issued and outstanding as of the
~
date of this Agreement, (ii) 799,979 shares of Cumulative Preferred Stock, $100 par value per share
(" Cumulative Preferred Stor:k"), of which (
) shares were outstanding as of the date of this Agreement, (iii) 2,000,000 shares of No Par Preferred Stock ("No Par Preferred Stock"), of which (
) shares were outstanding as of the date of this Agreement and (iv) 3,000,000 shares of Preference Stock without par value
(" Preference Stock") of which no shares were outstanding as of the date of this Agreement WHEREAS, Subsidiary has an authori:ed capitalization consisting of 1000 shares of Ccmmon Stock lOI v
l
without par value (" Subsidiary Common Stock") o f which ___,
( )
shares are issued and outstanding and own$d by Nolding on the date hereoft i
WNEREAS, Molding has an authorized capitalization consisting of 50,000,000 shares of Common Stock,'S3 par value per share ("Nolding common Stock"), of which 100 shares are issued and outstanding and owned by Atlantic on the date of this Agreements and WNEREAS, the respective Soards of Directors of Atlantic, Subsidiary and Holding have approved this Agreement and deem it advisable and to the benefit of such parties to merge Subsidiary into Atlantic in accordance with the applicable provisions of the laws of New Jersey on terms whereby Atlantic will be the surviving corporation and holders of shares of Atlantic Common Stock will receive shares of Molding Common Stock; i
NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto agree that subsidiary shall be merged into Atlantic (the " Merger"), that Atlantic shall be the surviving corporation of the merger, and that the terms and conditions of the Merger and the mode of carrying it into effect and f
the manner of converting and exchanging shares be as follows:
I l
[
O 1
i i
J ARTICLE I (A)
THE MERGER (a) subject to and in accordance with this Agreement, a certificate of merger shal'. be duly executed by each of Atlantic and subsidiary and such certificate shall be delivered to the Secretary of State of New Jersey for filing pursuant to the provisions of Section 14A 10-4 of the New Jersey Business Corporation Act.
The Merger shall become effective upon the filing of the certificate of merger in the office of the Secretary of State of the State of New Jersey or at such later time not to exceed 30 days after the date of filing as is specified in the certificate of merger (such time of filing, or if there be such a later specified time, then such later time, being. referred to O
sl herein as the " Effective Time").
At the Effective Time, the m
separate existence of Subsidiary shall cease and Subsidiary shall be merged into Atlantic (Subsidiary and Atlantic collectively being sometimes referred to hereinafter as the
" Constituent Corporations" and Atlantic, the corporaticn designated in the certificate of mergar as the surviving corporation, being hereinafter sometimes referred to as the
" Surviving Corporation").
(b)
Prior to and after the Effective Time, Holding, Subsidiary and Atlantic, respectively, shall take all such action as may be necessary or appropriate to effectuate the Merger.
In this connection, Holding shall O
4 issue the shares of Holding Common Stock which the holders
\\~-
of Atlantic Common Stock shall be entitled to receive as provided in Article II hereof.
In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement and to vest in the surviving Corporation all rights, privileges, immunities and franchises, of a public as well as of a private nature, and all property, real, personal and mixed, of the Constituent Corporations, the officers and directors of each of the Constituent Corporations, as of the Effective Time, shall take all such further action.
ARTICLE II l
TERMS OF CONVERSION OF SHARE 3
()
At the Effective Time by virtue of the Merger and l
l without any action on the part of the holders thereof:
(a)
Each share of Atlantic Common Stock issued and outstanding immediately prior to the Effective Time shall be changed and converted into one share of Holding Common Stock, which thereupon shall be duly authorized, validly issued, fully paid and nonassessable; (b)
Each share of Cumulative Preferred Stock and No Par Preferred Stock issued and outstanding immediately prior to the Effective Time shall not be converted or otherwise affected by the Merger (except to the extent, if any, provided by Chapter 11 of the New Jersey Business Corporation Act) ; and each such share shall continue to be O
~
s a
outstanding subsequent to the Effective Time as a duly
(-)
authorized, validly issued, fully paid and nonassessable share of the particular class and series-of the Surviving Corporation; (c)'
The shares of subsidiary Common Stock issued and outstanding immediately prior to the Effective Time n
shall be changed and converted into such number of shares of Atlantic Common Stock as shall equal the number of shares cf
._ _~...
Atlantic' Common Stock issued and outstanding immediately prior to the Effective Time; each such share of Atlantic Common Stock shall thereupon be duly authorized, validly issued, fully paid and nonassessable; and (d)
Each share of Holding Common Stock issued and outstanding immediately prior to the Merger shall be
~
cancelled.
ARTICLE III ARTICLES OF INCORPORATION AND BY-LAWS The Agreement of Merger, dated as of May 24, 1949, forming Atlantic, as amended, constituting the certificate of incorporation of Atlantic as in effect at the Effective Time shall be the certificate of incorporation of the Surviving Corporation, until thereafter amended as provided bv law, t
The By-Laws of Atlantic, as in effect at the Effective Time, shall be the By-Laws of the Surviving Corporation, until amended as therein provided.
l m
l.
ARTICLE IV DIRECTORS AND OFFICERS The persons who are directors'and officers of Atlantic immediately prior to the Effective Time shall continue after the Merger as directors and officers of the surviving Corporation, without change, until their successors have been duly elected and qualified in accordance with the Articles of Incorporation and By-Laws of 4
the Surviving Corporation.
ARTICLE V STOCK CERTIFICATES Following the Effective Time, each holder of an outstanding certificate or certificates theretofore
[}
representing shares of Atlantic Common Stock may, but shall not be required to, surrender the same to Holding for cancellation and exchange or transfer, and each such holder will be entitled *o receive a certificate or certificates representing the respective number of shares of Holdine Common Stock to which such holder shall be entitled hereunder.
Until so surrendered, each certificate which, prior to the Effective Time, represented Atlantic Common Stock shall be deemed and treated for all corporate purposes to represent the ownership of the respective number of shares of Holding Common Stock.
At the Effective Time, the stock transfer books for the Atlantic Common Stcck shall be deemed closed and no transfer of shares of Atlantic Cc= men O
7 Stock outstanding prior to the Effective "ime shall O
thereafter be made on such books.
ARTICLE VI CONpITIONS TO THE MERGER Consummation of the Merger is subject to the satisfaction of each of the following conditions:
'(a)
The Board of Public Utilities of the State of New Jersey shall have issued an order, satisfactory to Atlantic, approving the Merger; (b). the Merger shall have received the approval of the holders of common stock of Atlantic and Subsidiary as required by the New Jersey Business Corporation Act; (c) the Internal Revenue Service shall have issued
()
a ruling or rulings with respect to the Merger, satisfactory in form and substance to Atlantic and its counsel, or counsel to Atlantic shall have rendered an opinion satisfactory to the Board of Directors of Atlantic with respect to the tax consequences of the Merger and other transactions incident thereto; and (d)
The Securities and Exchange Commission shall have issued an order under the provisions of the Public Utility Holding Company Act of 1935 satisfactory to Atlantic, ordering, approving or permitting the Merger.
O
,, -,, -, -,,, +
.-------,--~r,-,
-,,, - -,-w,
-,,, - - - -, - - - - -- - -, ~,.,,,
g ARTICLE VII AMENDMENT AND TERMINATION The parties hereto by the mutual consent of their Boards of Directors may amend, modify or supplement this Agreement in such manner as may be agreed upon by them in writing, at any time before or after approval hereof by the 4
I shareholders of Atlantic, provided that after any such shareholder approval, no such amendment, modification or supplement shall, in the sole judgment of the Board of Directors of Atlantic, materially and adversely affect the rights of the shareholders of Atlantic.
This Agreement may be terminated and the Merger abandoned at any time prior to the Effective Time, whether before or-after approval of this Agreement by the s
shareholders of Atlantic, by action of the Board of Directors of Atlantic, for any reason.
ARTICLE VIII MISCELLANEOUS This Agreement may be executed in counterparts, each of which, when so executed, shall be deemed to be an original, and such counterparts shall together constitute i
but one and the same instrument.
IN WITNESS WHEREOF, the. parties hereto pursuant to approval and authorization duly given by resolutions adopted by their respective Boards of Directors, have caused this 0
9 Agreement and Plan of Merger to be executed by either its (V
. Chairman of the Board, President or one of its Vic'e 3
Presidents.
ATLANTIC CITY ELECTRIC COMPANY By:
ATLANTIC ENERGY, INC.
By:
X-ATLANTIC INC.
By:
O l
i I
l O
Draft 7/29/86 05700081DB0017D CERTIFICATE OF MERGER of X-ATLANTIC INC.
with and into ATLANTIC CITY ELECTRIC COMPANY Pursuant to N.J.S.
14A:10-4 Secretary of State State of New Jersey Trenton, New Jersey X-ATLANTIC INC.
(" Subsidiary"), a New Jersey corporation, and ATLANTIC CITY ELECTRIC COMPANY
(" Atlantic"), a New Jersey corporation, herewith state as
. follows:
O-merged with and into Atlantic is set forth in the (a)
The Plan of Merger under which Subsidiary is to be Agreement and Plan of Merger which is attached hereto and made a part hereof as Appendix I (the
" Plan of Merger").
(b)
Holders of record of shares of Atlantic Common Stock, S3 par value per share (" Atlantic Common Stock"), at the close of business on l
198_ were entitled to vote on the Plan of Merger.
On that date, Atlantic had outstanding shares of Atlantic Common Stock.
Each share of Atlantic Common Stock was entitled to one vote.
Holders of record of shares of Subsidiary Common Stock, without par value
(" Subsidiary Common Stock"), at the close of business on 198 were entitled to vote on the Plan of Merger.
On that date, Subsidiary had outstanding 1,000 shares of Subsidiary Common Stock.
Each share of Subsidiary Common Stock was entitled to one vote.
The Plan of Merger required the approval of the affirmative vote of two-thirds of the votes cast by the holders of all shares of Atlantic Common Stock entitled to vote and of a majority of the votes O
4
_.-.e,
,, -_-_----+-4 r,.__,_
...,y,.
3-.
2 g
cast by the holde'rs of all shares of Subsidiary Common Stock entitled to vote.
(c) shares of Atlantic Common Stock were voted for the Plan of Merger and shares of Atlantic Common Stock were voted against the Plan of Merger, shares of Subsidiary Common Stock were voted for the Plan of Merger and shares of Subsidiary Common Stock were voted against the Plan of Merger.
(d)
The merger of X-ATLANTIC INC. with and into ATLANTIC CITY ELECTRIC COMPANY shall become effective at the close of busir.ess on 198_.
IN WITNESS WHEREOF, each of the corporations has executed this Certificate of Merger by a duly authorized officer.
(Seal)
X-ATLANTIC INC.
By Secretary
Title:
(Seal)
ATLANTIC CITY ELECTRIC COMPANY Attest:
By Secretary
Title:
- 198, Dated:
O
a
_a.
a--
.e M
+--.
a
_. _ +
1 1
l l
EIBIBIT B i
l I
i i
)
i i
i l
l l
l 4
4 I
l
(~ 'T CERTIFICATE OF INCORFORATION
%)
OF ATLANTIC ENERGY, INC.
The undersigned, in order to form a corporation for the purpose hereinafter stct;d, under and pursuant to the provisions of the New Jersey Business Corporation Act, hereby certifies that:
I.
The name of the corporation is ATL ANTIC ENERGY, INC.
II.
The ourpose for which this corporation is organized is to engage in any cetivity for which corporations may be organized under the New Jersey Business Ctrporation Act, as same may from time to time be amended or supplemented.
III.
The total number of shares of stock that the Corooration is authorized to issua is fifty million (50,000,000) shares of Common Stock, of the par value of Three Doll;rs ($3.00) each.
IV.
The initial registered office of the Corporation shall be. located at 1199 Bl ck Horse Pike, Pleasantville, New Jersey 08232, and the name of the initial registered cg:nt of the Corporation at such location is E. D. Huggard.
V.
There shall be three (3) Directors constituting the first Board of Directors.
The name and address of each oerson who is to serve as an initial Director of the Corporation is as follows:
1 Name Address E. D. Huggard 1199 Black Horse Pike Pleasantville, New Jersey 08232 J. G. Salomone 1199 Black Horse Pike Pleasantville, New Jersey 08232 B. A. Parent 1199 Black Horse Pike Pleasantville, New Jersey 08232
/
s
(~~j The above-named persons shall serve on the $oard of Directors of the
%J Ccrporation until the first annual meeting of the shareholders of the Corporation and until their successors are duly elected and qualified.
VI.
The name and address of the incorporator is Atlantic City Electric Comoany, 1199 Black Horse Pike, Pleasantville, New Jersey 08232.
IN WITNESS WNEREOF, the undersigned, the incoroorator of the above-named corooration, has duly executed this Certificate of Incorporation on August 13, 1986.
ATTEST:
ATL ANTIC CITY ELECTRIC COMP ANY O
/11 /
/,
BY:
~
Se'Ufetary 7 E.C-fr Hugga M e'
'I /
/
President and Chief Executw' e' Officer O
.6.u_
m_____2.
--.._a a
a---e
.-,--2_.m a-a
-.u,,
m h
- EIBIBIT C J
.i
.i 9
l 1
'l i
J J
~. ----.
-.----..-----~n
l l
l
)
- h ATLANTIC ENERGY, INC.
(_/
1 NY-LAUS ARTICLE I MEETING OF SHAREHOLDERS SECTION 1.
Annual Meetings. The annual meeting of the shareholders to olset a Board of Directors and to transact such other business as may properly come before the meeting shall be held at such place, within or without the State of New Jersey, as may be fixed by the Board of Directors and stated in ths notice of meeting, on the fourth Wednesday of April in each year, at three o' clock in the af ternoon or at such other hour or on such other day stated in the notice of meeting as the directors shall determine.
SECTION 2.
Special Meetings. Special meetings of the shareholders of Corporation shall be held at such place, within or without the State of th)
New Jersey, as may be fixed by the Board of Directors and stated in the notice of meeting, and shall be called by the Chairman of the Board, the President or S:cretary upon direction of the Board of Directors.
SECTION 3.
Notice. The Secretary or officer performing his duties shall 31ve notice of every shareholders' meeting to each shareholder of record on ihn books of the Corporation entitled.to vote at such meeting, by mailing ritten notice to such shareholders' address appearing on the stock books of ths Corporation at least ten and not more than sixty days before the date of cuch meeting.
SECTION 4.
Officer to Preside. Meetings of the shareholders shall be i
prssided over by the Chairman of the Board, or in his absence, by the Prosident, or if neither of these officers is present, by a Chairman to be olacted at the meeting. The Secretary of the Corporation shall act as Sscretary'of such meetings, when present; otherwise a Secretary shall be chssen at the meeting.
SECTION 5.
Inspectors. As soon as may be practicable af ter their election in each year, the Board of Directors shall appoint two inspectors of th:reholders' votes and elections, to serve until the final adjournment of the n:xt annual shareholders' meeting. If they fail to make such appointment, or if their appointees or either of them fails to appear at any meeting of chcreholders, the Chairman or other person presiding at the meeting may appoint inspectors or an inspector to serve with the one appearing for that cacting.
W
] ; O l
l i
,-.----,--v.,_
a
,--,-,-,----1
(~~g ARTICLE II V
DIRECTORS SECTION 1.
Number of Directors. The Board of Directors shall consist of such number of directors, not less than three nor more than twelve, as shall bo fixed from time to time by the Board of Directors.
SECTION 2.
Vacancies. Vacancies on the Board of Directors, including vecancies caused 'oy reason of an increase in the number of directors, may be filled until the next shareholders' election only by a vote of a majority of cl1 the directors in office. However, if only two directors remain and are cble to meet at a meeting duly called for the purpose, then by the action of thsse two at such a meeting, or if only one director remains, by the act of that director, additional duly qualified directors shall be elected so that tbsre are at least three directors holding office oncil the next annual mesting of shareholders and until their successors shall be duly elected and shs11 qualify.
SECTION 3.
Quorum. A majority of directors holding office at the time of any meeting shall constitute a quorum.
SECTION 4.
Chairman and Committees. The Board of Directors shall elect a Chairman of the Board from among their own number and the Board may also elect an Assistant Chairman of the Board from among their own number.
Mactings of the Board shall be presided over by the Chairman of the Board, or c $f he be absent, by thi Assistant Chafraan, if there be one, or if the tJhnirman and Assistant Chairman, if there be one, are absent, by the Prcoident, or if none of these persons are present, by a Chairman to be olected at the meeting. The person serving as Chairman of the meeting shall dstermine the agenda and decide all rules of order and practice at all mestings over which he presides. The Chairman, and the Assistant Chairman, if thore be one, may be replaced at any time by a vote of a majority of all the directors in office. The Board of Directors, by a majority vote, may appoint from time to time from among their own number an executive committee and such other committees having such powers as shall be designated in the respective rotolutions applicable thereto.
SECTION 5.
Meetings. Meetings of the Board of Directors shall be hgld upsn the order of the Board, the Chairman of the Board, the Assistant Chairman of the Board, if there be one, the President, or two directors. The Secretary or officer performing his duties shall give reasonable notice of all meetings to each director, but no notice need be given of the meeting, immediately cfter the annual meeting of shareholders, at the same place, or of any other regular meetings held at times fixed by resolution of the Board. Meetings of ths Board of Directors may be held within or without the State of New Jersey.
4 O
=.
ARTICLE III O
t OFFICERS The Board of Directors shall elect, as officers of the Corporation, a Prcsident, who shall at the time of such election be a director of the C:rporation, a Secretary, and a Treasurer, and may elect one or more Vice Presidents and such other officers as may be deemed useful. The chief cx:cutive officer of the Corporation shall be the officer designated from time to time by the Board as the chief executive officer. Any two or more offices may be filled by the same person. All officers shall be chosen by the Board cf Directors and any officer may be removed from office at any time by a vote of tajority of all the directors in office. The several officers of the Corporation shall exercise the usual powers and duties pertaining to their rocpective offices, subject to such limitations as may be adopted by resolutions of the Board, and shall exercise such other powers and duties as th2 Board of Directors may from time to time determine.
ARTICLE IV RECORD DATE FOR PAYMENTS
' The Board of Directors of the Corporation shall have power by resolution to close the stock transfer books of the Corporation for a period not l
cxceeding fif ty days preceding the date of any meeting of shareholders or the date for payment of any dividend, or the date for the allotment of rights, or tha date yhen any change or conversion or exchange of capital stock shall go Cpto effect, provided, however, in lieu of closing the stock transfe,r books as feresaid, the Board of Directors of the Corporation may be rpsolution fix in cdvance a date not exceeding fifty days preceding the date of any meeting of shareholders or the date for the payment of any dividend, or the date for the allotment of rights, or-the date when any change or conversion or exchange of ccpital stock shall go into effect, as a record date for the determination of tha shareholders entitled to notice of and to vote at any such meeting or entitled to receive payment of any such dividend, or any such allotment of rights, or.co exercise rights in respect of such change, conversion or cxchange of capital stock,, and in such case only shareholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such costing, or to receive payment of such dividend, or allotment of rights, o,r czarcise of such rights, as the case may be, and notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed es aforesaid.
~
r O
ARTICLE V
,-s
(
s)
U STOCK CERTIFICATES The Board of Directors of the Corporation may authorize the issuance of duplicate stock certificates to replace stock certificates lost, stolen or d:stroyed. upon such terms and conditions as it may by resolution prescribe.
ARTICLE VI INDEMNIFICATION The Corporation shall indemnify its directors, officers and employees and may indemnify each other "corporace agent", as defined in R.S. 14A:3-5(1)(a) cf the New Jersey Business Corporation Act, and each other person whom the Corporation may indemnify under the indemnification provisions of the New Jortey Business Corporation Act, as in effect on January 1, 1986 or as th:reafter amended, to the full extent permissible under and consistent with such provisions. The right of indemnification provided in these By-Laws shall not be deemed exclusive of any other right to which said directors, of ficers or other persons may be entitled apart from these By-Laws.
ARTICLE VII AMENDMENT These By-Laws may be amended or added to at any meeting of che' Board of Csl the proposed change has been sent to all the directors ten days before the irectors by an affirmative vote of a majority of all the directors, if notice mesting, or if all the directors are present, or if those not present assent in writing to such a change.
l
~a ms.
4
.a5
--h s
e-m ua-- - - *'--- -
e-AM a--end-A-
-dA4.m+m-e A
--mn- - -- -
-m
.w 6
EIBIBIT D f
4 l
]
i 1
I s
I
+
l i
I
]
1 i
i l
i 1
O EXHIBIT "D" V
PRELIMINARY TIME SCHEDULE FOR IMPLEMENTATION
.OF AGREEMENT AND PLAN OF MERGER August 7,1986
- Atlantic City Electric Company Board of Directors approves form of Agreement and Plan of Merger authorizing forma-tion 'of non-utility holding company and authorizes filing with regulatory authorities.
August 15,1986
- File Petition with the New Jersey Board of Public Utilities requesting authority to form non-utility holding company.
August 27, 1986
- File Application with Securities and Exchange Commission pursuant to Public Utility Holding Company Act of 1935.
Dec mber 18, 1986
-- Issuance of Order by the New Jersey Board of Public Util-ities authorizing formation of non-utility holding company.
- January 8,1987
- Issuance of authorization by the Securities and Exchange Commission to form a non-utility holding company.
Ftbruary 5,1987
- Atlantic City Electric Company Directors approve joint Proxy Statement / Registration Statement.-
File joint Proxy Statement / Registration Statement with r4bruary 9,1987 Securities and Exchange Commission.
File listing applications with New York, Philadelphia and Pacific Stock Exchanges.
Atlantic City Electric Company, Atlantic Energy, Inc. and Mrrch 5,1987 Merger Company execute Agreement and Plan of Merger.
- Record date for 1987 Annual Meeting of Shareholders.
- Registration Statement becomes effective, Proxy Statenient approved by Securities and Exchange Commission.
Atlantic City Electric Company commences solicitation of shareholder vote.
Annual Meeting of Shareholders - shareholders approve April 22,1987 formation of non-utility holding company.
File Certificate of Merger with New Jersey Secretary of April 27,1987 State and Pennsylvania Secretary of State.
Effective date of Agreement and Plan of Merger.
May 1,1987 O
._m.en o
a e
--a u
mn--
m_a
.,-a.,,_m aem-,_
.e.-
.s ao -
m--
m_.e-..a e.
-e a,ea_.m
.s-w.--
Aa,e aa,m-As.__,
m,,
6 n
4 m.,
__am.__
5 9
EIBIBIT E i
e 4
i J
4 4,
i e
e i
h f
I I
i I
t 4
J 4
,I 1
1 I
1 I
I, S. M. Dodd, Secretary of Atlantic City Electric Company, D0 HEPEBY ERTIFY that the following is a true excerpt from the Minutes of Meeting of th2 Board of Directors of this Company duly called and held on the seventh day cf August, 1986, at which meeting a quorum was present and voting throughout.
EXCERPT FROM MINUTES OF t
MEETING OF BOARD OF DIRECTORS OF ATLANTIC CITY ELECTRIC COMPANY HELD AUGUST 7. 1986 RESOLVED that the proposed terms and conditions of the merger of X Atlantic Inc. into this Corporation, as set forth in the draft of Agreement and Plan of Merger by and among this Corporation, X Atlantic Inc. and Atlantic Energy, Inc. substantially in the fera submitted to this meeting, is approved, provided however, that the execution and delivery by this Corporation of such Agreement and Plan of Merger to be subject to further authorization by the directors of this Corporation.
RESOLVED that the officers are authorized to form a new corporation to be named Atlantic Energy Inc., with an authorized capitalization of 50,000,000 shares of
[-~sI common stock, par value $3 per share, with a Certificate
\\'-
of Incorporation and By-Laws substantially in the forms presented to this meeting with such changes as such officers, with the advice of counsel for this Corporation, deem necessary or appropriate.
RESOLVED that the officers are authorized to subscribe for and to purchase, on behalf of this Corporation, 100 shares of common stock of Atlantic Energy Inc. at a price of $3 per share.
RESOLVED that the President, any Vice President or the Secretary are authorized to execute and deliver on behalf of this Corporation any consent, vaiver or proxy with respect to the shares of common stock of Atlantic Energy. Inc. purchased and held by this Corporation.
RESOLVED that the officers of this Corporation are authorized to complete and file with the New Jersey Board of Public Utilities on behalf of this Corporation, a Petition for approval of the creation of a holding company and related transactions, substantially in the form of the draft Petition submitted to this meeting, with such changes as the officers, with the advice of counsel for this Corporation, deem necessary or appropriate.
l i
RESOLVED that the officers are authorized to take such further actions and to execute such further instruments as they determine to be necessary or appropriate to carry out the foregoing.
t 4
IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal of ocid Atlantic City Electric Company, this thirteenth day of August, 1986.
n m
ON 6 r Secretary 4
O e
' O
a
.a--
.-..a.
r,,,,-
sa.
-au
a.a m
n JL4-
--~ --
s-e>L---
6 ma-
..s r-an ma1A ae_-.s-m--a J -- - - -. - - - - -
EXHIBIT F i
l l
I I,
I I
i
\\
\\
- = - -
ATLANTIC ENERGY, INC.
Action Taken by Unanimous Written Consent of the Board of Directors t
August 13, 1986 The~ undersigned Directors of Atlantic Energy. Inc., acting without a meeting pursuant to Section 14A:6-7(2) of the New Jersey Business Corporation
+
Act, hereby take the following action:
1.
The By-Laws of the Corporation inserted in the Minute Book of the Corporation are approved and adopted.
2.
The following persons are elected to the offices
,;~
set forth opposite their respective names, to serve in accordance with the By-Laws of the Corporation:
Name Office 1
E. D. Huggard President o
J. L. Jacobs Vice President' N. A. Jarrett Vice President B. A. Parent Vice President J. G. Salomone Vice President & Treasurer S. M. Dodd Secretary j
l J. D. McCann Assistant Secretary & Assistant Treasurer 3.
The seal imprinted hereon in the form of a circle bearing the name of the Corporation and the words and figures " Seal 1986 New Jersey" is adopted as the corporate seal of the Corporation.
4.
The officers are authorized to take such action as is necessary or desirable to register with the i,
Secretary of State of New Jersey a Certificate of Registration of Ficticious Name authorizing this i
[
Corporation to trade as Atlantic Energy, Inc.
i O
~..
4 5.
The form of temporary certificate attached O
1 hereto is adopted as the certificate for the Corporation's Common Stock, par value $3.00 per share.
The Secretary is directed to obtain definitive engraved certificates for the Corporation's Common Stock, par value $3.00 per share.
t 6.
The offer of Atlantic City Electric Company to '
purchase 100 shares of the Corporation's C2mmon Stock, par value $3.00 per share, is accepted; the Corporation is hereby authorized to issue to such offeror 100 fully 4
paid, non assessable shares of Common Stock of the Corporation, par value $3.00 per share, for a purchase price of $3.00 per share; and upon delivery to the Corporation of the purchase price, the officers of the Corporation are authorized and directed to execute and deliver a certificate representing 100 shares of the j
Common Stock to Atlantic City Electric Company.
}
7.
The fiscal year of the Corporation shall be the
{
twe*ve-month period ending on the 31st day of December in each year.
i 8.
The Treasurer or any Assistant Treasurer is authorized to open in the name of the Corporation such bank accounts as may be necessary for the expeditious conduct of the Corporation's affairs. All drafts, checks s
or other forms of authorization for payments from the Corporation's bank accounts must be signed by the President, a Vice President, the Treasurer, the Secretary, an Assistant Treasurer or Assistant Secretary and also must be countersigned by the President, or a i
Vice President, except that no draft, check or other form l
of authorization shall be both sf gned and countersigned j
by the same person in more than one capacity.
9.
For the purpose of authorizing the Corporation i
to do business in any state, territory or dependency of the United States or any foreign country in which'it is necessary or expedient for the Corporation to transact
,i business, the officers of the Corporation are authorized to appoint and substitute such agents or attorneys for service of process, to designate and change the location I
of such statutory office and, under the corporate seal, to make and file such certificates as may be required by i
the laws of any state, territory, dependency or country l
to authorize the Corporation to transact business therein; and whenever it is expedient for the Corporation j
to cease doing business therein and to withdraw j
therefrom, the officers of the Corporation are authorized I
i 1
-. ~
'l to revoke any such appointment of agent or attorney for n
(
service of process and to file any necessary certificates, reports, revocations of tippointment or s
surrender of authority of the Corporation to do business in any such state, territory, dependency or country.
P August 13, 1986 b
c? c e i E. Dougla's Huggafd '
V j
7 c.s.
,c _ s Brian A. P rent J
G. Salomone O
1
_3
a a
=
______u.mam_
.AA.
_..a_h__
4 ma_..
t EIBIBIT C l
]
I r
I I
l
DRAFT - 7/28/86 05700081DB0014D 4
- t X-ATLANTIC INC.
BY-LAWS t
I ARTICLI I MEETING OF SHAREHOLDERS Section 1.
Annual Meetings.
The annual meeting of the shareholders to elect a Board of Directors and to transact such other business as may properly come before the meeting shall be held at a date, time and place, within or without the. State of New Jersey, as may be fixed by the Board of Directors and stated in the notice of meeting.
Section 2.
Special Meetings.
Special meetings of the shareholders of the Company shall be held at a date, time and place, within or without the State of New Jersey, as may be fixed by the Board of Directors and stated in the i
notice of meeting, and shall be called by the President or i
Secretary upon direction of the Board of Directors.
Section 3.
Notice.
At least 10 and not more than 60 days before the date of each meeting of the Company's shareholders, written notice of the time, date, place of the j
meeting and purpose or purposes for which such meeting is called shall be given to each shareholder of record entitled j
to vote at such meeting.
1 ARTICLE II DIRECTORS I
Section 1.
Number of Directors.
The Board of Directors shall consist of three, directors.
Section 2.
Vacancies.
Vacancies on the Board of Directors may be filled until the next shareholders' election only by a vote of a majority of all the directors in office.
I Section 3.
-Quorum.
One third of the total number of directors holding office at the time of any meeting shall constitute a quorum.
If a quorum is not present at any meeting of the Board of Directors, the directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until such a quorum is 4
present.
l t O I
i, l', _.
2 s
Section 4.
Commfttees.
The Board of Directors, by a majority vote, may appoint from time to time from among their own number an execut'ive committee and such other i
committees having such powers as shall be designated in the respective resolutions applicable thereto.-
l Section 5.
Meetings.
Meetings of the Board of Directors shall be held upon the order of the Board, the President, or two directors, and the Secretary or officer performing his duties shall give reasonable notice of all meetings to each director, and no notice need be given of regular meetings held at times fixed by resolution of the Board.
Meetings of the Board of Directors may be held within or without the State of New Jersey.
Section 6.
Notice.
Whenever any statute, the certificate of Incorporation or these By-Laws requires notice to be given to any Director, such notice may be given in writing by mail, addressed to such Director at his address as it appears on the records of the Corporation with postage thereupon prepaid or by telegram.
ARTICLE III 4
( )~
OFFICERS The Board of Directors shall elect, as officers of the Company, a President, a Secretary, and a Treasurer, and such other officers-as may be deemed useful.
All officers shall serve at the pleasure of the Board of Directors and i
any officer may be removed from office at any time by a vote of majority of all the directors in office.
The several officers of the Company shall exercise the usual powers and duties pertaining to their respective offices, subject to such limitations at may be adopted by resolutions of the Board, and shall exercise such other powers and duties as the Board of Directcrs may from time to time determine.
ARTICLE IV INDEMNIFICATION l
The Company sha31 indemnify its direotors, officers and amployees and may indemnify each other " corporate agent", as defined in R.S.
14A: 3-5 (1) (a) of the New Jersey Business Corporation Act, and each other person whom the l
Company may indemnify under the indemnification provisions of the New Jersey Business Corporation Act, as in effect on January 1, 1986 or as thereafter amended, to the full extent O
I
3 O
permissible under and consistent with such provisions.
The right of indemnification provided in these By-Laws shall not be deemed exclusive of any other right to which said directors, officers or other persons may be entitled apart from these By-Laws.
_l ARTICLE V FISCAL YEAR The fiscal year of the Corporation shall begin on January 1 and end on Decemnber 31 in each year.
O O
g
- ma a
e
.a e
s...
ma f
s EXHIBIT H u
\\
w
- \\
1 I
J l
l l
l l
-r- - -. -,,. - -. -,,,,,..,
n--,,,
--n.
+
DRAFT - 7/28/86 05700081DB0013D
?
CERTIFICATE OF INCORPORATION of i
X-ATLANTIC INC.
The undersigned, in order to form a corporation for the purpose hereinafter stated, under and pursuant to the provisions of the New Jersey Business Corporation Act, hereby certifies that:
1.
The name of the Corporation is X-ATLANTIC INC.
2.
The initial registered office of the s
Corporation shall be located at 1199 Black Horse
,,)
Pike, Pleasantville, N.J.,
and the initial registered agent at such location is 3.
The purpose of the Corporation is to engage in any activity for which corporations may be organized under the New Jersey Business i
Corporation Act, as from time to time amended or supplemented.
4.
The total number of shares of stock that
- he Corporation is authorized to issue is 1000 shares of Common Stock, without par value.
5.
The name and address of the incorporator is Holding Company Incorporated, 1199 Black Horse Pike, Pleasantville, New Jersey 08232.
6.
The first Board of Directors of the Corporation shall consist of three Directors.
The name and address of each person who is to serve as a Director of the Corporation are as follows:
r i
O
1 2
i 1
O t
Name Address i
IN WITNESS WHEREOF, the undersigned, the incorporator of the above-named Corporation, has caused this certificate of Incorporation to be executed on 198 ATLANTIC ENERGY, INC.
By:
O i
l k
)
i O
E HIBIT I 0
l l
l l
1 i
i I
k'
O SECURITIES AND EXCHANCE CGGGSSION Usshingtoe. D.C.
20549 F o ria I M AEBUAL rep 0RT FURSUANT TO SECTION 13 or 15(d) 0F TEE SECURITIES EICIANGE ACT OF 1934 For the fiscal year ended t' w==4cm File December 31, 1985 Eumber 1-3559 ATLANTIC CITY ELECTRIC COWANY (Exact name of Registrast as specified is its charter)
WEB JERSEY 21-0398280 (State or other jurisdiction of (I.E.S. Employer incorporation or organization)
Identification No.)
I l
1199 BLACK EDESE FIEE FLIASANTTILLE EEE JERSEY 08232 (Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: 609-645-4100 Securities registered pursuant to Section 12(b) of the Act:
O
.f. h Titles of each class which registered Common Stock. Par Value $3 New York. Philadelphia and Pacific. Stock Exchanges Cumulative Convertible Preferred Stock. 5-7/82 Series, j
Pcr Yalue $100 Bev York Stock Exchange 1
Securities registered persuant to Section 12(g) of the Act:
4 Wome (Title of class) s Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act af 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x
Wo l
(Continued)
- l l-..
-'s SECURITIES AND EXCHANGE COMMISSION Washington, D.C.
20549 Form 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) 0F THE SECURITIES EXCHANGE ACT OF 1934 Estigated aggregate market value of the voting stock held by non-ef filiates st. January 31, 1986
$560,309,064.75 Comuon Stock, par value $3, number of shares outstanding at Januery 31, 1986 18,257,009 shares Documents incorporated by reference:
Fegistrant has incorporated herein by reference certain sections of fts Annus1 Report to Shareholders for the year ended December 31, 1985 and Notice of Annual Meeting of Shareholders and definitive Proxy Staterent, to b2 hald April 23, 1966, to provide information required by the following parts of this report:
Part I-Item 2, Properties.
(]tII-Item 5. Market for the RegistrPnt's Common Equity and Felated
(,ckholder Matters.
Itcs 6, Selected Financial Data.
Itca 7, Management's Discussion and Analysis of Financial Condition and Racults of Operations.
Itcm 8. Financial Statements and Supplementary Data.
Part III-Item 10. Directors and Executive Officers of the Registrant.
Itsa 11 Executive Ccepensation.
Itca 12, Security Ownership of Certain Beneficial Ownern and Management.
Itse 13 Certain Relationships and Related Transactions.
.Part IV Item 14. Exhibits. Financial Stater.ent Schedules and Reports on Form 8-K.
e O
TABLE OF CONTENTS P. rt I Pagg
-Item 1 Buainees General 4
Construction Program 5
Financing Program 9
Rates 9
Energy Requirements and Power Supply 12' Nuclear Generating Station Developments 15 Fuel Supply 17 Regulation 21 Environmental Controls 22 Item 2 Properties 27 Ites 3 Legal Proceedings 27 Ites 4 Subsission of Matters to a Vote of Security Holders 27 P?rt II Ites 5 Market for the Registrant's Common Equity and Related Stockholder Matters 27 Ites 6 Selected Financial Data 27 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operation 28
,a 8 Financial Statements and Supplementary Data 28
.d2 9 Disagreements on Accounting and Financial Disclosure-28 Prrt III l
Ites 10 Directors and Executive Officers of the Registrant 28 Item 1,1 Executive Compensation 30 Ites 12 Security ownership of Certain Beneficial Owners and Management 30 Ites 13 Certain Relationships and Related Transactions 30 Part IV Item II Exhibits, Financial Statement Schedules and Reports on Forn 8-K 30 Opinion of Independent Certified Public Accountants 32 Signr.tures 33 Exhibit Index 34 Fincncial Statement Schedules 38 3
O
-3
g
- ~c.EM 1 BI' SINES S General Atlantic City Electric Company (the Company), whose principal office ic Icccted at 1199 P? ack Horse Pike. P.O. Box 1264, Pleasantville, New Jersey 08232, telephone (609) 645-4100, was organized under the laws of New Jersey en April 28, 1924, by merger and consolidation of sever 91 utility co:panies.
The Company is prir,arily engaged in the generation, transmission, dictribution mod sale of electric energy in the southern part of the State of New Jersey, having a population of appro::f rately 1.000,000.
During 1985, sales to the company's five largest rets11 customers totaled
$20,820,261 or approximetely SZ of total revenues. With the exception of a runicipal electric system cerving the City of Vineland, New Jersey, the Company supplies electric service without competition from other utilitien or runicipal systems. The Ceepany is a utility whose peak load has occurred during the summer months. Approrfmately 31% of 1985 revenues were tscorded during the quarter ended September 30, 1985.
The Ccupany also delivers process steam, water, and by-product electricity generated by back pressure turbines to E. I. duPont deNemourc &
Company, Inc. (DuPont). Procese steam and by-product electricity for Pont are generated by equipment installed at the Company's Deepwater nararfog Station. In addition, the Company's Greenwich Station supplied Pont's Repauno Plant with electricity from 1951 until 1974 and hrc supplied steam since 1951 under an agreement which, pursuant to the terms thereof, was terminated by DuPont on February 1, 1986. Deepwater Station cod Greenwich Station have been operated by Deepwater Operating Company, a wholly-owned subsidiary of the Company.
The Company has experienced in varying degrees come of the problems common to the electric utility industry in general, including the relctively high cost of capital and the need for adequate end timely rate relief in the face of strong consumer and regulatory commission resfetance.
Electric utilities have also experienced problers relating to construction programs, including increasing costs, project delays due to regulatory, irgialative or ether developments, and the abandonment of generating units undtr construction. Reference is made to Note 1 of the Notes to Financial Stotsmerts and to Management's Discussion and Analysir of Financial Condition and Results of Operation for information with respect to property ebrodonment costs and to proposed accounting standards which could affect th? operating results and financici position of the Company. In addition, c2rtain problems eFperienced by other utilities could have an indirect affsce upon the Company's operations and financial condition, as a result of common regulatory requirements and the fact that general fndustry
{
d volopments could affect the Corrany's cost of capital.
Ir addition, the Co;p2ny estimates that sales to certain customers could be reduced an a Togult of cogeneration projects constructed pursuant to the Fed'iral Public Utilfry Regulatory Policies Act.
The New Jersey Board of Public Utilities (PPU) has directed the gas Pod 01setric utilities under its jurisdiction to submit plans relating to the,
i u arvation and management of energy usage by customers in the State. In recponsa to this directive, the Company submitted a Conservation.
Cos;neration eed Load Management Plan (Plan), which was approved by the BPU in 1983. The Plan provides for the expansion of home and business energy audits, rebates for the purchase of energy-efficient appliances low cost Icens for conservation-related home improvements and proposes to encourage the develoyeest of customer-owned generation and cogeneration. The Company's estiested 1986 expenditures'in connection with this Plan is approximately $4.9 million.
j
~
On February 3, 1986, the New Jersey Department of Energy adopted final r:gulations which would require that all energy conservation' plans of Etilities, including the Company's Plan seet certain annual target levels of customer participation. The regulations require that each utility submit, within 90 days, plans for meeting such requirements. On March 19 1986, the Company and other affected utilities filed a Notice of Appeal from these regulations in New Jersey Superior Court. Appellate Division.
Th3 Company cannot predict the outcome of this matter or estimate the costs of compliance with the regulations, but such costs could be substantial.
i As of December 31, 1985, the Company employed 2.099 persons, of which 948 were affiliated with a national labor organization.
At Deceuber 31. 1985. the Company's electric transmission and l
dict'ribution system comprised 115 substations. 6.998 pole miles of assission and distribution lines and 734 miles of underground and eine cables.
Construction Program The Company maintains a continuous construczdon program, principally for electric generation, transmission and distribution facilities. The ccnstruction program, including the estimates of construction expenditures, ac well as the timing of construction additions. is under continuous review. The ultimate ef fect of the review on the Company's construction exp:nditures will depend upon factors such as long-tern load growth.
3:nstal economic conditions, the ability of the Company to raise the n:cocsary capital and to receive timely rate relief, and regulatory and
+
environmental requirements. Reference is made to " Energy Requirements and Powsr Supply" herein for information with respect to s'e Company's i
octinates of future load growth and capacity plans. Ret'erence is also made to the tabulation herein for information pertaining to cl.e Company's octinates of construction expenditures for the period 1936 through 1990.
The construction program reflects the anticipated effects of cu:tomer-owned generation, cogeneration, and the Coupany's load management prcgress, which are designed to reduce the rate of growth in electric i
systes peak demand without restricting the continued economic development of the Coepany's service area. The Company anticipates that its load 1
canagement program will encourage conservation and shif ts in patterns of cen:umption of energy resulting in deferral of planned future construction.
C'*I hough deferrals in construction timing may result in near-term i
saditure reductions, changes in capacity plans and general inflationary l
prico trends could increase ultimate construction costo.
4 I
5-l t
.,9
(
i
\\s /
-The following tabulation sets forth the Company's currently estimated construction costs, excludinF an Allowance For Funds Used During C:nstruction (AFDC), for the years 1986 through 1990.
1986 1987 1988 1989 1990 Total (Millions of Dollars)
Cc struction Costs Nuclear Generating Fecilities t 14.2 $ 12.4 $ 14.2 $ 9.5 $ 9.7
$ 60.0 Fossil Steam Gener-ating Feef11 ties 23.3 31.1 23.0 19.7 19.2 116.3 Trsnsmission and Distribution-41.3 49.3 52.9 35.3 31.5 210.3 G:neral Plant 18.0 16.5 12.3 6.2 12.3 65.3 Other Generating
.5 3.8 Facilities 1.1 1.1
.6
.5 Total Constru'etion
('
Costa
,97.9 110.4 103.0 71.2 73.2 455.7 s
s-1.ess Customer
. Contributions (6.5)
(5.1)
(3.3)
(3.8)
(4.1)
(22.8)
Net Company Cash Expendituree
$ 91.4 $105.3 $ 99.7 $ 67.4 $ 69.1
$432.9 Included in the Company's construction program have been expenditures relating to a 5% undivided ownership interest in the nuclear Hope Creek Gznerating Station, which is currently under construction by Public Service Elsetric and Gas Company (PS). Substantial expenditures and contractus1 commitments in connection with the construction of Hope Creek Station have hid to be made prior to the completion of the licensing and reguistory proceedings which must be completed before it can be placed in commercial operation. The Company has been advised by PS that, as of February 28, 1986, physical construction of Hope Creek was over 99% complete.
The start-up, testing end turnover of plant systems to the PS operating dspartment was about 96% complete. As of February 28, 1986, the Company's costs associated with the Hope Creek station totaled approximately $208.5 E1111on, including AFDC. In addition, such costs currently include the accrual of AFDC at approximately $1 million per month. Under present procedures of the Nuclear Regulatory Commission (NRC), operating licenses cre not issued until construction of a nuclear unit has been completed in cccordence with epproved specificationn. No assurances can be given that
[]11authorizationsnecessaryforthecompletionofconstructionand
\\s_,paration of Hope Creek Unit I will be obtained by any particular date.
In August 1982, the Company entered into a cost containment agreement with PS, the New Jersey Department of Erergy and the New Jersey Department --
a O
ef the Public Advocate in an offort to ensure the economic completion of th2 Bope Creek unit.
The careement, which was approved by the BPU in July 1983, provides for a ters:ted in-service date of December 1986 and a targeted cost for the citire pleet at the time of commercial operation of approximately $3.8
. billion, feeluding AFDC. The agreement provides for the graduated
'dicallowance of a return on reasonable project costs in excess of the t rg:ted amount. For purposes of computing a return on rate base, cost
.ov:rruns up to 10% above the targeted amount would result in an exclusion i
from rate base of 20% of such costs; cost overruns in excess of 101 would rceult in exclusion of 30% of such costs. However, such targeted amount
.may be subject to adjustment on account of changes in the regulatory
. tractment of AFDC or Construction Work in Progress, as well as changes due to cartain extraordinary events not contemplated by the parties in 1983.
As part of the agreement, the Public Advocate agreed not to further cot. test ths need for the unit. Prior to entering into the agreement, the Public Advocate had questioned the need for Hope Creek, and the New Jersey Department of Energy had indicated that without a program for cost contcineene, the need for Hope Creek should be reassessed. In addition, cortsin New Jersey legislation has been introduced from time to time which could have affected the continued construction of the unit.
The Company has been advised by PS that in August 1985. PS submitted to the BPU information relating to certain occurrences which PS identified as l
j r: ordinary events for the purposes of the cost containment agreement.
N I
its filids, PS set forth several extraordinary factors which contributed iccreased project. costs. including additional contracts required for l
completion of a radiation monitoring system, increased costs resulting from i
revised NRC requirements for the plant and costs associated with an ind: pendent design verification program. The aggregate of costs estimated by FS for the items cited ranged from approximarvly $31 million to $39 sillion. PS has further indicated in its notice that it would specifically l
qucatify such costs as data become available. The Company cannot predict thm ultimate effect of such notice upon it or its operations.
PS has advised the Company that it now appears that completion of the l
pro-cperational items required for receipt of a ifcense from the NRC may n:t cccur until April 1986; and that fuel loading cannot begin until some Icter time, but that PS continues to schedule the commercini operation of the unit for the second half of 1986. PS has recently advised the Company l
th:t it currently appears that the estimated overall cost for Hope Creek will approximate $4.18 billion. PS has further advised the Company that tha cetual cost will depend. in large part. on the date of commercial cysration, which is difficult to predict as the project nears completion b:ccuse of numerous pre-operational items and imprecision as to the timing of the testing and power ascension progress which must be adjusted to meet problean as they may arise; and that PS' first priority is to get the plant completed and operating as quickly as possible without sacrificing quality.
i Based upon such advice from PS. the Company currently estimatec that l
o portion of the costs of the Hope Creek unit will amount to s
l
)toximately$224million,comparedwiththeCompany'scurrent estimate cf
(
We cdjusted cargeted cost under the cost containment agreement of $200.1 cillion. The Cocyany does not currently expect that the provisions of the ccot containment agreement will have a signfficant negative impact on l
7-i
~
J n.
N-carnings.. However, delays in the start of commercial operatier of the
~
unit, additional direct costs ard additional accruals of AFDC would only irarve to increase'the emount by which the Company's costs may exceed the.
targeted arount.
In a proceeding-frvolving PS, the BPU will he examining th2 reasonchleness of costs of the Hope Creek-project, including the
.rsssonableneer cf certain claimed extraordinary events associated with the project. The Company cannot, at this time, predict the final cost of the
- Hope Creek unit, the date of commencement of commercial operatfen, or the ultimere effects thereof on it and its operations.
In order to permit the loading of fuel, a license must be. obtaired from the NFC.
PS had advised the Company that licensing proceedings are in i
pregress. In October 1983, the Public Adyccate was granted intervenor etetur fu the Hope Creek licensing proceedings by the Atomic Safety and Licensing Board, which agreed to review certain contentions put forth by th Public Advocate. The Company has recently been advised by PS that, in February 1985, PS and the Public Advocate reached agreement on the issues
!n contention and, as a result, the Public Advocate has withdrawn from the licensing prcceedings.
PS has recently advised the Company that on February 16, 1986, an alcetric generator which is part of one of the four diesel generators at Hope Creek failed during stert-up testing. PS has advised the Company that it will be necessary tc repair the generator at a cost estimated,to be up C)tc $1.5 million.
l
\\s e In connection with the generator failure, PS has advised the Company that PS is requesting action by the NRC to permit the issuance of the fuel lord licence with three operable diesel generators, and expects to complete the repair of the drenged diesel's electric generator in time so an vot to adversely affect Hope Creek's power ascension program preparatory to commercic) operation in 1986. PS ha's also edvised the Company that it has perding with the NRC various other requests with respect to parts of certain other systems, including the radiacion monitoring system and the transverse in-core probe system, which, if not granted, could adversely affect the timirg of fuel lead and power ascension.
Since the issuance of the licences necessary to load fuel end to 1
op3 rate Hope Creek ir solely within the discretion of the NRC, no assurance een be given as to the timirg of such issuance. As previously indicated, eny delays in commercial operation of Hope Creek would serve to increare costs.
It is also necessary to satisfy the Federal Emergency Management Agency with respect to emergency pierning in connection with Hope Creek. See
" Nuclear Generating Station Developments" herein for information relating to such emergency planning.
i s e
-8
,-~
I 1
~ Financing Program It has been the practice of the Company to finance construction costs in cxcess of its internally generated funds through the issuance of un30 ured short-term debt, consisting of bank loans and commercial paper, and to periodically repay them with the proceeds of longer-term debt and equity securities. See Part II, Item 7. " Management's Diecussion and Analysis of Financial Condition and Results of Operations" and Part II, Ites 8. Note 10 of Notes to Financial Statements incorporated by reference hernin. The company has arranged for bank lines of credit of $115 million, which are subject to continuing review and to withdrawal by the banks inv lved. As of December 31, 1985, the Company had no short-term
~
b:rrowings outstanding.
In 1985, the Company's permanent financing ' included the issuance of an cggregate of 423.305 shares of Common Stock, for a total of approximately
$11.2 million, through its Dividend Reinvestment and Stock Purchase Plan cud its Employee Stock Ownership Plan. In October 1985, the Company issued
$70 tillion principal amount of First Mortgage Bonds, 11 % Series due 2015.
In March 1986, the Company filed a petition with the BPU in connection with its financing program for 1986, requesting, among other things, cuchtrization to issue and sell one or more series of its long term debt, in cn aggregate principal amount of not more than $150 million. Proceeds t
the issuance of such long term debt would be applied to satisfy some 311 of the Company's cash requirements associated with its' construction gram and the repayment of short-tegn promissory notes issued in conn:ction with the interim financing thereof; to satisfy some or all of th) Company's cash requirements associated with maturities and sinking fund 2; and some amount may be applied to the retirement of outstanding long torm debt if determined to be economically feasible. Reference is made to Pcrt II, Item 8. Note 9 of the Notes to Financial Statements for information relating to the retirement and maturity of long term debt in 1985 and 1986.
See Part II, Item 7. " Management's Discussion and Analysis of Financial Condition and Results of Operations" for a descriptio.n of the Company's cxp:etations for internal generation of funds and external financing for th2 period 1986-1989.
Costs associated with the Company's share of nuclear fuel requirements fcr the jointly-owned Peach Bottom. Salem and Hope Creek Generating Stations are financed by non-affiliated companies which generally recover thaft respective investment costs as nuclear fuel ic consumed for power g:n: ration.
Rates The Company's rates for electric service at retail are subject to the cpproval of the BPU.
Reference is made to Part II, Item 8, Note 1 and Note f Notec to Financial Statements for information concerning changes in a rates and energy adjustment charges during the period 1983-1985.
The pcny's energy adjustment charges are based upon projected energy cours for the periods during which they are effective.
If actual costs differ from the costs recovered, such difference in deferred and reflected in the _
i
]
m;volopment of average energy costs to be recovered in a subsequent period.
E0rnings are not directly affected by increases or decreases in the costs cf fuel or net purchased power, because such costs are adjusted monthly to match amounts recovered thrcugh revenues. Underrecovery of energy costs in cry period can, however, serve to increase financing costs of the Company.
In cddition, several proceedings are currently pending before the BPU or u dargeing judicial review with respect to rates and the recovery of costs incurred by the Company.
In April 1985, the Company filed a petition with the BPU requesting a
$91.850.million net increase in total revenues to be implemented in two ph:ses; a first phase increase of $63.316 million proposed to be effective by January 1986; and a second phase amounting to a nec $28.534 millien r:1 sting to the Company's 5% ownership interest in the Hope Creek Nuclear
'G:nsrating Station, presently under construction by PS.
The first phase is based upon a test year ending September 30, 1985.
. H2crings before an Administrative Law Judge (ALJ) have concluded and actual d ta for the updated test year has been filed. On November 22, 1985, the Company, the Public Advocate end the BPU Staff filed initial briefs on revenue requirements in the first phase with the ALJ. The Company's brief supported the requested $63 million, with an overall rate of return of 12.04% and a return on common equity of 15.50%.' The Public Advecate brief r:commende.d additional revenues of approxiyately $8.0 million, an overall ento of return of 11.33% and a return on commun equity of 13.90%. The BPU Saff brief supported additional revenues of $12.2 million, an overall rate Ireturnof11.42%andareturnoncommonequityof14.10%. On January 21, 1986 the ALJ issued his Initial Decision on revenue requirements which rscommended a rate increese of approximately $27 million, an overall rate of return of.11.55% and a return on common equity of 14.4%.
Exception briefs and replies to exceptions have been filed with the BPU and a dscision by the BPU is expected by early Apri.1 1986. The Company cannot predict the exact timing or the amount of any rate relief which may be granted, or the ultimate effects thereof upon it.
On March 14, 1986, the Company filed with the BPU revised testimony in thz second phase of its current base rate case, primarily in connection with rate recognition of the Company's investment in Hope Creek. The Coapany has requested a net increene in annual revenues of $34.9 million, censisting of a net $32.2 million for Hope Creek and approximately $2.7 cfilion for abandoned nuclear fuel supply projects and refunds of construction contributions previously made by certain customers. The increase in the net amount requested for Hope Creek reflects updated infcrmation with respect to estimated project costs at completion, as well 1
ca cetimated fuel savings. In addition, the amount requested for Hope Crock reflects the estimated effects of provisions of the cost containment
.cgr:eaent with respect to an allowed return on costs in excess of the targeted amount. Hearings on the Compeny's request are scheduled to begin in April 1986 and the Company has requested that rates become effective supan commercial operation of the unit.
Because of its ownership interest in the Hope Creek Station, the pany has been admitted as a participant in the current PS base rate case in which ratensking treatment for Hope Creek will be determined. Hearings h:ve commenced before the Office of Administrative Law.
The BPU has ;
1
--__m_......,__m__.__._,,,
,._,y,,,,._..-,,,,.-,_._,_.m
,.-._.m--_w---.,,_,...,
M lr\\J rdtcised jurisdiction in the PS case on the issues of Hope Creek cost r:cconableness and extraordinary events. The Company cannot predict the outcome of these proceedings or the ultimate effects thereof.
In March 1984, the New Jersey Superior Court. Appellate Division.
cffirmed a 1981 BFU Decision establishing a Marginal Adjustment Clause (MA) f:r casino hotels, but ordered that rehearings be held to consider both visteging and load growth experience. The effect of the MA has been to require casino hotels to pay a larger portion of fuel costs then the portion which would result under the rates which the Company charges all its cther customers. Additionally, the excess of marginal revenue over i
syst:ge revenues collected through the MA was credited to all the Company's cther customers. In July 1905, a Joint Stipulation was signed by the ptrties in the proceeding, which was in turn accepted by the BPU in November 1985, and provided for the phasing-out of the MA over a five-year p riod beginning in 1986 with a corresponding adjusteent'in the rate ch:rged to all other customers. The MA has been renamed the Hotel-Casino 5:rvice Adjustment (HCSA). The Joint Stipulation also requires that the cccino hotels withdraw their appeals of two other rate cases.
Additionally, the Joint Stipulation provides that the casino hotel es tomers as a class will provide a rate of return to the Company equal to the Company's overall rate of return.
In August 1984, the Company filed an appeal in New Jersey Superior rt. Appel' late Division, from an August 1984 BPU Decision denying the
=
l
- ny's request for a $25.3'aillion increasi in base.rhtes. On November l
1985 the three-judge Appellace Court issued a unanimous opinion l
cffirming the BFU decision. On December 6. 1985, the Company filed a requsst for review of the appellate decision with the New Jersey Suprese Court. A ruling by the Court on the Company's request is expected in April 1986. The Company cannot predict the ultimate outcome of such request or ths offect thereof upon it.
In its August 1984 Order the BPU directed that a Phase II to the Comp:ny's base rate proceeding be initiated to consider an alternative cath:d of allocating production plant for cost of service purposes. The l
citernative method. known as hourly cost allocation, has the effect of l
piccing additional cost responsibility on residential electric heat cu:tomers large commercial and industrial customers and street lighting customers. Hearings began in December 1984 and in October 1985, the presiding ALJ in the matter issued an initial decision which recommended th2 continuation of the Company's current method of production plant cost cllocation. The BPU did not concur with the ALJ recompendation and on Jccu:ry 10, 1986, issued its Decision and Order wherein it directed the Comp:ny to develop or obtain an hourly production plant cost allocation meth:dolesy for use in the second phase of its current rate case and future rato cases. The BPU indicated that this new methodology will serve as a guideline for revenue allocation and rate design in these proceedings.
On January 27. 1986, the Company filed with the BPU a motion for rccensideration and rehearing.
The Company can not predict wbat the final
- nlution of this socion will be or the impact thereof upon it..
In September 1984, the BPU approved revisions to the Company's line extension policy for certain customer classes. Appeals from the BPU Order were filed in New Jersey Superior Court, Appellate Division by certain Q
i t
\\ wifceted customers.
In November 1985, the Appellate Court rcranded the is:ve to the BPU for further proceedings in order to develop a reasonable rav:nue tect.
The Company cannot predict the final outcome of this
.precceding or the impset thereof upon it.
On September 26 1985, the Company filed petitions with the BPU for chrnges in its levelf redienergy adjustment charges for 1986. Based upon
.projceted 1986 kilowatthour sales, the proposed rates were designed to decrease annual energy and fuel revenues by approximately $37 million.
Boo:d on updated projected costs and additional actual information which csrycd to reduce the Corpany's projected energy charges, the BPU, on D:catber 27, 1985, approved a Joint Stipulation reducing the Company's cvargy and fuel revenues by $44.0 million arnually, effective January 1, 1986. - As part of the Company's filing and incorporated in the Stipuletion w:s the exclusion of approximately $4 million of replacecent power costs associated with extended cutages during 1984 and 1985 at the Peach Bottom 2 cnd Salem 2 nuclear units. which costs wculd not be recovered from customers. The resultant charge against earnings, net of taxes. bas been raficceed in the financial results of 1985. The filing and Stipulation cico included the deferral from this proceeding of an additional $4.679 4
tillion of. replacement power costs relating to certain outages at the Salem Section during 1984. This additional deferral brings the total of deferred repiccement power coste associated with nuclear generating unit outages to
$12.179 million, subject to Inter review by the BPU.
(w)3 Jersey'selectricandgasutilities,theBPUissuedanOrderinAugust In connection with recent legf riation mandating management audita for 1984 directicg thet its Bureau of Management Audits initiate a comprehensive management audit of the operating procedures of the Corpany.
Th2 BPU mey, upon completion and review of such cudit, and af ter notice end opportunity fer a hearing, order the in.plementation of any new or altered practices and procedures determined by the results of such audit. The BPU Ordsr further provided that all eFpenses in connection Yfth the audit were to bo borne by the Company's shareholders. An a result, the Company filed a Notice of Appeal in New Jersey Superior Court, Appellate Division, rolcting to the treatment of these expenses.
In December 1984, the Court, upon request of the BPU, remanded the management audit issue to the BPU for further consideration.
In March 1985, the BPU fosued an oral decision sesting that expenses incurred in connection with the management audits are prcpsr business expenses and may be recovered through rates. The Company's c:nigement audit commenced in January 1985 and the final audit report was filed with the BPU in January 1966.
Eversy Requirements and Power Supply The Company's 1985 energy sales increased by approximately 2.4% over l
1984 onergy sales. The Company's 1985 utility system peak demand was 1,432,000 kilowatts, recorded in August 1985. This peak demand was 10.2%
groctor than the previous year's peak and 6.3% greater than the** previous
-time utility system peak demand recorded in July 1983.
12 -
-vv7 t,
m 4----.------r +-p,p-py.-p
--9p
,---,.,-------*,,,,,,,9ye-
-.yy_-
,.--,,.-,-,-pw,,
,-,--m.-_
y
--.yp
.-,q-,,
\\p
_,/ The net generating capability of the Company at December 31, 1985, consisted of the following:
~
Year Net Current Unit (s)
Capability St tion and Location Primary Fuels (1)
Installed (KW)
~
Deepwater
$21em Co., N.J.
Oil / Coal 1930-1942 99,000(2) 1954-1958 187,000(2)
B,L. England Capa May Co., N.J.
Coal /011 1962-1964 289,000 1974 160,000 Key tone Icdiana Co., PA.
Coal 1967-1968 42,000(3)
Coal 1970-1971 65,000(3)
P:Och Botton Y rk Co., PA.
Nuclear 1974 157,000(3)
S:les 5:les Co., N.J.
Nuclear 1977-1981 162.000(3)
Coub stion Turbine Uaits 011/ Gas 1967-1974 359.000 Diccol Units 011 1961-1970 8,700
("
Total Generating Capability 1,528,700 Firm Capacity Purchases 125.000(4)
Total Capability 1,653,700 N'tes (1) Certain of the Company's units at the Deepwater and B. L. England Sections have the capability of using more than one primary fuel type.
In cuch instances, the use of a particuler fuel type depends upon relative c:st, availability and applicable environmental regulations and r quirements.
(2) Includes 24,000 KW allocated to DuPont.
(3) Company's share of jointly-owned station.
(4) From Susquehanna Units 1 med 2 of Pennsylvania Power & Light Company.
The Company has generally been able to provide for '.he growth of energy r:quirements through the construction of additional generating capacity and thrcugh capacity purchases from other utilities. The Company's contract with Delmarva Power & Light Company (DPL) for the purchase of 51,500 kilowatts of capacity and energy from DPL's coal-fired Indian River Unit 4 ired in May 1985. Pursuant to power purchase arrangements with ncylvania Power & Light Company (PPL), the purchase by the Company of on dicional 63,000 kilowatts of capacity and energy commenced with the start of consercial operation of Susquehanna Unit 2 on February 12, 1985. The powar purchase arrangements with PPL provide for the purchase of a total of _ __
77
(
)
s
~
kilowatts of capacity and energy from the two Susquehanna nuclear 125,000 units through September 1991 and then from PPL coal-fired sources through S:ptember 2000. These arrangemente received BPU approval in 1983.
The relative sources and costs of energy provided by the Company for th2 years 1981 through 1985 are cet forth in Part II, Item 7. " Management's Diccussion and Analysis of Financial Condition and Results of Operations".
The Company is a member of the Pennsylvania-New Jersey-Maryland Intcrconnection (PJM), an integrated power pool which coordinates the bulk pow r supply to eleven electric utilities serving an area of approximately 50,000 square miles which includes all of the District of Columbia and D21cware, most of New Jersey, Pennsylvania and Maryland, and a small part cf Virginia. The Company's capacity addition plans are designed to meet its capacity and reserve obligations as a member of the PJM. The Company hac an interchange agreement with the City of Vineland, New Jersey, which op> rates a municipal utility located in the Company's service area. The Cerpany is a party to the Mid-Atlantic Area Coordination Agreement, which prcvideo for coordinated planning of generation and transmission facilities by the companies included in PJM. Further coordination of power supply picnning is provided for by inter-area agreements of such companies with cdjccent power pools.
The Company has an agreement with the Allegheny Power Syster for the Ources,ofshort-termcapacityandenergy,predominantlyfromcoal-fired rchase en an as-needed basis. The Company imports this energy to the digree it is economic and available.
The Company's current estimates of projected annual sales and peak load growth are shown below.
5-year period 10-year period 15-year period 1986-1990 1986-1995 1986-2000 Psck Demand 2.05%
1.81%
1.69%
Sales 1.79%
1.70%
1.55%
The result of increases in the Company's projected peak demand, tog 2ther with the higher level of load recorded in 1985, serves to increase j
tha Company's estimated capacity requirements for the future.
Such ccpecity requirements are based upon estimated peak loeds and reserve cep city obligations established by, and allocated among, the PJM member companies. Additional capacity of the Company is expected to be provided thrcugh the Company's ownership of 53,000 kilowatta of Hope Creek Unit 1, cch:duled to begin commercial operation in 1986. An additional 150,000 kilowatts of Company base-load generating capacity is forecast"for 1997.
Included in the Company's plans are estimates of cepacity made. availabic
~
.' thr: ugh commercial ard industrial cogeneration projects, which aggregate 7,000 kilowatts by 1991. Additional major base-load generating capacity currently not scheduled prior to 2001. The Company estimates that, by 988, its ability to meet its capacity obifgation will depend on continued cvo11 ability of its current generating capability, from its ownership intorest in Hope Creek and from the availability of capacity from,
p\\~,)
c: generation projects, over which it does not have absolute control. To th] cxtent that such capacity is not available, the Company would pursue cth r sources of capacity, such as purchases from others and acceleration cf its construction program. Increases in PJM reserve requirements or less than anticipated benefits associated with conservation and load management cfftrts could further increase the Company's need for additional generating l
cap:31ty, The Company expects to be able to continue to meet the demand for cicatricity on its system through operation of available equipment and by j
power purchases. However, if periods of unusual demand should coincide with forced outages of equipment, the Company could find it necessary at times to reduce and/or curtail load in order to safeguard the continued op;r tion of its system.
Nuclear Generating Station Developments The Company is a co-owner of the Salem and Peach Bottom nuclear g: arating stations, to the exter.t of 7.41% and 7.51%, respectively. In 1985, nuclear generation provided 32% of the Company's total energy req irements, compared with 22% for 1984. The approximate capacity factors cf the Company's nuclear units in 1985 were as follows: Salen Unit 1-95%;
Snlen Unit 2-52%; Peach Botton Unit 2-25%; and Peach Bottom Unit 3-36%.
Reference is made to " Construction Program" herein fbr additionni 90;k Generating Station.
irmat' ion with respect to the Company's ownership interest in the Hope The Company had been advised by Es that in October 1984. Salem Unit 2 va3 removed from service for replacement of the non-nuclear electric g:: Orator which suffered extensive damage as a result of an electrical fcult. The unit was returned to, service in May 1985 after replacement of th3 generator with a generator of a different design.
The Company has been advised by PS that, in March 1984, the NRC issued a r: port with respect to the inspection of Salem Unit 1 in December 1983 czd January 1984 for compliance with the NRC's fire protection trquirements. The report indicates that certain areas were not in compliance with such requirements and that certain additional information c:s required. The Company has also been advised by PS that, in accordance with accepted NRC practices, it has submitted exception requests with re:p:ct to certain of such requirements and has supplied the additional infermation requested. If all of the plant modifications and changes in pr:c:dures currently indicated by the NRC are ultimately required, the ecces to the Company thereof could aucunt to approximately $350,000.
On December 14, 1984, two civil lawsuits were filed in New Jersey Sup;rior Court, Law Division, by the Company and the other co-owners of the Solco Station epainst Westinghouse Electric Corporation, the supplier of tha nuclear steam supply systems and turbine-generators of the Salem Units.
1awsuits relate to failures of the Salem Unit I reactor trip breakern
- ] February 1983 and the Salem Unit 2 electric generator in October 1984 lawsuits seek recovery of compensatory and other damages, the extent of which have not yet been fully determined. Discovery is proceeding and the Comp:cy cannot predict the outcome of these proceedings.
15 -
(p)
The Company hes been advired by PS chat in January 1985, the Staff of th> NRC issued a letter to PS advising it that certain deficiencies with roepect to PS had been found in the annual emergency exercise for Salem Units 1 and 2 Feld in October 1984.
Ir addition, the Federal Emergency M:nagement Agency (FEMA) and the NRC identified certain deficiencies with rc:pect to certain governmental agencies of the State of New Jersey as a racult of their participation in the exercise. As a result, a second cxsrcise involving Sales County, New Jersey, was held in April 1905 in an cttempt to demonstrate the County's proficiency in emergency preparedness.
Following the exercise the New Jersey State Office of Emergency Management cgrced to modify itr. emergency plan in conformance with FEMA requirements cnd to correct the deficiencies with respect to certain New Jersey State ggsncies. The Company has recently beer advised by PS that PS ned FEMA h vs egreed to certain modiff cations to the emergency plan, which were sucousfully tested in an emergency drill on October 1, 1985, closing out th2 alleged deficiencies. PS has advised the Company that a successful sn2rgency drill for Hope Creek was conducted in late October 1985 with the State of Delaware and the FEMA Regional Office has recommerded that FEFA is:ue a certificate of approval for crergency preparedner,s for the State of Dritware as it relates to Hope Creek. The NRC has determined that the cdjacent Hope Creek and Sales siter will be considered one location for emergency planning purposes.
The Company was advised by Philadelphia Electric Company (PE), the f *70rator of Peach Botton Units 2 and 3 that, due to generic problems with
(
)rtain boiling water nuclear units, inspections and testing for cracks of bda piping of the residual heat removal dnd recctor reef rculating weter syctees on each unit were performed in 1983. The repairs of the units in 1983 were not permaneet and in April 1984 Peach Bottom Unit 2 commenced a echaduled outage for refueling and the replacement of piping in those cystems. PE advised the Company that the unit, originally scheduled to return to service by year-end 1984, was delayed until July 1985. Peach Bottom Unit 3 was removed from service in July 1985 for a scheduled outage for refueling and inspectfon of piping and had been originally scheduled te return to service in October 1985. PE has advised the Company that, due to piping repairs, the outage had been extended until mid-March 1986.
Additional piping repairs and replacements on Unit 3 are currently cchrduled to be performed during the next refueling cutage scheduled for August 1987. Advancerert of the timing of such outage to November 1986 nay b:come necessary if reruits of piping inspectsons performed at that time cro unsatisfactory.
In connection with the pfpe crackfog described ebove, the Peach Bottom own3rs have jointly filed summono in the Court of Common Pleas of the C:unty of Philadelphia careencing legal actions or April 10, 1985 against th> property damage insurance carriers and on April 25, 1985, against the engineer / constructor of and the supplier of the nuclear steam supply system for Peach Bottom. In addition, the Company has beer edvised that in J:cuary 1986 PE filed proof of loss with Nuclear Electric Insurance Lic;ited, with which the Peach Bottom owners have an insurance policy ovaring replacement power costs for Peach Bottem.
The Company has been advised by PE that PE has requested exemptions from NRC ocheduled requirements for fire protection as they relate to Peach Bsttom Units 2 and 3.
Since May 2, 1983, PE has been filing current l ;
O
( breation with the NRC. including requests for exemptions from schedules which otherwise would have required completion of certain activities prior to April 1. 1983. The Company has been further advised that the NRC has 2
approved certain of PE's submissions, including PE's alternative safe chmedown capability design and implementation schedule, but has not yet r:sponded to PE's other submissions and exemption requests. The failure to (becin such exceptions could result in the imposition of civil penalties and/6r the suspension of authority to operate the Peach Bottom units.
PE advised the Company that in June 1984, the NBC issued a Notice of Vis1ction and Proposed Imposition of Civil Penalties asserting failure by i
PE to confore to certain technical specifications applicable to Peach Bottos Units 2 and 3.
In addition, the NRC Staff issued an order requiring PE to submit to the NRC plans for appraisal of various aspects of PE pr:c:dures at Peach Bottom. PE has advised the Company that appraisal i
p10::;g were submitted in August 1984, which were approved'by the NRC in September 1984, and that in February 1986, the NRC infornied PE that all tcres of the order have been satisfactorily completed.
4 Puel Supply The prices of all types of fuels used by the Company for the generation i
cf olectricity are subject to various factors, such as world markets. labor 4
unrect and actions by governmental authorities. including allocations of fusi supplies, over which the Company has no c'ontrol.
~ O_il
)
Residual oil and distillate oil for the Company's wholly-owned stations cro furnished under arrangements with two major suppliers. The Company has s:ptrate contracts with one supplier for the supply of 1.0% sulfur residual cil for the Company's Deepwater Station and for distillate oil for the Comp:ny's combustion turbines through September 30, 1987. A contract with cn=ther supplier. which expires on December 31, 1986 originally provided fcr the supply of 2.0% sulfur residual oil to the Company's B. L. England i
Section. This contract was amended to provide a lower sulfur oil (1.0%) in cacardance with regulatory provisions established in connection with the cxterded authorization of the Company to burn coal at that station. See
" Environmental Controis-Air" for information concerning the use of perticular fuels at B. L. England Station.
At December 31, 1985, the oil supply at Deepwater Station was sufficient to operate Deepwater Unit _i for 55 days. At December 31, 1985.
I thm cil supply at B. L. England Station was sufficient to operate Urie 3 far 64 days, and to operate all three units for 23 days.
1lO i - - - -
-. - - ~..
Coal The Company has contracted with a supplier for the delivery of coal h ving an average sulfur content of 3.1%, for B. L.. England Units 1 and 2 L
through November 11, 1988. On Deceuber 31, 1985, the coal inventory at the B. L. England Station was sufficient to operate Units 1 and 2 for 76 days.
~
t
~ The Company has agreements which provide for the purchase of the full rcquirements (approxfastely 200,000 tone anrusily) of 1.0% sulfur coal for Docpwater Unit 6/8 through June 30, 1986. On December 31, 1985, the coal inventory at Deepwater Station was sufficient to operate Unit 6/8 for 69 d:ys.
The Keystone and Conenaugh Stations are jointly-owned mine-month g:cerating stations located in western Pennsylvania. The owners of the Ksystone Station have a long-term contract, extending through 2012. which is to provide for all of the anrual bituminous coal requirements of the Keystone Statioc.
A' separate long-term contract with another eupplier provides for a minimum of 60% of the encual bituminous coal requirements of th2 Conenaugh Station for the life of the station. To the extent that the rcquirements of both plants are not covered by these long-term contracts, coal supplies are, with minor exceptions, obtained free local suppliers.
As of December 31, 1985. Keystone and Conenaugh had approxiestely a 61-day supply and a 44-day supply of coal, respectively.
Gas The Company is currently capable of firing natural gas in four corbustion turbine peaking units and in one conventional stena turbine psn2 rating unit. The supply of natural gas is interruptible and is priced under the provisions of an oil parity tariff.
Nuclear Fuel As a joint owner of the Peach ' Bottom. Sales and Hope Creek generating units, the Company relies upon the respective operating company for i
crrcngements for nuclear fuel supply and management, and the Company i
participater in the costs thereof to the extent of its particular ownerchip interests.
Generally, the supply of fuel for nuclear generating units involves the cining and millfog of uranius ore to uranium concentrate, conversion of the urcnium concentrate to uranium hexafluoride, enrichrent of that gas and fcbrication of fuel ansemblies. After spent fuel is removed from a nuclear i
recctor, it is placed in temporary storage for cooling in a spent fuel pool i
et the nuclear station site. The Federal government has a contractual obligation for traneportation and ultimate disposal of the spent fuel.
i 1
j The Company is advised by PE, the operating company for Peach Bottom, that it has contractc for uranium concentrate which, together Vith Scnversion and fabrication contracts it expects to negotiate without ffficulty,willsatisfythefuelrequirementsofPeachBottonUnits2not 4
through 1992. The Company has also been advised by PE that its contracts v
i for uranium concentrates will be allocated to the Peach Bottom units, and othcr nuclear facilities presently in operation or under construction by l l i
I
. ~.. -
8 4
PE. on an as-needed basis. The Company has also been advised that PE has contracted for the following segments of the nuclear fuel supply cycle with respect to the Peach Bottom units through the following years:
Buclear Unit Conversion Enrichment Fabrication Peach Botton Unit 2.....
1992 2008 1988 Peach Botton Unit 3.....
1992 2008 1988 The Company has been advised by PS. the operating cespany for the Sales and Hope Creek Stations, that it has negotiated several long-term contracts for the supply of uranius concentrates and that these contracts will provide sufficient uranium concentrates to meet the requirements of the Sales and Hope Creek vrits through 1995 and exercising options on these contracts will allow coverage through the year 2000 and that PS expects thic concentrates will be provided from these contracts and from contracts to b3 negotiated in the future. In addition. PS has advised the Company th:t it has entered into contracts to meet the other nuclear fuel requirements for the Sales and Hope Creek units through the years indicated b31ow:
Wuclear Unit Conversion Enrichment Fabrication l
Sales Unit 1...........
1990 2014 1996 Sales Unit 2...........
1990 2014 1997 Hope Creek Unit 1......
1990 2014 1997
'In September 1985, the Company was advised by PS that PS notified 5:q:tysh Puels Corporation (Sequoyah), a subsidiary of Kerr-McGee Csrporation, that it was terminating a 1976 uranius supply agreement with 5:quoyah. The uranium supply project had been"fn a standby status since i
1980 due to the availability of uranium on the open market at prices sub:tantially less than those applicable under the contract. At September 30, 1985, the amount of such unrecovered advances was appronimately $4 cillion. The Company's interest in advances made to Sequoyah by PS. which eGro not recovered through the purchase of uranium, has been financed by Facel Puel Corporation (PPC), a non-af filiate. The Company hac paid co PFC ssh amount pursuant to its arrangements with PPC.
l The Company has been advised by PE that in December 1985. PE termicated ito uranium supply agreement with Quivira Mining Company (Lee Mine Project) on behalf of the owrers of the Peach Botton Station. The Company had advcaced to PE approximately $631.000 for its portion of the mining fccilites.
i l
The Company has been advised by PS that, effective December 18, 1985.
PS tessinated a 1976 uranium supply contract with the Homestake Mining Company for the long-raege exploration and development.of uranium reserves.
Th3 terminated contract provided for advances to fund the project and ovided for recoupnent of these advances as reserves were produced. The l
ject had been on a sinimum expenditure status since 1981, due to ilability of lower cost uranius elsewhere. The Company had advanced to i
PS cyproximately $607.000, including a termination payment of approximately
$100.000 that was taquired as a result of the project abandonnent.
- l
5--
The Company has begun amortinetion of emounts relating to the Sequoyah, Quivira and Homestake projects described above over a five-year period commencing in 1985 and has requested recovery of ameunes in respect of such emortization in Phare II of its current base rote proceeding before the PPU. Amortization over five years would result in an annual charge to epcrations of opproximately $.7 million, net of taxes, or approximately 4c p;r share of Common Stock. It is possible that action by the BPU may rcq: ire a change in the level of annual amortization, or could require the irm;diate write-off of any remaining unamortized balance existing at that time.
On September 17, 1985, the United States District Court for the Dietrict of Colorado, in a case to which the Company was not a party, grerted a partial summary judgment in. favor of the plaintiffs in which it w:2 concluded that a certain form of contract for the enrichment of uranium utilized by the United States Department of Energy (DOE) is null and veid.
Such contracts have been entered into by PS.rnd PE in the cane of the Salem, Hope Creek and Peach Pottom Nuclear Generating Stations. The DOE h:o appealed the decision and is asserting that the contracts are valid until all appeals are completed and is continuing to perform thereunder.
PS cnd PE, on behalf of the owners of Salem, Hope Creek and Peach Bottom, h:va joined a group of utilities in filing a brief amicus curiae in support cf DOE. The Company cannot predict the ultimate result of this proceeding, but does not believe it will have a materin) edverse affect on the ability of the operating companies to obtain enriched uranium.
In addition, the empany understands that import quotas en foreign uranium are heing n;idered. If imposed, such quotas could lead to higher uranium prices in th2 tuture.
In cenformity with the Nuclear Waste Policy Act of 1982 (the Act), PS, en behalf of the co-owners of the Salem and Hope Creek Stations, has cntored into contracts with the Department of. Energy (DOE) for the disposal cf cpent ruclear fuel from those stations.
Similarly, PE contracted with th? DOE in connection with Peach Bottom Units 2 and 3.
Under these contracts, the DOE is to take title to the spent fuel at the efte then trcnsport it and provide for its permanent disposal at a cost to utilities b c:d on nuclear generation, subject to such escalation as may be required to casure full cost recovery by the Federal government. A one-time fee rolcted to nuclear fuel dispocal costs associated with power generation through April 6,1983, amounting to approximately $10.9 million, was paid in 1985. Current payments have been made on a quarterly basis thereafter.
Th2 Company received approval from the BPU for recovery through its Icvolized energy claus; of its payment liability for the one-time fee by th) cnd of 1985. Rates are adequate to recover current costs.
Under this legislation, the Federal government must commence the cec:ptance of these materials for permanent offsite storage no later than 1998, but it is possible that such storage may be delayed for several years th:rcafter. The Federal government's present policy is that spent nuclear
.fu?1 will be accepted for long-term storage at government-owned *and rp;rcted repositories. At present no such repositorien are in service.
thoughreprocessingofspent fuel would make available additional nuclear 1, the Federal government has not taken the necessary action to make r:pr: cessing available.
l The Company has been advised by PE that spent fuel storage pools at F csh Bottom are adequate for storage of fuel discharged free each of the units through 1991. Expansion of the Peach Bottes spent fuel storage pool cap 2ity, which will provide adequate storage capacity for Units 2 and 3 through 1992 and 1994, respectively, is currently being performed and is expected to be completed in 1986. The Company's share of these costs are estimated to be approximately $850,000.
The Company has been advised by P5 that its high density spent fuel cttr se racks at Sales are adequate for storage of discharged fuel from Unit 1 through 1998 and from Unit 2 through 2000.
Resulation General The Company is a public utility under the laws of New Jersey and is subfect to regulation as such by the BFU. The Company is also subject to r g.slation by the Pennsylvania Public Utility Cassission in limited r:sp: cts concerning property and operations in Pennsylvania. The Company is c holding company under the Public Utility Holding Company Act of 1935
'by r:ason of its ownership of Deepwater Operating Company.
By filing an cuesytton statement annually, the Company is exempt from all provisions of such Act, except Section 9(a)(2) relating to the acquisition of securities f]opublicutilitycompany. The Company *is also subject, in certain
.pects, to the jurisdiction of the Federal Energy Regulatery Consission,
(,d it maintains a system of accounts in conformity with the Unifore Systes co cf Accounts prescribed for public utilities and licensees subject to the provisions of the Federal Power Act.
i The construction of generating stations and'the availahflity of i
3:ncrating units for commercial operation are subject to the receipt of nscoceary authorizations and permits from regulatory agencies and govsrnmental bodies. Standards as to environmental suitability or op2 rating safety are subject to change. Litigation or legislation designed l
to dslay or prevent construction of pecerating facilities and to limit the c0c of existing facilities may adversely affect the planced installation cnd operation of such facilities. No assurance can be given that necessary ostharizations and permits will be received or continued in effect, or that cte dards as to environmental suitability or operating safety will not be ch:nged in a manner to affect adversely the Company or its operations.
Operation of nuclear generating units involves continuous close regulation by the NRC. Such regulation involves testing, evaluation and sodification of all aspects of plant operation in light of NRC safety and environmental requirements, and continuous demonstration to the NRC that i
plcne operations meet applicable requirements. The NRC has the ultimate cuthority to determine whether any nuclear generating plant may operate.
i l
The Delaware River Basin Consission (DRBC) has required various ctric utilities, as a condition of being permitted to withdraw water the Delaware River for use in connection with the operation of certain l
Octric generating stations, to provide for a means of replacing water i
eithdrawn from the river during certain periods of low river flow. Such a requirement presently applies to the Hope Creek Station. As a result, the
! t l!
t
, I t
]. bbepany and certain other. electric utilities are jointly engaged in the
.Merrill Creek Reservoir Project to construct a reservoir, which is
' currently scheduled for completion in 1988.
If Project replacement water is not available during such periods of low river flow, the operation of N:ps Creek Unit 1 could be curtailed. The Company owns a 4.3% undivided igterest in the project and its share of the cost of construction is 4
cetimated to be $10.7 millfoe and is included in the Company's estimated cc :truction expenditures. In addition PS had previously entered into a l
j w:ter use contract for Seles Units 1 and 2 which could, in periolis of low l
river flow, result in the curtailment of some operations at Salen Station,
'unless supplemental water is provided to the river. DRBC requirements may cles result in the curtailment of operations at other gecerating stations on the Delaware Fiver in periods of low river flow, unless supplemental water is provided. Construction of the project commenced in September 1985.
In March 1983, New Jersey enacted a law which requires that the BPU j
scko a determination of fault with regard to any past or future accident at cny electric generating or transaieston facility, prior to granting a i
. request by that utility for a rate increase to cover accident-related costs j
in excess of $10 million. However, the law allows the affected utility to filo for nov-accident-related rate increases during such fault dstermination hearings and to recover contributions to federally mandated or voluntary cost-sharing plans. The law further allows the BPU to p)thorizetherecoveryofcertainfault-relatedrepair, cleanup,powerlacement or damage co j
( d cuthorized in writing by the BPU.
j The l' rice-Anderson provisions of the Atomic Energy Act of 1954, er c34cded, provide a limitation of $650 million for liability claims as a rocult of an incident at a licensed nuclear reactor in the United States.
Undst the Price-Anderson provisions, payment for such claims is to be made from funds generated by private insurance, and by retrospective assessments assit.at owners of licensed nuclear planto in the amount of up to $$ million par nuclear unit for each incident, but no more than $10 pillion per unit in cny year for all incidents. These provisions of the Atomic Energy Act
{
capire on August 1, 1987, unless extended by Congress. Several proposals for revision, extension and elimination of the Price-Anderson provisions 1
cro currently undergoing various congressional reviews. The Company cannot predict the outcome of such reviews, or the effect thereof.
Information regarding the Company's nuclear power replacement cost insurance and Ifebility is incorporated herein by reference to Note 11 of Notes to i
i Fin:ncial Statements, included in the Company's 1985 Annual Report to l
Sh2rcholders as Exhibit 13.
Environmental Controls c_en.ral The Company is subject to regulation with respect to air ant water 3
% 2ty and other enviroceertal matters by various Federal, state and local i
jhorities. Emissions and discharges from the Company's facilities are v4uired to meet established criteria, and numerous permits are rect. ired to ccustruct new facilities and to operate new and existing facilities.
i Additional regulations and requirements are continually being developed by i
i 22 -
i 4
i c.-.
.~,,v,--.c-m-w.,-,--w,__ww---,.--_,.-.,_.7-. _,,,,
...,,m.
n/
\\various government egetetes.. The principal laws, regulations and agencies r:1cting to.the protaction of the environment which affect the Company's
-cper:tions are described below.
Construction projects and operations of the Company are affected by the Wettonal Environmental Policy let under which all Federal agencies are required to give appropriate consideration.to environmental values in major Fed:ral actions significantly offecting the quality of the human environment. WRC approval of construction permits and operating licenses frr nuclese generating facilities has been held to constitute such action 4
and therefore requites a detailed environmental' review in each case.
~
j Delsys in the licensing proceedings of nuclear facilities have been encountered'end more may be espected.
The Federal Resource Conservation,aud Recovery Act provides for the idertification of hasardous waste and includes standards and procedures th:t eget be followed by all persons that generste, transport, treat, store or dispose of basardous waste. The Company has filed plans with the United Stttes Environmental Protection Agency (EPA) relating to the treatment of haarrdous waste at certain of its facilities and generating stations.
The use of polychlorinated biphenyls (PCB) in utility electrical equipment is regulated by the EPA under the Toxic Substances Control Act of 1976, as amended. IPA reguistions require that electric utilities phase
.cil PC3 capacitors from street locations by October 1. 1988 and all PCB Oformers in or.usar commercial buildings by Octob.or 1. 1990..The 2ny has implemented a program to remove all PC1 capacitors and tr : formers at such locations and replace them, as required with non-PCB l
olcetrical equipment.
The New Jersey Environmental Cisanup Wespon's'ibility Act. P.L. 1983 c.330, imposes a precondition on the closure, sale, or tesusfer of certain prty:rties associated with the manufacture, refining, transportation, tr ctment, storagt, hoodling, or disposing of hasardeus substances or westes. The precondition is the execution of en appceved cleanup plan which detsils the measures necessary to detoxify the property, or the
_cyprcval of the New Jersey Department at Envircomental Protection (NJDEP) cf a declaration that there has been to discharge of hasardous substances er c:stes on the property. or that any discharge has been cleaned up in l
accordance with procedures approved by NJDEP and the:s remains no hasardous l
sub:tances or wasten thereon.
The New Jersey Environmental lights Act enne. tad December 9, 1974 provides that,any person may maintain'a court action against any person to enfarce or restrain the violation of any statute, regulation or ordinance which is designed to prevent or minimise pollution, impairment or d:struction of t he environment.
l The New Jersey Worker and Cossunity Right To Know Act. enacted in 1903, i
coccblishes a comprehensive program for the disclosure of information about
- scrdous substancis in the workpince and the community, and provides a l
)cedurewherebyworkarsandresidentscangainaccesstothin l
..fsrwation. The implementing regniations provide for oxtensive j
rcesrdkeeping labeling and training to oe accomplished by each employer l
rocpronible for the handling of basardous substances.
The Company is i ;
-,-,---_.. ~
m-,
_,_.m_
__~,,.-.-_,,_~-~...__w.,
trently implementing the requirements of this legislation in compliance with appropriate schedules.
The Company is also subject tc the Wetlends Act of 1970, which requires applications tc and permite from the KJDEF for conducting reguloted cetivities~(including construction and excavation) within the " coastal wet 1cnds" as deflued by the Act. The New Jersey Coastel Area Facility Rsview Act requires applications to and permits from the NJDEP for construction of certain types of facilities within the " Coastal Area" as defined by the Act.
In addition, the New Jersey Pinelands Comprehensive M:negement Plan requires applications to and permite from the Pinelands Commission for construction of certain types of facilities within the i
Pinelands Area as defined in the New Jersey Pinelands Protection Act.
Environmental controls are in the procecs of further development and require, in rany instences, balancing of the reeds for additional qucntitiec of energy in future years and the need to protect the environment. As a result, the Company cannot estimate the prectee effect of existing and potential regulations end legislatien upon any of its i
cxicting and proposed facilities and operations, or the additional costs, net included in the estimated construction costs for the period 1986-90 '
rsferred to above, which the Company may incur in effecting compliance with potential regulations and legislation. The Company estimates that 1985 construction expenditures relating to improving the environment amounted to qprcximately $11.6 million. Cash construction expenditures estimated for J6.1987and1988 include $20.2,$15.4and$3.5million,respectively, s,ar cuch purycses. However, developments in these and other areas of regulation may require the Company to further rodify, supplement or replace equipment and facilities, and may delay or depede the construction ard oparation of new facilities, at costs which could be substantial.
AfE The Federal Clean Air Act, as amended in August 1977, requires that all n:ctes achieve specified primary ambient air quality stardards (relating to public health) by December 31, 1982 unless the deadline is extended for cartain pollutants for a particular state by appropriate action taken by th2 EPA and also requires that states achieve secondary ambient air quality standards (relating to public welfare) under this Clean Air Act within a retrovable time. The Clean Air Act also requires the Administrator of the EPA to promulgate revised new source performance standards for sulfur dioxide, particulates and nitrogen dioxide, mandate the use of the "best tachrological system of contiruous emission reduction" and preclude the use of low sulfur ccal as a sole means of achieving compliance with sulfur regulations for new power plants. The amendments to the Clean Air Act.
-chich previde for penalties in the event of noncompliance, further provide that State Implementation Plans (SIP) contain emission limitations and such othsr measures as may be necessary, as determined under regulattons promulgated by the EPA, to prevent "significant deterioration" of air gun 11ty based on regional non-degradation classifications. It Te not
,ripscted that the amendments will impact the Company's existing ofi-fired herating units as to air quality levels and emissions of pollutants.
The NJDEP is using the New Jersey Administrative Code, Title 7. Chapter 27 (NJAC 7:27) as its SIP to achieve compliance with the national ambient !
g-g
\\~-l cir quality standards adopted by EPA under the Federal Clean Air Act.
NJAC 7:27 currently provides ambient air quality standards and emission limitaticas, all of which have EPA approval, for seven pollutants, including sulfur dioxide and particulates.
Concerning the coal-fired units at the Company's B. L. England-Station, th3 Company has received approval from the NJDEP to continue coal burning cc B. L. England Station until November 1988, subject to certain r0ctrictions, some of which include the reduction of the sverage sulfur contcne of the coal burned in Unita 1 and 2 from 3.5% to 3.1%, the reduction of the sulfur content of the oil used in Unit 3 from 2.0% to 1.0%
cud the installation of emission monitoring equipment and additional ambicnt monitoring equipment in the immediate area around the station. The Company has implemented these restrictions and is in the process of implementing other restrictions on the schedule approved by the NJDEP.
In August 1985, the Company applied to NJDEP for a permit to construct o rew 475-foot chimney at the B. L. England Station. The proposed chimney would replace the three existing stacks and is designed to eliminate infrcquent occurrences of greater-than-expected flue ges concentrations ccesed by building-induced downwash. Construction is presently scheduled t3 b: sin in March 1986 following the receipt of all necessary approvals and io c;timated to cost approxfastely $19 =illion.
D The Company believes that all of its fossil fuel-fired generating units u J. in all substantial respe'ets, currently operacing in compliance with NJAC 7;27 and the EPA-approved SIP.
Water The Federal Wat9r Pollution Control Act, as' amended (the Act) provides fcr the imposition of effluent limitations to regulate the discharge of psilutants, including heat, in order to achieve the goal of eliminating the discharge of pollutants into the waters of the United States. The Act also r; quires that cooling water intake structures be designed to minimize cdverse environmental impact. Under the Act, compliance with cpplicable off1 rent limitations is to be achieved by a National Pollution Discharge Elicination System (NPDES) permit program to be administered by EPA or by' tha state involved if such state establishes a permit program and water qu211ty standards satisf actory to the EPA. Having previously adopted the New Jersey Pollution Discharge Eliaiastion System (NJPDES), NJDEP assumed authority to operate the NPDES permit program. The Company has received NJPDES permits for discharges to surface waters for all facilities with cxicting EPA-issued NPDES permits.
Ef fective December 2,1974, the NJDEP adopted new surf ace water quality standards which, in part, provide guidelines for heat dissipation from any source and which become standards for subsequent Federal permits. These NJDEP guidelines were included in the final EPA permits issued for the B.
England, Deepwater, Salem, and Hope Creek Stations. On receipt of the its for B. L. England and Deepwater Stations. the Company filed with EPA a request for alternative thermal limitations (variance) in ccesrdance with the provisions of Section 316(a) of the Act.
The NJDEP and EPA have subsequently found that B. L. England Units 1 and 2 are in compliance with applicable chermal water quality standards. The request -_.
/
C r a Section 316(a) variance for Deepwater Station has not yet been acted upon. The Company is not able at this time to predict the outcome of the rcquest, but it believes that it has adequately supported the request for c ch variance.
The Company believes that all of its steam electric generating units cra, in all substantial respects, currently operating in compliance with c11 applicable standards and NJPDES permit limitations.
The Company has been advised that PS has submitted studies to the EPA cnd NJDEP and requested that alternete thermal limitations be established for the Salem Units which would permit compliance without the use of c oling towers. The Act also requires that cooling water intake structures ba designed to minimize adverse environmental impact and PS has prepared cnd presented a demonstration to assess the environmental impact of the exicting Salem cooling water intake structure for Salem Units I and 2 crd to cvaluate alternative intake technologies and modes of station operation.
This assessment includes a comparison of the costs and potential cnvironmental benefit, if any, of implementing these alternatives. The d;monstration was submitted to NJDEP in February 1984 for review and d tsrmination, which review is expected to occur in 1986. PS has advised tha Company that if the demonstration is successful, the existing Salem intake structure will not require modification.
If intake modification and/cr cooling towers were ultimately required to satisfy these rsquirements, the Company's share of stah costs could be ' substantial and not included in the Company's construction program.
By order dated September 30, 1982, EPA cited the Salem plant for diccharging certain pollutants of a non-nuclear nature at levels in excess of prevailing hTDES permit limits. The ' order requires the evaluation of said discharges and implementation of a program to bring the discharges in qu:ction into full compliance with permit limitations. The Company has bsen advised by PS that PS, EPA and the NJDEP have signed a consent order, datsd May 27, 1983, which, among cther things, require the construction of cddftional wacte treatment facilities. The Company's share of the c:nstruction is estimated to be approximately $950,000.
The Company has been advised by PE that it has received NPDES permits cs rrquired under the Federal Water Pollution Control Act Amendments of 1972 for the discharge of effluents from Peach Bottom Station. Conditions of these permits could require the installatien of closed-cycle cooling syctems. PE requested the EPA to establish alternative thermal limitations fer Peach Bottem Station, which, if granted, would result in requirements lacs costly than closed-cycle cooling systems. PE advised the Company that 1
th3 EPA had approved the alternative mode of operating the Peach Bottom craling system. The Company had also been advised by PE.that the P;nocylvania Department of Environmental R ccurces (PDER) advised the EPA that, although it agreed with PE's poDition that a closed-cycle cooling system is not necessary for Pecch Bottom Station, it had determined that the niternative mode of Operating J.h] existing open-cycle system proposed by PE was not sufficiently V ;ingent. PE appealed the PDER determination, and has recently advised
(
Company that PDER has completed an evaluation of PE's proposal and in Octcber 1985, renewed the Peach Bottom NPDES permit authorizing operation cu proposed by PE.
).___
Q--]
NJDEP has adopted regulations and a permit program for the discharge of I
watcr to the ground. The current regulations require permits for seme Comp:ny facilities and say require the monitoring of groundwater at these Ic2ctions. The Company has applied for the required permits.
ITEM 2 PROPERTIES Reference is made to Schedule V - Property, Plant and Equipment for inf rmation regarding the Cowpany's investment in utility plant.
Substantially all of the Company's electric plant is subject to the lien of th] Mortgage and Deed of Trust under which First Mortgage Bonds of the Company are issued.
Reference is made to Item 1 - Business " General" and " Energy R:q irements and Power Supply" for additicnal information regarding the Comp:ny's properties. Information concerning leases is set forth in Note 12 cf Notes to Financial Statements incorporated herein by reference.
See Item 1 - Business, " General" for information regarding f acilities recd to supply process steam and water and by-product electric energy to DuPont.
Information regsrding electric generating stations is set forth in Item 1, Business " Energy Requirements and Power Supply."
kN3 LEGAL PROCEEDINGS Reference is made to Item 1 Business regarding various pending cdministrative and judicial proceedings involving rate, licensing, cperating and environmental matters.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDEF.S Nst Applicable PART II ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information for this item is set forth in the section entitled " Common Secck, Price Range and Dividends" on page 37 of the Company's 1985 Annual RepsrL to Shareholders, which is incorporated herein by reference.
ITEM 6 SELECTED FINANCIAL DATA Icformation for this item is set forth in the section entitled "Five-Year Ccrparison of Selected Financial Data, Including Unaudited Supplementary Dsta Adjusted For Changing Prices", on page 36 of the Company's 1985 Annuel Faport to Shareholders, which is incorporated herein by reference.
O V )
1
TEM 7 NANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPEPATIONS Information for this item ir, set forth in the section entitled
Karegement'r. Discussion and Analyef s of Financial Condition and Results of Op3 rat' ens" on pages 15 through 18 of the Cempany's 1985 Accual Report to Shercholders, which is incorporated herein by reference.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Sse Item 14 for informatice on Financini Statements and Supplementary Data.
, ITEM 9 DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE N:na PAPT III ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information for this item concerning Directors of the Company is set fcrth in the section entitled " Election of Directorc" in the Company's 1986 Notice of Annual Meeting and definitive Proxy Statement, which is inccrporated herein by reference.
,~
k
'% /
e 0
e e e k
V -- -.
I
s Information concerning the Executive Officers of the Company, as of
--DJcember 31, 1985, is set forth below. Executive Officers are elected by ths Board of Dire'ctors and may be removed from office at any time by a vote of.a majority of all the Directors in office.
Executive Officers of the Registrant Date First Age at Elected to Current Name 12/31/85 Title Position E. Douglas Hungard 52 President, Chief Executive 4/23/85 Officer and Director Jctroid L. Jacobs 46 Senior Vice President -
3/01/84 Operations and Engineering.
Michael A. Jarrett 53 Senior Vice President -
5/01/80 Corporate Services Brien A. Parent 41 Senior Vice President -
9/06'/84 Plavning and Rates J. Jerry Salomone 45 Senior Vice President -
8/01/85 Finance and Accounting D;vid V. Boney 61 Vice President - Customer 10/24/73 and Community Services John F. Born 61 Vice President -
4/13/76
(h Electric Operationc V 'nce E. Cooper 42 Vice President - Control 8/01/85 and Assistant Treasurer Thesas E. Freeman 55 Vice President -
5/01/81 Human Resources M2redith I. Harlacher, Jr.
43 Vice President -
7/01/83 EngineerinF 9/06/84 Jos:ph T. Kelly, Jr.
61 Assistant Vice President Operations H3nry K. I.evari, Jr.
37 Vice President -
8/01/85 Corporate Planning J. David McCann 34 Vice President, Treasurer 8/01/85 and Assistant Secretary Martic R. Meyer 55 Secretary ced Assistant 4/25/78 Treasurer Hanry C. Schwere, Jr.
44 Vice President -
5/01/80 Production Prior to election to the positions above, the following executive officers held other positions with the Company (unless otherwise noted) since January 1, 1981.
Mr. Huggard - Senior Vice President-Operations.
Executive Vice President Senior Vice President-Finance.
Mr. Jacobs Senior Vice President-Operations s_,)
Assistant Secretary, Vice President and Treasurer Pr. Parent Mr. Salomone-Vice President-Control, Treasurer Controller.
Mr. Cooper
7-~s
(
I b- '
Assistant Treasurer of Potorac Electric Power Company Mr. Freeman - Manager of Administration Mr. Harlacher-Manager of Computer Applications, Manager of Information Services, Assistant Vice President-Information Services Mr. Kelly -
Assistant Secretary Mr. Levari Manager of Corporate Planning, Maneger of Administration, General Manager-Corporate Planning Mr. McCann Manager of Treasury Operations and Planning.
Manager of Administration, Assistant Treasurer ITEM 11 EXECUTIVE COMPENSATION Information for this item is set forth in the sections entitled " Executive Ceepensation and Other Information" in the Conpany's Notice of Annual Misting of Shareholders and definitive Proxy Statement, which is incorporated herein by reference.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information for this item is set forth in the sections entitled " Election of Directors" in the Company's Notice of Annual Meeting of Shareholders end d2finitive Froxy Statement, which is incorporated herein by reference.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS tion for this item is set forth in the sections entitled "Other Transactions and Relationships" in the Company's Notice of Annual Meeting of Shareholders and definitive Proxy Statement, which is incorporated herein by reference.
PART IV ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K Exhihits: See Exhibit Index on Page 34 Financial Statements and Supplementary Schedules: The followinF information is included in the Company's 1985 Annual Report to Shareholders
)
and is incorporated herein by reference.
{
1 Financial Statements:
t Statement of Income and Retained Earnings for the three years ended D:cember 31, 1985 (Page 20).
Sectement of Changes in Financial Position for the three years ended D2cember 31, 1985 (Page 21).
. Belance Sheet - December 31, 1985, and December 31, 1984 (Paget 22 and 23 ).
rN
(
)
s- ;stes to Financial Statements, for the three years ended December 31, 1985 i
(Peges 24 through 33, inclusive).
9upplementaryinformationregardingselectedquarterlyfinancialdata
~
(Un;;dited) (Note 14 to Financial Statements, Page 33).
Opition of Deloitte Haskins & Sells, dated January 31, 1986 (Page 19).
5:pplementary Information Concerning the Effects of Changing Prices (Unardited) (Pages 34 through 36, inclusive).
Tha following additional financial data should be considered as cupplementary data for the three years ended December 31, 1985.
Financial Statement Schedules:
V.
Property, Plant and Equipment for the three years ended December 31, 1985.
VI. Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment for the three years ended December 31, 1985.
Opinion of Deloitte Haskins & Sells, dated January 31, 1986.
All cther yinancial Schedules are omitted for the reason that they are cithar not required or not applicable, or because the required information to frcluded in the Financial Statements and Notes in the Company's 1985 uol Report to Shareholders.
fep:rts on Forn 8-K:
Th3 following Current Reports on Form 8-K were filed during the quarter cod:d December 31, 1985 and during the period prior to the filing of this rcport:
- 1) Current Report dated December 6, 1985, relating to a) rate matters b) cce truction of the Hope Creek Generating Station and c) changes in the Compiry's Dividend Reinvestment and Stock Purchase Plan.
[)
(3)
OPINION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Atlantic City Electric Company:
We have examined the balance sheets of Atlantic City Electric Company as of December 31, 1985, and 1984 and the related statements of income and retained earnings and of changes in financial position for each of the three years in the period ended December 31, 1985 and have issued our opinion thereon dated Jenuary 31, 1986; such financial statements and opinion are included in your 1985 Annual Report to Shareholders and are incorporated herein by reference. Our examinations also comprehended the supplementary schedules of Atlantic City Electric Company listed in Item 14 In our opinion, such supplementary cchedules, when considered in relation to the basic financial statements, present fairly in all material respects the information shown therein.
DELOITTE HASKINS & SELLS
(]
DELOITTE HASKINS 6. SELLS
(_)
New York, New York January 31, 1986 9
OS e
(
32 -
,m
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchrnge Act of 1934, the registrant has duly caused this report to be cign:d on its behsif by the undersigned, thereunto duly authorized, who cico signed in the capacity indicated.
ATLANTIC CITY ELECTRIC COMPANY Dator March 26, 1986 By:
E. D. Hussard E. D. Huggard President. Chief Executive Officer and Director.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant sad in the capacities and on the date indicated.
Dato:
March 26, 1986 J. G. Salomone J. G. Salomone
()
Senior Vice, President-Finance and Accounting
)
(Principal Financial and Accounting Officer)
DIRECTORS:
l Elecnor S. Daniel
- Matthew Holden, Jr.*
Richstd M. Dicke*
Irving K. Kessler*
John D. Feehan*
Madeline H. McWhinney*
Jco.. Michael Galvin, Jr.*
John M. Miner
- G:reld A. Hale *
\\
l Dato:
March 26, 1986
- By:
J. D. McCann (Attorney-in-Fact) l
x
=
i EXHIBIT INDEX Exhibit No.
3a Agreement of Merger between Atlantic City Electric Company and South Jersey Power & Light Company filed June 30, 1949, and Amendments through April 27, 1982 (File No. 2-71312 and File No. 1-3559 Form 10-Q for quarter ended June 30, 1982, respectively).
3b By-Laws of the Company, as amended February 6, 1986.
4a Purchase Agreement, dated as of July 17, 1974, with respect to 9.96% Cumulative Preferred Stock (File No. 2-52000).
4b Purchase Agreement, dated as of De amber 1, 1977, with respect to $8.25 No Par Preferred Stock (File No. 2-60966).
4c Purchase Agreement, dated as of October 15, 1980, with respect to $9.45 No Par Preferred Stock (File No. 2-71312).
4d Mortgage and Deed of Trust, dated January 15, 1937, between the Company and Irving Trust Company and Supplemental Indentures through October 1, 1985 (File No. 2-66280 File No. 1-3559 Form 10-K for year ended December 31, 1980, Form 10-Q for quarter ended p
June 30, 1981. Form 10-K for year ended December 31,1983. Form d
10-Q for quarter ended March 31, 1984 Form 10-Q for quarter ended June 30, 1984, Form 10-Q for quarter ended September 30, 1985, respectively).
4e Agreement dated as of February 1, 1966, between the Company and Fidelity Union Trust Company and of Supplements dated as of May 1, 1968. (File No. 1-3559, Form 8-K dated March 7, 1966 and Form 8-K dated June 6, 1968, respectively).
4f Employee Stock Ownership Plan, as amended and restated, effective January 1, 1984 (File No. 1-3559, Form 11-K for year ended December 31, 1985).
4g Loan Agreement, dated as of April 1, 1982 between the Company and the Industrial Bank of Japan Trust Company (File No. 1-3559 Form l
10-Q for quarter ended March 31, 1982).
4h Lean Agreement, dated as of April 1, 1982 between the Company and The Bank of New York (File No. 1-3559, Form 10-Q for quarter ended March 31, 1982).
10a(1)
Directors Deferred Compensation Plan (File No. 1-3559 Form 10-Q for quarter ended Mar.ch 31, 19G2).
e O
t l i
.~
(JD EIBIBIT INDEX i
Exhibit No.
102(2)
J.D. Feehan Employment Contract dated as,of December 2, 1982 (File No. 1-3559, Form 10-K for year ended December 31, 1982).
10a(3)
Amendment, dated as of March 7, 1985, to J.D. Feehan Employment Contract dated as of December 2, 1982. (File No. 1-3559, Forn 8-K dated March 8, 1985).
10a(4)
Supplemental Executive Retirement Flan for Officers of the Company (File No. 1-3.559, Form 10-K for year ended December 31, 1982).
10n(5)
Executive Medical Expense Reimbursement Flan for Officers of the Company.
10a(6)
Description of the Bonus Incentive Plan for Officere of the Company.
10b(1)
Agreement as to ownership as tenants in common of the Salem Nuclear Generating Station Units 1, 2, and 3. dated November 24, 1971, and of Supplements, dated as of September 1, 1975, and as of January 26,1977 (File No. 2-43137, File No. 2-60966, and File No. 2-58430, respectively).
10b(2)
Agreement as to ownership as tenants in common of the Feach Bottos Atomic Power Station Units 2 and 3.' dated November 24, 1971 and of Supplements dated as of Septedber 1, 1975 and as of January 26, 1977 (File No. 2-43137, File No. 2-60966 and File No. 2-58430, respectively).
10b(3)
Owners Agreement, dated April 28, 1977 between the Company and Public Service Electric & Gas Company for the Hope Creek Generating Station Units No.'I and 2 (File No. 2-60966).
10b(3-1) Amendment to Owners Agreement for Hope Creek Generating Station.
dated as of December 23, 1981, between the Company and Public Service Electric Gas Company (File No. 1-3559. Form 10-K for year ended Decer*aer 31, 1983).
10b(4)
Letter Agreement dated January 4, 1983 between Atlentic City Electric Company and Public Service Electric & Gas Company relating to the proposed Hope Creek Transmission Project (File No.
1-3559 Form 10-K for year ended December 31, 1982).
10b(5)
Pennsylvania-New Jersey-Maryland Inter-cennection Agreement.
dated September 26, 1956 between Public Service Electric & Gas Company, Philadelphia Electric Company, Pennsylvania Power & Light O
Company, Baltimore Gas & Electric Company, Jersey Central Power &
Light Company, Metropolitan Edison Company, Pennsylvania Electric Company, Potomac Electric Power Company and supplemental agreements through June 15, 1977 (File No. 1-3559, Form 10-K for year ended December 31, 1981).
i -
1 EXHIBIT INDEX Exhibit No.
10b(6)
Pennsylvania-New Jersey-Maryland Interconnection Supplemental Agreement, dated March 26, 1981, between Public Service Electric &
Gas Company, Philadelphia Electric Company, Pennsylvania Power
& Light Company, Ealtimore Gas & Electric Company, Jersey Central Fower & Light Company, Metropolitan Edison Company, Pennsylvania Electric Company, Potomac Electric Power Company, Atlantic City Electric Company and Delmarva Power & Light Company (File No.
1-3559, Form 10-Q for quarter ended March 31, 1981).
4 10b'(6-1) Schedules, currently effective, supplementing the Pennsylvania-New Jersey-Maryland Interconnection Agreement.
10b(7)
Capacity and Energy Sales Agreement from Pennsylvania Power &
Light Company to Atlantic City Electric Company, dated September 24, 1979 (File No. 2-66280).
10b(7-1) First Supplement, dated as of March 27, 1984, to Capacity and Energy Sales Agreement dated September 24, 1979 (File No. 1-3559, Form 10-Q for quarter ended March 31, 1984).
O 10b(8)
Capacity and Energy Sales Agreement from Pennsylvania Power &
Light Company to Atlantic City Electric Company, dated June 29, 1983 (File No.1-3559, Forn 8-K dated July 1, 1983).
10b(9)
Agreement, dated as of January 1,1985 between the Company and Monongahela Power Company, The Potomac Edison Company and West Penn Power Company (APS Companies) relating to limited term and supplemental power and energy (File No. 1-3559, Form 10-K for year ended December 31, 1984).
10b(10) Nuclear Energy Contract dated as of June 15, 1982 between Pearl Fuel Corporation and Atlantic City Electric Company, included as Exhibit D to Credit Agreement, dated as of June 15, 1982, between Pearl Fuel Corporation and Chemical Bank (File No. 1-3559 Form 10-Q for quarter ended September 30, 1982).
10b(10-1) Amendment No. 1, dated as of September 20, 1984, to Credit Agreement, dated as of June 15, 1982, between Pearl Fuel Corporation and Chemical Bank.
10b(11) Extra High Voltage Transmission Line Agreement dated as of* April 27, 1967 (File No. 2-28696).
10b(12) Transmission Enhancement Facilities Agreement dated September 23, 1983, supplementing the Extra High Voltage Transmission Line Agreement dated April 27, 1967 (File No. 1-3559 Form 10-K for year ended December 31, 1983).
13 1985 Annual Report to Shareholders.
6
} g,
t EXHIBIT INDEX
~
Exhibit h.
24 Consent of Independent Public Accountants.
25 Powers of Attorney dated March 6, 1986.
e e
4 e
e
- l l
I s -. - -
_. _ - _ _.. _.. ~,.. - _ _ _.. _ - -. _ -.. - _ _ - _ _ - _.
ATI. ANTIC CITY ELECTRIC COMPANY SCllEDUI,E V - PROPERTY, PLANT, AND EQUIPMENT YEAR ENDED DECEMBER 31, 1985 (Thousands of Dollars)
Column A Column B Column C Column D Column E Column F Balance at Other Changes Balance at Beginning Additions Add (Deduct)
'End of Classification of Period at Cost (A)
Retirements Describe (B)
__ Period Utility Plant Electric Plant Steam Production
$ 269,054
$ 18,193 611 218
$ 286,854 Nuplear Production 227,122 21,329 1,282 247,169 other Production 19,461 (231)
' 0- 19,230 Transmission 190.969 10,191 967 324 200,517 Distribution 326,466 22,394 4,023 340 345,177 ceperal 52,987 11,887 1,304 20 63,590 Total Electric Plant 1,086,059 83,763 8,187 902 1,162,537 Land Held for Future Use 6,957 107 (C) (215) (D) 6,849 Nuclear Fuel 628 (628) (E) Construction Work In Progress 216,026 21,343 (59) 237,310 Total Utility Plant
$1,309,670
$105,213
$ 8,187
$ $1,406,696 Notes:
(A) Net of Contributions In Aid of Construction.
(B) Interaccount transfers.
(C) Property costs transferred from Non-utility Property ($107).
(D) Property costs transferred from Construction Work in Progress ($103) and to Electric Plant ($318).
(E) Cancelled uranium supply contract transferred to operty Abandonment Costs.
ATLANTIC CITY El.ECTRIC COMPANY SCHEDUI,E V - PROPERTY, PLANT, AND EQUlrllENT 7
YEAR ENDED DECEHRER 31, 1984 (Thousands of Dollars)
Column A Column B Column C Column D Column E Column F Classification Balance at Other Chenges Balance at Beginning.
Additions Add (Deduct)
End of of Period (A) at Cost (B)
Retirements Describe (C)
Period Utility Plant Electric Plant Steam Production 267,557 3.387 1,89d 269,054 Nuclear Production 221,993 7.276 1,233 (914) (D) 227.122 Other Production 19,642 (180) 1 19,461 Transmission 184.184 8.157 1.372 190.969 e
Distribution 308.352 23,446 5.017 (315) 326,466 e.
m General 44,243 9,705 981 20 52,987 e
Total Electric Plant 1,045,971 51,791 10,494 (1,209) 1,086,059 1cnd Held for Future Use 1,707 (E) 5,250 (F) 6,957 Nuclear Fuel 557 71 628 Construction Work in Progress 179,162 41,819 (4,955) (F) 216,026 Total litility Plant
$ 1,225,690
$ 95,388
$ 10,494
$ (914)
$ 1,309,670 Hstes:
(A) Certain 1983 amounts in the Annual Report to Shareholders were reclassified to conform to the 1984 presentation.
(B) Net of Contributions In Aid of Construction.
(C) Interaccount transfers.
(D) Study costs at Sales Station transferred to Deferred Debits.
) Property costs transferred from Hon-utility Pro rty ($475) and Investment in Subsidiary Companies ($1,232).
) Property costs transferred from Construction W n Progress ($4,955) and Electric Plant r-_--..
w....
4,%
ATLANTIC CITY EI.ECTRIC COMPANY SCPEDULE V - PPOPERTY, Pl. ANT, AND EQUIPMENT YEAR ENDED DECEMBER 31, 1983 (Thousands of Dollars) i i
Column A Column B Column C Column D Column E Column F Classification Balance at I
Other Chrnges Balance at Beginning Additione Add (Deduct)
End of of Period at Cost Retiremeny Describe (A)
Period Utility' Plant Electric Plant Intangible
$ $ $ $ $ Steam Production 257,781 12,161 2,385 267,557 Nuclear Production 213,941 8,716 664 221,993 e
Pumped Storage Production j Other Production 20,693 (1,051) (B) e Transmission 19,642 170,297 14,975 784 (304) 184.184 Distribution 300,079 15,053 6,945 165 308.352 General 37,632 6,998 526 139 44,243 Total Electric Plant 1,000,423 56,852 11,304 1,045,971 Nuclear Fuel 495 62 557 Construction Work in Progress 152,403 76,759
-0 _ 179,162 Total Utility Plant
$ 1,153.321
$ 83.673 11,304
$ $ 1,225,690 Notes:
(A) Interaccount transfers.
(B) Net of Contributions In Aid of Construction.
(C) See Note 1 of Notes to Financial Statements incorporated by reference herein for I
information with respect to the methods and rates used to compute annual depreciation.
e ATLANTIC CITY El.ECTP.lC COMPANY SCllEDULE VI - ACCUMUI.ATED DEPRECIATION, DEPI.ETION, AND AMORTIZATION OF PROPERTY, PLANT AND ECUIPHENT YEAR ENDED DECEMBER 31, 1985 (Thousands of Dollars)
Column A Column B Column C Column D Column E Column F Additions Balance at Charged to Other Changes Balonce at Beginning Clearing Accounts Add (Deduct)
End of Descri gt ion Of Period and Expenses (A)
Retirements Describe (B)
Period Accumulated Depreciation Electric Plant Steam Production
$ 96,850
$ 9,866
$ 1,501
$ 198
$105,413 i
Nuclear Production 50,862 8,887 1,817 572 58,504
-4*
Other ProductJon 10,024 541 10,565 Transmission 44,285 5,207 1,227 106 48,451 i
Distribution 89,163 12.484 5,517 809 96,939 Ceneral 8,853 3,303 1,133 11,023 Total Accumulated Depreciation
$300,037
$40,288
$11.195
$1,765
$330,895 Notes: (A) See Fote 1 of Notes to Financial Statements incorporated by reference herein for information with respect to the methods and rates used to compute annual depreciation.
(B) Insurance Recoveries
$ 1,698 1.ine Relocation Recoveries 27 Sale of Property 18 Hiscellaneous.
22
$ 1,765 9
O g-
ATLANTIC CITY El.FCTRIC COMPANY SCHFPULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT, AND EQUIPMENT YEAR ENDED DECEMBER 31, 1984 (Thousands of Dollars)
Column A Column B Column C Column D Column E Cj ucq F Additions Balance at Charged to Other Changes Balance at Beginning Clearing Accounts Add (Deduct)
End of Description of Period and Expenses (A)
Retirements Describe (B) J eriod Accumulated Depreciation Electric Plant Steam Production
$ 89,882
$ 9,589
$ 2,631 10
$ 96,850 Nuclear Production 44,196 8,280 1,614 50,862 8
Other Production 9,488 537 1 10,024 Transmission 40,551 5,000 1,603 337 44,285 Distribution 83,255 11,424 6,238 722 89,163 Ceperal 6,990 2,434 921 350 8.853 Total Accmrulated Depreciation $ 274,362
$ 37,264
$13,008
$ 1,419
$300,037 Notes:
(A) See Note 1 of Notes to Financial Statements incorporated by reference herein for information with respect the methods and rates used to compute annual depreciation.
to (B) Insurance Recoverfes 1,023 Line Relocation Recoveries 34 Sale of Property 362 1,419 e
e O
ATI. ANTIC CITY El,ECTRIC C'OMPANY FCilEDUI,E VI - ACCUHUI.ATFD DEPRECIATION, DEPl.F. TION AND AMORTIZATION OF PROPERTY, Pl. ANT, AND EQUIPMENT YEAR ENDED DECEMBER 31. 1983 (Thousando of Dollars)
Column B Column C Column D Column E Column F Column A Additions Other Changeo Balance at Charged to 7dd (Deduct)
,Falance at Beginning Clearing Accounts Describe End of Description of Period and Expenses Retirements (Note A)
Period Accumulated Depreciation Electric Plant Steam Production
$ 79,614
$10,648
$ 2,511
$ 2,131
$ 89,882 Nuclear Production 36,787 8,173 764 44,196 Pumped Stornge Production n Other Production 8,954 534 9,488 Transmission 36,671 4,789 1,050 141 40,551 e
Distribution 79,a42 11,320 8,141 634 83,755 Ceneral 5.540 1,883 433 -
6,990 Total Accumulated Depreciation
$ 247,008
$37,347
$12,899
$ 2,906
$274,362 Amortization of Nuc1 car Fuel
$ $ $ $ $ Notes (A) Insurance Recoveries 2,8,92 Line Relocation Recoveries 6
Sale of Property 8
2,906 G
4 O
A T
L A
N T
I C
E L
E C
T R
I C
l s
l
-4 l
~
~ ' ' '
e x
y 1
- e...
f
' f, l
l, ~
y
+
8 y
4; L~
g Af(g
~
O V
y
~'
y y
~
1 9
8 5
A N
N U
A L
R E
P O
R T
l f
t O
4 U
t t
'w]
Atlantic City Electrie Company is the official name ot the Company as it ap-
~
pears in the Articles of incorporation.
The Company also uses the registered trade name Atlantie Electrie in various shareholder and customer publications and in its daily operations.
P.O Bos 1264 1l99 Blad Horse Pike Pleasantsille. New Jersey OS232 1609 645-4100 The 1955 Annual Niecting of Share.
l.olders will be held on Wednesday.
April 23.1956 at the Quail Hill inn.
Snuthsille. New Jersey. A Notice of Annual Alceting uill be mailed in Alarch to those shareholders entitled to vote.
'w)
Letter to Shareholders 2
Report for the Year 4
Our Service Area 12 Cu,tomers At-A-Glance 13 Financial Information 14 Insestor Information 37 Statistical Review 1985-1975 38 Board of Directors 40 Director Committees 40 Corporate Officers 40 This year's cover design represents a significant milestone for the Company.
The Electric Light Company of Atlantic City and the Bridgeton Electric Light Company were each incorporated in 1886. Over the one hundred years which followed, these and other companies grew, merged and matured into Atlantic Electric, which today prosides service for more than one million people in fT Southern New Jersey.
\\vl
a FINANCIAL HIGHLIGIITS t
\\
\\.
Results of Operations 19851983
% Change 4 Change 1985 1985-1984 1984 1984-1983
!983
$ 579,733 5.5 5 549,531 6.3 5 517.142 Electric Operating Revenues (000's)
$ 490,327 7.0
$ 458,140 8.0 5 424.040 Operating Expenses (000's)
$ 60,519 (4.4)
$ 63,277 (4.3) 5 66.152 Net income (000's) 5 3.00 (6.3) 3.20 (8.0) s 3 43 Earnings Per Common Share 8R Dividends Paid Per Common Share 3
2.53 4.5 5
2.42 5.2 5
2.30 Total Assets (000's)
$1,299,633 6.5
$1,220,503 7.1 s!.139.973 Cash Construction Espenditures (000's)
$ 94,017 11.1
$ 84,630 13.7 s
74.457 Sales of Electricity iKWH)(000's) 6,199,672 2.4 6,053,791 3.5 5.x51.434 Price Paid Per KWH-9.48te 5.4 8.999e 7.6 (360e i All Customers)
Total Customer Service Installations (Year-end) 417,625 2.5 407.277 2.2 9s.5 2n g
i Number of Shareholders-Common Stock iYear end) 48,635 2.5 47.446 1.8) n.299 a
Number of Emplosees d' ear.end) 2,099 4.3 2.0 l 2
.9 1.,95 Book Wlue 24.76 2.0 24.27 2.9 s
23.53
.j j
f, k
)
y LJ 1
EIrli;gs & Disidends Per Share of Common Stock (in dottars) 8""
N j
-_ _..__-._-,._...,,_,,,n I
g9:t
.=.wn.-.m 19i3
= : = '
~ ~ ~ ~ ~ ' ~
1984
~'~ x a
~^ ~
$9g3
- N
.u.
_ s 0.no 1.50 2.00' 2.50-3.00 3.50
\\lirket Price Per Share of Common Stock (year-endin dollans
\\
\\
1981 s
-.a v -
-m w. - m N
1981 i
. - w-
.m
?
191i gyy4 A pp. - -
3
,o y
,N,,,.
... ~ - - -
7.
y" *'.O (m) 0 10 15 20 5
I i
- O krortmg to you upon the completion in earnings resulted from the fact that, cents, to 64% cents. With this in-ot tw5. we can cite major accom-despite our efforts. base ra:e relief has crease. the dividends paid per share phshments for the year. and opportu-not kept pace with generai increases in 1985 amounted to 52.53.
niti.:s 1br the future from a vantage in the costs of providing service.
pomt unique in the Company's After consideration of earnings This represents the thirty-third history.
prospects and the importance of consecutim year ofgrowth in Eamings per share for 19S5 totaled steady dividend performance. the diridends paid.
53.00. compared with 53.20 per Board of Directors raised the quar-j share achieved in 1984. This decrease terly dividend rate last June by 2h Our annual dividend rate is now i
52.58 per share.
~ W %* 1.
Enerev sales to our customers in-AL. y W.,
creased 3.49 in 1985. to a total S.2 j
billion kilowatt-hours. We base wit-
'4 nessed renewed strength in cur
,.i residential and commercial customer 7AN?
segments: The average number et
,.a
,,f -.. bb.
...f u.p '
residential customers far the year
~ ACiE D
grew by more than 8.700 and we i
recorded an increase of more than
?gg4.g 600 commercial customers. A new P
d 3,
y h-system peak demand of 1.432 mega-
[ j h s"t' watts was recorded in August. This i
t new peak represents an increase of r
\\
10.29 oser the peak recorded in a
1984, and it is 6.39 higher than the i Company's record peak set in 1983. I t
3 We have been quite successful in i
'the management of fuel and pur-s chased power costs. In 1985, such m
N.
r costs per kilowatt hour declined by i
8.39 from the year earlier. And for v.
6 1986, our energy adjustment rates.
i reflectine the costs of fuel and pur-chased power bome by our cus-
,3 tomers, have been reduced by appros-imately S44 million.
i r
p.-
For the second yearin a row, coal 9
.i and nuclear sources ofpower prorided more than 8fc of total
- * ~
system requirements.
T
/
g.
N Several records for generating unit p
4 and station performance were set in 1985, and Salem Unit 1. one of our jointly-owned nuclear units, estab-y s'
lished an all-time national record for I power output produced by a unit m a calendar year.
E. D. Huggard. J. D. Feehan 2
mr l
2 l
p U
The only generating capacity which 563.3 million, to reflect more current And, we have taken a closer look at we have under construction is a 5%
cost levels; and the second phase, for our business environment, observing interest in the Hope Creek Nuclear a net amount of $28.5 million, to that deregulation, competition and Generating Station. Construction of recover costs associated with the changing technology are having ever the unit is vinually finished. Fuel forthcoming operation of Hope.
greater effects upon our industry.
loading and testing are yet to be Creek. We anticipate a decisiori by Almost a century ago, the Electric completed, and Public Service Elec-the BPU on the first-phase request in Light Company of Atlantic City and tric and Gas Company, which owns the first quarter of 1986, and are the Bridgeton Electric Light Com-the other 95% of the unit and is re-seeking to have the second-phase pany were formed. Customers sought sponsible for its construction, has increase timed to coincide with the out these corporate predecessors of advised the Company that Hope commercial start-up of the Hope ours for the service and convenience Creek should be operational in late Creek unit.
that electric lighting could provide, 1986. A cost containment agreement The legislature in New Jersey has and not the electricity that was pro-for the Hope Creek unit was approved mandated periodic management audits duced. As we celebrate a centennial by the New Jersey Board of Public of electric and gas utilities in the of service, we do well to remind Utilities in 1983. It established a State, and the Company was among ourselves of that fact, and to find in it targeted in-service date of December the first to have a comprehensive the essence of success which lies 1986 and a targeted cost for the plant management audit completed in 1985.
ahead. We believe that the years to a the time it would begin commercial On balance, the findings of the inde-come are filled with challenges and operation. The agreement provided pendent auditors confirmed the opportunities for the Company. Our for incentives and penalties based effectiveness and efficiency of the future progress will be built upon a upon the final cost of the unit. Our Company's operations.
competitive spirit, with renewed portion of the originally targeted emphasis on service. performance and nt was approximately 5198 mil-The audit report noted that decisions the effective management of costs.
d at December 31,1985 we and sedons by cor'porate management The Company's commitment to be orded approximately $204 how sawd customers hundreds of alert to the opportunities of the million of costs. Our cost of the unit mi# ions ofdo#ars, future, and its ability to respond to a completion is currently expected them and manage them, will guide it to be approximately $226 million.
Audit recommendations suggested the toward the success of a new century.
Based upon developments to date, we potential for a modest reduction in do not currently expect that the cost overall expenses. Many corporate For the Board of Directors.
containment provisions will have a projects designed to cut costs and sigmficant negative impxt on improve efficiency had already been V
[
a.arnings.
underway at the time of the audit, and (
7. c e Lu -
Improvement and support of corpo-other efforts based upon the audit rate carnings depend upon receiving findings and recommendations have V
adequate base rate relief. We are been started.
J. D. Feehan continuing our efforts to obtain the In large measure, we would charac-Chairman of the Board needed increases in base rates. Our terize 1985 as a year of reflection and appeal from the BPU's denial of rate assessment of future opportunities.
relief in August 1984, and the affir-While others evaluated us in a man-
/
mance of the BPU's action by the agement audit, we took a closer look NY
'New Jersey Superior Court, have now at ourselves and set out to enhance E. D. Huggard been taken to New Jersey Supreme our operating and planning practices.
President and Chief Executive Officer Court. I ast April, we filed requests
% have worked to better understand with the BPU for rate increases in two our customers' needs, making January 31,1986 phases: a first phase, in the amount of changes within the organization to more effectively meet those needs.
3 3
A T
L A
N
'l O
9 hold characteristics and energy use.
easier for customers to select our USTOM ERS Although single family homes remain conservation services, and to provide w/AND SERVICE the dominant type of housing, there greater incentives for them to do so.
has been a shift in new housing units We introduced shop-at home conve-ie continuing success of Atlantic to multiple-family dwellings, such as nience for customers desiring our ectric depends on its ability to condominiums and apartments. There Scal-Up program services. In addi-
- asure and interpret customers' has also been a shift from the use of tion, we offered to install electric eds, and then to dedicate resources oil to electricity for central heating, water heater insulation wraps at no meet those needs.
while changes in the use of natural charge, giving us the opportunity to In early ~985, the Company's gas have varied slightly over a five-offer other quick and inexpensive l' forts to assess customers' needs was par period. Electricity currently conservation measures. In 1985, over pported by means of a residential appears to be the predominant 2,000 residential customers took
.stomer attitude survey. It provided heating source in duplexes, advantage of various Seal-Up ser-condominiums and townhouses. Sur-vices. More than 7,000 home energy iportant information on public per-ptions of energy use, conservation vey information with respect to audits were performed, and more than id the Company. Customers said changes in appliance usage helps us 200 other customers took advantage to address customer needs, forecast of energy audits available through a ey pref rred coal-fired generation id conservation as the means of future energy requirements and iden-new Commercial and Apartment roiding future energy shortages, tify additional opportunities for Conservation Program.
I lthough customers indicated an marketing conservation programs.
For the first time in several years,
.crezsed awareness of the impor-For 1985, the Company sought to the Company conducted a survey of nee of conservation, there was no greatly expand customer participation commercial customers to examine the in the reported level of in its various conservation programs.
relationship of energy use at various en by them to save energy.
Some improvements over the 1984 types of businesses to factors.such as i
levels of articipation were noted, floor space, lighting. heating and P
results tuggested that iore immediate economic incentives although 1985 results did not meet all cooling needs. A better understand-iay be needed to encourage conser.
of our goals. During the par, the ing of these relationships will assist ation efforts. Generally, customers Company made changes to make it the Company in forecasting the future l
l
, ppeared to hold a more favorable jy.1]
,ANy$ -
l
...3
.:, e 69 ' c h.v ; go. - M i[Y ?-
n h ;.Q.....
... [:
.s (h[1 pinion of the Company than in the r,4W
.h,;f 9.! C '..?vi
'ast. However, survey results indi-o.. O.? '.* 4 I th'h. D W 1.
o : n.& n n.n EV I ated that we may be able to improve
' '4. {
<y3 m.
c....-..
....r/,.<. c<u.....,c..a.. w up 9.g+r.
e 4
! ustomers, perceptions regardm.g cor-
%.6. x s.xn7 g.
o.
f:E..p gf.g.
I mrate profits and the value of M-a(.
1..o.. ; 7;.. ':r 1.! ^. ; 5 '.;,
'.. M ;.9.'y[;7 Q. T T %p M i :lectricity.
. t. :,
S., Q. g.... 7.7 M.. D.-v.W
. ~ $ f P.. _u y n= *... * '...
.;J The responses to a separate 1985
.u p
- m.. m,...
v..
a
.,.Q:4 g g.g.~rp.:7..3.,y y..g g % p::
ipplitnce saturation survey of resi-m eg ' * ^ t : ::-
h,h.N.d@v:i.
@[M[ f(JN(A8i89.h
- s.
Sential customers, and comparison 7M y
with prior pars' responses, helped us 4M : - e
- VN JD tD... ~.. [ o.
~
~.
identify trends with respect to house-h.
h,
(
h
.. "s -;. fr '] M s,'.E i S. mf;. c ?.W*.j;. $..,.? [
i
. p b i s!
.s j ' f :( f l::: D.] % j j f [h [
g-
% hy f
.,4 W
- -Hb.
q:" k.0f.Y.l O..
l::b". 5 Q '.h.
.k L
Nl ' N.MjhNhkj. '
i..
}; }~.;[f?lkh)!
f[
The Atamatic City skyline has beconne a insanier scene of Amer 6cahmost visited city.
O 1
4
C E
L E
C T
R I
C
- 5 % '
v.1g XJD
. y ) s.z.# ' 7
- O Y.,. O
' j. sy?[4. K 3 J ~~.J[.g f m f d,/ r s.
.v.
- eds of this rapidly growing seg.
..r jf ]
- f
.1 J l ~9.,'l i
' ' n',;i.- V }T s-F ient of our customer base, as well as s
iding in the development of better
[.(',~ Y;',..d..$. % j,,
M'ic: } 7. c f' f (. }gv..j ig $ f.; $. ~ I ~;D{.:.
[
r
. t nergy m:nagement services.
- '
- Q.g.fV
. ;.. [.
l Concern with improving customer 7 if.p';.y. ;".
g e.. y.
i;y3..;K'.. -' A Q.-
g
! :rvice was exemplified with the 1
pening of two pilot customer cour-4./Q..i p 3.i j E.? 4.j A.D. 7;ii;,;f,Wy.f l
h:?..
~ V.1 + ;
9
- Hg.
r,
- sy centers in 1985. The results of a pecial telephone poll had overwhelm-Q-A";p; e
"~'.jl
.' g., f. 1:7Y ~.<- p \\
l
~
.. - g-G.
V.h >I. "f y.y. igly indicated that personalized cus-cf .g(..~' O O
- {
C??. )mer service at remote locations --9.. -i 1- ..? ?,,
- T J'
[ ( s. ould complement the Company's y W 'in. l3 ,3 e.r. J* ~ ' f%g 31 p I . 1 q{h g, entralized customer service opera-g/.s.
- i. P 1
J b ?. ff fr. Q. 1E. ' .F 7 <.. ion. Visitors to these centers have ] ,; i: ..Q. ' '. 1 e ccess to a full range of services, .? af rom help with energy conservation d. e:"..;.l't %L .'y);. o bill payment assistance. The expe-I V.W - i . M/U:.. .: 4,9 4 .i. "P ) b. C '._.f M. c J P '.: h, "?. .h W6M1h ience with these two trial locations i vill be used to guide decisions on the ' m.?.. 9, N.N 1 '. ; h, ,e.
- o..,
4-
- r
) +.%. "... Q:gn$. h,'Ar Q,y..-m% ; a T.,e
- 7 S.". 1,;.'?M. ug.
a .g 4 ' ^ otential opening of additional cus-y,; t : T Q .,...;.'.g..; g., .a .a 4. n Qj. (g:/ n w. ~ omer courtesy centers, e Offering various rate schedules ' e 5. " ;-5 ' p:..; ;.MJ( ? fh',3 [ es the Company to meet specific Roadside stands han become a trademark of the southern portion of the " Garden State." m r needs. Recently the Com. -established a street lighting j :ariff which gives communities the the ~ allocation of charges for electric the need to afford customers a choice
- hoice of renting or owning energy-service, and the Company has asked of home heating methods.
efficient street lighting. In 1985, a the Board of Public Utilities to recon-In September 1985, Hurricane small group of residential customers sider a decision which the Company Gloria struck our service area. Com-agreed to participate in a one year believes would adversely affect a pany personnel were able to restore pilot program to test the effectiveness majority of its customer classes and 95% of the customers affected by of time-of-use rates. These rates are the economic vitality of the service the storm in less than 24 hours. Once intended to provide an incentive for area. In another State regulatory the situation in Southern New customers to shift energy usage from forum, a proposal was made which Jersey was controlled, volunteers from times of peak demand, thereby reduc-would ban the use of electric ing the need for costly additional resistance heating in favor of natural ? f;- %.k g yQ-generating capacity. gas. The proposal was ultimately 9' '., j. (p Q3.hy 7. Q'rg The Company's concerns with withdrawn, following efforts by the f 3 f(y.;yk - 4g regulation are not only related to Company to demonstrate the cost- / Egk securing necessary rate relief, but are effectiteness of electric heating, and also related to the interests of its - N 4 M - Ml AM customers. One of the proceedings hM k ' [% $dN continuing through 1985 has involved Employees of the Safety Department volunteer their time to explain h.gh voltage bazards. O 5
( A T L A N 1 Y radio-equipped Company vehicles Stations set new records for plant Compmy work force went to have helped summon life-saving ser-output. Compared with the use of oil-p restore service to Long Island vices and assistance in emergen-fired power generation the use of
- hting Company customers, who cies such as car accidents and fires
.relatively low-cost coal and nuclear re more seriously hit by the fuel saved the Company and its cus-through its Radio Watch Program. i For the Company, community in-For customers with limited financial tomers more than $136 million in 19??
- ricane, resources, the Company has partici-Units I and 2 at the B. L. England
'vement has long been an exten-Station are the largest of the Com- .n of customer service. In 1985, the pated in town meetings to discuss enkers Bureau made over 240 pre. the availability of free or low-cost pany's coal-fired units. There are certain unusual weather conditions weatherization services. stations to community organiza-which can create a downwash of plant ns and schools on such topics as emissions in the nearby area. In order ergy conservation, electrical safety to assure compliance with regulatory d environmental concems. Also in I' E R A T I O N S requirements, many attemative oper-85, the Company began supporting ating configurations were evaluated. tildwatch, by distributing informa-For 1985, the Company's cost of fuel and the Company decided that con- >n on missing children in monthly istomer mailings. The Good Neigh-and purchased power per kilowatt- .#q >r Fund, now in its third year, helps hour. by far the largest single element >g % heese i s' e': a MI ,.kl.;l"~' 8 - 'b of the cost of service, declined by
- serving South Jersey residents meet 8.3%. Output from our nuclear
._- [- inter heating costs. In the summer sources of energy improved substan- ) j.,pg onths, the Company has opened its v
- i mrs at the B. L. England Generat-tially during the year and, together 8*
[ f ' bs : *[~ / [.#61? ~ with our coal-fired sources, helped .g Station to let visitors "see electric-contain the cost of energy, in 1985, r. f -; } y
- made." Employees in Salem Unit 1. one of our jointly.
' H '2 --- ympgr-owned nuclear units, set a new record 3 for 277 consecutive days' operat on. . %g.~- < ',{%Mr Av i and it also set an all time national . ~ S'? $ y.- record for energy generated by a unit t ~ ~ - (M ' +D ') g in a calendar year. Nuclear power ~.'.-{57"5b purchased under contract from Penn-i sylvania Power & Light Compar.y in -[l 1985 was double the 1984 amount. ..-['".. J' @' d due to the start-up of Susquehanna Unit 2 in February. That unit set a The coinpany's open house tours at
- a. L England Station provide an record in 1985 for the most power
- PPonunny Air Mtors to m bow produced by reactors of its TIE". In electricity is inade.
addition. both of the j..omtly-owned. ~ e coal-fired Keystone and Conemangh I The new custest.ee courtesy centers provide an estra opportunity $st personal contact out la the service area. N ~ ^-"N v---
w F C E L E C T R I C r O m struction of a 75-foot chimnes would a .ng. . A-;. e,r <.. ..y,e e h p. 4 -' - 'J be the most effective means of respondmg to the situation The new f '. : ev [' }. b.,., 7.. stack will be designed to replace the n ..,. f. :. : cf.pf. g g
- ,'p.
g.gf [ j..7.. g i-three smaller ones now at the station - c.,e w W : ' '.;.e -: E Several studies were conducted in Q[ s .[f_ My{. /> y.
- 3..
32, 3 3 ,r
- .1
- ." Y.I.:
1985 to identify aditional ways to [ a .}.. reduce the costs of providing elec-i l
- 4. 4 +.' :. s.y g
p tricity We examined the feasibility of r c7 - .f.. p. ;<2.. p.. f f gg. % f..~ g A. modifying some of the Company's i . [ j ;;. g%n. could be escled to more econom- ' f. , J, i ' '. '. : ~ ..,t *. oil-fired generatmg units so that they j k , f; . i. ~.l ;..;% T *..f]g ? i ~ .J .? %pp ~ F. :..i[e ' ' :. .Q M M ically follow changes m system f A.. J ?4 :.,:d..t. 9 [ . ([y;ay:;..hl[.4 energy requirements Based upcn [
- "h~.
.' NMS 2.M-flE /[,h [4 3 gi :t?.. ' - A I results of another study completed m d%g(. f fy7 q.f- 'G.g O.k.% 7:pp:.;.' 1 g ': g{-N cj. 1985, plans have been made to mod-I [ 5 .. W..;: ej J. ;.;_.- 4 .. p:' ify a second unit at Deepwater Station
- 3. :
- .=
- m. -
.e t -3 3 to enable it to bum natural gas when ..v *.A.. u,., .n .ca
- 2k p4
~, x., ( . i f.t c %, j Q it is available and economical to do so in 1985, a new computenzed mam-4., o 6 ... - o,,. ? :.- ~ -... yt,.t,. p,, a g tenance management ss. stem was c;a.:.. .w.. . 3. $(. y.. s .w .= x..s, ,a - 4;r..a c . / ;f g;.0 f. wN j .t.. y':wh.bg 7.f f >. ~.} -p...c. s ..,. ',f.- selected for use starting m 1966 by y;y,.:h.Ql,l". ." g 's the Company 's production depart. g M.. ". d'
- 4. !.M... OC ^ C i C,NA rw h'(Q ment This system will aid in 1
[.2.'.)). Cyh hi.d'K ,hy :L:3:M y:R.'yrNcf.,([.. [ M.'f ~: ;; jf.,.{4)f.j Q.7 Q planrimg maintenance work by iden'c Q ' % $. 7.;.g J .;. f.1.(- .f gs;.lj. Q .. :..' O.'.p : dow? - fying tool and matenal requirements. ,; f.::;,q, g$q y%. :, y* $.. _.. y -..
- . ; ;- 3.,
. ::,5.. Q: s. e. ~p . f'y ;,c' 4.; g -::.. ... m.; g.s _ u. ?;. ~ ? " :,.J;Y. :Q [;;., '
- Q&R
& FF t.Y L 4 %C M ' 'l. k j., f.1.%%.;i-]t.',3 d.Mi'.:h.i l p.y:':ry,Q f.)l. Yl{..l' 5 }0, ,Q )\\, p.' (${.M W. A:f. ') / f{l;':,?,"j",. j;;;}.N:(
- ? j._ -
.Yrl. 'M. ..;J/ u $9p 2 r.
- e
-:q .y ' y: ' V.< - - : '.:nh T .c.O \\ T f
- ;+
.f'M l,;.;. .;ff.f.:l0;.i '*), W f
- (t gh, :.p[.f[e'og_;l)f k,M:.,:
? f l .f..:}:. :Qf.e.t M.. '.t!;ji Q3 : g .~ r~ l w ny._ y , S., \\, ,., n.;. ,;,4 71. N,P g,.. .o, N,, Cogenerstmo may prove to be an r ,t S: q ', = .: h.".,g#:.X q[ t --m:or
- c.. ~ '
V. i' 9O/g,..j h & %, ' p} 4 eHective means of prending energ3 .' i. D . gg Y{.[.. , l 7.? g%g c..gkfl, f,p w. d Q.g ' ospitals 3, ';s. ; - W QQ.ls' ^if,Q Q( 0- N*4
- ..; a
) l l; .L~, p ,.re, Opportunities to prmde erwadiy. per.a-h a servtce anny be sound at every ,, -a-r locanos. g ( r m d
-E (- = (h S w / A T L A N T 4 F ] 9 t-( J l kf i 7 ?.1; setting work standards, and formaliz-2 ~ g :; g?.( h ing maintenance procedures Savings e a g ~....a 4 b'c' - '/;.S!4 are expected through reductions in j i e /
- 5.,,dhti r ?.:.
maintenance overtime, contractor = 4 ) f,. A n. [.I. costs and improvements in generating d gg 'g [ '., T M.f.,. .,. [. unit availabihty. j h d ?yg-p . M. '. ?, (: . g - By replacing major unit compo-1 = g j g c.: nents, the useful life of existing 2 ..gcf.- 2 a *. '.1:(.. @ if generating facilities can be extended. g Ly ? 4 Yh:M. ' @.y, and costly additions of new generat-7 ( i / .:e ....,J.,." B **S'..-.. ing capacity can be delayed or t' - )' A ~ ' b ) am I g Qg-X.'J ^ '1'( C.) l,... A;A. ; redu-ed in 1985, major studies were f l ji.;( y.. begun to identify situations at the 5 [, 'g y:7 T. T J.. ' B. L England and Deepwater Sta-fj ( . f-: . p ., y. t. ge.., i.. .y m g g. tions where the replacement or
- P i.V @. v j 7 3 f +:.
La
- f..
- s r
- f. g s
c.
- ,. y.
?.7 O.,e refurbishment of major generating (; j7$.p.%/.'M,['J ? -f 4,,. f,., c. Q,,. e - {C ; p :"; :;. '.% A. m. '. -.. ; - unit components would result in y ia ,1 p,g. ' "l m.N. ( improved efficiency and availability- ? ]i..".'. : 1cj] 47 f.[: [ as well as longer operating life. ]
- /.j
- :q EM*3'j,~ )~ i]g;
,,4 i g !.;,. sin. :y.j s j, c. 7 g.q:,..~- The Company's transmission sys-b .g p[ 7 tem was strengthened m 1985 with "3 if f.'. D.K(
- f.fy the rebuilding and upgrading of the c.
= ^.q: h [M - p{ 1 4 ?..rf c . c..o. J [.l;[ f.1.[') 6. > Corson-Sherman 69.000 volt trans-l U j .~ 3-1 15 ~. :- mission line to 138.000 solts This 9, u,...y,p.,f.. S3c w - "' ;. : N l ig d..- U $ h:5 {Q . project will (erve to reduce power M.IE.,:J p '.K. ' T i g; w., J.J ( gf p O lif[.::; line energy losses and improse sys-g JQW; W E 'A...;<2 Vy:i .. ".. [ ;.(,'.,v .; A.. tem reliability. Import rehabihty was O.,g..M... : 3 .cs m;.7. @u..q).. 4 also increased in 1985 with the incep- 'd O. 3 .s., ...c: : u 3... ,=- . c., p. ? J,..W.U s..J... ; j tion of a program to install back-up ,J'..,'. tn : ; A4 E t rc. S. y,N ; e + ~ J y. c,.,
- Y.c!
power transformers at the Compans s Mir.,M ( ($$ y. &]7 j: ...5; .j.'j.y Sickler. Silver Lake and Mickleton x y
- i,.
..~m. g._ si- +cJ. c (h. c 4 +t ' 5 F Substations. = B- .c. y.: s Y:: -.J t :- .y m ., y.. ..3.. 4....Q ,.g.f; 3.. 2 .4 k <.. ;; ._2, .,c. ..e
- y:.1 : u..:x,9 y% 1c. f.y,Q'%
J.R _-f .M' ?? ]. ~ i2]3 ; yy .g y-]:::,..;g $ppp.i g . - h.i;g: L4.4 e. - "g ... + ::. s. C: 5 ,khi fi !; -?. s t h e., '} :,W;. Q i:g 3::c;. fl 9;s f. L : f i h. hf$k ,f .c 4 & W' ;; M M - d : M' w M $ 3 R. i.. M y? 4- &.y;N-p: 3. C :G.h h:~ .m n: h. .n
- f..".M T.Oh,;V'.J[. 71! f 21.D j
I [%,Mk.:.p[.hM hl'.f.'3 >?. [ p;O.' N. ';:!...y ;;*:y ;3;..i
- y 6
L.N:y i a: 6:p,_: : >. :. ,3.* ,.9
- k., ' W-;.?:nD;,. y ;.y ;;,q;
.. W.o &. f: '.".. [. 5 " ' -le?y..... <V3 4 z, ',1,.C. Q :n : C.fp;h., Gr.. M,.,W. < r s-9 - u v %. ', "? og.1 VT2% ?.- i N .h. h.... M h h hk l'- k .9.q:: ath in the Ccepany's service territory includes the construction of modern and .ent put6c huildings, such as the Atlantic County OfAce Building and Atlantic City Puthe Ubrary. i 0 l i 1a ~ = k_i -i
C E L E C T R I C operation of the radio-controlled sys-7 d-u tem will begin in 1986. and results dNERGYSYSTEM 3 from the trial program will be used to /PLA NN I N G g determine the value of offering the y,,$ service to more customers. effect, our customers are buying .E Cogeneration involves the produc-i :tssitits and conveniences such as -f tion of electricity and other forms of hting. heating and air conditioning, g& energy, such as hot water and steam. me of these "end-uses" can be ~ ~ i Successful applications of cogenera-wided by other means. The poten. p* tion may help reduce the need for I for substitution, together with other more Costly forms of generating One of our customers. Airwork regulation and technological devel. corpornuca. is an industry leader in capacity. For more than 50 years. the ments, present many cha!!enges [1**jy,,((,$,*] Company has provided cogeneration d opportunities for the Company. services to DuPont. Additional 2r pl:nning process has been devel-tadustrial applicadons. cogeneration opportunities in the ser-ed to enable us to recognize the itions created by this changing busi-Different techniques for controlling vice territory are dependent upon customers' use of steam and hot demand and energy usage from the ss environment. customer's side of the meter can have water. In 1985, the Company sup-a wide range of effects upon the costs ported cogeneration feasibility studies at more than 20 mid-sized commer-and forms of customer service, as ~ well as the financial well-being of the cial and industrial facilities. The Company. A special study to investi-Company also helped fund a major study of the cogeneration potential gate demand-side management was of a district hot water heating system completed in late 1985, and the res'ults will aid us in' developing in Atlantic City. Such a system effective strategies for ma'naging appeared to be feasible. and the growth and delivering services Company is involved in more desired by customers at the lowest detailed negotiations with the project sponsor. Major cogeneration oppor-reasonable cost, One of the methods which should tunities with certain large industrial customers are also being evaluated. be helpful in controlling costly One of the more pro'mising future growth in peak demand is the direct control of appliance load. Iri 1985, alternate energy technologies is i P otovoltaic generation. This means h the Company enlisted more than 500 residential customers in its " Peak of converting solar energy directly Saver Club." to test the effectiveness into electricity may prove to be cost- ^ K-Tron corporation, a major of radio-controlled switches for air effective by the early 1990's. For ,y. N,#Mc",[p[",8., conditioners and electric water heat. years, the Company has been collect-T ** ers. When demand approaches a peak ing local solar data and reviewing y service area ldeal for expansion. level, the Company will be able to l f tum these appliances off and on for short periods without perceptible dis-comfort or inconvenience. Test i 9 ) f
A T L A N T o
- lopments in solar technology. In n
kg, c p,, ,~mm. g,i ,,c y *,gh $.,],. G *gh.y..&h 1.#A. p {r-
- 5. the Company combined the alts of its data gathering with J%N 4Ee 1
O 9 .N Pis:8 ~, ings of an attemate energy tech- '4- >gy study to develop a better [' ' g 3 4.4d' M )
- ssment of the potential of this
~ ' 4{ - %[- ^' . ~ ~ mology. The Company has plans s e further research in solar energy, ,k g would hope to confirm the com-s cial feasibility of photovoltaic ? ,,^ 1 eration in our service area by s [' i ms of test programs and joint tures. g ) 'he Company has also studied the ibility of using refuse-derived fuel ~ _ _~. ' 4 s generating fs:ilities. These stud- },, ..g responded to the interest and con-is of municipalities seeking to tage waste disposal and have xd develop criteria for the safe l J efficient use of this potential rce of energy. g-k _ ~~ POR ATE FIN ANCE 3 / ND ADMINISTRATION 7 A Personalised sharehekser service has b en.=h ca ibis year by bringing au transfer asent 1 isfer agent and registrar services sad resistrar functions in-house.
- e brought completely in-house in 1985 to provide more timely and tion of the State's limited tax-exempt the expiration of Federal tax benefits
- ient turnaround of shareholder financing capacity for financing Hope afforded dividends reinvested in new
.sactions. Last year, a cross-sec-Creek pollution control facilities in shares of stock, the Company i of shareholders participated in a 1985, but we are continuing to seek arsended the Pitn in late 1985. <ey which has helped us know the necessary allocation in 1986. Beginning in 1986, reinvested divi-n better, understand their invest-During 1985, we issued a total of dends are being applied to the it objectives and get feedback on 423,305 shares of Common Stock for purchase of shares in the open reholder publications. approximately 511.2 million, through market. he Company's 1985 financing the Dividend Reinvestment and Stock The first phase of an Integrated
- gram included the issuance of Purchase Plan and the Employee Customer Service System was imple-h long-term debt and Common Stock Ownership Plan. Over the last mented in 1985. Scheduled for ek. In October, we sold 570 mil-10 years, the Dividend Reinvestment completion in 1987, it is designed to i of 30-year First Mortgage Bonds and Stock Purchase Plan has been allow quicker response to customers' h an annual interest rate of 11h#k.
effective in raising more than 562.6 billing inquiries, improve record-were unable to secure an alloca-million of equity capital, while keeping accuracy, and provide for i providing a convenient means for more timely responses to service shareholders to buy additional shares order requests. of Common Stock. With she Com-pany's reduced needs for capital and I
I l C E L E C T R I C I l This past year, the Company com-promote self-confidence, healthful improvement, and will also be used eted its evaluation and selection of lifestyles and general well-being. as a benchmark for comparison with new automated generalledger Voluntary skill refresher courses future surveys. counting system. When imple-proved to be a source of accomplish-The President's Award was estab-ened as an integral part of the Cost ment and incentive for many of our lished to recognize outstanding enter Management System currently employees to pursue more advanced achievement by employees. The
- ing developed,it will provide more education. The Company made avail-award for 1985 was presented to one
- til:d budget information, and help able its facilities for a program of the Company's customer service
.tablish clear-cut lines of cost con-promoting good eating habits and l ol responsibility. sensible weight control, and an after- "g 1 itors were established in 1985 to started by employees at Company i Company-wide performance indi. hours aerobic exercise program was a J 1~ j
- ep track of progress in achieving headquarters.
erformance in such areas as service ..(%g - f mg-term goals. Approximately 20 N 4 idicators were selected to measure ) eaf
- liability, safety and dividend rowth. The use of performance indi-The production of reports to ators is now being expanded to mas and membus of the iclude measurements at the depart-an ci.: e
.nity ioyoive.. coordinated team effort of anancial. tental level. accounting and production skills. Atlantic Electric's promotion of afe work habits involves not only r[jtion, encouragement andDaining, but also informal employees for the interested.' car-ing approach she has demonstrated to eL customers. Her spirit of thought-I .roup incentives. One of the most far-fulness and dedication to customer eaching safety training programs in service were cited as the strengths. he Company's history, the Confi-shared by all of her fellow employees. lence with Chemicals Program, upon which the future prosperity of wiefed more than 1,400 employees in Atlantic Electric's customers and he safe handling of potentially haz. shareholders will be built. trdous chemicals. Dinners have been sed by the Company to honor
- mployees working together to set g,,,,,,,,,,,,,,,,,q,,,,,,,,,
iew safety records. In 1985, several rapid, occurese gathwins of information for meter recordt )perating groups celebrated more han ten years without a lost-time accident, with one of them setting a A comprehensive employee attitude ecord of more than sixteen years. survey was conducted by the Com-Throughout 1985, the Company pany in 1985. Almost 1,800 physical has sponsored and encouraged vari-workers and office personnel ous employee programs designed to responded to the survey, which cov-cred such matters as work relations, 1 I communication, pay and opportunity l for growth and advancement. The results have suggested some areas for l l It -,,m e
i i i UR SERVICE AREA u,. ~ . l ~.:\\ ' -.;.y .q. m 7.c, ' q. h.,. ;.-g L.s,, '.y LCl.~' ?y*:..'~,
- y.
- ) f glg')
~ . d, i t, V ' hs f ' d,i6 1L 7 W "1 . '.. ',Jf... {%, i: F., 4
- m. w.,
y,D ' _. ~,. :...x. .s . n.f,.s.
- ..A-
.q w ~. - _ e <..,.; <..ree y)-y A-l 1 ; A '& -L_ . c 3 -+ w. g 4.,..j + y, ~ 9 9h,.,y - 4,. wri,1.. i r. r ec 3 7 yg33 wO . ~,. .v .3.. . ; L. v.? l f'..: th ;. y- - m., ^ m -?;.'y,-;i7 j,. p y -Q6.N.h t'r. T i ""...c g', s
- .,. A f..;~..
- i. %
-9, , 2 - s - er e .s?. .c., E..., _. .(,A w A.. g. ,'~
- i..., 5.. -
' u.r C i ' ' 'T '. ' gE =W W. y, e - r..,. ,", y, y * -,..'",.......t~, P. 3, 14g. s a4 3 4 ,g 3 .q.,, s.y g a. + .k?'^~
- c 4..
- . g Nb th
,,.y '- . s., f .L !$M* Mc '. ? ..- z-a- '.,&;,.. -w %' s; gw e;:- '.c, a.. 4 -ma rasark CWry 3~ '. :,c . p> '.+ s ~ < ?!. a ' f... h ~ [t .- - R 4.';. ,... g. .~ . ~, - b %- z ';;.g-- p h: X-R. 5.' Q Q.';& & - l 42: ,,, ".. K. - L I i. ~4 ~ ~. , u..r,%p:%.J. j r, ,,.y.;;'&'f..,% '; f;;&'Q&sA Q. a Y ll: l
- p, #.
- ~ - ~.m + a .s ... J.g AgA *gu.- n "-sg .w. [u. y
- r..
. _ g.. s ' ' _ '.,,,. -'* h &; 15 ...\\ E_ f 55 ? hk'$
- j. ^
( lantic Electric's service territory, commercial and light industrial cus- ) resenting the southern one-third of tomers are situated in the western part
- State of New Jersey, is situated of our territory. Farming and agri-ar such major cities as New York, culture continue as a significant t
iladelphia, Baltimore and Washing-customer base in the central and
- i. D.C. The majority of our custo-western regions of our service area.
rs are residential and commercial. { Tourism plays a major part in the l 2nomy of the eastern shore, while 5 i t .. c ,. _. _ _. - ~....
ISTOMERS AT A GLANCE average % of SIDENTIAL
- ]e sY
- average number of Atlantic Electric residential cus-
- q 78 k
1ers increased 2.6% in 1985, while average use per .tomer declined 2.8%. Over 9,100 new dwelling units ,,,,9 7'4 43 M re cc---r+i in 1985, of which 36% were electrically N ned. The majority of 1985 new home construction isai 7.7 43
- urred in the eastern part of the service area.
isse q 7.9 44 7.6 43 Est.1985-2000 iss5 i 1985 2000 ae Joos 7.5 44 ergy (billion kwh) 2.638 3.473 - 1.85 % e t 2 3 Miltons q'kwh ik (Mw) 680 874 1.69 % )MMERCIAL les to commercial customers increased 6.9% in 1985. ,,, q g 42.8 33 even casino-hotels were in operation at year-end. Sales to N ~ E 4.2 34 it segment increased almost 19% from 1984 and iss2 presented almost 6% of total energy sales. Approx. N E 46.8 35 isai i Cj,700 of the 44,256 commercial customers r;jin farming and related activities during 1985. qg Est.1985-2000 ings NE b 51.9 37 1985 2000 ae 65.0 40 2soo 3ergy (billion kwh) 2.299 3.094 2.00 % e 1 2 3
- ak (Mw) 562 765 2.08 %
NDUSTRIAL & OTHER he Company's 1,020 industrial customers are located issi q g 1240.0* 23 rimarily in the inland and western portions of the service neb i197.0* 23 rea. Industries include the manufacture of chemical, iss2 lass, plastic and rubber products. Sales to this segment N b 1200.4* 22 screased slightly in 1985. insi II 9# I Est.1985 2000 Annual Growth ,,,,9 h 1181 3* 20 1985 2000 Rate inergy (billion kwh) 1.263 1.282 0.10 % jeeg 9Eb 1204.9* 16 e t 2 3 tak (Mw) 190 198 0.28 % wiions a kwn
- tnoninni x
customers only O 13
? .... ^ A.,* ~ -., y e ..'...L.*.' ;..:..: '
- l. f. :.,T-s
.% '.. w' ~%. ~.. -'.,v .. ' ) r ~- l..,% . n.c q. X.,T, %, ?." $..,',,, yfe ..,..c ., '.N. k. 'J.
- " 3
- y.,- ).. ::. .-T s p,, .s . -Q. s.,;.cwy y y, y,,f "O . 3 r. '. * :.6
- w-m
-e.. . :. y e bg4 t $..,. s ;; - '; : ' :.': 1,.y ..m.'.[ * [.}- ;: j_ %. f,... LL.... w . : - , '; t Q': ~. y y,." ff'. .... V e
- .2.
2' L.; .. + DNT. O. Y. IN A. NCI AletNFORT1ATf0N.. J M.. s ; J.. ;... C . V" ' y..... _... J. We.. ^ ? ../. p+ Q..< } Q %.[. ;.. }Q l.f,: Y'j '[; }2',j$-l. ......x
- :. a:..
m....' ^ j,p.;M'*?Q. &..y ' ,"- 'i : (' ;ig<:;f .,.v.-..... . s ....y,...... .. g.. >,....
- a. -
.z
- v. s.. a. x:M... g. ;,...(..,...:s a.:. r
-w ,,.. ea .. :%W, *... & g..: -q,; ?.,.p...c - s. . 4.,4:.. ;.. y:1.g,; n. ,.;.,,, - -;; : m y...?,....; h... ....v...- t t-w . y. g... -- /. .. - -tm.;., c.. ..,s .,c : e. x, p :.w+ y - g.. -. m T 1cc,ncher mug.,lt. ', y<.M, ( %....i
- ..-);...P k.Q.i:'.h. T...7 4,
yle ",,. .~ -. - f. 1.. :... - . ;. P.. ~ ' %.:. l:a,, 4
- l)5l5 G( Fi. nan,C.ea. l Con. dm, on
't. a..T;%. ?.< '.~ :.. j{ g;. }.... :7... 'r ' tg.p 3. '. g g f.7, Q. F,".,,.yj ..] 1. (....{ / ? ... ~ ...r v./. 7 t RediN! Orcrama<.... s atg .. e f. e'tr.i.M MandEen nl i.,'..'.,. [' a-..,-.......n ... * -. e'le. W c%.j' '.(,.,. ,6, ,.'. 5 b -:;. c ~,^ c.,.:f:.'. %, b' : K.L % <g.,,, 'g,..,. * ; ..J,gg%f@*. % I [ ,5..,',. ,~
- - 6. J
? J-*' J. I. : O[ .d. ,u.m;;. &s .p ". fy ,(- { inens e g_ a,';.... . pdlif e ' [ -k'
- j-'[ ' I ' $
I - ~[, .. ~ + ..,If; ' h ' j.[I :- -- h S' g nc.,h.. g gt ~ l.; ^ $*1.'e'.c. 4h'.I'*; .b - '5 's ;'4E T .'.,.{..,' - _ f .. .-] f. 4 'g,
- l.. I.,;.... -
'O ...b,.^*[~'.. 4 g ,.,...'I. .f, *.. 'l p, .I k.. , h[. D ,v
- ..
- s.. f. x.. ' '... g.gn,.
.x....: - >~.. v.... l y.. .j k..J. '. :.. i, w concnt sy *,,.. ,. 9, ~,s
- 1. s,. h L:&p m y. e... r.., 2 u D.,%_.
q,,, r.. 4, ~ ^ .c;;;...; s $$k idl-u..;.t._...,... a:,4,~.,'~
- k......* 4 3
c ,...- s .....a. g["%[T-- %~ .0 .p* .ns. .h. Q.... i.. 2 y, h, g.. 1 m.
- e. r
-W. . : -c. p-
- ,d'
.,. ", $.3,.,.. . (V . y ,.i...-:.4, p ^ .J ;is, n ,e J'.,;.:..-.v... . j $ ;.- .a ,' - t ..<p. u n. .g h,,.
- 4.
g s. asn,e Shec.s.:. :*., (( 3( 7.... '. W. _,*J, 7* k % '.:... E .,.tk ;.- i 4
- .. z._.
l, p'..,,"...-% V.,; s., y e'. ..a.
- ,. ' ' f. l ~
- ly ._Q.- ...t.. -3s., y. .; g ~ :. -,,f','..;'m. t. :g . i."., .. * : '.* ?. '. :. : g s,
- 3. ghf.f "...i a ' k. '.
!; ;,%,--f. ((.." r, - n .,? I s ciEFihanMljh,d :'I . Q. ' '.'.W i 2. C. [ [,,. . p .q...; a.3,... n s 4 ..n* .+._ .D. h pier [nc..s.,;..b b.. \\ . 1./: '. j %-N.h. 3[:t$N e :- niary:Inforrnatug :.z,b.d+ . - I..WN r[-M. :$;.# . p.c c. '. 3 -.. .- 1. ' Y h..[: ',,.j,b,It].
- D
.,;.y ;. s.: c'rm,nr the Effeitj of,g;;J,l3.; ,.;.,%. y.e c, p N. ( c.; W.pi ( p;(p., 1;;'g']. h.( j.; ; J ( c S: h ;3 .;p$. h.f;.._;; w %. sngfryes tannen. duretJM.-W.,,"r^.hs.,gi N.d;i. '.2(. t,' G . N.:n,. & :- e '..: :: - -, G..:....
- y. *,.
y.g. .@'k. L. p jf[b.93 m T^:.. ,e.~... ". : ' n..., ; n ' t. hm., e n.,,t
- ,r.
S ': i ',. : ' ~. ; -:il",
- . :, e n
s,a W:
- ...; c
- .
L..: ::.k~.;;- ..p-s ... c: w,,.. ,.... ;.. ~,. e : ~.-r a'\\,[i. f; E 2,.r. n..~ . *c h,......, . Re J e.:. m.c
- .? : y m.:
$+. jf./,.9 &;G::..& M,, ?'.... (v. M..,,. W.. l3 @Q. \\..;. M - ). l:'. s , iy A b.f*; :a t- ~:
- L ?l't% %. & M, s.,.,'> :! w%... p.y.7h M
9: ..- ^ - y. .L. .,,c-..: 3.:Q.: 2 '..: L .f.A Q~.Q.
- 3. : & *k:'%. ' y. *.:..,...>,e.69 y:%} M:L b;.
?:.' i. 2. t [.f v.&. ;.,;~.;:.;.*.::...l, i.:v&. v&. w%$. s ... 4 ..<-w.: %, 5] ~:; ' * [, #, Q. ]. j ll,,,,...,71 ' ; $s'.; j.';} .'y..A%.. "?.h /.' ; ':. :.. q w.- 2 g n - ,,,.j c..,Y, : ? k j,,.w.[7'. ., ^ k: ...h*.y:t Y.., ,'v .. ::. u.Y..;. w.' ,...:. ;, - '. % *2 f; ::;i "*,:. * -l;<%. '....j.' " y ~f._:. W.. Wl7.*xl:. ' > : ; N ' 4++, _., ' ' ;; :., ::; ..%.?. .,,,4 i ..... :c 2. e .j ,f....;.y ;( ?,, N.. _. r:.;. :.& ',3.Q. A L ~_, L'.;. ..: 3. y (;.y
- J,... t i. :c y. _.;,.
m- , q.g.;;9,,, ; y, {? ',5.i&. :, _.; ~ :: : 4 1,4 .q ;i[. Q{Mw_..f.',J{Yg...w:M.:gk*._W y .[ ;;... - <.'.. t e _ 4; 4.; '.**1 ff*: .g [ Q Q.*f Q.?.; yh.f y. ; /[;.. _..,},..p ;];. i,jsg;f:Ap f' ' ', ar A.:.?. w . s g,%,'M~ ~ n..s%,*,.. ") si 5 ' ' w2.' m o. s = K
- h 4, F "/ /
' fo N*-[ f S' 5 (( I 1 4t: - r. M vp ' y %WD]MM;j.T ' 4? %.[ki.:,.* l (. W' :v :,h @".Y' 'M
- .. -Q,& LW by: ~;*.,f %.. 3.Y f f-
' N), 5,h 3 .g c-kh. ,J . 4.(. j:.. ??.%' L Q:'y : ' h.jk 's 'Q &, % ! -
- )
QM :.:.if.%)... T$ $W.y[W.':NM 8d c Q M g % g<f [gg .gqggg.gpg3ggw g.T's. g% bc...~ 4~n. g.es.. gg,f h. r
- n..
g. 3g hph. n..k. w:: G 8N.e c New J ( hh M.. 1 xp. ~.y..- .o y? M.u j. c
- .
- ; ;ct.
.s.. i s uq wmm! YhhbNbkh'?.-MkNhk NN k.3 k y r..+d s y wmekduwwwwm ygwan . m w n w n.ngm%e a m wpm 4gww s + u :.. ~.s vW,, vg..,n.v m.c;e7.m, qs.. w.p.m:x:e:n.a,gweg:. e.e.w.m.. u ,., www.u.. a
- .:y *; ).
- .m
. ~. ;n,M*3@, g. ,e.s u;y:6:MMO, m~N.+.x,.y' s $.p n
- h. : ev..,W. :
- 2...;r y :.w; E
y- .v. a ' P. M:, M;. D.m. M..a., - p:
- ?. r M
. m.9 y >. -..L )
- s..
.N. ..,a l$6. 4 -. w... r h. , m,m . M. f~gnyngy&vmry.: v. 4;. 3..(g.., u y a,$..h.3 a <M: @~.w:.jn.n.M.,n, y{ T ..a-. , 44u %,L 3 A.., g+ - .u d q p.. m, ' 's. ., m9 a .. w..x.! gyf.J.L.,,, 9.% y#. l'l
- r 9 y'
x 4..<- s.*. ws -...:n . 9. c, 7 < M x
- n Q a ;,3. v.
- g.:'5.c.
c ... v. s. gy. u.:.y p,:9 gg' ;p..,y..pg%" p.M Mp. <Mgg a v.r y ~
- .q.3.;9.Q 4; %... ;2 * -.
-L g g ,p,...,ft f,, :..,yy %.. .a t43., ( , t .n p L.
- y3:. )n g' U
- m. 4 m g
.x g%MMMM;&.WNhhhh,m.c..wn.m& a& h.f W&hhWh a.4 m.g a c.m %w l I M W N D N M M d M M k,# E RWSMMMWe#axwe$gg%edsm$ 5 mengshg $ w% A w%.,1. y i M3MpWG s-w e. w..x'p o % mh% %,e~Q,9:~% ;_Q _MdW %QQ. 0, V h kNhdN..tD.: kh$NN;.;;.::,. / : TW' f& . Q/L r bf} - - bNbd5kNbM ma EE g
WANAGEMENT'S DISCUSSION AND ANALYSIS OF w ecyy FINANCIAL CONDITION AND RESULTS OF OPERATION rueruc comy O Cash Requirements and laternal Generation of hads gg The nature of the Company's operations is capital inten-N im 4 M tiw. Wr invest a signincant amount of our funds in l scoperty and plant to generate, transmit and distribute "h== im 4 tiectnc energy service to our customers. At December 31, I l l 1 l985 our gross investment in property and plant was over =gg ,, 4MMl $1.4 bilhon. As a utility, our business is generally subject .w saws F nas o regulation by the New Jersey Board of Public Utilitics '* qg pl
- BPU), including regulation of the rates which are charged g
g 1 br providing electric service. The Company's ability to qgp ce===== inance its construction program, maintam service reliabil-3e! l e se sel 12e 150 6ty, meet its working capital requirements and provide a fair rate of return on investment to its shareholders is dependent upon adequate rate relief. War *End Capitalizatles ) I i 1 1 J "."c# ,m % M I I I omunon Ecuy LIQUIDITY AND CAPITAL RESOURCES .Prer=4 sad im ~ i -
- l coa.truction Program
. u.s o.m i E ~' During 1985, cash construction expenditures aggregated . snan== o w im l $94 million, which is an 11% increase from the $85 million qgg expenditure level expenenced in 1984 and a 27% increase im from the $74 million level in 1983. Included in the above q gg nts are cash construction expenditures associated with i j mpany's 5% interest in the Hope Creek Generating , the only additional generating capacity of the through the DRP and $2.6 million of Common Stock sold Company under con,truction. Such cash construction through the ESOP. Interim financing of our construction expenditures amounted to 531 milhon m 1985, and $23 program and working capital needs was provided by the million in each of the years 1984 and 1983. The five-year issuance of short term debt. (1986-1990) cash construction expenditures are currently Approximately 41% of the cash requirements for con-projected to be $388 million. The construcuon program struction, debt maturities and sinking fund requirements has been developed in response to the need to improve or during the period 19831985 was generated from operations replace existing production plant, upgrade our transmission after deductions for dividends and working capital needs, and distribution system and provide for projected growth, but exclusive of changes in temporary cash investments. The current forecast of peak load growth for the penod The Company estimates that with adequate rate relief, 1986-1990 is 2.1% per year. more than 70% of its total cash construction requirements, Financing Program debt maturities and sinking fund requirements will be in 1985, the Company's external financings totaled 581.2 generated internally during the five-year period from million, represented by $70.0 million of First Mortgage 1986-1990. Additional cash requirements will be satisfied Bonds, $10.8 million of Common Stock issued through the through extemal financing. Capitalization ratios at Dividend Reinvestment and Stock Purchase Plan (DRP) December 31,1985 are 47% long term debt. 45% common and 5 4 million of Common Stock issued through the equity and 8% preferred stock. The Company will Emploge Stock Ownership Plan (ESOP). In 1984,554.4 continue to use short term debt fin:ncing en an interim million was raised in the capital markets, with three basis and currently maintains aggregate lines of credit of pollution control series of First Mortgage Bonds totalling $115 million. 542.2 million; $11.4 million of Common Stock sold Provisions of the Company's charter, mortgage and through the DRP and $.8 million of Common Stock sold debenture agreements can limit, in certain cases, the through the ESOP. In 1983,564.3 million was raised in the amount and types of additional financing which may be capitd markets from the sale of $50 million of First employed. Estimated additional funding capwities at Mortgage Bonds, $11.7 million of Common Stock sold December 31,1985. giving effect to such provisions, O
vtANAGEMENT'S DISCUSSION AND ANAIXSIS OF INANCIAL CONDITION AND RESULTS OF OPERATION (comiamo b v muld araount to more than $400 million for First revenue increases, changes in Levelized Energy Clause dortgage Bonds, or $150 million for Preferred Stock or revenues and changes in kilowatt-hour sales. The effects of 140 million for unsecured debt, and may not necessarily the above factors on 1985 and 1984 revenues are shown o additive. below: tESULTS OF OPERATIONS (Nuaan c/Doesn) 1985 1984 Base Revenues $24,142 4.4% $12,971 2.4% 'he tabulation on page 36 includes key historical indicators vhich are helpfulin evaluating the performance of the Levelized Energy Clause (7,039) (1.3) 1,972 4 'ompany over the past five years. Kilowatt-hour Sales 13,099 2.4 17.446 3.5 increase $30,202 SJ% $32.389 Q% arnings hrnings per share of Common Stock, based on the eighted average number of shares outstanding, were Future changes in operating revenues will reflect the i i3.00 in 1985, compared to $3.20 in 1984 and $3.48 in timeliness and adequacy of rate relief, general economic conditions in our service area and the results of load 983. The decrease in earnings per share in 1985 and 1984 s attributable to increases in operating expenses without management and conservation programs.
- orrespondmg rate relief. In addition to rate relief, our Sales I
arnings are sensitive to other changes in revenues and Changes in kilowatt hour sales are generally due to 2penses as discussed below. changes in the average number of customers and average tevenues customer use, which is also affected by weather conditions. brating revenues increased by 5.5% in 1985 to $579.7 nillion compared to $549.5 million in 1984. The 1984 Energy sales statistics, stated as percentage changes evel of revenues represented a 6.3% increase compared to from prior years, are shown below: 9 se overall increases reflect the net resuhs of base Increase (Decrease) from Pnor Year 1985 1984 Average Average 'O.j,,,,, 9M Mh Customer
- of
- of Class Sales Use Cust. Sales Use Cust.
i N '-- ~ Eh Residential (.3)% (2.8)% 2.6% 4.0% 2.0% 2.0% iss2 Commercial 6.9 5.4 1.5 6.5 5.4 1.1 qg g Industrial .6 .1 .5 (2.3) (1.8) (.5) y,9 'c M, Other (2.4) (4.2) 1.8 (3.0) (2.2) (l.I) Total 2.4 2.5 3.5 1.6 1.9 im %M k The 2.4% and 3.5% increase in total kilowatt-hour sales in e 4.sl !.e s.s 6.e 6.s 1985 and 1984, respectively, is largely attributable to the number of new customers added to the Company's system herage Amasal Price Per Kilowatt. Hour m those years, and mcreased commercial activity in the
- q g
service territory. Sales to residential customers in 1985 c a=al remamed virtually unchanged from 1984 which, in turn, Iguh had increased 4.0% from 1983. In 1985, mild weather 9 ^ iss2 conditions and a lower average use per customer acted to im 9 M n. a offset the effects of an average of 8,700 new residential customers. In 1984, the effects of 6,500 new customers, im N '> E b together with an increased use per customer, resulted in increased kilowatt-hour sales. Sales to commercial custom- 'M qg g ers increased 6.9% and 6.5% in 1985 and 1984, e 2 4 e a to respectively. Business activities related to the expansion of the hotel / casino industry contributed to this commercial l sales growth in both years. Sales to industrial customers l increased by.6% in 1985 and declined 2.3% in 1984 as the result of changes in the number of customers and changes , 16 l l l
T ATt. ANTIC CITY ELECr:lC COMPANY / (x Pre hs laterest Coverage Ratio At December 31,1985 54,466,000 is shown on the balance sheet as Deferred Energy Revenues associated with the im 9 Eb current energy clause, The Company's annual fuel, interchange and purchased im q b power costs reflect changes in availability of low-cost generation from Company-owned and purchased sources, f* q g g as well as changes in the needs of other utilities ,, q g b participating in energy interchange. Certain costs associ-ated with purchased power are deferred on the balance im 9 b sheet since rates are levelized to collect these costs over the 17-par life of the PP&L Agreements (see Note 3 to the 2, J 4 s Financial Statements). Power production operation and maintenance costs AFDC as a Percent of Net Income melude the cost of maintenance of both wholly-and ,, qM jointly owned generating units. In addition, the Company has embarked on an aggressive program to upgrade our im NEME Pmduction and other facilities to insure efficiency and extend service life. Other operation and maintenance costs consist of the price of materials, supplies and services, as im 9 - a well as wages and emplope benefits. f* q Changes m depreciation expense generally represent changes in the amounts of electric utility plant in service qllel isl, and the respective in-service dates. q s se 25 The components of federal income taxes are detailed in e the notes to the financial statements. use of energy. Overall, however, the combined Interest charges before the allowance for borrowed funds of the changes in our sales and rates have resulted in used during construction rose to 541".6 million in 1985 an increase in revenues per kilowatt-hour of 2.3% in 1985 compared to 540.3 milhon m 1984, and $37.0 million in compared to 1984 and 4.2% in 1984 compared to 1983. 1983.The increase of 53.3 milhon m, interest expense m 1984 from the 1983 level reflects a full year's effect of Costs and Expenses Total operating expenses increased 7.0% in 1985 compared interest on the Company's 11%% First Mortgage Bonds to 1984. The 1984 operating expenses represented an which were issued in November 1983, the issuance in 1984 increase of 8.0% compared to 1983. Excluding deprecia-of an aggregate 542.2 million principal amount of several tion and taxes, operating expenses rose to 5332.8 mill on pollution control series of First Mortgage Bonds, and in 1985, an increase of 6.9% over 1984, which had higher average short term borrowing rates, offset by the increased 13% from 1983. retirement and maturities of First Mortgage Bonds and by Net Energy Costs reflect the amount of energy pro-lower average short term debt outstanding. The increase of i duced, as well as the various fuel and purchased power $1.3 million in interest expense in 1985 from the 1984 level sources used to produce it. Information on the sources and reflects a full par's effect of interest expense associated costs per kilowatt hour of energy are set forth in the with the pollution control series of First Mortgage Bonds accompanying graph. In 1981, N:t Energy Costs were issued in 1984, the issuance of 570 million principal reduced by 56,%9,000 reflecting the deferral of fuel costs amount of Ilh% First Mortgage Bonds issued in October incurred in excess of revenues collected under the fuel 1985 and higher average short term debt outstanding, offset clause effective for that year. For 1985, Net Energy Costs by the maturities of First Mortgage Bonds and lower include 55,865,000 of previously Deferred Energy Costs average short term borrowing rates. Interest rates on our representing fuel costs recovered under our energy clause. debt offerings are sensitive to the timing at which such financings are undertaken. Pollution control series of bonds and variable rate debt have been used to moderate the general upward pressures on interest rates. The embedded cost of our long term d:bt at December 31,1985, was 9.6%, compared to 9.2% in 1984 and 1983. j l 17
1ANAGEMENT'S DISCUSSION AND ANALYSIS OF me. j 'INANCIAL CONDITION AND RESULTS OF OPERATION <comin.edi si.scraic courasy h L/ Allowance for Funds Used Duritig Construction Tbtal Sources and Costs of Energy IJDC) including both the Borrowed Funds portion, i m,,,, hich b used to reduce interest charges, and the Equity unds portion, shown under Other Income, was $11.2 88 3, tillion in 1985 compared to $10.8 million in 1984 and a*=weamr = 9.2 million in 1983. The increases are due to increases in 5,2
- 3.,
t2 average balances of construction work in progress. .3 .FDC as a percent of net income for 1985,1984 and 1983 ,,N i a 18.5's,17.0% and 13.9%, respectively. 4ss 22
- 2es 4.
,s dation upplementary unaudited Anancialinforma: ion showing te estimated effecu of in8ation on the Company's 3 M 3 perations is shown on pages 34 through 36. These Lia, 2.3 3,, hich should be viewed as estimates of the approximate ffects c(inf ation, rather than as precise measures, f*% i emonstrate :he need to control costs and the responsibility t:3 as sis zos as 3r regulatory agencies to provide timely and adequate rate
- lief.
2_5 ,ccounting Standards 3, he Finar.cial Accounting Standards Board has issued an
- xposure Draft of a Proposed Accounting Standard 2.,o ntitled " Regulated Enterprises-Acepunting for Phase-in imq g
lans, Abandonments, and Disallowances of Plant Costs" mamammadia ti:s s2s iss 2:s as <hich is a proposed amendment to existing accounting s for regulated enterprises, including electric t' such as the Company. This proposal, if adopted in nt form, would modify current accounting stan-5f M ards for the types of events enumerated. While the 6,' 2.o
- ompany is still evaluating this proposal, it believes its perating results and 6nancial position will be impacted if
[l g,i pplied 13 certam past events such as the abandonment of ns as 22 s 2os as lope Creek Unit No. 2. The Company intends to submit written comments to the 'inancial Accounting Standards Board concerning this 2.2 foposal. \\,2 \\ 8 = 55 sm um 49s 32 s IOS 2s 75 0 1 21 3 4 5 6 7 in NWons of kuomett-hours l e Cent e Nearel Gas a Nerdser. laserranage e oir O 18
EPORT OF MANAGEMENT AUDITORS' OPINION m (V \\ n management of Atlantic City Electric Corr.pany is g sponsible for the Anancial statements presented herein. one wed Treo. comer use financial statements were prepared by management cargned Mc Accoumams Nm M Nw W0o48 conformity with generally accepted accounting princi-es applicable to public utilities which are consistent in all aterial respects with the accounting prescribed by the To the Shareholders and the Board of Directors are of New Jersey, Board of Public Utilities and the of Atlantic City Electric Company:
- deral Energy Regulatory Commission. In prepanng the uncial staternents, management made informed judg-We have examined the balance sheets of Attratic City ents and estimates relating to events and transactions Electric Company as of December 31,1985 and 1984 and the related statements of income and retained earnings and
- ing reported.
The Company has established a system of intemal of changes in financial position for each of the three years
- counting and financial controls and procedures designed in the period ended December 31,1985. Our examinations
> insure that the financial records reflect the transactions were made in accordance with generally accepted auditing f the Company and that assets are safeguarded. This standards and, accordingly, included such tests of the / stem is examined by management on a continuing basis accounting records and such other auditing procedures as >r effectiveness and efficiency and is reviewed on a regular we considered necessary in the circumstances. asis by an internal audit staff that reports duectly to the in our opinion, the accompanying financial statements ,udit Committee of the Board of Directors present fairly the financial position of the Company at The financial statements have been examined by Deloitte December 31,1985 and 1984 and the results of its laskins & Sells, Certified Public Accountants. The operations and the changes in its financial position for each uditors provide an objective, independent review as to of the three years in the period ended December 31,1985, unagement's discharge of its responsibilities insofar as in conformity with generally accepted accounting princi-wy relate to the fairness.of reported operating results and ples applied on a consistent basis. l ' condition. Their examination includes procedures by them to provide reasonable ssserance that the h * *&_q % 4Mk t i statements are not misleading and includes a eview of the Company's system of internal acco.mting and inancial controls and a test of transactions. The Board of Directors has oversight responsibility for
- January 31,1986 letermining that management has fulfilled its obligation in he preparation of financial statements and the ongoing
- xamination of the Company's system of internal account-ng controls. The Audit Committee, which is composed
- olely of outside directors, meets regularly with manage-nent, Deloitte Haskins & Sells and the internal audit staff
- o discuss accounting, auditing and financial repeting matters. The Audit Committee reviews the program of audit work performed by the internal audit staff. To insure auditor independence, both Deloitte Haskins & Sells and the intemal audit staff have complete and free access to the Audit Committee.
\\ 19 ..,ry--- r-.i. y
TATEMENT OF INCOME AND RETAINED EARNINGS as/nYu eoE (o %.J For the Wars Ended December 31 >=we of Dollars Except hr Share AmonarsJ 1985 1984 1983 'perstlag Revenues-Electric 5579,733 5549,531 5517,142 perating Expenses: nergy: Fuel 133,437 178,681 167.988 Interchange 17,272 (15.558) (1,697) Deferred Costs 5,865 (6,%9) (15.055) Net Energy 156,574 156,154 151,236 archased Power-Exclusive of Fuel 42,636 28,905 12,435 m Production-Operation and Maintenance 55,329 56,124 48,794 ther Operation and Maintenance 78,236 69,989 62,800 epreciation and Amortization 41,985 38,318 38,383 ew Jersey Gross Receipts and Franchise Taxes 71,100 60,769 55,324 ederalincome Tax Expense 36,308 41,227 48,728 ther Taxes 8.159 6,654 6,340 Total Operating Expenses 490,327 458,140 424.040 perstlag laceme 89,406 91,391 93.102 ther Inconne: .llowance for Equity Funds Used During Construction 5,216 4,821 4,320 liscellaneous income-Net 1,502 1,424 833 Total Other income 6,718 6,245 5,153 scome Before laterest Charges 96,124 97.636 98,255 s Charges: it Long Term Debt 39,604 38,231 33,795 ste Short Term Debt 1,565 1,861 2,669 Mher Interest Expense 416 204 535 Total Interest Charges 41,585 40,296 36,999 ,llowance for Borrowed Funds Used During Construction (5,980) (5,937) (4,896) Net Interest Charges 35,605 34,359 32,103 iet locome 60,519 63,277 66,152 ' stained Earnings at Beginning of War 161,629 148,454 128,825 222,148 211,731 194,977 Hvidends Declared: umul ive Preferred Stock 6,282 6,949 7.171
- ommon Stock 46,220 43,153 39.352 Total Dividends Declared 52,502 50,102 46,523 tetained Earnings at End of War 5169.646 5161,629 5148,454
. armings for Commes Stock: Jet income 5 60,519 5 63,277 5 66.152 ess Preferred Dividend Requirements 6,369 6,%8 7,201 Balance Available for Common Stock 5 54.150 5 56,309 5 58,951 Werage Number of Shares of Common Stock Outstanding (la thousands) 18,069 17,581 16,923 'er Comunoe Share: !arnings 5 3.00 5 3.20 5 3.48 )ividends Declared 5 2.555 5 2.45 5 2.32 ^ )i ': Paid 5 2.51 5 2.42 5 2.30 l w aven,aarias Nees W Finaanal stasements are as setegral part af tese stmements o
ATLANTIC CTTY ELECnUC COMPMY TATEMENT OF CHANGES IN FINANCIAL POSITION b Q/ For the Years Ended December 31 nosissadr e/Dollarr) 1985 1984 1983 omree of Bands: unds from Operations: Net income $ 60,519 5 63,277 5 66,152 Principal Non-Cash Charges (Credits) to income: Depreciation and Amortization 41,985 38,318 38,383 Allowance for Funds Used During Construction (11,196) (10,758) (9,216) Deferred Federal Income Taxes-Net 16,865 20,304 18.359 Investment Thx Credit Adjustments-Net 7.261 2,7o5 6,114 Other-Net 738 264 1,353 Total Funds from Operations 116,172 114.170 121,145 'unds from Outside Sources: 1.ong Term Debt 70,000 42,200 50,000 Pollution Control Funds (Held) Released by Trustees 7,718 (5,539) 7,885 Subtotal 77,718 36,661 57,885 Sale of Common Stock 11,515 12,487 15,060 Total Funds from Outside Sources $9,233
- a,148 72,945
)ther-Net 1,802 (2,517) (1,978) Total Source of Funds 5207,207 5160.801 5192.112 typlicaties of Funds: 3ross Additions to Utility Plant 5105,213 5 95,388 5 83,673 tilowance for Funds Used During Construction (11,196) (10,758) (9.216) et 94,017 84,630. 74,457 s on Preferred Stock 6,282 6,949 7,171
- )t ds on Common Stock 46,220 43,153 39,352 Retirement and Maturity of Long Term Debt 10,000 26,000 50,300 Unrecovered Purchased Power Costs 14,680 6,530 11.450 Unrecovered Nuclear Fuel Advances 5,215 Conversion of Preferred Stock 353 267 711 Redemption of Preferred Stock 11,850 2,100 2,100 Increase (Decrease) in Working Capital
- 18,591 (8,828) 6,571 Total Application of Funds 5207,207 5160.801 5192.112 lacrease (Decrease) la Working Capital
- Cash and Cash items 5 14,245 5
(751) 5(11,616) Accounts Receivable 6,247 6,576 6.858 Unbilled Ravenue 3,076 (1,340) 5,671 Fuel (2,614) 10,657 (5,146) Materials and Supplies (569) 597 974 Nuclear Fuel Disposal Costs 8,481 (8,481) Deferred Energy Costs and Revenue (22,190) 6,967 26,626 630 (5,261) (1,647) Accounts Payable Taxes Accrued 6,850 (3,923) (3,831) Deferred Taxes 1,136 (2,589) (7,557) Other 3,298 (11,280) (3,761) Increase (Decrease) in Working Capital 5 18,590 $ (8.828) 5 6.571 ! eEscludes Short Ttna Dets. Nones and Current Manances of Lang Tenn Debt and Cumulanve Prearrred Stock Subjen so Mandasary andempnon The escompanyug Neses to Fianactal Staseawats are as inugral pan of these staaements. l Ov 21 l l i
IALANCE SHEET l'D L/ December 31 1985 1984 rnemased ( Dessrs) hasets useeric UtElty Plant: a Service: S 553,253 $ 515,637 Production 200,517 190,969 Densmission 345,177 326,466 Distribution 63,590 52,987 General ~ 1,162,537 1,086,059 ~ Total 330,895 300,037 Less Accumulated C., uistion 831,642 786,022 Net 237,310 216.026 raamuction Work in Prognss 6,849 6,957 Land Held for Future Use 628 Nuclear Fuel 1.075,801 1,009,633 Electric Utility Plant-Net 4,298 5,901 Nea Utuity Property and Inwstaments 2,871 11,076 hilaties Centrei Ceestructies pheds Cornet Assets: 5,379 5,234 Cash and Working Funds 18,500 4,400 Temporary Cash lavestments Accounts Receivable: 42,899 36,276 ity Service 8,.i46 8,662 llaneous (1,600) (1,500) e for Doubtful Accounts 26,401 23,325 Unbilled Revenues 29,828 32,442 Fuel (= average cost; 17.223 17,792 Materials and Supplies (at everage cost) 8,382 5,066 Prepayments 2,407 Unrecovered Nuclear Fuel Disposal Costs 17,724 Deferred Energy Costs-Net 155,398 151,828 Total Current Assets Dellerred Debits: 19,878 17,029 Property Abandonment Costs 32,660 17,980 Unrecovered Purchased Power Costs 5,220 4,343 Unamortued Debt Espense 3,507 2.713 Other 61,265 42,065 Total Deferred Debits $1,299,633 51,220.503 lbtal Assets Tae assempesyng Neans no Fiammeul sensammes ase en asengral pari of esos sennements. O .2
ATLANTIC CITY ELECTIUC COMPANY G December 31 >=de ofDouars) 1985 1984 -. labilities and Capitalisation h planH ue h :
- ommon Shareholders' Equity:
Comunon Stock $ 54,771 5 53,464 Premium on Capital Stock 229,287 219.078 Capital Stock Expense (1,607) (1,660) Retained Earnings 169,646 161,629 Total Common Shareholders' Equity 452,097 432,511 Oumulative Preferred Stock Not Subject to Mandatory Redemption 41,353 41,706 Oumulative Preferred Stock Subject to Mandatory Redemption 34,100 49,550 ang Term Debt 437,462 412,462 Total Capitalization 965,012 936,229 Current Liabilities: Current Portiom Cumulative Preferred Stock Subject to Mandatory Redemption 5,050 1,450 lang Term Debt 45,000 10,000 %: counts Payable 28,755 29,385 raxes Accrued 5,372 12,222 iterest Accrued 12,865. 11,721 3i nds Declared 13,224 12,757 r Deposits ~ 2,945 2,737 d Taxes 17,747 18,883 10,888 Nuclear Fuel Disposal Costs Deferred Energy Revenues-Net 4,466 Other 5,681 7,482 Total Current Liabilities 141,105 117,525 Deferred Credits: Deferred Investment Tax Credits 65,412 58,151 Deferred lacome Taxes 120,464 103,599 Other 7,640 4,999 Total Deferred Credits 193,516 166,749 Commitments and Contingent Liabilities (Note 11) 1btal Liabilities and Capitalization 51,299,633 51.220.503 Y t 23
NOTES TO FINANCIAL STATEMENTS e NOTE 1. SIGNIFICANT ACCOUNTLNG POLICIES Reguieties Noelear Phel The accounting policies and rates of the Company are Fuel costs associated with the Company's participation in subpect to the regulations of the State of New Jersey, Board jointly-owned nuclear generating stations, including a of Public Utilities (BPU) and in certain respects ta the provision for estimated spent fuel disposal costs, are Federal Energy Regulatory Commission (FERC). All charged to Fuct Expense based on the units of thermal signi6 cant accounting policies and practices used in the energy produced. determmation o( rates are also used for financial reportmg g g purposes. The Snancial statements are prepared on the The Company provides deferred Federal Income Taxes on basi the Unihm System of Accounts prescribed all significant current transactions for which the timing of reporting differs for book and tax purposes. Investment tax Operating Revenues credits, which are used to reduce current federal income Revenues are recognized when electric energy services are taxes, are deferred on the balance sheet and are recognized rendered, and include estimates for amounts unbilled at the in book inconne over the life of the related property. end of the period for energy used subsequent to the last , pg,, biHing cycle. The Company has a noncontributory defined benefit Electrie Utility Plant retirement plan covering all regular employees. The Property is stated at original cost. Generally the plant is Company's policy is to fund pension costs as accrued. subject to a first mortgage lien. The cost of property Costs of the plan are determined actuarially under the additions, including replacement of units of property and aggregate cost method. betterments, is capitalized. Included in certain additions is Property Abandonment Costs an Allowance for Funds Used During Construction Dese costs consist principally of the Company,5 (AFDC) which is defined in the applicable regulatory unam rtized investment in Hope Creek Unit No. 2, a m of accounts as the cost during the period of nuclear generating unit which was cancelled in 1981, 'on of borrowed funds used h construction offshore nuclear units which were cancelled in 1978 and / -, ses and a reasonable rate on other funds when so unrec vered naclear fuel advances associated with three used. AFDC has been calculated using a rate of 8.5% and uranium supply contracts which were terminated in 1985. was semi-annually compounded on Hope Creek Unit No. I The Hope Creek Unit No. 2 investment is being expenditures beginning in 1984. Such rates are less than am rtized over a 15ar pen,od that began in 1983. The the maximum allowed by FERC. investment in the offshore nuclear umts is be, g amortized m Defermd Energy Costs and Revenues over a 20-year period that began in 1979. Unrecovered The Company has a Levelized Energy Clause which is nuclear fuel advances are being amortized, subject to BPU based on projected energy costs and includes a provision approval of their recovery, over 5 years, beginning in 1985. for prior period under or over recoveries. The recovery of The unamortized amounts are 512,765,000,52,745,000, energy costs is made through levelized monthly charges and 54,172,000, respectively, at December 31,1985. over the period of projection. Any under or over recoveries UmM PurchM h Ce are deferred in balance sheet accounts as a current asset or These represent purchased capacity costs, relating to the i current liability as appropriate. These deferrals are Comm's purchased power agreements with Pennsylvania recognized in the Statement of Income during the period in Power & Light Company, which are not being recovered which they are subsequently recovered through the clause. currently, but for which recovery has been specifically provided in a levelized component of future rates. 9'= UCompany provides for straight-line depreciation based N on the estimated remaining life of transmission and Dek premium, discount and expenses are amortized over disenbution property and, based on the estimated average the life of the related debt. Gains and losses relating to service life, h all other depreciable property. Depreciation reacqu red debt are recognized currently. applicable to nuclear plant includes amounts provided for Certain 1984 and 1983 amounts have been reclassified to decommissioning. The overall composite rate of depre-e nf rm with 1985 presentations. ciation was approximately 3.7% for 1985,3.6% for 1984 and 3.7% b 1983. Accumulated depreciation is charged with the cost of depreciable property retired together with costs less salvage and other recoveries.
ATLANTIC CITY ELaCTRJC COMPANY 10 i
- V N E 2.
7T.DERAL INCOME TAX-deral income tax expense is less than the amount computed
- applying the sta:utory rate on book income subject to tax r the followmg reasons:
Wars Ended December 31 Wasads afDollars) 1985 1984 1983 et lacome $60,519 $ 63,277 5 66,152 detallacome Thz Expense (as below) 36,317 41,876 49,061 mk Income Subject to Tax $96,836 $105.153 $115,213 come Thx Computed at the Statutory Rate $44,544 $ 48,370 $ 52,998
- ms for which deferred taxes are not provided:
Difference between Thx and Book Depreciation 2,801 (250) 1,8% Allowance for Funds Used During Construction (5,029) (4,832) (4,211) Capitalized Overheads (1,209) (1,221) (1,245) lavestment Thx Credits (2,178) (1,842) (1,775) Other (2,612) 1,651 1,398 Tbtal Federal Income Tax Expense $36,317 5 41,876 5 49.061 omponents of Federal Income Tax Expense: rderal Income Taxes Currently Payable $12,956 5 15.512 5 15,072 e Federal Income Taxes: ized Depreciation 11,899 18',335 10,438 Unbilled Revenues 1,415 (616) 2,609 Unrecovered Purchased Power Costs 6,753 3,004 5.267 Deferred Energy Costs (2,551) 3,205 4,948 Other (1,787) (1,034) 2,654 eferred Investment Thx Credits 7,261 2,765 6,114 mployee Stock Ownership Plan Credits 371 705 1,959 Total Deferred Federal income Tax Expense 23,361 26,364 33,989 otal Federal Income Thx Expense 36,317 41,876 49,061 ass Federal Income Taxes included in Other Income 9 649 333 ederalIncome Taxes Included in Operating Expenses $36,308 L41,227 5 48.728 1 n 1984, the Company filed amended federal income tax Service ORS) and the Company's federal income tax liabilities for al! ears through 1976 have been determined eturns for 1981 and 1982 reflecting the election of the 3 uset Guideline Repair Allowance. The effect of this and settled. The IRS has proposed certain deficiencies in lection is included in Deferred Federal Income 'lknes-tax for the years 1977 through 1981, The Company has .iberahzed Depreciation and Deferred Investment Tax protested the proposed deficiencies and is of the opinion
- Ledits, that the final settlement of its federal income tax liabilities I
The Company purchased tax benefits on equipment for these years will not have a material adverse effect on its inving an aggregate tax basis of approximately results of operations or financial position. 110,400,000 and $2,900,000 in 1983 and 1982 At December 31,1985 the cumulative amount of espectively. These tax benefits include depreciation and deferTed income taxes which have not been provided on avestment tax credits. timing differences, principally depreciation, amounted to The Company's federal income tax retums for 1981 and approximately $85,000,000 computed at the current have been exammed by the Intemal Revenue statutory rate of 46%. 25
NOTESte uwe 9 NOTE 3, RATL MATTERS Base Rate Case Deelsions During the three year period ended December 31,1985 base rate case decisions of the New Jersey Board of Public Utilities (BPU) are abown below: Dese of Amount Date Amount increase Test Petition Requested Effective Approved In Revenue Year imimau) (mimaul Jesuary 1983 5 30.8 October 7,1983 $ 24.5 4.5% September 30,1982 December 31,1983 October 1983 25.3 August 17, 1984 October 1984 24.1 February 13,1985 24.0 4.3% September 30,1982 The October 1983 increase relates to the 6rst half of the decision by the BPU was affirmed by the New Jersey purchase of 12.5 messwatts of capacity and related energy Superior Court. The Company has Sled a request with the from Pennsylvania Power & Light Company (PP&L) under New Jersey Supreme Court for review of the appellate two Capacity and Energy Sales Agreements (the PP&L ruling. The Company cannot predict the final outcome of Agreements), which commenced with the start of commer-the proceedings or the ultimate effect upon the Company. The February 1985 increase relates to the second half of cial operation of PP&L's Susquehanna Unit 1. The PP&L the Company's agreements with PP&L and commenced Agreements provide for the purchase by the Company cf with the start of commercial operation of PP&L's Susque-capacity and energy from the Susquehanna Units through September 30,1991, and then from certain PP&L coal-hanna Unit 2. its through September 30, 2000. Through Sep-In April 1985 the Company filed a petition requesting a r 30,1991, the estimated costs to be incurred by the net increase c( $91,850,000 to be implemented in tv.o pany for purchases of capacity and associated energy phases. The first phase request, for $63,316,000,is related from the Susquehanna Units will exceed the lewlized costs to increased operations an.1 maintenance costs and capital o be recovered by the Compar y from its customers. Such investment, and is based upon a test year of September 30, unrecovered costs will be accumulated and deferred. Such 1985. The Company anticipates a decision on this request costs are included in the balance sheet as Unrecovered in the first quarter of 1986. The second phase request, for a Purchased Power Costs along with related provision for net increase of $28,534,000, relates to the Compar.y's 5% deferred taxes. The level of rates approved by the BPU is ownership in the Hope Creek Generating Station, and designed to enable the Company to recover these deferred would become effective upon commercial operation of the costs and associated carrying charges during the balance of unit. the 17 year period. The stipulation provided that any Ene Clauses Cfference betwen actual costs incurred by the Company The ompany's energy clauses are reviewed ani 4,y by under the agreements and the estimated costs on which the the BPU and the most recent decisions are shown below; increased rates were based will be recognized in future base rate proceedings if such costs are found to be Date of Amount Date Amount reasonable. The BPU order prescribes a revenue reduction Petition Requested Effective Approved formula in the event that both Susquehanna Units fail to g meet a combined nummum performance standard estab-I Y 2 1 lished by the stipulation which could subject the Company, 8j ,y 5 under the most adverse circumstances, to a revenue September 1985 (37.l) January 1,1986 (44.0) reduction not to raceed $15,000,000 per unit per year. In August 1984 the BPU denied the Company's October As part of the February 1985 energy clause approval, 1983 request for the $25,300.000 increase in base rates. $1,639,000 of the costs associated with an extended outage 'ne BPU, in denying rate rehef, made several adjustments of Salem Unit I during 1983 were excluded from recovery, b the Company's requested rate base, test ) car operating and $4,298,000 of Deferred Energy Costs were reclassified income and rate of return, providing for an owrall rate of to Unrecovered Purchased Pbur Costs. The Company also of 11.35% and a return on common equity of agreed to defer $7,500,000 of Deferred Energy Costs, . Prior to the BPU decision, the Company had been relating to costs associated with certain nuclear unit ' zed to earn an overall rate of return of 11.7% and a outages in 1984. return on common equity of 15.0%. In November 1985, the 26
ATLANTIC CITY ELECTRIC COMPANY V As part of the January 1986 energy clause approval, the These costs represent the Company's pro rats impact of
- ompany agreed to expense $3,975,000 of replacement BPU findings in proceedings related to other co-owners zower costs associated with maintenance and repair with respect to replacement power costs associated with autages a Peach Bottom Unit 2 and Salem Unit 2. Also, certain outages at the Salem Nuclear Generating Station he Company agreed to increase the deferral of $7,500,000 (see Note 11).
if Deferred Energy Costs to $12,179,000. NOTE 4, RETIREMENT BENEFITS Ihe cost to the Company in providing a retirement plan for In addition to providing pension benefits, the Company a employees was $6,465,000, $7.555,000 and provides certain health care ar.d life insurance benefits for E563.000 in 1985,1984 and 1983, respectively. Approx-retired emplopes. Substantially all of the Company's imately 80% of these costs were charged to operating employees may become eligible for those benefits if they
- xpense and the remauung 20%, which was associated reach normal retirement age while working for the with construction labor, was charged to the cost of new Company. Those and similar benefits for active emplopes atility plant, ar: provided through insurance companies and other plan The weighted average assumed rate of return used in providers whose premiums and related plan costs are based determining the actuarial present value of accumulated plan on the benefits paid during the war. The Company benefits was 8% for 1985 and 7% for 1984. The Company's recognizes the cost of providing those benefits by expens-Plan is b compliance with the Employee Retirement ing the annual insurance premiums =id related plan costs.
Income Security Act of 1974 as amended. The cott of providing those benefits for retirees totalled A comparison of accumulated plan benefits and plan net $992,000 for 1985 and $845,000 for 1984 assets (including purchased annuity contract amounts) for in December 1985 the Financial Accounting Standards pany's Plan, as of the most recent actuarial . Board adopted an accounting standard which will require dates, is as follows: the Company to modify the financial accounting and reporting for its retirement plan beginning in 1987. The 3*""Y I Company believes the adoption of this new standard will (Nwands of Douars) 1985 1984 not have a material adverse effect on its results of A6tuarial present value of accumu-operations or financial position. lased plan benefits: Vested $ 84,563 5 86,758 Nonvested 4,459 3,846 Total $ 89,022 5 90.604 Net Assets available for benefits $121,778 5115,596 ) NOTE 5. JOINT 1Y. OWNED GENERATING STATIONS
- The Company participates with other utilities in the The amounts shown represent the Company's share of construction and operation of several electric production each plant at December 31, and includes an allowance for facilities, funds used during construction.
Eaer8y Company's Electric Plant Construction Station Source Share in Service Work in Progress Generation 1985 1984 1985 1984 1985 1984 (Wmands of Douars) (MWH) Keystone Coal 2.47 % $ 7,306 5 6,893 976 5 798 258,436 237,233 Conemeu8h Coal 3.83 12,355 11,684 210 332 400,790 423,653 Peach Bottom Nucicar 7,51 91,010 77,292 2,490 8,873 420,469 738,447 S" Nuclear 7.41 160,977 154.806 2,605 4,751 1,039,420 395,037 203,656 162,676 reek Nuclear 5.00 27 g r_.-
iOTES (comisme 9 The operators of the Salem and Peach Bottom Nuclear recovery of these spent nuclear fuel disposal costs is 3enerating Stations entered into contracts with the United provided as part of the Company's energy elsese. The Company provides its own financing during the states Department of Energy for spent nuclear fuel construction period for its share of the jointly. owned plants I hsposal. These contracts require the payment of a one-ime fee related to the Company's ownership interest in the and includes its share of direct operations and maintenance Salem and Peach Bottom Stations, which was made in June expenses in its Statement ofIncome. 1985,as well as ongoing quarterly charges. Current NOIT. 6. INVESTMENT IN OPERATING SUBSIDIARY The Company's investment in Deepwater Operating Com. which the equity of the Company is fairly represented by its investment. The net production costs of Deepwater are pony (Deepwater), a wholly-owned subsidiary which included in the Company's accounts classified as to operases generating and process steam units owned by the Company, was 53,291,000 at December 31,1985 and 1984. operation, maintenance and taxes. The principal asset of Deepwater is workmg capital in NOTE 7. COMMON STOCK As of December 31,1985 and 1984, the Company's Common Stock included 25,000,000 authorized shares of Common Stock ($3 par value). 1985 1984 1983 s issued and Outstanding: 17,821,346 17,250,882 16,574,021 _ ni1g of War 408,999 525,118 535,614 Dividend Reinvestment and Stock Purchase Plan 14,306 36,009 116.347 Employee Stock Ownership Plan 12,358 9.337 24.900 Conversion of Preferred Stock 18,257,009 17.821.346 17.250.882 End of year $54,771,027 553.464.038 551.752.646 At 53 Par Value Premium on Capital Stock was credited in 1935 and 1984 Stock authorized for issuance pursuant to the Employee with $10,209,000 and $10,799,000, respectively, repre-Stock Ownership Plan and 47,375 sh:ues of Common senting the excess of proceeds over the par value of shares Stock reserved for the conversion of 5%% Convertible of Common Stock issued, sold and converted. At Series of Prekrred Stock. December 31,1985 there were 57,179 shares of Common NOTE 8. CUMULATI)E PREFERRED STOCK The Company has authorized 799,979 shares of upon issuance. In certain circumstances, if dividends on Cumulative Preferred Stock, 5100 Par Value, 2,000,000 issued Preferred Stock are in arrears, voting rights for the shares of No Par Preferred Stock and 3,000,000 shares of election of a majority of the Board of Directors becomes Preference Stock, No Par Value. Unissued shares may, or operative. may not, possess mandatory redemption characteristics M
ATIANTIC CrTY ELECrRIC COMPANY .p V NOTE 8(A). Cumulative Preferred Stock Not Subject To Mandatory Redemption: December 31 Current $100 Par Value-Cumulative and Non. 1985 1984 Redemption participating shares issued and outstanding: (musands a/ Dollars) Price Per Share Series: 4% 77,000 Shares $ 7,700 $ 7,700 $105.50 4.10% 72,000 Shares 7,200 7,200 101.00 4.35 3 15,000 Shares 1,500 1,500 101.00 4.353 36,000 Shares 3,600 3,600 101.00 4.753 50,000 Shares 5,000 5,000 101.00 5% 50,000 Shares 5,000 5,000 100.00 5%% Convertible Series: 13,530 Shares (1985) 1,353 101.50 17,061 Shares (1984) 1,706 7.523 100,000 Shares 10,000 10,000 104.89 Total 541.353 541,706 Cumulative Preferred Stock Not Subject to Mandatory The 5%% Convertible Series, of which 3,531 and 2,668 Redemption is redeemable solely at the option of the shares wre convert.d in 1985 and 1984, respectively, is Company upon payment of the redemption price plus convertible, subject to adjustment in certain events, into ulated and unpaid dividends to the date fixed for Common Stock at the rate of 3.5 shares of Common Stock 'on. Premium on such Preferred Stock was for each share of Preferred. c December 31,1985 and 1984. NOTE C:B). Cumulative Preferred Stock Subject To Mandatory Redemption: Decembu 31 Current Refunding Par 1985 1984 Redemption Restncted Shares Issued and Outstanding: Value (7kusands e/Dottars) Price Per Share Pnor to Series: $10,000 8.40% 100,000 Shares (1984) 5100 9.963104,000 Shares (1995) 100 $10,400 $106.06 12,000 120,000 Shares (1984) 38.25 87,500 Shares (1985) None 8.750 106.56 November 1,1987 9,000 90,000 Shares (1984) 59.45 200.000 Shares None 20,000 20,000 104.20 November I,1989 39,150 51,000 less Portion due within one year 5,050 1,450 Total 534,100 549,550 On February 1,1985, the Company redeemed 8,000 shares fund at a redemption price of $100 per share. At the option of the 8.40% Preferred Stock series through the operation of the Company, an additional 8,000 shares may be of the sinking fund and optional redemption provisions at a redeemed on any sinking fund date, without premium, up redemption price of $100 per share. On August 2,1985 the to 40,000 shares in the aggregate. The Company redeemed y reacquired all of the then outstanding shares 16,000 shares at par in 1985 and 1984 through the ) of this series, with an aggregate par value of operation of the sinking fund and optional redemption 000 for $9,177,000. provisions. As of December 31,1985 the Company had l On August 1 of each year 8,000 shares of the 9.%% redeemed the maximum 40,000 shares pursuant to the Series must be redeemed through the operation of a sinking optional redemption without premium provisions. 29
lOTES teomin.co 7 (vl shares of the 59.45 No Par Preferred Stock Series must be On November i of each year,2,500 shares of the 58.25 redeemed through the oparation of a sinking fund at a 4o Par Preferred Stock Series must be redeemed through redemption price of $100 per share. At the option of the he operation of a sinking fund at a redemption price of Company, not more than an additional 40,000 shares may i100 per share. At the option of the Company, not more be redeemed on any sinking fund date, without premium, han an additional 2,500 shares may be redeerned on any up to 50,000 shares in the aggregate.
- inking fund date without premium. The Company The annual minimum sinking fund provisiens of the A.,4 2,500 and 5,000 shares at par in 1985 and 1984 above series aggregate $5,050,000 each year from 1986 tspectively.
On November 1,1986, and annually thereafter,40,000 through 1990. NOTE 9. LONG TERM DEBT December 3l. 1984 1985 (W - ' ef Dollant First Mortgage Bonds: $ 10,000 3%3 Series due (March 1) 1985 $ 10,000 10,000 4%3 Series due (January I) 1987 10,000 10,000 3%3 Series due (April 1) 1988 2.775 2.775 4%% Series due (April 1) 1989 10,000 10,000 4%3 Series due (March 1) 1991 10.350 10,350 4%3 Series due (July 1) 1992 9.540 9,540 4%% Senes due (March 1) 1993 50,000 50,000 [d.% Series due (February I) 1996'?Q Seriu due (November 1) 1993 9,980 9,980 19,000 19,000 8%3 Series due (September 1) 2000 27,000 27,000 8% Series due (May I) 2001 20,000 20,000 7%% Series due (April 1) 2002 29,976 29,976 7%% Series due (June 1) 2003 6,500 6,500 7%% Pollutic,a Control Series due (January Il 2005 2,500 2,500 6%% Pollution Control Series due (December 1) 2006 63,750 63,750 12%% Senes due (January 1) 2010 39,000 39,000 11%% Pollution Control Series due (May 1) 2011 850 850 10%% Pollution Control Series B due (July 15) 2012 Adjustable Rate Pollution Control Senes A due 18,200 18.200 ( April 15) 2014 (7%% Until 415 87) 23,150 23,150 10%3 Pollution Control Series C due (July 15) 2014 70,000 11%% Series due (October I) 2015 372,571 432,571 Total 2.267 Debentures: 2,267 5%3 Sinking Fund Debentures due (February 1) 1996 2,619 2,619 7%% Sinking Fund Debentures due (May I) 1998 4,886 4,886 Total 45,000 45,000 Notes-Variable Rate Notes due (April 30) 1986 5 5 Unamortized Premium and Discount-Net 422.462 482,462 10.000 Total 45,000 pss Lug Term Debt due within one year $412.462 $437,462 Total 30
ATLANTIC CITY ELECTRIC COMPANY (/ ) 't/ Deposits in sinking funds for retirement of debentures are Decemb:r 31,1985 the Company had reacquired and required on February I of each year through 1995 for the cancelled $11.250,000 principal amount of the 12%% SED debentures, and on May I of each year through 1997 Series which may be applied toward its requirements for for the 7h% debentures in amounts in each case sufficient 1986 and subsequent periods. On January 1,1986 the o redeem $100,000 principal amount plus, at the election Company redeemed an additional $6,000,000 of these of the Company, up to an additional $100,000 principal bonds through the operation of the sinking fund and amount in each year. At December 31,1985 the Company optional redemption provisions. Current sinking fund had reacquired and cancelled $1,233,000 and $1,081,000' requirements of $750,000 in connection with certain First principal amount of the Sh% and 7h% debentures, Mortgage Bonds outstanding may be satisfied by certifica-respectively, toward its requirements for 1986 and subsc-tion of property additions as provided for in the related quent periods. mortgage indentures. A sinking fund requirement of $3,000,000 each year The aggregate amount of debt maturities, in addition to relative to the 12%% First Mortgage Bonds begins in 1986 sinking fund requirements, of all long term debt outstand-and continues through 2009. The Company also has the ing at December 31,1985 are 545,000,000 in 1986, option to redeem an additional $3,000,000 principal $10,000,000 in 1987 and 1988, and $2,775,000 in 1989. amount on any sinking fund date without premium. At No maturities of long term debt occur in 1990. NOTE 10. SHORT TERM DEBT AND COMPENSATING BALANCES As of December 31,1985, the Company had bank lines of ments. With respect to the remaining available credit lines, credit available for use of $115,000,000. The Company is the Company pays commitment fees (generally %%) for required, with respect to $15,000,000 of these credit lines, which charges amounted to $235,000 for 1985,5242,000 to maintain average compensating balances of 5487,500. for 1984 and $269,000 for 1983. The Company had no These compensating balances are maintained in demand outstanding short term debt at December 31,1985,1984 or 'ts which are not legally restricted. The Company is 1983. Additional information regarding short term debt pliance with such compensating balance arrange-follows: IThousands ofDollans 1985 1984 1983 For the year ended-M.ximum amount of total short term debt at any month-end: Commercial Paper $55,700 $35,000 550.000 Nots Payable to Banks $10,000 5 7.000 Average amount of short term debt (based on daily outstanding balances): Commercial Paper $19,905 517.519 ' 523,954 Notes Payable to Banks 5 4,139 5 301 5 2,567 Weighted daily average interest rates on short term debt: Commercial Paper 7.9 % 10.6% 9.0% Notes Payable to Banks 8.1 % 9.2% 9.3% A ( 31
NOTES aco unuedi l V NOTE 11. COMMITMENTS AND CONTINGENCIES Construction Program construction and approximately 93% complete as to start-4 Total cash construction expenditures for 1986 are estimated up, and scheduled for completion in the second half of c approximately $86,082,000, which includes 1986. The cost containment agreement established a $18,796,000 forjointly-owned facilities. Current commit-targeted in-service date of December 1986 and a targeted ments for the construction of major pmduction and cost of $3.7952 billion, and provides for penalties for transmission facilities amount to approximately overruns based on the final cost of the unit. The $12,380,000 of which it is estimated approximately Company's portion of the originally targeted cost is $8,905 000 will be expended in 1986. These amounts approximately $198.1 million, includirg the Allowance for 3 exclude allowance for funds used during construction and Rmds Used During Construction (AFDC). However, the customer contributions. targeted amount may be subject to adjustment on account of changes in the segulatory treatment of Construction g g %,,, W rk In Progress and AFDC, as well as changes due to The Company is a member of certain insurance programs certain extra rdinary events not contemplated by the which provide coverage for property damage to members, Parties m 1983. At December 31,1985 the Company's nuclear generating plants. Facilitics at the Peach Bottom costs associated with Hope Creek amount to approximately and Salem Stations are insured against property damage $204 million and the Company has receraly been advised losses up to $1.1 billion per site under these programs py PSE&G that tbc esamated overall cost for Hope Creek The Company is also a member of an insurance program is expected to be between $4.15 and $4.30 billion. The which provides insurance coverage for the cost of replace-Company cannot predict the fmal cost of the Hope Creek ment power during prolonged outages of nuclear units umt, the date of commencement of commercial operation, caused by certain specific conditions. Under the property or the ultimate effects thereof on its operations. However, and replacement power insurance programs, the Company Management believes the final outcome of this matter will could be assessed retrospective premiums in the event the n t have a material adverse effect on the Company's rs' losses exceed their reserves. As of December 31, financial osition. P the maximum amount of retrospective premiums the y could be assessed for losses during the current Nuclear Plant Outages policy year was $8.2 million under these programs. The BPU has deferred consideration of $12,179.000 of in the event of a nuclear incident at any of the facilities replacement power costs associated with certain nuclear covtred by the federal government's third-party liability outages relating to generator failures at Salem Station indemnification program, the Company could be assessed pending the development of the record on such outages in up to $2.1 million per incident, but not more than the next energy clause adjustment proceeding of the $4.2 million in a calendar year, in the event more than one operator of the station, Public Service Electric & Gas incident is experienced. Company. The co-owners of the station have instituted litigation against the supplier of the affected equipment. p,% % 4 ,g, The Company cannot predict the outcome of this matter or The Company has an arrangement for a limited term its uhimate effect on the Company. purchase of energy and capacity from Allegheny Power System which was effective for 1985 and subject to annual Nuclear het extensions. The Company also has agreements to purchase The Company's contractual liability to purchase nuclear certaia capacity and energy output from units of Pennsyl-fuel from Pearl Fuel Corporation for Salem and Hope vania Power & l ight Company. Creek Generating Stations as of December 31,1985 was approximately $31,000,000. Under certain conditions of Hope Creek Cost Containment termination, the Cornpany will be required to purchase all "the Company owns 5% of the the Hope Creek Nuclear nuclear fuel then existing at a price which will allow Pearl Generating Station, currently under construction by Public Fuel Corporation to recover its net m, vestment costs. Service Electric & Gas Company (PSE&G). which owns Nuclear fuel requirements for Peach Bottom Generating the other 95% of the unit. In July 1983 the BPtI apprmed Stati n are bemg provided by the operating company an Agreement between the Company, PSEAG, the New through a fuel purchase contract. The Company is Jersey Department of Energy and the New Jersey Depart-resp nsible f r payment ofits share of fuel consumed and i I ment of the Public Advocate which establishes a program related perating costs and interest expense. These costs I to contain the continuing construction costs of Hope are included in fuel expense. k, which is currently 99% complete as to physical 32 l
ATt. ANTIC CrrY ELaCTIUC COMPANY O V iOTE 12. LEASES 1m Company has certam obligations which, in wd is not have a material effect on assets or liabilities, and would with criteria established by the Financial Accounting not affect income, since the total amortization of the leased
- tandards Board (FASB), are capital leases, but are assets and the intenst on tim lease obligation would equal ccounted for as operating leases in accordance with the the rental expense currently allowed for raremaking pur-asemalung treatment. An accounting standard issued by poses. Rentals charged to operating expenses for the years he InSB requires that the Company record such leases on ended December 31 were as follows
ts balance sheet by 1987. Reco: ding capital leases would Thousmide c/Douars; 1985 1984 1983 luclear Fuel $11,800 $ 8,457 5 6,364 )ther 4,511 4,759 5.268 Total $16,311 $13.216 511.632 the future minimum rental commitments under all non.
- ancelable lease agreements are not significant.
WOTE13. SUPPLEMENTARY INCO41E STATEMENT INFORMATION Wrating expenses include maintenance costs of 1984 and 1983 rest:ectively. Charges to income for royalties 143,378,000,539,247,000 and 535,066,000 for 1985, and advertising are less than 1% of gToss revenue.
- 14. QUARTERLY FINANCIAL RESULTS (UNAUDITED) fly financial data, renecting all adjustments necessary n the opinion of the Company for a fair presentation of tuch amounts, are as follows:
~ Operating Operating Net Earnings For Earnings )uarter Revenues income income Common Stock Per Share Thousmids ofDollars Escept hr Share Amounts) 985 ist $140,491 $19,104 $12,658 $10,%2 5.61 Ind 134,214 15,683 8,866 7,176 40 led I80,411 35,630 27,815 26,283 1.45 6th 124,617 18,989 11,180 9,729 .53 $579.733 $89.406 $60.519 $54.150 $3.00m 1984 ist $133,649 $21.527 $15.360 $13,588 $.78 l 2nd 125,073 18,448 l1,431 9,660 .55 3rd 163,929 36,275 28,330 26,586 1.51 4th 126,880 15,141 8.156 6,475 .36 $549.531 191,391 $63.277 $56.309 $3.20 f t)The andmdual queriers asy ser add to the amJ due is c. necreasing everage number of Cass,oe shares outstanding a the end of each guarter The revenues of the Company are subject to seasonal Auctuations due to increased sales and higher residential ng the summer rnonths. 33
l SUPPLEMENTARY INFORMATION CONCERNING THE EFFECTS OF CHANGING PRICES towauptTEn> ) (% t ) v' The following supplementary information about the effects certain recomrnendations it believes would simplify both c(changing prices is presented in accordance with the presentation and understanding of the effects of standards issued by the Financial Accounting Standards inflation on a business enterprise. The effects of changing Board (I%58). The Company cautions readers on using prices are calculated by adjusting the Snancial data for this information to draw any ct,nclusions concerning tae changes in specinc prices of the components of the Company or its operanons, since the Company's rates are Company's utility plant by applying the Handy-Whitman subject to regulation, Additionally, this informaion is stili Index of Public Utility Construction Costs to historical cost -W experimental in nature and under continuing by vintage years, reflecting the current cost of replacing review by the FASB. The Company has expressed its views resources actually used in the Company's operations. o the FASB conceming these disclosures and has made STATEMENT OF INCOME FROM CONTINUING OPERATIONS ADJUSTED FOR CHANGING PRICES (In Average 1985 Dollars) Results of Operations: war Ended December 31.1985 (Timessads of Dollars) At Current Historical Cost $579.733 5579,733 Crising Revenues OperatiIs Expenses: 412.034 412.034 Operation and Maintenance Expenses 41,985 89,273 Depreciation and Amortization Expense 36,308 36,308 Federal Income Tax Expense 28,887 28,887 Other 5 60.519 5 13.231 lacome from Continuing Operations 34
_,,9,,
1 ATLANTIC CITY ELECTRIC COMPANY Wiation and amortization expense expressed in current Net Utility Plant Costs Recowrable
- ost amounts were determined using the rates and methods Under rate making prescribed by the regulatory commis-ased for computing book depreciation and amortization sions to which the Company is subject, only the historical applied to utility plant balances re-expressed in terms of cost of utility plant is recoverable in res enues as deprecia-
- urrent costs.
tion. Therefore, the excess of the cost of utility plant stated Operating revenues and expenses, other than deprecia-in terms of current cost over the historical cost of plant is ion and amortization, were incurred ratably during the not presently recowrable. Due to this feature, the value of year and are, in effect, stated in average 1985 dollars. utility plant and its effect on income from continuing Income taxes were not adjusted because the present tax operations adjusted for changing prices must be considered !aws do not allow a deduction for depreciation and in terms of its net recoverable cost which is historical cost. I smortization adjusted for the impact of innation. There-While the rate making process gives no recognition to the fore, the Company's effective tax rate rises from 37.5% current cost of replacing utility plant, based on past ander the historical cost basis to 73.3% under current cost practices the Company believes it will be allowed to cam a basis. retum on the increased cost of its net investment when This supplementary information should not be used to replacement of facilities actually occurs. assess the probability of future cash Rows wh:n existing utility plant is replaced. The estimates do not reHect the Current Year Decline in Purchasing Power of Net Amounts Owed effects of the regulatory process nor the specific plans of the Company for the replacement or modemization of The current year decline in purchasing power of net utility plant. A meaningful estimate of the estimated level amounts owed was $28,980,000. During a period of of future capital expenditures is set forth on page 15 of the in8ation, holders of monetary assets such as cash and I arsaual report. receivables suffer a loss of general purchasing power while l holders of monetary liabilities, generally long term debt. i Current Year ENect of Increased Price levels experience a gain because debt will be repaid in dollars gmpads yoollarss having less purchasing power. The Company's gain from l the decline in purchasing power of its net amounts owed is 1(@; 12 General Price Levels on Primarily attributable to the substantial amount of debt and iity Plant Held 563,611 increases in Sp-cine hices cumulative preferred stock subject to mandatory redemp-on Utility Plant Held 29.406 tion which has been used to finance utility plant. This gain, however, should not be considered as providing funds Excess of Increase in General Price Levels Over to the Company, since the Company is limited under rate Increases in Specific Prices $34.205 making procedure to the recovery only of its embedded cost of debt. At December 31,1985 the cost of utility plant, net of } accumulated depreciation was $1.835,324,000 on a current cost basis, while historical cost was $1,075,801.000. The accumulated provision for depreciation and amortization under the current cost method was estimated for each major class of utility plant (production, transmission, distribution and general plant) by multiplying the respec-tive cost data by a percentage representing the expired life of existing facilities of each class at December 31,1985. Fuel inventories, the cost of fossil fuels used in l generation, have not been restated from their historical cost. New Jersey regulation controls fuel costs, through the operation of a levelized energy clause, such that recovery is ultimately limited to actual cost. For this reason fuel inventories are effectively monetary assets. l O v 35
FIVE, YEAR COMPARISON OF SELECTED FINANCIAL DATA INCLUDING nzcEcErE UNAUDITED SUPPLEMENTARY DATA ADJUSTED FOR CHANGING PRICES Thousands of Dollars Except Per Share Amounts-Current Cost Amounts Expressed in 1981 Dollars Wars Ended December 31 1985 1984 1983 1982 1981 Operatinlg Rewaue 5 579,733 5 549,531 5 517,142 5 444,178 5 469,683 -historical 490.128 481,016 471,925 418,231 469,683
- -trended in 1981 dcilars 5 60,519 5 63,277 5 66,152 5 49,055 5 46,988 lacome from Continuins Operations
-historical 11,186 15,740 19,546 3,805 7,648 -at current cost (a) laceme from Continuing Operations per Share of Common Stock (b) 5 3,00 5 3.20 5 3.48 5 2.76 5 3.03 -histoncal .32 .55 .79 (.21) .01 -at currer,t cost Effective inco.nu Tax Rate 37.5 % 39.8 % 42.6% 35.5 % 36.8% -historical 76.5 82.3 94.7 112.7 102.3 -curwnt cost basis Excess of inc: cases in General Price Leve!s Over 5 28,918 5 49,792 5 290 $ (6,724) 5 (25,204) 5 24,501 5 26,795 5 16,948 5 20,401 5 39,572 increases in Specine Prices (a) Decline in Purchasing Power of Amounts Omsha) Net Assess at Year End 5 493,450 5 474.217 5 448,894 5 414,834 5 338,846 410,179 408,270 402.895 386,460 327,892 -historical -trended in average 1981 dollars Net income as a Percent of Operating Revenn (b) 10.44 % 11.519r 12.79% 11.04 % 10.00% historical 8.83 10.07 11.67 10.40 10.00 nded in 1981 dollars Rate of Return on Shareholders' Equity ll.9A% 13.02% 14.49 % 11.20% 12.21% -historical 10.13 11.40 13.22 10.55 12.21 -trended in 1981 dollars Total Assets at war End 51,299,633 51,220,503 51,139,978 51,077,% 9 51,013,789 -historical Loeg Term Debt and Cumul.tive Preferred Stock Subject to Mandatory Rrdemption 5 521,612 5 473,462 5 459,366 5 462.470 5 447,389 -historical Dividends Declared per Share of Common Stock 5 2,555 5 2.45 5 2.32 5 2.24 5 2.08 -historical 2,16 2.14 2.12 2.11 2.08 -trended in 1981 dollars Market Pnce per Common Share at War End 5 28.50 $ 24.13 5 23.25 5 20.75 5 17.25 -historical 24.48 21.47 21.56 19.98 17.25 -trended in 1981 dollars 322.2 311.2 298.5 289.3 272.4 Average Consumer Price Index 1985 dollars (without adjustment of earnings io-the pro forma effects of Certai2 comparative per share data crended it: in6ation on depreciation amounts) are as follows: 1985 1984 1983 1982 1981 5 3.00 5 3.31 5 3.76 5 3.07 5 3.58 Earnings (b) 2.555 2.54 2.50 2.49 2.46 Dividends De:lartJ _ 28.50 24.99 25.10 23.26 20.08 Market Price (War End) O These amenats =dt dirier from those shawa in stammeas of tacome b.a Centweiss Opersions Adsessed for Ch f ased a the desa presented above (898li and as the changing pnce inkauanoa :19 56 is creer to diestrase the impact of changug f I laceme from Comusmag Opersions. Mi tacame and Earssags Per Share data for 19s2 metwee the cumulauwe effe \\ LJ 1 36 -y,s
nzcEEE NVESTOR INFORMATION i J Ybem abould I need inquiries E+-- ' ;anyinvestmentin Is additional information about the Company evallable? ) Ltlantic City Electric Company? The annual report to the Securities and Exchange Commis-h Company staffs an Investor Records Department sion on Form 10-K and other reports comaining financial which serves as recordkeeping agent, dividend disbursing da'a are available to shareholders. Specific requests should .sent and also as Dansfer Agent for C~ aman and be addressed to Mt M. R. Meyer, Secretary, or :he 4eferred Stocks. C is -:+A=c concerning such maners Investor Records Department, at the address shown above. o the replacement of dividend checks or stock certi6 cates, Mk WI tk& widress changes, transfer of Common and Preferred Stock hpany's M and hw erti6 cates. Dividend Remvestment and Stock Purchase First Mortgage Bond recordkeeping and interest disbursing 'lan inquiries or any general information about the are performed by Irving ' Dust Company, One Wall Street, knpany should be addressed to: New York, New York 10015. Debenture services are Atlantic City Electric Company. performed by First Fidelity Bank, N.A.,765 Broad Street, Inwsta Recads Depanmerit Newark, New Jersey 07101* P.O. Box 1334,1199 Black Horse Pike Pleasantville, New Jersey 08232 Whos are dividends paid? 'Ihlephone (609) 645-4506 or (609) 645-4507 The proposed record dates and payable dates for upcoming dividends on Common Stock are as follows: Mt M. R. Meyer, Secretary, is the Corporate Officer responsible for all investor services-Mr. R. E. Moeller is Record Dates Payable Dates Manager of Investor Services and Mrs. M. T. Lindsay is March 20,1986 April 15,1986 Supervisor of Shareholder Recordkeeping. June 19,1986 July 15,1986 Does the Company how a Dividend Reinvestment and September 18,1986 October 15,1986 Stock Purebane Plan? December 18,1986 January 15, 1987 i Plan allows shareholders and employees t The following table indicates dividends paid in 1985 and cally,nvest their cash dividends and/or optional 1984 on Common Stock: i nts in shares of the Company's Common S'ock. Holders of record of Common Stock interested in enrolling 1985 1984 b the Plan should contact the Investor Records Depart-First Quarter 5.62 5.59 ment. See our address above. f5 6 Where is the Company stock listed? Quart Common Stock and 5%% Cumulative Convertible Pre-Fourth Quarter 5.645 5.62 ferred Stock are listed on the New York Stock Exchange. Annual Total $2.53 52.42 The Company's Common Stock is also listed on the Pacific and Philadelphia Stock Exchanges. The trading symbol of Dividends paid on Common Stock in 1985 and 1984 the Company's Common Stock is ATE; however, news-were fully taxable. paperlistings generally use AtCyEl. The high s.nd low sales prices of the Common Stock as reported in the Wall Street Journal as New York Stock Exchange-Composite 'Dansactions for the periods indi-cated were as follows: 1985 1984 High few High Low First harter 25 % 23 % 23 % 20 % Second Quarter 29 % 24 % 21 % 19 % Third Quarter 29 % 25 % 23 20 % ! Fourth Quarter 29 % 26 25 22 % l [ O 37
,TATISTICAL REVIEW 19851975 /33 V ] 1985 1984 1983 1982 watina ser service r sal Utility Plant (Thousands) 51,406,696 51,309,670 51,226,165 51,153,321 o 3ross Additions to Utility Plant (Thousands) 5 105,213 5 95,388 5 83,673 5 126,893 bli Miles of 71ransmission and Distribution Lines 6,977 6,958 6,925 6,918 3enerating Capacity (Kilowatts) (a) (b) 1,605.700 1,594,200 1.594,200 1,531,200 J danimum Utility System Demand-kw 1,432,000 1,298,800 1,346,700 1,264,200 4 2apacity Reserve at Time of Peak (% of Ins:al. Gen.) 10.8 % 18.5 % 15.5 % 17.4 % l Energy Supply (Thousands of kwh): Net Generation 5,817,254 6,237,724 5,913,196 5,676,118 Purchased and laterchanged-Net 1,049,393 393,175 579,488 466,667 Total System Load 6,866,647 6,630,899 6,492,684 6,142,785 Electrie Sales (Thousands of kwh) itesulential 2,638,121 2,646,813 2,545,351 2,415,292 2,298,895 2,150,464 2,019,468 1,894,535 Cosamercial a !adustrial 1,204,971 1,197.392 1,225,637 1,218,520 All Others 57,685 59.122 60,978 63,770 Total 6,199,672 6,053,791 5,851,434 5.592.117 Ranidential Electric Servlee (Average per Customer) Amount of Electricity used during the year (kwh) 7,643 7,866 7,715 7,444 Revenue for a year's service 5 778,77 5 783.47 5 735.66 5 644.77 10.19e 9.96e 9.54e 8.66e Revenue per Kilowatt. hour Centenner Data (Average) Residential With Electric Heating 68,871 65,261 62,272 59,3!9 Resjdenti:1 Without Electric Heating 276,305 271,207 267,642 265,124 Total Residential 345,176 336,468 329,914 324,443 L mial 44,256' 43,615 43,152 42,885 ladustrial 1,020 1,015 1,021 1,018 554 544 549 627 i Other Total Customers 391,006 381,642 374,636 368.973 Total Service Locations 417,625 407.277 398,526 391,989 Population Served 1,142,000 1,112,000 1,092,000 1,069,000 Flamacial Data (Thousands of Dollars) Energy Revenues: Residential 5 26.8,814 5 263,612 5 242,705 5 209.191 1 Comrnercial 209,880 190,435 175,520 154,792 Industrial 80,392 79,123 76,109 71,255 All Others 10,315 10,405 10,133 9.255 Total Energy Revenues 569,401 543,575 504,467 444,493 Unbilled Revenues-Net 3,076 (1,340) 5,671 (6.795) Other Electric Revenue 7,256 7,296 7,004 6,480 Total 5 579,733 $ 549,531 5 517,142 5 444,178 lavestor leformation Earnings per Avera8e Common Share 5 3.00 5 3.20 5 3.48 5 2.76(c) Awerage Number of Shares Outstanding (In Thousands) 18,069 17,581 16,923 15.116 Dividends Paid on Common Stock 5 2.53 2.42 5 2.30 5 2 20 84 % 76 % 66 % 80% Dividend Payout Ratio Book Value Per Share (War End) 5 24.76 5 24.27 5 23.58 5 22.45 Price Earnings Ratio (War End) 10 8 7 8 Times Fixed Charges Earned (before income taxes) 3.33 3.61 4.11 2.27(c) Shareholders and Employees (War End) Common Shareholders 48,635 47,446 48,299 48,790 2,099 2,012 1,995 2,022 =gs -ledes capacuy allocased en a large sadustrial cusammer C) Includes unet purchase af capacuy under contracts wie Pennsylvamaa Ptruer & light evy (comuaracing in 19s3) and Delatarvo Pouer & Light Cosepany (fresa 1900 through 19 set C) Earmangs calculassen inchsess the cumulauw effect of an accouanas change. Fianacial runo is cosaputed escinding the casaalauwe afluct 38
ATLANTIC CITY ELECTRIC COMPANY \\ U 1981 1980 1979 1978 1977 1976 1975 51,064,928 5 962,052 5 870,075 5 802.473 5 753,269 5 710.343 5 675,617 5 123,318 5 97,330 5 72,773 5 58,073 5 48,733 5 41,702 5 46,745 6,910 6,879 6,831 6,786 6,735 6,6% 6,645 1,524,600 1,431,600 1,384,700 1,414,700 1,414,700 1,334,700 1,334,700 1,263,800 1,261,700 1,192,600 1,177,400 1,176,000 1,030,300 1,069,400 17.I% 11.9 % 13.9 % 16.7 % 16.9 % 22.8 % 19.9 % 5,302,023 5.533,178 5.397,338 5,625,988 5.293,019 4,918,906 4.715.357 946,241 643,106 464.143 130,037 224,169 324,196 190.852 6,248,264 6,176,284 5.861,481 5,756,025 5,517,188 5,243,102 4,906.209 2.480,225 2,514,738 2.411,732 2,377,202 2,221,250 2,070.766 1,938,724 1,849,863 1,769,208 1,580,384 1,586,097 1,478.559 1,392,029 1,346,216 1,279,724 1,286,205 1,255,304 1,250,636 1,220,260 1,143,170 1.036,755 65,555 63,753 60,799 60,705 58,866 57,667 56,465 5,675,367 5,633,904 5,308,219 5,274,640 4.978,935 4,663,632 4,378,160 7,751 8,003 7,849 7.951 7,653 7,320 7,018 5 670.66 5 536.99 5 439.92 5 406.18 5 378.36 5 349.64 5 329.25 8.65g 6.71g 5.61g 5.1ie 4.94g 4.78s 4.69e 56,100 52,225 48,339 44,387 40,318 37,581 35,235 263,904 261.988 258,941 254,592 249,927 245,2 % 241,019 g20,004 314.213 307,280 298,979 290.245 282,877 276,254 t 03,219 43,267 43,219 42,672 42,033 41,170 40,608 V I,032 1,041 1,048 1,034 1,047 1,071 1,100 634 654 667 673 676 681 684 364,889 359,175 352,214 343,358 334,001 325.799 318,646 386,046 379,242 371,362 362.131 352,205 343,147 336,105 1.056,000 1,037,000 1,015,000 990,000 %1,000 937,000 915,000 5 214,614 5 168,733 5 135,178 5 121,440 5 109,818 5 98.9N 5 90,955 156,624 115,973 88,819 80,539 73,354 66,354 63,544 82,908 60,512 47,590 42,185 40,885 36,438 34,974 9,700 7,835 6,624 5,973 5.630 5,406 4,881 463,846 353,054 278,211 250,137 229,687 207,iO2 194,355 5,837 5.337 4,895 4,921 5,308 4,925 4.724 5 469,683 5 358,391 5 283.106 5 255,058 5 234,995 5 212,027 5 199,079 5 3.03 5 2.62 5 2.36 5 2.21 5 2.06 5 2.60 5 2.41 13,034 12,372 11,980 10,791 10,630 9,747 9,490 5 2.04 5 1.90 5 1.765 5 1.67 5 1.62 5 1.56 5 1.51 67 % 73 % 75 % 76% 79% 60% 63% 5 22.40 5 22.22 5 21.63 5 21.27 5 20.71 5 20.25 5 19.34 6 6 7 8 11 9 7 2.84 3.03 3.62 3.62 3.17 3.14 2.88 48,424-47,762 48,194 44,490 43,826 42,516 39,232 2,035 1,%8 I,903 1,797 1,739 1,714 I,741 - ' neport has been papered en en pwpo g, .:.as seems and siansuca inamma. - -.: me Cosipany and see is -- we any sak, dier for _ solae"-'~ of an ener so buy any w_as. 39
30ARD OF DIRECTORS ( g ( gLEANOR 3. DANIEL DIRECTOR 2:",',r ddd+e/d h+hh* & say.empisped. vice PmMeat ead dreemr W COMMITTEES Cemassisee. Jew, pertaer Wtaw k Jtre W M M E. Audit simposa Thacher & Sorthtr JOHN D. FEEHAN Chesnesa ytan assed ythe Campsay -t Jos. MICHAEL GALVIN, JR. PresMeat and CMef Esecutin ODicer < Seien County Memorist Nespisei g,,,,,, GERALD A. HALE Opemises MMMM A: & Research PresMeat (NNN. Jac., en inwstment end measerment compsay MATTHE3 HOLDEN, JR. Finance K M M M ME 9% dGewenment and Tereign Affairs, Vaintetty < Virginie Possies & y E. DOUGLAS HUGGARD Im m esce PresMeat and CWef Eaecutiw OAlcer dshe Company gg IRVING K. KESSLER g Rentred. Former Esecutin M PresMent, RCA Corporeedom MADELINE H McWHINNEY M WM M PresMent < Dele Elliott & Company, e l I l i t consufring firm prorMing Relatices se the henkingindustry M. MINER M Committee Membefehlp Ja ,ensr .asant M Es Oftcle Membership OFFICERS hars of wars of %srs of Set w e Service 5.. -A JOSEPH T. KELLY, JR. ] E. DOUGLAS HUGGARD DAVID V. BONEY M Pmisent-Customer Assistant Vice PmMent-35 PresMrnt and CMelEsscutin Opicer 30 end Community Somers 31 Ope *eticas HENRY K. LEVARI, JR. JERROLD L. JACOBS !OHN E BORN M PmMent-M PmMent-14 Snaise M President-33 Carperste Pisaning j Operations and Engineering 24 Electric Operations 1 DAVID McCANN MICHAEL A. JARRETT LANCE E. COOPER Vice PmMent-Centrol M PmMent. Dessurer Senise M PresMent-3 sad Assistent seemary 13 Corposene Services 10 and Assis sat Dessum THOMAS E. FREEMAN MARTIN R. MEYER RRIAN A.PERENT Secretary and Assistent M PresMent-37 5enior M Pmident-Dresurer Pisaning and Asm 18 Nuesa Assearce MEREDITH I. HARLACHER, JR. HENRY C. SCHWEMM. JR. J. C. SALOMONE M Pmident-Senior & Pmident-M Pmident-16 30 Producenen 91asace end Accounting 9 Engineering O 1
= _.....v.,. _ -. _.. w............ ;..";,;.,._,.. .w.p. ... gA R y_ y .,y.- N , Q,V,,:. -..y-,- y Q.,. _ l+- :.d,.'L Glk* g.-l * %q : * :C, O;'& N.:y.sy.p~'.^E
- _
r e ., r.> &>.:,-lyWW{ '. h. Q'*: .h.g p.,- .;a. y ?N;. f_. r wf41-I.._T; k ih..,N.f f; l - 'f w w ......<a. .s- . h[R.f ~ ? .. W.'.-.,.., c .s.;> e 4.. - y. w- ,, ;.g.,.
- .~
....r ~ r _g ~
- 1.. ' ! "
y%%-C.,,. ;.. x-w ?.g. q.. y, t, j..,..a.s 4 % m: y m,. - a g
- AME,etet;.. a.
M'b2M.*;: y.s w ?- .~ . ' Ny%. w'.... E Y~ +* s h e. +; C Q : k 2 i. f L; M.y Of da ^ ? :.f. h.ql.y.fi$. l 'j, & Y.;N:; .,..~'.m_.. . m! w..- 4- >QV-. s .~ .,s. m m
- g..... g_, pag..
. ~.. 7_.n.. . ;;c, ? 4 s, .;[ _I., &; ' ~ ..,,,,.v., g p,..: ^;. * , * * ;;. - L r -'*y, 2 . ~...... AE %. E" .. ~ .. f* -;..:_ y. .. x,p. ' ;- w -,.., .j -._ 9 ,? 5 ') . sp..s .....;,'~;. 's .~ : E- .... 9 A.. :. -
- 3. z' y r
g ;. , ~. -,,.J. 7. - [;.__. l '.;,: ..',%,.:[k... t{. ~
- f. }'\\_ g.f....;..:.
,3,
- v...
.m :c.. -p.. _ . g3. .2;.. 3 d... ,x. y, ifjv J 0; < g.. c.6.'. .;;--4,.,,; p ". L
- :4.
7,..- .. M j 8..., .n .Vi 4' g.j:? 'N ' d M-e
- ~.;..,::. ;.. 3..;.n.$
.^ .o - s...... ;.. e;. y y . -- +. s --- -~ y y.;.
- s.. y i.
1 %._ " j..:. 4.-. ;.g % ~. L ~-:.: -. 4.. - .n. :.;, .. ? a, c- ...,,.,.s.~s....s .",...g.;.
- w. : x.3.;, -~
p_ a .,..b ,..%+ y.:- ,,'s.,'.'O
- 1..,,9
. '. /,' 'S'*.. - -. ' '.' et, q,',, .A
- i f o..,,
- S
',, t % lg.,, ? y ; . s ',. 4, _.:. ):. - . - t u,\\ . m..$.'... l i. :f ff.r '.:.. ;i, '. ). ' '%OA [. .. -J. ' ::., k ..,~.._.e.,- +. s y..,... ? :.... . 9 '..: ... j..b ,g .s .p.. y%1 ;L l
- i '
L 'j 'L' A :" i
- ,-; l g , :l' y, {.
g. ' ' l y.;._, y ; >;., -..t ' ; r.... _. ;- -.. t
- 1. ?.... y.:m a.._;, _.(
. -c.-.c.: af;..,
- - 7., n..g
.. :: w .;.. r v . nem m. :. ~......n. :: -w nc - n, s.. ~> =- J. ~
- ~
d' **"*4' 1s. tems,a.1s, Wo u,M. .16,.e; Q'.S ~ '- = m 3.A.w desurdass h .~.c..+ '4 = .g. n e ..:n. E- .w. ,j-p
- 4. 4-w i.'
m p,.^ 45 ",Q m,K y - ir " _ \\ ,,s..- ' ' 4 :f e.,'". wqr%- ' s. m h ~ L 4 E Z E gg' E hP;.Ap% ~.5 2 - = 2b g a# : e a 1$ ), ~ + r 'i t j 4. _9,. s eo b g,g.4,Y._ e T kssgue Maneller a w sie K r3 I ' cowe noea uun I d..
.Wg -y. .h - 2.J* )
- W"-
l 2' T e '*e.. e. u-._ ,~ (.O L $h3.'. ',L.i >~p.- p fh? A GQr<. 2-Q1. c a,x- - a
- 5y.= -
j(7.i-f.*
- ,s --
g- ; \\. -e.7% m '6 4.- ' 4%. 'Y ?' A P, ? ' A-Oh.;S' g* e- .k'. ) l ~ w 'i. ).- .i5$.f4 .V8 hy I y. a 9 m,_ b .t.;- ?,.,. A e Lt." ] 1 L
O ESTIMATED EXPENSES ASSOCIATED WITH PANY ? Securities and Exchange Commission Fillna Fee 1/M of 1% of total registered shares times $150,000 the average price of the past 20 days Stock Exchanne Listina Fees 24,000 i Legal Fees 105,000 Prrxy Solicitation (Incremental Expenses) 32,000 Misettlaneous. New Stock Certificates 40,000 O Deloitte, Haskins & Sells 30,000 Redemption Notice 9,000 Secretary of State 3,000 82,000 Total $393,000 O \\ _}}