ML20236A590
| ML20236A590 | |
| Person / Time | |
|---|---|
| Site: | Peach Bottom  |
| Issue date: | 12/31/1988 |
| From: | Feehan J, Huggard E ATLANTIC ELECTRIC OF NEW JERSEY |
| To: | |
| Shared Package | |
| ML18093B497 | List: |
| References | |
| NUDOCS 8903200046 | |
| Download: ML20236A590 (48) | |
Text
ij p Ti %, ;
ym
/
- 'R y;iQg: ; g; 00' '
Mi}f
.~.
w.
L; m.
3
- u m
q., c4l %p ~'y ' W,. a..
,p 4
- jNUg,,
hN<
<5m i.X,
"$1,
9.{:y c M
,n
, k.,l l-
> r
?f:
1
$b M
p-
_j p-g r-o
?,
1 f
j j_
H
,.x
=
g,==
Di?' '
E mm
~
[L
.) N
. :yi,
ANNI \\l RI 'P ( p R l l 9xx 4
e
/)hh yW
~
gap Y
y:
,y r.
V
".The figure is Not What' -
p1 it t ' sed Idlic.
g
' f ").g
,m 4,
c-
,,.e<,,
g %.
e Continuing the Sl'I'I'lY g
40 of lilectricit y l~t ipage toi 3,,.
o
- w, ns.
COGENERATION:
-g; Two for One N
.].M._
(page I ')
'vi,
.A
~
W -
Shaping the DEMAND for Electricity 1page I o >
q; t'
l' r
.(-
+
+ [i ?
',j,.
3 l
-[
.q
't
-l.
,gt I f-.
e~au I%
g,,
,...i; u.,,.' :. ' 9 y
- A mAm y
r$.
n
)
2 g4 Il g
h V' 890320004689031g Li!L k :j paa Apoca o50 %
1 a,
g,.,.wp m.c r.,rscs j
1" l
m
.g.
a(
~
--u
-~-
,~,. q
_y p
^
.~b 9
X.
.h 6 sk _
.J:g
%psdWtWi%
About the Cover
(.
4
,., y
-)
The B. L England Generating Station! located in 4d Le m
f:
3
[ Beesley's Point, NewJersey celebrated its 25th anni-N.
i c,
if versary of service this year. The 457-megawatt station is 3
n -,%
.d i
M i Atlantic Electric's largest wholly-owned power plant. The i b
g-
{i
- W[ g,#
d
~
'i 5
( hh)
$ plant is noted for being one of the first generating stations in the Nation to switch to coal during the 1973 gA a
('
d Etr M.
f hl oil embargo. The plant also operates the Nation's first y
h3 h
9758 natural draft salt water cooling tower. Its 475-foot
' ' ly.
j "lightstack" is a landmark on the South Jersey shore.
j (p[ Rf ;
- Nq %$g ' !
.t 5 &
.7 j'
l h
'h"(s
^ '%
q I NN 8
d
+
W
- Nh k i
k
'$.y
@ k hf %
RQ$f@qhg ' y; f d
Notice of Annual Meeting
}N
- d{h{
The 1989 Annual Meeting of Shareholders will be held
- 7..
9 3
y
. kNkhNhklg M
on Wednesday, April 26,1989 at Wheaton Village, M
p g
l%
_ hhf g;
4 PQ Millville, NewJersey. A Notice of Annual Meeting will be JJ q
y gy 7
. h{ mailed in March to those shareholders entitled
- I'"]ihd8kkh
. %n, ;
f fr
- /. fha 'h jf 3
N hiy QQM %
1q,.
J W b;& M M9Q
~
(e$g g l
%:g WW JS I.etter to Shareholders 2 AR Q4
. wgM 1 Contents '
9
? p et
. bc gqq g Q
y,
%y iW JM 4
' [h1
$ rM@b J ' 4$$MpgyQ.
. j The Year in Review 4'
g pgnp N $
w" sh Sg" R p/ibwWW ;y%@%[f [44WQ;%@Mp@MN
. The Future Is Not What it Used To Be" 6 : f*'e Mf ~
%. _v
- g...
%. g.
r MMPk&
9, g s #e- -yp a.
,7 g
3 Ap Continuing the SUPPIX of Electricity 10. g1 ;
k b;f.$, hy.$g
[ '" Q Ni k
?
COGENERATION: Two for One 12 h, hf 'kN(M[MkJ$s#S M $ $*."M" M Y' I
}
k
%g "d 06h %W %
he
@jhy h
di[%g #i; o 7
Custoiners At-A-Glance 17 fR WGO c W
q.'
Finan'cial information:
gg ^ ]
.gs
,\\Y d
%l:h"/M, $
j Management's Discussion and Analysis of hk
.fg '
Financial Conditiotiand Results of Operation 18
's J
y $l
$g t u
- h hk d.0*M Report of the Audit Committee 22 R$
- !6y wg n $:s " '
j-
- $4"'
Report of Management
,23 L pgM$'
[
s, i;$
a
- j g
4 Independent Auditors' Report
'23
- $gy ],
. M h
w.
Consolidated Statement of income 24
'g
-i a;
{$ % i 9
HY " '
- .g Consolidated Statement of Cash Flows -
h-i Consolidated Balance Sheet 26
~l pya ff% s&
Consolidated Statemim of Changes d
b hy
[
in Shareholders Equity 28 y
q 1
- 4.,
%W[ J < '
. Notes to Consolidated Financial Statements 29 i
mms
,1
<e IMh ' '
dnhc Statistical Review 1988-1984 41 Waty I
%p1 Investi>r Information.
'42 yb
$#p' '
- Corporate ofhcers --
M3 WM y
k h@CL@6 noard of Directors.
+1 he
- C., M g
.' 'm'
'f.
'[.'
it pj FinancialHighlights q
(y H
q s
{
O q
Results of Operations 1988-1986 j
['
% Change
% Change
- C 1988 1988-1987 198" 198' 1986 1986 fj o
0 Electric Operating k
Revenues (fXX)'s)
$ 675,859 4.3
$ 648.173 11.2 5 582,961
-l 64 Operating Expenses (00(Ts)
$ 553,080 3.-
$ 533,500 9.4
$ 487,507 lq 4
Net income (000's) 72,171
( 2.2 )
$ 73,765 34.2 54,946 q
Earnings l'er Common Share 3.68
( 8.-' )
4.03 36.3 3.00 j
j, Dividends Paid l
{
l'er Common Share 2.77
-i. 5 2 65 1.9 2.60 11 li>tal Assets (000's)
$ 1,660,286 10.7
$ 1 -699,381 7.0
$ 1,401,06 i i
Cash l'tility Construction
]
i:
Expenditures (000's )
$ 127,099 2 -1.2
$ 102,326 10 9
$ 92.283 j
7,350,280 4.8
" 014,400 7.6 6,52l,414 Sales of Electricity (KWIi)(000's)
Price l' aid Per KWil-( All Customers )
9.055<
25 8.833c
( 2.2 ')
9.033<
F
?..
Total Electric Customer j
L Accounts (Year end )
434,262 31
-ill,251 3.3 407,776 j
i_
Number of Shareholders-
]
Common Stock (Year-end) 44,473
( 2.4 )
-15,586 (3 3) 47,133
- ]
Number of Atlantic Electric
-{
- Employees (Year-end) 2,092 (16) 2,148
(.9 )
2,168 j
s V
ilook Value 27.16 56 25.~ 1 5.5 2i.37 1
4
):
1 E,
9 Atlantic Energy si -
Earnings and Dividends Atlantic Energy
,j U
Paid Per Share of Marku Price Per Share a
Common Stock of Common Stock D
H
[
. _ _. Q W
')
- i. -
y
. o-
~'
j p
=
\\;
w
' l
_. g:
19
=
'l c
- a a-vi m
a r
xs-s.
m m
r xs aus Lu nmgs
== Dn nic ht,
- mctado spn tal unt> Ju utend of M per Jwe I'
i 1
kyyyyymyg.
- s,
n E
i
- mmpe,
$ To meet future power supply needs, d
ca we ham begun mnmu@n C mnh b ddNHTgmygq$g$f)dhMbid gggT7"]
tion turbine peaking unit which is i
expected to be on-line by the summer our company had another good peak of 1990. In addition, we have signed year in 1988: very strong financial contracts with utrious cogeneration proj-I performance; important ect sponsors for capacity totaling 650 operating milestones; and some progress megawatts. Some of that capacity may be in the early development of the non-on-line as early as 1991. To provide for utility subsidiaries.
more immediate requirements, we have
$ Earnings for the year totaled $3.68 per made arrangements with both Public share, which has been exceeded only Service Electric & Gas Company and ne reasonfor L
once-in our record year of 1987.
the good nen's-Philadelphia Electric Company to buy O nividends paid per share increased to o"r """'J iirm capacity and power for the next subsidiary
$2.77 in 1988. This reflects a 5 cent several years.
special cash dividend paid in early 1988
$ We have, in our last annual and and a mid year increase in the regular interim reports, been updating you on quarterly dividend of 2 cents, to 69 cents developments with regard to the Peach per share. We have advanced our proud Bottom Atomic Power Station, which is record of dividend performance; the divi-operated by Philadelphia Electric Com-dends paid per share have increased for pany. We have a -'.51% ownership interest ULc 36 consecutive years.
The in Peach Bottom. That station was shut O Atlantic Electric continues to be our importance /
down by the Nuclear Regulatory Commis-Peach Bottorn source of financial strength. Located in sion in March 1987, following incidents of Southern NewJersey, its service territory unacceptable operator conduct. The has some of the fastest growing areas in unantilability of those units had its effect the state. We added more than 14,000 on Atlantic Electric again in 1988. Based customers in 1988, and kilowatt-hour upon the nuclear unit performance stan-
~
sales totaled more than 7.3 billion, a 4.8%
dard, some replacement power costs increase.
could not be recovered. We also had to O using many different generating units make a one-time credit to customers of with a variety of fuel types has served us
$5.3 million. Provisions for these rate well. In spite of the unavailability of the matters resulted in an earnings reduction Peach Bottom station in 1988, coal and success with of about 34 cents per share in 1988.
power supply nuclear sources of power accounted for diversity
$ PE, through a new management team, more than 80% of customers' energy has responded to the problems at Peach requirements. Each year since 1982, these Bottom by making major organizational fuels together have produced over three-and operational changes. We see favor-quarters of our total energy require-able signs in their efforts to get the units ments. We are proud of this record, since running again. PE has advised us that one p
these fuels have relatively low and stable unit could be ready for restart sometime costs, and are largely available within the in the second quarter of 1989, with the United States-other unit becoming ready during the third quarter of 1989 2
.( \\ '.
.(
0 We can't be certain when Peach Bot-Consequently, we have rearranged the tom will actually return to service and the partnership to make CPA's marketing and g
effects on earnings are continuing into project management efforts more Q'",
1989. Very recently we signed a stipula-productive.
W tion which, if approved by the BPU, would
$ The heart of Atlantic Energy is its l
,[,[f('/8 electric utility. In recent years, we have settle all Pench Bottom rate matters for 9,
1989. This agreement calls for an initial with experienced initiatives which promote H
credit to customers of about $17 million change significant changes in the electric utility and provides for additional credits on a industry. While the management of
.J
[
month-by-month basis if the units are not Atlantic Electric is not convinced that all L
operating later in the year.
of the proposed changes are progressive, j
$ We have taken steps to recover the we are working within the legislative d
losses that are being experienced, and regulatory systems to influence !he
]
Together with the other non-operating process in the best interest of our owners, Atlantic Electric filed suit against shareholders and customers. These PE to recover the damages associated efforts will bring much activity and many with the Peach Bottom outage. Those new challenges for your Company. But, proceedings are moving along, but it may we believe that the good year of 1988 is 1 -
be a while before an ultimate judgement just one of many more to come.
or settlement is reached. We'll be keep-For the BoarJ of Directors, ing you informed on these important developments.
Going
$ This year was our first full year as a
/"[jjj[,# ##
holding company. Start up activities for cornpany J $iNif the mind c
the three non-regulated subsidiaries
[k[hp came more slowly than we would have d
liked, but, we are making progress none-E D. Iluggard.
theless. One subsidiary, ATE investment, President and Chief Executive Officer 6
Sas already made a modest contribution February 2,1989 to consolidated earnings through its
.)
investments in leveraged leases. Atlantic e.
Southern Properties, our real estate S
subsidiary, is finishing up renovations
/
of its Mays Landing property, which will provide office and warehouse space 1
for Atlantic Electric and other area businesses. Atlantic Generation has been involved in the development of cogenera-
.?
tion projects through its partnership i
interest in Cogeneration Partners of America. We have found that initial devel.
opment costs for CPA have been much higher than expected and that the realiza-l tion of any benefits will take more time.
-l j
b
..i
.)
J 4
s.
.e B
could save up to $1.6 million in 1989 b.dddp P
k 5 $ gb M Sw a ggggg from an arrangement made this year with TWRGE WW"Q Construction of.
Baltimore Gas & Electric. The arrange-
@phgg'@3"'"N jg gg V
Freedons.
ment provides 100 megawatts of
+,
tility Operations and sms c mpleted in transmission capacity and gives access to q
h'ho low-cost power from the West.
j r ect y
Administration A new system peak demand of struction of tuu u Working through the Salvation Army, j
nere 69AVilnes, a Atlantic Electric's Good Neighbor Fund I
U 1,636 megawatts was reached in 1988, a nese substation f%.
1.7% increase over 1987, and a 33.inile, assisted about 1,600 families with their winter ge g
el[f N
heating bills.
]
a Atlantic Electric GOO g
f, was honored with awards for its com-munity service in 1988. The Governor's f' -
Safety Award was presented for success L
in preventing accidents and injuries.
'livo Presidential CARING ("C") Flags O Coal and nuclear sources of fuel 230AVline n'hich together provided over 82% of custom.
runsfrom the were received for volenteer and senior north central services efforts. The NewJersey Depart-ers total energy requirements for the part of the ser-year and has saved customers about vice territory to ment of Environmental Protection also thefast groarin#
recognized Atlantic m
$88 million, when compared to the use castern section.
Electric for its use or o 1.
Theproject reas cornpleted ahead of recyclable e In 1988, Atlantic Electrics construction ofschedule and expenditures totaled $127.1 million.
before estiinated billing envelopes.
Almost $68 million was spent to expand, improve and strengthen the transmission and distribution system in Atlantic Electric's growing service area.
o Atlantic Electric finalized plans to build a 75-megawatt gas-fired combustion tur-I bine in the central part ofits service i
territory. It is expected to come on line in Atlantic Electric 1990 at a cost of about $37 million.
spons reda j
series ofcon.
a Atlantic Electric entered into cLpacitY ferences called and power purchase agreements with
- Bullding 7%3 Hridges"that
~~4 neighboring utilities. Beginning in 1988 hring together
- i through mid 1990, up to 227 megawatts senior citizens and high school of capacity is being purchased from students. The Public Service Electric M Gas Co. When conferences are that contract expires, Atlantic Electric El c ric is o rg plans to purchase 200 megawatts of community capacity and energy from Philadelphia
- "]I'y',#"
Electric through mid-1994. Customers programs.
4
g o
m"W '
nuclear performance standard penalty.
[yA.;1g((}g,jp" gay' Q.b u in April, the NewJersey lloard of
,' ~
c r.
o
~
Atlantic Southern Ihh Properties is Ibblic l'tilities approved a Stipulation t W M'" ^
contpletirrg which resolved all rate matters relating to the outage at the Peach Ilottom Atomic A
th j I nt ing l'
Cornplex, a Power Station through December 1988.
The Stipulation included: a one-time foo c n r cial
/
7 pmperty uhtch credit to customers of $13 million; con-I trillinclude both tinuation of the nuclear performance 4
d' trarehouse and office space, when standard penalty in 1988; and, a provision i
egulatory and contpleted in 1989, for further regulatory action if either financial Statters this project trill In March, Atlantic Electric was offer spacious Peach flottom unit was not in facilities service by year-end 19(
granted an overall revenue increase of for Atlantic j
Electric and 9
5 in September, Atlantic 1
$40.3 million, made up of a $21.8 million other tenants Electric requested that decrease in base rates and a $62.1 nu.lh.on infast grorring the llN allow a increase in levelized energy clause reve-A'Inntic County.
continuation nues (I EC) The decrease m. base rate E
of its cur-revenues r rimarily reflects the eff.ects in 1988 of the changes in Federal income l
tax rates. The increase in IEC revenues s
includes current M
ME lm'd.
1, and prior per-
~t:H inent,Inc. M f- '] 3 g
iod fuel costs hb' C0'npleted
@^"
My leveraged lease 1
and reflec "t investinents in a $54 million t"y-two corninercial aircraft. In early rent energy adjustment 1989, ATEInvest.
rnent cornpleted charges. Atlantic Electric has since leveraged lease amended its requests and is seeking a int estraents in two corninercial
$9.3 million overall increase in energy containerships adjustment revenues. IIcarings on these and one comrner.
cial aircraft.
requests are 3cheduled to begin in March 1989.
m in March, Atlantic Energy raised
$42.6 million from the sale of 1.3 million new shares of additional Common Stock.
Most of the proceeds were invested in 9
^
Atlantic Electric. In September, Atlantic Electric sold 600,000 shares of $833 No Par Preferred Stock.
m in addition, $11.~ and $0.3 million of common equity was raised through the operation of the Dividend Reinvestment and Stock Purchase Plan and Employee Stock ( wriersi ip Plan, res; ectivelv.
5
gg '
. ;;, ' ;*/
k,, 4 %, A $g4 4 h: %hgM g,"
J l w,; $
$ y h" f
'%A
.f s
gQjffn g
kmd f
WgNy
- q
O y# 3kkpv
}'
- j. [.-
1.,.
n,jgrA
'p
. i r
g
}.
~
1' 8
o
~;y
(
3 p'
v
?
>J.
c,
A 4
A
?
5 j /j b
-m{
We g
g Vfm[1(
r i
_j'
\\
R w,i mg&.
- g/s p%v};g3y l -
L #'
g b:
f
-J Qg
'g~
%,,3f,p3 c
}$ gd4g@ 3Mb::?ngf
~
'f f;;
g he.
y; A Q8 ;)
^ f q)3ge$wegh lx pf s4 ap 4
s}al[x 5
T:
3, ff g.g> je j' J o
r g
gf
. my~&; 4}l g &e y;9)V 4
A i;
g
. h, e
n:..
- +
x:r
- , N) v m}::
l y
y y
.3,
- k gk,-
}.
p x
='-
jf q kn l
h :~3.
t a
fl t:
,l g,fg^g;y, (4
h J
f'
. g+pj&G{%?'s.
y 3f
.l;. }
l
, E ej,y i
e
+
^ fy s
ry } y
?
Q?p? gp,}~
s L
m.
s
$' 0
Sy,
- l e
' y, s
}, $g
'f3
37 30 t %g,-.
- . lt r '
-,o p
l
?.) {
hl gMh Futureis skfk r
...m o
+4 JA Ot lat g.gg -
e e m3go. W lt ['SeC a
e w'
- 4 ( eepende4 F 4 ds; $
o B e. m a J
%O6aceg^r SF atteMa$
04 A
MN.
M i :aR 4
Y ppf y
v
? TO&..
N.tO changed. It isn't the same as it was just J
he electric utility business has o l,'
lj
,w EL.
j glOOIOC COSIl-(g ten years ago. What brought about a T
@g} tog \\\\0gkod (O' elearicity affordable. simply puuhe indus..f fundamental change was the need to keep dB
~'
l COOS jjp3OC p th I ((gDI\\-
'~
try would have to find different, more economical ways of supplying electncitv.
IDb t\\OO'6 Otherwise, customers could not affi>rd its 2
[g{y'.Oi M product. And, the industry would not fulfill 15 gt' SUhhp' J-its obligation to serve its customers.
n g Enet9Y Y This obligation to serve customers has datory ftnaWO9 guided the industry fi>r over 100 years. It is a r
W -
d.
carefully balanced partnership. A utility y
(,,
agrees to provide safe, reliable electric ser-
" 4"%.
vice at a reasonable cost. In return, the utility has the right to serve a geographical area.
's
+
b
(
y r;F
'4
@ ' d ha v b'
i $ $ b,'
1
/
/
, p. %.,
Y The steep rise in electricity prices sparked fdkEf'%gavic,
FJ
- ' * ~ _
an urgent concern-keeping electricity
.un.,.;
affordable. This concern was shared by cus-
[
'M p
7:q, tomers, utilities and regulators alike. Federal gf f
and state laws were passed to try and control 3
DEC y g1929,; M L
.M Mf, the rising price of electricity. The Public
/
t gt"-
E.,.
%%?cj &8'. :.
Utility Regulatory Policy Act of 1978-ie ouw e'x L
PURPA-was designed to encourage the i
a ",""'
MM development of non-utility power sources 7
y
. ~
, wet 4 5g -
E a.
M; y: :'
^
and directed utilities to buy Ise.
y V
/
R:-
- em excess electricity from these wf
&[Nf
/
JQ 4
sources. In 1983, the sv
- '9 wo, his State of Newjersey cre-q cs
,y L'M i*" %.
'*Jou 9
ated the " Electric Facility
, q %n..
(
9 w m
..Lc Need Assessment Act.
V Traditionally,' x:My QG This law prohibits a utilities met their **
utility from building obligation to serve I m %
a new power plant 7M unless the utility customers' needs by
~ '
building bigger and
- 7) proves that a need for better generating N
p a,mj the new plant exists u
units. For years, fuel MA and that there is no Was abundant and rela V -
,:i; n w.MT _.,
.,n wm eWP u other more efh..cient,
.v h; w 1 j [p N g g' 9 %" e tively cheap, and F"
economical or environmen-h'h tally sound alternative.
generating units became increasingly more efficient.
V With these changes came a new way to over a span of 70 years, the price look at the future. As a holding company of electricity consistently declined.
whose primary business is producing elec-V 13ut it didn't last forever. The decade of the tricity, Atlantic Energy's future is guided 1970s was a time of fuel shortages, inflation by these changes. To meet its obliga-
.M and rising interest rates. During those years, tion to its utility customers, ps a
the cost to build a " bigger and hetter" gener-Atlantic Energy's role must be
{[4S S
ating station increased twofold or more. New that of a supplier of energy 9
and tighter safety and environmental services. For that reason, v *j
_n,h E
' [% k[y *_L.
requirements added expensive years to a variety of sources must power plant construction schedules. The cost be considered in order o%,,.
of fuel to produce electricity increased more to keep electricity
.g y h
3, c.
than live times between 1970 and 1980. Resi-s d%h, hg reliable and 7
dential electric bills doubled. " Rate shock" affordable.
[
id '
O 4' M
had set in.
a w& E
,& mZ
,x a
8 h
4
1he Price ofElectricity-2S-1892-present
}
For 70 years, theprice
~ 20 -
of electricity declined.
2 Around 1970, inflation, is:
a:
fuelshortages and high l
}
interest rates caused.
,,,,9 ;
electricityprices to rise i-sharply. These drarnatic [
changes sparked a con.
vST cernfor the cost of electricity that was o
shared by custorners, 1892 19tol 1930 19so 19 o i987 Y E A R utilities and regulators.
Y Alliong these sources are tuilj(yhjh g operated power plants using new, niore elIicient technologies to produce elec.
[Ef'fjegep,c,,,
kD W
7 triuty. Alternate power Mas
%eC
~
bl2 k
- L Li s
t power plant projects that are not built or
' StLUNO COOT 5.
k 3 NEIhda T EE**EIE operated by utilities-are also becon1-W
~
GH8ER g ing increasingly in1por tant as a futm>
- ""T
E energy source. In addition' udlides
- M2rJULM
_ _E2a H
AMOUNT BILLED]:-.;g^L4NCE {4gI to lle;p theni change and control
- cabog0347C..1 EL
- 19 8y,.
Ny gg 24-784Ng 81 wjjj continue to work with custoniers
' ME1[R REA0lNGS ' 'MULT.'
~-
ty* 84Lg NE (l1eir. energy usage. Each will play an in1portailt role fi)r f uture energy Ryg h
[ -~ 19.sah supply. Finding the right conihi-nation of these sources and the right so429105003E e
f. ATLANTIC GTY ELECTRIC COMPAN neofopuon wahin tl1eni is the new way of.
o c.
keeping electricity reli-N I el 1 1 tr l> ys l} e to t e >enefit of custoniers and shareholders' 9
a y
+.g o 3,.
u 10 r,esist these Tl n
e,-
s[ tr ategies n
Changes. Orflers to mnipecove en.__,,, g,'
- g wel~n>e the-g Atlantic Y Tlle future, for those in the electric' j(
,y, Energy utility l>usiness, is certainly not what it used sa<
e,
,i g.' 4 clieves to be. The articles that fi)llow describe whv (t
4 that the the future has changed and how the strat-gi%
- g ' gj,f
~
- best way for l
4 a
t cl iijt i j, l t
)
lj
{
p2p-
m-m x -
y 3
m !
r.
j j
h % h g g % y y { [ f} 7 7 A Supplying electricity in the future requires
~
batahmWhbine J
JM utilities to evaluate a mriety of choices. Relatively 9
fffh h
- "PP maudLA. mh!L&. ash.mM generating units using " fluidized bed combustion"
{
g upplying electricity has been a utility's job. In technology. These units use low-cost coal and, the past, utilities did that job by building a because of their design, can be built for about one-new power plant. It would be either a " base half the cost of a large coal fired, base load unit. In load" generating station-a large plant that operates addition, this " clean coal" technology helps protect at a fairly constant output and supplies a large the environment because the particles that may amount of electricity, or a " peaking" unit-a smaller otherwise harm air quality are captured during the plant that operates for just short periods when coal burning process.
demand reaches its highest point. Ilase load units A Peaking units, an impor: ant part of overall utility were expensive to build but could produce elec-supply, can be switched on during times of highest tricity economically. Peaking units didn't cost as demand. Ilecause they can be built for slightly more much to build but cost more to operate. Intermedi-than one-third the cost of a base load unit and ate units-units that are run for shorter periods of require less construction time, utilities can add time than a base load unit but longer than a peaking this capacity quickly to meet increases in unit-fall in the middle in terms of building and demand over the short term.
p3 operating costs. A utility's decision on how many of A Improving the availability and per-hI i
cach to build and when to operate them was largely formance of existing plants and system
[;
p 4
driven by customers' needs fi>r electricity.
facilities gives utilities yet another fi A Since the 1970s, the cost to build a base load unit option for managing the supply of L
s has more than doubled. Ilig, new generating stations energy. For less than one-fourth the
- + ;
e are something most customers and utilities can no cost of building a base load unit, these Rv longer affi>rd. I'tilities had to find other ways of improvements can add years of pro-(n9 supplying affordable electricity, and they did.
ductivity to an existing generating unit.
lj f
A From time to time, utilities also have f
^
A s.
- 411AT TO BUILDP 411EN TO OPERATE?
the option of buying and selling energy Q j b7 y
u Utilities still continue most economical to from each other. At tinles, utiIitles may
'1 RY
- to supply electricity by operate, utilities turn P%
building and operating them onfirst. Intermedi-he able to buy energy Cheaper than the k'
i generating stations.
ate andpeaking unt's cost to produce it for themselves.
- Dhen customers need are less expensit e to
,g$
ings from such economy E
s large amounts ofelec.
. build, but cost more to
- tricity at a steady rate, operate. When customers purchases can then be G,. Q_
g_
f i a base load unitfits the need more electricityfor passeg gl99g 79 cug79me7g_
, d[ q q '
j
. bill. They are the most shortperiods of time, f
s p )y}
- expensive to build, but these units su'ing into In addition, utilitles can
._{
' h
- because they are the
- action.
contract fi)r power on a d
~ ;yfl -
?
regular basis from j
j JW_
g COST TO OPERATE COST TO BUILD other utilities.
$f$
f www.m----
men em row yes nue-a -a== ;
mamum amm p -
--smswumm as,m s;6 w.muu imamim summ
, mv 4
m ew=IMEGEET=~~ r-r
%gswhad3 "m
i tow IIASE men em,.
a _ _.-
WWOMMTW9JWR DGM5" A.
'g#
L...
ymmmm ;(9 x
4 f
10
p A The concept of contract power purchases can be
'tp Ernproving the perfor.
,yy y,,j,,,,,,,f yg,,y,
extended to non-utility sources, including alternate
(
erating units can be an power producers-principally cogenerators, w.ho
's econornical and effective
.t elearidty have excess energy to sell to utilities as a by-product
- a x
reliable and affordable.
k of their industrial processes.
A Today, utilities are more than suppliers of energ v.
They are coordinators of energy supply. With a variety of energy sources to evaluate, utilities are 4
making use of sophisticated, state-of-the-art planning Atlantic Electric 5 Strategy-systems to find the right mix of options that will Managing the Supply provide reliable energy at affordable prices.
1'
- t ; gd gyppgy.g59y" (99ggyg$3g9y f -
owned and operated onegawatts ofpower. By
<;enerating stations produce about cu,ooo B
Izy electric utilities the end of1997, utilities yT supply the bulk of the preplanning to place L
Nation's electrical over275 newgenerating l
l L
^
energy. According to a units in service. They recent survey, utilities
. are expected to provide
'l operate over 10,300 over 42,000 rnegauwits b $ generating units that ofpower:
DEMAND-SIDE y
In 1988, then L.
Atlantic o-rated to
,(j p
-f Electric re.
deterrnine
_ N, W
R fined its long.
which corn.
y
^
p terrn plan to guide in bination of thern
'+
y the selection of rell-produces the desired L
y'
(
able, affordable effect-reliable,
. {*
f
.. Jgl b
energy sourcesfor the affordable electricity.
l*
y_/Q'.
f next30yeavs. This Atlantic Electric's -
y 43 g ; (,,
p y
4'"jW l W ;f ).,
plan recognizes that rnost recent study has Oi Q
.[
p&
' y&.
f thefuture energy sup.
Indicated that new a
'}:
i ply must cornefrorn capacity sources p(% q l;
- mu g
i different sources:
uvuld be largely a p
.,q
(
s Qhlj
- side"-by adding new supplied capacity l
?
utility-owned and and capacityfrorn
<'; j+ ;h %lQ Q.
I operated generating alternate power.
~
.k sources;frorn the producers, each car.
'Ll f f M ftf d; K[ f) '
l,
.;L
,gg p,
"dernand side"-by rying about equal gy changing the way weight. The balance i
pp electricity is used at would be snade avail.
wa}
Qff ;
%{
the consurners' level; ablefrom dernand.
kWf
'f andfrorn alternate side prograrns.
lO power producers, Currently, Atlantic Q
j
'k such as cogenerators.
Electricplans to corn.
,l X l ;/
These " capacity plete construction of IU W ;h /
sources"-supply-a cornbustion turbine c
side, dernand side generating unit by l
- f8 and alternatepower 1990 and anticipates ldr-'>#Y producers-are that sorne additional
/h
)
evaluatedfor their utility capacity will 2
hh- }f*'*
potential cost.
need to be built
\\,
y effectiveness and before the turn of
)
,l l<%]
- l\\.
\\
w reliability. They are the century l
4
y O % p h.pa k > b ' TW W "* N l
"T"
$ With the rediscovery of cogeneration's impor-a M
h
> JJhidK1shid.0h m dd' l
tance, Congress passed the Public Utility Regulatory c
memymww~mw vm smwn.aa._adLShu.M&iaudade ;.,LJ intended to make it easier for cogeneration units to be installed. It also
,,,7 y '
f.
fl A great deal ofheat amounts ofsteam ur hot gave cogeneration pro-f energy is used to make uater. The cogenerator electricity. The cogen-can beat u>ater to make
)ect developers a eration process gets steamfor use in its on n market for thelr L
l
/
more mileage out qf this business. The steam can CXCCh8 C1CCICA(V hV l
Y heat cmd, in doing so, also bepassed through a
}lf V
} f== e <
provides savings to its turbine generator to directing utilities to e#
N o,/
"i
,,,,,/
users. Cogenerators produce the cogener.
6 pS..
can use heat energy in atork electricity. if a lJQ, a fl\\,****'*
,,;a#'
1 set eral ways. Ihr exam-cogenerator makes
& Yor the electric
\\
y,,;,**'
l lJ}ggf,,,,)} \\, j'
)
pie, many industrial more electricity than it 9g;;gty ;9gus7(y, y 'V,
}f
}
and commercial opera-needs, that excesspower 7
tions need large can be sold to a utility.
cogeneration is vnewed k.s j;Vj iW as a mixed blessing. It is a n
j new source of electricity he cogeneration process traces its history to 1
without expensive utility
- 3. Stearn the earliest days of the electric utility indus-3*
drives a capital investment. But, the try. It is believed that at the turn of the a
turbine.
development of cogenera-y'}-~
century, cogeneration accounted for about one-halt.
tion projects does not
. v " ' N {>
of the suppiv of. lectricity generated in the United
_t e
represent the one States. Most of. hese "self-generators eventually t
"right solutionf abandoned their systems as utilities became eco-Cogeneration devel-nomical, reliable sources of. energy. By 19-'8, opment m a given s
cogeneration accounted f.or only about three per-area is of. ten k.nuted t
cent of the electricity generated. More recently, t
by the number of.
i &
.gj h
x cogeneration's energy-efficiency and economic businesses that can
- wi.a.w Jh a W behelits Were redi5 Covered during tinies of. I.uel l
benefit from the multi-J t
4A l
shortages and cost increases.1bday, it
,A
,faV.
,u 7
ple use. of energv.
gh*Q{
gg h
s h
is estimated that cogeneration could
/yd
.I,he timing and E, [n n 4, provide up to b percent of. he t
e size of.
t.
.C W,
E Nation's generating capacity
",j* M @ 6@ @ a % e % v' d
- f by the year 2000.
ly [, e "
~
~~~~"~A ff*l%,k,
%dC
- 1. In the cogen-('
eration system
,;p
- 2. IIeat energy con-j pictured, fuel is
)% ; Y ff N
cration capacity verts u nter to steam QWg burned to pro-y'M4 in a boiler, s1.
duce heat H
can involve more f
+
c++
enerxv.
r7 unknowns, since these projects are built according
[\\
k[
to the special needs of the business using them. If, Ny gy e 6 for some reason, the cogenerator decides not to
,c A
c x ;p av I[g Q
l
(? $
hk utility was counting on could be lost or delayed.
e Wye ?
Because of these variables, comingencv plans involv-w.
[t. f..
y ' 'y [.
ing Sohle type of litility-managed Capacity are an N
essential part of. a long term capacity program.
I
g-e ym**1"*m*"mw"m%
6 Excess M
l anale.
, anne electricity is 1
sold to a
~ *** l p utility.
W 5'
?%
~
u q
9
?q }
5Rh.%,ma Y'
[.
l s 9
l
[y '
\\Q%%_-\\s 7
\\-
\\
r.,
e
\\
' ;N l
~
Wf.sf MP
%s o***Q,/-W-B 7
\\T
\\J p
.,w b
Y
.m
\\
3 j
Atlantic Electric-Q
'f
- 4. A turbine Using Cogeneration t 4 L
drives a gener-Y h\\ ll ator, trhich Atlantic Electric has these bids on price k
f"
._(
electricity.
developntent and use including a project 1
produces been involved in the and non pricefactors,
'\\
y ofcogenerationfor feasibility and rella.
j altnost 60 years. In bility assesstnent. All
[ $ For utilities facing a need fi>r generat-1988 new arrange-contracts are subject
"' #" " "" "'"d"
' "EU**# h
'h" ing capacity, third-party cogeneration J
tvith severalpotential NewJersey Board of ll makes a lot of sense. When a large cogenerators that Public Utilities.
cogeneration project produces excess trould continue this f ]i
- ""# ""# 8"#####/'d
[~
d electricity, it can supply a utility with j'
history. In 1988:
c
-n n
needed and affordable power. In addition-5 Atlantic Electric b,
d
]j smaller cogeneration Eicilities can reduce negotiated agree-l@
- ~ ~
j individual customers' demand for utilitv-
'"#"" "*0l###
~'
potentialproject
- y supplied generation. For these reasons, developersfor up to ty3 -
q cogeneration provides opportunities both 650 enegauwsts of i
as a source of supply and as a way to
- "*"#"J ""d #"#'KF-i
?
1 Sorne of these projects 9
reduce demand.
are expected to be on.
fM f line as early as 1991.
f 5.3
- 5. Stearn and electricity are a In August, Atlantic
(* )
&\\
used by the cogenerator Electric, along seith for its industrialprocesses.
Other utilities in the
'T # &,
A '"N'""""" "# '"
state and state reg.
a plannedfor this South l> f ulators, established a p,,.sey industr tal
[,ly$ p p rnethodfor utilities to plant nusyprovide
(
[]
j
\\
f.
h receiveproposalsfor Atlantic Electric with l
l
\\ ij k
]
?' %
capacity and enerKY up to 106 rnegan atts of
hM G
[
frorn alternatepower capacity and energy
}
e producers. Under this beginning in 1992.
,N yl i
[ '.
rnethod, utilities will Atlantic Generation i
k p'f(i MW
)
announce their holds a partner.
" la amann h annan amman capacity needs each sh'P '"'""
A in cogeneranon
. j muum a 4imums m"M year and project Panners ofAnwrica, g/R s >
,p9, g,,
, y,g,o s.M
_7 y
m
.s the developer qf this s
- k.. :M!MM.k sell thern power. The project.
mg utilities will etuluate W
1 13.
p'%mwm iy
- m ya 3,.,.. a ;
-m q(
,~ y. ys, ' - :A.
?
te -
s'
- p,.
s,
fg s/fr
~ v r; -
i Q//g$1 /Arb NW su c.
j.
v s
v Ik k ) N, :[W
&WQi.7(q)V^o@ag,,-@/:M h ;hMhc~J ?4 MM I
h t
C gd
-O 2
a i
, h 4,
yy,
'kk g'
q} }-
m' 1
]
.f' 4
y.
d$$N
}g ~,
O h
/-z d[
3 y
s,NO l
^~
_ ' k,..
Q
_g
.M s
+
/f p
~
g
%g
+
6Gs&l
^
9flx <%n QY L&
z
$b$bwamiisss
' ~ ~ h3 M
- M3 g
QTKTTPW9 J
MEWP"T""T"
& As mentioned earlier, cogeneration is important
@$fifMhNJ if N 10b o
.J LE h EMGEITF Lii.hM1 an,Asurag2L hecause of its ability to atki to supply or to reduce 4
F PTSF25 m a %g e s g% P F 7 F 7 E P demand. Either wav, cogeneration lowers the peak yh tt 4k#
m.
~w h.mw dh2~
mm that must he met with utility-supplied capacity. Ilut, lectricity is a unique product. l!nlike other cogeneration is just one part of a strategy that helps manufactured goods, it cannot he put on the utilities shape the demand for their product. l'tilities shelf and stored for future use. The produc-promote a variety of programs to change the way tion of electricity and the use of it by cu.stomers are, customers use electricity. The amount of power in essence, simultaneous. A utility, therefore, must required for peak times can he favorably adjusted always have enough electricity available to accom-through " direct load management" programs. As modate its " peaks"-periods when the demand is an example, residential customers may allow the greatest, such as hot, humid summer days. The more utility to control their electricity demand through peaks a utility experiences radio signals that switch The Demand for Electricity and the higher they are, off, for short periods, the greater the electricity g
high-use appliances such supply must be. On the
/I j f %
as water heaters and air other hand, when demand f} ([* * * *j$%7."* '
y U ] cycle is designed to
" ' ' ' ' conditioned fhis on'off for electricity is at a low
%,9 H reduce the utility's system point, a "ndley"-such as 3
the early morning hours b
.. i hMh b peak demand, with little generating equipment 6:00 AM 6:00 PM 6:00 AM or no change in the resi-goes unused. lly changing dential customers' comfort The dernandfor elec-strive to level offsorne of the way electricity is used tricity on a given day thosepeaks andfillin or in the normal operalion at the consumers' level-1 looks sornerhat like <s sorne of those sulleys by ofIhe home. Ilusinesse3 rnountain range-corn-unrking tvith custorners.
shaping the demand-util-can ho wak kn&.s plete with peaks and That uny, utilities can l
itles can make hetter use
. valleys, This shape is rnake the anost efficient from load management caded a load cune.
use of #setr aradable of existing plant and programs if they can tem-When the dernandfor generating capacity, equipment. This increased electricity is at its high-which helps to keep porarily adjust their level efficiency can help main.
'8 'h"" '8 d e', dA d' #8 of operations or generate C#8'3 '#'"
lowest, a aulley l!tilities tain affordahle electricity.
their own electricity at M
1 m.4; y
i
- l
- x
- y
\\,
y r
3 h'
l\\,
a.,
h,'
\\
t
-\\\\
j (t
ob.
j/
M,,
'ji tP
~
31 g
J 4:
me-o qt'
_l j j' j
4
-o;
- s y
(
[
7
.g-m y[
p j.
c --
$' qa H
~
a n
7A A 1.
~ A
]
MA...
.g v
l n
awamn e2BMusMe I
' 3]
y'py nn '
-,. - - ~,
, y y
d
- y
.r,.w
---y,.---
.On gs l
~ J:
)
"D,
. ~ < >
a Nf
. !jd %Q
$g-
~
<7' u'
4 Rh-ilIIIIIflIII, M d ": % " "\\
-~
~
Y m =.. m sw
.w-
?.h x
w 3
times of the utility's peak. The utility can then use Hf def tools to turn this promise into that power for other customers. Shaping the de-1-
an achievement. The goal mand for electricity by reducing peaks helps control is to develop a partnership u
both the near-and long-term costs to customers.
between the customer and the
+ Filling in the valleys is also important, since the N
utility where both can make con-l resources are there and available for use. Many tributions to maintain the delicate balance of the utilities work with large industrial customers to supply and demand of electricity.
encourage usage during "off-peak" hours when
.j demand is low and offbr pricing incentives to do so.
N Some utilities are extending that concept to other j
customers to help till in the valleys even more.
Atlantic Electric-
.{
Encouraging the development of thermal energy Making the Most of What We've Got
- j storage-making heat or ice at off-peak times and Atlantic Electric trorks and the purchase storing it for later use-is still another way to make n'/dr custonners to help of energy efBclent R
thern change the tray appliances and y
better use of the valleys.
they use electricity der /ces.
]
+ In addition, utilities can encourage customers to and, in doing so, Consers atton incen-
]
use less, to conserve. l'tilities support conservation helps thern control tiresfor corninercial their energy costs.
and industrial cus.
eff. orts in the home by helping customers lind energy Just over $20 niillion torners include rebates
" trouble spots" and offering advice on how to fix has been cornin/tted for high efficiency them. t 'tilities al.so offer incentives to customers to fora residential di-lighting systerns. In I
rectload rnanagensent 1988, participants in use energy-saving appliances, insulate attics, walls prograin in 1988. By these prograins n'ere I
and water heaters and caulk windows. Conservation 1990, this prograin is able to reduce their incentives are extended to businesses to encourage e@ected to reduce the cornbined electricity l
dernandfor electricity needs by about one the.mstallation ol.more efficient heating, ventilatmg ly about 20 niegaunfts, inegan'att-enough l
and air conditioning systems. Cities, towns and In 1988, over 16,000 electricity to light res/denual custonsers about 1,200 hornes, businesses can furiher benefit from conservation by took advantage of a Atlant/c Electric can installing new, more efficient lighting systems.
rarlety ofprograins call on several hust-4 Changing the way customers use electricity that ren'arded trn-nesses to reduce their shows promise as a way to keep electricity afford.
provernents in horne electricity use at slines uvathertzation n' hen dernand is able. More and more, utilities are developing new 15 i
d reaching a peak. Dur-ing one such period,
?
together reduced their
~
R]f@@?OK ?"} & C}N"'?WI[#
.r JiC ; ~"h these businesses
<Y S
Nbi??Y}?
^
about 18 rnegauntis, or
~N, needfor electricity by
\\
y["
rnore than onepercent fz ofAtlantic Electrics
,, y 1988 peak load.
py
,)
Beginning in 1990, Atlantic Electric trill be able to offer lou'er ratesfor using elec.
4
~
%y y
-i tricity at qff. peak y
hours to a linsited T
nurnber of residen.
Y j
tial custorners.
&5 This experintental b= wa.s, ~ _.
u.
{
prograrn, recently The Afays Landing NeteJersey.1his air.
cooHng needs. Pro-approved by the Neue -
complex, under conditioning systent jects such as this can
-l Jersey Board ofPublic developrnent by produces ice at night reduce costly peak ll Utilities, is cApected AtlanHe Energys during Atlantic Elec.
dentand and provide to reduce the overall subsidiary, Atlantic trics off peak hours, long terrn savingsfor dentandfor electricity.
Saudiern Properdes.
113e ice is then stored the custorner as scell.
}
i
$ successful, Atlantic a in taHed d>efirst in tank and used die ice storage cooling folloscing day to help Electric hopes to ex-systern in Southern sneet the buildings
.i pand this prograrn to all custorner classes.
DOI etigtt c i
. :tb
.c
~
+
6ed 6itiui whe;gasj.tbc' et s teiste ? w e g 3 p jes M es eente L
e m
- ot tev
.q2ye r
1 tt$tbkdde 60 o
pstostgggers: 3 g oh" 's t e 3 e ts g e p%
^93st erg,'te?*[b4n63%adl yjde5' e
get Siot #S""' tn ds [c @w[h@
e s ss sa l
and e ebat
- stogett,
- ,j#
c bgsta ! ) a e 4f #
c 1
of sba?
' ~~
3 16 4
.,)
-f I,t k
-. =-
=--
= - - -
Atlantic Electrics Customers At-A-Glance RESIDI NTIAl.
~
l l
thillions of ku'b)
Total residential kilowatt. hour sales increased 5.7% in D'
l 1988 and average use per residential customer rose l
i 2.2%. In 1988, the average number of residential g
j customers increased 3.4% and comprises over 88% of Atlantic Electric's total customer accounts. Over 11,600 E
new residential dwellings were connected in 1988.
D Est.19M2003 i
Annual Growth 5
1988 2003 Rate
'84
'85 M
'87
'88 2003 Energy (bilhon kwhrs)'
3 213 4.433 2.17%
'0'{MJ10C
7.9 7.6 8.0 8.3 8.5 83*
u
- Feak(Mw) 810 1.135 2.27%
UnN uic, 44 43 44 43 44 45'
- estimated COM M ERCI Al
.~
c t
vbilhons of kub)
Total sales to commercial customers increased 5.8% in B
1988. The average number of comriercial customers increased 3.5% and now totals over.6,000. Sales to the B
twelve hotel casinos increased 2.5% from 1987 and I
account for 5.9% of total energy sales in 1988.
D D
Est.1988-2003 Annual Gnath
.g 1988 2003 Rate
'84
'85 M
'87
'88 2003 Energy (bilhon kwhrs) 2.742 4.015 2.57 %
'%'{MJ17C" 493 51.9 52.9 55 4 56.7 68.8*
u Peak (Mw) 648 994 2.89%
0.7.i,
35 37 37 37 37 41*
- estim ied
~
INDl'STRI Al. & OTIIER s
(hillunts of kwh)
Sales to industrial and other customers increased 1.0%
5 in 1988 from 1987 levels Industries in Atlantic Electric's service area include glass, chemicals and allied g
products, rubber and plastic products, food products, petroleum refining and machinery. Atlantic Electric's E
1,014 industrial customers, whose average use per customer increased 1.3% in 1988, are located primarily in the inland and western sections of the service D
territory-Es 19u2003 Annual Gnmth g
1988 2003 Rate
'84
'85 M
'87
'88 2003 Energv (billion kwhrs) 1 395 1.425 0 14%
'!'{MJ170,*'
1179.7 1181.3 1196.7 1304 0 1320.5 1353 5' u
Peak (Mw) 178 148 (1.22% )
- NaIule, 21 20 19 20 19 14*
'csumated tindustrial customers only
=:= =:==...
-=r==1
- == :=-----
- =====::
.~z:::~~=
h 17
g n
a f n;;
1 m
- Alaiiagetlients Discussion anEl Analysis ofl
+
LFinancial Conditiori and Results ofOperation:
)
1 Ariants tuergy. inc. arui sutualaries '
.j i
OVERVIEW been to support the 5% investment in the Hope Creek -
- Adantic Energy, Inc. (AEI) is the parent company of Atlantic
Generating Station and to' improve ACE's transmission system 1
City Electric Company (ACE), a regulated electric utility, and.
The construction program and the forecast of related ' ' +
1 7three nonutility entities-Atlantic Southern Properties,Inc.
construction expenditures is reviewed regularly and is'
-(ASP), Atlantic Generation, Inc. (AGI) and ATE Investments designed to meet customers' demand for electric energy,
Inc. (ATE) AE! raises capital through the sale of common service for the present and the future. The current forecast of :
4 i sicek in public offerings and through its Dividend Reinvest.
peak load growth for 1989 through 1993 is 2.6% per year. This J
' ment and Stock Purchase Plan; Proceeds fr6m these sales are -
forecast reflects a continuing commitment to manage the
- used to fund the capital needs of its subsidiaries; growth in peak demand by promoting efficiency among Consolidated earnings for 1988 amounted to $3.68 per customers, and alternatives to conventional energy supply,
' share compared to.$4.03 in 1987 and $3.00 in 1986. Such including cogeneration In response to customers' needsithe_
earnings are primarily attributable to ACE which is AEl's construction program includes elements to improve existing,
principal subsidiary.The following analysis discusses the production plant, and upgrading the trans' mission and dis.
q
. operations of the utility and nonutility businesses.
tribution system.
! Financing Program =
- UTILITY OPERATIONS i Atlantic Electric finances its construction program, as well as I
- The nature of ACE's operations is capital intensive. A' normal operating needs, through a combination of internally.
- significant amount of funds is invested in property and plant generated funds, short term debt used on'an interim basisc.
to generate, transmit and distribute electric energy service to long term debt and shareholder investment. Flexibility in.
s
, customers. At December 31,1988, gross investment in financing needs is complemented by maintaining lines of i property and plant was approximately $1.7 billion. As a utility, credit with lending institutions, which aggregated $145 ACE is generally subject to regulation by the NewJersey million at December 31,1988.' '
- Board of Public Utilities (BPU). ACE seeks to maintain a level
~ The aggregate dollar amounts of major financings for the of rates which will allow it to meet daily working capital.
past three years are summarized (in millions of dollars),
requirements, long term obligations and to provide a fair as follows:
c return on investment to its shareholder, while maintaining 1988 1987 1986' service reliability.
Construction Program First Mortgage lionds
$4.4 i
$220.0 l> referred Smck
- 60.0.
"4
']
During 1988, utility cash construction expenditures aggre; gated $127 million, which is a 24% increase from the $102 Common stock
.4 4;-
.4 j
.million expenditure level experienced in 1987 and a 38%
capital contributions 40.0
.9 i
q increase from the $92 million level in 1986. A major element Total
$100.0 '
$5.7
$220.4 1
of the construction program during the past several years has
.i l
1 Atlantic Electric Atlantic Energy
~j Average Booked Revenue AFDC as a Percent i
Per Kilowatt Hour 5 of Net Income I
a E
q
,l
_g l
t E
__ g
- h 1
i a
_g,
[E-j e
's -
t n
{
c 4
i OS$uY$$$$ib&5 TOkb5&
<U$b$$$$ S W$NS A
'84
'85
'86
'87
'88 l
j.. '84
'85
'86
'87
'88
)
.=
==.
f 18
,l
w r
q
%4 j
gy;-
r,..
t I n 1988 ACE received capital contributions from AEI of $40 l TP isions'of Atlantic blectric's charter, mortgage and
[E I
million following the sale by AEl of 1,300,000 shares of -
' debenture agreements can limit, in certain cases,. the amount -
1 p
i
~ Common Stock. ACE also sold 600,000' shares of $833 No Par ; and types of additional financing which may be usedJ At JPreferred Stock. Proceeds were used to repay short term debt December 31; 1988 Atlantic Electric estimates additional '
4 q.
Land for other corporate purposes.
.. funding capacities at $336.9 million for First Mortgage Bonds,i i&
, t The 1987 financings consisted of the sale of $4.4 million of :. or $4095 million for Preferred Stock, or $1585 million for First Mortgage Bonds,8K% Pollution Control Series A of
' unsecured debt; These amounts are not necessarily additive.
l
- Issuance of Common Stock was accomplished through the-Revenues.-
1 fl987, Proceeds were used to repay maturing notes payablec Employee Stock Ownership Plan (ESOP) prior to the ' effective Electnc operating rewnues increased 4.3% in 1988 to $675.91 date of the corporate restructuring which resuhed in ACE
' million compared to $648.2 million in 1987. The 1987 level of -
These overall increases reflect the net results of chang f l, revenues represented an 11.2% increase compared to 1986
> becoming a subsidiary of AEL Capital contributions represent ;
y the proceeds of Atlantic Energy financings, which consisted of.
i base revenues, levelized energy clause revenues and. kilowatt <
q
' Common Stock issued under Atlantic Electric emph)yee l
hour sales as shown below; r
benefit programs..
j'-
- Mortgage Bondsi $125 million of the 8%% Series and $95 rrbousands of Dollars)j
'1988' 1987-
. LThe 1986 financings included the sale of two series of First
. million of the 8% Series!Part of the proceeds of these Base and Unbilled Revenues.
- $(9,470) :. $30,647.;
fmancings was used to redeem outstanding indebtedness L.evelized Energy Clause 7,778
) (9,725) i which had been issued at higher interest rates. The 1986 Kilowatt. Hour Sales ?
29,378.
? 44,290 Common Stock issuance related to Atlantic Electric shares issued through the ESOP..
. Total
$27,686
$65,212 Approximately 35% of the cash requirements for construc.
~ tion, maturities, sinking funds, optional retirements and Future changes in operating revenues will reflect the resuhs. -
redemptions associated with long term debt and preferred f customer rate changes, general economic conditions in stock, and for other capital purposes of ACE during the
. the service area and the results of load management and q
petlod 1986-1988 was generated from dperations after conservation programs, g
i deductions for dividends and working capital needs, but.
Sales
' exclusive of changes in temp 6rary cash investments. Exclud-Changes in kilowatt-hour sales are generally due to changes d
' ing the early retirement of all of the 12%% Series First in the average number of customers and average customer :
1 Mortgage Bonds and a portion of the 11%% and 11h% Series -
use, which is affected by weather conditions.
1 First Mortgage Bonds of Atlantic Electric in 1986, approx-
,i
- imately 46% of cash requirements during the period -
'i 1986-1988 mis generated internally. '
Atlantic Electric Atlantic Electric Sources of Energy ;
Costs of Energy ~
f
=:
- e j
{
o
=
4
=
E ~.
. ~E M
ir C
o s;
- a
~
w i
b f
e
~
j n,
e m,,
s c
wyn p %n_
' g j ON" NN%M N
- -- w
'84
'85
'86
'87
'88
'84
'85
'86
'87
.88
. cc,,
suo cual.
aus Nudcar I
mus Nudcar aus oil j
une oil..
aur Natural Gas 3
ass Natural Gas sum interchange Jews Interclunge aan Yearly Average
+-
mne a 19
__________D
-f1
.1 m
..._w=-
uz : -,;-
(;
===u...-.
(.
I'
%fanagernernk Discussion and Anaysis of G
Financial Condition and Results of Opemtion <cownwes>
' iStlantic Fncrgy. Inc. md Subsidiaries --
- Energy sales statistics, stated as percentage changes from :
Net Energy Costs reflect the amount of energy produced, Jprior years, are shown below:
- the various fuel and purchased power sources used to produce it, as well as the operation of the levelized energy increase mecrease>from crior war ~
' clauses (LECs). Atlantic Electric's annual fuel, interchange and '
' Customer Class -
1988
.1987'-
Purchased power costs reflect changes in availability of low.
Cost generation from both owned and purchased sources and :
. Average Average -
~ Astrage Astrage.
Salesi Use # of Cust. Sales Use # of Cust.
In the unit prices of the fuel sources used, as well as changes
. in the needs'of other utilities participating in energy 3
- Residential -
5.7% - 2.2% 2
- 3.4%
.7.1% > 3.7%
3.2%
interchange. Net Energy Costs for the three years ended -
Commercial 5.8 2.2 3.5 8.0 4.7 3.1 -
December 31, (in thousands of dollars) include the following: -
Industrial 1.2 '.
1.3
(.1) 8.2 9.0
(.7)
- Other(
. (3.3) - (2.9)..
(.4)
.1
.1 1988 1987-1986
- Total
' 4.8 1.3
~3.4
. 7.6 -
~.2 3.2 Fuel
- $145,225
$125,271
$111,384.
4 Interchange 18,138 23,990'
'19.387 '
1The increases in total kilowatt. hour sales in 1988 and 1987 are. Deferred Costs
' (3,838)
(11,628)
,a largely attributable to the number of new customers added to Total -
$159,525
$137.633
$130,771
,]
~. the system. The growth of electricity consumption within the service territory is related to improving economic conditions,
.JI enhanced in part by the hotel / casino industry, and the -
The cost of energy is recovered through base rates and -
relatively stable price of electricity in the last few years.
. through the operation of LECs. LECs utilize projected energy -
, Overall, the combined effects of the changes in sales and costs and include provisions for prior period under or over.
rates have resulted in a decrease in revenues per kilowatt.
recovery of these costs. The recovery of energy costs is made hour of 1.3% in 1988 compared to 1987 and an increase of through levelized monthly rates over the period of projec-
- 2.9% in 1987 compared to 1986.
. tion. Any under or over recovery of costs is deferred on the Consolidated Balance Sheet as an asset or liability as
- Costs and Expenses appropriate. These deferrals are recognized in the Consoli-b Total operating expenses increased 3.7% in 1988 compared to dated Statement of Income during the period in which they
~.1987. The 1987 operating expenses represented an increase are subsequently recovered through the LECs. During 1988I
' of 9.4% compared to 1986. Excluding depreciation and taxes, and 1987, the cost of energy was impacted by higher than -
operating expenses increased by $28.2 million in 1988, an projected kilowatt-hour sales. In addition, the shutdown of increase of 8.0% from 1987, which had increased 7.5% from the Peach Bottom Station and the temporary loss of a major.
1986.
transmission line caused Atlantic Electric to incur incremental purchased [x)wer and interchange expenses.
Atlantic Energy Cash Requirements and Internal Atlantic Energy Generation of Funds Year End Capitalization i l E
IIH) l i
l E _$
k
')
o
~
m.
i f
e
.n -
}
l
-g~
t i
M-i j
i I
a m
i
=-
- 2na Q s f.sta g !g n _
_ g g g g g mmmrgmg g
}
'84
'85
'86*
'87
'88 I
'84
'85
'86
'87
'88
' i e Construction and other
- Common Equity f
= M.arurities. Retirements and Mnking Funds l
m Preferred Nock m Intern.nl Cash Generation a= 1.ong Terrn Debt
%cimtes certain oprumalretirements
- ::::==:.=.==
- ~ = = = =
= =
=\\
-~
~
20 l
ym rw w
g>
v
/During 1987, Atlantic Electric went from being in an overt 1987 are attributed t'o iSerest on deposits from third' parties,
l-L out 1988 ACE remained in an under recovered position. At: ^
for cogeneration projects and interest associated with the t
L recovered position'to an under reemered position. Through; LECs. The embedded cost of long term debt at December 31,
' December 31,1988, $27.6 million is shown on the Consoll-1988 was 9.1%, compared to 9.0% in 1987 and 8/)% in 1986..
dated Balance Sheet as Deferred Energy Costs compared to Atlantic Electric expects to use short term debt to fmance
[.
$23.8 million at December 31,1987. ~.
construction and working capital needs on an interim basis, -
7-
- Operation and maintenance costs include the costs of both - replacing it with long term issues as permanent financing.
P Lwholly-owned and jointly-owned generating units. At wholly-The Allowance for Funds Used During Construction
-j owned units, Atlantic Electric has instituted programs to (AFDC) including both the Borrowed Funds portion, which !
.l O
- upgrade these facilities to improve efficiency and availability.. is used to reduce interest charges, and the Cquity Funds ;
- In 1988 and 1987, these expenses increased as the result of
' portion, shown under Other Income, was $3.2 million in
- the commercial operation of Hope Creek, and planned unit 1988 and 1987, and $17.0 million in 1986. The 1988 and 1987.
overhauls. Additionally, operating and maintenance costs are amounts decreased compared to that of 1986 due'to the subject to price increases relating to' materials, supplies and decreased average balances of construction. work in progress
. services, and include wages and employee benefits.
resulting from placing the Hope Creek Generating Station -
Changes in depreciation expense generally represent in service.
' ~
changes in the value and mix of electric utility plant in NONUTI$TY OPERATIONS
- service and the respective in-service dates, including the llope Creek unit in 1987.
OPCrations of the nonutility companies have begun modestly Interest charges before the Allowance for Borrowed Funds f 11 wing a strategy to make prudent m. vestments where the.
Used During Construction rose to $52.2 million in 1988 p tential for future returns is promising. Nonutility opera-ti ns f r 1988 and 1987 resulted in losses amounting to
.y compared to $47.9 million in 1987 and $46.1 million in 1986;
$2,029,000 and $549,000, net of income tax credits, or losses j
~ These increases reflect the net effects of principal amounts.
and interest rates of debt outstanding in the period. A total of of10< and 3t per share, respectively.
j I
$224.4 million oflong term debt was issued during the.
. Atlantic Southern Properties, Inc.
1986-19_88 period as described under " Financing Program" ASP purchased a commercial real estate site in' Atlantic above at rates ranging from 8% to 8%%. In the same perkxt, County, NewJersey in December 1986. It is continuing to maturities included $45 million of floating rate notes in 1986, develop the site, as well as plans to attract future tenants. At
$10 million of 4h% Series of First Mortgage Bends in 1987 -
~ December 31,1988 the net assets of ASP consist primarily of and $10 million of 3%% in 1988. In addition, $60.'5 million, this real estate site, with a current carrying value of '
$36.675 million and $48.785 million principal amounts,
- approximately $11 million, including the initial purchase respectively, of the 12%%,11%% and 11h% Series of First price and construction to date, ASP plans to complete R
Mortgage Bonds were retired in 1986. In January 1987, an construction and renovation, which is scheduled for mid-i
.' additional $.3 million principal amount of the 11%% Series. - 1989. To date financing of ASP has been accomplished j
. was reacquired. The increase in short term interest expense through capital contributions and advances from AEI, and 7
' n 1988 and 1987 reflects higher average balances and higher loans from ATE. Permanent financing is expected upon f
i average rates. Increases in other interest expense in 1988 and. completion of the project.
q.
Atlantic Electric j
Atlantic Electric Pre tax Interest
~!
Total Energy Sales Coverage Ratio I
a M
U~
l
=
l 1
y o
u i
f
]
e i
n i
L a
m l.
d i
-i
-BI o~
-l l
>,B j
(
w
-M5 l
u t
c 3
- h l
l M.;
f I
E l
EdMLAGGM6l dE@l5MM 0
- s. EESMTMmMm.%EEEMM!iM
'84 :
'85 "86
'87
'88 1
'84
'85
'86
'87
'88 l
21
3 s
Y Olanagement's Discussion and Analysis of
- Financial Condition and Results of Operation ma&n utantic Energn Inc, and subudiarica 4tlantic Generation, Inc.
such opportunities is now coupled with the opportunity to 1 AGI is a partner in Cogeneration Partners of America (CPAl a finance such investments outside the regulated business. The
. partnership formed in April,1987. CPA designs, constructs, current activities of the unregulated businesses will need i
owns and operates cogeneration power projects. CPA has time to mature. The Board of Directors and management are L
reported losses from its operations to date. At December 31,"
reviewing strategies for additional investment opportunities
[
1988 AGI's net assets are represented by its investment in and that offer the potential to increase shareholder value.
advances to CPA amounting to approximately $6 million.
Our core business, Atlantic Electric, has positioned itself to Funding of AGI's investment in CPA has been through capital remain flexible in responding to the external forces that may contribution;and advances from AEI.
affect it. This strategy is evident in the utility operations and.
In the diversity of power supply sources, which include i ATE Investment, Inc.
Investments in both wholly owned generating facilities, as.
.j l ATE began its investment activities in May 1988 with its well as ownership interests in jointly. owned facilities,1sur-investment in two leveraged leases. No aircraft with a total chased power contracts, and a diversity in fuel mix including j
cost of approximately $109 million were irwohul in the coal, nuclear, oil and natural gas.
f 4
transactions with lease terms of approximately twenty-two There are external forces which Atlantic Electric may be
- years. At December 31,1988, ATE's net investment in these unable to influence. The sources and availability of electric
}
3 leveraged leases, net of nonrecourse debt financing, is power generation will be a critical issue for ACE to meet the -
approximately $27 million. ATE used a portion of a $50 increasing demands of customers. The continued 1
- million term loan facility to finance a portion ofits equity unavailability of the Peach Bottom Station, and the regulatory.
j' participation in the leases, with the remainder through treatment ultimately decided by the BPU, could have a capital contributions from AEl. ATE has also borrowed material adverse effect on the consolidated financial results of ;
on its credit facility to provide temporary construction Atlantic Electric and Atlantic Energy. Long term liquidity and i
financing to ASP.
financial flexibility depend in part upon receiving fair 1
OUTLOOK treatment from utility regulators in rate proceedings. The j
ability to finance operating and capital need3 is dependent Atlantic Energy is now in a position to take advantage of upon regulatory treatment and the ability to maintain good opportunities for investment and growth through its non-credit ratings.
' regulated subsidiaries A program of prudent evaluation of Report of the Audit Conunittee
)
. The Audit Committee of the Board of Directors is composed and the adequacy of the Company's internal control structure.
j of five independent directors. The members of the Audit The Committee met regularly with the Company's internal 1
Committee are: Richard B. McGlynn, Chairman,Jos. Michael auditor and independent public accountant, without manage-l Galvin,Jr., Matthew liolden,Jr., Irving K. Kessler, and Bernard ment present, to discuss the results of their examinations, 1
I J. Morgan. The Committee held four meetings during fiscal their evaluations of the Company's internal control structure,.
year 1988.
and the overall quality of the Company's financial reporting.
The Audit Committee oversees the Company's financial The meetings also were designed to facilitate any private
- l. reporting process on behalf of the Board of Directors. In communication with the Committee desired by the internal l
fulalling its responsibility, the Committee recommended to auditor or independent public atountant.
r the Board of Directors, subject to shareholder approval, the selection of the Company's independent public accountant.
The Audit Committee discussed with the internal auditor and
~>
Q the independent public accountant the overall scope and l
^
specific plans for their respective audits. The Committee also nichard B. Mcclynn, discussed the Company's consolidated financial statements Chairman, Audit Committec f
d r
l
. ~.. -..
l~
22 i
o
0
+.=
Report of?landgernentJ Q
The management of_ Atlantic Energy, Inc. and its subsidiaries provide reasonable assurance that the financial statements
' is responsible for the preparation of the financial statements.
are not misleading and includes a review of the system of presented in this Annual Report. The financial statements internal accounting and financial controls and a test of -
have been prepared in conformity with generally accepted transactions.
1
. accounting principles. In preparing the financial statements, The Internal Auditing Department conducts audits and 1
management made informed judgments and estimates, as appraisals of the Company's accounting and other operations, j
necessary, relating to wents and transactions being reported.
and evaluates the financial and other control procedures ;
i blanagement is also responsible for the preparation of other which have been established, and compliance with those '
j financial information included in other sections of this -
procedures. Both Deloitte liaskins & Sells and the internal.
(
Annual Report.
~
auditors periodically make recommendations concerning the I
Management. has established a system of internal account-system of internal accounting controls, and management '
. ing and financial controls and procedures designed to.
responds to such recom.mendations as appropriate in the -
H provide reasonable assurance as to the integrity and reli-circumstances. None of the recommendations made for the.
ability of financial reporting. This system is examined by year ended December 31,1988 represented significant
'j
. management on a continuing basis for effectiveness and deficiencies in the design or operation of the Company's
- j
. efficiency. Management beleves that, as of December 31, internal control structure.
l 1988, the system of internal accounting controls is adequate H
to accomplish its objectives. Management also recognizes its f-1
- responsibility for fostering a strong ethical climate in which i
. the corporation's affairs are conducted according to the y
' highest standards of personal corporate conduct. This.
E. D. Huggard, President and responsibility is characterized and reflected in the Company's Chief Executive officer code of ethics and business conduct policy.
The. financial statements have been audited by Deloitte
'}
ilaskins & Sells, Certified Public Accountants. The auditors N
i provide an objective, independent review as to management's discharge of its responsibilities insofar as they relate to the 1 o. saiomone, fairness of reported operating results and financial condition.
vice president and Their examination includes procedures believed by them to neasurer ht& pendent Auditors' Report j
i l Certified Public Accountants One World Trade Center Y
New York, New York 10N8 30 To the Shareholders and the Ik)ard of Directors financial statements. An audit also includes assessing the of Atlantic Energy, Inc.:
accounting principles used and significant estimates made by l
man gement, as weH as u Ung the omaH nnandal j
We have audited the accompanying consolidated balance statement present ti n. We believe that our audits provide a 3
sheets of Atlantic Energy, Inc. and subsidiaries as of m mble basis for our opinion.
December 31,1988 and 1987 and the related consolidated in onp n, sus mn a 6nandal statemenn P**"' 'airl) pin all m teri 1 respects, the financial positio statements of income, changes in common shareholders, i
equit>, and of cash flows for each of the three >' ears in the Atlantic E,nergy, Inc. and its subsidiaries at December 31,1988 perk >d ended December 31,1988. These h,nancial statements and 1987 and the results of their operations and their cash are the responsibility of the Company s management. Our flows for each of the three years in the perk >d ended responsibility is to express an opinion on these hnancial December 31,1988 in conformity with generally accepted statements based on our audits.
accounting principles.
We conducted our audits in accordance w. h generally t
. accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance h4 4A about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the February 2,1989
_a=
= _ _ _. _
= = =
h l
1 23 L
.m W-y-4
~!
...y
.. ~....
C KonsplidatedStatement ofincolheb
-; wanoe Enngy, Inc. ud wbsidiaries,
f For the Years Ended December 31 f'
< (Thousands of Dollars) ^
1986-L
! Operating Revenues-Electric
$675,859 '
$648,173 --
$$82,961 -
q L Operating Expenses:
' Net Energy Costsf 159,525 137,633
'130,771
$ Operations 162,362.-
163,842'-
t153,014
~ Maintenance :
59,649-51,899 -
44,820
~ Depreciation and Amortization '-
54,799.
151,080 ;
C42,515
~ NewJersey Gross Receipts Taxes 80,556 1 70,323 69,797-Federal Income Taxes - '
26,471' 48,916
- 36,754 LOther Taxes 9,718 L 9,807..
~,836 9
s L Total -
553,080 -
' 533,500 487,507-1.,
Operating income 122,779 114,673' 95,454 Other Income:
t Allowance for Equity Funds Used During Construction 359 1,436 8,336
. Miscellaneous Income-Net 3,194 6,645
' 3,165
~ Total '-
3,553 8,081.
11,501 R
' Application of SFAS 90:~
i Applicable Income Taxes 1,601 2,545 (15,571) l Plant Abandonments and Disallowances-Net (433)
(720) 6,512 Net Effect of SFAS 90 1,168 1,825
. (9,059)
- Income Before Interest Charges 127,500 124,579-97,896 -
' Interest Charges:
Interest on 1.ong Term Debt +
44,506'
.44,547 46,146-Interest on Short Term Debt 4,958 2,070 408
' Other Interest Expenses 2,723
. 1,291 (465)'
1 Total interest Charges 52,187 47,908 46,089'
' Allowance for Borrowed Funds Used During Construction (2,823)
-(1,761)
(8,684)
Net Interest Charges 49,364 46,147 -
-37,405 Preferred Stock Dividend Requirements of Subsidiary (5,965). -
(4,667)-
.. (5,545)
' Net income
$ 72,171
$.73,765
$ 54,946
' Average Number of Shares of Common Stock Outstanding -
((n thousands) 19,593 18,311 18,266 Per Common Share:.
. Earnings 3.68 4.03 3.00 '
i u
Dividends Declared 2.74
$ ' 2.715 2.61 1
1 Dividends Paid 2.77 2.65-
$- 2.60
-l
-1
.1 i
..The accompanying Notes to Consolidated Financial statements are an integral part of these natements 1
w;.
c.y..
_z==._
24 t
W Consolidated Statement of Cash Flows Adantic Energy, Inc, and 5ubsklaries For the Years Ended December 31
.i-(Thousands o(Dollars) 1988 1987 1986 Cash Flows From Operating Activities:
Net income.
/ $ 72,171
$ 73,765
$ 54,946 Deferred Purchased Power Costs (18,110)
(16,910)
(15,700)
Deferred Energy Costs and Revenues (3,838)
(36,984) 8,711 Preferred Stock Dividend Requirements of Subsidiary 5,965 4,667 5,545 4 Noncash items affecting operating activities:
Depreciation and Amortization 54,799 51,080 42,515 i
Allowance for Funds Used During Construction (3,182)
(3,197)
(17,020)
Investment Tax Credit Adjustments-Net (217)-
(1,552) 4,585 Deferred Federal Income Taxes-Net 14,642 19,807 32,184 j
Net Effect of Application of SFAS 90 (1,168)
(1,825) 9,059 Net (Increase) Decrease in Other Working Capital *
(2,591) 19,865 14,439 Other-Net 6,107 7,962
'(207)
Net Cash Provided by Operating Activities 124,578 116,678 139,057 Cash Flows Used by Investing Activities:
Cash Utility Construction Expenditures (127,099)
(102,324)
(92,283).
i Leased Property (5,144)
(10,261)
(6,252) 1,806 (5,922) i Property Abandonment Costs Nuclear Decommissioning Trust Fund Deposits (5,561)
Nonutility Property and Equipment (4,214)
(558)
(6,470)..
Investment in Partnership..
(2,100)
(3,001)
Investment in Leveraged Leases (32,615)
. Investment Tax Credits from leveraged leases 7,083 Other-Net (13,238)
(7,715) 1,925 Net Cash Used by Investing Activities (182,888)
(122,053)
(109,002)
Cash flows From Financing Activities:
. Proceeds from Long Term Debt 26,500 4,400 220,000 i
Retirement & Maturity oflong Term Debt (10,000)
(10,337)
(214,854)
)
Ibtlution Control Funds Released (IIeld) by Trustee 5,022
. (2,399) j increase (Decrease) in Short Term Debt (2,700)
-50,800 12,900 Proceeds from Capitallease Obligations 5,144 10,261 6,252 Common Stock issued.
54,563 2,320 548
- Preferred Stock issued 60,000 I
- Redemption and Conversion of Preferred Stock (5,050)
(7,454)
(9,499)
. Dividends on Preferred Stock (5,965)
(4,667)
(5,545)
'c Dividends on Common Stock (54,455)
(49,741)
(47,682) j Debt Costs and Other 90 6,435 (6,146)
)
Net Cash Provided (Used) by Financing Activities 68,127 7,039 (46,425)
Net Increase (Decrease)in Cash And Temporary Investments 9,817 1,664 (16,370)
Cash and Temporary Investments, beginning of year 9,540 7,876 24,246 l
Cash and Temporary Investments, end of year
$ 19,357
$ 9,540
$ 7,876
' Supplemental Schedule of Payments:
j interest
$ 48,922
$ 44,506 5 50,095 q
Federal income taxes
$ 10,822
$ 34,800
$ 3,100
- Escluding cash and temporary mvestments.
The accompanying Notes to Consohdmed Fmancial Statements are an integral part olihese surements i
i l
i d
f I
3 i
=== -
m====.
==..
-- n
.===n m 25 I
l
Consolidated Balance Sheet i
I
, Att,mtK I nern int and sotwidaries g
{
December 31 l (Thousands of Dollars 1 1988 1987
}
I Assets 1
Electric Utility Plant:
In Service:
Production
$ 863,429
$ 800,206 i
Transmission 233,408 217,741
]
Distribution 415,056 389,619 1
l General 91,299 78,756 l
l Total 1,603,192 1,486,322
- Less Accumulated Depreciation 419,183 388,329 Net 1,184,009 1,097,993 Construction Work in Progress 67,257 73,153 land 1-leid for Future Use 9,285 5,632 Leased Property-Net 32,880 37,694
! Electric Utility Plant-Net 1,293,431 1,214,472
- Nonutility Property and Investments:
! Follution Control Construction Funds 115 109 l
i+1uclear Decommissioning Trust Fund 5,612
~
Nonutility Property and Equipment-Nel 12,711 8,232 Other Investments 33,411 2,376 Total 51,849 10,717 Current Assets:
h Cash and Working Funds 13,089 9,540 Temporary Cash Imestments 6,268 i Accounts Receivable:
i I
Utility Service 50,400 43,126 I
Miscellaneous 11,578 10,750 Allowance for Doubtful Accounts (1,693)
(1,600)
Unbilled Revenues 31,689 24,973 Fuel (at average cost) 17,453 22,994
)
Materials and Supplies (at average cost) 23,788 20,749 i
3 Prepayments 9,381 9,497
)
y Deferred Energy Costs 15,466 11,628 a
1
! lbtalCurrent Assets 177,419 151,657 l
! Deferred Debits:
Property Abandonment Costs 11,066 11,794 Unrecove> red Purchased Power Costs 83,380 65,270 Deferred Fnergy Costs 12,179 12,179 Unamortized Debt Costs 23,608 25,686 Other 7,354 7,606 Total Deferred Debits 137,587 122,535 g 'Ibtal Assets
$1,660,286
$1,499,381 The accompanyuyc Note, to Consohdated Fmancial Statements are an integral part of the e statements L
L s
I
=.:
==
== ~=-
=.
.==
26
l
= =. - -.. -..
o December 31 (Thousands of Dollars) 1988 1987 Liabilities and Capitalization Capitalization:
Common Shareholders' Equity:
g Common Stock, no par value; 50,000,000 shares authorized
$ 339,993
$ 285,430 Retained Earnings 203,594 186,294 Total Common Shareholders' Equity 543,587 471,724 i
Preferred Stock of Atlantic Electric:
Not Subject to Mandatory Redemption 40,000 40,000 Subject to Mandzory Redemption 74,450 18,500 I
long Term Debt 513,186 489,265 Total Capitalization 1,171,223 1,019,489 l
Current Liabilities:
d Preferred Stock Redemption Requirement 4,050 5,050 Inng Term Debt due within one year 2,775 10,000 Capital Lease Obligations due within one year 590 679 l
Short Term Debt 61,000 63,700 g
Accounts Payable 44,836 37,591 Taxes Accrued 11,847 7,%9 Interest Accrued 10,168 10,118 j
i Dividends Declared 16,028 14,270 Customer Deposits 3,124 3,383 Deferred Taxes 10,366 12,714 Other 22,704 25,860 i
l Total Current Liabilities 187,488 191;334 l
Deferred Credits and Other Liabilitico Deferred Investment Tax Credits 66,395 66,612 Deferred income Taxes 185,433 168,010 R
Obligations under Capital Leases 32,290 37,015 Other 17,457 16,921 Total Deferred Credits and Other Liabilities 301,575 288,558 Commitments and Contingent Liabilities (Note 11) lbral Inabilities and Capitalization
$ 1,660,286
$1,499,381 l
I k
l 4
I
=..
==
_=
=
27
G pw.
~
w 9
\\."
' j
+9,.
..I w-1 i.1 g
.m Sb0soliclkted 5 tali >inekit of Chcinges in;:
4 l
YConnnon $bareholdeis' Equid 0
- - doanile Energy.Linc1 nd sutniduriest Q
l 3
l.
1
- Comm' n Stock :
! Retained Eamings..
S 0 (Ibousands of Do/lais) '
' Shares' o
1 18,257,009
$282A51L
$155.006 j
- Balawe, December 31,'1985 3 1
. Common stock issued :- '
- 16,646 l
.603;
..l
~ Net income ;
m f..
- 54,946
.+
'o Common stock dividends -
- (47,682).
(.
1 Balance, December 31; 1986
.18,273,655
- '283,054.
162,270?
- Common stock issued. '
-72,864'
- 2,376 ~
2 Net income'. 1 73,765 r I'Coinmon stock dividends D (49,741),
. Balance, December 31,1987 ~
18,346,519
'285,430.
186,294 "q.'
5 Common stock issued.-
1,665,042
-54,563:.
- 72,171
. Net income ; -
- Capital stock expense (416).
c (54A55).
LCommon stock dividendsD
. $203,594
- Balance, Decembdr 31,-1988 20,011,561
$339,993 '
f.^ '
I 5 accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
I L
U o
i j
_M
~~~M
.p i 28 a
J
q-1
=
r LNotes to Consolidated Financial Statements ummMx muse L
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES Organization '
The effects of the application of SFAS 90 for the year ended g
Effective November 1,1987, A'tlantic Energy, Inc. became the December 31,1986 were as follows (dollar amounts in parent company of Atlantic City Electric Company (Atlantic.
thousands):
Electric) pursuant to an Agreement and Plan of Merger (Plan) 1986 approved by shareholders on April 22.1987. Under the Plan,
. FRecu of SFAS 90-I each common share of Atlantic Electric was comerted on a Direct Disallowance
$(22A33) share-for-share basis mto common shares of Atlantic Energy.
Indirect Disallowance 3,218 On the effective date, a corporate restructuring took place Accretion of Discount 3,644 under which Atlantic Generation, Inc., Atlantic Southern Properties,Inc. (formerly Atlantic Housing,Inc.)and ATE Income Taxes 6,512
{
investment, Inc., previously subsidiaries of Atlantic Electric, Total became subsidiaries of Atlantic Energy. Deepwater Operating
- $ (9,059) -
Company, which operates certain generating facilities, Regulation remains a wholly-owned subsidiary of Atlantic Electric.
The accounting policies and rates of Atlantic Electric are Principles of Consolidation -
subject to the regulations of the BPU and in certain respects The consolidated financial statements include the accounts of to the Federal Energy Regulatory Commission (FERC) All j
Atlantic Energy and its subsidiaries, all of which are wholly.
significant accounting policies and practices used in the
' wned. All significant intercompany accounts and transactions determination of rates are also used for financial reporting o
1 have been eliminated in consolidation. Atlantic Generation is purposes.
a partner in Cogeneration Partners of America (a part-Electric Operating Revenues
. nership), and accounts for such investment by recognizing its Revenues are recognized when electric energy services are I
distributive share of the results of operations of the part-rendered, and include estimates for amounts unbilled at the i
nership. The results of operations of the nonutility companies end of the period for energy used subsequent to the last were not significant and are classified under Other income in 1
billing cycle.
l the Consolidated Statement of Income.
Electric Utility Plant Statement of Financial Accounting Standards No. 90-Regulated Enterprises-Accounting for Abandonments Property is stated at original cost. Generally the plant is sub-and Disallowances of Plant Costs (SFAS 90)
Ject to a first mortgage lien. The cost of property additions,
]
inclu% replacement of units of property and betterments, SFAS 90 requires that a loss be recognized if the carrying is capitalized. Included in certain property additions is an
]y amounts of abandoned assets exceed the present value of All wance for Funds Used During Construction (AFDC) future revenues to be generated by those assets. The standard which is defined in the applicable regulatory system of also requires that any disallowance of the cost of a newly accounts as the cost during the period of construction of completed plant, including an indirect disallowance which borrowed funds used for construction purposes and a provides no return on investment of any nortion of the plant, reasonable rate on other funds when so used. AFDC has be recognized as a loss. The NewJersey Board of Public en caWated u4 a sembannuah compounM rate d -
{
Utilities (BPU) issued an Order on February 27,1987 relating 8.95% as approved by the BPU, for the years presented.
1 to the llope Creek Generating Station and related issues. In the first quarter of 1987, Atlantic Electric adopted SFAS 90, at Deferred Energy Costs and Revenues which time previously issued financial statements were Atlantic Electric has Level! zed Energy Clauses which are 1
restated.
based on projected energy costs and include provisions for The application of SFAS 90 to Atlantic Electric resulted in prior period under or over recovery of costs. The recovery of the recognition of a loss for the disallowance by the BPU of energy costs is made through levelized monthly charges over certain costs relating to Atlantic Electric's investment in Unit the period of projection. Any under or over recovery of costs No.1 of the Hope Creek Generating Station; recognition of a is deferred in balance sheet accounts as an asset or liability as s
loss and subsequent accretion of discount, for an indirect appropriate. These deferrals are recognized in the Consoli-I disallowance of certain costs relating to Unit No.1 of the dated Statement of Income during the period in which they llope Creek Genersing Station excluded from earning a are subsequently recovered through the clauses.
return (in accordance with the provisions of a Cost Contain-ment Agreement); and recognition of a loss and subsequent accretion of discount, for each of several plant abandonments I
referred to under Property Abandonment Costs.
= -
=_ _-
==
=
==
29
==
INotes to ConsolidatedFinancial Statements wonanuan
) Mimtic Ericrgs Irnf md Nutwharn y
\\
Depreciation The llope Creek Unit No. 2 investment is being amortized ;
' Atlantic Electric provides for straight-line depreciation based over a 15 year period that began in 1983. The investment in on the estimated remaining life of transmission and distribu.
the offshore nuclear units is being amortized over a 20-year tion property and, based on the estimated average service -
- Period that began in 1979. Unrecovered nuclear fuel advances -
life, for all other depreciable property. Depreciation applica.
are being amortized over 15 years, beginning in 1986. The -
ble to certain nuclear plant includes anmunts provided for study costs are being amortized over 10 years beginning i decommissioning. The overall composite en of depreciadon in 1986.
was approximately 3.6% for 1988,3.8% for lv and17% for Unrecovered Purchased Power Costs
- I 1986. Accumulated depreciation'n is charged e the cost of depreciable property retired together with removal costs less Atlantic Electric has agreements for the purchase of 125 sahnge and other recoveries.
megawatts of capacity and related energy from Pennsyhunia -
1 Power & Light Company (PP&L) under two Capacity and i
Atlantic Southern Properties provides depreciation, using Energy Sales Agreements (the PP&L Agreements). The PP&L i
the straight line method for real preperty over a thirty one and one-half year life, and a declining balance me had for equip-Agreements provide for the purchase of capacity and energy -
/
ment over lives ranging from five tonen yet rs.
from PP&L's Susquehanna nuclear Unit I and Unit 2 through '
September 30,1991, and then from certain PP&L coal-fired Nuclear Fuel units through September 30,2000. Through September 30, Fuel costs associated with Atlantic Electric's participation in 1991, the estimated costs to be incurred for purchases of
- jointly owned nuclear generating stations, including a provi.
capacity and associated energy from the Susquehanna Units sion for estimated spent fuel disposal costs, are charged to will exceed the levelized costs to be recovered from fuel expense based on the units of thermal energy produced, customers Such unrecovered costs are being accumulated
- and included in Net Energy Costs.
and deferred as Unrecovered Purchased Power Costs. Related deferred taxes have been provided. The level of rates i
Federal Income Taxes approved by the BPU is designed to recover these deferred 1
' Deferred Federal Income Taxes are provided or. sgnifi-costs and associated carrying charges during the balance of cant current transactions for which the timing of reporting the contract period differs for book and tax purposes. Investment tax credits from utility property, which are used to reduce current Nuclear Decommissioning'Itust federal income taxes, are deferred on the Consolidated In 1988 Atlantic Electric established a trust to fund the future -
Balance Sheet and recognized in tx>ok income over the hfe decommissioning costs related to the nuclear units in which of the related property.
it has an ownership interest. Funding, which began in 1988, is -
based upon studies and forecasts of decommissioning costs.
Property Abandonment Costs Atlantic Electric has received favorable Internal Revenue These costs are stated at their net present value and consist Service rulings that the current fundings of the trust are
)
- principally of Atlantic Electric's imestment in flope Creek deductible for federal income tax purposes.
l Unit No. 2, a nuclear generating unit which was cancelled in -
InJune 1988 the BPU approved a Stipulation among j
1981, offshore nuclear units which were cancelled in 1978, Atlantic Electric, the BPU Staff and the Public Advocate which unrecovered nuclear fuel advances associated with utanium provides that, within five years, Atlantic Electric will deNsit supply contracts which were terminated in 1985 and study into the trust approximately $10 million. This represents the costs associated with a proposed plant site. Since no return amounts previously collected from customers and provided was granted by the BPU on these costs, the excess of the for as of December 31,1988, but no yet funded.
carrying ndue of the assets over their discounted present Other value was recognized as a loss at the date of abandonment.
Such discount is being restored to income by accretion over Debt premium, discount and expenses of Atlantic Electric j
I the amortization period allowrd for ratemaking.
are amortized over the life of the related debt. Costs associ-ated with debt reacquired by refundings are amortized over the life of the newly issued debt as permitted by the BPU.
Gains and losses relating to other reacquired debt are recognized currently.
Certain prior year amounts have been reclassified to l
conform to the current year reporting.
l I
f
.. ma 1
=
._.._.a NOTE 2. FEDERAL INCOME TAXES Years Ended December 31 (Thousamb of Dollars) 1988 1987 1986 i
- The Components of Federal income Tax Expense are as follows.
a Federal Income Taxes Currently Payable
- $ 11,483 L
$ 30,076
$ '790.
l_
Application of SFAS 90
. 433 720
- (6,512)-
Deferred FederalincomeItxes 14,244
-18,633 37,121' f
Investment Tax Credits Recognized on leveraged leases (727)
)
Total Federal income Tax Expense,
25,433 49,429 31,399 i
Less Federal Income Taxes included in Other income (1,471)
(207) 1,157 l
less SFAS 90 income Taxes '
433
'720 (6,512) l l
Federal Income Taxes Included in Operating Expenses
$ 26,471
$ 48,916
$36,754 1
1 Deferred Federal Income Taxes result from the following:
l 1.iberalized Depreciation
. $ 12,096
$ 14,422
$17,756 1
Unbilled Revenues (2,848)
(2,766)
(834)
Unrecovered Purchased Ibwer Costs 4,577 6,268 7,222 Deferred Energy Costs (36) 4,523 q
Costs associated with Reacquired Debt.
(1,195)
(949) 10,078 Other1 1,867
. (1,691)
(2,038) -
.I Deferrad Investment Tax Credits (217)
(1,552) 4,585 Empk yee Stock Ownership Plan Credits 378 352 Total Deferred Federal income Tax Expense
$ 14,244
$ 18,633
$37,121 A Reconciliation of the Reported Federal income Tax Expense compared to the expected Rxleral Income Taxes Computed by applying the Statutory Rate follows:
Net income
$ 72,171
$ 73,765
$54,946 Preferred Stock Dividend Requirements of Subsidiary 5,965 4,667 5,545 Federal income Tax Expense (as below) 25,433 49,429 31,399 l-Book income Subject to Tax
$103,569
$127,861
$91,890.
Statutory income Tax Rate 34 %
39.95%
46%
Income Tax Computed at the Statutory Rate
$ 35,273
$ 51,080
$42,269 Items for which deferred taxes are not provided:
Difference between Tax and Book Depreciation 591 1,521 2,223 Alk)wance for Funds Used During Construction (960)
(1,055)
(7,684)
Capitalized Overheads 925
. 485 (1,431)
Investment Tax Credits (3,257)
'(2,409)
(3,859)
Other (7,079)
(193)
(119)
Total Federal Income Tax Expense
$ 25,433
$ 49329
$31,399 Effective income Itx Rate 25%
39%
34 %
s Federal income tax returns for 1981 and prior years have The Financial Accounting Standards Board has issued a been examined by the Internal Revenue Service (IRS) and Statement of Financial Accounting Standards entitled federal income tax liabilities for all years through 1979 hase
" Accounting for income Taxes" which was to be effective for been detennined and settled. The IRS has proposed certain years after 1988, but deferred until after 1989. The statement i
deficiencies in taxes for 1980 and 1981. The Company has changes the recording methodology relating to deferred l
protested the proposed deficiencies and is of the opinion that income taxes to a liability approach. The principal impact the final settlement of its federal income tax liabilities for of this change to the Company relates to the recording of these years will not have a material adverse effect on its changes in tax rates on a current basis, and the recording of resuhs of operations or financial position. The years 1982 and deferred tax liabilities not previously recorded by Atlantic 1983 are currently under audit by the IRS.
Electric. The Company expects the impacts of this change to At December 31,1988, the cumulative amount of deferred be lessened due to rate regulation, and in the opinion of income taxes which have not been provided on timing management, would not have a material effect on results of b'
differences, principally depreciation, amounted to approx-operations or financial oosition.
imately $65 million.
k weea sd es
.ta,-
em-sue.e e.-
=usus,imaps a
=me-.
-m
-ae.-
sr
-mu-i 31
____-_________N
mm als i "
f-gig R.l
~
.f.-
+
-y l Notes tol Consolidated Financial Statements wononaan
]
F enue rnergy,inct and suimauriep :
j i
SNOTE 3; RATE MATTERS OF ATLANTIC ELECTRIC -
I y
L
? Base Rate Case Proceedings
' Energy Clause Proceedings
. In April l'986, the BPU issued an Order, in the first phase of a ' Atlantic Electric's energy clauses are reviewed annually.
[
e two phase request, granting an increase in annual revenues by the BPU.-
of approximately $13.6 million. The BPU Order reflects an over-In January 1986, the BPU ordered a reduction in energy :
- all rate of return of 11.42%, with a return on common equiry of revenues of $44.0 million. As part of thn decision, Atlantic.-
114.10%. The second phase request related to Atlantic Electric's.
Electric agreed to expense $3.975 million of replacement 5% ownership in the Hope Creek Generating Station.
power costs associated with maintenance and repair outages' The BPU issued an Order in February 1987 relating to the' at Peach Bottom Unit 2 and Salem Unit 2. Also, Atlantic second phase request granting a net increase in base rate Electric agreed.to increase a previous deferral of $7.5 million i revenues of approximately $31.4 million. The net increase of Deferred Energy Costs to $12.179 million. Recostry of this consists of $38.775 million primarily associated with the costs - deferral has been requested in the September 1988 filing as of owning and operating the Hope Cree!( Generating Station, updated and amended, as discussed below and in Note 11.
p
- and a decrease of $7.366 million associated with the cha'nges
~ The BPU ordered a net decrease in annual energy clause-
- in ' corporate federal income taxes resulting from the Tax revenues of $47.3 million effective February 27,1987. The n
- Reform Act of 1986. In its decision, the BPU disallowed Order includes approximately $7.0 million of fuel savings.
42.433 million of costs associated with the construction of associated with flope Creek and $7.2 million due to the L
flope Creek and fixed a level of irwestment for ratemaking effects of compression, which allows for the distribution of l
- purposes at $217,4 million compared to a target cost of the reduction over the remaining months of 1987. In this.
L $200.3 million. Although Atlantic Electric is allowed to decision, the BPU also established a performance standard -
j
- recover the $217.4 millio'n cost of this hwestment,20% of the - for the five nuclear units in Which Atlantic Electric has 1
excess, or $3.4 million, has been excluded from rate base for minority ownership interests. The performance standard sets purposes of computing a return on the investment.
an annual overall target capacity factor of 70% with incentives -
' On April 6,1988, the BPU ordered a decrease in base rates for performance in excess of 80% and penalties for perfor-of $21.8 million primarily to reflect the lower corporate mance below 60%. Under the penalty provisions a portion of
- federal income tax rates to be in effect for 1988 resulting Atlantic Electric's replacement power costs would not be :
. from the Tax Reform Act of1986. -
- recoverable through customer rates.
. In April 1987, the BPU ruled that energy revenues be decreased by an additional $2.4 million, to reflect interest on 1986 over recoveries of fuel expenses and the disallowance of certain replacement power costs associated with 1985 Peach Bottom outages. This reduction was compressed into the remainder of 1987. These issues had been deferred in the
- February 1987 decision.
In March 1988, the BPU authorized an increase in annual energy clause revenues, effective April 1988, of $62.1 million.
This increase is net of a reduction of $5.4 million in revenue j
resulting from the disallowance _of $4.8 million of replaces ment energy costs due to the application of the BPU
-l mandated nuclear performance standard for 1987.This net increase was compressed into the remainder of 1988.
l L
)
J l.
L l
32
_a
[(
p
g
_,m.i
, Atlantic Electric is a 7.51%' owner of the Peach Bottom,
- either of the units does not return to operation by December Y
T Atomic Power Station, which is operated by Philadelphia :
31,1989, the BPU may conduct hearings to review the status =
Electric Company (PE) The units have been ordered shut
of such nonoperating unit (s) in early December 1989; and -
i down by the Nuclear Regulatory Commission (NRC) since that Atlantic Electric would not object to an order making.
i March 31,1987 and cannot be restarted without their /
base rate revenues associated with Peach Bottom subject to
, approval. Proceedings were initiated before the BPU to refund effectheJanuary 1,1990. The Stipulation is subject to I
. determine whether the base rate revenues stemming from approval by the BPU;,
the investment in the station should be made interim and PE has submitted plans to the NRC to restart Peach Bottom subject to refund to customers while the units are out of.
Unit 2. Peach Bottom Unit 3 is currently undergoing a Loperation under the NRC order. On February 26l1988, the planned refueling and maintenance outage, however it is still BPU ruled that base rate revenues of $27.6 million associated. subject to the NRC order and review to restart. The NRC and
. s with the Peach Bottom facilities were interim and subject to the Atomic Safety and Licensing Board are considering.
. refund pending the outcome of further investigations on
. concerns raised by other parties regarding the licensing and 1 April 13,1988, the BPU approved a stipulation among Atlantic:
safeguards of the station and the restart of the units. Atlantic '
Electric and other affected parties intending to resolve all Electric continues to monitor the restart efforts but at this matters related to the Peach Bottom NRC outages from March time cannot determine when the units will return to 31,1987 to December 31,1988. The stipulation provided, operation.
among other things, for a one-time credit to Atlantic Electric.
Atlantic Electric currently estimates that application of the-customers of $5.3 million, which was provided for in March nuclear performance standard to the nuclear performance '
1988 and refunded in June 1988; that the nuclear performance during 1988 will resuh in approximately $16 million of standard would continue to be in effect during 1988 for all replacement energy costs not being recoverable from cus-
- nuclear units in which Atlantic Electric has an ownership -
tomers and has provided for such amount..
=
interest and that the maximum impact during 1988 of any on September 15,1988, Atlantic Electric filed petitions with r
penalty provisions of the performance standard effected the BPU seeking to continue its current energy clauses.
. would be limited to 25% of the estimated replacement Although Atlantic Electric's petitions supported alternative,
, energy costs, except in certain instances which would require rates that would increase energy clause revenues by $9.3 mil.
. special review by the BPU; and that Atlantic Electric would lion, the petitions requested deferral of a sufficient level of J not object to an order making base rate revenues associated prior perkxl under recovered fuel costs to' maintain the
. with Peach Bottom subject to refund effectiveJanuary 1,1989 current rates. Atlantic Electric requested that such deferrals based on hearings to be conducted in December 1988 should would be considered in cor.nection with the next change in.
either unit not be back in operation by December 31,1988.
energy clause rates but no later than January 1,1990. In The Peach Bottom units were not in operation at -
January 1989, Atlantic Electric amended its petitions request-December 31,1988. A Stipulation among Atlantic Electric and ing a net increase in energy revenues of $9.269 million.
other related parties us reached on February 2,1989 Hearings are scheduled to begin in March 1989, but it is likely resolving the ratemaking treatment of Peach Bottom for 1989.
that the BPU.will not decide this request untilJune 1989.
In this Stipulation, Atlantic Electric customers will receive a Atlantic Electric has requested in its amended petitions revenue credit of $5.66 million to be refunded in April 1989.'
that the BPU approve energy clause rates that utilize a cost
- This credit covers 12 nuclear unit months of nonoperation, basis of 18 months rather than the usual 12 months. Atlantic The Stipulation provides for an additional revenue credit of Electric cannot predict the final outcome of the proceedings
$750,000 per unit month for each month that a unit is not in in this matter.
operation above the combined base total of 12 unit months.
To the extent that such revenue credits become available,
. they will be applied to customers' future bills. Revenue
-- credits will not continue when a unit returns to operationc
' A unit will be considered in operation when it achieves an average capacity factor of 50% or more for a calendar month.
Neither Peach Bottom unit will be included in the 1989 nuclear performance standard until it is considered in operation. The Stipulation also prosides that in the event that l
)
.o
' "J';";r".;-~ ~
-.Z"*"-"
dumfrO---.~. " '~
33
l
' Notes to Consolidated Financial Statements <wwwwa>
Atlanut Energy. Inc arut hubskharies i
NOTE 4. RETIREMENT PLAN.
-l Atlantic Electric and its subsidiary have a noncontributory A reconciliation of the funded status of the plan as of.
defined benefit retirement plan covering substantially all December 31,1988 and 1987 is as follows (in thousands):
their employees. Benefits are tused on an employee's years
}
3933
- 39g7, of service and average final pay. The companies' policy is to fund pension costs within the guidelines of the minimum Fainalue of plan assets
$174,700
$162,081 required by the Employee Retirement Income Security Act, Pmiected benefn obligation 158,796 152,050 i
and the maximum allownble as a tax deduction. In December Excess of plan assets over projected 1985, the Financial Accounting Standards Board adopted a benefit obligation 15,906 10,031 new accounting standard for employers' accounting for Unrecognized net transitional asset (2,755)
(2,927) i pensions. The companies adopt-d the new standard effective Unrecognized net gain (12,050)
(7,104) -
1 January 1,1987. The new standard did not have a significant j
effect on the determination of pension costs. Pension costs Prepaid or accrued pension cost
$ 1,101 4
for 1988,1987 and 1986 were approximately $4.1 million,
$4.2 million and $4.3 million, respectively. Approximately Accumulated benefit obligation:
Vested benefits
$112,935
$108,408 80% of these costs were charged to operating expense and the remainder, which was associated with construction labor, Nonwsted benefits 4,690 5,671 was charged to the cost of new utility plant-Total
$117,625
$114,079 i
Net pension costs for 1988 and 1987 included the following components (in thousands):
At December 31,1988, approximately 61% of plan assets were l
1988 1987 invested in equity securities,26% in fixed income securities Service cost-benefits earned during -
and 13% in other imestments.
I the perkxl
$ 5,045
$ 5,579 The assumed rates used in determining the actuarial
)
Interest cost on projected benefit present value of the projected benefit obligation at year end obligation 12,053 11,664 were as follows:
Actual return on plan assets (16,217)
(3399) 19g3 1987
(
Met amortization and deferral
-3.218 (9,634)
Weighted awrage discount 8.25%
8.25%
Net periodic pension costs
$ 4,099
$ 4,210 Anticipated rate of increase in compensation 6.00 %
6.00%
J The assumed long term rate of return on plan assets wus 5
8.00% for 1988 and 1987.
Certain changes to the retirement plan became effective g
January 1,1989 and are expected to increase pension costs in 4
future years. These changes primarily relate to vesting, the benefit formula and early retirement benefits..
3 in addition to providing pension benefits, the companies l
provide certain health care and life insurance benefits for j
retired employees. Substantially all employees may become eligible for those benefits if they reach retirement age while working for the companies. Benefits are provided through insurance companies and other plan providers whose pre.
miums and related plan costs are based on the benefits paid i
l during the year. In December 1986, the companies estab-j lished a trusteed plan to begin funding for these post employment benefits. Funding on behalf of active emph)yees is based on the aggregate cost method over their service lives and is equivalent to normal cost. For current retirees, funding is based on current actual experience and amortization of l
expected benefits over the remaining life expectancy of the I
retiree group. The actuarial present value of accumulated post empk)yment benefits under the plan was $38.7 million at January 1,1988. The cost of these benefits was $3.2 million for l
1988 and 1987, and $2.9 million for 1986. At December 31, i
l 1988, the net asset value of the trust fund was $6.7 million.
f b
y 0
l t
L
7; q
7
~ ' - - -
-a NOTE INTLYOWNED GENERATING STATIONS ~
m Atlantic Electric participates with other utilities in the '
The amotints shown represent Atlantic Electric's share of each ;
construction and operation of several electric production
' plant at December 31, and includes an allowance for funds.
)
facilities.
used during construction.1 j
Electric Plant Construction.
j in Service
%rk in Progress Generation j
Energy-Company's.
l 15tation
' Source Share' 1988 1987 1988
,1987 1988 1987 flixmsands ofDollars) 1
^ (AN10 Keptone Coal-2.47%
$ 8,709
$ 8,198
$ 311
$ 614 298,785 292,801 ~
3.83 14,468 14,171'
.625 387 469,092' 395,456 j
Conemaugh Coal 4
Peach ikxtom Nuclear 7.51 104,927 93,904
-4,728 8,369 225,446.
1 Salem Nuclear.
7.41 171,720 167,523 3,546 3,192 '
991,322
' 914,095
- Hope Creek Nuclear 5.00 225.183 223,505
' 1,457 804 347,570
' 362,886' The operators of the Salem and Peach Bottom nuclear Atlantic Electric provides its own financing during the stations entered into contracts with the United States Depart-construction period for its share of the jointly owned plants ment of Energy for spent nuclear fuel disposal, requiring the and includes its share of direct operations and maintenance payment of fees related to Atlantic Electric's ownership expenses in the Consolidated Statement of Income.
interes's in the stations. Current recovery of these spent nuclear fuel disposal costs is provided as part of Atlantic Electric's energy clause.
NOTE 6. NONUTILITY COMPANIES -
Atlantic Southern Properties owns, develops and operates primarily in these leveraged leases which amount to approx-
' commercial real, estate property. Its net assets consist of a
. imately $27 million. Through February 2,1989, ATE made -
commercial site under development with a current carrying additional equity investments in leveraged leases aggregating -
i~
mlue of approximately $11 million. Atlantic Generation is a approximately $26 million, exclusive of transaction expenses partner in Cogeneration Partners of America (CPA), a and advisors' fees and expenses. None of the companies had partnership engaged in the development of cogeneration operating results in 1986. For 1987, the companies had power projects. Its net asets are represented by investment combined losses of $549,000, net ofincome tax credits of in and advances to CPA amounting to approximately $6 mil-
$670,000, due to the benefits from filing a consolidated lion. ATE Imtstment was formed to manage capital
, federal income tax return. In 1988 the companies had
- investments for Atlantic Energy and during 1988 made combined losses of $2,029,000fnet ofincome tax credits investments in two leveraged leases. Its net assets are of $1,654,000.
- NOTE 7. COMMON STOCK As of December 31,1988, there were 50,000,000 shares -
authorized of no par value Common Stock.
j
. Sbares issued and outstanding during the three year period:
j 1988 1987 1986
~
13eginning of the Year 18,346,519 18,273,655 18,257,009 issuances:
Public Offerings 1,300,000 J
Dividend Reimestment and Stock Purchase Plan 355hi?
Employee lienefit Plans of Atlantic Electric 9,995 35,910 9,665
]
i.
Conversion of Preferred Stock of Atlantic Electric 36,954 6,981 End of the Year 20,011,561 18,346,519 18,273,655 i
in December 1988 the Company registered 500,000 shares of and Stock Purchase Plan (Planl At December 31,1988, Common Stock for issuance under the Dividend Reinvestment 544,953 shares were reserved for issuance under the Plan.
= = =
35
_ _ _ _ _ _ _ _ _ _----_---_____=-__;
,I
[.@hii y' ' g.y r'
I
'l[
\\
s lil '
~
O'
& 'h
~
' 7( d '
~
un
~
{Notds to Ccinsolidated Financial Statements ranninneh '
\\
})
a
%nue rnbsy.Qua ss,ano x
1 p
R G
3
~
1 i
q
,J
- .j 1 NOTE 8. CUMULATIVE PREFERRED STOCK L1
'9 iOF ATLANTIC ELECTRIC -
1 y
.e TAtlantic Electr'ic has authorized 799,979 shares of Cumulative Par Value. Information relating to outstanding shares at
. Preferred Stock, $100 Par Value,2,000,000 shares of No Par December 31 is shown in the table below (dollars in Preferred Stock and 3,000,000 shares of Preference Stock, No i thousands, except par values and current redemption price'sD WP 1=
1988-1987 :
Current
[
Redemption 4 i Series -
Par Wlue Shares Amount Shares Amount Price -
h, i Not Subject to Mandatory Redemption:
14% *
$100
- 77,000-
$ 7,700 77,000
$ 7,700
$105.50 a 4.10% '
100 72,000 7,200 72,000 -
7,200 101.00 i
!V
,.4.35% l 100 15,000.
1,500 15,000 1,500 101.00
- 4 35%
1001 36,000 '
3,600
'36,000
'3,600
. 101.00 :
i 4.75% '
100 50,000 5,000 -
50,000 5,000 101.00 :
+
5%
100 50,000 5,000 50,000 5,000 -
- 100.00 -
7.52%
'100 100,000..
10,000 100,000 10,000-103.01' J Total
$40,000
$40,000
?
JSubject to Mandatory Redemption-d.
~
~$100 80,000
$ 8,000
' 88,000
$ 8,800 -
$1M98 9.96%
" $8.25 None-75,000 7,500 77,500 -
7,750 105.93
' '7 E $9.45,
- None-30,000.
3,000 70,000 7,000-j' =
.108.53.
$8.53 LNone-600,000 60,000 4
. Ta'tal '
78,500 23,550,
less portion due within one year.
4,050 5,050-Total
$74,450
$18,500
.' Cumulative Preferred Stock Not Subject to Mandatory
. On November 1 of each year,40,000 shares of the $9.45 No -
J
' Redemption is redeemable solely at the option of Atlantic '
Par Preferred Stock Series must be redeemed through the
- Electric, operation of a sinking fund at a redemption price of $100 per On August 1 of each year,8,n00 shares of the 9.96% Series share. Atlantic Electric redeemed 40,000 and 50,000 stures at :
D must be redeemed through the operation of a sinking fund at par in 1988 and 1987, respectively. As of December 31,1988,
- a redemption pric-of $100 per share. As of December 31, Atlantic Electric had redeemed the maximum 50,000 optional 1988, Atlantic Electric had redeemed the maximum 40,000 shares as allowed under optional redemption provisions.
' optional shares as allowed under optional redemption Beginr.ing November 1,1994 and annually thereafter, provisions.
120,000 shares of the $8.53 No Par Preferred Stock Series i On November 1 of each year,2,500 shares of the $8.25 No must be redeemed through the operation of a sinking fund at y" '
Far Preferred Stock Series must be redeemed through the a redemption price of $100 per share. At the option of Atlantic.
operation of a sinking fund at a redemption price of $100 per Electric, not more than an additional 120,000 shares may be -
fshare. At the option of Atlantic Electric, not more than an redeemed on any sinking fund date without premium.
1
. additional 2,500 sharts may be redeemed on any sinking Refunding of this series is restricted prior to November 1,-
' fund date ivithout premium. Atlantic Electric redeemed 2,500 1993 if the effective cost to Atlantic Electric of any refunding q
and 5,000 shares at par in 1988 and 1987, respectively.
Issue is less than a specified rate.
The annual minimum sinking fund provisions of the above series aggregate $4.05 million for 1989, and $1.05 million for 1990 through 1993 l.
.-4M
[-
3w
_Y 36
_ ___ o
m I
H-NOTE 9, LONG TERM DEBT Maturity December 31 Series Date '
1988 1987 Long term debt of Atlantic Electric consists of the following:
(Ibousands of Dollan)
-1 First Mortgage Bonds:
3%% -
April 1,1988
$ 10,000 4%%
April 1,1989 2,775 2,775 j
4%%.
March 1,1991 10,000 10,000 l
4%%
July 1,1992 10,350 10,350 4%%-
March 1,1993 9,540 9,540 11%%
Nowmber 1,1993 13,025 13,025-February 1,1996 9,980 9,980
(
8%
November 1,1996 95,000 95,000 8%%
September 1,2000 19,000 19,000 8%.
May 1,2001 27,000 27,000 7%%
April 1,2002 20,000 20,000 i
7%%-
June 1,2003 29,976 29,976 7%% lbilution Control January 1,2005 6,500 6,500 l
6%% Ibilution Control December 1,2006 2,500 2,500 -
]
l 11%% lbliation Control May 1,2011 39,000 39,000 10%% Ibtlution Control Series B July 15,2012 850 850 7%% Ibtlution Control Series A April 15, 2014 18,200 18,200 l
10%% Ibilution Control Series C July 15,2014 23,150 23,150 l
11E%
October 1,2015 21,215 21,215 8h%
May 1,2016 125,000 _
125.000 8%% Ibtlution Control July 15,2017 4,400 4,400
' Total 487,461 497,461 i
Debentures:
V Total 4,886 4,886 Unamortized Premium and Discount-Net (2,886)
(3,082)
Total Long lerm Debt of Atlantic Electric 489,461 499,265 q
Term loan of ATE Irwestment, Inc.
June 1,1990 26,500 Less portion due within one year 2,775 10,000 Totallong Term Debt
$513,186
$489,265 Depostts in sinking funds for retirement of debentures are refunding at effective interest costs to Atlantic Electric of less required on February 1 of each year through 1995 for the than specified rates.
5%% Debentures, and on May 1 of each year through 1997 for Current sinking fund requirements of $550,000 in connec-the 7%% Debentures in amounts in each case sufficient to tion with certain first mortgage bonds outstanding may be d
redeem $100,000 principal amount plus, at the election of satisfied by certification of property additions as provided for Atlantic Electric, up to ao additional $100,000 principal in the related mortgage indentures.
amount in each year. By December 31,1988, Atlantic Electric The revolving credit and term loan facility of ATE had reacquired and cancelled $933,000 and $781,000 prin-Investment, Inc. (ATE) provides up to $50 million that may be cipal amount of the 5%% and 7%% Debentures, respectively, borrowed by ATE. Interest rates on borrowings are deter-towards its requirements for 1989 and subsequent periods.
mined with reference to periodic pricing options available Regular redemption prices are currently in effect for each under the facility. Interest rates on borrowings in 1988 ranged series of first mortgage bonds, except for certain pollution from 7.82% to 10.2425%.
l l control series for which redemption is restricted prior to The aggregate amount of debt maturities, in additica to
- specified dates. Also, certain pollution control series contain sinking fund requirements, of all long term debt outstanding future sinking fund requirements. i<edemption of certain at DT mber 31,1988 are $2.775 million in 1989, $26.5 series of the first mortgage bonds are restricted prior to million in 1990, $10.0 million in 1991, $10.35 million in 1992, specified dates if the redemption is for the purpose of and $22.565 million in 1993 J
j
=
= = =. -
- - - =
37 i
O gqp h,
y
-c-Mtes to Consolidated FinanciOl Statements Nmanuan huan5 Energy. Inc and suthfiaries i
i !!
I"
,,il
! NOTE 10. SHORT TERM DEBT AND b
L COMPENSATING BALANCES-L l As of December 31,1988, Atlantic Electric had bank lines of ;
$61 mil! ion of short term debt outstanding consisting of
- credit of $144 million of which $134 million was available for
' $51 million in commercial paper and $10 million in notes L
? use. Atlantic Electric is required, with respect to $31 million -
. payable. At December 31,1987, Atlantic Electric had
- of these credit lines, to maintain average compensating
$63.7 million of short term debt outstanding consisting of-L balances in demand deposits which are not significant nor ;
$46.7 million in commercial paper and $17.0 million in notes 3 kgally restricted. Atlantic Electric is in compliance with such payable. Atlantic Electric had $12.9 million of short term debt Compensating balance arrangements. With respect to the outstanding at December 31,1986 consisting of $8.5 million -
i remaining available credit lines, Atlantic Electric paid com-of commercial paper and $4.4 million of pollution control mitment fees (generally W%) for which charges were not obligations. Additional information regarding short term debt
. excluding pollution control obligations) follows:
- significant. At December 31,1988, Atlantic Electric had
(
1988 1987:
1986' j :.
g (Thouumb ofDollars)
D
. For the year ended-L a Maximum amount of total short i term debt at any month-end:
. Commercial Paper.
$84,000
$46,700
, $10,500 Notes Payable to Banks
. $10,000
$17,000
$ 5,000 t
i
[ Average amount of short term debt j
- (based on daily outstanding balances)
Commercial Paper
$59,514
$22,497
$ 2,256 Notes Payable to Banks
$ 2,803
$ 3,327
$ 123
[-
, Weighted daily average interest rates on short term debt:
Commercial Paper..
. 7.6%
6.9% - ~
~ 6.3%
Notes Payable to Banks 7.8%
7.1%
6.8%
' NOTE 11. COMMITMENTS AND CONTINGENCIES Construction Program replacement power during prolonged outages of nuclear Atlantic Electric's cash construction' expenditures for 1989 are units caused by certain specific conditions. Under the estimated at approximately $161 million. Current commit.
property and replacement power insurance programs, ments for the construction of major production and Atlantic Electric could be assessed retrospective premiums in transmission facilities amount to approximately $152 million the event the insurers' losses exceed their reserves. As of
. of which it is estimated approximately $63 million will be December 31,1988, the maximum amount of retrospective
- expended in 1989. These amounts exclude the allowance for premiums Atlantic Electric could be assessed for losses
{
I
- funds used during construction and customer contributions.
during the current policy year was $8.99 million under these programs.
New legislation was enacted in 1988 under the Price-I
. Insurance Programs Anderson provisions of the Atomic Energy Act of 1954, which Atlantic Electric is a member of certain insurance programs a
. hich provide coverage for decontamination and property governs liability and indemnification for nuclear incidents.
J w
4s
' damage to members' nuclear generating plants. Facilities at All nuclear facilities could be assessed, after exhaustion of 1
the Peach Bottom, Salem and flope Creek Stations are private insurance, up to $63 million each, payable at insured against property damage kisses up to $1.58 billion
$10 million per year, per reactor and per incident. Based on p
. per site under these programs.
its ownership share of nuclear facilities, the Company cou!d d
in addition, Atlantic Electric is a member of an insurance be assessed up to $29.4 million per incident. This amount program which provides insurance coverage for the cost of would be payable at $4.67 million per year, per incident.
'e I
38 4
7-n o
A:
- Purchase Power Agreements -
most recent energy clause filings discussed in Note i The j
' Atlantic Elecvic has an arrangement for a limited term co-owners of the station have instituted litigation against the
. purchase of energy and capacity from Allegheny Ibwer supplier of the affected equipment. Atlantic Electric cannot
^
W L System which is subject to annual extensions. It also has predict the outcome of this matter or its ultimate effect, but agreements to purchase cer:aln capacity and energy output in the opinion of management, it would not materially affect from Pennsylvania ibwer & Light Company. The BPU order the results of operation or financial position. -
which approved rates for the PP&L agreements prescribes a Other revenue reduction formula in the event that the Susquehanna in connection with the extended outage of the Peach Bottom Units fall to mfet a combined minimum performance Atomic Ibwer Station, Atlahtic Electric has filed suit against standard established by the stipulanon which could subject Philadelphia Electric Company, the operator of theWration, Atlantic Electric, under the most adverse circumstances, seeking compensa:ory and punitive damages resulting from to a revenue reduction not to exceed $15.0 million per the outage of the station and the need for replacement unit pu par.
energy due to the outage. Atlantic Electric is unable to predict Atlantic Electric has entered into capacity purchase agree-the outcome of this litigation or its effect at this time, ments, expiring in 1990, with Public Service Electric and Gas Atlantic Electric has signed contracts with third parties for Company for 145 megawatts beginningJuly 1,1988, and the purchase of power from cogeneration facilities. The increasing to 227 megawatts atJune 1,1989.
contracts would become effective upon receipt of the
. Atlantic Electric has also signed a memorandum of appropriate regulatory approvals, and ultimate construction agreement with Philadelphia Electric Company for the of the facilities. Atlantic Electric would be obligated under the purchase of 200 megawntts of capacity and energy for a four contracts to construct connection facilities and to purcluse i
year period beginningJune 1,1990, certain specified minimum amounts of electric power Nuclear Plant Outages annually in accordance with specified formula pricing.
'The BPU had deferred consideration of $12.179 million of Atlantic Electric currently forecasts the first of such facilities replacement power costs associated with certain nuclear to be operational in 1991, with the remaining projects to be in
]
outages relating to generator failures at Salem Station.
operation through 1993
(
Atlantic Electric has requested recovery of this amount in its NOTE 12. LEASES Atlantic Electric leases various types of property and equip-additional purchases. Nuclear fuel requirements for Peach ment for use in its operations. Certain of these lease Bottom Atomic lbwer Station are being provided by the agreements are capital leases consisting of the following operating company through a fuel purchase contract, for at December 3h which Atlantic Electric is responsible for payment of its share 1988 1987 of fuel consumed and related operating costs and interest -
expense. Operating expenses for 1988,1987 and 1986 include (7bornands of Dollars) leased Nuclear Fuel costs of approximately $9.9 million, Production plant
$13,521
$13.521
$10.8 million and $7.8 million, respectively, and rentals and j
General plant 1.740 lease payments for all other capital and operating leases of
$5.5 million, $5.1 million and $4.0 million, respectively.
l 1btal 13,521' 15,261 Excluding the nuclear fuel obligation, future minimum rental Less accumulated amortization 5,396 5,690 Net M,125 9,571 significant to Atlantic Electric's operations.
' {
payments for all noncancellable lease agreements are not Nuc; ear Fuel 24,755 28,123
'l l
' Leased property-net
$32,880
$37,694 i
Atlantic Electric has a contractual liability to purchase nuclear fuel for the Salem and t h)pe Creek Generating Stations from Pearl Fuel Corporation. The asset and related obligation are reduced as the fuel is burned, and are increased for
=
=
=
= _. _
= = _
39 i
n
___9
g.-.
7 v
7
'l t
y -..;:
l
- l. f I,
K "
NNUles to Consolidated Finahtcial Statements 1dninnuho X
[.'
iAdarnN 15nergf Inc. and $$hsidiaries '
.i d
s LNOTE 13. QUARTERLY HNANCIAL RESULTS
/
L(UNAUDITED) 9R 1 Quarterly financial data, reflecting all ' adjustments necessary.
In the opinion of the Company for a fair presentation of such -
1 amounts, are as follows (in thousands of dollars, except per ~
A4
, share amounts):-'
4 u
Operating ~
. Operating Net.
' Earnings f.
' Quarter '
Revenues Income
\\ Income Per Share -
7.1988 -
l 1st '.
' $145,435
- $ 25,686
- $11,915
'$ 64.
2nd
' 154,756-
, 22,715 11,068,'
1 56-l 3rd.
. 213,225.
51,099
- 39,329' 1.98 '
4
-4th~
^ 162,443 23,279-9.859
-.49 -
' $675,859,
$122,779 '
$72,171 c $3.68(o :
~ I "1987
'.q
- 1st
$142,094 -
$ 22,715
, $14,1% -
$.78 :
[
V 2nd
- 152,962 E 26,764.
.15,176 c
.83 208,446' 46,748' 34,938 3rd;.
?144,671 18,446' 9,465
.52 s1.91 4thi M
- $648,173 :
- $114,673 -
$73,765 '
. $4.03(o
-4
. O) The indwidual quarters do not add due to the increasing average number of comrn 'n shares outstanding at the end of each quarter.
- The fevenues 6f Atlantic Electric are subject to seasonal
~
- fluctuations due to increased sales and higher residential b,
rates during the summer nionths.
t
?
l l
.40 l
y r
=
I 1
})
m xy
- SimimaryFinancial and Statistical Reviett f 1988-1984 -
wtannic Energy inc.andubearms
, 8 1
1988 1987 1986 1985'
'1984 Atlantic Energy,Inc.
j w
. intestorInformation ;
H Operating Revenues
. $. 675,859 ~ $ 648,173 _ $ 582961 '. $ f 579,733 $ 549,531 l.
' Net income 72,171' $ 73,765 $ '54S46 $ 46,150 ' $ ~ 56,433 Average Number of Shares outstanding (Thousands) 19,593
~ 18,311 18,266 18,069,2.55 ' $ 117,581.
1 Earnings per Average Common Share
' 3.68 $
4.03 ' $
3.001 $
3 21:
Total Assets (Year End)
$1,660,286. $1,499381 $1,401,064 $1,319,027 $1,253,083 long Term Debt and Cumulath'e Preferred Stock
.. Subject to Mandatory Redemption (Year End)
.$ 594,461 $ 522,815 $ 534,822 : $ 521,612 $ 473,462 Capital Lease Obligations,
$ ' 32,880 $ 37,694 $ - 37,603 $ 38,857 $.41,722 I
' Dividends Declared on' Common Stock 2.74 $
2.715 $-
2.61 $
2.555 $
2.45.
Divuend Payout Ratio
-75%
66 %
87%
99%
, L75% -
- Ik)ok Value Per Share (Year End) 27.16 - $
25.71 $
2437 $-
23S6 ' $. 23SO Price Earnings Ratio (Year End) -
9 8
12 11-8 Times Fixed Charges Earned (pre-tax, Atlantic Electric) 3 06 3.68 -
2S9' 3.06 3.62 -
1 Shareholders and Employees (Year End) 45,586 47,133 48,635
. 47,446-Common Shareholders 44,473 4
Employees (Atlantic Electric) 2,092 2,148 2,168 -
'2,099
- 2,012 '
-l l
Atlantic City Electric Company (Principal Subsidiary)
- Facilitiesfor Sertrice Total Utility Plant (Thousands)'
$1,712,614 $1,602,801 $1,503,010 $1,438,643 $1351,392 '
- Additions to Utility Plant (Thousands) 130,281 $ 105,521 $ :109,303 $ 105,213 $ 95388
. Pole Miles of Transmission and Distribution Lines '
1,807,700 1,660,700 -1,660,700 1,605,700 1,594,200--
9 7,111 7,055 17,015
. 6S77 6,958 -
Generating Capacity (Kilowatts) (a) (b)
Maximum Utility System Demand-kw 1,636,000 -1,609,000 1,459,000 1,432,000 1,298,800 _
t a
. Capacity Reserve at Time of Peak (% of Instal. Gen.)
9.5%
3.1%
9.1% ~
10.8%
18.5%
Energy Supply (Thousands of kwh):-
Net Generation 5,863,119 6,157,938 : 5,966,600 5,817,254 6,237,724 -
Purchased and Interchanged-Net 2,209,777 1,483,685 1,131900 ~.1,049393 393,175 1
1 Total System load 8,072,896 l 7,641,623 7,098,500 - 6,866,647 t 6,630,899 1
ElectricSales (Thousands of kwh)
'J Residential '
3,213,010 3,040,410. ; 2,839,114.2,638,121 2,646,813 Commercial 2,741,976 2,592,232 2,401,199 2,298,895 ' 2,150,464
- Industrial 1,339,005 -1323,567 1,222,981 1,204,971 1,197,392 All Others 56,289 58,191 58,120 57,685 59,122
. Total 7,350,280 7,014,400 6,521,414 6,199,672-6,053,791 b.
- ResletentialElectricSert'/ce(Average per Customer)
Amount of Electricity used during the year (kwh) 8,460 8,281 7,982 7,643 -.
7,866
{
~ Revenue for a year's service
$ 838.70 $ 838.08 $ 780.43 $ ' 778.77 -$
783.47 -
'1 Revenue per Kilowatt-hour 9.91t 10.12<
9.78e 10.19<
9 S 64 q
Customer Data (Average)
Residentialwith Electric lieating 78,805 75,900-72,640 68,871 65,261-i Residential without Electric IIeating 300,974 291,253 283,062 276305 271,207 Total Residential 379,779 367,153 355,702 345,176 336,468 Commercial -
48,398 46,775 45,359 44,256 43,615 a
Industrial.
1,014 1,015 1,022 1,020 1,015 :
Other 552 554 554 554 544-Total Customers 429,743 415,497 402,637 391,006 381,642 Operating Retenues (Thousands) 1 Energy Revenues:
- Residential
$ 318,520 $ 307,704 $ 277,601 $ 268,814 $ 263,612 j
Commercial
' 240,890 231,498 211,023 209,880 190,435 i
Industrial 91,661 89,261 78,404 80392 79,123 1
l All Others '
9,935 10,409 10,152 10315 10,405 j
Total Energy Revenues 661,006 638,872 577,180 569,401 543,575 j
- Unbilled Revenues-Net 6,716 385 (1,813) 3,076 (1340) 1 Other Electric Revenue -
8,137 8S16 7,594 7,256 7,296 Total-
$ 675,859 $ 648.173 $ 582961 $ 579,733 $ 549,531
.. s) Excludes capacity allocated to a large industrial customer.
(
- (b)1ncludes unit purchase of capacity under contracts with certain other uuhties.
41
-J
- ' ~ ~ - -
n.
_tIB". -
-4
'lltlOstor hlfonitatiot!
l f-Altnikhacrgy. inc and subsdutke -
I 1
%bere should I send inquiries concerning my intest.
. % ben are dividendspaid? -
mentin AtlanticEnergy,Inc.? - 1i The proposed record dates and payable dates for dividends The Company serves as recordkeeping agent, dividend on Common Stock are as follows:
. disbursing agent and also as Transfer Agent for Common Stock. Correspondence concerning such matters as the Record Dates Payable Dates -
replacement of dividend checks or stock certificates, addren March 15,1989 -
April 14,1989 changes, transfer of Common Stock certincates, Dividend
- June 15,1989 July 14,1989 Reinvestment and Stock Purchase Plan inquiries or any
- September 15,1989-October 16,1989 nI f >rmation almut the Company should be December 15,1989 January 15,1990 Atlantic Energy, Inc.
The folkning table indicates dividends paid per share in 1988 and 1987 Imtstor Records on Common Stock:
t P.O. Ikw 1334 1199 Black Ilorse Pike 1988' 1987 l
Pleasantville, NewJersey 08232.
First Quarter
$.72*
$.655 :
U f
i Telephone (609) 645-4506 or (609) 645-4507 second Quarter
.67
.655 Third Quarter
.69
.67 Ms. S.M. Dodd, Secretary, is the corporate of6cer responsible Fourth Quarter
.69
.67 i
for all imestor services.
AnnualTotal
$2.77
$2.65 f
Does the Company hace a Dividend Reint'estment
.nwuac,,4 amaena on os, Cnd Stock Purrhase Plan?
Yes. The Plan allows shareholders and employees to automat.
Dividends paid on Common Stock in 1988 and 1987 were
'ically imest their cash dividends and/or optional cash fully taxable.
payments in shares of the Company's Common Stuck.
IIolders of record of Common Stock interested in
,y, g, gg,,,,,,,,,,g g,,,,,,,pa,g,g,,,,,,,,
Atlantic Electrics Bonds and Debentures? -
I enrolling in the Plan should contact Investor Records
.at the address above.
First Mortgage ik)nd recordkeeping and interest disbursing are performed by Irving Trust Company, One Wall Street,-
l Obere is the Companyk stock listedp New York, New York 10015. Debenture recordkeeping and s
Common Stock is listed on the New York, Pacinc and.
interest disbursing are performed by First Fidelity Bank, N.A.,.
R Philadelphia Stock Exchanges. The trading symbol of the
/65 Broad Street, Newark, NewJersey 07102.
Company's Common Stock is ATE; however, newspaper listings generally use AtlEnrg or AtlanEngy.
Whom can I contact regarding the Preferred Stock of :
Atlantic Electric?
The high and low sale prices of the Common Stock as reported in the Wall Street Journal as New York Stock Atlantic Electric serves as recordkeeping agent, dividend Exchange-Composite Transactions for the perkxis indicated disbursing agent and Transfer Agent for its Preferred Stock.
were as follows:
Inquiries regarding such matters can be directed to the address listed above.
1 1988 1987 ubo are the independent auditorsfor Atlantic
,;;,9
- 7_o,
,,;gg 7,o, Energy, Inc.?
First Quarter 34 %
30%
41 %
36 %
Second Quarter 35 31%
37 %
32 %
Deloitte flaskins & Sells Third Quarter 33 %
31%
36 %
31 %
One World Trade Center Fourth Quarter 34 %
32 %
35 %
28 %
New York, N.Y.10048 Is additional totformation about the Company atullable?
b The annual report to'the Securities and Exchange Commis-sion on Form 10-K and other reports containing Snancial data are available to shareholders. Specine requests should be addressed to Investor Records, at the address shown.
f I
= -
==
-===-
=
42 3
- Officen ofAtlantic Energ): Inc. and Subsidiaries d
Officers of Atlantic Ene i,Inc.
- li DOUGLAS flUGGARD M!CllAEL A.JARRETT JG. SALOMONE nirectors of Adanne Energv's suh.
5'd"'"** 8 M*5 l'"883'd-President and Chief
\\1ce President Vice President Executive Officer andTreasurer
['nhd#'$ n["' """' ""'
MEREDITil I. IIARLACilER,JR. -
JOllN R. LILLY SABRINA M. IX)DD Vice Presider t.
Vlw President Secretary JERROLD L JACOBS IlRIAN A.1% RENT J DAVID McCANN Vice President Vice President Assistant Secretaq and Assistant Treasurer
. l.
Officers of Atlantic Cl Electric Com u Years of Service Years of Service -
E. DOUGLAS IlUGGARD 33 TilOMAS E. FREEMAN 8
President and Vice President-Chief Executive Officer iluman Resources JERROLD LJACOllS 27 JOSEPilI KELLY,JR.
38
- Executive Vice President Vice President-Imerconnection Operations MEREDITil 1. IIARLACllER,JR.
23 Senk>r Vice President-JAMESJ LEES 18 Planning and Regulatory Affairs Vice President-lues M1GilAEL A.JARRE1T 13 I
Senior Vice President-BERTRAM LeMUNYON 29 Corporate Senices Vice President-l Pown Delimy BRIAN A. I% RENT 21 Senl6r Vice President-IIENRY K. LEVARI,JR.
17 Utility Operations Vice President-Corporate Planning Jc;. SALOMONE -
12 and Performance Senior Vice President-l'inance and Accounting J DAVID McCANN 16 Vice President, Treasurer JOllN M. CARDEN 21 and Assistant Secretary
\\1ce President-g Customer Senice MORGAN I MORRIS,111 19 4
Vice President-h-LANCE E. COOPER 6
Administrative Services
" \\1ce President-Control
~
and Assistant Treasurer llENRY C. SCllWEMM,JR.
19 Vice President-SAllRINA M. DODD 3
Production Secretry
~
Of cers of Atlantic Generati' n, Inc. "
l o
. J.R. LILLY President, Secretary and Treasurer.
j j MA JARRETT JD.McCANN President Secretary and Treasurer JR. Lilly Vice President Officers of ATE investment,~Inc.
- 7..
j JG. SALOMONE JR. LILLY j
President Vice President
[' Vice President LE. COOPER _
J.D. McCANN Secretary and Treasurer
=.:
u..
= =. =
_ =. =. =
==;
= =
43
4,,,..i "O'd' IGL.J~'..
4e.-<~..
Directors ofAtlaritic E11ergn hic.
Y
+
ll
- t
!'n ii Director Committees l.
ll V l v
+
i) l Jt ts Mit fl All.l. GAIVl'N. JR.
t;
(.l:RA,l.8) A IIAl.1:
E E
E B.
1 mal l'IllX lit )l.1)l N lR
'If E
E E
9 3l 1.. IM )I t ells 111 G(!ARI) l TJ A
IlWIN(, h AIMI.l;R
.[
M Rl('llARI) ll %kGlYNN G
B B
mal-)lil.INii li' McWillNNiiY b
b b-EliRNARD J. MORGAN J
Muial thanks to:
h h
h h
15 F GouIrah, thlncktown Plant Ede.oo Ekcric insnture CAROI.t F ST MARK
^
j Flemic Power Rev art h Institute l<etktv Qemunications. Inc.
I
Atlanne Cny I ree itNic l.ibrar)
Q Q
Q ts t..gophy inipau uuin imaxe
[I[2]["#*
l E Committee Chairman m,um a,n skip suger to i i >
j flI Committee Membership i
ant,en nogen ip in i
R Ex Officio Membership j
vnhen shounk < p im l
l Ilcugo MurHer a \\1han inc nmn,
n_ mom roen,,x.ma no-ps,.
I
.._ L _l.._.
44
p,, e{'
WgG J
j
@ % g j $: {m p;,% q g ? W g f ' [a q ggj g
j ouv
+ w m
y
' sma.
as u
ejr.
jf Board ofDirectors of Atlantic Energ): Inc.
g&
i y@q
'@b fB
,,.9, m,.p yq a
(4 H > tis o t il liAN W L,..
ius i v, b sst i H Q
5 Mr feehan ha.s sersed as Chairman of the Mr Kessler, a Director since 1980, is a h
lioard since 1983 and has been a g
consultant with his own firm in Cherry f
fA Director since 19'3. Prior to his
%(k y
1 l hil, New Jersey. lie is a former ewcutive h;t retirement from Atlantic Electric in 1985,
~cf-vice president for RCA Corporation.
he held various positions uith the
'}
Company during his 33-year career f
including Chief Executne Olhcer
' O a
,g from 19'3-1985 I
.y. : !; :
'J l
s.
t X
l l6 i
~
n k
l{
H n uH ll\\il 4,\\lflN lH HH il \\HI) n w (,1) NN I
. S(
Mr. Galvin, a Director since 19'8. is Mr. McGlynn. Attorney at 1.aw and partner 4:
k Mb President and Chief Executive Ofhcer ol.
in me Itw hrm of 5try ker, Tams & Dill, ht m
i N
the South Jerso llealth Corporation- \\l lu3 heen a Director since 1984 lie is a D(. k state and Essex County liar Associ[Jersevition$.
t
']
q:M[h
/ :l. '
t</
The Memorial llospital of Salem County.
member of the American, New jf lie is also Chairman of the lioard, New t
Jersey llospitJ Assocution and a Trustee
'p as well as the American liar Foundation n
4 lhq4 for the Center of llealth Affairs. lie is and the American Law Insutute. lie is a M
g ip currently a member of the Southern New former commissioner of the NewJersey g)MM' Jerses Chamber of Commerce and an lioard of Public Utthties and former ethtor of Modern llealthcare Maganne.
judge in Essex County, NewJersey.
fm s
ld E
N y%
gW(' k t.I,M u is s li st i
E Y
u si*ilNi si w w eiini) d/M
(% :N Mr. Hale, a Director since 1983. is t:
s
- >c y
Viss McWhinney, a Director since 1983, President of 111111, Inc., an investment N
?
is President of Dale Elliot & Company,
-[
[b.
and management company. lie serves as g#
management consultants 5he is 1
chairnun and director of the Evans Clav Chairman of the lioard of Trustees of the
-'g y
}h' 7h Company, and a director of NewJersey' trustee of the insnture of Internanonal 1,-
hI h
Charles F Kettering Foundation, and a Manufacturers Insurance Company, New 4
m l
Jersev liusiness and industry Association, Education and the Management of g~
Strong S) stems. Inc and Carohna
[
Managers Mutual Funds =
+
Vermicuhte Lompany 1
a c.
9,k,
<h jIt) u st ing
- in n tn N lH
- T O mtosmiiwim.n M
v y
b[N,
Mr lloiden, a Director since 1981, is the l' t i Mr Morgan, banking industry executive, g
-}
1 llenry L and Grace M Doherty Professor p
of Government and Foreign Affairs at the was elected as a Director in 1988 lie is 9'
currently chairnun of the Finance f, ; Y ',',
Y
,g af Unisersity of Virgmia and an energy and Comminee for the Pennsylvania llankers k
regulatory affairs consultant lie is a Association, director of both the g/,
4 g former commissioner of the Federal
' 3 IVnnsylvania and Pluladelphia Chambers p' J
y Energs Regulatorv Commisuon and the of Commerce and a member of the d
%sconsin Public Service Commission Associanon of Reserve City llankers.
p I h
- g:.
i#
- c. a l'.k i li I iM H 4.i \\s iH (d.% Hit w',w. y
, 111 av' -
J
^d
( sin H I e s i M \\HA
!ti i
(
Mr iluggard n President and Chief i
- l Ms 5t. Mark. president of Pitney liones h;g liusiness Supphes and 5crvices. became
' [g Executne Of hcer of the Compan) and y
lus been a Director sin e 198i lie also p
j a Director in early 19x9 She is a gi 1 serves as Director of all of the p
k;#
corporate ofiker and member of the
! +)
i4 Companis subsiduries and lus been y
dj corporate management comnunce of
-4 h.
4" Pitney llowes, Inc. Ms 5t Mark is actise h{
with the Company ILr 33 years lie n l p6
, currenth a directorof the Few Jerses in se eral civic and professional sx 5tatt Clumber of Commerte and of hrst orgam/ations b
l'idelits llank of %uth lerses.
v-jl
'i N
c m
w>
y 1'
1
@~
x,,..
~]- -s yg g
b-g;
- g,
+
n y
1, O ~
VFM)?N P V-t e
c..
p s.
,s t.
4 y
..t,.
+
1
_ a
, y, l'
- q..
BULK RATE U.S. POSTAGE PAID PEltMIT NO.11 SOUTH JERSEY, NJ.
Aj' ' s 08031
^
.,\\ ' '., t e 5-I' $
.f.
i ' +
V:>
<s
(.._
1 y,
,~;p r I '
'_1 {l u
,,.s
- .,
- ' ? '
t ll'd 1
- M.
i b
_ l.
1
- N N
4
-G.
~
- 9..
4 rf.'
p p
~ );
~
A<;
E.
i-I:
g-L-,
M.' o
.o -
g..
- p..
Mrs M &BTe ar'"
6
- 3d BEE EM E Eb i
ENERGY h.
1199 lilxk IL>rse hke l'ieasantruie. New Jersey 08232 i
k- :
8 :-
7 f.
Y '
ur
,N '.