ML20237H923
| ML20237H923 | |
| Person / Time | |
|---|---|
| Site: | Calvert Cliffs  |
| Issue date: | 12/31/1983 |
| From: | Mcgowan G, Trueschler B BALTIMORE GAS & ELECTRIC CO. |
| To: | |
| Shared Package | |
| ML20237H898 | List: |
| References | |
| NUDOCS 8708170416 | |
| Download: ML20237H923 (48) | |
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Financial Highlights 1983 1982 1973 Earnings Per Share of Common Stock
$4.95
$4.07
$2.96 Average Shares of Common Stock Outstanding 38,136,000 36,090,000 23,835,000 Div dends Declared Per Share
$2.92
$2.80
$ 1.96 Revenues Electnc
$1,093,310,000
$ 1,035,606.000
$ 353,432,000 Gas
$45,295,000 539,438.000 115,991,000 _
Net income Applicable to Common Stock
$ 188,873,000
$ 146,936,000
$ 70,647,000 Dividends-Common Stock 111,423,000 101,507,000 47,132,000 Earnings Reinvested in the Business 77,450,000 45,429.000 23,515.000 Electric Sales-thousands of kilowatthours 18,263,000 17,292,000 14,341,000 Gas Sales-dekatherms 86,186,000 98,630.000 96,833,000 Investment in Utility Plant
$3,993,202,000
$3,739,345,000
$ 1,992,778,0(K) i Earnings Per Share of Common Stock Dividends Declared Per Share of Common Stock
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Dividends Paid on the Common Stock Continuously Since 1910-Always Earned-Never Reduced l
Contents i
l 1
Chairman's Irtter 2
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President's Report Financial Review 6
l Responding to a Changing Society 8
Marketing Ior a New Era 10 I
New Technologies. New Opportunities 12 Cover New Ways to Meet Our Goals 14
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j llG& E and Central Maryland-Growing Together 16 A I.aboratory Technician f Shaping Our Destiny 18 in the Pmduction Mainte-l nance D(partinent uses a l
Characteristics of the Ilusiness 2I Common Stock Data 2l
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i lat i )ata delice allotts her to exarn-i Management's Discussion and Analysis 24 j
Financial Statements 27 ine the inicmstructure of Notes to Yinancial Statements 33 rnetal alloys in our electric
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l Officers and Directors 44 generatingplants.
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BALTIMORE GAS AND ELECTRIC COMPANY / ANNUAL REPORT 1983 l
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.i.4 PLANNING i FOR THE s as important as meeting the challenges of today.
FUTURE The large lead time involved in utility plant construction requires that we anticipate now where we must be in the year 2000 and beyond.
At the same time, the planning process must be responsive to rapidly changing politi-cal, emironmental and economic develop-ments. It must permit the infusion of new ideas and anticipate technological advances.
Most of all,it must encourage timely changes in direction to take advaratage of new oppor-tunities for the benefit of customers and investors alike. This report discusses some of the ways we are shaping the future of BG&E today.
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The Chairman *s Letter 2!
to.Our Stockholders he trends in the national economy in 1983 were increase of only 5% in overall electric, gas and steam Tvery encouraging to this Company and the nation revenues. These percentages are in sharp contrast w as a whole. Business activity increased dramatically, the high rate relief requirements that have recched while strong improvements in stock market values, media attention in connection with new electric i
GNP growth and the nation's unemployment rate generating plants being brought on line. Brandon were realized. The sharp decline in inflation - cur-Shores is a clear but unpublicized example of suc-rently at its lowest leve! in ten years-was the most cessful management and planning practices of our l
positive aspect of 1983's economic performance for.
Company and the industry in general, the capital intensive nility industry.
At ilG&E, decisions are made with the objective of Your Company I rd well in the progressively benefiting both shareholders and ratepayers. The favorable economic environment of 1983. Earnings very nature of this industry necessitates a long-range per share reached a record level of $4.95. The major viewpoint. The farsightedness inherent in the elec.
factors contributing to this increase were the higher tric industry's planning over the past fifty years has sersice rates granted by the Public Service Commis-resulted in the most efficient, economical and relia-sion of Marpand, the unusually hot summer ble power supply system in the world. 'lowever, this weather and improved economic conditions which nadon's electric utility industry is presently standing boosted revenues significantly along with the con-at a crnical juncture. The political and economic
-l tinued application ofinternal cost control measures.
presswes during the last decade require a re-evalua-Improvement in the economy also exerted down-tion of this once stable and predictable industry and ward pressure on our financing costs.
the development of new business strategies to take The quarterly common stock dividend was advantage cf emerging trends.' The challenges increased from S.71 to S.75 per share effective with we face in the future, however, are filled dhidends paid beginning October 1,1983. Also, with opportunities.
j beginning January 1,1984, the 5% discount applied We at BG&E are working on many fronts to posi-0 to the price of shares purchased with reinvested tion the Company better for the more competitive dhidends was discontinued. These changes reflect environmer.t which lies ebead. Alternate sources of improving fundamentals and declining external energy are becoming more available to our cus-equity requirements. In the long-run, all share-tomers. In recognition of the new era facing the util-l holders will benefit from these changes.
ity industry, we are solidifying strategies to market The key underlying factor contributing to reduced current products more effectively, while at the same external capital requirements is the Company's rela-time positioning the Company to embark upon non-tively modest construction program. Unit No.1 of utility ventures to enhimce profitabihty.
Our coal fired Brandon Shores Power Plant is pro-ceeding well toward completian. Even though the costs associated with the May 1984 commere al operation of this unit required the Company to file for increased rat.cs in November 1983, the in-l service resenue requirements for this first unit, after consideration of expected fuel savings, will repre-sent less than a 6% increase in our electric cus-
'tomers' bills. The total rate case filed asked for an
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d We were disappointed by the Public Sersice Looking back at 1983, the year in most respects Commission of Mar >1and's failure to approve our was an excellent one for BG&E. Earnings improved
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proposed holding company structure-BGE CORP.
significantly, the market value of our common stock The Commission contended that the acquisition by increased, dhidends rose and cash flow remained BGE CORP of all the Company's common stock is strong - all aided by the sound, flexible planning in prohibited u: der a provision of Maryland law. We previous years. More importantly, a foundation has are challenging the Commission's decision in the been laid to move aggressively into an exciting and federal courts. We firmly believe it is in the best challenging new era for this industry. Moving into interests of our stockholde:rs to diversify in a meas-1984, your Company is on solid footing. We are well ured and controlled manner. Accordingly, regard.
positioned for the changes to come.
less of whether we are permitted to move forward We thank you - our investors - for your ongoing with our plans for BGE CORP, we aie proceeding support and invite you to learn more of our plans with our diversification efforts.
and goals for the years ahead as outlined in the re-Re-evaluating traditional areas of operation is as mainder of this report.
essential to positioning the Company for future growth and success as is pursuing new ones. As a result of our recognition of the ever more competi-tive energy environment, we entered into an agree-M ment with Thermal Resources of Baltimore, Inc. for the sale of our downtown steam supply system. This will permit us to focus our efforts on our primary liernard C. Trueschler utility senices.
Chairman of the lioard February 14,'1984 y.
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The President's Report 4
On Operations a
In addition to producing a new peak, last As we measure the achievements of the year just past, I realize how many of our accomplishments summer's hot weather was largely responsible for in 1983 were the results of plans initiated up to two our 5.6% increase in electric sales in 1983, although decades ago. This realization is as gratifying as the this figure reflects as well the improvement in the l
achievements themselves.
economy during the year. Gas sales declined 12.6%
l Twelve years ago, as we were planning the liran-in 1983. Warmer winter weather affected residential don Shores Power Plant, w e could envision the pos-and commercial consumption, and sales to large sibility of a future where oil mi:dit not be a primary commercial and industrial customers were down fuel for generation In tile mid seventies when that due to conversions from gas to alternate fuels.
very future was suddenly forced upon us, IlG&E was We do not expect this distortion of our gas busi-prepared, not only with the Calvert Cliffs Nuclear ness to continue. On the contrary, we see increasing Power Plant that provided 59% of our customers' signs of stabilization in gas prices and are forecasting 1983 electric needs with low-cost generation, but future gas sales to increase at an average of 1%
also with a strategy to shift other generating units annually. BG&E's aggressive leadership in contesting from oil to coal. The fuel savings from Calvert Cliffs our natural gas supplier's pricing policies before the alone now total over 53 billion. When the Charles P.
Federal Energy Regulatory Commission as well as Crane Power Plant, newiv converted from oil to our own customer oriented pricing policies have coal, returne:I to service m 1983, our customers helped to achieve this stability.
again beneikd from substantial fuel savings. They At our initiative, the Public Service Commission of will continue to receive similar savings throughout Maryland approved a tarifflinking the price of gas the eightica and beyond, as our two new 620 MW for interruptible industrial customers to the de-coal-fired units at Ilrandon Shores become opera-livered price of competitive fuel oil. We have tional, the first, in May of this year, and the second, worked with the Commission to establish a tariff in 1988.
solely for the transportation of gas which customers We are forecasting a manageable peak demand may purchase directly at the wellhead. While these growth of 2% a year for the remainder of this measures have allowed the Company to recapture decade. To accommodate this projected growth much of the industrial market, they cannot substi-we have combined load management techniques tute for continued progress toward deregulation of with a modest construction program, including natural gas. We remain firmly convinced that only Ilrandon Shores and the 190 MW expansion of the deregulation will produce the supply of gas this Safe liarbor Water Power Corporation's hydroelec-country needs at competitive prices.
tric facility of which BG&E is two-thirds owner. The Natural gas is but one of this nation's energy prob-s Safe Harbor project is expected to be completed lems requiring a political solution. The threat of early in 1986.
improper acid rain legislation, the failure of Con.
The validity of our forecasting was graphically gress to support the construction of coal slurry pipe-underscored by the new record for hourly peak load lines, the withdrawal of funding from the Clinch of 4,079 MW set onJuly 21,1983. This peak proved River Breeder Reactor and the controversy over the to be no higher than our forecast, which verified that relicensing of existing hydroelectric plants are j
our construction program has been correctly keyed among the energy issues confronting our industry, i
to Central Maryland's needs. At ilG&E we belica
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i that while construction is a major economic burden in the short term, in the long-run it is far less costly than falling short of the power supply our territory
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IlG&E is not passively awaiting the resolution of Sewage Treatment Plant. The biogas plant will pro-these dilemmas. Rather, we are actively communi-vide pipeline quality gas at a price which is 15%
cating with legislators and regulators to insure that below the commodity price charged by llG&E's i
the Company has a voice in decisions that affect our normal pipeline supplier.
country's energy future.
The expanding business and technological oppor-As we look to that futere, the Company is investi-tunities in our industry promise a challenging future.
gating a number ofinnovative alternatives to keep in the pages that follow we shall outline some of our the cost of energ,y at reasonable levels. In 1983 we plans ta meet these challenges, and share with you arranged to sell, when available, our unutilized share the optimism we feel about the years to come.
of the capability of the PJM Interconnection trans-mission system for importing energy from the west.
In the hope of better managing the cost of trans-
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porting coal, the Company has joined in a project to assess the feasibility of constructing the first coal slurry pipeline on the East Coast. We are also et pioring the possibility of a joint ownership agsce.
George V. McGowan ment involving the second unit of the Ilrandon President Shores Power Plant. On the gas side of our bu.siness, we organized a subsidiary in 1983 to operate our February 14,1984 newly completed biogas facility at the 13ack River
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Financial Review 6
i Earnings to increase the rate of return on our investment to a i
Earnings per common share in 1983 were $4.95 as more reasonable level was another factor leading to j
compared to $4.07 per share in 1982. Additional this filing. The processing of this application is j
revenues from higher service rates and increased expected to take until late May 1984.
J clectric sales, due to the effects of weather and an improving economy, were the primary factors for Construction Expenditures i
this 21.6% growth in earnings.
Construction expenditures by BG&E during 1983 totaled $276 million including $58 million in Allow-Dividend Increased ance for Funds Used During Construction. Electric The quarterly dividend rate on the common stock facilities required expenditures of $255 million of was increased to $.75 from 5.71 per share efTective which $58 million was spent on the construction of with the October 1,1983 payment. The new rate is the Brandon Shores Power Plant. Outlays for gas fa-equivalent to an annual rate of $3.00 per share, cilities amounted to $20 million. Nuclear fuel required additional outlays of $65 million. Approxi-l Rate Relief ma.cly three quarters of the funds required for l
OnJuly 1,1983, the Public Senice Commission of 19,3's construction and nuclear fuel expenditures Maryland granted the Company higher senice rates w.re generated internally. The remainder was pro-projected to increase overall revenues b) 574.5 mil-vided from the capital market, the Company's Divi-tion annually. The new rates are designed to dend Reinvestment and Stock Purchase Plan and increase electric revenues by $49.9 million, gas short-term cornmercial paper sold on an revenues by 523.7 million, and steam revenues by interim basis.
I 5900,000. At the same time, the Commission ap-Tne Company currently estimates a total of $260 proved a Company request to reduce the Electric million will be spent on construction in 1984 Fuel Rate, accelerating to our customers the effect including $40 million for AFC. An additional 850 of an estimated $49 million annual savings in fuel million will be spent for nuclear fuei costs associated with the switch from oil to coal at the Charles P. Crane Power Plant.
Security Transactions in its decision, the Commission expanded the cap-The following security transactions occurred during vitalization of the Allowance for Funds Used During 1983:
Construction ( AFC) by imputing AFC on not only a $50,000,000 was borrowed in February under a the Brandon Shores Power Plant but also on other five year unsecured bank term loan agreement. In-major electric projects expected to be placed in ser-terest varies with the lender's base rate unless the vice after 1983 Company elects a fixed rate for a selected period.
On November 2,1983, the Company filed an ap-For 1983, the weighted average interest rate was plication with the Commission for authorization to 9.86%.
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increase annual operating revem.,:s by a net total of a S48,000,000 of tax-exempt Port Facilities Revenue
$83.8 million. The proposed ne rates are designed Notes, Commercial Paper Series was issued by Anne l
to increase base revenues by 5135.8 million of Arundel County, Maryland, in June. Forty-six
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which $118.4 million would be ; roduced by higher million dollars of the funds were withdrawn from electric rates, $16.8 million from gas rates and the Trustee by the Company on an "as spent" basis
$600,000 from steam rates. At the same time, the for the acquisition of certain coal handling port
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Company is requesting permission to pass on facilities at the Brandon Shores Power Plant.
j promptly to consumers $52 million in annual savings The weighted average interest rate was 5.22%
j of electric fuel costs resulting from the operation of during 1983 i
Unit No.1 of the Brandon Shores Power Plant. This u $36,000,000 of Pollution Control Revenue Notes, j
request was initiated essentially because of the addi-Commercial Paper Series, were sold in September by l
tional revenues which will be required to provide Baltimore County, Maryland. Proceeds were esed to -
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for the operating expenses and capital carrying costs redeem Baltimore County's 9% Pollution Control l
associated with placing Brandon Shores Unit No.1 Revenue Bonds (1981 Series) which were originally into commercial operation in May 1984. The need issued to finance the Company's pollution control facilities constructed at the Charles P. Crane Power Plant. The redemption of the Baltimore County i
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bonds resulted in the rctirement of the Company's
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,m, 9% Series dueJuly 1,1984 First Refunding Mortgage
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e...L a-Bonds. The weighted average interest rate of the
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commercial paper notes was 5.53% during 1983 O 1,257,712 shares of new common stock were
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issued pursuant to the Dividend Reinvestment and
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E}iiiEE O The Company issues short-term debt on an inter-
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o im hasis to obtain funds for its construction program Construction Expenditures E Arc and other corporate purposes. During 1983, short-( wmo,s o/ Mars)
E construenon term capital needs were financed through the issu-
,3,y,,,,a ance of cornmercial paper at interest rates ranging from 7.85% to 9.90%.
N' O S38,484,000 of 10%% Series due September 15,
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mon stock in a convenient and economical manner
~~ft and Stock Purchase Plan. Participants in the plan j2 c sky j ' j l
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Average Rate Per Knoward.our of accericity During the year, the plan w' as amended: (1) to AH Customer Cakgorks r,,n ar m3 discontinue after the October 1,1983 dividend, the 5% discount on common stock purchased through reinvested dividends; and (2) to allow the Company H
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to use optional cash payments either to purchase E!SHE,;HK$ipM!RUMd;;q:rbo, f t "M newly issued shares of common stock from the
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- j independent ageat. These amendments were made
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eral taxes on up to $750 in reinvested dividends
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in 1982.
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j lxft: Ch>botics at filack and Below: A ucrking motherand
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DeckerManufacturing Corn-her cblidren featv textr town-pany'splant in Hampstead, house in the city's rnodern Maryland, help ernployees Coldspring New Town devel-frnprvteproductivity.
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l The att;tudes, needs and desires of the customers now required by robotics and computer operations.
we serve tos'ay are far different than those we These uses are also reflected in the growth of off-encountered twenty years ago. Business develop-peak demand for electricity which will permit more ment in Central Maryland, once dominated by heavy eflicient use of our generating facilities. This, manufacturing, now reflects the nationwide shift to in turn, will increase revenues without increasing new technologies largely invohed with the pro-construction expenditures, thereby improving cessing ofinformation. Socially, too, our region mir-profits while holding down the cost of electricity rors broader American patterns. A growing number for everyone, of wotnen, for instance, have joined their male coun.
The " age of the computer" will also help improve terparts in working outside the home. These and efficiency within the Company. By the end of the other developments have already begun to work decade most of our office functions undoubtedly profound changes in the purchasing decisions of our will involve automation, either directly or indirectly, cuswmers.
While this will help to control costs, it will also re-We are positioned to respond promptly and effec-quire different skills of our employees. To ensure tively to those changes through the medium of stra-that our people will be prepared for their new roles, tegic planning In 1970 we formalized this app.sch our human resource planners are already designing as a management tool. Today, our planning process the training programs we shall require.
Includes eight " planning groups," representing the As we strive to improve our own producthity, we integral elements of the Company. We also have a are finding a similar awareness on the part of our Future issues Committee, charged with defining the customers. Energy is becoming an increasingly dis-issues and events that could affect our Company and cretionary budget item. People are exercising more the utility industry.
and more control by choosing energy-efficient In 1983, our planning focused on evaluating equipment and appliances and thereby deciding social, economic and technological developments in how, when and in what form to use energy in their order to improve the Company's long term profit-factories, shops and homes.
ability. To accomplish our goals, we are taking In many ways, responding to new directions in advantage of the marketing of mmaged loads. The our customers' perception of energy usage is the setbacks in Maryland's steel, smelting and ship-greatest challenge BG&E will face in the years building industries are changing the local pattern of ahead.
industrial electric consumption. In addition to the
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Marketing For 10 a New Era Since we believe TOD rates enhance our customers' In addition to the sale of our products, our Mar-keting and Energy Sersices Department contin-ability to manage energy use economically, we are uously strives to keep our customers abreast of alsc, experimenting with similar schedules in the advances in energy-efficient technology.
residential and small commercial sectors.
Market research was a priority in 1983. This As we assist our industrial and commercial cus-research focused on a number of areas invohing our tomers in analyzing and selecting their most effec-industrial, commercial and residential customers.
tive rate schedules, we are also helping them to In the industrial and commercial sectors we are in evaluate new and evohing techniques for their par-the process of expanding our load management pro-ticular industry. One of the more significant of these gram through the application of Time of Day (TOD.)
is thermal storage, both hot and cold. These systems rates. By the end of 1985 these rates will apply to all minimize energy costs by operating at off peak l
of our large industrial and commercial users, com-times to generate cooling or heating which is stored prising approximately 50% of our total electric sales.
for future use. Taking advantage oflower cost
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at the fxtrbor's edge in ikdtl.
newindustrialparks teith rnorv, are offering residents excellent highteay and rail Below: More new detviojn the econornical electric beat transportation attracting ttd.
rnent;in our tenitory, like purnp.
nable industries to our tent-Lougra Associates'recently energy may well give these customers a competitive edge. This is but one of the evohing technologies which we strive to bring to the attention of our cus-tomers. Others would include new developments in electric furnaces, robotics, drying processes and commercial application of heat pumps.
We have initiated a program to study the value of compressed natural gas (CNG) as an alternative fuel to gasoline. During 1984 we shall monitor the per-formance of several CNG powered vehicles under fleet conditions. This study will prepare us to consider marketing CNG should it prove an eco-nomical fuel.
In the residential sector we are concentrating on
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This fall, working with local law enforcement agencies, we began our home security lighting pro-gram. This is another effort to sell off-peak power and at the same time provide our customers with added security.
Our third effort in the residential area is the pro-motion of high efficiency gas furnaces aimed at replacing less efficient oil or gas heating systems.
This is directed to customers now on our existing gas lines. Again, we have solicited the aid of local contractors and are happy to report that we have met with substantial success.
Underlying our emphasis on marketing is our goal of assisting all of our customers in using energy wisely.
New Technologies, 12 New Opportunities e/
Qur choice of technologies over the past twenty l
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for the latter part of the 1990s and the century beyond. A major part of IlG&E's technological plan-ning process involves developing and supporting research that will transform new ideas into practical solutions.
Over the next ten years, we are projecting annual electric sales growth at a rate of about 3%, and the completion of the second Brandon Shores unit, now scheduled for late 1988, will accommodate that expected growth. By the latter part of the century, t
we expect Central Maryland will need additional 4
generating facilities. Ilaving made the preliminary decision to build a fossil-fueled power plant at our 7
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technologies.
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These scrubbers are not only extremely expensive, but produce a sludge that creates a serious waste disposal problem. In a fluidized bed, sulfur is removed from coal during combustion. The re-sulting waste product is a dry material that can be disposed of more easily. In a combined effort with g
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other electric utility companies through the Electric Power Research Institute (EPRI), we are actively engaged in demonstration projects designed to per-fect this fluidized bed technology, Another promising technology for the nineties is coal gasification. We are directly supponing, along with eleven other utilities and the State ofIllinois, a demonstration of the Allis-Chalmers KILnGAS process which started operation in 1983. This pro-cedure will convert coal to a clean burning gas which can be used to fuel a variety of electric generating systems. The most likely configuration will be " combined cycle," wherein the gas will fuel combustion turbine-generators whose exhaust heat will, in turn, generate steam to drive additional steam turbine generators.
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Left: Aportion of the tv.
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f cotvryplant built and oper.
ated by Balthnorv Biogas, Below: Workonen unload a Inc. The taller absorber tower fuel cell at a flowardjohn-l and the srnaller regenerator son's Restaurant where ut i
touer rtpresent key eternents will rnonttoritsperfortnance in theprocess ofextracting under operating conditions.
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BG&E planners believe that appropriately sized and state scientists are finding evidence that rock-fuel cells have potential in our future generation fish grown in the warmer water at Crane are health-mix. Environmentally benign and highly eflicient, ier and larger than those raised in the wild.
the cells convert chemical energy to electricity and Some forms of waste can be used to generate heat, and can be turned on and off on short notice.
electricity and we are actively pursuing a number of Also through EPRI, we are supporting a program options. By burning coal mixed with a maximum with United Technologies to operate a 4.8 MW test 20% heat input from refuse derived fuel, or pro-cell which could be producing commercial power cessed trash, at our Crane Plant, we expect to pro-i by the late eighties. BG&E is also active in a users duce a yearly fuel savings of nearly $1 million. We group to promote commercialization of multi-are planning in the near future to purchase the.
megawatt fuel cells, electricity produced from the burning of waste To determine their effectiveness in our region, we at a regional solid waste incinerator now under are testing a 40 kilowatt cell, fueled by natural gas, construction in Baltimore.
in a local restaurant. The fuel cell pt oduces both Waste can also be an important source of gas. In t
electricity and heat. In applications where both 1983, the Board of Directors authorized the organi-energy sources are needed, the cell operates at an zation of Baltimore Biogas, Inc. (BBI), whose pri-overall efliciency rate of more than 80E BG&E is mary mission is to develop new supplies of gas from one of fourteen combination utilities in the country waste. BBI's first project, a recovery plant designed to evaluate such a cell under commercial conditions to extract pure methane-the equivalent of pipeline and the first company to install an actual test cell in quality natural gas-from raw sewage gas, was com-this region.
pleted in December. It is designed to produce Our environmental scientists are aiding in replen-enough energy to fuel 2,500 residential customers a ishing the Chesapeake Bay's dwindling population of year. BBI is also evaluating methods of deriving striped bass, or rockfish, as Marylanders prefer to methane from landfills and extracting gas from call the otlicial state fish. They are using warm dis-industrial food wastes.
j charge water from the C.P. Crane Power Plant to These technologies are the products of years of I
provide increased temperatures during the early research, planning and development.
l stages of the fishes' growth. Although the hatchery i
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Like our customers, we are constantly seeking During 1983, we realized a savings of $9 million in ways to control costs. Scientific advances will purchased energy costs by buying low-cost, coal-supply some of the answers, but we are also finding fired replacement energy from systems to the west new opportunities to achieve our goals through the of the PJM Interconnection. We also improved the effects of the marketplace on our industry.
profitability of our capital investments by selling our unutilized entitlement to the PJM Interconnection Bulk Power Transmission System.
Our decision to burn coalin the eighties and nineties prompted our investigation of the slurry mode of transporting coal directly from the fields to the power plant or terminal. Our analysis indicates this could be economically and emironmentally sound. An underground pipeline would alleviate transportation problems and pollution, and could significantly reduce our long term coal transporta-tion costs. With the recent Interstate Commerce Commission's decision to allow rail transportation rates fm coal to rise annually by 15% plus the rate of inflation, the slurry mode could become more eco-nomical every year.
To facilitate further study, we joined the Virginia Coal Slurry Associates, a partnership comprised of Dominion Resources, Inc., A. T. Massey Coal Com-pany and Transco Energy Co. to evaluate the feasi-bility of constructing the first coal slurry pipeline to the East Coast.
Planning for the growth of our gas business means working to bring gas to our customers as econom-
[,d ically as possible., We have utilized all legal means
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Since we effected the program in mid-1983, it has virtually restored the portion of our industrial gas load we lost to residual oil in the last half of 1982.
Twenty of our largest industrial customen s have con-tracted for natural gas at the wellhead. The typical volume of gas delivered under this service was equivalent to approximately 20% of the average gas daily sendout.
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such as llG&l. for their general supply system: but it has not yet begun such a program We are strongly urging our natural gas supplier to extend its trans-portation program to all of Marsland's industrv and to 110&l: so that low er priced gas can he used to supply a portion of all our customers' requirements i
BG&E and Central Maryland -
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Growing Together l
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G&E's financial health is tied to the economic special energy requirements will enhance our load B vitality of Central Maryland. Thus, it is only nat-management program, thereby helping us to opti-j ural that when we plan for our own future, we look mize the productivity of our existing plants and
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to the needs of our region as well. We are using our equipment. We are actively recruiting such firms for corporate resources and expertise to help our Central Maryland.
region grow and prosper.
At the same time, we are focusing on retaining The Company has traditionally worked with the companies already in the area. Our close relation-State of Maryland and its local jurisdictions in eco.
ship with customers places us in an excellent posf-nomic development efforts. Our stable and competi-tion to identify their potential difficulties. Averting tive rate structure as well as our history of out-a crisis sometimes involves serving as a customer's l
standing reliability give local officials lowerful
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l recruiting tool. In 1983, we establis.., economic couraging a firm's key suppliers to relocate to our development as a high priority for our Marketing region.
and Energy Services Department. Research is cur-rently underway to target specific industries whose l.
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working with several political jurisdictions to evalu-office-warehouse complex at its Rossville site in ate possible solutions to some of these problems Baltimore County, and we have begun a unique program to incinerate As we see it, BG&E and Central Maryland are sewage sludge in a coal-fired boiler of our Wagner engaged in a partnership of great potential.
Power Plant.
On the initial 70 acres at its Brandon Woods Energy Business Park, our subsidiary, Resource and Property Management, Inc. (RIH), will use fly ash from our Brandon Shores and Wagner power plants to develop valuable property for light industry. RPM is constructing a building to be ready for occupancy 17l P.
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has aHowed us to make the right moves at the right The success of these new endcacors depends on times.
the same fat f or that has always gisen the Company in the final analysis. planning at HG&l: is more its strength - our propic At hG&l, human resource than a tool to match resources, needs and oppor-des clopment is a kc) ( omponent of long-range tunitics -it is a committnent pervading all planmng l~ach ) car. our top management spends the aspects of our business equivalent of sescral weeks of its time working with
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Characteristics of the Business and the Area Served Baltimore Gas and Electric Company
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Baltimore Gas and Electric Company supplies electric and gas (supplying 59% of 1983 customer requirements),25% from coal, I
service to a thrhing metropolitan area characterized by its 25% from residual fuel oil,12% from light distillate oil,3% from dynamic mix of diversified industry and cultural and recreational hydroelectric power, and 2% from natural gu. ne primary opportunities. This includes Baltimore City and parts of nine Mary-sources of this output were the nine power plants BG&E owns in i
land counties. %e total area served approximates 2,300 square Central Maryland, supplemented by our shared ownership of two miles for electricity with some 2,335,000 residents and 600 square mine-mouth plants and a hydroelectric station in Pennsyh'ania.
miles for gas with a population estimated at 1,806,000. At year-The Company is also a member of the Pennsyhunia NewJersey.
end 1983, the Company served 874,580 elearic accounts and Maryland Interconnection, which aflo ds access to pooled capacity 513,970 natural gas accounts.
on favorable terms.
The diversity of the community we serve is reflected in the cus.
The Company has agreed to sell its steam supply system serving tomer distribution of 1983 unit sales: for electric,37% of our sales 585 commercial customers in downtown Baltimore. The sale will were to residential customers,13 to commercial, and 46% to be completed in 1984 after appropriate authorization by the industrial; for natural gas, the breakdown is 43% residential,7%
Public Service Commission of Maryland.
commercial, and 50% industrial. Our ten larg st electric customers To supplement our pipeline supply of natural gas as the need J
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accounted for only 9% of total electric revenues and our ten arises, we maintain additional facilities at three plants in Central
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largest gas customers for only 13% of gas revenues. Our twenty Maryland for the production and storage of liquefied natural gas,
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l largest customers overall were responsible for 12% of the Com-synthetic natural gas, and propane.
pany's revenues of $1.6 billion for the year. In 1983,71% of elec-Our service area's growing population and expanding labor tric revenues and 58% of gas sevenues were derived from sales force, particularly in professional and high-technology specialties, outside the City of Baltimore.
will assure continued economic development and continued Balance and diversity also characterize our electric generating demand for energy in the years ahead. We at BG&E understand facilities. In 1983, the Company's 5,021,000 kilowatts of installed Central Maryland's energy needs and stand ready to meet them in capacity and firm purchases came 33% from nuclear power the future as we have in the past.
1 1
l Common Stock Data l
The Company's Common Stock is listed on the NewYork, Midwest, preferential rate specified for each Series and no more, payable and Pacific stock exchanges, and has unlisted trading prhileges on quarterly, and to receive when due the applicable preference stock the Boston, Cincinnati, and Philadelphia exchanges.
redemption payments, before any dividend on the Common Stock Dividend Policy shall be paid or set apart.
The Common Stock is entitled to dividends when a..d as declared Dividends have been paid on the Common Stock continuously by the Board of Directors. There are no limitations in any inden.
since 1910. Quarterly dividends were paid on the Common Stock ture or other agreements on payment of dividends; however, during 1983 and 1982 in the amounts set forth in the accompany-holders of Preferred stock (first) and holders of Preference Stock ing table.
(next) are entitled to receive, when and as declared, from the Future dividends depend upon future earnings, the financial surplus or net profits, cumulative yearly dividends at the fixed condition of the Company, and other factors.
Common Stock Dividends 1983 1982 cnd Price Ranges (From composite Transaction as Dividend Price Dividend Price nyorted byThe Wall StreetJoumal)
Paid High Iow Paid IIigh low First Quarter............
$ 71
$31%
$28%
$.67
$26%
$22%
Second Quarter...
.71 31%
28%
.67 27 %
24%
Third Quarter....
.71 30%
27%
.71 29%
24 %
Fourth Quarter..
.75 34 %
29%
.71 30%
26%
Number of Common Stockholders of record as of December 31,1983. 85.372.
l Operating Statistics.
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Baltimore Gas and Electric Company l
Electric Operating Statistics 1983 1982 1981 1980 1979-1973 Revenues (Dollar Amounts in Thousands)
Residential..
452,772 413,139 366,903 342,796 274,079 138,186 Commercial..
242,790 230,628 211,889 198,936 174,157 91,092 i
Industrial.
390,751 386,237 350,553 311,182 263,319 122,263 Other,.
6,997 5,602 4,815 4,350 3,401 1,891
- Total,
$ 1,093,310
$ 1.035,606 934,160 857.264 714,956 353,432 Sales-MV11 Residential 6,644,403 6,101,831 6,006,255 6,005,110 5,496,737 4,617,840 Commercial.....
3,166,055 3,012,927 3,005,N8 3,063,119 3,052,081 2,687.972 Industrial.
8,452,975 8,177,421 8,573,161 8.159,691 8.274.422 7,035,007 Total.,
18,263,433 17,292,179 17.584,464 17.227,920 16,823,240 14,340,819 Customers l
Residential..
793,899 780,119 770,281 760,203 747,699 671,488 Commercial 78,921 77,144 76,171 75,144 74,575 69,495 Industrial.
1,760 1,876 1,801 1,642 1,416 1,163 Total...
874,580 859,139 848,253 836,989 823.690 742,146 l
Average use per Residential i
Customer-K411.
8,440 7,872 7,M8 7,956 7,413 6,969 Gas Operating Statistics Revenues Residential 262,993 234,000 195,784 165,006 146,598 64,184 Commercial 44,121 39,561 31,946 24,522 21,097 9,172 Industrial, 162,979 176,649 125,749 69,689 54,767 22,482 Interruptible Services-Industrial and Other 66,937 85,987 109,845 92,478 61,816 18,039 l
Delivery Service,
3,094
~
- Other, 5,171 3,241 4.625 3,041 2,796 2,114 Total.
545,295 539,438 467,949 354.736 287,074 115,991 Sales-Dill Residential 36,610,432 39,160,048 40,018,167 38,462,204 39,282,741 38,948,932 Commercial 6,149,379 6,551,424 6,359,071 5,490,367 5,320,010 5.239,223 Industrial...
26,584,148 34,341,145 30,237,352 19,501,190 17,671,851 18,979,532 Interruptible Services-i Industrial and Other 11,955,607 18,576,887 28,967,441 31,656,568 31,175,052 33,665,325 l
Delivery Service.
4,886,883 Total....
86,186,449 98,629.5N 105,582,031 95,110,329 93,449,654 f $J2 Customers l
Residential 479,147 478,213 477,654 476,318 473,761 467,838 l
Commercial 29,846 29,928 29,972 29,625 28,569 29,939 Industrial.
4.785 4,705 4,606 4,315 4,941 4,868 Interruptible Services-Industrial and Other 170 160 157 193 185 177 Delivery Service..
22 Total..
513,970 513,006 512,389 510,451 507,456 502,822 Average use per Residential Customer-Dill 76.5 82.0 83.9 81.1 83.1 84.4 1
23 Selected Financial Data Baltimore Gas and Electric Company Summary of Operations 1983 1982 1981 1980 1979 1973 Operating Revenues:
(Dollar Amounts in Thousands)
Electric....
$1,093,310
$1,035,606
$ 934,160
$ 857,264
$ 714,956 8 353,432 Gas.
545,295 539,438 467,949 354,736 287,074 115,991 Total Operating Revenues......
1,638,605 1,575,044 1,402,109 1,212,000 1.002.030 469,423 Operating Expenses:
Purchased Fuel and Energy....
654,386 676,723 585,098 469,561 331,046' 155,195 Operations.
292,251 279,570 244,861 214,047 179,370 79,556 Maintenance 97,902 88,819 86,332 74,810 63,956 26.106 Depreciation.
97,090 92,730 87,818 82,629 79,819 37,977 income Taxes:
Current,
28,137 44,742 55,021 40,080 9,369 21,226 Deferred......
66,773 22,616 8.572 23,279 44,098 Investment Tax Credit Adjustments.
21,554 28,122 22,488 13.812 16,515 2,221 0:her Taxes....,
108,309 103.018 86.880 87.696 84.724 48,247 I
Total Operating Expenses.
1,366,402 1,336,340 1,177,070 1.005,914 808,897 370,528 Operating income 272,203 238,704 225,039-206,086 193,133 98.895 income from Steam Operations, Net 933 1,264 1,390 213 321 269 Allowance for Other Funds Used i
l During Construction.
32,443 24.282 12,162 12,053 9,545 20,245 l
Net Other income and Deductions.
608 2,224 2,884 2,851 1,698 1,027 l
Income llefore Interest Charges..
306.187 266,474 241,475 221,203 204,697 120,436 Interest Charges 115,688 111,028 106,162 93,828 86,159 49,398 Allowance for Borrowed Funds Used During Construction..
(25,954)
(19.359)
(14,346)
(12,024)
(7,778)
(14,167)
Net Interest Charges.
89,734 91.669 91,816 81,804 78,381 35,231 Net income 216.453 174,805 149,659 139,399 126,316 85,205 l
Dividends-Preferred & Preference Stock..
27,580 27,869 26,416 22.099 19,784 14,558 Net income Applicable to Common Stock.
188,873 146,936 123,243 117,300 106,532 70,647 Dividends-Common Stock,
111,423 101.507 88A99 80.754 75,373 47,132 Earnings Reinvested in the Business...
$ 77,450
$ 45A29
$ 34,744
$ 36.546
$ 31,159
$ 23.515 Average Shares of Common Stock Outstanding (nousands).
38,136 36,090 3J,353 32,258 31,356 23.835 Earnings Per Average Share....
$4.95
$4.07
$;70
$3.64
$3.40
$2.96 Dividends Declared Per Share..
$2.92
$2.80
$2 55
$2.50
$2 40
$1,96 Ratio of Earnings to Fixed Charges.
3.84 341 2 21 3.25 3.17 3.17 Ratio of Eamings to Fixed Charges and Adjusted Preferred and Preference Stock Dividends Combined...
2.82 2A7 2.31 2.40 2.37 2.32 Other Financial Statistics at Year End Capitalization:
Common Stock, Premium, installments and Retained Eamings....
$1,316,053
$1,2M,008
$1,070,064
$ 1,010,941
$ 953,161
$ 639,096 Preferred and Preference Stock Not Subject to Mandatory Redemption.
234,185 234,185 240,108 241,806 242,753 226,319 Redeemable Preference Stock.
100,000 100,000 100,000 50,000 50,000 longterm Debt.
1,381,996 1,333.166 1,340,666 1,3N.970 1,250,132 833,735 Total,
$3,032,234
$2,871,3_59
$2.750.838
$2,607,717
$2A96.046
$1.699,150 5
Shares of Common Stock (7bousands).
38,607 37,350 33,836 32,690 31,692 24,529 Book Value Per Share..
$34.09
$32.24
$31.63
$30.93
$3008
$26.05 Common Stockholders..
85,372 87,026 88,373 89,579 89,698 73,216 Total Utility Plant.,
$3,993,202
$3,739,345
$3,437,089
$3,184,059
$2,974.653
$ 1,992,778 Accumulated Depreciation..
915,951 834,986 756,292 678.819 608.293 285,217 3,809.785 3,566,839 3,310A77 3,106,319 2,879,692 1,865,141 Total Assets..
Expenditures for Additions to Flctnt.
276,083 322,700 266,956 225,003 160,917 216,572 Emphyees.
9,158 9,118 8,915 8,672 8A85 8.113 Cenain prior year amounts have been reclassified to conform wkh the current year prewntauon.
Management's Discussion and Analysis of Financial 24
[
Condition and Results of Operations (All Note references hereunuer are references to Notes to Financial Statements.)
Baltimore Gas and Electric Company Results of Operations Electric operating revenues increased each year as follows:
Earnings increase (Decrease)
Earnings per share of common stock, on the mereasing average Fmm Prior Year number of shares outstanding in each period, were $4.95 in 1983 compared with $4.07 carned in 1982 and $3.70 in 1981. Annual 1983 1982 base rate increases of $74.5 million in July 1983 and $99.2 million On Mim ns Ipouars) in February 1982 authorized by the Public Service Commission of Attributable to:
Maryland contributed to the increases in earnings. Greater electric Base t A $
8 8
sales volumes resulting from substantially warmer summer weather d
'['....[.
and improved economic conditions further increased earnings for
'} land Electric Environmental 1983. Earn'ngs also reflected an increase in the Allowance for Surcharge..
(0.3) 0.7 Sales V lumes......
44.9 (1.3)
Funds Used During Construction (AFC) as a result of the expan.
sion of the AIC base in 1983 to include major electric projects in Net increases.
$ 57.7
$ 101.4 addition to Brandon Shores and a higher accrual rate for AFC in 1982 as authorized in rate Orders by the Maryland Commission Gas Saks (Dth) and Operating Recennes (see Note 4). Eamings were decreased in 1983 by $1.5 million, equivalent to 4e per share of common stock, as a result of a loss Gas sales for 1983 reflected the introduction in July 1983 of a new from the agreement to sell the steam business (see Note 9). Earn-rider to the gas tariff for a delivery service for customer-owned ings were decreased in 1982 and 19G1 by $< and a net 64 per gas. U ider this new rider, customers, principally industrial gas share of common stock, respectively, as the result of certain gen users with alternate fuel capability, are able to contract directly erally nonrecurring accounting adjustments (see Notes 3,4. 7 wna gas producers to purchase gas for their use. The Company and 81 transports such gas through its senice territory to the customer On November 2,1983, the Company filed an application with for which the Company receives a delivery service fee equivalent to its margin on gas it sells.
the Maryland Commission for an increase in electic, gas, and steam base rates. "1his request was initiated essentially to proside The percent increase (decrease) from the prior year in gas sales for the operating expenses and capital carrying costs associated and delivery senice by class of customer was as follows:
with placing Brandon Shores Unit No.1 into commercial opera-1983 I982 tion in May 1984. The filing also included a provision to increase Residential....
(6.5)%
(2.1)%
the rate of retum on investment to a more reasonable level. The Commercial........
(6.1) 3.0 Maryland Commission is expected to rule on this request in late Industrial.
(22.6) 13.6 May 1984.
Interruptible Senice.
(35.6)
(35.9)
Total-excluding Delivery Senice...
(17.6)
(6.6)
Electrh Saks (Mu N and Operating Ret enues
-including Delivery Senice,,
(12.6)
(6.6)
The percent increase (decrease) from the prior year in electric sales by class of customer was as fo* lows:
Total gas sales decreased 12.6% in 1983 primarily due to warmer weather experienced during the winter heating season coupled 1983 1982 with the continuing conversions by large commercial and indus.
Residential.
8.9%
1.6%
trial customers to alternate fuel sources. Delivery senice has Commercial.
5.1 0.3 offset, in part, declines in gas sales from industrial and commer.
Industnal..
3.4 (46) cial customers' conversions to alternate fuels. 'The decline in total Total.
5.6 (1.7 )
gas sales of 6.6% during 1982 reflected the reduced level of busi-Total electric sales increased 5.6% in 1983. Increases in sales t ness achity, particularly in the steel industry. Excluding the effect l
residential and commercial customers for 1983 were attributable of decreased sales to Bethlehem steel, gas sales would have to the substantially warmer summer weather. Industrial sales in decreased 1.0% during 1982. Decreased sales to residential cus-romers in 1983 and 1982 and to commercial customers in 1983 1983 increased due to additional electric usage by Bethlehem reflected the effect of conservation effons and the warmer Steel and increased business activity. In 1982, a 1.7% decrease m.
total electric sales was primanly due to lower sales to Bethlehem weather during the winter heating season. Growth in space heat.
Steel. Excluding the effect of decreased sales to Bethlehem Steel, ing customers contributed to increased sales to commercial cus-total electric sdes would have increased 1.1% and sales to indus.
tomers during 1982. Decreased sales to industrial customers in 1983 reflected conversions to ahemate fuel sources, while such trial customers 1.0% during 1982. Reduced levels of business activity also served to adversely affect 1982 sales volumes. Resi sales rose in 1982 as a result of conversions from oil to gas and dential sales in 1982 increased primarily due to growth in cus from interruptible service to firm supply, The adverse impact of tomers with electrically. heated dwelling units.
higher gas prices in both periods, as well as the effects of the Future electric sales will continue to be affected by the overall reduced level of business activity in 1982, served to reduce inter ruptible service sales.
economic situation and level of business activity in the Com-pany's senice territory, as well as by weather cond tions, addi-Future sales will be affected by the price and availability of gas, tional heating installations, and customer conservation efforts.
as well as by the ongoing impact of such factora as weather condi.
tions, gas conversions and conservation efforts by our customers.
If gas prices continue to rise in relation to ahernative fuels, con-versions from gas by industrial customers are anticipated in future
25-I: J ~ T T :? E ghg{}K,20 periods. Ilowever, the potential for large users to negotiate a kwer gunInun.;g;j :[pj}:;fjl.
dg gr wellhead price, free oflong term contract provisions, should enable g],41477+i
[
g gas to compete more favorably with oil as a primary fuel source.
- tt 4 jpp tytg 16 ttijgj h1f Gas operating revenues increased each year as follows:
Q:gg
+47ti l increase lDecrease)
Mll4t illTilJ
- y ItjMf i
y From Prior Year
[jyg 1983 1982 kinjM l
jihnr 12
- 1. t ;d i
(In Mdlions of Dollars) 3t;;p{d to Attributable to:
]y{i-
@{3 J
Base Rate Adjustments..
$13.2
$ 11.9 yni st
.8 l
Gas Cost Adjustments.
14.1 73.4 g
Sales Volumes.
(21.4)
(13 8)
}ntti jj%}iitjg; 6
nd"74+t:
- r
-4i-Q:+t-:t
+
tt
.4 Net Increases.
$ 5.9
$71.5
- t r 4t th!
ijgittt j
Operations and Maintenance 2$$$it:
$ ainf:
Z 4tt 2
} *!ntt1Itif Total purchased fuel and energy expense decreased in 1983 JU Mi~ -
O t
=
M3Mk ziduldmmfd h. i-i d is t#*
inrrxxun [r n 9[mEtuk mainly due to greater nuclear generation and to the deferral of under-recovered fuel costs associated with the Company's electric i
fuel rate and purchased gas adjustment clauses. In 1982, Sales of Electricity l E Indusmal purchased fuel and energy expense increased as a result of higher U"#*"' / Ammm e
! E commercial l
fuel and natural gas prices, partially offset by the deferral of ERewdennal under recovered fuel costs.
no l
Increases in operations and maintenance expenses in 1983
[HEHE5 W J{j}$ E ? ljH';fdHUM reflected higher payroll costs, partia!!y offset by lower mainte-rn+titt:
- t : ot+ n s n i n ;;12i n 100 d}}{}'f((lthg.pnt jggggj nance costs due to fewer scheduled outages at the Cabert Cliffs f+t T Nuclear Power Plant. In 1982, operations and maintenance cgn jj
+ni.M tag
- :t: n :pt; hg %+ E
=
5 t :I 1
expenses included higher provisions for uncollectible accounts as i
jyt{Hn go nitt j
f'yyy;u}"{ "O well as additional costs at the Calvert C!iffs Nuclear Power Plant nt nn ~
tuf;%n$ L}
which were due to refueling and maintenance activities and the cost of additional insurance. Lower pension costs resulting from a L
t:nntu g
change in actuarial assumptions partially offset the 1982 increases
{'in:
in#;t{k so E
(see Note 1).
N
$33}((d See Notes 6 and 7 for a discussion of deferred expenses and
[in;n:
! titut t$F}n j$3@
- E Note 15 for a discussion of Contested Deferred Fuel Costs.
Lin:
- 11t;ti; yg,s ITUTYZT.
2133H '3g a H+t4-
+++++ nf5 The Tax Equity and Fiscal Responsibility Act of 1982 made
- t;;;in T;11+ TO; 20 numerous revisions to the tax law. Most significant for the Com-
[33H}
$i33]
'U pany were revisions to depreciation and investment tax credit
- t};n; puttn' BitEH _.
[
rules for newly aa}uired or constructed property. Although these ttn:O n r n. - fu h m..; a r n lu ~ t E E E o revisions affect the timing of tax payments, they did not impact thnitti camings for 1983 or 1982 and are not expected to have a signifi EEEEh Eb MyQ [ l[ NME31N cant etTect on camings in future years.
saje, or c,as
' Industnal Federal income Taxes-Current decreased in 1983 due to a uhumnsof treat /wrms) commercial lower level of taxable income resulting from the deduction of the Residennal cost for disposal of spent nuclear fuel. The decrease in 1982 was due to a lower level of taxable income, an increase in the invest-ggggg.g;meggpumpm g., Rooo
{yjyNjydj$$h[:nnttn;++;
- yJtpk:{rr] ""
ktntrntfdttp+
ment tax credits, and the effect in 1981 of recurding a net tax deficieng resulting from settlement of the Internal Revenue Ser
[tnintr;t;4n:n+f$NI.ptipt; ~ '
gT g
vice audit for the years 1974-1976.
t twt;w 3,000
+~+
ildt+"U 2,soo ni i3;ji ginif. Man!+it:tt+ t 4
? tritM
[Itn
!;ng?t{
(+IM i,[p129
- ni PM
'tn.it 1, 2/x)o a
nj.
$tt,jd.J
%inti yyy fup 1.90
!., w3; h
$Y:
- nii'd ;
[JIlud
- h.t[:1 6""
init l137tn I
- rM1trCe,
, h,-..,,..
a g,- bd:ttti 0
- 7 c.~nt.m% ww ww,w, dymyb;p un u
Totp3 Utility Plant Uhlhons of Dollars)
26 Baltimore Gas and Electric Company
~
4 Federal Income Taxes-Deferred are the result of nonnaliza-Liquidity and Capital Resources tion accounting for the tax benefits arising from liberalized de.
Expenditures for construction, along with the related Allowance '
l preciation on property additions in 1976 and subsequent years for Fun 4s Used During Construction (AFC), and nuclear fuel for and for certain other timing differences between tax and book 1981 through 1983 and estimated amounts for 1984 and 1985 are income. The increase during 1983 was primarily due to the rever-ret forth below:
sal of the timing difference related to the liability for disposal of Construction AFC Nuclear Fuel Total spent nuclear fuel under the Nuclear Waste Policy Act of 1982' (In Millions of Dollars) an increase in the deferral of feel expenses associated with the 1981
$240
$27
$ 40
$307 Company's fael clauses, and greater liberallred depreciation 1982.
279 44 42 365 related to normalized property. The increase during 1982 was 1983 218 58 65 341 primarily due ta greater liberalized depreciation on normalized 1984..
220 40 50 310 property and an increase in the deferral of under recovered natural 1985.
230 25 50 305 gas expenses under the Company's gas adjustment clause. This increase was partially offset by a reduction in the deferral of fuel Actual construction and nuclear fuel expenditures may vary from expenses associated with the Company's electric fuel clause.
the estimates set forth above because of a number of factors such The 1983 decrease in investment tax credits was due to a lower as inflation and economic conditions, regulation and legislation, level of construction expenditures and a change from an in-rates of k>ad growth, and environmental protection standards, as l
vestment to a payroll basis for calculating the credits allowed well as the cost and availability of capital.
under the Empkiyee Stock Ownership Plan provisions. The in.
During the period of 1981 through 1983, the Company's inter.
crea3e in 1982 was due to additional credits related to nuclear nal generadon of cash approximated two thirds of expenditures fuel resulting from the Economic Recovery Tax Act of 1981.
f r c nstructi n and nuclear fuel. Assuming timely and adequate Taxes other than income taxes increased in 1983 and 1982 due 1
rate relief, the Company anticipates that about three-quarters of to higher property and opital stock taxes, payroll taxes, and the the funds required for 1984 and 1985 will be provided fmm Maryland Gross Receipts Tax.
Internal sources. The remainder will be provided through the See Notes 3 and 8 for a discussion of taxes.
capital market, the Company's Dividend Reinvestment and Stock Pumhaw h n weH as Wmogh short term commercial paper Other hacome andlncome Deductions The increases 'n the Alk)wance for Funds Used During Construc-hij"d U" " '
p st ates that approximately$51 million tion (AFC) in 1983 and 1982 were primarily attributable to con will be required for bond maturities and sinking fund payments tmued construction at the Brandon Shores Power Plant and, effec-during the period 1984-1985 (see Note 13), and $10 milhon for tive July 1,1983, to the accrual of AFC on other maior electric the mandatory redemption of reference stock (see Note 12). The P
projects scheduled for completion after 1983. The increase in AFC Company also anticipates payment of approximately $72 million in 1982 also resuhed from an increase in the annual AFC rate. See to the Department of Energy in 1985 for the disposal of spent Note 4 for a discussion of AFC.
nuclear fuel (see Note 7).
Net Other Income and Deductions includes a $1,509,000 after-During the three year period ending 1983, the Company issued tax loss in 1983 from the agreement to sell the steam business in 1984 (see Note 9) and an $898,000 after tax loss in 1982 on approximately $190 million of new first refunding mortgage bonds 550 million of redeemable preference stock, and $143 million debt reacquisitions. Also, see Note 3 for a discussion of purchased f new c mmon std Approximately$50 million of the common tax benefits stock was attributable to an offering of 2 million shares in April Interest charges in 1983 and 1982 incre tsed due to sales of addi-1982 and the balance was issued principally through the Dividend tional securities. The decrease in preference stock dividends in Reinvestment and Stock Purchase Plan and the Empkiyee Stock 19H3 was due to the conversion and final redemption, as of Ownership Plan. In addition, during 1983 the Company borrowed December 3,1982, of the 6%% Convertible Cumulative Preference
$50 million under a bank term kian agreement and $46 million i
Rock ~
under a loan agreement with Anne Arundel County, Maryland (see i
Note 13). During the same three year period.5245 million oflong-term debt was retired through bond maturities, redemptions, and sinking fund operations.
The Company's capital structure as of December 31 is presented l
below:
1983 1982 I
l Common Equity..
43.5%
42.0%
l Preferred and Preference Stock (not subject to mandatory redemption)..,
7.7 8.2 Redeemable Preference Stock..
33 3.5 lung-Term Debt.
45.5 46.3 Innation continues to be the major cause of attrition for cost of service regulated entitles such as the Company. For more inbrma-tion about the impact of inflation on the Company, see No ' 19.
m
27 Statements ofIncome I
1 l
l llaltimore Gas and Electric Cornpany Year Ended December 31 1983 1982 1981 (in Thousands of Dollars)
Operating Revenues Electric..
$1,093,310
$1,035,606
$ 934,160 Gas......
545,295 539,438 467,949 "otal Operating Revenues 1,638,605 1,575.044 1.402,109 l
Operating Expenses Purchased Fuel and Energy...
654,386 676,723 585,098 l
Operations.....
292,251 279,570 244,861 l
Maintenance.
97,902 88,819 86,332 97,090 92,730 87,818 Depreciation
)
Incos Taxes-Note 3...
116,464 95,4P0 86.081 i
Other Taxes,
108,309 103.018 86,880 i
Total Operating Expenses..
1,366,402 1.336.340 1.177.070 Operating income.
272,203 238.704 225,039 Income from Steam Operations, Net-Note 9...
933 1,264 1,390 Alk)wance for Other unds Used During Construction-Note 4.
32,443 24,282 12,162 i
r Net Other Income and Deductions.
608 2.224 2,884 -
income Before Interest Charges 306,187 266,474 241,475 Interest Charges, 115,688 111,028 106,162 Allowance for Borrowed Funds Used During Construction-Note 4 (25,954)
(19.359)
(14,346) i Net Interest Charges.
89,734 91.669 91,816 Net income.
216,453 174,805 149.659 l
Dividends-Preferred and Preference Stock.,..
27,580 27,869 26.416 j
Net income Applicable to Common Stock..
$ 188,873
$ 146,936
$ 123.243 I
Eamings Per Share of Common Stock (based on average shares outstanding)....
$4.95
$4.07
$3.70 Cenain prior year amounts have twen redassified to conform with the current year prewntanon.
l Statements of Retained Earnings Year Ended December 31 1983 1982 1981 (In 'Ihousands of Dollars)
Balance at Beginning of Period..
$451,473
$406,125
$371,643 Net income 216,453 174.805 149.659 Total..
667,926 580.930 521.302 Cash Dividends Declared i
Preferred Stock (Cumulative)
Series B (at the rate of 4%% per annum) 1,003 1,003 1,003 Series C (at the rate of 4% per annum).....
276 276
':76 Series D (at the rate of 5 40% per annum) 1,620 1,620 1,620 Preference Stock (Cumulative)
Convertible (at the rate of 6%% per annum).
289 452 1970 Series (at the rate of 8.75% per annum)..,.
2,625 2,625 2.625 l
1971 Series (at the rate of 7.88% per annum).
3,940 3,940 3,940 l
1972 Series (at the rate of 7.75% per annum).
3,100 3,100 3,100 1973 Series (at the rate of 7.78% per annum).
1,556 1,556 1.556 1974 Series (at the rate of 9.35% per annum)..
3,273 3,273 3,273 1979 Series (at the rate of 8.375% per annum)....
4,187 4,187 4,187 1981 Series (at the rate of 12% per annum).
6,000 6,0u0 4,384 Common Stock (at annual rates per share, $2.56 through April 1,1981,
$2.68 through April 1,1982, $2.84 throughJuly 1,1983, and $3 00 thereafter) 111,423 101.507 88,499 Other Charges-Expenses in connection with issuance of stock..........
102 81 262 Total Charges...
139,105 129,457 115,177 I
Balance at End of Period.............
$528,821
$451.473
$406,125 see ncies and schedules-pages 31 through 41
Balance Sheets 28 Baltimate Ga: and Electric Company December 31 1983 1982 Assets Gn *lhousands of Dollars) l Utility Plant l
Hant in service l
Electric-at original cost......
$2,623,600
$2,450,991 i
Gas-at original cost.........
368,959 357,753 Steam-at cost.
20,436 20,653 Common-at original cost..........
147,717 134.775 Total plant in service.
3,160,712 2,964,172 Construction work in progress-at cost.................,
823,400 766,050.
Plant held for future use-at cost......
9,090 9,123 t
Total utility plant.
3,993,202 3,739,345 l
Accumulated provision for depreciation..................................
(915,951)
(834,986)
Net utility plant..
3,077,251 2,904,359 l
Nuclear fuel-at cost (net of amortization of
$292,926,000 and $239,179,000, respectively)..............................
203,713 192,029 I
3,280,964 3,096.388 1
]
Other Investments..
33,359 29,098 3
1 i
Current Assets j
Cash............
3,477 2,100 l
Special deposits and working funds.....
1,659 3,734 1
Aca>unts receivable:
Customers' (net of provision for uncollectibles of
$5,838,000 and $5,130.000, respectively)....
170,021 145,341 M miscellaneous.....................................................
4,714 3,774 Fuel stocks-at average cost.
52,004 63,564 Materials and supplies-generally at average cost 76,152 71,694 Prepayments.
58,490 65,620 l
Other.
5,499 4.786 l
372,016 360.613 I
1 Deferred Debits s
1 Deferred fuel costs..................
88,862 58,365 Deferred nuclear fuel disposal costs..
13,535 2.466 Other.
21,049 19,909 123,446 80,740 l
l Total Assets.
$3,809.785
$3.566.839 l
Cerwin prk>r year amounts hae been recimihed to aw1 form with the current year pnwntatkm see runes and whedules-pages 31 through 43 j
i i
29 Balance Sheets llaltimore Gas and Electric Company.
December 31 1983 1982 Cepite.1 and Liabilities un husands of Dollard Comraon Stock and Retained Earnings Common stock-Schedule, page 31...................................
$ 787,069
$ 752,026 Installments received on capital stock-common...........
6 352 itemium on preferred stock................. }
157 157 Retained earnings................................
528,821 451,473 1,316,053' 1.204,008 Preferred and Preference Stock Not Subject to Mandatory Redemption Preferred stock-Schedule, page 31.....
59,185 59,185 Prefer: nce stock-Schedule, page 31..
175,000 175.000 234,165 234,185 Redeemable Preference Stock-Schedule, page 31..........................
100,000 100,000 long Term Debt Mortgage bonds-Schedule, page 32...............
1,220,056 1,302,598 g
Debentares-Schedule. page 32 29,940 30,568 Unamortized discount and premium........
(4,630)
(5,394) i 0:her-Schedule, page 32 132,000 long term debt estimated to be retired within one year......
(32,652)
(54.929)
I 1,344,714 1.272,843 1
Current Liabilities 1
Notes payable............
64,890 72,900 i
Accounts payable 120,428 128,525 Vacation costs accrued............
19,614 17,721 Taxes accrued................
23,529 28,818 j
interest accrued..........
35,907 38,531 Dividends declared 35,851 33.413 long term debt estir.ated to be retired within one year.g.....................
32,652 54,929 Other....
24,151 28.825 357,022 40M62 Deferred Credits Deferred investment tax credas 182,911 164,995 Deferred income taxes..................
194,089 124.680 Provision for dispod of spent nuclear fuel 71.E29 53,703 Other..
8,982 8,763 457,811 352,141 Commitments and Contingencies-Note 15 Total Capital and Liabilities...............
$3,809,785
$3,566,839 Cenain prkw year amounts have been reclassified to conform with the current year presentation see noten and scheduies~ pages 31 through 41 i
ll Statements of Changes
-30
'in Financial Position
~
1 Baltimore Gas and Electric Company j
s.
Year Ended December 31 l
Sources of Funds 1983 1982 1981 (in Thousands of Dollars)
Funds from Operations:
Net income..................
$216,453
$174,805
$149,659 Depreciation and amortization.
158,676-152,603 149,437.
1 Investment tax credit adjustments.............................
18,339 30,363 19,277
, Deferred income taxes............................
13,107 26,482 8,643 Allowance for other funds used during construction.................
g(32443)
__24,282)
(12,162)
(
s u bt otal..............................................
434,132 359,971 314,854 z
Funds from Outside Sources:
long tsm debt.......................
135,834 93,632
.89,424 Commori stock....
34,595 88,515 24,588 -
(3,945) 48,092 Preference stock (net of conversions)..........
Shon term deb-net (8,010) 52,050 20,850 Other-net......
(997) 5 345-Total.......
$595,S4
$590,228
$498.153 '
Applications of Funds Construction expenditures............
$276,083
$322,700
$266,956 Allowance for ether funds used during construction -
(32.443)
(24,282)
(12,162)
Purchase of nuclear fuel materials............
65A31 41,592 40,073 Common stock dividends.
111,423 101,507 88,499 Preterred.snd preference stack dividends.,.
27,580 27,869 26,416, Retirement of long-term debt...
87,170 102,500 55,304 Redemption of preference stock...............
1,978 Materials, supplies and fuel stocks....
(7,102)
(13,576) 2,545 l
Deferred fuel costs...
30,497 17,230 8,432 Federal incomuaxes payable..
6,693 13,656 10,537 Purchase of tax benefits.....
6 16,582 Investment in subsidiaries 6,177 2,718 2,649
.s....
Other-principally net change in other woridrg cap;tal items..
24,039 (20.246) 8,904 Tottd...........
$595,554 5590.228
$498,153 See mes and adedul.w-paMs 31 thnzugh 43 a
. dues-r_.
A% _
- Auditor's Report To the Stockholders of We have also previous'y examined, in accordance with gerw -
Baltimore Gas and Electric Company ally accepted auditing st glards, the balance sheets at December 31.1981,1980, and 1979, and the related statements of income, 1
l We have examined the balance sheets, including the schedules retained earnings and changes in financial position for the years of outstanding stocks, bonds, debentares, and erher long term ended December 31,1980 ard 1979 (none of which are pre-debt, of Baltimore Gas and Electric Company at December 31, sented ha ein); and we expressed unqualified opinions on those j
1983 and 1982 and the related statements of income, retained financial statements. In our opinion, the Summary of Operations camings and ch.inges in hnancial position for the years ended included in the Selected Financial Data for each of the five years H
December 31,1983,1982 and 1981. Our examinations were made in the period ended December 31,1983, appearing on page 23, is in accordance with generaDy accepted guditing standards and, fair:y stated in all material respects in relation to the financhi accordingly, included such tests of the accountng records and statements from which it has been derived-such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the financial staterunts referred to above (page 27 through the notes to financial statements on page 43), present fairly the financial position of Baltimore Gas and Electric Com-CNPers & Lybrand pat."at December 31,1983 and 1982 and the results ofits opera.
2Nacanth Bank S< Trust Building l
tions and changes in its financial pcsioon for the years ended Baltimore, M ryknd U 201 -
( December 31,1983,1982, and 1981 in conformity with generally.
Jamary 24, N
+
eccepted accounting principles applied on a consistent basis.
u.-
L L____
- k___~_.________
l 31 Schedules of Outstanding Stocks Baltimore Gas and Electric Company December 31 f
1983 1982 J
Un Thousands of Dollars) l Common Stock-without par value-45,000,000 shares authorized:
38,607,313 and 37,349,601 shares, respectively, outstanding.....
$787,069
$752,026
- )
(At the end of 1983,508,594 shares were reserved for the Employee Stock Ownership 1
Plan, and 3,507,019 shares for the Dividend Reinvestment and Stock Purchase Plan.)
Preferred and Preference Stock Not Subject to Mandatory Redemption Preferred Stock (Cumulative)-$100 par value-1,000,000 shares authorized:
Series B 4 % % - 222,921 shares outstanding...............................
$ 22,292
$ 22,292 (Callable at $110 per share.)
Series C 4%-68,928 shares outstanding..
6,893 6,893 I
(Callable at $105 per share.)
Series D 5.40% - 300,000 sh r.s outstanding................................
30,000 30,000 (Callable at $101 per sharc) j Total Preferred Stock................
$ 59,185
$ 59,185 i
i l
Preference Stock (Cumulative)-$100 par value-5,000,000 shares authorized:
j 8.75%,1970 Series-300,000 shares outstanding
$ 30,000
$ 30,000 (Callable at $104 per share prior to October 1,1986 and at
$101 per share thereafter.)
7.88%.1971 Series-500,000 shares outstanding.......
50,000 50,000 (Callable at $104 per share prior to October 1,1986 and at a lesser amount thereafter.)
7.75%,1972 Series-400,000 shares outstandin<t.....
40,000 40,000 I
(Callable at $103 per share prior to October 1,1987 and at J
$101 per share thereafter.)
7."'8%,1973 Series-200,000 shares outstanding 20,000 20,000 (Callable at $103 per share prior to December 1,1988 and at
$101 per snare thereafter.)
9.35%,1974 Series-350,000 shares outstanding 35,000 35,000 (Callable at $110 per share prior to April 1,1984 and at i
lesser amounts thereafter.)
Total Preference Stock..............
$175,000
$175,000 Redeemable Preference Stock (Cumulative)-
j
$100 par value-1,000,000 shares authorized:
I 8.375%,1979 Series-500,000 shares outstanding
$ 50,000
$ 50,000 12 %, 1981 Series A-340,000 shares outstanding 34,000 34,000 12 %,1981 Series B-160,000 shares outstanding..
16.,000 16,000 Total Redeemable Preference Stock..............................
$100,000
$100,000 k'e notes 11 and 12.
l.
l' l
l 1
Schedules of Outstanding Bonds, 32 j
Debentures, and Other Long-Term Debt t
fla!timore Gas and Electric Company M
December 31 1983 1982 On husands of Dollars)
First Refunding Mortgage Bonds 10%% Series. due September 15.1983....................
$ 41,677 31,000 9% Series, due july l,1984....................
Series V 2%%, due December 21,1984.........
19,123 19,123 Series X 2%%, due january 15.1986....
24,317
- 24,317 Series Z 3%, duejuly 15,1989.............
.36,754 36.754 12 %% Series, riue September 15,1990.
60,703 60,703 3%% Series, due December 1,1990..
29,682 29,682 16%% Series, due October 1,1991 63,491 63,591 4%% Series, dueJuly 15,1992....
25,000 25,000 14 %% Series, due july l5,1992...
66,235 75,000 4% Series, due March 1,1993........
24,095 24,095 4 %% Series, dueJuly 15,1994........
29,989 29,989 5%% Series, due April 15,1996,..
26,680 26.680 6%% Series, due August 1,1997 24,967 24,967 5%% Installment Series, due August 15,1998..............................
66,000 67,000 7% Series, due December 15,1998.
28,705 28,705 8%% Series, due September 15,1999....
22,198 22,198 8%% Series, due September 15,2000.
11,433 11,433 7%% Series, due April 15,2001.......
60,000 60,000 7%% Series, due September 1. 2001 60,000 60,000 7%% Series, due January 1, 2002..................................
50,000 50,000 7%% Series, duejuly 1. 2002........
50,000 50,000 5%% Installment Series, duejuly 15,2002......
12,500 12,500 7%% Series, due September 15,2002.
50,000 50,009 8%% Series, due February !. 2004..
74,986 74,986 6.80% Series, due september 15,2004.....
20,000 20,000 9h% Series. due August 1,2005..
15,638 15.638 8%% Series, due September 15,2006...
75,000 75,000 8%% Series, due September 15,2007........
75,000 75,000 9%% Series, due July 1, 2008...
62,560 62,560 6.90% Installment Series, due September 15,2009..
55,000 55.000 Total FIrst Refunding Mortgage Bonds......
$1,220,056
$1.3C2.598 Debentures 4h% Sinking Fund Debentures, duejune 15,1986 10,943
$ 11,177 4%% Sinking Fund Debentures. due August i,1990.......
18,997 19.391 Total Debentures............
29,940
$ 30,568 Other longterm Debt Port Facilities inan, duejune l,1986........
46,000 Pollution Control Inan, due September 1,1986...
36,000 llank Term inan, due February 19,1988.........
50,000 Total Other longterm Debt.
$ 132,000 see n<ne u
33 Responsibility For Financial Statements Baltimore Gas and Electric Company Management is responsible for the information and representa-Coopers & Lybrand, independent certified public accountants, tions contained in the Company's financial statements. %e finan-are engaged to examine the financial statements and express their cial statements are prepared in accordance with generally ac.
opinion thereon. Their examination is made in accordance with cepted accounting principles based upon currently available generally accepted auditing standards which include a review of facts and circumstances and Management's best estimates and intemal controls. Their repeu appears on par,,e 30.
Judgments of known conditions.
The Audit Committee of t'.e Duard of Directors, which consists The Company maintains an accounting system and related sys-of three outside Directors, acets periodically with Management, tem of internal controls which are designed to provide reason-intemal auditors, and Cmpet. & Lybrand to review the activities able assurance that the financial records are accurate and that the of each in discharging their responsibilities. The internal audit Company's assets are protected The Company's staff ofinternal staff and Coopers & Lybrand have free access to the Audit Com-auditors, which reports directly to the Chairman of the Board, mittee at any time.
conducts periodic reviews to maintain the effectiveness of inter.
nal control procedures.
i Notes to Financial Statements Accounting Policies The accounting records of the Company are maintained in ac-Commission of Maryland. The Company's principal accounting cordance with the Uniform Systems of Accounts prescribed by policies are described in Notes 1 through 7.
the Federal Energy Regulatory Commission and the Public Service Note 1. Pension Plan The Company maintains a noncontributory pension plan covering by $771,000 or 24 per common share. A comparison of accumu-its regular empk>yces. The funding of the Company's pension lated plan benefits and plan net assets for the Comp,ny's defin-d plan is through a deposit administration medium with an imme-benefit plan, as ofJanuary 1, is presented below:
diate participation guarantee feature employing the aggregate cost method. In 1983,1982, and 1981, the Company's cost for 1983 1982 pensions totaled $ 13,H07,000, $ 12.072,000. and $ 17,915,000, On Thousands of Dollars) respectively, of which $ 11,234,000, $9,823,000, and $ 14,5%,000, Actuarial present value of respedively, weie included in expenses. ne remainders were accumulated plan benefits:
charged to construction. The increase in 1983 was primarily the Vested
$187,860
$ 154,753 result of a full year's recognition of the 1982 benefit changes and Nonvested..
34,258 32,851 of higher payrolls. The decrease in 1982 was primarily the re-
$222.118
$187,6M sult of a change in actuarial assumptions, partially offset by an Net assets available for benefits...
$287.559
$257,873 increane resulting from changes in plan benefits effectiveJune 1, l
1982, and higher payrolis, The change in actuarial assumptions The assumed investment rate of return used in determining the increased 1982 eamings by $4,115,000, equivalent to 11e per actuarial present value of accumulated plan benefits was 9% for l
common share based on the average number of shares outstand-both years. Based on the latest available actuarial report, as of '
ing. The change in plan benefits during 1982 decreased eamings January 1,1983 there were no unfunded vested liabilities.
Note 2. Depreciation and Maintenance The amounts set aside for depreciation on the Company's txx)ks decommissioning oithe properties at the end of their useful au generally based on composite straight line rates, determined lives. Such provision is subject to pariodic review for future and revised periodically by means of independent engineering changes in economic conditions and advances in technology.
studies, applied to the average investment in depreciable utility Expenditures for maintenance and repairs, including renewals plant in service. The composite depreciation rate for nuclear of minor items of property (as distinguished from units o' prop.
electric pmperties includes a $36,000,000 provision for the erty), are charged to operating expenses and/or clearing accounts,
i 34 I '
Baltimore Gas and Electric Company
.6 unless the replacement of a minor item of property effects a sub-Composite 1983 1982 stantial betterment, in which event the excess cost of the replace-Rate (In husands of Dollars) l ment over the estimated currt r; cost of replacement without Electric betterment is charged to the a,)propriate property account. Re-
-Other than Nuclear..
3.26%
$1,687,089
$1,565,811 placements of items designated as units of property are accounted
-Nuclear...
3.45 901,360 849,913 for as Plant Additions and Retirements. When depreciable prop-Gas...
(a) 365,699 354,493 erty is retired or otherwise disposed of, the Accumulated Provi-Steam,.
2.75 20,231 20,448 sion for Depreciation is charged with the " original cost" of such Common...
(a)(b) 142,260 129,315 property, together with the cost of removal, and is credited with Total.....
$3,116,639
$2,919,980 the sah> age value or sale price and any other amounts recovered.
such as insurance.
(a) Effecove February is.1982, as ordered by the Maryland cornrnission.. the rare for The investment in depreciable utility plant as of December 31 gr,as increased frorn 2.60% to 2M and commm fnnn 3 00% to 3.39%
and the depreciation rates applied to each category are as follows:
(b) Except for vehides. whleh are generally deprecated on a usage bass.
i Note 3. Inccme Taxes 1983 1982 1981 Income tax expense is composed of the following:
(in Thousands of Dollars)
Included in Operating Expenses:
Income Taxes-Current..
$ 28,137
$ 44,742
$ 55,021 Income Taxes-Deferred..
66,773 22,616 8.572 Investment Tax Credit Adjustments 21,554 28,122 22,488 Total Charged to Operating income.
116,464 95,480 86,081 Included in Steam and Other Income:
Income Taxes-Current..
(5,760)
(9,686) 2,644 income Taxes-Deferred.
6,334 3,866 71 Investment Tax Credit Adjustments.
330 7,092 93 Total Charged to Steam and Other Income 904 1,272 2.808 Total income Tax Expense.
$117,368
$ 96.752
$ 88,889 Total income taxes currently payable consist of the following:
Federal Income Tax:
Included ir. Operating r.xpenses.
$ 28,072
$ 44,599
$ 54,873 Included in Steam and Other Income.
State locome Tax:
(5,904)
(9,872) 2,409 Included in Operating Expenses.
65 143 148 Included in Steam and Other Income.
144 186 235 Total Income Taxes Currendy Payable
$ 22,377 jsp56
$ 57.665 The puwiston for deferred Federal Income Taxes consists of the following tax
(
cHects of timing differences included in Operating Expenses:
1 Liberalized Depreciation
$ 23,986
$ 21,333
$ 15,234 d
Deferred Fuel Costs.
13,585 7.975 3,890 Spent Nuclear Fuel Disposal Costs-Note 7.
29,797 (6.699)
(7,222)
Pc nnsyhania Gross Receipts Tax-Note 8..
1,639 Percentage Repair Allowance..
(437)
(440)
(559) d Settlement of 1 R.S. Audit for Wars 1974-1976.
(16) 426 (4,387)
Other (142) 21 (23)
Total Charged to Operating income..
66,773 22,616 8,572 included m Steam and Other 1rcome.
6,334 3,866 71 Total Federal Income Taxes Deferred....
$ 73,107
$ 26,482
$ 8,643 The investment Tax Credit Adjustments are derived as fo' lows:
Included in Operating Er.penses:
Reduction in Federal Income Taxes due to credits arising from:
Eligible Property.............
$ 26,856
$ 30,388
$ 25,085 Employee Stock Ownership Plan.
3,220 4.269 3.292 Total......
30,076 34.657 28,377 Credits alkicated to income.
(8,522)
(6,535)
(5,889)
Net Total Charged to Operating income.
21,554 28.122 22.488
]
Included in Steam and Other income-1 Reduction in Federal income Taxes due to credits arising from:
Elig;hle Property..
28 6,541 95 Employee Stock Ownership Plan.
324 582 12 Total...
352 7,123 107 I
Credits alkicated to income.
(22)
(31)
(14)
Net Total Charged to Steam and Other income.
330 7,092 93 Total Investment Tax Credit Adjustments....
$ 21,884
$ 35,214
$ 22.581.
L_______________.___________________________..____.._
35 l
l 1
d Investment tax credits include credits allowed by the Intemal Investmen; tax credits, except those related to ESOP, are being j
Revenue Code to provide stock for empkgees under the deferred and allocated to income ratably over the lives of the sub-
]
Employee Stock Ownership Plan (ESOP). These tax credits repre-ject property.
sent the %% credit based on employee payroll in 1983 and the Total income tax expense was less than ths amount computed additional 1%% credit based on Company investment in qualified by applying the Federal income tax statutory rate to book income propeny in 1982 and 1981, before tax. The reasons for this difference are as follows:
1983
~1982 1981 On Thousands of Dollars)
Tax computed at 46% statutory rate on book income before tax..........
$153,558
$124,916
$109.732 Increases (Decreases) in tax from:
Excess of tax over book depreciation-not normalized...
2,072 396 (2,647)
Allowance for Funds Used During Construction-Borrowed Funds and Other Funds (26,863)
(20,075)
(12,194)
Investment Tax Credits allocated to income (8,544)
(6,566)
(5,903)
Net other items..
(2,855)
(1.919)
(99)
Total income Tax Expense.
$117.368
$ 96.752
$ 88.889 The tax reductions resulting from the difference between inchiding the related fraerest charges, decreased earnings after depreciation recorded on the Company's books and the depre-Federal income taxes by $4 and 78 per common share, l
clation taken for Federat income tax purposes amounted to based on the average number of shares outstanding in 1982 and j
$21,918,000 in 1983, $21,048,000 in 1982, and $ 17,962,000 in 1981, respectively.
i 1981 of which tax benefits arising from liberalized depreciation The pur-base of tax benefits resulted in decreases in current i
on property additions in 1976 and subsequent years totaling taxes of $5,701,000 and $ 10.712,000, and increases in deferred j
$23,990.000 in 1983, $21.444.000 in 1982, and $15,316,000 in taxes of $5,4'2,000 and $3,804 000 in 19F3 and 1982, respectively,
)
1981 have been normalized.
and an increase in investment tax credit adjustments of $6.908.000 l
In 1982 and 1981, the Company entered into settlement agree-in 1982. These effects on income taxes are included in Net Other l
ments with the Internal Revenue Service covering audits for the Iccome and Deductions.
l years 1977-1979 and 1974-1976. The settlement of these audits, Note 4. Allowance for Funds Used During Constriction 1he Allowance for Funds Used Dunng Construction (AFC), a non-equivalent to 58 and 264 per common share, respectively, cash item, is an accounting procedure by which there are accrued based on the average number of shares outstanding during each alkwances for the cosa of borrowed tbads and other funds u3ed yar.
to finance construction, segregated between other income and For ratemaking purposes, the Maryland Commission, in its interest charges in conformance with an Order of the Federal Order ofjune 1980, eliminated $1,S78.000 from the Company's Energy Regulatory Commiss]on. Such allowances are transferred rate base pertaining to retroactive accruals of Aliowance for Funds from the Statement of income to Construction Work in Progress Used During Construction stemming from rate case findings in the Balance Sheet. These allowances are not taxable income.
occerring between November 1972 and December 1978. Further-In 1981, the allowance was computed at a rate of 8.13% without more, as a result of a Federal Energy Regulatory Commission compounding applied to the construction expenditures for the audit finding in October 1981, the Company reduced the Allow.
Brandon Shores Power Plant. In February 1982, the rate was ance for Funds Used During Construction capitalized as a cost of increased to 9.13% compounded annually. InJulv 1983, the base the Brandon Shores project and decreased the Allowances for was expanded to include other major electric projects scheduled Borrowed Functs and Other Funds Used During Construction by l
for completion after 1983, and the rate was decreased to 9.08%
$788,000 and $790,000, respectively. The total reduction of
)
compounded annnally. These changes, which were made pursuant
$1,578,000 represented a decrease in 1981 earnings of 54 per to rate Orders of the Public Service Commission of Maryland, common share based on the average number of shares increased 1983 and 1982 earnings by $1,789,000 and $9,538,000, outstanding.
l Note 5. Other Investment 4 i
{
SubsidiaryCompanics:
Resource & Property Management, Inc. was formed in 1981 i
investments in subsidiary companies, which are accounted for primarily to develop land used in the Company's fly ash manage-under the equity method, are as follows:
ment program.
December 31 Diversified tioldings, Inc. was formed in 1983 to hold the stock Ownership 1983 1982 of companies engaged in diversified activities, including Balti.
Interest On husands of Dollars) more Biogas, Inc. and Bahimore Capital Resources, Mc., which safe liarbor Water Power were also established in 1983. Baltimore Biogas, Inc. was created
)
Corporation.,
67%
$14,782
$ 9,064 primarily to obtain gas from non-historic sources and Baltimore Resource & Property Capital Resources, Inc. was established for the purpose of engag-Management, Inc.
100 6,073 5,369 ing in investment and financing activities.
Diversified The capital stock of Safe llarbor, liesource & Property Manage-lloldings, Inc.
100
'1,495 ment, and Diversified Holdings is subject to a lien under the 4
Mortgage under which the Company's Mortgage Bonds are issued.
)
The irwestment in Safe 11 arbor Water Power Corporation, a pro-Purchased hv Benefits:
ducer of hydroelectric power, represents two' thirds of Safe The Company's investment in pu. hased tax benefits amounted Ilarbor's total capital stock, including one half of the voting stock, to!8,981,000 and $12,755,000 st December 31,1983 and 1982, and a two thirds interest in the Corporation's retained eamings.
respectively j
i
~_
C 36 Baltimore Gas and Electric Company Note 6. Deferred Fuel Costs The Company, by stature, recovers the actual cost of fuel used actual generation mix compared with the latest eighteen-month in generating electricity through a zero based clectric fuel rate generation mix used in the formula. The balances deferred as of clause. Actual fuel costs are recoverable so long as the Company December 31,1983 and 1982 were $66,041,0no and $48,989,000 continues to demonstrate that it has used the most economical
($35,724,000 and $26,516,000 net after income taxes), respec-mix of all types of generation and purchase, made everv reason-tively. See Note 15 for a discussion of contingencies related to able effort to minimize fuel costs, and maintained the productive Contested Deferred Fuel Costs.
capacity of its genera:ing plants at a reasonable level. As imple-The Company defers the net over or under-recoveries of pur-mented by the Public Service Commission of Maryiand, the fue!.
chased gas costs resulting from the operation of the purchased rate formula is based upon the latest eighteen month generation gas adjustment clause, as authorized by the Maryland Com-mix and the latest three month average cost for each t)pe of fuel.
mission. Any over or under-recoveries of purchased gas The fuel rate will not change unlev the calctuated fuel rate is costs for the twelve months ended November 30 each year are more than 5% above or beksw the fuel ra:e then in effect. To credited or charged to customers over the ensuing calendar year.
the extent that actual accumulated fuel costs are not recovered The deferrals as of December 31,1983 and 1982 were $21,988,000 through the fuel rate then in effect, they are deferred in actual and $9,507,000 ($ 11,874,000 and $5,134,000 net after income operation, the fuel rate cladse will result in under-recoveries taxes), respectively.
and over recoveries due primarily to the difference between the Note 7, Other Deferred Debits In June 1983, the Company contracted with the Depart nent of October 1978. %e amortization of these deferred costs was com-Energy (DOE) for the disposal of spent nuclear fuel pursuant to pleted during 1983, while the unamortized balance as of j
the provisions of the Nuclear Taste Policy Act of 1982. As a result, December 31,1982 was $2,466,000 ($1,332,000 net after income the Company is committed to pay to the DOE $71,829,000 for the taxes).
dimosal of spent nuclear fuel which existed at April 7,1983. As of in 1979 through 1983, the Company incurred a total of I
December 31,1983, the Company had colle cred $58,294.000 of
$10.626,000 in maintenance expenditures for inspecting and that amount through base rates. The remaining $13,535,000 has repairing seismic pipe supports to meet Nuclear Regulatory been deferred and is being amortized as recovered through base Commission requirements at the Calvert Cliffs Nuclear Power rates through May 1988. Amounts previously recorded for the dis.
Plant. These costs were deferred and, pursuant to theJune 1980 posal of spent nuclear fuel as of December 31,1982 have been Order of the Maryland Commission, are being amortized over reclass!fied from Utility Plant to Deferred Credits in order to con.
the remaining life of the plant. %e amounts deferred as of form with the 1983 presentation.
December 31,1983 and 1982 were $8,585,000 and $8,985,000 From October 1978 through June 1980, spent naclear feel dis.
($4,636,000 and $4,852,000 net after income taxes), respectively posal costs were deferred pursuant to an Order of the Public Ser-In 1981, the Company charged $2.048,000 ($1,106,000 net after vice Commission of Maryland which excluded these costs from income taxes) to Operations Expense to write-off expenditures the fuel rate computauon. In itsJune 1980 Order granting the accumulated in Other Deferred Debits associated with a joint ven-Company an increase in electric base rates, the Commission ture to mine uranium which was no longer economically feasible.
included a pnmston for the recovery of spent nucleai fuel dis.
This charge resulted in a decrease in 1981 earnings after Federal posal costs currendy chargeable to operations as well as the amorth income taxes of 3e per common share, based on the average zation, over a three-year period, of the costs deferred since number of shares outstanding.
Nots 8. Other Taxes Taxes, other than taxes on income, were as follows:
(a) In December 1981, the Company and the Commonweahh of l
1983 1982 1981 Pennsyhania agreed to a settlement of the contested liability On Thousands of Dollars) related to the 19'7-1979 Gross Receipts Tax applied to elec-Property
. $ 26,986 $ 25,323 $ 24,021 tricity produced in Pennsyhania and sold outside of that Capital Stoc k.
29,078 28,260 27,894 State, which tax was repealed effective January 1,1980. The Maryland Gross Receipts,
32,582 31,333 27,891 settlement, whereby Pennsyh ania conceded approximately Pennsyhania Gross 90% of the tax, improved 1981 earnings after Federal income l
Receipts (a).
(9,267) taxes by 94 per common share, based on the average number Maryland Electric of shares outstanding.
Environmental Sur-harge.
3,058 3,386 2,776 Social Security 18,296 16Mi 15,382 Miscellaneous...
3,169 2,463 2,242 113,171 107,406 90,939 Less amount included above rhat ged principally to accounts other than taxes.
4,862 4,388 4.059 Total Other Taxes..
. 5108,309 $ 103.018 $ 86,880 I
l J
'37 a
l l
1
)
U Note 9. Steam Operations l
On December 22,1983. the Company entered into an agreement Certain information relating to the Company's steam utility j
to sell substantially all of its steam production and distribution operations for the years ended December 31,1983,1982, and 1981 l
system assets to Thermal Resources of Baltimore, Inc., a wholly-is as follows:
I owned subsidiary of Thermal Resources of Ohio, Inc. The sale, Year Ended December 31 which will be completed in 1984 after appropriate authorization 1983 1982 1981 by the Public Service Commission of Maryland. reduced :983 (In 'Ihousands of Dollars)
- 3 after tax earnings by $1,509,000, or 4t per common share, based Revenues from Operations..... $19,254 $20,427 $18,947
{
on the average number of shares outstanding. *1he 1983 loss, re-Income from Opuations......
933 1,264 1,390 i
flected in Net Other income and Deductions, included income j
I
- f. axes of $467,000 and a prmision of $768,000 for income during the perhi prior to the completion of the transaction.
Note 10. Accounts Receivable The balance in Customers' Accounts Receivable includes approxi-although in part they do not mature within one year. It is not mately $28,112,000 and $22,762,000 at December 31,1983 and practicable to determine the amount of such installments which 1982, r spectively, receivable from unmatured merchandise install-do not mature within one year. An annual interest rate of 19% is l
ment accounts which, in accordance with the generally recognized currently being applied to installment sales.
q practice of utility companies, are classified as current assets
{
l r
Note 11. Changes in Common Stock and Preference Stock Not Subject to Mandatory Redemption Cumulative Common Stock Preference Stock Shares Amount Shares Amount (Dollar Amounts in Thousands)
Balance at December 31,1980.
32,690,093
$638,820 1/126,207
$182.621
]
Year 1981 l
Common Stock issued under:
I Dividend Reinvestment Plan...
9418,350 19,887 l
138.291 3,033 ESOP.
1 Conversions of Convertible Preference Stock, 1
6%% Series, into Common Stock (decrease) 58,771 1,685 (16.977)
(1.698)
Bahmce at December 31,1981,..
33,835,505 663,425 1,809,230 180,923 Year 1982 Common Stock issued under:
Dividend Reinvestment Plan.
1,175,854 29,103 l
ESOP..
200,613 5,222 Common Stock issue...
2,000,000 50.360 l
Conversions of Convertible Preference Stock, 6%% Series, into Common Stock (decrease)..
137,629 3,916 (39,453)
(3,945)
Redemption of Convertible Preference Stock, 6%% Series (decrease).........
(19,777)
(Ig78)
Balance at December 31,1982.......
37,349,601 752.026 1,750,000 175,000 Yerr1983 Common Stock issued under Dividend Reinvestment Plan..
1,257,712 35,043 l
Balance at t ecember 31.1983...
38,607,313
$787,069 1,750,000
$175,000 Note 12. Redeemable Preference Stock The Company has three issues of Redeemable Cumulative Prefer-1987 through 1991, while Series B will be redeemed in its entirety ence Stock outstanding The 8.375%,1979 Series consists of at par onJuly 1,1991.
')
500,000 shares ($ 100 par mlue) which will be redeemed at par at The Redeemable Preference Stock is junior to Preferred Stock the rate of 100,000 shares in each of the years 1985 through 1989.
and has parity with Preference Stock Not Subject to Mandatory The 12%.1981 Series A and B issues consist of 340.000 and Redemption. The Preference and Preferred Stock rank prior to 160,000 shares (both $100 par value), respectively. Series A will be Common Stock as to payment of dividends or assets auflable in redeemed at par at the rate of 68,000 shares in each of the years the event ofliquida an.
l
38 llaltimore Gas and Electric Company Note 13, Isng Term Debt Substantially all of the principal properties and franchises owned
$400,000 in cash, in principal amount of 4%% Sinking Fund by the Company are subject to a lien undf.r the Mortgage under Debentures, or in a combination thereof; and the 4%% Debenture which the Company's First Refunding Mortgage Bonds are issued.
sinking fund payment, to be made on or beforeJuly 31 of each On August 1 of each year, the Company is required to pay to year to and including 1989, requires annual payment of $600,000 the Mortgage Trustee an annual sinking fund payment equal to in cash, in principal amount of 4%% Sinking Fund Debentures, or 1% of the largest amount of Mortgage Bonds outstanding under in a combination thereof. In any year, at the Company's election, the Mortgage during the preceding 12 months. Such funds are to an additional sinking fund payment of up to $600,000 (noncumul-be used, as provided in the Mortgage, for the purchase by the ative) may be made under the 4%% Sinking Fund Debenture Trustee of Mortgage Bonds of any series other than the Install.
Indenture.
meet Series Mortgage Bonds of 1998,2002, and 2009, and the in February 1983, the Company borrowed $50,000,000 under a 6.80% Series Mortgage I onds of 2004. Purchases may be made by five year unsecured bank term loan agreement. Under the terms the Trustee in the open market and/or through responses to in-of the agreement, interest on the loan will vary with the lender's vitations for sealed tender offers if purchases are possible at or base rate unless the Company elects a fixed rate for a selected below the applicable redemption price, or directly through the period. De weighted average interest rate for the k>an during redemption provisions to which the Mortgage Bonds are subject 1983 was 9.86%.
if purchases at a more favorable price are not possible. The Com-In June 1983, Anne Arundel County, Maryland issued pany may purchase outstanding Mortgage Bonds from time to
$48,000,000 of Port Facilities Revenue Notes, (Baltimore Gas and time and may submit its sealed proposal for the sale of such Electric Company Project) Commercial Paper Series. %e proceeds Mortgage Bonds to the Trustee for the sinking fund.
of the issue were deposited with a Dustee to be loaned to the The installment Series Mortgage Bonds, due August 15,1998 Company as needed to finance the Company's acquisition of cer.
are payable as to principal on the fifteenth day of August in the tain coal handling port facilities at the Brandon Shores Power years and amounts as follows:
Plant. As of December 31,1983, the Company had borrowed Principal Amount
$46,000,000 for eligible expenditures on the project. The remain.
Years Each Year ing proceeds, $2.000,000, were still being held by the Rustee.
In September 1983, Baltimore County, Maryland issued $36,000,000 On Thousands of Dollars) of its Pollution Control Revenue Notes (Baltimore Gas and Elec.
1985 and 1986.
$ 1'000 tric Company Project) Commercial Paper Series (the Pollution 1987 through 1990.
2'000 Control Notes). The proceeds of the sale were made available to j
1991 through 1995.
3'000 the Trustee to be used to redeem Baltimore County's 9% Pollution 1996 and 1997 4'000 Control Revenue Bonds (1981 Series) (Baltimoce Gas and Electric 399g 33'000 Company Project) (9% Revenue Bonds), the proceeds of which The Instal! ment Series Mortgage Bonds, due.luly 15,2002 are were originally used to finance the Company's pollution control payable as to principal on the ifteemb day ofJuly in the years facilines construued in connection with the conversion to coal of r
and the amounts as follows:
two existing steam electric turbine generator units at the Com.
Prin.cipal Amount pany's Charles P. Crane Power Plant. The Company's 9% First j
Years Each Year Refunding Mortgage Bonds dueJu!y 1,1984, which were used as 1
1 On Thousands of Dollars) collateral for the drawdown of the original proceeds from the sale 1993
$ 420 of the County's 9% Revenue Bonds, were cancelled and replaced
- 994 439 with an unsecured loan for $36,000,000.
1995 through 1997.
605 The Port Facilities and Pollution Control kians will mature on 1998 and 1999.
690 June 1,1986 and September 1,1986, respectively, unless extended 2000 and 2001.
865 under the terms of the loan agreements and the indentures pur.
2002 6,725 suam to which the Port Facilities and Pollution Control Notes were issued. The weighted average interest rates for the Port The Installment Series Mortgage Bonds, due September 15,2009 Facilities and Pollution Control h)ans during 1983 were 5.22% and are payable as to principal on the fifteenth day of September in 5.53%, respectively. Additionally, the Company assumes all the years and the amounts as follows:
expenses associated with both programs.
Principal Amount The combined aggregate requirements for bond maturities, Years Each Year estimated sinking fund payme.its, and maturities of other long-On Thousands of Dollars) term debt for each of the next five years are as follows:
2005 through 2008
$ 3,250 Year Requirement 2009 42,000 (In Milhons of Dollars)
The Company is also required to make annual sinking fund 19M
$ 33 payments (in cash anNor Sinking Fund Debentures) to the 1985.
18 j
Trustees under the Sinking Fund Debenture indentures. The 4h%
1986.
136 1
Debenture sinking fund payment, to be made on or beforeJune 14 1987 19 l
of each year to and including 1985, requires annual payment of 1988 70 q
l i-
... -....I
l 39-1 Note 14. Short Term Borrowings
)
The Company maintains bank lines of credit to provide backup the lines are at the banks' prime or base interest rates or under j
financing capacity for commercial paper notes issued to satisfy cenain credit line arrangements at a fixed percentage over the l
ing flexibility. In support of such lines, the Company either pays term borrowings outstanding at December 31,1983,1982, and interim financing requirements and to permit shon-term borrow-London Interbank Offered Rate. Information conceming short-commitment fees at a fixed rate or maintains compensating balances 1981 and during each of the years then ended is set forth below:
(which are not restricted as to withd awals). Ilorrowings under 1983 1982 3 81 (Dollar Arnounts in Thousands)
At D cember 31 Shon term Borrowings Outstanding:
Commercial Paper Notes (maturing in 90 days or less)
$ 64,890
$ 72,900
$ 20,850 Weighted Average Interest Rate......
9.35%
8.79%
12.54 %
Unused Lines of Credit.
$163,175
$163,175
$163,000 Compensating Balances..
$ 1,724
$ 1,879
$ 1,960 During the Year Ended December 31 Maximum Aggregate Short Term Borrowings.
$125,400
$ 81,150
$101,865 Average Daily Short Term Ilorrowings (a)..
$ 35,702 f 19,931
$ 33,890 Weighted Average Interest Rate (b).
8.81%
10.74 %
16.27 %
(a) 'the sum of dollar days of outstanding txirrtmings dmded by actual days in the period (b) Actual accrmt interes during the perkad dMded by average daily txirrwings, Note 15. Commitments and Contingencies The Company has made substantial commitments in connection Company. The Excess Insurance protection is provided through a with its construction programs for 1984 and subsequent years.
combination of nuclear insurance pools and an industry-owned mutual insurance company. The major portion of any claim paid Nuclear Insurance:
through the Excess insurance coverage for damage to any nuclear The two units at the Company's Calvert Cliffs Nuclear Power Plant power plant operated by a member of the industry.oned mutual l
are its principal generating facilities and produce the lowest cost insurance company would be funded through insurance company j
power available to the Company. An incident at this plant could reserves and an after-loss assessment of each member. The con-have a substantially adverse effect on the Company's business tingent liability to the Compny for such after loss asses.sments and financial condition. Set forth bckm is a review of the special currently is $9.7 mihion in ar.y one nolicy year.
insurance coverages maintained by the Company f(x incidents at In the event of an outage at Ca. vert Cliffs, the Company must its nuclear power plant.
obtain repbcemert 1x)wer from other sources. Due to the rela-The Pnce Anderson Act (Act) currently limits the liability to the tively low cost of the power generatec" at the Company's nuclear public of an owner of a nuclear powet plant for property damage plant, replacement power would be more expensive. In the event j
of and boclity injury to third parties to 6580 million fer a single that there is an outage caused by physical damage to the nuclear nuclear incident, as defined in the Act The Company is protected plant which is insured as discussed above, then other insurance against this potential liabihty by a combination of commercial provided through an industry owned mutual insurance compary lasurance (currently $160 miPion through the nuclear insurance will provide coverage for a por:lon of the replacement power I
pools) ar.d Secondary financiai Protection currently amounting to costs if the outrge lasta more than 26 weeks. Specifically, after the a maximum of $420 million. Under regulations issued pursuant to inittal 26 weeks of an insured outage involving one of the two the Act, the $420 million of S(condary Financial Protection for Calvert Cliffs units, this insurance would pay a maximum weekly j
public liability resulting from a nuclear incident would be pro-indemnity of $2.5 million for up to a 52 week period, followed by j
vided through an after loss assessment of each nt. clear-powered maximum weekly indemnity payments of $1.25 million for the q
utility in the country at a rate of up to $5 million per reactor, with next 52 weeks. For one insured occurrence causing both Calvert a $10 million per reactor limit in any one calendar year for multi-Cliffs units to be shut down beyond 26 weeks, the weekly in-ple incidents. The Company's contingent liability in the event demnity payments would then begin for each unit at a rate of 80%
of a nuclear incident at any licensed nuclear power plant in the of the foregoing. This replacement power insurance would fund a country is an amount up to $10 million per nuclear incident ($5 claim paid to any member of the industry. owned mutual insur-million for each reactor at Calvert Cliffs),with a maximum contin-ance company through insurance company reserves and an after-gent liability of $20 million per year in the event of more than loss assessment of each member. The contingent liability to one nuclear incident in a particular year.
the Company for these after-loss assessments currently is The Company's insurance for physical damage to its nuclear
$15.4 million in any one policy year.
power plant is structured to provide a level of Primary Insurance The Company does not consider the amo mts ofinsurance dis-and a level of Excess insurance. The Primary insurance, provided cussed above to be adequate to cover the potential costs that through nuclear insurance pools, covers up to $500 million of could result from a major incident or an extended outage at physical damage, including contamination, to the plant. The either of the Calvert Cliffs units; however, the insurance described Excess Msurance currently provides full coverage for an addi-above is the only insurance currently available to cover such tional $491 million (or a total of $991 million) of physical damage public liability and replacement energy costs, and is the only to the plant, including contaminat. ion, and approximately 25%
reasonably priced property ir_,urance. The Company would seek coverage for any physical damage in excess of $991 million and to have any unrecovered costs included in its service rates, but up to one billion dollars. Any damage to the plant in excess of the company cannot assure that the Public Service Commission one billion dollars would be the financial responsibility of the of Maryland muld allow such recovery.
40 Ilattimore Gas and Electric Cornpany Contested Deferred Fuel Costs:
In November 1982, the Maryland Commission issued Orders in Court for Cah crt County. Maryland. People's Counsel had also two separate fuel rate proceedings denying the full recovery of appealed the Maryland Commission's decisions, arguing that the replacement energy costs incurred by the Company during two Company should bear the full amount of replacement energy unplanned maintenance outages at Calvert Cliffs. Maryland law costs of approximately$12 million.
provides that actual fuel costs are recoverable if the Company On January 18,1984, the Circuit Court issued an opinion sus-i maintains the productive capacity of all its generating plants at a taining the Company's view and disagreeing with both the Mary.
reasonable level. The Maryland Commission held that Manage-land Commission and the People's Counsel. The Maryland Com.
ment should bear responsibility for approximately $5.7 million of mission has appealed the Circuit Court's finding to the Maryland the replacement energy costs associated with the two outages at Court of Special Appeals. If the Maryland Commission is ulti.-
Calvert Cliffs because it did not show that its maintenance control mately successful, Deferred Fuel costs would be decreased and procedures were, in all respects, reasonable and appropriate for Purchased Fuel and Energy costs would increase by approximately 1
preventing ths outages. The Company believes that the operating
$5.7 million. The after-tax effect would be a reduction in earnings record of Calvert Cliffs demonstrates compliance with Maryland of 8.04 per common share, based on the current average number "y
law and, therefore, on November 29,1982. the Company of shares outstanding.
appealed the two Maryland Como 'ssion Orders in the Circuit Note 16. Segment Information 1983 1982 1981 Electric (in ' thousands of Dollars)
Operating Revenues........
$1,093,310
$ 1,035,606
$ 934,160 Operating Income before income Taxes,
358,172 299.853 268,890 Operating income.
249,436 214,021 196.159 i
l Depreciation........
85,943 81,859 78,052 Construction Expenditures........
255,114 303,266 239,225 Identifiable Assets at December 31.....
3,060,011 2,833,382 2,645,331 Gas Operating Revenues......
$ 545,295
$ 539,438
$ 467,949 Operating Income before income Taxes 30,495 34,331 42,230 Operating income.
22,767 24,683 28.880 11,147 10,871 9.766 Deprec;ation.
Construction Expenditures.......
20,467 19,018 26,988 Identifiable Assets at December 31.
332,059 324,928 31 % 564 j
Total
$1,638,605
$ 1,575,044
$ L402.109 Operating Revenues..........
Operating income before income Taxes 388,667 334,184 311,120 Operating income..
272,203 238,W 225,039 income from Steam Operatk>ns, Net.
933 1.264 1,390 Depreciation..
97,090 92,730 87,818 l
Construction Expenditures (a)...
276,083 322,700 266 956 Identifiable Assets at December 31.
3,392,070 3,158,310 2,960,895 Other Assets.
417,715 408,529 349,582 i
Total Assets....
3,809.785 3,566,839 3,310A77 ta) indudes sicarn experdiures Note 17. Jointly Owned Electric Utility Plant The Company's ownership as a tenant in common of undivided
'Ihe following data as of December 31,1983 represent the interests in the Keystone and Conemaugh mine mouth electric Company's proportionate share:
generating plants, kicated in western Pennsyhania, entitles the Transmission Company to 540 megawatts of rated capacity.
Keystone Conemaugh line Financing and accounting for these properties are the sane as (Dollar Amounts in Thousands) tho e for any other wholly owned property. The Company's share ownership Interest,,
20.99%
10.56 %
7.00%
of the direct expenses of the joint property is included in the t*tihty Plant in corresponding operating expenses in the Statement of income.
y 'Pmvs' ion for Depreciation.
16,413 9,416 424 Construction Work in Progress.
9.921 I S"'
41 i
i Note 18. Quarterly Financial Data (Unaudited)
.l The folkming data are unaudited but, in the opinion of Manage-The business of the Company is seasonal in nature, and it is ment, include all adjustments (comprising only normal recurring Management's opinion that comparisons between quarters of a accruals) necessary for a fair statement of such amounts. The data year do not give a true indication of overall trends and changes in l presented for Total Operating Revenues and Operating income operations.
! Plus AFC do not include the results of steam operations.
Operating Net Income Earnings Total income Applicable Per Share Operatmg Plus Net to Common ofCommon Quarter Ended Revenues AIC(a)
Income Stock Stock (in Thousands of Doliars)
March 31,1983..
$ 458,150
$ 75,153
$ 47,946
$ 41,051
$1.09 June 30,1983...
374,736 68,424 39,670 32,775 0.86 September 30,1983..
424,825 114.110 85,977 79,083 2.06 December 31.1983 380,894 72,913 42.860 35,964 0.93 Total Year 1983...
$1,638,605
$330,600
$216,453
$188,873
$4.95 March 31,1982..
8 454,923
$ 72,909
$ 45,863
$ 38,876
$1.14 June 30,1982...
361,738 63,346 38,M6 31,062 0.86 September 30,1982..
393,579 89,416 62,029 55,M9 1.49 December 31,1982.
364,804 56,674 28,867 21,949 0.59 -
Total Year 1982.
$ 1,575,044
$ 282,345
$ 174,805
$ 146,936
$ 4.07 (a) Alkmance for Funda Used During constructkn (for Dorrowed Funds and other Funds) is added to OperatMq Income in determining operaung income for ratemaking purposes.
Note 19. Supplementary Information to Disclose the Effects of Changing Prices (Unaudited)
The following supplementary information is supphed in accord-stant dollar amounts to the extent that specific prices have l ance with the requirements of Financial Accounting Standards increased more or less rapidly than prices in general.
l lbard S:atement No. 33. Financial Reporting and Changing P.-ices, lhe current cost of utility p! ant, comprising all plant in service, i for the purpose of providing cenain information about the effeca construction woik in progress, and plant held for future use, rep I
l of changing prices. It should be viewed as an estimate of the resents the estimated cost of replacing exising plant assets and approximate effect ofinflation, rather than as a precise measure.
was determ'ned by indexing the surviving plant by the Handy-i Constant dollar amounts represent I.istorical costs stated in Whitman Index of Public Utility Construction Costs. The current terms of dollars of equal purchuing power, as measured by the year's provision for depreciation on the constant dollar and cur-Consumer Price Index for All Urban Consumers. Current cost rent cost amounts of utility plant was determined by applying the i amounts reflect the changes in specific prices of plant from the Company's depreciation rates to the indexed plant amounts.
date the plant was acquired to the present. and differ from con.
i l
i l
1 i
42 1
I Baltimore Gas and Electric Company Statement of Income Adjtrated for Changing Prices For the Year Ended December 31,1983 Conventional Constant Dollar Current Cost llistorical Average Average Cost 19R3 Dollars 1983 Dollars (In Thousands of Dollars)
Operating Revenues.
$ 1,638,605
$ 1,638,605
$ 1,638,605 Purchased Fuel and Energy 654,386 663,796 670,154 Operations and Maintenance..
390,153 390,153 390,153 Depreciation..
97,090 226,679 250,841 Taxes..
224.773' 224,773 224,773 Total Operating Expenses 1,366,402 1,505.401 1,535,921 Operating Income.
272,203 133,204 102,684 l
Income from Steam Operations, Net.
933 10 (617)
Other income (including AFC)..
33,051 33,051 33,051 Income Before Interest Charges.
306,187 166,265 135,118 Interest Charges (net of AFC).
89,734 89.734 89,734.
Net incorne (excluding adjustment to net recoverable cost).
$ 216,453
$ 76,531(a)
$ 45,384 increase in Specific Prices (Current Cost) of Utility Plant and Nuclear Fuel IIeld During the Year (b).
$ 214,937 Adjustment to Net Recoverable Cost.
$ 19,148 72,420 Effect of Increase in General Price Irvel (237,882)
Excess of Increase in Specific Prices After Adjustment to Net Recoverable Cost Over increase in General Price Level..
49,475 Gain from Decline in Purchasing Power of Net Amounts Owed..
64,456 64,456 Net
$ 83,6M S 113,931 (a) Intludmg the adpritment to net reuwerable cost. net income on a omtan' dollar tats would have been $95,6%Xio 09 At Decernher 31. KM, current cm of uulity plant and nuclear fuel, net ut accumulated depreciation and amortinuon, m $6.334299.:XXA white hut &M ccm or r.et amt vetwtubic through de,,rertatkwi and amoruuuan was $3bC,964,uan Nuclear fuel material and its related effect on purchased fuel any excess of the cost of plant stated in terms of constant dollars and energy expense has been adjusted in a manner similar to util-or current cost over the historical cost of plant is not presently try plant for constant dellar amounts and at current market prices recoverable in rates, and is reflected as a reduction to net re-for current cost.
coverable cost. While the ratemaking process gives no recogni-Fuel inventories (other than nuclear fuel), the cost of fuel used tion to the current cost of replacing utility plant and nuclear fuel, in generation, and gas purchased for resale generally represent based on past practices, the Company believes it will be alkwved recent acquisitions and have not been restated from their histori.
to earn on the increased cost of its net investment when replace.
cal cost in nominal dollars. The ratemaking process limits the re-ment of facilities actually occurs.
i covery of fuel and purchased gas costs to historical cost. For these To properly reflect the economics of rate regulation in the reasons, fuel inventories (other than nuclear fuel) have been classi.
Statement of Income, the adjustment to net utility plant and fled as monetary assets-nuclear fuel should be combined with the gain from the decline As prescribed in Statement No. 33, income taxes were not in purchasing power of net amounts owed. During a period of adjusted.
inflation, holders of monetary assets suffer a loss of general Under the ratemaking prescribed by the Pubhc Service Com-purchasing power while holders of monetary liabilities mission of Maryland, the Company is generally limited to the experience a gain. The gain from the decline in purchasing recovery of historical cost of plant in service and nuclear fuel in power of net amounts owed is primarily attributable to the revenues as depreciation and amortization. During perkxis of substantial amount of long term debt outstanding which will be inflation, such amounts will be recovered in dollars having less repaid with dallars that are worth less than the dollars received purchasing power than the historical dollars invested Therefore, when such securities were issued.
43 l
j Five-Yeer Comparison of Selected Supplementary Financial Data Adjusted for Changing Prices 1983 1982 1981 1980 1979 On ' thousands of Dollars)
Operating Revenues Historical
$1,638,605
$1,575,044
$1,402,109
$ 1,212,000
$1,002,030 in Average 1983 Dollars....
$1,638,605
$ 1,625.711
$1,535,937
$ 1,465,400
$ 1,375,371 Illstorical Cost Information Adjusted for General Infttlon (in average 1983 dollars)
Net income (excluding adjustment to net recoverable cos0.
$ 76,531
$ 42,324
$ 34,812
$ 48,826
$ 68,514 income Per Common Share (after dividend requirements on preferred and preference stock and excluding adjustment to net recoverable cost)....,.
$ 1.28
$ 38
$.18
$.69
$ 1,32 l
Net Assets at Year.End at Net Recoverable Cost.
$1,522,681
$1,467,707
$ 1,388,830
$1,446,671
$ 1,552,243 Current Cost Information (in average 1983 dollars) l Net income (excluding adjustment to net recoverable cost).
$ 45,384
$ 21,948
$ 17,463
$ 28,063
$ 28,576 Income Per Common Share (after dividend requirements on preferred and preference stock).
$.47
$ (.19)
$ (.34)
$.04
$.05 Excess of increase in Specific Prices After Adjustment to Net Recoverable Cost Over increase in General Price level..
$ 49,475
$ 28,325
$ (110,604)
$ (231,895)
$ (274,907)
Net Assets at Year End at Net Recoverable Cost.
$1,522,681
$ 1,467,707
$1,388,830
$1,446,671
$1,552,243 Gener01 Information Gain from DecRne in Furchasing Power of Net Amounts Owed (in average 1983 dollars)..
$ 64.456
$ 70.532
$ 138.464
$ 197,908
$ 220,889 Cash Dividends Declared Per Common Share Ifistorical
$ 2.92
$ 2.80
$ 2.65
$ 2.50
$ 2.40 in Average 1983 Dollars
$ 2.92
$ 2.89
$ 2.90
$ 3.02
$ 3 29 Alarket Price Per Common share at Year End 3
ilistorical
$31.63
$2C5
$23.13
$19.75
$22.13 -
J In Average 1983 Dollars
$31.07
$29,34
$24.52
$22.81
$28.72 i
Average Consumer Price Index 298.4*
289.1 272.4 246.8 217.4 Year End Consumer Price index 303 8*
292.4 281.5 258A 229.9
'Istinured l
Officers 44- ;
i l
Baltimore Gas and Electric Company
]
Bernard C. Trueschler Arthur E. Lundvall,Jr.
Cha Jan of theBoardandChief Vice President, Supply hecuum Offica Henry H. Miller George V. McGowan Vice itesident, Distribution Ivesident and t bief Operating Chris H. Poindexter ll"
Vice IVesident, Engineering and Norman J. Bowmaker
"" construction Vice 1+esident, GeneralServices Alfred H. Inners Raymond C. Bryant Treasurer and Assistant Secretary Vice President, Consumer Thomas V Brady Assistant Secretary and Assistant Edward A. Crooke Treasumr Vice President, Finance and gy,7l,,y,gg;y,7y y
b Accounting, andSecretary Assistant 7Veasurer New Officer
^U icelY t
>rit, Afanagement and 7g
,,a 3,c,,g Assistant Secretary and j
l John W. Gore,Jr.
Assistant Treasurer succeeding l
l ViceItesident Electric Henry E. tentz who retired with Interconnection and Operations more than 44 yeats of service.
Board of Directors
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Bemard C.Trueschler Paul G. Miller Henry E Sayder,Jr.
t Chairman of the 80 arts of the Retired (Former Chairman of the General Afanager, Product Line Company, Baltimore Board, Commercial Credit Planning and Afanagement, Company) Baltimore AT&T Technologies, Inc.,
Ceorge V. McGowan (Financing Insurance, etc.)
Aforristown, N 1+esident of the Company:
I U**""#### "# N"#E*#"#l UdIh*0" George G. Radcliffe Chairman of theBoardand C. Edward Utermohle,)t.
). Owen Cole JYesident, 7be Baltimore Life Chairman of the Executive Chairman of theBoard. First insurance Company: Baltimore Committee of theBoard of the AlarylandBancorp, Baltimore (Insurance)
Compan): Baltimore (Bank Holding Company)
Charles S. Sar. ford,Jr.
George W. Velenovsky leslie B. Disharoon lYesident, Bankers Trust Retired (Former Chairman of Chairman of the Board and President, Afonumental Nene York Corporation, the Board, The Annapolis l
Nete York (Bank Holding Banking and 7Vust Company)
}
Corporation, Baltimore Annapolis, AfD(Banking) j (Insurance)
Company) l Sister Kathleen Feeley, John P. Sippel Harry K. Wells 5
Retirtd (Former Vice Chairman of the Board, S.S.N.D.
Presulent, Colkge of Notre Chairman of the Board, The AicCormick & Compan); inc.,
Baltimore (Food Processing Citizens National Bank) 1 Dar &JJ Alaryland, Baltimore Laurel AfD(Banking)
.5pices, etc.)
(Eduation)
Dr. John B. Slaughter New Dieector Jerome W Geckle Chancellor, Uniwrsity of At itsJanuary 1984 meeting, Chatrman of the thxtrd and blaryland at Colkge Park, the board af Directors elected LYesident PilH Grvup, Inc.,
CollegePark AfD Dr. John Brooks Slaughter, Baltimore (Vehicle and (Education)
Chancellor of the University l
FCF30""FI S"*##I of Mary!and at College Park,
{
a Director of the Company, effective February 1.1984.
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Annual Meeting Executive Officrs Upon written request to The annua! meeting of Gas and Electric Building, Alfred II. Inners, Treasurer, su k kholders will be held Charle.s Center, P.O. Box 105, P.O. Box 1475, Baltimore, at 10 00 A.M on May ( !9%
Hakimore, Maryland 21203 Md. 21203, the Company will in the Constellation Hallnium furnish without charge a copy of the Ilyan Regene) Hakimore, of its Form 10.K annual 3001.ight Street, Hakimore. Maryland Registrars report, including financial Preferred and Preference Stot k statements, after it is flied with The Chase Manhattan llank, the Securities and Exchange N.A., New York Commission in March 1984.
l'nion Trust Company of Maryland, Hakimore Common stock Morgan Gu 4ty Trust Company of New York i'nion Trust Company of Maryland, Bahimore Transfer Agent Preferred. Preference and Commlin $h A k Chemical Bank, New York Maryland National Bank.
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