ML20246A153
| ML20246A153 | |
| Person / Time | |
|---|---|
| Site: | Beaver Valley |
| Issue date: | 12/31/1988 |
| From: | Markle J, Rogers J PENNSYLVANIA POWER CO. |
| To: | |
| Shared Package | |
| ML20246A132 | List: |
| References | |
| NUDOCS 8905080186 | |
| Download: ML20246A153 (26) | |
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' 1988 ANNUAL REPORT W
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~ Operating Statistics . . . . . . . . . .' . . . . . . .,". l g>[%w/[yM6
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.~ Selected Financial Data : . . . . . . . . . . . . . '. . 5 '
' Wnagement's Discussion and Analysis ; . .. 6 8.
4 WW l Statements of Income . . . 4 4. .i. . . . . . , 9 ' b" d ip s/%$$@Unid,<'%f M
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. Balance Sheets ; . . .. . .. . . . . . . . . . .'. . 10-11; QMN OM$f -l' Statements'of
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99@Q)Md Ne:7 49 s - Qg v-. fp' Statements' of Retained Earnings J. . .. . . .. . . ,13 : <, M@gg.9 qq;Ay:3)@{g$J Other ws/M lpg%: x@h:.sg g-@,:
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- Paid-In Capital i . . . . . . . . . . . . . 13 n gi WMM ip[R 9 NN YLVANIAMbMl gggjpg , ',
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PENN POWER { Financial Highlights For the Years Ensled December 31, 19 4 1987 Change (In 31illions) NET INCOME Kilowatt-flour Sales , a ,o21. 7 4,182.3 + 20.14 W'umns of couars) Operating Revenues 827(2 $223.2 + 24.0g Operating Expenses 50 and Taxes 211.1 177.2 + 19.1g Operating income . . . $46 6 67.1 40.0 + 45.bg $45.4
7 Allowance for Funds Used Fdst During Construction, Net 2.0 28.4 - 92.99 l & M Interest Expense 12.1 41.2 + 2.39 40 " S j Net income .. ., :8.o 37,6 + 1.og l, ', $37.6 s38 o __
Earnings on Common Stock 27.0 20.5 + 1.8% ,
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Dividends on Capital Stock , 8 :b.6 $ 38.8 - 0.3% - Capital Expenditures- 30 - Construction of Facilities S 21.:. $ 54.5 ; Nuclear Fuel . L1 5.4 ) , Other Capital I, eases .I 1.3 Total , 8 21.8 $ 61.2 - 59.59 20 _ {l Internally Generated Cash 8 a.2 $ 27.9 - 84.9 9 I l j External Financing: A New Financing s n. . , s31.7 3 0,,,,_ - Redemptions and y I!cpayment8 19 30.3 Net Exteriud Financing . A i1.7 $ 4.4 lieturn on Average Common 0 -. Equity 9. % 9.39 1984 1985 1986 1987 1988 1 l
q s Message to Stockholders Record sales, revenues, and customer demand highlighted The Companyi total operating revenues increased 25 percent the Company's 1988 performance. for the year. Increased sales contributed to higher power pro-duction expense, which was up 18 percent. This factor, along
- Total sales reached a record 5 billion kilotcatt hours, with the loss of Allowance for Funds Used During Construction an increase qr/0,1 percent over 1987, when Perry Unit I went into service, limited the increase in
- Revenues Jhnn total kilorcatt hour sales climbed to a net income to 1 percent.
record $267.3 million, a 27.7 percent increasefor the yea r. Growth Continues In Sersiee Area
- A sunoner heat trare produced a record peak demand Penn Power's Economic Development Rider (EDR) to indus-of 666 megawatts, up JJ megarratts over the precious trial rates continues to encourage expansion within our service record set in 1987. area. In 1988, six industrial customers qualified and received special rates under the rider. These incentive rates have helped Retail Sales increase 42 companies start up or expard their operations and have Retail sales, led by a 7.5 percent rise in industrial sales, added $9.4 million in electric sales revenues to date. Our EDR increased 0.5 percent. This was the fourth straight year of solid also has helped create more than 1,800 new jobs within our growth in commercial sales, which were up 6.4 percent. Resi- service area.
dential sales increased 4.9 percent for the year, continuing our In the Company's Mercer County Division, a 238,000-square-history of consistent residential sales growth. Total sales were foot manufacturing building has been completed and will be led by an 85.2 percent increase in sales to other utilities. occupied by the Houston Texas-based Ivex Corp. Ivex expects Sales to Sharon Steel, our largest customer, were up for the to employ 200 at the facility by the end of 1989. year. Sharon Steel, operating under Chapter 11 bankruptcy Rapid commercial and residential growth continues to take since April 1987, increased steelmaking and set a production place north of Pittsburgh in our Zelienople District, record in 1988 There has been an encouraging development regarding the
- There are 58 residential and 160 commercial develop-idle Babcock & Wilcox seamless pipe operation in Koppel Lone ments in progress. In Cmnherry Tozenship, alone, Star Technologies is negotiating to buy the facility and we look about $75 million of construction took place during forward to this modern plant going back into production. 1988
- The Company teill open a new customer service office Bulk Power Sales Climb this spring to meet our customers' needs in this rapidly In 1989, Penn Power has commitments with other utilities groicing area.
to sell them as much as G3 megawatts.
- The completion in 1989 of the Allegheny E.rpressicay On January 1,1989, we increased our power sales commit- beticeen Pittsburgh and its northern suburbs icill im-ment to the Potomac Electric Power Company (PEPCO); prove accessibility to the city.
another increase in this long-term sales agreement will take place in June. Over the term of this agreement, signed in 1987, Also, we look forward to 1992, when both the Beaver Valley Penn Power will sell approximately 7 billion kilowatt-hours to Expressway and the expansion project at the Greater PE PCO, producing $21 million in average annual revenues. The Pittsburgh International Airport will be completed. These agreement extends through the year 2005. projects should spur growth throughout our service area. Revenues and Income Increase Planning for the Future New electric rates that include construction and operating For the first time since the early 1970s, our capital budget costs for Unit I at the Perry Nuclear Plant are now being for additions and improvements will be greater for projects at phased in as a result of a $67.1 million rate increase effective our coal-fired plants than for nuclear projects. In 1989, coal-fired May 4,1988. The rate increase for the fhyt year of the phase-in and nuclear projects are budgeted for $13 million and $6.5 mill-amounts to $24 million. ion, respectively. Total property additions and improvements 2
O PENN POWER for 1989 are budgeted at $30.3 million. Funds needed for addi-tions and improvements are e.stimated to total $140 mi!! ion for the five-year period 1989 through 1993. Management Change l A. Wayne Cole, Penn Power president since 1981, retired l from the Company effective March 1,1989 after serving the Ohio Edison System for more than 38 years. We are grateful for his dedicated and skillful service to the System, our customers, and the communities we serve. Employees itemain Committed to Safety and Service ELECTRIC PLANT Penn Power continues to maintain its position as the safest CONSTRUCTION EXPENDITURES elect rie utility in Pennsylvania and one of tL safest in the nation. #' "*P For the si.rth time in the Comptny'n history, employees 90 teorked one million consecutive man hours leithout a disabling injury. $81.3
- lhvee Alansfield Plant employees completed one million 80 ----------~~---
l man hours reithout a disabling injury, a first for our pla nts. 79 We also continue to maintain our high standing with our cus-tomers. Opinions gathered through the Company's annual survey eo reflect high customer satisfaction with our services. s54'o 554.5 We commend our employees for their safety achievements and dedication to providing Penn Power customers efficient and 50 courteous service. 40 r/ < .+- , $ 36.3 - Justin T. Ilogers, Jr. 30 Chairman of the Board
$21.3 20
.' O James E. Markle President 0
New Castle, Pennsylvania Mar ch 7,1989 1985 1986 1987 1988 1989 (Est.)
- Excludes Nuclear Fuel and Capital Leases 3
i l l l I i rb O 'ratino oStatistics 19s3 19N.. 1936 19sa. 1981 1 1 I Revenue from Electric Sales (Thousand.e 8 74,316 $ 09,133 j Residential . , 5 91,,73 $ 74,015 $ 75,751 Commercial , , , 50,c h 40,209 40,772 39,266 35,542 , Industrial , N;.225 69,958 75,923 77,803 77,210 : Otner , . .I 15 G,611 G,982 G,916 G,9G3 Subtotal . , , 23G.591 191,393 199,428 198,301 188,S48 Sales to Utilities M0. ' 90 18,124 15.455 20,125 14,721 ! 1 l Total >267. bl $209,513 62l4.X83 $218,420 $203,569
=.=
Revenue from Electric Sales-9 : Residential . , :1.2'i 35.09 35.39 34.04 34.09 i l Commercial 13.9 19.2 19.0 18.0 17.5 i l Industrial . . :2. : . 33.4 35.3 35.0 37.9 l Other , 1.1 3.2 3. 'L 2 3.4 l Subtotal . , , 33.5 91.4 92.8 90.8 92.8 l Sales to Utilities 11.5 8.6 s.2 9.2 7.2 Total . , , 100.09 100.09 100.0 9 100.09 100.09 Kilowatt Hour Sa'es DIillions): Residential , 1.003.3 961.3 922.2 894.3 890.7 I Commercial 663.1 627.8 597.5 565.5 548.4 Industrial 1,377.9 1,7 17.5 1,667.F 1,705.9 1,849.7 j Other 1: r..G 120.7 122.0 124.8 125.9 Suttotal , , :.cx9.9 3,463.3 3,309.o J,290.5 3,414.7 T;98.3 Sales to Utilities 1,.::(if 719.0 GX3.6 899.1 Total 5.o21.7 4,182.3 3,993.1 4,189.6 4,013.0 ) Custom (rs Served at December 31: Residential 116.936 115,793 114,646 113,697 113.3G8 Commercial 11,422 14.261 13,923 13,768 13,001 j Indvtrial 261 273 278 283 285 } Other 149 142 135 134 128 ! Total 132,o2., 130,469 128,982 127,682 127,3x2 ) ResidentialCustomer Averages: Average Kwh Used per Residential Customer 3.G76 8,357 b,091 7,880 1,854 Average Price per Kwh-Residential (Cents) 7.91 7.77 8.49 8.31 7.76 , Kilowatt-Ilours Generated (Millions) , 4,117.1 4,197.2 3,966.8 4,012.9 4,063.5 l Peak Load (Megawatts) . cGG Gil 547 569 597 Cost of Coal per Million BTU S 1. :5 8 1.34 $ 1.40 $ 1.50 $ 1.50 Generatmg Capability: Coal ,, 7 LG' , a 4.09 80.2% 44. 4 i..9 Oil , ,,
x 2.8 3.0 6.1 6.1 Nuclear .
~ ~
2'c 22.6 10.8 16.2 1R 2 Total 100.0'; 100.09 100.09 100.09 100.09 Sources of Electric Generation: Coal , 7.1 M i a.09 78.79 73.8 9 79.39 Nuclear , , .
~
u s.2~ 25.0 21.3 26.9 oo.7 Total , 100.o'; 100.09 100.09 100.09 100.09 Number of Employees at December 31 1.716 1,725 1,774 1,7" 1.828 4 _ _ _ ~
O-. PENN POWER 1 lJ L selected Financiai nata i n- 19s7 19s0 i9s5 19si (Dollars in Thousands) Operating I!evenues , 8 275.161 $ 223,197 8 233,024 $ 235,406 $218,566 Operating income $ 67,051 $ 4f>,991 $ 51,1f>4 $ 53,514 $ 44,519 Net income (i) $ 17,960 37,594 $ 44,740 $ 46,593 $ 45,4(" Earnings on Common Stock (i) 8 26,993 $ 26,511 $ 33,529 $ 36.576 $ 36,439 Cash Dividends on Common Stock ,
$ 27,676 $ 27,676 $ 25,998 $ 23,560 $ 20,862 Total Assets at December 31 81,011.n52 $ 979,890 $ 965,663 $ 964,735 $881,119 Utility Plant , 81,131,D62 $1,121,765 $1,063,719 $1,012,057 $930,510 Depreciation Reserve . 2y1.163 238,011 210,108 192,524 173,058 Net Utility Plant 8 867,7D 1 $ 883,754 8 853,611 $ 819,533 $757.452 1,ong-Term Obligations , 8 11.F 17 $ 50,277 $ 51,454 $ 51,628 $ 57,492 CAPITAL.!XATION:
ommon Stockhokler's Equity , S 277,N9 $ 278,510 $ 279,672 8 260,131 8247,096 Preferred Stock-Not Subjee; to 31andatory ltedemption 11,905 41,905 41,905 41,905 41,905 Subject to Mandatory Redemption ,
65,ln2 68,142 69,362 70,662 56,562 Long-Term Debt , '5^.261 372,391 357,144 379,128 317,764 Total Capitalization 8 713,110
$ 760,948 8 748,083 $ 751,826 $663,327 CAPITAL.lZATION RATIOS:
Common Stockhokler's Equity , 37. 4 ' - 36.6% 37.4% 34.6 9 37.3 % Preferred Stock-Not Subject to Mandatory Redemption 5.6 5.5 5.6 a.6 6.8 Subject to Mandatory Redemption x.6 9.0 9.3 9.4 8.5 Long-Term Debt , IN2 48.9 4.., a0.4 47.9 Total Capitalization 1no.nG 100.0% 100.0'L 100.09 100.09 (i) 1987 includes an $11,000,000 charge resulting from a Supreme Court of Pennsylvania decision concerning the recovery of costs associated with planned nuclear units which were terminated in 1980, resulting in a $7,300,000 reduction in net income and earnings on comnm a stock (see Note 3 to the Financial Staterv,nts).1984 includes a noncash deprecia-tion reserve adjustment of $6,800,000 which increased net income and earnings on common stock. 5 j i
F i l l l l l n e Management's Discussion and Analysis of
- Results of Operations and Financial Condition ltesults of Operations Increased operating revenues in 1988 reflect strong growth in kilowatt-hour sales over 1987. Additionally, on May 4,1988, the Company implemented new rates forits Pennsylvania Public Utility Commission (PPUC) jurisdictional customers which are designed to produce approximately $67,100,000 of additional annual revenues phased in over several years (see Note 2 to the
' Reodential Hnancial Statements). This rate increase includes investment C IC SALES og b Peg M 1 MS Mgan commWal opMahon (Millions of Kilowatt hours) E# Industrial during the fourth quarter of 1987) and recovery of associated E cornrnercial operating costs.
Other (includes The followirg summarizes the changes in operating revenues Street Lighting during 1988 and 1987: and Municipalities) . 4000 I988 IU87 l (In Millions) l Sales tollesidential, Commercial I and Industrialcustomers: 3500 Increased kilowatt-hour sales . $12.0 $ 9.5 I Change in base rates . . . . . 2.5 (10.6) Decrease in fuel recovery rates . (1.3) (10.5) e '% Totalbilled revenue ! 3000 increase (decrease) 13.2 (11.6) l Accrued phase-in plan revenues . . 29.5 - Sales to utilities . . . . ., ., 12.8 2.7 Other revenues . . . .. .. (0.5) (0.9) 2500 Net increase (decrease) .. . . $ 55.0 $ (9.8) Total kilowatt-hour sales increased for the second straight year. An 85.2% increase in sales to other utilities was primarily responsible for the 20.1% increase in total kilowatt-hour sales 2000 in 1988. Also contributing to this increase was a 6.5% increase in sales to system customers attributable to increases of 7.5%, 0.4% and 4.9% in kilowatt-hour sales to industrial, commercial and residential customers, respectively. This increase in kilowatt-1500 hour sales in 1988 continues the sales growth experienced in 1987 when total kilowatt-hour sales increased 4.7% over 1980. The reduction in base rates for 1987 reflects a PPUC rate order effective July 17, 1987, which was designed to reduce the 1000 Company's annual operating revenues by approximately
$13,000,000. Additionally, a settlement agreement was adopted by the PPUC on September 25,1986, whereby the Company has been making refunds to its customers in connection with certain income taxes normalized in prior years. The effect of this settle-500 - ment decreased operating revenues and income taxes by
$6,500,000 and $7,200,000, respectively, and increased other interest expense by $700,000 during 1986, resulting in no material effeet to net income for 198G.
O The following summary shows, by income statement caption, 1984 1985 1986 1987 1988 nonfuel expenses attributable to Perry Unit 1 operations in 1988 6
f.
= PENN POWER l
i i 4 l l SYSTEM ELECTRIC I l Residential SALES REVENUES and 1987. Also shown is the noncash return (allowance for funds (Minions of Douars) 'E industnal used during construction) included in net income attributable to M Commercial the unit in 1987 and 1986. Other (locludes 19S8 1987 1956 Street Lighting j and Municipalities) s (In Millions) l Otheroperation 250 expenses $ 6.2 $ 0.8 $ - ' Maintenance . 1.5 0.1 - Provision for ; depreciation . . 8.0 1.1 - 225 j
~
General taxes . 3.2 Allowance forequity !' funds used during $e. construction ... 17.4 16.1 200
- N Allowanee for borrowed ' -
i fands used during . construction . . . - 6.4 6.3 1 175 The adverse effect of these additional costs prior to recovery s
- j l through electric rates was somewhat offset by a PPUC account- ,
ing order which permitted the Company to defer Perry Unit 1 9 costs until May 4,19X8 (see Note 2 to the Financial Statements). 150 During 1988 and 1987, the Company deferred $6,334,000 and ,'
$1,855,000, respectively, of operating costs and $9,651,000 and '
n
,' ', W $1.369,000, respectively, of interest expense associated with the ,
unit. 125~~ The change in fuel costs during the last two years was attribut- ,', able to the following factors: 1988 1987 (In Millions) 100 . Change in fuel prices . . , $ 4.2 $ (3.2) ! Change in mix of fuel consumed 3.4 1.2 j Difference in net deferred fuel costs . (12.2) (9.9) l 75 Net decrease , , , . $ (4.0) $(11.9) Purchased and interchanged power increased in 1988 over 1987 principally as a result of the purchase of a portion of Cleve- 50 land Electric illuminating Company's Perry Unit I capacity. This capacity purchase arrangement will end in May 1989. Also, the Company purchased additional power in 1988 to meet de-mand during a scheduled maintenance outage at the New Castle 25 Plant and a refueling outage at lleaver Valley Unit 1. Purchased and interchanged power increased in 1987 over 1986 as a result ; of the Perry capacity purchase and a reduction in capacity sales to Ohio Edison. The 1988 outages also contributed to the I increase in maintenance expenses for 1988 when compared a ! to 1987, 1984 1985 1986 1987 1988 , l l l
\
7 i l
f l 1 l l l n U Managenlent's Discussion and Analysis (continued) Two events in 1987 affect the comparison of other income to Based upon earnings for 1988, the Cor.1pany wouki be permitted, l 1988 and 1936. First, the Company wrote off approximately under its first mortgage indenture, to issue approximately
$2,000,000 of costs in 19A7 associated with four nuclear generat- $115,000,000 principal amount of first mortgage bonds assuming ing units terminated in 1980. This write-off was a result of an interest rate of 11%, but couki not currently meet the require-accounting standards prescribed by the Financial Accounting ments in its charter for the issuance of acklitional preferred stock. l &andards Board which require the cost of such projects to be The Company will increase its electric rates in May 1989, l recognized as an as3et only to the extent of the present value of resulting in additional annual cash revenue of approximately 1 revenues to be collected during the period of cost recovery from $28,000,000. This increase is in connection with the phase-in j customers. Second, a Supreme Court of Pennsylvania ruling with plan referred to above. Additional annual rate increases of ;
respect to the recovery of the costs of these terminated units approximately $32,000,000 in 1990 and $36,000,000 in 1991 will l from the Company's reta:i <.ustomers resulted in a write-off and be implemented prior to a scheduled $52,000,000 reduction in provision for mfund to customers for previously collected 1992 which completes the phase-in program. abandonment costs which decreased 1987 operating revenues, i other income and income taxes by $2,300,000, $8,300,000 and ;
$3,700,000, respectively, and increased other interest expense SALES TO OTHER UTILITIES phi ns f Kdowatt hours) by $400,(M) (see Note 3 to the Financial Statements). The charge to 1987 net income from these two events totaled approx-imately S8,300,000. 1400 Interest expense increased in 1988 compared to 1987 due to L33l8 the issuance of $27,100,000 of long-term debt during 1988 nd .
$35,000,000 during the third quarter of 1987, The issuance cf 1300 {
additional long-term debt in 1987 partially offset the effect of > approximately $17,100,000 of redemptions during the first : 1200 . quarter of the year, resulting in an overall reduction in interest 8 expense for 1987 when compared to 1986. The electric utility industry i.s subject to inflationary pressures ggg -~ similar to those experienced by all other industries To the extent that the Company incurs additional costs or receives benefits resulting from the effects of inflation, it is anticipated that those 3000 - effects will ultimately be reflected in the Company's rates. Capital Resources and Liquidity 900 899.1 l_ Capital requirements in 1988 for the Company's construction KT?N i program, capital leases and nuclear fuel were approximately s%M ) ! i
$25,000,000. Over the la3t five years these requirr ments were 800 A y j ' y_
approximately $333,000,000, of which approximately $145,000,000 g 7190 d was provided from external sources. The 1989-1993 construction / u program and capitallease requirements are currently estimated 700 ; j_ 683 6 _ , _.-[ -.- S i ' A to be $110,000,0n0 texcluding costs of nuclear fueD; additional 4"a f financing will be necessary to fund a portion of this new con- 600 598.3 1 E ' struction. The Company has additional cash requirements of ; (( approximately $133,000',000 for the 1989-1993 period to meet L ' J ? a maturities of, and sinking fund requirements for, long-term 500 da s 1 !'E_ i debt, long-term obligations (excludm, g nuclear fuel), and $ t , i preferred stock. ; f
, ) l Investments for additional nuclear fuel during the five years 400j s_
[ 1989-1993 are estimated to be approximately $33,000,000. l i
;6 .
During that same period, long-term obligations related to j r nuclear fuel are expected to be reduced by approximately
$54,000,000 as the Company recovers such costs through its 300 _. d@
g flk 4 y electric rates. Investments in nuclear fuel of approximately ? 5 S- 1 ) [
$9,000,000 will be made in 1989 through the incurrence of addi. 200 M _ _> l
_q _ tional long-term obligations, At December 31, 1988, the Company had approximately h M d,
?
, j l
$5,000,000 of cash and temporary cash investments. The 100 _$ , _ y 4 Ccmpany also has $29,000,000 of short-term bank lines of credit @ i .
L (of which $4,000,000 was utilized as of December 31,19M) and 0 the ability to borrow up to $50,000,000 from Ohio Edison Company under a oystem funds pool agreement. 1984 1985 198G 1987 1988 8 )
--____a
A M= PENN POWER W ) L Statements ofIncome For the Years Ended December 31, 1!as 1987 1986 (In Thousands) l Operating llevenues (Note 2r ,
$273,131 $223,197 $233,024 Operating Expenses and Taxes:
Operation-Fuel . . 50 1% 00,100 60,980 j Purchased and interchanged power, net . 21,181 3,428 796 q Other operation expenses _ gj:,ylo 48,244 45,848 1 l Total operation 12 Nous 106,772 113,024 ;j Maintenance .. 21,743 18,977 18,355 > Provi.< ion for depreciation and amortization 2x, U;9 22,547 21,316 General taxes .. I x,62.; 14,943 14,813 Deferred Perry Unit I costs (Note 2) 01,331) (1,855) - Income taxes , , 20,509 15,822 13,732 Total operating expenses and taxes , al1,1lo 177,200 181,870 Operating income , c7,051 45,991 51,154 Other Income and Deductions: Allowance for equity funds used during construction 183 19,181 18,078 Mi3cellaneous, net t Note 3) 1.105 (9,251) 1,839 a income taxes-credit 197 10,297 7,870 j Total other income and deductions 1,787 20,227 27,787 Total Income 63.f 1 I 60,218 78,911 Net Interest: Interest on long-term debt , ax,437 35,793 J8,397 Interest on nuclear fuel obligations 2,can 3,674 3,077 Deferred Perry Unit 1 interest (Note 2) (9.631) (3,369) - Allowance for borrowed funds used during construction, net of deferred income taxes . (1,*31) (9,216) (8,539) Other interest expense , 1.29p 1,742 1,266 Net interest , :lo,s31 28,c24 34,201 Net income :7,900 37,594 44,74t) Preferred Stock Dividend 1(requirements 11,084 11,211 _ 10.967 Earnings on Common Stock , S 26,99:: $ 26,511_ $ 33,529 The accompanying Notes to Financial Statements are an integral part of these statements, f i i 9 ; i _o
I l l 1 l l l' \ l l l i i l l ! i l l 1 l
)
l r-- i Balance Sheets s k Assets At December 31, 19ss 1987 (In Thousands) Utility Plant: In service, at original co.st , ,.. , , , $1,039,166 $1,023,305 Less-Accumulated provision for depreciation . -
"G4,108 238,011 774,998 785,294 Construction work in progress-Electrie plant (Note 8) , , , , . . 66.293 63,623 Nuclear fuel , , , , , 20,503 34,817 92,796 98,460 j dG7,791 883,754 l 1
i Other Property and Ins estments , , 2,3 16 1,239 Current Assets: Cash and cash equivalents , , , 4,c70 8,998 i Receivables- l Customers (less accumulated provisions of $734,000 and {
$732,000, respectively, for uncollectible accounts) . , , , , , , 15,4x7 12,150 i Parent company ,, , , , 14,673 14,930 !
Other , ,. .. , , , 12,577 14,844 l Materials and supplies, at average cost- l Fuel . ,, 7,529 12,727 l Other , , , 9,025 8,088 l Prepayments , , 2,355 j if 29 G5,290 74,092 Deferred Charges: Deferred fuel costs , , ,, , . , , , , , , 18,065 4,961 Accrued customer revenues (Note 2) , , , , 30,015 - Deferred Perry Unit I costs (Note 2) , , , >1,209 5,224 Other , , , , , , , 9_,30:_1 10,620 78,022 20,805
$1,014,052_ $ 979,890 10
1 l PENN POWER i i l l l l l 1 Capitalization and Liabilities i At December 31, 19 + 1987 (In Thousands) ! Capitalization (See Statements of Capitalization): Common stockholder's equity , , 8 277,N:9 $ 278,510 Preferred stock-Not subject to mandatory redemption , i1,905 41,905 Subject to mandatory redemption , , 65,102 08,142 l Long-term debt , ,, . _ , jp.p;I
; 372,391
..- -.7.13,110 700,948 Lons Term Obligations:
Nuclear fuel (Note G) ,, , , . , ::7,o35 40,620 Capitalleases (Note l) -. 7.792 9,657 ;
,1 41,*1i 00.24s 4 Current Liabilities:
Currently payable preferred stock, long term, debt and l long-term obligations , , . 51,5u6 18,027 j Notes payable to banss (Note 7) , , , , , 4,000 - Accounts payable-Parent company , , , 1,i11 4,808 Other , 29.513 33,963 Accrued taxt 8 . . 6.5 13 2,013 Accrued interest , , 9.xt2 9,519 Other , , , 12._532 - 11,700 121,(!g 80,150 j Deferred Credits: Accumulated deferred income taxes , , , 59,900 41,740 Accumulated deferred investment tax credits , , 31.576 32,324 Other , , , , , li:,237 14,445 e _ 101,713 88,509 . [ Commitments, Guarantees and Contingencies (Notes 4 and 8) ,, _ . _ 81,011,052 $ 979,890 1 The accompanying Notes to Financial Statements are an integral part of these balance sheets. i (
)
11
1 l ) l r- . L Statements of Capitalization j l 2 l At December 31, 19 9 19*7 l (In Thousando Common Stockholder's Equity: Common stock, $30 par value, C,5f n),000 shares authorized I 6,290,tnio shares outstanding , $ 1".7t o $18x,700 i Other paid in iopital . , 209 212 {'
!!etained earning 3 (Note Sa) , m.9::o o9,598 Total common stockholder's equity 5f5 278.510 Optional liedemption Price i Number of Shares Aggregate
_ Outstanding (in ~ 19x8 1987 Per Share Thousands) Preferred Stuck (Note 5bh Cumulath e, $100 par value Authorized- 1,200JW H bhares Not Subject to Mandatory I?edemption: 4.2444JWJ , 141,019 141.049 $102.9N105JH1 $14,614 14.105 14,105 TJW?< 8.009 , 118,000 118,000 102.56-103,27 12,144 11,*ou 11,800 8.48 4 9.169 . 160.000 160.000 1 % 55 105.20 16,782 _16, m i 16JH K) Total not subject to mandatory redemption 419J49 419.049 S43,540 41/so5 41,1N)3 Subject to Mandatory l 1(edemption (Note Sc): ( 8.24 % 10.509 165,tx N) 170,000 $104.12-107.58 $17,526 16,300 17,000 1 11JHrbil.50% '139,616 343.616 103.29-107.67 35,823 . ,Juu 34,362 13.004-15JHlq 173,600 1AO,000 110.40-113,85 19,419 17 ;ino 18JHN) Itedemption within one year (1,220> l (2.7_2m Total subject to I mandatory k redemption 678.216 693,616 $72,768 65.102 6x,142 l Long Term Debt (Note 3dt i First mortgage bonds-10.969 weighted average interest rate, due 1938 through 1993 , s4,s9a in),268 10.069 weighted averageinterest rate, due 1991 through 199x , 46.s90 46,890 8,46G weighted as erage interest rate, due 1999 through 2003 , 67.629 67,620 9.26G weighted average interest rate, due 2tH4 through 21Hb . 41,0 to 41J40 j Total first mortgage bonds , 2 p g4 to 245,818 i Secured notes and obligation-6.46% weighted average interest rate, due 1988 through 1993 . , 19,701 2,5*;7 11.099 weighted average interest rate, due 1994 through 1998 e , owc 4x,0x6 10.669 weighted average interest rate, due 1999 through 2003 . 23,s:9 28,819 7,53'i weighted aves . ige interest rate, due 2004 through 2008 "o "69 22,369 h.989 weighted average interest rate, due 2009 through 2013 , 5,200 o,200 9.959 weighted average interest rate, due 2014 through 2015 , 26.930 26.950 131,113 134,411 An aunt held by Trustee mais (1.620) Total secured notes and obligation _ 150,x21 132,791 Unsecured notes-6.939 weighted average interest rate, due 2018 , lo,ano - Net unamortized discount on debt and other (lJulij (777) Long-term debt due within one year , (42.2'2 0 (5.441) Total long-term debt , :58.264 372,391 Total capitalization , , , 74",1 lo $760,948 The accompanying Notes to Financial Statements are an integral part of these statements, 12
PENN POWER t b Statements of Retained Earnings For the Years Ended December 31, 19 4 1987 19Ni (In Thousands) Italance at beginning of year , , , ,
$ x9,593 $ 90,760 $ N1,220
.. _37,960 37,594 44,740 Net income ., , . . , ,
127.55s 128,3M 127,960 27,676 27,670 25,998 Cash dividends on common stock , . . 10.952' 11,080 11,202 ' Cash dividends on preferred stock , , , 38.623 38,750 37,200
$ 90,700 Italance at end of year (Note Sa) , . , ,
$ glo $ 89,59K
] Statements of Capital Stock and Other Paid in Capital Prefcrred Stock -
Subject to Not Subject to .ilandatory Common Stock Mandatory lleden ption Itedemption
]
Other J Number Par Paid In Number Par Number Par j of Shares Value Capital of Shares Value of Shares Value j lI (Dollars in Thousands) l llalance, January 1,19% n,890,000 $176.700 $211 419,049 $41,000 414.528 $71,453 Sale of Common Stock . 400,000 12,000 - - - - - Sinking Fund 1:edemptions-H.249 Series .
- - - - - (5,000) (500) 11.00% Series .
1 - - (2,937) (294) llalance, December 31 1986 0,290,000 188,700 212 41.9,049 41,90a 400,591 70,659 i Sinking Fund I!ed"mptions- 1 8.244 Series .. - - - - - (5,000) (500) 11.009 Series , , (7.975) (797) llalance, December 31,1987 6,290,000 188,700 212 419,049 41,905 093,616 09,302 Sinking Fund 'Itedemptions- < 8.219 Series , , ,, ,
- - - - - (5,000) (500) 11.004 Series . , ,. . - - - - - (4,000) (400) 15.004 Series , , ,,
(3) - - (6,400) (640) llalance, December 31,1988 . . 6,200,000 $188,700 $209 419,049 .841,905 678,210 $67,822 4 The uecompanying Notes to Financial Statements are an integral part of these statements, l 13 ! i i
.. .. .. , .. . , . .. .... ., . . . , . . . .. .. . l
I + r l l l l mJ Statements of Cash Flows , 1 1 For the Years Ended December 31, les 1987 19 % 1 (In Thousands) 1 1 Cash Flows from Operating Actisities: ) Net income ,, 8 37sco $ 37,594 $ 44,740 )' Principal noncash items-Depreciation and amortization 10,1::2 31,469 29,190 Deferred income taxes net , , 1919 11.338 4,704 ; Investment tax credit 8, net . , , !74m (1,044) 5,119 I Leferred (accruedi revenue, net . G;l .17D 39 6.536 i Allowance for equity funds used during construction , ( b5i (19,181) (18,076) Deferred fuel costs, net a 13.2 N (618) 8,542 Write-off of terminated construction project 8 10,473 - 1 Deferred Perry Unit I costs ... (15,%:o (5,224) - l Change in applicable assets and liabilities-Receivables . . .. ,
< s t:0 12,524 4,571 Materials and supplies . , , 4.261 (4,926) (2,254) l Accounty payable , , N,597i (2,697) (3,360) l Other. 8,91a (3,130) 1,173 l Net cash provided from operations 66,617 60,883
_ _12.412_ l Cash Flows from Financing Activities: New financing-Common stock - , - - 12,000
~
Long term debt 27 "71 35,235 - Notes payable , i.non - - Other .. , , ce;;i (506) 729 Redemptions and repayment 8-Preferred stock , !,5 m 1,297 ;94 Long term debt 5.4 41 19,176 22,378 Long-term obligation < , 11.x55 9,79s 7,774 Dividend payments-Common stock , , , 27,67'i 27,676 25,998 Preferred 8tock 1n352 11,080 11,202 Net cush used for financing activities , ,
/.i.916 34,298 55,417 Cad Flows from investing Activities:
Property additions 21 170 41,831 47,162 Purcha.se ofinvestments . , 637 370 249 Sale ofinvestments . ( 1.:31) (723) (1,591) Other 4 72) (909) 386 Net cash u>ed for investing activities 2'M 40,569 46,2n6 Net increase (decrease)it cash and cash equivalents u,32M (8,250) (20,740) Cash and cash equivalents at beginnir. of year w9%, 17,248 37,988 Cash and e ish equivalents at end of year , s 4.670 8,993 s 17,248 Supplemental Cash Flow s Information: Cash paid dming the year-Interest (net of amounts capitalized) , s:d,495 $ 23,537 $25.111 Income taxes . , , 2.767 6,443 4,335 The accompanying Notes to Financial Statements are an integrali m : of these statements. 14
1 Mk I kgPENN POWER ] m L statements orTaxes l'or the Yearx Ended flecember 31, Hw, 1937 19*6 (In Thousands) General Tuxe*: State gros- receipts s R uo l S x,5G6 $ 9.2M I;eal end personal proports 4001 2.820 1*I43 State capital stock .I l 92" 1552 2.12F Social securit y and unemployment l.ll5 1553 1.00I 17 102 131 Miscellaneous Total gen 9r:d taxes 6l*.621 814 943 SM ?_Il l'rusinion for income Taxes: Currently pa3 able-
' 392 8 2.U43 8 2.043 Federal 2,3@
State 'l27' _., 65
,. b;5 2,008 1.912 Deferred, net (see belou l-l'ederal 15M9' 10.023 I.414 State 2.121 010 I2.Il0) 1 319 i!Xb 4,704 investment tax credits, net d amor*.izatior, 71" (1.044) 5.11,9, Total proviam for income taxes 521.omi $14.735 812.W-].
income Statement Classification of Prosision for Income Taxes: Operating expenses @ L5o9 $15.822 $13.732 0;her income . . ... .. .. i1971 (10.297) (7.870) Allovcance for horrow ed funds used d uring tonst ruction 1.021 7.377 8.873 Total provision for income taxes a21.o* 312.902 S14.735 Sources of Deferred Income Taxen: Exceu of f.ax over book depreciation, net s 7.2 15 $1G.237 $ 6,$s Alh wance for borrowed foods used during construction, u hich is credited to plant 1.02-1 7.377 h,673 Deferred fuel co.sts, net .,, .. .. ... 3.Ic1 275 (4,302) Armrtization of deferred interest on leased nuclear fuel, net <1,3501 (536) (1,404) Terminated construction projects, net < tai wMS) (822) Difference between tax and book revenue, net s ma7 (1,930) (3,330) l'roperty taxes . G1 1,724 (34) Deferred l' err,s tinit I costs . .. 5.0, 1,500 - Alternative minimum tax deferral ol . w (3,423) - Opera'ing loss curryforward . ! l,72m (7,x20) - Other, net. ic22, 1,459 (1,105) Net deferred income taxes .s1 .319 $11,3:b $ 4,704
===..
Iteconciliation of Federal Income Tax Expense at Statutory Itate to Total Provision for income Taxes: liuok income hefore p,ovision for income taxes . G .996 $50,496 $59,475 Federal income tax expense at statutory rate wo,059 $20.173 $27,359 increases (reductions)in taxe* resulting from: Allowance for funds used during construction, which does not constitute taxnble incoine ..... ( l-if h (7,063) (8,316) State income taxes, nrt of federtd income tax benefit .. . 1,511 349 (154) Amortization of inve8tment tax credit (1,G901 (1,794) (1,957) Exceu of book os er tax depreciation, net . 1,11 1,n57 737 1:es ersal of taxes deferred in prior years (Note 1) - - c,416) Other. net 112 760 (4 %) l Total provision for income :nes El. nan $12,902 $14,735 The accompanying Notes to Financial Statements are an integral part of these statements. 15
b Notes to Financial Statements (1) Summary of Significant Accounting Policies: on the Balance Sheet under ut! ;ty plant at December 31,19M, The Compm, a wholly owned 3ub3idiary of Ohio Edison include che following: Comcany (Edi30uh follows the accounting policie3 and practices prescrihed by the peDn3ylvania Puhlie f tihty CommSion lfPCC) t uhty Arrurnuhued Construr00n Con.pnyi alal the Federal Energy Hegulatory Commieion (FERC). (1 ant Prm ision for Work in Os nt o. hip Generaung l' nit s us$crsice Depraiatan l'rogreu 0) Internt l(eg e n uca-- O n Thousandd Th( Company's retali customers are metered on a cyctc basi- K F Sanab Revet,a is recognized for eiwtrie 3ervice based on meters reml gM[gh.y * ** *""'
- 2" * "'
through the end of the month. Reference is made to Note 2 xm t sm e with respect to the Compann policy of accruing revenues in and Na 3 - M.m 27an'o 3"" 5. M connection with a recent rate phase-in plan. *"m h? Revenues from Sharon Steel Corporation, the Company's bu' gest customer, armunted to approximately $27562,000, pyhi~ * "" ""' w4 Conmmn
$22.04000 and $21,70h000, in 199, 1987 and 19X6, respee- FacihtW 303,
- 14.3"" FN 5. 2 4 '<
tively, repre enting 10.0% 9.D'i aul 10.6% /erpectively, of the PW N" 2 - W" M Company's total operating revenues. On April 17, 1987, Sharon kal * *" , $ N ""._ E d" L Steel filed a Petition under Chapter 11 of the Federal I!ankrupte; Code. The Company has filed a proof of claim in tris proceeding m Excuw nucl..ar fa in procun i.ich has not yet he n a.- igned to a specific of approximately $m),000 for electric service furnished to nue:en una Sharon Steel prior to the Chapter 11 filing. The Company is currently being paid on a daily basis for electric service furni.ihed Nuclear Fuel-and has in addition accumulated a substantial 3ecurity deposit The Company amortizes the cost of nuclear fuel based on the pursuant to the order of the Bankrupter Court.
' rate of consumption. The Company's electric rates include amounts for the futare disposal of spent nudear fuel ba3ed upon Deferred Fuel Costs- the formula used to compute payments to the United States The Company recovers fuel cost 3 not otherwise recovenvl Department of Energy, through ha3e rates from its customers through an annual "levelized" energy cost rate (ECR). The ECR, w hich includeg Allowance for runds Used During Construction-mijustment for any over or under collection from cus>mers, is AFUDC represents the net financing costs capitalized to con-recalculated each year. Accontingly, the Company defers the struction work in lagress (CWIP) during the construction difference between actual energy costs and the amounts period. The borrowed funds portion refisets capitalized interest currently recovered from its customers. payments and the equity funds portion represenM the novash capitalization of imputed equity costs which are charged to con-Utility Plant and Depreciation- struction. AFUDC varies according to changes in the level of Utihty plant reflects the original co<t of construction includ. CWIP and in the cost of capital. The Company computea ing paynd and related costs such as taxes, pensions and other AFUDC utilizing a net of tu rate, which is consistent with the fringe benefits, administrative and general costs and allowance rate treatment. Effective January 1,1988, substantially au of for funds used during construction (AFUDCL the Companyi CWIP (excluding nuclear fueh was subject to The Company provides for depreciation on a straight-line basis the capitalization ndes for interest contained in the h Reform at various rates over the estimated lives of pn> pet ty included Act of 1980; therefore, no adjustment was necessary to reduce in phmt in service. The annua! composite rates for ele'etric plant the CWIP AFUDC rate to recognize a current income tax ben-were 2.99,3.19 and 3.29 in 19% 19M and 1986, respectively, efit. The AFUDC rate related to nuciear fuel financed only The Company recognizes as depreciation expense estimated through the incurrence of longderm obligations (see Note 6)13 nue' ear decommissioning costs as the costs are recovered from bued on actual intetyst accrued on the obligatic ns during the customers. Such amounts are invested in ext ernal decommicion. period. The annual rates used by the Company for all other ing trust fmnis construction projects were 10#4,10.14 and D.W for 1988,19M and 19S6, re.pectively.
Common On nership of Generating Facilities-The Company and other Central Area Power Coonlination income hes-Group (CAPCO) companies own, as tenants in common, various Details of tha total provision for income taxas are shown on power generating facilities. Each of the companies is obligated the Statements of Taxec. The deferred income taxes resu't from W pay a share of the construction costs of any jointly owned timing differences in the n cognition of revenues and expenses facility in the same proportion as its ownership interest. The for tax and accounting purpees. Company's portion of operating expenses awnated with these The Company allocated the income tax benefit which resulted jointly owned facilities is included in the corresponding operating from interest expense related to nuclear fuel in 1988 and CWIP expenses on the Statements of heome (see Note 2 with respect to the deferral of Perry Unit I costs). The amounts reflected in 19N and 1986 to income taxes-credit included under other income and dedvetions on the Statements of Income. 16
***~ PENN PDWER W
In April 1935. the Supreme Court af Ibnnsylvanir ruled ir npects that the add!tiona' deferred tax liabilities will be collected favor of the Consumer Adrocate of Penn-yhania in w appeal from its customere when ti.e taxes become payable, an n=et will takon from i 153 Common mlth Court decision, which upheld be recognized for that probable future revenue. The Company is the Campnj'r 194 PPUt retail rate ene deci3 ion al'ouing not required to adopt SFAS No. 96 until 100. Howew, if the nonnalMon v income taxes awiated unh certain Lberrlized Company had adoptM tne nu standard as oiDecember31,19% j depreciation banefits. The Supreme Court disallened state it estimates that total auet> wouki hate increased by approx-meome tax normahzation and remanded tm ho PPUC for further imsely $2un,000, boo w hh no material effect on net income, f study the practice of federal meome tax normahzation. On September 23,19M, a wttlement agreen ent was appmed by L diremerd Henefits-the PPI C. Accordingly, operating roente4 and income taxes The Companyk trusteed, noncontributory defined baefit were reduced by $0.547,000 and $7,231003, respathe!y, nnd pension plan covers almost uU ndLtime employees Upon retire-interest expense t,w increased by $659J)oo danng UM to men , employees receive a monthly pension based on length of recogniae the amounts refundable to customers e a result of service and compenution. The 0,mpany uses the iwojeeMI the settlement.1hin settlement had no material effect on n(t unit cref t method for funding per}wes an,1 was ny required income fbr UM. to make pension contributions ' luring the three years ended The Company expects that defe rred taxes a hich have m>t been Decemb( r 31,19%
; forided wil: he collected from hs customers w hen tne taxer The fol!owing sets furth the funded status of the pian and geome payabh bawd uporme e ebkhed eate making practices unounts recognized on the Balance Sheets:
of the PPUC and the FERC. A3 of December 31, lW, the cunmlative act income tax timme differences thr which defenwl At DecemberW, IN hb7 income taxu have not been pmvided were approximately htwial preent value of
$100,000,000. twnefit obligatmns The Company de?.ers mvestment tax credits (ITO. u tih. zed Vested benefits $ 45,10Um S 39.MnJm and amortizes these crediu to income over the estima&d life p .W d h>wb - 3d000 MWM of the related property 'lhe fax Reform Act of 1986 repealed the ITC effective January 1,19H6, except for certain transition Accumulated hmeth obligation $ 45,4 Mjo00 property. As of December 31,16,6 approximately $10.000,000 ~~ , $,J M 1,0 g
^~
(f unused ITC was available to offset future federal income taxes ptyable, of whiet approxima'ely $9,000,0W expires at phn asets at fair value . , y N,83 UJoo 4 75,733,000 the end of 2001 with the remainder expiting at the end of 2001 Actuarial present vak The Company aW ha4 approximately $8,300,000 of altermtive of projected benefit minimum inx crelits nailable whitb may be carried forward obbgation . G A09doo Rf4),um indefinitely, in addition, t he Cc ml.any has accumulated approx-U" " * * * ."* "fP " imately $23.3M,000 of tax net operating losses through jected benetit obligadon 17d25J m. lyGLOOO December 31,19M, of which approximately $8,f>00,000 expires G, b ,060) c19,000 at the end of 2002 with the remaindt r expiring at the end of (,nmogmzed net law (gaint L nmyuzed prior 2003. Such tax net operating losses have been reewuzed by not ,po p wh wt prov.iding deferred income taxes of appmsimat(13 $1.700,0t0 unrecognized not and $7,800,000 in 19M and 19M, res pesively, which would other-transition asset f.14 4 ,000) r io, &M n wiese have been provided. Under the tax sharing agreement between the Company and Edison, the benedt of such tax net Net onsion liabdity 3
$ 2,M1.tm $ 1,8N,ood op rating loon will be realized in the future when taxable income p sufficient to offset such losse4. The mets of the p:an consist primarily of common stocks, the hnancial Accountingstandrds hoar . Unned hte gm ernment bon is and e$rporate bond <. Net of Financial Accountingstandardso(SF ASO;lissued penxion
- 96. " Account.ing Statement to4s for the three years ended December 31 lW were fm inemeTaxes which,amongotherthings, vquires achange computed as follows in the methai used by enterprises to account for def erred income z taxes. Under the new standard, the Comnany wiU be required to 1N W7 NS6 reduce its net deferred tax balances to reflect the forer income Service cen .-benefits tax rates hicorporated in the Tax Reform Act of 19AG. Instead of earm d during increping income due to this potential reduction, the Company the period , . S 3wna 4 3.;rW $ 9Nm wih defer these amounts and ine!ude them as a reduction to cost laterest on projected of servic+ in future rate proceedings. The new standard win abo . benefit obligation i..;% m 4Msm mum require the Company to record a deferred tax Fability for tax Heturn on plan assets Ot.w p m cr;fw Ou13snu benefits that have previoudy been thed through to customers Net deGeral and an assrmed deferred tax liabdity applicable to the equity t amortization t J.rlam Guam TMw component of AFUDC, for which noincome tax timing difference gyt pcg,jgn gue j g,g 3 33, } g,,g exists under curert accounting standards, dince the tompany 17
E Notes (wntinued) The assumed dis?ount rate and tute of increase in future that all amounts defenvd during the phase-in period will be fully compensation levels u3ed in determining the actuarial present recovered by the end of the fourth year, For the first year, the va'ue of the projected benefit obligation were 99 and 7%, Company's rates were increased to produce approximately respect;vely, fer each year The assumed expected long-tern $24,WO 000 in additional cash revenue. The difference between rate of return on plan avets was 10% in 1988 and 94 in 1987 reverues actually billed and revenues that wouki have been billed and 1980. abant the phase-in plan is recognized as additional accrued The Company provides a minimum emount )f ror. contributory revenue for financial reporting purposes. Such revenues and life insurance to retired employees in addition to optional con- associated interest accrued for future collection in connection tributory insurance. Health care benefits, which include certain wJth this plan were appn>ximately $30,045,000 in 1988. employee deductibles and copayments, are also availabla to re- Prior to these rates becoming effective, the Company was tired employees, their dopendents and, under certair ordered by the PPUC to derer Perry Unit 1 operation and mainte-circumstances, their survivora. The Company pays insurance nance costs (net of energy savings from the unit), depreciation tiremiums to cover a portion of these benefits in excess of 8et expense, [roperty taxes and interest expense beginning with limits; all amounts up to the limits are paid by the Company. its November 18,19M7, commercial operation date ttntil the effee-Expenses as sociated with health care and life insurance benefits tive date of new rates which inch de recovery of Perry costs for retirees are charged to income during the applicable payment 01ny 4,19M). Based on this onler, the Compary has defened periods, and amounted to $668,000, $617,000 and M97,0n0 in $21,209,0W for future recovery from its retail etutorners. 19M,1987 and 19Ni, respectively. (3)'lbrminated Construction Projects: Significant Parent Company Transactions- In Jarnary IDM, the Company and all other CAPCO com-Operating revenues for 1988,1987 and 1986 include $5,81'i,000 panies terminated plans to construct four nuclear generat ng
$8,7>l4,(>00 and $11,b93,000, respectively, attributable to trane- units. On October 15,1987, the Supreme Court of Pennsylvania actions with Edison. Such revenues resulted prirurity from reversal ajudgment of the Commonwealth Court of Pennsylvania Edison's purchase of capaelty from the Company's oivnership which affirmed the PPUC% decision to permit the Company to interest in Beaver Valley Unit 1. Purchael and interchanged n cover the emts of the terminated ur.its. The Supmme Cotirt's power, net, reflects charges (credits) of $9,809.000, ($128,0n0) decision waA wed on its interpretation of Section 1315 of the and ($2,2Ti,000) due to the Company's net rweipt (dehvery) of Pennsylvania Pehlic Utility Code (which m in effect at the tima interchared power to and from Edhion during IW,1987 and of the PPUC's rate onleo, which it concluded bars the aveovery 1986, respectively, In addition, other operation expenses for of such costs through ti.e rate making pnicess. The Company prote 1988,1987 and 19A6 include $3,779,000, $4,W2,000 and $3,647,000, off Ihe unamortn'ed costa of the tenninated t nits applicah:e to its respectively, primarily attributable to data processing services PP UC jurisdictional eustcmers and established a liability for pot en-nmdered by Edisor, to the Compm/- titd customer refunds of pn viously recovered co#x, reducir,g net income by appmximately $7,300,000 in the fourth quarter of 1987.
Supplemental Cash Flows Information- On January 11,19W, the U.S. Suprnie Court upheld the Supr eme The Company adoped SFAS No. 95, " Statement of Cash Court of Pennayhnniai decisior. Flows," for the year ended DecemL . 31,1988. The Statements of Cash Flows for the years ended December ?.,1,1987 and 1986 (0 Leases: t have been reclassified to conform to the 19M presentation. All The Company leases a portion of its nuclear fuel require-I temp 9raty cash investments purchant with an initial maturity ments, certain transmission facilities, computer equipment, of three months or less are reported as cash equivalents on it.e office space and other prol.erty and equipment under cancelable 141ance Sheets, The Company records temporary cuh invest- and noneancelable leases Consistent with the rezulatory treat-nents ut cost, which appmximates their maset value. Noncash ner.t. rental payments for capital and operating leases are fiaancing and investing activities included capital seases of charged to operating expenses on the Statements of Income.
$4,553,000, $8,331,000 and $6,G59,000 for the ye; rs 1 4 8, 1987 Such costs for the tirree yean ended December 3L 1988, aro and 1936, tyspectively. Noncash investing activitiu also includ(d summarize 1 as fouows:
allowt nee for equity funds used during construction. 19e im7 19 4 .
- 42) Recovery of Perry Unit 1 Costs: . h Thourands)
The PPUC granted the Company a base rate increase effective Interest on capital kases 81.M5 si,cC5 $1,9% May 4.li488, which meluded uAestment recovery for hery Unit 1 Amortization of mpitallenes . 3,fs78 5,G 3,831 and associated operating costs. in its 9nler the PPUC autheria d opemting leases . . 1,177 1,173 un7 rates designed to produce approximately $67,100,0&f additional annual operating revenues to be phased in over several years, such Toud rental payments -$6,120 - ITM6l
$7h91
==w I
o 18 L .
l e y PENN POWER The future minimum rental commitments as of December 31, The Company's sinking fund requirements for the next five 19% are: years are: Capital Operating 1989 $ 2,3),000 _ Leases Leases 1990 3,220,000 1989 $ 4,118,000 $ 169,000 1991 6,220,000 1990 , 2,322,000 126,000 1992 6,220,000 1991 1,974,000 112,000 1993 6,220,000 1992 1,673,000 110,000 1R),3 ... 1,501,000 110,000 (d) Longterm Debt-Years thereafter - 16,438,000 2,838,000 The mortgage and its supplements, which secure all of the , Total minimum lease Company's first mortgage bonds, serve as dimet first mortgage { payments 2x,026,000 $ 3,465,009 liena on substantia'ly all property and franchises, other than ) specifically excepted property, owned by the Company. Executory costs , 6,015,000 Based on the amount of bonds authenticated by the Trustee Net minimum lease through December 31,1988, the Company's annual sinking and payments 22,011,000 improvement fund requirement for all bonds issued under the Interest portion 11,449,000' mortgage amounts to $1,220,000. The Company expects to Present value of net minimum satisfy this requirement in 1939 by certifying unfunded property lease payments $10,562,000 additions at 166-2/3% of the required amount. As of December 31,1985, the Company's sinking fund require-monts for certain series of first mortgage bonds and maturing
- 0) Capitalization: long-term debt for the next five years are:
(a) Hetained Earnings-l'nder the Company's Charter, the Companfs retained earn- 1989 $42,293,000 ines umvstricted for payment of cash dividends on the Com- 1990 , , 5,633/>00 panyk common stock were $61,651,000 at December 31,19n8- 1991 , 5,635,000 i 1992 , ,, ,, 18,444,000 (b) Preferred Stock- 1993 32,589,000 At the Companyk option, all preferred stock may be redeemed in whole, or in part, at any time upon not less than 30 nor more The weighted averate interest rates shown on the Stotements than 60 days notice, unless otherwise noted. Redemption of all of Capitalization relato to long term debt outstanding at I preferred stock issued within the past five years is <ubject to December 31,1988. I certain restrictions regarding refunding operations. Tne optionhl Total secured notes outstanding at December 31,1989 and j redemption prices shown on the Statements of Capitalization will 1987, exclude $327,000 and $1,620,000, respectively, of certain dech,ne to eventual minimums per share according to the Charter pollution control notes, the proceeds of which were then in escrow provisions that establish each series. pending their disbursement for cor.struction of pollution control facilities. The Company's obligations to repay certain pollution I (c) Preferred Stock Subj.ect to 31andatory Redemption- control revenue bonds are secured by series of thvt mortgage Annual sinking fund provisions for the Company's preferred bonds. The unsecured notes outstanding are entitled to the stock, which are retired at $100 per share plus accrued dividends. benefit of an irrevocable bank letter of cred t of $11,027h)0. i are as follows: To the extent that drawings am made under this letter of credit i to pay principal of, or interest on, the pollution control revenue 1 Series Shares Date Beginning bonds, the Company is entitled to a credit on the notes. The l 8.24 9 5,000 December 1 (i) Company pays an annual fee of 4/10% of the arnount of the l January 1 letter of credit to the issuing banu: and is obligated to reimburse ; 1 LOO 9 4,tk W) (i) 15.009 3,20) July 15 (i) the bank for any drawings themunder. I 11.504 15,0(K) July 15 1989 l 13.009 5,000 July 1 1990 (6) LongIIbrm Obligations: I 11,50% B 30,000 September 1 1991 Pennsylvania Ibwer Fuel Corporation (a corporation in which 10.50 % 100.000 April 1 2040 the Company has no ownership interest) prov: des 'Junds for the prc.curement of ntelear fuel on behalf of the Company. The (i) Retirements of this series have begim. Company also pa rticipates in arrangements wherein the Cent ral ( ! l 19
- _ ~_
i l l r-LJ Notes (continued) Area IUnergy Teust (C AET) finances the acudi3ition of nuckar $30,000,000 is applicable to 1%9. In addition, the Comlany material that will ultimately be used to fwl various CA'rW expects to invest approximately $33Mjo#H) for nudear fuel generating units. Umler ordinary cireum3tinees, the Company diuing the 1989-1!@ period, of which approximately $9,ooon) makes payments lbf nuclear fuel as it is consumnl. Financing is applicabhr te- N9. on behalf of the Company of up to $%000#N (of which The CAPCO companies are continuing to review the statas of '
$11,00fhooo had been utiliad as of Deieraher 31,11@ is Perry Unit 2. Cmwntly, no significant worh is being perfonned on currently available'through t he Penn3yh' ann Power Fuel Coepc re the unit and the Company does not capitalize AF U DC, Until review t ion, oit her i brough reve.lving credit arram.smento or the i +suance of the etam nf Umt 2 has been completed, there will be no defined of comtnercial paper, which is supported by r, bank letter of enxtit, tcheJule Mr its completion: the construction estimr.tes for the or a combinadon of hath. Financing of up to M9.000DWf which I!eG1!W perbi do not include any ame.unts applicable to Perry
$8,000,000 had been utilia<l as of Decerter 31,1!bN is anilable Ucit 2 7 constnution of the unit were to be resumed. Possible toCAETonIrhalf of the Comptmy,subjet tocenninlimitations. alternative, bd.ng reviewed with mpect to Unit ? include indefi-The Compmy accrues inten>t applict.ble to the nuclear fuel nite suspension of constrw: tion on the unit, resumption of work obligations (for fuel not pt itu'uded in utility plant in sivice) on the unit and termination of the nuit. In accordance with the which v capitalit.ed, net of income tax effect. No direct borre CAPCO arrangements, none of these alternatives nmy be imple-mys have been or are exiected to be made ngairst the line of ,nented without the a}. proval of each of the CAPCO companies.
credit available to the fael corp 3 ration; the ! bel corponnion has Duquesne Light Companyb (Duquesne) claimed "de facto" issued and has outstanding commercial paper mpported by tha abandonment, for rate making purposes, of its 13.749 interest line of credit. To the extent that borrowings are lesi, thau the in Perry Unit 2 was aecepted by the PPUC in a 1987 rate order
$18,000,000 available ur. der f his credit line, the fuel corporatmn and Duuuesne was allowed recovery of its investment in Perry must pay a commitmer.t fee of UW to 1/29 on the available l'ait 2 over a ter-year period. Duquesne ha3 advised the PPUC portion of the line of credit. h also pays a fee of SM to 74'i thr.t it vill not agree to the resumption of construction of Pemy for the letter of credit on the ageregate amount of outswuling Unit Z Daquesne'4 decision was independently made and de commercil paper. Interest on CAET purchwe commitments is not rerresent a decision on the part of the Company to abandim at raten which vary from 1-lM to 1-1/29 over the interest Unit 2 fr rate making or any other purpmes. Hwever, any future rates applicable to certain haler placed commercial papen The deci ion on the stntus of Perry Unit 2 will have to take into account effective average annual interest rates applicab!e to nucker fuel Duq uwne's position and w nys will has e to be found to accommmhitr obligations were 9.39, 8.Y1 and %19 during 199, V#7 and this peition if constructim on the unit is to resume.
!!N. respectis ely. Delay in the cempletion of Perry Unit 2 can be expected to The Compan3 ptvsently expat., to make pryments applicable increuse its total cost by amo'.mts which are not tu esently deten j to these obligations duing the next five ye trs as foHows minah.le. If a decision were mr.de to teeminate Unit 2, certain costs which wv currently migard to Unit 2 wnuki be reassigned, 1939 , S4723,n where app"opriate, to Unit 1. However, cancellation charges 1990 s,971,000 } ayable to echtractolv and other costs of termination coukt be 1991 8 JM.ON incurred. Pending completion of the CAPCO review, the company ;
1992 7,802,Ml is unable to predict whether the construction on Unit 2 will con- ; 19 % 3,"h7, NU t inue nr, if eentinued, on what basis such cantinuatic,n wi'll prseed. I flaud on Section 520 of the Pennsylvan'.a Public Utility Code j (7) Notes Payable to Hanks and !!ines of Credit: (whkh specificaHy permits utilities to reemer a return of, but l The Company hm lines of credit with barAs that pimide for r.ot a return on, pruent!y incurred costs of any partiaUy com- ! horrowmys of up to 129.00n on0 at t ne pnn ailing prirae or sim!iu r pleted facility when canceuation is fennd by the PPUC to be in ; interest rate. Short-term horroriags may he made under these the public interest far any genecuting unit canceled after 1 lines ef credit or the Company's unseem ed notes. '1 he Conpany October 10, '98R the C>mpany he'.ieven it couki recever its is required to pay commitme nt fm I h:r. vary fmm #iG to 1/29 investment in Unit 2 with rupect to its PPUC juriwiletional to annre the mnbhility of these lines of credit, All of tl'e eastomers lf a decision were made to terminate PelTV Umt 1 j e irrent lines expice Demmber 31,19A9, houever, a y ;rnuud the Companyi reported net income would be reduced at that time ; lines may Se camceled by the bans at any time, by the difference betv.een the cest of Perry Unit 2 and the present The Company aho hu a credit agreemst uitn Edisen vaine of re enue to I e collected from retailjurisdictional customers ; whereby eitner company em bmTow from the other by issuing appliable to the unit unsecured notes a'; the preval.iv pnme or dmdar raterest Th< FERC has revised its pelicy with regeet to recovering the rate. Under theJerms of this agreement thmv is ao maxirxun costs of terminated construaion projects. As a result, if "erry , horrov/rg lirI;f; howeven the Compar v's borrowing under this Uni; 2 were terminated, the Company would he required ta write I agreement is tunently Unuted by the PPUC to a total of- cff one-half of its im estment appteable to its FE RC jurisdictional Mo,coh000. Either cotepmy can terminate tN agwonent v ith cutmers if and to the extent that the FERC revi+d policy is six months' nonce. app;icable. Under such cirramstances, the rerua;uing co3ts, plus a return on tbe unamortized investment, vanhl be meoveral from (S) Commitmenb., Guarantees and Contingencies its FERC jurisdictional cestomers. Con.ttruction Progenm-- i The Company'8 current badget forecast rettects e spendnvres Guarantees- . ; of approximately $140.0%000 for property addit: ions arvi The Compary, wgether with the other CAPCO companies, has improvements frmn 'px9 through 199;1. of 'vhht approximately severa guarantees of certain de'ot and lease obligat ions in connee-20 L_ - mm im - --. - - - - - # l
A
~
= PENN FOWER D
tion with a coal supply ecatruet for the ik'we Man 3 field Plant. Pennsylvania and the sta% of New Wrk and Maine, which As of Ikeember 31, IW, the Company' share of the guarantee sought to force the EPA to make findings under Section 126 of was $2njird,000. The price under the n al supply contract, which the Clean Air Act. Section 15 provides a reniedy for a downwind includes certam minimum Imyments, has byen determined to be state that can show edvr:rse impact because air pollution in an sufficient to .,atisfy the dew md lea + ob!!aations The Company's upwind state causes nonattainment er air quality standards in total paytoents under the coal supply contract amounted te thr: downwind state. The petition complained of excemve
$H,317pno, $6,630,000 and $6.111,000 dur i ng 199, l!wi and liNi, particulate and SO 2emissions from a number of sources in Ohio respectively. Under tre coal supply contract, the company's and other states, including potentially Sammis Unit T. The fnure minimum payments are: petitioners and othn> appealed the EPA's decision to the U.S.
Court of Appeals for the District of Columbia, asking that the 19x9 $ 2 x:N 00 riecision be reviewed and reversed, modified or set aside. In July 1990 2.711W) 19M, the Court uphekl the EPXs 19st denial except for certain 1991 2 523,000 particulate matter portions of the New Erk petition which are 1992 2,53:1,0t m not expected to have a significant effect on the Company's opera-19!G 2J).1,000 tions On October 20,1958, the petitioners appealed tne Court Yeaty thereafter 12 315.000 of Appeals' decision to the U.S. Supreme Court. In April 19%, neveral states, the Province of Ontario, a nd Energy Cost Itate Proceedings - several environmental groups petitioned the EPA to conduct a on January 22, !!M, the PPUC entered an order instituting rulemaking umler Semion 115 of the Clean Air Act. Section 115 an imentigation into the justneu and reasonableness of the is that portion of the Clean Air Act which addresses poHution Company's proposed l'Cl!. The proposed ECR included, among across international boundaries. The petitioners claim that the ot het things, five months of the costs of purchasing 12 EPA has u! ready determined that sources in midwestern states megawatt .4 of l'erry Unit I capacity from Cleveland Electric contribute to air pollution which they allege is endangering public lisminating Company (CED as provide 1 in a 1930 agreement health and welfare in Canada. The EPA is being asked to officially among the CAPCO companies. The remaining 13 months of the confirm thi uletermination. The E PA hu informed the petitioners CEI purchase was to be reflected in a subsequent ECil fuing. that it does not presently have sufficient information to act on On April 2x,199, the PPUC disallowed all costs attributehle to the petitions. The Company is unable to predict the outcome of this purchase to the extent that .such costs exceed the Coripany's this proceeding. average "nergy costs. The Company has appealed the PPUC During the past seseral years, the U.S. Court of Appeals for order to the Commonwealth Court of Pennsylvania. If this order the District of Columbia reversed several significant portions
;,tands after appeal, it is currently estimated that net income of the EPA's regulations on the methods used by the EPA to would be reduced by approximately $10,000,000. The Company determine the amount of stack height credit for establishing is unable to predict the ultimate disposition of this matter. individual source emission limits for SO 3 Portions of the latest EPA regulations were reverved and remanded by the Court in Emironroental Matters- January 19M as a result of appeals by the Company, Edison Varion federal, state and local authorities regulate the and ot hers, Review of this dec'sion was sought by environmental j Company with reord to air and wat er quality and other environ- groups before the U.S. Supreme Court knd thereafter the mental matters. The Company e. timates that compliance requires Company, Edison and othery filed their own petitions for review additional capital expenditures of approximately Slo,00 nano, before that Court. The Supreme Court declined to hear the case.
w hich is included in the const ruction estimate given above under After the EPA promulgates new regulations in conformity with
" Construction Program" for the period 19X9 through 1991 the final Court decision in this matter, Ohio and Pennsylvania As part of the reauthorization of ' he Clean Air Act, legislation mu<t then review their emission limits to ensure conformance ha- been introduced in Congrev to address the so. called " acid with the r.ew EPA regulations. Such review could result in more rain" problem. Variou : bill-introduced would require reductions stringent emission limits for some existing plants and increased in emissions of stunir dioxide tSOg and axides of nitrogen from capital costs and operating expenses. The Company is currently utility pmer plants and other sources located in several states, unable to predict the outcome of these proceedings.
including Ohio and Pennsylvania. The Company is una' ale to in June 1937, the EPA announced regulations covermg small predict whether legislation will be enact.ed and, if so, to what particulate matter emisions from utility boilers. Although the extent, if any, the emission hmits at the Companyk plants would Company has an mvnership interest in a generating unit in one he affected. Substantial changes in the emission limits could of the two eounties in Ohio n here EPA computer modeling predicts result in the need for changes in coal supply, significant capital excessive smali particulate emissicms will be found, the Company invest ments in flue gas desulfurization or other pollution control is unable to predict the ultimate effect of these mgulations, equipment or the closing of some coabfired generating capacity With respect to the environmental matters described above, to asure compliance if flue gas desulfurization equipment were the Company expects that any verulting additional capital costs to be instated on all ef its generating units to achieve compliance, which may be required, as well as any required increase in operat-a circumstance that may be physicahy impossible because of ing costs, would ultimately be recovered from its customers. space limitations at Sammis Unit 7. the Company estimates that the capital costs associated witF such installation could exceed
$1m),0n0,000.
On December 5,19M, the federal Environmental Protection Agency (EPA) denied petidons from the Commonwealth of 21
i l l i
- Notes (continued) l (J) Suinmary of Quarterly Financial Data (1lnaudited)- 'l The following summarizes certain operating results for the ]
four quarters of 1988 and 19hi.
).
31arcl; 31, June 30, September 30, December 31, i Three Alonths Ended 1988 1988 1988 1988 ! (In Thousands) Operating Ilevenur 3 ... , $60,199 $65,306 $77,173 875,450 l Operating Ext,_nses and Taxes , 49,429 51,608 55,792 54,281 i Operating Income . .. , , . , 10,770 13,698 21,381 21,205 ) l Other Income and Deductions ,, 364 439 507 477 a l Net Interest , , , , 2,775 _ 7,500 10,243 10,303 6 l Net Income , S 8,359 $ 6,577 $11,645 $11,379 j Earnings on Common Stock , ,,, S 5,609 $ 3,827 $ 8,915 $ 8,642 l
.Tlarch 31, June 30, September 30, December 31, Three .Tionths Ended 1987 1987 1987 1987 (InThousands)
Operating llevenues . $59,763 $56,002 $55,963 $51,469 Operating Expen3es and Taxes , , 46.237 42,786 43,211 44,972 Operating income . 13,526 13,216 12,752 6,497 Other Income and Deductions 6,043 7,791 7,637 (1,244) Net Interest 7,721 7,558 7,382 5,963 Net Income (Loss) , $11,848 $13,449 $13,007 $ (710> Earnings (l,oss) Applicable to Common Stock , , $ 9,076 $10,677 $10,236 $ (3,478) l 22 c_____-______
i M PENN POWEA 1 l %' Report ofIndependent Public Accountants To the Board of Directors of Pennsylvania Power Company: We have audited the accompanying balance sheets and state-ments of capitalization of Pennsylvania Power Company (a Pennsylvania corporation and wholly-owned subsidiary of Ohio Edison Company) as of December 31.1988 and 1987 and the related statements of income, retained earnings, capital stock and other paid-in capital, cash flows and taxes for each of the ) three years in the period ended December 31,1968. These finan-cial statements are the responsibility of the Company's manage-ment. Our responsibility is to express an opinion on these finan-cial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstate-ment. An audit includes examining, on a test basis, evidence ; supporting the amounts and disclosures in the financial state-ments. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Pennsylvania Power Company as of December 31,1988 and 1987, and the results of its operations and its cash flows for each of the three years in the period ended December 31,1988, in conformity with generally accepted n' counting principles. The continued construction of Perry Unit 2 is currently being reviewed by the CAPCO companies. As discussed in Note 8 to the financial statements, possible alternatives being cor.sidered include indefinite suspension, resumption of work and termina-tion of the Unit. fleeause the Company is unable to predict the results of the review, it cannot now predict if construction of Perry Unit 2 will be terminated and, if terminated, to what extent the Company's inver.tment will be recoverabk. As discussed in Note 8, on Ap:il 28, 1988, the PPUC iaued an Order in which it held that a portion of the costs associated with a purchase of Perry Unit I capacity from The Cleveland Electric illuminating Company should be disallowed. The Com-pany has appealed the PPUC order to the Commonwealth Court of Pennsylvania. The Company is unable to predict the ultimate disposition of this matter. k . Arthur Andersen & Co. New Wrk, N.Y. January 31, 1989 23
I l l l Directors N Officers ,
- 11. l'eter llurr Justin T. Itogers. J r.
Semor Vice President of the Companyk parent. Chairman of the floani Ohio Edison Company. Akron, Ohio Jamen 1:. 31arkle Itubert II. Carlson hwident President of Cnisersal-1(undle Corporation, a plumbing fixture manufactun r, James it. Edgerly ; New Castle, Penroybania Vice hesident. Secretary and General Coun.el James it. Edgerly Robert l'. Wushinske Vice President, Secretar.s ami Vice Iw+ident and Tn asuivr General Coun <el of the Compary, i New Castle, tenn8ylvama William F. Recher
)
James E. Slarkle hwident of the company. Angeline Comparone ; New Castle Pennsyhania Assistant Sectvtary Joseph J. Nov ' k Francis A. Fazzone Executive %ce , sident, Operations, Anistant Treasurer Cyclops industrie Inc. , I a manufacturer of 8 teel pnnlucts. (_'larence 11. Kauffman Pittsburgh, Pennsylvania Assistant Treasurer f William F. Recher DIVISION SIANAGER Vice President of the Company, James it. Topper New Castle, Pennsyhania Mercer County i Justin T. Itogers, Jr. Mr. iWgers is pn+ident of the parent company, Chairman of the [brd of the Company, and President The pnnripal employment of all other officers is of its pmen: Ohio Edison Company. Akron, Ohio with the Company. Douglam W. Tschappat itEGISTilAll for Prefened Stock: E.xecutise %ce President of the Company's parent, lirst Seneca llank and Tiwt Company, Oh.o Edimn Compan,s Akron, Ohio Washington Centre, New Castle. Pennsylvania 10101 G. luo Winger ; Consultant-Fonnerly President and Chief Operating Officer TRANSFElt AUENT for Prekered Stock: ' of Steel Casting Corporation. Cnitcast Canada Inc.. Office of the company, New Cast!c, a castings manufacturer, Sharon, Pennsylvania Pennsylvar.ia NM*91 PillNCil'AI, OFFIFES:
.1 E. Washington Street PO. Ilox x91 New Castle, Pennsylvania IC10SnX91 i (412C2.."A11 l Pennsylvania Power Company is an equal opportunit y employer.
.\lanagement Changes A. Wayne Cole, Penn Power president since 19x1, retired M.'rch 1,1989. Fle was succeeded by Ames E. Markle, fornaer division manager of the Lake Erie Division of the Compgv's parent, Ohio Edison Company.
Williata A. Margruf, assistant secretary who served as an officer of the Company since 1972. retired ApH 1,19m. IL Peter flurg. senior vice president of the Company's parent. Ohio Edison Company, was ek.cted to IV Inntrd on December 21,19% Victor A. Owoe, who will re tre in April , as executive vice president of Ohio Edison, elected to retire from the Penn Power board at the er,d of January 1989. l 24
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