ML20246D957

Gpu Annual Rept,1988

ML20246D957
Person / Time
Site:	Oyster Creek, 05000000, Crane
Issue date:	12/31/1988
From:	Kuhns W GENERAL PUBLIC UTILITIES CORP.
To:
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ML20246D789	List: ML20246D785 ML20246D957
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NUDOCS 8905110097
Download: ML20246D957 (48)

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i 1 ) GPU System Profile The General Public Utilities System provides about 38.5 billion Lilowatt-hours of electricity for approximately 1.8 million customers, or 4, n y p(, a total population exceeding 4.2 million. The GPU service territories encompass about half the land area of Pennsylvania and New Jersey. / The operating companies are Jersey Central Power & Light Com- / pany in New Jersey and Metropolitan Edison Company and Pennsyl- 'y vania Electric Company in Pennsylvania. General Portfolios Corporation (GPC), organized in 1988, is a holding company for non-utility busi-ness and investments. GPU Service Corporation provides integrated System plans and policies, along with a broad range of professional services to the operating companies and GPC. GPU Nuclear Corpora-8 /crsey Centml Pbwer & fight tion is responsible for the operation, maintenance and management of M Metropolitan Edison the System's nuclear facilities. ' Pennsylvania Dectric j The GPU System General Public Utilities Corporation (GPU) F I I I I I I I d Jersey Central Metr litan Pennsylvania f / General GPU Service GPU Nuclear Edison mpany Corporation Cor oration Portfolios Eleetne Power & Light o m Co r tion Y (Met-Ed) (GPUSC) ( PUN) C V f f f / l / Energy initiatives incorporated (Ell) / Operating Companies' Statistics 1988 JCP&L Met-Ed Penelec GPU Revenues (000). $1,422,318 5 655,876 5 760,956 $2,833,974 Total assets (000). 53,034,282 $1,593.707 $1,759,666 56,415,405 Sales mix: Residential. 40 % 34 % 28% 35 % Commercial. 34 % 24 % 25 5 29 % l Industrial. 24 % 39% 42 % 33 % Customers at year-end (000). 860 414 543 1,817 l Megawatt-hour sales (000) 16,766 9,544 12,144 38,454 l Peak load (MW)*. 4,161 1,799 2,027 7,987 l Number of employees. 3,892 2,772 4,136 13,473

• At ume of GPU System peak.

j Contents i \\ Letter To Shareholders 2 Ycer In Review 4 Generanon Now And For The Future 10 GPU's Goal: Satisfied Customers 16 Adiciaistration 19 Selected Financial Data 21 Quarterly Financial Data 21 Management's Discussion And Analysis 22 Statement Of Management 27 Report Of Independent Accountants 28 Consolidated Financial Statements 29 Notes To Financial Statements 33 System Statistics 43 Directors And Officers 44 Shareholder Notes inside Back Cover 1988 Financial Summary 1988 1987 Change Financial Data (in millions) Operating revenues S 2,834 $ 2,673 6.0 % Income from operations. S 434 394 10.2 % Net income.. S 284 5 259 9.5 % Operating Data Megawatt-hour sales (000) 38,454 36,169 6.3 % Customers served at year-end (000).. 1,817 1,783 1.9 % Common Stock Data Earnings per share. S 4.75 4.12 15.3 % Dividends per share.. S 1.35 .45 200.0 % Book value per share. S 34.88 $ 31.48 10.8 % Closing market price per share. S 38 28% 33.9 % Market price to book value at year-end. 109 % 90 % Return on average common equity.. 14.2 % 13.8 % /ROO4,

l Centrzl Puille Utilttias b To Our Shareholders 1988 was a good year for GPU. Generating station per-formance was excellent. Sales were up as a result of increased customer usage, stimulated by a hot summer. Expenses were controlled by our planning and cost control strategies. As a result, we were able to increase the divi-dend twice during the year. Compared with lart year: g a Kilowatt-hour sales increased 6.3%; a Revenues advanced 6% to $2.8 billion; a Earnings per share rose 15.3% to $4.75; l m Return on equity increased from 13.8% to 14.2%; e Annual dividend rate increased to $1.80; a Market price / book value increased from 90% to 109%. Our Commitment D-3 We provide electric service to more than four million people Y f) and thousands ofindustries in New Jersey and Pennsylvania at rates which are among the lowest in each state. High quality customer service at competitive rates is our continuing goal. Hilliam G. Kuhns Good customer service is in the best interest of our share-Chairman. President holders. The progres.5 we made in 1988 and our outlook for and Chief Executive opccr the future enabled us to increase the dividend from a quar-terly rate of 15c per share a year ago to 45c per share today. Recognition Electric Light & Power magazine named GPU the Electric Utility of the Year. We are the first utility holding company to receive the award since the program's inception in 1969. The award was based on our ";ecovery from the devastating effects of the U.S. nuclear power industry's first major acci-dent, for strong financial and operating performance during 1987 and this year-to-date, and for the manner in which it has restructured itself for future growth." We accepted tb .ard on behalf of the many people, both inside and outside the company, who contributed to our recovery. At the same time, it provided an opportunity to remind us that we can and must improve in all that we do. Our Future Preparing for the future, we: a repurchased 4.8 million shares of common stock on the open market and in a special program for small shareholders; 2

e. .:p n.vunu.3 m continued the process of obtaining new sources of supply from cogenerators and small-power producers with more than 1,700 megawatts being under contract at this time: m held the increase in payroll and other operation and maintenance expenses well below inflation through our Expenditure Analysis Program, even though the number of customers and kilowatt-hours sold increased; a continued decontamination work at TMI-2 toward placing the plant in safe, secure monitored storage in 1990; eincreased the amount of electricity generated by company-owned stations to 31 million megawatt-hours, an all-time high; and m established a new subsidiary, General Portfolios Corpora-tion, for non-utility business investments. Board and Management Changes Three of our Directors will retire from the GPU Board at the May 3,1989 annual meeting of stockholders. John F. Burditt, Dr. David L. Grove and Dr. John W. Oswald have served your company with great distinction through a very difficult time. They have played a significant part in our recovery, and we will miss them. I expect to retire as an officer of the Corporation at the May meeting of stockholders. I initially retired as your Chairman in May 1987, but was recalled upon the sad death of John F. O' Leary the following December. We are now in the closing stages of our selection process and expect to announce a new Chairman in the near future. I will spare you a second farewell other than to express my thanks for the opportunity to serve and my good wishes to all. Your company is ready for the future. For the Board of Directors, $/-) W. G. Kuhns Chairman, President and Chief Executive Officer March 3,1989 3

Illncreases in both the number of customers and the amount of electricity I used by customers were major contributors to the Corporation's substantial earnings improvement in 1988.!! 6 ..yk s i ~/ ( .) 4 l sp 3 - j, [hiEA"'"F{* wo;. Ig ~,1 yp t

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Oznirit PubHc UtHitiss l Yearin Review a% JII % ales, net income and earnings per share reached new [ (% highs without change in customer rates. We 3 g / 9the year 1989 financially stronger, better fecused and / v(1' ( more efficient. j <l J sp Electricity Sales Climb q , - {p ', g of electricity used by customers were major contributors to Increases in both the number of customers and the amount 1 ;j/ the Corporation's substantial earnings improvement in 1988. w, g%

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Most of the sales growth was in the residential and com-W mercial sectors of New Jersey and eastern Pennsykania. E..( l The summer's unusually warm and humid weather helped L J .r create the highest System peak demands in GPU's history. An all-time peak load of almost 8,000 megawatts was fc7dtIa clNrQ" j"',,/ reached on August 15, the fourth record set during the JCP&L Vice President-Northern Area summer months. Operations, view one of many new Sustained economic growth in GPU's service area over development projects in that company's the past few years has resulted in a significant increase in electric energy usage and peak loads. This has been par-ticularly true of Jersey Central Power & Light Company (JCP&L) as a result of growth of commercial activity in northern New Jersey and residential construction in its southern area. Metropolitan Edison Company (Met-Ed), which set a new annual record for electric sales, added about 11,000 new MWH Sales customers last year and expects to add 12,000 in each of In Thousands OfMWil the next two years. The sales growth rate, which averaged 6% in the last three years, is affected by spillover from sur- [ rounding metropolitan areas. m Pennsylvania Electric Company (Penelec), which serves a /- the largest geographic area in the GPU System, has had an m, /- average sales growth of 2% per year since 1985. Electric / / sales growth in 1988 resulted largely from a much im-y proved steel industry. Although the System's electric sales growth in 1988 was >- -/-r /-/- about 6.3%, GPU is forecasting average System long-term / s s /- sales growth of about 2% per year - JCP&L,2.3c/c; / Met-Ed, 2.1%; and Penelec,1.3 %. '83 '84 '85 '86 '87 '88 5

i c.n.,. puniie uninis.2 Operating Revenues Financial Base Strengthened in Billions OfDollar, In 1988, GPU made considerable progress toward achiev-ing four major financial goals: controlling expenses, re-2E pg 23 straining capital expansion, establishing and maintaining 2n w fl l solid 'A' bond ratings and optimizing the use of the Sys-l f, .__ l<- Net income increased $24.7 million, or 9.5%, over 1987. 2e tem's equity capital, j g' h 6 q p l Payroll and other operation and maintenance expenses were j h-H held to a 2.7% increase. This is well below the rate of ~ g l l inflation and was achieved even with a 1.9% increase in !7 f k n k 5 1 + the number of customers. These results reflect our substan-E A A I tial efforts in the last three years to analyze, control and ij f l j minNze our expenditures and improve productivity, while i Li ( j continuing the safe operation and proper maintenance of 3 l L L our facilities. 3 83 84 85 w 87 se GPU's construction program has been approximately flat O rnergy renerty cost secovery; f r three years. We expect to be able to maintain construc-O sase rother cosis ansRerurn, tion levels at aboili $500 milh,on annually through 1990. All GPU utilities have investment-grade security ratings. Most bond and debenture ratings were raised in 1988. At year-end, the System's common equity ratio was 47%, above its 44% target. That target is designed for two pur-poses - to protect the ratings of the System's senior securi-ties and to minimize customer cost relating to servicing equity capital. Our management of the common equity ratio involves dividend policy, common stock repurchase and non-utility investments. Earnings Per Share The quarterly dividend payable on GPU common stock was increased to 45C per share in October. We opened ,,g,,,,,, /- the year witn a 15c per-share rate, raising it to 30c in us January and then to 45C in October. We recognize the il2 importance of the dividend and the value it provides to f our shareholders. E I Per-share earnings were improved by the repurchase of about 4.8 million shares of common stock on the open market and through a special program for small shareholders. g, f 'H This odd-lot program allowed 19,000 of our shareholders to w realize the market value of their shares in a cost-effective /- and convenient way. It also reduces our administrative costs. GPU has authorization from the Securities and Ex-change Commission to purchase an additional 3.2 million shares of common stock through 1992 and may continue to 83 84 8s se 87 88 do so periodically, as market conditions make that desirable. 6

Gcnerla PubHc UtHiti;3 Fleturn On Average GPU added a new subsidiary, General Portfolios Cor-Common Equity poration (GPC), in 1988, which will be an umbrella cor-In Percent poration for non-utility business and investments. GPC 13 1 currently has one subsidiary, Energy Initiatives, Inc. (EII), 'g! which is in the business of developing, owning and H operating non-utility generating facilities. y / R 1 h l Financings A d g Financing the System in 1988 required a relatively minor H amount of permanent capital from external sources. The i H System raised about $155 million of such capital in 1988. I This consisted of $100 million of JCP&L first mortgage y y bonds and $55 million from the sale and lease-back by H [ JCP&L and Met-Ed of their interests in a reservoir. These s '.33 Proceeds represented only about 30% of our 1988 capital 3, 33.se 87 88 expenditures; the remainder was funded from internal sources. In addition, JCP&L and Penelee entered the commercial paper market for the first time in their histories to meet their short-term capital needs. Ability to use this lower cost fimancing tool reflects their growing health and helps keep our costs down. Met-Ed did not need short-term capital in 1988 but plans to enter the commercial paper market in 1989. Rates Among Area's Lowest GPU is committed to providing reliable and high quality service to its customers. We have consistently met that commitment. Where The 1988 Revenue Dollar Went Fuel And Purchased Pon er. 29% .d Operating AndMaintenance. 31% Dividends Andinterest. 9% I Taxes Other Than income Tates. 9% ,Y Depreciation And Amorti:ation. 10% l ReinvestedEarnings. 6% income Tates. 6% 7

acams puun utmum Typical Bill Comparisons In addition, the residential rates of the three GPU com-Residential 500 Kwh/ Month Panies are among the lowest in their states. Industrial and In Dollar 3 commercial rates also compare favorably to those of neigh-su boring electric utilities in New Jersey and Pennsylvania. p Our rates in 1988 were essentially the same as they were ,g~ s , '" 5 in 1982. This means that the real cost of our service - the price adjusted for inflation - is about 207c lower than it was in 1982. This has contributed to sales growth, p During 1988, Met-Ed reduced its rates to reflect the end g of previously authorized customer charges for the cleanup of TMI-2. JCP&L had done so in 1987 and Penelec will I l follow in May 1989. i As we look forward, some upward adjustments in our i rates will be necessary. In 1989, for example, we expect to e l incur higher fuel and purchased power costs. Avg. JCP&L Avg. Met-Penelec NJ PA Ed Costs Controlled Rates In Egccr Erbruary 1.1989 To remain cost competitive, we implemented in 1986 our Systemwide Expenditure Analysis Program. This ongoing, long-term program to control our costs involves inten-g -- 3 sive reviews of all that we do. So far, we have identified $3 $48 million in potential permanent annual savings. We im- @N plemented programs in 1988 to achieve a substantial portion p gWj'f.$h]n f those savings and, over the next two years, will address r the balance. k^ Employment levels are a part of our cost control effort. s 1 hy On December 31, the number of GPU System employees ^ totaled 13,473, 2.2 % fewer than the year before. We expect [ a continuing downward trend, primarily through retraining ,~ and attrition. q m. U TMI 2 Cleanup Nears Completion ,1 Now in the fast stages of cleanup activitv, workers are removing the final one-third of TMI-2's damaged core 1_ debris while robots are decontaminating parts of the reac-a tor building. Most of the cleanup work is expected to be completed in 1989, and the plant is scheduled to be placed in long-term At the end of cleanup activities, more than storage in a safe, stable and secure condition suitable for an 99% of the damaged core debris will have extended period. Some activities, such as disposal of the been ecmovedfrom she rul 2 site and accident-generated water, will extend into 1990 and beyond. shipped to the Department of Energy's l laboratory in Idaho. l s

Cinit:0 Pflic U41118823 l ~ By the end of 1989, more than 99 percent of the fuel will TMl-2 Core have been removed from Unit 2 and shipped off site. A small amount of fuel will remain in and on some surfaces of the reactor system. Continuing decontamination beyond eq@s the proposed conclusion of the cleanup program would not GJi add to the public's margin of safety but would unnecessarily .d i expose personnel to radiation. l[ j' l f Throughout the cleanup program, worker radiation ex-L_l pr posure levels have remained low. The overall work force ,Mk exposure at the end of the cleanup program is expected to j any L - -castw be significantly below an early estimate by the Nuclear b '5$"s * Regulatory Commission (NRC). l L

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We expect the cleanup to be completed within its original m nen matenaq $1 billion budget and the funding is in place. l i GPU Nuclear Corporation expects TMI-2 to remain in ]gj j storage until some time in the next century, when it will be k.( Dvf decommissioned along with TMI-1, and is preparing to ob- -Lower pienum tain necessary NRC approval. TMI-2 is not included in the %l]b"5 l GPU System's present energy supply plans. Decommissioning Assurance Required i The NRC in June issued regulations requiring nuclear plant l licensees to provide, by July 1990, f' ancial assurance for m eventual decommissioning of those facilities. Minimum - j funding for the type of reactors we own was set at $100 to + (9 g lI I $125 million per reactor for removing radioactive materials. p l= F# An independent consultant estimated a cost of about f{ radioactive and non-radioactive materials (other than the $200 to $300 million per plant in 1987 dollars for removing 5 H l fuel) and the structures at TMI-I and Oyster Creek. The i g L' actual cost of decommissioning may be materially different i from these estimates, depending upon regulatory require-loose matenal ments and technology available when the work is done. No L p$"$ais" li study has been conducted for TMI-2, but decommissioning \\ ih of that plant is expected to be substantially more expensive \\ asse q $ee*ris' #""* than Oyster Creek or TMI-1. i

1. dI By the end of 1988, GPU had accumulated about $26 mil-ion from customers to decommission Oyster Creek and TMI-1. No funds are being collected for TMI-2. GPU in-

[h y afre7thN979 acIi1NrYop; l tends to pursue more adequate recognition of the cost of and as it appears today (bottom). decommissioning its nuclear plants in future rate Cases. 9

fiNea supply and delivery resources will be needed to meet our customers' Drowing needs. GPU is remaining flexible so that 11 may continue to adapt to changing customer needs and available resources.fi gy g M g5 BM 3E s.'. S-< vsag 1.

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$.8hhb f.' w y At Ws115sas N. %, o,=., r, **r r Aramager, sad Aseerr o. t9& O .h f (' 6 Parne0, % =I=*=r c 7- . a%, ,..,,-,.,.. w, TMI-I al==t=*=c en which p essauf rosas sycrears gy I' g g underse entensive On$nig g a Edwin E. K;ntner (left), GPUN Executive Vice President, and Philip R. Clark, GPUN President and Chief Executive Oficer 10

I s Seneral Public Utilities Generation Now And For The Future l ] Utility World Changes 7 55he utility environment is changing and the GPU System l is changing with it. The generation of electricity is no longer a utility monopoly. Non-utility generation pro-c jects under contract to the GPU companies are beginning to I g_,p g come into commercial service, and we expect to see rapid , QQf f*- growth of that supply in both New Jersey and Pennsylvania. g), %M In addition to expanding the sources of non-utility genera-tion and the ways in which utilities can obtain power from ~ z ' ~, them, regulators across the country are evaluating issues in- -i volving increased access to utility transmission systems and expanded options for pricing transmission services.

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l The GPU System is working with regulators and public officials in a joint effon to build public confidence in a part-nership of customers, regulators, entrepreneurs and utilities to assure the continued strength of the electric systor. GPU Facilities The GPU System owns about 7,300 MW of generating capacity: 44% coal,20% nuclear,32% oil and gas and 4% Extending the lives of generating hydro and pumped storage. [t$,Yc Yeha# # Yin f GPU System-owned facilities generated a record-high ~ ' cto 31 million megawatt-hours in 1988, 3% more than in 1987. capacity plans. Our success in power generation in 1988 was a direct result of prudent spending for maintenance and the com-mitment of our people. l Several coal-fired generating units set new operating l Net Generation records last year. The Homer City, Conemaugh and Key-In nousands ofArwn stone stations, with an aggregate capacity of 5.266 MW, 2" 3m all operated by Penelee for GPU companies and other utilities, exceeded generation expectations for 1988. In 2s gg addition, Penelec's Warren Station Unit 2 (44 MW) and 2n w Seward Station Unit 4 (62 MW) both set new records for consecutive days of operation. Titus Station (240 MW), owned and operated by Met-Ed, i set records both for availability and continuous days of operation. Nuclear operations were also noteworthy in 1988. Before being shut down in the summer for a scheduled refuel-ing and maintenance outage, Three Mile Island Unit 1 '83 '84 '85 '86 '87 '88 (800 MW) completed its best performance cycle since it 11

Genstal Public Utilitiss m 4 went into commercial operation in 1974. During that out- / age, fuel assemblies were replaced and rearrar,ged to max-imize energy productica. TMI-l's next refueling outage is 4 c f scheduled for Janua y 1990. a ( ) TMI-l had the,vorld's fifth best operating record, based j 3 Y on capacity, for the year ended March 1988, as ranked by q* < Nuclear Engineering International magazine. v A '+ The 628-megawatt Oyster Creek nuclear unit in New I j Jersey was operated at near-full power for 229 consecutive 1: / days through July, the most productive run in the plant's 19-year history. It was shut down in July for inspection and Pipes are inspected with a video repair of a main steam isolation valve. The reactor was

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returned to service the following month and operated at essentially full power until late September, when it was shut down because of a technical problem. Management at that time decided to begin the refueling and maintenance outage, scheduled for October 15, rather than restart the plant. Oyster Creek is scheduled to resume power t e operations in March 1989. 4< During the outage, about one-third of the fuel assemblies were replaced with higher enriched fuel designed to allow _ /k y more efficient reactor operation. The new fuel configura-g tion should extend plant operations to a 21-month period =- ' 'p* between refueling outages. At the time of the shutdown, the plant had exceeded its production goal for the year. Despite this good production Ii ~?" ~ performance by TMI-l and Oyster Creek in 1988, the D operation of the performance standard imposed on nuclear plant operation by the New Jersey Board of Public Utilities l [ h, (NJBPU) cost us about $4 million in unrecoverable expense in 1988 and another $1 million in 1989. This is largely re-i 4 'S lated to the particular design of the performance standard related to energy clause periods and refueling outages. Oyster Creek has been in the process of being refur- ~ bished, overhauled and modernized over the past five years. Life extension of this facility beyond the assumed retire-A ment date of 2004 is under study. We are continuing our efforts to maximize the output of Technicians more assemblies during our nuclear facilities, consistent with their safe operation. TMH defueling and refueling operations from this fuel handling bridge. 12

a.n.,.i poi n. uunu.. l / We plan to maintain existing generating facilities in serv-hs ice as long as technically and economically practicable. As j ri-generating plants age, however, we must decide whether to l continue to devote capital and operating / maintenance re- / sources to those stations or replace them. In this connection, '/ we plan to retire in 1990 two aging Penelec coal plants, the f N Front Street Station (110 MW) and the Williamsburg Station 8 (34 MW). These facilities were originally placed in service in 1917 and 1914. N We plan to spend about $500 million on construction during 1989, mainly to expand and reinforce the transmis-sion and distribution systems and to install combustion turbines to meet peak demand requirements. JCP&L is l building two oil-fired combustion turbine units adjacent to / ,_ y the Oyster Creek Nuclear Generating Station to supply g 70 megawatts of power to customers during peak demand i periods. The turbines, which will cost $38 million and are A scheduled to be in service in 1989, will reinforce the rapid-ly growing southern Jersey Central area. Maintaining generating facilities in service involves hundreds of tasks pgyylylllgY g ggg 9glgl annually, such as this one at the Conernaugh coal-fredplant. New supply and delivery resources will be needed to meet our customers' growing needs. GPU is remaining flexible so that it may continue to adapt to changing customer Energy Supply Sources needs and available resources. In Percen, To balance the growing demand with supply over the _ fm next decade, we will: a implement appropriate conservation, efficiency and load management; a continue the operation of existing generation for as long as technically and economically practicable; a purchase power from other utilities, as we have done in recent years to the benefit of our stockholders and customers; a purchase power from non-utility generation sources, an { industry which has grown to be the principal source of new U_ electric power capacity in the past few years; and a 4 '83 '84 '85 '86 '87 '88 0 Od And Other 0 h uclear 0 PurchasedPower B Coal 13

l llTo meet our customer needs, we plan to rely heavily on non-utility generation.!! i' ' Cf6 :,g ,i@h I Gary ? ~ 89_an,, 4;Y a ,{ .n ~ -s _y .. i3d N y . me, : ^ a?h '4 MWemand. ft ed;&'

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\\ Osnsr&1 Puille Utilities a construct relatively small generating units employing ap- -~w propriate technology and fuels. ) s T Non Utilities Compete To meet our customer needs, we plan to rely heavily on non-utility generation. We now have nearly 200 MW of I -g non-utility generation on line and have contractual com-

• +g mitments for more than 1,700 MW to be on line threugh the mid-1990s.

The NJBPU has approved a competitive bidding process l Melvin Heuer (center), President of or non-uWity generators. Mer &at ymgram, XM wiU Energy Initiatives. Inc.. tours a annually identify its needs, specify the amount of energy cogenerating plant which supplies excess and capacity to be purchased and advertise for competitive energy to dcrat with Marcal Paper bids to fill that need. The utility thus will be able to main-c$Irbn'an# II c"f #[c"utf" o'hce'r' ' tain control over procurement and take advantage of com-d and Nichclas Marcalus (right), petition to find the best possible opportunities. This process President. jimits our need to construct large generating plants. By this strategy, we are working to keep customer costs at the low-est achievable level and, at the same time, reducing risk for our investors. GPU is competing nationally for non-utility projects through EII. That company is about to place into service its first major project, a 570 million cogeneration facility in which it has a 507c interest. EII also has several projects under development in various states and is actively pursuing opportunities to acquire and invest in other non-utility generating facilities. 15

i 640ur aim is to strengthen rur relationship with our customers by understanding their needs and helping them help themselves through conservation and load management.ff ' qw' 7 1 ~w r yu: .c -f 'g. p C ).., .-f) ~^ M 3, w 3 -~ l ...g.. ~~%~ .) j ' g, y-l:,'. S' t - .g s,

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t .g j 3 4e p 1 4 5-4 -( [ e 43. a, .: 'i i ~ b- ' 'a Y*. ) ' / 1 r ' l. e 5 V: s 0}' 'gb ~' Ah, c-a. y., Matten see is pourd into moms at _\\' .9 _s ~ g Foundry Machine Company, a Met-FJ in __p '_ MT .n. _ ,, &Y,l,.; w " 1 .y. ~ ~ 9%2 l ~ g,. 3m .- ~ Fred D. Hafer (left). President of Met-Ed, reviews operations at the Pennsylvania Steel Foundry and Machine Company uith the foundry's President. Daniel M. Goodyear. 16

Camerci Puilic UtHitlSe l GPU's Goal: I Satisfied Customers Economic Development 1,1centives Pthrough its recently established Ec enelec is promoting development in its service territory Department. Incentives include both innovative rate 3 structures and comprehensive information on local re-g sources. Met-Ed also has received regulatory approval for t incentive rates. Penelec's economic development rates provide reduced charges to qualifying manufacturing industries. Other t programs include off-peak rates and curtailable serv-ice contracts. I We assist current and potential customers in locating '~ 1. financing and obtaining governmental assistance, help them find information on new technologies and provide data for their environmental applications. In addition, we are devel-j oping a database on available construction sites and details on transportation, highways and water and sewerage systems. Penelec President Roben L Hise (right) meets with Larry E. Belluchie, Presiden, Conservation Promoted of stoneycreek steel, one of the utility s All GPU companies promote conservation for residential, larger industrial cutomers. commercial and industrial customers. Through advertising, bill inserts and financial incentives, the GPU companies encourage residential customers to use electricity efficiently. Our customers can control their usage with energy-efficient appliances and home insulation. We encourage the use oflarge appliances during off-peak hours, when the cost of generating electricity is lower. In the commercial and industrial sector, we recommend the use of high efficiency lighting and electric motors and explain how costs can be further reduced through thermal storage and curtailable/interruptible rates. Energy audits are conducted for customers upon request. Our aim is to strengthen our relationship with our cus-tomers by understanding their needs and helping them help themselves through conservation and load management, l 17

4tnzeri Publia Utilitise l l l ' XK5'gm Community involvement ".g,g The GPU System conipanies and their employees are active i

g m commumty service programs.

One of those programs invites joint contributions by the GPU companies, their customers and employees to help 4 residential customers who are temporarily unable to pay / their electric bills. We also work with payment-troubled customers to develop a suitable payment plan or refer them 3 to agencies for further assistance. In our Gatekeeper Program, field personnel identify Potential problems associated with older citizens and con-per ing mp ew k i oca p lice departments to provide parents with tact appropriate professional organizations to investigate and children's ident$ cation cards, render assistance. Under our Crime Watch program, employees contact authorities if they notice signs of unusual activities. Children are photographed and fingerprinted in still another volunteer program, coordinated through local police departments. Area charitable organizations, including United Way, are aided by employee contributions, and hundreds of our employees volunteer in community service organizations. 18

A- - - - ~. - .a a Generti Pxtills Utilitiss Administration Board Additions } ~.- ,~ hree new members were elected to the GPU Board of 3 Directors in February 1989: John M. Pietruski, retired I Chairman and Chief Executive Officer of Sterling Drig { - 4h r "- c/ Inc., New York City; Henry E Henderson, Jr., President and I (% Chief Executive Officer of H. E Henderson Industries and } 7,, Systems Control Corp., West Caldwell, NJ; and Catherine A. .p p.y v ~ ~ Rein, Senior Vice President of Human Resources of Metro- ^ politan Life Insurance Co., New York City. O' h Management Changes ,~ f.f* Mary A. Nalewako, former assistant to the chairman, was elected corporate secretary of GPU and GPU Service Corporation in September. She replaced Grace Wade, who cru's Management Development Planning retired after 20 years of dedicated service to the Corpora-Program, introduced in October 1987, tion, three as corporate secretary, provides the corporation with a coordinated The following have been elected officers of General strategyfor GPU Systemwide succession planning and management development. Purtfolios Corporation, GPU's new subsidiary for non-utility and m. vestment business: William G. Kuhns, chair-man; John G. Graham, president; Michael R Morrell, treasurer; Peter E. Maricondo, comptroller; and Mary A. Nalewako, secretary. Employment Opportunities The GPU System companies have Affirmative Action Programs designed to encourage the full participation of women and minorities in all areas and at all levels of the Corporation. Administration and support of Affirmative Action Programs continue to be a priority within the GPU System companies. ) 19

r:- w- -s ~ ~ - - ,-[. Financial Section Index Selected Financial Data 21 Quarterly Financial Data 21 Management's Discussion And Analysis Of Financial Condition And Results Of Operations 22 Statement Of Management 27 Report OfIndependent Accountants 28 i Consolidated Financial Statements 29 l Notes To Consolidated Financial Statements 33 l System Statistics 43 1 i f

i Selected Financial Data General Public Utilities Corporation And Subsidiary Companies Year Ended December 31, 1988 1987 1986 1985 1984 1983 Common Stock Data: Earmngs per share... $ 4.75 $ 4.12 $ 3.36 $ 1.99 $ 2.19 $ 1.46 Dividends per share... $ 1.35 $.45 5-Book value per share. $34.88 $31.48 $27.83 $24.53 $22.37 $20.16 Closing market price per share.. $ 38 5 28% $ 22% $ 17% $ 11% $ 7% Average common shares outstanding (000). 59,725 62,864 62,864 62,864 62,864 61,526 Shares outstanding at year-end (000) 58,022 62,864 62,864 62,864 62,864 62,864 Market to book value at year end. 109 % 90 % 81 % 70 % 51 % 38 % Price /carnings ratio... 8.0 6.9 6.7 8.6 5.3 5.3 Return on average common equity. 14.2 % 13.8 % 12.8 % 8.5% 10.2 % 7.4 % Financial Data (In thousands): Operating revenues .82,833,974 $2,673,421 $2,787,077 $2,869,509 $2,735,286 $2,480,304 Other operation and maintenance 892,199 868,350 854,688 769,418 715,289 620,915 expense. Net income. 283,786 259,097 210.947 125,206 137,603 89,550 Net utility plant in service . 4,264,512 4,081,162 3,803,555 3,532,230 3,354,610 3,245,834 Cash construction expenditures. 441,408 458,148 482,740 388,755 294,957 275,491 Total assets.. 6,415,405 6,278,915 6,018,434 5,848,088 5,515,433 4,825,476 Long-term debt. 1,727,914 1,668,763 1,736,580 1,816,311 1,797,154 1,804,%5 Cumulative pferred stock with mandatory redemption requirements. 58,300 63,650 67,194 Quarterly Financial Data (Unaudited) General Public Utilities Corporation And Subsidiary Companies in Thousands Except First Quarter Second Quarter Per Share Data 1988 1987 1988 1987 Operating revenues $727,128 $719,406 $652,312 $621,580 Operating income. 143,453 118,691 97,371 88,786 Net income. 107,943 86,289 55,676 52,513 Earnings per share. 1.75 1.37 .93 .84 in Thousands Except Third Quarter Tourth Quarter Per Share Data 1988 1987 1988 1987 Operating revenues $781,729 $702,623 $672,805 $629,812 Operating income Net income. 123,926 108,458 68,899 77,696 85,155 72,088 35,012 48,207 Earnings per share... 1.45 1.14 .62 .77 21 - - __ __ = _ _ _ _ -

Management's Discussion And Analysis Of Financial Condition And Results Of Operations Results Of Operations (tn mimono 1988 1987 In October 1988, GPU increased its quarterly divi-Kwh sales (excluding energy portion) $101.3 $ 73.4 dend from $.30 to $.45 per share. At December 31 Rate decreases, net (53.7) (6.1) 1988, the market value of its common stock was Energy revenues 120.7 (173.8) 538 per share which is above its year-end book value Other (7.7) (7.2) of $34.88 and represents a 34% increase in value since Net increase (decrease) in revenues $160.6 $(113.7) December 31,1987. GPU's return on average common equity (ROE) was 14.2% for 1988 as compared to Kilomart-Hour Sales 13.8% and 12.8% for 1987 and 1986, respectively. GPU's current ROE compares favorably with the cur-1988 rent industry average of approximately 13.1%. Also , Kwh sales increased in 1988 due to a 2.1% increase during 1988, GPU's earnings per share increased by m the average number of customers as well as in-15.3% to $4.75 due to a 9.5% increase in net income creased usage per customer. Most new customer and a decrease in the number of outstanding shares. growth occurred in the residential and commercial Net income increased $24.7 million to $283.8 million sectors in the New Jersey and eastern Pennsylvania in 1988 primarily due to an increase in kilowatt-hour service territories. Customer usage increased in all (kwh) sales partially offset by an increase in other customer categories partially due to weather conditions operation and maintenance expense. Net income in 1987 and mereased activity by mdustrial customers m increased $48.2 million to $259.1 million primarily due Pennsylvania. to an increase in kwh sales panially offset by an in-jpg7 crease in depreciation expense. Kwh sales increased in 1987 due to a 2.3% in-crease in the average number of customers as well as increased usage per customer. Most new customer Market Value vs. Book Value growth occurred in the residential and commercial In Percent sectors in the New Jersey and eastern Pennsylvania service territories. Customer usage in 1987 increased mainly in the residential and industrial categories. In-dustrial customer usage increases were primarily at e Penelec although Penelec's overall customer sales re-mained relatively level as compared to the previous year. 5 3e Customer Growth in Thousands 1 174 's3 '84 '85 '86 '87 '88 3 1835 Flevenues: Total revenues increased 6.0% to $2.8 billion in 1988 after decreasing 4.1% to $2.7 billion in 1987. The com-ponents of these changes are as follows: y y y y y y 's3 84 as 'Sc 87 88 j 22 t-

Rare Decreases, Net TMI-2 cleanup costs which are not provided for in the jpgg funding plan and $15 million for a settlement of prior Revenues in 1988 reflected a rate decrease mainly years e crEy C st rate C mPlaints. These increases resulting from the reduction of federal income tax rates were partially offset by a reduction in costs caused by fmm 40% to 34% imposed by the Thx Reform Act of 1987 charges for certain prior years engineering costs which did not recur in 1988. 1986 (TRA-86). 1987 1987

• 1. E'#8 " * "

".**"*** **P'" Revenues in 1987 reflected a net rate decrease result-e eral income ta rates f % to 40 im Y*

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TRA-86 partially offset by the effect of rate increases Depreciation And Amortization received in 1986. j9gg Energy Revenues Depreciation and amortization expense increased 1968 $2.1 milli n due to additional plant in service partially Generally, changes in energy revenues do not affect f set by a reduction in costs caused by 1987 charges net income as they reficct changes in the energy cost relating to the removal of equipment which did not rates billed to customers and expensed. Energy reve-recur m 1988. The increase in plant in service was nues increased in 1985 as a result of increases in the primarily due to additions to existing generating facil-energy cost rates in effect and an increase in kwh sales, ities to improve their performance and extend their lives and additions to the distribution system related to 1987 new customer growth. Energy revenues decreased in 1987 as a result of jpg7 decreased energy cost rates in effect despite an increase m kwh sales. Depreciation and amortization expense increased $28.6 million due to additional plant in service and charges relating to the removal of equipment. The in-Other Operation And crease in plant in service was primarily due to addi-Maintenance Expense tions to existing generating facilities to improve their in Millions ofDollars performance and extend their lives and additions to the distribution system related to new customer growth. Taxes Other lhan income Taxes 769 l 1988 And 1987 f21 ChanFes in taxes other than income taxes do not significantly affect net income as they are substantially recovered in revenues. In 1988, taxes other than income taxes decreased mainly due to a reduction in Public Utility Realty taxes. Other income, Net Other income includes noncash accretion income on the GPU System's unamortized investment in TM1-2 'a3 '84 '85 86 87 '88 and Forked River, which is being recorded in accord-ance with Statement of Financial Accounting Standards No. 90. The accretion income is $36.4 million, $39.6 mil-Operating Expenses: lion and $43.4 million and the after-tax effect on net Other Operation And A/aintenance income is $20.7 million, $22.0 million and $23.5 mil-lion for the years 1988,1987 and 1986, respectively. jpgg Other operation and maintenance expense increased primarily due to third quarter charges of $19 million for 23 4 l

l l 1 i i l i Liquidity And Capital Resources capitalization Target Range 1988 1987 1986 Capital Needs: The GPU System capital needs, which consist of long-term debt 47-43 % 40 % 41 % 45 % Notes payable 4 3 1 construction expenditures and amounts for maturing Preferred stock 10-12 9 9 10 obligations, were $497 million in 1988 and are expected Common equity 43-45 47 47 44 to be $$35 million in 1989. Management estimates that 100 % 100 % 100 % 100 % I l approximately one-half of these capital needs in 1989 will be satisfied through internally generated funds. Cash construction expenditures were $441 million Several steps have been taken to achieve manage-in 1988 and are expected to be $517 million in 1989, ment's long-term capitalization target. The quarterly Construction expenditures are expected to remain rela, dividend, currently $.45 per share, has been increased tively stable into the early 1990s. Expenditures for twice since it was reinstituted in April 1987. The Cor-maturing debt and sinking fund requirements were poration will continue to review the level of the divi- $56 million in 1988 and are expected to be $38 million dend in the light of the then existing corditions. GPU in 1989. In 1988, JCP&L and Penelec retired First repurchased 4.8 million shares of GPU common stock Mortgage Bonds of $14 million and $32 million, re. on the open market in 1988 at a total cost of spectively. Other long-term debt retirements and sink. $157.7 million and has authority from the Securities ing fund payments in 1988 totaled approximately and Exchange Commission (SEC) to repurchase up to $10 million. an additional 3.2 million shares through December 31, 1992. Financing: Penelec and JCP&L are considering issuing long-term Non-Utility Business: debt in 1989 to refinance short-term notes and maturing In 1988, GPU organized a new subsidiary, General long-term debt, satisfy sinking fund requirements and Portfolios Corporation (GPC). GPC is a holding company finance construction activities. "Ihe GPU System's for GPU's pon-utility business which is currently con-ability to obtain external financing is evidenced by the ducted by Energy Initiatives, Incorporated (EII) and I subsidiaries

• investment grade security ratings. The sub.

its subsidiaries. EII is in the business of developing, sidiaries' bond ratings were raised in 1988 and are now Operating and investing in cogeneration and other inde-rated either A2 or Al by Moody's, BBB+ or A-by pendent power production facilities. GPU has author. Standard & Poor's and 6 or 5 by Duff and Phelps. ization from the SEC to contribute up to $25 million to The subsidiaries' interest coverage ratios are sub. GPC for use by EII and will seek additional authority stantially in excess of indenture restrictions for new if Opportunities arise for additionalinvestments. In debt issues which require that operating income equal addition, GPU has requested authorization from the or exceed two times interest payments. SEC to invest funds in diversified, passive equity investments. If approved, these investments would be Interest coverage made by a new subsidiary of GPC, which would be capitalized with funds that are in excess of the current 1988 1987 1986 needs of the System's utility business. Jersey Central Power & Light 4.26x 4.46x 3.64x Metropolitan Edison 4.62x 4.76x 4.38x Competition: Pennsylvania Electric 4.98x 4.91x 4.99x The electric utility industry is gradually moving Capitalization: toward an increasingly competitive business environ-Improved earmngs and earnings retention, along with ment where a utility may be competing with other continued debt and preferred stock redemptions and energy producers to supply its customers' energy retirements, have worked to increase the common needs. The GPU System's cost of service to customers equity component of the capitalization ratios, which are must remain competitive with those of alternative as follows: energy sources if it is to continue to be successful. Although the GPU System presently produces, transmits and distributes energy for the use of its customers, the future rules adopted by regulators will determine the l 24 ._A

~ degn:e to which the GPU System participates in energy while continuing to operate safely and meet customer generation, transmission and distribution activities. Some needs reliably. As a part of this effort, the GPU customers already han the option of self-generation or System's goal is to reduce the number of employees to cogeneration and depending on the extent of future 13,000 by the end of 1990. deregulation, may be able to enter into contracts for wholesale power purchases fmm other utilities. The Available Capacities GPU System's ability to remain competitive in this f, gg environment will affect the results of operations in . future years. W D Mg gg GPU intends to meet the challenges of increased 7agef f + f competition by continuing to control costs and to meet f its customers' needs as well as improving its services n Oy gg yg provided to customers. Costs will be controlled by effi-c E CMshn ,yl3 Mf ciency and productivity efforts as well as meeting Mf Qphy% energy demands with least-cost alternatives. h k kh Net Systeni Flequirements 'N &g6gg Q J Nyh{ & in Thousands OfMWH 43171 $Wr ' W 0QM 4 36756 37246 38H '83 '84 '85 '86 '87 '88 34368 G Purchased E Company Owned 1 Meeting Energy Demands: The GPU System is forecasting long-term electric energy demand growth to average about 2% per year, g with individual growth rates for JCP&L, Met-Ed and 3 Penelec projected at 2.3%,2.1% and 1.3%, respectively. Oj 'lhis projected growth would result in an increase in net 4 system requirements of almost 50% by 2008. The GPU System intends to meet its growing energy '83 '84 '85 '86 '87 E Power Purchased requirements by securing energy supplies from the least-cost alternatives, which include extending the lives ofits U'" " d"" existing generating facilities, promoting energy conserva-tion and load management programs, encouraging third Controlling Costs: party generation and constructing new GPU System owned The GPU System has continued to implement cost generating facilities. The GPU System's construction pro-reduction plans as a result of the Expenditure Analysis gram is designed to keep most of the System's existing Program (EAP). This program, initiated in 1986, is in-generating facilities operating during the next 20 years, tended to effect long-range savings by controlling costs which is well beyond their previously scheduled retire-to reduce the operating costs of the business and con-ment dates, and to construct new generating facilities for tributing to the GPU System objective of remaining periods of peak demand. Third party generation could competitive with other energy supply alternatives. The include extending and enlarging long-term energy and first phase of the program identified savings opportuni-capacity purchases and transmission capabilities as well tier by comparing operating, maintenance and adnum-ar '.he fostering of advantageous generation from small strttive practices among the GPU System companies. "Ower producers and cogenerators (qualifying facilities). The second phase of the program, comparing GPU's Qualifying facilities are independent electric generators business practices with other selected utilities, has just which are not rate regulated as utilities. begun. The goal of the EAP's second phase is to adopt By working with qualifying facilities, the GPU efficient industry practices in order to reduce costs System can increase the capacity it has available to 25

h b s meet the growing demand for electricity without incur-Additionally, over a period of years, the subsidiaries ring the significant capital requirements of new utility-have been notified by the Environmental Protection owned generation. The New Jersey Board of Public Agency (EPA) and state environmental authorities that Utilities has approved a competitive bidding process for they are among the potentially responsible parties who qualifying facilities, independent power producers and may be liable to pay for the costs associated with the demand reduction projects which will allow JCP&L to investigation and rt> mediation of certain hazardous / toxic better control the magnitude and timing of capacity and waste sites. The ultimate cost of remediation will de-energy purchases as well as the terms of payment. This pend upon changing circumstances as site investigations process will also create an opportunity for JCP&L to continue, including: (a) the existing technology required purchase energy and capacity at prices below other for site cleanup, (b) the remedial action plan chosen alternatives. Met-Ed will attempt to secure Public Utility and (c) the extent of site contamination and the portion Commission approval to initiate a pilot competitive attributed to the subsidiaries. The subsidiar;es are bidding program in Pennsylvania, unable to estimate the full extent of possible cleanup At December 31, 1988, the GPU System had in place action or costs (which may be material and may not be 395 megawatts (MW) of capacity and load reduction covered by insurance). Management expects to recover from 44 qualifying facilities and other production such costs, as described above, in rate proceedings, but facilities. The GPU System's capacity forecast reflects there can be no assurance as to the extent to which over 1,700 MW of net production capacity from non-these costs will be recoverable. utility generation facilities by the mid 1990s. There are risks in any energy supply strategy which the GPU inflation: System might adopt. Management believes the strategy inflation affects the GPU System in the form of in-it is employing, with all its component parts including creased replacement costs of utility plant, which are reliance on non-utility generation, will, with continuing significantly higher than the historical cost reflected in regulatory acceptance, properly balance these risks in the financial statements. The GPU System anticipates it the best interests of its customers and investors. will recover the increased cost of facilities when, and if, replacement actually occurs. Inflation also affects Regulation: the GPU System in the form of increased operating in recent years, the ability of electric utilities to ob. costs which regulated utilities can expect to recover; tain adequate and timely recovery of their investments however, in times of high inflation it may be adversely in, and operating costs (including a provision for affected by the regulatory lag in reflecting them in decommissioning) of nuclear generating stations and rates. associated replacement power costs has become more uncertain. In addition, there has been a growing Accounting issues: tendency by regulators to retroactively assess the in December 1987, the Financial Accounting Stan-prudence of operation and capital investments. For dards Board issued Statement of Financial Accounting more information concerning the GPU System's nuclear Standards No. 96 (FAS 96) " Accounting for income programs, contingencies and retrospective examinations, Taxes," which is effective for fiscal years beginning see Note 1 to the financial statements. after December 15, 1989. The Statement will require utilities to establish substantial deferred tax liabilities Environmental Matters: and receivables due from customers for such deferred As a result of existing and proposed legislation and taxes not previously recorded as liabilities. The regulations dealing with environmental matters, in-provisions of FAS 96 will not have a material impact on cluding legislation regarding acid rain, water quality net income. regulations, air quality regulations relating to stack height requirements and storage and disposal of solid and hazardous wastes, the subsidiaries may be required to incur substantial additional costs to construct new equipment, modify or replace existing and proposed equipment and to improve or clean up waste disposal sites currently or formerly used by them, including previously owned coal gasification sites. 26

Statement Of Management The management of General Public Utilities Corpora-believed to be cost-effective in the circumstances to res-tion (GPU) is responsible for the information and pond appropriately to these recommendations. For the representations contained in the financial statements and reasons stated above, management believes that, as of other sections of this annual report. The financial state-December 31,1988, the Corporation's system of internal ments have been prepared in conformity with generally control provides reasonable assurance as to the integrity accepted accounting principles consistently applied. and reliability of the financial statements, the protection in preparing the financial statements, management of assets from unauthorized use or disposition and the makes informed judgments and estimates of the ex-prevention and detection of fraudulent financial pected effects of events and transactions that are cur-reporting. rently being reported. The Board of Directors, through its Audit Committee, To fulfill its responsibilities for the reliability of the consisting solely of outside directors of the Corporation, financial statements, management has established and is responsible for reviewing and monitoring the Corpo-maintains a system ofinternal control. This system pro-ration's financial reporting and accounting practices. vides for appropriate division of responsibilities and The Audit Committee meets with management and in-written policies and procedures that are communicated ternal auditors four times a year to review the work of to employees with significant roles in the financial each and to monitor the discharge by each of its reporting process and is updated as necessary. Manage-responsibilities. The Audit Committee also meets at ment continually monitors the system of internal control least four times a year with the independent auditors for compliance. GPU maintains an internal auditing who have free access to the Audit Committee, without program that independently assesses the effectiveness of management present, to discuss internal control, the internal controls and recommends possible im-auditing and financial reporting matters. provements thereto. In addition, as part of its audit of Coopers & Lybrand, independent public accountants, GPU's financial statements, Coopers & Lybrand con-are engaged to audit and express an opinion, which ap-siders the internal control structure in determining the pears on page 28, on the financial statements. nature, timing, and extent of audit tests to be applied. Management has considered the internal auditor's and Coopers & Lybrand's recommendations concerning the system of internal control and has taken actions that are l l 27

Report Of Independent Accountants i I To the Boant of Directors and Stockholders Genem! Public Utilities Corpomtion Ibrsippany, New Jersey We have audited the accompanying consolidated their operations and their cash flows for each of the balance sheets of General Public Utilities Corporation three years in the period ended December 31,1988 in and Subsidiary Companies as of December 31,1988 conformity with generally accepted accounting and 1987 and the related consolidated statements of in-principles. come, retained earnings, and cash flows for each of the As more fully discussed in Note i to Consolidated three years in the period ended December 31,1988. Financial Statements, the Corporation is unable to These financial statements are the responsibility of the determine the ultimate consequences of certain Corporation's management. Our responsibility is to ex-contingencies which have resulted from the accident at press an opinion on these financial statements based on Unit No. 2 of the Three Mile Island Nuclear our audits. Generating Station (TMI-2) and the response of rate We conducted our audits in accordance with generally regulatory authorities to these matters. The mar ers accepted auditing standards. Those standards require which remain unresolved are (a) the recovery of the that we plan and perform the audit to obtain reasonable cost to be incurred in connection with the clean-up to assurance about whether the financial statements ast the extent it exceeds the present estimate and, with free of material misstatement. An audit includes respect to the Corporation's Pennsylvania subsidiaries examining, on a test basis, evidence supporting the only, the eventual decommissioning of TMI-2 from amounts and disclosures in the financial statements. An customers, and (b) the recovery of the excess, if any, of audit also includes assessing the accounting principles amounts which might be paid in connection with claims used and significant estimates made by management, as for damages resulting frem the accident over available well as evaluating the overall financial statement insurance proceeds. presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to Cop & Lybrand above (pages 29 through 42) present fairly, in all material respects, the financial position of General 1251 Avenue of the Americas Public Utilities Corporation and Subsidiary Companies New York, New York as of December 31,1988 and 1987 and the results of February 21, 1989 28

m Consolidated Statements Of income General Public Utilities Corporation And Subsidiary Companies (In thousands) For 7be Years Ended December 31, 1988 1987 th6 Operating Revenues...,.. $2,833,974 $2,673,421 $2,787,077 Operating Expenses: Fuel 417,448 411,718 3Y,966 Power purchased and interchanged, net 433,362 367,444 4.f3,056 Deferral of energy costs, net. (22,986) (85,654) 81,279 Other operation and maintenance............ 892,199 868,350 854,688 Depreciation and amonization................... 255,877 253,771 225,143 Amortization of propeny losses.......... 15,706 17,040 21,778 Taxes, other thaa income taxes 248,914 263,637 263,490 Total operating expenses..... 2,240,520 2,096,306 2,252,400 Operating income before income taxes.............. 593,454 577,115 534,677 income taxes. 159,805 183,484 180,452 Operating Income.. 433,649 393,631 354,225 Other income and Deductions: Allowance for other funds used during construction.... 7,812 12,065 16,186 Other income, net...... 42,842 55,595 51,701 Income taxes.......... (17,424) (24.982) (18,013) Total other income and deductions....... 33,230 42,678 49,874 Income Before Interest Charges and Preferred Dividends... 466,879 436,309 404,099 Interest Charges and Preferred Dividends: Interest on long-term debt. 140,632 137,175 143,589 dther interest.... 22,604 17,234 17,547 Allowance for borrowed funds used during construction (10,121) (7,760) (4,957) Preferred stock dividends of subsidiaries.. 29,978 30.563 36,973 Total interest charges and preferred dividends........ 183,093 177,212 193,152 Net income $ 283.786 $ 259.097 $ 210.947 Earnings Per Average Share 4.75 4.12 3.36 j Average Common Shares Outstanding (000). 59.725 62.864 62.864 l End of Period Common Shares Outstanding (000). 58.022 62.864 62.864 Cash Dividends Paid Per Share...... 1.35 .45 Consolidated Statements Of Retained Earnings General Public Utilities Corporation And Subsidiary Companies (In thousands) For The Years Ended December 31, 1988 1987 1986 Balance, beginning of $1,059,846 $ 830,387 5 621,182 Add, net income..... year. 283,786 259,097 210,947 Deduct: Cash dividends on common stock... 80,849 28,289 Other adjustments.... 1,349 Q42 Balance, end of year.,.. $1.262.783 $1.059.846 $ 830.387 The accompanying notes are an integral pan of the consolidated financial statements. [ 29 t I

f l Consolidated Balance Sheets a General Public Utilities Corporation And Subsidiary Companies December 31, On thousands) 1988 1987 Assets Utility Plant (at original cost): In service......... $6,303,075 $5.943,183 Less, accumulated depreciation 2,038,563 1,862,021 Net utility plant in service.. 4,264,512 4,081.162 Investment in Three Mile Island Unit 2 655,704 627,529 Less, accumulated amonization. 401,061 367,046 Net investment in Three Mile Island Umt 2 254,643 260,483 Construction work in progress. 288,202 253,316 Property under capital leases, net 218,341 205,834 Held for future use. 19,646 20.243 Nuclear fuel, net. 10,284 19,371 Net utility plant. 5,055,628 4,840,409 Investments: loans to non-affiliated mining companies. 5,725 6,725 Other, at cost. 19,345 18,579 Total investments 25,070 25,304 Current Assets: Cash and temporary cash investments. 90,883 64,533 Special deposits... Accounts receivable: 27,049 37,670 Customers, net. 197,690 178,708 Other.. 72,250 116,658 Materials and supplies, at average cost or less: Construction and maintenance 142,396 146,228 Fuel.... 56,667 62,425 Deferred income taxes.. 57,813 62,558 Prepayments.. 13,219 14,848 Total current assets. 658,170 683,628 Deferred Debits and Other Assets: Unamortized propeny losses....... 118,256 130,074 Remaining TM1-2 cleanup funds to be collected....... 77,937 192,397 Deferred income taxes. 235,415 197,132 Decommissioning funds. 33,677 21,337 Other 211,252 188,634 Total deferred debits and other assets. 676,537 729,574 Total Assets. $6,415,405 $6.278,915 The accompanying notes are an integral part of the consolidated financial statements. 30

On thousands) December 31, 1988 1987 Liabilities and Capital Long-Term Debt, Capital Stock and Consolidated Surplus: long-term debt $1,727,914 $1,668,763 Cumulative preferred stock. 399,674 399,674 Common Stock and Consolidated Surplus: Common stock... 157,229 157 '29 Consolidated capital surplus. 761,757 761i 57 Consolidated retained earnings.. 1,262.783 1,059,846 Total.... 2,181,769 1,973,832 Less, reacquired common stock, at cost. 157,816 70 Total common stockholders' equity. 2,023,953 1,978,762 Total capitalization.. 4,151,541 4,047,199 I Current Liabilities: Securities due within one year. 37,947 54,112 Notes payable 166,185 109,459 Obligations under capital leases. 194,819 175,467 Accounts payable. 268,432 202,834 Taxes accrued 141,579 138,903 Deferred energy credits 62,710 44,765 Interest accrued. 52,779 44,563 Other 89,255 129,870 Total current liabilities. 1,013,706 899,973 Deferred Credits and Other Liabilities: Deferred income taxes 743,780 728.627 Unamortized investment tax credits. 236,289 248,390 i Estimated remaining TMI-2 cleanup costs 56,229 161,175 Obligations under capital leases. 23,522 30,367 Other 190,338 163.184 } Total deferred credits and other liabilities. 1,250,158 1,331,743 Commitments and Contingencies (Note 1) Total Liabilities and Capital. $6,415,405 $6.278.915 l 31 l

Consolidated Statements Of Cash Flown General Public Utilities Corporation And Subsidiary Companies For the Years Ended December 31, (In thousands) 1988 1987 1986 Operating Activities: Income before preferred dividends of subsidiaries 8 313,764 $ 289,660 $ 247,920 Noncash items included in income: Depreciation and amortization, 278,696 281,523 278,428 Deferred income taxes and investment tax credits, net. (26,016) 83,411 38,928 Deferred energy costs, net. (5,326) (80,349) 88,532 Accretion income (36,400) (39,600) (43,400) Reserve capacity............... (17,976) (28,259) (23,432) Allowance for other funds used during construction..... (7,812) (12,065) (16,186) Unfunded TMI-2 cleanup costs.. 18,750 Changes in working capital: Receivables. 25,641 (84,223) 4,802 Materials and supplies, 7,470 (17,419) (18,670) Special deposits and prepayments. 13,484 29,576 14,417 Payables and accrued liabilities. 27.207 22,491 43,428 Funds received for TMI-2 cleanup. 62,490 85,458 82,554 Expenditures made for TMI-2 cleanup. Other, net, (84,040) (%,522) (101,465) (4,019) (12,799) (15,243) Net cash provided by operating activities. 565,913 420,883 580,613 Investing Activities: Cash construction expenditures............ Proceeds from sale / leaseback - Nuclear fuel.. (441,408) (458,148) (482,740) 16,329 117,980 - Merrill Creek project 54,990 Other, net. 467 (625) (4,504) Net cash used for investing activities. (369,622) (340,793) (487,244) Financing Activities: Increase in long-term debt. 98,665 2,800 24,250 Increase in notes payable, net. 56,370 65,211 78,478 Retirement of long-term debt......... Redemption of preferred stock of subsidiaries. (56,403) (62,383) (153,930) Reacquisition of common stock.. (26,026) (66,244) (157,746) Dividends paid on common stock..... (80,849) (28,289) Dividends paid on preferred stock of subsidiaries. (29,978) (31,148) (36,290) Net cash required by financing activities. (169,941) (79,835) (153,736) { Net increase (decrease) in cash and temporary cash investments from above activities. 26,350 255 (60,367) Cash and temporary cash investments, beginning of year. 64,533 64,278 124,645 Cash and temporary cash investments, end of year. $ 90.883 $ 64,533 $ 64,278 Supplemental Disclosure: Interest paid (net of amount capitalized) $ 153,765 $ 149,366 a 148,376 Income taxes paid. $ 198,305 $ 168,076 $ 139,653 j New capital lease obligations incurred. $ 62,501 $ 161,731 $ 13.668 'Ihe accompanying notes are an integral part of the consolidated fmancial statements. i 32

_-] i 4 Notes To Consolidated Financial Statements General Public Utilities Corporation (the Corporation) Subsidiaries are not collecting revenues from retail is a holding company registered under the Public Utility customers far the decomminioning of TMI-2 and do Holding Company Act of 1935. 'Ihe Corporation does not believe that the current level of revenues being not operate any utility properties directly, but owns all collected for the decommissioning of their other nuclear of the outstanding common stock of three electric utili-plants will be adequate to cover actual future costs. ties, Jersey Central Power & Light Company (JCP&L), Although it is management's intent to seek to recover Metropolitan Edison Company (Met-Ed) and Penn-the costs described above in rate proceedmgs, their syhania Electric Company (Penelec) (the Subsidiaries). recovery cannot be assured. The Corporation also owns all of the common stock of GPU Service Corporation (GPUSC), a service com-TMI-2: pany; GPU Nuclear Corporation (GPUN), which oper-The 1979 TMI-2 accident resulted in significant ates and maintains the nuclear units of the Subsidiaries; damage to the TMI-2 systems and components, con-and General Portfolios Corporation (GPC), a holding tamination of major portions of the plant and a release company for non-utility businesses. All of these Com-of radioactivity to the envimament. panies considered together are referred to as the "GPU System. Accident Cleanup: Cleanup efforts at TMI-2 are expected to be com-pleted in 1990 at a cost of approximately $973 million.

1. Commitments And Contingencies while management believes that the cleanup can be accomplished for this amount, the final cost is subject Nuclear Facilities to continuing uncertainties including (a) regulatory re-The Subsidiaries have made investments in three ma-quirements, technical challenges and resolution of jor nuclear projects - Three Mile Island Unit No. 2 criteria for decontaminating and maintaining the plant (TMI-2), which is now being defueled following the pending its ultimate disposition and (b) the effect of 1979 nuclear accident, and Three Mile Island Unit g vernment actions on the issue of waste disposal. If No.1 (TMI-1) and Oyster Creek, both of which are changes m the scope of the cleanup program are re-operational generating facilities. At December 31,1988, quired by regulatory authorities which result in expen-the Subsidiaries' net investment in TMI-l and Oyster ditures above the $973 million estimate, management Creek, including nuclear fuel, was $614 million and believes that such additional expenditures should be

$679 million, respectively. TMI-l and TMI-2 are jointly recoverable through the ratemaking process. owned by JCP&L, Met-Ed and Penelec in the percent-As of December 31,1988, $917 million has been ages of 25%,50% and 25%, respectively. Oyster Creek spent n the cleanup. Of the remaining $56 million, the is owned by JCP&L. Subsidiaries have arranged for funding of $37 million of in recent years, the operating costs and capital re-which $16 million is expected to be received from cus-quirements for nuclear plants have been increasing and t mers and the balance of $21 miIlion from the federal becoming less predictable, in large part due to changing g vernment, inyestor-owned utilities and others. Some regulatory requirements and safety standards and the of the fundmg is dependent on voluntary contributions experience gained in the construction and operation of r annual authorizations. The remaining $19 million nuclear facilities. As this has occurred, the ability of was charged to operating expense b $88. estric utilities to obtain adequate and timely recovery Pbst-Cleanup: of their investments in nuclear projects has become At the end of the cleanup program, the facility will more uncertain. Similarly, the recovery of the carrying be in a safe, stable and secure condition and we plan to costs associated with investments in nuclear facilities, place it in monitored storage, although this action their operating and maintenance expenses, and the costs would require Nuclear Regulatory Commission (NRC) of any needed replacement power has become increas-approvals. ingly subject to question. Recovery of the cost of in-The Subsidiaries' present energy supply plans do not vestments, as well as their carrying cons, would also reflect the restoration to service of TMI 2. Retirement be uncertain in the event of a premature retirement of of TMI-2 would require prior regulatory authorization; a cuclear facility given the fact that, for economic or no application for such authorization has been submit-other reasons, operation of these plants for the full ted. Reference is made to " Nuclear Plant Decommis-term of their now assumed lives cannot be assured. The sioning Costs" for further information. 33 1

Urigation And Claims: Nuclear Plant Decommissioning Costs As a result of the accident and its aftermath, in-

• "U dividual claims as well as purported and actual class actions, which are material in amount, for alleged per-Upon completion of the TMI-2 cleanup program in sonal injury (including claims for punitive damages) 1990, GPUN intends to place the facility in monitored have been asserted against the Corporation and its sub-st rage. The Subsidiaries are not coUecting revenues sidiaries. Some of the claims also request damages fbr r m retail customers for the decommissioning of injuries from alleged emissions of radioactivity before TMI-2, the cost of which is expected to substantially and after the accident. Questions have not yet been ex eed the cost for decommissioning TMI-l or Oyster Creek as discussed below.

resolved as to whether certain of these claims are (a) subject to the limitation ofliability set by the Price-I" a N rdu, the New Jusey Board opuMic Utih.ues (NJBPU) stated that, while its policy has been Anderson Act and (b) outside the insurance coverage to allow utilities to recover the costs of decommission-provided pursuant to the Act. In a 1985 decision, which in8 nuclear P ants as a part of the cost of service borne l was later reversed on jurisdictional grounds, a U.S. District Court held that punitive damages are available by ratepayers, such policy has been implemented only in actions under that Act. in a fully litigated base rate proceeding. The NJBPU In 1985, the Corporation's insurance carriers settled rder also stated that the next JCP&L base rate pro-282 personal injury claims for an aggregate of $14.3 mil-ceedmg w uld provide the appropriate forum for lion. Following these settlements, complaints on behalf determining the total estimated reasonable costs of of more than 2,100 plaintiffs claimmg personal injuries decommissioning TMI-2 and the appropriate collection (including claims for punitive damages) as a result of mechanism and period. A request for collection of (a) the TM1-2 accident and its aftermath and (b) alleged TMI-2 decommissioning costs has not yet been pre-emissions of radioactivity before and after the accident, sented to the Pennsylvania Public Utility Commission b were filed in state courts against the Corporation and its subsidiaries. The Corporation and other defendants Management believes that costs associated with the have had these cases transferred to federal court. The eventual decommissioning of TMl 2 (which meludes plaintiffs have challenged the transfer and have also the annual cost of monitored storage) should be re-appealed an earlier state court decision dismissing a c verable through the ratemakmg process. number of claims on the grounds they are barred by the statute of limitations. There can be no assurance as to the outcome of these proWe Subsidiaries are collecting from customers and charging to expense amounts intended to provide for the ~ Oyster Creek *- c st oi decommissioning TM1-1 and Oyster Creek over During 1986, inspections of the steel shell that houses their remaining service lives. The Subsidiaries are con-the Oyster Creek reactor vessel indicated that a portion tributing these amounts to trust funds established for of the shell's wall was thinner than expected. Af*er ex-y l988, the NRC adopted regulations requiring amination and the performance of tests, GPUN con-RU. nsees Puatmg commucial pown reactors, cluded that, although some corrosion had occurred, the wall continued to meet design requirements and the which meludes TMI-2, to submit a report by July 1990 plant was safe to operate. After a review by the NRC, setting forth a plan for providmg, with reasonable as- ) the plant was restarted in December 1986. GPUN be-surance, funds for decommissioning. According to the lieves that installation of a protective system, completed NRC guidelines, a minimum of between $100-$125 mil-li n per react r in 1986 dollars for the types of reactors during the current refueling and maintenance outage, together with continuing efforts to prevent water leakage Perated by the GPU System is required to be funded to provide reasonable assurance for decommissioning. into the corroded region, will retard further corrosion. While the rule addrases activities related to the re-However, if corrosion were to persist to the point that m val f radioactive structures and materials, it does the shell can no longer satisfy its intended safety (*

• SS * ##"*' "

functions, the plant would w to be shut down in order to make structural repairs to the shell. "."*ls or (b) establish residual radioactivity limits.***Y ' ria 34

i An independent consultant to GPUN has completed insurance j site-specific decommissioning studies of TMI-I and l Oyster Creek. The studies estimate the cost of decommis-

• GPU System has insurance for its operations and l

sioning each plant to be approximately $200-$300 million facihties including coverage for property damage, i in 1987 dollars. These studies include the cost of re-liability to employees and third parties and loss of use moving radioactive and non-radioactive structures and and occupancy (pnmanly meremental replacement materials but not the removal and disposal of spent Power costs). There is no assurance that the GPU nuclear fuel, for which separate fees are payable to the System will maintam all existing insurance coverages. federal government. The studies considered three pos-Future losses or liabilities which are not completely sible decommissioning plans: (a) prompt removal and insured, unless allowed to be recovered through rate-makmg, could have a material adverse effect on the dismantling, (b) entombment with delayed dismantling and (c) mothballing with delayed dismantling. Both the finan tal c ndition of the GPU System. mone cithe work and the period of time it takes will earIns m n m be determined by the plan that is ultimately chosen. The amount of revenues required from customers for . The primary property damage and decontamination decommissioning will be a function of (a) the plan insurance for the TMI station (TMI-l and TMI-2 are selecte:1, (b) the effective escalation of the various cost cmsidered as me site for insurance purposes) and for elements (including, but not limited to, general infla-Oyster Creek is $500 million per site. This provides tion), (c) the amount and timing of the receipt of these all-risk coverage for TMI-1 and Oyster Creek but only mvenues, and (d) the carnings on escrowed decommis-en-m ear emerage for porties oN2. sioning funds. In its last rate case, JCP&L requested The GPU System has an additional $1.225 billion of m, - revenues for decommissioning based on the then pro-surance for losses m excess of the primary insurance posed NRC guidelines of $100 million per plant. c verage for a total of $1.725 billion per site. The addi-t nal property insurance requires that proceeds from The revenues granted, however, were based on lower such m.surance shall first be paid for decontammation estimates that had been proposed by other participants in that rate proceeding. The ultimate cost of decommis-and debris removal expenses. NRC regulations require sioning may be materially different from these estimates that the deemtaminatim and debris remmal priority BPP y to the primary property emerage as well, begm, - l because regulations governing decommissioning have not been fully developed, significant experience in " "E " AE'" decommissioning such facilities is lacking, and the GPU System's liability to third parties for a technology available at the time of decommissioning nuclear m, eident at one of its sites is hmited to ap-may differ significantly from that assumed in these Proximately $7 billion by the Price-Anderson Act. studies Coverage for the first $160 million of such liability is JCP L is collecting revenues for decommissioning Provided by private insurance. The remaining coverage Oyster Creek based on an estimated cost of $56t2 mil. is Provided by a retrospective premium payable by all aclear namr waa A melear meidem at one of lion, and for decommissioning TMI1 based oa its 25% share of an estimated $61 million cost, both as-GPU System's reactors or any other licensed nuclear Power reamr m 6 ccetry enld result in assessmems 7 suming in-place entombment. Met-Ed and Penelec are collecting revenues based on tneir shares ($19 million f $66 milhon per meident for each of the GPU and $9 million, respectively) of an estimated $38 mil-System's three reactors. The rnaximum annual lion cost to decommission TMI-1, assuming dismantle-assyssment for the GPU System is $10 million per I ment. The revenue levels for Met-Ed and Penelee are meidem per M reamr. based on the cost of decommissioning only the The GPU System has insurance coverag for in-l cremental rep acement Power costs resulting from an radioactive components of TMI-1. The Subsidiaries expect that the current level of accident-related outage. Coverage commences after the revenues being collected for nuclear plant decommis-nnt 21 weeks of the stage and cmtinues for two sioning will not be adequate to cover ac:ual future yeaa in the Ant year, tk cmerage for TMI-I and costs. The Subsidiaries believe that additional expen-Oyster Creek is $1.9 million and $1.4 million per week, ditures above the levels currently being collected should respectively. The second year's coverage is one-half of these ammms. be recoverable through the ratemaking process. 35 l

Some of the GPU System's insurance policies ap-disposal sites currently or formerly used by them, in-plicable to nuclear operations and facilities are with cluding previously owned coal gasification sites. The mutual insurance companies. Under those policies, the Subsidiaries are unable to estimate the full extent of GPU System is subject to maximum annual retro-such possible cleanup and other costs (which may be spective premium assessments of approximately material and may not be covered by insurance) or the $43 million, in addition to those payable under the impact on future operations. Management expects to Price-Anderson Act. recover such costs, as described above, in rate pro-ceedings, but there can be no assurance as to the extent Other insurance: to which these costs will be recoverable. The GPU System is also subject to retrospective The GPU System's construction programs, for which premium assessments under directors' and officers' substantial commitments have been incurred and which liability and general liability insurance policies which extend over several years, contemplate expenditures of could total approximately $1.8 million annually. approximately $517 million during 1989. The Subsidiaries have entered into long-term con-Other Commitments And Contingencies tracts with non-affiliated mining companies for the pur-In 1988, Met-Ed and Penelee signed a settlement chase of coal for certain generating stations in which agreement with the Consumer Advocate regarding com-they have ownership interests. Tue contracts, which ex-plaints against their 1986 and 1987 Energy Cost Rates P I * **P" (ECR) which resulted in an after-tax charge to income lives f the generating stations, require the purchase of in August 1988 by Met-Ed and Penelec of $4.2 million

• ' *r f xed or minimum amounts of the stations' coal and $3.6 million, respectively. A request for approval of requirements. The price of the coal is determined by this settlement is pending before the PaPUC.

I rmulas Providing for the recovery by the mining In 1987, the NJBPU established an annual perfonn-companies f their costs of production. The Sub-ance standard for JCP&l's two operating nuclear units. sidianes' share of the cost of coal purchased under Operation of these units at an aggregate generating a reements is expected to aggregate $100 million capacity factor below 60% or above 80% would trigger an adjustment to the recovery of replacement energy The Subsidiaries have entered into agreements with costs. The current annual measurement period, which other utilities for the purchase of up to 2,355 megantts began March 1,1988, coincides with the Levelized (MW) of capacity and energy for various periods Energy Adjustment Clause (LEAC). JCP&L will not through 1999. Payments pursuant to these agreements meet the annual performance standard, and, therefore, are est mated to agggate W mEon for M g expects a $5 million disallowance of replacement power Price of the energy purchased under the agreements is costs for the LEAC period ending February 1989, of determined y c ntracts, which have been accepted by which $4 million was expensed through December the Federal Energy Regulatory Commission, providing 1988 E*"*#" D ' '* # ##7 The Subsidiaries have been r,cmed by the U.S. Other possible purchases are the subject of pending Environmental Protection Agene,> and others as poten-ne au tially responsible parties regardity, certain hazardous subsidiaries have entered into power purchase waste disposal sites and may be found liable for W pmde contributing to the costs of cleaning up such sites. tion facilities for the purchase of energy and capacity There can be no assurance as to the outcome of these for periods up to 25 years. The price of the energy to Pmceedings. As a result of existing and proposed be purchased under these agreements is determined by legislation and regulations dealmg with environmental contracts for which, in general, NJBPU or PaPUC matters, mcluding legislation regardmg acid rain, water approval has been obtained or is being sought. By quality regulations, air quality regulations relating t 1993, cogeneration and small power production projects stack height requirements and storage and disposal of now under commitment is expected to provide about solid and hazardous wastes, the Subsidiaries may be re-1,700 MW of energy and capacity to the GPU System. quired to incur substantial additional costs to construct In the normal course of the operation of its business, new equipment, modify or replace existing and pro-the GPU System Companies are from time to time in-posed equipment and to improve or clean up waste volved in disputes, claims and, in some cases, as defen-dants in litigation with customers, contractors, vendors 36

4 and other suppliers of equipment and services. The service lives. Current dep eciation allowance method-GPU System Companies are also defendants in actions ology for rate regulatory purposes may not make ade-seeking compensatory and punitive damages for alleged quate provision for the recovery of such investments. It unlawful employment practices. It is not expected that is management's intent to seek to recover such costs in the outcome of these matters will have a material affect rate proceedings, but there can be no assurance of the on the GPU System's financial position. extent to which these costs will be fully recovered. The subsidiaries use depreciation rates which, on an aggre-gate composite basis, resulted in an approximate annual

2. Summary Of Significant Accounting rate d 3A6%,3A7% and 3Ao% for me years s88, Policies s87 and s86, mpeedvely.

Allowance For Funds Used System of Accounts During Construction (AFUDC) The consolidated financial statements include the ac-counts of all Subsidiaries. The regulated subsidiaries. The Uniform System of Accounts defines AFUDC as accounting records are maintained in accordance with "the net cost for se period d conswenon d bor-the Uniform System of Accounts prescribed by the rowed funds used for construction purposes and a rea-s nable rate on other fuu when so used." AFUDC is Federal Energy Regulatory Commission and adopted by the PaPUC and NJBPU. rec rded as a charge to construedon work in progress, and the equivalent credits are to interest charges for the Operating Revenues Pretax cost of borrowed funds and to other income for the allowance for other funds. While AFUDC results in Revenues are generally recorded on the basis of bill-a current increase in utility plant recognized for rate-ings rendered. making purposes and represents current earnings, it is not realized in cash until the related plant is depre-Deferred Energy Costs ciated or amortized. On an aggregate composite basis, the annual rates utilized were 9.92%,10.08% and Energy costs are reccgnized in the period in which l the related energy clause revenues are billed. 9.75% for the years 1988,1987 and 1986, respectively. Begmmng m, 1987, as a result of the Tax Refonn Act Utility Plant f 1986, the Subsidiaries employed an AFUDC accrual rate which was not reduced by income taxes. Prior to It is the ge teral policy of the GPU System to record 1987, the Subsidiaries generally used a net of tax ac. additions to utility plant (material, labor, overhead and crual rate for AFUDC, which provided that the income an allowance foi funds usej during construction) at tax reductions associated with the interest component of cost. The cost of curret repairs and minor replace-AFUDC were allocated to reduce interest charges. The ments is charged to appropriate operating and mainte-corresponding tax effect is included in other income nance expense and clearing accounts and the cost of and deductions, renewals is capitalized. The original cost of utility plant retired or otherwise disposed of is charged to Amortization Policies accumulated depreciation. Assets Not krning A Return: Depreciation Met-Ed and Penelec are presently collecting annual The GPU System provides for depreciation at annual revermes f r se amonizadon d MI-2 of approxi-rates determined and revised periodically, on the basis mately $25 million and $12 million, respectively, which of studies, to be sufficient to depreciate the original will be rufficient to recover their remaining investments cost of depreciable property over estimated remaining ver the next five years. In 1984, the NJBPU author-service lives, which are generally longer than those ized JCP&L to recover its investment in TMI-2 over an I errgloyed for tax purposes. As a consequence of licens-18-year peri d beginning with a rate order which would 1 ing, environmental and other requirements for nuclear be effective on or about April 1,1989. In this regard, and non-nuclear facilities, substantial additions to facili-JCP&L made a compliance filing on January 31,1989 ties may be required relatively late in their expected with the NJBPU to provide revenues for the n I \\

amortization of TMI-2 of approximately $10.5 million Nuclear Fuel Disposal Fee annually over the next 18 years. At December 31,1988, $108 milhon is meluded m, unamortized property losses The Subsidiaries are providing for estimated future on the balance sheet for the Forked River project. disposal costs for spent nuclear fuel at Oyster Creek JCP&L is presently collecting annual revenues for the and TMI-l in accordance with the Nuclear Waste Iblicy amortization of the Forked River project of approxi-Act of 1982. The Subsidiaries entered into contracts in mately $12 million which will be sufficient to recover 1983 with the U.S. Department of Energy (DOE) for its investment by the year 2006 the disposal of spent nuclear fuel. The total liability in-The Subsidiaries have not, however, been provided cluding interest at December 31, 1988, all of which revenues for a return on the unamortized balances of relates to spent nuclear fuel from nuclear generation the damaged TMI-2 facility and the cancelled Forked throLgh April 6,1983, amounts to $110 million and is reflected m. other liabilities which a.re long-term. As the River project and, twefore, these investments are being carried a' & : <.ismunted present value in actual liability under these contracts is substantially in accordance witt Nim ent of Financial Accounting excess of the amount recovered to date from ratepayers, Standards No. 90. the Subsidiaries have reflected such excess ($45 million at December 31,1988) as deferred costs. The rates Nuclear Fuel: presently charged to customers reflect all of these costs, Nuclear fuel is amortized on a unit of production and provide for their collection, plus interest, over a re-basis. Rates are determined and periodically revised to maining period of nine years. amortize the cost over the useful life. (See Note 10.) The Subsidiaries are collecting from their customers l 1 mill per kiloutt-hour generated for spent nuclear l Income Taxes fuel disposal costs resulting from nuclear generation The GPU System files a consolidated federal income subsequent to April 6,1983. These amounts are re-tax return and all participants are jointly and severally mitted quarterly to the DOE. liable for the hl! amount of any tax, including penal-Statements Of Cash Flow ties and intercat, which may be assessed agamst the group. For the purposes of the statements of cash flow, tem. Deferred income taxe::, which result primarily from porary investments include all unrestricted liquid assets, liberalized depreciation methods, deferral of energy such as cash deposits and debt securities, costs and abandonment losses, are provided for differ-ences between book and taxable income to the extent permitted for ratemaking purposes. Investment tax credits (ITC) are amortized over the estimated service

3. ShortTerm Borrowing Arrangements lives of the related facihties.

) At December 31, 1988, the GPU System had l The cumulative net amount of income tax timing differences, primarily due to depreciation, for which $166 million of short-term notes outstanding, of which I deferred income taxes have not been provided, approx- $78 million was commercial paper and the remainder was borrowed under informal bank lines of credit. imates $515 million at December 31,1988. It is ex-pected that future revenues will be provided for such The Corporation and certain of its subsidiaries have a taxes as they become payable. Revolving Credit Agreement (Credit Agreement) with a in December 1987 the Financial Accounting Stan-consortium of banks that permits total borrowings of dards Board (FASB) issued Statement of Financial $110 million. The Credit Agreement expires April 1, Accounting Standards No. 96 (FAS 96), "Accountmg 1989 and is expected to be extended. The notes issued for Income Taxes," which is effective for fiscal years under the Credit Agreement bear interest at rates based on either the prime rate, a certificate of deposit rate or begmnm, g after December 15, 1989. The Stztement re-quires that utih, ties establish substantial deferred tax a Eurodollar rate. Notes issued under the Credit Agree-liabilities and receivables due from customers for such ment are subject to various covenants and acceleration under certain conditions. deferred taxes not previously recorded as liabihties. The provisions of FAS 96 will not have a material impact The Corporation and its subsidiaries also have infor-mal bank lines of credit which are generally subject to on net mcome. 38

s ,. _. ~.. l l commitment fees. Borrowings under these lines of credit generally bear interest based on the prime rate or

5. Capital Stock And Surplus money market rates.

Common Stock The following table presents information relating to

4. Longterm Debt the common stock of the Corporation:

At December 31,1988, the Corporation's subsidiaries comon stock - h*' 3 3 ' had long-term debt outstanding, as follows: $2.50 par value 1988 1987 Authorized shares 150,000,000 75,000,000 Interest Rates issued shares 62,891,669 62,891,669 4 % to 6% to 9% to Treasury shares 4,869,189 28,074 Maturities 5%% 8%% 12 % Total Outstanding shares 58,022,480 62,863,595 (In thousands) The Corporation reacquired 4,841,115 shares of com-First Mortgage mon stock during 1988 at an average cost of $32.58 per Bonds: share. No shares of common stock were reacquired in 1 8 $179,901 $208,766 5 28,500 $ 417,167 1987 r 1986. The Corporation has authorization from I 1999 the Securities and Exchange Commission to repurchase 2008 488,240 494,856 983,096 an additional 3.2 million shares of common stock 2009-through 1992. 2018 63,500 100,000 163,500 Total $179,901 $760,506 $623,356 1,563,763 Preferred Stock Amounts due within one year (29,358) At December 31,1988 and 1987, the Subsidiaries had the following issues of cumulative preferred stock Total 1,534,405 (without mandatory redemption provisions) outstanding: Debentures: 1989 Stated Value Shares (in thousands) Series per Sharc Outstanding Stated Value 1998 $ 26,700 $128,240 $ 16,500 171,440 8.75 % - 9.00 % $ 25 3,400,000 $ 85,000 Amounts due within one year (8,460) 3.70 % - 7.88 % 100 1,323,912 132,391 8.00 % - 8.36 % 100 1,810,000 181,000 Total 162,980 Total 6,533,912 398,391 Other long-term debt 34,925 Premium 1,283 Other current obligations (129) Total $399'674 Unamortized net discount (4,267) Total $1,727,914 If dividends on the preferred stock of any Subsidiary For the years 1989,1990,1991,1992 and 1993, the are in arrears in an amount equal to the annual divi-Corporation's subsidiaries have long-term debt matur-dend, the holders of preferred stock, voting as a class, ities, including cash sinking fund requirements, of are entitled to elect a majority of the board of directors $38 million, $67 million, $24 million, $65 million and of that Subsidiary until all dividends in arrears have $31 million, respectively, been paid. No redemptions of preferred stock may be Substantially all of the properties owned by the Cor-made unless dividends on all of that Subsidiary's pre-poration's subsidiaries are subject to the lien of their ferred stock for all past quarterly dividend periods respective mortgages. have been paid or declared and set aside for payment. The preferred stock is callable at various prices above its stated values and at December 31,1988, the aggregate amount at which shares could be called by the Subsidiaries was $415 million. Non-mandatory 39

t J. redemptions of 9.36% preferred amounted to $25 mil-Income tax expense is comprised of the following: lion in 1987, while mandatory redemptions of various series were $64 million in 1986. (In millim) At December 31,1988 and 1987, the Subsidiaries 1988 1987 1986 were authorized to issue 37,035,000 shares of cumula-Federalincome tax $172 $106 $135 ) tive preferred stock, no par value. No shares of cum-State income tax 27 17 23 ) ulative preferred stock were sold during the three years Provisions for taxes cur-I ended December 31,1988. rently payable 199 123 158 Deferred income taxes: Retained Earnings Liberalized depreciation 36 29 40 1 i Each of the Subsidiaries has indenture restrictions on Deferral of energy costs 2 38 (42) Reserve capacity credit 9 15 12 i the payment of common stock dividends from retained Accretion income 16 18 19 } earnings. At December 31,1988, the Subsidiaries had Unbilled revenue (14) (14) 1 retained earnings of $725 million, of which $123 million Gain on sale of nuclear fuel 2 (14) was restricted. For Penelee and JCP&L, payments of ' i' } 2 clean ts ( 4 dividends on common stock after December 31,1978 Other and 1980, respectively, are restricted to earmngs avail-(30) (26) (9) able for common stock accumulated from those dates Deferred income taxes, net (10) 85 20 Current ITC 1 16 32 less amounts paid for the purchase or reacquisition of their own stock (other than by mandatory smking fund Amortization of ITC (13) -(16) redemption of preferred stock). The NJBPU has lx a tax expense $177 $208 M8-(12) ordered that JCP&L notify it before paying dividends n ts conunon stock. Examinations of federal income tax returns through The adjustments to retamed earnings of $1.3 million 1982 have been completed. The years 1983 and 1984 and $1.7 milhon m 1987 and 1986, respectively, resulted have been audited and are currently under appeal, the from premiums paid for the redemption of preferred gg gg, effect on net income. De years 1985 and 1986 are currently under audit by the Internal Revenue Service (IRS). He consolidated balance sheets at December 31, 1988 and 1987 reflect a receivable from the IRS for

6. Income Taxes

$33.2 million and $50.8 million, respectively. In both 1988 and 1987, as a result of the Tax The reconciliations from net income to book income Reform Act of 1986, JCP&L offset $12 million of subject to tax and from Federal statutory rates to effec-deferred tax credits against the unamortized Forked tive tax rates are as follows: River abandonment loss account in accordance with an an m uions) order from the NJBPU. 1988 1987 1986 Net income $284 $259 $211 Preferred stock dividends 30 31 37 Income tax expense 177 208 198 Book income subject to tax $491 $498 $446

==

m m. m m. Federal statutory rate 34 % 40 % 46 % Effect of difference between tax and book depreciation for which deferred taxes were not provideA 4 3 4 Amortization of ITC (3) (3) (3) Other 1 2 (3) Effective income tax rate 36 % 42 % 44 % 40

l

7. Supplementary income Statement The actual return on the plans' assets for the years Information 1988 and 1987 were $105.2 million and $60.7 million, respectively. Pension cost for the GPU System i

Maintenance expense and other taxes charged to amounted to approximately $35.3 million in 1986. operating expenses consisted of the following: The funded status of the plans and related assump-tions at December 31,1988 and December 31,1987 e as M o w 1988 1986 Maintenance $261 $245 $263 On millions) December 31 Other taxes: 1988 1987 State and local gross receipts $160 $153 $159 Accumulated benefit obligation: r ss reme and Vested benefits $ 583.4 $ 484.9 Nonvested benefits 54.4 61.5 3[ Effect of future compensation levels 205.4 241.3 Real estate and Projected benefit obligation (PBO) $ 843.2 $ 787.7 personal property (6) 20 13 Other 34 34 31 Plan assets at fair value $ 885.4 5 799.1 Total $249 $264 $263 PBO (843.2) (787.7) ~ ~ Plan assets in excess of PBO 42.2 11.4 The decrease in real estate and personal property Unrecognized net loss (gain) (42.5) 1.0 taxes resulted from a refund of Public Utility Realty Unrecognized net transition asset (12.9) (13.8) taxes being returned to customers in 1988. Accrued pension liability 5 (13.2) $ (1.4) Principal actuarial assumptions: Annual long-term rates of return

• . Postemployment Benefits on plan assets 8.0 %

Discount rate 8.5% 8.0 % The GPU System maintains defined benefit pension plans covering substantially all of its employees. Plan y 3 6.0% 6.5 % benefits are based on years of continuous service and the e-- =- average annual base compensation during the five years of highest compensation. The GPU System's policy is W assets of the plans are held in a Master Trust to currently fund net pension costs within the limits and invested prm, espally in common stocks, guaranteed permitted by the Internal Revenue Code. Effective insurance contracts, bonds and real estate equity in-January 1,1987, the GPU System adopted Statement vestments. The unrecognized net loss (gain) represents of Financial Accounting Standards No. 87 (FAS 87), actual experience different from that assumed, which " Employers' Accounting for Pensions," which did not has been deferred and not included in the determination have a significant effect on 1987 net income. f 1988 and 1987 pension cost. The unrecognized net A summary of the components of net periodic pension transition asset arising out of the transition to FAS 87 cost for 1988 and 1987 follows: has been deferred and is bemg amortized as a credit to pension cost over the average remaining service period On millions) f covered employees. 1988 1987 In addition to providing pension benefits. the GPU Servic -benefits earned during System provides certain retiree health care and hfe in- $2L9 5 26.7 surance benefits for substantially all employees who Interest cost on projected benefit reach retirement age while working for the GPU obligation 61.6 57.5 System. For retired employees, these benefits are Less: Expected return on plan assets (63.5) (58.3) generally recognized as expense when premiums are Amortization of net transition asset (.9) (.9) Net periodic pension cost $ 25.1 $ 25.0 --==. - - 41

0 paid. For 1988,1987 and 1986, those costs totaled 10.Le8Seb l approximately $4.5 million, $3.9 million and $3.5 mil-lion, respectively. The FASB is considering an approach for recognizing The GPU System has recorded capital leases at December 31,1988 and 1987 of $218 million and the costs and liabilities for providing these benefits $206 million, respectively (net of amortization of sumlar to that prescribed m the Statement of Financial Accounting Standards No. 87, Employers' Accounting $110 million and $65 million, respectively). These leases nelude amounts for nuclear fuel at December 31, for Pensions." If a final standard using this approach is adopted by the FASB, a substantial liability for such 1988 and 1987 of $182 million and $163 million, respec-tively (net of amortization of $78 million and $36 mil-postemployment benefits and a receivable from customers for the cost of such benefits not previously lion, respectively). The recording of capital leases has no impact on net income because all leases, for recorded as liabilities may be required to be reflected on the balance sheet. ratemaking purposes, are considered operating leases. Pursuant to nuclear fuel lease agreements, the Sub-sidiaries may currently finance nuclear fuel require-ments up to $250 million outstanding at any one time.

9. Jointly Owned Stations Leases for Oyster Creek and TM1-1 are subject to individual limits of $125 million outstanding at any one The Subsidiaries participated with non-affiliated time. It is contemplated that when consumed, portions utilities in the following jointly owned stations at of the presently leased material will be replenished by December 31,1988:

additional leased material. The Subsidiaries are respon-sible for the future disposal costs of nuclear fuel leased I under these agreements. Accalated The nuclear fuel leases are renewable monthly, sub-O*" O** ject to certain conditions, and expire in 1993. Lease Homer City Penelec 50 $366.8 $104.2 expense consists of an amount designed to amortize Conemaugh Met-Ed 16.45 63.8 19.9 the cost of the nuclear fuel as consumed plus interest a reek c sts. For the years ended December 31,1988,1987 Seneca Penelec 20 14.0 3.2 and 1986 these amounts were $52 million, $46 million and $1 million, respectively. The leases may be ter-Each participant in a jointly owned station finances minated at any time upon five months notice by either its own portion and charges the appropriate operating party. Subject to certain conditions of termination, the expenses with its share of direct expenses. Subsidiaries are required to purchase, within 120 days, all nuclear fuel then under lease at a price that will allow the lessor to recover its net investment. In June 1988, JCP&L and Met-Ed sold and leased back substantially all of their respective ownership in-terests in the Merrill Creek Reservoir Project. The future minimum lease payments under these operating leases, which begin in 1990 and continue for 42 years, average approximately $3 million annually for each company. 42

System Statistics General Public Utilities Corporation And Subsidiary Companies 1988 1987 1986 1985 1984 1983 Available Capacities On MW): Company owned (a) 7,304 7,261 7,289 7,289 7,345 7,345 Contracted for. 2,171 1,%5 1,945 1,925 1,395 541 Total capacity at year-end. 9,475 9,226 9.234 9,214 8.74 .---.0 7.,886 - ----==--..---- Hourly Peak Load (in MW): Summer peak.. 7,987 7,315 6,608 6,691 6,401 6,140 Winter peak.... 7,019 6,519 6,228 6,612 6,044 5,945 Reserve (%) (b).. 18.6 26.1 39.7 37.7 36.5 28.4 Net System Requirements On thousands of MWH): Net generation..... 31,007 29,980 25,121 24,590 20,075 20,635 Power purchased and interchanged, net 12.164 10,624 13,277 12,656 16,681 14.333 Total net system requirements, 43,171 40.604 38,398 37.246 36,756 34,968 load Factor (%) (c). 61.5 63.4 66.3 63.5 65.3 65.0 Production end Power Purchased Data: Cost of energy On mills per KWH): Coal 14.04 14.02 14.45 15.79 15.92 14.90 Power purchased and interchanged, net. 25.93 24.13 30.63 42.33 45.89 48.60 Nuclear..... 5.99 6.02 3.59 5.03 6.25 5,85 Other (oil & gas). 33.77 33.85 39.47 50.29 56.96 54.80 Average 16.84 16.26 19.45 25.91 32.58 31.65 Sources of energy (%): Coal 43 46 43 46 46 51 Power purchased and interchanged, net. 28 26 35 34 45 41 Nuclear.. 21 20 16 11 Other (oil, gas & hydns). 8. 8 6 9 9 8 Total 100 100 100 100 100 100 Electric Energy Sales On thousands of MWH): Residential. 13,310 12,445 11,779 11.142 11,273 10,901 Commercial 11,038 10,275 9,654 9,080 8,826 8,322 Industrial. 12,800 12,140 11.856 11,707 11,770 10,608 Other 1,306 1,309 1,481 1,417 1,622 1,669 Total 38.454 36.169 34.770 33,346 33,491 31.500 Kilowatt-Hour Sales per Residential Customer 8,322 7,938 7,682 7,433 7,666 7,535 Operating Revenues Gn millions): Residential. $1,152 $1,085 $1,107 $1,109 $1,049 $ 979 Commercial 848 793 816 828 765 688 Industrial 705 670 736 808 773 673 Other 90 92 97 95 108 105 Total electric revenues. 2,795 2,640 2,756 2,840 2.695 2,445 Other revenues 39 33 31 30 40 35 Total $2.834 $2,673 $2.787 $2,870 $2,735 $2.480 Price per KWH (Cents): Residential. 8.66 8.72 9.40 9.96 9.31 8.98 Commercial 7.68 7.72 8.46 9.11 8.67 8.26 Industrial 5.51 5.52 6.21 6.90 6.57 6.35 All customers. 7,27 7.30 7.93 8.52 8.05 7.76 Customers at Year End On thousands): Residential. 1,611 1,583 1,549 1,511 1,482 1,456 Commercial 193 187 181 175 170 166 Industrial 10 10 10 10 10 10 Other 3 3 3 3 3 3 Total 1.817 1,783 1,743 1,699 1,665 1,635 (a) Does not include capacity for TMI-2 of 906 MW as it has been out of service since 1979. (b) Based upon summer peak. (c) The ratio of the average net system requirements in MW to the peak load occurring during the year. 43

- - - - - - - - - - - - - - - - - - - - - - ~ - - - - - -- --~- i Directors 1.OUIS J. APPELL, JR U WILLIAM G. KUHNS 2.3 Elected 1973 Elected 1967 President Chairman, President and Chief Executive Offrer Susquehanna Broadcasting Co. General Public Utilities Corp. York, PA 17401 Parsippany, NJ 07054 (Communications and Consumer Pmducts) .DR. JOHN W. OSWALD 18 DONALD J. BAINTON u Elected 1980 Elected 1982 President Emeritus Chairman and Chief Executive Offrer The Pennsylvania State University Viatech, Inc. Ogontz Camp.us Syosset, NY 11791 Abington, PA 19001 (Engineering, Architectural and Surveying Services) JOHN M. PIETRUSKI 18 THEODORE H. BLACK u Elected 1989 Elected 1988 Retired Chairman of the Board Chairman, President and Chief Executive Officer and Chief Executive Officer Ingersoll-Rand Co. Sterling Drug Inc. Woodeliff Lake, NJ 07675 New York, NY 10119 (Industrial Machinery Manufactunng) (Pharmaceutical and Household Pmducts) ' JOHN F. BURDITT u CATHERINE A. REIN u Elected 1974 Elected 1989 Retired Chairman and Chief Executive Officer Senior Vice President - Human Resources ACF Industries, Inc. Metropolitan Life Insurance Co. Earth City, MO 63045 New York, NY 10010 (Equipment Manufactunng) (Diversified Financial Services)

• DR. DAVID L. GROVE u PAUL R. ROEDEL 18 Elected 1981 Elected 1979 Former President Chairman and Chief Executive Officer David L. Grove Ltd.

Carpenter Technology Corp. Armonk, NY 10504 Reading, PA 19603 (Economic Consultants) (Specialty Metals) THOMAS B. HAGEN u DR. PATRICIA K. WOOLF u Elected 1988 Elected 1733 President lecturer Erie Insurance Group Woodrow Wilson School of Erie, PA 16530 Public and International Affman (Insurance) Princeton University HENRY F. HENDERSON, JR. U Mn, NJ 08W Elected 1989

• Retiring from the board in May 1989 President and Chief Executive Officer H. E Henderson Industries 1Member of Audit Comnunec West Caldwell, NJ 07006 2Member d Personnel Comminee (Engineered Systems for Government / Industry) 3Member d Nom Comminee Stock Price 1980-1988 "E

E5)3eg~ 3au a ass 29% g [E 26 25 27y. 22 21 % 17% 16 % 11% 6% 7% 10% B 6% T h ' 3'4 I dh '80 '81 '82 '83 '84 '85 '86 10 20 30 40 10 20 30 40 44 1987 1988

p. Th3 CPU Syst:m l Officers Companies p General Public Utilities Corporation General Public Utilities Corporation i WILLIAM G. KUHNS 100 Jmerpan Parkwsy Chairman, President and Chief Executive Officer (IO Pf63 55 c resid n and Chief Financial Officer Jersey Central Power & Light Company Madison Avenue at Punch Bowl Road F. ALLEN DONOFRIO Mornstown, NJ 07960 Comptroller (201) 455-8200 MICHAEL P. MORRELL Metropolitan Edison Company Treasurer 2800 Ibitsville Pike $"h[9[3501 ^ MARY A. NALEWAKO Secretary MARY L. BRESLIN Pennsylvania Electric Company 1001 Broad Street Assistant Secretary Johnstown, PA 15907 (814) 533 8111 Subsidiary Company Presidents GPU Nuclear Corporation i Upper Pond Road Jersey Central Power & Light Company Parsippany, NJ 07054 JAMES R. LEVA (201) 316-7000 Metropolitan Edison Company GPU Service Corporation FRED D. HAFER 100 Interpace Parkway Parsip any, NJ 07054-1149 Pennsylvania Electric Company (201;{s3.s500 OBEM L WISE General Portfolios Corporation GPU Nuclear Corporation 100 Interpace Parkway PHILIP R. CLARK Parsippany, NJ 07054 (201) 263-6500 GPU Service Corporation WILLIAM G, KUHNS Energy initiatives, Inc, 1 Gatchall Dnve General Portfolios Corporation 1%rsippany, NJ 07054 JOHN G. GRAHAM (201) 292 9630 Energy initiatives, Inc MELVIN C. HEUER JAMES B. LIBERMAN General Coun'el Shareholder Notes 1989 Annual Meeting Transfer Agent The Annual Meeting of Stockholders of General Public Manufacturers Hanover Trust Company, P.O. Box 24935, Utilities Corporation will be held at 10 a.m., EDT, May 3, Church Street Station, New York, NY 10249. 1989, at the Equitable Life Assurance Society Building, 787 Seventh Avenue, New York, Ni 10019 Transfers also can be hand delivered to Manufacturers Hanover Trust Company, Securities Window, Street Level, Dividends 130 John Street, New York, NY. The Board of Directors declares dividends on the first More information Thursdays of January, April, July and October. The record dates for the dividends fall on the third Fridays followmg Copies of GPU's System Statistics and the Corporation's 1988 dividend declaration and usually fall on or about the 20th of Annual Report to the Securities and Exchange Commission on the dividend declaration months. The dividend payment dates Form 10-K will be available after March 31,1989. Write to fall on the last Fridays of February, May, August and Shareholder Relations, General Public Utilities Corporation, November. 100 Interpace Parkway, Parsippany, NJ 07054 1149, or call (201) 263-6600. General Public Utilities is listed as GPU on the New if you are receiving more than one copy of the GPU Annual York Stock Exchange. On December 31, 1988, there were Report because of multiple accounts,beturers Hanover Trustlea 61,210 registered holders of GPU common stock. labels from the extra copies to Manu Company, P.O. Box 24935, Church Street Station, New York, NY 10249.

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