Text

Forwards Philadelphia Electric Co Annual Rept 1988
	ML20247G281
Person / Time
Site:	Peach Bottom
Issue date:	04/11/1989
From:	Bradley E; PECO ENERGY CO., (FORMERLY PHILADELPHIA ELECTRIC
To:	Murley T; Office of Nuclear Reactor Regulation
References
	NUDOCS 8905300351
	Download: ML20247G281 (1)
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PHILADELPHIA Ei.ECTRIC COMPANY 2301 MARKET STREET P.O. BOX 8699 I

PHILADELPHIA A. PA.19101 1

12151841 4000 Egc.

,g April 11, 1989 e

B Associate General Counsel I

Dr. Thomas E. Murley Director Office of Nuclear Reactor Regulation

)~

Document Control Desk l

U. S. Nuclear Regulatory Commission Washington, D. C. 20555 Re:

Philadelphia Electric Company Peach Bottom Atomic Power Station Unit No. 1 - Docket No. 50-171 1

(Provisional _Qperating License No. DPR-12

')

Lear Dr. Murley:

Pursuant to Section 50.71(b) of the Commission's Regu-lations, I am forwarding hciewith for filing with the Com-mission a copy of the 1988 Annual Report of Philadelphia Electric Company.

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Philadeipblo EleetricCompanyAnnualReport I988 FinancialHighlights I988 I987

% Change Operating Revenues

$3,228,7I2,000

$3,IB I.464.000 l%

Operating Expenses

$2,486,II 7,000

$2.464.38I.000 l%

Taxes Charged to Operations

$444,374,000

$499.653.000 (Il%)

Operatung income

$742,595,000

$7I7,083.000 4%

Earnings Applocable to Common Stock

$468,765,000

$448.240.000 5%

Earnings per Average Common Share

$2.33

$2.33 Cash Dividends Paid per Common Shore

$2.20

$2.20 Average Shares ofCommon Stock Outstanding 20I,5I7,000 I92,489,000 5%

Construction Expenditures

$l,088,571,000

$l.037,500,000 4%

Total Assets

$II,862,852,000

$II.209,736,000 6%

Contents Letter to Shareholders two Report cf f 988 Operations fve Funancial Statements nineteen Dtrectors forty-fve O@cers for:y-eught Shareholder Informotton forty nine Cover:

EARNINGS AND CONSTRUCTION Vortous newspaper hoodlines ofl988 DIVIDEND 5 PER $ HARE EXPENDITURES

$aYs

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two tilret To Our Shareholders in I988, Philadelphia Electoc Company gained substantial momentum in the process of. :wvering from the l987 shutdown of our Peach Bottom Atomic Power Station. After an absence of two years, I was deeply honored to be invited by your aoard of Directors to return to the Company to help provide leadership for this difficult, complex and continuing effort and to help achieve new levels of excellence, not only in our nuclear operations, but in all our activities.

Although much remains to be done, I am pleased to report that your management was able to accomplish a number ofimportant objectives in 1988.

l. Despite the significant costs of the Peach Bottom shutdown, total common stock earnings reached a record $469 million in 1988, an increase of 5% over 1987 earnings. However, with 5% more shares outstanding, cornings per share remained the same - $2.33.

2. The dividend was maintained at $2.20 per share. The market valut; improved from $l8.00 per share in the first quarter to $20.00 per share at year end, providing a dividend yield of Il%.

3. Costs have been reduced in key areas of the Company's operations, with a large share coming from restrictions on overtime, reduction in management salaries and directors' fees, debt refundings and a reduction in contract forces.

4. Although we have changed our estimate of when Peach Bottom will be ready for restart until the second quarter of l989 to assure a successful restart and power ascension program, we completed all I38 onitially scheduled restart readiness items by September 1988.

5. Construction of Limerick Unit No. 2 continues to be a success story. \\% now anticipate loading fuelin the summer of 1989 and achieving commercial operation as early as February 1990, which would be about six months ahead of schedule and which would result in a final cost of Unit No. 2 about $200 million under the cost cap established by the Pennsylvania Public Utility Commission.

Joseph F Poguette,

6. There have been favorable responses to our extensive efforts to establish better communications wich Jr., ss, os chairman of the Board, cs.stomers, regulatory agencies, governmental representatives and the media.

president and chief

7. Despite the unavailability of Peach Bottom, our electric system satisfactorily met the recora demands

'g"s':'$,*m*p{,'y

imposed upon it dunng th'. unprecedented hot weather of the past summer due to excellent availability j' **f,',,'n';' *I of our other generation. Our customers' hourly demand reached a new peak of 6,826 megawatts on C,**P'"

p August IS, on increase of 4% over the previous record established in 1987.

f)-Pr njnj~

8. While our energ; sales got a boost from {3vorable weather, solid economic growth in the service territory coun' Int for *Icht years prior tejoin-also provided real growth in our electric and gas businesses. Both electric and gas sales were at record ing consumers Power Company in levels as electric sales rose 5.5% and gas deliveries improved by 7.6%.

Michigan in Iss6.

9. Your Board of Derectors was strengthened with the addition of Susan W Catherwood, Chairman, Board of N'aIeh N.'"

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Overseers, the University Museum, University of Pennsylvania and Ronald Rubin, General Portner, Richard I. Rubin & Company, a leading nation-wide real estate development firm. AdmiralJames D.

Watkins, United States Navy (Retired), former Chief of Naval Operations, joined the Board inJune, but resigned on January I2,1989, upon his appointment as Secretary of the U.S. Department of Energy.

10. Our management team was also strengthened by the addition of three seasoned executives from outside the Company Corbin A McNeill,Jr. joined the Company in March as Executive Vice President for Nuclear Operations: James W Durham became Senior Vice President, Legal and General Counselin October; and Joseph A. Carter became Vice President of Personnel and Industrial Relations in September.

In 1989, our top priorities will be to return both units at Peach Bottom to service; complete construction, load fuel and begin power testing of Limerick Unit No. 2; achieve earnings at least adequate to preserve our common stock dividend and lay the foundation for future economic success. To accomplish this, we will continue to emphasize cost control, to set and closely monitor performance objectives and to measure and improve the quality and quantity of our work.

This sur mer we plan to file an electric rate increase request with the Pennsylvania Public Utility Commission to seek recovery of the costs of Limerick Unit No. 2. The proceeding should conclude by mid-1990, and the decision will have a major impact on the Company's future funancial condition. I believe we have a solid basis tojustify Limerick Unit No. 2 as a valuable asset for our service territory and the Commonwealth of Pennsylvania's economic development efforts.

I am optimistic about the future of this Company. With a sold capacity base to serve the expanding needs ofour service territory, an excellent record ofservice reliability, ready access to the capital narkets, a strengthened management team, and dedicated, skilled employees, we will be ready to respond to the challenges and opportunities that lie ahead.

M pseph f Puquette,Jr.

Chastman of the Board. Presudent and ClaelExecutive Offcer a

February I,1989

>fa l 9 8 8. F i n'a n c l o l R e s ult s Fn Earnings improve Total earnings for common stock Improved to a record $469 million In 1988, a 5%

increase from the $448 million earned in 1987. However, because the average number of shares outstanding also increased by 5% to 202 million shares, earnings per share of $2.33 were the same as in 1987.

Earnings growth was primarily due to higher electric sales and the Company % continuing cost reduction efforts which offset the earnings penalty of the Peach Bottom thutdown. Strict cost conteels reduced fossil and other operating expenses by approximk.ely $22 million. Replacement power costs attrite table to the Peach Bottom shutdown which were charged against earnings amounted to $61 million for 1988 and have totalled $ll9 million since the shutdown began on March 31,1987. Effective March I, l988, the Pennsylvania Public Utlhty Commission (PUC) directed the Company to establish temporary electric rates which reduced revenue by approximately $30 million per year, reficcting the disallowance of a return on the Companyt common equity Investment in Peach Bottom. The reduction in common stock earnings per share associated with both the replacement power costs and the equity return penalty was approximately 254 for 1988, versus 176 in 1987.

Sale Records Established Electric and gas sales benefited from a strong regional economy, additional customers and favorable weather. Total electric sales increased to a record 32 billion kilowatt-hours, up 5.5% over 1987 levels, with W3ut one-half of the increase resulting from economic growth. Electric residential and house heating sales were 1% above last year with 16,500 new customers. Commerclol and Industrial sales were 5% higher with a 3,900 custon ir increase. Total gas sales were up 7.6% to 88 billion cubic feet, reflecting increases in virtually all classes of service and 7,400 additional customers.

Record Power Use The summer of 1988 posted record-breaking temperatures, reaching 90 degrees or higher on 45 days. This, coupled with continuing economic growth, resulted in record electric demands by Company customers. New maximum hourly and dally outputs were set for weekdays, Saturdays and Sundays. A new record hourly demand of 6,826 megawatts occurred on August 85 despite a 5% voltage reduction and load curtailments by Interruptible customers. Without these imposed constraints, the estimated peak would have been 7,ll4 megawatts, a level which was forecast for the year 2002. In addition, a record winter peak of 5,560 megawatts was established on December 12. The shutdown of Peach Bottom strained our supply system, but the remaining generation, together with all transmission and distribution systems, performed very well during the summer. These higher demands will require a revision of our forecasts of future peak demands.

Limerick Unit No. 2, scheduled for full operation in 1990, is essentlal to a :ontinuing, reliable energy supply in our service territory in the future.

New Capital Provided l988 was another busy year of financing. The Company raised approximately

$l.3 billion in capital for its construction program, debt refundings and general corporate needs.

Major l988 financings appear in the table on page 6. In June, the Company sold its undivided 44%

Interest in the Merrill Creek Reservoir Project for $l45.3 million through a sale / leaseback arrange-ment. See page 14 for a further d.~scription of the Project. In a continuing cffort to reduce costs,

$l54.2 million of tax-exempt Customized Purchased Bonds (CP Bonds) were issued in July on behalf of the Company. Proceeds of the CP Bonds were used to refund $l54.2 million of higher-cost, tax-exempt debt previously Issued to finance pollution control equipment for the Company.

This transaction resulted in annualInterest savings of approximately $600,000. The Company also

su seven:

arranged $180 million of new bank term loans, the proceeds of which were used to call tu hlgh l coupon d'ebt issues. This refunding resulted h, annualIntersst savings of approximately $5 million.

~

To date, the debt refunding program which began in 1985 has enabled the Company to reduce

~ annualInterest expense by more than $28 million. In December, the Company sold a portion ofits accounts recelvable for $200 million to conclude the yeart financing."

. h88 Major Finaniings

' Millions'of Dollars Month s

'. March Stated Rate Auction Preferred Stock

{

- 10.15% (Initial rate through 4/30/93)

$ 50.0 '

April

- Mortgage Bonds - 80% Serles due I998 150.0 Mortgage Bonds - Il% Series due 2018 I00.0

. June Sale of Murill Creek Reservoir Project 145.3 July Customised Purchase Bonds - Floating Rate

.l54.2-December Accounts Receivable 200.0

_4 january-December Common Stock Purchase Plans:

Dividend Reinvestment Plan & Employee Stock Purchase Plan 7,182,000 shares; average price of $I8.19 I44.9 L

^l t

Common Stock Continuous Offering:

2,000,000 shares; average price of $I8.12 ST.4 i

Sub Total

$ 98l.8

. i Jenuary-December.

Bank Borrowings:

Revolving Credit Agreement - net borrowings I50.0 New term loan borrowings I80.0 Total

$l,3 f l.8

$1.8 Billion of New Plant Investments Made Investment for new plant and equipment in 1988 totalled

$l.l billion, up 4% from the 1987 level. Approximately $626 million was'for construction at i

.1 Limerick Generating Station. In 1989, PE expects to spend approximately $l.1 billion for new plant R

and equipment. Beginning in 1990, the levels of plant investment are expected to decline dramat-Icolly upon the completion of Limerick Unit No. 2, the Companyt last major construction project

' planned for this century.

Peach Bottom Atomic Power. Station

. Restart Activities Following the shut down of Peach Bottom on March 31,1987 pursuant to a Nuclear Regulmory Commission (NRC) order, the Company has been diligently pursuing a comprehensive program aimed at a successful restart. Over the past 18 months, the Company % nuclear opera-tions have been completely restructured into a nuclear dedicated organization, in which all as-pects of the Company % nuclear operations are combined into a single, Integrated organizational structure. This structure will provide improved control, accountability and direction in all nuclear operations.

The specific restart process which the Company has fol-lowed has been detailed and exhaustive, It has produced thousands of hours of work and volumes of questions, answers and technical data involving the NRC, ewo states, the Institute of Nuclear

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Power Operations (INPO) and numerous public meetings. A wa-kforce of as many as 3,700 people 1

}r.,49,is (n ecsttive vs<e Prundent.

has been involved in the restart process.

Nuclear and is responsible for ett Major activitles were t lertaken to improve the physlCol aspects of the ca.

pony % nuclear facilities at Peach Bottom. While the plant has been out service, some I?,000 maintenance

,',',' ',"l,]'ll, tasks have been performed,178 modifications'have' been adertaken,~ radiation ' contamination.

- ','*;""f"'"'

and radioactive waste inventories have been r4..u

.g reduced, and control panels have been

'g"lP;,",'f,'y"-

color-coded and labeled to provide better visibility to operators on key systems. The new Peach 2H**' co'.s", &y Bottom control room simulator is expected to be Installed at the plant in the fall of 1989.

with the U in tsal and has The Company has provided ready access to information served in verlous nees tuve copack about Peach Bottom to elected officials and area community leaders through a coordmated titi in nutleQr generation prior community relations and publ C affairs program. Senior PE offelais have regularty' attended to joining PE en February essa.

governmental meetings and, in turn, government and civic leaders have visited and toured the

',$$",l,'5ln.

plant. Biweekly newsletters to eve ry resident of the area and a focused speakers bureau' activity

. n;l,,';, f,"'

along with several news media briefngs, have helped to keep the public Informed.

[",bly*;;R, The Company has made considerable progress on its ex-i cu,pany.

tensive restart plan to prepare Peach Bottcom for a return to service. Although 138 major restart plan action items were completed by September,in October, the Company announced that its-i scheduled restart readiness for Peach Bottom Unit No.1 would be extended until th$ second quarter of 1989, with Peach Bottom Unit No. 3 restart readiness extended until the third quarter l

of 1989. This action was taken in order to provide additional operator training, to improve managerial and supervisory effectiveness and to improve plant security. Also in October, the NRC accepted the Company % revised plan for restart.

An NRC Systematic Assessment of Licensee Performance (SALP) report covering the activities at Peach Bottom between June I,1987 and July 31,1988, Indicated that " considerable progress" had been mude In the plant % operations. The NRC awarded grades of category I,Its highest rating,In engineering support at the station; category 3, its lowest rating which Indicates a need for signifcont improvement, in the security crea; and category 2, Indicating that satisfactory performance is being achieved, in all other areas. The Cornpany already has taken steps to improve security at the plant.

The Company announcement changing the estumate of j,',"l',{,,,

when Peach Bottom would be ready for restart followed the issuance 11 the SALP report and

',*"fy',* h h

preliminary observations by sPPO concert,Ing its evaluation of activities at Peach Bottom. The g,

teamatelt to rightl additional time allotted for preparung for restart will also provide greater assurance of an orderly John S. Kemper,60, sentar v,ce Presh restart and power ascension program. Cumpletion of all the physical wc>rk le ' " ng to testart is dent, Nucleor construction; scheduled for March 1989. The schedule anticipates a two-week NRC teatra w sment in Febru-Graham M. Leitch.

st.vre President, ary followed by a period of about six weeks for report development prior to c.. NRC decision on Y,',$9lll&

restart. Therefore, the Company anticipates the removal of allImpediments to restart by early

(,$!lll,"'l;f' April, with an NRC decision to follow.

s

llp'hllo2'$11 The Company estimates that the restart delay will result In a

kllll,P,';,'l,';"'

a continuing replacement power cost penalty of approximately $8 million per month ($4 million ysja" y;

per unit) and an equity return penalty of approximately $2.5 million per month, for a total President, Peac h penalty of approximately $l0.5 million per month. In August, the NRC proposed a pne of Bottom Atomlt Power statJon.

$1,250,000 against the Company for falling to detect, report, and deal with inattentive reactor a

i

ren C!ticn -

operators and supervisors who condoned the inattention of reactor operators at Peach Bottem fa13"dl,Hg'"an.

prior to th ' Merch 1987 shutdown. The NRC also proposed pnes, rnnging from $500 to $l,000, President.

. Operocons and has against 33 p?sent or former reactor operators at Peach Bottom for sleeping or other acts of et years o(service with the Company inattention to duty that occurred at Peach Bottom. The $1,250,000 fine was paid in September.

He has respan.

$llo'rTp","?

Unit No. 3 Repiping Completed '

The replacement of Peach Bottom Unit Nc. 3 primory' piping was completed on schedule and under budget in 1988. The pipe replacement, necessitated by Inter-

s,"e'j,l,"'p',","l?

granular stress corrosion of the original pipe material, was slml!ar to that accomplished on Unit

",*"',',j,',',' ',s

{

No. 2 in 1985. The replacement of this reoctor piping has been undertaken at other boiling water d'"'ll"'**)s,**

reactors. The replacement was completed wtth less radiation exposure to workers than any n~I"s "d research, and all

]

comparable job in the country. The total cost of the piping work done in 1988 was about $12 cu norn"-related activides, He also million of which pet share was $32 million.

~ervoses the a<-

tivh fes of the f)ye Security hangcover Nuclear power plant security is a comples operation thet includes security force o,,.sian unoge, mangement, administrative controls, physical security equipment, a trained security force,

$'p"c',*uC[dla7"'

7 proper plant design and construction, at:d close cooperation with locallaw enforcement. During

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c

'**V'Y the summer, PE selected and retained a new contractor to provide protection services et Peach Bottom, the same one that provides high-q nlity security at Limerick. With the new contractor at Peach Bottom and Improved corporate review, nuclear security has been signifcontly upgrat'ed.

Co-owners File Suit On July 27, l988, Public Service Etrterprise Group Incorporated and its subsidiary, Public Service Electric and Gas Company, filed on action against the Company in the United States District Court concerning the shutdown of Peach Bottom that was ordered by the NRC. On the same date, Atlantic City Electric Company and Delmarva Power and Ught Company fled a s;milar i

suit against the Company with the some court. The three companies, as co-owners of Peach Bottom, seek to recovur darnages resulting from the shutdown of the station. The suits allege breach by the Company of the Owners Agreement under which it operated the station and various tort claims. The suits do not specify any dollar amount of damages. In October, the Company fled motions seeking dismissal of the tort claims in both actions. The Company filed answers to the complaints with respect to breach of contract claims in January. For further discussion, see l

l page 31.

-Shareholder Lawsuits '

In September, the Company % Board of Directors voted to take no action to preclude shareholder lawsuits from proceeding against the former Company Chairman and Chief Executsve Offcer and the former Company President and Chief Operating Offcer for claims alleging mismanagement which resulted in the shutdown of Peach Bottom. This action does not

"'g"l*,,"gf constitute a prejudgment by the Board but rather refects a decision that it is in the best Interests cunes op"av"'

w!th his manage-of the Company and its shareholders to allow the parties to proceed with their claims and ment team +ft to r6ght) AlvinJ.

defenses in an appropriate legal forum. The Board also voted to seek dismissal of the claims wersand. so. vice Ps eudent. Engl-against these former offcers for actions taken after the issuance of the March 31,1987 shutdown nening and

' $"b $.'"

d order, dismissal L,f all claims against the remaining Individual defendants, all of whom were either offcers or directors at the time of the Peach Bottom shutdown, and dismissal of certoln proxy i e$,", "r',',',',,*",':

claims in connection with the 1987 Annual Meeting of Shareholders. Counsel for the shareholders

'[*" "'Ru in the lawsuits that were pending have subsequently modified their lawsuits to conform to these fj*,"p%';g Commerc'o' Ope

decisions of the Board For further discussion, see page 39.

avons;and phthp LomcricL Generatang 5tation G Mulkgan.M.

Vge President, Gos Unit No. I Operations at Umerick Unit No. I continued to go weII. Covering performance for the operasoons

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} J; s t l l . Ruhard a Gamore, period February I,1987 to April 30,1988, the NRC SALP report awarded Umerick Unit No. I six, .J 6l,k 5erslor Vice ' category I ratings { highest) and two category 2 ratings (satisfactory). On November 8, Unit No. I onasent - ru ^ nance and Chieg r nanesol otfue. broke its own record of continuous operation; that record continued through January ll,1989, 1 lllll*,"n'h ' totalling 263 days. Although such records are 'mpressive and encouraging, the Company % opera-l ~

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tional values are focused on the safety, predictability and quality of operation, and not on the. ,, y. lll,jala"ll'lt%,, length of run. Operating decisions are governed by long term objectives and not by short-term l s ystems; purchon-

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) Ing and other sonnel ruckn An example of excellent performance at Limerick Is'the He ensumed his level of collective personal radiation exposure. In 1988, the plant performed at a near world present rapon~ ' sotruttuen In Apr"U Iss6. Mr. aamore record level oflow exposure for large bolling-water reactors. This extremely low level of exposure - Nlllll$g"'o resulted jrom excellent plant safety practices, the high reliability experienced in 1988 and design l h

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features which provide for radiation shielding._ l ["",','e'l;"",*" Fuel cladding failures have occurred on the Unit Intermit- . ll,,'"'ld;"' *I tently since the spring of 1988. These fuel cladding failures are being corrected by replacing the sg affected fuel rods with corrosion-resistant fuel during the refueling outage that began on January 1 I II, l989. The refueling outage is expected to be completed in approximately three months. ' Unit No.1 Nearly Complete At yearend, Unit No. 2 construction was 91.6% complete and the pre-operational testing progrm was 63.5% complete. ThIs compares with target goals of 95% and 50%, respectively. Because of the excellent construction progress, the Company anticipates load-Ing fuelin Unit No. 2 in the summer of 1989, approximately six months ahead of schedale, and a commercial operation of Unit No. 2 is now anticipated in February 1990, also about six months - ahead of schedule. Based upon that schedule, the forecast pnol cost would be cbout $200 million ^ under the cost cap established by the PUC In 1985. Construction at Unit No. 2 has benefited from schedule adherence, high productivity and quality construction. Water 5ptem Update Umerick Generating Station needs a supplemental supply of cooIIng water. during periods oflow flow on the Schuylkill River, to be supplied through a planned supplemental cooling water system designed to draw water from the Delaware River to Limerick. Following the resolution of certain legal and regulatory impediments, construction of the Point Pleasant Pump-Ing Station resumed in March 1988 and continued through the year. The Bucks County Commis-sloners assumed control of the water 41 version project which is scheduled for completion in the summer of 1989. At December 31, Point Pleasant was approximately 65% complete. Work on the 2H-mile pipeline between Point Pleasant and the Bradshaw Reservoir, which began in April, was i completed In November. Mr; cumore @ack PEk construction of the Bradshaw Reservoir continued to comuop ente eth ha a anase-throughout l988. The 25-million-gallon reservoir and pumping station, which will receive water "lg'"l>'n"r"EoWE from Point Pleasant and act as the dividing point for water for Limerick and two Montgomery P$s5t$all County water authorities, are essentially complete. Constr' ction of the seven-mile pipeline be-u Y,*,"j,,,, yu, tween Bradshaw Reservoir and the East Branch of the Perkiomen Creek (East Branch) began in k [*,'l*"'; April 1988 and was completed in Jenuary 1989. The water will flow approximately 25 miles . l*yjpll,,ll;,, through the East Branch to a pumping station near Umerick which will pump the water through soformatio" syn-an eight-mile transmission main to the station. The estimated completion date of all components }) tems and General surnes:and of the supplemental water system for Umerick is September 1989. ) Donald P scott. s4, 7 rreasure. Several legal and regulatory problems exist, any one of 1 1 J 1

fourteen. pfteen which if resolved unfavorably to the Company, would prevent the use of the supplemental cooling cutlardarenner n as senior Vice water system as presently designed and approved. The delays inherent in the resolution of these president. Corporate problems also heighten the importance of the Company % ability to continue to obtain adequate . communocatiam sources ofinterim cooling water. While there ss no assurance as to the outcome of these problems,

r#llo'c'$p"$y the Company believes that it will successfully resolve them, or successfully redesign and obtain the

. 'Zj,'"n","'l*j,'" \\ '\\ necessary approvals for a modifed supplemental cooling water system. For further 6scussion, see Q"llll,",fl,'*l,'R": h***>*"' page 32. operations at Merrill Creek Reservoir Completed Construction of the 15-billion-gallon Merrill Creek Reservoir was M dgny)'; completed and the initial filing of the reservoir was pnished in October. PE and six other utilities Umerick Enersy In-formatton Center. sh,re operation of the $120 million fact!ity. The stored water will be released to the Delaware ne has ta ears at r esperience wish PE. River during periods oflow flow to replace water evaporated in the operation of the participating l utilities' power plants, Including Limerick. Capacity / Energy Sales Ccmpletion of Limerick Unit No. 2 will assure the ability to meet the economic growth in the Delaware Valley and also will give the Company an opportunity to arrange short-term capacity and energy sales to other utilities in need of additional generation. In September, the Company arranged for the sale of 200 megawatts of system capacity and associated energy to a neighboring utility from 1990 to 1994. In addition, we have nearly completed negotiations for the sale of an additional 200 megawatts to another utility for the same time period. These arrange-l . ments are scheduled to expire when the capacity will be needed solely for Company customers. Serving Customet s And Communnty Expanding Economy Served 1988 was another productive year for the Greater Philadelphia region and Philadelphia Electric Company. The region % unemployment rate of 43% continued to be below national (5.5%) and state (5.l%) rates. Industry continued to diversify, thereby enhancing the regiont ability to weather economic downturns. In l988, the Company helped to locate 68 companies in its service area, with I2 companies establish!ng new facilities,16 establishing branch plants, and 40 relocating within the territory. As a result, 8,500 jobs were e;t',er created or retained. Evidence of the regiont vitality was everywhere. In Center City Philadelphia, nine new offce buildings were either completed or under construction. Major tenants have been obtained for a significant number of the p*ojects. Along the Delaware River waterfront, major development is underway from the Tacony-Palmyra Bridge to the Walt Whit-man Bridge. A number of developers and investors have committed more than $l billion of their loneph A Corter. own capital to marinas, hotels, offces, and residential projects along the waterfront. Economic s2.josned the Com-growth also continued in the suburbs which comprise 95% of the Company % service territory. pony on september 1988 as Vrce Major development is occurring along most of the region % major highways. In the airport area, a pres, dent. personnet and Industrial number of projects have been completed, including the initial phase of a major shipping com-nerantons. n, os ,',%,$l')4 l". ponyt distribution facility which will eventually employ up to 1,000 people. In addition, major renovations are planned for Philadelphia International Airport itself. (*][l4* * ' Q, Not far from the airport is the Intersection ofI-95 and the y;;,', M'g'f', Blue Route, o highway which willlink Delaware County riverfront communities and other comn u- ,tye eac o Montvate, New nities along the highway with the Pennsylvanlo Turnpike west of Philadelphia. This long-awaited, Jersey, where he cross-county highway will open up the East Coast market to more of the region % businesses. The served as corporate voce President for first section has opened and construction is underway on the remaining sections, with completion Human Resources.

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James W Durbom, scheduled for 1998, In anticipation of completion of the Blue Route, development is underway o

' i ' si,ls senJor Vlce PresJ4ent,.. planned along much af the route. Not for from the Blue Route % Intersection with the Pennsylvania Lsgoland Generat coumes. ne as re Turnpike, a major aquonal shopping mall and business complex with over I.6 million square feet of 'Q,TNl,',,*$ns retoII, offee and hot ~l space are planned. $'r'ls"l??e' r'h As the economy of'the Company % service territory con - j,,*"'4llll"* tlnued in high gear during 1988, the Company % workioad to supply the resulting load growth ,1unRoLr dontinUed at a heavy pace. Construction of new substations, supply lines, and local distribution P e par in octok' facilities.vas required to serve the many new residential, commercial and Industrial customers. 1988, he served es , senior vice Prest-EEE Program Wim Award The success and recognition of pet Excellence In Energy Effclency (EEE) d$nt, Gerval ~

coumel and see-Program has continued to grow. Through this program, the Company works with area home-

$?sia'n'sTlneral builders to assure construction standards that result in energy-effelent homes. The high thermal ~ ,"'l$l,,Ta*,"' building standards of this program offer the homeowner an energy-effelent home resulting in. ?l rya *n'$*o'r*eja"n?" Years of comfort with lower utillty bills. Presently, with more than 200 builders participating,7,000 new homes have been built to EEE standards since the program began In 1985. In July, the,EEE. program was recognized with a national award by the Edison Electric Institute, winning the eel Common Goals Award in the energy management category. PE was commended *... for its leadership in developing a program that serves as a model of excellence and success in the Industry

Gas Rates Compete On January 15,1988, the PUC apprcved modifications to the Company % interruptl-ble gas rates to provide for market-based "fexible* pricing. This modification allows for monthly rate changes to match the pricing of competing fuel sources, provided that the rates remain within a regulatory-approved range. Natural gas con now compete directly with' oII, propane, and gasoline In the energy commodity market through multiple rates targeted at specific citernate fuel applications. Three PE gas tariffs are priced using the fexible rate concept. Two of the tarlffs '

provide an alternative fuel option to industrial and commerclol customers who have

dual fuel".

operations, while one rate offers natural gas as an alternative fuel for feet operators. Since natural gas is competing In the boiler and vehicula.- fuel markets as a con nodity fuel,lt is advantageous for PE to price gas as close as possible to the ~ customer specific competition. This requires monitoring the fuel markets in the Company % service territory, as well as maintaining contact with customers to develop monthly pricing decisions. The goal of these multiple gas rates is to make gas competitive with a customer % specific alternate fuel, to minimize customer fuel switching and to increirse profitability in these markets. Low-income Customers Alded in 1988, the Company Integrated two programs to provide comprehen-sive assistance to limited Income customers. The Company introduced the Alphonso Deal Usage Reduction Program which provides energy education and the installation of extensive weatheriza-tion measures to eligible low-income customers who have electric or' gas space heating or water i heating provided by the Company. The existing Customer Assistance Program was expanded to .\\ . ur. ournam gaa provide further energy education, affordable monthly budgets, and opportunities for possible

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cancellation of past unpaid debts to customers who have a verifed Inability to pay their energy . ';;ent seam: Lucy s. bills. During this first year of the Integrated Alphonso Deal Usage Reduction and Customer m l Iknder, st, secre- [ tory > and Eusml. Assistance Programs, over 4,000 limited income customers have received energy education anet Bradley,69, vke President and As-900 Customers have had Weatherlzation measures Installed. By Combining thergy education, sociate General counsel. innovative weatherization measures and reduced energy budgets, the Company is substantially __a

eighteen nineteen improving the ability of these customers to cope. Storms Interrupt Customers 1988 was a year of severe storms which significantly affected the transmis-slon and electric distribution system, customers and Company employees. The biggest storm of the year, the lightning storm of August 17, Interrupted nearly 170,000 customers and became the seventh most severe storm cn record for number of customers affected. Over 1,000 field and offee personnel were involved in the restoration effort. Other H i g h li g h t s Management Changes Two of the Company % top officers retired in I988. John H. Austin,Jr., resigned as President, Chief Operating Offcer and Director, effective March I, l988, and James L Everett resigned as Chairman and Chief Executive Officer, effective April I3,1988, and subsequently resigned from the Board of Directors on October 24,1988. Both men started with PE as engineers In 1950 and spent their entire rareers devoted to service to the public. They have served the Company unselfishly while contributing with distinction to this city % business, educational, cultural and charitable communities. 20-Year Plan Submitted in April 1988, the Company submitted to the PUC on Integrated Resource Plan. This is the frst of an annual *Ieast cost" plan to meet the projected needs of the Company % electric customers during the next 20 years. PE submitted the plan to the PUC in compliance with new state legislation. Highlights of the plan include: l) no new power plant construction scheduled following the completion of Umerl:k Unit No. 2; 2) additional customer requirements met through a combination ofload management prograns, rehabilitatkan of older generating facilities, Inter-ruptible load, and new non-utility generation sources such as municipal solid waste facilities; and

3) excluding inflation, the real cost of electric service in the year 2001is expected to be about the same as in 1988.

Training Upgraded The Company is expanding its management and technical training In support of the . nuclear stations and in the past year has added

people skills' to the training effort. Communica-tions skills and team training have been emphasized in the simulators. Performance-based team tralaing has also become possible by adding some site-specific nuclear plant equipment mock-ups to our Barbadoes Training Center. Teams made up of varied work groups are able to practice their skills in specialized and Interrelated tasks in a simulated radiological environment and under conditions found at both nuclear stations. This training is designed to teach Company employees how to more effectively perform the technically complex tasks required in a nuclear plant and, equally important, how to work together more productively.

Conowingo Project Two of the Company % subsidiaries, Philadelphia Electric Power Company and The Susquehannr Power Company, as licensees of the Conowingo Hydro-electric Project, reached a settlement in connection with the Conowingo relicensing case before the Federal Energy Reg-ulatory Comm!ssion (FERC) in August 1988. The settlement requires the licensees to maintain Maryland State water quality standards, maintain a schedule of minimum flows, and provide additional psh passage facilities at the Project. The settlement agreement was approved by FERC on January 24,1989, and resolves all remaining issues in the relicensing proceeding which has been in litigation since August 14,1980. The Company plans to construct a new fish passage facllity at an estimated cost of $l2.5 million.

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M a n a g e m e n t 's Discussion and Analysis of Financial r ondition and R e s ult s o f O p e r a tio n s Phltndelphia General by approximately $25 million. The estomated annual U*aric Ccmpany Earnings per share for I988 were $2 33, the same as in I987 reduction is $30 milhon. The associated reduction in common nnd SubslalarY wnth approximately 5% more shares outstanding The stock earnings per share was approximately 7e in l988 and positive efects of higher (5 5%) cIcctric sales and the is estimated at approximately 9t annually - Company's cost reduction effor ts ogset the negative oressure Onjune I, I988, the Company filed its annual Energy on earnings caused by the Nuclear Regulatory Commussion Cost Rate factor (ECRF) with the PUC proposing a 4.850 mill (NRC) order ofMarch 31,1987 suspending power operations per kWh credit applicable to customers' c!ectric service. On at the Peach Bottom Atomic P6wer Station June 30. I988. the PUC approved on Audut Bureau adjusted The increase on electnc sales was the result of the hot ECRF ofa 6 291 moll per kWh credit to be efectweJuly I, and humod weather expenenced dunng the summer months I988 throughJune 30, I989. The PUCMapted rate refects and the contsnurng economoc development in the Company's an adjustment to the Company's proposalofapproximately service terntory $42 millron, of which $4 7 million was disallowed and in I988 the Company set electric output records for approximately $37 milloon deferred pendong resolution of two the second successive year. Records were set for yearly, separate ECRF investigations. monthly. weekly. dady and hourly output, as wcII as Saturday Onjune 27, I988, the third phase of the three-phase and Sunday daily and hourly output. electric rate increase approved by the PUC in itsJune 27, An all.timc hourly peak of 6.826 megawatts (mW) l986 0ider became egective. This third phase, amounting to was set on August I5 I988 between the hours of 4 and 5 approximately $II7 milhon per year, is designed to recover p m, and an alhtime winter hourly demand of 5.560 mW was costs associated with the operation ofLimerick Unit No. l. set on December I2, I988, between the hours of 6 and 7 p.m. Revenue deferred under the phase-in plan wull be recovered These output records were not forecast until the turn of the from customers over the threeyear period beginnnngjune century I989. On March I, I988, the Company placedinto efect In accordance with the PUC order datedJune 27 temporary electric rates refecting an order by the I986. the Company continues to accrue a carryung charge Pennsylvania Pubhc Utikty Commission (PUC) denyong a equivalent to allowance for funds used during construction return on the Company's equuty unvestment in the Peach (AFUDC) on the 50% of Limerick common plant excluded Bottom Atomrc Power Stattort The Company filed a Petitson from rate base by the order. In I988, this accrual benefited for Stay and a Petitnan for Reconsideration wrth the PUC common stock earnings by approximately $73 I mi!! ion. concerntog the order. On Apnl 21, I988, the PUC denred the OnJanuary I5. I988, the PUC approved on $8.6 Company's petituons in accordance wrth the PUC order. the mnthon, 3 l% increase un gas rates. The increase includes a temporary rate adjustment became effective for an unstral one-year Federal Tcx Adjustment Surcharge to recover $0.9 period of six months OnJune 30. I988. the PUC extended the milhon for the prior effects of the Tax Reform Act ofI986. temporary rate adjustment for an addstoonal sivmonth period On September 30. I988. the PUC approved a $I6 ending February 28, I989. The PUC also authonzed the milhon uncrease in the Purchased Gas Cost Rate for the Company to file a tonff supplement which. on one day's pertod October I, I958 through September 30, I989. The notice, would remove the temporary rate adjustment when a uncrease is pnncipally the result of the exparation of a refund generatong unit at Peach Bottom operates for 100 contonuous for past overcollectrons which had been in effect since hours at 95% of that untt's rated capocrty Ac part of the October I987. settlement, the Company agreed not to seek any recoupment As a result of the Tax Reform Act ofI986 tint ofrevenue lost as a result of the Peach Bottom temporary rate reduced federalincome taxes. the Company passed back to order for the penod March I, I988 through February 28, I989 tts electnc customers $89.5 million through a Federal Tax On October 2I, I988. the Company announced that Adjustment Credit (FTAC) for the year I988 In I989, the its schedule for restart readuness ofPeach Bottom Unit No. 2 Company wnll pass back to uts electnc customers $66.5 had been extended from late December J 988 untul the second milhon through a FTAC. quarter ofl989, with Unit No 3 restart extended until the Onjune 16,1988. the Company sold its 44 24I% third quarter ofl989. As a result the Company docs ont unterest in the Merrill Creek Reservonr Project for $l45 3 expect that one unit at Peach Bottom will operate for 100 milhan. Under the terms of the agreement, the Company is continuous hours at 95% of that unit's capacoty pnor to Icosing back its share of the rescryour for 44 % years with February 28,1989 lease reroewals and a purchase option available to the The temporary rates wull become permanent on Company February 28. I989 unless the Company (des a complaint with On December 20, I988, the Company sold a portion the PUC. Tbe Company is currently revuewing all of ets options ofits existing and future accounts receivoute for $200 milhon to prevent these rates from becoming permanent. through a five-year purchase and sale agteement. The Company estimates the delay in restart wrII result Tbe Company is completong construction ofLomerick on u contunuing replacement power cost penaity of Unit No 2 under o PUC-mandated cost containment plan approximately $8 molhon per month ($4 mi!I,on pcs unit) and whrch provodes for a maxsmum net rate base alinwance for an equity return penalty of approximately $2 5 m,Ilion per Unit No. 2 (exclusive of common plant) of a prudent month See note 2 of Notes to Funancual Statements. page 29. investment of $3 I97 bilhon The Company estimates that In i988. the wntecff of $6l 4 molhon ofPeach Bottom the cost of Lomenck Untt No 2 wellnot exceed the $3 I97 replacement power costs had a negative umpact on carnings b Ihon cap. of18c per shnm As of December 31, I988. Lomenck Unit No. 2 was In I988. the temporary electnc rates rrduced revenue 97.6% complete with expenditures, uncluding AFUDC.
Management?s. Discussion and A n aIy sis of twenty two Fln a n clai Condition and R 'e s u I t s ofOperations twenty-three - Cononued . Phii;delphia totalbng $2 238 bilhon. the Company's cost reduction egorts. The nncrease in non-fuel Ehetik Compan1. In December I987, the Financial Accounting operating and maintenance expenses in 1987 and I986 was s.nd subsidiary Standards Board (FASB) issued SFAS 96. "Accounung for pnmarily attnbutabic to the commercialoperation ofLimenck Income Taxes." which requires an asset and habihty approach Unit No. f. for (nonc of accounting and reporting for nncome taxes. Due to the complexities of SFAS 96, its originalefective date has Depreciation . been delayed by FASB for one year. The Company is required Increases in depreciatoca in each of the last three years to adopt this statement by I990. The provtsions of the refected oddutions to plant in service. In I987 and I986 statement may be opphed cumulatively ir, the year of increases in depreciation were primarily attributable to adoptnan or may be opphed revooctively by restating Limerick Unit No I being placedinto service previously issued (noncial statements The Company is continuing to evaluate the provssions of SFAS 96 and ats efect locome Taxes on the Company's (noncial statements. Income taxes charged to operatnons and income tax crednts included in other encome decreased in I988 compared to 1987 Electric Operating fsevenue primarily due to higher operatsng and maintenance expenses increased electric rewnue for I988. I987 and I986 was andinterest charges. Totalincome taxes for I987 compared to - attnbutable to higher base rates and increased sales restated (986 were higher pninarily due to the Company Kilowatthour sales ofelecincuty to retail customers increased adoptnon of Statement of Financial Accounting Standards No. a 5% sn i988 over I987 and 5 4% in I987 over I986 9C.
~~Regulated Enterprises - Accounting for Abandonments and Disallowances of Plant Costs" and Statement No. 92, Electnc Revenue Increase /(Decrease)~~
' Regulated Enterposes - Accountong for Phase-in Plans? MtIInons of Dollars '88 vs. '87 '87 vs '86 '86 vs. '85 Other Taxes Oder taxes inacased shghtly in I988 versus I987 due to Rate Increase $ 0.9 tl93 7 $I85 0 FTAC ($5.1) (34 4) higher payroIIandgross receipts taxes. Other taxes increased in I987 versus I986 due to higher capital stock and gross fuel Related Revenue I6.8 (l49 0) (39 4) receipts taxes. In l986 0ther taxes decreased due to lower Sales and Other 78.7 100 0 37.6 Total $40.6 $II0.3 $I83.2 Allowance for Funds Used During Construction (AFUDC) Gas Operating Revenue The oncrease in AFUDC on I988 compared with 1987 was une ina cased gas revenue for I988 was attnbutable to sncreased result ofincreases in construction work in progress, due sales and rates. For I988. total gas sales, including transported primarily to construction ofLimerick Unst No 2. AFUDC gas. uncreased 7.6% over I987. Lower gas revenue nn I987 decreased in I987 and I986 as a result of the commercial \\ ^ compared wnth I986 was pnmanly attributable to a lower operation ofLimertck Unit No. l. Purchased Gas Cost Rate resulting from reductuon in the price ofgas from suppliers. For 1987. total gas sales, includung Interest Charges 1 transported gas, increased I3.7% over I986. Interest charges on debt increased in each of the last three years due to additionaldebt outstanding. The ratio ofearnings fuel and Energy Interchange Expense to mortgage interest, which is one measure of the Company's For accounting purposes. fue! and energy interchange costs are abiluty to issue mortgage bonds. for the calendar years I988, deferred untnl bnfled as fuel adjustment revenue. See note I of I987. and I986 was 2.69. 2.83 and 2 82 times, respectively i i Nutes to Funancial Statements, page 29 In I988. gross fuel and Under the Company's mortgage, additional mortgage bonds energy interchange costs were $10 milhon lower than un I987 may not be issued on the basis of property addotrons or cash primarily due to the reduced cost of' interchange purchases and depostts unless earntngs before income taxes and interest increased output at Lamenck Unit No. l. Fueland energy dunng i2 consecutive calendar months of the precedung IS - Interchange cents deferred on prevrous years reduced expense ' calendar months are at least two times the pro forma annual on i988 by $4J milhon In I987. gross fuel and energy snterest on all mortgage bonds outstanding and apploed for in interchange costs were $98 milhon higher than in I986 addntion. as of December 3l. I988, the Company was entitled primarily due to the refuchng outage at Lamenck and the Peach to issue approximately $ I I bilhon of mortgage bonds. wsthout Bottom shutdown. Fuel and energy interchange costs deferred regard to the earnings test, agarnst prevuously retired bonds. in prevuous years reduced expense in I987 by $68 million In l 1986. gross fuel and energy interchange custs were $28l Capital Expenditures and Changes in Financial Position l milhon lower than in I985 pnmarily due to the excellent ihe Company's construction program is estimated to require performance of the Company's nuclear units Fueland energy expenditures of approximately $I.I bolhon in I989 and $2.0 interchange costs deferred in prevsous years and charged to bolhon from 1990 to 1992 A significant portion of the exi.ense in I986 amounted to $189 milhon. expenditures relate to the construction of Limenck Unit No. 2. ~ Successful completion of this program is dependent on the Other Operating and Maintenance Expenses Company's abshty to obtarn external fnancing pnmarily In I988. nornf.icI operating and maintenance expenses through sales ofdebt and equity secunties which are subject i tocreased $30 molhon or 3 mv over last year pnmanly due to to market conditions and to meeting certarn carnings tests. [ Peach Bottom related expemes which were partially offset by The program ss also subject to the hcenssng requirements of 1 l
1 the NRC, other regulatory approvcIs in connection w th the protest wil, oe successfal If the IRS claims cgoonst the \\ planned supplemental coohng water system for Limenck. purchaser are upheld, comphance with the indemnification fnancing approvals by the PUC and changes due to Ictigauort provisoons of the agreement could result on a signifcont Intenm fnancing of the construction program is charge to income. provided by short-and intermediate-term bank loans which In the long run, the future financial health of the are also dependent on the Company's fnancial position. Company us highly dependent on the regulatory treatment of Limerick Unst No 2. The Company beheves that the prospects Outlook for favoraUe treatment have inc osed because bmerick Unit Onjuly 27, I988, Pubhc Service Enterprise Group No 2 has become more valuable 4 yet less costly to build Incorporatedandits subsidiary Public Service Electric and since constructnan resumed. The Company's recent sales Gas Company fled an action agamst the Company in the growth and peak load expenence is a clear indscation of the United States District Court concernsng the shutdown of need for the addelsonal capacity which Limerick represents. Peach Bottom Atomic Power Station that was ordered by the Although the Compc'y contunues ta actively support l NRC. On the same date, Atlantic City Electric Company and conservation and co-generation and factor them into the i Delmarva Power and bght Company fled a simolar suit planning equation the customers' increasing demand must against the Company woth the same court. The three be met with re* able sources of committed power. Complevon companies. as co-owners of Feach Bottom, seek to recowr of Limerick Unit No 2 wuli assurc the abshty to meet the damages resulting from the NRC ordered shutdown of the expanding growth in the servve terntory and provide an Station. The suits alleged breach by the Company of the opportunity to arrange short-term capacity sales to other Owners Agreement under which it operates the Station and utihtres in need of addsuonalgeneration. For example, in vanous tort clarms. The complaints do not specify any dollar September the Company announced that ut has artonged the amount of damages. On October 2l, I988. the Company fled sale of 200 mW of system capacity to a neughbonng utshty motoons seeking dnsmissal of the tort claoms in toth actions from I990 to I994 In addstion, negotiavons are contonusng for The Company fled answers to the complaints with respect to the sale of an additional 200 mW to another utohty for the the breach ofcontract claims onJanuary 13. I989 If the same time penod These arrangements are scheduled to litugation is ultimately determined adversely to the Company, conclude when the capacnty well be needed on the Company's such adverse determnnavon could have a matenal adverse system. effect on the Company's fnoncial condstoon. Considenng the outrondt.,g progress in the In December l98I, the Company sold the federal construction ofbmcrick Unst No. 2, the Company anticipates income tax benefts assocrated with Unst No. 2 of the Salem fkng a rate case in the summer of I989 to sr.clude its revmue Generating Station for SS3.7 milhon un a safe harbor lease requirements n rates The Company os examentng every transaction. Under the sale agreement, the Company agreed possible opuon which would and in motigating the umpact of to indemnify the purchaser agoonst the loss of the tax benef ts placing Unut No 2 in service. resulting from any Internal Rennue Service (IRS) clasms la conclusion, earnings per share have held up wcII whrch ret. der the sale invahd. The Company's undemnifcatron dunng this diffcult year due, on large part, to oncreased sales obhgation also includes the payment ofinterest. at pnme from favorabk weather orud a strong regtonal econorny rates. on the ondemnufication amount and all associated costs However, the Company has made sigmficant stndes on cost of contesting an IRS challenge. The Company has been reduction and on oncreased cffciencies. advrsed that IRS Las asserted, in auditsng the purchaser, that These etforts wrll contunue to be a hig? pnonty for the sale was invalid. Although the purchaser has protested management and are cntical to the objectsve ofmasntaining the IRS claims, the Company has no assurance that the the common stock dividend 1 l l ) 1 4
t.- i-l- C o n s oIid a t e d Statements ofIncome twenty-four twentyfve '[ Philadelphia for the Years EndedDecember 3I . Elecsrne Company - p9gg j9g7
~~986 i~~
and Subsidiary 3 companies ' (Thousands ofDollars) t Operating Revenues f Electnc $2,850,315 $2 809,673 $2.699.365 Cas 378.397 37I,79I 39I,504 TotalOperating Revenues 3,228,1l2 3,I8I.464 3.090.869 Operating Expenses Fueland Energy Interchange. 145,110 710.648 889.277 Other Operatsng Expenses 727,791 695.440 6I8.257 Maintenance 304,75l 306.706 274.200 Depreciation 264,09I 25I,934 2I7,640 Income Taxes 206,774 264.940 284.355 Other Taxes 231,600 234.7I3 232.627 . Total Operating Expenses 2,4R6,Ili 2.464,38l 2.5I6.356 Operating income 742,595 7I7.083 574.5I3 Other income and Deductions Allowance for::her Funds Used During Construction 98,924 77,228 76.82I Capitalized Limerick Costs 73,074 66.582 I72.926 Adjustment to Utility Plant Costs (368,900) Credit (Charge) Related to Phase-In Plan 26,l62 I8.459 (9I,880) Income Tax Credits. Net 43,467 35.324 279,709 Other. Net 7,900 l8.270 2.4t,2 Total Other Income and Deductions 249,527 2I5.863 7I.I38 Income Before Interest Charges 992,I22 932.946 645.65I Interest Charges Long-Term Debt $24,131 467.252 458.885 Short-Term Debt 24,188 I7.243 I2.5l2 Allowance for Borrowed Funds Used Dunng Construction (122,l47) (92,l55) (lol.bl7) Net Interest Charges 426,172 392.340 369.780 income from Contunuong Operations $65,950 5'O.606 275.87I Income from Discontinued Stcom Operations I,790 I,9I6 Loss on Disposal of Drscontunued Steam Operations (l,250) Net income 565,950 542.396 276.537 Preferred $tock Dividends 97,l85 94.l56 90.96l Earnings Applicable to Common Stock $ 468,765 5 448.240 $ 185.576 i Average Shares of Common Ssock Outstanding (Thousands) 20I,5I7 I92.489 I83.I4I l Earnings Ptr Average Common Share from Continuing Operations (Dollars) $2.33 $2 33 $l.01 Earnings Per Average Common Shore (Dollars) $2.33 $2 33 $I.0l Dividends Per Common Shore (Dollars) $2.20 $2 20 $2 20 See notes to finonaal statements, 1 l
J 'C o ^n s o l i d e t e d Stotements ofCasb F80ws Philadelphia for the Years tinded December 31 Elastric company, gqsg g9g7 gqgg tnd $ubsidiary -
~~Companies (Thousands ofDollars)~~
Cash flows from Operating ActMtles . Netincome $565,950 $542.396 $276.537 Adjustments to Reconcile Net income to Net Cash Provnded by Operattng Activrties: ' Adjustment to Utility Plant Costs 368.900 Depreciation and Amortization 29I,277 288.039 282.200 DeferredIncome Taxes 86,856 I69.605 (26.528) Investment Tax Credits. Net (9,291) {l6.953)' 8.655 Allowance for Other Funds Used During Construction (98,924) (77,228) {76.82I) Increase in Deferred Umerick Costs (73,074) (66.582) (l65.699) Increase in Unrecovered Revenue (6I,231) {l78.595) {li2.472) Credit iCharge) Related to Prese-in Plan (26,I62) (l8.459) 91.800 Amortization ofLeastd Property 36,l00 49.700 65.600 Limerick PrecommercalfuelCost !6.448 Change in Current Assets and Other Current babilutues I93,939 (92.399) 230.988 Change in Other Deferred Debuts and Credits (28,843) (lI.769) (l7.707) l Net Cash Provided by Operating Activstics 875,897 587.750 94I,98l l Cash Flows From Investing ActMties increase in Utsinty Plant (937,419) (925.550) (723.527) Allowance for Other Funds Used Dunng Construction 98,924 77.228 76.82I Cost ofProperty Returec* and Cost of Removal (54,528) (37.636) (86.332) Sale ofMernll Creek Reservoor I45,330 Sale ofSteam Plant 28,762 Transfer from Deferred Debits 25.lS7 Increase;'(Decrease) un Other Investments 1,I54 (lI.232) (2.032) Net Cash Used by lnvestang Activities (144,539) (868.428) (709.913) Cash flows from Financing Activities Issuance ofCommon Stock I82,345 I62.272 230,978 Issuance ofPreferred Stock 50,000 65.000 75.000 Retirement of Preferred Stock Includsng Change on Other Fondan Capital (20,529) (54.0l8) (17.897) Dividends on ' referred and Common Stock (541,526) (Sl7.353) (494.9I6) Change in Disdends Payable 2,933 (2.964) (l.09I) Expenses ofissurng Preferred ond Common Stock (I,131) (l.318) (2.005) l$suance of Long-Term Debt 584 100 740.000 82I,000 i Retirement ofLong Term Debt (395;iO2) (328.588) (260,829) Premium on Retirement oflong-Term Debt (2,800) (42.747) (28.930) Net Borrowings under Revolvmg Credit Agreements 850,000 150.000 (550.000) Changein Short Term Debt (I02,000) I02.000 (I.000) Capitallcase Payments (36,l00) (49.700) (65.600) Change sn Escrow funds (30) IO.459 2.872 ,l Payment of Other Obliganons (37,7I9) Net Cash (Used) Provoded by Fonancing Activuttes (I30,841) 233.043 (330.I37) Net Change in Cash and Cash Equivalents $I7 $(47.635) $(98.069) Cash and Cash Equivalents at the begunning of the penod $ 43,08I $ 90.7I6 $ I88.785 Cash and Cash Equivalents at the end of the period $ 43,598 5 43.08I $ 90.7I6 See notes to finantual statements l
_ C o n 's o l's,d a t c ' d B a 1 -o n c e Sheets' . twent y-six twenty-se~n December 31 Philadelphia. Usetric Compws ypgg gpg7 ~ and Subsidiary (7housands of Dollars) Companies ~ ' ASSETS . Utility Plant, at origmal cost Electr't $ 9,003,850 $ 8,760.993 - (a 583,705 542.483 s ~amon, used on all services i48,942 I44.650 9,736,497 9,448 I26 Less: Accumulated Depreciation 2,395,820 2,I69,390 1,340,677 7,278.736 Nudear Fuel, Net 242,040 . I93.I10 Construction wbrk in Progress 2,465,750 I.999.99I Leosed Property, Net 187,538 2R7.I98 Net Utility Plant 10,336,005 9.759.035 Current Assets Cash and Ternporary Cash Investments 43,590 43.081 ' Accounts Receivable Customers 14l.107 344.560 34,6II 4I,274 Other -Inventories. ot average cost FossilFuct 50,046 59.202 Materials and Supplies i20,210 9I.052 ' 50,399 6.220 Deferred Energy Costs 60,859 56.64I CompensatedAbsences Unrecovered Revenue 54,087 i8,008 I7,150 Other 572,925 659.IB0 Total Current assets Deferred Debits and Other Assets Unrecovered Revenue, Net 250,952 2I7.646 375,980 285.969 Deferred limenck Costs Investments 97,780 100.934 iI8,338 Il9.052 Loss on Rcocquired Debt iI0,942 67.920 Other TotalDeferred Debits and Other Assets 953,922 791.521 Total $II,862,852 $II,209.736 See nctes to funonaal statements. l
( l December 3l I988 l987 (Thousands cfDollars) CAPITAUZATION AND UABlUTIES . Capitalization Common Sharehokiers' Equity Common Stock $ 3,177,584 5 2.995.239 Other PaidIn Capital 5,119 4.579 Retorned Earnings 409,663 387.070 3,592,566. 3,386.888 PreferredStock Without Mandatory Redemption 627:472 572,472 With Mandatory Redemption 368,07f 389.I46 Long-Term Debt 5,2I9,5II 4.870.733 Total Capitchzetion 9,802,627 9.219.239 Current Uabilities Notes Payabic. Bank l02.000 Long-Term Debt Due Wuthan One Year 70,235 80,889 CapttalLease Obhgatoons Duc Wittun One Year 12,046 60,588 Accounts Payoble 180,831 169.353 Taxes Accrued i39,966 II4.738 Deferred Income Taxes - Energy Costs 20,011 2.679 Interest Accrued i29,408. I2I.650 Dmdends Pdyabic 39,575 36.643 Compensated Absences 60,859 56.64I Other (9,877 I5.5IO i Total Current Liabilities 732,808 760.69I Deferred Credits and Other Liabihties Capitallcase Obhgations 215,492 226.6l0 DeferredIncome Taxes 153,267 682.899 UnamortszedInvestment Tax Credats 272,976 282.3II Other 85,682 37.986 Total Dcferred Credits and Other Liabilities I,327,4l7 I.229.806 Commitments and Contingencies (Notes 2. 3 and I5) Total $II,862,tS2 $II 209.736
C o n s o II d a t e d Statements ofChangesin C a rn m o n twenty-eight Shareholders' Equity and Preferred 5tock twenty none Other Philadelphia [** **"S'*'k Pabd-in Retained P'*f*"*8 5'*'k Etectric Company and Subsidiary Shares Amount Capirof Earnings Shores Amount Companies [ All amounts an thousands) Balnce, January I,1986 I77.680 $2.601.989 $7.331 $583.728 8.908 $890.78l Net income 276.537 Cash Deidends Declared Preferred Stock (at specufied annual rates) (9I.393) Common Stock ($2 20 per share) (403.523) Espenses of Capotal Stock Issues (2.005) issuance of Stock Publ>c Sales 6.000 I I 7.2I6 750 75.000 Employee Stock Ownershep Plans 625 I3.2I5 Divndend Reinvestment and Stock Purchase Plan 4.774 100.547 456 (l84) {lB.353) Pedemptoons Balance. December 31. I986 I89.079 2.832.967 7.787 363,344 9.474 947.428 Net income 542.396 Cash Dwdends Declared Preferred Stock (at spectfred annual rates) (94.068) Common Stock ($2 20 per share) (423.285) Expenses of Caputal Stock Issues (I.317) Issuance of Stock Public Sales 1.500 32.429 650 65.000 Employee Stock Osnershop Plans I.303 26.690 Dwdend Reinvestment and Stock Purchase Plan 4.995 I03,I53 Redemptions (3.208) (508) (50.8IO) Balance. December 3I I987 I9v.877 2.995.239 4.579 387.070 9.6I 6 96I.6IB Net income 565,950 Cash Dividends Declared Preferred 5tock (at specIfied annual rates) (97,463) Common Stock ($2.20 per share) (444,063) Expenses of Capital Stock issues (1,63l) Issuance of Stock Pubhc Sales 2,000 37,435 500 50,000 Employee Stock Ownership Plans 609 II,478 Dividend Reinvestment and Stock Purchase Plan 7,IO3 I33,432 $40 (211) (2l,068) Redemptions Balance, December 31, l988 206,589 $3,l 77,584 $5,Il9 $409,863 9,905 $990,550 See notes to financial statements
Notes to Financial Statements Philadelphia I. Significant Accounting Policies recoverable through adjustments ofrates charged to its Electric Company customers. and Subsidiary General ComPenI** All ultitty subsidtary companoes of Ph>Iadelphra Electric Income Taxes Company ore wholly owned and are included on the Deferred oncame taxes are provuded for differences between consohdated finanaal statements Non-utshty subsiduanes are book and taxable encome to the extent permitted for rate-not matenal and are accounted for on the equoty method. malung purposes In addition, the effects of the Alternatwe Accountung pohcies are on accordance with those prescrJ>cd Monsmum Tax (AMT) are normahied Investment tax credits. by the regulatory authorities having junsdoction. pnnapally other than credits resultsng from contnbuttons to employee the Federal Energy Regulatory Commiss,on (FERC) and the stock ownership plans which do not ofect uncome. are Pennsylvania Pubhc Util:ty Commisston (PUC) deferred and amortized to uncome over the estimated useful Itfe of the rclatec' utihty plant. Investment tax credits related Revenues to property not encluded on rate base are accounted for on Revenues are generally recorded on the accounts upon bdhng the flow-through method (see note IO) to the customer Rate increases are balled fr om dates authonzed or permitted to become eXectwe by the Allowance for Funds Usea During Construction (AFUDC) regulatory authontres AFUDC os a non cash stem whnch us defined on the Un> form Pursuant to a rate phase an plan approved by the 5ystem of Accounts as "the net cost for the penod of PUC un its electric rate order of June 27. I986. the Company construction of borrowed funds used for construction is recording revenue equal to the full amount of the rate purposes and a reasonable rate on ather funds when so used" oncrease approved, based on kilowatthours buled to AFUDC is recorded as a charge to Construction Abrk In customers Unrecovacd Revenue is classified as a current or Progress. and the equsvalent credits are to ' Interest Charges" other asset in the accompanying balance sheets according to for the pretax cost of borrowed funds and to "Other Income whether et wull be billed to customers within the next year or and Deductions" for the remannder as the allowance for other in subsequent years ( z note 3) funds The rate used(br caprtahzong AFUDC. winch averaged 9 SVc on I988 and I987 and 9 55% on I986. Is computed fuel Adjustment Clauses under a method prescnbed by the regulatory authontues The The Company's retail electnc servtce providedin Pennsylvania rate is a " net af ter-tax rate"and the current encome tax is subject to a fuct adjustment clause designed to recover or reductions apphcable to the nnterest charges capaahzed are refund 80% of the d,fferences between the actual costs of fuel. recorded on "Other income and Deductions? In addttion. the energv interchange and purchased power and the amount of PUC <s permating the Company to record a carryong charge such costs bulled to customers The gas service has a equtvalent to AFUDC on 50% of bmenck common plant purchased gas adjustment clause designed to recover or which us deemed assooated wah Unit No 2 and the refund the dqferences bet +een the actual costs of gas sold equivalent credas are to Copstahzed' mench Costs AFUDC u and the amount cf such costs uncluded nn rates D 9erences and carryong charges on 5(N ofLamench common plant ar e 9 between the amounts bdied to customers and the costs not oncluded in taxable oncome and the depreoatron of recoverable are d=ferred and coHected or refunded an future capitahzed AFUDC and the amortaatoon of carrying charges penods by means of promectwe adjustments to rates or e not tax deductibic Under the Tax Reform Act ofI986. Generally such rates are adjusted annua!!y (see note 2) AFUDC and carryong charges are consadered tax preference items when computing the Company's AMT. Nuclear Fuel Nuclear fuelis capachzed and charged to fuel c xpense on the Gas Exploration and Developmentjoint Ventures unit of production method Estimated costs of nuclear fuel The Company has onvestedin severaljoint ventures for dosposal are charged to fuel expense as the related fuelis explanng and dolhng for natural gas Costs are capaahzed consumcd under the full cost method and charged to operations commensurate with production Depreciation and Decommissioning For finonaal reporting purposes, depreaction is prowded Garns and Losses on Reacquired Debt over the estimated servrce hves of the plan' on the straught Ga:ns and loves on rcacquired debt are deferred and hne method and for tax purposc% generally over shorter hves amor tszed to interest expense over the penads permitted for on accelerated methods Annua! depreccion provtsions. rete rnahng purposes expressed as a percent of average depreaable utthty plant on servoce. were approximately 2 87% on 1988. 2 84 b in 1987
2. Shutdown of Peach Bottom Station and 2 95h in 1986 On March 3I, !987. a Nuclear Regulatory Comm:ss\\on The estimated Company ownership, arvon of the (NRC) order required the Company to shut down the Peach nuclear-related costs for decommrssicning as t,proicd for Sattom Atomc Fbser Stavan (Peach Bonom) located on nrk rate-mahng purposes totals approximately $2c ' Bol.000 as Coumy. Pennsylvania. and consatong of two nuclear of December 3I.1988 This cost os bcong charged generoung unas Thesc unns were placed onto commeroa!
operations as permated for rate-making purposes The operavon on I974 and are jornt!y owned by the Company. amounts charged are deposited in escrow and trust accounts 42 49% Pubhc Serw e Dettnc and Gas Company. 42 49% andinvested for funding of future costs Ihe Cornpany Atlanta Cay Decinc Company. 7 SI V andDelmarva beheves that any nncrease un the estsmated costs would be Power and bght Company 7 5R Under the ownershep
q . N o t 'e s 't' o' f I n a n c ) ai S t a t e m e n t s.--Continued thirty'..
~~thirty-one -~~
9hitadelphia agreement, the Company, as operator of Mch Bottom, is the inattention ofreactor operators at Mch Bottom. The y' . Electric Company. . reimbursed by the other owners for costs incurred in the - NRC also proposed fines. ranging from $500 to $l.000, -

df4 L operation of the facihtyin the same proportion as their against 33 present or former reactor operators at Peach respective ownership interests. At December 3I, I988, the Bottom for sleeping and/or other acts ofinattention to duty,
Company's net investme nt in Peach Bottom was $449 S that occurred at Peach Bottom. The $I.250.000 (me was paid .million (see note 5). on September 30, I988. The Company charged to expense replacemerit The Company expects its scheduled readiness for power costs of $6l milhon and $58 mollion in I988 and I987, restart ofunrt No. 2 to be the second quarter ofl989. and ~ respectively. caused by the NRC's shutdown order. The scheduled readiness for restart of Unst No. 3 to be the third Company does not believe that its' investment in the Peach quarter of l989. The Peach Bottom units cannot be restarted Bottom Unns has been impaired as a result of this shutdown. without the required app ~ ovals. which the Company has no assurance rt will recewe. The Company cannot predict when NRCActions the NRC will permit the Company to restart Peach Bottom. - On August 7, I987, th' e Company submutted its Peach Bottom Commstment to Excellence Action Plan (Plan) on response to.INPO . the NRCk requirement that, prior to being permitted to OnJanuary i2, I988, the Chairman of the Nuclear. ' restart either unit at Mch Bottom, the Company provide to Committee of the Board of Dorectors received a letter from the Administrator of Regen I for hos approval a detailed. the President of the Institute of Nuclear Power Operations comprehensive plan and schedule to assure that the facihty (INPO). an independent Industry organization which reviews will safely operate and comp!y wuth all requirements. the operations of utihties wuth nuclear plants. on the subject includsng staten procedures. At a meeting held on September of accountabnhty for hoch Bottom problems. The INPO letter 14, l987, the NRC Commossooners expressed their recapped "some of the history that led to and that continues ' dtssatosfaction wuth the Plan as submitted. undicating. among to contribute to serious performance problems at Peach other concerns. their disagreement wrth the Plank emphasis Bottom. and within the Philadelphia Electric Corporate on solutions to problems related to the plant and its organization The letter was hnghly cntical of senior "y personnel without adequate emphasis on solutions to management with respect to its effectiveness in preventing ' i problems related to corporate management responsibihty and resolvsng Peach Bottom problems and the locL of On November b 8 and I9. I987, the Company fled adequate corporate accountabihty The letter recommended wrth the NRC apphcotons to amend its nuclear facihty (I) the development of a full report of an investigation operating hcenses (License Amendments) to refect proposed completed by the Compmy on Peach Bottom control room ) reorganizational changes, including on-stte changes. On operator behavior. (2) e nodfcation of the Company's November 2L I987, the Company submitted to the NRC the Peach Bottom restatt plan so as to msnimize the number of Corporate Action Section (Section I) ofits Plan for Restart of meawres planned to strengthen assessment of nuclear Ptach Bottom Atomic Power Station (Plan for Restart) station performance independent of kne management and detathng its nuclear reorganization On December 24.1987, (3) major changes in the uorporate culture, the acquisition of the NRC notfed the Company that. based upon ots "sufFcuent outside talent to properly upgrade the PECO prelirmnary revnew of the Company's Plan for Restart and a nuclear situation"and corporate accountabihty for "the Temporary Wawer of Comphance. the Company should unsatisfactory situatuon that has been allowed to develop over proceed with implementing the Plan for Restari The lette a period of years" The Company has taken a number of stated that the NRC's conclusions regarding the Plan (nr actions in response to these recommendations. Restart were prehminary until the NRC had assessed the effectiveness of the revised corporate structure and had Commonwealth of Pennsylvania completedacten on the Company's proposed License OnJanuar y 22, I988. the Commonwealth of Pennsylvania filed Amendments Section II of the Plan for Restart. which covers wuth the NRC a petiten to intervene and requested a hearing responses to issues and root causes specfc to the plant site, in the Peach Bottom License Amendment proceedong was subm;tted on February I2. I988, and a revision of the regarding the Company 5 applications to amendits nuclear l Plan for Restart was submitted on April 8, I988. operating hcenses' technucal spec $cc1 tons to reflect ses On October I9.1988, the NRC issued its Safety proposed nuclear reorganization, including on-site changes. Evoluotoon Report documenting the NRC's acceptance On April I, I988, the NRC issued on order referring of the Company's Plan for Restart. The NRC concluded that Pennsylvania's petitoon to an Atomic Safety and Licensing the Plan for Restart. as t evised, meets the reqourements of the Board (Licensung Board) to consider whether it should be NRC's shutdown order on that it adequately characterizes the granted OnJune 22. I988. wnth the petition for intervention picblems leading to the shutdown and that the Company 5 and hearung stull pencling, the NRC issued the Company \\ actsons or plans are appropnote to address the root causes requested amendment to the nuclear operating hcenses' identfed by the Company in its Plan for Restart. The NRC technical specifications. wuth any heartng to be held after such will continue to monitor the effectiveness of the ussuance On August 2l, !988, the Commonwealth fled with implementation by the Company of the Plan for Restart the United States Court of Appeals for the Third Circuit a l. On August 10. I988, the NRC issued a Notice of petition for revoew of the NRC's ussuance of the Lucense Voolatnon and proposed impositwn of Civul Penalties to the Amendments The Company and the Commonwealth have Company proposing a fine of $I.250.000 against the been conductsng negotiations toward settlement of restart Company for failing to detect, report and dea; with issues raised by the Commonwealth on the Licensung Board snattenture reactor operrnors and supervisors who condoned and Court of Appeals htigatwn. both of which remoun pending
On February 23, I988, the PUC entered on order tv
3. Limerick Generating Station reduce electric revenue through the imposttson of temporory rates which tefect the denialof a rcturn on common equity General onvestment sn Peach Bottom. effective March I. I988 The Tbe Company's Limenck Unst No I commenced commercoal Company entered a settlement with iespect to the denial of a operation on February I, l986. Construction of Unit No 2 return on common equity investment on Peach Bottom under resumed on February I986. followung a suspensson of whsch temporary rates would be extended for an addetoonal approximately two years whrch was or dered by the PUC. Unit 6-month penod endung February 28, I 989 and the Company No 2 rs scheduled to be completedin I990. At Decernber 3l, would be permitted to remove the negative surcharge on one I988. Unit No. 2 was approximately 98 percent complete day' nottce when one unit at frach Bottom has operated for based on estimated man. hours needed to complete the Unit.
s 100 continuous hours at 95% of the unot's rated capacety The NRC approval us necessary for startup of Unit N12. As of Company has announced that its scheduled readiness for December 3I. I988. the Company had unvested restart ofPeach Bottom Unit No. 2 has been extended unto apprommately $5.83 b,Ilron in the Limenck Generating the second quarter ofI989. The projected restart schedule Stanon. consistung of $2 25 b,Ihon on Un<t No I. $2.26 bilhon will prevent the operation of one unit at Peach Bottum for un Unit No. 2 and $I.32 btilion un common facilities I l 100 continuous hours at 95% of that unst's capactty poor to OnJune 27. I986, en connection with the Company's 1 February 28. I989. with the result that the temporary rates fihng to recover the costs assacrated with Limenck Unot No I, wdl become permanent on February 28, I999 The Company the PUC approved an increase nn electnc rates of intends to tolse the necessary actaan to prevent these rates approximately $35I melhon annually. and authonzed a rate of from becoming permanent However. there con be no return on common equity of I& 75k The uncrease es berng assurance that the Company's actions wdl be successful phased on over three years on equal steps. followed by o three-year recovery penod, without unterest. of amounts Co-Owners Lawsuits recoverable under the phasenn plan In accordance wuth its Onjuly 27, I988. Pubhc Servoce Enterpase Group prior practice. the PUC excluded 50% of common plant from incorporated and its substd,ar y Pubbc Serv >ce Electnc and rate base. but permitted continued accrual of an amount Gas Company (PSE&G) filed on acton against the Company equivalent to AFUDC on the excluded SW Accordingly, the on the United States Dustnct Court for the Distnct ofNew Company is capitahzong a carryung charge equrvalent to Jersey concerning the shutdown ofPeach Bottom ordered by AFUDC on this investment, classified as Deferred Limenck the NRC on the same dare. Atlantoc Caty Electnc Company Costs un the accompanying balance sheets. The increase also (Atlantic Electnc) and Delmarva (bwer and Light Company reflects an exclusson from the Company \\ rate base cf $368 9 (Hed a simdar sunt against the Company with the same court mdhon. whah the Company recognaed no I986 as a loss for The two sorts allege that the Company breached the Osners accountong purposes. due to attegedly umprudent construction Agreement (the Owners' Agrcement) pursuant to whwh the delays in I976 and I978 The Company bebeves that the four companies own Peach Bottom and under which the $368 9 mdhon disallowed by the PUC was a prudent Company operates Peach Bottom The two suits clarm that investment and appealed the PUC's decisoon to the the Company has breached two provusions of the Owners' Commonwealth Court of Pennsylvania On March 31. I988. Agreement These suits also vanously cHege negirgence, gross the Commonwealth Court reversed the PUC's dectsron and neghgence, fadure to disclose. fraudulent misrepresentation remanded the case for fur ther heonng The PUC has and neghgent misrepresentation Netther of the compkunts appealed the Commonwealth Court's decisuon to the spec;fies any dollar amounts of damages The plannoffs seek Pennsylvania Su >reme Court. compensation for certain replacement power costs they have On December 23. I9b'5. follow no > PUC unvestigaten. oncurred os a resul of the shutdown of Peach Bottom the Company fded its response with tac PUC acceptong the t Additionally, the complaints chege that the to owners have conditons of the cost containment and operatung incentive been deprived of the benefits of therr Peach Bottom ownershep plans set forth on the PUC's December 5. I985 order. whsch unterests and Investments. that they have made payments to concluded that the Company could complete the construction the Company for capital and operating and maintenance of Lamenck Unit No 2 condmoned upon the acceptance by costs for which they have receved no benefit, and that they the Company of such cost containment and operating have encurred increased costs idlost profts PSE&Gand incentwe plans. nncluding a manimum net rate base allowance Atlantic Electnc farther allege that they have been reauired fx Unit No 2 (exclusive of common plant) of a pruacnt by the NewJersey Board of Pubhc Utihtres to provrde thew investment of $3 I97 b>Ihon customers with a credit because af the Peach Bottom shutdown Both complaints onclude claims for punrtive Recovery of Costs Pendmg Regulatory Proceedings damages On October 2I. I988. the Company fHed motions In accordance wuth the Declaratory Order nsued by the PUC seckung damnsalof the tort claims in both actions The on September 28. I98+ the Company deferred an operating Company fded ansacrs to the complaints with respect to the costs. carryong charges an snvestment. fact savungs and breach of contract claims onJanuary I3. I989 If the htigation associated uncome tan effects of Lamenck Unst No I and 5% ss ultrmate!y determoned adversely to the Company. such ofcomman plant from Febrvary I. I986, the date of adverse determination could have a matenal aserse effect commercral ope'atron untd the plant was uncluded un rates on on the Company's financial condition June 27,1986 The rec overy of these costs. which is not assured. well be addressed by the PUC on a subsequent electnc rate case The Company has deferted a totalof $I37 2 m>Ihan in accordanc e with the Declara'ory Order. as
Notes to FinancIaI S t a t e m e n t s -Cont >nued thirty-two thirty-three FhUadelphia part ofDeferred Lamenck Costs. protracted permit proceedings and related appeals, some of tiectrk company If the Ccmpary estimates the totalcost to complete whsch remoon pending and sut>sidiari Una No. 2, uncluding AFUDC, would exceed the $3 I97 bilhon The avaolabiirty ofcoohng water from the System os Companies cap. On immediate charge to expense would be recogni:ed contingent upon completion ofconstruction of the several for the excess The Company estimates the cost ofLimench components; the successful completion by the Company of Unst No. 2 well not exceed the $3 I97 billrun cap Ofcourse, condemnation proceedings to acquire flowage rnghts over completion of Limerick Unit No 2 withsn the cost cap is some four hundred rnpanon properties along the East Branch dependent upon receiving the necessory permits and bcenses of the Perksomen Creek (East Branch). or the purchase of on a t1mely basis. Recovery of amounts expended for such flowage nghts. the successful appeal by the Company of construction of Lamenck Unit No. 2 and Deferred Lumenck National Pollutant Discharge Ehmination System (NPDES) Costs well be subject to the PUC's determination that such permrt effluent condoons imposed by the Pennsylvania costs were prudently incurred Currentiy the PVC has an Department of Environmental Resources (DER) on the independent party conducting on audit of the Limenck Unit discharge of System water imo the East Branch; and the No 2 construction costs. If the PVC disallows the recovery of c@rmance on pendung appeals, and possibb prther appeals, certh costs from customers, an immed: ate charge to of vanous other DER permst-related actions which have been expense would be requored. challenged by sntervenors The unfavorable disposason of the condemnation proceedings, the NPDES appeal, and other Excess capacity Standards pending appeals would prevent the use of the System as OnJuly 10. I986, the Governor ofPennsylvansa signed unto lauv presently designed and approved legosbtron amending numerous provtsions of the Pennsylvania Pendung availabshty of the System, Limerick Una No. I Pubhc utshty Code One provision, the legrslotton whuch has been operating since 198S ussng. dunng the cntical afects rate iegulation imposes standards on the PUC on months,intenm sources of supplementalcoolung water determining whether new generatsng caoacety ss excess approved by the Delaware River Basin Commission (DRBC) capocay This pr ovision requtres a disallowance from rates of on an annual basis. The last DRBC approvals were efective any portion of ccpacity whrch is determoned to be excess through December 31, l988, and the Company has submitted capacay The provisions relating to excess capocay are to the DRBC requests for such approvals for 1989 amended opphcable to rate cases "pending before the Commission' to incrude requests to approve such intenm sources for both Ihe PUC held that the legislation d?d not apply to the Lnmenck units in antrcopation of the Lumenck Una No 2 Limenck Una No I rate case. Further more, the PVC held scheduled fuelload:ng and power ascension in I989. Since the that, even of the legislation did apply. Lumenck Una No I did approval of such modified requests for intenm sources may not constotute excess capacity under the standards smposed not provode a sufficuent supply of ontenm supplemental by the legislat>on. OnJuly 28. I986. Petitsons for Review of the coolong water for Limenck Unit No 2. the Company plans to PUC'sjune 27. l986 electnc rate order were filed wrth the submit to the DRBC requests for the approval of new intenm Commonwealth Court by the Company appeahng the sources for Limenck Una No 2 for I989. Among the Intenm excluston of $368 9 milhon from rate base and by the Offce of sources requured to meet the needs of both Lumenck units are Consumer Advocate (OCA) and a group of the Company s munscopal reservost s. for which contracts must be negatoated commerctal and small industnal customers on the issue of with two municipahtnes Such contracts are subject to possible excess capacay and on varrous rate desrgn and cost of service PUC proceedings ussues On March 3l.1988. the Commonwealth Court ossued Should the System for any reason not become an order alfrming the PUC on excess capocay and oil other operational, the operatton of the Limenck untts danng the nssues. and remanded the construcnon delay issue to the PUC cnocal months wull depend upon the successful development, for farther beanng and adjudication On May 2. I988. the hcensing and construction of a modsfied supplemental coohng PUC and the OCA appealed the Commonwealth Court water system and the continued successfal acquisttron and dectsron to the Suprerne Court Thus excess capacay law wsil approval of snteam sources as discussed above pending the be opphcable to Lamenck Una No 2, which, of found to be ovadabshty of the modfed system There n no assurance that excess capacity upon becoming operational. could result on a the Company will be successfulin these efforts. partral or complete disallowance from rates of the appbcable plant cost L Retirement Benefits The Company and its subsidianes have non-conti butory Supplemental Cooling Water trusteed retuement plans apphcable to all regular employees Because of perma and regulatory conditions wh<cn restoct The benefits are based pnmanly upon employees' years of the usc of the wrmai source of coohng water, r supply of servsce and overage earnongs priar to returement. The supplemental coohng water is needed to avwd the hmaatson Compun{s fundung pohcy es to contnbute at a mnnsmum, or cessation of operation of the Lumenck units dunng certann amounts sufficient to meet ERISA requirements. months of the year The number of cntscalmonths, which may Approximately 55% of pension costs were ctwged to be as many as six, will vary from year to year deper ding upon operations and the remainder. associated wrth construction stream flows and related condit\\ons The consw uon of labor. to the cost of new utshty plant vanous components of a piar vd supplements! coohng water InJanuar y I987. the Company adopted Statement of system (System) which sncludes pumpung stations. a Tonancnal Anounting Stancards No 87 (SFA5 87). reservoir and transmussuon mains and utthres txtstang " Employees Accountsng for Pensions" Pension cost for poor streams, os neonng completrcn cespae substantial opposnian years was not restated f om vanous groups, construct >on stoppages. htigatsun Pension cast was $7.10I.000 nn l988. 529.458.000 nn
I987 and $42,500,000 in I986 Pension costs for I988 and to 7% ct December 31, I987. 1987 rncluded the following components Poor service cost is amorttzed on a straight-luv basis (Thousands) over the average remasning servsce penod of employeu I900 I907 expected to receive benef ts under the plan. Servnce cost - Benefits earned The funded status of the plan at December 3I, I988 danng the penod $ 24,073 $ 26.970 and I987 ts summonzed as follows: Interest cost on projected benefit obhgavons 85,779 80.588 (7housands) I900 I90I At taal retur n on plan assets (l34,647) (4I.929) Amortaavan of transubon asset ( 4,539) ( 4 539) Actuanal present value of Amortaation and deferral 36,435 (3I.632) accumulated plan benefit of bgouans Net penstan cost $ 7,l01 $ 29.458 Wsted benefit obhgation $ (138,76l) $(641.713) Accumulated benelit abhcavon (741,751) (650.l46) Projected l'enefit obbgavon for Change in Net Periodic Pension Cost serv,ce,renserenga dore $(g,ogs,13s; $(1,o44 sgy; The change in net periodic pension cost on I988 and I987 is Plan assets at foor value I,f 63,848 I.056.358 accounted for as follows: Funded 5tatus ll6,417 Il.746 (7housands) Unrecognaed transition asset ( 76,554) ( 89.092) I988 I987 Unrecognacd pnor servnce costs III,715 I I S.276 (a) change un number. charactenstucs Unrecognaed net garn $ I5I,578 $ 45.930 and salary levels of parocrpants Pr epand pensvon costs $ $ and net actuartal gam $16,l89 $ t I.492) (b) change on plan provsssons 375 2.873 (c) net change pnor to 5FAS 87 I6,564 I,38I In additoon to pronding pensson benefits, the (d) changes to comply wrth 5FAS 87 (24.972) Company provodes certarn health care and hfe Insurance (e) changes due to mud year plan benefits for retired empIOyees Substantially allof the amendment (38,928) 10.549 pg g g if) net change (c) + (d) + (e) $(22,357) $(13 042) if they reach rettrement agc while stsll working for the Company These benef ts and sim>Ior benef ts for acove Plan assets consist poncopally of common stock, U S employees are provided by an unsurance company whose government obbganons and cther fixed uncome instruments. premiums are based on the benefits paid dunng the year The in determining pensson cost fur I988 and 1987. the assumed Company recognizes the cost of prowdrog these benefits by long-term rate ofreturn on assets was B 5% and 7 5%. charg>ng the annual onsurance premrums to expense The respcctsvely cost of provrding those benef:ts for approximately 4.000 The wcughted<werage discount rate used on returees dunng the years I988, I987 and I986 os not determining the actuanal present value of the projected separable from the cost of proved,ng benefits for benef t obbgavon was 8 75% at December 3I, I988 and approximately II.500 active empInyces far the same penod I987 The rate of mcrcase un future compensation levels Total premiums amounted to $38 8 m>Ihon. $30 0 milhon and ranged from 5% to 7% at December 31. I988 and 6% $3l 6 mdhon far I988. I987 and 1986. respectively
5. Jointly Owned Electric Utility Plant The Company's ownership unterests in jointly owned ut\\hty plant at December 3I.1988 were as follows Production Plants Transmiss on Plant Peach Bottom Salem hvstane Conemogh Operatar Phnadetphra PubbcSerm e Penn@ama Penns ylvama Vanous Electuc Electnc and Elecinc Electnc Companies Company Gas Co opunt Company Company Ptirt capanng Interest 42493 42 59%
20 99h 20 72h 2I% to 43% Company's share of (7housanas cf Daars) Uvhty Plant $ 583.043 $ 968.196 $72.347 $ 74.4 74 $ 73.410 Accumulated Depreciation I t 2.97 I 227.404 28.525 29.335 IB.623 Constructnan h%rk In Progress 29 458 22.I00 2.74l 4,I95 6I The Company's partic poong inter cuts or c (;nanc ed with Company funds and when placed un servscc. all operavans are accounted for as rfsuch par tscopaung interests are wholly owned fxibucs
~~6. Common Stock 206.589.023 and l96.876 848 shares. remecovely.~~
At Decnmber 31. I988 cod I987. Common Stod without par outstandmg At Decemt er 3l.1988. there were 5.810.383 value consisted of 240,000 000 shares authonzed and sharcu reserved for tssunnce under stock purchase plans
Notes to FinanciaI 5 t a t e m e n t s -Continued thirty four therty five Phuadelphia
~~1. Preferred Stock vectric company At December 31. I988, and I987 Prefened Stuck $100 par. cumulatne. consisted ofI5.000,000 shares authorized.~~
and 5ubsidiary $ hares Amount Companies Current Refundmg Outstanding Redemptron Restncted Prrcc (a) Pruor to (b) I988 I987 I988 I987 (Thousands o[ Dollars) Senes (wsthout mandatory redemption) 14 l5% (c) $ l I415 2 I-90 500,000 500.000 $ 50,000 $ 50.000 l3 35% (c) II3 35 2-I-89 150,000 750.000 15,000 75.000 12 80% (e) I08 50 150,000 750.000 75,000 75.000 IO 75Me) (e) (e) 500,000 50,000 9 50% I03.50 750,000 750&GO 15,000 75.000 8.75% lol 00 650,000 650.000 65,000 65.000 7.85% 10l 00 500,000 500.000 50,000 50.000 7 80% IOl 00 750,000 750.000 75,000 75.000 7.75 % I OI.00 200,000 200 000 20,000 20.000 4 68% 604 00 150,000 l50,000 15,000 15.000 44% II2 50 274,720 274.720 27,472 27.472 43% IO2 00 I50,000 l50.000 I5,000 I5.000 38% I06 00 300,000 300.000 30,000 30.000 6,214,720 5.724.720 622,472 572.472 Series (with mandatory redempticn) (d) I5 25 % IIO 00 5-l-90 350,000 400.000 35,000 40.000 I4 625 % (f) {f1 500,000 500.000 50,000 50.000 l0% IOI II 5-I-90 88,000 I32.000 8,800 I3.200 9 875 hi I09 88 8 I-92 650,000 650.000 65,000 65.000 9 52% IO3 00 287,l80 332.557 28,718 33.256 9h0% I986 5enes 109.50 l l-I-91 750,000 750.000 75,000 75.000 8 754 I978 Senes I03 60 333,500 366.800 33,350 36,680 7.325% 102 93 450,000 480.000 45,000 48.000 7% IOI 00 272,I00 280.100 27.2I0 28.0l0 3,680,780 3.891.457 $368,078 $389.l46 Total Preferred Stock 9,905,500 9.6 I6. I 77 $990,550 $96I.6I8 (a) Redeemable, at the optron of the Company. at the cather a long term penod(l lO years) or a short term penod endscated dollar amounts per share, plus accrued dwudends (49 days). wnll be established by an auction held on the (b) Poor to the date specfed, none of the shares of each busmess day next preceding the begsnning of each such senes endicated may be redeemed through refund <ng at an penod The ossue is redeemable dunng any long-term penod nr;terest cost or dnndend rate which us less then the dwoaend only on the last day of the penod or following an unsuccessful rate of such senes auction. on an cggregate number shoch constitutes anc or (c) Ownership of these senes of preferred stock ts evidenced more untts (l.000 shares), at a poce of $IO0 per share. plus by depositary rece: pts, each representing I/10 of a share of accrued and unpard dwudends to the redemptron date on the preferred stock shares redeemed On any dwidend payment date with (d) Senhng fund requirements (par value) nn the penod rcspect to a short. toenod. units are redeemable, on l9b9-1993 are as follows l989 $15 910.000. wholc or on part. at the ption of the Company at a pnce cf l t990 $26.030.000. I99I-$2I.630.000. I992-$25.380.000. $I00.000 per unit plus an amount equal to accrued and 1 1993-538.380.000. unpard dwudends ta the cate of redemption (e) 7he dmdend rate through Apnl 30 I993 wullbe 10 75 m (f) Not redeemable poor to May I. I990 per annum. and the rate for each subsequent dw&nd penod.
~~8. Long-Term Debt At December 31 Senes Due 1988 1967 (Thousands of Dollars) brst and Refundong Mortgage Bonds (a) 3%% I4%~~
I988 $ 52.500 5%I4% 1989 $ 62,500 62.500 l I4h 1990 II,000 II.000 I4% 1991 II,000 II.000 I3%%I4% I992 II,000 I36.000 6%%I4% 1993 71,000 7I.000 4 n%I5 n% 1994-1998 I,042,l34 902.553 7k%II%% 1999-2003 524,220 526.889 6%I21% 2004-2008 488,500 588.500 l3%% 2003 20I3 107,962 7.962 8!a%I2%% 20l4-2018 1,295,000 I. I 95.000 TotalFirst and Refandong Mortgage Bonds 3,624,3I6 3.564.904 Notes Payable - Banks (b) l991 I993 405,000 225.000 Revolvang Credit and Term Loan Agrcements (c) 1999-l995 300,000 ISO.000 Fbilutoon Control Notes 5 n%I3% I997-20l3 269,6I$ 269.620 Debentures I4 Hn% I990 50.000 Ocbentures 985%I44% I993 20II 706,850 706.850 Sonking Fund Debentures - Philadelphia Electnc Power Company. a Subsid,ary 4u% I995 I3,67i I4.580 Unamortized Debt Drscount and Premium, Net _ 29,706) (29.332) ( Total Long-Term Debt 5,289,746 4.95I.622 Due Within One Year (d) 70,235 80.889 Long-Term Debt included in capitalization (e) $5,2I9,$ll $4.870.733 (a) Utthty Plant is subject to the ben of the Company's on the unused amount At December 31.1988. $300 m:Ihun mortgage. was outstano:ng under thus agreement (b) At various nnterest rates The Company also has a $400 molhon revolvong credit and (c) The Company has a $'00 m<lhon revolving credet and term loan agreement woth a group of banks which expores on term loan agreement wuth a group ofbanks which is designed I992 Ihere is an annual commitment fee of be% on the to provude the financong for the construction program. unused amount At December 3I. I988. no amount was nnckxling completion oflumenck Unit No 2. and general outstanding under this agreement. corporate purposes The revolving credit arrangement (d) Long term debt matuntnes in the pernod l990-1993 are as converts snto a term loan on November l992 The borrowings follows: 1990 $26.960,000.199I-127.850.000, are due on sex semr-annual installments with the first payment I992-$181.913.000. l993-$4 72.348.000 due 6 months after the conversson snto the term loan. Interest (e) The annualszed unterest on long-term debt ut December on outstanding borrnwings is based on specific farmulas 3I. I988. was $53I 6 mulhon of which $355 0 milhon was selected by the Company unvolving yuelas on severnt types of assooated with mortgage bonds and $I76 6 melhon was debt instruments. There us an annual commitment fee of 3% associated with other long term debt. 9.Short TermDebt I988 I967 I986 (Thousands of Donars) Average Short-Term Borrowungs $II4,I64 $ 30.937 $ 233 Average Interest Rates. Computed on Daily Basis 8.l8% 7 74'o 95l% Maximum 5hort. Term Borrowings Outstandrog $216,000 $205.000 $l.000 AverageInterest Rates on Short. Term Bank Loans at December 31 7 98 % At December 3I. I988. the Company had no stnri ter m debt outstand >ng under furmal and unfarmal hnes of credit with banks aggreganng opproxomately $ 3IO mIhon The Cornpany generally does not have formal compensating txnance arrangements wsth these banks
Note to Finoncial S t a t e m e n t s - continued thirty-six thirty seven Philadelphia
~~10. Income Taxes (Continuing Operations)~~
I988 I987 I986 Electric company and 5ubsidiary (Mousands of Dallars) Companies Federal Currect $ 57,484 $ 74.l85 $ll4.496 Deferred I32,742 I86.390 II0.178 Investment Tax Credits. Net (9,291) (16.960) 29.04I 5 tate Current 22,982 9,386 30.I34 Deferred 2,857 II.939 506 included in Other income and Deductions: Federal Current 16,578 l.845 (10l.566) Deferred (48,732) (27.730) (l21.303) (20.400) lovestment Tax Credits. Net State Current (l0,602) (10.650) (l9.057) Deferred (718) 1.2ll (l7.383) Total $l63,307 $229.6lb $ 4.646 Investment tax credits (lTC) and uncome tax cred,ts resulong on AMT rnxable income which oncluaes certain preferences from contnbuttons to employee stock ownershup plans and adjust...ents. The Company's I988 and l987 current tax reduced Federal uncome taxes currently payable by $23 Irabn!,ty was determined under the AMT method resulung nn a m Ihon un I988, $20 molhon un I987 and $43 milhon on I986. tax credot of $II3 mnIhon which can be utihzed on future years Under the Tax Refor m Act of I986. ITC has been repcoled when regular tax habuhty exceeds AMT habihty. efectiveJanuary I, !986 with the exceptson of transtoon for a number of years the Company has used property Ihe Company bcIneves that Limenck Unnt No 2 accelerated depreciation for nncome tax purposes and quahfies as transitron property chgibic for ITC. straughtsne depreciation for financial reportung purposes. Approximately $ 130 molhon of additional business Deferred taxes were recosded on!y on those tomnng credits generated f~ l983 through I988 have not been d;Werences recognized for rate-making The cumulatwe net utshied due to kmrtusons based on taxable uncome, These amount of such timung diferences for which deferred taxes cred ts. which expire between I998 and 2003. may be used to were not recorded was approximately $393 msthon at reduce f ederat income taxes on future years. December 3I. I988 5:nce the Company expects to charge The Tax Reform Act of I986 created n.w customers for taxes when the timang diferences reverse. the Alternative Minnmum Tax ( AMT). calculated at a 20% rate tax efect of such timing d;Werences ns not reco ud currently Provisions for deferred uncome taxes on continurng operations consist of the tax effects of the follownng timing dtWerences: 1988 1987 1986 (Thousands of Dollars) Depreciation and Amortizat on $72,966 $ 93.075 $I27,278 Deferred Energy Costs I7,332 45.566 (95.383) Precommercsal Operavan of Limenck Unst No I 10,2 IO l Deferred Lumenck Costs I I.004 Net Loss on Reacquired Deb: (l,874) I6.668 I4.305 Unrecovered Revenue 23,415 77,583 55.040 Alterncove Minsmurn Tax (29,716) (82.963) EWects of SFAS 90 and 5FAS 92 25,087 23.533 (I6I.42I) Garn on Sale of MernI! Creek Reservoor (l9,899) Other II,805) (l.652) 10.965 Total $86,156 $ l 7I.Bl0 $(28.002)
The totalincome tax provosions on continuing operations differ from amounts computed by applying the Federal stowary tax rate to income and adjusted income before uncome taxes for the followsng reasons: 1988 l987 l986 (Thousands of Du!Iars) Income From Continuing Operations $565,950 $540.606 $275.87I TotalIncome Tax Provistons 163,307 229,6I6 4.646 Income Before Income Taxes 129,257 770.222 280.5I7 Deduct: Allowance for Funds Used Durung Cxst uction 22I,071 169,383 178.438 Limeruck Carryong Charges 73,074 66.582 I72,926 Adjusted Income Before Income Taxes $435,8 I2 $534.257 $(70.847) Income Taxes on Above at Federal Statutory Rate of 34% in I988. 39 95% on i987 and 46% in I986 $l47,938 $2l3,436 $(32.590) l Increase (Decrease) due to Depreciation Taming D$erences Not Normalsied 5,493 23.920 I9,230 Effects of SFAS 90 and SFAS 92 5,993 (9.784) 27,870 Unbulled Revenue i2,903 I2,I37 State locome Taxes. Net of FederalIncome Tax Benefits 9,587 9,I5I 6.620 Amortization ofInvestment Tax Credits (lI,903) (l3.586) (I3.468) Other. Net (6,704) (5.658) (3.0I6) Totalincome tax provisions $l63,307 $229.616 $ 4.646 Provtston for Income Taxes as a Percent of Income Before Income Taxes 22.4% 298% I7% Adjusted income Before Income Taxes 37.5% 43 0% In December 1987, the Finanaal Accounting Standards the statement may be opphed cumulatively on the year of Board issued SFA5 96. "Accounung fcr Income 7 axes." which adoption or may be opphed oetroacttvely by restaung requires an asset ar,d liabihty apptxch for financial previously issued finanaal statements The Company is accounting and reportong for uncame taxes 7hc Company us continunng to evaluate the provisions of SFAS 96 and its required to adopt this statement vy 990 The provtsnons of effut on the Company's finonaal statements. Il. Taxes, Other Than income - Operating l988 1987 1986 (Tixnisands of Dollars) Gross Recerpts $I37,I72 $ I34.09I $I32.468 Capotal Stock 33,5I9 32,400 25,5II Realty 35,975 37,098 49,l10 Prtyroll 27,095 25,978 23.594 Other 3,839 5.I46 I,944 Total $237,600 $234.7I3 $232.627
~~12. Investments At Decemter 31 1988 I987 (Thousands of Dollars)~~
Gas Expioratuan and DevelopmentJornt Ventures $ II,657 $ 37,I58 Real Estate Developments and Other Ventures 23,54l I 9. I55 thn4)tchiy Property I7,550 II.525 Escrow Depossts for Decommiss*oning Nuclear Plants 43,677 31.52I Other Depassts I,355 I.575 Total $ 97,780 $ l00.934
Notes to Financial S t a t e m e n t s -Contonued thorty eight thirty-nine Philadelphia
~~13. Leases I988 I987 Esectric Company Leased property uncluded un Uuhty PWnt at December 3I and Sutvidiary (Thousands of Dollars)~~
CompaMes $502,796 $500,733 Nuclear Fuel 9,879 I0.452 Electric Plant 56 IIO Common Plant 512,131 5Il.295 Gross Leased Property (225,l93) (224.097) Accumulated Amortization $287,538 $287,I98 Net leased Property The nuclear fucI obligatron is amortezed as the fuelis operatong expenses onclude unterest on caputallease consumed Amortization ofleased property totaled 536 I obligations of $I5 4 milhon, $I4 0 milhon and $16 4 milhon in mdhon $49 7 mulhon, and $65 6 milhon for the years ended 1988. I987 and I986. respectively Monsmum future lease December 31. I988. I987 and I986, respectively Other payments as of December 3I,1988, are-Year Ending Decemkr 31 Caputalleases Operatung leases. Total (Thousands of Dollars) $ 99,347 $ 65.757 $ 165 l04 1989 102.603 65.491 168.094 l990 67.457 84.620 152.077 1991 4I.209 76,489 I I7.698 I992 3I.369 74.988 106.357 I993 10.678 743.788 754.466 Remaining years Total Minimum Future Lease Payments $352.663 $I,III,I33 $ I.463.796 ImputedInterest (rates ranging from 6 5% to I 7%) (65 I25) Present Value of Net Minimum future Lease Fbyments $287.538 Onjune 16.1988. the Company sold its 44 24l% interest in for as an operating lease and the gain on the sale is being the Merroll Creek Reservoor Project for $I45 3 mullson and amortized on a straight line bests over the life of the Icase entered into a leasing arrangement for a 44 241% ir.terest on Under this lease, total rental ex pense was $8 4 mnIhon in the project for an an,t al pernod of 44.5 years, wsth renewals I988 and a purchase option avanlable Dunng the lease term. the Rental ex pense under operating leases. Including the Company is responsble for sts share of the cost of operatung Mer> ill Creek project. totaled $64 2 milhon. $5I 4 milhon. ond and maintaining the reservoor. The lease is being accounted $54 0 miliuon on I988.1987 and 1986. respectively I988 I987 I986 I4. Segment Information (Thousands of Dollars) Electrnc Operations $ 2,850,315 $ 2.809.673 $ 2.699.365 Oparcting Revenues Operattng Expenses. exclud,ng depreciation I,913,725 1.895.ID4 l.96l,429 245,499 234.925 201,773 Depreciation $ 698,098 $ 679.644 $ 536.163 Operatung Income $ 827,620 $ 908.799 $ 753.232 Utility Plant Additions Gas Operations $ 378,397 $ 37I,791 $ 391,504 Opcrating Revenues Operating i.xpenses. ex cluding depr ecuatoon 308,301 3s,'.343 337.287 18,592 l7.009 15867 1 Depreciation SI,504 37.439 38.350 Operating incorne 46,II1 44.328 35.053 Utahty Plant Additsons Identifiable Assets (") $lo,012,922 $ 9,I78.435 $ 8.341.559 Electrrc Gas 500,205 449.986 416.824 NonaHocable Assets I,349,725 I.58 I.3 I 5 I.4II.937 Total Assets $ll,862,852 $ l l.209.736 $lo,l 70.320 ' Includes Utthey Plant less accumulated deprecratton, nnventor tes and alkxated common utility property 1
15. Commitments and Contingencies other undmdual present or former offcert directors and The Company has incurred substantial commitments in employees who had been named as defendants in the connection with uts construction program Construction lawsuits. ond dismissol of all clooms concerning the proxy expenditures are estsmated to be $l.I bullion for I989 and statement which has been distributed by the Company on
$2 0 billron for I990 l992 These estomates are reviewed and connectson wsth the I987 AnnualMeeting of Shareholders. revised periodsca!!y to reflect changes on economic conditions. Counsel for the plaintiff shareholders have subsequently revised load forecasts and &.:ppropriate factors. Tacihtoes consnhdated ite actions into one lawsust and amended their under construction and to be constructed. particularly complatnt to comport wuth the resolutions of the Board. Limenck Generating Station and assooated foohties. wd! Because ttn consohdated lawsuut which remains pending require permits and hcenses which the Company has no agarnst the two prmer offcers us brought denvatively by assurance willbe granted shareholders on xhalf of the Company. any monetary The Pnce-Anderson Act, as revssed August 22. I988. damages which may be recovered. net of expenses wdl be sets o "Limut ofLiabritty" of $ 7 I billion for claims that could paid to the Company artse from an ancident involvung any bcensed nuclear facilsty nn On September I2. I988. the PUC ossued a proposed policy the notson. AI! utshties wnth nuclear generating plants, statement with respect to recovery of pipchne take-or pay oncluding the Company. obtained coverage for these potentool costs bi!!cd by the i? mtate ptpehnes under FERC-opproved claims through a combination of pnvate unsurances ($I60 tonfis The pohcy stat, cnt proposes a preferred recovery mdhon. increased to $200 milhonJanuary I. I989) and method under whrch the distribution company would absorb mandatory partiopation nn a financial protection pool Under 5% of tokc-or-pay amounts bdled by sts pipehne supphers. the amenaed law all nucIcar iecctor operators can be The Company began oncurnng such charges on May I988 and assessed up to $63 milhon per reactor, payable at $lo mdhon presently estimates a total habihty of approximately $41 per reactor per year tf the damages exceed $7. I bdhon. the mdhon over a fve year penod in recognition ofits pending President is to submit to Congress a plan for provsdong policy statement. the PUC. by order entered September 30, addottonal compensation to Lt,c snjured parties Congress I 988. removed take-or-pay costs of approximately $II.5 could impose further revenue varsing measures on the nuclear mdhon un the Company's current purchased gas claase undustry to pay clooms The Company's maximum total cdjustment effective October I, I988 Thos amount was annual assessment for Limerick Unit No I andits ownersh>p c.rdered deferred unta further actnon us taken on the proposed interest in Peach Bottom and Salem os $27 mahor, per year up pnhcy statement. to a massmom of $I70 mdhon. In December I98I. the Company sold the federal socome tax The Company maintanos property nnsurance, benefits assooated with Unit No 2 of the Salem Generating includtog contamination coverage for loss or damage to its Statson for $53 7 milhon un a safe turbor lease transaction. nuclear foohties Although ut os impossible to determune the Under the sa'e agreement. the Company agreed to ondemnufy total amount of the loss that may result from an occurrence the purchaser against the loss of the tax benefits resulting at these faohties. the Company maintatns the maxsmom from any Internal Revenue Servtce (IRS) claoms whicn render amount ofinsurance presently anlable, $I.575 bdhon for the sale invahd The Company's indemntficction abhgation each station. Under the terms of the vanous msurance also sncludes the payment of rnterest, at pnme rates, on the agreements, the Company could be assessed up to $3I undemnificctnon amount and all assoooted costs of contesting melhon for losses incurred at any plants unsured by the an IRS challenge. The Company has been advrsed that IRS Insurance companres The Company is self-insured to the has asserted, on audrung the purchaser. that the sale was extent that any losses may exceed the maximum amount of invahd Although the purchaser has protested the IRS clairrs, unsurance avadable the Company has no assurance that the protest wdlbe The Company is a member of an undustry mutual successfal If the IRS clasms against the purchaser are upheld. Insurance company wtch prc.ndes replacement power cost comphance with the ondemnifcatoon provtsions of the unsurance m the event of a major outage at a nuclear station agreement could result nn a significant charge to oncome. The premium for th s coverage is subject to an assessment for adverse loss expenence The Company's maximum sharc of
16. Sales of Accounts Receivable any assessment is 5IS mdhon in December I988, the Company entered snto a fiveyor The Company is subrct to assessments under its agreement wuth a finanaalinstutution whereby It can seII on a chrectors' and off;c ers' habohty and general habiht y unsurance dady basis and with hmited recourse up to $200 mdhon of an poboes The maximum I988 ansurance premium assessments undivuded unterest in designated accounts recervable At under these pohcies could be approximately $10 mdhon.
Decembor 31. l988, the Company had sold a $200 mulhon In September 1988, the Board of Directors adopted interest m xcounts recesvabic under this agreement The the recommendations of a 5pecsal Committee of the Board Company retained the servicing iesponsibnhty for these and resolved to take no action ta preclude four then pending reccovaoles The average unterest rate computed on a dody shareholder denvative lawsuits from proceeding against the basis on the portoon of the accounts rec covable sold but not former Chartman/Ch<ef Executive Omcer and President / yet collected was 9 39% in December I988 Chuef Operating OFcer of the Company. with respect to By the terms of this agreement, under certain clasms allegung mismanagement on their part pruar to the occumstances up to 575 mdhan of unrecovered revenue could shutoown of Peach Bottom by the NRC rn March I987. be oncluded un the poolof ebgoble receivables At December Tbe Boo-d also resolved to seek the dismussat of all claims on 3l. I988. $5I mdhon of unr ecovered revenue has been the lawsuits agatnst these furmer officcrs for actions on their oncluded on the pool of chgsbie recewables s par t after the shutdown durmissal of o!i cloums against the
g 4 forty N o t e s ' It o F l n ~a n c i a I S t a t e m e n t s -- Conunued forty one 'Ithuespus'
~~11. Cash and Cash Equivalents.~~
~~with fscal years ending afterJuly 15, I988. For purposes of Uxctric Company Statement ofFinancial Accounting Standards No 95, the Statement of Cash Flows. the Company considers all l " " " *'Y~~
Statement ofCash Flows"(SFAS No. 95) requires highly liqurd debt instruments purchased with a maturity of replacement of the Statement of Changes in Financia! Position three months or less to be cash equivalents. The following
'~ with the Statement of Cash Flows for funancial statements supplemental disclosures are required by SFAS No. 95: 1988 1987 1986 (In thousands) Cash paidduring the year: Interest (net ofamount capitahzed) $420,I81 $367,277 $37I.590 Income taxes { net ofrefunds) $ 82,730 $ 75,l00 -$ 3,l49 Noncash Investing and Financmg: Capitallease obhgattons incurred $ 35,800 $ 55.095 $ 48,47I
~~18. Quarterly Data (Unaudited)~~
The data shown below include oII adjustments whnch the Company considers necessory for a four presentation of such amounts. Operatsng Revenues Oper atong Incorne Net incorrw Quarter Ended I988 I987 I988 I987 8988 I987 (Thousands of Dollars) March 3l $85l,259 $869,463 $204,301 $2l5,72l $l61,374 $l 72,0l0 June 30 699,640 735,I93 I55,75I I58,724 II0,064 III,965 September 30 898,988 839,268 244,076 I9I 258 I96,86I I44.823 December 3I 778,825 737.540 I38,467 I5I.380 97,65I' II3,598 Earnongs Applucable Average Shores to Common Stock Outstanding Earnings Per Average Shore Quarter Ended I988 I987 8988 I987 I988 I987 (Thousands ofDollars) (Thousands) (Dollars) March 3l sl37,734 $l48,l24 l97,575 (89.294 $.70 $.78 June 30 85,435 89,037 200,217 I 9I,469 .43 .47 September 30 172,401 "' ' 42 202,843 193.379 .85 .63 December 31 73,l95 89,937 205,366 195,735 .36 .46 Independent Auditort Report To the Shareholders and Board of Directors Philadelphia Electric Company We have audited the accompanying consohdated balance sheets of Philadelphia Electric Company and Subsidiary Companies as of December 3l, I988 and 1987, and the related consolidated statements ofincome, changes in common shareholders' equsty and preferred stock, and cash flows for each of the three years in the period ended December 3I, I988. These financual statements are the responsubuhty of the Companies' management. Dur responsibility is to express on opinion on these financial statements based on our audits. We conducted our audits in accordance wrth generally accepted audung standards Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the (noncial statements are free ofmatertal misstatement. An audit includes examsning, on a test basis, evidence supportong the amounts and disclosures in the financial statements. An oudot also uncludes assessing the account og principles used and signifcant estimates made by management as wcIl c s evaluatrng the overallfinancial statement presentauon. %b beheve that our audits provsde a reasonable basis for our opinion In our opinuon. the financial statements referred to above present fairly. in all material respects. the consohdated fnoncial posutron of Philadelphia Electric Company and Subsidiary Companies ss of December 3I, I988 and I987, and the l consohdated tesults of their operattons and their cash pows for each of three years on the period ended December 3l, I988, in conformity with generally accepted accounting principles As discussed in Note 2 to the consohdated financial statements, certain legal actnons were fled agarnst the Company on I988 by the other comwners of the Peach Bottom Atomic P6wer Stauon seaing compensatory and punitive damages related to the shutdown of this Station The ultimate outcome of these legal actions cannot presently be determined. Accordingly. no provmon for any habihty that may result has been made in the cuccompanying consohdated financial statements i 2400 Eleven Penn Center Philadelphia, Pennsylvania / /h February I,1989 1L__
Financia1 5 t a t i s t i c s Philadelphia Electric Company and Subsidiary Companies
~~SUMMARY~~
OF EARNINGS (Mahons ofDollars) for the Year Ended I988 I987 I986 I985 I984 I983 I978 0perating Revenues (for details see pages 43 and 44) $3,228.7 $3. l8I.5 $3.090 9 $2.945 2 $2.896. 7 $2.524 9 $ l.4 l3.9 Operating Expenses Fueland Fnergy Interchange 745.1 7IO 6 889.3 I.097.8 I.069 9 9305 546 I Labor 424.2 437.6 4I72 370.8 339 6 3II.2 I95.0 Or.her Matenals. Supphes and Scrwces 608.3 564 6 475 2 440l 4I38 342.3 I24 9 TotalOperation and Countenance I,777.6 I.7I2.8 I.78I.7 I,908.7 I.823 3 I.593.0 866.0 Depreaat>on 264.8 25I 9 2I 7. 7 I83 0 I76 4 I63 4 I I4.9 Taxes 444.4 499.7 5I 7.0 440 9 449.I 3768 I93.3 Total Operating Expenses 2,486 I 2.464 4 2.5I64 2.532.6 2.448 8 2.133 2 I,l 74.2 Operatingincome 742.6 7I7. I 574 5 4I26 449.9 301.7 239.7 l Other Income and Deductions l Allowance for Other Funds Used Durung l Construction 98.9 77.2 76 8 I76.3 I34 5 I08. I 37.6 1 Capitalized Limenck Costs 73.1 66 6 172.9 Adjustment to Utaty Plant Costs (368 9) Credit (Charge) Related to Phase-In Plan '6.2 I84 (9I 8) Income Tox Credits. Net 43.5 35 3 279.7 I33 4 II6 4 87.9 26 3 Other. Net 7.9 I83 2.4 (3 5) _ (3 I) 4.6 02 Total Other income and Deductions 149.6 2I5.8 7I.I 306 2 2?> l. I I92.9 68 5 Income Before Interest Charges 992.2 9329 645 6 7IB B 70I O 584 6 308 2 Interest Charges long-Term Debt 524.I 467.3 458.9 435 4 402.5 3302 I76.3 Short. Term Debt 24.2 I72 I25 I 7.7 30 9 35 2 2.5 Allowance for Borrowed Funds Used During Construction (I22.I) (92.2) (l01 6) (257.2) (220 4) (l67.9) (53 4) Net Interest Charges 426.2 392.3 369 8 I95 9 2I30 I97.5 125 4 Income Frcm Contunuung Operations 566.0 540 6 275 8 5229 488 0 387I I82.8 Income from Discontinued Operatnons I8 I.9 24 44 20 2.0 Loss on Dosposol of Discontinued Operations (l.2) Net income 566.0 542 4 276.5 525 3 492 4 389.I I84 8 Preferred Stock Dividends 97.2 94 2 90.9 90 6 82.7 67.4 43 5 i Earnings Applicable to Common Stock 468.8 4482 I85 6 434 7 409.7 32' 7 I A l.3 Dividends on Common Stock 444.1 423 3 403 5 373 5 334 3 283 6 I35 7 Earnings Retained $ 24.7 $ 24 9 $ (2r 7 9) $ bl.2 5 75 4 $ 3 56 Earnings Per Average Common Shore from Continuing Operutions (Dollars) $ 2.33 $ 2 33 $ 1 01 $ 2 55 $ 2 67 $ 2.39 $ l.85 Earnings Per Average Common Shore (Dollars) $ 2.33 $ 2 33 $ l.0I $ 2.56 $ 2 70 $ 240 $ 1 87 Dividends per Common Shore (Dollars) $ 2.20 $ 2.20 $ 2 20 $ 2.20 $ 2 20 $ 2 i2 $ I 80 Common Stock Equity (.ner Share) $ I1.39 $ I7.20 $ I6 95 $ 17.97 $ I7 BI $ I 7.99 $ I9.28 Average Shares of Common Stock Outstanding (Millions) 20I.5 I92.5 I83 I I69 8 I5I B I33 9 75 4 __.__________.__-___._-___________.__________._____.___m
F.i n a n c i a l 5 t a t i s e i c s -cont,nved Philadelphia tiectric company and subsidiary companies forty-two forty.threr {. i
~~SUMMARY~~
OF flNANCIAL CONDITION (Mdisons of Doitars) December 3I I988 I987 I986 I985 I984 I983 I978 Assets Utility Plant, at original cost $l2,444.3 $ll.64l 2 $ lo,847.8 $lo,572.2 $9.834. I $8.364.2 $5.502.5 Less: Accumulated Depreciation 2,395.8 2 I69.4 2.005 7 I.824 4 I,726.3 I.592 0 I.053.3 Leased Property. Net 287.5 287.2 281.3 338I 352I 364.0 109.4 Net Ut+ty Plant 10,336.0 9.159 0 9.123 4 9.085 9 8.459.9 7,636.2 4.558.6 i Current Assets Cash and Temporory Cash Investments 43.6 43.0 90.7 le88 30 4 57.2 38.6 Accounts Receivable 875.7 385 8 375 6 370.9 384.2 338 6 223 5 Inventones i10.3 I50.3 I29 7 I23 7 I50.5 I31.I 93.3 Unrecovered Revenue 54.1 Deferred Energy Costs 50.4 6.2 (88.2) IOI 7 229.9 I49.3 4.2 Ode 18.9 73 8 78 6 71.8 I37.0 52.3 25.7 Deferred Debits and Other Assets Unrecovered Revenue. Net 251.0 2I76 20 6 Deferred Limeruck Costs 375.9 286 0 202.7 Investments 97.8 800.9 89.7 87.7 80 9 99 4 30.0 Loss on Reacqu, red Debt iI8.3 II9 I 76.8 48 6 0:hcr 110.9 68 0 70 7 86.2 62 9 80.4 7.S Total $ll,861 $ l l.209.7 $ l0. l 70.3 $ lo.165 3 19.555 7 $8.544 5 $4.98I 4 Capitalization and Liabilities Common Stock $ 3,017.6 $ 2.995 2 $ 2.833.0 $ 2.602 0 $ 2.36I.0 $2.IIO 5 $ I.I39.7 Other Pard-In Captal
5. I 46 7.8 7.3

6. 7 59 2.0 Retained Earnings 409.9 387.I 3n3 583 7 523 3 452 9 333 6 Common Shareholders' Equity 3,592.6 3.386 9 3.204.I 3.I93 0 2.89I O 2.569.3 I,475 3 Preferred Stock.
Wsthout Mandatory Redemptron 622.4 5725 572.5 572.5 572 5 522 5 372.5 Wrth Mandatory Redemption 368.I 389.I 374 9 3l8.3 326.2 284 9 2l0.9 LoqTerm Debt 5,2.89.5 4.870 7 4.286 8 4.309.2 3.778.0 3.381 8 2.l73 2 Total Capitahzation 9,802.6 9.2I 9.2 8.438.3 8.393 0 7.567.7 6,758.5 4.231.9 Current Liabilities Short-Term Debt I02 0 I.0 260 0 267.5 I62 iong Term Debt Due Wsthan One Ycar 70.2 80.9 I08 6 80.8 50 4 52 9 L ease Obhgations Due Withnn One Year 72.1 60.6 69.4 76 3 68 3 6I 5 IB 8 Accounts and Dmdench Payable 220.4 206 0 222.I I85 l 200.I I79.9 I20.3 Taxes Accrued 140.0 II4 7 86.I 58 5 40.3 25 8 42.3 Deferred Incom= Taxes - Energy Costs 20.0
~~2. 7 (44 8)~~
SI B l l 7.7 76.5 22 Interest Accrued i29.4 I21.7 90 7 93 0 9I I 9I 6 5 I.0 Other 803 72 I 80 0 72.0 I27.2 54 I 29.3 Deferred Credits and Other Liabilities Capitallease Obbgatoons 215.5 226.6 2l20 26l 8 283 8 302.5 90.6 Deferted Income Taxes 753.3 682 9 560.5 502.6 373 3 346 5 I77 3 Unamortsted Investment Tax Cred<ts 273.0 282 3 299.7 302 4 299 4 249.7 I38.4 Other 85.7 38 0 47.7 87.0 76 4 I30 2 IO 2 Total $lla%2.9 $ l l.209 7 $ lo. l 10.3 $lo.I65 3 $9.555 7 $8.544.5 $4,98) 4 L_-__-_-_-___
Operating S t a t i s t i e s PMadelphia Electric company and Subsidiary Companies i ELECTRIC OPERATIONS l988 1987 1986 1985 1984 1983 1978 Output (Md!,ons of Kilowanhours) Steam 10,225 9.835 7.864 9.455 iI.085 IO.457 i3,I60 Naclear I2,328 II;353 I 7.I25 8.359 6.462 5.520 7,769 Hydraulic I,307 I.590 l.848 l.484 2,085 l.739 l.700 Pumped Storage Output I,5I5 I.25I I.I76 I.235 I. I 30 979 I,I09 Vumped Storage loput (2,I63) (l.787) (I66I) (l.754) (l.579) {l 427) (l,606) Furchase and Net Interchange II,367 9.806 4.258 I0.252 II.975 I2.I8I 6.65I a Internal Combustion 285 232 269 l78 425 49I 704 Other 382 l.254 TotoI Electric output 34,864 32.780 31.26i 30.463 31.553 29.940 29.487 Sales (Mahons el Kaiowanhoun) Residential 10,058 9.44l 8.900 8.440 8.515 8.467 7.875 Small Commercial and Industrial 4,666 4.34I 4.022 3.73I 3.543 3.284 2.880 Large Commercial andIndustnal I6,5I6 I5.789 I5.068 I4.920 I 4.88I I4,478 I5.302 All Other 999 974 993 I.044 I.06I I.003 I.329 Service Terntory 32,239 30.545 28.983 26.I35 28.000 27.232 27.394 Jersey Central Power and Light l (SalemUni:No 2) I 395 346 1 l Total Electric Sales 32,239 30.545 l8.963 28,l35 29.395 27.578 27.394 1 l Number of Customers, Decem' er 31 p 1 Residential I,296,784 I.280.297 I.263.465 I.245.48I I.230.883 I.2I 7.635 I. I58.853 Small Commercial andIndustnal I35,214 I3I,279 I27.797 I24 7I9 I2I.676 II9.292 II5.945 Large Commeraaland industnal 4,520 1.589 4.668 4.881 5.IDO 5.437 5.780 All Other 779 77I 763 773 75I 75I 2.413 Total Electric Customers I,437,357 l.4 I6.936 l.396.693 I.375.854 l.358.410 t.343 Il5 l.282.998 Operating Revenues (Mahans of Donars) Residentsol $ I,I27.8 $I.092 6 5I.023 6 $923 9 $854 9 $7440 $ 430.8 t Small Commercialandlodustnal 489.4 47I.7 437 0 388.7 360 2 316 6 I76 5 Large Commercnal cndIn'ustno! I 089.5 I.I03 3 I.I03 3 ! 06I 8 I.008.5 877.4 5440 L All Other I43.8 I42.1 135 5 I41.8 145 I 139 4 73 l Service Terntory 2,850 3 2.809.7 2.6994 2.516 2 2.368 7 2.077 4 I.224 4 Jersey Central Power & Light (5.,lem Unit No 2) 67.0 30 5 TotalElectric Revenues $2,850.3 $ 2.809.7 $2.699 4 $2.5 I6.2 $2.435 7 $2.107.9 _ $I.224.4 Operating Expenses (Mahons at Donors) Operatsng expenses excluding depreciation $ I,913.7 $ I,895. I $ l.96I 4 $I.974 2 iI.858 5 $I.592 0 $ 896.3 Depreciation 245.5 234 9 20I 8 168 2 I63 0 150 9 106.3 Total Operating Expenses $2,I59.2 $2.I30 0 $2.163 2 $2.I42 4 $2.02l} $I.742 9 $ I.002.6 Electric Operating Income (Mahans ofoonars) $ 69I.I $ 679.7 $ 536.2 $ 373 8 $ 4l4.2 $ 365 0 $ 2218 Average Use per Residential Cusic ner (hlowatthours) Wothout Electnc r1cating 6,667 6.43I 6.l77 6.034 6.l60 6.319 6.290 Wnth Electric Heating 17,738 I6.824 I6 66I IS 923 17.293 16.523 2I.884 Tota! 7,807 7.427 7.097 6 820 6.960 6.990 6,883 Electnc Peak Load. Demand (thousands of kWs) 6,826 6.547 6.134 6.034 5.925 5,879 5.667 Net Electric Generating Capaaty - Year-End Summer rating (thousands of kWs) 7,762 7.762 7.870 7,599 7.765 7.974 7.727 i Cost of fuel per Millw 8tu $l.l9 $l 35 $l IB $l 72 $2 22 $2 25 $l 29 Btu per Net Kol:>watdeur Generated 10,88l 10.879 10.844 IO,843 10.920 10.906 80.773
f.. '~ O _p e r o t 'l n g 5 t altfl s t i C s -Conunued Philadelphia Elsctrk Comptnytnd Subsidiary Companies forty-/ bur lbrtyfive GAS OPERATIONS I968 I987 I986 I985 I984 I983 -I978 - Salzs (Malhans of Cubuc Feet)
Residential I,933 I,854 I 8Sb I,810 I,94l 2.168 2.316 House Heating 28,II2 26.Ol0 25.731 23.227 25.429 22.98I 24.974.

CommercialandIndustrial 39,073 38.I70' 33.834 36,254 4I.I45 39.043 32,784
~~' AllOther 2,228 f.541 578 l.209 1.282 672 94 TotalGas Sales~~
~~71,346 67.575 61.999 62.500 '~~
~~69.797 64,864 60.l68 ^ Gas Transported for Customers 9,272 7.374 3.907 10.262 3.794 789 TotalGas sales & Transported 80,688 74.949 65.906 72.762 73.591 ~ 65.653~~
~~60. I'S Number of Customers, December 3l Residential 66,599 67.688 68.590 69,632 70.794 72,501 87,715 House Heating 239,012 231.618 225.Ol0 2l7,840 211.984.~~
206 443 163.469 Commercial andIndustrial 27,Il9 26.02l 24.884 24.234 23.442 22.810 l9.207 Total Gas Customers 332,740 325.327 3l8.484 3II,706 306.220 30I.754 270.391 Operating Revenues (Methons of Dottars) Residential $ i7.0 $ I6.7 $ I80 $ I8.7 $ I90 $ I 9. I $ 9.9 ~ House Heating i80.6 I75 7 I89 8 I85 4 I9I.7 I658 86.6 CommercnolandIndustnnl I65.I I67.5 I77.7 2 I4. I 243.7 227.3 92.2 AllOther 6.6 4.4 20 52 S.6 30 0.2 Subtotal $369.3 $364.3 $387.5 $423 4 $460,0 $415 2 $lB8 9 Other Rever (includung transportedfar customers)
~~9. I 7.5 40 S.S 3.0 1.8~~
' O.6 TotalGas Revenues $378.4 $37I 8 $391.5 $428 9 $463.0 $4l7.0 $l89.5 Operating Ex penses (MJhons of Dottars) Operating expenses excluding ~ depreciation $308.3 $317.4 $337.3 $375 4 $4I3 9 $377.6 $l63 0 Depreciation I8.6 I 7.0 IS 9 I48 I3.5 12.7 86 ^ Total Operating Expenses $326.9 $334 4 $353.2 $390.2 .$427.4 $390 3 $l7I 6 Gas Operating income (MJhons ofDattars) $ SI.5 $ 37.4 $ 38 3 $ 38.7 $ 35 6 $ 26 7, $ 17.9 ' Securities Statistics Ratings on Philadelphia Electric Companyt Securities Mortgage Bonds Detentures Preferred Stock Agency Ratsnt Date Estabbshed Rating Date Estabhshed Ratung Date Estabbshed - Duff and Phelps. Inc. 9 3/80 10 3/80 Il 2/83 Fitch lnvestors Servoce BBB 9/82 _BBB-9/82 BB + 9/82 Moody's Investors Service Baa3 I/83 Bal I/83 bal I/83 Standard & Poor's Corporation BBB - 9/82 BB + 9/82 BB + 7/86 NYSE - Composite Common Stock Pricts, Earnings and Dividends by Quarters (Per Share) I988 I987 Foseth Thord Second Forst Fourth Thord Sec ond Forst Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter High Pnce $20% $l9 $l9% $21% $20% $23% $22n $26 Low Pnce $l86 $l1H $l6% $l8 $16% $l9% tl9n $20% Earnings 364 854 434 704 46e 63d 474 784 Dmdends 554 554 554 554 SSt SSt 554 554 1
B o c r d o f Dir e c t o r s: 3 Susan W Catherwood Director Changes: Chairman, Board of Overseers. The Universety Museum Universtty John H. Austnn,Jr resigned as a member cf the Board, efective ~ ofFtnnsylvania March I, l988 William t Coleman,)r., Esquire Joseph F l%quette,)r was elected a member of the Board and a Senior Partner of the law frm member of the Esecutive Committee on March 7. I988. and was O'Melveny & Myers elected Chanrman of the Board on Aprnl I3. I988 M. Walter D'Alessio* Robert F Gilkeson dud not stand for re-electron in I988, havnng President and Chief Executive O@cer. reached the mandatory retsrement age Latimer & Buck. Ir,:. (Mortgage banking and real estate development) James L. Everett resigned from the Board, efective October 24, I988 William 5. Galther Vice Chastman, Roy F Weston. Inc. James D Watkans was elected a member of the Board onjune 27 (Envtronmentaland consulting I988, and ressgned upon oppotntment as Secretary. Department engrneenng) of Energy. onjanuary I2.1989 Richard G. Gilmore Susan W Catherwood was elected a member of the Board. efective Sennor Vice President. Finance and January 23. i989 ChiefFinancialO@cer of the Company Ronald Rubin was elected a member of the Board, efectwe January 23. I989 Robert D. Harrison
Management and marketing consultant Joseph C. Ladd*
Choorman and Choef Executive O@cer. The Fodelsty MutualLife Insurance Company EditheJ.Levit M.D. President Emeritus and Life Member of the Board, National Daard ofMedncal Examiners Joseph J. McLaughlin* President and Chuef Executrve 0@cer. BenefncialMutualSavnngs Bank Joseph E Paquette,Jr,* Chairman President and ChuefExecutive Offcer of the Company Ralph j. Roberts Chairman. Pressdent and Chnef Executive O$cer. Comcast Corporation (Communications company) Ronald Rubin General Partner. Rochard I. Rubin & Company (Realestate development and nunagement)
~~Memt,cr of Esecutwe Commottee~~
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F forty cight. .O f fIC e r s : 1 ' Jonph E Pequette,)r.. ' Eugene).Bradley Donald R Scott Chosrman. President and Chsef Vice President and Associate General Treasurer ^ Exscutive O@cer. Counsel ' M.Doreslaylyons Corbin A.McNeill,)r. Albert). Solecki > Assistant Secretary ' Exscutive %ce President. Nuclear. %ce President. Informotson Systems and ' General Services }on A. Katherine Assistant Treasurer nichard G. Golmore Sensor Mce President, Finance and Joseph A. Carter. %ce President. Personnel and Industrial William M. Lennox,)r. ChiefFinancialOWu'er Relations ' AssistantTreasurer .l ' john S. Kemper Senior %ce President. Huclear Lucy S. Binder . J. Robert Couston Secretory Assistant Treasurer Construction. .i haymond E Holmen ' Senior Mce President. Operations Monogement Chonges: ' John H. Auston.Jr resigned as President and ChnefOperating O@cer. Citjford Brenner Senior %ce President. Corparate. efective March I 1988 Communications - James L Everett resigned es Charrinon of the Board and Chuef Executive O@cer. cgective April 13, l988 james W Durham Senior %ce Presudent.Legaland Joseph F Poquette.)r. was elected President and ChiefOperatsng GeneralCounsel O@cer on March 7. I988 and Chairman of the Board. Presudent and Chief Executive Officer on Aprili3. I988 Phlkp G. Mulligan - %cc President, Gas Operations Corbin A. McNeill,Jr. was elected Executnve %ce Pressdent. Nuclear on March 7,8988 Morton W. Rimerman %ce President. Fonance and Accounting Edward G. Bauer,)r. resigned as Sensor Mce President. Legal and GeneralCounselon May 23. l988 Raymond C. Williams %ce President. Rates CInfiord Brenner was elected Senior %ce President. Corparate Commuricationsonjune27 I988 Albert G.Mikolauskas %ce Presndent. Electric - Transtnnssnon and Distribution Eugene) Bradley was c!ected Vice President. Legaland Associate GeneralCounselonjune 27.1988 Joseph W.Gallagher ' %cePrestdent.NuclearServices AsbertJ. Solecki was elected %ce President. Information Systems andGeneralServices onJune 27 I988 S.}oseph Kowalski Charles L Frott retired as %ce President. Personneland Industrial Yce President. Nuclear Engineering Relations onJuly I,1988 AMn). Weigand . %ce Pressdent. Engineering and Joseph A. Carter was elected %ce President, Personneland Industrial Relatnons, eWectove September I, l988 Productson. Kinneth G. Lewrence James W Durham was elected Sennor Vice President. Legal and %ce Pressdent. Commercial General Counsel, eWective October 24, I988 Operations A. Lewus Porry.)r. retsred os %ce President. Purchasing end General Services on October I, I988 Getham M. Lettch Mce President. Limerick Generatung Station Dickinson M. Smith %ce President. Peach Bortom A omic Power $tation
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ML20247G281

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