Text

Central Power & Light Co Annual Rept 1988
	ML20247J774
Person / Time
Site:	South Texas
Issue date:	12/31/1988
From:	Shockley T; CENTRAL POWER & LIGHT CO.
To:	;
Shared Package
ML20247J737	List: ML20247J747; ML20247J774; ML20247J782; ST-HL-AE-3181, Forwards 1988 Annual Financial Repts for Houston Industries, Inc,City of Austin,Central Power & Light Co & San Antonio City Public Svc;
References
	NUDOCS 8907310319
	Download: ML20247J774 (86)
	v • d • e

{{#Wiki_filter:;i ' f .Q'f. 1 j!8l7 '. . - 1 ;, -..'gp; _.,, [ [. ]$ c.'.i, _ ; '3 y :,}Q;p,(.p,'? bj J. -.Q:.y ' ., i,., '.k;- { $ f.,, . ' ' " ' '..'.,{.' y,4. f.

('

i....s, ,.,,..3 (; yc; ;L, ', _ _ _ _. 9...

o.. '. :

9:... ,!3 i s o w - ;; 4 v..,:. v.:;:;.y ' f.i t.1,0.:~ '.. .a in- . *'.,.s.. - ; *~.~.:..,% v y~.. .o .-.. S . q. s. a V,;, } ; j f. h J Re:g l. g. n;pA.;j '... c;.,;:...f..l,. ;j.f,v

~;.9: ;Q,.ly!};:!./ n '...

. ?~n.

'.. Y ( :,j :.

y. p. p; ~ 3, ;

, y.'..

..:. 1 . '... - 'qy*:.. i 7,a; g,,.ppc4,,. [), i c,j;g;g,.,. gg

Q.

s n c... s. .;, ;F. ,. - {, < m.,,:.., ; a e.., r..p; p +. 4c. _n n .'t is ,y iz.' u-g4 'y \\. l-o. a [ y. '. ;. T. :. ' ' ~ I,N.;s \\.. g 7,. d [, .,,y~,

M, :.9,' o ' ' '.. /, Dij.

(.' 1 v..;.' ;.. c en,,, w. i,. aq

i. c../.C ',.?:"

~-.,,.:.' ' i. '#, '.i t'.A, ' + -,, -, .f 7 .. j, (;c.gg ; v ..' 81 m.,m.w]' { Ji N.m.,w;.. I:.,........'.c.... j .h., i i 4 .'{'.f.'[ ..n . ~- i' w;,,,,,e,. y.; m ,,r7 . l..) '.I'.. ..'..o : :y,i,, c u" ? t .,...ys. ..wm. .. w.,,,,. . r g,,. g, 7 ....,.f. f

.[

b ^ .. ~ .: w ,.n ., t. t l-).3; Q.[M... j [ [... D [_. _h q.,p..0% (. ' kt k 6 h.,h h, .)- s. 9 U m .f- ': ', ~ I I' a: N :.'l. '. '. :n.-.l - ]:J4Y J '. I., ' ll O.[,],Ql $ $ O,N ? A: ,s' L : ;f ^ .,:Qk. . - I ^, Jc.. .,J.....mp,f.); s,&,., f:t,. ;;;);,y.. ll. '.:.. s. _ $.? R,g s.. . lpp' i., (p v e y' '. - 3 _,.,.,; ' p 7.,.'hyy'3:' f:@:>,":. '.,,.ikp,,,.,,.,.. . ~; 4,:. 3~ ,, l.. ty y l. . e.".N;g;o, v.,.. gs..,,.,.s I !!.k

c.,,;-

p,p.e.'* ' ':',v._

? '_

.,e 9 ~... : :,...., ',.g.g,. ;.9.,,. v ). g. .y . r 4 ,. c )g I ., p 4l'. f ' L.h,g. g . 3 ~, -. ,.= (. , ~, J r'o.\\ ' ;(t.,:l ', 0,,i.,,.., .p p N [ f ',I~. ' 3 O'.,.\\ .- - '_, y ;,\\. : j i l... l . )* - e. ?. ::l' _ ' ] l[i,). _._ :. : ' ?...'.' : i '., u.._. -; '- ' '.,'...'/..... Q'h I [!'; D..d[a[.1..p! ~ ;sf :;;L,h,c;M..,~,h.N. ,a. F [ a - ~... [.;. .., m. ?: 0/^.~ h&jj.~ .' '; 1..f. 3 .c.n.. .e ' ' W,v g ~,. -' . 'W ..:.. O '; T... y' b;c m'. a. . w. 3%'.. j ~ } :;,f,$p.J N,: l [ }q::,% ',".lIf' ? p..??[*j.$, ; l 3, _ ' ? \\. -.. 1. w.' s. 7_: m. e.yL; M/,ib;'. E w,ilQ.b V M,fr7.4'~a0 $,^4j a d./ ' J.. ,y L

3.s{..).-f..b.,. ; -

6 q 5.f(!l..t.. qy. p 4:u,y.j l,g, ;;R :..

y

'...g .,. 3 -..., 7 a s,.... .y a, ',Ni:.Qk v. ~ ', ' 'pl '.,,.,, 7^, y --..'. F.. . ~.. ~ 7,79..;, : 9,:.9..g.:.:;.4, y f[:' L.. y ~... ~ hM... 7 s ' ;"q u,. .a Mh 4 .. ' ; (c. J iy, ( 4: c,' ,./ ..c.: %.m v.m c: y,, .e ..,:.y:Q.. . p. ,,F f .., &.,; ; y. ,,:[ __ y.. s<.. .= . W5 ; 4 :( __y' Ifp. " t P. { Q. ic: Q .,:~. Wpy;. ; ':;3 ;...:, y y.,, , j ' l Q{\\[G 'g%.., ':.

- ' "...",;..;p v.H

'.. 7e... ,, :... g :/ - ').

s. 1

(' y t TM c .i. y.. ~ f W. r: -. ; ;: w. ..{. .,- g./. - _-4,.,.....- ,. - Q y. i s : k;l.o,Nc. .f..a ,,. y_ _ /- 'c.. . :0., 7,;: : n / ' ' l ' La.,.l .7 ' ~ ' ',, - )...;,g..q y w, .,; ;,.4,k._.,_.,.,_ ; w ._ ; y,. m (,, ; ( - b;Q ;'Qr.l,ajeF j ' - l. f.,;. V '. ' W.1 '. o., e.- m c.- i 2:" & _ ; : f l..,' ( ~ .s Mf.y:.4 i ^ 7 '.- - i f [j) .4, r.:.: o .,.$ 3

4. ~. -

. a R: ca.w V :v.,::y....r :.., . M:. . a; -. .. V .a

.y. ?

n..:.,. o. i'D (g.w j [,'j ;[..-, ji f; ; :... . (, [ ' I,9 l['I ~;A'V., D ./ er , C. /l,k,f

u;,... -.-

s;,,g t y e . ff,. ,3 J .._y .. -. w~a a w .. + w m + ~ / ( 3 , m ') '. f. l -s ;d - ~,4 - S. '... v' i - -';

\\

1 Q \\\\ n' g;.3,.g, t ; g;(,,.7. e-, t a J ' L, ,, n o@ 5 '1 g g. f .l ?.9

l

,.. ;g,..,. #. ' t. '? d .,',.(..., ..,.. g'.[ y

/ '

.. ;. ;, g, 1 ;. n o.. .i. ...,.; a.:. ':: /p..... p,. ' ' .. - (9'.. {:., ;q...m y e. ;,...., :4.. . S..' h ... ;.:j.,;3 f.. p... p 3., .q .,'p o ' 3( *Yb. . 'l ..l$ $ ',' il

l..

~....

?:N.l k/..l.:.k. k; W ?, ? a. m w a n,.. -

? ' $,.9

. ', lh 2' ' l,,. ll,l b,h,. ' r&. %... .'-..,... ' ', i,.,.,J;.g, ' t"t 3 L:' i'.. (n ',...,..,6 - F. 51; ',. ' &, ..l.. ' O 1:i - '.. .m '? e, ., g.,7 ..y p '[:, j l, q'#g,j j ;. ',... c. { d. s

[; f (c.,. g..y 3'.,..;f C

',q :,m,., Y. o l %Q9

s,h

..t. c.q, {H g..g. S.. e, ~,.j,..

y. : 7,p

3..

' k k O.N.b5'. a kM,% &; fQ.[ j,@h$ f[n;hk,[.$'S'N h,[ hf !, ), ,[.' j ' -} hh ,b L.: Why3. )yW mh My ?. \\ ; :,.. :Q O h.:s n n. ?f % %,;%y$ m$ $ mg h $ a% f L' D %.,.... ;. [.

a ;.

~g k ,pg w.a g. 4'agg $qwa v v. ~ :. .... ;.y ( /,. g. p@lgpk c.my; g(;q(.,7l1?g'l.$q[( gg3f;[yg?yy.;,a;.3,ggg%::y y p 3.g.Q.1 Q i., L.

j. :q n

' //, -, . q qt . g t ...6- '. [Ih,.;<. w. <.I.i,I f'. 5, .' i

3,

fI. ./3 .<f. y f. . ;,,...., y.W,.,. p g, Q g'h, EI[!,'; fly;,;c 'f k $W;N[N 'h

. -, *, ' W ? i '. '3,.l. Q Q Q ; % *

.,; j 'qV- 'I- / I'.l ' ; Jt '. L.*'U- ~ %l,:C ,,c %;.3 f' e J;., N:39.: i c. :} - ~ i

.J.: _, [ b;.;$g;f.f.:

2-o.. [ 5 f [ ;',;. i ' / 1 j, $,.m &r,qL gj f , %el,V*r ; J.%,L. l a: 9g.: ff. ;.;; ; [ggy y s. 'j 4.,, h j Q Q%s,Y ~.'... 3 "~ : ' : .g l .f,,'_ g '; . -. A './ [.? .'9 m.# ~ . ;,g./4, p,gg,r., ; il a..,,i ', ,g.r l./. k q, f. '3 . i. ~.L. y ?"... .. ~';. ' :,. %}^,. b. - [' -

.,,,-

f ;g l :.

m c j- .. r..., .V. <.:,g.- y[3y[; s. a 'p[' ...w. ~,. .., ~ - ; . ~ lk. ,\\

.b.: j ll '.. Y; a N l[f([ ' l ll[:l;:'.

J;,. [ '. i~" (p'd '4 [,;,

J

.'.F j j .g l Nf k fQ Q:l [" ' f.l',. , l.~ '. \\p Q ^N ? [. S y.g.; s 3 7.& m _;3;y 3 ~1 y g p4 % s w $n% $. c _u a n,y R .m. ,m,3g _4 -. .m ww m

n w:u
w: .

. 1. /.. .s

,fn.). }. g .l. s, \\ 9. le ~ sl i\\t l ! Y., I. ~ - i' ? '.' ' y .s ^ ' ' .) t I y _ ,'M*

,j f,

6 f,,. ..s . i 4e tq.. q e; -.e. hhh Eh ' N 4: N..y.. 'qudamen att amme asim anus - ' j' o ?. - 3 ,., ff i' 1 ' -%^ hh,M,k

.;..,'....,; @, i g

' 'l ',. :.. i s;, ' Y ,.[,.N,j/,gNyisis,sshding aser Mr ammtheels J

i m

N. N _. ',f !\\. I..l. ' mmh , f ?,.,. 'E. 9 m f g,it. '.h, "U 4 "7': [ W ', .,Q (. ,V a '. j ie'. 1 ,/ ' f;. - ~,. ',A'" '. i, h - h h plM O'N ',7 ( ~ki^, ,.J.l...'..? \\,' 3 v, tg k.. ?. :. + '*I 'l ,., j l '

e

.N.[ Js,. ^ '4 'A' ,. i .J ' ';I Fff'. ; e - s ' ' E.j, 6,, N'\\ '..,. ! ..,.,4' 4' I'., a 4 ?, .i*- ,' j, f'. g R e c. _n_.* fA. > - y.x - E: .. w3 a,w.. F . f, k k g y {,'.4 k i i: a ?, .3 rf,

7. - "

'\\- 1EP ans. ' t ep e (* 16 g ,, ) / e

f.,* [-

a s

i. M '

(

g: air 4 d m.a rianennt. 0v 3,... ~ 6 .;,..e b ^ 1.[ ) h h .,S. ' h.[ ,? - i g g %"- }',q.,. 6 I', g I..' [* ',

~

_ f _f. k - h 's I. I* ' I y, \\ _ { '. ' _ -[' f.* I

.,? '.

.'.$,. 6 - )p,., \\, ..:5... k n e' - [ ' h' _ +., L- ' f. '.. .;.s. ,. > i4 t' d. - - Q;,, a% ! ' N. p 'g, f.''vT' ha';% *j, - . ' ' * ~...'.'. '..;. ]}T '.., (,F,- .[' ' g ~. ?.C ?Q:j, Q .g w p* K 4 . j'..' ^ ;g,. ' ' - V~ ~ };,_ _ 4 s f., a,,W p g ,& 4j e, 'i ' ., \\,l .p +.l \\ ** <.t... "... h... -,- . f.., ;., Y '

e 4

".~.' .N s * [ .e- ,.,.Y A -. ($. ,{' y, y *., - .,...g' " : sten - mar v. o - ; c

5. s. %

e DjL%R n \\W_ 9- , y i ' f. 4,., , /, V s _ f 4p. o -' h ) y ( i t .,;.. - k ', g ba. 1' A *g. J ee. Mi.e ..g f ' g

L

-'O. .k I E y,,e g.

)

g; ..p._ h. m \\".' \\\\ l;;. l-

f.

c entral Power and Light Company i

Cmile area that reaches into 44 c supplies electric service to a 44,000-square-South Texas. The Company is a subsidiary of Central and South West Corporation, a registered _ holding company. At the end of 1988, Central Power and Light Company served 539,896 customers in 224 communities and the surrounding area. The Company also' supplies, at wholesale, a - part or all of the electric requirements of five rural electric cooperatives and two municipal electric systems. The territory served by the Company has a population of approximately 1.8 million. Principal executive offices are located at 539 N. Carancahua Street, Corpus Christi, Texas. Telephone: (512) 881-5300. i,I I- [hT[? s d$ anu E AmirRWm l i ) i i I 1 1

~ I k s i 9 ( 1 f a M: 6 h a c . k:.. g [ 1 i p 7, "o ,8 s r, t , ) }g ; e \\ At CFL re regaaf Sxth Tcras'cducatienalfacilities l[n 1988 we witnessed the South Texas Project Electric ss ritalresc2rces that mnst be nurtured. The s realization of our long-Generating Station (STP) 1 Compny's cc!1ege scholarship program is one s/ cur ,1 range fuel diversification achieved one milestone after et/ arts that enmplifies a commitment to education. program, fulfilled increasing another, culminating in the regulatory requirements, and commercial operation of Unit 1 adjusted to operating as a in August and fuelloading of new, more-streamlined Unit 2 in December. Since PRES / BENT'S organization. During this becoming operational, Unit 1 LETE transition period, I'm proud to of the nuclear power plant has say that our employees achieved an outstanding continued to exhibit dedication operating record. When Unit 2 and loyalty that has for so long begins commercial operation been the tradition and later this year, STP will place foundation of this Company. us in an excellent position to Throughout the year the defend against future fluctua-tions in our energy supply, a f M f;} ;

1 The completion of STP - develop the economy of South studies indicate that trend l Unit I heralded the time Texas. should continue. That speaks i f when it must be reflected in We are seeking to defer well of our efforts to work our rates. A tremendous - certain operating and mainte-efficiently and to be a partner amount of work and nance expenses associated with South Texas. l preparation for our rate case with STP until our new rates We are committed to j occurred last year, but we become effective. Without making the extra effort to I were not able to file a case deferred accounting our provide superior customer l until February 1989 because earnings deteriorate rapidly, service. Traditionally, we have thcre was no clear direction and our Company's financial been above average in from the Public Utility standing suffers. The PUCT delivering reliable, quality Commission of Texas (PUCT) completed its hearing of our services to our customers. on certain issues. deferred accounting request But to move from above Without doubt, this is the last August, and in February average to superior in our most significant rate case this 1989 the hearings examiner customers' minds means company has ever filed. Its issued a report, with which giving special attention to each outcome will have a tremen-the Company disagrees. The customer. dous impact on our Company PUCT is expected to issue a That means putting together and will determine our future final order soon. This and all the elements - reliability, ability to reliably serve our other regulatory subjects are reasonable rates, value, trust, customers. We also recognize covered in more detail in the community involvement and that it will have an impact on financial section of this report. respect for the customer - those same customers. For Our Company and our that makes the difference that reason we are asking the industry face numerous between above average and PUCT for a four-step increase challenges that require us to superior service. in rates to moderate the respond with bold initiatives. We are involved in a number effects of the change. Our Recognizing this, we of programs that will help us - l .i filing seeks an increase of streamlined our organization in achieve superior customer rates of $125 million in the 1988. service. Many of these first year. If we continue The reorganization programs support community through the full regulatory affected virtually every area of service projects, educational j process, we would not expect our operations. Through programs, and efforts to help 3 to see permanent rates until attrition and an early retire-low-income and elderly South l 1990. ment program, we reduced Texans. We continue to pursue our work force by 11% We As I said, we owe our negotiations with the also implemented new successes in 1988 to the hard ~ intervening parties to settle programs that centralize many work of our employees. I am this case and three other operations and allow us to confident this dedication will l regulatory proceedings related serve our customers more continue as we face the j to our investment in STP. We efficiently. difficult times ahead. The next hve proposed a settlement These efforts tnmslate into year will not be easy, but we i that would increase rates in savings for our customers. will face the challenges with i two steps with base rates Our residential customers perseverance and come out a frozen at the second level continue to pay among the stronger company, fully. through 1995. lowest rates of investor-owned prepared to serve the future it is hoped that a settlement electric utilities in Texas. Even of South Texas. can be reached for the benefit with the proposed rate of our Company, our increases our rates are customers and all of South expected to remain competi-Texas. It is our desire to put tive within the state into the e these regulatory issues behind 1990s and beyond. A recent 7 us as quicidy as possible so PUCT draft study shows that i that we can concentrate on since 1976 our residential T. V. Shockley, III i serving the energy needs of rates have stayed below the President and Chief Executive Officer cmW Paer and @ cwny our customers and helping rate of inflation, and our own 1

e 7. - r: ',3 . i t7emn4!M p}'O%.,

c.

u.: ' j :( ' 8 Vl f -'L"...' I ~ ' (. ". "4'.... s,. -

, 4 7;y r

. '.: ". *. s[ : ':.: ~ ' ' "; ^'

Q,4 " "

.s (. i yu' .o. 'x 3 ' ^ &)."*;;,.. ;,[, h]!]'.i ' M,rp.' ' j [. J- .j... .f - W o,. ..,L'..4 '5,

l. }

9 .') "I .U W '1%g. ,, ' QG,.. _, (f,. . /.s .. mp.. t C'{ { ,...m j' m ....h k :, 'o . _ ** f :,,; N '..[ .^

i. ' ' _ -

? .Q' -r } 3 ["y.' ~ 4l. [

.,s...",

[ u,,;, ; 6 ..g.,

h..

f.,... " 9}4 ' ) ~ ...e, "l [ / ..l .o s ft ;... i c ),. Yj4."t. s g. ,J , f g,. - - g .Mi,.; s e;. 3 v.q: : '. y n ry jm }l v 'f y. .q [" ~ r ~f '

I.

.'.n.. . \\ s,x.,e,.. p...' so. ) - ' '.. *,'..j [ g. .st y s N+') .s ' [q w, h[ I z

w. f,.

S' sa .( [ S. f',, j,. f Y Q Rhg 'i_ } - g ',s e., ~ .r,, j} ,9 b e ? " gih ' ' ~ b 7 ,{' q[.. ' 9; *'g }.l.', 4. 'I *' )j. ] N.,p. .qY (,, e.. .g ,lp .$p o., ,' 11 i .3 $,;l.; * * ,..L~. f* y. I s } .f .k { ^ 4),* .x y. ~. ., t.;;.. 'E., [, 4 - Y. ' b h. -,, .[ ..,n'- . I,, f ' , ). -

7 v- '

h } ' ' \\. c... [, [, .g , j: ._ f* ' y,A _ _g _,..g[ _ J ; ' ', h h.- ' " .y .g e g. ,[ b.kl.h .. [ [ fl. k 1 t i.Ii '3! .pk. k g 's f - 'i g. s.. ...,.',;'4 ? .c. g- ' # - N.., i' ,'"^ 'y p d ' {.i l j# ' , f, I, (., ( n '.1 ' ' '..

;((,

f ,] 4N \\ ;9 f[. .q ~# g [ p. .g. [..., g 9'l,. ,lp . " ?!/, j' ; g >., i - ' gap y N + + . t f' ,,. g 4., s .a @g.7"'. Q M.. p @p . f I' . v: ..i. mi) E y .v .. o :,. 9/.. m < g' +. .z. < 1 . i j f ' ',\\ n._ . C. U. s .A es _y .g..~ v . ; ' y f Q'.,.. ' .6.' . 's f y,Ik,

O e.3, '

. fch i! ..L.',- ".v. ep s. gI 3 ;- ,1.j!*y., Q ;j'%,. '.,i. ;.... .9

};;.,, ' g,. b i 1 d, '

.. ; n s 0;I W};; p.,',t,M ;g e, J j.- .. V :- 'u..,, s ~ ,s .7,... wi l .l' i ~ u.,. t. t.. c

d' l,*,y

,n. -[,., - ;,} $l, I'.. ..'!? ' I i- ~ \\ f . T ! }, ...' '::,, n \\,.;, d... . r. pr ,p., .f '. : ' 4. .J p..... 4. '!,. - I.[&;. h... t l# h- . v. ~., -r .,.,.. [. ' ' w L ,' \\ *.i - ,.i. t. . y. q. % '; i.'. t ~; l " h:;;,7:.q[h.u .' d . b ". I . '. u I. y _y. q"v.;.g., -,t .' ' 1, ?, ' ep '.,, 'd S,. - n f...,,.,f/ j.'p; y'p e Q..!, 4s,' 1, gr .t 9 f .c s. u. s - . Q'.., ',, p", t.. .' { ' jid, '; }g.,, / .i i . x _.. so _ /. w..p:. j uym== awan,mp an am,ew;C . [m. 3 y,t...- /,.... RNim.40r%.s w saa mua mim au n eme w -~ .A;.. g.~. % w .3 14%l.g.. e :,. i

suenr m

. J . ? .. p', pmWMamadaOmrsAuMy4C.. i S.misserespretateisivasgesendwhd }(,,. *.. l 4 T M, sna nahrahum u =M:nmir@Mpt% g K LW- '3 Q; ~3-v, - T.m. gj },1.

<. ' I.,

Whij '_. '. A ' '.., 'h h,' f.f ;9 sy y ., ' ], kW ; ! V ' ; ' b ', 7 I. * %y .y :. ' i y, 'l 'L _'T- .' :hf ),' .NM , i [*, ,$.'l..,.;.t

s. : %

3, ~. = ,,j;h,',. . gy s

c.. ~ - N..ht;:, y ',

/, '.Q.y-Q, _

n m _y". qw , ;~,f. v..:. .. ;; y. s ,e , ; r, e ;.y v.

~, f //h .Q., ? I t p_ ~[ g ;5y ,-( l M i[ 'l.

1 w

o i t l i hl l. h (y f [h( ?? 1', l0 I* ( .d. ' 3' l ,r / .., Tv ', t;- < @W ~ c 'f' g[/.. ?. I ' ' $ QQ 5 e a 4 0j W2 W y$ W $lh. 6,,,( K yy ',N. Q,i i E' o COMMERCIAL OPERATIONOF i ? SOUTH TEXAS PROJECTUNIT1 0 STREAMLINING OUR CORPORATE STRUCTURE f

PREPARING FOR RATECASEFILING l

These events dominated 1988 at CPL. ht, as important as they were to the Company's future, efforts to achieve excellence in customer service also ranked as a top priority. This will be the u case in 1989 and beyond. W W, ,U@$w m%y I$ ^ y CPL approaches every customer mqimy or y problem with the objective of. creating a positive yb(4 . R _y ;. customer contact. Our goal is 100% customer &jg%g,-Q Ha c; V ,1 satisfaction. A number of new programs and %QQji f% fRQ} initiatives got under way during 1988 to provide Q more reliable, convenient andfaster service. We ~ ~ RJW believe excellence in service willprove the key to f_>rospering in our increasingly competitive )f% Q@i , ~[41 Q mdustry. yf im w% wgg: ?g sv &w 4;g7 36. ' } h w' C " W > % Y ,l' Ile 80##1 TeJBS new era of greater fuel

k ' Of ; * )W diversity for CPL, and stable-j$$W Db,

i Pro #ect Commitment priced electricity for South O y'%a W ss yp9 Texas. We own 25.2% of the /m! Project Electric two-unit, 2,500-megawatt b"'s/p@ MM!* '<7 + c 4 he South Texas @F'$ g

4 n

I power station in Matagorda 'L7 m '4,% ^'ET'M .1 Generating Station County. g/K^ J d n' q (STP) underscores our After Unit I achieved its J" " # o s ' commitment to customer first nuclear reaction March 8 i +5 # jhf* ' M;"k 4 M m f @g 6 k 3 service by providing reliable, successful low-power testing reasonably priced electricity of the unit continued through F 3g /F.

im for South Texas.

the spring. STP Unit 1 f s g, $ < We became participants in received its full-power license W iM @ " @~p.'%'y" the nuclear project to help from the Nuclear Regulatory 9, j' ~ Qkff protect our customers from Commission (NRC) March 21. W 2 '% 3 [b the uncertainty of gas When Unit 1 achieved 75% & y,o?R W q availability, its volatile price, power, it became the single QpW A q ^ M # N P 5 %@m, and the resulting effect on the largest generating unit in the cost and availability of state. The unit reached 100% %f m c 4 electricity. Commercial power July 27, and went into

htM,

. MO f & - oMM operation of STP Unit I during commercial operation August kW, e 3 @O g[k 7 ; the past year ushered in a

25. When Unit 2 goes on line g

G~ > %. Mp[m 'v $ j x. ) h @s %y ?)-{fYlll&l4 (?

l this summer, STP will deferred accounting would two cases became outdated i represent 14.4% of our reverse this situation, and we while we awaited the PUCT's I generating capacity, and will would have an opportunity to decision to allow post test produce about 25% of our total recover most of the costs of year adjustments for major annual energy needs. Unit 2 rendering service incurred new generating facilities. l construction was completed on during the last months of However, commercial the schedule set in 1982 by 1988. operation of STP Unit I has l l Bechtel Engineering Corp., CPL's total revenues now enabled CPL to complete the project architect / engineer increased by 3% due to several and file the third case. This and construction manager. factors, the most significant case, based on a September. l This unit was granted a low-being higher fuel costs and 30, 1988, test year, was filed power license by the NRC higher kilowatt-hour sales. February 15,1989. It is by far December 16, and fuel load Base rate revenues decreased the most significant rate was completed four days later. by less than 1% while fuel request ever filed by CPL, Unit 2 is expected to,be in revenues increased 8%, and both for our customers and for commercial operation in June kilowatt-hour sales were up by the Company. 1989. more than 4%. We seek to recover our One of our highest priorities Average revenue per investment in STP, which will be continued participation kilowatt-hour from residential represents more than half of in monitoring and evaluating customers increased from 5.90 our total assets. CPL has STP's perfonnance. Our focus cents to 5.97 cents during the invested $1.37 billion in cash is shifting from plant year, further reflecting and $842 million in allowance construction to its operation increasing gas prices. Average for funds used dming and efficiency. We will residential usage increased construction of the nuclear l continue to be active in fuel from 10,369 to 10,925 power station. In our filing, j procurement, setting kilowatt-hours, an increase of we have requested a four-step operational goals, and plant 5%. The number of residential rate relief plan to moderate r I budgeting. STP represents customers also increased. the impact on customers while l CPL's largest single In the commercial category, maintaining the financial health l investment, and we will do our revenue was up 6% due to of CPL. pad to ensure its efficiency, slight increases in kilowatt-If ur plan is approved, the safety and reliability through hour sales and in the number first merease would be l the life of the plant. of customers. l Industrial revenues declined app ately M in 1990. The plan will require three Operating ResultS by approximately 9%, and additionalincreases that are kilowatt-hour sales decreased ,\\,ot since the fuel cn.. estimated to be 11% m 1991, sis by approximately 2% The. 7% m 1992, and 6% m, 1993. of the early 1970s had closm.g of a major petrochemi-Each of these increases will be CPL recorded a net a cal plant, cogeneration and loss in the Company's monthly subject to PUCT review and ince tive rates led to these earnings report. However, in approval. We project that our - the fourth quarter of 1988, base rate would remain stable CI,L's net income decreased CPL had a net loss of $3.3 follow ng the finalincrease for from $191.9 million in 1987 t million. This compares to net at least five years, from 1994 income of $42.6 million for the through 1998. However, the s tt but let the same period in 1987. pnce of electricity may deferred accounting issue inadequate rates and the fluctuate to adjust for the cost 6scussed abom PUCT's delay in issuing a of fuel. We hope to have the decision regarding our request new rate in effect by early for deferred accounting caused 8/68t/#g COMpelllNe 1990, if an earlier settlement the losses. This illustrates the D cannot be negotiated. (Sce: urgency of our effons to na eS settlement Proposat). receive fair rate relief from PL prepared several During 1988 we initiated the PUCT. Again, an order j' rate case packages several changes in our rate granting our request for during 1988. The first structure designed to keep our

i 1e 'g, \\,. T% 0, ......,/ '..,.4 ? rs' ,y ~. _g e N g. h

Y;

,'*l.t..* e . g. ~ ' > ' ?- . 3 :l, i.; s ulp 4 Wp 4 W a t W B W asy @et suimassiW ator NK L 1,7.':.,.; ~ s

' *, q:. :-

.eptuperaluegersausum j ;. j ,5 C .'. " I. l. 9._., ; hb if;,.. s' l v ', j_.< r,)* ;'(; l ), '..'. ' ' '

- L c

'y,...._, ri.:. ? 3.;,'! ' \\.il.',. ;,y; g.:l.-\\_..;- * ,..im,.- x,._ li - em,;* /..t. i. 'f k.;.i'E+ c.. ; -. s.. 'g y[f ~ ' p!,M,3.;.;.. r y@,.. ' j 4; ,-[ ,. ;. i t .. f!Gf*f f! 3l y;i.;lp q.;, '.h;';j$I%f. '.lgl',:.l.l._h, } *?'..:,. } *. , g;g;g;

..g;, _..

e

,I'f f.l; h *V-h hjfI 'i: p..y.}['p.f.;h, 'T j n .;.: / - a n. ; w gga . h m. 4y: s r u.a.. w., y [ :.:p.m}$;': ~ s n h. pTfl.F }.l 9... ,'.:j.'[.![. [ .4 { y.{t, ~ ~ :. '... c:: l'..2.. ts%,q.r;, L { s, - y ,,..;&,y.W: bqft, l,'.f_ +* s. +y,. b..h;W?.,' i s. e .:,..v. : :s. . 'l, If. )..:,.~;. ip:.Y L .h< i D ?[ ?' I. ' ' ~ w ..Wh%. p l.. J-V ve. @q e' 4,.7 % q,.,,,, ' N p%. i,-.o i ..,.2: [ % :.W;.u..p , j.R ( '. .,(.. ?:,y@tp;y. 2.,5 - %f.y N [. K :. y w l.: . _ y _., L.$... t 5.y 9; kr m .. i . w 1 4, . %,, \\ ~. ; 4, -,f.;. ,. fr. r F t,'.. - m ' P,, ~ -.n!%+ W;.1 .m m. p. r.'", 4'- I ', ,{. e .,X. t,.. g. e Q...; n. ?!.i. - - ~ 0 k

g g

~' i e e ( ,J ,.. e .q .e ,,gn ^ y - g ~ . w. A ,g g e y E .s. f \\ 4 s,

3 Q-W =. c" V T9 CR MM n.. ; .t

w q ::

s 4 -.v c > a o i j. 3 {Y hg]h g ,; N sfii .q ,s.. T u ,c ,m., M, 3,y ! 4 ....,o . [(t..h

q. c <, ;.@g@/?.b y(: y. g V

r s 4< - g; g M; w,. .a g 3. [ . ( M' ?.rh' .N ;3 - .g 6. ve.. . k,... a# *gq. c. ..v e t". k, M G,;;, .e,. .,g,. C h Rf,..,,j., +."*i'[ gp.' y g,, a'.

' 'S$

... ' '.<h.( 3 g.. ',4 .[ O, [. {.', [. -[h p. ~,[ 4 I ~~ ' [. Uk,.; : .,,Q[g ' 5 4 s, .1 9) I '.I I 9 '[. I 9 4 ... N. .. e "L I 4 ; _ 8-_ N,.' 'e I . k.., g. 4 a.,. ' s. .p.N . i e 'g , '..' h e ,j %. Q g q$,,4,,. '_ E.',,, q."' ' QI 7,; m j,9 g ' ;, i' U b." (j', f "*'M NM. g.' -[~ ."..[' ').1 * "M/,,' g *',t'

Q
- ' ' geu i..

6' ,y (, ':,e y * -r. .,.g ,....i y .q

(...,

p . ; c(.' ' j <.. '. '. ) y ;., _ J wm '.j:,. :. p. Q y'[.3 :., '7 "r a.. " ; '.' ](1, . f. ; jf( !; 8' } l( ' : f. ', ( : l' ' e ~

g.j,(' 's,n, Q-

,.,4., :. L,, : .h,- g ' D ',.,, h ', .Y. '. :f ; , b T ' y n a., llT, o.;. - ..'i. .l-h- . Uf.. 'g'. [',.. f) 2 - '.',*t.' .,,a' g '. j, h ". g iJ . / 3 'c ', s, p V b.c I' it-t,.

y _, :,. _,".o-

d,'

4 . ;, '..;.. 4'.;f..:.'.,., ; ~ ..y t-t ) a i: i - 'v a j. ,,%.....,,;t 9.. ,j .e }q 7,., g ;, .gy*'

. g

..,hw. - 3; _1.. N.

.,.,y.

1,. s, ' N. f r - ,v, $..t., -

( - '

,,l .N....q 0l -.- 4 -. + ?e _,s $. 5 , su

9.. ~

% I.'?..'v... ' - Qd %..: .y,.Q.g,', f, 7. _ ' G,,,, .a. v u l g :,,} <. '. ' [* ueg, ypy =, *, .; p. s 6f @G me 4 w 0-

W.

_. i. A, ,t - e. . p i3.f.j ,a e. , i,- ' 7,,p,, p p, ', e , ; gl, . { t ! ' f, [. [. %.* ft n '-.g [f ? ",' $ h',., j .'.'t .. r,,, ;,;.. "4,,;, %,* t..%,, O. - 4 ' v..hyl; g -; A*,g,- ,,,} ? *.{ p q 'f S.r$g... ' (. '.,*[ kg,, [r([,'J [ ' ',[;. f Y. Y' ;p E,,.. \\..". '.k'"; }'k... e' ',f: .,. g .+...:... a., - [$. ap '.l . j.' 'i '., k.',....... P g, O t8 e .- no. h.[; d, 'e -'b 'O ' [. . h,* ' ,.. _... ' A ', { y 'N ' [. , g, [. 5 'c' r- ?. . + 5;.r..,,,,.:: w ', ;. ', - n: q... t'. y. ~:,?. . ;.r :.,

-T..: '. ?,:.;&:

n:.c-

'? h- ,ty ,...}.* ,; y :, ..,s n: ,.. g ; s..;.. n. e_ ;. f.. . ;; ;;;y. '^ ' * * '. ~. r; ,j_....- l, 7 .k ',l .*?,* . er., p'. ' ' ', ^, .L Y' png'***.!.L_ _ y ;.' ; ~.. Y:l.'.. Y,.:, - ' . },. -l 'l ,N; e l 'l ,' f . 'l .. l 3.. l., .c t -.. p. 7 . 3 ' ; i' ; h~ 1 ) "n, q,g 4 1.. A ' *: t,:. -' ' ' ; ;t. ,g%.. ,,.g .I g,, ',8, q%, b.,, d j.,, 6 -t

.. ; 5

, 'k. ' U h' -s.h. 'g. ' ,,e'*g ,' *i *i N.. {J

i..:). ' '*?**
(, '. ',

e

I g

4-;

P' 3;

Y., 3.., '.g, e_ ,.r-e -, ~. s* s '(. g g - ( s ? il 'g ' " . g.4; e %,,', c.i. ,) -(... !q...' ,',g., gj p, ? b i>\\ ..*..G,. 2 ! ~ s. a..* ,.e A f

)

'4 g .. ;4.k,...h*.u. 3 ,f } ' w, ,4, '. f. f. ; l - ~ ., '.{ ',l .[';.1^ g _.., ~ m. ~,.. ~., ',,, ~g,,, - ~ u .' k h : > ' N. ;' j. 'k Nl ) -Q.. _l? l ' .h..d : h *, ;,l? j;i , l .;y U. q:.3 4 3[.g+$l),.:l'. l, 'L.:.. y ym& -..y v4... : n> :. s w-n. .3.- .g . J. <..,v .s. ~.y'Q.y. ?. c,. ; : : 8 ~ x 3 g_'uq% f gf :9.. k;.( p o. g yt,L'. y.., y ..- l::;; y., 5, ~; ;, ' ^ (;Y.g_ } ; y 9 [. q.:.. f.".. 8 .. M .h.r ' - y.l,4 _f, -}., ', ; : - (, J:; l.,*'.., e s. 4 e e.; ;. h5E C 3. w,h'k.[f{9} i. j$ .v.. v. . 3. N 'h:f.: - ' [ P.. '.' [ ) k ~,. l-N

.;,M$ ?( I. 9 j -

= h. i ~. a. ? s.e '.i- .,_' L, .f }.,' q4 ? _ J _'.:,s f. ] 9 b..! f.y.: '. :[ ' %, i i.' t - ]). j. y Q_ } i f,;':..,'T. j.. .. m.Q; 3

p -

,\\ j,',- ..; v. - v. .g. Q..... ".1 .At. 9 a.t, - .. :. ;s :. e. -. k. s -. Y p.-. i N. ,,4 ; .J "'A Nh : [.* f d..l '. 'S. -[ ^ ; - E N.. '.. ~ y. :'.., ' p.... v.d..l, / *.' +j +g. N - !: 7 :.:. ; 1, ,: ?Qr . j. :...e... A. ,,, 4. L;. . x... - - a. ~ .z ..a. . : f. w. '.,..n,., g . '.i, V,9 7.. 5 .. L'. N,. '; f- 'x'%~ -

4.. -(.

y q -

4.,3.

.. e. : v... w...... 3 , av. ?3

s. ;

g. ;4... N:,..;;fa.

rm. g

h

'a . j,. h-e-e ..;y s, .g.4. ,., J ' h ;t., ',\\,,.. p [ ..'i 8 ' u . 8 j

- g

.. g ',, n. r. - ,j

%g h. ~ is k A$- - #7 cg,,wg m. [!d Jk, Wp - vl' ]w[:,%[ $,Q MQi]"f t - $ bf:n:' ,, 'f% l s~A n ~ ^ ^ ' ' w Y. 'b 0 g' Ii t senice competitive and retain $gfffffyggf @gFgel n our large industrial customers. bp In August CPL obtamed PL has proposed to the 4, approval from the PUCT to g intervening parties a revise a tariff that can be used U settlement of all s % for expansion of senice to regulatory issues concernmg existing large industrial STP. We are pursuing a 4 .~ 4 ' I customers. During 1989 we negotiated settlement c expect the Union Carbide involving representatives of C facility in Seadrift to begin the cities served by CPL, ^ 1/M. yNd = taking service under this other interveners in the rate revised tariff. Our rate filing cale and the PUCT. A a s request is being reduced by settlement would benefit all ~ ~ ~ $1.5 million by this sale, and parties by shortening an we believe other large otherwise lengthy and / industrial customers may also expensive rate proceeding. It Q [,'> h. M~ b3 g/o, %_ d yp m take advantage of this senice. also would allow us to focus i Also, the retail rate case we our efforts on further l ~Q," 7t l < Fg %[ p y _ p, s l filed in early 1989 contains recovery and expansion of the f% W ~ yQf gf y E;n l several proposals that will South Texas economy, and m yn permit us to remain prevent the buildup of G ij gyg.4g g competitive while benefiting additional interest charges i 4, G W our customers. These include: on STP Our settlement proposes a j,Q ggi,m. 4-y. s g. M

A fuel-supply plan to permit 44,d!: eQ f

large industrial customers to two-step rate increase over y. supply their own fuel. two years. Step one would g p g,p g E g gtjg 4 (( 9fyj" g,g'p{"f{%p increase rates 28%. The hg.pmPvP&pW; 'i yppyys Keeping these customers on line benefits all of our average cost of a kilowatt-hour W - %( w uld increase from 5.5 cente customers by spreading our ff4 fixed costs over a greater to 7 cents, increasing annual 4 S;' * ~ $ ' 4 [g 4, M number of kilowatt-hour revenues by !229 million. One M year later, step two would % g~, #y" *# J F sales. raise rates 11%. CPL's average b- @c- @ J D Expanded interruptable-rate would increase to 7.75 ?, "*WA[ d service options for large cents per kilowatt-hour, industrial customers. increasing revenues by $115 U" ' % ' g' A [ y/'h]b p'g % An expanded off-peak rider million. Rates then would be V f on an experi nental basis for frozen, excluding fuel costs, i %gMi < fJ ,Lq

i. f smaller commercial double-digit inflation or other

>WMTM h@f' "sM[: Q[t customers. abnormal, unforeseeable N A separate rate for Good

9 mic changes, through

,ggg 44 4 v; 1W1 Cents Homes that provides a lower price for these It is projected that the g; g P ;g 'q Eppy [g,Q q %g % g Q2 FF homeowners in the winter, proposed rates would be comparable to those of other Jg' w w based on their higher annual 7Q load factors. Texas electric utilities through 1995. We expect a lower than 1 ' ** L MPC Retention of the commercial nomal return on common

sm

.6

TS heating and water-heating equity the first year of the V

<'WMi b w[E nders. which are designed to settlement. The raturn on m" N;4 reflect the benefits of these common equity would increase off-peak loads. 'E M" 7,4 e p /g. 6 ,m ~ . N N.ih p' p' ,$kh e W L -u 4 &e n' m. e T I- ". C ,2 gI. y 65 y g: '

4. i,
G r

~ I W*f y sgM m . g w ;g ga xwg s w w

$h L

k. -

.m h, K Qs 3 I + t P) gg *cy@g " p(w;. c m ,n g4 y y h s .1 yAgiggggi in later years to returns from some two dozen .jm> typical of those now allowed suppliers. Diversification . ;g. E by the PUCT. We wi!! continue continued in 1988 with the 1 l a,,.,,. [ ,F",. to negotiate with interveners. completion of a gas line to our . a,, :.., e -,. Ennis Joelin Power Station at J { 44 ~ nf 1 J Seeking Stable fuel Poirt comfort. Ali but one of our stations have muiriph gas %,. *,,(( T y& 4 SN((h.08 suppliers, and several stations rd mML Jn; J e : Akt"$ N TP requires a large have as many as five h(e A. @p f.]-43, m investment, but it suppliers. This increase in will more than pay for suppliers and resulting - r < ',W i f g w...: ? g' YAN 7.; itself through fuel savings for competition has helped bring .,4 '[- EN.! g i our customers. Fuel savings down fuel costs. J @ " 'I. d. are projected to be about Our customers benefited T,.1, .F e $5.39 billion through the directly from lower gas prices jNeNk.i qqNkMy o + $e, r g,K hp'fggg:pdd i While adding diversity to our refunded $21.2 million in fael lV,, p operating life of the plant. through fuel refunds. CPL y, 5 fuel mix, uranium is expected savings to custoners m Feb-j m@, '@- O'% to remain plentiful and ruary 1988. And, in the spring { relatively inexpensive. STp of 1989, we hope to refund i v '9 has suf6cient nuclear fuelin about $20 million in savings gy j inventory or under contract to collected during 1988. + 4k. P N ensure stable fuel prices Coal is the third main 7 l through 1995. element of CPL's fuel supply. <,m M M For the first time in CPL's The prices we paid for coal 1 ' k @h [Mi% d hwjg,3;gM7 [m(y, i d history, natural gas repre_ remained relatively stable y % f sented less than 50% of our during 1988, and we expect o A g{y){V q during November and Decem. next several years. We ,.y ,44 9 3 .nonthly fuel requirements that to remain the case for the 1 g" M hl/M ;45f N s, Q ber. When Unit 2 begins conducted coal test burns at y M M[g p% hb in g: i hR g commercial operation, our gas our 600-megawatt Coleto WS d j requirements should decrease Creek Power Station during fip W.@sy" Mj M C 1y further. However, natural gas the past year to determine if T mv O will remain our primary fuel vanous types of coal can be p'(.k@ $gdi M D.h ':< 3 source. In 1990, the first fr;j burned effidently and within W cd. W Jj year in which STP will be environmental standards. This completely operational, tbout procedure enhances ~ @ ]f. lh"y g ,%". Q P, 9 half of our generation wii! be competitwn among suppliers, J i d prosided by gas, and about helping us to further reduce M 25% each by nuclear fuel and our fuel costs m the future. ,d W Oi coal. We will continue ;.o test other 1 .9 To maintain a relible gas coal from new appliers during g T[ '

K"g l

supply and competition among 1989 to seek lower-cost fuel. 4 J suppliers, we continue to ? k g, Md diversify our sources of fuel SBfl#g [0/ the OUSiOMBf $"t ns. e ' ? N A few years ago, CPL had N ome customers measure only four major gas suppliers. (% our efficiency and the }j f, Half of our power stations kJquality of our service ~ m 4 were served by only one only by the size of their bill. ,1p e[,, s j major supplier. We now have CPL had the lowest resider.tial W m ? 13 different pipeline systems rates of the nine investor-supplying firm and spot gas owned utilities in Texas for 4 ,j + n m i if[ s }s }yy m M.. '[

s, ; en -

a...

.r,n;,...

gy. ::.7-E$@*hg. ?' j ?...; ;..;; ;;;. u, ;.?.

.,c ?):,6;? n;'. mpi ;..m.

if:3;.

. g;,&). ;f,,&q.; flS. *. Q< a g - ';. y( W) .= ::jf f l'. ;,,,,:: %.,i, ' .m. ..... y:.;.e :..,

Y'f;,.'h

%, s:'.,Q)m:f,$o

N:E:

e ..l . :5 .c;w;g _ - L .< u

,3. x.;%.-,Lt

/ : -a . h:A "^ ' 2":q' jf' I. ..... ~_ r.. \\" g

.' ; QT...,. ' [' 1, bl.

g W. l: *i ' y ff,'ly) ;,6 t,,-.:.. - - , :;V/w f. :_'. l}$h. ..y f$ ~J. <J,';. m aw ,l."_,;.G;h...?;8E ~:x., +.

..,25 pq, ; _, '; y.: : :..-

.y

%M + y

,"'M.*

.y s -. y w. :% : L;y.b i n, .i - Q, .v.. .l%,.fly;4:Q,; y:. ~ .....N

+ '. j.y;.._;s.,

. 3,. l'... :.. yl.. l: 4 m. i Q:a.- * : (. ? + i.::..

o 4

._. _ - I ; it. ll';?'

y ? 5. :...?:7

. e, ;* ;. v.3 .n i j-kp nx3 y. ;,: 9.mM.M*l.m

y. [y, h,h ~.

s 1 g&. 4:" ;v :. p:, : Tjl. 1 c. f. [> :{,, r%.s.,n.:...',hkQ[c.a ...,%.. j , 4..- >;c... .L n ~ ,.I. w y p :f:(.

' ' z,gef,..,h :;4. ;-

a g ' g} yl' % :try ?. y p .:.. p r E. ;. e%*

o1 F

p g;. p.w,:.:gp

,}s.ff f n.

Q (,, ' ?. k:. ?l; g,; pg..g;g.. -y J c':' m,.

q g.;: . 4d -( Wl q 9

umq% [g::S a f . ^

..%.s:pfs:T,.L

~ Q:S ju, S c qr ....;% % @. Q; 3 4.;.;l _.g :p q -. m,g: p;:.; . g., y -

..Th.H z

.. 97.g.g yp y L

~n

.m k. [';,, ;f. ~. Vf,6 jh c... n 1 Y! - w i 7 a y;;.h; v. '~g $iM: f a: p + ::pn ::... ;. ;. F. Q( " ;.. i'o.,.,; [,. l? 34,:y f.:

. :l

~ n {>lh ;.;: y c,A. ~ Qf I l[., ... ;, 3 ;,y. 3 3.y. ;;, - .,. ';l < t.. .t g.... Y, + eu [t..,. f,....f. ;i-l ~ m.. y,.,. , g lq p.

s.. Q.,N.

.9,. .~.y. r;;;;q.y ,Y f -y. e.g;; : j _, w,p p n.,r. c.

y,.y;tl,

l:. .lQ

>11

...Q' '..+,.-,:,k. ;..,

n

~... ..., mw 'N l'f... f;:\\J.': y w? % n. x C. w lf:'[ 7" .( e, .:,.f. ye %.4 3 ;4@'WQ

L,

'.'f'., Q:f. %pglg.; gy [ } m.y j, ( ' Q+.u..,... ,.. e, ' .,. i. ) <' . g;7, 3 g

y,

.s ni..qqj ? v w. t '.m ;j,. v,) 4

w: u. a;1 y ;\\

n y.i y.y;.;; ;A N- + . c. m ' l,. i Q [~ ' )my.g:;L; e. G a +.c y

A.

e_ y, _ . 9 ' - ,L b'?, ' ' '

x f: -

.s k ';; w.ff.

, ; :.. ' p-l

. -:..y;; 7 ,.=,.v. n. ;;; g... f*' 'f-x:.3 x;r, y.v:..#.::.s';,g;fn.pt.~h 'l ta .:l VMg, 9.. ,, g+ m:. ; ;.:. I,.'_ ' ?,,:... ff(';?,,',,;k&j!?-l,il? y (.' p . gt _; q. },l '* ...:4 h .W L, 3 .,t

y. i. : &. %.,.r,y, ; n,.,; g.; p ;

.c E ,q q;.. a. ,.4 ~n, . $'*,' ; L :"... ~. ; . j l~.V mw.; iY ;t E , 4 3. .g:~ l' &$'.:h 3 . ? ' _:l Y Mtj %p c.,.. 7 4., g.,. n,- 9, Yl

f.j': x. _ -

Mk.H.M,:@g.ghy: - ' ;ly:., ',$.fl:g' u,+ . ea u.n.~ A + a. M. ( .n\\,N 4. g:,. p. n c, y u. n., g.' N' $ S Y., 8 F M j ~ a ~h k n.:y.," x w M. -. h. M. S M:.. y. - ltl.),le $ bh'_ h* g., ?k;r [; } a v 6a m mNS hkf.l n};J:y ~ v:. -.. T. ' ; Y.h-n m i sa ~ g.: :Q:QWQ..Gw. n;.:sk?, fn(:fh. n'y..n f : ..^ )q:+. w' + g:-[ *9... t,rg. y, :- pm.s._ ., n<.,, c m . ;9 ;; w?e:ijy_ v' L ' ' l s .v.:.g a . p.,,

r a.

.:.;4 .P. .,e.- - lm[.: ~ %g " yL,. %Q," '.- ! ~; . ;f. 1-y. s g

.7

> w,e e, $_ nq m. ,." }, .,.. ' " :. :., :. r. *v. y. y, J a%* " ~: ~ &..) v m., q ; [ C cd.. s

-7.

py ,., a .;;' ...J ' ' : ,.n +e r..:,;, m 3, ... Rh,; s.o.[ ; ;. ':::?r. l. if ; _b.. ., v n.

r -

L

.b ,.q,_Q y g; v _, ;s. 4. _ .u

w. c u,,nI ' b.;.

._,,.~n. J .m.; w. '?

w: am Mi f,,

~ a; .,.k : % - l' u. .,l _. +.

...,m m.3 4

\\ l.:. ...... m,. . fl ~ lN ~ ' + ' [.. n..w. .f:..&, $l, w.. v%} ., N : s]) ' .qd l Y, y,..

t a _ n.

n..

~M.~..,,.,:,,, .e. :., 6,.,, ' } y... ) '_ f; : (hs. .....3

. Q i

3,

s

' ;_ ;l.;;; ' !l.' l- - ::... )g,, a,s....ma.t.,c e.. p.- _ si' n .;;;q ' 'a 'L

l.,

.?

,l.-

. ~. g,Ed. ,O- .s .m. :...... ... ;g y 4*.'. . y j. e 1 ;'.,. 'y :,1. <,

,g.. e,.. 7

.s Q g.

l. ' -

...g u.

z..

v ' :. e_,

. ~,.....

\\".. D a p:..~yf

.,l.., .sf g , :. y y p.q. > :

(-Q,f ~ ;.,,....

.j'& u. + t ;'

?

...j .g- ..y.

y,: v4

<^ ..c s: ' ; r,;.;;.5 :, - .,s. 1 $. ). .. ciu....{l..., k ' ; -". s- . V }' ,. s ' ~. *,- '9 '. :l, 4.. ;v....j / f 7,, ha. 8, y,;.,..s s{ ,, s p. er ( k*. .?'-. <.. s.n s '.. sy

g r, f. y, ',;

., '.. l f

6 *" * :% M... ;; %.. ..'.,-y> I' [ ( (, s ? W ;.; &,,W. @ t N: > S. s ' c.. : "% ':% 4 4.;[,:.',f j\\; , g:{( p ( 1.],y,"

.,3.

. p ' p. ! ' N., (#'. l' ." f-h' h, } . h. :' [ '. - ~ .V h ',' * k.:.. ' f1ff

tb

,{ .. '. k

e' N{!llf y?.'.,.',1. f * :/. ' q l O l Q..,,.N hj

.. I;f ..h ~ " M *... .y'g i ';...ft; %,.. '- Q: 4-W& ,f.;[ 1 'T' t y ':;o [, (.. i G:. NW.' p,"l ' 0,. * ',

b. K,,,;

-:. $",. 'g

' 6 l ',,

' $V / - .% F -L;.,,,, -M, ',','?.'.'.#3,., h:... - t- ,. *i.

1. 3; ?:

,g g/ 4 y ; e-

. r. t g, < ;,.-

6. q r .y y

Y'. (..f,,':;~'

, M';;; g.. )

" ' ' "?,. a

. g g,,,. ' i t.',.::.,,., ' 3 *:~, _ >. }': " d ;,. * 't.V 'M.,,..i .4 Y .., ( a}.,, : x.ldy_ ^ ? ' f;',d, %, '.. ' l ',4'. ; n,f;.' ' ',,,[., , '7@[:*%:V,. c-,,. [ :,,.,, 'f: I , T [', m "G,, ; f. /.' f '['.C.,y:"' _ 9s::,,j Q - - f;,,, ' .. L'" 4

s, y-.,.

.W.4 x :q.,. n... Sk.,",,... '. '-. '.'.;

5.

... 4 3 gs <., -1,o'. f.[. : p g' g._ \\ Hed. -g. 3.f'. b's:':bd'C O:q. ,. V, * : ..u Di n'.....-) T 1,} }t .',..,[ .f i '.\\ l 7,

{<,

a, r , j,' f,{. f.' ,','.,,k..' I> ". k '.,, t,.. ' ( ', - 1 L..

j I syS(;', -

' p., .c.,, ...v Q : h).,.

t,

4 '. .r.. m.. ~^,, ' '4.. ::A; ?- ,,. yF '..,%' : L f, ' _. a n4 o. - .J.. '..l :... - ^ ' ". h?...: }'; 's;f .,*: es' f, z, m : .Q }, s

a..

o .- > '. ^ :: ?,, 3 ',f. . ? : '1' ' *. '.'.., l u.Y..' S....;' ?, ,<q.G, -?. ' as .o r - jty'gy;'., ..r' ..( ..pI',' 4, J. i' -. , k. I,, - * .f. <Q- ^;". r.,? + .l.y...p 3 ,,. ',.... q g, h ;' ' '.. y ; ','.g.s 3 ... c ; i J',,.,..j ', 4'. f, o a ~. c q '.ic. ip.. 9.. l....- '. *..

,.,v

.,,.,M,y :.,.. Q, n i.. : '. l ,',,t' , ' ], ; n.., -.. .l e J;;> 5, I;[.;. e- + s.. n q v 4 ,Q ; ;;,nj.,.,,- { v 5,. a s. ~ ... ~ c MM.h':,g'l'h yy I, '[gj,.'..;'...'-. ev '; .l ..,q,. I ,.,e e a, ". - ,,.. p[ W ' @,/ h f'q.. (._ D .l h &h5 :' I". 1 i f'f".K....&.( .' ' g ;l1..['; p, Q.1f ; h.h - 3e.. (i (,}.., \\*. W "; '

b: .

2 * ;...e E, . [* 'y.k ( '.... b a/,-

y ',

\\f f '.., '\\ s i ;., A. O bf,.

y.,. v ',,. _

-:), ' i ,4.,., W 4q,. ' - '".,1. [.. ' ' :, g ' ' -

*;f

_ h ' \\ ( ( }'.,t :, 4 f,l,G : y' a ,g _ '. l. Q '. **,, g ,G j' .f'. { ) _. W f,!% \\... ; :. s. f: ,, ':s,, _. '. ':y :- t. f -,, 'th *.. h); f' ', o. $ 'I.f . '..,4 ?,ff ' e *' ' 'b , h..,. '. E ? f.; _ _ '. /.. Q ' ' 'i .N g. Q *.. ' , ' (g. A h-g,?.. Y' 3 Wff;M.'4' - I' '.3.4.ti. [.Mg$'..h f ^ ?[.. '. ".Y3 f ', "$g., p. s - c4 ,i I., [.. D.5 ',f'Nd E 2. 1 ? t t g,g}k .. ' ' 9- ., " ;-.ht,.y / j.y: .c'., ?- .(, a ;, g,. 6. / jy 9 /p -, p, g, : f ].l. .b, l_ -) h * "y. .jg_ '-' f .1 '}. k%g'is *'(- /* '.,g. ~ . s j J.. ?![, 'y, ' "'/ Q;* % '

.,g

' }: ,p q 'q ,. j),,. :. * '&ih. f.: ,9 . :. 3 4 - : : ,4 W'F >,,, ; , :. g A

s j.

, -, -lN' . l. ?. l ( i'; l -

S

.I ,l:A k' l, ? '. l . b::.:. Q. . \\ ^. ' 3! -' ' ' N: ;.A,4 :.d l'.'.; - * ~ b ": lp 'T'k ? 'I .' ' l, q'. 7,,'. Y,.'.;h", '*'.' V

1*

.: *L.*;* . ~. . is:k A \\' ' L'O' '+ - ' ' ?.* y 'N-l Y'g '

p t y ;.g

~ ,'.*,**.P.. 1';, ii ','[' ' ( - L' '..: . ;* > y ; ' :. - {. "?' ' f' - /* . cf? 'w 4 V;. _- kC . hl -

m.. g., 9 ' t ;. b ^ i '

l r r.' _ l

,*. 4

'o i 4 jf,q. / '8 ibi#

7,. ; -.

',': { i@ '. ' 'y.,.....Q, . -' 'q, p ' Y, .M .Y 9.i p', fi, i ]t k,..[H,{ ; ,_3 ..' k I, 4 - Y..,J, > j

t.

,7p._ J ,.9 / ',y ' U.I I. N.[2/ M S i Yr. 'I ' g,:. - '#,[ i j.. h. 5 l! ; .[c '^ . '. #j,h ' _J,/, 'J f " f l ?..., N .,N' . ' b.. [ #y' < - % .,.,,.,,*./ l

i.

/y{hf 'l u .. p.W 1: pg ",..,l ; p I' '- '- '/ . g 9.y e '. . )I,l, c.c [ 'l M"' ' ' gil,: .,, '. '. Q,', [., '. -c{. ', I,d # i ' !.i h. ., Y @?b$ h8., Gb l[: h ', 4: ), k I' V ,V/,, - [ l.i.h't *' i.(v:f., ' :.. '};Y - (I 'N }: 7 ' I .'? I. 'n h *. ,7l.D. '., '. ') .s.. .. ' 3. ; ; ['. (,. ' ' py. : r.g t 5, :. (. ;. c ,[ U ' ', i "{ 'i Y ,4q ~ ~ [. .\\ . g, ': '... : w ' ~ ~ g. , _>f.., c. ?-' v.; l, v ;;Y ; ; ;,. '.nq.. n#3 s.. , '.g.. * '. ,[,, _ 3.. -

v '. *
q:

~z t ' ;x * * '.

c.. : ;.u

.., s ,l ' %h ',. I A(' ', :, i' - g., ~. . 4.. .k y,- .-. ',,,j ., i I ',.,;. ' ' ' ', ' ? : i '. .s * *

... t.

- ".1..4 4.,. ' g,p : 'V'r 4.,_.;', ", '., ' . 4.:. '..../;.

y,y.

., y. p ' J .st... 9, n., os {., 4,s g, '. ".g :...,', e t ') u-l,,.. I , g., -

. g f, d.l ;.

.b ,,.'.\\;

;4,

'..',,.'.,c;.(,: - e:.,'. .... *3

4,,.

I

;...:. s o.

.' x ~ *' .,s,. A. ",6.. y .,.T,y.,,p g;]-). v i.-. ;,; - c.,'." .u. ,' J,t,: ,.. '...%g {..*, - y ..) g n e - ,f'.,,.*I..:.,'- '.'),N ' ,'4,., v.6.. j.. n, a. 9- %gg ,,.a..,.. - g/..,g pu.,.,- A.;3 ' 4, - '.. '. .- Y,..,;,sp - t j g,

,., j,.

y.. ,. g i y - j;,';3.l 'y }g,, .,:. 3 s

. 8

'.;;v,g;;. i' .a n ye g. .s. p ,,, ; - lg :., 5 .,y.7 ,3 .y '. : - ,.f., } ' h, . [ U,Y , jg 's yg * ' ' - - -.,* ", - ' '. '. d' >y,, \\, -, 'M g, c f, j,,..((._.,., ',,;,y,,. ',.,,,.,. f;,'.gg

~

.,' '.,,c', ', 7,. i'-, J. c._ ?. ,pc, t,... _9 ,,.,f .f*'.'. e: (,. , j . $s. *>. ;.- s. ^ x, L. ; 6 ;:. ,Y

., e f

's 'i.- /' ' :-' 1 - *',*,c,' ,k,g,' . 3 ' A 's t. 's . ~ v' q{ - s.. > y - 0c%

' Jyf, J

i - '. g h.,:'d ' y [ f' r ~ [' .','.c' ...~ N ,.5.. i ' ' v ' t,' h. - ' % ' ",[';4,, y-e a e ' ' -. -,/. ,,,,g,; - *pi5, s l h,v -. gl.I., Q }/ '.....,. ...'(*. .',.t.. **. 9- ,-,l ,/ ". 4 t y'..4

c,

?. * * '. '. 'j,. 2 .J '.t. .,g'.,( s. 1 y . i

l.'

p.. t, W. : q . Qtg 1,2, * *

~

'-lt-..j .,.i. '.. ( 6,) '.*.i i..g. , P i ' M '..,,.i ' !s;

A e,

.,h 7 ...?' t,,, - * ~ p r>. s' .I -1 ,4 y -; r,.'ij ,t.,$.

3., !

.?g ;,' x _, N,,,L'.. \\4 :;., - '.'i,.'_*5*. ti g !4 .f , d c ' '. l } Q** ,'J i. g p. y,

g, m

.y. ',,e 'J[

p le f' 3

1] l ,,.f.k. ' 1.... 'f. .[c.,,,, - ",.j. " g;[. jedeghk [f.k (%n.I,'.[ ' Anhas a ;.; ;4= 7 ;l:(.E. ' f ,(;- .g... monen . ww,w 8.x

f. ;.. 4

~ . + e; n. n... augw _ (fkf f [.l f.;l[j [ ] {l;}rlm./.7.v.c7

' & $ &p amm p ounpmweigh.?l&.f,'. A " J
L '

m Y .:..., e. 7 e.., 77 '... . g g A f ' h N..? ? : f l ."..;J_...y

.3 %..l,

f Q x'., v A nnan q

Wg fy[f(l n. a,*;,:;,.n ..., - ~ e ~/. w~.. 2 .a 4 ~,., ' ,, v.. ~

4. r, t.'.,,

, f,. -- .g- . i '..,. ;.p ' ' l. o, .,...; y.E WW .' b.[ _ '.f.- l; ..'r. ,s .o r-7, n. 4 ;, ) ' ' ) ' ', a _ % (;;*.. ;.. : +x. 'u . g 2,,, s ?. - ( ' f.; '.. h _. N R..:,,[ yn,f... *, .,,,,.. j. y:g :.; g l* ah'll.i', ' ' 2 ? 4 ' '.. ' ' ;, ; q. _ J. ' ) ; '. ! . x_ ~ hp8 _t

,+

.' ' gj, [g g

[,

1,000 kilowatt-hours of programs for public schools. us, both as individuals and as a electricity for seven months But CPL's support of an adult Company, to put something during 1988. However, literacy program was a new back into our communities. keeping customers satisfied initiative. Needy families in South requires more than reasonably Without an educated, Texas who have trouble priced electricity. That is why literate workforce, South affording senice will benefit CPL emphasized customer Texas faces a threatened from a new program - CPL's senice programs in 1988. economic future. That is why Neighbor-to-Neighbor - Residential customers during 1988 we became a which will begin during the responded enthusiastically to corporate sponsor of the spring of 1989. Neighbor-to-our Equal Payment Plan, Corpus Christi Literacy Neighbor will seek small which averages their bills to Council. donations from customers who eliminate seasonal variations. Stockholder funds were can afford to help needy This equalizing of payments used to produce a public families pay their energy makes it easier for our awareness campaign called bills. Our stockholders will customers to budget for their " Windows to the World." provide up to $100,000 for this monthly bill, and it helps to Radio, television and print program. Community agencies stabilize our cash flow. More public senice armouncements throughout our senice area will than 13,000 customers signed proved very successful at both administer this emergency aid up for the program during attracting needed tutors for fund. 1988. the literacy council's program Last June we also made our - more tien 300 tutors The 80#fh TBIRS bills easier for customers to signed up - and making more g,no g, understand and more people aware of the unuupA informative by replacing educ.ional opportunities PL is keenly aware of postcard bills with letter-sized available through this free j% the importance of bills sent in envelopes. In senice. We plan to extend promoting new industry addition to providing larger, support for literacy programs in South Texas and more legible print, envelope throughout South Texas in diversifying our economy. Our billing allows us to include a 1989-Area Development and Large return envelope and brochures Another indication of our Industrials group played a about safety, energy community involvement is the major role during 1988 in conservation and customer new Reddy Neighbor encouraging many businesses senices offered by CPL. The Program. During December, to locate operations or to bill includes more information employee volunteers in every expand existing facilities in about customers' electricity region spent a Saturday South Texas. usage. On the back of the weatherizing and painting the Last year, 37 companies bills, we publish CPI's policies homes of four elderly, low-announced they would expand and eligibility requirements for incc,me families. Community their enterprises or begin new different senice rates. welfare agencies in each operations in our senice area. Customer surveys show the region recommended the The list included uranium change to emw' ope billing has families in need of help, and mining, food processing, I been popular and a benefit to CPL paid for the supplies. The shipyard construction, l customers. objective of the program is elec'tronics assembly, defense 1 Unfortunately, South Texas three-fold. First, it contracting, and interests such I has one of the highest reemphasizes, to all as General Dynamics, De illiteracy rates in the nation - customers, the importance of Dietrich, Fruit Of The Loom in some places 407c or more of weatherization for home and OxyChem. The largest the adult population cannot comfort and energy efficiency industrial expansion was read at a functional level. CPL Second, Reddy Neighbor announced by Formosa has traditionally supported exposes volunteers, and other Plastics Corporation USA in education in our area through South Texans, to the needs of November. Formosa will college scholarships, our less-fortunate neighbors. create 1,700 new, permanent educational materials and And third, the program allows jobs with its $1.32 billion plant ) ymmqq MMSM j

hI hh hy h DM gy,. g gyg m0b r 3 % * $ h W h N rl j)y:' y;;$, & &@ / &n% n M ,fQ f 1 expansion at Point Comfort. constmction of the $22 million The investment is expected to facility with a sizable indirectly create nearly 8,000 contribution. We believe the i

jobs, aquarium will prove both a

( Throughout South Texas, major draw for visitors, and a i maquiladora (or twin plant) valuable educational and growth continued at a research facility, phenomenal rate during D88. Our service area's $2 billion There are currently 35 twin-agriculture industry suffered plant facilities in our service during 1988 due to depressed area, manufacturing everything markets and the drought that from rebuilt jet engines to plagued most of the nation. fiberglass bathtubs. The However, adequate rainfall this maquilas represent the spring could brighten the interest of many blue-chip outlook for South Texas f, manufacturers - Delco farmers and ranchers. Citrus Electronics, Ford Motor production has almost Company, General Electric, completely recovered from the Sunbeam, W. R. Grace, effects of the 1983 freeze. Westinghouse rnd Zenith. h f k. f . d[fi 4f In Febmary officials broke Mgfkgf[gg [g[ggfg 4dh@hhje My }L. 7h<hu Ingleside. Construction C#Sl0merseesS ground for Naval Station g P ;'g i-Q d k $ ( p Q p gg continues at the new facility espite the sluggishness i FfJelgg f' which will be the homeport of of the South Texas m p-4 g b@gg tk Pgh the refurbished battleship USS economy during 1988, M a g Wisconsin and a support CPL's Marketing group i 4 b" fg%g g*f n ' ~ / 3 " ]Q Y K. flotilla. When complete in continued to have success j th; W ^WQ[Ar 1990, Naval Station Ingleside promoting our services. 4 + 6pM$ f / Q is expected to boost the Total electric homes % p$ g y " Q y Corpus Christi area economy represent 80% of the new 4 4 2 _o j% s4y by $300 million annually. On-housing market, despite gfQ Mgg - site electrical load is projected aggressive competition from p g{h ./.. w,, p. m j j%y t be more than 20 gas companies in water and y fj hkg_ megawatts. space heating. In 1988, 85% of gQ y W D Lg g g The overall picture is all air-conditioned new homes y g7 f y g . [p p; brightening in the had electric heat. g'l7(g'wh [g >.Q petrochemical field, and South Lighting sales, an area in i MMP q%pg1 %, W % l g y7 mA 7q p Texas is seeing an increase in which we achieved record-3 plant development. The setting levels for our industry o p% %)g, " 7,, y y y relatively low value of the during 1987, continued to be

q 7 g f,'

4 ;, g dollar and petroleum feedstock substantial. We met our 1988 I

J q

has spurred this expansion. goal of an additional 10,000 j u ,$$5 $ g; ' d b:) 4 %* W/%s. Tourism in all parts of South high-pressure sodium lights. J 4*' Texas continues to expand. Since 1986 CPL has installed e MW@Nyw % 4 fs d Every year, more retirees more than 32,000 of these gpy W g3 M from the Midwest and other highly efficient lights. kg ? 'gwg[44,'$:$h,j,f@M,,y f $h parts of the country are Customers obviously have m J g choosing to enjoy the Rio responded to the service, and % g 2y $; d Grande Valley's mild winter the lights have increased sales g %h~% $pg 1 p eg m W'j weather. In Corpus Christi, during off-peak hours, M, w] y :, [ d Mg[g j%% groundbreaking for the Texas We also introduced a y Cgykm % lj sfh State Aquarium iook place in commercial floodlight program [7 i ' " h March 1988. CPL supported durig 1988. More than 2,500 aif W-k m( n m ,r'u +g;i j,g 3 3 ' %ll M b yf 's 3 Cm g %' ~p; p[p < M. w pp;y] g&qQ f yg r gy

,q .; s. '. _g .) f 1. y, a jQy 0QNl .:u .4., r ...,t,. .pl... 'l 4 s- .. p .. '.;v s 1T .h '.. 4} i ,,i., ^ 4 ' R.. 3, t _., i'

g..%.,. a

'7

j. - p.,;.

4 ;.4 I, )' . '., ( ' -},! - ( ' Cfl; . f l.s. l l I'"'W b s..% ? f.. ':. .. p f,

1. & h. 'pg

..a w: s w '1 v '. ~ I k'). .2 p- -, '7 ~.,t . ',s *.- .p , *g.. (... pll 7 .. k ~ 5,; ,g .c' ,,J-(' f 1' 6 n

y..

.c%b.

. w - ' f: .l.. ;,

,\\ f - e - W. -. -l ~.,. . Jl ~ _ ^,) ' g;. :.., ,W,... t 1, ^ __ .t,, (; il } ) s, Q, .{_- . f;.; ; ,j. g u C y,.; , g v. p. '. a: s U e '. e., Y}.. e ,l. j [ ' p,.. .)..,' ,.y q

y. p' 4 _.

, f,4 .0 .;.h s- ~.. g, 49 _ Y* .'} ^ ..; p. g-i b,. ,,v. .. ~. $. ' ' g.. e;*',. [.. 1,9 - - ~ v.:-*' s s. 3 x,. o g ~ d ,t s m. 4 . s. -. \\_ ._-b l* >A s : [ y 'h(. y,, 0 . y .c J, 3. f is _.%..+

j R

. p. n.y*) n,n.. c :)., Nekkp M$ng lhnnkehntMkW. ~_ c,; ' Ol 3 ~. m - ~. my my3 u. q_ .y - -- /gq m,g,pg m q73 s.. m..

, gp, y, a; g; 3; 4 ;..

o ? y gy g.;;y ( 3; -s y ,.. r- . g. ;- ., g-6-

e g s. /.

9. '.

3 ~4 . 4,;.[ '..t a 1 s s ,r .t* b;,. 'l i. $ %- k. , s Aer".'~ .nea 2,,.....- y%,... ; 8- ,,,., n. e.e.* ~ .j.,., 'Y /' ,[.* e g y '. a. -. I.a. ' l n.. s..<. .,.,7 ~ ^., 4 e g ,,i'*HW..,. [\\

^

_ 7- . esmovir m.. U m M.,, y '. 48 v f.p 4 .a a,', ,,7 ggf' 4w,f",. k l l / , ~ / d u' ,a f, . asaar, ,1 - i ' f W. a, N 6 f g ;.jf ~[. .d,., w.y .~..; ,l'. .av - ~- : -N.' ~ .y. Ad ~ t, . p' ] y

_ 3c7,

3 q y, ap p yp y n = . L / ] Q,- 4 4,,,, e.. i g..; ./ 1., n ? f 4 1 9,.., ,;+..a e ) ,,,r f t M: e t. U T'

fa g

N.

i. '.

f s' i.. :, ,l d ) .2 j, G." n 4 g N... 41.' 4 , - / ., j g J M r. n,; i ~ Q. y '. i - .':,6'. qlk

j. h ' '

') ]-- g' ,. -@,6 - h, g.'/,* *) .,o, . ?[ ~ O ' SN c,$.7..- ' :lg: ' ... -. <, !, [-., ~ aW # M W#m' w y% nue. mpa- =f'=sthe ,.D sh g

NW#t hair Aser Apurium assusata g

N j- ' f/

g, ai.

c.

',,,,,,&: qf \\mm~,, jy,_j

..v. _.3. - :~- - /- '. s'. % /. j. .y ,V s, 6 a,'. V f. f.j l,!l; - I. ? ) .q ..s, .4'a -) (i O \\., -= (

commercial floodlights were enhance our natural security procedures to control installed. These lights emironment for future theft of senice, improve represent one megawatt of generations. It symbolizes the money handling procedures in off-peak load, and sales of four strides we can make as a our area offices, and better million additional kilowatt-team. " protect employees and hours. We also participated in the equipment. Texas Coastal Cleantip in Preserving Natural Septemscr. CPL volunteers Positive Customer Jomed the statewide effort by Resources adopting a one-mile stretch of Contact Training /Phe Ben E VaughanJr. beach on Mustang Island and FPo ' setter reflect the b Hatchery and spending a Saturday mormng F importance of our 1 Research Center at pickmg up trash. All told, we A. people to the success sacked more than a ton of our Barney M. Davis Power of CPL, we renamed our litter. Station in Corpus Christi was Employee Relations group completed and dedicated in Human Resources in 1988. W0rkl#g 8Marter, That department initiated a 1988. It stands as one more example of our continued W0rkl#"8 ale'r number f tr ining programs commitment to preserymg and to improve our employees improving South Texas' natural 7mproving customer senice ability to serve customers. In environment. The new }j was the driving force December we began an research facility also illustrates Ebehind a toll-free telephone extensive Customer Relations how industry, a conservation number we began in Senice training course. The group and a government December to provide 24-hour class teaches clerks and office agency can work together to customer service. Under this employees about human enhance our natural resources pilot program in our Central behavior and how to create a and t'ie economy. Region, customers in each positive, memorable contact This cooperative effort community can call a regular with each customer. We stress between CPL, the Gulf Coast CPL area office telephone that employees need to Conservation Association and during business hours, or a conduct business on a genial the Texas Parks and Wildlife toll-free numbe.r at any time of as well as a professional level. Department produced the the day. The 800 number Managers and supenisors latest addition to the GCCA/ connects customers with a receive training to help them CPL Marine Development central office staffed by recognize their role as coaches Center. The center, which trained CPL employees. We and developers of people, and opened in 1982, concentrates expeer the new centralized to keep alive the philosophy on restoring threatened senice to help shorten our taught in the training program. gamefish populations through response time, and to cut Another new training tool, a research, and providing costs. If successful, the self-taught computer program, fingerlings for release in senice will be made available teaches our customer senice Texas' coastal waters. With in all four CPL regions. employees extensive facts the new 14,000-square-foot Company employees about CPL Because our facility, the center can produce worked safer during 1988. We clerks personify CPL to 20 million gamefish fingerlings reduced the number of lost-customers, they need to have i per year. CPL has provided 69 time accidents during the past answers to all kinds of acres for the development four years by 75E Our questions - everything from center. accident average was about how to read a meter to the Texas Governor Bill ha f that of the industry's. latest progress at STP. l Clements said at the June 17 CPUs Safety group is dedication of the center, "This currently creating a database day marks a milestone - a to track trends in injuries so milestone not only in our that we can continue to reduce efforts to improve fishing in accidents in the future. We the Gulf, but to conserve and also have formalized our [

b ...w. c.rm 1 y*-~-V' 1

. M T7-- 1..y - -. ya

,w-. .c ' "M@ 'Q ) ) i \\j, Q Q' 'Q 4 : nv" ? ., uy' j, ' "g@' GYc 'n 3.pki. $,. dQ%%pw[ig t c R Y,, W J ' 0 W y y$ g [, 3 Anh Q >7MM ,x.~ g> p; m,, w, - ~ o m.m @m p m y1.,dp ,bgfa y,nmg p 2 d r / ;n, e + n.ig a - ...a mg a c gQ4 ms e y R Q M,3 n 1 04 m -- < K- - 11 s. m3 4 g g y-m ir 4 p. s , % p p,..x,m # Q m, b f, %b w (,:x;;<.

1 P

5 < v

w e

1, mm, ;. .a,; y: n. (<hl s e / .. y;9,l 4 ii , *uy m.' 4-

%.] i g,

.t,. 3 e I i /T. Q '.d - t f r. g g 4': e?. J y )! n i ;. J(y, ,i y g }, s..ayq M,q% .Oa w 6 w. Q;' pg.: y;;n y,: ym r ^'. ' ~'t . y%p W E # @ W ;, A W W gn W @ g/ gM W h@ s, 5 J& ' f.R f bl;gf-j] 4'

f?.,

e [ 'T H 4 JN @@s@@ N M i x . m x? v g, J 1 x wg \\ + n, v y h. hh hNN f h ',,',',ff; E s W, ym< -

g'.

wa me . M P) y Rp ~ - c' u, g - jf' ~ , pg h; =e:.. d l g%; };$',. ; o hf:: 3, 9 s+ r t g% f ., g.N '.m ft j al, 4 3(3 l' m

. s

v. p afc e p. ~

r.a i ^ ,) w n: %.g_;Nf&af.q# QQQ%%w,f%,; %fM W$y y \\.4 yy q y94 33 ggy, ff Q l $f m a m %w~ : gag Mc n&o.m%% w <.gcjp gf w ! w gw g <a e, w,m;;fBOARD OF DIRECTORS" ', y,0F --A 4 .Ms w~ ~g-/ m,o i ~-,. ,p %hy. ~q' 'rm

s., m

, Q..lbQ1 c

4' y

c 3 -, q q a a 1 3: s t ,.m. tl) h , AO' J P f' )3 K_: )- Q' f Gl' ' 'l..O % Q. i ; i

t

\\ g t Ay 'J1 ..h 1 g a;4 m.A J :, y - ;Q@,;{g/ ,-.A, qq VT, V. Shockley, HI 0pw.7, a3 pN 49M j nj g. . s., su 7,... 5,y a 1 M;K Shockley,1H L u @, 3 ~g

M.'s R$ Pnnudem mW Chief hviwe OtacetA @pW, 'a s d

t d i heedent ans Cw!Execdw Chr M i @T l k g#g.Centrd her mW IJght Company,p 4 --'?r J + sid! 'f., 7 c.,p.Chrig gg,g - g '; -

.kohe"rt,L Rangen,, '

H pfg. 3 p~ -e s p y* s.4M. L Borch<elt ay;,w eM'M;@.M,+',/?e r>

Execu6ve b beeino e < _ %.u ',

m.- -eu w p 9 L 1lW f WlW. Nrman, hesicint adChiel Execwe y 1;Richwd F(Verret n p..,'".Ay / r..: t < m> 4 g.l 2j M 1 9 1 M,ci+M.l d Forrm, Cemral and, su th ht con,uon,0 " %, E h Nident ud Chief Engin, ee,rin,g Offur y 4 v ..Js .s 4

q9s v.

g y,g %gue g; g~ y "M,, c y, ~,s, ,y

mg %< g: m ; y;[,L 3; m. -

n u i M/?p'* fJohn W. Crutchfieldi; ; i3.,, s N,, " ; Clayton'R" ', Kirk"rcq i) '. m fre ident e " i hesident ad owne4 John W. Cndchriend C ~ ~- : s 4 y . ~. J t hyeny (a diversirx d enn-any). ; E- . 4 ch e , q>j ;; p s W %Cor, pus, Chri,g 7 m a c-,,=n i i Jh PreM p f Mi d ..,m

Robert R. Careyj ~

s EW, R. Farquha,)rh.. _ ', t

Retiremnd MmMrl Lavaca-l' W. nh he'id"* ? "

i W i Navidad Rwer Auttecity, Edna g IGerald kV, hid e f 1Ruinn M. Garclaf n, s s. p ' bCounder f ' ' [ j s J i yl5 const,ructen and lasj devebpmen.t,' Laredo ; bendem w prunW at severd Arms engaged (

MM* SMI.'ivani ?

4 2

L: -

on a Ea i m. 3 s 4 c 'Iteasuru. -4 g , Wa.her A. R'a'tclif"f ; F Ronald L Kellett 5 iGns Rawh, Inc'. lurkvmeM:s _, wm' 4 o =i 4 .. m Nwdentc.5,, s - ,,s q a m 1 D5 beht'A/ M.AilenCh [.M M, E Mary E. Hunt f/];, q ] t i s ' iChAinnan, han %AefunceharN lac,d ' Q~.. ; J Aaaalampegap p_ } hiace { ~ f' -'W ' g y g. Q ]%', _. + q s M Rekam C, PetrD,7.1 M~

^satam %reimir i

,, W.1 ? y '1 > Amng carrisospringni y ~ W

W.,,, ~ c 4

u.,.

~ ~.

r ' Robert L Range 2 ' "v 1 4 E ve h P,eodem, c,mrd Posa ; - fTRANSFER AGENT /J d . ?ghf Cawnx Com CW D REQSTRAR OF STOCKk ? NifE Lee Richards(,i z jj ["' sw.1 - e o. m y, s m 1 Central and South West d, i ' ~ ' LPremdent, Hygein Dalry, Itatinges;VW O

gd 4

w.W plq v. TServices,inct.' s i! r : v1 se _s N g .B. E Teague V 'EM C" W R O. Bot 660164 h / Ad%r % ,; s [&q:{ CampwtyoCarpunOn,isG xb Praidtnt, Central heer andjighp %.:n Dallas @f< m 7 c.p --gfy a a j. 3s s y f{d rmatid secunty hoMen eWWThi , "y SJ g [ bhR 11 1.' N 'v. / e h Freenient and Chief !$gineennghE[eM 'A4 !.and customers of the Company and is not ' J ransmitted its connection w g Central Power and Light Cornpuny.e 3.: s < ' b.f[- < i <Cerpua. >Christi A ' ' - ' ' J: \\ t y' q 3 i b Cany security or offer to scll or rdid to buy ( ',any security.11.3 i fl 1, A 9- ' Copies of Wa rerunt anme 6nad ii Richani H. Bremer ?esigned'an Vice; 4 statements induded therein and15e : LPraident and th,rectooA. pnm.. In.. a -- a o hr r. noad Chalker retired as twetor,3 2Secutides and Endiange Commission. Annual-e 7.- Report on Form 104 are availabk gen August 3t;In ' N

10 aD security staiders of se Compais A r

.;o. i copy will be mailed to any security holder.or ! [ Walter A. Ratcliff transferred toCentrat and n . other interested party upon written request . feuthwast Services, inc_, effnctne 11 arch L 19H9. ' l to Walter A. Ratchft, Secramy.. P 0, Box, H ' He was rephced by C. Wayne Wre..;

2U1,T* pus ;Christi, Textri1403414. '

h' ) y {..

j

.g .I , i, .1 s'] t 3 .-e i c 3' 3,- m ( <-1,7 5. I N j-- g q. t '4-,.7, ,,.m-Mg.' ( i M .T n fed [. 3 y

f y k{ &, Q,h w ; by }+x hp. - mu n% - .y ~. a m.g .;c .~a .n., x g% h N,, Wh . wu -dw h h kf b g,3 a[a.<:A( g9 l.j g;;g'. g,g :-. % nw, cp J Q&gw. }whgg:.%zg ; ,,.a nu

a; w.g -Qfg.;y p p" ;m-uu

. m ,i 'My g /,j ,,g{q;gL; qq.q %n(. ~a i' ~. ,y - j j ^ %;f- ,,y Q, hbM ^ @a o,. W' .q m,, ? M.awp;& , g;Q;, w,.~N.; , w,f,,3%g. + y.,q, h, g s . w,Mg, fp

p 7

swn u u e ,7-w;vv ,jgy,h w a,n ' n'>r G g%n v %m,W 1 m m:. A s o. uv e n cad, M,y c u. mgt..p.q > qs+m y 4.u4..o h.;5,m. e ;,. a m, u ,q a(Lw. yw. ~+m, n., m;H n; x.a '.,wj m'w,- ,' mg f.~ Ty1 yy, r, g.g n.. s,mi.M, d, A,up sAs t,g e. y . x..g;M ' 7, m,p= Me.c 1.~.jia f ' 5 + na s v. .,1 i ,p t,@a m g}u~m yfd. y/g < % p.- 1 ra.. q nq D yL ,h 4m m s .e. s q: @~p)g lM _,. 5 n "s V" ,1 . P mp =-

7 4

t t

ica t, Y n &. c t' .gg) A,A., [,.%v +7 t-4 3,.g# g 4Q W.X Wpm u, s .p e:,-Q i,3 / ti,% [h,'p %G" y akh3 #[g f-j ] h. s.(V'2Q c.M$ ' i ' ' {zju ' * . c h?f'$y[)P4 y y/ *

Aj.S

.1 v $ 9:3. W.; ijMy((jpIaf,Y'i 7 ;Qi,

g

%@..r I hi$y ] 2 V. i %) i ( ,r j a." 4 ..e y' XMK w s ( v.. Q 3 \\ I s l M@bbN M M u'- bbN 9b ' ' j M.. *m. E g@t.'[3 1 - gum

M^

Ms. y

[

'+ 4 &, k. h, i@ Q,. ~ i $,WW > v g 3 n,e im;.9 ,~ y Q b ^ > %.J ~ yh. \\., et w ,, y n.d h,p . - ~s.e, r .,,n

u nl

\\' %Qt W l Jn r w m.,~ ~j e4 .c. r 4 s j e ..a n s y. %q,, 1 r ,,g ,p .; t, 4r s I my.,, f.$\\ A& q%ay! %; 4 y ; %W MM y% f W- . Q 't.. *. 3 w m .n ga a y

v. 1. x,Sy p%

w,( a, a s +g s -s.. N- ~ .,g. A-p m.i ...s 4 k F[ ' IStbani .D * < U[ IRatchffit d ' *W% ' k[ N11dnt$$$ih ^L.c 'N ' a cker "%i khyk }n&W h&hf b ,&M" gY:, ? ', l, '. % ? < J ' QW 9 2::,R g,-'.

3.. r. o,

O, ;[np.?wi A, a\\. x e e t-33 (

j

k-

\\ O y 4.. g,, 6 a g g, e, e. y,x 3 s m$ 'y,

l g

su, -+ - ~ o 1 \\x q h ma ,. p ~~y m., yf 9 > < g, _ ,,=, q i ( i - r I' g ' ( * \\ O t . ~i '. '. l j;W $' d" t. ' / .) p ..@,y,M, Mrd.uhar@ # , %JQ$hDerci@. E j l Cr,utsSeN <

Beebe -

4% , 9W J ff Q q %, e ~. m

y. ;;p y Q).

y, g y n m's' r p.: w. x 7. . ign .t, v. Ag e [. [ ( ~ t q YQ. ~ O t s \\... u L. 4 s.. w s,j i &,.,g ,9. m, 2 . 3 y+; . Q< 4 \\ s y Nhry-B. y- ..g z .a ? -.- y,. ..q t i ( W:3g (.- (' ~ ,A'gM yf 'j e s / ^ l 'J kkiards

)

KellettD McAllen Petry i 1 [j 4 1 -) 1142,435 a d 04) W Qgh' 6 Net income @ > s ,7%9 J 156,819 L M91,927 ? att8)v, 3 s hg[ % OPERATING STATISTICSJ ( '%'W y g [~ [g 4 ((Nffy ' - cg$ [ 9.Kaowatt-hour Sales Uhousands) - .14,617,583 14,028,160 y4( 4 s h' WSystem Maxanum Demand (Kuowatts); () hh L@[i Electric Customers Near.endr 3,0.13,000 + 2,881,000, L5" W 539,896 4 4 5d546i U dir W g ,k:, CAverage KGowatt-hour Sales Per Residential Custoruer ' !10,925: . 10,369

5?
C s "+ "! N 1~d
-Q 3 w ,yd l ? Average Residential Rate Per KGowatt-hour '.5.97c l 5.9%. O4 flu , K ff (W}.jj 1 , a 6 N, S-V1:M -y m ,c, ;. n wn m w we, u y ympy,,~ ' < lY %gkg,, - hMY \\ ?:th ~ S, ,!yy. ,7 y ,s, e, q,, t. ~ t ~ $f ' l REPORT:0F. MANAGEMENT. Vyh,kh .m muso ww 4 pp',,, y g 1 n y n. v ' o/L > 3 TManagemei:t is responsible for the preparation,.. Arthur Andersen' & C6. was eng5ged to audinhed ' ' MMY n
jm
integrity and objectivity of the financial statements of financial statements of the Company and issue a report &ysgyl M
i Central Power and Light Company as well as all other : thereon. Their audit was saducted in accordance w'ith 3 7 @Mul f1 i jirformationic6ntainedin this ArmualRepert. Tbei. ' require a revietofintemalcontrolslexam genera!!y accepted auditing standards,LSuchstandsdsi %d h ifinancial statements have been prepared in conformity., S 7, (,, fwith'generaDy accepted accounting principles applied on provide reasonable assuduce that the finasci selected. transactions and other procedures sufficient to - 5JK MiM 4' ? a consistent basis and/ in some casesjeflect amoants ' h"h i ( basbd on the best estimates and judgments of manage 4 ' statements neither areinisleading nor containindial : ' d j;Q[ i mentigiving due consideration to materiality. Financial errors. The Report ofIndependent Public Accountants % %~ R', e information contain'ed elsewhere in this Annual Report ' does not limit the responsibility of managemtut.for '. d ' a% Lis bonsistent with that in the financial statements. information contained in the financial Atateniedts andU % 8" WQ. ^The Company maintaind an adequate system of. ~ lsewhere in the Annual Report.: AMM$ e M 2h,*o finternal controls to provide reasonaWe assurance that ' 4-i A Q % M, @' C M management's authodzation, that financial sta'tements . /f a - / ( ~ ".. i > w WM 'W,2s ..J transactions.are executed in accordance with f' D N M Mg(*,, - iaccounting principles ~and that the assets of the ' ) are prepared in accordance with generaty accepted - Q/,} ' 5 g< ~ rA V lg yg U Shdde 1(, 4
Yk,N CCompany are properly safeguarded. The system of.Linternal controls is'ducumented, evaluated
d*'# ""d
"*'W q
.c m, pyh%(N Mki @? dp ~ by the Company'sjinternal auditors on a continuing . M' M[M N 3 h QO@%_- ( basis? No internal, control system mi provide absolutec L; ^ 'f.R. D lahsurance that errors and irregularities will.not occur - h s M',OP g]&ds x g Edue to se inherent limitations of the effectiveness of R$bert L konge ' M a lhiQ M intemal dontiols hoversr, management strives to L Executive Mee Presidentb {' q WM, ?1 J maintain a hilance; itcoptizing that the cost of shch a ' w X.1 -
4 Sea.M M br'b + M ^, l Q%
p C ~l, @ system:should not exseed W benefits derivd NC 1 1~ 'M ' 4 inaterial juemal control weaknesses have been 'y MYj ,g 3 )reportedtomanagement, Gerald w.11 der 7* /j< %h QM f :m Controner y > $3 { % .l' (QQ: yb M*'l NQ
).[ A
'M A cp ,_ 7:~ f s t t e a m l s v
,,,n_,
,n p,@' y g.. a nL
i %W u s 5 ,4 y .m 7p
., z g>
g; g< : 3, my 3:. g c.y q m w, ,:. 4, s;c u, p, ap gg ,n .w' >l'g ca ; ' 'I: b s y ., i. [j: ,y; .c 4 . 1 + L REPORT OF AUDIT COMMITTEE '-{ w., ?The Audit Committee of the Board of Directors is # independent public accountants die overall scope hab 7 composed of seven outside direc%The members of i '. sprific plans for their respective audits. The G. N the Au&t Committee are: IL C. Petry, Jn; Chairman,(. 3 g. Committee also discusses the Company's' financial C P L,k U j John W. Crutchfield, Ruben M; Garcia,'W,.R. Farquhar; My statements and thesdequacy of internal controls 2The$ ^
Jr., Robert A. McADen, Ronald L. Kelled and 11. I.eef.v

M Committee meets regularly.with the Company's internalf M
-- during 1988.- f N auditors and independent public accountants; without - ;M . Richards. The Committee held three meetings ! '" ' V c management present/to discuss the results of their ' 's i !;L taudits, their evaluatiotis ofinternal controls, and the t y > gg$ The Audit Committee oversee:S the Company's.. T 1overallquality of the Company's financialreportirig.The : $ m ' ' financial reporting process on behalf of the Board of L meetings are designed to facilitate any private {.? 'aM' $geommunication with the Committee desired by
Directors. In fulfilling its responsibility, the Conraittee :
^ t recomtnends to the Board of Directors, subject to '. +9', G q . sharehokler approval, the selection of the Compcny's,
internal auditors or independent public accountantsSS 3
i;! W,,H "f, i' i _ k independent publicaccountants. The Audit Committee: a-I". bi n E discusses %ith the intemal auditors and the s m o l4 3. y.. i <L 6 y M, t? M j 10. 1 4 s ,3r m. . ~. /$ 't- % ~ J H. C. Petry. Jr.t ' c A
x
e u
? Chairman / Audit Committec ;. O 1., 7
y
..@y,,#;d C q;- W ,ey y m %c IM v[ l j ti 1 e 6 "[ ~%,,, 0 ,j 4 3 .. ( 7., 4, 0< .a a A REPORT OF INDEPENDENT - A A o 4 N PUBLIC ACCOUNTANTS -ca 1 >44 < ~ ' y y w q, Texamming, on a test basis, eside'nce suppo To the Stockholders and ky:2 " @ Board of Directors of . amounts and disclosures in the financial statements. An' Central Power and Light Company: iudit also includes assessing the adounting principles 1 We have audited the accompanying balance sheet's used and significant esumates made by. management, as? - jy J and statements of capitdzation of Central Powes and weH as evaluating the overall financial statementy 'i'@ 3' Light Company (a Texas corporatia't and wholly owned presentation. ye beheve that our audits propa 3 gg~ g% g subsidiary of Central and South West Corporation) as of. reasonabh basis fx ow opnonc 3 $ j p, - In om opinion $e financial statements referred to N '1 December 31,1988 and 1987, and the related, . bow pasent fairly, ;n all material resphets,' the y A, ' y' a i statements of income, retained eamings and cash flows? .= financial position of Central Power and Light CompanyC for each of the three years in the period endid December 31,1988. These financial statements are the as f December 31i1988 and 1987, and the msults of g, its operations and its cash flows for each of th threeby y ' C "I nu,ty wn generaHy accepted e responsibihty of the Company's management. Our years ya the paiod ended Denmber 3y19 responsibility is to express an opinion on these financial [,. 4 gh y gb ingg g. statements based on our audits. prmciples. + qyg We canducte<l ouaudits in accordance with generaDy ' [g } $*, j accepted auditmg standards. Those standrds require : ~1 :n that we plan and perform the audit to obtain reasonable T. Arthur Andersen & Co?, w.m free of material misstatement. An audit indudes Februaky 23,1989; y , %s ^f assurance about whether the financial statenwnts are DaHas, Texas i e 1 F 4 ig g. gy 1 't .,q o m
p pl p
iM >h m x h'. \\_.
w. ;
i 1 G 7 y e, c } \\;' l ' CENTRAL POWER AND IJGFIT COMPANY ' ^ i E For the Years Ended December 31 1988 1987 1986 - (thousands) ' (- Dectric Operat'.g Revenues" n X Residential - $295,167. $273,223 $284,345 N Commercial - 244,082 231,004 - 241,773 - Industrial 180,345 198.481 254,626 ,4 Sales for resale 35,458 c 30,034 47,239 j y ', Other 35,380 = 35,522 31,992 { [. --790,432 768,264 - 859,975 .. i i g . Operating Expenses and Taxes. - Fuel 1 324,698 303,867 392,535 jurchased power 18,931 13,440 4,8Fj-3 g; a Other operatmg : 136,181 124,276 - 115,153 4 Maintenance - 42,338 -40,891 44,254 li 4 s, s ' Depreciation and amortization - 71,497 - - 55,115 52,223 ) i Taxes, other than Federal income - 45,430 38,177 36,388 - .] Federalincome taxes' 28,979 - 50,063 69,087 { 668,054 625,829 714,509 L; Operating Income - ii 122,378 142,435. 145,466 l i . Other income and Deductions Allowance for equity funds used during construction 98,424 103,340 83,846
Other, 2,912 825 3.053 l
101,336 104.165 86,8W ~ income lie. fore Interest Charges
223,714 246.600 232,365 Interest Charges
~ Interest on long-term debt - 122,356 108,038 107,521 ih Interest on short-term debt and other , 7,087 12,172 - 6,770 - Ailowance for borrowed funds used during construction (62,548). (65,537) (56,091) 66.895 54,673 58.200 Net income 156,819 191,927-174,165 l' heferred Stock Dividends 21,525 15,820 16,010 Net income for Common Stock $135,294 $176,107 $158,155 .- x CENTRAL POWER AND LIGliT COMPANY 1 For the Years Ended December 31 1988-1987 1986 6 (thousands) Retained Earnings at Elegmning of Year ' $585,662 h59,555 $197,555 Net Ircome for Commou Stock 135,294 176,107 158,155 Deduct: Common Stock Dividends 50,000 96,155 Retained Earnings at End of Year $720,956 $585,662 $459.555 'lle accornpanying notes to fmancial statements are an integral part of these statements. ): iS ] ~
g, Jp ym ,y q:.1 -, 7;;gggyp pm N..y:_ + o gi s qq s w;7 gg4 gwp n i, g yfyh.u.g y, ~ y 3, - Mo gy g p,ygj],j ]j 'f Uf 2 pi r a r w. . ~,. y 'p k' 4 i p y
3%gp,
ygh [f ? CENTRAL POWER AND LIGIIT COMPANY, 'OM y g%[ / /4 - As of I)ecember 31 '1988' - IW7s 1 pg
1 W v, (thousands) -
W" J 1 a 4.. A *a&. 4, k r n. . ASSETS - ' ou W Wi%L Electric Utility Plant '.m ' $2,292,798 '
$ 1727,686 J$dhyh ' 3
' Production ' S 289,618g[% Q M -- Transmission - 304.133.
u. L
.~ 555,914 M. 97 N.4 Distribution J v579,562 ; i 1 1 a 193,327, ' x190,048 &JM fn General p' w m1,M7,78hh i hh'% Construction work in progress
682,716s Nuclear fuel 4117.101s v102,51N
%Jh $p 13,853,568 /Q@ -.k
4,169,637-i 589,9094 less - Accumulated Depreciation 2-658,015 :
y S 0 3,263,659 4;j WW li 3,511,8122, +- 4 L-Current Assets r -' w M!k{} hk M 737J h Cash and temporary cash investments m b 1,790 ~ 4-4 q j',g" f% Advances to affiliates Hu, d?- :52,205 - Accounts receivable - J 14,282
.14,866W s 910,145efM ( ; [f Materials and supplies, at average cost Y
' 23.042 r 27,039 F Fuelinventory, at average cost-25,046-Prepayments and other - ] i 12,162 - ee . 12,074 a a 4 g4 mr < 128,527 c - ' 2 64,861 & L y ' sJfN ' 4 30,283s 113.429 c %,n M Qj M. Deferred Charges and Other Assets .x > : cr , e 3,670,43h 13,341,949 i %" P,, * ' s @ >n ,W > pq K (, gg p 3 1 4 g .Af, krm,y N "!f+ q:1PM CAPITALIZATION AND LIABILITIES iE Capitalization Ji -; M i iie Qmvmp Common stock, $25 par value, authorized 12,000,000 shares, Mg3F r issued and outstanding 6.755,535 shares 168,888 Y 168,88$*- yg-M j%%'h Paid-in capital z 405,000 4 > s. 405,000 e 1d@ Retained earrungs x 720,956., E 585,662 s 4 lival Common Stock Equity '1,294,844- '1,105,550: Preferred stock m q c %u n*, P' y .$ Afgp% Not subject to mandatory redemption e 250,368 - 1166,782 4 %g Subject to mandatory redemption "46,966 m
46,660 Long-term debt 1,325,977'

1,179,456 - 5 1.Wi!;
m lbtal Capitalization 2,918,155 c m 2,552,448 e Current Liabi!ities ~ ff$@;$ + Long-term debt due within twelve months 11.149 -12,140 s fi? s, t 42,430 - @ @j/ Advances from affiliates 144,309 $7g % Accounts payable > 40,929
?
Fuel refund due customers ' 19,964 c - 20.188 J * ' ~ ' s s Customer deposits L 8,992 - M ' 8.799 A c ' m yy3 q,'l,,ba w Accrued taxes 73,880: - 23,850 s [lpf + '33,012 ' 44,375 RW ' W,, W Accued interest 4 4 Other
15,601=
- 14,702 ; e p .p - 133,5274 210,793 - N4 m so w s. Deferred Credits , 4; 4 Q s Unbilled customer accounts sold ~ 39,175 < 35,917) 4 ,1 <qr income taxes . 386,057; 3 .V 347,69735 m vp p iw Investment tax credits
193,518-195,094i:
'1< Q . 618,750 578,708 t Wyh - $3,670,432
$3.341,949 -
i} y l 4; 'c' N The acconomying notes to financial statements are an integral gart of these statenuts.. ', y p t s . j,. M.; i *
+
n.
c-a 3_ ' !j ' .- J l
. q. ~
5 <d m M,:.,. : r 4 ) :a r w. i 4; .) t .): a CENTRAL POWER AND LIGilT COMPANY-1 s y . For the Years Ended Decemter 31 - 1988 - 1937 -1986 ' (thousands) . OPERATING ACTIVITIES ; a, ~
Net income
$156,819 $191,927 $174,165 Non-cash items included in Net income ~ , - Depreciation and amortization I 82,569' 61,752/ - 61,078 s Deferred income taxes 39,826 - 128,923 41,243 Deferred investment tax credits" ' (1,576). i - 14,301 19,748 4 Mwance for equity funds used during constructka - r (98,424) (103,340) (83,846) - ~~ ' Changes in Assets and Liabilities ~ ' Accounts receivable 564 i : L800 (6,908) 4 . ;i. Fuel refund due customers ! .(224) (17,161)- 13,555 g Fuelinventory. j '1,993-(7,4 61) 21,951 r. j ' Acmunts payable (3,380). 5.239 (25,217) ' Accrued taxes
(19,970)-
(L359) 23,217, ' Other ' (38,820)' 47,295: (1,187) ,s 1 a / 119,397: 221,963 J 237,499.. [' 1NVESTING ACTIVITIES k Ms Construchon expenditures - T JI68,250) (275,846)- (293,1M) ~ . Allowance for borrowed funds used during. construction . (62.548) - (65,5T/) ; (56,091)- p Sale of elects; utihty plant < t A 50,537 q a (230.798) (341,383) - -(298,678).
a..
,' FINANCING ACTIVITIES - I N. Proceeds from issuance of:. ?r; < Long-term debt '.150,000 100,000 260,000-Preferred stock : 85,000 / 75,000 jL Retirement of long-term debt . (12,140) - (131) .(10,123) Reacquisition of long-term debt -(17,915) - (212,501) L - Redemptian of preferred stock -(42,853) ~ L Proceeds from po!!ution control bonds held in trust 5,175-58,462 19,977 . Change in short-term debt (42,430) 42,430 1 Payment of dividerxis '.(20.946). -(65,820). -(11' 165) t t 164.650 117,026 - (22,665) NET CHANGE IN CASH AND CASH EQUIVALENTS - 53,258 (2,394)
(83,844) a ; ; CASH AND CASH EQUIVALENTfj AT BEGINNING OF YEAR "737 3.131 86,973 t
CASH AND CASH EQUIVALENTS AT END OF YEAR - $ 53,995 $ '737 5 3.131 ?' mm "the accrenpanying thtes to finarmial statemerds are an iritegmi part of these statements., L l -b .{ l li'
y O p,
'i' i 4 1'
L x
9 l
r I
g urar. m - - ammmmmmmanuwammmmmum CENTRAL POWER AND ILHT COMPANY ~ As of December 31 198M 1987 (thousands) ~ ~ ~ ~ ! COMMON STOCK EQUlTY $1,294,844 $1,159.550 - ~ ~ ~ ~ PREFERRED STOCK Cumulative $100 par value, authorized 3,035,000 shares Number of Shares Curren't ' Series Outstanding ' Redemption Price 3'3A Not subject to mandatory redemption 4.00 1 100.000 $105.75 10,000 10,000 l 4.20 % 75,000 103.75 7,500 7,500 I' 7.12% 260,000 101,00 26,000 26,000 500,000 105.82 50,000 50,000-8.72 % 7,84 % 750,000 - 101.00 75,000-75,000-l. 7.85% 425,000 100.00 42,500-(' 8.70 % 425,000 100.00 42,500 l' Issuance expense (3,1321 .O,718) i ~ ~~ h '250,368 166,782 - t. j; . Subject to r'inidatory redemption 10.05 % 500,000 104.76 150/d00 50,000 t 1ssuance ex;FdnSe (792) (792) ' Unamortized rydemption cogs (2,242) (2,548)
y 46,966 46,660 LONG-TERM DEET First mortgage bonds Series I, 4%%, due April 1,1989 11.000 Series j, 6%%, due January 1,1998 28,000 23.000 Series K, 8h%, due January 1, 2000 25,000 25,000 Series L, 7%, due February 1, 2001 36,000 36,000 Series M, 89, due November 1, 2003 46,000 46,000 Sedes N, 9N9, due June 1, 2004 40,000 40,000 Seats 0, 8H1, dtr October 1, 2007 75,000 75,000 l'
Seties T, acliustab'e rate, 9% to December 14,1989,due Series P, 8%%, due September 1, 2008 75,000 e5,000 December 15, 2014 111,700 111,700 l , Series U, 9%%, due Juiy 1, 2015 81,700 81,700 - Sedes V,11%%, due August 1,2015 85,000 85,000 Series W, 8%%, due May 1,1996 200,000 200,000 Series X, 9%9, due November 1,1994 100,000 '100,000 Series Y, 9K%, due June 1,1998 150,000 Debentures _ Series 1985, 124, due September 1, 2015 85,000 85,000 Instalhuent sai s agreements - Pollution control txmds 7%%, due June 1, 2004 9,825 9,825 64, due November 1, 2007 ~ 34,235 34,235 7%%, due September 15, 2014 6,330 6.330 - 10%%, due October 15,2011 139,200 139,200 7%%, din December 1, 2016 (net of $4,745,000 and $9,920,000 held by uusted 55,255 50,080 Notes payable, 6%%, due December 8,1995 1,349 1,493 Unamortized discount (18,980) (18,996)- Unamortized costs of reacquired debt (39,637) (42,416) 1,325.977 1,179,456 TOTAL CAPITALIZATION $2,918,155 $2,552,448 The accompanymg notes to finamial statements are an nitegral part of thew statements.
_ _ _ _ _ _ - _ _ _ _ _ _ _________ - __ __---- = t [4; ;,. ( ,E I'
1.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES . Central Power and Light Company (Company or recorded as a charge to deferred income tax expense. CPL) follows the Uniform System of Accounts . The Company excludes from the alculation of - L prescribed by the Federal Energy Regulatory AFUDC that portion of CWIP included in its rate base Commission (FERC). The Company, as a member of . for rate-making perposes. the Central and South ' West System (CSW System), Depreciation. For financial reporting purposes,- s
engages in transactions and coordinates its actmties provisions for depreciation of electric utility plant are ~
^ and opentions with other members of the CSW computed using the straight-line method, generaDy at System. The significant accounting policies are individual rates applied to the various classes of summarized below: depreciable property. The annual composite rates Statements of Cash Flows. The Company averaged 3.13%, 3.55% and 3.60% for the years 1988," adopted Statement of Financial Accountmg Standards 1987 and 1986. No. 95, S_tatement of Cash Flows, for the year ended Nuclear Decommissioning. The Company's - December 31,1988, and has restated the years ended portion of the estimated cost of dec6mmissioaing the - December 31,1987 and 1986 for consistency. For South Texas Project (STP) nuclear power plant is $85; purposes of the statement of cash flows, the Company million in 1986 dallars. This cost estimate will be considers highly liquid debt instruments purchased reviewed and updated pernlically. The Company is - with'a maturity of three months or less to be cash reg'iesting recovery of this cost over the life of STP ir equivalents. Accordingly, the temporary cash its retail rate filing. The funds ' received from investments and advances to affiliates are ash customers applicable to decommissioning will be paid equivalents. to an independent trust. De Company will begin The following amounts ofinterest (net of amounts recognizing this cost upu the receipt of an order by capitalized) and income taxes were paid for each of the the Public Utility Commission of Texas (Texas three years ended December 31. Commission) authorizing the recovery from its
0**
1988 1987 1986 (thousands) Electric Revenues and Fuel. Revenues are Interest $73,w2 $44.106 5s3,675 generally recorded at the time billings are made to Inome Taxes 14.895 4.168 (9.73m customers on a cythbilling basis, and the cost of fuel _ Electric Utility Plant. Electric utility plant is is charged to expense as consumed. The Company stated at the original cost of construction which recovers fuel costs applicable to sales to its wholesale - includes the cost of contracted services, direct labor, customers, regulated by the FERC, through an materials, overhead items and allowances for automatic fuel adjustment clanse, borrowed and equity funds used during construction. Under rules established by the Texas Commission ~ Allowance for Funds Used During the Company recovers fuel costs as a fixed component: Construction. The allowance for funds used during of base rates. The difference between fuel revenues construction (AFUDC)is the result of an accounting billed and fuel expense incuned is recorded as m procedure whereby amounts, based upon the level of addition to or a reduction of revenues, with a construction work in progress (CWIP), representing corresponding entry to accounts recch'able or fuel the interest on borrowed funds ar.d a return on equity refund due customers, as appropriate. Over-recoveries capital used to finance construction. are reDected as f fuel are to be refunded to customers; under. credits on the statements of income and charges to recoveries may be billed to customers after 'Ihas CWIP AFUDC does not represent a current source of Cocnission approval. Prepaid Federal income taxes cash funds. Under established regulatory rate re recorded on the cumulative over-recoveries and practices, a retum on and recovery of such costs is classifed on the bilance sheet in prepayments and permitted in determining the rates charged for utility ther. services. Le gross composite rates averaged 11.8%, The cost of nuclear fuel is amortized to fuel expense 11.9% and 12.2% for the years 1988,1987 and 1986. based on a atio of the estimated Btu's used and he tax effect applicable to the debt component is available to generate electric energy, and includes a - 1 1
pt 9p9 1;; [ m r +:L*^1 , ' Q: ?
. g
-:c:- + v.
w
..m a 4 1 ' j v. c m 3 p:Q" M[,i'l4 CENTRAL POWER AND IJGilT COMPANY' h ,, " P Ok R j provision for the disposal of spent ntdear fuel, ne to CSW Credit, Inc., a wholly owned subsidiary of J, i difference between the cost of nuclear fuel and the F Central and South West Corporation. In Febmaryy x
system's displaced cost'of fuelis included in revenues 1987,' the Company began _ selling receivables fori and fuel expense, to the extent STP is not included in <
electric service provided but not yet billed to ;; &,,g ,a %p? a~ bv ~ rate base, until new rates go in effect to re&ct STP. customers.' .a p, %, f in service.h Company is deferring this prics. < New' Accounting Standards. Reference is'made T differential as a reduction in deferred charges and Eto Management's Discussion and Analysis of Financial ?( 3
other assets on the balance sheet. Such deferral was
. Condition - New Accounting Standards on page;38 v, n $6 millionin 1988. - for a discussion of standards expected to have an ; l; W _f Unbilled Customer Accounts Sold.The) - effect on the Company,: ~ L Comp ny sells accounts receivable, without recourse, - c,. t 1 e
2. FEDERAL INCOME TAXES m.
4 y L 4 The Company, together with other members of the A' s CSW. System, files a consolidated Federal income tax. B ' retum. Details of Federal income taxes are'as follows: 1988 1987o
19H6 -
(thousands) - 'E Included in Operating Expenses and Taxes Current - $ (8,728F $ 6,873 $ 6,589 Defeired income taxes ? I? AFUDC - borrowed 21,14C 25,409 - 26,243 i A Deprecation differences 27,653 8,606-8,129 s W DefeIred fuel 1,556 - (6,588) - (1,859) ' Reacquired debt cotts - (960). (258)- 10,405 - Unbilled revenues (5,512) - (8,799) Other (4,600) - 10,519 -(168)- . p,s 4 7 39,283
28,889 42,750 -
,;g Deferred swastment tax credits Provision (701) ' 20,349 - 23,039 - Amortization -(875)- (6.048). . (3,291) (1,576) 14.301 19,748. 28,979-50,063- - 69,087 : p - Induded in Other income and Deducturis Current 614- - (1,822): 5,294 Deferred 543 34 ' -(1,507), q 1,157 (1.788) - 3,787 ' 4 $30,136 $48,275 - $72,874 (.; ) t j I' i h, 7K
MVR, @n 7'- 4 at Q '. e .f~ g ,C
's :
). ' q* {Li) y g&, m l Taxes deferred m pnor years are credited to!.. .. Total income taxes l differ from the amounts com-J 4 $ G.. rincome when book deductions exceed the related tax : . puted by applying the statutory Federal income tax L q' hm 5 ( deductionsi The dehed investment tax credits are i
rates to income before taxes. The reasons for the -'
+ t included in income ovdr the Eyes of therelated differences ^are as follows: yoperti:S.', 4 . -Gy ~ ..r 't o'
(<kdars in thousands).-
19H8- ' 1987 ; 19H6 - D U c Differences f = $63,565 . 34.0 i $96,0811 50.0- .. $113,638, 46.0 e Q
Tax at statutory rates

? .s 'M1,336); - s(17.2) - !(35,569). i-(155f @4 AFUDC-equity E ~..
(33.464)i (17.9) f u investment tax credits 0

(875)

1 (0.5): ' : (6,048) \\(2.5)- (3,291) ' 1:(1.3) ? - ()t}x.r : ' ' i, 910 0.5 - (422) ~ . ;. (0.2) < 1.09T v0.4 - ( d Y $30,136 16.1 548,275. 20.1 $ 72,874. . 29.5 ; Y U 3-t m .: 1. ;. ,t h<' l-x lf p., ' At Decembbr 3171988,' the cumulative' net E.. ? related tax effect amounted to approximately. 7 1 p7 Vamount ofincome tax timing differences for which $34,944,000 and $11,881,000.' 33 .x Tdeferred taxes had not been provided and the i l.;.g;' ) 3 pg', M ,s - 3. LONG-TERM DEBT-b y wm .m { ', R-l The mortgage indenture, as amended and supple. Limitations on Dividends. 'Ihe mortgage in-l l ?" e "mented, securing first mortgage bonds issued by the , denture of the Company, as amended and jj Company constitutes a direct first mortgage lien on supplemented, contains certain restrictions on the - N substantially all electric utility plant. payment of common stock dividends. In accordance : ] / 'p Annual Requirements. The annual sinking fund with provisions of certain of the Company's supple-j ^ ~ requirements are generally 1% of first mortgage mentalindeutures, the Securities and Exchange ' 1 ia
bonds outstanding. These reqdrements may be Commission '(SEC) has entered an order permitting i
satisfied by the' application of net expenditures for. the payment of dividends not otherwise permitted:
1

bondable property in an amount equal to 166%% of under the Company's most restrictive supplemental the annual requirements, jndentures. The SEC's order requires that any divi-At December 31,1988, the annual sinking fund dends paid out of amounts that would otherwise ben requirement 6dusive of matu*ities, and the annual restricted are limited to net income eamed in the.
tc
-aggregate I oturities including sinking fund require. ;
twelve months immediately preceding payment of. ' q 4 the dividends. At December 31,1988, $585,662,000f ments, of long-term debt are as followsi u of retained earnings.were not available for payment ~ ~. " of cash dividends. H Annual Sinking. Annual Aggregate
1
.M Fund Requirements' - hturities Sale of Long Term Debt. In June 1988 the 'j ~ w a sands) Company issued $150 milhon of 9%%, Series' Y, First' j ~~ 1989 : $8,600 $19.749 Mortgage Bonds due June 1,1998. The proceeds 1990 8.600 8,953 from the issue were used to reduce the Company's - q k"x -1991. 8,600 8.979 short-term debt and to finance construction f 1992 8,600 9,005 Vl expenditures. w 1993 8.000 9,751 Reacquired Long-Term Debt. In 1987 and 1986, the Company reacquired $206 million of long- 'l term debt. The premium and related reacquisition q costs of long-term debt are classified as a reduction h to long-term debt on the balance sheets and are { being amortized over 10 to 30 years. 6kl l ly, a
, ;J y {g v y q y y3 - - x p- - ;q > m: y j :C %
r..J
%fk;eg 9.y ,I .i - - -:{ 1 -t. ,3_ gi < : W 3s % 1 i p' 'p %;>,yjp 4 <W s .y [
r;1 E
' 'j; ;GS3 i 1 m, 3 ,c .h' , l* L a-Y + QQ '* j ,,;- ;qp /1 s (m, m i CENTRAL POWER AND LIGIIT COMPANN, i ,.- U.h w zgL t-. .m t 4 MMhd k - 4. PREFERRED STOCK. ^ ' F w , C ' ~ lm a ,m ~.. and January 1,2001(.. 'a speci6ed ntunber of shares iny, y j( 'W, The dividends on the Company's $'160 mBhon ' 4 auction preferred stocks are adjusted every 49 days, : each twelve-nnnth pedod themafter(Thel sinking %hM. G @$ V ' based on current market rates. The dividend rate j fund redemption price is $100 per, share.5. i : Each serierof the preferred stocidwith thei v..Tb l exception of the;10.05% Serics,is redeema . averaged 6.43% and 5.16% during 1988 and 1987. 3 M .In May 1986, the 10.10% Series Preferred Stock,L par value $100 per share, was called for redemption.
option of the Company upon 30 days notice at the 3
'A& current redemption price per store. Redemptions W s$$ The premitun and related redemption costs are clasa si6ed as a reduction to preferred stock on the L ~ prices of the 8.72% and 10.05%' Series decline at ; c, speci6ed intervals in future yearsc The 10.05% w balance sheets and are being amortized over 10 - 1
Mi years.
L is not redeemable until 1994. The Company's three "i De Company's 10.05% Series, $100 par ulue y - issues of auction preferred stock totaling.$1607 * ' f :14 U %'i N W preferred stock requires a mandatory sbng fund "
million may also be r_edeemed on any dividend g sufficient to retire 35,250 shares in each twelve-payment ifate at the redemption price applicable at ; un 0
.$g month period,beginning Febmary 1,199) and ending; Lthe time of redemption.4 ~ ' ' '~ i m w$ QQy ^ M x '5. SHORT-TERM FINANCING - 2 4 m .e w f W x The Company, together with other mbmbers of - aggregating $185,000,000, including the Company'sNP 'Q$j $ I t +, ,j. r ,? 4 f-l credit generally require an annual lines of credit, have been 6btamed. These lines of1: w ~ the CSW System, has established a System money _7 j pod to coordinate short-term bormwings and to. cash surphises transferred to the money pool!. ' ,1 receive interest income in accordance with then & ~~ make borrowings outside the money pool through ',.. 'the' issuance of commercial paper and from banks. In : connection therewit i System bank Enes"of credit. money pool arrangement.y y y. y b,,, g* f, 1 g c
6. BENEFIT PLAN 5 i
n 4 ' x,[ The Company, together with other members of The components of net'pensiontost are as ! $s the CSW System. participates in a non-contributory followsi ~ i ,'%1 c". defined bene 6t pension phn covering substantially all. 1 ' its empbyees. Bene 6ts are based on ernployees' -19884 ' !19871 years of senice, age at retirement and' ' 4 (timands) d~~ ' ~ compensation. The CSW System's fundag policy is 'Sehice cost - $4,518 A. $4,802. "..1 based on actuarially determined contributions, taking Interest cost on projected t into account amounts deductible for income tax bene 6t obligation 7 J11,031 ,9,794 j y [ purp'ases and minimum contributions required by the Actual reten plan assets :, 114,431L R7,235) - W 4 _ Net amortistian and deferrali L 5,498i J (2.590); < Employee Retirement huome Security Act of 1974, as amended. $6.616 2 - $4;771 L Q,7j The CSW System adopted Statemmt of Financial ' Assumptiorr T6. $d Accounting for Pensions (SFAS 87), during 1987c kng-term compensation 1 . L 8.3% i, '. : 7.5% ; y l Accounting Standards No. 87, Employers' Discount ute T L y@$ r This change in accotmting did not have a material - imease P ? 6.2 " &21 ( effect on the Company's results of operations or Reten plan asset'. 8.5 - D8.5 s <s s financial mndition. Pension costs for tne plan in 1986 - were determined under the pmvisions of previous o accounting principles. M 9 l i 6}
Vi l-
...g,.
. _ (a..
,,.(, a .As of December 31,1988 and December 31, substantially all active employees and employees 1987, the plan's net assets exceeded the total who retire from the CSW System. The Company's actuarial present value of ae;umulated benefit cost of providing those benefits was $6,886,000 in obligations. The Company's pension cost accmal was 1988, covering 2,290 active etroloyees and 907 $5,642,000 for 1986. retirees; in 1987, the cost was $6,646,000, covering i in addition to the pension pim, the Company also 2,602 active employees and 669 retirees; and in L participates, with other members of the CSW 1986, the cost was $5,958,000, covering 2,671 ,L System, in medical and death benefit plans for active employees and 646 retirees. q
7. JOINTLY OWNED ELECTRIC UTILITY PLANT The Company has entered into a participation.
participant providea financing for its share of the agreement with three non-affiliated entities covering project which was placed in service in December the construction of the South Texas Project 1986. The statements of income reflect the .c ' consisting of two nuclear generating units. Company's portion of the operating costs of the (Reference is made to Note 8.) The Company also plant. In August 1986, the Company sold 67.6 .has a joint ownership agreement with other ' Public Utilities Board of the City of Brownsville for megawatts, a 10.2% interest, in Oldaunion to the. members of the CSW System and non-affiliated entities to provide for the operation of the 665 approximately $50.5 million. At December 31,1988g megawatt, coal-fired Oklaunion Power Station Unit the Company's participation in the jointly owned No.1 (Oldaunion) and its related facilities. Each plants is shown below: South Texas Project Oklaunion (dollars m thousands) Plant in service $1.573.258 $35.981 Accumulated depreciation 15,165 2,348 Plant under construction 641.002 Plant capacity - mw 2.500 665 Participation 25.2 % 7.8% Share of capacity - mw G30 52
8. LITIGATION AND REGULATORY PROCEEDINGS SOUTH TEXAS PROJECT.
Introduction. The Company owns 25.2% of STP At the end of December 1988, Bechtel Energy which is located near Bay City, Texas. In addition to Corporation, the plant's architect-engineer, reported the Company's share, llouston Lighting & Power that construction of Unit 2 was complete. A license Company (IILP), the project manager, owns 30.8%; for fuel loading and low-power testing of Unit 2 was the City of San Antonio (San Antonio) owns 28.0%; obtained from the Nuclear Regulatory Commission - 1 ar'd the City of Austin (Austin) owns 16.0%. (NRC) in December 1988. Fuel loading was Project Cost and Schedule. In November completed in December 1988 and low-power testing 1988, the Texas Commission issued a final order is underway. A full-power license is expected to be confimung August 25,1988, as the date that Unit I requested from the NRC in March 1989. Unit 2 is i was in commercial operation in accordance with its scheduled for commercial operation in June 1989. rules. j l'
ny g q a 'l gs 1 j H """ # f" 9 U r in October 1988, the estimated cash cost,of STP in some areas studied and imprudent in others;, 1j was increased by $150 million (of which the condusions regarding several other areas were, q Company's portion is $37.8 million). IILP attributed postponed. Emst & Whmney is scheduled to supple- - 4 the increase primarily to delays in achieving the ment its report byJune 1989, quantifying the impactJ y . commercial operation of Unit 1. The Company's of imprudent acts on the cost and schedule of the, j estimated cost of STP, including AFUDC of $882 project and reaching conclusions on the open areas. million, is now $2,238 mi!! ion; net of related in January 1989, the Texas Commission appointed .l deferred taxes of $162 million, the estimated total Resource Management International, Inc., to review. j' cost is $2,126 million. the Company's management decis' ions regardingl. . Brown & Root Settlement. As the result of' STP. A preliminary report is expected to be issued. the settlement oflitigation filed in December 1981, in March, with a final report in April 1989. ' each of the STP owners received a pro rata share of Additionally, Texas Commission staff testimony for - . $750 million from Brown & Root, Inc. (Brown & Docket No. 6668 is scheduled to be filed byJune 15,( 1 Root), the former architect-engineer and constructor 1989.- of the project, payable in quarterly payments over Interrenor 7estimony: In August 1988, the Ofsce' seven years, without interest. The Company elected of Public Utility Council (OPUC) filed in Docket No. to receive $146.8 million, the present value of its 6668 testimony calling for a ' disallowance of certain aw . share of the settlement, in December 1985. This - costs of STP after taking'into account the settlement 0 amount was recorded as a reduction in the cost of ' with Brown & Root. In October 1988. OPUC STP. supplemented its prior testimony asserting that-- Prudence Review $LO50 billion or 42% ofits estimated cost of the 1 Texas Commission Activities. In 1985, the Texas Company's share of STP should be deemed 4 + Commission hired Lubow, McKay, Stevens & Lewis unreasonable and excluded from any rates charged - i(Lubow) to review the prudence and efficiency of by the Company. OPUC indicated that it did not ' the construction of STP. In June 1986, Lubow consider the reasonableness of the costs incurred submitted a report to the Texas Commission, subsequent to the replacement of the former covering the period from 1973 through January 1983, architect-engineer and that the recommendations Lubow claims in its report that $1.1 billion to $1.3 "ontained in the testimony are preliminary and billion of direct costs were spent imprudently on subject to change based upon fmal costs and STP by all owners. According to Lubow's report, commercial operation dates for STP Units 1 and.2. these amounts do not indude AFUDC or rate in September 1988, a group 'of cities served by effects that, Lubow conduded, substantially offset the Company filed a consultant's report in Docket, each other. The amounts also do not take into No. 6668 with the Texas Commission.' The report, account the proceeds from the Brown & Root after taking into account the settlement with Brown settlement. The report recommends that the Texas & Root, recommends a disallowance of $1.105 billion Commission decline to review the merits of the or 53% ofits estimated cost of the Company's share Brown & Root settlement and concluded "that it was of STP. not unreasonable for the STP owners to settle the Additional intervenor testimony, if any, is litigation on the terms they did.' scheduled to be filed by June 7,1989. Management in 1986, the Texas Commission opened Docket disagrees strongly with the methodologies and .'j No. 6668 for the purpose of determining the condusions of the two interveners' filings. pmdence and efficiency of planning, management Company TestimonJ: The Company filed in l . and construction of STP. The accounting treatment February 1989 in Docket No. 6668 and in its retail j of the Brown & Root settlement proceeds will also rate filing (Docket No. 8646) with the Texas W be determined in this docket. Commission an extensive report prepared by The !l In April 1988, Ernst & Whinney was appointed by Nielsen-Wurster Group, Inc. (Nielsen-Wurster).' The-1 the Texas Commission to review IILP's prudence report, done at the request of the Company's related to STP. Ernst & Whinney issued a report in counsel, reviews all aspects of the reasonableness of December 1988 covering certain issues identified in project planning, design, construction, start-up and its study. This study determined HLP was prudent licensing of STP. Unit I was examined from 1 u
p ? i ( 3 d r + r g. pre-construction through the commercial operation The Company previously filed a report in s date: Unit 2 was examined from pre-construction February 1988 in Docket No. 6663 prepared by Drs. through September 1981. The rcport reviews all Dyer and Ashley of the University of Texas; this i phases of the development of STP to determine the report was supplemented in February 1989 and - a . cause of schedule delays and increased costs related additionally filed in Docket No. 8646. The report - 1 to any unreasonable performance. The report reviewed aspects of the Company's management. quantifies for all of STP a total of $1.043 billion of decisions and monitoring activities regarding STP. unreasonable costs, including allowance for funds Dyer and Ashley reviewed the Company's activities m used during construction at the Company's rates, based on the use of appropriate corporate objectives Q' before giving effect to the Brown & Root and information available at the time decisions were settlement. made. The report concluded that the Company'r The report finds that of the 94.4 months of delay management decision making and processes related from the initial date of scheduled commercial to STP were reasonable and prudent. g . operation, 64.9 months was unavoidable and Deferred Accounting and Rates. The uncontrollable delay due to regulatory matters, Company has filed an application with the Texas
industry environment and other circumstances. The Commission for deferred accounting on STP Unit 1.
T remaining 29.5 months delay results in total in February 1989, a hearings examiner issued his 3 foreseeable costs due to unreasonable decision report for deferred accounting. If the Company were making or performance of $766.9 million. The report . to receive an order from the Texas Commission; also finds $276.0 million of non-delay costs consistent with this hearings exammer's ~ report, net - attributable to unreasonab!c performance. income, relating to the August through December-The report finds that the Company was prudent in 1988 deferval period, would increase by an estimated ~- 'its activities as a member of the STP Management $28 million and would he recognaed in a future Committee. The report also concludes that Ikown & period. However, the report recommends the. Root, as architect-engineer and constructor, was exclusion of an equity return on the deferred amount responsible for $814.1 million of the unreasonable during the recovery period, which could result in a costs and that HLP, as project manager, was significant reduction of this amount for financial ] responsible for the remaining $228.8 million of reportmg pugoses. unreasonable costs. The report concludes that the The Company filed in February 1989 for an 1985 Brown & Root settlement of the STP litigation increase in its retail rates. Reference is made to; reasonably compensated the STP owners for Brown - Rates and Regulatory Matters - Settlement Proposal & Root's performance failures. and Retap Rate Filing beginning on page 36 for more The Company filed additional testimony in infonnation. Dockets No. 6668 and No. 8646 of Morris H. Viability Review. In March 1985, Docket No. Jacobs, a principal of Arthur Young & Company. 6184 was initiated for the girpose of gathering Jacobs used the. Nielsen-Wurster findings to evidence concerning the economic viability of STP determine if any adjustments to STP costs were Unit 2. Initial hearings were held in January 1987 necessary. Jacobs concludes that, based on an and final phase hearings were held in October.1987.' economic analysis of the net present value of No activity occurred in this docket in 1988 and none revenue requirements, the pre-1983 project delays is anticipated in 1989. H - did not harm the Company's ratepayers. Further as HLP Suit. The Company and Central and South to post-1983 delay costs and the unreasonable non-West Corporation (CSW) received in January 1988, 'a - ea : delay costs found by the Nielsen-hster report, copy of a First Amended Original Third Party 0 - Jacobs concludes that the proceeds received from Petition (Petition), which HLP filed in Dallas County L i the Brown & Root settlement exceeded the in the 101st Judicial District, asking the Court for d unreasonable expenditures and that no adjustment to authority to add the Company, CSW and San Antonio ' j STP costs is necessary-as parties to a suit (Austin Suit) between HLP and - H Both the Nielsen-Wurster report and the Jacobs Austm. The Austin Suit was filed in January 1983 0 analysis present methods to determine the and is pending in the same Court. The Court, in a reasonable cost of STP to be allowed in rate base in subsequent hearing, severed for a separate trial the (y accordance with Texas law. ] i
CENTRAL POWER AND LIGHT COMPANY r~ w., - aw: ay lawsuit against the Company, CSW and San Antonio. accordance with the STP Participation Agreement in IILP also has filed an original complaint in Matagorda the event HLP refuses to arbitrate. Subject to its County against the Company, CSW and San Antonio request for abatement, the Company has. requesting the same relief as requested in the counterclaimed against HLP for damages in an Petition, which remains pending subject to a plea in unspecified amount related to HLP's breach of duties abatement. No other action has occurred in the and obligations pursuant to the STP Participation 'Matagorda County lawsuit. Agreement, requested that all relief sought against HLP has asserted in the Petition that if it is liable the Company and CSW in the Petition be denied, to Austin for any damages in the Austin Suit, HLP is requested that the Court enter a declaratory entitled to contribution or indemnity from the judgment construing the STP Participation Company, CSW and San Antonio because all the Agreement and declare llLP liable to the Company. activities complained of were decisions or activities for breaches thereunder and stated that CSW is not of the STP Management Committee, which had a proper party to the action. members from all STP participants, rather than In April 1988, HLP filed a brief contending that - HLP's decisions as project manager, or that HLP the Company's and CSW's request for arbitration is was acting as an agent for the other participants iraproperbecause the issues raised and the relief and, therefore, all participants are liable for de sought by the Company and CSW are not subject to actions complained of by Austin. HLP has alleged arbitration under the STP Participation Agreement. that CSW is a proper party to this suit because it Austin Suit. Originally in January 1983, Austin participated through control of and direction of tha filed suit against HLP and its parent company,. Company in all major STP decisions. Management Houston Industries incorporated, alleging that HLP believes that HLP does not have a sustainable claim had misrepresented the capabilities of the original for contribution or indemnity against the Company or architect-engineer and constructor of the project and CSW. had failed to properly perform its duties as project HLP also is seeldng a declaratory judgment manager. construing the STP Participation Agreement to the The Company was informed in September 1987 effect that HLP, as project manager, has no liability that HLP and Austin had reached an agreement in to Austin, San Antomo, the Company or CSW for its principle under which all htigation between HLP and actions relating to any matter complained of in the Austin would be dismissed. However, in October Austin Suit. HLP also has requested the Court to 1988 HLP announced that the settlement agreement direct unplementation of alternative methods of was terminated. As a result, HLP and Austin filed a dispute resolution as authonzed by Texas law, such mnon to commence the trial of their pending as non-binding arbitration, m order to settle the litigation. The new trial is currently scheduled to disputes related to STP. begin March 6,1989, in Dallas. HLP has reported in March 1988, pursuant to the STP Participation that Austin filed a memorandum that claimed Agreement, the Company and San Antonio called for damages in excess of $1 billion. - binding arbitration of the disputes with HLP. The Summary. Although management cannot predict arbitration call stated that HLP as project manager the outcome of the various STP proceedings, has breached its duties and obligations to the other management believes that the Company's STP participants and is liable to the Company and participation in STP and its performance have been San Antoruo for damages and that the Company and prudent and its investment in STP is recoverable San Antomo have no liability to HLP for any portion through rates or from HLP. The Company intends to of the damages alleged agamst HLP by. Austin. Also pursue its claims against HLP, alleging that the on that date, the Company filed with the District project manager breached its duties and obligations Court its response to the Petition. In that response, to the Company. However, if any significant costs of which was fi:ed subject to arbitration, the Company STP are not recovered, there would be a material requested the Court to abate both of HLP's petitions adverse effect on the Company's results of until the conclusion of arbitration, lumt all action to operations. the arbitration procedure and compel arbitration in
= 7 g AO ? I [k: } t o, yg~ )N. g
xn i
y&m, fy o 4 al 9 s L 75h 94
k W
l r Mg o y~ ', y ' DM M,g 1' i 9. COMMITMENTS AND CONTINGENT LIABILITIES ,'J 4 P% It is estimated that the Company will spend complete any decontamination operatkms that may - Mb 4 1 approximately $153,924,000 for construction 1 ' be crdered by the NRC and that such proceeds be3 8% '/E L purposes in 1989 (induding AFUDC of $44,977,000).' paid to a special trustee appointed to hold insurance M"1 C dj i
Substantial commitments have been made by the.
+ proceeds up to $1.06 billion to be used for _f %] 4' [ (Company in connection with the construction - decontamination. The decontamiriation priority andi g~ i J program.;. trustee prmisions were'to have been implemented i Nuclear Insurance. In connection with' the' , by October 4,1988; however, a temporaryJ,,,.. q licensing and operation' of STP, the owners have Lexemption from these provisions has been granted : 4yA P, purchased the maimum limits of nudear liability by the NRC to remain in effect until the earlier of L AM the effectiveness of additionalrules or AprilL 1989.i W insurance, as required by law,.and have executed W i indemnification agreements with the NRC, in Further rulensking is anticipated in order to addr r ? accordance with the firancial protection difficulties in implementing these requirements, ; y n, i' requirements of the Price-Anderson Act. particularly the trustee requirement.f ; [ g"
Congress has renew'ed, until August 1, 2002, the The owners of STP currently maintain on-site s y',Sb 'H Price-Anderson Act, a comprehensive statutory property damage insurance in the amount of $1.3956 4
' arrangement providmg limitations on nuclear liability - billion, which amount is less than the total amount 'of f WM; 2 and governmental indenmities. The limits of liability such insurance currently available to cover such a 9 + for licensees of nudear power plants was increased losses. Decontamination liability and property J 7 from 5720'million to $7.635 billion per incident. The insurance is provided by American Nuclear Insurers 0 j owners of STP are insured for their share of this and Nudear Electric Insurance Limited (NEIL).L W[ t . liability through a combination of private insurance Policies of insurance' issued by NEIL stipulate that' '3 and a mandatory industry-wide program for self-policy Iroceeds must be used first to pay'. M insurance. The maxnnum amount that each licensee . decontamination and clean-up costs, before being ' j may be assessed under the industry-wide program used to cover direct losses to property. The! H . of self-insurance following a nudear incident at an Company and HLP are members of NEIL and are, 'U insured facility is $66.15 million (which amount may subject to annual assessments, which could amount N be adjusted for inflation) for each licensed reactor, to approximately $9 million for the current policy but not more than.$10 million per reactor for each year November 15,1988 to November 15,1989, in " d nudear incident in any one year. The Company and the event that property losses as a' result of an f s each of the other STP owners are subject to such accident at a nudear facility of any NEIL insured ? l assessments, which the Company and the other exceeds the accumulated funds available to NEIL" h o'vners have agreed will be borne on the basis of The Company and the 'other owners of STP have: ,' i i their respective ownership interests in STP. For entered into an agreement that provides for the total purposes of these assessments, STP has two cost of decontamination liability and property; M licensed reactors. insurance for STP (induding premiums and! ' NRC regulations require licensees of nudear assessments) to be shared pro rata based upon each; M power plants to obtain on-site property damage owner's respective ownership interests in STP.: ,f insurance in a minimum amount of $1.06 billion.. In 1989, the Company plans to purchase.extrai M NRC regulations also require that the proceeds from expense insurance under the NEIL I Extra Expensei M, this insurance be used first to ensure that the Program. Tids insurance will reimburse the ; _ ' ' w licensed reactor is in a safe and stable condition and Company for extra expenses incurred to' generate ork ' H J can be maintained in that condition so as to prevent purchase power lost as the result of a covered 4 4'
g any significant risk to the public heakh or safety.
accident that shuts down production at STP for : 4 gM F Further, NRC regulations require that any more than 21 weeks. ~ remaming insurance proceeds'be used first to l' / 7 .M, <;y 3 9[ J J y I t I u: LL Y/ ) ,a 'h i
~'
r w
g l i' CENTRAL POWER AND LJGilT COMIWNY y.. l
10. QUARTERLY INFORA1ATION (UNAUDITED) l The following unaudited quarterly information (consisting only of normal recurring adjustments) l includes, in the Company's opinion, all adjustments necessary for a fair presentation of such amounts.-
Electric Operating Operating Net ' Quarter Ended Revenues Income income (thousands) 1988 March 31 $175,526 $25,621 $41,416 June 30 191,291 31,926 49,497 September 30 234,109 46,536 63,253 December 31 189.506 18,295 2,653 _ l I.?8I i March 31 $168,212 $27,947 $37,514 June 30 188,883 33,014 45,527 September 30 227,559 48,388 62.138 December 31 183,610 33,086 46,748-Information for quarterly periods is affected by seasonal variations in sales, rate changes and other factors. x. l The fo!!owing selected fir.ancial data for each of highlight significant trends in the financial condition the five years ended December 31 are provided to and results of operations for the Company. 1988 1987 1986 1985 1984 (thousands, except ratios) l Electnc Operating Revenues $ 790,432 $ 768.264 $ 859,975 $ 924,908 $ 972.184 l Net income 156,819 191,927 174,165 152,164 137,734 Preferred Stock Dividends 21,525 15,820 16,010 15.991 16,005 Net income for Common Stock 135,294 176,107 158,155 136,173 121,729 Total Assets 3,670,432 3,341,949 2,950,129 2.723,361 2,455.61 I lYeferred Stock Not Subject to Mandatory Redemption 250,368 166,782 166,705 93,115 93,115 Subject to Mandatory Redemption 46,966 46,660 46,355 88,864 88.874 Long-Term Debt 1,325,977 1,179,456 1,048,987 981,481 866,551 Ratio of Earnings to Fixed Charges (SEC Method) 2.44 32 3.16 2.86 3.37 Capitahzation Ratios Common Stock Equity 44.4 % 45.4% 45.0% 45.5% 44.8%. Preferred Stock 10.2 8.4 9.3 8.5 9.6 lame Term Debt 45.4 46.2 45.7 46.0 45.6
' ;W. m y'" % $p ' TU ' + T Y W + < d[ s i Wib s VMOR " N] z ? g - p 4 f ? r,,. ' ( F / ' r'#.0'R D, : 8 go u,.m, E, ,.a .4 ' n._ t, ' effect from its retail rate application;.and 4) not: m' ggggggg. $2 Yg
permit'a return to common shareholders on the; m
w hh'~' UP JThe following discussion'and ana ysia of the
deferred costs during the time the sosts are being[ '
t3, t ^ ' Cdmpany's financial condition and rem 3 p collected from customers,' which ts expected to be Q' s operations relate to the Financial Se mi Notes; ? over thelife of the plant.1 1 y 1 i, ~ 4 t to Financial Statements and the Sekm Fcancial L1f the Company were to receive a1 order from the h g l$ %%? , ' ? Data. The information contained therein sould be. 3 Texas Commission consistent with this hearings.6 f*R i1 P ^ ' read in conjunction with and is essential in. ' xaminer's report net incomeL relating to the Q i e 4 'understrading the' following discussion and analysis.. August through December 1988 defeiral period,N / K/ .x q[M%~ l w would increase by an estimated $28 million ratheri f%
OVERVIEW <
than by the estimated $54 million that would resul? ' i( H p, %'^ .. cNet mcome for. common stock for the year 1988 . Any such amounts would be recognized in a futureL nMR ? f 3 m. 'from the Company's deferred accounting request? M,J ff g
declined 23%to $135 million from $176 nillion in
" M %. . period. Under an assumed deferral period of 16 L Q 69 (1987,. As a' , semce dun, result of STP Unit.1 bemg placed m months, the hearings examiner's deferral smount N $$b ng 1988 without deferred accounting g",, would be $155 million, and the effect on net incomel 3%f
operatmg expenses m, d rates, depreciation and

would be $122 million. However,'the report?,
L treatment or merease M ' s cmased and AFUDC : ' decreased causmg tne material decline in earnings recommends the exclusion'of an equityreturn on thel < 'M' , y ^*7.> 3, - during the year. deferred amount during the recovery period,"whichi %n ~ ~ could result in a signi5 cant reduction in theseL ~ r ,1
RATES AND REGULATORp amounts for financial reporting purposes.t 1
' MATTERS The hearings examiner's report is inconsistent N F f, t* ih di fi . w t an s gni cantly more negative than previous y C O^ Deferred Accounting. InJune 1987, the orders from the Texas Commission on deferred ; x> ?ompany petitioned the Public Utility Commission of accounting. The Company will file' numerous ' c' Texas (Texas Commission) to approve deferred - exceptions to the hearings examiner's riport. The ; l 'f accounting treatment'of the costs re ated to the final order hearing before ths Texas Commission has - operatir a of STP Unit 1. Deferred accountin would not been set. f s m", allow the Company to recover in future periods
We cannot predict what the Texas Commission

86 4 m costs that otherwise may not have been recovered will order for deferred accounting treatmenti '7 ~A through historical ratemaking practices l The However, if the Texas Commission does not permit: Company filed supplements to the original petition in the iferral of a materia':: ount of the costs" a4 m October 1987 and rgain in June 1988. cont.med in the Company's petition, 'there_ would ' g, . The deferral period under the petition would continue to be a signi6 cant adverse affect'on the..... "' s vg cover the time from when Unit 1 went into results of operations of the Company until STP. Unit' ,' : commercial operation until rates are placed in effect ~1 is included in the Company's rates. reflecting this unit in service. The deferral would + melude the plant's total carrying costs, for which the ' Settlement Proposal. In November 1988l thefL ~ ' i - Company has requested a special accountmg Company began meeting with representatives'of the. +" J 4 techmque. Such technique would dassify more of the.. staff of the Texas Commission and all the groups. N that have intervened in three STP dockets that now 5 1carrymg costs as interest than otherwise. would be are pending before the Texas Commission. The i done and, as such, would positively affect the s Company's results of operations dunng the deferral . purpose of these, meetings'was to discuss a proposal; by the Company to settle these dockets and the : " e penod. Assummg a &, ral penod of 16 months, tohl estimated costs oderred including carrying retail rate filingcThe three' dockets pertain to: 1)' . prudence and efficiency of the construction of STP charges as requested by the Company would. and the Comparc/s prudence id participating in the : ' approximate $359 million. The effect on net income - project: 2) economic viability af Unit 2; and 3) wo,uld be $228 million. . deferred accomting. Any settlemem agreement ! e* a February 1989, a hearings examiner issued his 4 report on deferred accounting. The report made the must be approved by the Texas Commission. following recommendations to the Texas The Company's proposal would increase rates m. N Conunissiex 1) approve the Company's deferrM two steps. The first step would mcrease rates - accounting on STP Unit 1, but not permit the approximately 28%, or.$229 million. The second step t Vl recovery of an equity return during the deferral w uld merease rates an additional 11%, or $115 - g' ? . period; 2) not allow 'the special accounting technique milli n, and would occur one year after the first, k
that the Company had requested: 3) limit the atep. Rates then would be fixed at that level through,
b' dcierral period to the earlier of December 31,1989. December 31,1995, except in the event of external or the date' wFen the Company has new ntes in f ctors uncontrollable by the Company. additionally,l e '~ . the Company would continue to recover fuel costs ,~ y, ., J,.4
(
+ I N \\~
y .n
p&y g
C lp1 ; u u t , ;.g > m ae 2 pm M N5 [, i @b jg cm upi ' '_y 9 f j' f f @ [3 ' CENTRALCOWER AND LIGHTCOMPANY j ' V g ;g ]g Qg^ g 7 ibased on the current rules of the Texas Company's tcTl STP investment will be inchided m :.. ~# $ 4 rates after the implementation of the fourth Commission; these rules provide for separate fuel the first year rates would increase' by 16%, or.$125 ',, = cost recovery.i
Under the proposal, deferred accounting for STP million, net of $29 million in reduced fuel costs. The ; 4
'l '"Q '. Unit I would end with the implementation of the . Company then would seek permission to increase
first step increase. Deferred cosss would be.
rates in each of the following three years by 11%,J%3 0 ! recovered by the Company over the remaining life of and 6%, respectively, based on current estimates,1 4 STP. The Company would not request deferred which would increase revenues by approximately i accounting for STP Unit 2, which is scheduled for $299 million. Under present sales forecasts, rates O, eW-commercial operation inJune.1989. The Company would be unchanged for the remaining five years,. projects that, assuming a settlement in early 1989 Costs deferred under the plan would be' recovered based on the terms of the proposal, its return on over the last six years. A fiaal order from the Texas i common stock equity.would approximate 9% in 1989. Commission on the rate increase request is. This return would be lower than what the Company expected in early 1990.. > V, ' currently earns because the Company.would not Also included in the filing is a rdquest for deferred ? have the benefit of deferred accounting treatment on accounting treatment on STP Unit 2. l Deferred u, < Unit 2. liowever, the Company's returns in operating expenses, net of fuel savings, pn STP, Unit : J subsequent years are projected to increase to levels 2 woud irnount to about $3 million per month and i " ~ . ould have about a $2 million per month effect on. that currently are being allowed to other electric. w M utilities by the Tex 4 Commission. net income. If the special accounting technique L M in the event the Company were to recover requested on Unit I were approved,' the estimated 4 amounts from any third party through litigation or $8 million of monthly carrying charges on the t arbitration in connection with the construction or investment would all be considered equity and could J g management of construction of STP, the recove:y not be recognized in the results of operations. would be applied first to offset the Company's . llever, if the Company receives deferred deficiency in eamings available to common accounting on STP Unit 2 consistent with the l. shareholders during the period of this agreement. hearings examiner's report on deferred accountingi The deficiency in earnings available to common for STP Unit 1, the Company would be permFted to1 shareholders would be the amount by which the recognize a debt canyi:g charge of $2 million per return on the Company's average common stock ' month. ~ . equity starting in 1989, is less than a return that is The Company plans' to file in the second quarter indexed to U.S. Treasury bonds. This return of 1989 a request for an interim rate lacrease ~ currently is approximately 12%. To the extent effective August 1989. recovery is made in excess of this amount, it would Prudence' Review. The Texas Commission has ' be shared equally betweeu customers a*1d common instituted a prudence review to determine how much. shareholders. of the Company's investment in STP is includable in We believe that the settlement offer would rate base. Please see Note 8 for more information shorten what otherwise will be a very costly and regarding the prudence review. . lengthy regulatory process. We expect that the Rates Summary. The results of operations of ' I Company's rates under the proposal would be the Company will continue to be adversely affected comparable with the average of ' iner atilities in until some or all of the rate matters discussed above Texas for the period through i emaber 31,1995. relating to deferred accounting, the proposed - Counterproposals have been made and discussions settlement and the retail rate filing, including the - are continuing. The counterproposals have, for the prudence of STP, are resolved. We cannot predict most part, been similar to positions taken by the the occome of these matters but we be!ieve that; interveners in Docket No. 6668 as discussed in Note the long-tcrm financial strength and integrity of the - N
8. Management cannot predict whether or not a Company will be maintained.
settlement agreement will be achieved or what order the Texas Commission might render. CONSTRUCTION PROGRAM - Retail Rate Filing. The Company filed in The Company's need for capital results pnmanly ; February 1909 with allincorporated cities it serves from its construction progrdm which is designed to - ' that have retained original jurisdiction and with the pmide reliable ciectric service to its customers. Texas Commission for an increase in its retail rates. Dun,ng 1988, construction expenditures mcluding. n L The request reflects the' commercial operation of Al UDC decreased 26% to $329 million trom $445 i <STP Unit 1 in August 1988 and the scheduled milli n in 1987. The decline m construction is due to k L commercial operation of STP Unit 2 in June 1989. the completion of STP Unit 1 in August 1988. It is The 51ing includes a four-step phase-in plan over estimated that construction expenditures dun,ng the - 7 ' nine years based on a return on equity of 14%. The 1989 through 1991 penod will aggregate $393 million g m i [. I i_
a
======n====s
(including AFUDC of $72 million). As of January 31, capital structure. The Company's short-term 1989, construction of both STP Units was complete. borrowing limit from the money pool is $185 million Reference is made to Notes 7 and 8 of the and borrowings will be made during 1989 as accompanying Notes to Financial Statements. No required. During 1988, the average amount of short-base-load power plants are currently planned until term borrowings outstanding at month-end was after the year 2000. $22,862,000 at a weighted average annualinterest ~ FINANCING AND CAPITAL rate f 7.13%. The maximum amount of short-term RESOURCES borrowings outstanding at any month-end during - 1988 was $85,098,000 and there were no Internal Generation. The financial strength of b rrowings outstanding at December 31,1988. the Company is dependent on numerous factors, the NEW ACCOUNTING STANDARDS most significant of which is the receipt of rate relief. Rate relief mtrst be sufficient to prmide adequate In December 1987, the Financial Accounting coverage ntios necessary for additional external Standards Board (FASB) issued SFAS No. 96, financing and for a fair return on invested capital. In Accounting for Income Taxes. Tie standard requires 1988, the Company obtained 43% of its capital a change in the accounting and reporting for income requirements from mternal sources and anticipates taxes from a deferrai manad to a liaoility approach, approximately 68% of capital requirements dunng the and will be adopted by the CSW System no later 1989 through 1991 time period will be provided from than 1990. The change on the balance sheet will mternal sources. reault in material increases to the accumulated y Long-Term Financing. During 1988, the deferred income tax liability, to a regulatory ~ Company issued $150 million of First Mortgage obligation and to a regulatory asset. The adoption of Bonds and $85 million of auction preferred stock, as this standard will not have a material effect on the discussed in Note 3 of the Notes to Financial results of operations. Statements. The proceeds were used to reduce The FASB presently is reviewing the accounting short-term debt and finance capital expenditures. for Other Post-Employment Benefits (OPEBs). Long-term financing by the Lompany involves the These primarily relate to companies' medical and sale of first mortgage bonds, preferred stock and the death benefite paid to employees after they retire. receipt of capital contributions from its parent Generally, the cost of the unfunded medical benefits company or other blancing alternatives. The goal of currently is recognized by the Company as the the Lompany is to provide a strong capital structure. benefits are paid to retirees. The FASB is At December 31,1988, the capitalization ratios were considering changing the accounting requirements to 44% common stock equity,10% preferred stock and an accrual basis so that these costs would be 46% 1ong-term debt. leng-term financing may be
ecognized over employees' periods of employment, required during the 1989-1991 period, however the rather than as the costs are paid. This type of nature, amounts and t,mmg thereof have not been i,
accounting change could result in the addition of a determined. Significant amount of benefit expense on the income Unbilled Customer Accounts Sold. The statement and the recognition of a significant liability Company sells its accounts receivable to CSW on the balance sheet. These effects would be. Credit, Inc., a wholly-owned subsidiary of CSW. In mitigated to the extent that such cost increases April 1987, the Company began selling receivables could be recovered through rates. for electric senice prmided but not yet billed to customers. The sales provide the Company with RESULTS OF OPERATIONS cash immediately and reduce working capital and revenue requirements. The monthly average and Net Income for Common Stock. The year-end amounts of accounts receivable factored Company's net income for common stock declined were $79,814,000 and $72,727,000 in 1988, as 23% in 1988 to $135 million from $176 million m, 1987.. compared to $76,246,000 and $64,912,000 in 1987. The dechne resulted from STP Unit 1 going m, to senice in August 1988 without a deferred Short-Term Fir. ncing. The Company, together with other members of the CSW Eystem, has acenuntmg order or higher rates m, effect to recover established a System money pool to coordinate the c sts of the unit. See ptes and Regulatory M tiers for more mformation. short-term borrowings. These loans are unsecured demand obligations at rates approximating the Electric Operating Revenues. Total electric-. System's commercial paper borrowing costs. operating revenues increased $22 milhon, or 3% from Periodically, all of the Company's short-term lesns 1987 due primarily to a 4% increase in kilowatt-hour are repaid with the proceeds from permanent sales and recovely of higher fuel costs. Customer financing, and therefore these loans are not gr wth averaged 1% dunng 1988, with year-end 3 considered a part of the Compay's permanent customers approximating 540,000. Residential kilowatt-hour cales increased by 7%D
CENTRAL POWER AND UGIIT COMPANY g-j. s. v-
over 1987 reflecting a slight increase in customer the CSW central dispatch system whenever growth along with higher usage per customer which conditions exist that make it more economical than was attributable to warmer summer weather in the meeting additional requirements through generation.
senice tenitory. Revenue per customer was $652 in Expenses and Taxes. liigher operating and 1988, an increase of $40 over 1987. This was the maintenance expenses, including depreciation and result of increased usage and recovery of higher fuel other taxes, primarily reflects the costs associated . costs. with STP Unit 1 being placed in senice. The Industrial sales decreased in 1988 primarDy as a Company's cost-cutting and efficiency programs result of the loss of sales due to cogenemtion which implemented in early 1988 offset part of the was offset in part by the opening of a major increase. If the Company's deferred accounting petrochemical plant. The Company has responded to appliuition for STP is approved, the portion of the ' the effects of competition from cogeneration by deferral for operating expenses, depreciation and -. i offering incentive rates for large industrial taxes wi!! be shown as a reduction to this section of customers. The Company is committed to continue the statement of income in 1989. - its efforts to develop new business and to retain Inflation rates, as measured by the Consumer existing customers in the face of more competition. Price Index, have averaged about 3.3% for the three. Sales for resale increased 18% from the same year period ending December 31,1988. The period in 1987 and is primarily due to the Company believes that inflation, at these levels, requirements for off-system purchases by other. _ does not materially affect its results of operations or g CSW companies and neighboring electric utilities and ' financial condition. However, under existing l the Company's ability to meet those requirements. regulatory practice, only the historical cost of plant Changes in kilowatt-hour sales by customer class is recoverable from customers. As a result, cash for each of the years 1986 through 1988 are shown . Dows designed to provide recovery of historical plant in the following chart: costs may not be adequate to replace plant in future' years. The continued decline in Federalincome tax Residential s.8% 1.45 22% expense primarily was due to lower book taxable N7[ (((3 income which was caused by the need for rate relief. ,33,7) Other 14.3 .26.4) 21.0 The 1988 reduction also reflects lower income tax ' rates under the Tax Reform Act of 1986. The Total sales 4.2 no.3) 0.1 reduction in tb ite to 34% in 1988 is the final. Fuel and Purchased Power Expense. liigher decline in rate Jer this Act. _ unit costs are responsible for approximately half of Interest Expense and Preferred Stock the increase in fuel expense and an increase in Dividends. Interest on long-term debt increased ' generation due to KWH sales was responsible for primarily due to the issuance of first mortgage bonds. . the rest. The average cost of fuel for the year was in late 1987 and early 1988. The decrease in interest $2.11 per million Btu as compared to $2.08 in 1987. on short-term debt is due to additionalinterest The average cost of natural gas, which was used to expense recorded in 1987 from the settlement of - generate 63% of the Company's kilowatt-hour prior years' tax returns, interest being accrued on a requirements, was $2.21 per million Btu, a 5% lower balance c,f fuel refunds due to customers and a - increase over 1987 which was attributable to higher decrease in short-tenn borrowings. Preferred stock spot market prices. The average cost of coal was dividends increased due to the issuance of auction $2.14 per million Btu this year; the increase of $.09 preferred stock in early 1988 and a higher dhidend over 1987 was primarily due to higher spot market rate on the existing auction preferred stock. prices and contractual escalations. Allowance for Funds Ussd During Construce These higher unit costs were partly offset by low tion. The decline in the amount of AFUDC was due cost nuclear fuel at STP. Tha cost per million Btu of to STP Unit 1 going into senice in August 1988. . nuclear fuel for STP was $.54 in 1988. The AFl>DC will continue to decline in subsequent years Company is recognizing this reduced cost in due to the projected in-senice date of STP Unit 2 in proportion to the amount of STP it has in rate base June 1989 and the decline in the Company's - until new rates go in effect to reflect STP in senice. - construction program. Reference is made to Note 1, "Electrv Revenues Other Income and Deduct!ans. Other income - J, and Fuel" for additional infonnation on naclear fuel increased primarily due to higher interest income oni expense. advances to affiliates.~ If the Company receives its'
Purchased power expense is up due to increased deferred accounting order, the effects of the deferral

purchases of cogenerated energy from the of STP carrying costs will be classified in this : ' i
Company's industrial markets In addition, the section of the statement ofincome.'
' Company will purchase off system energy through y a
m Q? Q g; <sy a. s*y < ' '*M', tj$$"s ' T$M ' r j
fWM i ', *l
^,' M jN 'O h
l-
~ a q f,k2.l.&, E .:c ' g &h N ? W6gFGy)Ql?.h% b Qhf$ 'l U e [ qP
g Q
W, $45W be gh Q y ~ '> ~ .? 3, s t n t oi.7NIFAL POWER AND UGilT COMPANY-i' % gf] s 1988L 6 1987-; N n1986 ) h k [^ < ) AVERAGE NUMBER OF CUSTOMERS + ye f% ~ W & A .r.N #'G F Residential '452,707! $ 1446,548 a ', e 44L849 $... a d 4 Commercial. ~ 70,285 A e70,008. M69,719 m NQ:. " '" - All other V3,320 i '3,277a <
m3,254
,A y Industrial ,6,570:
6,548 W " ::6;713 9
4 o,' V, s G . Total / 532,882 = < a526,3810 * " ;521;535 W J
527,392' m.,
e . NUMBER OF CUSTOMERS-END OF PERIOD <, 539,896i 532.546 P 4 4 $m;uaL,, ' SALES - KILOWATT-IIOURS (Thousands) p H 4,945,741S
4,630,356 % 4,567,961 4.,; m.p
, 4>
Residential--
4 r c Mg g)'y ; M ' ' Commercial 3,898,835'
!3,736,151W c3,734,321]

Industrial
?4,244,925s, ^4,325;326M95,521,263 1 ~ L<?' All other - 1,528,082 ' 1,336,3274 % S16,'470 m ~ _1 L Total :: t 14,617,583 c .14,028,160 na15,640,01% [w% r( n C ^o REVENUES (Thousands) NW M N, Q, c ,i Residential c $295,167 i !$273,223 2 ' $284;345 K. l Commercial c2 M,082L 231,0047N$M 241,76E m Jindustrial 7 i30,345 i v198,481MM254,626 %, g All other h 70,838 65,556i, M 379,231) i /
i. %
- Total - ? $790,432 e n $768,264
> $859,975
/, RESIDENTIAL AVERAGES - @ W L.p, 1 Kilowatt-hours per customer - 10,925 010,369 L W' 110,336 ' Revenues per customer > $652.00 > 461L86 < 4 i $643.53 ,;i>, Revenues per kilowatt-hour /5.974 h t5.90e t S W 6.22 av, -, ~ - SYSTEM CAPABILITY AT PEAK (Kilowatts) ' WW ! W CPL stations '3,801,000I 23,698,000i m 43,703,000 Purchase contracts r.-- t > : -M N Total system 3,801,000-t3,698,'000% x3;703.000 '"i 4 SYSTEM MAXIMUM DEMAND (Kilowatts)
3,013,000 ~
s 2.881,000 7 ' r 2,974,000 [~' FUEL EFFICIENCY DATA d' i' m ?(s Average BTU per net KWH - n10,085: T10,164 z x10,174 Cost per million BTU J $2.11: $2.08 e i $2.33 fy Cost per KWH generated (mills) t21,26'- r21.17 V - 23.'70 s y pm . BALANCE SHEET DATA (Thousands) d s y ; *+ Electric utility plant ~ $4,169,637 ' $3,853,568e r $3,426 969 (M ' Annual constructed additions '329,222 ! 444,723 J433,063 5> Accumulated depreciation 658,015N ~ 4 89,909:. "546,285 Percentage of accumulated depreciation o % 2.R to original cost ' '15.78 % i f15.31M ' E15.M 2 ,1+. > ', CAPITALIZATION (Thousands) N " V s Common stock equity. - $1,294,844 4 $L159,550 ^ ' s $1;033,443 4 Preferred stock - 297,334' "213,442i 4 213,060 ' Long-term debt 1,325,977/ J 1,179,456 t, t 1,048,987
0 a'
u +y me N N' .L i f t'9 m m '3 A \\ s y + r , n k...[ [fh. .s g' t t } y 4';' d y $ h' %g + W. k'{, lY r i Ji i , \\ 'g.
p
[.h= v ifG-b i' ' ' g' ' yqq > 1 u _,d.. Qi ( J ,..y, , ' ~ h ? [y ' ',f
% C.;j a'
T - ~. A. < ~ e, i [,$/o[ > - - i"'. ' o-
1 o; y ",dy,,'. m, y ,3, 4 t -~
g
,p p, v. oc E$ T '1984 1983 1982i 1981" 1980-
1979-1978:
Y 706 'v 420,487 '407,006: 394,437- - 376,444 - 361,181-3347,746 "334,046 1 s 220~ 67,217 - 65,359
63,581 360,386 57,901 56,023

53,768:.
.t ,f 4 27
6,717. '
6,652- '6,560: 6,322 ? " 6.014-- -5,771 5,619 ^ c268 .3.206 3,185 -3,174' z 3,108 3,051'- 2,9811 2,9481 Y.. e721 -497,627 482,202 . 467,752? o446,260. -428,147 /412,521 e 396,381 ~, c281-507,402 492,712-477,892?
459,0031 4 437,438 v 422,298-406,447.
(884.4,209,063 '.3,863,79S.3,988,1111 3,736,235 3,574,451- :3,202,513: 3,108,160 n e447 -3,452,989 J 3,268,206' 3,278,005 4 E3,085,744- @S84,986 -~ ' 2,723,4461 l 2,640,039 L e326 6,280,810 '5,910,999' u5,532,386 ^ 5,'867,785 ' 5,675,723: :5,663,115 5,488,879; c630- 1,166,087 1,116,20I 1,111,941 : 1~531,2501 1 251,973,1,131,0522 > 1,210.460 : ,q l '7Q V s J287 : 15,108,949 ? 14,159,204113,910.443 L 14,221.014 L 13,387,133 12,720,126 12,4,4,7,538 >[ 6038 $298,186 $286,182 - $282,616 - $ '33,593 -.$203,214 '. $159,701" e $150,11 6334 255,879 '249,255 242,215 - t '202,819 L .17.1',047 127,743. 119,240: 'I 6915 342,900 336,604-303,933 277,829:. = 234,906 J 189,017! 175,764: r s621 75,219 ' -74,240 70,422 79,701' '60,429 -42,125 +
41,9800 3908
' $972,184 $946,281 $899,186 ? $793,942 ! $669,596 ? $518,586 $487,495 4 (325 10,010 9,493 10,111' 9,925-9,897- -9,209 9,305-II.53 $709.14 $703.14 $716.50 $620.53 ' . $562.64
$459.24
$450.57 G.60s 7.08e 7.41e ' 7,09e - 6.25e ' 5.69e - 4.99e *
4.84e 6000 3,667,000 3,625,000 3,523,000 '3,523,000 2,954,000. 2,976,000:- 2,976,000 s -._ s 10,000 10,000 L000 3,667,000 3,625,000 3,523,000 '3,523,000 2,954,000 :2,986,000 -2,986,000 6000 2,832,000 2,869,000 2,825,000 2,734,000: :2,505,000 2,390,000- 2,262,000 <
6040 10,298 10,231 10,236 10,171- -10,374
10,262 10,325-5.89
$3.27 $3.47 $3.51 $3.04 c $2.55 - $2.20 $2.07 E01 33.65 35.47 35.97 30.93 26.43 22.58 21.39 3619 $2,758,977 $2,385,489 $2,110,440 $1,880,395 $1,687,124 $1,461,916 $1,241,935- $151 386,952 286,524 237,251 199,519 231,858-228,631'- 195,362' _q 4405 458,834 418,037 377,738 339,497 301,299 .269,212 243,464 - i 4.47% 16.63% 17.52% 17.90% - 18.05% 17.86%- 18.42% 19.60% 443 $851,805 $723,254 $635,049 $555,245 $478,191 $426,184 $377,534 0 ,979 181,989 182,024 132,770 132,770 132,796 93,136 43,569-y 481 866,551 728,149 647,404 573,427 509,024 434,590-444,628 1 4 1y u n -i a ;j*) ..u y
n- _e n, m. . m - nwc %w,.
v. m= c,

n. c
.c,.n n. w, ,, s en,y n.w.up.n. w @k,:@c < -nu ;;y,; w >, a
w 4,.

a.
n." : n ni"- ~. ~ ha s @ p, W,m n,w usQ i f 1j dd:p ku/ @m:.. N< wyh, r ^ u W ;,. c c.i W m > w ;_ q s
y4w &c F@y n
, M Q f ~, siy @.J k,n*& W p%p % ~n+u.ap>gk W L 5G m O f C J 5'. "W' #p' $v ',j 4@,,b r ?8 hl [w % $y d i e ,s w w c s w hu,.,w t ' '. ;,v4ls n r m.,. .,n g 1. s n. my m o e n. , " %~ ;y t_.
@t M,

F.
, pp %.,..b..',W , ! < 8h., > Wp. ,' o ?M i 1 fl.m m.n s Ta M.
v. _
r a A~ ; t, t y a[ 4, c yf y.. q, y %,4..g.p%.a.s %. 1, g- < - up, m - i r, v, c i <a i w., s - m-r,. s .pt.w. a- ,,o u.,o, r^,
ga
-y s-.. <.4 w-,t
, s ;.- si
.. ;w" H < ajm, r_ w,' > 3 d~+iM .o et ./9 0: ar', <A ..e m., g,, ; , 'Ano..q y o<, w i 4 g1 .t WW,.,@ "m l-y a1 ' x ( & BULK RATE (.. E a o,- jMe,M , O EO.L Box 2121,* Corpus Christi, Texas' 78403-2121; N, M iU.SJPOSTAGE; PAID b M 50W 21. PERMIT NOJ 182 7 i MU M i Address Correction Requested ? @.il ' s sy *n& J A Member of the Central and South We'st Sistem i /W '.N CORPUS CHRISTI; TEXAS 78403i M C.p M g~ 1 wu. - u. 7 3(4 .x. r, - 1 4 y.b N.[~,. , + g.. :. a,w a v .m e.+, ' w$,, w. , ary.'3 1 l1.a v.. ..,.g: d i..,, p 44,,;, g r ,0 ^4
hi g
m I - p v.q d k f' ',, -[, [7 y // k g fpf* i ,.y. ^~ 1 f ~ ,.i3.., L 3. ! s, ' ^ ,p. / 'h '88'- C" l,, 1 < 'r '-'1..n g:'j 'w:. y!. t, b',,,,, }'., i gu. p' ;, $5 7 , 4:p i f! #c'r% N,,; 3 1 q, t ' i.,.....w :.( [;- w. ..M q p pr,Q . ]m.w; v.: g ,6 , v,, p.m, v a v a 1 4 i, e. .s g' w4: Y .7 o r,)M,4; * - it.' o,'.e > ,1 ~s 4> (, .s o -r .s n y '~ "J7 ..t.g;, .v cc, r.,ce c - g, i ' t cv - Gm1p%m, Ju ,I ,,g' lt '3 5 f l .g, _s,N;,k,W's /.l y$,,,,, 57 - J $.I Y.;%,[,. &{ir
l Y Y >, x,. / '

r + r;l,,,,
%' l9.\\ , 3 f' . bib A. it 4 j lj :. ' N1e ,.d; i -,- .l V. , } e A n, 2 ? i + g y t 4'e 'h L ^sc s- ? pl, 5 3 p s:jJ V
, ~. N'I s r
J: 11 1 ( _l-g .,j ~ L.- q..*- ,7 ?JC v 13-3 v.hg. 'f y' u 7 p:.. 1 f 1,*. I' 4 i s ia ,.,f. g~h. f& A g 3; -, 3,, / ' g c.
c. ! <(-,,,, y i n.,,$., t t
4 4 i n yv sr, : -
c. t
+e r r s 4 a,,.. 3,)s s. v -m m. m' m* a-v.9.. 1 ,y- '4: ~ 7pg[, j; e a p, ' h, .. qp ";d " c y s' [h i ) I['I ;j J.., ,4 i q?E 3 r .m, A 2 ,.3
e.,
,'y ( Q.W j , g,WN^ yow r y. c.a. A fcg-OW y-g. g.,.,., , a.2, m
y. m 4
a, t. , (4 -3 > ',.g [ f, 7 f f, D 5 fN., '. * * 'f k i,*. Wh% '.Y1
'~

. B ;.j i.g l
. Y 'm:8, o. s c ne 9' J.\\ l, 33 3,. _ yf ' i 'L Ghs sh. w2 L 4 .w ,m.. [, , L f r e ue '+ my b t w ;n ]',. g. y, (h [- h ,,, ' M. ,,..[: 'w.e 7 gi lv- ;. ;.. i
q. -p,
,p i, y g-t o . [ -~c u,, a.~. g - ' k[. I 4 g-d ! ' ski ) 1
MI i I,i
( yj, @(. N [', -.1L,,. ~<# j,,.j ~5^ 4 3 ~ -[m t ,g q l[{4M y; TQ y; y,3 +1 6 - - 3 ,97
q p;.p.y
( 24'71 t n-y9,f.;; V 4 . 4 .f:- , a r
y. % jlg f, y. '
,;p-, ,4q;, s.- w-e e q d;
.;j,
s s n w:= u.g _4). :y r* 0,7 .t m ;p. . a t ps g, %s 8 9b,, - 7pp +. u c gj, g.-a y i s w s s d.;, y. e i ai i , t.. 'm, ;. yy.. - s
w r
r s c .m . ^., i .v 3' a s. ,., A i .'t, /y ' '^ 1 W yw ;- 1 x i c,
r.,7 -
en n (,1,;. . s s u, y n e <w I a ':;4,: 4 y I ~ y:.n i ' s a i e.,, U r j q @- r + ' e i 9 3. u t, H . p, m. o t
j
\\ R h.1
V
Q':
.L p> y P.. / y 'J ^ ,-)4 'rr. W s t g, .,c 4 S Y 1 ) ,s= s ,,,T,' ", 7, a, 'd 1 7 t -[ ' P
c i
3p ' i. f *'. (I l-l 4 -l "j h, 7 C j, ; I. i.t;( g-5 5'..jg-, p 4.p, - g ... ! p 5 s g .g. y g,9 7 .p' 5 I f,i I ([. - ,] 15, m 5 uo., ,l 3,v,;, I r I g 1._s t , ( i. F ' i....

. 2.
i /-
y?
'y, J [ di J. I 6 1-( 3 4
Sp:
>,ta'.'.-" g
.. r.
q,4.;.: N }, ll t x
1
.v.,h D-O %. < .,w' ) ' ^^ 4 i c s 4 ?. t 3 - i 1 24.. ',I'2,(.. j t
l
~ { l I 5 's A'. L , s. 4,. ,s o, -.,g. ,-_ f,o ,g_1 1; ~ 7 a u 3 s 5 l. s 4 [ k 5 (. l, el 4 ) s Q: s a I 1, 1 1 rm. y' O \\ % b {' f..., _,j-I g E C q p f 4 3 4j 1 v1 + i 3 1, .' + 'h7 1 .'f' ( s i } e. L. t 4' 'm k i 5, i g J I ,[,; ',~) , a [< r? }, t I a i I, 5j 1 , i .) d
n l-24 1
^ 11 ,~ a 9
).

1. 4 L
< A 1. g s 1 3, - w' i 1 ji
9. 'i

v..
i nr,. 4' f l af..,s { ' I - Y 'u.'h. x 4 f t c p q.% 3' d' qJ \\. P ig l 4 l -{I 'f. q '(. ,l j I y t. cl ; ( ') j ( '.h,-' l e' - - !I 3,) I,,' y,- '1 4 2 #),* < n, , i.(3do l u r s,, LJk. ph i.. C h... ~ .__y ! - -. (.. w M-i I' .] =, J h 5 n
1 O {l SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ) l FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31,1988 i COMMISSION FILE NUMBER 0-346 l CENTRAL POWER AND LIGHT COMPANY (Exact name of registrant as specified in its charter) TEXAS 74-0550600 (State or otherjurisdiction of (IRS Employer incorporation or organization) Identification No.) 539 North Carancahua Street, Corpus Christi, Texas 78401-2802 (Address of pri' -ipal executive offices, including zip code) Registrant's telephone number, including area code: 512/881-5300 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered None None j l l Securities registered pursuant to Section 12(g) of the Act: J Cumulative Preferred Stock, $100 Par Value (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes x No Number of shares of Common Stock outstanding at December 31,1988: 6,755,535 (None of such shares are held by non-affiliates.) DOCUMENTS INCORPORATED BY REFERENCE Pages 20-39 of Central Power and Light Company's Annual Report to Stockholders for the year endeo December 31,1988 are incorporated into Part II hereof. = i
a i DEFINITIONS ) The following abbreviations or acronyms used in this text are defined below: f 1 4 Abbreviation 1 or Acronym Definition AFUDC........... Allowance for funds used during construction Austin.... City of Austin, Texas Bechtel............. Bechtel Energy Corporation Brown & Root........ Brown & Root, Inc. 1 Btu................. British thermal unit l CEO................. Chief Executive Officer l CERCLA.............. Comprehensive Environmental Response, Compensation l and Liability Act of 1980 Code................ Internal Revenue Code Company. Central Power and Light Company, Corpus Christi, Texas CSW................. Central and South West Corporation, Dallas, Texas CSW System.......... CSW and the electric operating companies Electric operating companies...... The Company, PSO, SWEPCO and WTU EPA........ United States Environmental Protection Agency i ERC0T............... Electric Reliability Council of Texas FERC.... Federal Energy Regulatory Commission H LP............ ~louston Lighting & Power Company Holding Company Act. Public Utility Holding Company Act of 1935 HVdc.............. High-voltage direct. current Kw.................. Kilowatt Kwh. Kilowatt-hour LCRA....... Lower Colorado River Authority Lubow..... Lubow McKay Stevens & Lewis Mcf......... 1,000 cubic feet Mw.... Megawatt NEIL................ Nuclear Electric Insurance Limited l NPDES............... National Pollution Discharge Elimination System NRC............... Nuclear Regulatory Commission Oklaunion........ Oklaunion Power Station Unit No. 1 OPUC................ Texas Office of Public Utility Counsel PCB.......... Polychlorinated biphenyl Petition............ First Amended Original Third Party Petition l PSD.............. Prevention of Significant Deterioration PS0................. Public Service Company of Oklahoma, Tulsa, Oklahoma RCRA...... Federal Resource Conservation and Recovery Act of 1976 San Antonio.. City of San Antonio, Texas SEC................. Securities and Exchange Commission STP......... South Texas Project electric 'generat.ing station SWEPCO... Southwestern Electric Power Company, Shreveport, Louisiana TACB.. Texas Air Control Board Texas Commission.... Public Utility Commission of Texas TWC............... Texas Water Commission WTU................. West Texas Utilities Company, Abilene, Texas 2
PART I ITEM 1. BUSINESS. The Comoany. The Company, a Texas corporation, is a public utility engaged in generating, purchasing, transmitting, distributing and selling electricity in south Texas. It is a wholly-owned subsidiary of CSW, a ragistered public utility holding company. At December 31,
1988, the Company supplied electric service to approximately 540,000 retail customers in a 44,000 square mile area in south Texas, vith an estimated population of 1,841,000.
It supplied at wholesale all or a portion of the electric energy requirements of six rural electric cooperatives and two municipal electric systems. The three largest cities served by the Company, and their estimated populations, are Corpus Christi, 260,000; Laredo, 109,000; and McAllen, 68,000. Manufacturing, metal refining, petroleum, agriculture and tourism comprise the economic base for the Company's service territory. In 1988, industrial customers accounted for 23% of the Company's total operating revenues. Contracts with substantially all industrial customers provide for both demand and energy charges. Demand charges continue under such contracts even during periods of reduced industrial activity, thus mitigating the effect of reduced activity on operating income. The Company carries on a continuing construction program, the nature and extent of which is based upon current and estimated future loads of its system. (See " ITEM 2. PROPERTIES -- Construction"). REGULATION AND RATES Reculation. The Company, as a subsidiary of CSW, is subject to the jurisdiction of the SEC under the Holding Company Act with respect to the issuance, acquisition and sale of securities; acquisition and sale of certain assets or any interest in.my business, including certain aspects of fuel exploration and development programs; accounting practices and other matters. The FERC has jurisdiction under the Federal Power Act over certain of the Company's electric utility facilities and operations, including wholesale rates, and certain other matters. The Texas Commission has exclusive jurisdiction over
accounts, certification of utility service territories, sale or acquisition of certain utility property, mergers and certain other matters.
Neither the governing bodies of incorporated municipalities nor the Texas Commission have jurisdiction over the issuance of securities. 3 ~..
k i i E geg. The Texas Commission has original jurisdiction over retail rates in ) e l all unincorporated areas. The governing bodies of incorporated municipalities .have such jurisdiction over rates within their incorporated limits. Municipalities may elect, and some have elected, to surrender this jurisdiction to the Texas Commission. The Texas Commission has appellate jurisdiction on a "de novo" basis over rates set by incorporated municipalities. Electric utilities in Texas are not allowed to make automatic adjustments to recover changes in fuel costs from retail customers. A utility is allowed to recover its known and reasonably predictable fuel costs through a fixec fuel j factor established during a general rato case, fuel reconciliation proceeding or j interim fuel proceeding. An interim fuel proceeding is conducted cc the +.equest I } of a utility when a utility has materially over-recovered and proj octs to materially over-recover its known or reasonably predictable fuel costs c r under j such other circumstances upon the initiative of the Texas Commission. In the event that reasonably unforeseeable circumstances have resulted in a naterial under-recovery of known or reasonably predictable fuel costs, a utility may petition the Texas Commission for an emergency interim fuel factor; the Texas Commi, ion must act on such petition within 30 days. In the case cf an over-recovery in excess of 4% of annual fuel costs, a utility must file a petition to make interim refunds and such petition may be granted by the Texas 1 Commission without a hearing. Final reconciliation of fuel costs are made at the time of the utility's general rate case or a reconciliation proceeding. In the event that the utility does not recover all of its fuel costs under these procedures, such event could have an adverse impact on net income. Under the Texas Commission's rules the Company has filed a petition to refund approximately $21 million of over-recovered fuel costs, plus interest, for the period January 1988 through January 1989. In September 1986, the Company filed an application with the FERC for an increase in base rates charged to its wholesale customers. The application requested a two-step increase of $2.6 million and $4.9 million, respectively. The FERC granted the Company's request to place the $2.6 million increase in effect in December 1986, subject to refund. A settlement among parties was agreed on in the final order which increased rates by $2.2 million per year through Joe 1987 and $1.3 million thereafter. The settlement provides for cescomers to be individually assi ned annual costs of STP Unit 1 and defers j 6 charges of $9.2 million per year to be repaid by affected customers over a five-year period after retail rater reflecting STP Unit 1 in rate base are placed into effect. All of the Company's contracts with its wholesale customers contain fuel-adjustment provisions that pe.rmit it to automatically pass actual fuel costs (including those associated with purchased power) through to its customers. I In February 1989, the Texas Commission established Docket No. 8644 to review the effects of the reduced corporate tax rates under the Tax Reform Act of 1986 on electric utilities' revenue requirements. Although management cannot predict the outcome of this docket, it expects that any findings will be prospective and will not have a significant impact on the Company's results of i operations. See "1 TEM 2. PROPERTIES -- STP" for information. as to rates relating to f STP. 4
OPERATIONS Peak Loads and Capability. The following table sets forth for the years 1986 throgh 1988 the net capability of the Company (including the net of j contr4cted purchases und contracted sales) at the time of peak demand, the j j maximum coincident system demand on a one-hour integrated basis. (exclusive of -) sales to other electric utilities), and the respective amounts and percentages of peak demand generated by the Company and purchased from and sold to others: j l Percent Increase Maximum (Decrease) Net Purchases Coincident In Peak Ceneration at (Sales) at Net System System Demand Time of Peak Time of Peak Capability Demand Over Prior Year Mw Mw Period Mw Mw 1986 3,661 2,974 (1.6) 3,156 106.1 (182) (6.1) 1987 3,644* 2,801 (3.1) 2,674 92.8 207 7.2 1988 3,836* 3,013 4.6 2,937 97.5 76 2.5
These totals do not include 107 Mw of system capability in 1987 and 276 Mw of -
system capability in 1988 in long-term storage as described under " ITEM 2. PROPERTIES -- Facilities." The Company is a member of ERCOT, which also includes Texas Utilities Electric Company, HLP, UTU, Texas Municipal Power Agency, Texas Municipal Power Pool, LCRA, the municipal systems of San Antonio, Austin and Brownsville, the South Texas and Medina Electric Cooperatives, and several other interconnected systems and cooperatives. The ERCOT members interchange power and energy on firm, economy and emergency bases. The Company also engages in j economy interchanges with the other electric operating companies in the CSW System. I The Company, along v,ith the remainder of the CSW System, operates on an interstate basis. The electric operating companies are installing HVdc transmission interconnections to facilitate exchanges of power. The first link, the North HVdc Tie, a 200,000 Kw Tie at Oklaunion between and owned by WTU (25,000 Kw) and PSO (175,000 Kw), was completed in December 1984 The second link, known as the South HVdc Tie, was planned as a 500,000 Kw ircerconnection between SWEPCO and STP. In November 1987, the Texas Commission dismissed the 1 application by the Company, SWEPCO and HLP to build the South HVdc Tie. As a result of delays in the application for ti e South HVdc Tie, the co-owners of this second link filed an application in May 1986 with FERC requesting approval to move this second link to a new location in Titus County in east Texas. This new project, referred to as the East HVdc Tie, is presently proposed to be a 600,000 Kw back-to-back direct-current terminal built at SWEPCO's Welsh Power Plant near Cason, Texas and a 16 mile, 345 kilovolt alternating-current transmission line from the Welsh terminal to Texas Utilities Electric Company's Monticello power plant near Mount Pleasant, Texas. The East HVdc Tie is 5
.1 presently proposed to be owned 50% by the Company and SWEPCO with the balance to be owned by non-affiliated third parties. The FERC-has approved the request to build the East HVdc Tie but a Certificate of Convenience and Necessity still must.be obtained from the Texas Commission. Emtilovee s. At December 31, 1988,- the Company had 2,333 employees. ] i l s i J 6 s \\
l 1 1 -i i CENTRAL POWER-AND LICHT COMPANY l OPEPATING STATISGCS Year Enled December 31, t. 1988 1987 1986 l KILOWATT-HOUR SALES (Millions): Residential................... 4,946 4,630 4,568 Com:ne rcial.................... 3,899 3,736 3,734 7ndustrial............ 4,245 4,325-5,522 Electric utilities and other... 370 355 351 Sales to retail customers.... 13,460 13,046 14,175 Sales for resale 1,158 982 1 465 Total.................... 14,618 14,028 15, 9 0 NUMBER OF ELECTRIC CUSTCMERS AT END OF PERIOD: Residential................... 459,190 452.,449 447,554 Commercial.. 70,798 70,310 70,017 Industrial 6,564 6,503-6,599 l Electric utilities and other... 3,344 3,284 3,222 ') 1 Total........ 539,896 532,546 527,392 I 1 RESIDENTIAL SALES AVERAGES: Kwh per customer.............. 10,925 10,369 10,338 Revenue per customer $652 $612 $644 Revenue per Kwh............... 5.97p 5.90g 6 22g REVENUES PER KWH ON TOTAL SALES. 5.41g 5.48g 5.50g FUEL COST DATA: Average Btu per net Kwh....... 10,085 10,164 10,174 Cost per million Btu.......... $2.11 $2.08 $2.33 Cost per Kwh generated........ 2.13g 2.12g 2.37p Cost as a percentage of revenua...................... 41.1 39.6 45.6 7
i I 1 ) The Company has experienced some loss of industrial load due to plants either closing or installing cogeneration facilities. It is expected that further losses may occur. The Company filed economic development tariffs with the Texas Commission in February 1988. These tariffs are designed to provide rate incentives for present and new industrial customers to promote Kwh sales to this class. The Company cannot predict the outcome of these actions. ] i FUEL SUPPLY ) General. The Company's electric generating plants showing the type of fuel used and to be used, are set forth under " ITEM 2. PROPERTIES." During 1988, approximately 63% of Kwh generation was from gas, 31% from coal and 6% from nuclear fueled units.. Natural gas requirements tottled 93,566,000 Mcf and coal requirements were 1,896,000 tons. I Natural G.gg. The Company's eight gas-fired electric generating plants j are supplied by 21 separate long-term natural gas purchase agreements accounting for approximately 60% of the total gas requirements in 1988. The balance of the l Company's natural gas requirements could have been supplied under existing long-term arrangements. However, with the soft spot market existing during the I period, the Company elected to purchase most of these requirements under spot market arrangements. The Company's principal long-term gas supplies are those provided under the long-term firm agreements with Valero Transmission Company, 3 Enron Industrial 1:atural Gas Co. and Corpus Christi Gas Marketing, Inc. They l supplied approximately 15%, 14% and 164,, respectively, of the. Company's total natural gas purchases. These agreements expire in 1992, 1990 and 1991, respectively. Including spot market suppliers, the Company had 32 individual suppliers of natural gas during 1988. l .C_pfl. The Company's two coal-fired electric generating plants, Coleto l Creek. and Oklaunion, are both primarily supplied by - single long-term coal purchase agreements. At Coleto Creek, the long' term agreement, which expires in 1999, is with Colowyo Coal Company and currently provides approximately 75% of 3 the coal requirements of the plant. The coal is mined in northwestern Colorado and is transported approximately 1,400 miles under a long-term rail ngreement with the Denver & Rio Grande Western Railroad Company, the Burlington Northern Railroad Company and the Southern Pacific Transportation Company. The balance of the Coleto Creek requirements are currently beind procured on the spot market. At year-end 1988 the Company had approximately 299,000 tons of. coal in inventory at Coleto Creek. At Oklaunion, the long-term coal supply is provided under a twenty year agreement with Exxon Coal USA, Inc. This agreement is for Wyoming coal which is railed approximately 1,100 miles to the plant by the Eurlington Northern Railroad Company. Over 90% of the 1988 Oklaunion coal requirements were supplied under the Exxon Agreement with the balance procured l on the spot market. The Company's share of the December 31, 1988 coal inventory l at Oklaunion was approximately 42,000 tons. The sulphur content of the coal provided under these contracts allows compliance. with existing environmental regulations. 8
Nuclear Fuel. The nuclear fuel cycle entails several steps, including purchase of uranium concentrate, conversion of uranium concentrate to uranium hexafluoride, enrichment of uranium hexafluoride in the isotope
U235, fabrication of the enriched uranium into fuel rods and fuel assembliea, and reprocessing of spent fuel rods.
Fuel requirements for STP (see " ITEM 2. PROPERTIES STP") are being. handled by a committee comprised of representatives of all participants in STP. The Company and the other STP participants have entered into contracts with suppliers for uranium concentrate sufficient for the operation of both STP units through 1995. Enrichment contracts have been secured for a 30-year period for each unit. Contracts have been secured for conversion services for both units through 1994. Also, fue? fabrication services have been contracted for the initial cores and 16 years of operation of each unit. The Company believes it will be able to obtain adequate supplies of nuclear fuel components and services that will be required for STP. No commercial nuclest fuel reprocessing is presently permitted in the-United States. If spent fuel car.not be reprocessed, it must either ue stored j permanently ' or treated as vaste for disposal. No permanent waste disposal facilities are currently available. The Nuclear Vaste Policy Act of 1982 provides that the Federal government, beginning not later than January 31, 1998, will dispose of spent nuclear fuel in return for the payment of certain fees. 4 These fees will be established by the Federal government to r.11ow full cost recovery. It also requires the Federal government to take title. to the spent fuel at the reactor site and assigns the responsibility for transportation of the spent fuel to the Federal government. STP has on-site storage facilities with the capability to store up to 33 years of spent fuel discharged from each unit. governmental Re rul a_tiP_D. The price and availability of each of the foregoing fuel types are significantly affected by governmental regulation. Any inability in the future to obtain adequate fuel supplies or adoption of j additional regulatory measures restricting the use of such fuels for the generation of electricity might affect the Company's ability to meet j economically the needs of its customers and could require it to supplement or replace, prior to normal retirement, existing generating capability with units using other fuels. This would be impossible to accomplish quickly, would require additional expenditures for construction and could have a significant adverse effect on the Company's financial position, revenues and income. Fuel Con g. The Company is unable to predict accurately the cost of fuel in the future. Information as to the historic costa of fuel appears u1 der "0PERATING STATISTICS," l~ 9 l E
i 1 ENVIRONMENTAL MATTERS ] The Company is subject to regulation with respect to air and water quality and solid waste standards, along with other environmental matters, by various
Federal, state and local authorities.
These authorities have et,ntinuing jurisdiction in most cases to require modifications in the Company's fccilities i and operations. The Company is not a party to any litigation or. administrative proceedings with respect to environmental matters, except as described below. 1 Air _ Quality The TACB has jurisdiction over air quality standards and i emission limitations, except for standards imposed by the PSD program which the FPA administers. The Company complies with regulations of the TACB, which require permits for. all generating units on which construction is commenced pr units that are substantially modified after the effective date of the applicabic regulations. The Company believes that all of its present units conply in all material respects with existing Federal, state End local air quality and emission regulations., Permits have been received for the STP plant, subj ect to ] final operating approval on the basis of start-up tests to be conducted during initial operations. The EPA has approved and may enforce air standards and limitations, which i have been adopted by the TACB, and has adopted ambient air quality standards for ] all new or substantially modified generating units. Currently, no modifications of existing plants are expected which may require permits or permit amendments under current EPA or TACB regulations. The Clean Air Act Amendments of 1977 provide for limitations on certain new or expanded emission sources and require use of emission control devices or precombustion fuel cleaning for such sources, except under limited circumstances. Such requirements could affect the siting, construction and cost of future Senerating units. Water Ouality. The TWC and EPA have jurisdiction over all ' wastewater j discharges'inte waters of the state. The 7WC has jurisdiction for establishing water quality standards and issuing permits covering discharges which might j affec t the quality of state waters. The EPA has jurisdiction onr " point j source" discharges through the N.? DES provisions of the Clean Water Act. The Company has obtained or is renewing all required Federal and state. wastewater { discharge permits for facilities currently in operation. FtLP, the project j manager, nas obtained Federal and state permits for STP. 1 foMd Wa s te _Dj.gpp.pg.],. The EPA and the TWC solid warte rules provide I for comprehensive control of all solid wastes fron generation to final di.sposal. The TWC has received authorization from EPA ro administer the RCRA program in I the State of Texas. The Company believes it is in compliance with all r.uch i applicable regulations. fdLQia _and OthgI. Under CERCIA, owners, operators, transporters and/or generators of hazardous substances for disposal can be held liable for the j cleanup of hazardous substance disposal sites which pose or may pose an irainent i risk to the public or environment. Similar liabilities for han.rdous subotence disposal can arise under applicable' state law. 10
In November 1985, the Texas Attorney General brought suit against the Company under the Solid !Jaste Disposal Act and Chapter 26 of the Texas Water Code. This suit alleged that the Company was one of the parties responsible for PCB contamination at the Industrial Road and Industrial Metals sites in Corpus Christi, Texas and therefore should share the responsibility for cleanup of the sites. The sites were used by several metal salvage companies for the salvage of varioua materials purchased from electric utilities, including the Company, and others. Currently the Company is actively participating with others potentially responsible and the Texas Attorney General's Office to design closure plans for areas of the sites with PCB contamination. The Company's share of cleanup costs at this site has not yet finally been determined but is not expected to have a material effect en the Cc repany's financial position. In December 1986, the EPA named 650 entities including the Company as potentially responsible parttes for removal of PCB articles and materials stored at a now defunct EPA-permitted PCL disposal firm site in Missouri, formerly operated by Martha C. Rose Chemicals, Inc. In August 1988, the Company made payment of approximately $170,000 to the Rose Chemicals Steering Committee representing the Company's Consent Option Assessment. To the extent presently known it is anticipated this sum will be sufficient to satisfy the Company's liability for cleanup costs. ITEM 2. PROPERTIES. Facilitif s,. At December 31, 1988, the Company owned and operated the following electric generating plants (or portions thereof in the cases of the jointly ovaed Oklaunion and STP plants). (See " ITEM 1. BUSINESS -- TUEL SUPPLY"). 1 11
Net Dependable Type of Fuel Capability Plant Name and Location Primary / Secondary Mw .+ --- ---------- Barney M. Davis gas / oil (a) 333 Corpus Christi, Texas gas / oil 338 Coleto Creek coal 601 Golled, Texas Lon C. Hill gas / oil (a) 557 Corpus Christi, Texas Nueces Bay gas / oil (a) 544 Corpus Christi, Texas Victoria gas / oil (a) 254(b) Victoria, Texas La Palma gss/cil 46 San Benito, Texas gas / oil (,a) 153(b) E. S. Joslin gas / oil (a) 254 Point Comfort, Texas l J. L. Bates gas / oil (a) 182 l Mission, Texas Laredo gas / oil (a) 65 Laredo, Texas gas / oil 101 Eagle Pass Eagle Pass, Texas hydro 6 Oklaunion(c) coal 52 Vernon, Texas South Texas Project (d) nuclear 315 Bay City, Texas 3,801 (a) For extended periods of operation, oil can be used only in combination with gas. Use of oil in facilities primarily designed to burn gas results in increased maintenance expense and a reduction of 5% to 10% in capability. (b) F.xcludes units in long-term storage - 228 Mw at Victoria and 48 Mw at La Palma. (c) The Company owns 7.81% of the 665 Mw unit operated by WTU. (d) The Company owns 25.2% of the 1,250 Mw unit operated by HLP. 12 L_
I All of the generating plants described above are located on land owned by the Company or jointly with the other participants in jointly owned plants. The Company's electric transmission and distribution facilities are for the most I part located over or under highways, streets and other public places or property I owned by others, for which permits, grants, easements or licenses (deemed I satisfactory, but without examination of underlying land titles) have been obtained. The principal plants and properties of the Company are subject to the lien of the first mortgage indenture under which the Company's first mortgage bonds are issued. Construction. The estimated total capital expenditures (includf r.T AFUDC) for the years 1989-1991 are as follows: 1989 1990 1991 Total (Millions) Generation..... $ 81 $ 17 $ 16 $114 Transmission...................... 18 47 32 97 Distribution.. 32 34 35 101 Fuel........ 9 18 18 45 Other............................ 10 11 11 32 Total (a) $150 $127 $112 $389 l (a) Includes AFUDC in the following amounts: 1989. $ 41,000,000; 1990 $14,000,000; 1991 - $14,000,000. The following table shows the Company's estimated costs and expenditures (including AFUDC) for its 25.2% interest in each of the 1,250 Mw units at STP that are jointly owned with non-affilioted participants. l Scheduled Estimated Cost Expenditures Planned For S e rvi c e - - - - - - - - - - - - - - - - - - Through 11 ant & Capability (pegk Total Dec. 31, 1988 Unit No; Fuel Mw season) (Millions) Per Kw (Millions) STP Unit No. 1 Nuclear 315 1988(a)) ) $2,2.88(b) $3,632(b) $2,214 STP Unit ) No. 2 Nuclear 315 1989 ) l l (a) Unit 1 began commercial operation in August 1988. (b) The project's estimated cost net of releted deferred taxes of $162 nillion is approximately $2,126 million or $3,375 per Kw. Information in the foregoing tables is subject to change due to numerous factors, including the rate of load growth, escalation of construction costs, changes in nuclear and environmental regulation, delays in obtaining permits and from regulatory hearings, the adequacy of rate relief and the availability of 13
i ) 'l necessary external capital (see " Financing" below). Changes in these and other factors could result in the adjustment of the ownership percentage of future CSW joint units, or cause the Company to defer or accelerate construction or to sell i or buy more power, nhich would affect its cash position, revenues and income to I an eztent that cannot now be reliably predicted. STP INTRODUCTION. The Company owns 25.2% of STP, which is located near Bay City, Texas. In addition to the Company's share HLP, the projact manager, owns i 30.8%; San Antonio owns 28.0%; and Austin owns 16.0%. 1 PROJECT COST AND SCHEDULE. In November 1988, the Texas Commission issued a final order conff rming August 25, 1988, as the date that Unit 1 was in commercial opers. tion in accordance with its rules. At the end of December 1988, Bechtel, the plant's architect-engineer, I reported that construction of Unit 2 was complete. A license for fuel loading and low-power testing of Unit 2 was obtained from the NRC in December 1988. Fuel loading was completed in December 1988 and low-power testing is under way. A full-power license is expected to be requested from the NRC in March ' 1989. Unit 2 is scheduled for commercial operation in June 1989, i In October 1988, the estimated cash cost of STP was increased by $150 million (of which the Company's portion is $37.8 nillion). HLP attributed the increase primarily to delays in achieving the commercial operation of Unit 1. The Company's estimated cost of STP, including AFUDC of $882 million, is now $2,288 million; net of related deferred taxes of $162 million, the estimated ) total cost is $2,126 million. I I BROWN & ROOT SETTLEMENT. As the result of the settlement of litigation filed in December 1981, each of the STP owners received a pro rata share of $750 million from Brown & Root, the former architect-engineer and constructor of the ) proj ec t, payable in quarterly payments over seven years, without interest. The 1 Company elected to receive $146.8 million, the present value of its share of the cettlement, in December 1985. This amount was recorded as a reduction in the I cost of STP. I PRUDENCE REVIEW. Texas Commission ActfNities I in 1985, the Texas Commission hired Lubow to review the prudence and efficiency of the construction of STP. In June 1986, Lubow submitted a report to the Texas Commission, covering the period from 1973 through January 1983. Lubow claims in its report that $1.1 billion to $1.3 billion of direct costs were spent imprudently on STP by all owners. According to Lubow's report, these amounts do not include AFUDC or rate effects
that, Lubow concluded, j
substantially offset each other. The amounts also do not take into account the proceeds from the Brown & Root settlement. The report recommends that the Texas Commission decline to review the merits of the Brown & Root settlement and concluded "that it was not unreasonable for the STP owners to settle the litigation on the terms they did." i 14 ~
In 1986, the Texas Commission opened Docket No. 6668 for the purpose of derertaining the prudence and efficiency of planning, management and construction of STP. The accounting treatment of the Brc,wn & R6ot settlement proceeds will also be determined in this docket. 1 In April 1988, Ernst f, Whinney was appointed by the Texas Commission to review HLP's prudence related to STP. Ernst & Whinney issued a report in ) December 1988 covering certain issues identified in its study. This study determined HLP was prudent in some areas studied and imprudent in others; conclusions regarding several other areas -were postponed. Ernst & Whinney is scheduled to supplement i ts report by June 1989, quantifying the impact of imprudent acts on the cost and schedule of the project and reaching conclusions on the open areas. In January 1989, the Texas Comission appointed Resource Management International, Inc., to review the Company's management decisions regarding STP. A preliminary report is expected to be issued in March, with a final report in April 1989. Additionally, Texas Commission staff testimony for Docket No. 6668 is scheduled to be filed by June 15, 1989. Intervenor Testimony In August 1988, OPUC filed in Docket No. 6668 testimony calling for a disallowance of certain costs of STP af ter taking into account the settlement with Brown & Root. In October 1988, OPUC supplemented its prior testimony asserting that $2.050 billion or 42% of its estimated cost of the Company's share of STP should be deemed unreasonable and excluded from eny rates charged by the Company. OPUC indicated that it did not consider the reasonableness of the costs incurred subsequent to the replacement of the former architect-engineer and that the recommendations contained in the testimony are preliminary and subject to change based upon final costo and cenercial operation dates for STP Units 1 cnd 2. In September 1968, a group of cities served by the Coopany filed a consultant's report in Dochet No. 6668 with the Texas Commission. The report, j l after taking into account the settlement with Brown & Ecot, recommends a disallowance of $1.105 billion, or 53% of its estimated cost of the Company's share of STP. Additional intervenor testimony, if any, is scheduled to be filed by June 7, 1989. Management disagrees strongly with the methodologies and conclusions of the two interveners' Cilings. Company Testimony l The Company filed in February 1989 in Docket No. 6668 and in its retail rate filing (Docket No. 8646) with the Texas Commission an extensive report pcepared by The Hielsen-Wurster Group, Inc. The report, done at the request of q the Company's counsel, reviews ' all aspects of the reasonableness of project i planning, design, construction, start-up and licensing of STF. Unit 1 was examined from pre-construction through the commercial operation date; Unit 2 was examined from pre-construction through September 1981. The report reviews all phases of the development of STP to determine the cause of schedule delays and increased costs related to any unreasonable performance. The report quantifies for all of STP a total of $1.0429 billion of unreasonable costs, including AFUDC at the Company's rates, before giving effect to the Brown & Root settlement. 15
The report finds that of the 94.4 months of delay from the initial date of scheduled commercial operation, 64.9 months was unavoidable and uncontrollable delay due to regulatory matters, industry environment and other circumstances. The remaining 29.3 months delay results in total foreseeable costs due to unreasonable decision making or performance of $766.9 million. The report also finds $276.0 million of non-delay costs attributable to unreasonable performance, The report finds that the Company was prudent in its activities as a member i of the STP Management Committee. The report also concludes that Brown & Root, I as architect-engineer and constructor, was responsible for $814.1 million of the ) unreasonable costs and that IILP, as project manager, was responsible for the remaining $228.8 million of unreasonable costs. The report concludes that the 1985 Brown & Root settlement of the STP litigation reasonably compensated the l STP owners for Brown & Root's performance failures. l The Company filed additional testimeny in Dockets No. 6668 and No. 8646 ol' Morris H. Jacobs, a principal of Arthur Young & Company. Jacobs used the i Nielsen-Wurster findings to determine if any adj ustments to STP costs were necessary. Jacobs concludes that, based on an economic analysis of the net present value of revenue requirements, the pre-1983 project delays did not harm the Company's ratepayers. Further as to post-1983 delay costs and the unreasonable non-delay costs found by the Nielsen-Wurster report, Jacobs concludes that the proceeds received from the Brown & Root settlement exceeded the unreasonable expenditures and that no adjustment to STP costs is necessary. l Both the Nielsen-Wurster report and the Jacobs analysis present methods to determine the reasonable cost of STP to be allowed in rate base in accordance l with Texas law. l The Company previously filed a report in February 1988 in Docket No. 6668 prepared by Drs. Dyer and Ashley of the University of Texas; this report was supplemented in February 1989 and additionally was filed in Docket No. 8646 i The report reviewed aspects of the Company's management decision and monitoring l activities regarding STP. Dyer and Ashley reviewed the Company's activities based on the use of appropriate corporate objectives and information available at the time decisions were made. The report concluded that the Company's managemeret decision making and processes related to STP were reasonable and prudent. NFERRED.ACCOUlTLM. In June 1987, the Company petitioned the Texas l Commission to approve deferred accounting treatment of the costs related to the operation of STP Unit 1. Deferred accounting would allow the Company to recover in future per'.ods costs that otherwise may not have been recovered through historical ratemaking practices. The Company filed supplements to the original petition in October 1987 and again in June 1988. The deferral period under the petition would cover the time from when { Unit I went into commercial op3 ration until rates are placed in effect reflecting this unit in service. The deferral would include the plant's total carrying costs, for which the Company has requested a special accounting technique. Such technique would classify more of the carrying costs as Interest than otherwise would be done and, as such, would ponitively affect the Company's results of operations during the deferral period. Assuming a deferral period of 16 months, total estimated costs deferred including carrying charges as 16 L._ _--
requested by the Company would approximate $359 million. The effect on net income would be $228 million. In February 1989, a hearings examiner issued his report on deferred accounting. The report made the following recommendations to the Texas Commission: (1) approve the Company's deferred accounting on STP Unit 1, but not permit the recovery of an equity return during the deferral period; (2) not allow the special accounting technique that the Company had requested; (3) limit the deferral period to the earlier of December 31, 1989, or the date when the Company has new rates in effect from its retail rate application; and (4) not permit a return to common shareholders on the deferred costs during the time the costs are being collected from customers, which is expected to be over the life of the plant. If the Company were to receive an order from the Texas Commission consistent with this hearings examiner's report, net income, relating to the August through December 1988 deferral period, would increase by an estimated $28 million rather than by the estimated $54 million that would result from the Company's deferred accounting request. Any such amounts would be recognized in a future period. Under an assumed deferral period of 16 months, the hearings examiner's deferral amount would be $155 million, and the effect on net income would be $122 million. However, the report recommends the exclusion of an equity return on the deferred amount during the recovery period, which could significant reduction in these amounts for financial reporting result in a purposes. The hearings examiner's report is inconsistent with and significantly more negative than previous orders from the Texas Commission on deferred accounting. The Company will file numerous exceptions to the hearings examiner's report. The final order hearing before the Texas Commission has not been set. As a part of its retail rate filing (see "Mji. -- Retail Rate Filing" below) the Company requested deferred accounting treatment on STP Unit 2. Deferred operating expenses, net of fuel savings, on STP Unit 2 would amount to about $3 million per month and would have about a $2 million per month effect on net income. If the special accounting technique requested on Unit I were approved, the estimated $8 million of monthly carrying charges on the investment would all be considered equity and could not ba recognized in the results of operations. However, if the Company receives deferreo accounting on STP Unit 2 consistent M th the hearings examiner's report on deferred accounting for STP Unit 1, the Company would be permitted to recognize a debt carrying charge of $2 l I million per month. Management cannot predict what the Texas Commission will order for deferred accounting treatment. However, if the Texas Commission does not permit the deferral of a material amount of the costs contained in the Company's petition, ) significant adverse effect on the results of there would continue to be a operations of the Company until STP Unit 1 is included in the Company's rates. RATES. Settlement Proposal In November 1988, the Company began meeting with representatives of the staff of the Texas Commission and all the groups that have intervened in three STP docke*:s that now are pending before the Texas Commission. The purpose of these meetings was to discuss a proposal by the Company to settle these dockets and the retail rate filing. The three dockets pertain to: (1) prudence and 17 L
efficiency of the construction of STP and the Company's prudence in participating in the proj ect; (2) economic viability. of Unit 2; and (3) deferred accounting. Any. settlement agreement must be approved by the Texas Commission. The Company's proposal would increase rates.in two steps. The first step would increase rates approximately 28%, or $229 million. The second step would increase rates an additional 11%, or $115 million, and would occur one year after the first step. Rates then would be fixed at that level through December 31, 1995, except in the event of external factors uncontrollable by the Company. Additionally, the Company would continue to recover fuel costs based on the current rules of the Texas Commission; these rules provide for separate ' fuel cost recovery. Under the proposal, deferred accounting for STP Unit I would end with the implementation rif the first step increase. Deferred costs would be recovered by the Company over the remaining life of STP. The Company would not request deferred accounting for STP Unit 2, which is scheduled for commercial operation l in June 1989. The Company projects that, assuming a settlement in early 1989 based on the teras of the proposal, its return on common stock equity would approximate 9% in 1989. This' return would be lower than what the Company currently earns because the Company would not have the benefit of deferred accounting trer.tment on Unit 2. However, the Company's returns in subsequent years are projected to increase.to levels that currently are being allcwed to other electric utilities by the Texas Commission. In the event the Company were to recover amounts from any third party through litigation or arbitration in connection with the construction or management of construction of STP, the recovery would be applied first to offset the Company's deficiency in earnings available to common shareholders during the period of this agreement. The deficiency in earnings available to common shareholders would be the amount by which the return on the Company's average common stock equicy starting in 1989, is less than a return that is indexed to U.S. Treasury bonds. This return currently is approximately 12%. To the extent recovery is n.ade in excess of this amount, it would be shared equally between customers and common shareholders. Management believes that the settlement offer would shorten what otherwise will be a very cor.tly and lengthy regulatory process and expects that the Company's rates under the proposal would be comparable with the average of other utilities in Texas for the period through December 31, 1995. Counterproposals have been made and discussions are continuing. The.:ounterproposals have, for the most part, been similar to positions taken by the interveners in Docket No. 6668 (see "Intarvenor Testimony" above). Management cannot predict whether or not a settlement agreement will be achieved or what order the Texas Commission mig,ht render. Retail Rate Filing The Company filed in February 1989 with all incorporated cities it serves that have retained original jurisdiction and with the Texas Commission for an increase in its retail rates. The request reflects the commercial operation of STP Unit 1.in August 1988 and the scheduled commercial operation of STP Unit 2 in June 1989. The filing includes a four-ste;; phase-in plan over nine years based on a return on equity of 14%. The Company's total STP investment would be included in rates after the implementation of the fourth step. In the first year, rates would increase by 16%, or $125 million, net of -$29 million in reduced fuel costs. The Company then would seek permission to increase rates in 18 e
each of the following three years by 110, 70 and 60, respectively, based on current estimates, which would increase revenues by approximately $290 million. Under present sales forecasts, rates would be unchanged for the remaining five years. Costs deferred under the plan would be recovered over the last six years. A final order from the Texas Commission on the rate increase request is expected in early 1990. Also included in the filing is a request for deferred accounting treatment on STP Unit 2 (see "p_EEFERRED ACCOUNTING." above). E The Company plans to file in the second quarter of 1989 a request for an interim rate increase effective August 1989. Rates Summary The results of operations of the Company will continue to be adversely affected until some or all of the rate matters discuss-d above, relating to deferred accounting, the proposed settlement and the retail rate filing, including the prudence of STP, are resolved. Management cannot predict the outcome of these matters but believes that the long-term financial strength and integrity of the Company will be maintained. VIABILITY REVIEU. In March 1985, Docket No. 6184 was initiated for the purpose of gathering evidence concerning the economic viability of STP Unit 2. Initial hearings were held in January 1987, and final phase hearings were held in October 1987. No activity occurred in this docket in 1988. HLP SULI. The Company and CSW received in January 1988, a copy of a Petition, which HLP filed in Dallas County in the 101st Judicial District, asking the Court for authority to add the Company, CSW and San Antonio as parties to a suit (" Austin Suit") between HLP and Austin. The Austin Suit was filed in January 1983 and is pending in the same Court. The Court, in a subsequent hearing, severed for a separate trial the lawsuit against the Company, CSV and San Antonie. HLP also has filed an original complaint in Matagord". County against the rompany, CSW and San Antonio requesting the same relief as requested in the Petition, which remains pending subject to a plea in abatement. No other action has occurred in the Matagorda County lawsuit. HLP has asserted in the Petition that if it is liable to Austin for any damages in the Austin Suit, HLP is entitled to contribution or indemnity from the Company, CSW and San Antonio because all the activities complained of were decisions or activities of the S1P Management Committee, which had members from all STP participants, rather than HLP's decisions as project manager, or that HLP was acting as an agent for the other participants and, therefore, all participants are liable for the actions complained of by Austin. HLP has alleged that CSW is a proper party to this suit because it participated through control of end direction of the Company in all major STP decisions. Management believes that HLP does not have a sustainable claim for contribution or indemnity against CSW or the Company. HLP also is seeking a declaratory judgment construing the STP Participation Agreement to the effect that HLP, as proj ect manager, has no liability to Austin, San Antonio, the Company or CSW for its actions relating to any matter complained of in the Austin Suit. HLP also has requested the Court to direct implementation of alternative methods of dispute resolution as authorized by Texas law, such as non-binding arbitration, in order to settle the disputes related to STP. 19
In March 1988, pursuant to the STP Participation Agreement,.the Company and San Antonio called. for binding arbitration of the disputes with HLP. The arbitration call stated that HLP e project manager' has breached its duties and obligations to the other STP participants and is liable to the Company and San - Antonio for damages and that the Company and San Antonio have no liability to HLP for any portion of the dauages alleged against HLP by Austin. Also on that' date, the Company filed with the District Court its response to-the Petition. In that response,.which was filed subject to arbitration, the Company requested the Court to abate both of HLP's petitions until the conclusion of arbitration, limit all action to the. arbitration procedure and compel arbitration in accordance with the STP Participation Adreement in the event HLP refuses to arbitrate. Subject to its request for abatement, the Company has counterclaimed against HLP for damages ' in an unspecified amount related to HLP's breach of duties and obligations pursuant to the STP Participation ~ Agreement, requested that all relief sought against the Company and~ CSW in the Petition be denied, requested that the Court enter a -declaratory j udgment construing the STP Participation Agreement and declare HLP liable to the Company for breaches thereunder and stated that CSW is not a proper party to the action. In April 1988, HLP filed a brief contending that CSW's and the Company's request for arbitration is improper because the issues raised and the relief sought by CSW and the Company are not subject to arbitration under the STP-Participation Agreement. I AUSTIN SUJ1 Originally in January 1983, Austin filed suit against HLP and its parent company, Houston Industries Incorporated, alleging that HLP had misrepresented the capabilities of the original architect-engineer and constructor of the proj ect and had failed.to properly perform its' duties as-project manager. I The Company was informed in September 1987 that HLP and Austin had reached an agreement in principle. under which all litigation between HLP and Austin would be dismissed. However, in October 1988 HLP announced that.the settlement agreement was terminated. As a result, HLP and Austin filed a motion to. commence the trial of their pending litigation. The'new trial began March 6, 1989, in Dallas. HLP has reported that Austin filed a memorandum that claimed damages in excess of $1 billion.
SUMMARY
. Although management cannot predict the outcome of the various STP proceeding +, management believes that the Company's participation in STP and its j performance have been prudent and its investment in STP is recoverable through rates or from HLP. The Company intends to pursue its' claims against HLP, alleging that the' project manager breached its duties and obligations to the Company. However, if any significant costs of STP are not recovered, there { would be a storial adverse effect on CSW's and the Company's results of operations. NUCLEAR INSURANCE. In connection with the licensing.and operation of STP, the owners have purchased the maximum limits of nuclear liability insurance, l as required by law, and have executed indemnification agreements with the NRC, in j accordance with the financial protection requirements of the Price-Anderson Act. 20
Congress has renewed, until August 1, 2002, the Price-Anderson Act, a comprehensive statutory arrangement providing limitations on nuclear liability and governmental indemnities. The limits of liability for licensees of nuclear power plants was increased from $720 million to $7.635 billion per incident. The owners of STP are insured for their share of this liability through a combination of private insurance and a mandatory industry-wide program for self-insurance. The maximum amount that each licensee may be assessed under the industry-wide program of self-insurance following a nuclear incident at an insured facility is $66.15 million (which amount may be adjusted for inflation) for each 1" censed reactor, but not more than $10 million per reactor for each nuclear incident in any one year. The Company and each of the other STP owners are subject to such assessments, which the Company and the other owners have agreed will be borne on the basis of their respective ownership interests in STP. For purposes of these assessments, STP has two licensed reactors. NRC regulations require licensees of nuclear power plants to obtain on-sito property damage insurance in a minimum amount of $1.06 billion. NRC regulations also require that the proceeds from this insurance be used first to ensure that the licensed reactor is in a safe and stable condition and can be maintained in that condition so as to prevent any significant risk to the public health or safety. Further, NRC regulations require that any remaining insurance proceeds be used first to complete any decontamination operations that may be ordered by the NRC and that such proceeds be paid to a special trustee appointed to hold insurance proceeds up to $1.06 billion to be used for decontamination. The decontamination priority and trustee provisions were to have been implemented by October 4, 1988; however, a temporary exemption to these provisions has been granted by the NRC to remain in effect until the earlier of the effectiveness of additional rules or April 1, 1989. Further rulemaking is anticipated in order to address difficulties in implementing these requirements, particularly the trustee requirement. The owners of STP currently maintain on-site property damage insurance in the amount of $1.395 billion, which amount is less than the total amount of such insurance currently available to cover such losses. Decontamination liability and property insurance is provided by American Nuclear Insurers and NEIL. Policies of insurance issued by NEIL stipulate that policy proceeds must be used first to pay decontamination and clean-up costs, before being used to cover direct losses to property. The Company and HLP are members of NEIL and are subject to annual assessments, which could amount to approximately $9 million for the current policy year November 15, 1988 to November 15, 1989, in the event as a result of an accident at a nuclear facility of any that property losses NEIL insured exceeds the accumulated funds available to NEIL. The Company and the other owners of STP have entered into an agreement that provides for the total cost of decontamination liability and property insurance for STP (including premiums and assessments) to be shared pro rata based upon each l owner's respective ownership interests in STP. l In 1989 the Company plans to purchase extra expense insurance under the NEIL I l l Extra Expense Program. This insurance will reimburse the Company for extra expenses incurred to generate or purchase power lost as the result of a covered accident that shuts down production at STP for more than 21 weeks. 1 21
Financing. The Company may need additional long-term financing during the 1989-1991 period, depending on the amount and timing of future rate increases, but the nature, amount and timing of the financing have not been determined. In addition to funds required for its construction program, the Company will require $11,000,000 to retire first mortgage bonds maturing in the period. The Company anticipates that approximately 88% (including AFUDC) and 68% (excluding AFUDC) of the funds required for its 1989-1991 construction program will be provided from internal sources and pollution control funds held by a trustee and anticipates that the balance of the funds required for that period will come from long-term financing. The issuance and sale of first mortgage bonds and preferred stock by the Company are subject to compliance with earnings coverage and other requirements of its first mortgage-indenture and its articles of incorporation. The respective earnings coverage provisions require, in general, (i) for the issuance of additional first mortgage bonds, a minimum before-income-tax earnings coverage of two times the pro forma annual interest charges on first mortgage bonds and indebtedness secured by a prior or equal ranking lien, and (ii) for the issuance of additional preferred stock, a minimum after-income-tax earnings coverage of one and one-half times pro forma annual interest charges and preferred stock dividend requirements, in each case for a 12-month period ending within a specified period no more than 90 days preceding issuance. Earnings used in calculating such coverages include, in the case of the preferred stock coverage, all non-operating items including AFUDC and, in the case of the first mortgage bond coverage, such items to the extent they do not exceed 10% of earnings. The Company's first mortgage indenture requires in effect that the Company certify property additions to the extent that expenditures for maintenance and repairs are less than 15% of utility operating revenues after deducting the cost l of electricity purchased for resale. The Company has br en required to certify property additions to satisfy deficiencies under this requirement. However, the Company's present projections do not indicate any shortage of property additions l usable as a basis for issuance of first mortgage bonds expected to be issued at l least through 1991. i The earnings coverage provisions under the first mortgage indenture with respect to the issuance of additional first mortgage bonds similarly require I minimum deductions from earnings for maintenance, repairs and depreciation equal to at least 15% of such revenues after deducting the cost of electric!ty purchased for resale. This requirement has reduced earnings coverage. The l i earnings coverage provisions may require the use of alternative debt financing by the Company at intervals during the next three years which could result in j higher financing costs to the Company. The first mortgage bond indenture cannot be amended to alter the above j described provisions until the bonds of all series maturing during or before 2004 are retired or unless there is approval by 100% of such bondholders. l l The Company's articles of incorporation generally prohibit the issuance or assumption, without the affirmative vote by the holders of a majority of the preferred stock, of any unsecured debt obligations if, after such issuance or assumption, (i) the principal amount of unsecured debt would exceed 20% of the 22 ) i ( . = _ _... _
aggregate of the principal amount of secured indebtedness and total capital stock and surplus or (ii) the principal amount of unsecured debt maturing in less than 10 years would exceed 10% of such aggregate. An unsecured borrowing which has a maturity of more than 10 years at the date of issuance is not consi6ered an unsecured obligation maturing in lecs than 10 years until the principal thereof shall be due within three years. These limitations may interfere with the presently projected requirements for unsecured debt for the 1989-1991 period, depending on the amount and timing of future rate increases and deferred accounting treatment. The projections upon which the foregoing statements and estimates are made are based on a number of general assumptions as to revenues,
earnings, construction and other costs, the adequacy and timeliness of rate increases, interest rates and other factors.
Actual experience may vary significantly from these assumptions. (.' ITEM 3. LEGAL PROCEEDINGS. See " ITEM 1. BUSINESS REGULATION AND RATES" for information relating to regulatory proceedings. See " ITEM 1. BUSINESS -- OPERATIONS" for information relating to system interconnection. See " ITEM 1. BUSINESS -- ENVIRONMENTAL MATTERS" for information relating to environmental proceedings. See " ITEM 2. PROPERTIES -- STP" for information as to pending legal proceedings relating to STP. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None, y
23
PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. All of the outstanding shares of Common Stock of the Company are owned by its parent, CSW. ITEM 6. SELECTED FINANCIAL DATA. 1 4 The information required by Item 6 is incorporated by reference to i page 35 of the Company's 1988 Annual Report to Stockholders. j ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. i The information required by Item 7 is incorporated by reference to l pages 36-39 of the Company's 1988 Annual Report to Stockholders. ] ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information required by Item 8 is incorporated by reference to pages 20-35 of the Company's 1988 Annual Report to Stockholders. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCIASURE. None. I, 24
PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. (a) The followir.g is a list of directors of the Company, together with certain information with respect to each of them: Name, age, principal Year First Shares of CSW Common occupation, business experience Became Stock Beneficially and other directorships Director Owned (1)(2) M. L. BORCHELT (3) AGE. 63 1979 29,758 Chairman, President and CEO of CSW since September 1988. Vice Chairman of CSW from 1986 to 1988. President and CEO of the Company from 1981 to 1986. Director of CSW and each of its subsidiaries. JOHN W. CRUTCHFIELD AGE - 69 1972 President and owner of John W. Crutchfield & Company (capital investments), Corpus Christi, Texas. Director of First City Bank of Corpus Christi, Corpus Christi, Texas. W. R. FARQUHAR, JR. AGE. 68 1984 1,300 Retired. Prior to his retirement Mr. Farquhar was General Manager and CEO of Lavaca-Navidad River Authority, Edna, Texas. RUBEN M. CARCIA AGE - 57 1981 President or principal of several firms engaged primarily in construction and land development in the Laredo, Texas area. Director of Federal Reserve Bank of Dallas, San Antonio Branch, San Antonio, Texas. l RONALD LEE KELLETT ACE - 48 1987 Vice President of King Ranch, Inc., Kingsville, Texas. 25
) Name, age, principal Year First Shares of CSW Common occupation, business experience Became Stock Beneficially and other directorships Director Owned (1)(2) ROBERT A. McALLEN AGE - 54 1983 500 President, CEO and director of Texas Valley Bancshares and subsidiaries. Vice Chairman and director of Hidalgo County Bank and Trust Company, Mercedes, Texas. Chairman and director of National Bank of Commerce, Edinburg, Texas. HERBERT C. PETRY, JR. AGE - 71 1964 300 President of the law firm of Petry 6 Stewart, Carrizo Springs, Texas. Director of Union State Bank, Carrizo Springs, Texts. ROBERT L. RANGE AGE - 55 1979 6,856 Executive Vice President of the Company. H. LEE RICHARDS ACE - 54 1987 President of Hygeia Dairy Company, Harlingen, Texas. Director of Harlingen National Bank, Harlingen, Texas. T. V. SHOCKLEY, III AGE - 43 1986 1,543 President and CEO of the Company since June 1987. Senior Vice President and Chief Engineering Officer of the Company from 1986 to 1987. Other executive and managerial positions with the Company from 1983 to 1985. B. W. TEAGUE AGE - 50 1984 2,716 Vice President. Corporate Services of the Company since 1988. Various executive and managerial positions with the Company from 1984 to 1988. l l l 26
Name, age, principal ' Year First. Shares of CSW Common occupation, business experience Became Stock Beneficially and other directorships. Director. Owned (1)(2) RICHARD P. VERRET ACE. 42 1988-1,036 Vice President and Chief Engineering Officer of the 'j Company since'1987. Vice . President. Power in 1986. Various managerial positions with the Company from 1984 to 1985. All 16 directors and executive officers of the Company as a group. 48,566 (1) Messrs. Range, Shockley, Teague and Verret have currently exercisable stock-options granted under the CSW Stock Option Plan for 750, 626, 626. and 828 shares, respectively, which amounts are not reflected in this column. (2) All directors' and executive officers' shares owned as of January 1, 1989 as indicated are owned directly, and aggregate less than 1.0%.of the outstanding shares of such class. (3) Mr. Borchelt was re-elected as a director of the Company in 1988. He was previously a director from 1979 to 1986 during which period he held various executive positions with the Company. All-directors presently serving as executive officers of the Company j have been employed in a managerial or executive capacity with a member or members of the CSW System for at least the past five years, and all outside directors have engaged in their respective principal occupations liated above l for a period of more than five years unless otherwise indicated. I (b) The following is a list of the executive officern who are. not. directors of the Company, together with certain :information wich respect. to ) each of them: Year first Electer. to ) Present Name Age Present Position Position i Clayton R. Kirk 59 Vice President - Business Development 1986 l Gerald W. Tucker 42 Controller 1986 i Mary E. Sullivan 32 Treasurer 1988 l 1 I Robert R. Carey 51 Vice President. Operations 1988-j Ear.h of the directors and executive officers of the : Company is elected to l. hold office until the first meeting'of the Company's Board of. Directors after l the 1989 annual meeting of stockholders, presently scheduled to be held on April-13, 1989. Each of the executive - officers listed.in the table above has been employed by the Company or an affiliate in the CSW System ' in an executive l or l managerial capacity for more than the last five years, except for Mr. Tucker who was with the Certified Public Accounting firm of Knuckols,.Duvall and Hallum in. 1986 and held various managerial positions with SWEPCO prior to 1986. 27 l l
1. 1 ITEM 11. EXECUTIVE COMPENSATION. l l The following table contains information with respect to cash compensation paid by the Company to each of the five most highly compensated executive officers of the Company for all services rendered during 1988 and the aggregate cash compensation so paid by the Company during 1988 to all of the Company's executive officers as a group: Name of Individual or Cash Number in Group Capacities In Which Served Compensation T. V. Shockley, III President and CEO $ 181,596 Robert L. Range Executive Vice President 127,416 B. W. Teague Vice President - Corporate 97,541 Services Richard P. Verret Vice President and nief 92,966 Engineering Officer Clayton R. Kirk Vice President - Business 85,932 Development All 11 executive officers of the Company as a group (a) $ 824,045 (a) Pursuant to the rules of the SEC, this total excludes -the aggregate incremental cost to the Company of certain non-cash benefits made available to executive officers. l ) CSU provides an Employees' Thrift Plan to all CSW System employees over the-age of 20 who have completed one year of service. The Plan is a savings plan which allows employees to contribute up to 10% of annual compensation. The first 6% of contributed employee compensation is matched 50% by the Company; 75% if the employee has over 20 years of service. Deposits and company I contributions for certain participants, including executive officers, may be l limited as required by the Code. Employee contributions up to the 6% level and matching Company contric.u: ions may be invested at the employee's option in CSW Common Stock, in a guaranteed fixed income program or split equally between the j two. Contributions over 6% are not matched by the Company and must be invested l in the guaranteed fixed income program. Employees are vested as to the Company's contributions after three years of participation or five years l service. Employees may withdraw all their contributions from the Plan at any time. The Company's contributions and investment gains on employee'and Company contributions may not be withdrawn until retirement, resignation or death. All employees listed in the table participated in the Plan in 1988. Company matching contributions during 1988 for Messrs. Shockley, Range, Teague, Verret and Kirk were $4,528, $4,848, $3,744, $1,725 and $3,310, respectively. Total company contributions to all 11 executive officers as a group in 1986 were $23,414. j 28 i 1 ~
CSW shareholders approved the establishment of the CSW R mtricted Stock Plan at the 1984 annual meeting. The Plan ' assists CSW and its subsidiaries in securing and retaining key executive employees of outstanding ability, and recognizes their best efforts on behalf of CSW and its subsidiaries, through awards of CSW Common Stock. Any employee who is responsible for the management, growth or protection of the business of CSW or its subsidiaries is eligible for awards under the Plan. The Plan permits CSW's Board of Directors (or a committee thereof), at its discretion, to award up to a maximum of 500,000 l shares of CSW Common Stock, in the aggregate, to eligible employees subject to certain adjustments for a change in classification, subdivision or combination of shares. In addition, in connection with any such award CSW's Board of Directors determines the group of eligible employees and the restricted period over which such award will vest. No shares m;y be awarded beyond April 19, 1994, the tenth anniversary of the Plan's effective date. Awards under the Plan were made to officers of CSW and its subsidiaries on January 4, 1988. Mr. Shockley was awarded 700 shares and was the only officer of the Company to receive an award in 1988. The restricted period for currently outstanding awards lapses as to 20% of the awards on the first three anniversaries of the date of grant and as to the remaining 40% on the fourth anniversary with all restrictions lapsing upon a participant's retirement. Each participant must render substantial services to the Company on a regular basis during the restricted period. If such service is not rendered for such period, except by reason of the participant's death, total disability or normal retirement, the participant will forfeit those shares which were previously awarded and are still subject to the restricted period. During the restricted period, the participant will have all the rights of a shareholder, including the right to receive dividends paid on such shares, except that the participant may not sell, assign, transfer, pledge or otherwise encumber the shares. The fair market value of shares to which restrictions lapsed in 1988 awarded to Messrs. Shockley, Range, Teague, Verret and Kirk was $4,012, $18,998, $7,110, $856 and $1,357, respectively. The fair market value of shares to which restrictions lapsed in 1988 awarded to all 11 executive officers as a group was $51,389. Executive officers, like other employees, are also eligible to participate 4 in the CSW System Pension Plan, and all eligible persons whose compensation is reported in the table participated in this Plan. Contributions to the Plan are determined actuarially and etnnet be readily calculated with respect to any individual participant or small group of participants. The amount of such contribution is thus omitted from the table. For purposes of determining Plan benefits, compensation for each of the individuals listed in the table is substantially the same as the amounts set forth in the table. Plan benefits depend upon years of credited service, age at retirement and amount of compensation. Compensation under the Plan includes base salaries, exclusive of bonuses, overtime, expense allowances and other compensation. Assuming retirement at age 65, a Plan participant would be eligible at retirement for a maximum annual pension benefit as follows (reduced by half of primary Social Security benefits payable at age 65): 1 l l 29 l l
Annual Benefits After Specified Years of Service Average Earnings 20 25 30 or more $100,000 .... $ 33,333 $ 41,667 $ 50,000 150,000.. 50,000 62,500 75,000 l 200,000..... 66,667 83,333 100,000 250,000. 83,333 104,167 125,000 300,000. 100,000 125,000 150,000 l l Messrs. Shockley, Range, Teague, Verret and Kirk had 12, 30, 27, 16 and 30 years, respectively, of credit.ed service under the Pension Plan at December 31, 1988. " Average earnings" means the average annual earnings during the 36 consecutive months of highest pay during the 120 months prior to retirement. CSW shareholders approved the establishment of the CSW Stock Option Plan at the 1986 annual meeting. The purpose of the Plan is to as.41st CSW and its subsidiaries in securing and retaining key executive employees of outstanding ability and to recognize their best efforts on behalf of CSW and its subsidiaries. The Plan authorizes the grant of options to purchase shares of CSW Common Stock and stock appreciation rights to officers and key employees of CSW and its subsidiaries. Any employee who is responsible for the management, growth or protection of the business of CSW or its subsidiaries is eligible for such selection. The Plan is administered by a committee of not less than three directors appointed by the Board of Directors of CSW (the " Committee"). Under the Plan, the Committee is authorized to grant stock options at an option price not less than the fair market value of the shares covered by the option at the time the option is granted. The Plan also permits the Committee to grant stock appreciation rights which permit an optionee to receive from CSW, upon exercise, cash or shares of CSW Common Stock with an aggregate fair market value equal to the aggregate appreciation in value of the shares in respect of which the right was exercised. Stock appreciation rights may be granted with respect to stock options granted under the Plan. Options granted under the Plan may be options that are intended to qualify under particular provisions of the Code, as in effect from time to time (" incentive l stock options"), options that are not intended so to qualify under the Code ("nonqualified stock options") or combinations of the foregoing. No option can run for more than ten years, and no option is exercisable until the optionee has been continuously employed by CSW or any subsidiary for one year from the date the option was granted. The Plan does not limit either the number of persons who are eligible to receive options or ctock appreciation rights or the number of shares subject to nonqualified options or stock appreciation rights that may be granted to any or e person. The Plan does not limit the aggregate number of stock options and stock appreciation rights that may be granted; only the number of shares authorized for issuance and sale and the number of shares with respect to which stock appreciation rights may be exercised are limited. 30
The maximum number of shares of CSW Common Stock to be issued and sold under the Plan is 1,500,000, subject to adjustments to reflect stock splits and certain other changes in the number and kind of outstanding shares. The maximum number of shares with respect to which stock appreciation rights may be granted pursuant to any particular award shall not exceed 50% of the shares subject to the options granted under such award. As of January 1, 1989, 1,310,200 shares of CSW Common Stock were not subj ect to outstanding options and remained available for issuance under the Plan, while an aggregate of 189,800 shares of CSV Common Stock wer-subject to outstanding options under the Plan. No incentive stock options or stock appreciation rights were granted in 1988. Other Information Resnectine Director Compensation The Board of Directors held five meetings during 1988. Directors who are not also executive officers or employeer, of the Company or its affiliates receive $6,000 annually for service on the Board and $300 plus expenses for each meeting and each audit committee meeting attended. Directors who are not also officers and employees of the Company were eligible in 1988 to participate in a deferred compensation plan. Under this plan, directors could elect to defer payment of annual directors' and meeting fees until they retire from the Board or as they otherwise direct. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. All 6,755,535 shares of the Company's outstanding Common Stock, $25 par value, are owned beneficially and of record by CSW, 2121 San Jac!nto Street, Dallas, Texas 75201. For information regarding the amount of each class of equity securities of the Company and of CSW beneficially owned directly or indirectly by all directors and executive officers of the Company, see " ITEM 10. DIRECT 7RS AND EXECUTIVE OFFICERS OF THE REGISTRANT." ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The Company retains as legal counsel the law firm of Petry & Stewart, Carrizo Springs, Texas, of which Mr. Ilerbert C.
Petry, Jr.,
a director, is President. 31
PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. The financial statements included in the Company's 1988 Annual Report to Stockholders are hereby incorporated by reference and made a part of this report. Page Reference 1988 Annual 1988 Report to 10-K Stockholders (a) Financial Statements (Included under " ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA"): Report of Independent Public Accountants. 21 Statements of Income for the years ended 22 December 31, 1988, 1987 and 1986. l Statements of Retained Earnings for the 22 years ended December 31, 1988, 1987 and 1986. Balance Sheets as of December 31, 1988 23 and 1987. i l Statements of Cash Flows for the years 24 ended December 31, 1988, 1987 and 1986. Statements of Capitalization as of 25 December 31, 1988 and 1987. Notes to Financial Statements. 26-35 (b) Reports on Form 8-K: On December 7, 1988, a Form 8-K was filed by the Company, reporting " Item 5. Other Events." (c) Exhibits:
3. (a) Restated Articles of Incorporation, as amended, of the Company (incorporated herein by reference to Exhibit 4(a) to the Company's Registration Statement No.
33 4897, Exhibits 5 and 7 to Form U-1 File No. 70-7171, Exhibits 5, 8.1, 8.2 and 19 to Form U-l File No. 70-7472). 32
Page Reference i 1988 Annual 1988 Report to I 10-K Stockholders ) (b) Bylaws, as amended, of the Company (incorporated herein by reference to j Exhibit 6 to Form U-l File No. 70-7472.) 4. (a) Indenture of Mortgage or Deed of Trust dated November 1, 1943, executed by the Company to The First National Bank of Chicago and Robert L. Grinnell, as Trustees, as amendGd through October 1, 1977 (incorporated herein by reference to Exhibit 5.01 in File No. 2-60712), and the Supplemental Indentures of the Company dated j September 1, 1978, January 1, 1980, January 1, 1981, March 1, 1983 (incorporated herein by reference to Exhibit 2.02 in File No. 2-62271, Exhibit 2.02 in File No. 2-66202, Exhibit 2.02 in File No. 2-69943, Exhibit 4.02 in File No. 2-76811 1 and Exhibit 4(b) in File No. 2-82095 I and Exhibit 12 to Form U-l File No. 70-6821) and December 15, 1984, I July 1, 1985, August 1, 1985, May 1, 1986 and Novenber 1., 1987 (incorporated herein by reference to Erhibit 17 to Form U-1 File No. I 70-7003, Exhibit 4(b) in File No. 2-98944, Exhibit 4 to Form U-l File 1 No. 70-7128, Ex'..ibit 4 to Form U-l File No. 70-7236 and Exnibit 4 to l Form U-l File No. 70-7249) and June 1, 1988 (incorporated herein by reference to Exhibit 2 to Form U-1 File No. 70-7520). (b) Debenture Indenture dated April 1, 1982 executed by the Company to The Bank of New York, as Trustee (incorporated herein by reference to Exhibit 4.01 in File No. 2-76811) and the Supplemental Indenture of the Company dated September 1, 1985 (incorporated herein by reference to Exhibit 18 to Form U-1 File No. 70-7128). i 33
Page Reference 1988 Annual 1988 Report to 10.K Stockholders 12. Statement re computation of Ratio of 41 Earnings to Fixed Charges for the five years ended December 31, 1988. 13. 1988 Annual Report to Stockholders. Filed Herewith 24. Consent of Independent Public 42 Accountants. 25. Powers of Attorney. Filed Herewith (d) Schedules: Report of Independent Public 36 Accountants on Supplemental Schedules and Exhibit. V. Property, Plant and Equipment for the 37 years ended December 31, 1988, 1987 and 1986. VI. Accumulated Depreciation, Depletion 38 and Amortization of Property, Plant and Equipment for the years ended December 31, 1988, 1987 and 1986. IX. Short-Term Borrowings fo-the years 39 ended December 31, 1988, 1987 and 1986. 1 X. Supplementary Income Statement 40 Information for the years ended December 31, 1988, 1987 and 1986. All other exhibits and schedules are omitted because of the absence of the conditions under which they are required or because the required information is included in the financial statements and related notes to financial statements. 34
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on Marca 14, 1989. CENTRAL POWER AND LIGHT COMPANY By /s/ Robert L. Range Robert L. Range Executive Vice President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed belc e by the following persons on behalf of the registrant and in the capacities indicated on March 14, 1989. Signature Title
T. V. Shockley, III President and CEO and Director (Principal executive officer)

Robert L. Range Executive Vice President and Director (Principal financial officer)

Gerald W. Tucker Controller (Principal accounting officer)

M.
L. Borchelt Director
John W. Crutchfield Director

W. R. Fa rquhar, J r.
Director
Ruben M. Carcia Director

Ronald Lee Rellett Director

Robert A. McAllen Director

Herbert C. Petry, Jr.
Director
H. Lee Richards Director

B. W. Teague Director

Richard P. Verret Director

Robert L. Range, by signing his name hereto, does sign this document on behalf of the persons indicated above pursuant to a power of attorney duly executed by each such person and filed with the Securities and Exchange Commission.

By: /s/ Robert L. Rance Robert L. Range Attorney-in-Fact 35
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SUPPLEMENTAL SCHEDULES AND EXHIBIT To the Stockholders and Board of Directors of Central Power and Light Company: We have audited in accordance with generally accepted auditing standards, the financial statements included in Central Power and Light Company's annual report to the stockholders incorporated by reference in this Form 10-K and have issued our report thereon dated February 23, 1989. Our audits were made for the purpose of forming an opinion on these statements taken as a whole. Supplemental schedules V, VI, IX, X and Exhibit 12 are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These s che d.tle.s and exhibit have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Arthur Andersen & Co. Dallas, Texas, February 23, 1989. 36
SCHEDULE V CENTRAL POWER AND LIGHT COMPANY PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED DECEMBER 31, 1988, 1987 and 1986 Column A Column B Column C Column D Column E Column F Balance Other Beginning Additions Retirements Changes Balance Classification of Year at Cost at Cost Add /(n duct) End of Year e (Thousands) Year 1988 Electric Utility Plant: Production $ 727,686 $1,565,839 $ 1,218 491 $2,292,798 Transmission 289,618 15,605 1,149 59 304,133 Distribution 555,914 34,746 8,582 (2,516) 579,562 General 190,048 3,518 2,131 1,892 193,327 Construction work in progress 1,987,786 (1,305,070) 682,716 Nuclear fuel 102,516 14,585 117,101 $3,853,568 $ 329,223 $ 13,080 (74) $4,169,637 Year 1987 Electric Utility Plant: Production $ 715,779 $ 12,323 193 (23) $ 727,686 Transmission 268,648 14,764 1,716 7,922 289,618 Distribution 534,081 38,976 9,339 (7,804) 555,914 General 162,081 34,704 2,557 (4,180) 190,048 Construction work in progress 1,646,332 341,454 1,987,786 Nuclear fuel 100,048 2,502 (34) 102,516 $3,426,969 $ 444,723 $ 14,005 (4,119) $3,853,568 Year 1986 Electric Utility Plant: Production $ 670,242 $ 49,874 4,337 $ 715,779 Transmission 261,984 16,399 1,129 (8,606) 268,648 Distribution 497,466 35,489 7,915 9,041 534,081 General 157,786 7,060 2,303 (462) 162,081 Construction work in progress 1,375,267 318,065 (47,000) 1,646,332 Nuclear fuel 93,874 6,174 100,048 $3,056,619 $ 433,061 $ 15,684 (47,027) $3,426,969 37
SCHEDULE VI CENTRAL POWER AND LIGHT COMPANY ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED DECEMBER 31, 1988, 1987 AND 1986 Column A Column B Col'imn C Column D Column E Column F Additions Charged to Costs and Expenses Other Balance Changes Balance Beginning Other Add / End of Classification of Year Depreciation Accounts Retirements (*) (Deduct) Year (Thousands) Year 1988 Electric Utility Plant: Production $ 289,195 $ 38,229 $ 1,064 $ 1,218 761 $328,031 Transmission 90,377 8,861 1,149 (26) 98,063 Distribution 151,648 21,588 8,581 (2,266) 162,389 General 58,689 2,819 5,104 2.131 147 64,628 Nuclear Fuel 4,904 4,904 $ 589,909 $ 71,497 $ 11,072 $ 13,079 $(1,384) $658,015 Year 1987 Electric Utility Plant: Production $ 264,750 $ 23,817 $ 1,090 394 (68) $289,195 l Trat.ranission 84,314 8,235 1,716 (456) 90,377 Distribution 142,028 20,800 9,339 (1,841) 151,648 Ceneral 55,193 2,263 5,547 2,406 (1,908) 58,689 $ 546,285 $ 55,115 $ 6,637 $ 13,855 $(4,273) $589,909 Year 1986 Electric Utility Plant: Production $ 245,245 $ 22,905 $ 1,090 $ 4,336 $ (154) $264,750 Transmission 77,630 7,954 1,129 (141) 84,314 Distribution 132,783 19,386 7,914 (2,227) 142,028 General 47,747 1,978 7,765 2,296 (1) 55,193 $ 503,405 $ 52,223 $ 8,855 $ 15,675 $(2,523) $546,285 (*) Retirements are at original cost. 38
SCHEDULE IX CENTRAL POWER AND LIGHT COMPAh7 SHORT-TERM BORROWINGS FOR THE YEARS ENDED DECEMBER 31, 1988, 1987 AND 1986 Column A Column B Column C Coluran D Column E Column F Maximum Average Weighted Category of Balance Weighted Amount Amount Average Aggregate at End Average Outstanding Outstanding Interest Short-term of Interest at any During Rate During Borrowings Period Rate Month-end the Period the Period (Thousands) Year Ended December 31, 1988 Advances from Affiliates $ $65,098 $61,048 7.1% December 31, 1987 Advances from Affiliates $42,430 8.3% $73,383 $37,335 7.0% December 31, 1986 Advances from Affiliates $ $ 5,178 432 7.3% 1 39
SCHEDULE X CENTRAL POWER AND LIGHT COMPANY SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR THE YEARS ENDED DECEMBER 31, 1988, 1987 and 1986 Year Ended December 31 1988 1987 1936 (Thousands) l Real estate and personal property taxes $19,432 $15,174 $13,429 State gross receipts taxes 9,204 8,679 9,346 Payroll taxes 5,646 4,860-4,727 Franchise taxes 9,653 8,031 7~278 State utility commission ar.sessments 1,297 1,220 1,407 Other taxes 198 213 201 $45,430 $38,177 $36,388 The amounts of taxes, depreciation and maintenance charged to accounts other than income and expense accounts were not significant. Rents, royalties, advertising and research and development costs during these years were not significant. l \\ l l 40
EKHIBIT 12 CENTRAL POWER AND LIGHT COMPANY RATIO OF EARNINGS TO FIXED CHARGES FOR THE FIVE YEARS ENDED DECEMBER 31, 1988 1988 1987 1986 1985 1984 (Thousands except Ratios) Operating income $122,378 $142,435 $145,466 $138,912 $143,923 Adj ustments : Federal income taxes (8,728) 6,873 6,589 (16,709) 31,642 Provision for deferred Federal income taxes 39,283 28,889 42,750 68,069 11,006 Deferred investment tax credits (1,576) 14,301 19,748 11,606 24,258 other income and deductions 4,069 (963) 6,840 119 1,145 Allowance for borrowed and equity funds used during construction 160,972 168,877 139,937 129,158 79,765 Earnings $316,398 $360,412 $361,330 $331,155 $291,739 Fixed charges: Interest on long. term debt $122,356 $108,038 $107,521 $101,325 $ 77,667 ?nterest on short. term debt and other 7,087 12,172 6,770 14,645 8,905 Fixed Charges $129,443 $120,210 $114,291 $115,970 $ 86,572 Ratio of Earnings to Fixed Charges 2.44 3.00 3.16 2.86 3.37 41
l 1 EDIIBIT 24 l CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ) To the Stockholders and Board of Directors of Central Power and Light Company: As independent public accountants, we hereby consent to the incorporation of our report dated February 23, 1989, incorporated by reference in this Form 10-K, into Central Power and Light Company's previously filed _ registration statements on Form S-3, (File Nos. 2-82387 and 33-4897). Arthur Andersen & Co. Dallas, Texas, March 14, 1989. I 42}}

ML20247J774

Contents

Text

SUMMARY

======n====s

SUMMARY

Navigation menu

ML20247J774

Text

SUMMARY

======n====s

SUMMARY

Navigation menu

Search