SNRC-1166, 1984 Annual Rept
| ML20117F435 | |
| Person / Time | |
|---|---|
| Site: | Shoreham File:Long Island Lighting Company icon.png |
| Issue date: | 12/31/1984 |
| From: | Catacosinos W, Leonard J LONG ISLAND LIGHTING CO. |
| To: | Harold Denton Office of Nuclear Reactor Regulation |
| References | |
| SNRC-1166, NUDOCS 8505130244 | |
| Download: ML20117F435 (37) | |
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I, Corporate In$rmation Sumesa.=y MEgMehts 1984 Executive Offices Summary of Operations (Millions *)
1984 1983 175 East Old Country Road Hicksville, N.Y.11801 Total Revenues
$1,974
$1.788 Common Stock Listed Operating income
$ 308
$ 269 New York Stock Exchange Pacific Stock Exchange income for Common Stock * -
$ 340
$ 287 Ticker Symbol: LIL Average Common Shares Outstanding 110 102 Transfer Agents Earned Per Average Common Share *
$ 3.09
$ 2.80 u ac u Hanover Dividends Declared Per Common Share
$ 2.02 50 esN3r Street
'Except Earned Per Average Common Share and Dividends Dedared Per Comrnon New York, NY 10001 Share. Non-cash allowance for funds used dunng construction represented 91% in 1984 and 99% in 1983 of income for Common Stock and Earned Per Average Preferred Stock Common Share.
The First National Bank of Boston 50 Morrissey Boulevard Dorchester, MA 02125 Registrar Common and Preferred Stock Fidata Trust Company 67 Broad Street New York, NY 10004 Shareowners' Agent for Automatic Dividend Reinvestment Plan Manufacturers Hanover Trust Company 450 West 33rd Street Territory Servesi New York, NY 10001
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Annual Meeting ja a. -
-. The Annual Meeting of Shareowners will be held on Connecticut n
May 13.1985 at 2 00 p.m. In i
connection with this meeting, 5'
proxies will be solicited by the Company. A notice of the
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meeting, a proxy statement, L ng ist nd Sound W
and a proxy will be mailed to wi a shareowners in April.
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seom Form 10-K Annual Report
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The Company will furnish, Bronx 2,
without charge, a copy of the
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Company s Annual Report, Terntory served By Long Island
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Queens Form Secun10-K, as filed with the Ughnng Cornpany ties and Exchange Commission, upon written Kngs
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request to: Investor Relations.
u'as *** " " Atlantc Ocean Long Island Ughting Company,175 East Old Country Road, Hicksville, NY 11801 LILCO supplies electric and designated Metropolitan employed within the two gas service in Nassau and Statistical Area (MSA) which counties. While the area Suffolk Counties and the has the highest median served is predominantly Rockaway Peninsula in disposable income per residential, the Company Queens County, all on Long household of the more than receives significant Island, New York. The 1,230 300 MSA's of the nation and commercial and industrial square mile service area ranks in the top ten such electric revenues. Although contains a population of areas, including metropolitan electronics and aerospace are approximately 2.7 million New York, Los Angeles and the largest manufacturing persons, 100,000 of whom Chicago, in population, total industries in the area, about live in Queens County.
income and retail sales. About 85% of total employment is Nassau and Suffolk Counties 70% of all workers residing in non-manufacturing.
together consititute a federally- ( Nassau-Suffolk are
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1 To Th3 Charxwnzra l
emp.-- ---re-m LILCO just completed the most difficult year in its history. We k
1 have successfully maintained the Company's financial viability,
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but many critical hurdles still remain.
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shortfall for 1984 of approximately $400 million even after When I became Chairman 14 months ago, the Company faced significant problems, including an anticipated cash p
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drawing down all its available lines of credit. In addition, b"
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J because of uncertainties over licensing Shoreham, the financial markets were closed to LILCO as a source of capital. Our
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,e-immediate objective was to resolve the cash problem. A f' $
number of unprecedented moves were taken, all of which bp
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were reported to you as we proceeded. It is appropriate to 5
,,;f recall briefly some of these major actions in reviewing 1984.
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- Implementation of an internal austerity program including
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a roll back in management salaries and the elimination of 1,000 LILCO and contractor jobs.
- Discontinuance of construction payments for LILCO's 18%
- j participation in the Nine M?e Point 2 project in upstate New York.
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- Suspension of cash dividends on the common stock in March and on the preferred stock in October.
L If in part, because of these actions, we were successful in:
a William J. Catacosinos
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- Repaying $90 mi!! ion of our mortgage bonds which came pm due in September of 1984, thus averting bankruptcy.
- Obtaining an increase in electric rates of $155 million annually effective September 1984.
- Entering into a Settlement Agreement with Niagara Mohawk Power Corporation (NMPC) whereby NMPC will make our construction payments on the Nine Mile Project with LILCO issuing bonds to NMPC.
- lssuing $100 million of General and Refunding Bonds.
The resolution of LILCO's financial problems is intertwined with Shoreham. One of the first steps we took last year was to review the various options available as they related to this facility. The Board of Directors carefully considered different alternatives including mothballing the plant or abandoning it, i
but determined it was in the best interest of ratepayers and shareowners to license the plant. In its deliberations, the Board l
considered the following factors:
- The demand for electricity in the Long Island community continues to grow. System kilowatthour electric sales increased 5.0% in 1983 over 1982 and 3.2% in 1984 over 1983. Sales increased 2.6% during the first two months of I
1985 over the same period in 1984. Without Shoreham, we will be deficient during 1985 in generating reserve capacity t
l as required by the New York Power Pool.
- Operating Shoreham would save between seven and eight million barrels of imported oil annually, significantly reducing Long Island's heavy dependence on foreign oil to generate electricity.
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2 o The Shoreham plant is complete ar.d ready to provide On other matters relating to the'curre*nt year:
nearly one-third of Long Island's electroty. There are limited sites for power plants on Long Islano and substitute coal
- We are seeking from the PSC a 3.8% annual electric rate plants would be expensive and would require an estimated increase for $68.7 million to become effective January 1, ten years to plan, construct and license.
1986.
- We are planning to sell at least $100 million of G&R Bonds We continue to seek a license for the Shoreham plant before later this year.
the U.S. Nuclear Regulatory Commission (NRC) in Washington. Here, we are pleased to report that we have At the start of 1985, we partially lifted the hiring freeze and made progress. The Appeal Board of the NRC upheld a restored the 10% and 5% pay reductions for sa!aried licensing board's 1600 page decision which stated Shoreham employees. The PSC has approved an Employee Stock (with the exception of the diesels and emergency planning)
Ownership Program which we proposed in order to retain is safe and ready to operate. The NRC unanimously approved management employees. Under the plan, employees must the first two phases of low power testing which permitted the remain with the Company until April 1986 to receive this stock.
Company to load fuel and test the reactor at very low power.
The NRC has also approved a low power license for the final We urge you to read the financial information and Notes 4 two phases which would test the plant at up to 5% power.
and 7 of Notes to Financial Statements which review more However, an Appeal Board of the NRC remanded a diesel extensively the matters just mentioned.
related issue to the Licensing Board which must be resolved before the Commission's action can become effective.
Our foremost objective remains to provide Long Island ratepayers with safe and reliable electric and gas energy at Two issues remain unresolved as we proceed toward fully the most economical rates possible consistent with LILCO's licensing Shoreham.
continuation as a financially viable utility.
First is the diesel generators which provide power to the plant This goal is particularly important to us as a public Company in the event of the loss of off-site power supply. We completely which delivers essential services to the community and which rebuilt and retested the DeLaval diesels. In addition, we is owned by over 160,000 shareowners, over half of whom brought in reserve diesels from Colt Industries. These Colts live in New York State and a fourth of whom reside on Long will eventually supplement the DeLavals, although the lattar Island. Our shareowners and our employees have made large are fully capable of supporting the plant. We are awaiting a sacnfices this past year to enable the Company to continue decision from a Nuclear Regulatory Commission licensing to provide the community with reliable service. In this report, board on whether the DeLavals are qualified to operate.
we rededicate ourselves to serving our customers, with the eventual goal of retuming LILCO to its former financial strength The second issue is the approval of an emergency evacuation for the benefit of all shareowners.
plan for the federally mandated 10-mile area surrounding the Shoreham plant. In trying to resolve this, we have worked We thank you for your support.
diligently throughout the year in seeking the cooperation of Suffolk County and New York State to arrive at a plan which would be acceptable. Unfortunately, our good faith efforts have met with continued resistance to date. Suffolk County Respectfully, officials continue to believe that the federal requirements of a 10-mile zone are inadequate, and that for Shoreham a 20-mile zone is required. The County believes an evacuation Mhd MM >
from a 20-mile zone around Shoreham is not possible. The Company has developed its own emergency plan using LILCO workers and has litigated that plan before an NRC wimam J. Catacosinos licensing board. We are awaiting a decision from that board Chairman of the Board.
and have sought a full scale exercise of the plan under the Chief Executrve Officer and auspices of the U.S. Federal Emergency Management President Agency. Although the Company has been unsuccessful to March 25 1985 date in the state and federal courts concerning matters related to emergency planning, the NRC is the body responsible for approving LILCO's plan.
On March 13, 1985, two New York State Public Service Commission (PSC) Administrative Law Judges recommended to the Commission that LILCO suffer a $1.2 billion prudency penalty for the Shoreham plant. The Company will appeal to the PSC and the courts, if necessary, to contest vigorously the Judges' recommendation.
3 Financial Analysis.
level of cash. Accordingly, in order to conserve cash, begin-ing in February and March 1984, the Company (a) reduced This analysis discusses matters of signiRcance in the Com-its non-fuel related operations and maintenance expenditures pany's Financial Statements, which follow, with regard to and achieved other austerity cash savings totaling approx-capital requirements and liquidity and with regard to results imately $94 million in 1984, (b) suspended construction of operations for the last three years.
payments for its share of Nine Mile Point 2 (see Notes 4 and 7 of Notes to Financial Statements), and (c) omitted common Capital Requirements and Liquidity stock dividends. In August 1984, the Company (a) was granted an electric rate increase effective September 1,1984 Financial Objectives: The electric utility industry is one of to provide an additional $155 million of revenues annually, the most capital intensive industries in the world. Very large (b) entered into a Revolving Credit Agreement providing up amounts of capital must be obtained over long periods to to $150 million (expandable to $200 million with the consent construct new generating facilities to meet customer of all the banks) through December 31,1985, and (c) entered demands for energy. To provide this capital, electric utilities into a Settlement Agreement with Niagara Mohawk Power customarily issue short-term debt, which is repaid periodically Corporation (NMPC) pursuant to which NMPC will finance with the proceeds from the sale of permanent securities and up to $250 million of LILCO's share of construction costs for from funds provided through internal cash generated from Nine Mile Point 2. In September 1984, the Company sold operations. A general objective in the industry is that inter.
$100 million of General and Refunding Bonds (G&R Bonds),
nal cash generation from operations (as described under 17W% Series Due 1989. As a result of all these actions, at Capital Provided and Uquidity) should provide about 50%
December 31,1984, the Company had loans of $36.0 million of the total funds required for construction. Until 1983, outstanding under the 1984 Revolving Credit Agreement and LILCO's financial corporate objectives also included (1) retire-had cash and short-term investments totaling $31.7 million.
ment of all short-term debt at least once a year; (2) in the normal course of events, a maximum amount of short-term (2) During 1984, no short-term debt was outstanding. Dur-debt outstanding not exceeding $100 million unless the Com.
ing 1983 and 1982, the maximum aggregate amount of pany had the clear ability to refinance completely such short.
short-term bank loan and commercial paper borrowings at t:rm debt with long-term securities; and (3) maintenance of any one month-end was $212.7 million at June 1983 and capitalization ratios of (a) not over 50% long-term debt, in-
$104.8 million at August 1982. The daily averages of total cluding the Trusts, (b) 10-12%% preferred and preference bank loan and commercial paper borrowings were $71.7 stock, and (c) 40-37%% common stock and retained million, and $26.8 mi!! ion, respectively, in 1983 and 1982.
carnings.
The approximate weighted average interest rates (excluding the effects of compensating balances and commitment fees)
Until mid-1983, the Company essentially met these objec-on revolving credit and commercial paper borrowings were tives, with the exception of the level of internal cash genera-10.2% and 12.4%, respectively, in 1983 and 1982. (See tion from operations, discussed below.
Note 5 of Notes to Financial Statements.)
(1) Short-term debt was fully retired at least once in each of (3) At December 31,1984,1983 and 1982, the Company's the last ten years including each year-end except for 1980.
capitalization ratios were:
In mid-1983, adjusting to the political and regulatory uncer-tainties facing the Company, the downrating of its securities capirmaretion series eMecember 3f 1984 1983 1982 to below investment grade, and the withdrawal of its Com.
m:rcial paper ratings, the Company modified its objectives oeu ondudes Trusts) 48.3 %
51.1 % 46.6%
to eliminate the use of all short-term debt and to maintain Preferred stock 12.1 13 4 13.5 a total of cash and short-term investments of between $200 Cornrnon Stock and Retained Earrungs 39.6 35.5 39.9 milhon and $300 million. Toward this objective, in 1983 the Total 100.0% mo% 100.0 %
Company borrowed the full $400 million available under its j
domestic and Eurodollar Revolving Credit Agreements on a long-term basis. The Company had cash and short-term Capital Requirements: The Company's financial viability investments, excluding investments in the Trusts, totaling after 1985 depends upon its ability to continue to obtain re-
$275.4 million at the end of 1983.
quired cash through external financing and through ade-quate and timely rate relief, including recovery in rates of its The Company's original 1984 financing plan called for the prudent investments in Shoreham and Nine Mile Point 2, sale of an aggregate of approximately $700 million of debt whether or not either plant ever operates. As a result of enter-and equity securities. In January 1984, the Company sold ing into the 1984 Revolving Credit Agreement, the Company five million shares of common stock providing gross pro-believes that it has the financial capability to complete its ceeds of $52.5 million and in February 1984 the Company planned 1985 construction requirements and to meet its other realized gross proceeds of $10.4 million through its dividend 1985 capital requirements. The Company also believes that rinvestment plan. Thereafter, however, given the various there are currently markets for high yield utility debt secenties, adverse factors then impacting the Company, little or no such as those of the Company. Providing the funds to meet assurance could be given regarding the Company's abihty the Company's capital requirements after 1985 wdl be depen-to raise additional funds in 1984 or in future years in order dent upon the Company's ability to conserve cash, timely to meet:its construction and other capital requirements and receipt of adequate additional rate relief, its ability to access operaticnal needs. In view of this situation, the Company's the capital markets, and its ability to repay or to extend its cash cujective in 1984 was revised to balance its cash 1984 Revolving Credit Agreement and to extend the recdpts and disbursements rather than maintaining a set maturities of some or all of $673 million of revolving credit
,m bank loans now schsduled to mature in 1986. The Company The capital provided in 1984 was, and that estimated for cannot at this time predict whether it will be able to obtain 1985 is, as follows:
any or all of such external financing or rate relief. The Com-Actual Estimated pany has begun preliminary discussions with its lending capital ProvWed banks respecting an extension of the maturity of the 1984 (Dollars in Millions) 1984 1985 Revolving Credit Agreement from December 31,1985 to Ext' al Financing Long-term June 30,1986 and an increase in the amount of G&R Bonds den (l) that tne Company is permitted to sell in 1985 from $100 Preferred stock million to $225 million.
Common stock e4 T
nvYstments The estimated capital requirements and capital provided c
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shown in the tables that follow are based on the following Bank Loans 36 assumptions: (1) Shoreham is operational October 1,1985 Internal Cash Generation and is reflected in rates effective January 1,1986 (See Note from operations (2) 233 315 7 of Notes to Financial Statements under Rate Relief) and O'$nerat ($)
(17) 14 (2) the Company is able to continue to provide required cash.
Total Capital Provided
$789 5577 Total capital requirements for 1984 and those estimated for (1) includes G&R Bonds delivered to NMPC and amounts deferred on the 1985 are as follows:
gnd note pursuant to the LILCO and NMPC Settlement Agreement.
Actual Estimated (2) Includes:
Capital R.,.........ts (a) Retained eamings (net income less in 1984 dividends on preferred (Dollars in Mllons) 1984 1985 n
Construction Requirements (c) Deferred and other federal income taxes Electnc Less-(d)AH wance for funds used during construction O
to Credit
)
Nine Mile Point 2 (1) 221 206 (3) Includes:
Nuclear Fuel (1) 15 30 (a) Changes in working capital h production (b)Other non-cash items - net Total Electnc 904 725 Federal legislation enacted into law in 1984 may permit tax-Gas 12 16 exempt refinancing of up to $2.8 billion of the costs of Common s
11 Shoreham. Such refinancing depends, among other factors, Total constructon (incl. AFC) 921 752 on the receipt of various approvals from certain agencies of Less AFC (310)
(308) the State of New York. The Company has been advised that it must be able to provide assurances that Shoreham will be Total construction (Excl. AFC) 611 444 Refunding Requirements approvals will be forthcoming.
sener secunties 151 22 Bank Loans 111 Resources Trust 27 For information with regard to the Company's actions to Constructon Trust recover its costs in the abandoned New Haven and Total Refunding Requirements 178 133 Jamesport nuclear projects and to protect its investment in Bokum Resources Corporation, see Note 7 of Notes to Finan-Total Capital Requirements
$789
$577 cial Statements.
(1) See Notes 4 and 7 of Notes to Financial Statements.
For additional data on the Company's capitalization and other Capital expenditures for Shoreham after October 1,1985 are Balance Sheet items, see Table 10 of " Selected Financial estimated to add up to $40 to $50 million per month, in-Data". For quarterly data on the market prices of the Com-cluding approximately $27 million of allowance for funds used pany's securities during the past two years, see Table 11 during construction (AFC), to the cost of the plant. For addi-of " Selected Financial Data."
tional data on construction expenditures for prior years, see Table 9 of " Selected Financial Data."
Through December 31,1984, the Company had expended
$2.7 million in defense of two shareowners' derivative ac-Capital Provided and Liquidity: Internal cash generation tions and a class action settled in 1983 which alleged federal from operations provided 44% of total construction expen-securities law violations with respect to disclosures concern-ditures in 1984, negative 14% in 1983, and negative 50/o in ing the BRC transactions. Of this amount, approximately $1.5 1982. For this purpose, construction includes (1) LILCO con-miWon was paid on behalf of certain of the Company's past struction less AFC plus (2) construction expenditures for the and present directors and Officers. The Company recovered Company's share of Nine Mile Point 2 less interest capitaliz-
$1.2 million of the $2.7 million through December 31,1984, ed by Tri-Counties Construction Trust plus (3) expenditures pursuant to its directors' and officers' liability insurance with of Tri-Counties Resources Trust for nuclear fuelless interest the National Union Fire Insurance Company (National). This capitalized by the Trust.
insurance and insurance currently with the New England Reinsurance Corp., the Buffalo Reinsurance Company, and
O Associated Electric and Gas insurance Services Limited Quarterly dividends on the common stock were paid as (AEGIS) provide the Company with coverage for wrongful follows during the last three years:
acts by directors and officers as well as indemnification for Paid Per Share the Company and its directors and officers. In addition, the Payment Dates 1984 1983 1982 Company had also expended $0.4 million through December 31,1984, in defense of another class action and Feb.1 50%*
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48W8 derivative action, alleging federal securities law violations with
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respect to disclosures principally concerning the prudency Nov.1 50we 50w*
of the construction costs of Shoreham and its management.
Total Paid
$0.505
$2.02
$1.98 The insurance from National and AEGIS also provides fiduciary liability coverage for the Company, its directors, of-ficers and employees for any alleged breach of fiduciary duty The Company estimates that for federal income tax purposes under the Employee Retirement Income Secunty Act of 1974.
none of the common and preferred stock dividends paid in The total premiums for all these coverages were $535,000 1984 represent a return of capital and, therefore, these for tha six month period ending February 28,1985.
dividends will be taxable as ordinary income.
Results of Operattores The Company estimates that for federal income tax purposes certain percentages of the dividends paid in 1983 and 1982 Earnings: Summary results of recent earnings are:
represented a return of capital and, therefore, may not be taxable as ordinary income. These percentages are 100%
Earnings 1984 1983 1982 of the common stock and approximately 60% of the income for common stock dividends paid on all series of preferred stock in 1983, and (M ms
$340.3
$287.2
$249.4 100% of the common stock and approximately 81% of the Outstanding (Muons) 110.1 102.5 92.5 dividends paid on all series of preferred stock in 1982. Such Eamed Per Average estimates are subject to audit by the Intemal Revenue Common Share
$ 3.09
$ 2.80
$ 2.70 Service.
The increases in average common shares outstanding in.
The trends of earnings, dividends, and coverage of interest dicated in the above table reflect the sale of a total of 6.1 and fixed charges over the past six years are provided in million shares in 1984,3.5 million shares in 1983, and 19.1 the Summary of Operations, Table 1, of " Selected Financial million shares in 1982. For all years, income for common Data." Information with regard to the electric and gas stock increased, in part, because it includes increases in segments of the Company's business for the most recent LILCO non-cash AFC which reflect the inflationary impact three years is provided in Note 8 of the Notes to Financial of higher costs of capital and additional capital raised (see Statements. Additional data for prior years for both electric Note 1 of Notes to Financial Statements). In 1984, the in.
and gas operations is contained in the various tables of crease in income for common stock also reflects, to a limited
" Selected Financial Data" cxtent, the effects of the Company's austerity program to con-serve cash.
Revenues: Total revenues, including revenues from the recovery of fuel costs, increased $185.7 million, or 10.4%,
The ratio of earnings to fixed charges was 2.49 in 1984 com.
to $1,973.6 million in 1984 from $1,787.9 million in 1983.
pared with 2.46 in 1983, and 2.42 in 1982. The ratio of ear.
The increase in 1983 from 1982 was $154.3 million, or 9.4%.
nings to fixed charges and preferred dividend requirements Revenues realized from sales of electricity and gas to the was 1.91 in 1984, compared with 1.88 in 1983, and 1.90 various classes of the Company's customers are shown in in 1982. Both ratios. in each instance including AFC, are detail in Tables 2 and 3 of " Selected Financial Data." Elec-computed in accordance with Securities and Exchange Com-tric and gas revenues reflect monthly adjustments in rates mission rules. A similar ratio of earnings, but excluding AFC, as a result of changes, up and down, in the cost of fuels for to fixed charges, was 1.40 in 1984, compared with 1.28 in electric generation, purchased power costs and the cost of 1983, and 1.34 in 1982.
gas.
Dividends: The February 1,1984 common stock dividend The principal factors causing these changes in revenues was paid. On March 6,1984, the Company announced that, were:
as part of its austerity program to conserve cash, it would Factors Causing Change In Revenues fro P Year omit cash dividends on the common stock for the balance of 1984. The Company subsequently agreed (as part of the (Donars in Maons) 84/83 83/82 1984 Revolving Credit Agreement) to suspend the declara-(1) Fuels and Purchased Power S 30.3
$ 65.8 tion of preferred stock dividends payable on and after OC-(2) Rate Increases 127.2 56.7 tober 1,1984, and not to declare or pay any dividend on (3) Changes in Energy Sales its common stock through the maturity of the 1984 Revolv-and Other Changes 28.2 31.8 ing Credit Agreement, currently December 31,1985. The Total
$185.7
$154 3 Company is seeking to extend this maturity to June 30,1986.
Under its Certificate of Incorporation, the Company may not pay dividends on its common stock when it has failed to mak7 payment in full of its cumulative preferred stock divi-dend requirements. (See " Capital Requirements and Liquidi-ty" and " Revenues - Rate Increases").
P Additional information about these factors:
in 1984. The $28.2 million balince of the increase was due to a gain of $14.1 million from increased electric sales and (1) Fuels and Purchased Power: Changes between periods an increase of $14.1 million in gas sales. Revenues resulting in the cost of electric fuels, purchased power, and gas fuels from rate increases of $56.7 million provided the major por-were influenced primarily by (a) the mix of fuels used and tion of the total $88.5 million increase in revenue net of fuels (b) changes in the cost of fuels.
in 1983. The $31.8 million balance of the increase was due (a) During 1984 and 1983, the Company displaced 40% and to a gain of $40.3 million from increased electric sales and 38%, respectively, of the oil it would otherwise have used a decrease of $8.5 million in gas sales.
to generate electricity by burning gas and purchasing power from other utilities. Burning gas and purchasing power dis-in 1984, the PSC granted the Company permanent elecrtric placed 10.0 million barrels of oil in 1984 and 9.1 million bar-rate relief totaling $245 million annually, including the $90 reis in 1983. The Company estimates that these and related million interim rate relief granted in September 1983. The new interchanges of power with other utilities saved electric rates became effective on September 1,1984. This rate relief customers a total of $93.4 million in 1984 and $77.2 million did not significantly reduce the Company's requirements for in 1983 compared to the estimated cost of generat.ing an cash from other sources during 1984. However, this rate relief equivalent amount of power on the LILCO system with oil.
enabled the Company to obtain additional credit and made In addition, electric customers saved $25.0 million durin9 possible the Company's re-entry into the securities markets 1984 and $33.2 million during 1983 as a result of burning in 1984, and can be expected to satisfy a portion of the cash higher sulfur oil through the Company's Environmental Quali-requirements for the Company's operational, construction ty Control System. As a result of sharing in the economies and refunding needs in 1985.
of burning gas to generate electricity, gas customers saved
$14.9 million in 1984 and $11.6 million in 1983.
On February 27,1985, the Company filed for a 3.8% in-crease in electric rates to become effective January 1,1986 The m!x of fuels and purchases of power for providing the to provide an annual increase of $68.7 million. In that filing, Company's electric system energy requirements during the Company indicated that it would request that an earlier 1984,1983 and 1982 were as follows:
proceeding be reopened to permit filing of a revised rate moderation proposal for reflecting Shoreham in rates (see Fuel Afix 1984 19F3 1982 Note 7 of Notes to Financial Statements under Rate Relief).
Oil 60 %
62 %
64 %
Purchases 21 23 20 (3) Changes in Energy Sales and Other Changes:
Gas 19 15 16 Changes in energy sales to customers result from changes Total 100 %
100 %
100 %
in (a) the number of customers and (b) the level of consump-tion by customers, which, in tum, may be influenced by dif-(b) The cost of electric and gas fuels in 1984,1983 and 1982 ferences in weather conditions.
Electric Sales: The changes in the above factors between Fuels aryf Purchased Power
- Current and prior comparable periods were as follows:
(Dollars in FAlfions) 1984 1983 1982
% increase Electnc Fuels
$568.8
$516.8
$501.4 from Pnor Year Purchased Pow 173.7 128 4 106.7 Gas 192.6 209 6 180.9 Customers and Average Use 84/83 83/82 Total
$885.1
$854.8
$789.0 (a) Average Number of Customers Residential 0.9%
0.9%
Commercial & Industnal 2.0 2.0
- Includes fuel cost adjustment de' erred.
(b) Average kWh Use Per Customer The avera e unit prices of fuels in 1984,1983, and 1982 Residential 0.8 5.2 Commeroaf & Industrial 2.8 2.2 were as f ows:
Average Unit Price
- 1984 1983 1982 Consumption by residential customers accounts for approx.
For Electnc Operations 5/kWh imately 45% of the Company's annual system kWh sales of s
Fuels consumed for electricity. This is one of the highest proportions of such sales P
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stable operations of the Company.
For GLs Sendout - $/dth
$3.67
$4.13
$3.53 3
- Irv3udes fuel cost adjustment deferred.
Electric Sales (MMons of kWh) 1984 1983 1982 Additional fuel data for prior years is contained in Tables 4 S
and 5 of " Selected Financial Data."
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g Co7nnwcial & l~hstnal 7,129 6.79' 6.524 (2) Raw increases: Total revenues net of the above fuel costs t%ner 448 4N 438 increased $155,4 million, or 16.7%, in 1984 to $1,088.4 Totai Sydem Sa'es 13,577 13.149 '
12.519 m%n and $835 million, or 10.5%, in 1983 to $WO rnil! ion.
Power Pool Sales 418 494 552 Rate increases of $127.2 million provided the mahr portion Total Sales 13,995 13.643 13.071 of the total $155.4 million increase in revenue net of fuels
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7 Total kWh sales to r'esdential, commercial and industrial exclusive of fuels and purchased power was due to higher customers increased 3.4% in 1984 over 1983 and increas-labor and materials costs, with the balance due largely to ed 5.1% in 1983 over 1982. Reflecting the strength of the higher administrative and general costs, including employee Long Island economy, kWh sales to commercial and in-pensions and benefits, legal services, regulatory related ex-dustrial customers increased 4.9% in 1984 over 1983 and penses and research and development. Information concer-increased 4.2% in 1983 over 1962.
ning the effects of inflation on the Company's operation is contained in Note 10 of Notes to Financial Statements. Ad-Gas Sales: Approximately 72% of the Company's annual ditional expense data is contained in Table 8 of " Selected system dekatherm (dth) sales of gas results from consump-Financial Data."
tion by space heating customers. Accordingly, total gas system revenues and sales are heavily influenced by Other items: Federal income taxes in 1984 were $51.1 seasonal temperature variations between periods and the million higher than in 1983. In 1983, federal income taxes availability of gas for sale to interruptible customers.
were $17.0 million higher than in 1982. Changes in federal income taxes are due principally to variations in net income The average d'h use of gas by space heating customers in-before income taxes, recognition of investment tax credits, creased 6.4% in 1984 from 1983 compared with the 7.1%
and items capitalized 'or financial statement purposes that incr:ase in the number of degree days. In addition, the are allowed as curren: deductions on the Company's tax average number of gas space heating customers increas-returns. (See Notes 1 and 6 of Notes to Financial Statements.)
ed 1.5% in 1984 together resulting in an 8.0% increase in total sales of gas to firm space heating customers. Sales of Other items such as depreciation, operating taxes, interest gas to firm non-space heating customers were up 2.7% in expense and preferred stock dividend requirements, (in-1984 over 1983 while sales to interruptible customers increas-cluding $21.3 million being reflected in the financial ed 7.3%. The average dth use of gas by space heating statements although unpaid beginning October 1,1984)in customers decreased 5.8% in 1983 from 1982 compared aggregate increased $97.0 million, or 14.4%, to $771.9 with the 4.6% decrease in the number of degree days bet-million in 1984, from $674.9 million in 1983. These were par-ween the years. This decline was partially offset by a 2.5%
tially offset by a $25.3 million increase in total AFC and a increase in the average number of gas space heating
$22.9 million increase in Allowance for borrowed funds us-customers, together resulting in a 3.5% decrease in total ed during construction - trusts. The increase in these items sales of gas to firm space heating customers. Sales of gas in 1983 over 1982 was $95.6 million, or 16.5%, substantial-to firm non-space heating customers were up 0.1% in 1983 ly offset by a $83.5 million increase in total AFC. Increases over 1982 while sales to interruptible customers decreased in depreciation generally result from the addition of plant in 12.8%.
service. Increases in operating taxes are largely due to higher property taxes resulting from the addition of new plant and oss sales increased property tax rates. State and local gross income (dth in Muons) 1984 1983 1982 and franchise taxes Vary with revenues. Increases in interest charges and preferred stock dividend requirements resu!t Arrn Spn Sares Space Heatng 36.9 34.2 35 4 pnmarily from increased bank borrowings and from the sale Ncn-Space Heatng 8.3 8.1 8.1 of additional seCunties. Interest charges on Trust obligations are capitalized and vary with changes in the lending rates Totar Arrn 45.2 42.3 43.5 in;ern;ptble s.7 5.3 6.1 of the Trust's credit banks. Such charges are offset by AFC Total Systern Sales 50.9 47.6 49 6 Degree Days Bdled 4.921 4.596 4,816 AFC is a non-cash credit to income that represents the cost cf borrowed funds for construction purposes and a Additional energy sales data for prior years is contained in reasonable rate upon a utility's other funds when so used.
Tables 6 and 7 of " Selected Financial Data."
The amount of AFC (including interest on Trust obligations which corresponds to AFC) fluctuates from period to period Operations and Maintenance Expenses: Total operations with changes in the cost of money, the level of construction and maintenance expenses exclusive of fuels and purchas.
activity, the amount of construction work in progress (CWlP) ed power decreased $5.9 million, or 2.3%, in 1984 to $256.4 included in rate base, and modifications in regulatory policy.
million. These expenses increased $23.1 million, or 9.7%,
The amount of electric CWIP included in rate base (on which in 1983 to $262.3 million. Nearly 58% in 1984 and in 1983 the Company is allowed to eam a cash return in lieu of non-of these total costs represented employee wages and cash AFC) was increased, effective May 29,1981, from $300 benefits. The $5.9 million net reduction in 1984 is after giv.
miffion to $400 million. The average amount of electric CWIP allowed in rate base was $400.0 million in 1984,1983 and ing cffect to increases of $5.6 million to reflect four months of amortization of thE abandoned New Haven nuclear plant 1982, including the $355.0 million related to Shoreham in and $15.7 million of austerity expense reductions which were 1984,1983 and 1982.
def;rred in order tc limit income for common stock to the rate of return on ccmmon equity allowed by the PSC. The LILCO AFC (excluding AFC related to Trust interest) totaled
$310.1 million in 1984, $284.8 million in 1983 and $201.4 decrease in 1984 from 1983 in operations and maintenance cxpenses exclusive of fuels and purchased power, totaling million in 1982, representing 91%,99%, and 81% of income
$27.2 million before the increases indicated above, was due for common stock in each year, respectively.
principally to the austerity reductions. Most of the increase in 1983 over 1982 in operations and maintenance expenses
l e
l FinancialCtatements O
Balance Sheet' i
Assets At December 31 (In thousands of dollars) 1984 1983 1982 Utility Plant Electnc
$1,831,580
$1.798,490
$1,748,406 Gas 368,531 360,174 341,137 Common 87,633 85.734 82,730 Construction work in progress 4,317,759 3,467.211 2.812,119 Nuclear fuelin process 9,113 23 115 Construction and nuclear fuel in trusts 657,928 710.888 552235 7,272,544 6,422.520 5,536,742 Less - Accumulated depreciation, depletion and amortization 788,565 727.298 672.518 Total Net Utility Plant 6,483,979 5.695.222 4.864.224 Other Property and Nonutility property, pnncipally at cost 2,811 2.816 2,623 Investments Investment in subsidiary companies, at equity 569 637 608 Other investments and deposits 65,259 64 240 59 488 Total Other Property and Investments 68,639 67.693 62.919 Current Assets Cash 10,105 3,301 8,838 Temporary cash investments 21,600 272.074 18200 Special deposits 61,900 3,557 8,308 Accounts receivable (less allowance for doubtful accounts of $3,838.000,
$4289.000 and $4,062.000) 184,028 169,947 155.689 Accrued revenue on accounts billed bimonthly 23,908 21,328 19.030 Materials and supplies at average cost 28,010 31,575 31,984 Fuel oil at average cost 49,359 40211 71,208 Gas in storage at average cost 43,715 43,949 46.945 Prepayments 2,015 1.060 1,017 TotalCurrent Assets 424,640 587.002 361.219 Deferred Charges Electnc fuel cost adjustment deferred 1,038 62 959 Unamortized cost of abandoned New Haven generating project 44,108 Other 77,769 39.604 60.404 Total Deferred Charges 122,915 39.666 61,363 Total Assets
$7,100,173
$6.389.583
$5.349 725 See Notes to Financial Statements.
)
l l
0 I
I l
Capitalization ansiLiabilities At December 31 (in thousands of dollars) 1984 1983 1982 Capitalization Long-term debt
$2,316,175
$2.180.721
$1.602.777 Unamortized premium and (discount) on debt (9,658)
(8.198)
(5.605) 2,306,517 2.172.523 1.597.172 Preferred stock - redemption required 529,375 540.013 478.050 Preferred stock - no redemption required 221,056 221.119 157.070 Treasury stock, at cost (505)
(1.772)
Total Preferred Stock 749,926 759.360 635.120 Common stock 551,061 520.600 502.864 Premium on capital stock 999,996 964.562 921284 Capital stock expense (56,103)
(56278)
(50.335)
Retained earnings 956,356 580.115 501.806 Total Common Shareowners' Equity 2,451,310 2.008.999 1.875.619 Total Capitalization 5,507,753 4.940.882 4.107.911 i
l Trust Obligations 685,621 713.484 598.335 i
Current Liabilities Current matunties of long-term debt 129,046 107.057 107.052 Current redemption requirements of preferred stock 4,437 38.037 11.600 Accounts payable 164,589 140227 175.431 Accrued taxes (including federal income tax of $19.526.000 $2252,000 and $2.307.000) 124,131 54.621 56.666 Accrued interest 59,580 61.413 44,726 Customer deposits 12,762 12231 10.865 Dividends payable 67.488 60.429 Total Current Liabilities 494,545 481.074 466.769 Deferred Credits Accumulated deferred income tax reductions 338,607 222.502 156.385 Other 54,649 25.055 14.476 Total Deferred Credits 393,256 247.557 170.861 Reserves for Claims, Damages, Pensions and Benefits 18,998 6.586 5.849 Commitments and Contingencies Total Capitalization and Liabilities
$7,100,173
$6.389.583
$5.349,725 See Nutes to Financial Statements.
I 10
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L Statement ofIncome For Year Ended December 31 (in thousands of dollars) 1984 1983 1982 1981 1980 Revenues Electnc
$1,613,397
$1,435,947
$1,320.515
$1.402,719
$1,039.666 Gas 360,153 351.904 313.002 262.113 237.272 Total Revenues 1,973,550 1,787.851 1.633.517 1.664.832 1 276.938 Expenses Operations - fuel and purchased power 885,096 854.83/
789.026 865.352 651.726 Operations - other 195,829 192.435 170.455 158.267 132.207 Maintenance 60,568 69.887 68,743 68.253 57,503 Depreciation, depletion and amortization 65,209 63.410 61,598 60.065 56.668 Operating taxes 255,855 241.204 207.952 198.979 172,916 Federal income tax - current 14,096 (4.128)
(662)
(1.008)
(2.915)
Federal income tax - deferred and other 188,476 101.217 89.712 89.036 14.205 Total Expenses 1,665,129 1.518.862 1.386.824 1.438 944 1.082.310 Operating income 308,421 268.989 246.693 225 888 194.628 Other income and (Deductions)
Allowance for other funds used dunng construction 235,840 205.441 157.923 113,648 80,993 Other income and (deductions)
(1,056) 7270 334 (1,084) 5.002 Federal income tax credit - current (315)
(4.128)
(662)
(1,128)
(2,985)
Federal income tax credit - deferred and other 86,757 36.198 41.660 29.855 24.910 Total Other income and (Deductions) 321,226 244.781 199 255 141.291 107.920 income Before Interest Charges 629,647 513.770 445.948 367.179 302.548 Interest Charges and (Credits)
Interest on long-term debt 275,979 214.952 170.574 134.174 113,679 Other interest 161 13.244 9.434 19.631 12.710 Allowance for borrowed funds used dunng construction (74,281)
(79.400)
(43.454)
(34.358)
(28.859)
Interest capitalized by trusts 87,186 64.274 69,784 69,876 42.730 Allowance for borrowed funds used dunng construction - trusts (87,186)
(64 274)
(69.784)
(69.876)
(42.730)
Total Interest Charaes and (Credits) 201,859 148 796 136.554 119.447 97.530 Net income 427,788 364.974 309,394 247,732 205.018 Preferred stock dividend requirements 87,524 77.811 59.989 48.830 40.103 Income for Common Stock
$ 340,264
$ 287.163
$ 249.405
$ 198.902
$ 164.915 Average Common Shares Outstanding -(000) 110,120 102.484 92.475 77.988 65.138 Earned per Common Share 3.09 2.80 2.70 2.55 2.53 Dividends Declared per Common Share 2.02 2 00 1.92 1.84 Sm Notes to Francra! Statemts i
- -. -i...--
11 Shereowrsers' Equity Call Pnce Per Share December At December 31 On thousands of dollars) 31.1984 Final 1984 1983 1982 1981 1980 Ctatement of Retained Earnings Balance, January 1
$580,115
$501,806
$439,285
$391,113
$346.001 Add - Net income for the year 427,788 364.974 309.394 247,732 205.018 Less - Capital stock expense 1
38 1
1 Less - Cash dividends declared.
Preferred stock 51,546 78.998 60.009 49.289 39,701 Common stock 207.629 186.864 150.270 120.204 Balance. December 31
$956,356
$580.115
$501.806
$439.285
$391.113 Common Stock Par Value $5 per Share Shares authonzed 150,000,000 150.000.000 110.000.000 110.000.000 80.000.000 Shares issued and outstanding 110,212,156 104,120.072 100.572.887 81,370,597 69,981.436 increase in shares outstanding 6,092,084 3.547.185 19.202.290 11,389.161 9.758.153 Increases in $5 par value
$ 30,461
$ 17,736
$ 96.011
$ 56.946
$ 48,791 increases in Premium on capital stock 35,434 43.278 197,043 104.908 99.009 increases (Decreases) in Capital stock expense (175) 5 943 8 228 6.967 5.002 Preferred Stock Par Value $100 per Share, Cumulative.
Shares authorized 7,000,000 7,000.000 7,000.000 7.000.000 5.050.000 Shares issued and outstanding 2,985,813 3,397.311 3.527.203 3.633.330 3,700.675 Shares held in treasury 12,875 24.375 5 % Senes B
$10100 $101.00
$ 10,000
$ 10.000
$ 10.000
$ 10.000
$ 10.000 425% Series D 102.00 102.00 7,000 7.000 7,000 7,000 7,000 4.35% Series E 102.00 102.00 20,000 20.000 20.000 20.000 20.000 4.35% Series F 102.00 102.00 5,000 5.000 5.000 5.000 5.000 l
5% % Senes H 102.00 102.00 20,000 20.000 20,000 20.000 20.000 5% % Senes I Convertele 100 00 10000 4,056 4.119 5.070 6,083 6.968 8.12% Senes J 104 00 101.00 25,000 25.000 25.000 25.000 25.000 8.30% Senes K 105.37 103.29 30,000 30.000 30.000 30.000 30.000 7.40% Senes L*
104 98 100 00 27,650 20,750 30.800 31.850 32,900 8.40% Senes M*
105 60 100.00 33,600 35.000 35.000 35.000 35.000 7.50% Series Q*
28.800 33.600 38.400 43.200 8.50% Senes R*
11500 100 00 45,000 52,500 56.250 60.000 60.000 9 80% Senes S*
10500 100 00 72,562 75.000 75.000 75.000 75.000 Total Par Value $100
$299,868
$342169
$352.720
$363.333
$370 068 Par Value $25 per Share, Cumulativo Shares authonzed 30,000,000 30.000.000 14.400.000 14.400.000 7,200.000 Shares issued and outstanding 18,200,000 18,280.000 11,760.000 8.805.200 6.310,000 l
Shares held in treasury 34.800 10.000
$2.47 Senes O'
$ 26.50 $ 2525
$ 40,000
$ 42.000
$ 44.000
$ 46.000
$ 48.000
$2.43 Senes P 29.30 27.75 35,000 35.000 35.000 35.000 35.000
$3 31 Senes T*
28.75 25 00 75,000 75.000 75 000 75.000 75.000
$4 25 Senes U*
30.00 25.00 65,000 65.000 65.000 65.000
$3 50 Senes V*
29 25 25 00 75,000 75.000 75.000
$3.52 Senes W 32.00 27.50 65,000 65.000
$3 50 Senes X*
29 25 25 00 100,000 100 000 Total Par Valuo $25 455,000 457.000 294 000 221.000 158.000 f
Less - Sinking fund requirements 4,437 38.037 11,600 11,600 7.850 Less - Treasury stock at cost" 505 1.772 569 186 Total Preferred Stock
$749,926
$759 360
$635120
$572164
$520 032 See Notes to hnanc al Statements
- Redemption required. See Note 2, "Hcld to meet annual sinking fund requirements m
12 Ctatement cf Changes in Financial Position For Year Ended December 31 (in thousands of dollars) 1984 1983 1982 1981 1980 Source of Funds Operations Net income
$ 427,788
$ 364.974
$ 309.394
$ 247.732
$ 205.018 Pnncipal noncash charges and (credits) to income:
Depreciation, depletion and amortization 65,214 63.415 61.603 60,070 56.668 Deferred and other federal income taxes 101,720 65.019 48,052 59.181 (10,705)
Wnte-off and amort. of abandoned projects 18,100 Allowance for funds used dunng construction (310,121)
(284.841)
(201.377)
(148.006)
(109.852)
Other 12,883 14.344 14.786 8.473 9,145 Interest capitalized by trusts 87,186 64.274 69,784 69.876 42,730 Allowance for borrowed funds used dunng construction - trusts (87,186)
(64.274)
(69.784)
(69.876)
(42.730)
Funds Provided from Operations 315,584 222.911 232.458 227.450 150.274 Long-term Financing Long-term debt 264,500 685,000 217.200 300.000 50.000 Preferred stock 171.769 76,121 65.399 75,114 Common stock 63,585 54.352 292.528 161.409 147.676 Other increase in short-term debt 93.164 Decrease in working capital (excluding short-term debt) 175,833 106.215 45,353 Other sources 47,927 20.195 12.405 16.128 25.365 Total Source of Funds
$ 867,429
$1.154.227
$ 936.927
$ 770.386
$ 586.946 Une of Funds Construction expenditures
$ 961,953
$ 741.230
$ 742.789
$ 501.894
$ 422.473 Nuclear fuel expenditures 9,090 (92) 79 23 13 Construction and nuclear fuel in trusts (49,909) 158.653 145.693 87.893 76.448 Less - Allowance for funds used dunna construction (AFC) 310,121 284 841 201.377 148.006 109.852 Construction and Nuclear fuel expenditures,less AFC 611,013 614.950 687.184 441,804 389.082 Dividends on preferred stock 51,546 78.998 60.009 49.289 39.701 Dividends on common stock 207.629 186.864 150.270 120,205 RedJOtson of long-term debt 129,046 107,056 107.052 72.048 60.044 Preferred stock conversions and retirements 7,130 40.761 12.613 12.867 9.159 Trust obligations 27,863 (115,149)
(158.910)
(90.490)
(61.628) 118.000 Decrease in short-term debt 211.478 17,191 Increase in working capital (excluding short-term debt)
Electric fuel cost adjustment deferred 976 (897)
(3.229)
(35.031) 16.510 Gas cost adjustment 6,099 (17,561) 4.934 6.410 (4.838)
Other investments and deposits 1,019 4.752 715 3.903 Capital stock expense 424 7.121 9.405 8.144 6,179 Cost of removal 3,391 4.041 3.658 3,797 4.638 Other uses 28,922 11.048 26 632 12.184 7.894 Total Use of Funds
$ 807,429
$1.154.227
$ 936.927
$ 770.386
$ 586.946 increase (Decrease) in Working Capital (excluding short-term debt)
Cash 6,804 (5.537)
$ (1,185)
$ 4,113
$ (2.71 5)
Temporary cash investments (250,474) 253.874 (24.000) 42,000 (3.280)
Special deposits 58,343 (4.751) 7,706 (977)
(10.848)
Accounts and notes receivable 14,081 14.258 69 13.008 26,668 Accrued revenue 2,580 2.298 (523) 3,436 2.250 Matenals, supplies, gas in storage and fuel 5,349 (34.402) 17.595 26.660 14.635 Prepayments 955 43 (301) 151 (39)
Current matunties on long-term debt (21,989)
(5)
(35.004)
(12.004)
(40,004)
Sinking fund requirement on preferred stock 9,600 (2.437)
(3,750)
Redemption required Preferred Stock Senes O 24,000 (24.000)
Accounts payable (24,362) 35.204 (22.500)
(42.624)
(13,923) 1 Accrued taxes (69,510) 2.045 (28.140) 10.236 (6.295)
Accrued interest 1,833 (16.687)
(4.510)
(12.396)
(5,625)
Customer deposits (531)
(1.366)
(1.097)
(1,163)
(526)
Dividends payable 67,488 (7.059)
(14.325)
(9.589)
(5.651)
Net increase (Decrease)
$ (175,833)
$ 211.478
$ (106.215)
$ 17.191
$ (45.353)
See Notes to Financial Statements
1
..m..,
.. o
.u.-
.c.-
..- ~.
13 N:t:0 to Mn ncirl Ctctam:nta g,,,,,,,
Revenues are recorded when billed. Billings are rendered on a monthly or bimonthly cycle basis. The Company accrues estimated NJf3 f. Surnstery of Signl# cant Aecounting revenues for customers billed bimonthly in the month in which they Policies are normally not billed.
The accounting records of the Company are maintained in The Company's tanffs for electric service include a fuel adjustment accordance with the Uniform Systems of Accounts presenbed by clause under which electric rates charged to most customers are the Public Service Commission of the State of New York (PSC) adjusted to reflect changes in the average cost of fuels and of cer-and the Federal Energy Regulatory Commission (FERC).
tain purchased power costs. The Company's tariffs for gas ser-vice contain a comparable clause.
Utility Plant Additions to and replacements of utility plant are recorded at Deferred Fuel Cost Adjustments original cost, which includes material, labor, overheads, and an The Electric Fuel Cost Adjustment represents the difference tae-allowance for the cost of funds used during construction (AFC).
tween actua fuel costs and the fuel costs allowed in the Company's The cost of renewals and betterments relating to units of property base tanff rates. The Company, to achieve a proper matching of is added to utility plant. The cost of property replaced, retired, or costs and revenues, defers this difference along with the related otherwise disposed of is deducted from utility plant and, general-income tax effects to those future periods in which it will be billed ly, together with dismantling costs less any salvage, is charged to customers. The Company's tariffs for gas service contain com-to accumulated depreciation. The cost of repairs and minor parable adjustments. The Company believes that the PSC will con-renewals is charged to maintenance e pense. Mass properties tinue to permit the recovery of deferred fuel costs.
(such as poles, wire, and meters) are accounted for on an average unit cost basis by year of installation.
Federal income Taxes The Company's general policy is to reflect as income tax expense Allowcnce for Funds Used During Construction the amount of income taxes currently payable; however, in cer.
The Uniform Systems of Accounts defines AFC, which is not an tain instances authorized by the PSC, provision is made for income item of current cash income, as the net cost of borrowed funds tax effects of the differences between net income before income for construction purposes and a reasonable rate upon the utility's taxes and taxable income, as disclosed in Note 6.
equity, when so used. AFC is computed monthly using a rate per-mitted by FERC on that portion of construction work in progress The major items which are part of the deferred tax provision are (CWIP) which is not included in the Company's rate base. Since as follows:
September 1984 and prior to Feoruary 1983 the Company com-
- Income tax deductions for reduced depreciable lives permitted puted AFC on its Shoreham Nuclear Generating Plant (Shoreham) by the Revenue Act of 1971.
at a rate which reflected the income tax effect of the interest por-tion of AFC. However, between February 1983 and August 1984, e income tax deductions for deferred fuel cost.
with certain restrictions and limitations as ordered by the PSC to e income tax deductions for the Metropolitan Transportation reflect related rate treatment, AFC on certain construction costs.
Authority (MTA) tax surcharge.
including costs of Shoreham, has been computed at a rate which
- Income tax deductions for interest on amounts financed through does not reflect the income tax effect of the interest portion of AFC.
the Company's Tri-Counties Construction and Resources Trusts.
This change increased AFC, which resulted in a non-cash increase e income tax deductions for real property taxes and certain con-in income for common stock of $18.8 million, or 188 per share in struction costs associated with Shoreham.
1983. However, as a result of the interim rate increase, between
- Income tax deduction associated with cancelled generating September 15,1983 and August 31,1984 what otherwise would projects.
have been future non-cash AFC earnings were replaced, retroac-
- Income tax deductions for increased tax depreciation on post tive to June 1983, by cash earnings in an amount equivalent to 1980 asset additions mandated by the Economic Recovery Tax the amount granted as the intenm rate increase. Accordingly, the Act of 1981.
Company estimates that $10.5 million of net after tax cash earn-
- ncrease in investment tax credits under the Tax Reduction Act ings were received in lieu of non-cash AFC earnings between of 1975.
September 15 and December 31,1983 and $32.4 million between January 1 and August 31,1984.
- Normalization of investment tax credit under the Economic Recovery Tax Act of 1981.
The average annual AFC rate, without giving effect to compound-sincome tax deduction for operatior.s and maintenance expenses ing or the reduced net of tax rate, was 13.26%,12.83%,12.68%,
under the Austerity Plan. See Regulatory Accounting below.
I 11.52% and 10.54% for the years 1984 through 1980, respectively.
Investment tax credits allowable under the Revenue Act of 1971 are accounted for as a reduction of federal income tax expense.
In compliance with a FERC order, the Company allocates the por-The basis of accounting for these credits was modified by PSC tion of AFC relating to borrowed funds to the Interest Charges and rate orders, the effect of which was to recognize a cumulative total I
(Credits) section of the Statement of Income, of $13.422,000 of additional credits for financial accounting and ratemaking purposes for the three years ended 1980 (See Note D:prsclation 6). The balance was amortized over 36 months beginning in June The provisions for depreciation result from the application of 1981. The utilization of such additional credits for tax purposes, straight-line rates to the original cost, by groups, of depreciable however, continues to be subject to the provisions of the Internal properties in service. The rates are determined by annual age-life Revenue Code.
studies of depreciable properties. Depreciation was equivalent to 3.3% for electric and 2.4% for gas of respective average Reserves for Claims, Damages, Pensions and Benefits decreciable plant costs for each of the five years ending December Losses arising from claims against the Company and from extraor-31,1984.
dinary storm losses, are partially self-insured. Provisions to the reserves are based upon experience, risk of loss, actuarial estimates and/or specific orders of the PSC.
L
4'
,4 Capitalization-Premiums, Discounts and Expenses of siiing funds curing the period October 1,1984 through Premiums or discounts and expenses related to the issuance of Decnber 1,1983 The aggregate amount of Preferred Stock re-loag-term debt are amortized over the lives of the issues. " Capital quire 1 to be redeemed in each of the years 1985 through 1989 stock expense" related to that portion of Preferred Stock required is $4,437,000, $13,638,000, $16,888,000, $19,888,000 and to be redeemed is wntten-off as an adjustment to retained earn-
$23,888,000, respectively. Dividends on the Preferred Stock are ings or, if redeemed below par value, as a gain on reacquired required to be paid in preference to dividends on the Common capital stock in " Premium on capital stock" Such gain was Stock. The Company's Certificate of Incorporation states that all
$3,637,000, $1,333,000 and $1,064,000 at the end of 1984,1983 Preferred Stockholders have the right to elect the smallest number and 1982, respectively.
of members of the Board of Directors so as to constitute a majonty, should the Company be in arrears for a total of four quarterly divi-Regulatory Accounting dend payments in any one series of Preferred Stock.
In accordance with present generally accepted accounting prin-ciples, plant, operating and financing costs may be deferred in On February 20,1985, the PSC approved a Company proposed certain circumstances for recovery in the future under a rate ESOP which will provide LILCO employees with Company stock moderation plan; regulatory disallowance of a portion of a plant's in lieu of salary lost as a result of salary reductions in 1984 in con-cost would not, in itself, require an immediate charge to income.
nection with the Company's Austenty Plan. The provisions of the The Financial Accounting Standards Board (FASB) is currently ESOP require that employees remain employed with the Company reviewing various aspects of Statement of Financial Accounting until Apnl 1,1986 in order to receive the stock.
Standards No. 71, Accounting for the Effects of Certain Types of Regulation; changes in accounting requirements may evolve from Restnctions as to the declaration of Preferred and Common Stock this review. The Company is unable to predict with certainty what dividends as well as sinking fund redemptions of Preferred Stock changes could occur as a result of the review of these topics by were imposed by the 1984 Revoiving Cred:t Agreement. For fur-the FASB.
ther information refer to Note 7 under 1984 Revolving Credit Agree-ment. Cumulative preferred dividends in arrears resulting from the After the Company inst:tuted a cost savings plan called The Austen-dividend suspensions referred to above were equal to $21.3 million ty Plan, the PSC ordered that the Company provide an accoun-representing one quarterly dividend per series, at December 31, ting mechanism to recognize and preserve the benefits of its 1984.
Austenty Plan. In its rate order effective September 1,1984, the PSC recognized approximately $36 million of these cost savings None of the authonzed shares of nonparticipating Preference Stock, in rates and ordered the continued recognition and preservation par value $1 per share which ranks junior to the Preferred Stock, of the remainder As of December 31,1984, the accumulated are outstanding.
preserved austenty savings of $15.7 million were recorded in
" Deferred Credits - Other" and have been included in " Opera-Note 3. Retirement Benefff Plans tions - Other" expense on the Statement of income. After provi-sion for the related income tax effect, the effect on " Income for The Company maintains two pension plans. The total costs related Common Stock" was a reduction of $8.5 million, or 82 per share.
to the plans were $17,796.000, $16,820,000, $15,840,000,
$14,418.000 and $12,946,000 for the years 1984 through 1980 (of Pursuant to a PSC rate order effective September 1,1984, the which $5,082,000, $5,092.000, $4,655,000, $3,901,000 and Company began accounting for the effects of a Financial Stability
$3,699,000 were included in construction costs), respectively. The Adjustment (FSA). The order provided the Company with current costs of the defined benefit retirement plan, which covers most cash inflows and provided that plant cost would be reduced by employees, are determined as the amount needed to meet current such amounts. The total amount of such cash inflows is $198 million service costs and to amortize unfunded past service costs over a per year of which $56.6 million (or $29.2 million after tax effects) 30 year period. All pension costs are borne by the Company. The was recorded during 1984. See Note 7 under Rate Relief.
Company makes annual contributions to the plan equal to the amounts accrued for costs related to the plan.
The cost of abandoned generating projects continues to be classified as CWIP until such time as an order is received from The Company also provides, without contnbution from such the PSC conceming disposition.
employees, supplemental death and retirement benefits for officers and other key executives. Death benefits are currently provided by Note 2. Capital Stock insurance. Retirement benefits, which are not available until 1986, have been recognized as expense but are unfunded.
Of the 150,000,000 shares of authorized Common Stock at December 31, 1984, 216.330 shares were reserved for sale to A companson of accumulated plan benefits and plan net assets employees,6.802,247 shares were committed to the Automatic Divi.
for the Company's retirerent plans is presented below:
dend Reinvestment Plan, 733,600 shares were reserved for the Employee Stock Ownership Program (ESOP) desenbod below and January 1, 236,519 shares were reserved for conversion of the Series I Con.
1984 1983 1982 vertible Preferred Stock at $17,15 per share-On thousands of doHars)
Redemption of Senes, L,M,0,R S.T,U,V, and X Preferred Stock is Actuanal present value f accumulated contemplated through the operation of various sinking fund provi-d^'
sions. However, the Company has purchased an aggregate number ed
$267,593
$248.571
$230.966 of shares of its Preferred Stock Series L,M and R equivalent to the Nonvested 10,199 9.615 9.037 number of shares of such senos scheduled to be redeemed by way Total
$277,792
$258.186
$240.003 Net assets avadatale for benefus
$263,676
$238 396
$207,783
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.. 45 The weighted average assumed rate of return used in determining any assurances. One of the conditions under which the Construc-the actuarial present value of accumulated plan benefits was 6%
tion Trust's revolving credit agreement might be converted to a for all years.
term loan is that, since Decemoer 31,1981 or at a later date ac-ceptable to the Construction Trust's lending baras, there has been in addition to providing pension benefits, toe Company provides no change in the condition or operation of the Company which cert 3n health care and life insurance benefits for retired employees.
would have a matenal adverse effect on the ability of the Com-Substantially all of the Company's employees may become ehgi-pany to carry out its obhgations under the Construction Trust ble for these benefits if they reach normal retirement age while work-Agreements. Another condition is in substance that, since the same ing for the Company. These and similar benefits for active employees date, there has been no htigation against the Company which, if are provided through insurance companies whose premiums are adversely determined, would prevent the Company from perfor-based on the benefits paid during the year. The Company ming its obhgations under the Construction Trust agreements. Ad-recognizes the cost of providing these benefits by expensing the ditional information is set forth in Note 7 under Nine Mile Point 2.
annual insurance premiums, which were $13,058,000 for 1984. The cost of providing those benefits for 1,809 ret:rees is not separable Funds currently required by the Resources Trust to finance the from the cost of providing benefits for the 5,242 active employees.
Company's nuclear fuel program and by both Trusts to make in-terest payments are being provided by the Company. With respect Noto 4. Trust Obilgations to such advances by the Company to the Construction Trust in excess of the $500,000,000 advanced by the banks, the banks The Company estabhshed Tri-Counties Resources Trust and in-had indicated that the Company's advances violated provisions Counties Construction Trust to finance, respectively, the Com-of the Construction Trust agreements. It was the Company's view, pany's nuclear fuel program and its share of the costs of construc-however, that such advances were not intended to be covered tion of a nuclear plant, Nine Mile Point 2, and its fuel. The Resources by the Construction Trust agreements. To resolve this question, Trust and the Construction Trust are currently financed by revolv-the Company and the banks in 1984 agreed to amend the ing credit loans which were fully utilized at December 31,1983 agreements to cover pnor advances by the Company in excess and which initially provided for borrowings of up to $180,000,000 of $500,000,000 and exclude future advances by the Company and $500,000,000, respectively. The amounts outstanding, for the purpose of enabling the Construction Trust to make interest however, at December 31,1984 were $176,437,000 for the payments under the Construction Trust agreements These amend-Resources Trust and $509,184,000 for the Construction Trust. Of ments were approved by the PSC in February 1985.
the $176,437,000 outstanding under the Resources Trust,
$145,981,000 had been used to finance nuclear fuel expenditures The Trusts' average annual interest rates (excluding commitment and $30,456.000 had been invested in the Company for general fees) on average borrowings of $696,941,000, $658,902,000, corporate purposes. The Company has guaranteed the obliga-
$500,198.000, $381,614,000 and $314,360,000 (ewluding loans tions of the two Trusts and additionally has secured those obliga-from the Company) outstanding dunng the years 1984, 1983, tions (along with certain other Company obhgations) by a Third 1982,1981 and 1980 were 11.9%,10.3%,14.7%,19.4% and Mortgage on substantially all of the Company's properties. The 15.6%, respectively. Of the total average borrowings, $54.649.000, lien of the Third Mortgage is subordinate to the liens of the First
$50,546,000, $45,889.000, $45.100,000 and $45,100,000 related Mortgage and the General and Reft,qding Mortgage desenbed to general corporate purposes for the respectiva penods. The in Note 5. The revolving credit agreements of both Trusts provide Trusts' interest costs on borrowings utikzed to finance construc-for borrowings pnncipally at the pnme interest rate prevaihng from tion and nuclear fuel are reflected in the Company's Construction time to time or, if advantageous, at alternate borrowing rates bas-and Nuclear Fuel in Trust accounts and are deducted currently ed on the London Interbank Offenng Rate or the Certificate of for tax purposes on the Company's tax return.
Deposit Rate. Currently, these borrowings are based on six-month Certificate of Deposit Rates averaging 9.45%.
Note 5. Debt af December 3f The Company is obhgated to purchase nuclear fuel owned by the The First Mortgage is a first ken on substantially all of the Company's Resources Trust, or heat from such fuel. In this connection, the properties. The General and Refunding Mortgage (G&R Mortgage).
Company has elected to purchase heat from the initial core at which is a second lien on substantially all of the same properties, Shoreham. Loans under the revolving cred:t agreement of the is subordinate to the lien of the First Mortgage. All First Mortgage Resources Trust mature in September 1986.
Bonds issued on and a'ter June 1,1975 (Pledged Bonds) were issued to the Trustee of the G&R Mortgage as additional secunty Similarly, the Company is obhgated to reimburse the Construc-for General and Refunding Bonds (G&R Bonds) tion Trust for nuclear fuel and construction costs not later than six-ty days after the earliest to occur of several events, including the The Third Mortgage, which is a third ben on substantially all of the issuance of an operating hcense for Nine Mile Point 2, fuel loading same properties, is subordinate to both the First Mortgage and the at Nine Mile Point 2 and October 31,1986-Upon termination of, G&R Mortgage and was created to secure the Company's debt or default by, either Trust, the Company is obhgated to repay fully under (1) a Revolving Credit Agreement with several domestic banks the obligations of the Trust. The present matunty date of the loans for borrowing up to $250 mdkon, (2) the Eurodollar Revolving Credit under the revolving credit agreement of the Construction Trust is Agreement with several foreign banks for borrowings up to $150 December 31,1986, but the loans may be converted to a term milkon, (3) the revolving credit agreement between in-Counties loan matunng in 1988 provided that certain conditions for the con-Resources Trust and several banks for borrowings up to $180 version are met as to which the Company cannot presently give milkon, (4) the revolving credit agreement between inCounties Con-struction Trust and several banks for borrowings up to $500 milhon and (5) intermediate term loans with several banks providing for
$105 mdhon, all of which are discussed below The $250 mdhon Revolving Credit Agreement which terminates December 1988, has provisions for four annual extensions until December 1992, with the consent of the lending banks. Borrow-ings are at fluctuating a!ternative avadable interest rates, namely,
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,N a rate based on the pnme rate, a rate based on the London Inter-bank Offering Rate or a rate based on rates charged by lenders Long-term Debt at December 31 (In thousands of dollars) for domestic certificates of deposit or time deposits. The commit-Rate of Interest Senes Due 1984 1983 1982 ment fee is 3/8 of 1% per year on the average daily unused por-tion of each bank's commitment.
First Mortgage Bonds
$ 25.000 3W %
F 1983 $
The Euroddlar Revolving Credit Agreement with several foreign 15,000 banks provides for borrowings up to $150 million including $75 4%
i 1986 20,000 20.000 20.000 million that will mature in August 1985. Borrowings will be at a rate 4%
J 1988 20,000 20.000 20,000 based on the London Interbank Offering Rate. The commitment fee 5
L 1991 25,000 25 000 25.000 is 1/4 of 1% per year on the average daily unused portion of each 4.40 M
1993 40,000 40,000 40.000 bank's commitment.
40 N
1994 25,000 25.000 25.000 4 55 O
1995 25,000 25.000 25.000 5%
P 1996 40,000 40.000 40.000 At December 31,1984, the Company had borrowed all of the $400 O
35 @0 milhon of funds available under its Revdving Credit Agreement and h
9 000 its Eurodollar Revolving Credit Agreement. There are no re-9%
S 2000 25,000 25.000 25.000 quirements for compensating balances or fees in lieu thereof in either 7%
U 2001 40,000 40.000 40.000 agreement.
7W V
2001 50,000 50.000 50.000 75!s W
2002 50,000 50.000 50.000 The Company's $105 mdlion of intermediate term notes have fixed 8%
X 2003 60,000 60.000 60,000 interest rates averaging 12.72% per annum. Of these loans, $30 million matures in 1986; the remainder in 1988.
t Pledged First Mortgage Bonds 465,000 535.000 615.000 The Company's 1984 Revolving Credit Agreement provides up to t Less Pledged First Mortgage
$150 milkon of revolving credit, expandable with the consent of the Bonds 465,000 535.000 615.000 fourteen lending banks to $200 milhon. The termination date is December 31,1985. At December 31,1984, the Company had Less Current matunties 000 000 outstanding $36 milhon under such agreement. For additional details concerning 'his agreement, see Note 7 under 1984 Revolving Credit Total First Mortgage Bonds 490,000 505.000 520.000 A9 "
General and Refunding Bonds 80,000 9%% Senes Due 1983 The Company entered into an agreement in 1984 with Niagara 9%% Senes Due 1984 90.000 90.000 Mohawk Power Corporation (NMPC) to finance the Company's 9%% Senes Due 2006 70,000 70.000 70.000 share of the cost of Nine Mile Point 2. Pursuant thereto, the Com-8%% Senes Due 2006 50,000 50.000 50.000 pany issued $250 mdlion of its G&R Bonds, of which $128.5 milhon 8%% Senes Due 2007 85,000 85.000 85.000 had been delivered to NMPC at December 31,1984 and the re-9 20% Senes Due 2008 75,000 75.000 75.000 maining Bonds are held in pledge as of that date to be dehvered 9.75% Senes Due 1999 94,000 96.000 98.000 i
14%% Senes Due 2010 50, M 50.000 50.000 as needed. The last of such bonds are expected to be delivered 15.75% Senes Due M1 m,m EM WM in late 1985 or early 1986. Such G&R Bonds held in pledge for 17%% Senes Due 2011 50,000 50.000 50.000 future delivery are not yet debt in the Company's capital structure.
16%% Senes Due 1991 50,000 50.000 50,000 For addihonal deta:Is of this agreement, see Note 7 under Nine Mile 18% Senes Due 2011 50,000 50.000 50.000 Point 2.
17% Senes Due 1991 50,000 50.000 50.000 17%% Senes Due 2012 100,000 100.000 100.000 The Company has authonty from FERC to issue up to a total of $400 15%% Senes Due 2012 100,000 100.000 100 000 million in unsecured short-term notes to banks and commercial 125.% Senes Due 1992 75,000 75.000 paper. No commercial paper or short-term bank borrowings were 13W% Senes Due 2013 105,000 105.000 17 19 outstanding at December 31,1984,1983 or 1982. The Company
'000 has no current arrangements for borrowings under this authonzation.
1,454,000 1,196.000 1,098.000 The annual First Mortgage depreciation fund and sinking fund re-tt less Bonds held by pledgee 121,500 quirements for 1984 are estimated at $187 milhon and $12 milhon, Less Current maturtes 3,000 92.000 82.000 respectively. The Company expects to meet these requirements-Total General and due June 30,1985, pnmanly by utilizing matured First Mortgage Refunding Bonds 1,329,500 1,104.000 1.016.000 Bonds and bondable property additions.
Other Long term Debt Authonty Finanong Notes 7W% to 8%% Due 2006-2012 66,675 66.675 66.675 Bank Notes 11W% to 14.18% Due 1985-1988 541,000 505.000 Promissory Note BW% Due 1985 46 102 154 607,721 571.777 66.829 Less Current matunties 111,046 56 52 Total Other Long term Debt 496,675 571,721 66.777 Total Long term Debt
$2,316,175 $2.180,721 $1.602.777 The aggregate of the Company's long term debt due in the next five years is $129,000,000 (1985), $733,000,000 (1986),
$23,000,000 (1987), $481,000,000 (1988) and $160,000,000 (1989).
17 Note G FederalIncome Taxes The Federal Income Tax amounts included in the Statement of Income differ from the amounts which result from applying the statutory Federal income tax rate to Net income before income taxes. The reasons are as follows:
(In thousands of dollars) 1984 1983 1982 1981 1980
% of
% of
% of
% of
% of Pre-tas Pretax Pretax Pretax Pretax Amount income Amourt income Amount In s ne Amount income Amourt income Fcderal income tax. per State-ment of Income - current
$ 14,097
$ (4.128)
(662)
$ (1.008)
$ (2.915) included in other income and deduchons-current 315 4.128 662 1.128 2.985 Total Current 14,412 0
0 120 70 Deferr;d and other (see Note 1)
Accelerated tux depreciation 6,547 3.085 1.177 (1,967) 4.740 Fuel cost adjustments 1,509 (8,145) 2.150 (7.072) 5.330 Investment tax credits deferred 108,365 57.746 34.611 32.568 38 Interest captahzed 20,950 4.836 2.005 18,038 Shoreham overheads (22,891) 3.432 1.038 7.196 Westnghouse settlement (169)
(46)
(126)
(2.847)
C_rcened generating projects (1,203) 501 (24,743) 31.060 Auster4y adjustment (7,202)
TLx benefits of net operating loss 3,937 3.291 (3.338) 42.283 (45.390)
Investment tax credits - other (5,762) 5.562 12.562 5.911 (10.512)
MTA surcharge tax 1,846 1.061 1.270 Other items, net (4,208)
(6.304)
(3.297)
(10.186) 4.029 Total Deferred 101,719 65.019 48.052 59.181 (10.705)
Total Federal income tax ex-pense 116,131 65.019 48.052 59.301 (10.635)
Net income 427,788 364.974 309.394 247,732 205.018 Net income before income taxes
$ 543,919
$ 429.993
$ 357.446
$ 307.033
$ 194.383 SCutory Federal income tax
$ 250,203 46.0% $ 197.797 46 0% $ 164.425 46 0% $ 141.235 46 0% $ 89.416 46 0 %
Reducbons in Federal income tax resutting from:
Ceceited generatng protects 3,508 0.6 Excess of tax depreciaton over book depreciation 4,084 0.8 2.930 0.7 (2.771)
(0 8)
(2,402)
(0.8)
(2.808) (1.4)
AFC, which does not constitute taxable income (142,656) (26.2) (131.028) (30.5)
(92.633) (25 9)
(68.083) (22 2)
(50.526) (26 0)
Costs charged to plant but deducted currently (4,629)
(0.9)
(3.679)
(0 9)
(3.873)
(1.1)
(2.973)
(1.0)
(12,105) (6.2)
Lien date property taxes 7,218 1.3 (5.626)
(1.3)
(6.291)
(1.8)
(4.428)
(1.4)
(4.655) (2 4)
Interest captalized (4,279)
(0.7) 1.832 0.6 (17.964) (9 3) investment tax credits 3,398 0.6 810 02 (13.384)
(3.7)
(9.758)
(3 2)
(11.632) (6 0)
Other atoms not (716)
(0.1) 3.815 09 2.579 0.7 3.878 1.3 (361) (0 2)
TotJ Federalincome tax opence
$ 116,131 21.4% $ 65.019 151% $ 48.052 13 4% $ 59.301 19 3% $ (10.635) (5 5%)
Certin onginating timing differences included in the deferred income tax provision above are in part shown net of investment tax credit.
Th7 amount of ITC carryforward available as credits to tax returns for years aner 1984 is approximately $220,000.000. These credits expre by 1999.
The Company has not provided deferred taxes on approximately $660 million of vanous other deductions and depreciation method differences for property placed in service pnor to 1981 which, in conformity with the ratemaking practices of the PSC, have been flowed through. These vanous other flow-through tax deductions, which are deductible currently for tax purposes but captahzed for accountng and ratemaking purposes, include artain t >es, a portion of AFC, pensions and certain other employee benefits.
l 18
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Note 7. Commitments and Contingencies the petition on the grounds that it is premature and that it relates to a matter properly and presently before the NRC and the federal Shoreham courts. Fuel loading and !ow power testing up to 0.001% of full power pursuant to an operating hcanse issued by the NRC was l
General: Approximately $3.8 billion had been expended on completed on Feburary 16,1985.
Shoreham through December 31,1984, of which $612 million was expended in 1984. The Company expects that its subsequent ex-In the event that low-power testing and, with appropriate authoriza-penditures, including AFC, for Shoreham through the date of com-tion from the NRC, ascension of power to levels substantially above mercial operation will be approximately $45 to $55 million each 5% are conducted for a period sufficient to indicate that Shoreham month, almost all of which would be for carrying charges, including will be a reliable source of base power, the Company may then financing charges, insurance, taxes, interest and other overhead declare the unit to be in commercial operation, at which time the expenses. The Company is unable at this time to determine when Company expects that it will cease to accrue AFC.
Shoreham will g7 into commercial operation, if ever.
Emergency Power Sources: On February 21,1985, the Appeal Various uncertainties, includ!ng the Company's continued Board, as part of the administrative review process, remanded for economic viability, exist with respect to the recoverability of further proceedings that portion of the NRC's fuel load and low-Shoreham-related costs. The Company believes that all Shoreham-power testing orders which permitted low-power testing from related costs including AFC have been prudently incurred and 0.001% to 5% of full power in order that an ASLB might further should be recoverable from current or future revenues. However, review physical secunty provisions of a! ternate emergency power the recovery of some of these costs may bc disallowed as a result sources (e.g., protection from sabotage). In addition to preparing of an administrative finding of imprudence (see "Prudency Hear-for the remanded proceeding, the Company has asked the NRC ings" below). The Company is monitoring all of these matters and to review this Appeal Board decision on an expedited basis.
will monitor any future related matters in determining whether it continues to be appropnate to capitalize all or a portion of NRC regulations require on-site standby generating capacity which Shoreham-related costs. Despite the resolution in 1984 of some would be utilized in the unlikely event that all offsite power sources of the problems which had prevented the earlier issuance of failed at a time when it was necessary to shut down Shcreham.
authorization to load fuel at Shoreham and operate up to 0.001%
The low-power testing authorized by the N RC relies principally on of full power, the Company is continuing to encounter difficulties, four 2.5 MW diesel generators and one 20 MW gas turbine as an descnbed below, in obtaining an operating license permitting alternative to the three diesel generators manufactured by Trans-operation at levels in excess of 0.001% of full power. Therefore, america DeLaval, Inc. (TDI) which have been completely rebuilt the prospect exists for further delays and uncertainties, further in-after cracks were discovered in the original crankshafts in August creases in the cost of Shoreham and severe financial strains upon 1983. The three rebuilt generators have been completely retested the Company until the license to operate at full power is granted and hearings before an ASLB respecting their adequacy were con-and the prudency and rate phase-in issues are resolved.
cluded on March 12,1985. While the NRC has expressed its con-cern with diesels manufactured by TDI located at other nuclear A favnrable partial initial decision (PID) respecting an operating plants as we!I as at Shoreham and is conducting an investigation license for Shoreham is pending on appeal before the Nuclear of the problems, it has issued a low power license for one such Regulatory Commission (NRC). The PID decided substantially all nuclear plant and a full-power license for another. The Company of the issues which were previously litigated in administrative pro-does not expect the results of this investigation to impact adversely ceedings before Atomic Safety and Licensing Boards (ASLBs) of the licensing of the Company's TDI diesel generators. If the TDI the NRC and affirmed by its Atomic Safety and Licensing Appeal diesel generators are licensed, the Company intends to use those Board (the Appeal Board) with the exception of the issues discuss-diesel generators when Shoreham becomes operational. If the TDI ed below relating to the adequacy of emergency power sources diesel generators are not licensed, the Company intends to con-and the adequacy of the Company's offsate radiological emergency nect and utilize three additional emergency diesel generators response plan (including the issue of the authonty of the Company manufactured by Colt industries Inc. (the Colt diesel generators) to implement such plan). The PID is also before the United States which have been installed in a new specially constructed building.
Court of Appeals, District of Columbia Circuit (the Circuit Court)
The Company estimates that the cost of this additional project will as part of a challenge initiated by the State of New York and the be approximately $100 million, almost all of which was expended County of Suffolk, both of which are opposed to the operation of in 1984. Testing of the Colt diesel generators is scheduled to be Shoreham, to an order authorizing low-power testing of Shoreham completed by May 1985. Approval by the NRC respecting the use up to 0.001% of full power. Since the State and County have taken of the Colt diesel generators is required and ASLB heanngs may the position that an approved offsite emergency response plan also be required under certain circumstances. In effect, the pro-is a prerequisite to low-power testing, they have argued that there cess of licensing the Colt diesel generators could require exten-is no need at this time to proceed with low-power testing until the sive NRC staff review and could involve State and County litigation.
offsite emergency response plan issues have been resolved. The State and the County argue that it is unlikely that the Company Regardless of the source of the on-site standby generating capaci-will ever obtain approval of the Company's offsite emergency ty, the State and the County are expected to continue their op-response plan, position to low-power testing.
The New York State Consumer Protection Board has filed a peti-Offsite Radiological Emergency Response Plan: The Com-tion with the Public Service Commission of the State of New York pany faces senous problems in obtaining approval of the offsite (PSC) requesting that the PSC not allow the Comcany to recover emergency response plan which it has developed without the certain of the costs associated with low-power testing, including cooperation of Suffolk County or the State of New York. The ap-the costs to decontaminate the reactor, in the event Shoreham is proval of the offsite emergency response plan and its successful ultimately denied a full operating license for lack of an approved demonstration in a federally graded exercise are cond:tions to ob.
emergency response plan. The Company has moved to dismiss taining a full power operating license from the NRC. The County and the State have taken the position that an adequate emergen-cy response plan is not possible, have refused to participate in offsite emergency response planning, and have opposed the Com-pany's efforts to obtain licensing. Nevertheless, it is the Company's view that federal law authorizes the NRC to accept an offsite
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.w emergency response plan submitted by a utility, notwithstanding agreed to in a 1981 contract between the Company and Suffolk the lack of participation of state and local governments, provided County. The complaint seeks a declaration by the court that the j
the NRC determines that sucn plan provides reasonable assurance actions of the defendants are unlawful and that the Company is r
that public health and safety are not endangered by operation of entitled to damages in excess of $4 billion. The County moved the facility. Under the circums:ances, the Company has argued to dismiss the complaints in both lawsuits. On March 18,1985, I
before the ASLB that the Company's offsite emergency response a Federal Distnct Court Judge rendered a decision in each case i
plan can be evaluated by the NRC and that the federally graded dismissing the respective complaints. In the COEP lawsuit, the court exercise may be conducted and evaluated by the Federal rejected the Company's arguments that the County's actions in J
l Emergency Management Agency (FEMA) without local and state declining to participate in radiological emergency response plan-governmental participation. The ASLB has not acted on the Com.
ning were federally preempted and that the County was required
]
pany's request that the ASLB determine that it and ultimately the to participate in the planning process. However, the court stated NRC have the legal authonty to approve a Company-implemented that Congress had considered the possibility that a state or local offsite emergency response plan under such circumstances. Hear.
government might fail to participate in emergency planning and, ings before an ASLB respecting the Company's offsite emergen-rather than require participation, provided for the utility to present I
cy response plan have been concluded. The County and the State its own plan to the NRO. In the lawsuit against the County Executive have requested hearings with respect to add:tional issues. The alleging inverse condemnation, the court concluded that the Com-earliest time now expected for a decision is in Apnl 1985. No date pany's request was prematurely brought. The Company is con-a has been set as yet by FEMA for it to supervise and grade an ex.
sidenng whether to appeal from the decisions of the court.
,;l 4
ercise of the Compary's offsite emergency response plan. Hear-ings before an ASLB may be required following the graded While the Company believes its own emergency response plan T.
exercise.
will adequately provide for the safety of the public, there can be no assurance that such plan will be accepted in the hcensing pro-i The State, the County and the Town of Southampton instituted ceedings or that an operating hcense wdl ultimately be issued.
^
f separate lawsuits in New York courts seeking declaratory
[
judgments that the Company lacks the legal authonty to under-Property Taxes: As it had done with all of the 1983-1984 real i
take its offsite emergency response plan and that the Company's property taxes attnbutable to Shoreham, the Company deposited i;;
plan is unlawful and illegal under the United States Constitution on January 10,1985 an amount equal to the first installment of y
and the laws of New York State. These actions were consolidated real property taxes and related charges, amounting to approx-g in New York Supreme Court, Suffolk County. The Company mov-imately $30.9 million, attnbutable to Snoreham for the tax year ed to dismiss the complaints. On February 20,1985, a decision 1984 1985, with a third party, pending resolution of litigation by a
f; was rendered holding that under the laws of New York State, the the Company in New York Supreme Court, Suffolk County, seek-Company lacks legal authonty to take certain steps necessary to ing review and correction of the assessments of the Shoreham pro-Si implement Shoreham's emergency response plan. The Company perty for the tax years 19,6-1977 through 19781979, and f
intends to appeal the decision. The Company is unable to predict 1980-1981 through 1984-1985. The Company has taken the posi-g the outcome of its appeal.
tion that the unpaid taxes. and the taxes assessed for pnor years which have been paid, were illegally and excessively assessed r
i The Company is an intervenor in 3 suit brought in November 1983 and, accordingly, that the Company is entitled to a net refund of b
in the U.S. Distnct Court for the Eastern Distnct of New York against taxes. This action of withholding the tax payments was taken 5
the County of Suffolk by a group called Citeens for an Orderly because the Company believes that, if the Company is successful Energy Policy (COEP). The issue raised by COEP is whether Suf-in pending tax htigation respecting the claimed overassessments,
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folk County resolutions prohibiting County participation in emergen-it would be unable to enforce a judgment directing a refund of t
cy planning at Shoreham are preempted by the United States the substantal amounts of taxes already paid. These arrangements
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Atomic Energy Act. COEP claims Suffolk County has a duty under for the deposit of the moneys permit the money to be withdrawn
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New York law to participate in the planning process. The Com-if the Company's Board of Directors determines in good faith that
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pany claims that Suffolk County has violated the Company's nghts funds equal to the taxes, penalties, interest and other charges no 5
j to due process and equal protecton under the law, provid.ng longer need to be on deposit. The total amount on deposit at
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grounds for liabihty under federal law. The Company was granted December 31,1984 was approximately $61 milhon. In separate leave to intervene and subsequently filed its complaint in Apnl 1984.
actions brought in New York Supreme Court, Suffolk County, by 3
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The Company a!so filed a complaint in June 1984 in U.S. Distnct the New York State Attorney General and the Receiver of Taxes Court for the Eastern District of New York against Peter Cohalan, of the Town of Brookhaven, the Supreme Court has decided that County Executive of Suffolk County, New York, and Suffolk County, the Company is not legally required to turn over the funds on 3
seeking declaratory relief and damages resulting from the defen-deposit to either plaintiff. The pla,ntiffs have appealed this decision.
f dants' refusal to develop and implement an offsite radiclogical J
emergency response plan for the Shoreham Nuclear Power Sta-Under certain conditions, the Compan/s First Mortgage, its tion. The complaint alleges that as early as 1982 the defendante General and Refunding indenture and its Third Mortgage permit h
sought to prevent Shoreham's operation, usurp the regulatory func-the payment of the taxes to be deferred pending good faith htigt tions of the NRC and cripple the Company economically. The com-
' ion challenging the tax assessments. The Company believes that plaint also alleges that, should the defendants succeed in preven-it is in comphance with the apphcable provisions of the First Mort-ting Shoreham's operation, either through denial of an operating gage, the General and Refunding indenture and the Third hcense by the NRC or by causing the Company to abandon the Mortgage.
plant, the defendants' action will amount to an inverse condem-nation of Shoreham without just compensation in violation of the In November 1984, Suffolk County purchased the hen, amoun-Company's constitutional nghts. The complaint further alleges that ting to approximately $60 6 mdhon, for the unpaid 1983-1984 taxes.
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Suffolk County breached its contractual obligations with the Com-The Suffolk County Tax Act and a Suffolk County local law pro-t-
pany to prepare a radiological emergency response plan as vide, in the case of a puchase by the County, that the owner of property on which a tax hen has been sold has a 45-month penod from the date of such safe within which to redeem the property by paying the dehnquent taxes. In the normal course, the hen for any unpaid 19841985 taxes will be offered for safe in November j
1985.
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Prudency Hearings: The PSC is currently investigating the Department, upheld the PSC and dismissed the Attorney General's prudency of the costs incurred by the Company in the construc-petition for review of the PSC decision. The decision of the Court tion of Shoreham. On March 13,1985, two Administrative Law is subject to further judicial review. The program submitted by the Judges (ALJs), before whom heanngs were conducted and to Governor of the State of New York for consideration at the 1985 whom the parties - the Company, the PSC Staff and intervenors session of the New York State Legislature also includes a proposal l
- submitted briefs in a phase of the invest!gation which began that would require a levelized rate phase-in of at least ten years in August 1981, recommended to the PSC that. based on a for Shoreham. The Company is unable to predict what action the previously submitted projected cost of $4.2 billion, $1.2 billion of legislature might take on the Govenor's proposals and, if enacted 5
such cost should be excluded from rate base as having been im-into law, what action the Company might then take or what im-prudently incurred. Thus, the ALJs in effect have made a recom-pact the new legislation might have upon the Company's finan-g mendation, based on such projected cost, that $3.0 billion will have cial condition and results of operations. A legislative proposal has been prudently incurred and will therefore be includable in rate been submitted by two New York State legislators which, if enacted base. The PSC Staff had recommended to the ALJs that no more into law, would prevent the Company from seeking increases in than $2.296 billion of the Shoreham costs be allowed in rate base rates so long as the Company withholds payment of its real pro-regardless of the date that Shoreham goes into operation. The New perty taxes. The Company, the County Executives of Nassau and York State Consumer Protection Board, Suffolk County and Long Suffolk Counties and a group of Long Island business and labor Island Citizens in Action, three of the intervenors in the prudency leaders have agreed to submit to the New York State legislature investigation, in their filed testimony, alleged that "a strong a program designed to hold down future rate increases which the presumption is raised that any expenditures on Shoreham in ex-Company would charge its ratepayers whether or not Shoreham cess of $1.9 billion through 1983 are the result of imprudence.'
becomes operational.
The Company believes that its direct testimony, filed in 1981 and supplemented in 1983, together with its rebuttal tesimony filed The PSC has suspended a proceeding begun in 1982 respecting in 1984, supports its view that all of the costs of Shoreham have the rate treatment to be applied to Shoreham when it begins com-been prudently incurred. The parties have an opportunity to sub-mercial operation. In this proceeding. vanous proposals to mit exceptions to the recommended decision before it is con-moderate the impact on consumers resulting from inclusion of sidered by the PSC and the Company intends to do so. The PSC Shoreham in the Company's rate base were under consideration.
has discretion to raise or lower the amount of the recommended The Company proposed a moderation plan designed to estabhsh i
decision. The Company cannot predict when the PSC will act on a level of rates over a period of time which is economically accep-
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the recommended decision, or what its determination will be. Its table to the pubhc and the Company. In general, the proposals.
decision, however, will be subject to judicial review.
including the one submitted by the Company, would have restncted the size of rate increases resulting from Shoreham's in-in the event the PSC disallows a portion of the Shoreham costs clusion in rate base dunng the first few years, contrary to conven-from the Company's rate base, the effect of such disallowance tronal ratemaking policy. The Company intends to request the PSC on the Company's financial condition and results of operations to reopen the suspended proceeding and to consider appropnate could, under certain circumstances, jeopardize the Company's rate phase-in proposals in light of changed circumstances since abihty to meet its financial obhgations. In such event, the Company the proceeding first began, including the consequences of the $1.2 might be required to file a petition for rehef under the Federal billion disa!lowance proposed by the ALJs in the pruder,cy pro-Bankruptcy Code. Under certain assumptions, if the Company ceeding discussed above and the reconsideration discussed in were not allowed to include a significant portion of Shoreham's Note I respecting certain existing financial accounting standards.
cost in its rate base and cost of service, it bekeves that a wnte-down of the Company's investment in Shoreham through a charge Certa:n State and local government officials have suggested that to income may be required by generally accepted accounting pnn-Shoreham be totally abandoned or indefinitely mothballed. The ciples. The Company cannot now determine the amount, if any, Company beheves that it is in the pubhc interest that Shoreham of such disa!Iowance or of such wnte-down. See also the discus-be permitted to become operational. Any such action, absent timely sion in Note 1 respecting a reconsideration of existing financial and adequate rate increases in the future, could have a senous accounting standards.
adverse financial impact and could result in a fikng of a petition for rehef under the Federal Bankruptcy Code.
Shoreham Rate Proposals: Levehzed rate phase-in proposals to hmit rate increases due to Shoreham have been considered by Other Litigattom Separate class action and shareowners' the New York State Legrstature in 1982,1983 and 1984, but none denvative action lawsuits initiated in 1984 by holders of the Com.
of these proposals became law. The Govemor of the State of New pany's Common Stock and holders of certain classes of the Com-York has submitted for consideration by the New York State pany's Preferred Stock. alleging violations of the Secunties Act of Legislature in 1985 a proposal, among others, which would pre-1933 and the Secunties Exchange Act of 1934, have been con-vent a utikty company from recovenng from its ratepayers the costs sohdated into a single proceeding in U.S. Distnct Court for the of a nuclear power plant if the nuclear power plant fails to com-Eastem Distnct of New York. The Company and certain of its past mence commercial operation and would bar, from the effective and present officers are named in the consohdated lawsuit as are date of the proposed legislation, the recovery in rates of any con.
certain of the Company's past and present directors, certain of struction work in progress associated with an unkcensed nuclear the underwnters in its Common Stock offenngs and its indepen-power plant. In this connection, the Attomey General of the Stato dent accountants. In general, the plaintiffs a!!cgo that over a penod of New York has argued, in litigation affecting another New York of years one or more of the defendants, either individually or in utikty company, that under New York law a utikty may not recover concert, failed to make adequate disclosures or made falso and any of its investment in property unless it is "used and useful to misleading statements respecting the cost of Shoreham and the its customers" and consequently the PSC could not lawfully have management of its construction. The aflegations of mismanage-a!! owed recovery of expenses relating to a generating station pro-ment appear to be based either upon reports appeanny in Ject that had been cancelled prior to commencement of construc-newspapers or statements appeanng in the testimony of the PSC tion. The New York Supreme Court Appel! ate Division, Third fdod in the prudency investigation discussed above The plaintiffs seek damages to be proved in the litigation. The Company will oppose the ktigabon, has moved to dismiss portions of the com-plaints alleging fraud on the ground that such attegations are not
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made with the required specihcity, and is proceeding with analysis ty portion of each cotenant's share of the costs in excess of $4 6 cnd preparation for defense of the conschdated actions. The mo-billion would be reduced by 20% Subsequently, the PSC ordered tion i as argued on September 19,1984 and has not yet been that there would be no recovery of prudent expenditures above decided. The Company is presently unable to measure the im-
$5.4 biilion. Based on the latest estimate of the Company's share pact, if any, that the ultimate resolution of such htigation will have of the cost of Nine Mde Point 2, the Company currently beheves on its financial condition or results of operations.
that the imposition of these kmitations. including the IROR penal-ty, over the expected hfe of Nine Mile Point 2 would not have a Nine Mile Point 2 matenal adverse effect on the financial cond> tion of 'he Company, The Company has an 18% undivided interest in Nine Mde Point although no such assurance can be gwen
- 2. O nuclear power plant under construction near Oswego, New York. The cotenants of Nine Mdo Point 2, in addition to the Com-The proposals submitted for action in 1984 by the Governor of pany, are Niagara Mohawk Power Corporation (Niagara Mohawk),
the State of New York to the New York State Legislature included New York State Electnc & Gas Corporation (NYSEG), Rochester some which related to Nine Mde Point 2. None of the Nino Mile Gas cnd Electnc Corporation and Central Hudson Gas & Electnc Point 2-related proposals wcre adopted. As part of his program Corporation.
submitted to the New York State Legislature for action in 1985, the Governor has proposed a bill that would require a levelized in J:nuary 1985, Niagara Mohawk, which is also the project rate phase in of at least five years for a new nuclear plant, such manager for Nino Mile Point 2, announced a $250 milhon increase as Nine Mde Poirt 2, owned by two or more utility companies The in the estimated total project cost, including financing costs, to Company is unable to predict what action the legislature might
$5.350 bilhon. The increase in required to accomplish work not take on this proposal and, if enacted into law, what action the Com-completed in 1984 and assames production rates histoncally pany might then take of what impact the new legislation might have achieved. The Company's r. hare of this newly announced cost upon the Company's financial condition and results of operations.
estimate is $963 million including financing costs. The new con-struction cast est mate includes $637 mahon for 1985, exclusive in 1983, the Staff of the NRC, in accordance with its regular pro-of financing costs, of which the Company's share, approximately cedures, reviewed the construction program of Nine Milo Point
$115 mdhon, is to be provided through a loan mado by Niagara 2, concluded that management's attention to certa 1n aspects of Moh:wk in 1984. The Niagara Mohawk loan is secured by the the program should bo increased and proposed the imposition
$250 mdhon of the Company's General and Refunding Bonds of a $100,000 fine which has been pa.d. Niagara Mohawk has discussed below.
implemented corrective actions and, under an NRC approved plan, has provided for independent ver ficabon of the actions taken At December 31,1984, the Company had expended $813 milhon by it as project manager to correct those and other deficiencies for its share of Nino Mdo Point 2, before giving effect to federal (notably work performed by contractors) identified by the NRC.
incomo tax benefits of $100 mdhon resulting from the deduction A report of the independent review was completed in 1984 The of the interest portion of such costs? The $813 milhon consists of implementation of the recommendations resulting from tas review
$501 million for direct construction costs, $12 million for nuclear process is not presently expected to impact adversely the Cost fuel cnd $300 mdhon for financing costs.
estimates or the schedu'ed completion dato of Nino Mao Point 2.
The newly announced cost estimato for Nino Milo Point 2 con-The Company ex pects that beginn 7g sometimo in 1985 the PSC templ2es a commercial operat:on dato in Octuber 1986. Niagara will commence a proceeding to determino the prudency and Mohiwk has advised the Company that if certain construction ac-recoveratAty of the costs incurred in constnJction of Nino Mdo Point tivities scheduled for completion in the Spnng of 1985 are not met,
- 2. The Company does not know when such proceeding will begrn, tho scheduled commercial operation dato may not bo met A report the amount, if any, which the PSC Statt or other potential in.
issued in January 1985 by a consultant retained by the PSC has tervonors might claim to have been imprudently incurred or the questioned whether a commercial operation dato in Octotx>r 1986 amount,if any, which the PSC itself might disallow from the Com-c1r be met. Any delay in achieving the scheduled commercial pany's rato baso At this time, uso Company is unable to predict op;rition dato is estimated to add $60 mdkon each month, in-the extent, if any, of disallowance of the costs of Nino Mdo Point cluding financing costs, to the total cost of th1 project. Based upon 2 of the impact thereof on the financial cond tion or results of opera.
the Company's assessment of the Nino Mdo Point 2 project's atAty tions of the Company. for a discussion of the possiblo results of to meet construction milestones and increa;od progress in other the PSC's prudency investigation of the Company's Shoreham Creas, particolarly in piping installabon and successful eng:neer-co3ts, sco "Prudency Heanngs" under the heading Shoreham ing review of installed systems, the Company beheves that a com.
above.
merci:1 operabon dato in October 1986 is achim able Otven con.
tinued aggressive construction management The Company wdl Operation of N,no Mdo Point 2 is subject to the completion of its closely monitor such efforts as system turn overs and start up construction and the issuance by tr o NRC of an operating hconso operCions, as well as construction milestones, in order that the One of the steps in the operating kcento proceedingq is a technical commercial operation dato may be continuously assessed review of Nino Mac Point 2 by tha NRC's Advisory Committee on Reactor Safeguards f ACRS) After performing its technicai roview in Apnl 1982, the PSC concludod that continued construction of of Nino MJo Point 2, the ACRS recommended to the NRC that Nino Mao Point 2 was warranted The PSC niso indicated that it "there is reasonable assuranco that the Nino Mao Point Nuclear wou'd closely monitor construction activities and, in reviewing costs.
Stat,on Unit Two can be operated at loveh up to 3323 MWt (full would apply a stnct standard of prudence The PSC also adopted power) without unduo r sk to the health and safety of the pubbc '
an incenhvo Rato of Return Plan (IROR) to provido no added in-Moreover, construction of Nine Mao Point 2 has not occasioned ducement for timely and ethcient completion of the plant The IROR any local or stato opposition comparatto to that which the Com.
provides that the revenuo requirements associated with the eque pany has empenenced at Shoreham Neverthe!ew the Company cannot predict when, of whether, tho operating hcence wdl bo issued
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The Company's arrangements to date for financing its share of fuel savings attnbutable to the operatio i of Shoreham. However, the costs of Nine Mde Point 2 include (i) the Construction Trust the fihng addresses the requirement of it least a 5.6% increase which has provided $500 milhon, the maximum amount available under any Shoreham eventuakty, The Company proposes to to the Trust under its revolving credit agreement with lending depart from conventional rate treatment for Shoreham in thalit does banks, (n) the sale and issuance of the Company's secunties, in-not seek to include all of the prudently incurred costs of Shoreham cluding the issuance to Niagara Mohawk of $250 milhon of the in rate base dunng its first yev of operation. Instead, the Com.
Company's General and Refunding Bonds (the Bonds) and an pany has requested the reco,ery of depreciat:on and a fair rate unsecured promissory note to Nragara Mohawk with a maximum of return on only a portion of its total investment in Shoreham. The pnncipal amount of $150 mdhon (the Gnd Note). (m) other borrow-Company's filing states that the amount of the investment to be ings from banks and (iv) funds raised internally Upon the basis factored into rates in 1986 should be no higher than the level >f a
of the latest estimato of the cost of Nine Mde Point 2, the Com-Shoreham's construction work in progress (CWIP) currently in rate pany will be required to obtain additional financing beyond the base plus an amount which will produce revenues equivalent to
$900 mdhon represented by the arrangements with the Construc-the additional cash flow relief granted by the PSC as a financial tion Trust and Niagara Mohawk. However, the Cornpany presently stability adjustment to the Company in its most recently conc!ud-d has made no provision for financing any substantial portion of such ed rate caso descnbed below. In add. tion to seeking rate rehef i
costs.
to begin on January 1,1986, the Company's fding states that a
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Commission determination is necessary as to the manner in which g
The Company issued the Bonds to secure its obligations for ad-the remainder of the prudently incurred costs of Shoreham will be vances of funds made by Niagara Mohawk since February 7,1984, recovered. The Company will seek such a determination in a for related interest and for additional funds which Niagara Mohawk separate proceeding.
will advance on behalf of the Company for the Company's 18%
share of Nine Mdo Point 2. These Bonds bear interest at an an-In 1984 the PSC granted the Company permanent electnc rate f
nual rate of %% mature in 1993 and are st.b ect to a mandatory rehef totakng $245 mdhon annually, including t to $90 milhon in-cash sinking fund between 1989 and 1993. The Company has tenm rate rehef granted in September 1983. The rehof granted was also agreed to make quarterly supplemental payments to Niagara in response to a Company apphcation for $281 milhon annually, Moha Ak equal to 4 625% (18 5% on a per annum basis) of an including the 590 milhon intenm rato rehef. The new rates became amount equivalent to the pnncipal amount of General and Refun-effective on September 1,1984. In the opinion and order gran-ding Bonds held from time to time by Niagara Mohawk. Such sup-ting the Company this rato rehef, the PSC stated that a sign /icant 7
plemental payments will be recorded as interest expenso by the portion of the rate relief was just fied only if it would allow the Com-g Company. The Company has the option of making the supplemen-pany to obtain new financing and thus avoid bankruptcy. Approx.
tal payments in cash or defernng the cash payments until the imately $47.4 million of the rate relief is based on a conventional earkest date (the Crossover Dato) to occur of (a) the Commercial Cost of servico Calculation, includ.ag a retum on Common equity operation of Nine Mde Point 2, (b) the assignment by the Com-of 16 3h Any mcomo that would result in an camed return on pany or by the Company's Construction Trust of any part of their common equity in excess of the 16 3% allowed rato of return will interest in Nine Mdo Point 2 or (c) August 1,1987. The Company be deferred and mado subject to futuro dispostion by the PSC.
has elected to defer Cash payment of the first of such supplemen-At December 31,1984, the amount so deferred, representing the tal payments, amounting to $4 6 mdhon, which became due on estimated return on common equity for the penod May 1 through February 1,1985. Such supplemental payments are reflected as December 31,1984 in excess of the allowed return granted by pnncipal in the Gnd Noto and bear interest at a rate of 19% per the PSC, was $15 7 mdkon. The baiance, approximately $197.6 annum Such interest may also be paid in cash or deferred and, mdhon, of the rato rehef granted in 1984 represents a financial in either event, Wdl be recorded as interest enpenso by the Com-stabihty adjustment intended to provido the Company with a por-pany, if de' erred, it wdl a!so be reflected as pnncipal in the God tion of its cash requirements for 1984 and 1985. Sinco such cash Note The Gnd Noto will be amortiled over not more than 16 flow rato rehef is intended to permit the Company to remain finan-quarterly payments begroning on the Crossover Date In approv-cially viable and to provido assurance of revenues to support new ing the issuance to N.agara Moha Ak of the Bonds and of the Gnd financing. the opinion and order contains a provision rescinding j
Noto, the PSC indicated that it would address at later dates the the Cash flow portion of the rehef in the event the Company seeks propnety of the interest rato for ratomaking purposes and of the protection or is adjudicated as bankrupt under the Federal overa'l ratomaking and accounting treatment of the transactions Bankruptcy Codo The issuance by the Company of the Bonds and its agreement The Long Island Progressivo Coahtion and the Long Island Power to mako quarterly supplemental payments to Niagara Mohawk, Project in concert with New York Stato Assemblyman Paul j
d'scussed in the preced:ng paragraph, resolved the depute bet Harenberg and the New York Community Action Network, filed ween the Company and the other cotenants which aroso in a petition with the PSC for recontidorat,on of the f:nal rato order february 1984 when the Company suspended payments of its of the Commission The pet, tion aHeged an " abandon (mentj of im-share of the Costs of Nino Mdo Point 2. The agreements pursuant partiahty" and prejudgment on the part of certain "decison makers to which the deputo was resch,ed d<d not mod,f y the Company's capable of prejudicing the proceed:nq " Tho petition a!so alleged obhgations under tho Da9c Agreement botween itnolf and the other there is no " evidence in the record that bank ruptcy would, in fact,
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coteaants of Nine MJo Point 2. Tho Ba9e Agreement remains in creato a larger detnment to LILCO's ratepayers" than granting full forco and ettect the f ato increase The Commis90n has denied the petition Rato Relief Naminq both the PSC and the Company as respondents, the New On February 27,1985, the Company fded a request with the PSC York Stato Consumer Protection Board. the New York Stato At.
to increme its electnc rates beg >nning January 1,1986 by 3 8%
forney General, the County of Suffnik and four Now Ynrk Stato or $08 7 mdkon, in add,t.onal revenues in its fding. the Company legislators commenced an Articto 78 proceeding in New York ind ca'od that. as a result of the proposed incremet combined w th Supremo Court, Albany County, seeking to annul the rato order the effect of a forecmted increase in the pnco of fos 91 fuoK (over on tho grounds that it was at'ected by an error of law and was which tne Company has liffic control). the 1986 costs to ratnpyerS afbittary and capnctous iho Articto 78 pet tion alleged that the j
would be 5 6% higher than the comparable 1995 costs The in-crea',o in rates is nece%ary in order to meet the Company's total a
operating and inaintenanco costs in the rato year Assuming that Shoreham wdf bo in serv 1Co throughout 1986. the incremo ret lects
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PSC had prematurely provided rate rehef to support the construc-As part of the 1984 Revolving Credit Agreement, the Company tion of Shoreham, that it permitted retroactive ratemaking and that agreed to suspend the declaration of Preferred Stock dividends it denied petitioners a fair and impartial heanng. In addition, the payable on and after October 1,1984 through December 31,1985.
Article 78 petrtioners, like the petitioners who sought the rehear-For purposes of calculating earnings available for owners of shares ing, claimed that the order was not supported by evidence in the of Common Stock, the Company will continue, however, to reflect record that the prevention of the Company's bankruptcy was in such undeclared dividends on the Statement of Income as " Prefer-the public interest. The Company responded that the allegations red Stock Dividend Requirements". The Company has purchas-in the petition were without logal or factual substance. The court ed an aggregate number of shares of its Preferred Stock, Series has dismissed the appeal on the ground that it was prematurely L, M and R, equivalent to the number of shares of such senes filed. The appeal may be renewed at a later time.
scheduled to be redeemed by way of sinking funds for such senes dunng the penod from October 1,1984 through December 1, 1984 Revolving Credit Agreement 1985. The Company has also retired all of the balance of the Prefer-The Company has an agreement with fourteen banks (the 1984 red Stock, Series 0, which was due in 1984. The Company record-Revolving Credit Agreement) providing up to $150 milhon of revolv-ed in " Premium on capital stock" a gain on reacquired capital ing credit, expandable, with the consent of the banks, to $200 stock of $1.4 million from the above-mentioned purchase of 'ts million, for a term extend:ng to December 31,1985. The amounts Prefermd Stock. The Company has announced that, depend' ig outstanding under the 1984 Revolving Credit Agreement at on market conditions, it may continue its program of open mauet December 31,1984 totalled $36 milhon. The cost of funds under purchases of shares of its pubhcly held Preferred Stock, $25 par the 1984 Revolving Credit Agreement includes (a) interest payaye value Senes 0 and $100 par value Senes S. The aggregate number on borrowed funds at the Citibank Alternate Base Rate,10.75%
of shares previously purchased and which may be purchased in at December 31,1984,(b) a commitment fee of W of 1% per an-1985 is not expected to exceed the numDer of shares of such senes num on the unused funds and (c) other fees and expenses. Future that are scheduled to be redeemed by way of sinking funds dur-advances by the banks will be subject to certain terms and condi-ing the penod ending December 31,1985. The Company does tions; and the occurrence of an event of default (including, in ad-not expect, dunng such period, to make cash redemption dition to other events of default, a default by the Company in payments or otherwise to make redemptions with respect to the meeting certain financial tests or in maintaining vahd secunty in-sinking funds for either of such series. Under its Certificate of in-terests) will give the banks the nght to accelerate payment of their corporation, the Company may not pay dividends on its Common loans and to take other remedial action.
Stock when it has failed to make payment in full of its Preferred Stock dividends. Nthough the Company had suspended payment The loans made pursuant to the 1984 Revolving Credit Agreement of Common Stock dividends earlier in 1984, it has agreed in the are secured by a first lien on the Company's accounts receivable.
1984 Revolving Credit Agreement not to declare or pay any divi-The Company is in the process of supplementing this collateral dend on its Common Stock pnor to termination of the 1984 Revolv-with a ken on its #6 fuel oil irventory. At the time the Company ing Credit Agreement. The Company presently behoves that the completed the arrargements or the 1984 Revolving Credit Agree-suspension of dividends on its Preferred Stock adversely affects ment, the Company also cre ated a third mortgage (the Third Mort-its ability to raise funds through the sale of any equity secunties.
gage) to secure previoush ansecured bank debt, in the maximum amount of $1.195 billior.. The Third Mortgage is a ben upon In 1986, the Company will have total refunding requirements of substantia!!y all of the Company's properties and is subordinate
$747 milhon, including $673 milhon owed by the Company's finan-to the Company's First Mortgage and its General and Refunding cing trusts to their lending banks. Under cer*ain circumstances Mortgage. The Third Mortgage is to remain a lien upon the Com-discussed in Note 4, the $500 milhon of Construction Trust debt pany's properties until payment in full of the debt which it secures, currently scheduled to mature in 1986 may be converted to a term the latest scheduled matunty of which is in late 1988. The holders loan which would mature in 1988. In 1987, the Company's refun-of the bank debt secured by the Third Mortgage are secured as ding obhgations will be $60 milhon, in 1988, the amount will be well by a second hen on the Company's accounts receivable men-
$501 milhon, of which $400 milkon is owed to banks. In 1989, the troned above. The Third Mortgage is also discussed in Notes 4 amount will be $204 milhon. The refunding requirements for the and 5. Under the 1984 Revolvir'g Credit Agreernent, the Company years 1987,1988 and 1989 include amounts which may be due is permitted to sell no more than $100 milhon of G & R Bonds in Niagara Mohawk under the Gnd Note or as redemptions of the 1985 and an additional $200 milhon of G & R Bonds from January Bonds issued to Niagara Mohawk. The Company's abihty to meet 1,1986 through September 30,1986 The arrangements W th the these requirements, as well as its aowy to meet its operational and banks permit the Company to sell an unhmited amount of G&R construction requirements, is dependent upon, among other faC-Bonds after September 30,1986 but require varying portions of tors, timely and adequate rate relief in addition to the rehef granted the proceeds from the sale of such G & R Bonds to be apphed in August 1984. Such additional rate rehef, in turn, is dependent to repayment of debt secured by the Third Mortgage. The 1984 in substantial part on the outcome of the many contingencies af-Revolving Credit Agreement does not prohibit the Company from focting Shoreham and Nine Mile Point 2.
sell.ng unsecured debt and equity secunties, both of which would be subordinate to the debt secured by the Third Mortgage.
Nuclear Fuel Although the Company has no present commitments which would At December 31,1984, expenditures for procurement of nuclear enable it to refinance any amounts to be outstanding at December fuel totaled $167 milhon, including $12 milhon of its share of nuclear 31,1985 under the 1984 Revolving Credit Agreement nor has it fuel for Nine Mile Point 2 and $55 milhon in advances and related now any assurance that additional financing will be available at financing costs for the purchase of uranium concentrates from that time, it has begun prehminary discussions with its lending Bokum Resources Corporation. The Company also has substan-banks respecting a waiver of the $100 milkon G & R Bonds hmita-tial commitments for nuclear fuel.
- o-tion contained in the 1984 Revolving Cred.t Agreement which 3
,C, would permit the sa!e of up to $225 milhon of G & R Bonds in 1985 M",'
and entend the term of the 1984 Revolving Credit Agreement from December 31,1985 to June 30,1986 However, the Company
(
cannot give any assurance as to the outcomo of these d scussions y
with its lending banks or of its abaty to sell additional G & R Bonds in 1985 of to meet its operational, construction and refunding needs
('*
in later years M.
h r;..
- hh j
.. 3
20 2
e -- ** ' - ' -
a-V v5-
'- 'o m-=
us-
~~
The Company has made provision for storage on-site through the The Company's ability to recover its loans and advances to BRC year 2003 of spent fuel removed from the Shoreham reactor.
through liquidation of the BRC properties or by completing and Beginning in 1998, the Federal Department of Energy (DOE) is operating the mine and mill properties is dependent upon an in-required by statute to have permanent underground facilities crease in the market price for uranium to levels substantially higher available for long-term storage of such high-level radioactive than the 1978 market price levels. The domestic uranium market wastes. DOE is presently in the process of selecting the location has deteriorated markedly since late 1979, and has remained of such storage facility. The Company, which will be charged a depressed. No assurance can be given that price levels of uranium user-fee for the storage services, currently one mill per kilowatt will rise to a point where the operation of the mine and mill, either hour, payable quarterly, anticipates that it will recover its costs from as an integrated unit or separately, will be economically viable.
ratepayers if and when Shoreham becomes operational. Storage of low-level radioactive wastes from Shoreham becomes the To the extent that the moneys advanced or loaned to BRC or the responsibility, under federal law, of the State of New York as of interest capitalized on non-interest bearing advances are not ap-January 1,1986. New York State, which has not yet selected a plied as a credit against the purchase of other nuclear fuel, returned site for such low-level radioactive wastes, is permitted in enter in-to the Company upon the sale or refinancing of the BRC proper-to a multi-state compact for such storage. The Company expects ties, recovered through litigation, or offset by the proceeds from that its costs, an amount not yet determinable, for use of the facili-the settlement of litigation against Westinghouse Electric Corpora-ty for storage of low-level radioactive wastes will also be recovered tion ansing from its failure to deliver contracted-for uranium, the in rates if and when Shoreham becomes operational-Company will apply to the PSC for appropriate rate relief. The Com-pany beheves its investments in BRC were prudent and that it is The Company's Financing Trusts entitled to recover such investments from ratepayers. The Com-For information respecting the Company's financing trusts, see pany has pending before the PSC two proceedings respecting Note 4.
approximately $14.3 milhon which will have been advanced by the Company between July 1980 and December 31,1985 for the Bokum Resources Corporation maintenance of the BRC properties and the Company's htigation At December 31,1984, the Company's advance payments to expenses. The Company cannot predict the outcome of any pro-Bokum Resources Corporation (BRC), presently in reorganization ceedings before the PSC relating to BRC.
Under Chapter 11 of the Federal Bankruptcy Code, for uranium concentrates under long-term contracts and its loans to BRC to Two shareowners' denvative actions, now consolidated, are pen-complete the development of a Uranium mine and to construct ding against certain of the Company's past and present directors an ore-processing mill, totaled approximately $85 million. This in.
and officers, claiming negligence and breach of fiduciary duties cludes $20 milhon of advances made through July 1978 for by these officers and directors in connection with the BRC tran-uranium concentrates and $5 million expended since mid-1980 sactions. At this time, a!! hough no assurance can be given as to for preservation and maintenance of BRC's mine and mill proper.
the outcome of these lawsuits, the Company believes that they ties pending resolution of the bankruptcy proceedings and the will not have a matenal adverse effect on the Company.
litigation discussed below. The Company ceased accruing interest on its loans to BRC after the fihng of the bankruptcy petition.
Due to the many contingencies upon which the outcome of the Howevu, financing costs on the advance payments for the BRC transactions and the related htigation are dependent, the Com-uranium concentrates have continued to be capitahzed by the pany cannot accurately measure either the probability of its realiz-Resources Trust and totaled approximately $35 milhon at ing a loss on the transactions involving BRC, or the amount of that December 31,1984. This amount is not included in the $85 milhon loss if it should occur. While under the most adve se circumstances discussed above.
the loss could be material, the Company beheves that the loss, if any, by itself will not have a material adverse impact on the finan-Litigation between the Company and BRC before the U.S.
cial condition of the Company.
Bankruptcy Court for the Distnct of New Mexico has included a contested involuntary petition seeking reorganization of BRC, Abandoned Generating Projects adversary proceedings relative to certain counterclaims brought in the 1970's, the Company and NYSEG had sought regulatory by BRC against the Company and adversary proceedings involv-approval for the construction of two nuclear generating ur'ils at ing other creditors of BRC. Appeals are pending with respect to Jamesport, New York. The Company and NYSEG each subse-certain of these previously ktigated matters. Other adversary pro-quently abandoned the appkcation to construct the Jamesport ceedings are pending in the same court. The pending adversary units. The Company's share of the Jamesport nuclear and coal-proceedings between BRC and the Company include a mortgage related costs, net of estimated tax effects of $18.5 milhon, was ap-foreclosure by the Company against BRC, a counterclaim by BRC proximately $89 milhon at December 31,1984. The Company has against the Company in the mortgage foreclosure proceeding apphed to the PSC for recovery of the costs associated with seeking recovery of approximately $45 milhon in compensatory Jamesport. Heanngs on this apphcation began in November 1984.
damages and $20 milhon in punitive damages, and a breach of The Company is unable to predict the outcome of this prudency contract suit begun by BRC against the Company in which BRC investigation. In connection with the cancellation of Jamesport, seeks up to approximately $200 milhon in compensatory damages Westinghouse is claiming approximately $63 milhon in cancella-and $25 milhon in punitivo damages, as well as other suits involv-tion costs for the Nuclear Steam Supply Systems, in addition to ing BRC and its creditors. While the Company beheves that both payments already made, which claim the Company is disputing.
its claims against BRC and its defenses against BRC claims are if there are any cancellation costs, NYSEG and the Company would mentonous, no assurance can be given as to the outcome of the share them equally, in which event, the Company intends to seek htigat.on between the Company and BRC.
their recovery in rates.
The eventual disposition of the Company's loans and advances to BRC and the viabihty of BRC as a source of nuclear fuel de-pend on many factors, including the market pnce for uranium. At present, the Company beheves that the cost to mine and mill uranium from BRC's properties substantially exceeds the "six)t" market pnce of uranium.
E5 The PSC has issued orders authorizing the amortization and Courts, the amount of the award to the Company for the proper-recovery over a three-year period of 80% of the Company's share ties acquired and severance and consequential damages would of its investment at May 31,1984 in the abandoned nuclear plants be determined in proceedings in the New York State Courts. The at New Haven, New York, which the Company and NYSEG had Company will continue to monitor closely any developments.
planned to own equally. The PSC has disallowed the remaining 20% of the investment in the New Haven project. The Company Other will not be allowed any return on the unamortized balance. The The Company has entered into substantial commitments for fossil Company has petitioned the PSC for permission to defer for future fuel and gas supply. The costs of fuel and gas supply are normal-amortization and recovery 80% of that portion of the New Haven ly recovered from customers through provisions in the Company's i
investment consisting of carrying costs incurred from June 1 rate schedules.
through August 31,1984. The total investment at August 31,1984, befora giving effect to the disallowance, was $62.2 million. Reflec-There are currently pending in the federal courts and before the ting the action taken by the PSC in 1984 with respect to the New Federal Equal Employment Opportunity Commission and the New H 1ven Units, the Company wrote off $11.4 million, net of a federal York State Division of Human Rights complaints by employees and income tax effect of $1 million as included in the Statement of in-former employees alleging that the Company has discriminated como under "Other Income and (Deductions)". The remaining against them on the basis of race and of age. One of the actions
$49.8 million of the investment at May 31,1984 is being amortiz-in the federal courts is a class action. Some of these complaints ed commencing in September 1984 at a rate of $1.4 million each allege that the discriminatory actions were taken by the Company month. At December 31,1984, $5.6 million had been amortized.
when it reduced its work force in March 1984 as part of its Austerity Both NYSEG and the New York State Consumer Protection Board, Plan. The Company believes it has meritorious defenses to these an intervenor in the New Haven prudency proceedings, petition-complaints, but it cannot predict the ultimate outcome of these mat-ed the PSC for a rehearing. Their petitions were denied. The deci-ters. The Company believes that the outcome, if adverse, would sion of the PSC may be reviewed by the courts. In addition, three not materially affect the financial condition of the Company or the plaintiffs The League of Women Voters of Tompkins County (N.Y.),
results of its operations.
c customer of the Company and a customer of NYSEG, have pett-tioned the New York Supreme Court, Albany County, for an order Regor Construction Co., Inc. brought an action in 1984 against annt".ng the PSC orders permitting recovery of any of the prudent-the Company and Regor's surety, New Hampshire Insurance Com-ly incurred New Haven costs. Although the Company cannot pany, in the New York State Supreme Court, Nassau County, aris-predict the outcome of the appeal, the Company believes that the ing out of work performed by Regor for the Company pursuant record in this proceeding supports the decision of the PSC and to a wntten agreement on construction projects at the Company's th t, under New York law, it is entitled to recover the prudently Northport Power Station and at Shoreham. In one cause of ac-incuned costs of abandoned projects.
tion, Regor a:leges that the Company owes it approximately $5 million for additional work performed pursuant to the agreement.
Suffolk County Takeover In two other causes of action, one alleg:ng conspiracy with New Suffolk County retained Daverman & Associates, P.C. Architects Hampshire, and one alleging restraint of trade, Regor seeks to end Engineers, to study the feasibility of establishing a county-recover approximately $20 million. The Company has served its owned electric and gas utility in Suffolk County. Daverman con-answer to the complaint denying all of the allegations. The Com-cluded that acquisition by Suffolk County of the Company's elec-pany believes it has mentorious defenses to this action but can-tric distribution and transmission facilities within the County and not presently determine the extent. if any, of its potential liability.
of c pro rata portion of the Company's generating facihties (in-However the Company believes that the outcome, if adverse, ciuding a portion of such facikties located outside Suffolk County) would not materially affect the financial condition of the Company presents " attractive possibilities" and recommended further in-or the results of its operations.
vestigation into such acquisition. The consulting firm also conclud-cd that acquisition of the Company's gas facilit'es by Suffolk County Statements have recently appeared in the media alleging wrong-is not economically viable.
doing and possible faulty workmanship in connection with con-struction activities at Shoreham. Numerous allegations regarding The capital required to finance the acquisition has been estimated the quality of the plant have been investigated in the past by the by Daverman to vary between $%9 million and $3.5 billion, depen-NRC and have been determined by its Staff to be without founda-ding on, among other things, the valuation method used, estimates tion. The Company is unaware of any wrongdoing involving any of consequential damages and whether the County would be liable of its directors, officers or employees in connection with the prac-to the Company for all or part of the cost of the Shoreham facility.
tices alleged and would, if requested, cooperate with the authonties Th; Company believes that the estimated range would constitute in any investigation prompted by these charges.
grossly inadequate compensation for its facilities and for the severance and consequential damages which the Company would in February 1984, a New York State Supreme Court Justice surn as a result of such acquisition.
dismissed a lawsuit that would have prohibited the Company from declanng or paying dividends on its Common or Preferred Stocks Suffolk County has not indicated wha' action will be taken con-and would have suspended the intenm electnc rate increase cerning the findings of the report, which was first made public in granted by the PSC in 1933. The proceeding was brought as a June 1983. Should the County government determine to acquire class action by a business association and several commercial and the Comoany's facilities, a proposition must be submitted to and residential ratepayers against the Company and the PSC. Plain-approved by the County's voters in a public referendum. Ten tiffs filed a notice of appeal, but failed to perfect it within the time members of the Suffolk County Legolature submitted a resolution allowed by law. Accordingly, the lower court decision stands.
in October 1984 to provide for such a referendum but the spon-sors withdrew their support for the resolution in mid March 1985.
Should it be presented to the full Legislature and adopted. the County Executive has indicated that he would veto the legislation.
Twelv; votes out of eighteen vo'es are needed to overnde the County Executive's veto. If the proposition were to be submitted to the County's voters and apprc ved, and if the County's right to condemn the Company's facilities were to be sustained by the
e i
26 1
Note 8. Segments of Business i
The Company is a public utility operating company engaged in the generation, distribution, and sale of electnc energy and the purchase, distribution, and sale of natural gas.
1984 1983 1982 (in millions of dollars)
Total Total Total Electric Gas Company Electnc Gas Company Electnc Gas Company l
I Operating information (Year ended December 31):
{
Revenue
$1,614
$360
$1,974
$1,436
$352
$1,788
$1,321
$313
$1,634 Expenses (excluding income tax) 1.150 313 1,463 1,108 314 1,422 1,022 276 1,298 Operating income (before income tax)
$ 464
$ 47 3 511
$ 328
$ 38
$ 366
$ 299
$ 37
$ 336 AFC and other 235 213 158 Interest charges 202 149 137 income taxes-operatng 202 97 89 income taxes-nonocerating (credit)
(86)
(32)
(41)
Net income per accompanying Statement of income
$ 428
$ 365
$ 309 Other Information (Year ended December 31):
Deprecation, depletion and amortization S 57
$ 8
$ 65
$ 55
$ 8
$ 63
$ 54
$ 8
$ 62 Captal expenditures for construction and nuclear fuel 909 12 921 882 18 900 867 22 889 investment Information (At December 31):
Assets (a)
$6,276
$317
$6,593
$5,445
$308
$5,753
$4.662
$319
$4.981 Nonutility plant 3
3 3
l Other Investments (b) 65 1
66 64 1
65 59 60 Assets utihzed for overall Company
{
operations 438 569 306 l
Total Assets
$7.100
$6,390
$5.350 l
l (a) includes net utility plant and deferred charges (excluding common), mattnals and supphes, accrued revenues, gas in storage and fuel.
1 (b) Consisting of in 1984, $57,480.000 Bokum Resources Corporation, $569.000 subsidiary companies ($59,000 electnc $510.000 gas). $7,779.000 l
other investments, in 1983, $56,882,000 Bokum Resources Corporation, $637,000 subsidiary companies ($112,000 electnc, $525.000 gas),
$7,358,000 other investments; in 1982, $56,113.000 Bokum Resources Corporation, $608.000 subsidiary companies ($111,000 electnc, $497,000 gas), $3.315.000 other investments.
Note 9. Quarterly Financial Information (unnunfted)
Income for Earned per (in moons of dollars except Operating Operating Net Common Common l
Earned per common share)
Revenues income Income Stock Share l
First Quarter 1984
$547
$84
$118
$96
$0.87 1983 481 67 91 74 0.73 1982 476 69 84 69 0.77 Second Quarter 1984
$438
$68
$103
$81
$0.73 1983 383 66 87 68 0 66 1982 359 56 69 55 0 61 Third Quarter 1984
$514
$94
$118
$96
$0.87 1983 479 85 111 91 0 89 1982 413 74 89 75 0 81 Fourth Quarter 1984
$474
$62
$ 89
$67
$0.62 1983 445 51 76 54 0.52 1982 386 48 67 50 0.50
27 Note 10. Supplementary Information Concerning the Effects of In#ation (unaudited)
Effect of inflation on Net Plant Investment At December 31,1984, the cost of property, plant and equipment, For the past several decades, the utlity industry has constantly net of accumulated depreciation, restated for industr y inflation since pointed out to economists, regulators, and law makers that year of expenditure, was $9.9 billion while historical cost net of ac-calculating depreciation on the onginal cost of the utihty plant would cumulated depreciation was $6.4 bilion.
not permit the recovery of the cost required to replace a piece of equipment which became obsolete or fully depreciated if any degree The effect of 1984 inflation which spoofically affected the industry of inflaton were experienced over the hfe of the property. The solu-on the cost of replacing the Company's undeprecated plant invest-ton suggested by the industry was to calculate deprecation on the ment (such investment was calculated by restating plant and related reproducbon cost of existing facihties, or to use a depreciation rate accumulated depreciation for industry inflation since year of expen-which reflects inflation. In an attempt to have information available diture) from the beginning to the end of the year, less the $105 million to inform investors of the consequence of this inflationary erosion increase in depreciaton expense shown above, amounted to $397 throughout the business world, the Financial Accounting Standards million. Further, the effect of 1984 general inflation, of about 4.0%,
Board developed certain standards for quantfying and providing on the cost of replacing the Company's January 1,1984, this informaton to investors. W1i!e we believe the concept has ment undepreciated plant investment amounted to $359 million. The ef-if it leads tc wiser govemmental decisions as to taxation and utihty fect of 1984 general inflation exceeded the effect of industry infla-regulation, we wish to point out to our shareowners the theoretical ton by $38 million. In 1984, the adjustment of undeprecated plant natura of this information, and to suggest cauton in its use for the stated in terms of industry inflation to net recoverable amount is an purpose of making investment deosions in the utility field and for increase of $163 million. Similar adjustments for the years 1983, comparing one company to another in terms of expected future 1982,1981 and 1980, when restated in average 1984 dollars, was performance.
an increase of $170 milkon in 1983, and reductons of $365 milhon,
$228 milhon, and $91 million from 1982 through 1980 respectively.
The data which follows reflect a restatement of the histoncal cost of property, plant, and equiptrent (by approximate year of expen-Effect of inflation on Certain Assets and Liabilities ditur ), the related accumulated depreciation and depreciation ex.
During periods of inflation, monetary assets such as cash and pense. Income tax expense has not been restated for the effects receivables lose their purchasing power. Similarly, monetary habikties of inflation. The effect of inflation on the Company's operations is such as long-term debt can be a benefit because they will be repaid measured for that inflation which impacts the utikty industry by us-in dollars having less purchasing power. The net monetary amounts ing the latest available estimates for the Handy-Whitman index for owed by the Company during the years 1984,1983,1982,1981 Public Utikty Construcbon Costs.
and 1980 resulted in an unreahzed benefit of $142 million, $102 milhon, $72 million, $176 milhon, and $231 milhon, respectvely. The Under the ratemaking prescnted by the PSC, only historical cost Company's net assets (total assets less total hablities) at year-end, of ut lily plant is recoverable in revenues as depreciation. Therefore, when restated in average 1984 dollars, for the years 1984,1983, any cxcess or deficiency of the amount of uthty plant stated in terms 1982,1981 and 1980 were $3.2 billion, $2.9 bilion, $2.7 bilhon, of industry inflation compared to historical cost is reflected as a
$2.3 bilion, and $2.2 bihon, respectively.
reduction or write-up to recoverable amounts, respectively.
Effect of inflation on Revenues, Common Stock Effect of Inflation on Net income and Common Stock Dividends and Common Stock Market Price Earnings per Share Revenues were $2.0 blkon in 1984. Revenues restated in average 1984 dollars for the years 1983 through 1980, respectively, would have been $1.9 bihon, $1.8 bilion. $1.9 bilion, and $1.6 bihon.
(Average 1984 dollars, No cash dividends were declared on common stock in 1984.
in thousands of ddlars except Adjusted for Dividends declared in prior years restateo in average 1984 culars Eamed per Common Share)
Industry inflation for the years 1983 through 1980, respectively would ha'.e been
$2.11, $2.15, $2.19, and $2.32 per share. The market price per 1984 Net income as shown common share at year-end was $6.88 in 1984. The market pnces on the Statement of It come
$427,788 per common share restated in year-end 1984 dollars for the years increase in dep eciation 1983 through 1980, respectvely, would have been $10.79, $18.48, cxpense if adjusted for
$15.84 and $17.09. The average consumer pnce indices for the inflation 105.166 years 1984 through 1980 were 311.1,298.4,2891,272.4, and 246.8, respectively.
1984 Net income as cd usted
$322.622 i
Earned per Common Snare as cdjusted 2.13 Net income as adjusted 1983
$275.145 1982 231.018 1981 187.405 1980 165.415 Earned per Common Share as adjusted 1983 1 87 1982 1 80 1981 1 69 1980 1.76
28 Neport ofIndependent Accountants To the Shareowners and Board of Directors of Long Island Ughting Company We have examined the balance sheet of Long Island Lightng Com-dations of the Administrative Law Judges. The Company is present-pany at December 31,1984,1983 and 1982, and the related ly unable to determine the amount, if any, of Shoreham's costs statements of income, shareowners' equity and changes in finan-that will ultimately be deemed to have been imprudently incurred.
cial position for each of the five years in the period ended December 31,1984, appeanng on pages 8 to 27. Our examina-(c) The Company has incurred costs of approximately $89 million tions of these statements were made in accordance with general-net of estimated tax effects in connection with an abandoned ly accepted auditing standards and accordingly included such tests nuclear project in Jamesport, New York and has certain related of the accounting records and such other auditing procedures as unsettled claims against it with respect thereto. Further, the Com-we considered necessary in the circumstances.
pany has made advances and loans, including financing costs, of approximately $120 million to Bokum Resources Corporation in our report dated February 10,1984 (except as to Notes 4 and for uranium concentrates and has expended approximately $112 7 which were as of March 9,1984), our opinion on the 1983 finan.
million for procurement of nuclear fuel for Shoreham and the Nine cial statements was qualified as being subject to the Company's Mile Point 2 nuclear project presently under construction. The Com-continued financial viability and to the effects, if any, on the 1983 pany is presently unable to measure either the probability of its financial statements of the ultimate resolution of certain other mat-realizing a loss on such transactions or the amount of such loss, ters. Three of such matters related to uncertainties regarding (i) if any.
the effects of the Company's suspension of periodic payments for its share in the Nine Mile Point 2 nuclear poject presently under (d) The Company is unable to predict the impact of regulatory ac-construction, (ii) the possible acceleration of the Company's long-tions by the New York State Public Service Commission with term debt in the event a default was found to have occurred and respect to the Company's investment in the Nine Mile Point 2 not have been cured under the loan agreements made by Tri-nuclear project ($713 m,!! ion at December 31,1984).
Counties Construction Trust and (iii) the recoverability of the Com-pany's investment in an abandoned nuclear project in New Haven, (e) Separato class action and shareholders' derivative action New York. As more fully desenbed in Notes 4 and 7 of the ac-lawsuits initiated in 1984 have been consolidated into a single pro-companying Notes to Financial Statements, (i) a Settlement Agree-ceeding in U.S. District Court for the Eastern District of New York.
ment was entered into respecting the financing of the Company's The Company is presently unable to measure the impact, if any, share of Nine Mile Point 2, (ii) the banks which are lenders to the that the ultimate resolution of such proceeding will have on its finan.
Construction Trust no longer raise the issue of whether the Com-Cial condition or results of operations.
pany may have violated the Trust Agreements and (iii) an order of the New York State Public Service Commission was issued per-In our opinion, subject to the Company's continued financial viabli-mitting the Company to recover a substantial portion of its invest-ty and the effects on the 1984 and 1983 financial statements of ment in the abandoned New Haven nuclear project. According-such adjustments, if any, as might have been required had the ly, our opinion on the 1983 financial statements, as presented outcome of the uncertainties referred to in items (a), (b) and (c) herein, is no longer qua'ified with respect to these matters.
of the preceding paragraph been known and on the 1984 finan-cial statements of such adjustments, if any, as might have beel As discussed in Notes 4 and 7 of Notes to Financial Statements:
required had the outcome of the additional uncertainties discusk ed in items (d) and (e) of the preceding paragraph been known, (a) Tlie Company has expenenced significant delays and substan-the financial statements referred to above present fairly the finan-tial additional costs in completing and obtaining an operating cial position of Long Island Lighting Company at December 31, license for the Shoreham Nuclear Power Station and opposition 1984,1983 and 1982, and the results of its operations and the to operation of the plant by the State of New York, the County of changes in its financial position for each of the five years in the Suffolk, New York and others. These and other factors have penod ended December 31,1984, in conformity with generally significantly affected the Company's financial resources and its accepted accounting pnnciples consistently applied.
ablity to finance its operating and capital requirements, including costs to complete and obtain an operating license for Shoreham.
(b) On March 13,1985, two Administrative Law Judges of the New York State Public Service Commission (PSC) recommended to the PSC that $1.2 bilion of Shoreham's previously submitted projected cost of $4.2 bilion be excluded from rate base as having been imprudently incurred. On February 10,1984, the Staff of the PSC and intervenors had proposed to the PSC that no more than $1.9 bilion to $2.3 bilion of the plant's costs be included in rate base.
Through December 31,1984, the plant's costs approximated $3.8 bilion. The Company intends to file exceptions to the recommen-
)
Jencho. New York Price Waterhouse March 25.1985 m
SelectedilnencialData 29 t
1984 1983 1982 1981 1980 1979 1974 Summary of Operations
- rabs 1 Totai revenues ($000)
$1,973,550
$1.787.851
$1.633.517
$1,664.832
$1276.938
$1.045.498
$586.503 Total operating income ($000)
Before federat income taxes
$ 510,994
$ 366.078
$ 335.743
$ 313.916
$ 205.918
$ 188.4rdi
$ 96.933 Arter federal income taxes
$ 308,421
$ 268.989
$ 246.693
$ 225.888
$ 194.623
$ 170.984
$ 92.601 income for common stock ($000)
$ 340,264
$ 287.163
$ 249.405
$ 198.902
$ 164.915
$ 128.812
$ 47,721 Average common shares outstanding (000) 110,120 102.484 92,475 77.988 65.138 53.366 23.565 Earned per common share
$ 3.09
$ 280
$ 2 70
$ 255
$ 253
$ 2 41
$ 203
)
Divdends pad per share
$ 0.505 5 202
$ 1.98 5 190
$ 182
$ 174
$ 146 Book value per share at year end
$22.24
$t929
$1865
$18 78
$18 94
$1888
$17 81 Common shareowners at year end 163,354 180291 181,127 169.124 159678 151.752 102251 Ratio of earnings to fued charges 2.49 2 46 2 42 2.37 2.14 2i0 2 28 Ratio of earnings to fixed charges and preferred divdends 1.91 1.88 1 90 187 1 74 1 77 1 77 Ratio of earnings to fixed charges (excludino AFC) 1.40 1 28 1 34 1 40 1 25 1 42 1 91
- See Tab.e 10 of Selected Financial Data for / ssets and Capitalization. See also Note 7 to Notes to Finanoal Statements Ciectric Operating inconte (in trousanas at donars>
Table 2 Revenues Resdential
$ 752,123
$ 674.190
$ 608.384 5 634.3'8
$ 478.618
$ 400.936
$232.431 Commercal and odustnal 796,543 694.038 639.360 666.078 479.486 393.040 223204 Street and highway lghting 19,004 17.320 16 779 17.657 13.594 12209 10.869 Other pubhc authonties 23,986 21,138 19,385 27.74S 21.685 15240 10,680 Other utAtes 408 1.066 717 822 196 564 731 Other (2,446) 3 276 5 898 6 416 7094 5949 709 System revenue 1,589,618 1.411.028 1290.523 1.353.137 1.000.673 827 938 478 624 Power pools 23,779 24 919 29 992 49 582 38993 32 860 1.710 Total Operatino Revenue 1.613,397 1.435 947 1.320 515 1 402 719 1 039666 860 799 4A6 314 Expenses Operations - fuel and purchased power 692,515 645.211 608.101 719.845 521.062 389.622 219.406 Operations - other 136,411 146.350 127202 118.870 98.017 89 071 52 841 Maintenance 50,038 58,865 58.525 57.746 47f>87 43.587 24 803 Depmciation 57,198 55.649 54203 53.108 50 235 47.872 32 604 Oporattng taxes 213,691 201.842 173.808 167.535 143589 128.496 79 925 Federal income tax - current 9,710 (16174)
(3.770)
(1.843)
(9 862)
(7 816)
(3 098)
Federal income tan - deferred and other 177,567 104 765 82 816 81 621 15128 18 111 5195 Total Expenses 1.337,130 1 195 908 1 100 885 1198882 865 756 709 765 411 676 Electric Operating income
$ 276,267
$ 240039
$ 219610
$ 203 837
$ t 13 910
$ 15t.033
$ 74 658 Gas Operafing inconte on ercosants of douaru Table 3 Revenues Resdential - space heating *
$ 195,035
$ 186,753
$ 161794
$ t 34 407
$ 11/228
$ 93077
$ $2273
- other 35.916 36144 31194 28.028 26 556 2386I t 4 985 Non res&ntial, firm -- space heat og' 63,442 61.927 55.486 45S00 37.729 31145 17040
- other 31,526 32134 P6 684 2t 318 18 asl t 5 005 80%
i Total f.rm saios revenue 325,919 316.958 275 758 229 253 199 996 161068 92.351 Intorrupt ble 32,149 12 768 35161 10 757 35395 t9A10
% 61 Total system sales revenuo 358,068 349 7?6 310.919
?60 010 2h391 182 898 98 016 Other utit.es 671 Total sars revenuo 358,068 349/26 310 919 P60 010 2%391 182 fn8 9800 Other revenue 2,085
? 178
? 08 1
?101 1 881 1 802 t 480 Total Onorattrvt Rovonue 360,153 151 904 11100?
?6?Ill
?17272 184 700 1n0169 l
Espenses Operatons - fact 192,581 209 626 180 9?S t45 W t 30 664 48791 31 310 Operates - other
$9,417 46.085 41251 39197 14190 29 571 18984 Maota nance 10,530 11.02?
10 218 10507 9 916 8 619 6 110 l
Depreoaton, depetun and amorteaton 8,011 7 761 7.:n5 6 957 6 4 T1 6 t 88 5 %8 Operabog faws 42,164 39 3r,2 34tJ4 3 t 44.1
?9 127 25 210 t/981 F ederal ocome tai - current 4,386 12 646 3.108 8T 6 917 56M 2 186 i r+ral inenerm la s - deforrrw1 and other 10,910 n Sam 6106 6 415 rTh Ht6 f 151) i Tof al I nwnws 327,999 322954 2H5.911 240 06.5 216 % 4 161 741 H? ??6 One Operating income
$ 32,154
$ ?H %0
$ ?/ 06 1 5 ?? 05 t
$ Po /In
$ ImI
$ t74n
- In tho hvabog dawhcatms the toventes shown cover MI Uas uWt trKludfx) r onheat ny uw o
30 1964 1983 1982 1981 1980 1979 1974 Electric Operatforts Tasse 4 Energy - mdhons of kWh Net generation 12,159 11,703 11.516 11,720 11295 11,085 12.795 Power purchased and Isold) - net 2,689 2.754 2.197 2.091 2.719 2.636 (89)
Total system requrements 14,848 14.457 13.713 13 811 14.014 13.721 12,706 Company use and unaccounted for (1,271)
(1.308)
(1.194)
(1.19 0 (1.331)
(1 254)
(1.285)
System sales 13,577 13,149 12.519 12.615 12.683 12.467 11,421 Power pool sates 418 494 552 772 882 852 314 Total Satos 13,995 19641 13071 11187 19665 11119 11 715 Peak Demand - net mW Station coincrient demand 2,528 2.553 2,757 2.730 2,994 2.718 2.553 Purchased or (sold) 568 555 288 402 149 201 246 Systom Peat < Domanct 3,096 1108 1 045 3112 1141
? 919 2 799 Capability it Time of Peak - net mW LILCO stati is 3,721 3.721 3.721 3.721 3.721 3.842 3.457 Fem purchase or (salo) 57 47 46 56 62 108 Totai capaba tv 3,778 3.768 3 767 3 777 3.783 3 950 3 457 Fuel Consumed for Electric Operations 04 - thousands of barrels 15,531 15.707 15.360 15.665 15.428 16.671 20.773 Gas - thousands of dth 29,149 22,747 21.727 23.374 20.426 10.909 3.444 Total - bdhons of Btu 127,468 122.019 119.341 122.577 117,965 115.376 131,414 Dollars per m,lfg>n 8tu 4.47
$ 423
$ 418
$ 4 58
$ 3 41
$ 2 56
$ 1 71 Cents per kWh of net gertraton 4.684 4 41C 4 33C 4 79C 357C 267C 175C Heat rate - Btu per net kWh 10.483 10 425 10 363 10 459 10 456 10 480 10 271 Gas Operaflotts Tabi 5 Energy - thousanth of dth Natural gas 52.558 50100 51.135 50224 50,489 46.799 47.176 Manutartured gas and cNngo in storago (15) t00 69 (62) 124 (4)
Totai natural and manufactured gas 52,543 50 806 51204 50.162 50 613 46.795 47.176 (349)
Sales to other utat'es Total system requirements
$2,543 5026 51204 50.162 50.613 46195 46827 Company use and unacrourt,vi tor (1,632)
L1240)
(1628)
(1 800)
M 419)
(1 170)
(2270)
Systnm sales 50,911 47'/i6 49 576 48162 4/194 41625 44557 349 Sales to othor utit.os Total Sales 50,911 47 9,6 49 576 48.362 47.194 43625 44 906 Maximum Day Sendout - dth 359.527 381 624 402.536 3/1 845 358 638 316 996 301.500 Capability at Time of Peak - dth prit day Natural gas 315,400 315 400 310.100 308 800 308 800 307200 314 700 L NG manutarturrvi nr t P qu 145,600 146 900 1 % 200 142 300 142100 14?100 151100 Total Cetui,t/
461,000 462 100 465100 451 100 451 100 441 500 46H000 Natural Gas Consumed Dn trtc Op ratms - thousarvh of dth 29.020 22 6'10 19307 15294 12221 2 726 3.444 Gas npvatms -- thuands of <tth
$2,646 51 771 41 987 410?6 50 402 46101 46817 1
Total hatural Gas Cormunn!
81,666 74 401 68 254 68120 62 fi23 4H HM 50 261 Calendar Degree Days
)
f 5a rar arram 610h 4.739 4 781 4 754 4 851 5.151 46?2 4 921 v
31 1964 1933 1932 1981 1980 1979 1974 Woctric Selee erniCustomers Tabse 6 Sales - millions of kWh Resdential 6,000 5.900 5.557 5.581 5.655 5.599 5.185 Commercel and industrial 7,129 6.797 6.524 6.494 6.431 6.291 5.621 Street and hghway Ighting 182 181 182 180 188 188 187 Other pubic authonties 259 252 242 345 404 370 394 Other utilities 7
19 14 15 5
19 34 System sales 13,577 13.149 12.519 12.615 12.683 12.467 11.421 Power pool sales 418 494 552 772 882 852 314 tom Sales 13.995 13.643 13.071 13,387 13.565 13.319 11 735 Customers - monthly average Residantal 840,843 833.163 825.740 8t 8.879 812.898 806.325 766.612 Commercial and industnal 88,459 86.687 85.016 83.899 82.918 81.955 76,108 C;hars 4,339 4 269 4 368 4 683 4.185 4137 2 790 Customers - total monthry averago 933,641 924.119 915.124 907.461 900.001 892.417 845.510 Customers - total at year end 935,964 926.335 915.672 908.303 900.419 892.772 848 236 Residential kWh per customer 7,136 7.081 6.730 6.815 6.957 6.944 6.763 Ravenue cents per kWh 12.534 1143C 1095c 1137C 846c 716e 4 48c Commercial and Industrial kWh per customer 80,591 78.409 76 738 71.403 77,559 76 762 13.849 Revenuo per kWh 11.17c 1021c 980c 1026c 7 46c 625c 3 97C System - Total revenue per kWh sokt 11.71c 10 73c 1031c 10 73c 789c 6 64C 419C Gas Sales eruf Customers Table 7 Sales - thousands of oth Res+nt;al - space heating
- 27,528 25.387 26.110 25.753 24187 22.873 23.023
- other 3,702 3.601 3.677 3V>6 3.654 3.496 3 359 Non resdmtial - finn - space heating
- 9,357 8160 9282 9.042 8269 8228 8 180
- other 4,638 4 518 4 433 4 021 3831 3 603 4 721 Total f.rm sales 45,225 42266 43.502 42.382 39 943 38200 33883 intonnot hin 5,686 s 100 6n74 s onn 7 ?st r, 4 's
- n?3 Total systom malos 50,911 47'm6 49 t> 7f, da v,?
47198 416?',
44rWi Customers - morithly averago Rasemtial - spaco heating
- 179,030 176250 171.760 165,093 153.440 139672 136.110
- otter 190,507 191.967 194 142 198 336 206 331 217,172 222.413 Non tesdmtial - f rm - spacc heat.ng' 20,173 19,959 19,756 19202 18229 17.452 11.763
- othne 11,973 119'A 11061 19 t r,0 12441 t ? UA t l hvi Total firm customers 401,683 400.t 35 397.621 394 811 390 4*I 386.954 389.921 Intorrupt bin 306 308 109 121 319 317 404 Customers - total mor'th*/ amea9o 401,989 400 443 397910 195194 190 780 3A 710t 190 v5 Customers - total at year ervt 402,430 400 815 398 572 396 094 19? 7? )
387110 189 Pf,0 Degree days - bh1 4.921 4 8/wi 4 816 4 975 4 910 a r,12 4 9t t, Residential dth por customer 84.5 79 3 81 4 80 7 774 73 9 73 6 n* venin gw r dth 8 7.40
$ 763
$ 6 ',0
$ $ 54
$ 516
$ 4 41 12%
Non-residential - firm rr,h per cust<cw r 435.4 4186 4124 415 5 394 6 3T 9 4100 Revent e per ilth
$ 8.79
$ 7 04
$ 5 9'l
$ $ 12
$ a r>4
$ 3 90
$ 186 System - totai rnve nun in r f rm rtth sokt
$ 7.21
$ 7 60
$ 6 34
$ 5 41 1 501 1 427
$ 2 3?
'In the heat,rq c I,iwkatem tho saica shown tover nil g.ii us'd inculing rioriheating u,si
3]
l 1984 1983 1982 1981 1980 1979 1974 1
Operations and nfaintenance Expense Details <,n snousanas at narst rabne 8 Total payroll and employee benefits
$ 215,373
$ 227.014
$ 207.511
$ 185265
$ 168.137
$ 150.479
$ 100.008 tess - Charged to construction and other 66,331 75 962 65181 55272 53 649 49 065 31.335 Charged to operations 149,042 151 052 142.330 129 993 114 488 101 414 68 673 Fuels - eiectr:c operations 569,528 516.097 498.744 560.856 402.6 %
295.428 224.105 Fuels - gas operations 192,581 209.626 180.925 145.507 130 664 88.794 31.310 Purchased powr costs 123,963 128217 106.128 123.958 134.876 108.772 5.664 Ekxtnc fuel cost adiustment deferred (976) 897 3.229 35031 (16 510)
(14 578)
(10.363) 1 Total fuel and Purchased Power 885,096 854 837 789 026 865.352 651 726 478 416 250 716 M other 107,355 111270
% 868 96 527 75 222 69 436 34 301 Total Operations and Maintenance
$1,141,493 S t.117.159
$1.028224
$1.091.872
$ 841.436
$ 649.266
$ 353.690 l
Employees at December 31 5,202 5.947 6.012 5177 5.669 5.563 5.426 Construction Expenditures nn tnousanss a nars>
Tasse 9 Electric Producton oncludes constructon trust)
$ 852,774
$ 804 538
$ 777.033
$ 517.971
$ 399.219
$ 362.689
$ 169.043 Transmission 3,541 9 920 11 627 8.987 14,529 25.991 29.234 DistnDu%n 31,778 40.617 37.742 33.951 32.835 28.867 34 907 Gereral 1,294 1.100 5 t 90 3872 3265 1 617 1 810 Electric Total 889,387 856265 831.592 564 781 449.848 419.164 234.994 Gas Total 12,354 17.458 20.728 22.536 21.114 13.345 7.014 Common Total 4,622 9 432 8 845 7237 4 822 7037 2.167 Total Construction Expenditures
$ M6,363
$ 883155
$ 861.165
$ 594 554 5 475.784
$ 439.546
$ 244.175 Nuck'ar f uel oncludes Trusts)
$ 14,771
$ 16 636
$ 27.396 (4.744)
$ 23149
$ 25.539 Salance Shoet on t%usane a warsi Tabs.10 Assets Ut+ty Plant
$7,272,544
$6 422.520
$5.536142
$4 662.402
$4 095 896
$3.611962
$1.825.666 Less - Accumulated deprecaron.
deplet on and amort zaton 788.565 727 298 672 518 620 616 573 765 526 992 349 935 Total Ut 1.ty P: ant 6,483,979 5 695 222 4 864 224 4041786 3 522.t 31 3.084 970 1,475.731 Other Property and investments 68,639 67.693 62.919 62.183 56.962 76.985 1,193 Current Assets 424,640 587.002 36 t.219 361 859 273 378 246108 140285 DWrrm1 Charrys-Entnc fuel cost ad ustment dWerst 1,038 62 959 4.188 39219 22109 14 732 i
Unamortist cost of abandoned New Harn generat og prorct 44,108 Ohr 77,769 39 604 60 404 38 136 26 OE6 28 210 7548 Total Awets
$7,100,173
$6 381583
$5.349 725 14 508152
$3 917.746
$1459.582
$1.639 489 Capitalization and Liabilities Capitattaten Long term debt
$2,316,175
$2180121
$1.602177
$1492.629
$1264 677
$1274122
$ 735.000 Unanw;rt:/ed prem'um and Mstount) on debt (9,658)
(8 1981 (5 605)
(2.349)
(39) 24 2.614 PrNerred stor k - red,trept+on reqweed
$29,375 540.013 478D50 414 650 361250 294 100 110 000 PrWrrot stock - ru rodempt on reqwred 221,056 221,119 1570/0 158 083 158 968 160 090 147.006 Tre.isory stoa at cost (505)
(1172) f %9)
(1861 Common stor.k and promum 1,551,057 1485162 f.424148 f.131094 469 240 821440 268.540 i
Cag itai stock eense (56,103)
(56 2 /8)
(50 335)
(42.10/)
(15140)
(30.138)
(9 919)
Heta no 1 carn,rm 956.356 580t15
',013r6 4'9245 mt tt3 346001 18753/
Tetal Cap t4/ awn 5.507,753 4 mq 887 410/911 3 'a0 /16 7 tin 481 2 866 2 M 14407/8 in A1001"ptonn 685.621 7t1494
'a8 Tis 4 H 4,"i 341 915 287 7n8 Co teet bah +t m 494.545 4a10/4 an6 tra int 191 407 m
?4? 715 174 m r
()e'ennd CrMts Ar O Aubi!"d dNenel n omo I.iu rM(fin m 338.607 222',0?
156 aw, t(Mi /95 418/1
$5 698 19 891 Oth"r 54.649 X0%
14 4/6 6 09I 2 ?Ti tud
/rn Tot.0 DHennt f re*1 N 393,256
?47 % 7 1/0RGt t t 2 M6 46 f wiO 57 FA
?Ofo9 H,. er es ti w Cla ms t Lmtyt tmd Pens'on4 18.998 6 %G 580) 1H?
4 9t.',
5 961 3678
. v Total Captai./at.. n nnd bahites
$7,100,173
$6MPAl
$5 341//5
$4 fan 152
$191/ /46
$1459 58?
$16M 4W)
Conennen and Preferred Stock Prices
- n The Common Stock of the Company is traded on the New York Stock Exchange and the Pacific Stock Exchange. The Preferred Stock
$100 par value Series B, E,1, J, K, and S. and the Preferred Stock. $25 par value, Series 0,P,T,U.V,W, and X of the Company, are traded on the New York Stock Exchange. The table below indicates the high and low sale prices on the New York Stock Exchange listing of composite transactions for the years 1983 and 1984.
Common Stock Preferred Stock Sees 8 Sees E Seres I Seres J Seres K Sees O Se es P Seres S Sees T Seres U Sees V Sees W Seres X 5%
4 35 %
Sk%
8 12 %
8 30 %
$247
$243 9 80 %
$331
$125
$350 13 52
$350 Onler H@ Lcw H@ Lcw H@ Lon H@ Lcw H@ Lo* H@ Low H@ Low Hgn low Hgn Lcw H@ Lcw H$ L0w H@ Lcw HgjiLow Hgh Lcw 1943 Fat 17 % 15 % 394 36 34W 31% % 92 644 59 65 " 61 21W 19% 20W 17W 82'i 78 26 % 24 33 29 28 % 25 %
Seard 174 15%
40 37 36 32 % 94 SS 664 59 664 60 21 % 13 % 20 17 % 64 00 26 % 24 % 33 29 % 25 % 24 % 28W 244 Thrd 16% 14W 38 54 % 34 30 944 73 60 56 4 61W $7% 19% 18% 18% Fs 81 70 25W 22% 31% 29% 26% 24W 26". 23 %
Fath 164 9%
377 29 31% 24% 84W 60% Se% 47 61 49 18 % 14 % tSW 17 73 60 24 % 19 31 23 4 26 % 19 % 26% t3 25 % 19 %
1944 Fnt 114 6%
33 28 4 30 23 65 51 534 454 55W 454 18 14 4 17 % 12 % 65 55 23 17 4 28 22W 23W 15% 23% 18% 23 % 19 4 Sacand 74 5 29 23 % 24 19 57 53"i 45 37 % 45% 365 15; 11% 14W 11 54 45 % 1 9. 13 % 22 % 14 % 195. 14 5 19 14'.8 20 % 14 Thr1 6% 34 254 16 23 14 4 49 35 40 2th 4Pe 234 13 % 7 13 % 6 46W 27% 16 % 8'i 23 tt% 16 % 9 4 V 9 16 ; 8 4 Fourth 8% 54 264 20 23 17W 56 % 45 % 41 % 34 4 42 4 34 % 15 % 12 13% t04 52W 41 1 9 s 13 % 22 17 18 % 14 % 15% t4 15 % 14 %
The Series D-4.25% Stock is traded in the over-the-counter market We have been advised of scattered trading at pnces rang.ng between $10 and $28W per share dunng 1984. The Senes F. H. L M and R Preferred Stock are held priva'ely.
Direefore ONIsers William J. Colecooinos William J. Catacoeinos John J. Russell Charman of the Board.
Charman of the Board, Vice President Chief Executive Officer and Chief Execuhve Officer and Customer Relations Presdent Presdent e
Long Island Lightng Company Long Island Lighting Company Winfieli E. Fromm James W. Dye, Jr.
Finance Recred sa Pre,mdent Executive Vice Presdent Michael Czumak Eaton Corporation Electronics Joeoph G. Acker Controller Vice Presdent Edward W. Eocker Lionel C. Goldberg Transmisson/Distnbution and Treasurer Senior Vce Presdent Sennce Operatons Matthew C. Cordero J. Kommey, Jr.
of N
- ork, Vce Presdent ary Insurance Enginanna Kathleen M. Brown ice Presdent Ire L Freilicher Assstant Secretary Vee Presdent Lon0 Island Lighbng Company Put*c Affars Edward M. Barrett Jay R. Keeeler General Counsel ner V'ce Presdent Suom. Enghsh &
Francis M. Welsh Cianod. PC Gas Opwatons General Ciams Attorney Law John D. Leonard, Jr.
V'ce Presdent Eben C. Pyne Corporge Director Nuclear Operations and Consultant Adam M. Medeen Retired Senior Vce Presdent Vice Prent Cit bank. N A-Corporate Planrvng John H. Telmoge meglerd S. Pollock Form Manage' Vice Presdent H FL Talmage & Son Fossi Producton Phyllie S. Vineyard Matthew S. Procelli Past Charperson Vice Presdent N Y. Statew de Employee Relatons Health Coordin#ing Courd
7 Long Islarui LighNng C'ernpany 175 East Old Country Road Hicksville. NY 11801 6
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V ggg LONG ISLAND LIGHTING COMPANY co-wranwwyrwwuau,ji SHOREHAM NUCLEAR POWER STATION P.O. BOX 618, NORTH COUNTRY ROAD. WADING RIVER N.Y.11792 JOHN D. LEONARD, JR.
VICE PRESIDENT NUCLEAR OPERATIONS May 8, 1985 SNRC-1166 Mr. Harold Denton Office of Nuclear Reactor Regulation U.S. Nuclear Regulatory Commission Washington, D.C.
20555 1984 Annual Report Shoreham Nuclear Power Station - Unit 1 Docket No. 50-322 i
I
Dear Mr. Denton,
Enclosed, please find ten (10) copies of the Long Island Lighting Company's 1984 Annual Report which is being submitted in accordance with 10 CPR 50. 71(b).
n
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N 33 (6htLW J
D. Leonard, gr.
Vi e President-Nucl ar Operations D
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