ML19347D881

Forwards Annual Financial Rept 1980.Certified Financial Statement Encl

ML19347D881
Person / Time
Site:	Point Beach
Issue date:	04/10/1981
From:	Goetsch J WISCONSIN ELECTRIC POWER CO.
To:	NRC
Shared Package
ML19347D882	List: ML19347D881 ML19347D884
References
NUDOCS 8104140386
Download: ML19347D881 (17)

Text

O

'b Msconsin Electnc mea cower  :

231 W. MICHIGAN, ".? B0X 2046 MILWAUKEE, WI 53201 April 10, 1981 .

e.?&<Q 96 Nuclear Regulatory Commission

-- V}y. ,9y e 6;

Washington, D.C. 20555 gTT C) 9 g, r . 7,/

p 'g.

Gentlemen: h , ., ,

, , . 7.,; , -

In accordance with the regulations of your Commission, there~is enclosed a copy of each of the following:

1. Annual Report of Wisconsin Electric Power Company which includes certified financial statements of the company and its subsidiaries (consolidated);

2. Certified financial statements of Wisconsin Electric Power Company (corporate).

The abovementioned reports are being filed with your Commission pursuant to 10CFR, Section 50.71 of the Nuclear Regulatory Commission Regulations as Wisconsin Electric Power Company is the holder of Facility Operating Licenses Nos. DPR-24 and DPR-27 issued by your Commission under Dockets 50-266 and 50-301, respectively.

Very truly yours, N u .

-)M/M':,/v'

J. H. Goetsch Secretary Enclosures

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810.41.40 M -

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I WISCONSIN ELECTRIC POWER COMPANY

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l Financial Statements for the Year 1980

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l REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and the Stockholders of WISCCNSIN ELECTRIC POWER CG!PANY In cur opinicn, the accompanying balance sheet and statement of capitalization and the related statements of inccme, retained earnings, undistributed subsidiary earnings, and changes in financial positien present fairly the financial position of Wisconsin Electric Power Ccmpany (parant company only) at December 31,1980 and 1979, and the results of its operations and the changes in its financial position for each of the three years in the period ended December 31, 1980, in conformity with generally accepted accounting principles consistently applied. Our examinations of these statements were made in accordance with generally accepted auditing standards and acecrdingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. -

I PRICE UATERHOUSE & CO.

Milwaukee, Wisconsin l January 29, 1981 l

WISCONSIN ELECTRIC POWER COMPANY INCOME STATEMENT Year Ended December 31 1980 1979 1978 (Thousands of Dollars)

Operating Revenues Electric $761,232 $667,963 $583,360 Steam 8,162 8,570 8,272 Total Operating Revenues "r69,394 676,533 591,632 Operating Expenses Fuel (Note A and H) 216,615 180,757 155,969 Purchased power 63,203 67,863 48,568 Other operation expenses (Note B) 140,054 117,706 98,980 Maintenance 73,851 63,858 52,927 Taxes other than inecme taxes 31,807 30,996 31,342 Depreciation (Note C)

Straight line 61,538 53,158 47,942 Deferred income taxes (Note D) 21,044 15,914 2,633 Federal income tax (Note D) (243) 7,788 27,127 Investment tax credit adjustments - net (Note D) 30,728 26,822 23,500 State income tax (Note D) 2,115 6,026 6,026 Total Operating Expenses 640,712 570,666 495,014 Operating Income 128,682 105,645  % ,618 Other Income and Deductions Equity in earnings of subsidiaries 5,328 7,998 7,211 Interest income 4,852 2,885 2,243 Allowanca for other funds used during construction (Note E) 5,330 7,535 3,372 Discount on purchase of bonds for sinking fund 575 479 358 Miscellaneous - net (770) (288 ) (670)

Federal income tax (Note D) (1,901) (1,266) (912)

State income tax (Note D) (314) (208) (141) ~

To.tal Other Income and Deductions 13,100 17,135 11,401 Income Before Interest Charges 143,782 122,780 108,079 Interest Charges Long term debt 49,289 37,829 33,942 Allowance for borrowed funds used during construction (Note E) (8,338) (6,165) (1,895)

Other 18,343 8 ,58 4 4,427 Total Interest Charges 59,294 40,246 36,474 Net Income $82,h88 $82,532 171,605 The notes on pages 9 through 15 are an integral part of the financial statements.

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WISCONSIN ELECTRIC POWER COMPANY RETAINED EARNINGS STATEMENT Year Ended December 31 1980 1979 1978 (Thousands of Dollars)

Balance, January 1 $228,247 $201,844 $180,282

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Additions Net inecme 82,488 82,532 71,605 Equity in earnings of subsidiaries (5,328 ) (7,998) (7,211)

Dividends received from subsidiaries 5,175 7,935 5,175

. Transfer of amorti::ation reserve -

hydroelectric projects - -

305 310,582 284,313 250,156 Deductions Dividends - cash Preferred stock 13,294 12,178 7,088 Common stock - $2.485, $2 345 and

$2.21 per share 48,469 43,784 ho,537 61,763 55,962 47,625 104 Cost of issuing capital stock 170 687 61,933 __56,066 -48,312 Balance, December 31 $248,649 $228,247 $201,844 4

5 STATH4ENT OF UNDISTRIBUTED SUBSIDIARY EARNINGS t

Year Ended December 31 1980 1979 1978 (Thousands of Dollars)

Balance, January 1 $ 23,241 & 23,178 $21,142 Equity in earnings of subsidiaries 5,328 7,998 7,211 Dividends received from subsidiaries (5,175) (7,935) (5,175)

Balance, December 31 $ 23,394 $23,241 $ 23,178 The notes on pages 9 through 15 are an integral part of the financial statements.

e.

WISCONSIN ELECTRIC POWER C WPANY STATEMENT OF CHANGES IN FINANCIAL POSII' ION Year Ended December 31 1980 1979 1978 (Thcusands of Dollars)

Financial Resources Provided Operaticns Net inccme $ 82,488 $ 82,532 $ 71,605 Depreciation - straight line 61,538 53,158 47,942

- deferred income taxes- 21,0W 15,914 2,633 Accumulated deferred investment tax credits 26,232 22,893 19,611 -

Nuclear fuel expense 8,431 12,767 8,782 Amortization of precertification expenditures 5,906 - -

Undistributed subsidiary earnings (153) (63) (2,036)

A11cwance for funds used during constructicn (13,668) (13,700) (5,267)

Total frcm operations 191,016 173,501 143,270 Ccamon stock 21,767 14,864 5,516 Preferred stock 24,906 - 59,455 Long term debt 148,970 75,525 104,882 Sale of nuclear fuel 66,501 - 5,192 Release of construction funds held cy trustees 20,633 10,695 -

Normalization of inccme taxes - precertificatien expenditures 9,939 - -

Shcrt term bcrrevin8s - 110,300 3,028 Contributions in aid of construction 1,756 1,817 1,108 Miscellaneous 7,130 2,754 (868)

$493,420 $389,456 $321,583 Financial Resources Used Construction expenditures $277,861 $239,479 $212,388 Nuclear fuel 31,260 37,362 33,436 Divideds 61,763 55,962 47,625 Retirement of lcng term debt 13,112 9,400 12,014 Reduction of shert term borrowings 59,260 - -

Constructicn funds held by trustees - 23, 4 7 12,153 -

Increase in working capital (other than short term borrcwings and long tenn debt due currently) 50,164 23,806 3,967

$493,h20 $3E9,456 $321,583 Increase (Decrease) in Ccuponents of Working Capital Cash and temporary cash investments $(10,970) $ 5,841 $ (946)

Accounts receivable 4,117 419 9,075 Accrued utility revenues 4,814 10,254 5,766 Fossil fuel 40,603 12,807 13,007 Material and supplies 9,663 8,364 4,339 Accounts payable and taxes accrued (3,367) (13,736) (25,349)

Other 5,304 (143) (1,925)

$ 50,164 $ 23,806 $ 3,967 The notes on pages 9 through 15 are an integral part of the financial statements.

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WISCCESIN ELECTRIC POWER CCNPANY  !

BALANCE SHEET December 31 ASSETS 1980 1979 TThousands of Dollars)

Utility Plant Electric $2,027,080 $1,571,082 Steam 18,113 17,274 2,045,193 1,565,356 Accumulated provision for depreciation (751,945) (673,576) 1,293,243 914,750 Construction work in pro 6ress 216,034 411,347 miclear fuel (Note A) 46,533 94,709 Accumulated provision for amortizatien - (11,773) 46,533 32,936 Net Utility Plant 1,555,015 1,409,063 Other Prcperty and Investments Nonutility property 3,426 3,410 Accumulated provision for depreciation (633) (631)

Net nenutility property 2,793 2,779 Investment in subsidiary ccmpanies 49,900 49,747 Total Other Prep 7rty and Investments 52,693 52,526 Construction Funds Held by Trustees (Note F) 4,272 24,905 Current Assets Cas h 1,364 2,738 Temporary cash investments 400 9 996 Accounts receivable (Ncte 0) 148 44,031 -

Accrued utility revenues 48,682 53, 48,868 Accounts receivable frca subsidiary companies (Note H) 5 5 Notes receivable frem subsidiary ccupanies (Note H) 29,104 19,704 Feasil fuel (at average ccat) 729 59,126 Materials and supplies (at average cost) p9,696 41, 32,033 Prepayments and other assets 5,874 6,522 '

Total Current Assets 260,002 223,023 Deferred Charges and Other Assets 21,832 17,915

$1,914,614 $1,727,432 The notes on pages 9 through 15 are an integral part of the financial statements.

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WISCONSIN ELECTRIC PNER CCEPANY BALANCE SHEET December 31 LIABILITIES 1980 15rt9 (Thousands of Dollars)

Capitalization (See Capitalization Statement)

Ccemen Stock Equity (Note I) $ 628,707 $ 586,385 Preferred Stock - Redemption Not Required (Note J) 160,451 160,451 l Preferred Stock - Redemption Required (Note K) 25,000 -

Long Term Debt (Note L) 750,410 605,532 Total Capitalization 1,5o4,5cd 1,352,363 Current Liabilities Long term debt due currently (Note L) 2,137 11,635 Notes payable to banks (Note M) 14,983 14 Ccamercial paper (Note M) 55,061 114,983

,322 Accounts payable 55,118 44,791 Accounts payable to subsidiary companies (Note H) 250 2,307 Payroll and vacation accrued 9,940 11,275 Taxes accrued - income and other 22,817 27,720 Interest accrued 927 11,379 Custcmer deposits 15,633 1, 1,466 Other 5,707 5,639 Total Current Liabilities 133,573 245,517 Deferred Credits and Other Liabilities Accumulated deferred investment tax credits 95,686 69,454 Nuclear fuel costs accrued (Note D) 29,369 19,646 Unamortized accrued utility revenues 16,395 19,127 Other 8,089 6,142 Total Deferred Credits and Other Liabilities 149,539 114,359 Contributiens in Aid cf Construction 16,934 15,178 ~

Ccemitments and Contingencies (Note N)

$1,914,614 $1,727,432 l The notes en pages 9 through 15 are an integral part of the financial statements.

WISCONSIN ELECIRIC POWER CCNPANY CAPITALIZATI M STATEMENT December 31 198o 1779

( a cusands cr Dollars)

CGE M STOCK K UITT (Note I)

Causen Stock ($10 par value; autherised h1,000,000 shares; issued 20,067,779 and 19,085,720 shares) $ 200,678 $ 190,957 Premitan en Capital Stock 155,986 lu ,obo Retained Earnir4s 248,6h9 223,247 Undistributed Subsidiary Earni=gs 23,394 .23,241 Tctal Camam Stock Equity 629,707 586,355 PREFERRED STOCK - Cumulative Six Per Cent. Preferred Stock - $100 par value; autherized 45,000 shares; W ,5~8 shares issued k,451 4,451 Serial Preferred Stock - $25 par value; autherized 5,000,000 shares; unissued - -

Serial Preferred Stock - $100 per value; autherised 2,360,000 shares 3.605 Series - 260,000 shares issued 26,000 26,000 8.90% Series hoo, coo shares issued L0,000 L0,000 7.77;, Series - 300,000 aliares issued 30,000 30,000 8.80% Series - 600,000 sbares issued 6o,000 6o,000 Tetal Preferred Stock - Redacptim Not Required (Note J) 16o.4=1 160.k51 10.875% Series - 250,000 shares issued, r h aale at par 25.000 -

Total Preferred Stock - Redempticn Required (Ucte K) 25.oCX) -

LCIC T!2M DE3f (Note L)

First Mertgage 3mds Series Due

• isemin Electric PevTeCcmpacy 2-3/tv5 1980 -

3 .995 3-1/h5 1982 9,220 . 324 10.20% 1982 50,000 50,000 3-1/95 1984 15,275 15,h25 3-7/95 1986 21,773 22,070 13-3/45 1986 80,000 -

11.40% 1987 70,000 -

L1/9% 1988 22,789 23,062 5  % 1990 26,756 26,871 5-7/9% 1996 28,o41 29,077 6-7/9% 1977 37,959 38,081 6 7/8% 1998 33,771 33,908 6.105 1999-2008 25,000 25,000 6.25% 1999-2008 1,000 1,000 7-1 1999 38,988 39,991

%3 1999 39,552 39,555

6. *$ 2004 12,000 12,000

%3/h6 2006 60,000 60,000 6.k5% 2006 k,000 4,000 -

6.505 20c7-2009 10,000 10,000

%7/95 2008 80,000 80,000 Femer Wisconsin Michigan Power ccupany (=erged with campany in 1977) 2-3/L5 198o - 6ho 3-5/85 1981 2,137 2,147 3 1984 2,112 2,164 L 1991 3,623 3,623 h-1 1993 5,049 5,052 5-7/9% 1996 9,251 9,251 6-1/25 1977 s 11,539 13,539 6-5/8% 1998 9,877 9,889 S1/25 1999 11,772 11,929 721.kE9 *Ch.kil Debentures (Unsecured)

Wiscensin Electric Power C:z:peny - 7% Series due 1993 32,767 33,531 Unaccrtised Discount - net (1,709) (777)

Iceg Tern :ebt Due currently (2,137) (n,635)

Total Long Tem Debt 7 9 .klo 605.512 Tctal Capitalizatics $1.%.%8 $1. '*2.16 5 Tha notes en pages -) thrcugh 15 are en integral part cf the f"anr4=1 statements.

8-P00R BRIGINAL

WISCONSIN ELECTRIC PGiER CG4PANY NOTES TO FINANCIAL STATEMENTS Summary of Significant Accounting Policies General The accounting records of the ccupany and its utility subsidiary are kept as prescribed by the Federal Energy Regulatory Commission, modified for require-ments of the Public Service Ccamission of Wisecnsin (PSCU). The cccpany cwns all of the ccamen stock of Wiscensin Natural Gas Ccepany (Wiscensin Natural) and Badger Service Ccupany. The ecmpany carries its investments in subsidiaries in accordance with the equity method of accounting.

Revenues ,

Meters are read anel accounts are billed monthly. Since January 1,1977 utility revenues have been recognized on the accrual basis and include esticated amounts for service rendered but not billed. Accrued utility revenue of (,32 million at December 31, 1976 is being recorded as revenue in equal amounts over a ten year period as prescribed by the PSCU.

Fuel The ecst of fossil and nuclear fuel is expensed in the period ecnsumed.

Nuclear fuel expense includes an esti= ate for offsite stcrage of spent nuclear fuel for ten years after removal frcm the reacter. No salvage value is recognized for spent nuclear fuel. The accounting for nuclear fuel follous the ratemaking treatment for such costs.

Property s' Electric utility property is recorded at original ccst, and steem utility and nenutility property is recorded at cost. Additions to utility property and significant replacements are charged to utility plant at cest. Cost includes material, labcr and allowance for funds used during construction (see Note E).

Replacements of miner items of property are charged to maintenance expense.

The ecst of depreciable property, together with removal ecst less salvage, is charged to accumulated provisien for depreciation when property is retired.

Income Taxes Deferred inccme tax accounting is practiced in respect to significant

' timing differences. The federal investment tax credit is acccunted for en the deferred basis and is reflected in incere ratably over the life of the related property.

Debt Premium, Discount and Expense Long tem debt premium er discount and expense of issuance are amortized by the straight line method ever the lives of the debt issues. Unamcrtized amounts pertaining to debt reacquired for sinking fund purposes are written off currently.

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A - Rental Expense Total rental expense was $27,828,000 in 1980, $16,550,000 in 1979 and

$21,010,000 in Icf/8. This includes charges of $25,551,000 in 1980, $15,000,000 in 1979 and $19,835,000 in 1978 for the pertion of nuclear fuel which was leased.

During 1980 the company entered into a netr nuclear fuel leasing arrangement withWisconsinElectricFuelTrustandplaced$66,501,000 of nuclear fuel there-under. The lease provides the ccupany with lower financing costs as ccupared to the pricr lease which has been phased out. The new icase as described beleir is acccunted for in a ranner simile to that for the prior lease. The lease on any batch of fuel terminates upon removal frca the reactor or covers a period up to a may h of 60 months. The ccupany has agreed to pay the lessor for the unbacr-tized cost of nuclear fuel in the event the lease is terminated which can be dcne by the ecmpany on five days notice. Rental payments are made quarterly based cn the burn-up rate of the fuel plus the lessor's cost of commercial paper, the ecst of a back-up line of bank credit and a management fee. The company is obligated to pay additional rental in an amount sufficient to enable the lessor to repay maturing conmercial paper of the lessor in connection with the lease transaction if the lessor is unable to meet those obligations out of the proceeds of normal rental payments and other borrowings.

The nuclear fuel leases have been treated as operating leases in the finan-cial statements and by the PSCW in determining revenue requirements. The value of the leased fuel is not included in the ecmpany's rate base. Had the leases been accounted for as capital leases, expenses before income taxes and indeter-minate effects of corresponding ratemaking treatment would bave been increased

$1,857,000 in 1980 and decreased $599,000 in 1979 and $891,000 in 1978, and an asset and ccrrespondin6 liability equal to ther unaccrtized cost of the leased nuclear fuel would have been recorded at December 31 in the amount of $55,568,000 in 1980 and $9,534,000 in 1979 B - Pension Plans Several noncentributory pensien plans cever all eligible employes. Normal employe pensien cost is accrued and funded currently. Unfunded prior service liability is amortized over periods frce ten to thirty years. The unfunded pricr service liability of the pension plans is not significant. Pensien expense was $8,120,000 in 1980, $6,767,000 in icyt9 and $5,244,000 in 1978.

A comparision of accumalated plan benefits and plan net assets available fcr benefits is shoun below.

December 31 1980 (Thousands of Dollars)

Actuarial present value of accumulated plan benefits:

Vested benefits $110,324 Nenvested benefits 5,201

$115,525 Net plan assets $120,020 The weighted average rate of return used in determining the actuarial pres-ent value of accumulated plan benefits was 7.0%.

The excess of net plan assets over the present value of accumulated plan benefits is the result of required calculations being made on two different bases, and does not necessarily reflect the cmpany's funding position. The present value of accumulated plan benefits shown above has been determined in accordance with Statement of Financial Accounting Standards No. 35 and is based on present employe earnings. However, ccupany contributions and resulting net plan assets are based on estimated future employe earnirgs.

C - Depreciaticn Depreciation expense is accrued at straight line rates certified by the PSCW. Depreciation rates include estimates of salvage and plant removal ecsts.

Nuclear plant depreciation rates provide for an amount to cover estimated plant deccamissioning costs.

Additimal depreciation is accrued in accordance with the PSCW requirments which is equal to the tax effects of timing differences related to property and nuclear fuel including principally the use for tax purpoces of accelerated depre-ciation methods (see Note D).

Straight line depreciation as a percent of average depreciable utility Plant was 3 5% in 1980, 3 7% in 1979 and 3 5% in 1978.

D - Inc me Tax Expense Below is a summary of inccme tax expense and a recenciliation of total in-ccme tax expense with the tax expected at the federal statutcry rate.

1980 1979 .

1978 (Thousands of Dollars)

Current tax expense $ 4,087 $ 15,288 $ 34,206 Investment tax credit adjustments -

net 30,728 26,822 23,500 Deferred taxes charged to depreciation expense 21,044 15,914 2,633 Total tax expense $ 55,S59 $ 53,024 $ 60,339 Inccne before income taxes $138,347 $140,556 $131,c44 Expected tax at federal statutory rate $ 63,640 $ 64,656 $ 63,333 Allowance for funds used durirs constructicn (6,267) (6,302) (2,528)

Equity in earnings of subsidiaries (2,451) (3,679) (3,461)

State inccme tax net of federal tax reduction 4,508 4,588 4,483 Investment tax credit restored (3,733) (2,820) (1,689)

Other (no item over 5% of expected tax) 182 1,581 201 Total tax expense $ 55,559 $55,023 $ 60,339 The aggregate accunt of deferred inecne taxes included in the accumulated provisien for depreciation at December 31 was $154,164,000 in 1980 and

$131,985,000 in 1979

In 1978 the ccupany filed china for refunds with the Internal Revenue Ser-vice (IRS) for the years 1970-72. The claims seek a refund of federal income taxes for the deduction of storage and other costs for spent nuclear fuel. Such costs were disallowed as a current deducticn by IRS on audit and the resulting assessment was withheld from a previous refund. Management is 3cntesting the disallcwance, but pending resolutial the company recorded the ' an effect of these costs for the years 1CJTO-80 by increasing the current federal auccme tax provi-siens and normalizing those amounts by reducing deferred inecne taxes by

$2,151,000 in 1980, $2,057,000 in 1979 and $14,738,000 in 1978, resulting in no effect on net inecne. Deferred nuclear fuel costs accrued were reduced by the amounts of taxes provided. This accounting for inecme taxes is in accoriance with the PSCf practice. Related interest was accrued in the amounts of $1,801,000 in 1980, $807,000 in 1979 and $1,682,000 in 1978.

E - Allowance fer Funds Used During Constructicn (AFDC)

AFDC is includ'ed in utility plant accounts and represents the cost of bor-rowed funds used during plant construction and a rate of return on stockholders' capital used for ccnstruction purposes. On the income statement the ecst of bor-rowed funds (before inccme taxes) is a reduction of interest expense and the return on stockholders' capital is an item of noncash other inccue.

The ccupany is lhited by the PSCf to capitalizing AFDC only on construction work in progress exceeding 10% of its nat investment rate base. Revenues granted by the PSCT in rate orders include the equivalent of a return on investment in construction work in progress belott this 1 bit. AFDC was capitalized in 1980, 1979 and 1978 at a rate of 7% approved by Fle PSCT.

F - Construction Funds Held by Trustees The ecnstruction funds were established to finance pollution control and environmental improvement facilities at the ecmpany's new Pleasant Prairie Pcwer Plant. Proceeds frcm the sales of municipal revenue bcnds issued by the Tctm of Pleasant Prairie in 1978 and 1979 were deposited in the funds under lean agree-ments with the co=pany. As a revenue source and collateral for the loans, the ccmpany has issued to the town its first mortgage bonds in the aggregate principal amount of $52 million. Funds are released to the canpany as qualifying property is constructed at the plant.

G - Accounts Receivable ,

Accounts receivable are shown on the balance sheet after deducting an accu.

mulated provision for doubtful accounts in the amount of $1,134,000 for 1980 and 965,000 for 1979 Uncellectible account write-offs net of recoveries were h^2,244,000 in 1980, $1,852,000 in 1979 and $1.240,000 in 1978.

H - Transacticns with Subsidiary Ccmpanies The ccmpany renders managerial, financial, accounting, legal, data proces- l i sing and other services to Uisconsin Natural, which in turn renders to the ecmpany i certain accounting and other services. These services are billed at cost by the respective companies. The ccmpany also purchased gaa in the amount of $21,558,000 in 1980, $24,554,000 in 1979 and $3,202,000 in 1(178 frca wisconsin Natural for electric generation at rates apprcived by the PSCW. To take advantage of the ecmpany's access to short term funds at a lower cost than that available to Wisecesin Natural, the ccupany makes loans to the subsidiary at an interest rate apprmimating the cost to the ccmpany.

.. l I - Cctraon Stock and Premium on Capital Stock Under the Autmatic Dividend Reinvestment and Stock Purchase Plan, sales of common stock were 727,076 shares in 1980, 426,901 shares in 1979 and 114,506 shares l in 1978. Proceeds fra the sales were $15,551,000 in 198c., $10,173,000 in 1979 and

$3,148,000 in 1978. Sales of c mmon stock under the Tax Rt. duction Act Stock Owner-ship plan (TRASOP) were 254,983 shares in 1980, 185,072 shares in 1979 and 83,173 shares in 1978. Proceeds fra the TRASOP sales were $6,216,000 in 1980, $4,691,000 in 1979 and $2,368,000 in 1978. The increase in premium on capital stock is the excess of the prceeeds frca sales over the $10 par value of the cmmon stock sold.

J - Preferred Stock - Redemption Not Required The Serial 1 a.ferred Stock is redeemable in whole or in part at the optien of the company at the following redemption prices plus any accrued dividends.

Series Redemption Price Per Share 3.60% ^101 8.90% 04 to Dec eber 2, 1985 and $101 thereafter 775% v107 to November 1,1981; $104 to November 1, 1986 and

$101thereafter 8.80% $108.80 to January 1,1984;$105.87 to January 1,1989;

$102 94 to January 1,1994 and $101 thereafter The only increase in this account during the past three years tma

$60,000,000 in 1978 representing the sale of the 8.80% Series of Serial Pre-ferred Stock.

K - Preferred Stcck - Redemptien Required In July 1980 the cmpany issued 250,000 shares of Serial Preferred Stock, 10.875% Series. The redemption at $100 par value of 6,250 shares is required anmmily on each September 1, from 1990 thrcugh 2009, with redemption of the remaining shares required on September 1, 2010. In addition to the mandatory redemption, the ecmpany may at its option redeem the stock at $110.88 to Septem-ber 1,1981 and at declining amounts thereafter to $100 after September 1, 2009 In the event of default in the payment of divilends or in the mandatory redemp-tien requirements, no dividends or other dist:.ibution shall be declared on any preferred stock class and series except rathbly on all preferred shares accer- -

ding to their respective dividend rates.

L - Long Term Debt The maturitics and sinking fund requirements through 1985 for the aggre-gate amount of long term debt outstanding at December 31, 1980 are shcwn belcu. l Of the annual sinking fund requirements, $3,690,000 may be satisfied by certi-  !

fying additional mortgaged property.

Maturities Sinking Fund

)

1981 $ 2,137,000 $ 5,880,000 1982 59,137,000 5,845,000 1983 - 5,720,000 1984 16,733,000 32,387,000 1985 - 55,490,000 Future sinking fund requirements have been anticipated by advance pur-chases of bcnds to the extent of $2,479,000 and certification of property in the amount of $3,690,000. cinking fund requirements for 1981 have been satisfied.

l Gubstantially all utility plant and nonutility property is subject to the  ;

lien of the applicable mortgage.

M - Notes Payable and Ccramercial Paper i Unused lines of credit for shcrt term borrcwing amcunted to $166,405,000 at December 31, 1930. In suppert of various infer =al lines of credit from banks, the ccupanies have agreed to maintain unrestricted ccmpensating balances. With the exceptien of funds required for daily cperations, the cash balance shetin en the balance sheet at December 31, 1980 as ven as $400,000 of non-interest bearing certificates of depcsit included in temporary cash investments represent ecmpensating balances.

N - Ccumitments and Ccntingencies  ;

i Construction expenditures through 1985 are estimated to be $1 billion, of which $203 minica is planned fer 1981. Ccemitments for new generation facili-ties amounted to $89 minion-at December 31, 1980.

The inclusicn of nuclear fuel costs in the company's autccatic fuel adjustment tariff and the collection of menies to cover future decccmissiening costs for Pcint Beach Ituelear Plant are matters currently pending befcre the Uiscortsin Court of Appeals. The eccpany and the PSCf have appealed an earlier circuit court judgment which had reversed certain previsiens of a 1979 rate cr-der providing for inclusion of nuclear fuel in the fuel clause tariff and col-lection thrcuch rates of menies to ecver the decccmissioning costs. The ultimate impact cf the circuit court's judgment, if upheld en appeal, cannet be determined at this time. If nuclear fuel is ultimately el N4nated frcm the automatic fuel adjustment tariff, the ecmpany vculd generally seek to cffset changes in nuclear fuel expense thrcuch adjustment of its base rates frce time to time to include recevery of estimated future nuclear fuel expense.

In its interim rate crder of January 15, 1981, pending dispcsition of the  !

above described issues, the PSCf established a limitatien in the tariff which prevents the ccupany frem recovering in any month the nuclear fuel ecsts in ,

excess of estimated average ecst of nuclear fuel found to be appropriate. The

$75,916,000 annual increase in electric service rates granted by the interim 4

-I crder vill be conected subject to refund paMing a final rate crder.

on october 9,1980 the PSCI issued a final rate order which provided that revenues to cover costs attributable to Point Beach Unit 1 steam generator problems, estimated to be $7,416,000 through December 31, 1980, are subject to refund, plus interest, in the event the PSCf finds these problems were caused by imprudent management. In the cpinien of =anagement, the actions taken in I cperating and maintaining Point Beach Intelear Plant were reasonable and prudent and such expenditures should, therefore, be recognized for ratemaking purposes.

Pursuant to the PSCW's !: arch 1979 crder, the cccpany wrote off thrcughcut 1979 its share ($2.3 mmien after income tax effect) of certain capitali::ed expenditures related to the discentinued Kcshkencng nuclear plant project. The write-off reduced 1979 earnings by $0.12 a share. In issuing its crder the PSCT deemed that such expenditures were prudently made, but cri no future value.

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P00R ORIGINAL

In late 1979 the Brown County Circuit Court found that such expenditures trere prudently made and were not to be charged to the stockholders, and therefere reversed and remanded the order to the PSCf for modification. The ecmpany and other participating utilities subsequently filed a motion with the PSdf reques-ting reinstatement of the expenditures written off and proposin6 a formula to recover such expenditures through rates in subsequent separate utility rate dochets. The PSc7 has not acted upon the utilities' motion but appealed the circuit court decisien to the Court of Appeals, which subsequently dismissed

. the appeal. The matter is presently pending before the Wisconsin Supreme Court, w

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i WISCGISDT ELECTRIC POWER CCMPAITY DIRECTGS Frederick M. Belacre

• Charles S. McNeer Russell 17. Britt

• Donald K. Mundt Sol Burstein

• John P. Reeve -

Richard L. Johnson

• Morris U. Reid

• Jen G. Udell v

(*) Member of Executive Cemittee; all other directers are alternate members OFFICERS Charles S . McNeer . . . . . . . . . . . . President and Chief Executive Officer Russell W. Britt . . . . . . . . . . . . . . . . . . . . . . . . . Executive Vice President Sol Burstein . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Executive Vice President Thcmas J. Cassidy . . . . . . . . . . . . . . . . . . . . . . . . . . . . Senier Vice President Nicholas A. Ricci . . . . . . . . . . . . . . . . . . . . . . . . . . . . S enicr Vice President Robert H. Gorske . . . . . . . . . . . . . . . . Vice President and General Ccunsel Richard A. Abdoo . . . . . . . . . . . . . . . Vic e President - Carperate Planning Jchn H. McLean . . . . . . . . . . . . . . . . . Vice President - Custcmer Relatiens Russell A. Niles .............. Vice President - Divisicn Operations Huberto R. Plat: ..... Vice President - Engineering and Constructicn Philip G. Sikes . . . . . . . . . . . . . . . . . Vice President - System Op erations Richard E. Skogg . . . . . . . . . . . . . . . Vice President - Operating Services John E. Speaker . . . . . . . . . . . . . . . . . . . . Vice President - Ccumunicatiens Jchn H. Goets ch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S ecretary Jerry G. Ramm*1 .......................................... Treasurer Richard R . Pilt z . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C ontr oll er John 17. Fleissner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assistant S ecretary Dawn L . Freita6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assistant S ecretary -

Gordon A. Willis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assistant Treasurer GEI1ERAL OFFICES 231 West Michigan Street, P.O. Box 2016, Milwaukee, Wisconsin 53201 4

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