ML19318B684

Amend to Application for Ol,Including Annual Repts for 5 Utils and Miscellaneous Financial Info

ML19318B684
Person / Time
Site:	Perry
Issue date:	06/20/1980
From:	CLEVELAND ELECTRIC ILLUMINATING CO.
To:
Shared Package
ML19318B681	List: ML19318B680 ML19318B684
References
NUDOCS 8006270298
Download: ML19318B684 (480)

Text

{{#Wiki_filter:O O Before the UNITED STATES NUCLEAR REGULATORY COMMISSION Docket Nos. 50-440 & 50-441 In the matter of THE CLEVELAND ELECTRIC ILLUMINATING COMPANY DUQUESNE LIGHT COMPANY OHIO EDISON COMPANY PENNSYLVANIA POWER COMPANY Tile TOLEDO EDISON COMPANY Application for Operating Licenses for O Perry Nuclear Power Plant Units 1 & 2 Consisting of: (1) General Information Section (2) Environmental Report (under separate cover) (3) Final Safety Analysis Report (to be submitted under separate cover on or about September 1,1980) Date: June 26, 1980 O

sooeno AM T

Application for Utilization Facility (~~')T (m- Operating License General Information

1. Names and Addresses of Applicants

a. Duquesne Light Company 435 Sixth Avenue Pittsburgh, Pennsylvania 15219

b. Ohio Edison Company 76 S. Main Street Akron, Ohio 44308

                          ~

c. Pennsylvania Power Company One East Washington Street New Castle, Pennsylvania 16103

d. The Cleveland Electric Illuminating Company P. O. Box 5000 Cleveland, Ohio 44101

e. The Toledo Edison Company 300 Madison Avenue

(} V Toledo, Ohio 43652 Duquesne Light Company, Ohio Edison Company, Pennsylvania Power Company (a subsidiary of Ohio Edison Company), The Cleveland Electric Illuminating Company and The Toledo Ediron Company share undivided ownership of the utilization facility, known as the Perry Nuclear Power Plant Units 1 & 2. Together, the five electric power companies have a total installed net demonstrated generating capacity of 15,398,500 kilowatts as of January 1980 and serve a population of over seven million in a service area or about 14,000 square miles in western Pennsylvania, northwestern, northeastern, and central Ohio, the details of which are as follows: Net Demonstrated Generated Size Capability (KW) Population (Square Miles) Duquesne Light 3,294,000 1,500,000 800 Company ,r m (  ; %.J i d i )

      .s                                                            Net Den.ons trated Generated                                       Size a                                                    Capability (KW)                  Population   (Square Miles)

Ohio Edison 4,856,000 2,386,000 7,472 Company f Pennsylvania 855,500 323,600 1,517 Power Company The Cleveland 4,617,000 2,086,700 1,700 Electric Illuminating Company i j The Toledo Edison 1,776,000 750,000 2,500 ] Company i The Cleveland Electric Illuminating Company has complete responsibility for the j design, installation, construction, operation and maintenance of the Perry l Nuclear Power Plant Units 1 & 2 and for the prosecution of this application and I all related licensing activities and proceedings before the Nuclear Regulatory l Commission. Duquesne Light Company, Ohio Edison Company, Pennsylvania Power h Company, The Cleveland Electric Illuminating Company and The Toledo Edison Company are not acting as the agent or representative of any other persons in filing this application.

2. Description of Business and Organization of Applicants j a. Duquesne Light Company is a public utility incorporated under the laws of the Commonwealth of Pennsylvania and is engaged in the generation,

!                           transmission, distribution and sale of electricity in western
)

l Pennsylvania in and about the City of.Pittsburgh. Duquesne Light Company sells directly to customers in 146 municipalities and provides i wholesale power to one municipality in Pennsylvania. Duquesne Light Company is not owned, controlled, or dominated by an alien, foreign corporation, or foreign government. The names and business addresses of Duquesne Light Company's directors and principal

;                           officers, all of whom are citizens of the United States, are as follows:
+

j /^\ Directors V John M. Arthur Philip A. Fleger Duquesne Light Company Jefferson School Road 435 Sixth Avenue R. D. #2 Pittsburgh, Pennsylvania 15219 Ligonier, Pennsylvania 15658 Charles M. Atkinson Edward J. Hanley Duquesne Light Company Allegheny Ludlum Industries, Inc. 435 Sixth Avenue 2122 Oliver Building Pittsburgh, Pennsylvania 15219 Pittsburgh, Pennsylvania 15222 Edward O. Boshell G. Christian Lantzsch

323 River Drive Mellon Bank, N.A.

Tequesta, Florida 33458 Mellon Square Pittsburgh, Pennsylvania 15230 Doreen E. Boyce Apartment 508 Eric W. Springer Fox Chapel Mews Horty, Springer & Mattern 300 Fox Chapel Road 4614 Fifth Avenue Pittsburgh, Pennsylvania 15238 Pittsburgh, Pennsylvania 15213 John H. Demmler Stanely G. Schaffer Reed Smith Shaw & McClay Duquesne Light Company Box 2009 435 Sixth Avenue 1 Pittsburgh, Pennsylvania 15230 Pittsburgh, Pennsylvania 15219 !/ 3 'V Sigo Falk 3315 Grant Building Pittsburgh, Pennsylvania 15219 Officers John M. Arthur Earl J. Woolever Chairman of the Board and Vice President - Engineering and . Chief Executive Officer Construction 435 Sixth Avenue 435 Sixth Avenue Pittsburgh, Pennsylvania 15219 Pittsburgh, Pennsylvania 15219 Stanley G. Schaffer John A. Knepper President Treasurer and Controller 435 Sixth Avenue 435 Sixth Avenue Pittsburgh, Pennsylvania 15219 Pittsburgh, Pennsylvania 15219 Charles M. Atkinson Howard W. Staas Vice President - Fiscal Secretary 435 Sixth Avenue 435 Sixth Avenue Pittsburgh, Pennsylvania 15219 Pittsburgh, Pennsylvania 15219 Clifford N. Dunn Roland G. Males Vice President - Operations Assistant Treasurer s 435 Sixth Avenue 435 Sixth Avenue Pittsburgh, Pennsylvania 15219 Pittsburgh, Pennsylvania 15219 ' (J)

1 m William F. Gilfillan, Jr. Elmer H. Puchta Vice President - Customer Services (V) 435 Sixth Avenue Assistant Treasurer 435 Sixth Avenue Pittsburgh, Pennsylvania 15219 Pittsburgh, Pennsylvania 15219 George I. Rifendifer Joan S. Senchyshyn Vice President - General Sersices Assistant Secretary 435 Sixth Avenue 435 Sixth Avenue Pittsburgh, Pennsylvania 15219 Pittsburgh, Pennsylvania 15219

b. Ohio Edison Company is a public utility incorporated under the laws of the State of Ohio and is engaged pr ipally in the generation, transmission, distribution, and sale of electricity in northeastern and central Ohio. Ohio Edison Company sells directly to customers in 138 municipalities and in rural areas and supplies electric energy for resale to 20 municipalities, i Ohio Edison Company is not owned, controlled, or dominated by an alien, foreign corporation, or foreign government. The names and business addresses of Ohio Edison Company's directors and principal officers, all of whom are citizens of the United States, are as follows:

!p Directors W. A. Derrick Dr. Incille G. Ford 1323 Johnson Street Ashland College Sandusky, Ohio 44870 Ashland, Ohio 44805 John L. Feudner, Jr. (Retired) J. Robert Groff 332 Afton Avenue The James Leffel & Co.

            , Akron, Ohio 44313                            Springfield, Ohio 45501 Robert L. Loughead                           W. R. Tappan Copperweld Steel Company                     The Tappan Company 4000 Mahoning Avenue                         Tappan Park Warren, Ohio 44483                           Mansfield, Ohio 44901 D. Bruce Mansfield (Retired)                 D. W. Tschappat 544 Merriman Road                            Ohio Edison Company Akron, Ohio 44303                            76 South Main Street Akron, Ohio 44308 V. A. Owoc l~             Ohio Edison Company                         Frank C. Watson 76 South Main Street                        Youngstown Welding & Engineering Co.

Akron, Ohio 44308 3700 Oakwood Avenue i Youngstown, Ohio 44509 [Q

f'~N, J. T. Rogers, Jr. R. G. Zimmerman

 '(')     Ohio Edison Company                     Ohio Edison Company 76 South Main Street                   76 South Main Street Akron, Ohio 44308                       Akron, Ohio 44308 W. H. Sammis (Retired)                  Fred H. Zuck (Retired)

Ohio Edison Company 603 Columbus Avenue 76 South Main Street P. O. Box 1460 Akron, Ohio 44308 Sandusky, Ohio 44870 Officers H. P. Burg G. F. LaFlame Treasurer Assistant Treasurer 76 South Main Street 76 South Main Street Akron, Ohio 44308 Akron, Ohio 44308 F. E. Derry D. J. List Vice President Vice President 76 South Main Street 76 South Main Street Arkon, Ohio 44308 Akron, Ohio 44308 Lynn Firestone Joanne Martin Senior Vice President Assistant Secretary 76 South Main Street 76 South Main Street Akron, Ohio 44308 Akron, Ohio 44308 G (_,) W. G. Fouch W. B. Marvin Assistant Comptroller Comptroller 76 South Main Street 76 South Main Street Akron, Ohio 44308 Akron, Ohio 44308 C. N. Glasgow R. J. McWhorter Assistant Secretary Senior Vice President 76 South Main Street 76 South Main Street Akron, Ohio 44308 Akron, Ohio 44308 V. A. Owoc D. D. Vowles Executive Vice President Secretary 76 South Main Street 76 South Main Street Akron, Ohio 44308 Akron, Ohio 44308 J. T. Rogers, Jr. R. G. Zimmerman President Senior Vice President 76 South Main Street 76 South Main Street Akron, Ohio 44308 Akron, Ohio 44308 l R. J. Spetrino C. W. Frederickson Vice President & General Counsel Vice President ! 76 South Main Street 76 South Main Street Akron, Ohio 44308 Akron, Ohio 44308

      )

v

D. W. Tschappa6 ((") Executive Vice President 76 South Main Street Akron, Ohio 44308

c. Pennsylvania Power Company, a subsidiary of Ohio Edison Company, is a public utility incorporated under the laws of the Commonwealth of Pennsylvania and is engaged principally in the generation, transmission, distribution and sale of electricity in northwestern Pennsylvania.

Pennsylvania Power Company sells directly to customers in 38 municipalities and to adjoining rural areas, and wholesale power to five municipalities. , Pennsylvania Power Company is not owned, controlled, or dominated by an alien, foreign corporation, or foreign government. The names j and business addresses of Pennsylvania Power Company's directors and principal officers, all of whom are citizens of the United States, are as follows:

     'N                                          Directors J. F. Dunlevy                                W. H. Sammis Pennsylvania Power Company                   76 South Main Street 1 East Washington Street                     Akron, Ohio 44308 New Castle, Pennsylvania 16103 Ray E. Semmler J. R. Edgerly                                Pennsylvania Power Company Pennsylvania Power Company                   1 East Washington Street 1 East Washington Street                     New Castle, Pennsylvania   16103 New Castle, Pennsylvania 16103 D. W. Tschappat(*)

D. Bruce Mansfield Ohio Ldison Campany 554 Merriman Road 76 Souta Main Street Akron, Ohio 44303 Akron, Ohio 44308 V. A. Owoc C. M. Whittaker Ohio Edison Company 101 Fairfield Avenue 76 South Main Street New Castle, Pennsylvania 16105 Akren, Ohio 44308 ' G. Leo Winger W. F. Reeher Foundry Group Pe'insylvania Power Company Midland-Ross Corp. 1 East Washington Street 700 South Dock Street New Castle, Pennsylvania 16103 Sharon, Pennsylvania 16146 f 7-s y (*) Mr. Tschappat's term will begin upon receipt of the necessary authorization t ) of the Federal Energy Regulatory Commission under the provisions of Section

  '- /        305(b) of the Federal Power Act.

i l

          - - .      ~ -                  ..                        . - - .. _.

1, j ~' . Justin T. Rogers, Jr. Ohio Edison Company s 76 South Main Street Akron, Ohio 44308 Officers

Justin T. Rogers, Jr. R. P. Wushinske Chairman of the Board Secretary & Treasurer

)          Ohio Edison Company                        Pennsylvania Power Company 76 South Main Street                      1 East Washington Street Akron, Ohio 44308                          New Castle, Pennsylvania   16103 Ray E. Semmler                             B. D. Burford President                                  Comptroller Pennsylvania Power Company                 Pennsylvania Power Company 1 East Washington Street                  1 East Washington Street New Castle, Pennsylvania 16103             New Castle, Pennsylvania   16103 4

W. K. Conover R. P. Armstrong ! Vice President Assistant Secretary and Assistant 1 Pennsylvania Power Company Treasurer 1 East Washington Street Pennsylvania Power Company New Castle, Pennsylvania 16103 1 East Washington Street New Castle, Pennsylvania 16103 ' J. F. Dunlevy Vice President W. A. Margraf Pennsylvania Power Company Assistant Secretary and Assistant 1 East Washington Street Treasurer New Castle, Pennsylvania 16103 Pennsylvania Power Company 1 East Washington Street W. F. Reeher New Castle, Pennsylvania 16103 Vice President

;          Pennsylvaia Power Company                  Angeline Comparone i

1 East Washington Street Assistant Secretary l New Castle, Pennsylvania 16103 Pennsylvania Power Company 1 East Washington Street J. R. Edgerly New Castle, Pennslyvania 16103 Vice President Pennsylvania Power Company 1 East Washington Street New Castle, Pennsylvania 16103 L l

d. The Cleveland Electric Illuminating Company is a public utility incorporated under the laws of the State of Ohio and is engaged l principally in the generatiori, transmission, distribution and sale of I

electricity in northeastern Ohio. The Cleveland Electric Illuminating Company sells directly to customers in the City of Cleveland and 88 other municipalities and surrounding territories. e 4 The Cleveland Electric Illuminating Company is not owned, controlled,

  \_,/         or dominated by an alien, foreign corporation, or foreign government.
                                                   ~

The names and business addresses of The Cleveland Electric Illuminating Company's directors and principal officers, all of whom are citizens of the United States, are as follows: Directors Lei t h Carter Craig R. Smith Treuco, Inc. The Warner & Swasey Co. 10701 Shaker Boulevard 11100 Cedar Road Cleveland, Ohio 44104 Cleveland, Ohio 44106 Robert M. Ginn Charles E. Spahr The Illuminating Company 1901 Terminal Tower Building 55 Public Square Cleveland, Ohio 44113 Cleveland, Ohio 44113 Herbert E. Strawbridge Roy H. Holdt The Higbee Company White Consolidated Industries, Inc. 100 Public Square 11770 Berea Road Cleveland, Ohio 44113 Cleveland, Ohio 44111 Richard B. Tullis f-'g John Lansdale, Jr. Harris Corporation () Squire, Sanders & Dempsey 21 Dupont Circle, N.W. Melbourne, Florida 32919 Washington, D.C. 20036 Harold L. Williams The Illuminating Company Richard A. Miller 55 Public Square The Illuminating Company Cleveland, Ohio 44113

55 Public Square Cleveland, Ohio 44113 Karl H. Rudolph i The Illuminating Company 55 Public Square Cleveland, Ohio 44113 Officers I

Charles C. Chopp Clement T. Loshing Controller Treasurer 55 Public Square 55 Public Square Cleveland, Ohio 44113 Cleveland, Ohio 44113 Dalwyn R. Davidson Edgar H. Maugans Vice President - System Engineering Vice President - Finance and Construction 55 Public Square 55 Public Square Cleveland, Ohio 44113

 -l   \ Cleveland, Ohio 44113 O

l 1

      ^          Andrew R. Felmer                                        Richard A. Miller                          ;

Secretary Executive Vice President l 55 Public Square 55 Public Square Cleveland, Ohio 44113 Cleveland, Ohio 44113 i John W. Fenker E. Lyle Pepin  ! Vice President - Administrative Assistant Secretary Services 55 Public Square 55 Public Square Cleveland, Ohio 44113 Cleveland, Ohic 44113 l Philip B. Perry Robert M. Ginn Vice President - Power Supply President 55 Public Square l 55 Public Square Cleveland, Ohio 44113 l Cleveland, Ohio 44113 Harold L. Williams Richard C. Horning Executive Vice President i Assistant Treasurer 55 Public Square , 55 Public Square Cleveland, Ohio 44113 ' Cleveland, Ohio 44113 Alan D. Wright Raymond J. Jirousek Vice President & General Counsel Assistant Treasurer 55 Public' Square 55 I%biic Square Cleveland, Ohio 44113 Cleveland, Ohio 44113 i Frank A. Kender

Vice President - Energy Application i' Services 55 Public Square Cleveland, 01.1o 44113 i

t

e. The Toledo Edison Company is a public utility incorporated under the laws of the State of Ohio and is engaged principally in the generation, transmission, distribution and sale of electricity in northwestern Ohio. .The Toledo. Edison Company sells directly to customers in /*9 incorporated munic.ipalities and in rural areas and provides wholesale power to 15 municipalities.

[ The Toledo Edison Company is not owned, controlled, or dominated by an ( alien, foreign corporation, or' foreign government. The names and I business addresses of The Toledo Edison Company's directors and , principal officers, all of whom are citizens of the United States, are as follows: lV l l' i

Directors {}

  '~'

Floyd M. Canter Willard I. Webb, III 3252 Corey Road Chairman of the Board Toledo, Ohio 43615 Ohio Citizens Trust Company P. O. Box 1688 , Samuel G. Carson Toledo, Ohio 43603 Chairman of the Board The Toledo Trust Company Robert G. Wingerter Summit and Madison Chairman of the Executive Committee Toledo, Ohio 43603 Libbey-Owens-Ford 811 Madison Avenue Robert H. Davies Toledo, Ohio 43695 Senior Vice President Director of Corporate Development John P. Williamson Owens-Illinois, Inc. Chairman of the Board and Chief P. O. Box 1035 Executive Officer Toledo, Ohio 43666 The Toledo Edison Company 300 Madison Avenue Elwood L. Elberson Toledo, Ohio 43652 President and Chief Executive Officer Wendell A. Johnson Dinner Bell Foods, Inc. President and Chief Operating P. O. Box 388 Officer Defiance, Ohio 43512 The Toledo Edison Company 300 Madison Avenue

  /~^       Virgil A. Gladieux                       Toledo, Ohio 43652

(_-) Chairman of the Board Gladieux Corporation Richard P. Crouse P. O. Box 1016 Vice President - Nuclear Toledo, Ohio 43697 The Toledo Edison Company 300 Madison Avenue Marvin S. Kobacker Toledo, Ohio 43652 Vice Chairman of the Board _Kobacker Stores, Inc. Donald G. Nicholson P. O. Box 1508, Central Station Vice President - Finance Toledo, Ohio 43603 The Toledo Edison Company 300 Madison Avenue Isabel F. Martin Toledo, Ohio 43652 4 Consultant The United Way Lowell E. Roe One Stranahan Square Vice President - Energy Supply Toledo, Ohio 43604 The Toledo Edison Company 300 Madison Avenue Henry Page, Jr. Toledo, Ohio 43652 3945 Hillandale Road Toledo Ohio 43606 i A

f'~} Officers () John P. Williamson Lowell E. Roe Chairman of the Board and Chief Vice President - Energy Supply Executive Officer The Toledo Edison Company The Toledo Edison Company 300 Madison Avenue 300 Madison Avenue Toledo, Ohio 43652 Toledo, Ohio 43652 Paul G. Busby Wendell A. Johnson Controller President and Chief Operating The Toledo Edison Company Officer 300 Madison Avenue The Toledo Edison Company Toledo, Ohio 43652 300 Madison Avenue Toledo, Ohio 43652 Stratman Cooke Secretary Richard P. Crouse The Toledo Edison Company Vice President - Nuclear 300 Madison Avenue The Toledo Edison Company Toledo, Ohio 43652 300 Madison Avenue Toledo, Ohio 43652 Robert F. Ertle Assistant Treasurer John R. Dyer The Toledo Edison Company Vice President - Public Relations 300 Madison Avenue The Toledo Edison Company Toledo, Ohio 43652 300 Madison Avenue

   )  Toledo, Ohio 43652                        Gary M. Hawkinson

(~'/ (, Assistant Treasurer

     ' Frank W. Keith                           The Toledo Edison Company Vice President - Administration           300 Madison Avenue The Toledo Edison Company                 Toledo, Ohio 43652 300 Madison Avenue Toledo, Ohio 43652                        J. Fred Plassman Assistant Controller David A. Nelson                           The Toledo Edison Company Vice President - Corporate                300 Madison Avenue Development                               Toledo, Ohio 43652 The Toledo Edison Company 300 Madison Avenut                        Donald H. Saunders

• Toledo, Ohio 43652 Treasurer The Toledo Edison Company Donald G. Nicholson 300 Madison Avenue Vice President - Finance & Asst. Sec. Toledo, Ohio 43632 The Toledo Edison Company 300 Madison Avenue Toledo, Ohio 43652 Lyman C. Phillips Vice President - Administrative Services The Toledo Edison Company

,o    300 Madison Avenue

( ) Toledo, Ohio 43652 'O 4 4

3. Class and Period of License Requested

(>T s_- 1 Applicants request two class 103 operating licenses for a period of 40 years i from date of issuance of Construction Permit expiring on May 3, 2017, authorizing The Cleveland Electric Illuminating Company to operate the utilization facility described in Item 5 below.

4. Additional Licenses Requested Applicants request such additional source, special nuclear, and byproduct j

material licenses as may be necessary and appropriate to the operation of the facility.

5. Description and Use of Facility 4

4

The Perry Nuclear Power Plant Units 1 & 2 is be a nuclear electric generating plant with boiling water reactor generating systems, utilizing the Mark III containment and BWR/6 design. The rated core thermal power of

, Os each unit is 3579 Mwt with a design power of 3758 Mwt. All safety evaluations in the FSAR were made at 3758 Mwt. The corresponding unit net electrital output is 1265 Mwe. The Perry Nuclear Power Plant Units 1 & 2 are located near Lake Erie in Lake County, Ohio. The plant site is approximately 35 miles northeast of Cleveland, Ohio, and 21 miles southwest of Ashtabula, Ohio. l -Details concerning the plant and the site are contained in the Environmental Report, which is submitted under separate cover and in the Final Safety Analysis Report (FSAR) which will ne submitted on or about September 1, 1980, which constitute parts of this application.

6. Financial Qualifications.

1 i j Applicants will own the plant as tenants in common without right of g-'S partition, their respective undivided ownership interests being as follows: [V l _

s Duquesne Light Company 13.74%

     )                          Ohio Edison Company                  28.96%

Pennsylvania Power Company 6.28% The Cleveland Electric Illuminating Company 31.11% The Toledo Edison Company 19.91% 100.00% The companies will share all expenditures for the design, installation, construction, operation and maintenance of the plant, and in the energy production, in proportion to their undivided ownership interests therein, except that djustments appropriate to any particular kind of expense may be made. All financing will be provided by the applicants. For example, sharing of operation and maintenance costs, including fuel, will be adjusted when full entitlement to the capability and output of the plant is not taken by any tenant in common therein. The financial information required by 10CFR50.33(f) for operating license applications will be supplied upon request of NRC. Copies of the Applicants current annual reports and prospectuses have been included as Appendixes L

 ;(       and M respectively.

7. Technical Qualifications A description of the technical qualifications of The Cleveland Electric Company and its principal contractors is contained in Chapters 1 and 13 of the FSAR. A description of The Cleveland Electric Illuminating Company's training program is contained in Chapter 13 of the FSAR.

8. Completion Date The scheduled fuel loading date for Unit 1 is May 1, 1983 and for Unit 2 is l May 1, 1987.

l I i u l

'-f s 9. (a) Regulatory Agencies One or more regulatory agencies and municipalities may have jurisdiction over the respectita rates and services of the Applicants , incident to the generation and distribution of electrical energy from the utilization facility for which a class 103 license is requested i herein. 'The names and addresses of such agencies and the names of such municipalities are set forth in the attached Appendices A through E. l (b) Trade and News Publications 1 The lists of trade and news publications which are in general ! circulation in the respective service areas of the Applicants and which are considered appropriate to give reasonable notice of this Application to those municipalities, private utilities, public bodies { and cooperatives which might have a potential interest in the utilization facility are set forth in Appendices F through K.

   ) 10. Security Agreement The Applicaticn does not contain any Restricted Data or other defense information. Applicants agree that they will not permit any individual to have access to Restricted Data until the Civil Service Commission shall have made an investigation and report to the Nuclear Regulatory Commission on the character, associat .)ns, and loyalty of such individual, and the Nuclear
                                                                                   /

Regulatory Commission shall have determined that permitting such person to l have access to Restricted Data will not endanger the common defense and security, i 11. Communications i The Cleveland Electric Illuminating Company on behalf of itself and Ohio Edison. Company, Pennsylvania Power Company, The Toledo Edison Company and

Duquesne Light Company will hereafter submit all further information l

D.

  "'s, required in connection with this Application. Applicants request that all
 \~ 2  communications pertaining to this application be set to:

Dalwyn R. Davidson, Vice President System Engineering and Construction Post Office Box 5000 Cleveland, Ohio 44101 In addition, it is requested that copies of each communication be sent to The Cleveland Electric Illuminating Company's Washington counsel: Gerald Charnoff, Esq. Shaw, Pittman, Potts and Trowbridge 1800 M Street, N. W. Washington, D. C. 20036 and to Cleveland's counsel: Donald H. Hauser, Esq. The Cleveland Electric Illuminating Company Post Office Box 5000 O Cleveland, Ohio 44101 i i l l l t N~-] } t I i 1 4 l APPENDIX A Duquesne Light Company l  ; j Regulatory Agencies Having l

,                                                                                    Jurisdiction Over Rates and                                   [

l Services > I l l 1. Federal Energy Regulatory Commission  ! J Washington, D. C. 20426 i 5 2. Pennsylvania Public Utility Commission f P. O. Box 3265 }. Harrisburg, Pa. 17120 I t i ! l i I i I 4 i

l

. t i i t c I I A-1

APPENDIX B Os Ohio Edison Company Regulatory Agencies Having Jurisdiction Over Rates and Services

1. Federal Energy Regulatory Commission Washington, D. C. 20426

2. The Public Utilities Commission of Ohio

361 E. Broad St.

Columbus, Ohio 43215

3. The following municipalities:

Akron Division Akron Mogadore j Aurora Munroe Falls Barberton North Royalton Boston Heights Northfield I Brady Lake Norton Briarwood Beach Oakwood i Broadview Heights Peninsula Brunswick Ravenna Chippewa-on-the-Lake Reminderville Clinton Richfield Cuyahoga Falls Seville Doylestown Silver Lake Fairlawn Solon Glenwillow Stow Gloria Glens Park Streetsboro l' Hartville Strongsville Hudson Sugar Bush Knolls Kent Tallmadge Lakemore Twinsburg Macedonia Wadsworth Mantua Walton Hills Medina Westfield Center i B-1 I

Bay Division Marion Division Bay View Ashley Bellevue Caledonia Castalia Cardington Huron Chesterville

       *- Marblehead          Delaware Milan               Dublin Manroeville         Edison Norwalk             Galion Port Clinton        Green Camp Put-in-Bay          Magnetic Springs Sandusky            Marion Mount Gilead Lake Erie Division  Plain City Prospect Amherst             Richwood Avon                Shawnee Hills Berlin Heights Elyria              Springfield Divicion Grafton Kipton              Catawba Lagrange            Donnelsville Lorain              Enon North Fairfield     Fairborn i          North Ridgeville    Jefferson Oberlin             Lawrenceville

[]/ s_. Sheffield Sheffield Lake London North Hampton South Amherst South Vienna Vermilion Springfield Wakeman Tremont City Wellington W. Jefferson Mansfield Division Warren Division Ashland Cortland Butler Garretsville Crestline Hiram Hayesville Lordstown Jeromesville Newton Falls Lodi Niles Loudonville Warren Lucas West Farmington Mansfield Windham Mifflin Ontario Perrysvillc Polk o B-2

t' e i J l v

;                                                                                Youngstown Division l

l Andover Mcdonald  ; Campbell New Middletown l Canfield i New Waterford

Columbiana Orangeville l Craig Beach Poland i Girard Rogers f Hanoverton Saler. l l Hubbard Struthers 1 l Leetonia Washingtonville i

Lisbon Yankee Lake l Lowellville Youngstown 1 l  ! i I B-3

r i l + l 1 4 APPENDIX C I ' Pennsylvania Power Company Regulatory Agencies Having Jurisdiction Over Rates and Services

1. Federal Energy Regulatory Commission

Washington, D. C. 20426

2. Pennsylvania Public Utility Commission

! P. O. Box 3265 } Harrisburg, Pa. 17120 i  ! 4 l l i . { l i l I i I i i 1 4 C . - _ . . . -,._. _ .._,.._. _ .-_.._._ _._ , _ ._ ..._ ,_--.._ __ . ._,-_.,-_ _. _ _ _ __-_ __ _ ____._ __. .-__ __ _ ____

APPENDIX D

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1 (G The Cleveland Electric Illuminating Company Regulatory Agencies Having Jurisdiction Over Rates and Services

1. Federal Energy Regulatory Commission Washington, D. C. 20426

2. The Public Utilities Commission of Ohio 361 E. Broad St.

Columbus, Ohio 43215

3. The following municipalities:

CUYAH0GA COUNTY City of Bay Village City of Maple Heights City of Beachwood Village of Mayfield City of Bedford City of Mayfield Heights City of Bedford Heights City of Middleburg Heights Village of Bentleyville Village of Moreland Hills j City of Berea Village of Newburgh Heights Village of Bratenahl City of North Olmsted

  /~'              City of   Brecksville                         Village of North Randall

(_,}f City of Broadview Heights City of North Royalton City of Brook Park Village of Oakwood City of Brooklyn Village of Olmsted Falls Village of Brooklyn Heights Village of Orange Village cf Chagrin Heights City of Parma City.of Cleveland City of Parma Heights City of Cleveland Heights City of Pepper Pike Village of Cuyahoga Heights City of Richmond Heights City of East Cleveland City of Rock River City of Euclid City of Seven Hills City of Fairview Park City of Shaker Heights City of Garfield Heights City of Solon Village of Gates Mills City of South Euclid Village of Glenwillow City of Strongsville-City of Highland Heights City of University Heights Village of Hunting Valley Village of Valley View City of Independence Village of Walton Hills City of Lakewood City of Warrensville Height , Village of Linndale City of Westlake City of Lyndhurst Village of Woodmere O  ; lt

LJ l

D-1

     .~,-_..a ..                        an _          ,                      . - . -              _      , _

LAKE COUNTY l City of Eastlake l Village of Fairport Harbor i Village of Grand River City of Kirtland Village of Kirtland Hills Village of Lakeline , Village of Madison j City of Mentor City of Mentor-on-the-Lake Village of North Perry Village of Perry

' Village of Timberlake Village of Waite Hill City of Wickliffe City of Willoughby

, City of Willowick 1 City of Willoughby Hills GEAUGA COUNTY 4 l Village of Aquilla Village of Burton

Village of Chardon Village of Middlefield

!                Village of South Russell

LORAIN COUNTY City of Avon City of Avon Lake City of North Ridgeville ASHTABULA COUNTY 2.

1 City of Ashtabula i City of Conneaut City of Geneva Village of Geneva-on-the-Lake Village of Jefferson . Village of North Kingsville Village of Orwell Village of Rock Creek i l l i I O D-2

                                             .~  - ._   . . . . _ _ _. _ . _         _ _ _ _ _ _ . _ _ ,

i f'" APPENDIX E , \ The Toledo Edison Company

Regulatory Agencies Having i

Jurisdiction Over Rates and Services i 1. Federal Energy Regulatory Commission i Washington, D. C. 20426

2. The Public Utilities Commission of Ohio 361 E. Broad St.

Columbus, Ohio 43215 l 3. The following municipalities: Alvardton McClure Archbold Metamora Berkey Millbury Blakeslee Milton Center Burgoon New Bavaria Clay Center Ney Clyde Northwood Defiance Oregon Delta Ottawa Hills Edon Perrysburg

 '\             Fayette                           Risingsun j                Gibsonburg                        Rocky Ridge Grand Rapids                      Rossford Green Springs                     Stryker Hamler                            Swanton Harbor View                       Sylvania Helena                            Toledo Holgate                           Walbridge Holland                           Waterville Jerry City                        Wauseon Liberty Center                    Wayne Lindsey-                          Weston Luckey                            Wr-   Unity Lyons                             Whitenouse Maumee
,(

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                       . . .-                     -                         _ . .                       ~.       . .._ -.        _       - . .        - -         . _ --                  . _ . .

i-i l ! APPENDIX F i f List of Trade Publications Electrical World 330 West 42nd Street New York, N. Y. 10036 i Electrical Light & Power 221 Columbus Avenue ! Boston, Mass. 02116 1 Nuclear News 244 Ogden Avenue j Hinsdale, Illinois 60521 Nuclear Industry 475 Park Avenue South New York, N. Y. 10016 ! Power 330 West 42nd Street New York, N. Y. 10036 e i i Power Engineering Technical Publishing Co. l 1301 S. Grove Ave. Barrington, Illinois 60010 ! Public Utilities Fortnightly Suite 502 1828 L Street, N.W. Washington, D. C. 20036 l i 4 i 1 I 1 l. O ( F-1 l l t

   -....--.4  _ ._ _ -        . . . . . . , - , _ _ _ . . _ _ . . . _ . . _ .         , . . _ _ , . . .     . , .         ..        -,      , . . . . _ . . . - , - - . . . . . . - -         - .

! APPENDIX G ! Duquesne Light Company l List of News Publications In Service Area f PITTSBURGH PRESS

34 Boulevard of the Allies Pittsburgh, Pennsylvania 15222 l- (263-1100) l PITTSBURGH POST-GAZETTE 4

50 Boulevard of the Allies Pittsburgh, Pennsylvania 15222 BEAVER COUNTY TIMES Box 400 Beaver, Pennsylvania 15009 (755-3200). , j McKEESPORT DAILY NEWS i P. O. Box 128 l McKeesport, Pennsylvania 15134 l (664-9161) VALLEY NEWS DISPATCH 210 Fourth Avenue

Tarentum, Pennsylvania 15084 l .(224-4321) l l

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   /N                                    APPENDIX H Ohio Edison Company List of News Publications In Service Area AKRON DIVISION                          NORTON PRIDE Box 1048 AKRON BEACON JOURNAL                    Norton, Ohio 44203 44 East Exchange Street Akron, Ohio 44328                       RECORD COURIER 126 North Chestnut Street BARBERTON HERALD                        Ravenna, Ohio 44266 70 Fourth Street, N.W.

Barberton, Ohio 44203 THE REPORTER P. O. Box 2042 BRUNSWICK TIMES Akron, Ohio 44309 811 Pearl Road Brunswick, Ohio 44212 SEVILLE CHRONICLE & FARM JOURNAL 17 E. Main Street THE BULLETIN Seville, Ohio 44273 8870 Darrow Road Twinsburg, Ohio 44087 STOW SENTRY Stow CITY PRESS Ohio 44224 , (,,,.

  /"'}  2718 Front Street Cuyahoga Falls, Ohio 44221               SUMMIT COUNTY LABOR NEWS 969 Grant St.

THE FALLS NEWS Akron, Ohio 44311 111 Portage Trail Cuyahoga Falls, Ohio 44222 THE TALLMADGE CIRCLE 14 Whitehall Drive THE HARTVILLE NEWS Tallmadge, Ohio 44273 Hartville Ohio 44632 TRIBUNE GAZETTE 3982 St. Rt. 43 THE HUDSON TIMES Kent, Ohio 44240 75 Ravenna Street Hudson, Ohio 44236 VILLAGE VIEWS 77 Shiawassee Avenue HUDSON HUB Fairlawn, Ohio 44314 l P. O. Box 698 Hudson, Ohio 44236 NEWS BANNER 115 Watrusa Avenue THE LODI ADVERTISER Wadsworth, Ohio 44281 203 Wooster Street Lodi, Ohio 44254 THE MANCHESTER SIGNAL 414 E. Seventh St. f- g Ravenna, Ohio 44266 ( + G l H-1

i l BAY DIVISION LAKE ERIE DIVISION f' S THE BELLEVUE GAZETTE LORAIN COUNTY TIMES Cazette Building P. O. Box 516 Bellevue, Ohio 44811 Lorain, Ohio 44052 ERIE COUNTY FREE PRESS LORAIN LABOR LEADER P. O Box 357 2501 Broadway Sandusky, Ohio 44870 Lorain, Ohio 44052 HOME TOWN PAPER THE JOURNAL 503 W. Perkins 1657 Broadway Avenue Sandusky, Ohio 44871 Lorain, Ohio 44052 MONROEVILLE SPECTATOR THE LIGHT 40 South Main Street 34960 Center Ridge Road Monroeville, Ohio 44847 North Ridgeville, Ohio 44035 NORWALK REFLECTOR OBERLIN NEWS-TRIBUNE 61 East Monroe Street 32 S. Main St. Norwalk, Ohio 44857 Oberlin, Ohio 44074 NEWS HERALD VERMILLION PHOTO JOURNAL 115 W. Second St. P. O. Box 23 Port Clinton, Ohio 43452 Vermillion, Ohio 44039 (N PENINSULAR NEWS MANSFIELD DIVISION ( ,) P. O. Box 27 Lakeside, Ohio 43440 ASHLAND TIMES-GAZETTE P. O. Box 128 THE REPORTER Ashland, Ohio 44805 358 Main Street

Huron, Ohio 44839 CRESTLINE ADVOCATE P. O. Box 226 SANDUSKY REGISTER Crestline, Ohio 44827 314 West Market Street i Sandusky, Ohio 44870 LOUD 0NVILLE TIMES 514 West Main Street THE VOICE Loudonville, Ohio 44842 P. O. Box 1900 Milan, Ohio 44846 NEWS-J0URNAL 70 West Fourth Street l LAKE ERIE DIVISION Mansfield, Ohio 44902 AMHERST NEWS TIMES TRIBUNE COURIER 192 Park Avenue P. O. Box 127 Amherst, Ohio 44001 Ontario, Ohio 44862 CHRONICAL-TELEGRAM

225 East Avenue Elyria, Ohio 44035 A

l N, H-2

(} MARION DIVISION WARREN DIVISION THE FORUM WESTERN RESERVE DEMOCRAT 84 N. High Street 280 N. Park Dublin, Ohio 43017 Warren, Ohio 44483 GALION INQUIRER YOUNGSTOWN DIVISION N. Market Street Galion, Ohio 44833 ANDOVER CITIZEN Andover INDEPENDENT REGISTER Ohio 44003 114 S. Marion Street Cardington, Ohio 43315 AUSTINTOWN LEADER 4332 New Road THE MARION STAR Austintown, Ohio 44515 150 Court Street Marion, Ohio 43302 BOARDMAN NEWS 412 Boardman-Canfield Road MORROW COUNTY SENTINEL Youngstown, Ohio 44512 18 W. High Street Mt. Gilead, Ohio 43338 THE BUCKEYE REVIEW 214 W. Wood Street PLAIN CITY ADVOCATE Youngstown, Ohio 44502 30 South Oak Street Plain City, Ohio 43064 CATHOLIC EXPONENT 20 E. Boardman O

  's_,)

THE RICHWOOD GAZETTE 26 S. Franklin Youngstown, Ohio 44503 s Richwood, Ohio 43344 EAST PALESTINE DAILY LEADER , 78 N. Market Street l SPRINGFIELD DIVISION East Liverpool, Ohio 43920 THE MADISON PRESS FARM & DAIRY 30 South Oak Street P. O. Box 38 London, Ohio 43140 Salem, Ohio 44460 SPRINGFIELD NEWS-SUN GIRARD NEWS l 202 West Limestone Street 12 South State Street Springfield, Ohio 45501 Girard, Ohio 44420 WARREN i. ' "a i

                   " " ~ ~ ~

HUBBARD NEWS Hubbard, Ohio 44425 l NETWON FALLS HERALD 14 South Center St< et THE LEDGER Newton Falls, Ohio 44444 17 Union St. Youngstown, Ohio 44406 THE DAILY TIMES 35 West State Street LEETONIA COURIER Niles, Ohio 4446 13 Main Street i Leetonia, Ohio 44431 l WARREN TRIBUNE-CHRONICLE g-~3 240 Franklin Street, S. W. .( ) Warren, Ohio 4482 , I w ./ H-3

k YOUNGSTOWN PP11SION I LIBERTY NEWS (Niles Publishing Company) 35 West State Street Youngstown, Ohio 44446 THE JOURNAL

23-25 Lowe11ville Road Struthers, Ohio 44471 i

MAHONING VALLEY CHALLENGER 1115 Glenwood Avenue Youngstown, Ohio 44502 'l t THE MORNING JOURNAL ! S. Park Avenue Lisbon, Ohio 44432 POLAND CLARION P. O. Box 5027 Poland, Ohio 44514 i PYMATUNING AREA NEWS l- Andover

Ohio 44003 1

! THE SALEM NEWS

!      166 North Lincoln Avenue Salem, Ohio 44460                                                                                             ;

i YOUNGSTOWN VINDICATOR

,      Vindicator Square

? Youngstown, Ohio 44503 i t I e i ([$) 1 H-4

l

                                                                                                                                   )

1 I APPENDIX I C Pennsylvania Power Company List of News Publications In Service Area ALLIED NEWSPAPERS THE HERALD 113'N. Broad St. South Dock St. Grove City, Pa. 16127- Sharon, Pa. 16146 i BEAVER COUNTY TIMES YOUNGSTOWM VINDICATOR 4 Fair Ave., P. 0. Box-400 New Castle Office Beaver, Pa. 15009 18 E. North Street New Castle, Pa. 16101 CONNEAUT LAKE BREEZE Pymatuning Area Printing Co. EAST LIVERPOOL REVIEW

Linesville, Pa. 16424 Midland, Pa. 15059 1

ELLWOOD CITY LEDGER i 835 Lawrence Avenue Ellwood City, Pa. 16117 THE GLOBE I 129 W. Neshannock Avenue New Wilmington, Pa. 16142. MIDLAND NEWS 707 Midland Avenue Midland, Pa. 15059 q NEW CASTLE NEWS j 27 North Mercer St. New Castle, Pa. 16101 NEWS-RECORD, INC. (Includes North Hills & Butler County) .i P. O. Box 160 Zelienople, Pa. 16063 PITTSBURGH POST GAZETTE i -50 Boulevard of the Allies

P. O. Box 957~

Pittsburgh, Pa. 15230 PITTSBURGH PRESS 34 Boulevard of the Allies Pittsburgh, Pa. 15230

         .THE RECORD-ARGUS
         .10 Penn Avenue
   -g     .Greenville,'Pa. 16125 i\d f
                                                        -I !

4 APPENDIX J O\ The Cleveland Electric Illuminating Company List of News Publications In Service Area CUYAHOGA COUNTY ASHTABULA COUNTY THE CLEVELAND PRESS CONNEAUT NEWS HERALD 901 Lakeside Avenue 182 Broad Street Cleveland, Ohio 44114 Conneaut, Ohio 44030 THE PLAIN DEALER GENEVA FREE PRESS 1801 Superior Avenue 23 South Forest Street Cleveland, Ohio 44114 Geneva, Ohio 44041 LAKE COUNTY LORAIN COUNTY THE CLEVELAND PRESS ELYRIA CHRONICAL TELEGRAM , 901 Lakeside Avenue 225 East Avenue Cleveland, Ohio 44114 Elyria, Ohio 44035 THE NEWS HERALD LORAIN JOURNAL 38879 Mentor Avenue 1657 Broadway l Willoughby, Ohio 44094 Lorain, Ohio 44052 ! (O) PAINESVILLE TELEGRAPH 84 North State Street Painesville, Ohio 44097 GEAUGA COUNTY THE CLEVELAND PRESS 901 Lakeside Avenue Cleveland, Ohio 44114 i TIE PLAIN DEALER 1801 Superior Avenue Cleveland, Ohio 44114 i GEAUGA TIMES - LEADER 111 Water Street Chardon, Ohio 44024 ASHTABULA COUNTY ASHTABULA STAR BEACON 4626 Park Avenue Achtabula, Ohio 44004 .o

J-1

APPENDIX X s The Toledo Edison Company List of News Publications In Service Area 1 THE BLADE l 542 Superior Street Toledo, Ohio 43660 THE DAILY SENTINEL-TRIBUNE 121 E. Wooster Street ! Bowling Green, Ohio 43402 i FREMONT NEWS-MESSENGER I 107 S. Arch Street Fremont, Ohio 43420 NEWS HERALD 115 W. Second Street i Port Clinton, Ohio 43452 SANDUSKY REGISTER 314 W. Market Street Sandusky, Ohio 44870 l DEFIANCE CRESCENT-NEWS l Second & Perry Sts. Defiance, Ohio 43512 NORTHWEST-SIGNAL 612 N. Perry Street

,            Napoleon, Ohio 43545 i

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1 Bu:inra cf tha Camp ny  ! Duquesne Light Company is engaged principally in the produc-tion, transmission, distribution and sale of electric energy. The Company serves an area of approximately 800 square miles in m ] Allegheny and Beaver Counties. This area, which includes the '

                                                                                                                                                                          , l City of Pittsburgh, is located in Southwestern Pennsylvania and                                                                                                            l has a population of about 1.500,000. Allegheny County Steam                                                                                                                l Heating Company, a wholly-owned subsidiary, provides steam heating service in the principal business section of the City of Pittsburgh.

The executive offices of Duquesne Light Company are located at 435 Sixth Avenue, Pittsburgh, Pennsylvania 15219. 1 l Tcble of Contents Directors . . . . . . .... ... . . .. . This Page Financial Highlights . . . . .. . .. . . ... 1 Letter to Stockholders ... . .. . . .. 2&3 l 1979 in Review . . . . . . . . . . . .... . 4 to 6 Our First 100 Years . . . . . . . . ..... .. . 7 Th3 Company's Beginnings . . . . . 7 Early Growth . . . . . . . . . . . . . . 8&9 The Lean Years . . . . . .. .. 10 & 11 Board of Directors The Nuclear Age . . . ..... . .. . .. ... 12 & 13 John M. Arthur t Chairman of the Board and Chief The Value of Energy . . ... . ... .. . 14 & 15 Executive Officer of the Company Report of Management ....... . . ... .. .. 16 Stanley G. Schaffer Accountants Opinion . . . . . . . . . ... . 16 President of the Cocpany Financial Information . . .. .. . . 17 to 31 Charles M. Atkinson l CAPCO Map . . . . . . . . . . . . .. ... . . . 32 Vice President-Fiscal of the Company Company Officers . . . . . . . ... ......... Inside Back Edward O. Boshell*t Service Area Map . . . . . . . . . . . . . . . . .... ... Inside Back investments Doreen E. Boyce*t Chairrnan of the Department of  ; Economics and Management and i

m.

• we;; s . o ,

Professor of Economics and s e

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Management-Hood College, Md. ' jdW 5 J9n H. Demmler t

                                          '. .x .O

• Partner, Reed Smith Shaw & McClay A

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                                        -? a                                                                  x        ..       Attorneys-at-Law b                                                 "

N /.g y. y 4tjk[f y :f Sigo Falk* Vice President. Keystons Bank )

                      ,.                       .             TC                ,n                                      et    Philip A. Fleger t
                                                                       .*

• Retired Chairman of the Board and i

                         ~

3 g( VeQ - ' F Chief Executive Off2er of the Company M

                                          'i7
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((y 1 E Edward J. Hanley t Retired Chairman of the Finance Committee, Allegheny Ludlum

                                                    ~
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s fndustries, Inc.

                                                                                    -                               i        G. Christian Lantzsch*t etw                                 ..':'                                                             Vice Chairman of the Board of Mellon Bank. N.A.
                                                                                                 .w_                            and Mellon National Corporation             ,
                                                      -                                      pc                    g".:      Eric W. Springer t                             l Partner, Horty, Springer and Mattern        l i                                                                                                                                Anomeys-aRaw                          -

Strnding. left to nght: John H. Demrnier; Charles M. Atkinson; on ilp A. l t Fleger; Doreen E. Boyce; Edward O. Boshell; G. Chnstian Lantzsch; ' Member of Audit Committee Enc W. Springer; Sigo Falk; Seated. left to right: Stanley G. Schaffer; h*[$e No[7a"ng"c">mm t John M. Arthur; Edward J. Hanley ' Elected to Board in April 1979 l l < I l

Highlights-1979 Duquesne Light Company Percent

 /97inancial                                                                1979                                  1978                         Change U otal T Operating Revenues                                          S      622,540,000                S         573.128,000                       +   8.6 o Net income .                                                          82,207,000*                           65,723,000                    + 2 5.1      'o Earnings Per Average Share of Common Stock                                      $1.81 *                              $1.49                -+ 21.5 %

Dividends Per Share of Common Stock $1.76 S1.72 + 2.3 % Shares of Common Stock Outstanding at Year End 35.550,000 31,750,000 -+ 12.0 'o Operating Utility Plant S 2,380,805,000 $ 2,201,805,000 - 8.1 o Kilowatt-Hour Sales 13,320,791,000 12,645,043,000 + 5.3 % Peak Load-Kilowatts 2,296,000 2,379,000 - 3.5 o Cost of Fuel Per Million BTU 1318e 125.3c - 5.2 o Average BTU Per KWH Output 10,924 11,031 - 1.0 %

      " Includes the cumulative effect of a change in billing practice of $3,845,000 or S.12 per share as discussed in Note 2 to the Financial Statements.

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TD Our Stockhdd:rc: In March 1980, Duquesne Light Company will be 100 years old, almost half as old as our nation. During this century, electric power has transformed our service area into one of the world's major workshops-a transformation of which we are proud to have been a part. We hope you will take time to read the Company's history, included in this report, because it records the many challenges we have faced over the years. The Company met many challen-ges-treating them as opportunities rather than obstacles-accounting, in large measure, for our remarkable g owth and prominent position in our service area. We must call on the same kind of courage again, for today's business climate is more complex and unpredictable than any we have experienced since our beginnings. During 1979, there were bright spots and significant improvements. However, it was also a year of obstructions, most of which were not our doing. On the positive side of the 1979 ledger, the most significant financial event for the Company was the S58 million annual rate increase which became effective July 15th. This increase, which amounts to about an 11% rise in rates on an annual basis, has greatly improved our present financial condition. Also, for the first time since 1973, the common stock dividend was increased. A dividend of 45v per share, declared in August 1979, represents a two-cent increase per quarter and raises the indicated annual dividend rate from S1.72 to S1.80 per share. Earnings and electric sales also improved during the year. The Company camed S1.81 per average share of common stock-a 21.5% increase over 1978. Earnings for 1979 included 12e per share from a non-recurring change in billing practice required by ANNUAL SYSTEM PEAK LOAD Mm the Pennsylvania Public Utility Commission. Electric sales were 1910-1989 obl Actual up 5.3%, primarily as the result of the use of new electric arc $o"* ' kd ** , Forecast furnaces by Jones and Laughlin Steel Corporation. It is heartening to report that increased use of electric arc furnaces, like those serving the Pittsburgh Works of J & L, will 3.s offset other steel-related losses and will add approximately S28 million to the Company's annual revenues by 1981, while saving more than 6,000 jobs for the Pittsburgh area. a.o On the negative side, by far the most significant electric utility problem in 1979 was the accident at Three Mile Island. Though no one was killed or injured and the radiation released 2.s was so small that the effect was not measurable above normal conditions, Three Mile Island has raised disturbing issues which have affected Duquesne Light and the entire electric utility g~g h Lr-industry. m Because of the uncertainties affecting future nuclear power, severe financial constraints, combined with a reduced rate of growth, we, along with the four other utilities of the CAPCO 73 y[4 f c1 4 Group, announced the termination of plans to build four addi- i .o ,_ $@ tional nuclear units which were in the design stage. Also, the r Q p estimated completion daies of three nuclear plants presently Msd ) under construction were extended 12 to 36 months. As part of CAPCO, we are going forward with the construction of those 0.s (QQQL a ti three nuclear units, plus one coal-fired unit, which we believe will g p g] Q b oo *3o -g'*Q Qt y,o ion- %* ,j .8o '89: add sufficient capacity to see us through the mid-80's.

                                                                                                                  ~

2

Another difficulty we faced during 1979 was the impact of inflation on our operation. Inflation imposes a heavy burden on O all capital-intensive utilities, including Duquesne Light. Beyond increasing our costs for goods and services at a furious pace, inflation increases the cost of funds in the long-term capital market. We have been and are now a financially sound utility. However, Duquesne Light's ability to continue to get the capital necessary to finance construction programs will depend, in part, on the government's ability to control inflation. Our subsidiary, Allegheny County Steam Heating Company (ACSH), forced to convert to oil to meet environmental regula-tions in 1974, has continued to lose money. ACSH lost $1.2 million in 1979 due largely to rising oil prices. On December 31, 1979, the Pennsylvania Public Utility Commission approved an ACSH request for permission to re-establish a fully compensa-tory fuel clause and to transfer to base rates $1.2 million of fuel adjustment revenues. In the meantime, Duquesne Light and a sWW- group of stes n users are meeting to find solutions to ACSH's W financial problems.

   ...s                                Along with the entire electric utility industry, the Company was faced with many environmental regulations during 1979. A case in point is our Cheswick Power Station. Studies conducted at
         ~

v this coal-fired facility indicate that the plant is not adversely JA % ' affecting the air quality of the area, including neighboring com-munities outside of our service area,to any significant degree. Yet, to comply with the letter of the law, we may have to install a O g' , scrubber system which would cost an estimated $26 million to build and $36 million annually to operate. Over the life of the f. station, our customers would pay an additional S1 billion j r expense for something that would provide them with little bene- l fit, and, at the same time, offer no meaningful improvement in air 1 quality. Despite our many concerns, we believe Duquesne Light has John M. Arthur the people and the expertise to continue providing reliable serv- 1 ice at reasonable cost, so that our customers can use electricity to enrich their lives and maintain their livelihoods. We take this opportunity to thank our dedicated employees, our customers and our stockholders for their support. We feel that our "Second Century of Electricity" will be even more chal-( lenging and rewarding than our First. 4 i ..

                     ~

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                                  ' John M. Arthur Chairman of the Board and Chief Executive Officer f/j;
         ;Q;jf                      n Q( v{Ad p i

G l l/ L Stanley G. Schaffer 4 President 2 Stanley G. Schaffer February 21,1980 3

1979 in Rovizw ing capacity that could offset, to some degree, increased Revenues the reduced capital requirements. The delays in Revenues for 1979 increased by S 49 million over the units under construction will also reduce the 1978. Approximately 67 % of the increase Company's capital requirements by about S12 resulted from rate relief, the net energy clause million per year over the next three years, and the Pennsylvania tax surcharge. The remain. although the eventual cost of these units will ing 33% came from greater kilowatt-hour sales. increase substantially. Subject to regulatory approvals, the Company Customer Consumption increased plans to amortize its investment in the cancelled Electric sales were up approximately 5% over units of $30-S35 million, as well as its share of last year. The two, new 350-ton electric arc fur- any cancellation costs, over a period of ten years naces at the Jones and Laughlin Steel Corpora- and to recover these amounts through its rate tion's Pittsburgh Works and the opening of the schedules. (See Note 3 to the Financial State-first phase of the Century ill Mall in West Mifflin ments) made major contributions to the increased sales. Nuclear Operations About 29% of electric revenues came from Beaver Valley Power Station Unit #1 (a CAPCO residential customers, 30 'o from commercial facility) represents the Company's lowest fuel customers and 38% from industrial customers. cost generating station. Because it is nuclear, The remaining 3% came from such other sources however, it operates in a sensitive atmosphere, as street lighting and sales to other utilities. circumscribed by a variety of safety requirements unknown to plants fired by fossil fuels. Future Load _ In compliance with a Nuclear Regulatory Com-The new Pittsburgh Convention Center, sched-uled to open in October 1980, is expected to sbn M Wehp, Nam VaHey #1 was u wn a - mgust 1979, in order to provide the Company with an additional S180,000 in annual electric revenues. Furthermore, this make minor modifict s in certain piping sup-p rts to meet seisma, uirements. The order project will generate additional economic activity a e on ugus and ham in the Pittsburgh area. It is estimated that the Val ey # 1 p r ted at full power from August 17 Center will attract 120,000 people a year who will , through September 1979, at which time its power stay an average of four days and spend S95 per was uced b Mend com Me. day, for a total of $46 million annually. Another encouraging type of growth taking cost oF COAL. oil & NUCLEAR FUEL place in the Pittsburgh area is typified by the $6n P whon btu s Freighthouse Shops which opened in 1979. A 160c new hotel planned for Station Square, as well as new office buildings, hospital and health facilities expansion, two major shopping malls and two "O large electric arc furnaces at Crucible Steel Cor-paration's Midland Works, will provide new reve-120 nues in the near future. _ Future Construction Program Revised On January 23,1980, the Company, along with ' - - the four other utilities of CAPCO, announced the termination of plans to build four nuclear gener- gg ating units then in the design stage and a delay of - --- from 12 to 36 months in the completion of three nuclear units now under construction. Financial so ~~ ~-~ restraints, growing uncertainties affecting future nuclear power and reduced need for future capacity were the primary reasons why the 40 _ __ ___ CAPCO construction program was revised. The cancellations will reduce the Company's capital requirements by approximately $1.27 bil. 20 _ _ _____ _ _ _, lion. However, depending on future load growth, the Company may have to provide other generat- 6g ,7g 73 72 '73 74 75 *76 77 78 79 0 4

On Nov:mber 30,1979, the unit was again Net proceeds to the Company were shut down, this time for refueling, routine main- S99,035,000, tenance and many industry-wide NRC safety On November 15, 1979, the Company [3 inspections and safety-related equipment modifi- issued 3,800,000 shares of Common Stock V cations. The unit is expected to be out of service at a price to the public of $14.00 a share. until mid year 1980. Net proceeds to the Company were

                                                                            $50,730,000.

FuelSupplies Reasonably Assured Although ever-increasing corTgetition for coal Environmental Costs Substantial and fuel oil creates a burden for our Company, it Approximately S27 million was spent by the Com-is believed that adequate quantities of these pany on new environmental control facilities in fossil fuels are available for the foreseeable 1979. Traditionally, Duquesne Light, winner of future, but at increased price levels. Dunng two major environmental awards, has been a 1979, approximately 25% of the coal consumed good neighbor and an advocate of a healthful at the Company's wholly-owned stations came environment. Nuertheless, we believe that there from its Warwick coal mine. should be economic as well as other justifications Nuclear fuel requirements are also reasonably for environmental programs and that the environ-assured through 1986, despite the Company's ment should be protected by sensible and real-involvement, along with the other CAPCO com- istic regulation rather than by punitive programs, panies, in litigation involving Kerr-McGee Corpo- the benefits of which canrbt be cost-justified. ration for failure to deliver contracted quantities Too often, the Company is forced to spend too of uranium due in 1979. much to accomplish too little. Both government regulatory bodies and the Company should care-Financing Summary fully evaluate environmental regulations that About 70% of the Company's capital expendi- increase costs while providing only marginal ben-tures of $198 million during 1979 was raised efits to the environment. through outside financing. /7 On March 1, 1979, the Company sold Consumer Affairs Cl $100,000,000 of 10% % First Mortgage In response to a mandate from the Pennsylvania Bonds, Series due February 1, 2009. Public Utility Commission, the Company during the year implemented the following changes SNEAR GROWTH-KWH SALES  ? Residential which affected primarily our residential custom-1975-1979 E!m24 Commercial Billions of Kilowatt-Hours can!I Industnal ers. . 34 e=a otner

• Meters are read bi-monthly instead of quar-terly.
• More restrictive policies govern the Com-12 -.J " .

pany's credit and shut-off practices.

• Newly designed billing statements are giving customers more information and are easier a to read and understand.

10 _

                               ._.-M i       f              j           However, these changes required the hiring of

[b h: : 3 h ;lj additional employees, as well as an increase in 8 E2p 9L f _._}Q O fj the use of special equipment, both of which increased the Company's operating costs. N k @M/ h"n J# pjj? y l 6 {( Lf@ nq MJ Q3_Q M Conservation and Consumer Information lt is established Company policy to provide our h$ [q h M customers with information which will help them 5 fI bg  ; use electrical energy as efficiently as possible, in

         ,    MQ]

g 9 M g (4] accordance with national policy. Duquesne Light 1Q g a i believes that energy conservation has made and i, ,I dJ p$g d [f-V can continue to make a meaningful contribution 2 h to the extension of America's energy supplies. 3 The Company believes it has an obligation to s supply its customers with two important items of 17

• l ' '

h@49

                                             ~
                                                    " *        ~

7 information relating to conservation: the need to conserve energy and methods of conserving g

l r cnergy. To achieva this du:1 objectiva, w] use During th3 year, abou; 28% of our employees print and broadcast media, Speakers' Teams and received additional training through participation spccial Company representatives who function in Company-sponsored courses or by attending as expert advisers. one of the fine universities in our area. In print media, we use newspaper adver-tisements, booklets and bill enclosures to explain Professional and Supervisory Employees both the need for and the methods of conserving Most of Duquesne Light's supervisory employees emetrical energy. Our Company's Speakers' have spent years learning their ; kills. In fact, the Teams have similar objectives. In 1979, Company typical Duquesne Light non-union employee is, Speakers gave 142 presentations, attended by on the average,43 years old and has 18 years over 7,000 people. service with the Company. In broadcast, the presentations by Mrs. Jane Cricks (the Company's Director of Consumer Union Agreements Education), on KDKA TV and KOV Radio in The Company and the International Brotherhood Pittsburgh, have provided valuable information to of Electrical Workers reached an agreement on a the consumer and have increased customer two-year contract effective October 1,1979. The understanding of the Company and its objectives. settlement maintained the Company's relative Our two films, "The Paradox of Plenty" and wage position with other electric utilities.

      " Paying for America" have been well received.                           Employees of the Company's coal mines are Finally, Company representatives, working                          represented by the United Mine Workers of directly with representatives of larger businesses                    America (UMW) and are covered by the industry-and industries, explain in detail the most effective                  wide Bituminous Coal Wage Agreement. A three-energy utilization methods.                                           year agreement was reached with the UMW effective March 27,1978.

Company Employees The Company's total number of employees at year end was 4,398, about 2% higher than 1978. O HIGH & low SALES PRICES oF COMMON STOCK High High 1978-1979 1978 I L1979b-Dollas Per share Lign

  $20                                                                                                             Low            Low 19h 18                            .                  18                17te 17 %                                                               16 %

f2- ' ' "Tj 16 % 16%, p. 13 16 % . . . . f

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i - L 13%_ 12 1st 2nd 3rd 4th 1st 2nd 3rd 4th ouarter ouarter ouarter ouarter ouarter ouarter ouarter ouarter High and Low Pnces of Duquesne Light Company Common stock as reported by The Watl Street.lournal. The New York stock Exchange is the pnncipal market in which the Common stock is traded. 6

of the initial installation ci the Brush Art Dynamo. At right, Our First 100 Years ""'"'" inghtstisc sr streamsinten

                                                                                             '"" " """ +h              niaci n t n ."'""">""-"r""~""'
                                                                                .h ts of thieven IcJ to t he <ompany's tirst customer. Penn-1)uquesne I.ight is telchratmg its first centun of senice. Thi,          ultania Italroad had a senous problem of boxcar h>oting at anniversan is an ex< client renunder of how the progress of our          night. Arc lights mountcJ on pelo helped solve the problem.

cif)nomit ss st em bas depcHded up4)n the advancement < >i N"*'d'"**"* i*d U E'4E N"AN " r b D' g g(.7 int Teast t he < < >napany's generating capacitv. I he ins enti< >n >i the maintena,ite irce incandescent bulb hs Thome I dison, <oupied with the fast-growing reputation of The Company's Begiimings '"' '" " ' r" " ' f"' d'r'"d"" ' 'e nh , spuned inemased demand. The Pittsburgh area's first electric utilin company-Alleghens I. ate in 1880, the first permanent pouer plant of the com-Counn 1.ight Compant -was formed on N1arth 6,18 80 pant was built in an old buildmg in Virgin Alles (nou Oliver Initialls, carbon art lights were the onlv practical use of Avenue). Elet tnc service demand continued to grow. In 18 8 5, t lo trit in. These unrefined lights tonsisted of open globes with the capacin of the Virgin Alley plant was greatly expanded. hean carbon tilaments w hich needed Jaily trimming. To pro- The compant had its share of imitators. \Vith electricirv s ide a pouct source for these lights, the company purchased a more and more usciul e an energy source, there were about Hrush Art Dynamo, one o ^ the earliest a pes of generators. 150 electric companies operating lotalls at the turn of the Pittsburgh's \Vestinghouse .\lachine Company wa_s the site century. Competition was verv heated. 4 g , k

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J EARLY GROWTH Di ' 3

• The original Duquesne Light Company was incorporated on August

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5,1903. In November 1912 this Company merged and consolidated b . j; - , K-Q .'s. ..' .m9 -$ with two other electric companies to form the present Duquesne

                                                                                                    -Q ' i g                                                    Light Company as a subsidiary of The Philadelphia Company, a
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                  . ;                                                                                                              j                            utility holding company. Durmg the next twenty years, Duquesne m                     .s.,              '?~~                                    " .41                                            j                             Light acquired the property and franchises of a large number of "k,.f .                                                                                                           @l                                             small electric compames in Allegheny and lleaser Counties, thereby w.4 s ..' ;                                  h.f<                         .- ' ' '                                               ~

eliminating duplication of service and promotmg etliciency of opera- ( igg /dW Q ' tion. Included in these acquisitions were the property and franchises (

 %                   'N                                                          ~

of the Allegheny County Light Company in 1927 and the Allegheny i a -

{;{,fg - . County Steam lleating Company ( ACSil) in 1913 as a wholly-

g.  ;

owned steam heating subsidiary.

7. ' ? . .- The creation of ACSil began the control of downtown Pitts-

] .] ' j.; 7'.'~ T"7 burgh's air pollution problem. ACSil's steam, pumped from its two central stations, replaced the myriad of dirty, small furnaces which s r- h.f- , d..f

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                                                                                                            , 7 . ,. c heated individual buildings. hlay, ASCil heats approximately 300 M-[                                                                                  
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                                                                        'i                                                                                      downtown buildings.
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               \                      .e                                        ..-                         ;f                                                3     Ily 1915, construction of a 66,000aolt transmission ring 90 miles
                                                        ' ' * ~

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J in circumference was begun. Perhaps the first one eser in a metropol- '; ['; -

                                                                                                                                                          %     itan area, the ring received energy from two generating plants
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                                                                               ~.y'.                                                                f -         (llrunot Island and Colfax) and transmitted it into large substations jm # -                                                 -

for distribution.

                       '                                 '                           ~              '

a ,,.  ?. .J The advent of the electric trolley was a boon to the growth of the  ! s .m., n. . ..s.s . E '--Y'. I Q.: F Company. The demand for electricity to run the trolleys during the

          .                                                                                                           y.""6*4                  V ;.y            day balanced the residential and street lighting load at night.

f- - y; With the coming of the 1920's, electrical appliances came into 7 .* vogue. Duquesne Light sold appliances to customers through a { 3 }] [ .. , system in which the cost was added to their electric bills. Accep- {. t 7 r y w A ., f tance of electncal appliances increased demand.

33 g Tj' + y '# Electncity in industry increased, too, leading to higher production

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                                                                                                                                                    , ,,, 1 and better working conditions. Ilefore the 20's were oser, Pittsburgh was a leader in the Jubilee Light-Up celebrating the 50th anniversary
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                                                             . .:        .                                            43 ; =                     "a,            of Edison's incandescent lamp.

1i. IP$f J. M . " ;. . j. During the same decade, Duquesne Light pased the way for other _s.f $v.c.O. oU.j .

_ . -, *j"..jJ , .

electric utilities in establishing a System Planning Department. This l f ~ ,r -: 1

                - m- J,.                          ~.-                   -f                                                                                . department was to develop an expansion plan to furnish system              j
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                                                                                                                                               '[! $            capacity efficiently at the lowest possible cost.

s#- In 1924, an otter to help electrical equipment manufact urers F - d; p /, improve high-voltage circuit breakers throut 5 testing them under

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actuJ operating conditions, led the Company, a year later, to an

                                                                            .#                                        [ / y');                                  agreement with West Penn Power Company for a high-tension inter-4 4,.                                    .j .

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                                                                                                                                                          .y    connection between the two systems. This efTort led to better prod-
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                                                                                                                                  ;; '         .          .?     ucts, improved service to customers of both systems, and set a stand-
                                                                                                                                                          .y s  ard for the entire industry.
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With the great growth and prosperity of Duquesne Light in the l

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f i 20's, the Company was in a healthy condition as it celebrated its 50th anniversary in late 1929. For the challenge that was ahead, it

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4 t V,. s - . c. J &j.n / was a fitness that would be tested. 9 L ___-_-________ - _.

                    @ HARD T MES @#

M st f illl\ (lHl t ht' (lt '(' Ule * ( >! t } H ' Illlit u 's se 't ' I )1H {l h ' silt

• l .ight la( t*

IlH' st'\t'It' l }e '[)Tt *wl()tl t }la t ll( tort '(l { } h ' % 4 hr !d's t '(l in( dil\ . l)llt it also hr onght the deustatuiu (;reat I'lood ol It) 36 Wit h t he' ( filla})se ol t ht' sit >Ck nlarket in l929 and t he eU(>nonliC t alls l)llt t }l.it It)!!()M t'(l. k)thint'w M .h lact'(l u lll1 tfD' (l1(IICllll task (>I at t t'in pt in g til hrillg IhtOk in\ estors h\ pro \ Mhnu an adequate r.'lliril f all { {l!'I f Ill\ t 'st il h 'llt s. \s a tillllt\ dt%tlIng lT()lli strelleth, l )l H p le ' sill ' !.lg}lt M.h .il)h ' t t ) % t 'alllt'T t llt ' I )t 'j )r t 'wl( )!! .IIH l C()ll- / t illlit ' to lll)lloh! Its Cour si' < il s '\ panded elect rlO ser\ ice , I Ile ' IH'uliltlilig t il l} H' l'(lli tlt's san l$rlillt)t IslalH$ as t ht' }H)nh' ()l t ht' lit '% jallies }l llred Pon er htation 3long %1th the c\isting lif tiniet Island Station, t he lleed Station w as loinn! to t he 66D HI-

          \ oli t ralhililwliln ring coinpleted in 1913 l                  l hongh a tilne of great liardship in all industr\, 1)nquesne I.ight                                                         x.m                           '

l' per sonnel in.nnt.nned nulnstr\ leadership in technological de\ cl- (IhhA@h opn ie n t s in the early Thirtms. there w as a need to protect h~~ W of kers u lnlc e(popnient M as de-energUed Ior repairs 'Io nWet s qs l t l? , i, tins n, cd. (:oinpany engun ers designed a nn chanical key niter- , _.

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i \ i The (:ornpain w as surs n ine the natnini econonne storin win n a (t)Trn tij ,ggn itlh r IllagnitIH b tin >k g)[g.g,_Jlg, (; , g I i \lart h IN Hnh. the J.unes il Ib ed. liruin>t Isl. uni .uul (ffi()n

                                                                   . ollas Ntations w ere kin >< k. d out d' m m h. g g ( y, I

pain s custonn rs w itin >ut ser s ic - Thi- ( )lIa s pl ant u as ('l( ny y j w ien w ater s ros. to witlun a h uit of t h. ir hnal creq W ypw inatels (fi h et flest< > ring sers ice at t he t arliest tune possibh pr< >s ed t< > be a dilheult challence for I)uqu sne laubt f low es er. its response to the situation w as notlung short of sensational M ithui hours f rorn Ikie lu n - M *rs U t- had k)tt*n (llse(g j{ g n g.d, jg y y j g ql nhtained thronuh s arious uiterconin on,m M mWh mm parnes. l'his supply w as able to handle eniereenes needs mal hw functions ur::il the resuniption of regula; sersice took place.

                                                                       ! bn ille sitTs is ('d (lp- l),-l)rt'ssn >n el TL- ( b M L'h d t b

(:ornpany closed out the decade ni escellent comhtnin to sers e the Pittsburgh area ulth the energ3 needed in the < 'nnnu s ears M ith f uture dernands in nund l)ng w [@ m gg}gg fliilln H prograign <3l g spinhi(H) ;uujn M ngggggggq g 1939 Ihi helated (:hris:rnas uilt to the people of Micehen3 aini lle.n er ( .ounta s w ould not IH- a gos erinnent-hnanced project-

    .g-                                                           nit one pani f.or eritircl3 hs prn ate capital gq                    gy                                                l he 19tFs broucht Worki War Il f)uquesne f.ight's u ndo,n in
                                                                  >uinhnu capacit3 donne the .,, rs p,d gg,c ,,,,,, 3, ,

3 J steel mills, f actories and slup> ards producine for the w ar eff' ort f{g g were staggering. The (:oinpam inet gu,y,4 g 9 -

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shYHE NUCLEAR NGEfh \ Duquesne Light embarked upon the nuclear age in power gen-eration as an independent company. In 1952, Duquesne Light was separated from The Philadelphia Company, of which it  ! had been a subsidiary. This move meant complete autonomy in decision-making and in operations. With the discovery of nuclear fission in the Forties, the Com-pany was looking to make commercial use of this new way to produce energy. The year 1954 brought one of the most heralded research and development projects Duquesne Light, or any other pri-vate company, had yet undertaken-The Shippingport Atomic Power Station. Based on competitive proposals, the Company , was selected to participate in the project with the United - States Atomic Energy Commission (now a part of the e-Department of Energy). - This innovative power station was the world's first full-scale M = 'er i

                                                                        -c %((h3 %[^c atomic power facility operated as part of a major utility. It has proved to be an important training ground for those in techno-logical and administrative positions of the nuclear power               /fy                   gg.

p' [kk M industry. While the station's educational value continues, the @p@ plant has estab!ished itself as a reliable though small source > FT " of energy for Duquesne Light customers. Duquesne Light supplied the land on which the plant was J. 38( built, contributed $5 million for design and construction, and  %. A installed the turbine-generator. The nuclear part of the power , a station is owned by the Federal Government, while Duque, n Light owns the turbine-generator portion and is under govern-ment contract to operate the plant. President Dwight D. Eisenhower formally dedicated The Shippingport Atomic Power Station in May 1958. The Fifties were also a period when the family home became more than just living quarters. It became an entertainment center as television changed the way Americans spent their evenings. Marketed on a broad scale, Llevision became a regular household item by the end of the decade. The domina-tion by radio and movie theaters as prime enterta,nment My{ggg gq i y 1gy 4pgj outlets was about to disappear. Commercial and residential air-conditioning, as well as many industrial process changes, ,. joined with television to start a demand-growth spiral for elec- PMM . . _ y nm-tricity which was greater than anyone ever dreamed. ~WR 9% AWN The Company's new nuclear development, combined with 4"TC~v7 far-sighted capacity and transmission planning, allowed Duquesne Light to continue to meet customer demand. , g;&p

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JMcc j Through the prudent application of private capital, Duquesne i - y Jg:p ] Light continued to meet demand in the 60's while, at the same 'u @ n Plh 1 time, financing the beginnings of a massive environmental

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mea _ __, u=mmm-=-mm----- REAUZlbG THE 6 TRUE VALUE O ENERGY p- _ j [. t=m.nv.wrsmma.=x:mza:rzaa:n:z-wm-awu;=m:1 9 y (l ~ . 1 , t The year 1973 proved to be o turning point in our understanding 4:P 'j ' L' t *

p of energy. That was the year the first notional " energy crisis" came about, due in large part to the OPEC oil embargo. In the years oJJ "'.' q preceding 1973, electricity had become an inexpensive, efficient ax,m form of energy. Most of the world's population accepted this type

                          '                       p
               *M                                  -                         of energy without questioning whether they were in danger of losing it.

But 1973 changed all that. There was sudden awareness of the perils of dependence on oil and natural gas as fuels to generate s electricity. Then it was realized that costs for these forms of energy E were going sky high. The prices of oil and gas rose. The cost of l.. _ m cool increased, as well. And before anyone knew what was hop-VN' pening, cheap energy-as we all knew it-was forever ended. The true economic value of energy suddenly began to be realized hf7 $ g by the general public. For years, Duquesne light had understood the importance of the

w. -

                                                         ,D                  diverse use of fuels to assure continued electric service to custom-7*       ?              ers in times of shortages. Now this wisdom was paying oft A new
   -)                                                     % f                cool-fired plant at Cheswick reduced the Company's consumption
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• of cool per kilowatt hour of electricity produced, aiding in keeping the cost of fuel as low as possible. During this some time, the

                                                                         ;   cool-fired Sommis        7, Eastlake 2 5, three units of the new Bruce w                                 7         Mansfield plant in the Beaver Valley and the two nuclear units at
          ,,                                              )              ;   the new Beaver Valley Power Station were being built through an i       s                               NO                       orrongement with the Central Area Power Coordination Group
                                                                !            (CAPCO). This arrangement, begun in 1967, consists of Duquesne N                                                <

h ' M} . ~ Light and four other utilities in Pennsylvania and Ohio, it permits joint bulk power construction programs that enable these utilities to { Jg pool their resources to provide the needed capacity for the region. In the Seventies, concern for the state of the environment contin-ued. To meet expanded regulations imposed on its facilities.

                   +

h. Duquesne Light spent more than $300 million on environmenta!

M programs. This progressive approach to serious pollution control problems won the Company a major award in the pollution control field in 1973. H owever, environmental control expenditures increase the cost of energy. In addition, regulatory and political uncertet nties are hampering our obility to build and operate

                                                                         ;    nuclea fccilities.

, , Neve theless the benefit of the Company's balanced use of L*- . . fuel soui es was quite apparent during the coal strike in the winter

      ,                                               Jg                      of 1977-/8. By purchasing power from neighboring utilities and O                                                               ,        operating its nuclear and oil-fired capacity, Duquesne Light was able to provide its customers with electricity and to keep the system operating with only limited curtailments of service.

Duquesne light enters its second century strong and optimistic-ready to accept the challenges of the future in the some manner in which it solved the problems of the post. 15

R:portcf M:n g:m:nt appointment was ratified et th3 Annu:1 Meeting of Stockholders. Their examination was made in accord-The management of the Company is responsible for ance with genera!!y accepted auditing standards and the financialinformation and representations con-included a review of the system of internal accounting tained in the financial statements and other sections controls and tests of transactions to the extent they of this Annual Report. Management believes that the considered necessary to provide reasonable assur. financial statements have been prepared in conform-ance that the financial statements are not misleading ity with generally accepted accounting principles and do not contain material errors. appropriate in the circumstances to reflect, in al' ~ste-nal respects, the substance of events and trant The Board of Directors has an Audit Committee

                                                      .          composed of four non-officer directors which meets tions that should be included and that the other infor-mation in the Annual Report is consistent with those         four times a year. The Audit Committee has the foi-statements. In preparing the financial statements'           lowing duties and responsibilities: (1) recommends the independent public accountants; (2) reviews the management makes informed judgements and esti-mates based on currently available information of the        scope of their audit and other services to be per-formed; (3) reviews the financial statements and the effects of certain events and transactions.

Management maintains a system of internal related report of the independent public accountants; (4) reviews with the officers, internal auditors and the accounting control designed to provide reasonable cssurance that the Company's assets are safe- ndependent public accountants the adequacy of the guarded and that transactions are executed and Company's system of intemal accounting control, recorded in accordance with established procedures. including their recommendations with respect thereto; There are limits inherent in any system of intemal con- and (5) reviews the planned scope and results of the trol based on the recognition that the cost of such a internal audit function. The independent public system should not exceed the benefits to be derived. accountants have full and free access to the Audit The system of internal accounting control is supported Committee and meet with it, with and without manage-by written policies and guidelines and is supplemented ment being present, to discuss internal accounting by a staff of internal auditors. Management believes controls, auditing and financial reporting matters, that the internal accounting control system provides reasonable assurance that assets are safeguarded {' - P and financial information is reliable. C. M. Atkinson ohn M. Arthur - The accompanying consolidated financial state-V ce President Chairman of the Board and monts have been audited by Deloitte Haskins & Sells, independent certified public accountants, whose (F scal) Chief Executive Officer Accountants' Opinion DELOITTE HASKINS & SELLS Certified Public Accountants Two Gateway Center, in our opinion, the consolidated financial state-Pittsburgh, Pennsylvan,a i 15222 ments referred to above present fairly the finan-cial position of Duquesne Light Company at TO THE DIRECTORS AND STOCKHOLDERS

                                                                                 '      "           "n          s s of OF DUQUESNE UGHT COMPANY-                                                                         .

its operations and the changes in its financial We have examined the consolidated balance position for the years then ended, in conformity sheets of Duquesne Light Company as of with generally accepted accounting principles December 31,1979 and 1978 and the related applied on a consistent basis, except for the statements of consolidated income, retained change, with which we concur, in the method of carnings and changes in financial position for the billing and recognizing revenues as described in years then onded. Our examinations were made note 2 to the financial statements. t in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other audit-g ing procedures as we considered necessary in the circumstances. February 21,1980 >16

Duquesne Light Company Statement of Consolidated Income For the Years Ended December 31,1979 and 1978 l f'N (Thousands of DoHars Except Por Share Amounts) 1979 1978 OPERATING REVENUES: Electric . . . . . . . . . . . . . . . .. .. .. . .... .. . .. ...... .. S611,346 S562,114 Steam heating . . . . . .... ... . . . . . .. .. . ... .. 11,194 11,014 Total Operating Revenues . . . . . . . . . . .. .... .. ... .. .. .. 622.540 573,128 OPERATING EXPENSES: Fuel...................................... . .. .. . .. .. 211,939 170,814 Purchased power . .... ... .. ..... . . . . ..... .. . 10,922 35,803 Other operation . . . . . . . . . . . . . . . . . . . . . . . . . . . ............ .... .. . 87,682 79,812 Maintenance . . . . . . . . . . . . . . . . . . ..... . . .... . . . .. .. .. 52,444 52,493 Depreciation . . . . . . .......... ... .. .. ... ...... ..... .. ....... 48,450 45,660 Taxes other than income taxes . . . . . . . . . . . . . . . .. .. .... .. . ...... 47,476 41,997 income taxes (Note 10): Fed e ral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 9,196 (2,143) State . .. . ....... .... ... .. .. . ... ... . .. . ..... .. .. 8,312 5,040 Income taxes deferred-net . . . . . . . . . . . . . . . .. .. .. .. 10,779 22,037 Investment tax credit defarred-net . .. .. . .... . .. . . ...... .. 20,808 18,409 Total Operating Expenses . . . . . . ... . .. . . 508,008 469.922 OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . ... 114,532 103,206 OTHER INCOME: Allowance for equity funds used during construction (Note 9) . .... . . . . 18,852 15,971 income taxes-credit (Note 10) . . . . . . . . . . . . . .. .. . ...... 8,643 6,088 Otherincome and deductions-net .. .. . ... ... ..... . .. . . .. 1,750 1,072 Total Other Income . . . . . . . . . . ... .. .... 29,245 23,131 INCOME BEFORE INTEREST CHARGES . . . .. . . .. . ....... 143,777 126,337 (~,. INTEREST CHARGES: Interost on iong. term debt .. .. . ..... .. .. ..... ......... .. 69.655 61,183 Other interest . . ............ ..... . ....... ... .. ... . .. . 3,475 4,396 Allowance for borrowed funds used during construction, not of int 'me taxes (Note 9) . . . . ..... .. . .. .. . .... . (7,715) (4,965) Total mterest Charges . . . . . .. .. ............. . .. ... . .. 65,415 60,614 INCOME BEFORE CUMULATIVE EFFECT OF THE CHANGE IN BILLING PRACTICE . . . . . . . . . . . . . . . . . .... .. ... .. . .. .. . 78,362 65,723 CUMULATIVE EFFECT TO JANUARY 1,1979 OF THE CHANGE IN BILLING PRACTICE, NET OF INCOME TAXES (Note 2) . . . . . . .. . .. . 3,845 - N ET I N CO M E . . . . . . . . . . . . . . . . . . . . ... ... ...... ......... .. .. .. 82,207 65,723 DIVIDENDS ON PREFERRED AND PREFERENCE STOCK ..... . .. ... 23.721 18,915 EARNINGS FOR COMMON STOCK . . . . . . . . . . . . . .. . .. . . . . .. S 58,486 S 46,808 AVERAGE NUMBER OF COMMON SHARES OUTSTANDING (000) .. . . .. . 32,239 31,464 , EARNINGS PER AVERAGE SHARE OF COMMON STOCK: ! Before Cumulative Effect of the Changt in Billing Practice . .............S 1.69 S 1.49 l Cumulative Effect to January 1,1979 of the Change in Billing Practice (Note 2) .12 - Total.......... .. .. .... ... .. ..... . .. ... . .. .. .S 1.81 $ 1.49 PRO FORMA AMOUNTS ASSUMING THE CHANGE IN BILLING PRACTICE IS APPLIED RETROACTIVELY (Note 2): Earnings for Common Stock . . . . . . . . . . . . . . .. .. .. .. . . . S 54,641 S 47,956 Earnings Per Average Share of Common Stock . . . . . . . . . . . ... ... ....S 1g S 1.52

      - The notes and schedule on pages 21 through 29 are an integral part of these statements.

p. ;

 \

v 17

Duque:no Light Comp ny Consolidated Balance Sheet December 31,1979 and 1978 . (Thousands of Dollars) l 1979 1978 ASSETS PROPERTY, PLANT AND EQUIPMENT: Electric plant: In service . S1.939,254 $1,818,936 Construction work in progres!, 4 0.678 361,030 Steam heating plant 22,873 21,839 2,380,805 2,201,805 Less accumulated depreciation 386,479 349,668 1,994,326 1,852,137 OTHER PROPERTY AND INVESTMENTS: Nonutility property (at original cost less reserves) 1,454 1,380 Construction funds held by trustees . 3,134 9,852 Miscellaneous investments . . . . 254 254 4,842 11,486 CURRENT ASSETS: Cash. . . 4,115 3,878 Deposits, principally for payment of interest and dividends 334 5,282 Accounts receivable: Customers, including recoupment receivables of S21,800 at December 31, 1978 (less reserve for doubtful accounts: 1979-S1,785; 1978-S1,536) 62,540 63,738 Other (including tax claims: 1979-56,560; 1978-$16,256) 14,864 32,105 Matenals and supplies (generally at average cost): Coal . . . . . 40,045 31,551 Other operating and construction . . . 23,431 23,087 Deferred fuel costs . .. 10,619 19,512 Other current assets . . . 12,052 8.372 168,000 187,525 DEFERRED DEBITS: Deferred costs of cancelled generating units (Note 3) 31,116 - Unamortized debt expense . . . .. , 2,273 2,149 Other deferred debits . . . . . 21,980 15,456 55,369 17,605 Total . $2,222,537 S2,068,753 The notes and schedule on pages 21 through 29 are an integral part of these statements. O 18

    ,m
  .(    )

C' 1979 1978 LIABILITIES - CAPITALIZATION: Common stock (authorized-45.000,000 shares; outstanding-35,550,000 and 31,750,000 shares, respectively) (Note 6) . . .... .. . . ... . S 35,550 S 31,750 Capital surplus . ........... ....... . ...... .. . .... . . 433,984 387,185 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .... .... . 158,772 158,035 Non-redeemable preferred and preference stock . . . . .. .. .. .. . . 156,137 156,137 Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . .. 784,443 733,107 Redeemable preferred and preference stock, less sinking fund and repurchase requirements (Notes 6 and 7) . . . . . .. . .. . ... . 149,998 154,572

;             First mortgage bonds (less sinking fund requirements) . . . . . . .                                             . .         .       808,830      721,710 Sinking fund debentures . . . . . . . . . . . . . . . . . . . . . . . ..                                          .. . .             11,436       12,358 Pollu* ion control obligations . . . . . . . . .                         ..                          ...                            116,000      116,000 Unamortized debt discount and premium-net . . . . . .                                   .          ..               ... .             (5,770)      (4,977) 1,864,937    1,732,770 l            CURRENT LIABILITIES:

First mortgage bonds maturing within one year . . . .. .. ... 12,000 15,000 Notes payable-banks and commercial paper (Note 5) .. . . 11,000 34,500

,             Accounts payable . . . .             . .. .          .... . . .. .. ..                                            ... ..             63,835       52,074 Accrued taxes . . . . . . . . ........ .. .                                                                                          27,693       22,005

{ /] .. .. ...... . . ..... . Q Deferred income taxes-deferred fuel costs Accrued interest . . . . . . . . . . . . . . . . . . . . . .. . 5,518 18,519 10,431 19,147 DivMends declared . . . ... .... ..... ....... . ... . ..... . 21,886 18,512

Sinking fund and repurchase requirements . . . . . . ... . .. . .. . .. 10,145 9,265 170.596 180,934 DEFERRED CREDITS

Investment tax credits . . . . . . . . . . . .. . .. . . ... . . ..... 82,366 63,913 Other deferred credits . . . . . . . . . . . . . . . . . . . ....... ...... .... . .. 1,894 3,995 84,260 67,908 ACCUMULATED DEFERRED INCOME TAXES (Note 10) . . . . . . . . . . . . . . . . . 102,744 87,141 Total'................. .............. ........ . . . . . . . . . . S2,222,537 S2.068,753. T i

     \q 19

Duquesne Light Company Statement of Changes in Consolidated Financial Position For the Years Ended December 31,1979 and 1978 l (Thousands of Doitars) l 1979 1978 SOURCE OF FUNDS: Operations:

                                                                                                                                                                           )

1 Net income (1979 includes cumulative effect of change in billing practice of $3,845) S 82,207 S 65,723 l Non-working capital charges (credit) to income: Depreciation . . ...... . .. ... . . . ... . .. 51,428 47,698 investment tax credit deferred-ne,t . . . . . . . . . . . ... ... . .. 18,453 16,552 income taxes deferred-net (non-cunant portion) .. .. .. . 15,603 21,388 Allowance for equity and borrowed funo3 used during construction .. . (26,567) (20,936) Total..... ...... ... ....... ......... .. . .. .. . .. . 141,124 130,425 Sale of bonds . . . . . . . . . ... .. ... .... . . . .. . .. 100,000 - Sale of preferred stock . . . . . . . . . . . . . . ... . . . .... ... . ... .. - 30,000 Sale of preference stock ..... . .. . ... . ... .. ... . . . - 50,000 Sale of common stock ... . . . .... . .. . . . .. 50,730 48,400 increase (decrease) in notes payable . . . .. ..... .. . .. . (23,500) 34,500 Construction costs reimbursed by trustees from proceeds of pollution control financings . . . . . . ... . .. . 7,375 1,376 Decrease (increase) in working capital (exclusive of current maturities of long term debt and notes payable) (a) . . . .. .. . . . . . . 35,687 (31,643) Total Source of Funds . .. .. . . .. .. . . S311,416 S263,058 APPLICATION OF FUNDS: Construction expenditures (net of allowance for equity and borrowed funds used during consiruction) . . . . . . . ... .. ... $197,927 S181,000 Dividends on capital stock . . . . . . . . . . . . . . . .. . . 81,343 73,494 Payment of first mortgage bonds . . . ... . .. .. . . .. 15,000 - Sinking fund and repurchase requirements .. . . . .. ... . . 5,496 4,019 Other-net . . . . . . . . . ... ... . . . . .. . ... . . . 11,650 4,545 Total Application of Funds . ... ..... .. .... . ..... . . . $311,416 S263,058 (a) The components of working capitai (exclusive of current maturities of long-term debt and notes payable) were as follows: Current assets: Cash and special deposits . . . . . .... . .. ... .... .. S 4,449 S 9,160 Accounts receivable . . . . ... .... ... . . ... .. . . .. ... 77,404 95,843 Materials and supplies and other assets . . . ... .. .. .. .. . .. 75,528 63,010 Deferred fuel costs ... . . ....... .... . .. .. . . . 10,619 19,512 Total . ...... .. ... ....... ... . ... .. . .. . .. 168,000 187,525 Current liabilities: Accounts payable and accrued interest . . . . . . . . . . . .. ... .. .... 82,354 71,221 i Accrued and deferred taxes . . . . . . . . . . . . . .. .. . .... 33,211 32,436 l Dividends declared . . .. ...... .. ...... . . .. . ... ... . 21,886 18,512 Sinking fund and repurchase requirements . . . . . . . . . . . . . . . . . . . . . . . . . 10.145 9,265 Total.. .......... .. .. ... .. . ..... . .. .. 147,596 131,434 Working capital at end of period . . . . . . . . . . ... ... .. .... .... 20,404 56,091 Working capital at beginning of perivd . . . ... . . ... . .. .. .... . 56,091 24,448 Increase (decrease) in working capital (exclusive of current maturities of long-term debt and notes payable) . . . . . . . . ........ . ..... . . S(35,687) $ 31,643 The notes and schedule on pages 21 through 29 are an integral part of these statements. 20 1

Duquesne Light Company Statement of Consolidated Retained Earnings For the Years Ended December 31,1979 and 1978 [] (Thousands of Dollars) ( 1 1979 1978 BALANCE, JANUARY 1: As previously reported . . .

                                                                                                                $158,857        $1s  373 Less settlement of prior years' income taxes (Note 4)                                                      822              822 As restated . . .              ..                   .                                           .      158,035        166,551 NET INCOME FOR THE YEAR , .                          .                                                     82.207         65.723 Total. .     . .                                                                           240.242        232,274 DEDUCT:

Cash Dividends Declared: Preferred Stock: 4% Series . . . 1,100 1,100 3.75% Series . . . . . 281 281 4.15% Series . . . . 291 291 4.20% Series . . 210 210 4.10% Series . 246 246

                 $2.10 Series .                                                                                       336              336
                 $8.64 Series .                        .                                 .                          2,427          2,478
                 $7.20 Series ,                            .                                      .                 2,520          2,520
                 $8.375 Series .             .                                                                      2,512          1,759 Preference Stock:

S7.50 Series . . . 2,283 2,373

                 $2.75 Series .       .                                                                             1,689          1,992 (m) v
                 $2.315 Series .
                 $2.10 Series .           .

2,778 2,520 2,778 2,520 59.125 Series . . . . 4,560 - Common Stock (Per Share: 1979-$1.76; 1978-$1.72) 57,590 54,610 Total Cash Dividends . . . 81,343 73,494 Other . . . .. .. . . . . . .. . 127 745 BALANCE, DECEMBER 31 . . S158,772 $158,035 The notes and schedule on pages 21 through 29 are an integral part of these statements. Notes to Financial Statements i 1.

SUMMARY

OF ACCOUNTING POLICIES Revenues Consolidation Customer meters are read bimonthly and bills are ren-The consolidated financial statements include the Com. dered on a monthly basis. Revenues are recorded

 ,       pany and its wholly-owned steam heating subsidiary.                       when billed.

l Property, Plant and Equipment Allowance for Funds Used During Construction The properties of the Company and the steam heating In accordance with the uniform system of accounts subsidiary's properties are carried at original cost. The prescribed by regulatory authorities, an allowance for Company's properties, with minor exceptions, are sub. funds used during construction (AFC) is included in ject to a first mortgage lien. All maintenance and construction work in progress and credited to other income for AFC attributable to equity funds and to lG repairs and replacements of minor units of property interest charges for AFC attributable to borrowed (~) are charged to income. Replacements of retirement units of property and betterments are charged to prop. funds. AFC is a non-cash item and is computed using erty. In connection with retiroments, reserves are a composite rate, which is applied to the balance of charged with the carrying value, plus dismantling construction work in progress and which assumes that > charges, less salvage, of property retired. funds used for construction are provided by borrow-21

ings cnd by pr:ferred, pr:f r:nca cnd common stock Employee Benefits equity. This accounting procedure results in the The Company and its subsidiary have a trusteed inclusion in property, plant and equipment of amounts retirement plan to provide pensions for all employees, considered by regulatory authorities as an appropriate except coal mine employees who are covered under a cost for the purpose of establishing rates for utility plan administered by the United Mine Workers of charges to customers. America. Pension costs are funded as accrued and Depreclation include amortization of prior service cost over 30 The Company provides for depreciation of electric years. The Company is liable under the Federal Mine plant, exclusive of coal properties, on a straight-line Safety and Health Act and related state laws for the basis determined in a manner consistent with applica- payment of disability benefits to coal mine employees ble Ponnsylvania law and with methods applied by the disabled by black lung and to their survivors and Pennsylvania Public Utility Commission in the determi- dependents. The estimated costs of providing such nation of depreciation in rate proceedings. Deprecia- benefits, including amortization of prior service cost, tion is computed on the basis of the following annual are accrued on the basis of mine payroll costs. rates expressed as a percentage of original cost: pro- Debt Discount, Premium and Expense duction plant-2.27% to 4.44%, transmission plant- Debt discount or premium and related expenses are 2.15%, distribution plant-2.52% and general plant- amortized on a straight-line basis over the lives of the 3.38%. The Company provides for decontamination issues to which they pertain. and dismantling costs for the Beaver Valley No.1 nuclear generating unit on a straight-line basis over 2. CHANGE IN BILLING PRACTICE Pursuant to an order by the Pennsylvania Public Utility the life of the unit. Such costs are presently estimated to be approximately $27,000,000. Provisions for Commission, the Company changed its method of bill-ing and recognizing revenues for residential and cer-depreciation and depletion of other Company property tain commercial customers from a quarterly to a and the steam heating subsidiary's property are made monthly basis , effective January 1,1979. The on various bases (tons of coal mined for coal proper-es,etc4 $3,845,000 cumulative effect of the change on prior years (after reduction for income taxes of S7,353,000) Income Taxes is included in income for the year ended December Deferred income taxes are provided principally for dif- 31,1979. The additional effect of the change on the forences between depreciation for income tax pur- year ended December 31,1979 was not significant. poses and depreciation for accounting purposes to The pro forma amounts reflect for each year the effect the extent permitted by the Pennsylvania Public Utility of retroactive application of the change in the method Commission for rate-making purposes, and for fuel of billing and recognizing revenues and related costs deferred for accounting purposes but deducted income taxes. currently for income tax purposes. In compliance with

3. CANCELLATION OF CAPCO GENERATING regulatory accounting, income taxes are allocated UNITS between operating expenses and other inene, prin-In January 1980, the Company and the other CAPCO cipally with respect to interest charges re #J to con-companies cancelled the construction of four nuclear struction work in progress. Investment tax credits are generating units. The Company's share of the accu-deferred and amortized over the lives of the related mulated construction costs applicable to these units facilities

• was $31,116,000 as of December 31,1979. Additional Deferred Fuel Costs costs could be incurred as the outstanding contracts The Company defers the difference between actual associated with these units are terminated. While the fuel costs and base fuel costs until the period in which amount of termination costs cannot be reasonably such costs are billed to customers through the not estimated at this time,it is tne opinion of the Company cnergy clause. that final resolution of the termination costs will not Nuclear Fuel Costs have a material adverse effect on the Company's The Company's share of nuclear fuel costs under a financial position. The Company intends to seek non-capitalized financing lease agreement is charged approval from the Federal Energy Regulatory Com-to fuel expense based on the quantity of electric mission and the Pennsylvania Public Utility Commis-energy generated and reflects a zero not salvage sion to amortize the accumulated construction costs value for the leased nuclear fuel. Since regulatory and any termination costs, over a 10-year period cuthorities have not determined whether spent fuel and to recover such costs from its customers. If the may be reprocessed, and therefore it may be nec- Company is denied the right to recover these costs essary to store spent fuel for an indefinite period, no fr m its customers, it would be required to charge provision for final disposition costs of such fuel has such costs to income. The Company believes that all been made. such costs should be recoverable from its customers.

22

4. PRIOR YEARS' INCOME TAXES tha w:ighttd averaga interest rate applicable to such The Company's income tax returns are settled short term borrowings was 11.28% and 8.55%,

through 1970 with the exception of the percentage respectively. depletion issue discussed below. Income tax retums

6. CHANGES IN CAPITAL STOCK g for 1971 through 1976 have been examined and the The Company sold 3,800,000 and 2,750,000 sharas returns for years subsequent to 1976 are subject to of Common Stock in 1979 and 1978, respectively, review. The Internal Revenue Service has assessed 500,000 shares of Preference Stock in 1978 and deficiencies regarding the Company's computation of 300,000 shares of Preferred Stock in 1978. The Com-percentage depletion on coal mined for 1956 through any redeemed 122,240 and 121,400 shares of Pref-1961 and has proposed simifar deficiencies for 1962 erence Stock in 1979 and 1978, respectively, and through 1972, as well as certain other issues of rela-repurchased 6,000 and 513 shares of Preferred Stock tively minor importance for 1971 through 1976. The n 1979 and 1978, respectively.

Company paid the assessments related to percentage depletion for the years 1956 through 1961 and insti. 7. REDEEMABLE PREFERRED AND tuted a suit for refund in Federal District Court. A PREFERENCE STOCK recovery in 1979 of a major portion of such payment The shares of 58.64 Preferred Stock are entitled to a resulted in a not charge to retained earnings of non-cumulative purchase fund under which the Com-

        $822,000. The proposed additior al Federal income         pany offers to repurchase annually up to 6,000 shares taxes relating to percentage depletion for 1962           at not more than S100 per share. The shares of through 1972, together with intet ast and related state   $8.375 Preferred StoM are subject to a cumulative income tax effect, amount to $4,152,000 af ter deduct. sinking fund beginning with the year 1984 which will ing the related tax benefit of $1,489,000. The Com.       retire 12,000 shares on April 1 in each year at $100 pany expects that the Court's decision in the 1956        Per share. The Company may on a non-cumulative through 1961 case will serve as a basis for settlement    basis retire an additional 12,000 sharos in each such of the proposed deficiencies related to depletion for     year. The Preferred Stock is entitled to quarterly 1962 through 1972. It is the Company's opinion that      cumulative dividends. In the event that four quarterly the settlement of Federal and state taxes will not sig. dividends are in default, the holders of the Preferred nificantly affect the Company's financial position or     Stock are entitled to elect a majority of the Board of results of operations.                                    Directors until all dividends in arrears and current O      5. SHORT-TERM BORROWING ARRANGEMENTS dividends have been paid.

The shares of S7.50 Preference Stock are entitled At December 31,1979 and 1978, the Company had to a non-cumulative purchase fund under which the lines of credit with banks totaling $70,000,000 all of Company offers to repurchase annually at $100 per which was unused at December 31,1979 and share up to 4% of the number of shares originally S61,500.000 was unused at December 31,1978. The ss e shams of $235 Mmnce Stod am interest rate under both lines is at a rate not to exceed s@mo a cumdahe sding fund which will retire the prime interest rate. As part of the arrangement

                                                                     ,000 shares on August 1,n   i each year at $25 per for one of the lines of credit, the Company is expected share. The Company may on a non-cumulative bas,s      i to maintain compensating balances of ten percent of retire an additional 55,000 shares in each such year.

the line plus ten percent of any borrowings under that shams of SM 25 Nemnce Stock are subject to fine in connection with the other line, the Company is a cumulative sinking fund beginning with the year required to pay a commitment fee of M of 1% per 1984 and continuing through 1997 inclusive which will annum on the total of the line. In connection with the retire 33,300 shares on January 1 in each year at guarantee of $5,157,000 ofindebtedness of an

                                                                  $100 per share. The Company may, on a non-unaffiliated coal supplier (see note 13), the Company Cumulative basis, retire an additional 33,300 shares ,n i is expected to maintain a compensating balance of fif.

each such year, provided that ti e Company may not teen percent of the amount borrowed under such redeem through the exercise of this option more than arrangement. The notes payable-banks and commer-an aggregate of 150,000 shares. The Preference cial paper outstanding at December 31,1979 and Stock is entitled to quarterly cumulative dividends 1978 had a weighted average interest rate of 12.76% xcept that no dividends may be paid if dividends on and 10.32%, respectively. During the years ended any series of the Preferred Stock are accumulated

      . December 31,1979 and 1978 the maximum amount and unpaid. In the event that six quarterly dividends of short-term borrowings outstanding was                 on the Preference Stock are in arrears, the holders of
         $64.500,000 and $69,000,000, the average short-term the Preference Stock are entitled to elect two direc-borrowings were $20,993,000 and $31,324,000 and g                                                               tors until all dividends in arrears have been paid.

( ) mj 23

Tho combined aggregats redemption requir::m:nts 9. ALLtWANCE FOR FUNDS USED for the r. ext five years as of December 31,1979 are as DURING CONSTRUCTION follows: The Company follows the procedure prescribed by the Sinking Fund Federal Energy Regulatory Commission in determin- ) D e ". 31 Ma kRede np ons ing the rate used for computing allowance for funds 1980 53,275,000 used during construction. Such rate was 7% and 1981 3,275,000 7.6% compounded semi-annually in 1979 and 1978, 1982 J,275,000 respectively. { 1983 3,275,000 1984 7,805.000

8. BUSINESS SEGMENTINFORMATION The Company operates predominantly in the electric utility industry. During the years ended December 31, 1979 and 1978, approxirrstely 11% of total operating revenues were derived from one customer.

10. INCOME TAXES Totalincome taxes in 1979 and 1978 were comprised of the following components:

1979 1978 (Thousands of Dollars) included in operating expenses-Federal .. . .. . . . .. . S 9,196 S (2,143) State ..... . . . . . . 8,312 5,040 Included in other income (income taxes-credit): Federal . . .. . . . . . . (6,887) (4,893) State . . .. . . .. . . ... . .. (1,756) (1,195) Taxes currently payable (recoverable) . .. . 8,865 (3,191) Income taxes deferred-not: Federal . .. .... . . . .. ... .. 8,339 17,436 State . ..... . . . . . 2,440 4,601 Investment tax credit deferred-net . .. ... .. . 20,808 18,409 Total income tax expense . . .. . . . . .. S40,452 S37,255 income taxes deferred principally relate to differences between depreciation for income tax purposes and accounting purposes which are normalized (1979-S19,171,000; 1978-521,026,000), to fuel costs which have been deferred for accounting purposes but which are deducted currently f income tax purposes, and amounted to a credit of $4,913,000 in 1979, and to an investment tax credit carryforward recognized as a credit to in:ome taxes deferred of $3,088,000 in 1979. Total income taxes in 1979 and 1978 were less than the amount computed by applying the statutory Federal income tax rates of 46% and 48%, respectively, to income before income taxes. The reasons for this differ-ence in each year are as follows: 1979 1978 (Thousands of Dollar 3) Computed Federal income tax at statutory rate . . . . .. ... . .. . ... . $56,423 S49,429 Increase (decrease) in taxes resulting from: Allowance for funds used during construction . . . . . . .. .. .. . ... . (12,221) (10,049) Excess of tax over book depreciation .... . . .... . .. . . .. . ..... . . (1,116) (2,091) State income taxes, net of Federalincome tax benefit. . . .. .. .. .. ... 4,840 4,392 Amortization of deferred investment tax credits . . ....... . ........ . .. . (2,718) (2,063) Other. net . . . . . . . . ... .. ..... . . . . ... . ... .. .. .... .. (4,756) (2,363) Total income tax expense . . . . . . . .... . .. . .. . . . .. . _40,452 S S37,255 O 24

11. EMPLOYEE BENEFITS 13. COMMITMENTS AND CONTINGENT Pension costs charged to expense or construction for LIABILITIES the years ended December 31,1979 and 1978 were The Company presently estimates that it will spend n S7,224,000 and $6,480,000, respectively. At January approximately $731 million for construction during the

( ) 1,1979 (the date of the latest actuarial valuation) period 1980 through 1983, principally related to V unfunded prior service cost was approximately CAPCO generating units (see page 32). See note 3 for S35,939.000, including unfunded vested benefits of information rega, Jing contract termination charges approximately $32,604,000. Black lung costs for the which could be incurred as a result of the cancellation years ended December 31,1979 and 1978 were of construction of four CAPCO nuclear geaerating S1,824,000 and S1,766,000, respectively. At July 31, units. The Company and the other owners of certain 1979 (the date of the latest actuarial valuation), the generating units in the CAPCO arrangements have unfunded prior service cost for disability made long-term coal supply arrangements with a min-benefits under the Federal Mine Safety and Health ing company to supply coal for three CAPCO generat-Act and rotated state laws was approximately ing units. As part of these arrangements the individual

      $24,706,000.                                                                CAPCO companies are severally guaranteeing debt and lease obligations of the mining company in con-

12. LEASES nection with the development and operation of two Rental payments in 1979 and 1978 amounted to mines from which the coal will be supplied. At Decem-

      $9,844,000 and 59,508,000, respectively, of which ber 31,1979 the Company had guaranteed the S6,049,000 and $7,288,000 were charged to operat-ing expenses. The Company has an undivided interest                         obligations of the mining company with respect to in nuclear fuel lease agreements for three CAPCO                           approximately $46,874,000 of indebtedness and had generating units. Rental payments are made monthly                         guaranteed lease obligations relating to approximately
                                                                                   $26,763,000 of capital equipment for the mines. The during the terms of the lease based on the amount of Company expects to make additional similar guaran-nuclear fuelleased and the amount of nuclear fuel burned. The nuclear fuel leases may be terminated by                       tees, the amount of which will depend on the actual the lossees or lessor on a one year's notice or by                         cost:: of the development of the two mines. It is pres-casualty or certain other contingencies, including                          ently expected that the development of the mines will default by the lassees. In certain situations involving a                   be substantially completed in 1981 and the Company termination. the lessees may be required to purchase                       expects that by 1981 it will have made further guaran-the leased nuclear fuel at the higher of fair market                       taes with respect to a minimum of $17,844,000 of additional indebtedness and leased capital equip-(O)     value or unamortized cost. At December 31,1979, the ment. Also, in connection with coal supply arrange-Company's share of the lessor's unamortized cost of the leased nuclear fuel was $38,684,000 and the                             ments for its wholly-owned generating units the vompany expects to lease an additional S7,924,000                           Company has guaranteeri debt obligations of an of nuclear fuel by 1982. The Company also has cer-                          unaffiliated coal supplier in the amount of $5,157,000 tain buildings under lease, subject to purchase and                         as of December 31,1979. In general, it is contem-renewal options. At December 31,1979 minimum                                plated that the purchase prices to be paid for the coal rental payments, based principally on estimated usage                       to be received under the foregoing arrangements will of nuclear fuel under lease and building rentals, were                      include amounts sufficient to service the obligations so guaranteed.

cs follows: (Thousands of Dollars) The Company is involved in various legal proceed-1980 . ....... ... ..... .......... S 9,370 ings. In the opinion of management of the Company 1981 ....... ...... . ....... .. 10,534 such legal proceedings will not have a material effect 10,578 on the financial position or results of operations of the 1982 .... .... . .. ..... .... . 9,573 Company. 1983 .. . . ... ... ............... 1984 ............... ........ . ... 8,870 1985-1989 .. .. ...... ....... . . 21,684 Af ter 1989 . . . . . . . . . . . . . . . . . . . . . . 8,454 Total..... ........ . ... S79,063 If the noncapitalized financing leases were capitalized as of December 31,1979 and 1978, property, plant and equipment-net would have been increased by

       $43,871,000 and $39,601,000, respectively, with related increases in current liabilities and long-term n) d debt of $4,476,000 and $39,613,000, respectively,in 1979 and $6,409,000 and $33,311,000, respectively, in 1978. The impact on net income of capitalizing such leases in each year would not be material.

25

1 1

14. QUARTERLY FINANCIAL INFORM ATION (UNAUDITEO)

(Thousands of Dollars) Operating Operating Net Earnings Per l Ouarter Ended Revenues Income income Share March 31,1978 . $137,548 S27,652 518,324 S.46 June 30,1978 . . 144,629 26,036 17,102 .39 September 30.1978 . . . 142,233 24,131 14,755 .31 December 31,1978 . . . . 148,719 25,386 15,541 .34 March 31,1979 .. ... . 162,003 26,073 21,221 .48 June 30,1979. . . . . . 143,396 25,625 16,900 .34 September 30,1979 . . 156,529 31,369 22,261 .51 December 31,1979 . . . . .. 160,612 31,464 21,826 .47 Not income and earnings per share for the first quarter of 1979 include the cumulative effect to January 1,1979 of the change in billing practice of S3,845,000 or S.12 per share, respectively (see note 2).

15. SUPPLEMENTARY INFORMATION TO DISCLOSE THE EFFECTS OF CHANGING PRICES (UNAUDITED)

The following supplementary information is supplied in accordance w th the requirements of the Statement of Financial Accounting Standards No. 33, Financial Reporting and Cha iging Prices, for the purpose of providing certain information about the effects of changing prices. It should be viewed as an estimate of the approximate effect of inflation, rather than as a precise measure. STATEMENT OF INCOME ADJUSTED FOR CHANGING Pr.!CES For The Year Ended December 31,1979 (Thousands of Dollars) Constant Current Conventional Dollar Cost Historical Average Average Cost 1979 Dollars 1979 Dollars Operating revenues . .. . . S622,540 S622,540 $622,540 Fuel . . .. .. . . . 211,939 211,939 211,939 Purchased power . . .. . .. . 10,922 10,922 10,922 Other operation and maintenance expense . .. 140,126 140,126 140,126 Depreciation expense . . 48,450 94,749 114,378 Taxed other than income taxes . . . 47,476 47,476 47,476 income taxes . .. . . ... .. .. 49,095 49,095 49,095 Interest charges .. . .. . .. 65,415 65,415 65,415 Other income and deductions-net . . . . .... . (29,245) (29,245) (29,245) 544,178 , 590,477 610,106 income before cumulative effect of accounting change (excluding reduction to net recoverable cost) . . . . . .. . . . S 78,362 S 32.063* S 12,434 Increase in specific prices (current cost) of property, plant and equipment held during the year" . ... . . $413,136 Reduction to not recoverable cost .. . .. . . S(193,556) (104,746) Effect of increase in general price level . . . . . . (481,581) Excess of increase in general price level over increase in specific prices after reduction to net recoverable cost . . . . .. (173,191) Gain from decline in purchasing power of net amounts owed 173,076 173,076 Not . .. . .. . . . . S (20,480) S (115)

• Including the reduction to net recoverable cost, the loss before the cumulative effect of the accounting change on a constant dollar basis would have been $161,493.

  "At December 31,1979, current cost of property, plant and equipment, net of accumulated depreciation, was
     $4,103,997, while historical cost or net cost recoverable through depreciation was $1,995,780.

26

FIVE-YEAR COMPARISON OF SELECTED SUPPLE"ENTARY FINANCIAL DATA ADJUSTED FOR EFFECTS OF CHANGING PRICES (Average 1979 Dollars, in Thousands Except Per Share Amounts)

V Year Ended December 31, 1975 1976 1977 1978 1979 Operating revenues . . . . . . . . .. S546,616 $547,995 $582.688 S637,949 S622,540 Historical cost information adjusted for general inflation income before cumulative effect of accounting change (excluding reduction to net recovera-ble cost) . ... .. .... .... . .. ..... 32,063 Income per common share before cumulative effect of accounting change (after dividend requirements on preferred and preference stock) . . . . . . .. .... ... . ........ $ .26 Net assets at year-end at net recoverable cost 594.417 Current cost information income before cumulative effect of accounting change (excluding reduction to net recovera-ble cost) . . . ..... ..... .. . ... . 12,434 Income (loss) per common share before cumu- l lative effect of accounting change (after divi-dend requirements on preferred and prefer-ence stock) ... . ... ..... . . S(.35)

Excess of increase in general price level over increase in specific prices after reduction to not recoverable cost . . . . . . . . . .. ..... 173,191

'p    Not assets at year-end at net recoverable cost                                                                    594,417      )

Q Generalinformation Gain from decline in purchasing power of net j amounts owed . . .... .... ...... ... 173,076 Cash dividends declared per common share . S 2.32 S 2.19 S 2.06 S 1.91 S 1.76 Market price per common share at year-end . $23.78 $26.15 S22.92 $16.42 S13.63 Average consumer price index . . . . . . . . . 161.2 170.5 181.5 195.4 217.5 Constant dollar amounts represent historical costs stated in terms of dollars of equal purchasing power, as measured by the Consumers Price Index for all Urban Consumers. Current cost amounts reflect the changes in specific prices of plant from the date the plant was acquired to the present, and differ from constant dollar amounts to the extent that specific prices have increased more or less rapidly than prices in general. The current cost of property, plant and equipment, which includes land, land rights, intangible plant, property held for future use, construction work in progress and nuclear fuel in process, represents the estimated cost of replacing existing plant assets and was determined by indexing surviving plant by the Handy-Whitman index of Public Utility Construction Costs. The current year's provision for depreciation on the constant dollar and current cost amounts of property, plant and equipment was determined by applying the Company's depreciation rates to the indexed plant amounts. Fuelinventories, the cost of fuel used in generation, and purchased power have not been restated from their historical cost in nominal dollars. Rate regulation limits the recovery of fuel and purchased power costs through the operation of adjustment clauses or adjustments in basic rate schedules to actual costs. For this reason fuel inventories are effectively monetary assets. As prescribed in Statement 33, income taxes were not adjusted. Under the rate-making prescribed by the regulatory commissions to which the Company is subject, only the

     - historical cost of plant is recoverable in revenues as depreciation. Therefore, the excess of the cost of plant stated

[n) in terms of constant dollars or current cost that exceeds the historical cost of plant is not presently recoverable in rates as depreciation, and is reflected as a reduction to net recoverable cost. While the rate-making process gives no recognition to the current cost of replacing property, plant and equipment, based on past practices the Company believes it will be allowed to earn on the increased cost of its net investment when replacement of facilities actually occurs. 27

Ta properly r;flect the oconomics of rata reguiltion in th) Stat m:nt of Incoma, th3 rr. duction of n:t property, plant and equipment is offset by the gain from the decline in purchasing power of net amounts owed. During a period of inflation, holders of monetary assets suffer a loss of general purchasing power while holders of monetary liabilities experience a gain. The gain from the decline in purchasing power of net amounts owed is primarily attrib-utable to the substantial amount of debt which has been used to finance the acquisition of property, plant and equipment. Since the depreciation on this plant is limited to the recovery of historical costs, the Company does not have the opportunity to realize a holding gain on debt and is limited to recovery only of the embedded cost of debt capital. Duquesne Light Company Schedule of Capital Stock, Bonds, Debentures and Other Long-Term Debt December 31,1979 (In Thousands) Number of Shares Outstanding Amount Capital Stock Common Stock-$1 par value (1) . 35.550 $ 35,550 Capital Surp!us Premium on Common Stock $439,710 Capital Stock Expense (5,921) Other . 195 Capital Surplus . S433,984 Non-redeemable Preferred and Preference Stock Preferred Stock-SSO par value (cumulative) (1) 4% Series . 550 $ 27,498 3.75% Series 150 7,500 4.15% Series 140 7,000 4.20% Series 100 5.000 4.10% Series 120 6,000

         $2.10 Series . . .                                                                             160           8,000
         $7.20 Series (2) . . . .     ... ...                                                           350         17,500 Preference Stock-51 par value (cumulative) (1).... .....
         $2.315 Series (3)                                                                            1,200           1,200
         $2.10 Series (3)           ,                                                                 1,200           1,200 80,898 Premium on Non-redeemable Preferred and Preference Stock .                    .                                        ..                                     75.239 Non-redeemable Preferred and Preference Stock                                                    $156,137 involuntary Liquidation Value                                                                    $155,998 Redeemable Preferred and Preference Stock Preferred Stock-SSO par value (cumulative) (1)
         $8.64 Series (2) .             . .     . .                                                     281      S 14.044
         $8.375 Series (2) . . .      ......                                                            300         15,000 Preference Stock-51 par value (cumulative) (1).... .....
         $7.50 Series (2)         .                               .                 .                   301            301
         $2.75 Series (2) . .             .                     .                                       550             550
         $9.125 Series (2)      .                   .                                                   500            500 30,395 Premium on Redeemable Preferred and Preference Stock .                                                      121,578 Repurchase and Sinking Fund Requirements .                   .             .                                 (1,975)

Redeemable Preferred and Preference Stock . . $149,998 involuntary Liquidation Value $149,998 O 28

First Mort Bonds (4) Series September t 1982 (3 % %) . . . . . . . . . . . . . . ...... .... . .. $ 14,000 Series due September t.1983 (3% %) . . . . . . . ... . .. . . . . . .. 12,000 Series due July 1,1984 (3%%) . . . . .. .. . . .... . . 16,000 Series dua Apni t,1986 (3%%) ..... .. . .. . .... . .. 20,000 ,7m . . 15,000

g i Senes due Apnl 1,1988 (3% %) . . . . .. . . .. ... . .

  'j

s Series due March 1,1989 (4% %) . . . . ...... . . . . . 10,000 Series due February 1,1996 (5% %) . . . . . .. . . 25.000 1

Series due February 1,1997 (5% %) . . . . . . .. .. . . . . . 25,000 Series due February 1,1998 (6%%) . . . .. .. . . . .. . . 35,000 Series due January 1,1999 (7%) . . . . . . . ... . . .. . ... 30,000 Series due July 1,1999 (7%%) . . . . . .. . . 20,000 Series due March 1,2000 (8%%) . . . . . .. . . .. . . . . .. . 30,000 Series due March 1,2001 (7% %) . . . . . ... .. . . .. . . .. 35,000 Serie; due December 1,2001 (7%%) . .... .. .. . .. .. .. .. 35,000 Series due June 1,2002 (7% %) . . . . .. . .. . . 35.000 Series due January 1,2003 (7%%) . .. . ... .. .. 40,000 Series due July 1,2003 (7% %) . . . . . .. . .. .. .. . . . . 35,000 Series due Apnl 1,2004 (8%%) . . . . . . .. .. . . .. . . 45,000 Series due March 1,2005 (9% %) . . . . . . . 50.000 Series due June 1,2006 (9%) . . ... ...... . . .. .... . 80,000 Series due April 1,2007 (8% %) . . . . . . . . .. ... . .. . .. .. 100,000 Series due February 1,2009 (10%%) . . . . .... . .. . . .. ... . . . 100,000 1 First Mortgage Bonds . . . . . .. ... . . ... . .. 817.000 Less current sinking fund requirements .. .... . . .. . .. 8,170 Total... ... . ....... . ... . . . . . $808,830 Current Matunties-Series due August 1,1980 (2%%) . . .. . . ... .. . $ 12.000 Sinking Fund Debentures due March 1,2010 (5%) . . . .. . . . $ 11,436 Other Long-Term Debt-Pollution control obligations (5) . . .. $116,000 (1) Authorized shares: Common Stock--45,000,000; Preferred Stock-4,000,000; and Preference Stock-8,000,000. (2) $100 per share involuntary liquidation value. (3) $25 per share involuntary liquidation value. (4) On January 17,1980 the Company issued $60.000,000 of First Mortgage Bonds, Series due January 1,2010 (12% %). (5) Average interest cost to the Company ranges from 5.49% to 8.40%. l v

   ,m     e l
    '%/

29

Duquesne Light Company Financial and Statistical Summary 1979 1978 1977 1976 1975 1969 REVENUES Residential . . . .. 176,744 187,338 143,299 127,515 121,497 50,937 Commercial . . 185,701 173,768 147,433 130,804 123,701 44,685 Inoustrial . . 232,389 205,149 171,174 148,493 138,577 47,000 Street lighting and other . 10,370 9,942 8,286 7,789 7,374 3,465 Miscellaneous . 6.142 5,917 5,054 3,667 3,277 681 Tothi electric revenues . .. . 611,346 562.114 475,246 418,268 394,426 146,858 Steam heating revenues . . .. 11,194 11,014 10,997 11,310 10,698 3,046 Total operating revenues 622,540 573,128 486,243 429,578 405,124 149,904 Operation and maintenance expenses . .. 362,987 338,922 249.223 237,086 218,216 72,512 Depreciation .. . 48,450 45,660 43,185 34,702 30,186 14,938 Taxes other than income taxes . . . 47,476 41,997 40,238 30,777 28,622 5,980 Income taxes . .... . 40,452 37,255 43,944 31,175 33,250 16,835 Interest charges, net of allowance for borrowed funds used during construction . 65,415 60,614 58,684 47,214 41,420 14,554 Other income, principally allowance for equity funds used during construction 20,602 17.043 16,498 17,802 18,091 4,934 Income before cumulative effect of the change in billing practice . 78,362 65,723 67,467 66,426 71,521 30,019 Net income .. . 82,207t 65,723 67,467 66,426 71,521 30,019 Dividends on preferred and preference stock , 23,721 18,915 16,677 14,687 12.858 2,703 Earnings for common stock 58,486 46,808 50,790 51,739 58,663 27,316 Average number of common shares outstanding . 32,239 31,464 29,000 26,570 24,740 13,199 Earnings per average share of common stock . 1.81 t 1.49 1.75 1.95 2.37 2.07 Dividends paid on common stock . . 1.76 1.72 1.72 1.72 1.72 1.66 PLANT Property, plant and equipment , . 2,380.805 2,201,805 2,017,774 1,856,339 1,703.032 851,312 Accumulated depreciation . 386,479 349,668 320,832 284,455 255,224 208,467 Net property, plant and equipment 1,994,326 1,852,137 1,696,942 1,571,884 1,447,808 642,845 CAPITAllZATION Common stock . . . .. . 35,550 31,750 29,000 29,000 26,400 13,200 Capital surplus . .. 433,984 387,185 341,817 342,944 298,057 70,484 Retained earnings (t) .. 158,772 158,035 166,551 165,759 159,618 91,131 Non-redeemable preferred and preference stock . . . ...... .. 156,137 156,137 156,137 126,137 96,137 61,137 Redeemable preferred and preference stock 149,998 154,572 79,062 81,864 84,647 30,000 Bonds. .. . . . 817,000 729,000 744,000 719,000 679,000 334,000 Debentures ... , , . 11,436 12,358 12.436 12,702 13,326 15,865 Pollution control obligations . .. . . . 116,000 116,000 116,000 116,000 101,000 - Total capitalization . . .. 1,878,877 1,745,037 1,645,003 1,593,406 1,458,185 615,817 tincluder. cumulative effect to January 1,1979 of the change in billing practice, net of income taxes of $3,845 or S.12 per share. tYears prior to 1979 have been retroactively restated for prior period adjustment described in Note 4 to the Financial Statements. All amounts above are in thousands of dollars except for average shares outstanding and per share amounts. RESIDENTIAL SERVICES Average use per customer (kilowatt-hours) . 6,124 5,765 5,786 5,581 5,572 4,677 Average revenue per kilowatt-hour . 6.230c 5.924t 5.094e 4.734t 4.559t 2.378t SALES OF ELECTRICITY (millions of kilowatt-hours) Residential . .. . . .. 2,778 2,825 2,813 2,693 2,665 2,142 Commercial . . .. .. .. .. 3,866 3,782 3,909 3,769 3,699 2,909 Industrial . . . . . , , , , . . . . . . .. 6,546 5,908 6,182 5,925 5,674 4,962 Street lighting and other . . . . 131 130 130 129 126 114 Total . . . ... . . 13,321 12,645 13,034 12,516 12,164 10,127 ENERGY SUPPLY AND PRODUCTION DATA Energy supply (millions of kiiowatt-hours) Generated in system plants 13,634 12,252 13,798 12,467 11,987 9,885 Purchased and net interchange . . 125 1,089 (125) 762 942 926 Losses and company use . . . (438) (696) (639) (713) (765) (684) Total . ., . ... . . 13,321 12,645 13,034 12.516 12,164 10,127 30

1979 1978 1977 1976 1975 1969 Generating capabihty (thousands of kilowatts) 3.294 3,289 3,289 2,964 2,541 1,652 Peak load (thousands of kilowatts) . 2,296 2,379 2.371 2,260 2,230 1,781 Cost of fuel per milhon BTU . , , 131.779e 125.349e 100.696t 102.910e 104.266c 21.689c C' BTU per kilowatt-hour generated . . . . 10,924 11,031 10,855 10,696 10,244 12,243 Average production cost per kilowatt-hour 1.913e 1.919e 1.393c 1.334e 1.248t 0.383e NUMBER OF ELECTRIC CUSTOMERS-At End of Year Residential . .. , , ,. 496,005 491,698 487,474 484,301 480,117 460,158 Commercial . , 47,976 47,679 47,154 46,652 46,231 45,052 Industrial . .. .. 1,975 1,932 1,889 1,866 1,343 1,662 Street hghting and other . 1,746 1,747 1,768 1,774 1,745 1,773 Total . . . 547,702 543,056 538,285 534,593 529,936 508,645 Management's Discussion and Analysis of Results of Operations Operating revenues increased by S86.9 million in Taxes other than income taxes increased in 1978 compared to 1977 due primarily to general each year primarily due to increased Pennsylvania rate increases ($37A million), net energy clause gross receipts taxes, which vary in direct relation-revenues (S36.6 miihon), state tax adjustment ship to revenues and, additionally, in 1979 as a (S6.2 million) and a temporary energy surcharge result of increased capital stock tax expense. ($122 r 41:on). These increases were partially Income taxes fluctuated in 1978 and 1979 princi-cifret by a decrease in electrical consumption pally as a result of changes in taxable income. (SbA million). Operating revenues increased by (See note 10 to financial statements for additional

        $49.4 million in 1979 compared to 1978 due pri-           information regarding income taxes.)

marily to general rate increases (S25.4 million), net The increases in allowance for equity and bor-energy clause revenues (S17.4 million), increased rowed funds used during constraction were pri-clectrical consumption (S16.3 million) and state marily due to the increased cost of construction of tax adjustment ($2.1 million). The temporary new facilities. The decrease in other income and O cnergy surcharge revenues in 1978 of $12.2 mil- deductions-net in 1978 compared to 1977 was V lion did not continue in 1979. due principally to reduced temporary cash invest-The CAPCO companies placed Beaver Valley ments. Interest charges increased as a result of Unit No.1 in full commercial operation in April the issuance of additional debt to finance the 1977, Mansfield Unit No. 2 was placed in full com- Company's capital expenditures. Other interest mercial operation in late 1977, and in September expense fluctuated due to changes in the amount 1977 the Company returned the Shippingport and interest cost of short-term borrowings. Atomic Power Station to service after an outage of Earnings for common stock and earnings per more than three years. The operation of these average share in 1978 as compared to 1977 generating facilities at the times indicated was the decreased due principally to the factors discussed principal cause of the increases in fuel expense, above, to the absence of adequate rate relief, and other operation expense, maintenance and repair to increases in preferred and preference stock expense and depreciation expense in 1978 com- dividends and average common shares outstand-pared to 1977. Purchased power increased in ing. Earnings for common stock and earnings per 1978 and decreased in 1979 due principally to the average share in 1979 include $3.8 million and strike of the United Mine Workers of America in S.12 per share, respectively, as a result of the the first quarter of 1978. Fuel expense increased change in billing practice (see note 2 to financial in 1978 and 1979 due to higher fuel prices and in statements). 1979 to increased generation. Other operation expense increased in 1979 due primarily to increased generation and higher pollution control costs. V 31

CAPCO in 1967, Duquesne Light joined with four other electric utilities to begin the Central Area Power Coordination (CAPCO) program. Plants built under the CAPCO program have shared owner-ships based on individual requirements. Member companies pay only for equipment that servec their customers. The CAPCO program is constantly under review and schedule changes are made according to the financial and generating needs of the member companies. Jointly-owned Generating Units--CAPCo Program D. L Co. ownership share of Year Name Fuel operating Company size--KW Capacity 1971t sammis #7 Coal Ohio Edison Company 650,000 31.2 *. 203.000 KW 1972t Eastlake #5 Coal The Cleveland Elec. 650,000 31.2 % liluminating Co. 203,000 KW 1976t Beaver Nuclear Duquesne Light 810,000tt 47.5% alley # 1 Company 385,000 KW 1976r Mansfield # 1 Coal Pennsylvania Power 825,000 29.3 % Company 242,000 KW 1977t Davis- Nuclear The Toledo Edison 906,000 0 Besse # 1 Compary 1977t Mansfield #2 Coal Pennsylvania Power 825,000 8.0% Company 66,000 KW 1980 Mansfield #3 Coal Pennsylvania Power 825,000 13.74 % Company 113,000 KW 1984 Perry # 1 Nuclear The Cleveland Elec. 1,205,000 13.74 % litum naang Co. 165,000 KW 1986 Beaver Nuc! ear Duqucsne Light 833,000ti 13.74% valley #2 Company 114,000 KW 1988 Perry # 2 Nuclear The Cleveland Elec. 1,205,000 13.74 % liluminating Co. 165,000 KW tin operation itExpected ul' mate capatuhty of 862,000 KW "m (j ._ wyV i g-w;) 1 g l]p R .:. m  : . .d 9 (( c .

                             ,                       Form 10-K Offer
                      ;t ~                      '
                                                .~   if you are a holder or beneficial owner of any class of the Com-
             , ;p P/                                 pany's stock as of February 29,1980, the record date for the 7                                           1980 Annual Meeting, the Company will send you, upon request
            ;                       ~ - - ,

and at no charge, a copy of the Company's Annual Report on f.C,~ Form 10-K to the Securities and Exchange Commission for the D C,"~Z-' year 1979 (including a list of exhibits). All requests must be made in writing to the Secretary,435 Sixth Avenue, Pittsburgh, Pennsylvania 15219. 32

i C mpany Offiacrs John M. Arthur 7 9 . lI' Chiirman of the Board and ~~ '\ U~ /f ~~ ~ ' 7 ,V / - g , ~- * ""'

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Chief Executive Officer itant:y G. Schaffer Pr:sident I '

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                                                , 3./l Chrrl:s M. Atkinson                              .g                                 -I                                                                 '
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Vics President-Fiscal j g '.A Clifford N. Dunn W ..

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Vice President-Operations William F. Gilfillan, Jr.

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n g f:n i N 4W ujj~ d(a I y y // Vice President-Customer Services L(, ygj

                                                                           ! 61 @ kepts'             Qf d ".h]'"*f'3                             e' G:orge 1. Rifondifer                            J M-                                                                                             f/

Vics President-General Services ep, "r M c 1 < Ecri J. Woolever Vico President-Engineering dh,fE.) W 'E 9 $EDh'AM 9M Ne m .Jn ; 4: . M l' [OD N +9

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John A. Knepper

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Treasurer and Controller d , I@%{" c 5 Howard W. Staas .. Secretary - - tw Ronald G. Males Left to right: Wilkam F. Gilh!!an, Jr.; Earl J. Woolever; Charles M. Atkinson; Assistant Treasurer George 1. Rifendifer; Clifford N. Dunn Elmer H. Puchta Acsistant Treasurer Joan 3. Senchyshyn Av.istant Secretary R gistrars (, Common, Preference and Preferred Stocks M;llon Bank, N.A., Pittsburgh The Chase Manhattan Bank, N.A., New York Harris Trust and Savings Bank, Chicago Duquesne Light Company Trcnsfer Agents Service Area Common, Preference and Preferred Stocks Pittsburgh National Bank, Pittsburgh Ch:mical Bank, New York ta* ~ r / M Am:rican National Bank and Trust Company of Chicago, Chicago ( ,, j.ws-

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1969-1979 Dimensions Magazine $/ In mid-year 1980, the Company plans to publish Duquesne Light dk.,. aurcev Dimensions containing more in-depth information than is availa- et.vta s'- -+ bla in this Annual Report. Dimensions will include a 10-year QQ _ et ~~svo v.~,. str.tistical review and discussion of some of the important issues ~~" g~~'f-frcing Duquesne Light Company. For a copy of 1969-1979 , m _ ,,, Dim:nsions write: K Duquesne Light Company a >=m" Public Information Department i 435 Sixth Avenue d' Pittsburgh, PA 15219 *% ,,,c nt GREENE wtST vNsNta 4 i me.Rv t .Nt> Duoveve L.gN Comoany Se wce A en

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OHIO EDISON COMPANY and SUBSIDIARY Ohio Edison Company, That price must be with headquarters at sufficient to meet our TABLE OF CONTENTS Page Akron. Ohio, provides costs, to provide fair Ohio Edison Company and Subsidiary . ...... . 2 electric service to about compensation to our 828,000 customers in on employees, and to make Financial Highlights . . . . ...... ... . . ... 3 oreo of approximately reasonable dividend 7.500 square miles in payments to our President's Letter . ....... . .. . . . . . . . . . 4, 5 centrol and northeastern ;tockholders. Ohio. The Company's As consumers of Definitions to Assist You . . . . . . . . . . . . . . . . . . . . 6 wholly-owned subsidiary, electricity ourselves, and ....... 7 Pennsylvanic Power Electric Sales and Revenues . . . . . . . . . as neighbors and friends Company, with of other consumers, we Rates............. ......... ............ 8 hoodquarters at New understand that we must Castle, Pennsylvania, cordhue to find the most income, Earnings, and Dividends . . . . . . . . . . . . . . 8 provides electric service economical and efficient to about 122.000 methods for providing Financing . . . . .. .. ....... ... .... 10,11 customers in on area of eiectricity. We work to approximately 1.500 increase productivity, to System Operations . . . . . . . . . . . . . . . . . . . . . . 12 square miles in western budget wisely, and to Pennsylvania. FuelSupplies . . . . . ..... ......... .. 15 plan responsibly for the Ohio Edison also electric needs of future Power Supply Planning . . . ......... ..... 17,18 provides steam heating generations. service in the downtown By working with our EnvironmentalIssues . . ... .. ......... 18 oreas of Akron. employees, cu:.tomers, Youngstown, and and stockholders, we are People Serving People . . . . . . . . . . . . . . . . . . . . 21 Springfield. confident that our efforts will keep electricity a President and Vice Presidents. . . . . . . . . . . . 22.23 People Serving good votue. Other Officers Division Managers . . . . . . . . . . . . 23 People While computers. We are companies machinery, and Board of Directors . . . . . . . . . . . . . . . . . . . . .. 24 made up of people who technology are Instrumental in Consolidated FinancialInformation . . . . . . . . 25-46 live in the communities whors we work. mar ufacturing and Service Territory Map . . . . . . . . . . . . . . . . . . 47 delivering electricity to We are concerned that our customms, it is the rising costs of energy place o burden on ultimately because or, many, a hardship on people serving people some. We are sensitive to that we con make our the needs of the poor, of product available. This the elderly on fixed year,s onmal report incomes, and of young ocknowledges that people rolsing families. traditim of mutual We support those respect and programs that coopmotion. realistically assist the needy in cor'ng w{th higher energy costs. We are committed to providing customers with reliable electric service of a reasonable price. 2

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PRESIDENTS LETTER

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To My Fellow rehability of our large Stockholders generating units of the y In 1979, Ohio Edison Sommis Plant in Stratton. b l and its subsidiary. Ohio We recognized, in Pennsylvania Power 1977. that we wanted a Company, showed comprehensive hard- h improvement over 1978's hittinq, assault upon the j disappointing financial difficulties that we-and I results Total revenues utihtles across the country , amounted to $994 6 -faced with l milli on, up 15 3 percent breakdowns in large over 1978 Earnings per generating units We shore of common stock hired a consulting firm to increased to Si 80 from work with us in creating ,

  $119 in 1978               o detailed plan of action 0                                                 '

Some of the events that - contnbuted to improved earnings included the 0

  $86 2 million emergency                         '

J. T. Rogers, Jr.. President rate increase granted in example, we have May. i479. which served componies in the Centro l intensified the training megowatts their os on advance against programs for plant Area Power Coordination ownership in each of the our $128 4 million Group (CAPCO) made in permanent rate operators. and we are two units of the Perry ' working on costly and January.1980. will Nuclear Plant Ownership application (On Januaw significantly reduce our 30.1980. The Public complex engineenng by The Cleveland modifications that will financing burden and Electric illuminating Utihties Commission of continue to improve the will have a positive effect Ohio granted Siii 6 Company will increase performance of these on our financial health by o corresponding milhon of the permanent units in addition. Cool dunng the next few amount. request ) Improved years CAPCO which suppliers have We made these operating results and a 2 9 percent increase in responded to our includes Ohio Edison decisions despite the < pressure for improvement and Pennsylvania Power. fact that we continue to electric soles. despite the l in the quality of cool As terminated four nuclear beheve in the safety and mild weather and the units and delayed, from general slowdown in o result of our efforts. we economic odvantages have secured high one to three years. three of nuclear power. industrial activity, also . quahty cool that has CAPCO nuclear units Unfortunately. the offected earnings in lessened. in a very riow under construction l addition.1978's two- country's regulatory and I measurable way. erosion month strike on the port (described in detail in emotional climate. cf Edison employees on boiler tubes- the " Power Supply aggravated by trie historicolly one of the Planning" segment of this occident at Three Mile l represented by the Utility report) The units not to I leading causes for Island Nuclear Plant, has ' Workers Union of generating unit outages be built would have cost made it highly advisoble Americo and the We firmly expect to more than $7 3 billion. iii-day cool miners. for us to reduce the level maintain steady progress and included Units 1 and of our financial com-sinke-both of which in improving reliobility. 2 of the Frie Nuclear depressed earnings in mitment to this energy Plant which were to be source The CAPCO 1978-were not Although they did not repeated in 1979. offect earnings in 1979 built and o rated b Ohio Edison n another i of the Another oreo of decisions that the five CAPCO decision. Ohio I improving performance Edison and Pennsylvanio in 1979 was our success Power reduced by 80 in increasing the l l 4 l 1

lermination of these units increases extremely Owoc will continue to involves some risk frustrating bec7use serve os chief financial because these many regulations are officer. Vice President reductions in generating overly stringent, arbitrary, R. J. McWhorter was capacity could offect and, most important from elected senior vice the reliability of electric a societal standpoint, do president in charge of service to our customers not provide results production and system in thD 1990's. Our commensurate with the operations. System decision regarding enormous costs. Operations Department nuclear expenditures is The federal Environ. Manager C. W. based on sound mental Protection Frederickson was planning, ana is one we Agency (EPA) will require elected vice president in have made in the the electric utility industry charge of engineering interests of our customers to spend, by the EPA's and engineering and of our investors. own estimate, more than planning. Even though earnings $103.2 billion between On December 31,1979, increased in 1979, and 1977 and 1986 to meet John R. White retired we obtained federal air and water after 26 years with the improvements in the pollution control Company. During his last r: liability of our large r gu ns. A th ce five years here, he pg generating units, we still

• served as President. We foco heavy financial Ohio Edison and are grateful to have had

  )urdens. Inflation and      Pennsylvania Power have        the benefit of his skillful ov;rnment regulation       spent more than $213.7         leadership, and we wish are realities that require    million for environmental      him good health and a huge expenditures on          equipment. Between             happy retirement.

now and 1986, to meet O ' P rt' C "8truct U" air and water quality I am very pleased to be costs are skyrocketing. continuing my 22 years regulations at our other c to b idn wer an n p e ur new Pr s ent. power plant has om confident we will increased nearly 500 Companies will have to expend on estimated continue our successes percent. We are and resolve our responding to soaring S540 million of new capital- difficulties because I operating costs with know what kind of tough budget admin. Finding solutions to the dedication our istration and thorough, expensive problems of employees possess. They cost-effective planning. regulation and inflation have demonstrated their In addition to inflation, creates a challenge that capabilities by meeting regulation has requ;res skillful the challenccs tf at dramatically offected management. In faced the' M the past, December, the Board of our finances. We and I e u ' ain tey will respond to directives Directors further ce" M & impro'.9 strengthened our from more than 100 mo I 19 't - . as futur s local, state, and federal S Th. . , re 4.W tea m, e ad am pos d h [4hw([s. regulations sharply In Senior Vice Presidents D. W. Tschappat and increase our workload y. A. Owoc to be execu-nd costs. We find these tive vice presidents. Mr. Tschappat was also elected a director and will serve as chief Akron, Ohio J. T. Rogers, Jr. cperating officer: Mr. March 19,1980 President Oh% Edison Cunpany 5

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ELECTRIC SALES and REVENUES ,/ D b Ohio Edison and Penn- November,1979, to LOod sylvania Power customers close two steel mills in Management used approximately 23 1980, will result in a total Our load management billion kilowatt-hours of loss of 5.000 steelworking program encourages electricity in 1979, an jobs and on estimated customers, through cost-increase of 2.9 percent $5 million reduction in saving incentives in our over 1978. Revenues annual revenues for us. electric rates, to shift or 49 years. While our from electric sales were in the past, we have spread out their daily use earnings improved this S968.7 million in 1979, a faced similar problems in year, we ore not of electricity. This helps L 0 percent ,ncrease i Akron when the rubber us reduce our daily peak. Increasing the dividend over 1978. industry announced cut- load generating amount at this time. One Kilowatt-hour sales to backs (30.000 lost rubber requirements, which of the reasons we are not residential customers jobs during the past thirty increasing the dividend is lessens the burden of were up 2.3 percent; years). In Akron, we par- financing additional ticipated with community rep ce some ie sales to commercial generating capacity- money we took from our customers increased 5.0 groups to develop diver- Our ten-year load retained earnings in 4978. r ercent, and sales to in- sified employment op- management goal to Retained earnings are dustrial customers rose portunities, and we are reduce peak demand what remains from sales 2.4 percent, working to accomplish by 300,000 kilowatts from each year offer we pay We had projected, of the the some in Youngstown. what it would otherwise all our expenses, beginning of 1979, a 3.8 Although the increase in be by 1988 represents ,,"foy e is nd c oercent increase in total electnc sales was more than S360 million to:res. We use these

     ;tectric sales, but such   modest, revenues from          (current dollars) in costs if retained earnings to (Octors os mild weather         electric soles for 1979        we were to add                enhance our and the slowdown in          increased 16.0 percent         generating units to meet      stockhciders' equity, to home construction in         over 1978, from S835.4         that demand. Our              protect future dividends, 1979 reduced sales.         million in 1978 to $968.7      reduction of 19,500           and to help reduce the Electric sales for Ohio      million in 1979. This          kilowatts in peak             need to issue additional increase occurred              demand in 1979 is             securitles for construction Edison were otso of.

fecteo by industrial shut. mainly because of the equivalent to o savings {xpenses h at normal downs, specifically steel. S86.2 million emergency of more than $23 million rate increase, on on conditions that offected plant closings in the (current dollars) in earnings in 1978 required Youngstown area. Jones annual basis, that The generating requirements, us to use some of our and Loughlin's decision Public Utilities retained earnings that in 1977 to close it3 vommission of Oh,io year to make dividend Campbell Works con. granted, effective payments in 1979, we tinued to offect us in May 2,1979. " ' ret ined earning's. 1979. Their closing in a formerMADGE MRS. beautic SHY'lon now December,1979, of a confined to a wheelchair, second mill, combined wrote to us in 1979 with United States Steel's explaining that her shores decision, announced in of Ohio Edisoa stock, which she inherited from her uncle, have been in her family for many years. i She told us, "I was o beauty operator for 39

• years, and i don't know i ,

anything about big business," but she wanted

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to know why her dividend ( '(o) has not incrcased. U Yic espr.d-Ohio tmson nM p Sd

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RATES INCOME, EARNINGS, and DMDENDS i

O 4 Rate Requests sii6.0 million permanent The improvement in Inflation, the high cost of rate increase in early operating revenues for i borrowing money, and May,1980, the year, offer regulatory lag (the During 1979, the deductions for expenses

length of time for the Company begon and other costs, resulted i regulatory process), negotiations with the in a net income of,

' made it necessary for various communities and S134.8 million in 1979 Ohio Edison to seek rate townships that we serve compared to $86.0 relief in 1979. An for an increase of million in 1978. After application for a $128.4 opproximately 33 pr v sions for preferred million permanent rate percent in street lighting and preference stock increase, on on annual dividends, net income rates-the first such basis, was filed with The general increase in street for common stock for the Public Utilities Commis- lighting rates. All but a year was $105.1 million, sion of Ohio (PUCO) on few of the communities compared to S61.3 ALVIN LINDSEY April 2,1979. On May 2. and townships approved m!!! ion in 1978. Earnings hos been a meter reader 1979, the PUCO granted per share of common the increase by contract r he po t e n on one us an S86.2 million For those remaining, the st k rose to Si 80 in half years, and he is emergency rate ,n- i Company applied to the i from $1.1 in i 8. Involved with restructuring crease, which affected PUCO to fix the rates. The The overage number of mat:r readers' routes. "It's all industrial, com- rates were fixed in the common stock shares a raal challenge," says mercial, and residential order issued by the outstanding increased Lindsey,"because of the customers in urban and PUCO on January 30. during 1979 to 58.3 trsmendous growth we've rural areas served at million from 51.6 million had In the Lake Erle 1980. The new street retail by the Company, lighting rates are shares in 1978. Division. , This emergency increase, expected to increase the Quarterly dividends of 44 Outside of office hours, granted on a temporary Lindsey is Minister of Company's annual cents per share on basis, represented on revenues by about S2 common stock of Ohio Music for the Glorious advance against our

                                                    '                                    million'                     Edison were declared by
                                 ,      ,$ch ln E. y n ngipermanent request.                                          the Company's Board of On Januarv 30,1980, the        Fuel Adjustment a w ek with the Apostolic                                                                  Directors in each quarter ins!mble, and the group         Commission granted us          Charge                      of 1979-trovals to other states on      S111.6 million of our          On October 10,1979, weekends giving church          requested permanent musical presentations.                                         +he PUCO onnounced rate increase, or 87           that its indepth review of Lindsey is also Director of     percent of the total           our fuel adjustment Chu cl es ho                    U"0"".t requeed. The           practices reveo'ed we Commission also                followec sound fuel ordered the Company to         purchasing rev;so its rom structure to    practices, and the croote ar, tam . roles for     application of fuel residen%' customers in         charge' S customers' urban cred ruro: yeas-         bills ha, been " fair, just p                                              4   Because infiction and          and reasonable."
 ,                                                    I   increasirg regulatory expenses continue to p~                                                       offect us, we filed a letter of intent on February 7,                                   'fgg*Jn*'*,*n"llj "on .

3 4 1980, with the communities we serve sono,n t naomna acr.. uon a m. and with the PUCO, g,vy"lf' "'

• pa'"8 '" " '" **

g indicating that we will file on application for o g i nomgeg.g.,n.;ng.goyr

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FINANCING O.

Utility Plant and Capitalization $3.012 9 f 1nonc ng the Millons of Dollars) 52,839 pollution Control foCilities E Net Utility Plant $2,600 of NWyWM NWs E3 c. pit.nmon $2,417 52,404 coal-fired Ncv/ Castle Plant. 52,116 1 Ohio Edison again issued

                                              $2,073 pollution control notes in
                                  $1.850                                                                                               December. A S7 million 8'

si,567

           $1,615                                                                                                                      issue was made through the Ohio Air Quality 1                                                                                                                                 Development Authority for various environmental control projects in Ohio, k                                                                                                                                 and Si9 million worth of pollution control notes were issued through the Beaver County Industrial Developmer.t Authority

• for the Mansfield Plant.

Both are 30-year 74 75 76 77 78 79 issues with an overage life of 28 years. First Mortgage Ohio Edison and Common Stock notes, which corres-Bonds Pennsylvania Power On February 22, Ohio ponded to a like amount raised approximately in June, Pennsylvania Edison sold six million of bonds issued by Power privately placed

    $334 million in new                         shores of common stock                    Pennsylvania's Beaver capital and obtained                                                                                                               $20 million in o 10.5 with a realization to the                 County industrial                            percent series of first commitments from                           Company of S15.97 per                      Development Authority.

institutional investors for mortgage bonds, which shore, or $95.8 million. The proceeds werc used are due in June,1999. In the purchase of Si32 to finance a portion of During the year, we also December, Ohio Edison million in new securities the pollution control raised S21.6 million from completed arrange-in 1979. Raising capital facilities at the coal-fired ) the issuance of 1.5 ments for private place- ) in this age of Bruce Mansfield Plant million shores of ment of $100 million of

    " expensive" money                                                                    and to refund a $26.5 common stock through                                                                  first mortgage bonds at a requires sound financial                   our Dividend Reinvest,                     million pollution control planning. Because we                                                                   note previously issued for rate of 12.75 percent. Of ment and Stock Pur-                                                                    the proceeds from this require huge, continuing                   chose Plan.                                the Mansfield facilities.

investment in facilities, issue, $16 million were On February 4,1980 in addition, Pennsylvania made available in we are a capitoi- Power participated in this Intensive Industry. Ohio Edison offered h5 February,1980, and $84 million shores of financing by issuing million will be made l The proceeds from our pproximately S3 million available during common stock, resulting l various sales of stocks in proceeds of in pollution control notes May,1980. and bonds were used, approximately S84.3 (Beaver County) for the Pennsylvania Power largely, to reduce short- million. Mansfield project and, arranged, in 1979, for term loans for about S3 million in S22 million of 10.90 construction, and for p nunon contro1 notes, Pollution Control thr ugh the Lawrence percent First Mortgage acquisition or betterment Notes Bonds, which will be of facilities. County Industrial closed in 1980. On April 10, Ohio Edison issued S27 million in 25-year pollution control 10

l RNANCING O

Prefarence Stock Long Term Loans inflation Accounting ELEANOR FRANCIS, i

in July, Ohio Edison in May, Ohio Edison As inflation continues to stockholder, says she negotiated the private completed affect us, we are wanted to own Ohio placement of S27 million arrangements for $30 reporting in this year's Edison stock even when financial section the she was a little girl. "I in two series of million in long-term loans don't know why, exactly, preference stock. One in the form of two Si5 estimated financial P series of the stock, million, three-year effects of inflation. Usual f,"a',Pho*[a company totalling $9 million and maturity, bank-term accounting methods do Mrs. Francis finally bought 9,000 shores, has a loans. The interest rate not reflect the fact that st dividend rate of 9.5 for these loans fluctuates one dollar of post costs is The Co any ,ad percent and on overage with the prime lending not recovered by a performed well, Ilike the I life of eight years. The rate of the two financial dollar of current management, and it's a i other series, of $18 institutions. In December, revenues. In traditional more securo stock," said million and 18,000 we borrowed $50 million accounting systems, Mrs. Francis, who works as shares, carries o 10.25 pursuant to o seven-year financial results and on executive secretary at percent dividend rate bank-term loan. The taxation are presented a mental health clinic for and on average life of as though the value of children. "So we bought interest rate is fixed at

;        14.5 years.                       11.5 percent for the first               today's money were the                                some.

two years of the loan same as that of Individuals-of record held and floats with the prime yesterday's. Inflation per n f o n unc n Oc ber lending rate thereafter. oun est otes the 10, the public offering of shores of common stock

        .two million shares of                                                                                                            outstanding on December upon eamings.                                         31,1979. Women repre-nother series of Mreference stock,                                                                                                                    sent 38.3 percent of our convertitde, cumulative,                                                                                                         individual stockholders, and without por value, to                                                                                                        men,29.4 percent, and 1 int wnership, 32.3 l'       be desi9noted Si.80                                                                                                              percent. According to o Preference Stock. These                                                                                                          survey completed in 1979, new shores were offered                                                                                                          47.8 percent of our to the public at $15.125                                                                                                         individual stockholders per share. The                                                                                                                      re retired,51.1 percent Consolidated Capitalization                                         $1,411 expect the stock to preference stock was convertible offer January                                    """ " ' ""                           s1,343                         provide o relloble income i,1980, into common                                                                                                              source, and 61.2 percent stock, equal to one                                                                                    j                         purchased their first
                                                                                                                =                         stock in the Company shore of common stock                                                                                                            since M73.

for each share of Si.80 Preference Stock. The sg7o d' Company received a net of $28.9 million from $851 j sole of the stock. - Preferred Stock In April,1980, i

Pennsylvania Power will s4sa privately place SiO million of a 10.5 percent s406

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y g-c Preferred Stock issue. 'S'f d.%5 b: lQ 9 f[' { IO Preferred and Common Long Term ' -

                                                                                                                                                                   #          I Preference Stocks Stockholders' Equity Debt                             '
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l SYSTEM OPERATIONS 9: Generating Unit December,1979, the Availability Company signed a letter As we reported to you of intent with a group of in 1978, one of the private investors Company's major interested in purchasing objectives is to improve the Youngstown steam the performance and system. Eventually, they avai'obility of the large may replace this plant generating units at the with a refuse-burning Sommis Plant in Stratton, plant. Ohio. In Akron, the Company in 1978, we created the agreed in 1976 to sell its executive-level Reliability steam plant and Committee to direct a distribution system to the comprehensive program city. The city has built on DR. MIRIAM BROWN We respond: to improve the overall energy recycling plant, is a stockholder who Even though Ohio Edison's reliability and and following the plant's h:lds a Doctorate in Inter- prime energy source is performance of those certification, the city will nati nal Law. She has cool, we continue to units. The Availability Task assume responsibility for i I:d for 18 years in West explore alternative supplying steam to Akron Force, organized at the er0b f he department managers, steam customers. wf of a [a*n se or p o u ng Fcraign Service, electricity. We keep in level, works closely with DIportment of State. plant managers to select New Area mind, at all times, that our "En!rgy independence primary objective is to strategies for improving DisPotchin9 Office atf: cts our foreign provide customers with reliability and then A new Akron area p:lley," sold Dr. Brown, reliable electric service at reports its conclusions to d,spatching office was i

 "In t:rms of how             a reasonable price.             the Reliability Commit +ee,   placed in servic in 1979 competitive we con           We are now studying the ramoln in a world where                                      We are pIeosed that our       contly the monitoring of feasibliity of constructing en:rgy sources are           hydroelectric plants on         strategies resulfed ,ni equipment at 23 major b* coming more and           the Ohio River. In improvernents in              substations in the Akron m:r3 of on issue. What is   addition, we have                reliability in 1979. We       creo. A computer-l Ohio Edison doing to         financlolly supported the       know that to complete         directed system now secure future energy        Clinch River Breeder             our reliability program, l sources?                                                                                   scans the entire Reactor Project of Ook          we will need to spend        transmission and Ridge, Tennessee.               large sums of money          distribution system every The electric industry, as a     and. therefore, our goal      two seconds and con whole,is actively               will take several years        immediately pinpoint involved, through the           to achieve.                   any circuits or substations                 i Electric Power Research Institute,in energy             Phasing Out                   involved in on outage.

projects, including wind Steam BUSINESS We are planning to generation, solar power. Facing continuing loss of begin construction in fuel cells, cool customers, operating 1980 of a new system-gosification, and other wide dispatching office research. losses, and huge expenditures for clean to increase further the Most lmportant, we air equipment, we efficiency of our system petitioned the PUCO in dispatching operation. ploy s o me$s and stockholders to urge June to grant us Ia permission to end steam their govemment representatives to service in Springfield and Youngstown. We have c/nh*f, s.av. dvan".fo7,'o'ci."f,d'o'f."'* yP develop a clem energy unn i. program that v.Ilead this been looking for buyers top montapproximat.e ve.sa mn.. .: country to enwgy for our steam plants in ""/n*'E.'f)',"l,*/f,'*,'n ,'/,'"*J., ,o u independence. these two cities. In *lgg*oa'mn data to a e ntrai g Nt[.'":loni ofl**f"/o."."/Z"A" ar.a dispotetung ofnc

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FUEL SUPPUES O Cool Supplies The Companies' coal-fired power plants burned more than 9.7 million tons of coal in 1979. The majority of Ohio Edision's cool purchases are made through long-term contracts, with those THEODORE W. ROEHLIG 11 would not save, in any full-scale, lengthy, and cool supplies coming is a social worker and on significant number, Ohio costly rate hearing each from southeastern Ohio income molntenance mining jobs. According to time the cost of fuel and western supervisor for o county the Ohio Electric Utility changes. (Fuel costs now

     - Pennsylvania. The           welfare depnrtment's Aid        Institute, statistics                      represent our largest remainder is purchased      to Dependent Children           provided by the Ohio                       operating expense, and, progr m. Mr. Roehlig, on        Department of Energy                       in 1979, amounted to on the open market from      Ohlo Edison customer,           show that Ohio's cool                      more than $316 million.)

the some region and wrote to us and asked the exports declined by 11 from eastern Kentucky- The fuel adjustment following: million tons between 1970 clause permits us to pass Pennsylvania Power buys and 1978. Nearly six

                                   .'If Ohio cool con be                                                      increases or decreases in its coal from centrol and   burned safely with the use      million tons of that cool                  fuel costs directly to the western Pennsylvania.        of scrubbers (albeit more       would have been                            customer by adjusting the r

expensively) howlong exported to Michigan fuel charge. The fact that 001 QUOlity con we com,nue to between 1973 and 1978, we recover only 90 provement purchase western coalin but has not been percent of our fuel costs Program view of the high cost of because of the federal through the fuel tronsporting that cool EPA s st ngen a of adjustment clause Our aggressive program easU 9 provides us an extra of obtaining higher SU ,Uf C quality coal from "If there is a means to incentive to purchase the suppliers continued in eliminate the fuel With the imposition of II'ost economical cool odjustment clause AND stringent air qual;ty possible. 19'/9 and resulted in a save Ohio jobs AND show standards, Ohio's high- And, finally, if the fuel significant improvement concern for the sulfur cool has become adjustment chcrge were

        .inthe quality of cool we   environment, then e             most unottractive. This is                eliminated, we believe, received at our power       must pursue that cc "3e."       hardly the do'ng of Ohio's                as do many rate experts plants-cool that is        We oppreciate Mr.               utilities.                                in the industry, that the higher in heat value and    Roehlig's seekin0               Ohio's electric utilities                 substitution of a longer lower ,n i ash content.      Information from us, and        continue to provide o                     and more complicated That program hos also       we respond:                     good market for Ohio                      regulatory review process enabled us to reduce                                       cool, despite the many                    would be costly and First, regarding your point                                               would inctease our substantially the amount   about western cool. We          cost and environmental customers, bills.

of coal ash that must be have traditionally bought obstacles. processed through our an important share of our Third, the fuel adjustment waste disposal system. In cool from nearby states clause exists so that we addition, cool with a and never from western con adjust our billings to lower ash content has states. If EPA guidelines reflect actual fuel costs less of on eroding effect regarding cleon oir without having to go to a on boiler tubes-a compliance will permit us primary cause of to m ke a portial shift to

                  .      .          Iow sulfur cool (oway from generating unit outages,   high-sulfur Ohio cool),

then we will buy that low-sulfur cool from nearby states, not from the west. v s*c. D *8n*2,E,*c*o %*.' 7

• Secondly, adding g geoogs,og'g' hour scrubbers to our ple-)ts U r$**g N ? O N '

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POWER SUPPLY PLANNING Nuclear Plants one year for the Perry terminate those nuclear customer demand for i The five companies in Nuclear Plant Unit 1, from units not yet under electricity during the the Central Area Power May,1983, to May,1984; construction in order to 1980's is four percent, or Coordination Group two years for the Beaver reduce the future less, each year. In light of Valley Power %ation Unit financial risks to our the decision made by (CAPCO) terminated in January,1980, plans to 2, from May,1984, to customers cnd the CAPCO companies build four additional May,1986, and three shareowners. to terminate plans for nuclear units that were in years for Perry Nuclear However, this belief that construction of four the design stage. Plant Unit 2, from May, nuclear power is a safe, CAPCO includes Ohio 1985, to May,1988. economical, and en- WAYNE COLE, Edison, Pennsylvaria CAPCO also made vironmentally superior Marion Division Manager, Power, The Cleveland changes offecting the method of generating served as President of the Electric illuminating ownership of Perry electricity resulted in Residential Home Company, Duquesne Nuclear Plant Units i and CAPCO's decision to Assoclotion of Marion Light Company, and The 2. Ohio Edison and complete the three units from 1974 through 1979. l Toledo Edison Company. Pennsylvania Power already well along in The Assoclotion is o non-Their combined service reduced by 80 construction. The new profit group that works megawatts their completion dates reflect I* creas include approxi- ,, o eb clIz nf a family motely 2.5 million ownership ,n i each unit. o more realistic time atmosphere, so that they customers in northern Ownership by The frams for the construc- con develop skills for and central Ohio and CWveland Electric ' ion and licensing of Independent living. The i

 > western Pennsylvania.          Illuminating Company           auclear plants.           Association is involved              ,

will increase by a with two homes and on e four terminated units corresponding amount. Cool-Fired Plants oportment. Mr. Cole bere i ere Units 2 and 3 of the Ohio Edison and The coal-fired Bruce is talking with a resident i Davis-Besse Nuclear Pennsylvania Power will Mansfield Plant Unit 3, of the Home for Men. ' Power Station near Port now have a combined which is being built and Mr. Cole joined Clinton, Ohio, and Units i will be operated by Pennsylvania Power in ownership in these units and 2 of the Ene Nuclear of 35.3 percent. Ohio Pennsylvania Power on 1950, and he come to - Plant near Berlin Heights. Edison kept its ownership behalf of CAPCO , is Ohio Edison in 1966. He l Ohio. The estimated cost (361 megawatts) in nearing completion. We hos held various , to build those four units expect the 825-mega. engineering posts, ' Beaver Valley Unit 2' including a previous stint was S7.3 billion. watt unit to be in The decision to terminate commercial operation in in Marion as The CAPCO companies these Units stemmed, in superintendent of also announced that the fall of 1980. Ohio large part, from political " construction will con-tinue, t,.ider an extend- " Edison and Pannsylvania

                                                                       *O Nrbin Cert n es ffecting                                   in 1979, the Marion Neul j    ed schedule, on two                                               9      N      9      Life newspaper selected the future construction of     percen0 of the unit.

l nuc' eor units near North nuclear plants-uncer- Mr. Cole as " Mon of the Perry, Ohio, and another Year" .n recognition of his l tointies that intensified AdequoCy of Power many community of Shippingport, Penn- follow ng the occident at sylvania. The reschedul-Three Mile Island Nuclear Supply activities. ing of the three units The revised, projected - Plant. Because of 4 under ccnstruction in- regulatory uncertainties rate of growth for s cludes time delays of and delays and because of inflation, the construction of nuclear f gga,",,ag,'ug **

• power in the future g g _wan y n 4. .na g cornes greater uncer-tainty of eventual cost. t

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Therefore, in spite of our j l no,n t.m won .. enmeang on convictions that nuclear q power is sote and <

l '"* @ 0 7 "'*vE.Unna. nuc economical, the j g g g m g.ngg uncertainties compelled the companies to tan a una eis m e , nign. 17 l

POWER SUPPLY ENVIRONMENTAL PLANNING ISSUES O nuclear units and to desened to meet strict Regulatory Ohio Edison is continuing reschedule three other air pClution standards Developrnents to work toward < nuclear units, and if the for cot 'l-burning power agreement with the U.S. Ohio Edison faces con. customer-growth- plants. Unlike flue gas tinuing uncertainties as EPA. In addition, on demand projections desulfurization Nove'iber 5,1979, we to the sulfur dioxide and should be exceeded, or (scrubbers) processes, particulata (fly ash) announced that we will if unsch3duled outages the by-products of gas acwlerate our emission limitations at our of our units exceed cleaning are generally plants. The U.S~ compliance program. current expectations, we usable and will require We will put into effect at Environmentol Protection are concerned about minimal disposal. Agency (EPA) and the all our plants a program the reliability of electric At this point, on that is consistent with our Ohio EPA disagree over service for our customers engineering firm is Understanding of sulfur in the m,d-1980's and, the method for mon . i reviewing the design for toring our compliance dioxide and particulate especially, the early the demonstration plant. emission limitations. with sulfur dioxide 1990's. We will continue The plant is not yet fully However, our com-emissions. We favor the to seek methods to funded, and Allis- method proposed by the pliance program does resolve these concerns Chalmers is seeking Ohio EPA, which would not mean we are not still as we monitor growth in additional financial allow us to burn approxi- subject to claims for civil customer demand and support from other mate!y 1.3 million more and criminal penalties compare that growth to groups. A final decision associated with the tons of Ohio high-sulfur our capacity. about the feasibility of cool per year than does C!ean Air Act. In our judgment, our building the plant the U.S. EPA method. < neighboring systems probably will not be face the some serious made until the m,ddle of The U.S. EPA announced in F i obstacles to the timely 1980. Those companies . February,1980, in that it shut down c'ertain' we completion of new

• 11 propose a new sulfur generating units, which that contribute to the d. oxide enforcement capacity additions. Thus, plant project will have have a combined net the amount of power priority for using the *YJ senW on, when it is proposed, will generating capability of that various electric technology. 60 megawatts, of three companies will be able be subject to public of our smaller cool-fired to provide to one Hydroelectric comment and possible power plants. More than another during future Sludies implement ti n by the $27 million would have critical lood capacity On November 5, we filed state of Oho. Until that

                                                                            ,           been required to equip shortages is uncertain.                                     new        enon is           these old units with opplications with the              nn un     d. Ohio Ed.ison necessary environmental Federal Energy Future Power                Regulatory Commission           [SS"ge'niefce$nt t
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ee Sources (FERC) for preliminary policy that is slightly The closed units . include C' I Gosification Si"dY P*""its for possible more stringent than the the East Palestine Power hydroelectr.ic plants of s,x i Plant, the Norwalk Power in cooperotion with current Ohio-proposed Corps of Engineers locks Plant, and Unit i of the several other utilities: and dams along the P "' Ohio Edison is partici- MRWPM Ohio River. These Until the issues of sulfur pating in a cool, permits, if granted, dioxide compliance and gosificotton project, would provide us the type of cool we are

.nitiated by the Allis-    exclusive rights for three      to burn are resolved, Chalmers Company, to                                                                     'fn:,^,,"$g;,*g,*f4"f;;o*ng f

years to conduct procuring fuel and nani ano.i m. no oe m. 9so-root build a demonstration detailed feasibility designing related air plont in Wood River, TILE"o*mWas""Ifr""?n'# lea *i.T studies to determine pollution control **o' c Ill..nois. This cool whether we wish to equipment oce extremely to..t.rt m.iaro.it.aren ono gosification process proceed with difficult to do. Despite 'fjds'o"O"*n**,"fo*1',,'.'J;"i.a involves the use of a construction' this uncertainty of vo"v "h** *'udo* *** ** *"5*'d rotating, cylindrical kiln regulatory requirements. to produce gas 1.om to.., m on,: a vi.. erom m. ,op or cool, which then is used

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as a fuel. This process is g;'.c^g gmy,rg',g, Po. t nov. spent $2131 million so far. 18

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PEOPLE SERVING PEOPLE i l I O Employees to our hiring practices releases to a large telephones or writes, 3 regarding minorities, number of newspapers; which helps in reducing Prov.i ding the kind of females, the distribution of costs to the Company, wo n atmo handicapped, and educational brochures ge j hof Customer SerViCOS veterans. The Company and pamphlets; tion or d improves the s committed to Ine involvement with More than 300 highly performance of the development of teachers and school trained employees work j Company s operations is additional programs administrators; and we with customers who want our continuing goal. To which will provide on keep in touch, regularly, information. These provide this opportunity, increasing number of with people in the news employees include we asked consultants to equal employment media to help them professional engineers conduct a Company- opportunities for females provide the public with who work with large j wide employee attitude and minorities. occurate information industrial accounts; survey. We are evoluoting about the Company. consumers' represent- , the results of this survey so Solaries and Wages atives who work with 1 we con respond in the area of solaries We have also created groups on such issues as oppropriately, and wages, we are in advertising programs understanding the use of in addition to seeking compliance with the that are designed to energy in the home; I President's guidelines for increase pubh,c representatives with employees' opinions 1 wage-price controls. Understanding of factors agriculture backgrounds about their work that drive up the cost of i environment, the who work with agri-  ; Company offers training CommuniCOilOnS electricity. At the same business customers, and A good communications time, these programs people who respond to fondbrograms educational to increase link with customers, illustrate the value that telephone calls from iV electricity represents in employees' expertise employees, investors, residential customers and the community-at. these inflationary times. Concerning their electric i and involvement in the Company's operations. large is vital, considering Our using advertising this service.These employees the complexity of issues way helps to control the implement programs to Affirmative Action that offect how the cost of communicating assist and inform cus-In October, the Office of Company performs in with customers. For tomers on how to use I l Federal Contract behc.f of each of these examole, it costs about electricity more efficiently.  ! l l Compliance Programs, grouas. Wo conduct S t69 to respond to a l Department of Labor, regular customer opinion single five-minute phone randomly selected Oh.io DICK BRANDON,line surveys so we can better call from a customer i " 'd I Edison headquarters for understand and tailor questioning the cost of b eo e pro'b e for Mr. l auditing. We received a our communications electricity. For the samc and Mrs. Amend offer I

       !etter from the office            programs to their             St69, we con discuss         ' their lights had been out       I indicating that, subject         specific needs.                the cost question in the       for about 20 minutes. Mrs.

to several revisions, our mass media with Amend thanked Mr. Affirmative Action e ou approximately a Brandon with a batch of Program, in our General ng om sadors homemade sweets and l i for the Company, and thousond viewers or ' Office, is acceptacle listeners. Our advertising wrote o "thank you" letter under current federal we are continually to the Company. regulations with respect WO OO P v f wh ' e b fo e the si r op{ec

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y ', : __, .: _ ;. __; 4 _ _ gg Justin T. Rogers, Jr. Victor A. Owoc D. W. Tschappat President of this Cornpany and Executive Vice President Executive Vice President Cn rrmon of the Board of its subsidiary. Pennsvivania Power Company l 1

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Robert J. McWhorter Russell J. So Pbc Frank E. Derry l Senior Vice President Vice Presiat aniTeneral Vice President ,i Counsel l 22 l u___ __ _ _

l l OHIO EDISON COMPANY O 1 l

                                                                                                                                                        -m++:=g1                                      OTHER OFFICERS N.                                               1-W. B. Marvin 5 %s .                                                            .
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e w '. % s H. Peter Burg

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                                                                                                                                                "kn                                                   D. D. Vowles Secretary Q=7.                                                   6                                               .'           ]                                            j 3M                                        -        il      ?g
                                                                                                                          -       i                /                                         'l       W. G. Fouch I.OEj%,                    ih..                          I ~?                                        J                                                                         Assistant Comptroller l
                                                              ...-            F        5.-                                                         .                                                  G. F. LaFlame t

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Assistant Treasurer C. N. Glasgow

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                                                                                                                                                                                        &             Joanne Martin
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Lynn Firestone R. G. Zimmerman nior Vice President Senior Vice President [ MANAGERS

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s J. E. Markle [_ \ Lake Erie Division f( ' M. E. Cash Mansfield Division h A. W. Cole Marion Division N. R. Monchon Springfield Division j

                                                                                                                  ;y                                                                                   R. E. Dawson
                                                                                                                                  .                                                                    Stark Division j                                                                                           D. C. Bixler, Jr.
                                                       ,                                               21                                                                                              Warren Division y              D. J. List                                                                                      Clyde W. Frederickson                                                                D. R. Gundry                j Vice President                                                                                    Vice President                                                                       Youngstos.. . Division      '

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OHIO EDISON COMPANY General Offices 76 South Main Street Akron, Ohio 4A308 (216) 384-5100 0 BOARD OF DIRECTORS W. A. Deralck

• R. L. Loughhead W. H. Sommis R. G. Zimmerman Independent Electrical President of Copperweld Retired-formerly President Senior Vice President of <

ond Mechanical Steel Company, Warren, of this Company and of this Company. Engineering Consultant, Ohio, manufacturer of its subsidiary, also President of Leisure carbon and alloy Pennsylvania Power Fred H. Zuck Industries, Inc., Sandusky, blooms, billets, and bars. Company. Member, O

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                                                                                               *[         n      i e Board s  fo*nd e dentio            D. Bruce Mansfield                                             of Sandusky Foundry &

building. Member, Salary Retired-formerly President W. R. Toppon Machine Company, Committee' f this Company and Retired-formerly Sandusky, Ohio, Chairman of the Board Chairman of the Board manufacturer of John L. Feudner, Jr. of its subsidiary, of The Tappan Com- centrifugal castings. Executive Director of Pennsylvania Power pony, Mansfield, Ohio, *Mr. Loughhead was elected Akron Community Trusts, Company. Member, manufacturer of a Director by the Board of Akron, Ohio. Chairman, Audit Committee. microwave ovens, Directors on December 19 Audit Committee. appliances, kitchen 1978 and by the V. A. Owoc cabinets, and bathroom si ckholders in the Annual Dr. Lucille G. Ford E t e Vice President h Dean of Business o ompany. vanities. Chairman, Salary Committee. Nei nIib ' ve upon receipt of authori20 tion Administration, by the Federal Energy J. T. Rogers, Jr Econom.'es, and the Gill D. W. Tschappat Regulatory commission President of this under provisions of Section Center fo Business and Executive Vice President Economic Education, f s Company. ' Ashland College, ar a f the Board fcffor h rioee of its subsidiary, Frank C. Watson Application for such Ashland, Ohio. uthorization was promptly Pennsylvania Power President of The j Company. mode but is stdl pending. / J. Pobert Groff Youngstown Welding Accordingly. Mr. Loughhead Consultant to The James and Engineering has not yet served as Leffel & Co., Springfield, Company, Youngstown, Director. Ohio, manufacturer of Ohio, fabricator of non-hydraulic turbines and ferrous aiioys. Member, steam generating Audit Committee. eouipment. STOCK TRANSFER AGENTS AND REGISTRARS FOR The Company's c,nual report COMMON STOCK on Form 10-K as filed with the AND ALL SERIES OF Securities and Exchange Com. mission, wili be avaiiocle to PREFERRED AND shareh r "* PREFERENCE STOCKS. o y, se r to D Continental Sincx Transfer & Vowles, Secretary, Ohio Edison Trust Company Company, 76 South Main - 19 Rector Stree; Street, Akron, Ohio M308. New York, New York 10006 Transfer Agent and Registrar Ohio Edison is on equal Transfer Clerks of Ohio Edison opportunity employer. Company Akron, Ohio M308 Transfer Agent BancOhio National Bank,

     . o M308 Registrar 24

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l l I CONSOLIDATED FINANCIAL STATISTICS  : Summary of Operations 1978 1977 1976 1975 1974 B 19794 J}1 P , Thousands of Dollars Operating Revenues . . . , .. $ . 904,005 4 $ 862,956 $ 796.289 $ 644.852 $ 593,324 $ 498,355 Operating Expenses. . .. .

                                                       . . .p ; MS,731.          N       668,224        561,687       459,905        428,217      371,711 Tcxes-                                                       F - e. . d General .    ...... .           . ..            ..           cN,1339                   76,804         65,046        54,084        51,046        44,463 Federal and State income-                               g    ..;.4:

provision (credit) . .. . .P J41,908 e (6,017) 23,048 8.646 24,398 11,086 Total Operating Expenses -

                                                                       - .jj and Taxes           .      . .. ..                    e  830,841 4             739,011        649,781       522,635        503,661      427,260 Operating income. . ...                      .           .F 2148,7441                  123,945        146,508       122,217          89,663        71,095 Other lucome and Deductions-                                         '

e; net . . .. .

                                                             *M - 68,NF ;j                 47,413         36.992         63,726        64,652       43,439 N:t Interest and Other Charges-                            p_1                W Interest Expense..                                  . .H :188,884                   103,104          88,557                       67,859       52,879
                                  .... .                                                                                 79,141 Allowance for Borrowed Funds Used During Construction . . . . . . . k (48,300)g fi (22,436)'      (20,504)

Subsidiary's Preferred Stock ft . .. 4 Dividend Requirements . .F+ :4,000d 4,660 3,873 3,626 3,035 2.120 Net Interest and Other @ A { Charges . . . . . . . . .b 86,3043 85.328 71,926 82,767 70.894 54,999 income before cumulative effect of a T .l change in accounting method. 34,807 d 86,030 111,574 103,176 83,421 59,535 Cumulative effect to Dec. 31,1973 . ' 3 of recording metered but h(. ' ' m'i unbilled revenues . .... . .h l - - - - 2,587 N:t income . . . . . . .. . ... . .bM134,807 4 86,030 111,574 103,176 83,421 62,122 Pr:ferred and Preference Stock

                                                        . .b fM20,087       'D ]i Dividend Requirements . . .                                                           24,771         23,711        20.399         15,780       11,087 N:t income for Common Stock . .                        . .i$ r106,1901 $ 61,259                    $ 87,863      $ 82,777       $ 67,641     $ 51,035 Av: rage number of shares of                                Pc                 j Common Stock outstanding                                %                  M (Thousands). .        .    .            .        ...           58,2001               51,620         44,682        38,751         34,695      30,445 E rnings per share of Common Stock (i)             ..            .

[s.-....

                                                    . . 6 '~ S ' 1.80]4$ 1.19                            $ 1.97        $ 2.14         $ 1.95      $ 1.68 Dividends declared per share of                             p; f 4 Common Stock . . .             ...               . . P t-S 1.78 01                   $ 1.76         $ 1.71%     ' $ 1.67         $ 1.66      $ 1.64%

Utility Plant and Capitalization b i Utility Plant . . . . . . . . .. . . .!$3,767,4037j $3,395,926 $3,014,903 $2,664.723 $2,354.569 $2,081,460 Accumulated Depreciation . . .lE 746,200 M 678,106 611,093 548,925 504,079 466,195

                                                             !$3,012,197--i $2.717,820              $2,403,810    $2,115,798     $1.850.490   $1,615,265     )

C pitalization- h . ci Long Term Debt. . . ...... . $1,343,195 $1,189,821 $1,087.755 $ 920,932 $ 868,509 Redeemable Preferred Stock. , . 6(81,410,782s 198,000! 98,000 98,000 88,000 88.000 - Non Redeemable Preferred E T ?? 9 Stock . ....... . . . . . . . P 407,472 A 307,472 262,472 262,472 214,472 214,472 Redeemable Preference Stock . .. y ' 57.300.i - - - -

                                                                                                                                                            }

Common Stockholders' Eqt;ity . ,, , F 900,543 L]851,119 866,725 634,707 545.704 484,146 Total. .. .. . .. . . . . . .gg/4 $2.599,786 $2,417,018 $2.072,934 $1,769,108 $1,567,127 C:pitalization Ratios- E 1.. J I Long. Term Debt. , . . . . . . . . . . . b ?4W.7%M 51.7 % 49.2 % 52.5 % 52.1 % 55.4 % Redeemable Preferred Stock. . . . . W ';,8.4M 3.8 4.0 4.2 5.0 - Non-Redeemable Preferred yi Stock.. ..... .. ..... . . . ;10.8 i i 11.8 10.9 12.7 12.1 13.7 Redeemable Preference Stock . , , . F ? 2.0L d Common Stockholders' Equity . . . f* -- 34.2 b ni 32.7 35.9 30.6 30.8 30.9 Total. .. ... . ... . .P 100.0% W 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % (i) Based on average number of shares outstanding during the year.

OHIO EDISON COMPANY AND SUBSIDIARY COMPANY MANAGEMENTS DISCUSSION AND ANALYSIS

     ) .OF CONSOUDATED FINANCIAL STATISTICS The following is management's discussion and analysis of certain significant factors which have affected the
       - Companies' earnings during the past two years. Stated increases or decreases for 1979 and 1978 are derived from o comparison with 1978 and 1977, respectively.

A summary of the changes in the principoi items offecting earnings is shown below: Increase or (Decrease) 1979 vs.1978 1978 vs.1977 B Amount y Percent Amount Percent i . A Dollars in Thousands Operating revenues . . . . . . . . . . . . . . . . . . . - .IS131,629j 15.3 % $66,667 8.4 % Co s t o f f u el . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . M 30,988; 14.5 61,508 28.6 Purchased and interchanged power, net . . . . . . . . (34.1) 3,919 4.5 Other operation expenses . . . . . . . . ... . . {J"j4~ 117(31,198)4!

                                                                                                         ,                    3.1                 26.956                25.0 M ain ten ance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                        17.3                   5,651                 6.9 Provision for depreciation .. .. ........ ..                 ..

115,198f cj3,412 4.4 8,503 12.3 General taxes ... .. ... . .... ...... ....... G12,318j 16.0 11,758 18.1 Provision for income taxes . . . . . . . . . . . . . . . . k.L51,4001 - (30,144) (184.1) Allowance for funds used during construction . . . . L38,520l 66.0 10,209 21.2 Interest and other charges (excluding allowance for borrowed funds used during construction) . . [U M} p 23,720 4 22.0 15,334 16.6 Preferred and preference stock dividend requirements. . . . . . . M.I

                                                                                                ]9}6j                        19.8                   1,060                 4.5 Operating Revenues O The $86.200.000 emergency rate increase effective in                                               increase may be passed through directly and there is (j May 1979, in addition to lesser increases which were                                              approximately a 1-1/2 month lag between the incur-effective in September and December 1978, subston-                                           ring of the cost by the utility and its recovery from tially increased operating revenues in 1979. Adding to                                       customers.

this were increased kilowatt-hour sales in 1979 of 2.9%. A major portion of the increase in 1978 resulted COST of Fuel from fuel adjustment clause revenues. Such revenues The increase in total fuel costs in 1979 and 1978 increased by 21% and 7% during 1978 and 1979, resulted from the combination of changing prices, rnspectively. Ohio fuel adjustment clause regulations change in fuel mix and the effect of Penn Power's operate to the detriment of earnings in a period of ris- deferred energy costs. The following analysis details ing cool prices in that not more than 90% of a fuel cost these effects individually for coal, oil and nuclear fuel. e ;7=. 4 Coal Oil Nuclear MTotal - l Thousands of Dollars b . y 1979' . . (,._ Increased costs due to changing fuel prices . . . . ... $30,915 $ 7,204 $- 3$38,119 Increased (decreased) costs due to change in 'iFO quantity consumed . . . . . . . . . . . . . . . . . . ... . 13,850 (12,828) (2.038) c (1,018)e

                                                                                                 $44,765                 $ (5,624)             $(2,038)            h837,103l
                                                                                                                                                                      ,  a . 1 Effect of Penn Power's deferral . . . . . . . . . . .                    ..... .          .      .. . . ......... .                ...           . . ,      M2,883 i Totalincrease ln cost of fuel . . . .... .........                                   .. .. . ..... .. ......... .. . . .                                . E 839,988]

1978 increased costs due to changing' fuel prices . . . . . . . . $40,428 $ 659 $ 754 $41,841 Increased (decreased) costs due to change in quantity consumed. . . . . ... 13,050 8,074 ( . ... . .. ... .. (463) 20,661

                                                                                                 $53,478                  $ 8,733               $ 291                $62,502 Effect of Penn Power's deferral . . . . . . . . . . . . . . . .                     ... . ....            .    .........       . . ...... ...

(994) cTttal increase in cost of f uel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $61,508 27 m.

i

                                                                                                                       )

Purchased and Interchanged Power, Net five year, combined with increased property taxes Uss $ P The substantial decrease for 19/9 in purchased and gg o n u-interchanged power, net, resulted from improved mP sy ani p su ther increased property taxes for the year. The 1979 in-generating unit performance and the obsence of crease was partially offset by the reversal of approx-unusual factors which increased dependence on imoiety $1,136,000 opplicable to prior years for the power supplied from other utilities in 1978. In an at- Ohio Cool Consumption Tax, which was declared un-tempt to conserve the Componies' supplies of cool constitutional' during the strike by the United Mine Workers of America, large amounts of power were purchased The changes in the provision (credit) for income taxes during the first quarter of 1978. The strike by the Utility are set forth in Note 1 of Notes to Consolidated Finan-Workers Union of America (UWUA) against the Com- cial Statements. pony adversely offected efficient operation of several of the Company's generating units in the third quarter Allowance for Funds Used During of 1978, thus cousing greater reliance upon power supplied by other utilities. Construction (AFUDC) The increases in AFUDC resulted principolly from in-Other Operation Expenses creases in the amounts of construction work in prog-mss causM by conMg @ leds of consMon NormallY escalatin9 costs of salaries and wo9es' activity. The commencement of commerciot opera-materials and supplies, and oths. udministrative and t on of Bruce Mansfield Unit No. 2 in 1978 held down general expenses contnbuted to increases in other the increase in that year. Also contributing to the 1979 operation expenses during 1979 and 1978. The strike increase was an increase in the rote used by the Com-by the UWUA further increased such costs in 1978. pony for calculating AFUDC on a gross basis, before provision for deferred income taxes on the allowance nienance for borrowed funds used during construction (see Note Approximately 99% of the Increase in maintenance i of Notes to Consolidated Financial Statements). costs in 1979 related to work performed on the Com-panies' coal-fired generating units. Such Interest and Other Charges maintenance has increased the availability of the Interest and other charges (excluding the credit for units, as mentioned above. The 1978 increase resulted allowance for borrowed funds used during construc-principolly from increased maintenance performed tion) increased during i979 and 1978 due fo increased on the Companies distribution line facilities and ong-term and short-term debt outstanding during maintenance at W. H. Sommis Unit No. 7 and Beaver both years, coupled with significantly increased in-Valley Unit No.1, despite reduced maintenance at terest rates on the debt. Details of the Componies' debt several of the Company,s generating units during the financings and redemptions during 1979 and 1978 are UWUA strike. shown on the Statements of Consolidated Sources of Funds for Gross Property Additions on page 33. Pr vision for Depreciation Continued growth in depreciable utility plant in ser. Preferred and Preference Stock vice effected the increases In depreciation expense Dividend Requirernents for 1979 and 1978- Increased preferred and preference stock dividends resulted from the Company's sale of 9,000 shores of T xes S95.00 Preference Stock,18,000 shores of $102.50 General tax increases in 1979 and 1978 resulted Preference Stock and 2,000,000 shares of Si.80 primarily from Increased gross receipts taxes op- Preference Stock in 1979 and 450,000 shares of 9.12% plicable to the increased revenues for each respec- Preferred Stock in 1978. 28

OHIO EDISON COMPANY AND SUBSIDIARY COMPANY m STATEMENTS OF CONSOUDATED INCOME x-

    ) For the Years Ended December 31                                                                                                                h31W9T e-                -

1978 Thousands of Dollars OPERATING REVENUES: Electric (Note l) . . . . . . . . . . . . . . . . . . . . ... ... ........ .... ..... {WE217]j p $857,545 Heating........................... . .... . .. . .. . . . F ~ 5,311 5,411 Totaloperating revenues . . . ... ... ...... ..... .. . . hSO4005j 862,956 A f:~

                                                                                                                                                     /

OPERATING EXPENSES AND TAXES: d ~ Operation- [f - Cost of fuel (Note 1) . . .. . ..... ... .. .. .... ......... . ... 6 318,538 276,570 Purchased and interchanged power, net . . .. .... .. .... . [ 100,313: 91,509 Other operation expenses . . . . . . . . . . . . . . . . . . ... ...... ...... F 188,712f 134,595 Total operation . . . . . . . . . . . . . . . . . . .. . ... .. ... .. . 502,674 Maintenance . . . . . . . . . . . . . . .. .. ...... . . ... ..... .. .

                                                                                                                                                     %(815,581j
                                                                                                                                                       12,938j                87,738 Provision for depreciation (Note 1) . .. .                             .      .....            . .... .. ...                       . .              ;81,234;          77,812 General taxes . . . . . . . . . . . .... . .. . . ...                                   . ..              ..                            .           ;88,12Rl          76,804 income taxes- provishn (credit)(Note 1) . . . . . .                           .         ..       .. . .....                     ..                  741,90Si           (6,017)

Total operating expenses and taxes . . . .. . . ... . l:8M,841j 739,011 OPERATING INCOME . . . . . . . . .. . ... ... .. . ... . .. h183,744} 123,945 OTHER INCOME AND DEDUCTIONS: (J Allowance for equity funds used during construction (Note 1) ...... ' 50,571 35,895 Miscellaneous, net . . . . . . .. .. .... . .... .... . ... . 6 (1,MB 3,767 ,- Income taxes-credit (Note 1) . . . .. .... . . . ... ... . . . p 4,NT} 7,751 ( m./

    )          Total other income and deductions-net . .                                     .         . .          .               ..         .. F 50,NFl                   47,413 TOTAL INCOME . . . . . .             .            ...... .              .                  ... .. ..                .           ..            I22,0111                  171,358 b                   d NET INTEREST AND OTHER CHARGES:                                                                                                               [

Interest on long-term debt . . . . . . . . . . ... . . .. . ... .... . ' 188,401)) s 98,100 Allowance for borrowed funds used during - h construction (Note 1) . . . . . .. .......... .. .. .... . ........ e (48,NS (22,436) Other interest expense . . . . . . . . . . . . . . . . . . 5,004 h_ h18,423l1 Subsidiary's preferred stock dividend requirements . . . . ...... .... . f T 4,800 4,660 Net interest and other charges . . . . . . . . . . . . . . . . . . . . . . .. k 88.34! 85,328 N ET I N C O M E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. .. b184,80F # 86,030 PREFERRED AND PREFERENCE STOCK DIVIDEND REQUIREMENTS . . . . . . . . F SOSF 24,771 N ET ;; " ? M E FO R CO M M O N STOC K . . . . . . . . . . . . . . . . . . . . . . . . . . . ... IS108,124 5 61,259

                                                                                                                                                                   >a0 AVERAGE NUMBER OF SHARES OF COMMON STOCK                                                                                                             '

OUTSTANDING (THOUSANDS) . . . . . . . . . . . . . . ... ........ ... ....... . g 51,620 EARNINGS PER SHARE OF COMMON STOCK g< , f (based on average number of shares outstanding

                                                                                                                                                        ~

d u ri n g t h e ye a r) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . o f

                                                                                                                                                              ?S 1.80)          $ 1.19 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

a 29

l CONSOUDATED BALANCE SHEETS At December 31 p ?t979 d 1978 Thousands of Dollars ASSETS F'""~" c w y UTILITY PLANT (Note 1): f In service, at original cost . . . . . . . . . . . . .. . .. .. .... .. ....... tS2,8'63,401, $2,581,022 Less- Accumulated provision for depreciation . . . . . . . . . . . . . . . . . . . . . . . . k ' 746,296j 678,106 k 1,902,916 Construction work in progress. . . . . . . . . . . . . . . . . . . . . .. .. .... h.1,908,186 }803,732 N uclear f uel in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . d 1,091,706])

                                                                                                                                ~ 12,304              11,172 h 3,012,197i             2.717,820 t                   A

3 OTHER PROPERTY AND INVESTMENTS: . . . . . OJ Construction funds held in escrow, including accrued interest . . . . . . . . . . . . .. ,

127,308] 23,851 Common stock of Ohio Valley Electric Corporation, p .a: at cost (Note 2) . .................. .. ......... ... . . ... 1,650 [p j1,0001l Ot h er, at cost . . . . . . . . . . . . . . . . . . . . . . . . . ... . .... . .... .. e s,814 3,468 [ E 32,800hf

                                                                                                                                            .zi 28,969 CURRENT ASSETS:                                                                                                           I .'              .T]

Cash ... . ................................. . .. ..... ... ... . k :11,208]  % 7,880 Receivables- i-: - Customers (less accumulated provision of $1,094,000 and  :

        $1,048,000, respectively, for uncollectible accounts) . .                      ... ..            ..... .

[ p 86,937]j 74,349 Other................................... .. ..... .. . [i fi9,463 a 17,806 Materials and supplies, at average cost-r Fuel................................... ... . .. . .. .. R .64,840 ] 55,498 Other......... . .... . ..... .......... .......... . . . ..... h. $29,782)g 26,838 Prepayments and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .... F v12,206l 11,510 t a 223,2961' 193,881 4

                                                                                                                         }:1                   3 DEFERRED DEBITS:                                                                                                           r.

Deferred energy costs (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . /J . 3,030

                                                                                                                                      . . . ]1         4,717 Property taxes applicable to subsequent year                   .     .. .... ... ......... ..                          10 e 37,742l                36,059 Deferred costs of terminated construction projects (Note 3) . . . . . . .                          ...        . ... b 100,172                     -

Other.................................... .................. . .... f '37,368] 29,468 V i178,3023) 70,244 fg $3,010,914 O. 3e

                                                                                                                                                               )

OHIO EDISON COMPANY AND SUBSIDIARY COMPANY s

     ) At December 31                                                                                                                 f -'1979 Q              1978 J

Thousands of Dollars CAPITALIZATION'AND LIABILITIES CAPITAll2ATION (See Statements of Consolidated Capitalization): {e'l e e*[ 1 s Common stockholders' equity . . . . . . . . . . . . . . . . . . . . . . .. .... ...... . l$ 909,643]j $ 851,119 Non redeemable preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 205,625 265,525 Redeemable preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . L 78,000 80,000 Redeemable preference stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,200 - Non-redeemable preferred stock of consolidated subsidiary . .............. fg ;41,947],

                                                                                                                                              ;               41,947 Redeemable preferred stock of consolidated subsidiary . . . . . . . . . . . . . .                                         .  ? . ; 17,000 ?          18,000 Lo n g-t e rm d e bt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... ... . . .                    f1,410,782 j        1,343,195 b 2,838,647 )       2.599,786 h
                                                                                                                                       -                ]

CURRENT LIABILITIES: P . . . , t Current maturities of long-term debt and preferred stock . . . . . ..... .. 1 63,411) - Notes payab'e to banks (Note 6) ...... .. ... . ... . ... ..... .. . (191,N91 96,604 Accounts payable . . . . . . . . . . . .. ................ ..... ....... ... "l/ 100,051 j 95,551 Accrued taxe s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ..... ....... 3 46,611 Accrued interest . . . . . . . . . . . . . . . . . .. .. . .. . .. . ... . .... J 00,345]! 28,978. 27,157 Dividends declared on preferred and preference stock . . . . . . . . . . . . . . . . . 4,151 2,527 Miscellaneous . . . . . . . . . . . . . . . . . . . . . ... . ... . . ........ .. 12,303 l 15.733 403,332 2 284,183 ,/m d ll g

                                                                                                                                          ^

l DEFERRED CREDITS: Accumulated deferred income taxes (Note 1) . .. .......... .. . ....

                                                                                                                                                  ._k

_;30,784j 37,755 Accumulated deferred investment tax credits (Note 1) . . .. .. .... . h - 55,944 j 42,129 Property taxes apr 'icable to subsequent year . . . . . . . . . . . . . . . . . . .... [Mr137,742j 36,059 Other... ...... .. . .... .. .. .. ..... ... . 411,015 11,002 L 144,485] 4 126.945 COMMITMENTS, GUARANTEES AND CONTINGENCIES N-

                                                                                                                                         '~

(Notes 2,4 and 7). . . . . ..... .......... .. . . ..... . .... . ... ... J

                                                                                                                                                     - i.

[gj] $3,010,914 The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets. n. 31

                                                                                                                                                                                                       ~l STATEMENTS OF CONSOLIDATED CAPITAUZATION IIDecember 31                                                                                                                                 t-               AND 1                          1978 Thousands of Dollars COMMON STOCKHOLDERS' EOUlTY:                                                                                                                  p ev'-'m Common stock. 39 par value, authorized 75,000,000 shares-outstanding 59.622,369 and 52.120,230 shares, respectIvely (Note Sa)                                                                                 y/ $- 6 d'                                $ 469,082 Other pe46n capital (Note Sa).                            .              .                                                                  F SW                                         232,422 Retained earnings (Note 5b) . .. . . ...                         .                                                                                       1M-                             149.615 Total common stockholders' equity .                .                              ,       ,.           .

E 851.119 Optional Redemption Price , Number of Shares Aggregate # h_ ~ Outstandin0 (in  ! 1978 Per Share Thousands) 1979 ,-

                                                                                                                                                                             ]

PREFERRED STOCK (Note Sc). *W 7 Cumulative. $100 par value- - Authorlied 4.000,000 shares . )i NON. REDEEMABLE: 4 3.90% -7.24% . 1.000,000 1,000,000 $103.375108.000 $105.468 ] 100.000 j 7.36%-8.20% . . .. 800,000 800,000 106.520 107.400 85.612 [ 80,000 8 64 % - 9.12 % . .. . '850,000 850,000 108.640 109.120 92.560 E g 85,000 Premium. .. .. - - - - P . 525 Total non redeemable b 5 preterred stock . . .. 2.650.000 2.650.000 $283.640 [M'1 _ 265.525 {n REDEEMABLE (Note 5d): 10.48 % - 10.76 % . . 780.000 800.000 $110.480111.870 $ 86.702 L78,000 j 80,000 Redeemable within one year . . . .' Ml - Total redeemable 0- - - preferred stock . I_M$ 80.000 [- ,] PREFERENCE STOCK: { '; Cumulative, no par value- -- s. Authorized 4,000,000 shares [D

                                                                                                                                                                            -j; REDEEMABLE (Note Se):                                                                                                                                ,,1
          $95.00-$102.50 Series .                           27,000                        $1,095.0001.102.500                $ 29,700           7 > 3F 2180 Series .             .     .

2.000.000

                                                                                                   $16.925                      33 850        f3,0001                               !

Total redeemable preference stock . 2 027.000 -

                                                                                                                             $ 63.550         le-g-
                                                                                                                                                 ~

EFM ' - U PREFERRED STOCK OF CONSOLIDATED It oc c!j SUBSIDIARY (Note Sc): Cumulative, $100 par value- 1 Authorized 740,000 shares 2  ? NON-REDEEMABLE: E -

                                                                                                                                                                            ;d 4.24% -9.16% .                               419.049            419.049         $102.980109.160                 $ 44.538         *'       S 41.34F j                            41.947 k
                                                                                                                                                                            ;-i REDEEMABLE (Note 5d):                                                                                                              b                 -.          '4 8.24 % - 11.00% . .                    .      180.000           180.000         $108.240'112.110                $ 19.793         P             ' 17 AAB j                       18.000 L                              jj    =

LONG TERM DEBT (Note 5f): fi

                                                                                                                                                               ^

First mortgage bonds: Ohio Edison Company-2 7/8% Series due 1980 , . - - W]

                                            .       ..            .                                                      .                .            ,                                     58,000 10% Series due 1981 . . . . . . . . . . .                   .                                                                                  ? 199400 j                          150,000 3-114% Series dus 1984 and 1985 . . . . . . . . . . . . .                                                                                '
                                                                                                                                                               &#l -                         50,491 4114 % ~ 4-3/4% Series due 1988 through 1991.                                                                                                                                      100,000 71/2%-9-114% Series due 1995 through 2003.                                                                  .                         i:                                           325,000 j

8 3/8%-9-1/2% Serles dus 2006 tbrough 2008. O 315.000 Pennsylvania Power Company-h aMW1 - 998,491

                                                                                                                                              !?!                             l 2-3/4 % -141/2% Seriea due 1980 through 2008.                                      .                                    .                         1FF.M5 "                         160.805 Total first mortgage bonds .                                                      .                    .

{L 1.110.M8 1.159.296 k Secured notes and obligations: Ohio Edison Company-b f'

                                                                                                                                                                       '^j y

Pollution Control- Ei Q 1973 Series A, average interest rate 5.62% due 1984 through 2008. . . N' J ; a 35,000 1974 8%-8 3/8% Series A and B. due 1990 through 2004. . . . . .. . .  % 1 30,453 1976 7 7/8 % Series D, due 1992 through 2006 . . . . . .  ! 40.000 pC ~J

                                                                                                                                              .~
                                                                                                                                                         ' g'j 1977 4-314% Series E.due 1979(refinanced in 1979) . . .                                                                      .                                 6                 26,500
         -1978 7.30 %Obligatlon, due 1988 tbrough 2003. . . . . . . . . . . . . . .                                                                                                           8,186    7' 1979 7 5/8%-9.20% Series A. F and G, due 1995 through 2009.                               . .. ..             .                  .
                                                                                                                                                     . 16                                  140.139 Pennsylvania Power Company-                                                                                                                                           d 1973- 1979 4-3/4% -8 3/8% Series due 1979 through 2007 .                            . .. ..                        .                                #                  ;         45.461 Totat secured notes and obligations .                    .    .       .       . .            .. .                                                                  s          185.600 Unsecured notes of Ohio Edison Company, due 1982 through 1986(Note 5g).                                          ..                    . r                M.                              -

Net unamortized premium (discount)on debt . .. . . k it.110 (1.701) j Totat ion 0-term debt . . .. .. ... . . . 1- 1 1.343.195 ~ TOTALCAPITALIZATION(Note 7).. . . , , . , f ;j $2.599.786 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 32

OHIO EDISON COMPANY AND SUBSIDIARY COMPANY STATEMENTS OF CONSOUDATED RETAINED EARNINGS 4 For the Years Ended December 31 (M1MW 1978 v Thousands of Dollars B A' ,' N C E AT B EG I N N I N G O F Y EA R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . "$14415] $180,530 N ET IN CO M UO R COM M ON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1EWa 61,259 i - WJW 241,789 DEDUCT: Dividends on common stock, $1.76 per share (Note 5b) . . . . . . . . . . . . . . . . . . . . . ,16 90,790 Dividends declared on preferred and preference stock in excess of i; .d current year'a requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... ...... E LW1 174 Capital stock issuance expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . W 1.210 [P100,1 5 92,174 sal.ANCE AT END OF YEAR-(See Nde 55 for dividend 4 re st ri c t io n) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........ [ g-p l 3 49,615 f- ] STATEMENTS OF CONSOUDATED SOURCES OF FUNDS FOR GROSS PROPERTY ADDITIONS For the Years Ended December 31 U 1914 1978 Thousands of Dollars SOURCES OF FUNDS: 7" Netincome...................................... ........ . ... K' $ 86,030 Less- Dividends on common stock . . . . .......... . . .......... . . 90,790 Dividends on preferred and preference stock . . . . . . . . . . . . . . . . . . . . . .  ; 24,945 m 1,Nt (29,705) Principal non-cash items-

                                                                                                                                                                 ~

2 o Depreciation and amortization- ~ lV ) Charged to provision for depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ch arged to other accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes-net . . . . . . . . . . . . . . . .... ... .............. 1 A 1 77,812 1,857 1,042 investment tax credits-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Mi; (13,893) Allowance for equity funds used during construction . . . . . . . . . . . . . . . . . . . . I (35,895) Deferred energy costs, net of deferred income taxes . . . . . . . . . . . . . . . . . . . . . L 3 _: (624) Tota! funds from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. [ 41781 594 Proceeds from issuance of- W.. J Common stock, including premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . '(117, M ' 15,309 Pre f e rre d s to c k . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , j - -- q 45,000 Pre f e re n c e s toc k . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - Fi rst mortg ag e bond s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a 145,000 Secured notes and obilgations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , s 8,500 Unsecured long-term notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 'i lih - Increase in notes payable to banks . . . . . . . . ................. ........ _ li i! 84,621 sD I IM 298,430 Payment at maturity of long term debt and preferred stock . . . . . . . . . . . . . . . . . . MI l_ t (13,000) Construction funds hsid in escrow, including accrued interest . . . . . . . . . . . . . . . , ;WlE R 11,461 Net change in current assets and current liabilities excluding , d notes payable to banks and current maturities of long-term 7 , debt and preferred stock- J Temporary cash investments . . . . . . . . . . . . . . . . . . . . . .... ...... .. 4- 38,000 Rec eiva ble s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6 , (15,412) Materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U' (267) A c c o u n t s p ayable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,740 A c cru ed t axe s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . wn 2,548 O t h e r, n e t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F' 989 67,598

      ;     O t h e r, n e t (i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                        1 T 079_

j C ROSS PRO PERTY AD DITIONS (i) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $395,h 2 () Denotes negative amount. (1) includes allowance for equity funds used during construction (Note 1). The accompanying Notes to Consolidated Financial statements are an integral part of these statements. 33

Notes to Consolidated Utility Plant, Depre clation Financial Statements nd Molntenonew Utility Plant is stated at the original cost of construction i Summary of Accounting Policies: which includes payroll and related costs such as The consol; doted financial statemer is include the oc. taxes, pensions and other fringe benefits, general and counts of Ohl6 Edison Company (Compor.v) and its administrative costs and on allowance for funds used wholly-owned subsidiary, Pennsylvania Power Com. during construction (see Allowance for Funds Used pony (Penn Power). All significant intercompany trans. During Construction). octions have been eliminated. The Company and The Companies provide for the depreciation of Pznn Power (Companies) follow the accounting depreciable plant in service on a straight-line basis at policies and practices prescribed by The Public various rates over the estimated lives of the property. Utilities Commission of Ohio (PUCO), the Pennsylvan,a i In the opinion of management, the amounts provided Public Utility Commission (PPUC) and the Federal have been adequate and the methods used to deter-Energy Regulatory Commission (FERC). The more rnine the amounts meet the requirements of the significant policies are summarized below. regulatory commissions. The effective composite rate for electric plant for 1979 and 1978 was 3.3%. R__ venue $ Estimated decommissioning costs for the Company's The Companies, residential and commercial or.ly nuclear generating unit in service are currently customers are metered on a cycle bas,is. The Com- being provided through depreciation rates. Penn ponies policies are to include in revenue residential Power was granted on allowance for its shore of and commercial service revenues relating to meters estimated decommissioning costs, for radiooctive read through the end of the month. components only, in its last rate order and began pro-i v ding f r such costs in 1979. Deferred Energy Costs The Company records the cost of fuel used for Property additions, renewals and replacements are generation during the period the fuel is consumed. charged to utility plant accounts. Property considered to be retirement units, retired or otherwise disposed of Penn Power defers certain increased energy costs it in- in the normal course of business, together with cost of curs and estimates to be billable to customers in suc- removal, less salvage, is charged to the accumulated ceeding periods, in accordance with its energy provision for depreci .on. No gain or loss is recop-clause. Effective July 1,1978, the PPUC adopted on nized in the income accounts. Repairs of property ara , energy clause that replaced the fuel adjustment charged to maintenance. clause. The energy clause provides for the recovery or refund, over a six-month period beginning two calen- Common Ownership of dor months after incurrence, of energy costs which dif- Generating Facilities fer from established base energy costs. It also pro- The Companies and other Centrol Area Power Coor-vides for on adjustment for any over or under collec-dination Group (CAPCO) companies own, as tenants tion resulting from the operation of this clause. in common, various power generating facilities. Each Management expects that the PPUC will allow Penn of the companies is obligated to pay a share of the Power full recovery of any deferred costs, including costs of any such jointly owned facilities in the some those relating to changes in the lag period, or any proportion as its ownership interest. The amounts other changes, in accordance with the objectives of reflected in the accompanying Consolidated the energy clause provisions icluded in its approved Bolonce Sheet under utility plant include such costs at tariffs. December 31,1979 as follows: CAPCO Units in Service (a) CAPCo Units Under Construction Bruce Bruce Perry W. H. Mansfield Beaver Mansfield Beaver #1 and mmis #7 #1 and #2 valiey #1 #3 Valley #2 #2 Total Thousands of Dollars Utility plant in service . $ 94.427 $431.091Jb) $322.216 (b) $ - $ - $ - $847,734 Accumulated provision for depreciation . . $ 19,785 $ 39.499 $ 32.723 $ - $ - $ - $ 92.007 Construction work in progress . $ 4.266 $ 9.642 $ 28.556 $185.756 5279,149 $461.266 $968,635 Nuclear fuel in process (c) . $ 12,304 Companies' ownership interest in unit capacity 68 80 % 55.15 % 52.50 % 41.88 % 41.88 % 41.88%(d) (:) The Companies' portions of operating expenses associated with the common ownership of generating facilities are included in the corresponding operating expenses in the accompanying Statements of consolidated income. (b) includes common facilities. (c) Unsegregated among the CAPCo nuclear units. (d) Will ultimately be reduced to 35.27%. 34

Allowance for Funds Used During pense related to' investments in properties other than Construction (AFUDC) utility plant in service (primarily construction work in i AFUDC, a non-cash item which is charged to construc. progress) to income taxes-credit included under other o tion work in progress during the period of construction, income and deductions in the accompanying represents the net cost of borrowed funds and equity Statements of Consolidated Income. funds used for construction purposes. The amount of Deferred tax expense results from timing differences in AFUDC has varied as a result of changes in the level of the recognition of revenues and expenses for tax and construction woJ' in progress and in the cost of accounting purposes. The sources of these differ-capital. Effective Ionuary 1,1979, the Company ences and tax effect of each are as indicated below: changed its method at calculating AFUDC from a gross rate to a net of tax rate consistent with the rate treatment granted in a rate order. The net of tax rate used by the r I LIM J 1978 Company during 1979 was 8.75% and the gross rate Thousands of Dollars used during 1978 was 9.5%. Penn Power computed Debt component of y"9 AFUDC during both years utilizing a net of tax rate of 8%, allowance for funds used ' 1 consistent with the rate treatment granted by the PPUC. during construction j which is credited [.L W Income Taxes to plant . . . . . . . . . . . . . . . $1,392 The provision (credit) for income taxes consists of the Excess of tax depreciation p{ , $18,8021 allowed pursuant to the ;i following: p P 1979] 1978 Class Life ADR p l depreciation system, net . [ 5,3461 1,768 Thousands of Dollars Currently p.syable- &'~~~t Accelerated amortization of 1 3$'8,731] the cost of certain Federa! . ............ Ots t e . . . . . . . . . . . . . . . . . 11,3 4)

                                                                       $ (1,528) 59        facilities covered by                                              y       .,

q

                                                                                                                                                                             ]

Necessity Certificates . . . j; (1,305 (1,382) Total currently payable (MSI (1,469) , Amortization of previously net- f . j p Federa 17,904: 1,117 deferred income taxes 1. w] _ Deferred'l ..... . .[~-

                                                     ; . . .SOFJ . . . . . . . . State............

477 resulting from liberalized F depreciation . . . ... 1 '(1,17 4 j (1,442) Total deferred, net l -~

                                                                                                                                                                         . :i Property taxes applicable to mj               (see below) . . . . . . .           [F      1%M1}         1.594        subsequent year, net . . .                                           ?

133) 706 Investment tax credits, net , d h 19,003j 1,042 of amortization (i) . . . . . . . 13:318! (13,893) I~ Penn Power's deferred 'l Total provision (credit) -~d energy costs, net . . [ 552

                                                                                                                        .. .                                          1981)(

frincome taxes . . . _33F,701; $(13,768) Total deferred tax expense, net . . . . . {.

                                                                                                                                                         , $18,9211 1
                                                                                                                                                                                 $1,594

() Denotes negative amount. ~ ' (i) Amount for 1978 reflects the reversal of previously ( ) Denotes negative amount. recorded investment tax credits, now being carried forward due to the carryback of net operating For inccme tax purposes, the Companies have losses. claimed liberalized depreciation (double-declining Such PTovision (credit} is included in the accomPUnY-e, e es mh WWeNWem ing Statements of Consolidot ome as follow;. provision methods) and, consistent with the account-ing and rate making policies of the applicable tg 'W _ 1978 Thousands of Dollars regulatory authorities, the Companies have followed

                                                                                     " flow-through" accounting except as indicated Operating expenses . . . . . . !"S41                       J   $ (6,017)     above. Rate orders received by the Company during Other Income . . . . . . . . . . . J                              (7,751)    May and December 1978 have provided on Total proylsion (credit)                     _ a                       allowance for deferred taxes on excess tax deprecio-for income taxes . . .               i $3F.79q9,      $(13,768)     tion allowed pursuant to the Class Life ADR System for additions in 1977 and subsequent years. Such rate The Company has been allowed a provision for                                 orders cover approximately 75% of the Company's deferred taxes on the allowance for borrowed funds                           revenues and deferred taxes are currently being pro-used during construction in rate orders applicable to                        vided for such portion. The amount of such deferred approximately 75% of it'e Company's revenues.                                taxes provided during 1979 and 1978 amounted to Accordingly, effective January 1.1979. deferred taxes                        $4,036,000 and $169,000, respectively. Penn Power
 -~

were provided on the applicable portion of such has deferred the excess tax depreciation allowed pu.~ o!!owance for borrowed funds. Penn Power has pro- suant to the Class Life ADR System during both years to vided deferred taxes on the entire allowance for bor- conform with the rate treatment granted by the PPUC. rowed funds in 1979 and 1978. During 1979 and 1978 the Company allocated 25% ono 100%, respectively, of the income tax credit arising from the interest ex-35  !

Notes to Consolidated Financial Statements (Cont ) l The Companies follow deferral accounting with Nuclear Fuel respect to investment tax credits and amortize such The cost of nuclear fuel in service is charged to fuel credits to income over the estimated life of the related expense based on the rate of consumption, assuming property. At December 31,1979, approximately a zero net salvage value. The manner of disposition of $26,000,000 of unused investment tax credits were spent nuclear fuel may not be determined for many available to offset future Federal income taxes years, therefore necessitating storage of such fuel for payable, of which $10,000,000 expires at the end of an indefinite period. In its January 1980 rate order, the 1984, S9,000,000 expires at the end of 1985 and PUCO outhorized the Company to begin recovering $7,000,000 expires at the end of 1986. these costs from its customers. Penn Power will seek The total provision (credit) for income taxes shown in egulatory approval for recovery of the costs through [ts rate case proceedings. i the accompanying Statements of Consolidated in-Come is less than the amount which woulo be com-puted by applying the statutory Federal income tax Pensions rate to income before income taxes. The following The Ccmpanies have trusteed, noncontributory pen-table summarizes the major reasons for these dif- sion plans that cover almost all full-time employees. ferences: Upon retirement, employees receive a monthly pen-sion based on length of service and compensation. h..%m 1978 Pension costs for 1979 and 1978 were $13,731,000 Thousands of Dollars and $12,008,000, respectively. Of those amounts, Book income before '"-**"? $9,163.000 and S8,058,000,respectively,were charged provision for income , w% to operating expenses. The balances were charged taxes.... .. . ..... a$173,58j $72,262 primaiily to construction. Such costs include the Amount of Federalincome fg y amortization of post service costs on on actuarial tax expense at b *i basis over 30 years. The Companies fund pension statutory rate . . . . . . . . [ $ ,79,854 * $34,686 costs accrued. The estimated unfunded post service Reductions in taxes '

                                               ,                        liability of the plans at June 30,1979 (the date of the resulting from:(i)                           -                     latest actuarial report) was $55,689,000. The market Allowance for funds used n                                           value of the pension funds at December 31,1979 ex-during construction                .

M4 ceeded the actuariolly computed value of vested benefits at June 30,1979. which does not constitute taxable

                                              ' ~g income (ii) . .   .          .. 1                     (26,745)    2 Ohio Valley Electric Corporation (OVEC):

Excess of tax over book E (as, set .. The Companies are participating with 13 other depreciation . .. A ; S,915 (18,423) investor-owned electric utility companies and with Capitalized pension costs C ~ OVEC in arrangements with the Department of Energy and taxes expensed j( (DOE) to supply the power requirements of the DOE currently for tax , ., 9 plant near Portsmouth, Ohio. The sponsors are entitled purposes . . . . . . . . . 3 ((R,5FM (1,765) to receive from OVEC, and are obligated to pay for Other, net ... . .. . p ;(1M (1,521) the right to receive, any available power in excess of Total provision (credit) L- the DOE contract demand. The proceeds from OVEC's for income taxes . . . IS SF,7Dk $(13,768) sale of power are to be sufficient to meet all of its costs, including amortization of debt capital over a ( ) Denotes negative amount. period ending December 31,1981, and also to pro-vide for a return on common stock. At December 31, (i) Under the established rate making practices of the 1979, OVEC had debt capital of approximately regulatory commissions to which the Companies $24,000,000 remaining to be amortized. The par-are subject, it is expected that the deferred taxes ticipation of the Companies In the power ar-not provided for currently will be collected in rangemeds is ES% customers' rates when such taxes become payable. (ii) Represents the tax effects of (a) the equity portion The Company and certain others have also agreed and 25% of the debt portion of the allowance for (the Company's participation being 16.5%) to supply the Company and the equity portion of the OVEC ce tain capital requirements if needed, in-allowance for Penn Power in 1979 and (b) the total cluding $10,000,000 for additional common stock. allowance for the Company and the equity portion OVEC has deferred the need for additional common of the allowance for Penn Power in 1978. stock by issuing interim debt to banks. The Companies do not expect that the cash outlay for The Securities and Exchange Commission, acting income taxes with respect to any of the succeeding under the Public Utility Holding Company Act of 1935, three years will materially exceed income tax expense reserved jurisdiction for future determination of for such years. whether or not OVEC's securities could be retained by 36

the Company or by other companies subject to the Common Stock by automatically reinvesting their Act. Hearings have been held but no decision has Common Stock dividends and by making optional

   ) been rendered.                                                           cash payments. Purchases made with reinvested 3 Terminated Construction Projects,                                     dividends re m de t price equal to 95% of the overage of the high and low market prices on the in-In January 1980, the Companies and all other CAPCO                      vestment dates. Prior to July 1,1979, purchases made companies terminated plans to construct the follow-                      with optional cash payments were made at a price ing four nuclear generating units-Davis-Besse No. 2                     equal to 100% of such overage. Purchases made with and No. 3, and Erie No.1 and No. 2. The Companies'                      optional cash payments subsequent to June 30,1979, share of construction costs incurred as of December                     are made at a price equal to 97% of such overage. At 31, 1979 applicable to these units amounted to                          December 31, 1979 the Company had 1,202,850
      $ 100,172,000. The Companies intend to seek op-                         sharec reserved for issuance under this plan. There proval from the PUCO, the PPUC ond the FERC to                          were olso 2,000,000 shares of Common Stock reserved amortize these amounts plus contractors' concellation                   for possible conversion of the $1.80 Preference Stock charges, if any, over several years and to recover the                 at December 31,1979. In February 1980 the Company costs from customers to the extent that they are not                    sold 6,500,000 shares of additional Common Stock otherwise recoverable. The Companies believe that                      to underwriters with proceeds amounting to $12.97 such costs were prudently incurred and have no                         per share.

reason to believe that the regulatory authorities in-volved will not react favorably to their requests and b) Retained Eamings therefore believe that any loss of investment and Under the Company's Indenture, the Company's con-concellation charges, if any, will be recoverable from solidated retained earnings unrestricted for payment of cash dividends on the Company's Common Stock their customers. Until orders are received from the were S67,127,000 at December 31,1979. P'JCO, the PPUC and the FERC, none of the charges will be reflected in earnings. c) Preferred Stock The Company has 4,000,000 outhorized and unissued 4 LeoSeS: shares of cumulative $25 por value Class A Preferred Tha Companies rent or lease nuclear fuel, certain Stock. transmission facilities, computer equipment, office The preferred stock is redeemable in whole, or in part, m space and other incidental equipment and property

   }                                                                         unless otherwise noted, at the option of the Com-
 # under     concelable total rental        andincluded expenses        nonconceloble              leases. The in the accompanying        panies and upon any time not less than 30 nor more Statements of Consolidated Income for 1979 and                         than 60 days notice.

1978 are $10,356,000 and $12.125,000, respectively. Redemption of preferred stock (excluding the Tho future minimum rental commitments as of 3.90 4.56% Series of the Company and the December 31,1979 for all nonconcelable leases are 4.24W4.64% Series of Penn Power)is subject to certain as follows: restrictions regarding refunding operations for five 1980. ..... .. . . . . . . . . . . . . . $ 11,749,000 years from date of issue. The optional redemption 16 241,000 prices shown will decline to eventual minimums per 1981lllll..'.'l.'[.(((((((((((('. 1982 16,216,000 shore in accordance with the Charter provisions that 1983.. ................. .. . 16,018,000 establish each series. 1984.............. ... . .... 12,458,000 d) Redeemable Preferred Stock Years thereaf ter . . . . . . . . . . . . . . . 313,221,000 The 10.48% Series and the 10.76% Series of the Com-If all noncopitalized financing leases had been pony each include provisions for a mandatory sinking fund sufficient to retire a minimum of 20,000 shares on capitalized, the effect on total assets, total liabilities and expenses would not be material. December i and January 1, respectively, in each year beg,nning in 1980 of $100 per share plus oc-i 5 CoEitoHzation*. crued dividends. In November 1979, the Company purchased and retired 20,000 shares of its 10.76% o) Common Stock During 1979 and 1978, the Company issued 7,502,139 Preferred Stock, resulting in a gain of $79,000 which and 913.565 shares of S9 por value Common Stock for was credited to other paid-in capital. The 11% Series Sii7,408,000 and $i5,309,000, respectively. The ex- of Penn Power includes a provision for a mandatory sinking fund sufficient to retire a minimum of 4,000 cess of the proceeds over the por value (S49,888,000 and $7,087,000, respectively) was credited to other shores on January 1 in each year beginning in 1980 at paid-in capital. All of the shores issued in 1978 and $100 per share plus accrued dividends. The 8.24% 1,502,139 of the shares issued in' 1979 were issued Series of Penn Power includes a provis!on for a man-datory sinking fund sufficient to retire a minimum of

    )through the Dividend Reinvestment and Stock Pur-                        5,000 shores at $100 per share plus accrued y chose Plan. Under the plan, holders of Common Stoc,k                      dividends on December i in each year beginning in con acquire additional new shares of the Company s 1982.

37

Notes to Consolidated Financial Statements (Cont ) l l The sinking fund requirements for the next five years Based on the amount of bonds authenticated by the l will amount to: Trustees through Decernber 31,1979, the annual sink- 1 1980. . .... S2,400,000 ing and improvement fund requirements amount to , 1981... . . . . 4,400.000 S17,177,000. The Company presently contemplates 1982. .. . 4,900,000 that funds to be deposited in 1980 will be withdrawn 1983. . . 4,900,000 upon the surrender for cancellation of a like principal 1984. . . . . . . .. 4,900,000 omount of bonds specifically authenticated for such purposes against unfunded property additions. This c) Redeemoble Preference Stock method of withdrawal of sinking and improvement The preference stock is redeemoble in whole, or in fund deposits will result in minor increases in the part, unless otherwise noted, at the option of the Com- amount of the annual sinking fund requirements. Penn pony and upon any time not less than 30 nor more Power presently contempiates that its requirements than 60 days notice. wll be satisfied in 1980 by permanently waiving its Redemption of preference stock is subject to certain right to issue bonds against $2,019,000 of the restrictions regarding refunding operations for five S2,798,000 of retired bonds that are presently ycors from date of issue. The optional redemption available for that purpose. Alternatively, Penn Power prices shown will decline to eventual minimums per could fulfill the requirements in the some nanner os shore in accordance with the Charter provisions that previously outlined for the Company. establish each series. As of Decemoer 31,1979, the sinking and improve-The change in redeemable preference stock out. ment fund requirements and maturities of first mort-standing during 1979 was as follows: gage bonds, secured notes and unsecured long-term notes for each of the next five years will amount to: Involuntary Number of Liquidation 1980. S 78,177,000 Shares Value 1981. 172.177,000 Bilance, January 1,1979. - 1982. 52,982,000 Sale of $95.00 Series . 9,000 9,000,000 i983. 17,177,000 Sale of $102.50 Series . . 18,000 18,000,000 1984. . 44,003,000 Sale of $1.80 Series . . . . 2.000,000 30,250,000 Ba!ance, December 31,1979 2.027,000 $57,250,000 g) Unsecured Notes Of the unsecured notes outstanding, $50,000,000 carry on interest rate of 11%% and $30,000,000 have fluctuating interest rates which approximate the The S 102.50 Series and the S95.00 Series include provi- prevailing prime interest rate. sions for o mandatory sinking fund sufficient to retire o minimum of 900 and 1,800 shores, respectively, on July 6 Notes Payable to Banks and 1 in each year beginning in 1984 and 1985, respec-tively, at S 1,000 per share plus accrued dividends. The 1.ines of Credit *' S 1.80 Series includes a provision for a mandatory sink- The Companies have lines of credit that provide for ing fund sufficient to retire a minimum of 100,000 borrowlngs of up to S235,000,000 at rates that vary shores on October 1 in each year beginning in 1985, from pr,me i up to 108% of the prevailing prime interest at S15.125 per share plus accrued dividends. rates. Short-term borrowings may be made under these lines of credit on the Companies' unsecured The sinking fund requirements will begin in 1984 and notes. All of the current lines expire December 31, will amount to $900,000 for the year ended December 1980; however, all unused lines are concelable at the 31,1984. option of the banks. The $1.80 Series is convertible into Common Stock on The Companies mainiain cash balances on deposit or after January 1,1980 at any time, unless previously with banks to provide operating funds and to assure redeemed, at a conversion prlce of $15.125 per shore availability of $149,500,000 of the above-mentioned (equal to one shore of Common Stock for each share lines of credit. Such compensating balances, net of of Si.80 Preference Stock), subject to adjustment " float," are expected to be maintained at on under certain conditions. average of opproximately S7,859,000. These balances are not subject to any contractual restriction f) Long-Term Debt against withdrawal. The mortgages and supplements thereto which secure all first mortgage bcnds of the respective Companies serve as a direct first mortgage lien on substantially all property and franchises, other than specifically ex-cepted property, owned by such company. 38

The Company has trust demand note arrangements ferred stock, preference stock and common stock, with a borrowing limit of $22,000,000. Amounts bor- The issuance of odditional first mortgage bonds and rowed (S19,499,000 and S20,104,000 at December preferred stock is subject to the limitation requirements

  > 31,1979 and 1978, respectively) are collable on de-                         of the Companies' mortgage indentures and charters.

mand. The Company holds available o portion of its previously mentioned bank lines to cover any call for The Compan.ies, together with the other CAPCO com-payment. The interest rate on these borrowings is ponies, have made long-term coal supply ar-based on rates for certain directly placed, high rangements with Quarto Mining Company (Quarto). quality commercial paper. There are no compen. The CAPCO companies have severally, and not joint-soting balance requirements associated with this ly, agreed to guarantee their proportionate shores of credit arrangement. Quarto's debt and lease obligations incurred in con-nection with ceveloping and equipping the mines Additional information with respect to these notes whe'her or noi the coal can be utilized because of en-payable is as follows: vironmental considerations. As of December 31,1979, the Companies' share of the guarantee was gg4 ' a 1978 $215.025,000 (S81,378,000-long-term indebtedness,

                                                                                $81,SO9,000-lease obligatbns and $51,838,000-Weighted average interest 5 rate on outstanding                v short-term bank credit), which is ultimately expected bank line borrowirigs                                                 to increase to S250,000,000 based on presently

budgeted mine construction costs of $431,000,000.

at Decembor 31. . . . . . . r. 11.75 % Because of significant difficulties experienced during Weighted average interest a ~' q the developr9nt period, the Companies are review-rate on outstanding ' 6 ing the various alternatives available to reduce unit trust demand note production costs, which are presently in excess of the borrowings at bg M1 " current spot market price of coal. Management December 31 .....

                                       .h          jW%              10.55 %    believes that the costs incurred in connection with this Maximum amount drawn                  7            .y                    project will be recovered through the operation of the down during the year . . .                             $96,604,000    Company's fuel adjustment clause and Penn Power's energy clause or through base rates, Average borrowings during the year . . . . . . . . ,

n M $32,089,000 The Companies are subject to regulation with regard ~/ Weighted average interest k q fo air and water quality and other environmental mot-rate during the year k ,, ters by various Federal, state and local authorities. To (based on the daily - comply, the Companies estimate that auditional amounts outstanding) . . h.  % '$$] 8.91 % capital expenditures of approximately S821,000,000 may be required. Of this amount, c '.oroximately S283,000,000 was spent prior to 1980 and 7 COMMITMENTS, GUARANTEES S465,000,000 is included in the estimatetNonstruction AND CONTINGENCIES: costs for the 1980-1984 period referred tc hove. If the The currently estimated cost of property additions and use of low sulfur non-Ohio cool is not pei, !tted for improvements that the Companies expect to incur compliance with Federal sulfur dioxide emission during the period 1980-1984, inclusive, is approx- limitations, estimated capital expenditures would in-imately $2.300,000,000, of which approximately crease by approximately $300,000,000 and annual S510.000,000 is applicable to the year 1980. The major operating costs would increase substantially. Similarly, portion of the Companies' construction activities dur- if a flue gas desulfurization device must be installed at ing the 1980-1984 period relates to the CAPCO com- Penn Power's New Cast le Plant to comply with such ponies' program for the joint development of power emission limitations, it is estimated thot the capital ex-generation and transrnission facilities. In connection penditures would increase by S85,000,000 and on-with the future commercial operation of nuclear gen- nual opero+ing expenses would increase by approx-eroting units, the CAPCO companies have entered into imately S 15,000,000. If the Companies are required to commitments with respect to the supply of nuclear install additional off-stream cooling in connection with fuel. The Companies' share of the cost associated with the operation of the New Castle and Sommis plants, such commitments is estimated to be $1,236,000,000. additional substantial, but presently undeterminable, costs would be incurred. Although the Companies are The Companies presently contemplate o financing unable to predict the ultimate results of various legal program during the 1980-1984 period which will in- proceedings pending in Ohio and Pennsylvania clude the sole or issuance from time to time of op- relating to compliance with environmental regulations propriate additional amounts of first mortgage bonds, or ony additional capital and operating expenditures secured pollution control and environmental notes that may be necessary as a result thereof, they expect and obligations, unsecured lonO-term notes, pre- that the impact of any such costs would even'ually be reflected in their rate schedules. 39

l J Notes to Consolidated Financial Statements (Cont-) In some of these proceedings, criminal fines or civil desulfurization system at Mansfield and the threat of penalties ultimately could be imposed under the radioactive emissions at Beaver Valley. In addition, Clean Air Act Amendments of 1977 and the Federal numerous individual plaintiffs have filed actions seek-Water Pollution Control Act as amended by the Clean ing monetary relief in on unspecified amount for Water Act of 1977 or the Companies could be forced damages claimed to be o result of the same alleged to shut down significant amounts of cool fired capaci- operational malfunctions. Although unable to predict ty. The Federal government has begun legal pro- the ultimate outcome of this matter, the Company ceedings against the Componies, under the Clean Air believes that its ultimate disposition will not rosult in Act, asking the courts to assess civil penalties for any material adverse effect on the Company's con-alleged continuing violations of particulate emission solidated financial position and results of operations. regulations of the W. H. Sommis Plant and sulfur diox-ide emission regulations at Penn Power's New Castle in 1977, the Boroughs of Ellwood City and Grove City, Plant. Region V of the Federal Environmental Protec. Pennsylvania, filed a complaint against Penn Power, tion Agency (EPA) has advised the Company that it in- alleging that Penn Power, individually and in con-tends to issue a delayed compliance order, the effect spiracy with the Company and other CAPCO com-of which would be to extend into 1980 the dates as of panies, has violated Sections 4 and 16 of the Clayton which enforcement proceedings may be brought Act to restra,n i and monopolize trade and commerce against the Company for failure to comply with sulfur in alleged markets for electric power. Damages of dioxide standards at the Sommis, Edgewater and S7,000,000 (to be trebled) and injunctions against the Niles Plants. The Clean Air Act amendments which unlawful acts are sought. On January 4,1979, the became effective in August,1977, permit the impos. Court granted summary judgement in favor of Penn tion of civil penalties of up to $25,000 per day of viola. Power as to certain allegations of the complaint. tion. The penaities, if any, that may be imposed by the Management is unable to predict the ultimate out-courts for alleged post violations are not now deter. come of this action. minable, but such penaltiescould be substantial. The On April 10, 1979, Kerr-McGee Nuclear Corporation Companies expect to comply with any final orders of filed a complaint against the CAPCO companies the courts and, in the meantime, to conduct operation alleging a breach of a 1973 uranium supply contract, of the plants so os to minimize the applicable emis- thus allegedly entitling Kerr-McGee to treat the con-sions to the greatest extent that they deem to be proc- tract as having been terminated. Kerr-McGee also ficable. Therefore, the litigation described above seeks unspecified damages, costs and such further should not result in the imposition of any substantial relief os the Court deems just and proper. If the civil penalties for future conduct. uranium is not delivered by Kerr-McGee, the CAPCO The EPA had tentatively indicated on intention to seek companies will have to make other arrangements, to enforce noncompliance penalties beginning which may result in additional, but presently undeter-August 7,1979 for failure to comply with applicable minable, costs to CAPCO members. emission limits, os required under the Cleon Air Act; The PPUC instituted on investigation into on outage of however, final regulations have not been issued. Even Beaver Valley Unit No.1 during the period March-if schedules which have been subrnitted by the Com' August 1979, which outage had been ordered by the pony to bring the units of its system into compliance by Nuclear Regulatory Commission to analyze possible 1984 ore accepted, substantial noncompliance seismic deficiencies of safety-related piping and pipe penalties may result. Until final regulations are issued, supports in the Unit. This investigation is to determine th3 date from which penalties will begin and the whether, os a result of this outage, the Unit should be m;thod of calculating such penottles w,ll i not be eliminated from, or adjustments should be made in, O** Penn Power's rate base and whether expenditures by in addition, the following summarizes certain other Penn Dower for purchased replacement power should outstanding legal actions and complaints against the be disallowed for purposes of Penn Power's energy Componles: clause. in a separate investigation, the PPUC is con-sidering whether additional construction costs in 1977, the Borough of Shippingport, Pennsylvania, resulting from deferral of construction projects should filed actions against the CAPCO companies seeking to be excluded frorr rate base in subsequent rate pro-cnjoin the operation of the Bruce Mansfield and ceedings. Beaver Valley plants and to obtain damages resulting from alleged operational malfunctions of the flue gas O 40

8

SUMMARY

OF QUARTERLY FINANCIAL DATA: m The following dato summarize certain consolidated operating results for the four quarters of 1979 and 1978. w ,l Three Months Ended

                                             **$ F "** /* W                        *&* W k "

• M e '*

Thousands of Dollars

                                                                                                                                       '","he -  *is,'i M '

• E *l M '

Caerating Revenues .. , , 5218,876 $197,991 5219,478 $226,611 operating Expenses and Taxes , PM=

                                           %           "A -W7 M< MAR      .'l* M' *831FF1?M          186,225                            165,428    188,394     198,964 operatingincome . .     . ,      ,   y . ~~ - c WM                 W,997         WJ                   32,651                       32,563     3'i,084     27,647 other income and Deductions-net . ~,                                         ' 17,116j                       9,717                  11,333    12,010       14,353
                                                            ? g* 'i W ~ 14,$10 N:t Interest and other C6,;;;;            MM                       2tJfB       ' 88 888 L              19,176                      20,924     22,357      22,871 Nit income .      .         .      .F' 8 M 8 '8&SF1 18 NAN - 8 SFAdB 4 $ 23,192                                                 5 22,972   $ 20,737     $ 19,129 N t income for Common Stock        .k 81854 : $ R 3tB           -8 MSIS - S 20.3081 $ 17,264                                    5 17.045   5 14,775     5 12,175 AvIrage Number of Shares of                                                           ~j Common Stock                      l  +
                                                                                               <j outstanding (Thousands) . . .          RS4          Nm          80A46       '50,300 1              51,301                        51,499    51,707      51,972 Earnings per share of Common Stock {       $-.38 ~ ' ; $ AD -      ;8 .66

• 8 ;40 4 $ .34 5 .33 $ .29 $ .23 Auditors' Report ARTHUR ANDERSEN & CO, 1345 Avenue of the Americos New York, N Y,10019

( To the Stockholders and Board of Directors of G Ohio Edison Company: We have examined the consolidated balance sheets In our opinion, the financial statements referred to and statements of consolidated capitalization of Ohio above present fairly the financial position of Ohio Edison Company (on Ohio corporation) and its sub- Edison Company and its subsidiary company as of sidiary company, Pennsylvania Power Company, os of December 31,1979, and 1978, and the results of their December 31,1979, and 1978, and the related operations and the sources of funds for gross property statements of consolidated income, retained earnings additions for the years then er.ded, in conformity with and sources of funds for gross property additions for the generally accepted accounting principles applied on years inen ended. Our examinations were made in oc- o consistent basis. cordance with generally accepted auditing standards and, accordingly, included such tests of the account-ing records and such other auditing procedures as we y (- considered necessary in the circumstances. February 8,1980 f v 41

SUPPLEMENTARY FINANCIAL DATA FINANCIAL REPORTING AND CHANGING PRICES Statement of Financial Accounting Standards No. 33, " Financial g Reporting and Changing Prices" (SFAS No. 33), provides for the preparotion 6f supplementary financial information to disclose the estimated effects of inflation and changes in prices on prop-erty, plant and equipment. This data is presented in accor-dance with SFAS No. 33. however, it is not intended as a substitute for earnings reported on a historical cost basis. Adjusted for the Effects of Changing Prices For the Year Ended December 31,1979 (in Thousands) As Reported Historical in the Cost Adjusted for Primary Adjusted for Change in Consolidated General Specific Prices Statements inflation (Current Cost) (Average 1979 Dollars) Operating Reven ues . . . . . . . . . . . . . . . . . . . . . . . . . . . ...... . $994,585 $ 994,585 $ 994,585 Operating Expenses and Taxes: Operation and maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . 618,497 618,497 618,497 Provision for depreciation . . ........ ..... .. ......... 81,224 144,517 172,189 G e n era l t ax es . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,122 89,122 89,122 Incom o taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... 41,998 41,998 41,998 Total operating expenses and taxes . . ....... ... ... 830,841 894,134 921,806 Operating income . . . . . . . . . . . . . . . . . . . . . . . . . .... .... 163,744 100,451 72,779 Other Income and Deductions, net . . . . . . . . . . . . . . . . . . . . . . . . 56,267 56,267 56,267 Nst interest and Othcr Charges .. ................. ... . 85,104 85,204 85,204 Preferred and Preference Stock Dividend Requirements . . . . . . . . 29,687 29,687 29,687 income from Continuing Operations (excluding reduction to net recoverable cost) . . .............. .... . .......... . ..... $105.120 $ 41,827(a) $ 14,155 increase in specific prices (current cost) of property, plant and equipment held during the year (b) . . . . . ......... ................ . . ...... $ 555,648 Reduction to net recoverable cost . . . . . . . . . . . . . . . ..... .. $(295,138) (183,514) Effect of increase in the general price level on property, plant and equipment . . . . . . . . . . . . . . . . . . . . (639,600) Excess of increase in the general price level over increase in specific prices of property, plant and equipment after reduction to net recoverable cost . . . . . . . . . . . . . . ..... .... (267,466) Advantage resulting from the decrease in purchasing power of net monetary llaMlit ie s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...... 247,269 247,269 N:t............................................ .. $ (47,869) $ (20,197) ( ) Including the reduction to net recoverable cost, the income (loss) from continuing operations adjusted for general inflation would have been $(253.311,000). (b) At December 31.1979, property, plant and equipment, net of accumulated depreciation, all adjusted for changes in specific prices (current cost) was $5,513,999.000, whUe historical cost (net cost recoverable) was $3,015,686,000. See Notes to Supplementary Financial Data on page 44. 42

OHIO EDISON COMPANY AND SUBSIDIARY COMPANY FIVE-YEAR COMPARISON

   ,OF SELECTED SUPPLEMENTARY FINANCIAL DATA Adiusted for the Effects of Changing Prices For the Years Ended December 31 1979        1978                1977                        1976                            1975 OPERATING REVENUES (in Thousands)

As reported in the primary consolidated statemen ts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 994,585 $862,956 $796,289 $644,852 $593,324 Adjusted to average 1979 dollars . . . . . . . . . . . . . . . . . S 994,585 $%0,116 $953,792 $822,234 $800,178 HISTORICAL COST INFORMATION ADJUSTED FOR m p*m - m e? e m J'.. - v :. m -%n w M CENERAL INFLATION s 'I - w ,~ (in Average 1979 Dollars) income from continuing operations (excluding [i  % M

                                                                                                                                                                                       ^
                                                                                                                                                                                              ,^

reduction to net recoverable cost)

                                                                                                   /[
                                                                                                   '; a               m,              '-

g' W. (in thou sand s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41,827 + " 3 p' lJ f . Income from continuing operations per common M_

                                                                                                                                                ~

share (excluding reduction to net ' "s {' ,

                                                                                                                                                                    - : g"                         d recoverable cost) . . . . . . . . . . . . . . . . . . . . . . . . . . . .          $ .72 p., .    '

m h CURRENT COST INFORMATION ' ' [ (in Average 1979 Dollars) [ ,. <

                                                                                                                                                     , ,,                                        .ib income from continuing operations (excluding                                                [     -

m . , T d reduction to net recoverable cost) [. J .

                                                                                                                                                                 '^

c ' ge ~ (In thou sands) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,155 &,4 f ,2 j Income from continuing operations per common 0 >f( ., i < share (excluding reduction to net ' , ^' ' ' E ~,' _ - gj j recoverable cost) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .24 b '

                                                                                                                                                            .s                               Tl Excess of increase in the general price level over increase In specific prices of property, plant and
                                                                                                   $'                                 .A                    * '                      '
                                                                                                                                                                                                 ^^

f ,; , ..

                                                                                                                                                              ' l.                             ~d equipment afte tsduction to net recoverable                                              d4                                                 '
                                                                                                                                                                              .g                      "

cost (in thousands). . . . . . . . . . . . . . . . . . . . . . . . . . $(267,466) p 1 , e , -

                                                                                                                                                                        ,           N4[.

• n , '

OTHER INFORMATION 4 4 . Common stockholders' equity at December 31 at net recoverable cost (in thousands of Average h 1

                                                                                                               '~
                                                                                                                                                                           . %" f.l
                                                                                                   %                          ~

Q 1979 Dolla rs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 919,205 x; , . Advantage resultir.g from the decrease in d ,W m%; A ,- < purchasing power of net monetary liabilities 7 - , , ?S $@

                                                                                                                                                  ~

j (in thousands of Average 1979 Dollars) . . . . . . . . . . $ 247,269 W ,. c @ >~ s - a m Cash dividends declared per common share- JdMGwehaheh A s re p o rt ed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1.76 $1.76 S1.715 $1.67 $1.66 Adjustod to average 1979 dollars . . . . . . . . . . . . . . $1.75 $1.94 $?.04 $2.12 $2.22 Market price per common share at December 31-A s re po rted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13.375 $14.875 $19.50 $20.875 $16.75 Adjusted to average 1979 dollars . . . . . . . . . . . . . . . $12.65 $15.94 $22.78 $26.04 $21.90 Average consumer price index . . . . . . . . . . . . . . . . . . . 217.4 195.4 181.5 170.5 161.2 See Notes to Supplementary Financial Data on page 44. 43

Notes to the Supplementary Financial cumuioted provisions for depreciation were esti-moted for each functional class of property, plant and Data Adjusted for the Effects of equipr vnt bf applying the Handy-Whitman Index to Changing Prices a vinoged theoreticci reserve for depreciation. The Consumer Price Index for All Urban Consumers Incame taxes incitded in income from continuing (CPI-U) was used for converting historical amounts for operations adjusted fu general inflation and for property, plant and equipment into overage 1979 changing prices is the sorne os the provision reported dollars, thus giving on indication of the effect of gen- in the primary consolidered financial statements, in eral inflation on the principal assets of the Componies. conformity with SFAS No. 33. Curront cost of property, plant and equipment other During inflationary periods, the investment necessary Lon %rd was calculated by applying the Handy- to replace property, plant and equipment will be Whitmar "dex of Public Utility Construction Costs for more than their original cost. Because the Companies the North Centrol Division and the Bureau of Labor are permitted to recover in revenues, through a and Statistics engineering indices to functional ac- depreciation allowance, only the historical costs of counts by vintage years, except for large construction such assels, the additional cost of plant as adjusted projects which were trended based on the year that for changing prices is indicated as a " Reduction to costs were incurred. The current ccst of land was col- net recoverable cost." culated by applyirsg the CPI-U to the actual costs in the respective years of acquisition. The current cost Net monetorY liot.ilities of the ComPCnies consist dato approxin.otely reflects the current cost of acquir- primarily of long-terin debt and preferred stock. Dur-ing property, plant and equipment identical to assets ing inflationary periods, the Companies will be repoy-currently owned. ing these net monetary liabilities with dollars having less purchasing power than dollars had when the Depreciation expense adjusted for general inflation liability was originally incurred. The difference is in-and for changing prices was determined using the dicated by the " Advantage resulting from the some rates and methods used in calculating the pro- decrease in purchasing power of net monetary vision in the primary financial statements. The ac- liabilities." O 1 1 0 44

OHIO EDISON COMPANY AND SUBSIDIARY COMPANY

/_,

CONSOLIDATED OPER ATING STATISTICS ( ) }Q 11NSj.A 1978 1977 1976 1975 1974 e D OPERATING REVENUE v (THOUSANDS) i $314,867 Residential Sales . . . . . . . . . . . . . . $284,512 $232,433 $221,230 $179,300 Commerclal Sales . . . . . . . . . . . . . . , 205,901 191,381 155,572 149,268 122,009 industrtal Sales . . . . . . . . . . . . . . . . ,. l 258,767 236,434 195,311 180,086 159,585 Other Sales . . .......... .. ...  ; 55,817 39,569 37,762 33,560 26,929 Total Electric Sales . . . . . . . . . . . . x 3 835,352 751,896 621,078 584,144 487,823 Other Electric Revenue . . . . . . .. rd , 4 22,193 39,281 19,542 4,797 6,449 Steam Heating . . . . . . . . . . . . . . . . b' i 5,411 5,112 4.232 4,383 4,083 Totat. .... ... ............ . pgj $862,956 $796,289 $644,852 $593,324 $498,355' ELECTRIC SALES IN KILOWATT. h' p, > HOURS (MILLIONS) J R sidential . .. ..... ......... - i,W3 6,501 6,334 6,024 5,809 5,610 Commercial . . . . . . . . . . . . . . . . . . . 4,470 4,549 4,358 4,169 4,023 i@! i 1 Industrial . . . . . . . . . . . . . ...... All Other . . . . ...... . ... . , ,i

c. -W.

1,95Fi 9,600 1,738 9,671 1,675 9,262 1,558 8,514 1,489 9,630 1,419 Total... ....... ... ......... t 22,309 22,229 21,202 19,981 20,682* CUSTOMERS SERVED AT k-END OF YEAR bs ,, ,. h]4 Resident lal . . . . . . . . . . . . . . . . . . . . 198 848,268 836,500 824,851 813,308 800,612 Commercial . . . . . . . . . . . . . . . . . . - ?W1,M SP 86,410 85,002 85,512 83,710 83,111 Industrial . ........... .... .. '

                                                                        . i1,181;            1,160     1,147     1,111                                  1,132     i,109
                                             ... ... ..                       .bMS             689       682       681 _                                  676       586 p] AllOther 1              Totat. . .........
                          ... ..... .              . ....       fy                         936,527   923,331  912,155                      898,826             885,418
                                                                    ,     J~           )

RESIDENTIAL CUSTOMER DATA - Average annual use- - ,~. kilowatt hours . . . . . . . . . . . . . . . . k.; ;7,FM j 7,724 7.637 7,361 7,204 7,070 Average price per kilowatt hour. .. .... ...... (SuGBh 4.84c 4.49c 3.86c 3.81c 3.20$ h STEAM g1 0 Salesinmillionsof pounds .. . . iFSF; 860 876 992 980 1,164 Customers served at end of p3r. . {(V ffy 392 417 456 479 522

• Exclusive of the cumulative effect to December 31,1973 of recording metered but unbilled sales and revenues of 188,553,000 kilowatt hours and $5,028,000, rescoct!vey.

 /^'N I w/

45

OHIO EDISON COMPANY AND SUBSIDIARY COMPANY PRICE RANGE OF COMMON STOCK, BOOK VALUE PER SHARE AND QUARTERLY DMDENDS PAID PER SHARE g Price Range of Common Stock k,}h 1978 1977 1976 1975 First Quarter High-Low ' r 19% 17% 21 18% 19% 16% 16% 12% Second Quarter High Low 18% 17 20% 19 18% 16% 16% 13% Third Quarter High-Low g . , 19 17% 21% 19% 19% 17% 16% 15 Fourth Quarter High Low ' M 1 17% 14% 20% 18% 21 18% 17% 15% Yearly High-low ] 19% 14% 21% 18% 21 16% 17% 12% Prices are as quoted on the New York Stock Exchange prior to January 23,1976, and oq the NYSE Composite Transactions thereaf ter. Book Value Per Share )19f9 1978 1977 1976 1975 At December 31 P: $18,98 $16.33 $16.93 $15.93 $15.29 Quarterly Dividends Paid Per Share 1979) 1978 1977 1976 1975 First Quarter LS M '.

                                                                                         $ .44             $ .42%            $ .41 %            $ .41 %

Second Quarter >M .44 .42 % .41 % .41 % Third Quarter , fM]S. .44 .42 % .41 % .41 % Fourth Quarter e -M M) .44 .44 .42 % .41 % Total for Year tu$t.78. .1 $1.76 $1.71 % $1.67 $1.66 This Company's coramon, preferred and preference stocks are listed on the New York Stock Exchange and the Midv est Stock Exchange and are traded on other registered exchanges. O CLASSIFICATION OF HOLDERS OF COMMON STOCK AT DECEMBER 31,1979 Holders Shares Held Number  % Number  % Individuals . ... . .. . ..... .. 152,840 88.1 33,449,967 56.1 Fiduciaries . . . . . ... . .. ... .. ... 15,524 8.9 2,998,288 5.0 Brokers . . ... .. . . .. . .. . 65 - 491,888 0.8 Nominees . .. . .. . . .. ... . 1,381 0.8 19,975,583 33.5 Banks & Financialinstitutions . . . . .. . 66 - 159,114 0.3 Insurance Companies & Other Corporations. . . . . . 1,669 1.0 1,437,132 2.4 Charitable, Religious & Educationalinstitutions . . .. 627 0.4 465,233 0.8 P:nsions, Profit Sharing & Other Investment Trusts . . 1,310 0.8 645,164 1.1 TOTAL. . .. .. . .. ....... .. . 173,482 100.0 59,622,369 100.0 DCTJ.%%' "",;',*.*,,",n*o",a e 0*O*na." ' o",;Ps".=J:"o W Tai"a% o""Ja.*""*.'Loe

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48

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this past year showed an increase of .(N* ,T  ;

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                                                      $6.2 million in net earnings for         .l 'y     ,h              -

common stock over 1978. f r 3 } Thh e hN e Two basic reasons for this marked improvement were the positive effects of the rate increase p

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Increases in kilowatt-hour sales da N ['47 were also positive factors in the improved picture. Kilowatt-hour [ Q $ q[* M~ %w p]y[ 4w 7 M. A sales showed a 2.9 percent rise over 1978 figures. This, plus the full c$ dj

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year oi revenue from the already Justin T. Rogers, Jr. and Ray E. Semmler noted rate increase, produced a 25.1 percent improvement in electric sales revenues. Total operating and environmentally superior revenues were $145.3 million. method of generating electricity. Unfortunately, the increase in ,_. While they did not affect 1979 regulatory and political uncertain- ',; earnings, decisions made by the ties following the accident at Three .J Central Area Power Coordination Mile Island made it highly advisable (CAPCO) group in Jariuary 1980 for us to reduce the level of our

                                         ,6 ,

will redece our financing burden heavy financial commitment to this

                                      '~-             and have a positive effect on our     energy source.

financial strength over the next several years. These decisions were not made without risk, for they will affect CAPCO terminated programs the supply of electricity in the involving the future construction of future. Reliability of electric service four nuclear generating units and to customers may be particularly delayed the scheduled completion affected in the 1990s. A more of two nuclear units which are complete discussion of CAPCO already under construction in construction schedule changes which the Company has an owner- appears later in the report. ship interest. In June 1979 the Company sold We and the other four companies $20 million in first mortgage bonds in CAPCO remain convinced that to finance construction programs. nuclear energy is a safe, economical Approximately $6 million principal amount of pollution control notes were issued by the Company in April corresponding to a like princi-pal amount of pollution control bonds sold by industrial develop-ment authorities, the proceeds being used to pay part of the cost COVER. On October 21, IJ79 Thomas Edison produced the world's i:rst of the pollution control equipment T successfulincandescent electric light. This

                                                  .                                         at the New Castle Power Plant and ,,, ,)

glowing filament from a rephca of that the Bruce Mansfield Plant. light symbolizes the industry's observance of the Centennialof Light during 1979. 2

       )

J Financing plans during 1980 applied to the Pennsylvania Public At the present time we are awaiting include a private sale of $22 million Utility Commission for an $18 that agency's response to certain of fia;. mortgage bonds (10.9% million increase in rates. Application proposals suggested as solutions by Series) to a group of insurance for the increase was filed the Company. More detailed companies and a private sale of $10 January 16,1980, to become information concerning this impor-million of 10.5 percent preferred effective for all retail customers on tant matter and other matters in stock to a single insurance com- and after March 17,1980.On litigation appear later in this report. pany. I. ate in the year we plan to February 15,1980 the Commission sell to our parent company, Ohio suspended the increase pending The Company lost a valued Edison,340,000 shares of common further proceedings. member of its board when Wesley S. stock (par value $30, total $10.2 flodge, director since 1965, died million). Approximately $2 million The Company's first mortgage July 4,1979. We shall miss his will be obtained through the bond ratings have not changed. counsel, his experience as a bus %ess , issuance of a pollution control note Moody's presently gives us a Baa and industrial leader and his l in the summer of 1980. A portion rating on our first mortgage bonds, friendship. of this total of $14.2 million was while Standard & Poor's gives us an used March 1,1980 to retire at A rating. John R. White, chairman of the maturity $3 million of first mortgage board since 1975, elected to take bonds (2 3/47c Series). The Meeting air and water pollution early retirement effective remainder will be used for new control requirements has been a December 31,1979. The past five construction and improvement of most challenging problem for the years have been among the most existing facilities. Approximately past several years. The problem re- difficult in the history of the utility

          $59.6 million has been budgeted             mains with us, even though our         industry and we are grateful for his for such work in 1980,                      total estimated expenditures over      effective leadership.

several years amount to $61 million

 '-s           As noted earlier, our present          or more for air and water quality          While columns of statistics and ifinancial health is somewhat better           and other environmental require-       rows of figures are the heart of any n/than that of the previous two years.               ments. One of the most difficult       annual report, nur major asset is But inflation continues its nagging         problems involves sulfur dioxide       our strong team of employees process of erosion, rising 25               emissions at our New Castle Power      whose daily dedication to providing percent since the test year which           Plant. A continuing series of meet-    good service often requires more was used as we sought the rate              ings with representatives of the       than ordinary effort. We sincerely increase mentioned above. That test          Pennsylvania Department of            appreciate their talented contribu-year was for the 12 months ended             Environmental Resources (DER)         tions and continued support.

July 31,1977. Thus we have has sought solutions to this issue, t.dC b-Industrial kilowatt-hour sales Chairman of the Board HIg'hh* ts reached 1.9 billion, showing . an increase for the fourth consecutive year. *~= Total operating revenues were

                     $145.3 million, a 22.01%

increase' CAPCO group tenninated . plans to build four nuclear Pmsident generating units in major New Castle, Pennsylvania construction cutback. M reh 11,1980 On July 16,1979, a n3w system peak load of 554,000

kilowatts was recorded and on - Average annual use per resi-August 1 this mark was dential customer was 7,626

    -m              . equalled.                         kilowatt-hours, a drop of 53 kilowatt-hours, first year since vi                                                 = the early 1930s to show a

j. decrease in average annual use.

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4 6 0 Brief Financial Summary n i 1979 1978 , REVENUES RECEIVED Thousands of Dollars Operatinq rasenues F rom sale of electricit y and miscellaneous revenues . S145,340 $ i 19,118 Other income - net. 6,297 9,810 To:al. 151,637 123,928 o HEVENUES PROVIDED FOR. Wages to employees, mcluding costs of pe isions, group life insur ance,

                                                                                                                                          ~

hospitalization and other benefits. 14,978 14.154 Cost of f uel (11. 45,587 38,608 Materials arni supplies and other e x pen ses Electr icity pur chased, plus net 17,649 17,911 2 h interchange with other electric - utilit y companies 7,516 3,134 l Taxes f eder at -tate and local . Pr ovision fo depreciation 17,672 12,517 9,669 11,887 l Amor ti/ation of debt discount, f premium and ex pense net 114 112 Inter est exiw>nse net. 14,398 13,466 Capital stock issuance expense 12 Pr ef er r ed stock dividend r equ a ements 4.660 4.660 - Pref erred stock dividends declared i in excess of requoements 174 Common stock dividends 12,278 5,452 Total 147,369 119,239 4 RE TAINE D E ARNINGS $ 4.268 $ 4,689 (1) Amounts for 1979 and 1978 include an increase of $1,686,717 and , a decrease of $1,175,344, respectively, representing the net I-amor tization of the previously deferred e'nergy costs. See Note 1 of Notes to Financ.al Statements on page 28 herein. h ., yl -~

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F I.EIT. J. A. Elser, right, Zelienople l . District customer services representative,

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                                                                                                                                                                                           ??O '                                      apartment complex in Stars, PA.

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y- - u E E @ H Y: where it came from, N m_^  %.,* kilowatt-hour sold were 2.5G cents compared to 2.27 cents in 1978. where .ti went LRa@M Part of the increase in operation and maintenance costs was due to A new systen. peak load of hour use per customer failed to extensive turbine repairs to Unit 551,000 kilowatts was established gain over the previous year, No. 5 at the New Castle Power July 1G and equalled August 1. although total residential kilowatt- Plant and the use of more expensive hour sales did increase 1.1 percent. low-sulfur coal since June at th Total kilowatt hour sales were plant. Unit No. 5 was out of service 2.9 percent higher than in 1978. It should be noted that 1979 was from February 9 to June 7. In Kilowatt-hour sales showed an a year without the usual extremes addition, the Beaver Valley nuclear increase of 93,767,281 over 1978, of weather, resulting in less use of station was out of service from while total electric sales revenues heating and air conditioning in March 13 to August 20 for the increased 25.1 percent to $131.7 many homes. This was compound. Nuclear Itegulatory Commission million. ed by lower general use because of (NRC) design investigation and higher energy costs it was also a required modifications. Resuming The previous year's rate increase year which saw a slowing economic production in August,it again was of $23.3 million and increased fuel pace in its latter months. taken out of service December 1 for prices affected all retail rate classes refueling and further modifications. and raised the average residential The limited growth in the resi- It is not expected to return to pro-rate to 5.G 1 cents a kilowatt-hour dential area was offset to some duction until July 1980. compared to 1.5G rents a kilowatt- degree by the record of industrial hour in 1978. and commercial use. Industrial  ! css cf production from these kilowatt-hour sales have shown a two stations required the operation Average use per residential solid growth trend for the past of less et fit ient units and also customer was 7,62G kilowatt-hours three years. Industrial sales for caused purdased and interchanged compared to 'i,679 kilowatt-hours 1979 rose by 3.4 percent to a level power costs to increase $ 1.1 million. in 1978. The average annual resi- second only to the high established dential bill was $430.01 compared in 1973. Commercial kilowatt-hour Total operating taxes increased to $319.81 in 1978. sales rose 3.7 percent. to S17.7 million from $9.7 million in 1978. Interest cl. ges rose, This was the first year since the Total operating expenses were amounting to S18.8 million, due depression years of the early 1930s $85.7 million, compared to $73.8 principally to the sale of first that the average residential kilowatt- million in 1978. These expenses per mortgage bonds June 28,1979. 5 u_. _ _ _ . _ _ _ _ _ _ _ _ _ _ _ _ _ _ . . _ _ _ __ _ _ _ _ _ _ _ _ _ _ . _ . _ _ _ . _ _ _ _ _ . _ _ _ _ _ _ _ . _ _ _ _ . _ _ . _ _ . _ . _ _ _ _ _ . _ _ _ _ _ _ __

______ _ - _ - - - _ . - - - - - _ - - _ . - - . _ _ __ . _ . . _ . _ _ . . - ~ ~ - . . . _ . = - - - - . _ . J d 1 i l i 9 I I i j %g7. ' q f?Q qcq x l t i i ge .r 1

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    \\ ,a I. nwn at t tw cerwrater of I' nit b llat Ihe llruce Stans(wid l'! ant. I *ni! No. Iis scheduled for commeretal operatton in Octoher ].%O.
        \1o st of t he Company's const ruc-                        Company is the builder ami                                                              t he Company has ow nership                                                     !

l t o n funds are allocated for operator of the liruce .\lansfield in t e rest s. , 1 generat ma fanhties ia conjunction Plant for the C APC() croup. The i I w it h t he const ruction procram of plant is located at Shippingport, PA. .The four units terminated by this t he (' AP('() troup. action were I'mts Nos. 2 and 3 at ()n t hree occasions, in 1971, the I) asis-llesse Nuclear Power l 1977 and 1978, the CAPC() Station near Port Clinton,()hio l

        .l'h i s f.u e comi any troup, in n                             s d t onhum                                         and I nits Nos. I and 2 at the Erie                                              ;

aihhtion to t he (lompany and ()hi" Nudear Plant north of Berlin schedules for generatine units. IG hson, consist s of 'I h; Cles cland fleights ()hio. At the time of  ;

                                                                   ,,orecast.s indicated a slowmg of Electric lilununating ( ompany                                i ustomer electricity needs and the                                                      ternunation all of these units were                                             '

I)uquesne 1.icht ( ompany and :Th" ' m the desien state. resulting construction slowdown I oledo Edison ( ompany. cased to some degree the need for .I.< tal estimated cost to build the o the huce amounts of construction four termmated units was 87.3 i Smce t he P APn ) procram beg.. > c,pital.}}