ML20126F341

1984 Annual Rept

ML20126F341
Person / Time
Site:	Trojan File:Portland General Electric icon.png
Issue date:	12/31/1984
From:	Short R PORTLAND GENERAL ELECTRIC CO.
To:
Shared Package
ML20126F325	List: ML20126F321 ML20126F341 ML20126F351 ML20126F358
References
NUDOCS 8506170440
Download: ML20126F341 (42)

Text

PORTLANDGENERALELECTRICCOMPANY 1

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4 REACIIING OUT IN NEW DIRECTIONS e

ANNUALREPORT 8506170440 850611 PDR ADOCK 05000344 I

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k ABOUT Tile COVER IEACillNG OlJr IN NEW

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DIRECTIONS IS NOT ONLY EXCITING BUT ESSENTIAL OlWGON WASIIING' ION IN1DDAY'S ClIANGING ENVIRONMENT. AS WE g

ACTIVELY EVALUATE NEW s um.m BUSINESS DEVELOPMENT

,rA OPPOKlVNITIES OUR IIORIZONS AIE EXPANDING

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RIM COUNTRIES AS WELL AS "O

OTIIER PAR 13 OF TIIE tj WORLD.

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LOCATEDIN TlIEIIEART y*

OF OIEGON'S POPULATION CENTER, PGE PROVIDES 2((d '

M SERVICE TO A 3,170 SQUARE-J.C

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MILE AREAIN TIIESTATE-APPROVED ALLOCATION OF i;st 4,070 SQUARE MILES.TIIE COMPANYSERVES MORE

' (mpg ~ gg TIIAN 40"/o OF OREGON'S

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ELECTRIC CUSTOMERS.

HIGIIIJGIUS

% increase 1984 1983 (Decrease)

Operating revenues

$ 722,068,000

$ 86,4(M,(x)0 23.1 Net income

$ 158,364,000

$ 114,144fx))

38.7 incume avadable for common stak

$ 123,892,000

$ 79,334JXX) 562 Earnings per average common share Before extraordinary item

$2.80

$3.01 (7.0)

(1.14) l Extraordinary item After extraordinary item

$2.80

$1.87 49.7 Dividends declared per comrnon share

$1.81

$1.77 2.3 Ikx>k value per common share

$19.05

$18.18 4.8 Ikturn on awrage common equity before extraordinary item 15.10 %

16.57 %

(8.9)

Net utility plant

$1,962,937,000

$2,018,627/xx)

(2.8)

Gross utility construction expenditures

$ 128,957,000

$ 191,131,0lx)

( 32.5)

Kikwatt-hours sokl (in thousands) to ultimate customers 13,144,000 12,460,000 5.5 Customers servn! at year-end 516,129 515,328

.2 Average kikwatt hours used per residential customer 12,M4 12,027 5.1 CONHNIS Service Area Map Inside Front Cover ilighlights 25 ikport to Stockhoklers 1984 Calendar 6-7 Financialikview 8-9 l\\werSupply & Demand 10-11 New Directions 12-15 Management's Discussion and Analysis of Financial Condition 16-19 20 Ikport ofIndependent Public Accountants Consolidated Statements of income and Iktained Earnings 21 Consolidated Balance Sheets 22 Consolidated Statements of Capitalization 23 Consolidated Statements of Changes in Financial lbsition 24 Notes to FinancialStatements 25 31 Quarterly Comparison for 1984 and 1983 32 Supplementary Information to Dischne the Effects of Changing Prices 32 33 Market and Dividend Information 34 Stmkholder Information 35 Selected Financial Data and Statistics 36-37 Ikurd of Directors and Senior Otficers 38 1

1

"1984 was a dramatically LP year for PGE. Our internal cost control and increased marketing efforts are showing positive results."

Electric sales to customers UP 6%.

Residential connections UP 7.4%.

Operating revenues UP23%.

Net income UP 39%.

Earnings per common share UP 50%.

Common stock market value UP 24%.

Dividends per common share UP to $1.82.

Moody's Upgrades securities 3 steps:

First Mortgage Bonds........ UP to A2 from Baa 2 Preferred Stock.............. UP to a3 from baa 3 Standard & Poor's Upgrades securities:

First Mortgage Bonds.......

UP to A from BBB +

Preferred Stock............

UP to A-from BBB-2

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"1985 looks good. We willcontinue l

our efforts to be flexible and l

innovative and profitably adapt to and manage changing conditions."

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Itobert i 1. Simrt Cluirnun of the ikurd and Chief Executive Officer March 1985 l

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CALENDAR 19M jrnuary April June o Colsinp iJnn 3 goes mto tom a Tropn shuts down for annual e Montana Power ( n reschedules meraal operanon P(iE owns 2O reluch.ig and maintenante uimplenon ot ( ailstnp l'mt 4 percent of the 7(W),(XM) kw unal n (:ompam announ es ottenng of unnl nud 1%

hred plant in Montana up to l(MUMM kw long term a Tropn emplosecs uimplete one e 14 iE agrees to transfer 2 percent Jutwer sale and up to 2t U iX 0 kw nulhon manhours wnhout a lost of its customers arul a Ju>rtion of in ownership of Ikiardman ( nal ume acudent ts distribution system to ( nlum Plant and Tropn. along wnh an a Pennons signed in 22.tMO IT ii.

hia River People's Utihty I)istnct equivalent share of the lugh t ustomers and resolunons f rom in enhange for $13 nulhon to vohage Northwest Interne 4 3 lotal governments are subnut-ted to the Federal Energy Reg-end a (ondemnation suit.

May ulnon ( nmnussion seeking February a l)irettors approve inc rease in e Tropn Nuticar Plant sets con u,nunon stock thudend to an tull teuew of BPA thanges to the l

tmuous operation retord of 13 3 ette(ove annual rate of $1 X2 f ederal pow er en hange tosts days.

e " Repair 1)on't Replat e" voor F1.R(; agrees a ()regon Pill grants rate int rease water heatet is the theme of July to unver an increase m the Ikm P(iE's tusv "I lot Watt" market u Residennal and f ann rates rRNille Power Admnustranon's mg program det rease 3 9 per(ent wnh a 10 transuussion rates and a tax e Meter readers hegin elet trona percent increase in the amount kvied by the Warm Springs Indi meter reading, improvmg of the I ederal power enhange ans on two IT iE hydro projc(ts acuiracy and ettu ienty a Plih invests in 5snektron. a o llPA nicals plan to thange the a Tropn Visitors Informanon Portland area manutacturer of federal power en hange costs llenter hosts its milhonth usnor uimputer (hsk-dnvc motors, and which wouki mcrease rates to Montgomen Ventures 11. a ven.

IT iE's resklential and f arm cus-ture tapital tirni in ( alitonna tomers as mtah as 38 per(ent n ITiE forms subsahanes Western EnerTec h and Western EnerTet h

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$2XO,(XX) to help needy f amiln's with their winter heatmg needs i

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t he its Jtt ersthed enern voora, o the o arred ha< bun >osnJs and expericer, e <,t its r

.\\lavragernent i or*r*ntiter greati\\ < ontrrhist< to th< streergth avrJ si. < < u of your i t *99ffan\\ l et br*1 [t'It l'rt'stJerrt \\\\'llllJr91 f I turkhlJj ha s J hau bg n oltklJ 191 f< rh er n stern oft rattort s e ergtrue err *ig a*rJ, our strio. trort \\a un.r \\ 'i. e l 'rn ido ert and (,v*r

't gal ind ol tit, Jl ar erJ!( ornnsel {Jone s \\\\ l brorhaan brr* tis e \\fe vie n< < t ot the f

e *ta r u hole h e l'ro:Jerrt of l'on er \\oterns I e stir i iImM has unanaged ser a vai f 9feratr*rQ etik'IvicerrnQ Jr1 fle tr has!*rg art as

o " Good Frnts" marketing a PGE campgrounds and parks a Chaired by 130ard Chairman program begins as a step to close for the season having been Ibbert i1. Short, Ponland area encourage the construction of enjoyed by more than 500,000 United Way campaign meetsits electrically heated, encrgy.

visitors.

goal for the first time since 1980.

efficient homes and apanments.

October

' U.S. I)istrict Coun rules 13PA August

. Open Ilouse held for first Good and the Supply System breached a Transfer of customers to Colum.

Vrnts home.

their contract with PGE and bia River PUD is completed

= Warm Springs Indians and three other private utilities when with ICE retaining thelargest ICE sign new rental agreement a construction haft was forced on industrial customer in the area.

through the year 2001 for prop.

Washington Nuclear Project 3 o PGE forms subsidiary, Columbia-eny for the 398,000 kw Pelton/

(WNP 3).

Willamette Development Co., to Round liutte hydro projects.

December develop company-owned, and

= Trojan returns to operation.

= Company files more than other properties.

November

$500 million in damage claims September e Oregon voters appnwe forma.

against BPA and the Supply a FERC appnwes modified BPA tion of a Citizens Utility Board to System due to the breach of changes to the federal power be supported by voluntary contract on WNP 3.

exchange costs. Rates for membership.

m PGE common stock closes the PGE residential arellarm cus.

s Expansion of spent fuel pool year at 16% per share, up 24 per-l l

tomers will rise 9.5 percent in capacity at Trojan receives cent from a year earlier.

November, federal appnwalalkming the g

plant to store fuel until govern-I""""'I l

ment waste depository is in "S"'*"'" f8E'"E '"1' ""d operanon in late 1990s.

i litigation surrounding WNP 3 is l

agreed upon by BPA, the Supply l

System, PGE and three other investor-owned utilities.

February l

m Moody's Investors Service upgradesits rating of PGE's first mortgagelmnds to an A2 and preferred stock to an a3, their highest rating for PGE securities N

in our 95 year history.

I March a Standard & Poor's upgradesits ratings to an A for PGE's first mortgage bonds and an A for the Company's preferred stock.

e Robert G. Cameron, Executive Vice President, Lloyd Corpora-tion, named to PGE's Board of Directors.

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Turther bnudening the Jepth <>f PGli's Afanagenrent G>mmittee are, fn>m left.

Vice President li KaiStepp, uha bru eas expertue un hunran rewuras andadmin-ntratur management, Senwr Vu e President and Chief Funanaal O/Rar Ken L llarrown. uvoth en Jepth knoseleJge offnamr. aavunting, rnsruments and nete brauness Jesrlornrent, andSenwr Vur President of Eleartc Operations Charles L Ilernruh u sth a badgn>undin engineering, cantomia a,ud regulatory affairs 7

FINANCIAL REVIEW Years of teamwork and effort 1984 capital requirements were Favorable Rate Action to resolve financialproblems with met entirely with cash fhw from PGE received PUC approval unfinished nuclear projects and to operations. Indeed, the Company to include in rates its $237 million put an effective cost control and had sufficient cash thw to meet all investment in Colstrip Unit 3. It also planning system into place were ofits needs even if work on the was given permission to amortize rewarded with excellent financial two pwer plants had continued over five years $36 million ofits performancein 1984.

on schedule.

investment in the terminated Skagit/

These achievements did not go Continued strengthening of Ilanford Nuclear Project.

unnoticed. The nation's three largest the Company's capital structure was Changes in pricing policies securities rating agencies upgraded accomplished as debt was reduced by the Bonneville Power Admin-their ratings for PGE's securities in to 46 percent of total capitalization.

istration also had an influence on 1

1984 and early 1985, in their May 1984 annual PGE's electric rates in 1984. Track-Financial targets were met review, PGE's Directors voted to ing increases were granted ICE by or exceeded in all areas of the increase the dividend to an effective the Oregon Public Utility Commis.

Company.

annual rate of $1.82 per share.The sioner to cmcr BPA's increases in Earnings increase dividend had been $1.78 per share.

wholesale power and transmission Earnings increased to $2.80 a Ratings Upgraded rates and changes to the Regional share in 1984, up from $1.87 a year Important recognition of Power Act power exchange.

earlier.Totalrevenueswere$722 these financialimprovements began The Company did not seek a million in 1984, compared with in March 1984,when Standard &

general rate increase in 1984.

$586 million in 1983.

Poor's initially upgraded its ratings Operating income was $271 for PGE's first mortgage bonds and million while net income was preferred stock.

$158 million in 1984, compared Duff & Phelps upgraded its with $209 million and $114 million ratings for PGE's securities later in the year before.

1984.

The Company achieml'a

'lhen came a three step return on common equity of 15.1 upgrade in February 1985, by percent in 1984.

Moody's investors Service. It now Construction expenditures rates PGE's first mortgage bonds an were held to $129 million in 1984, a A2 and our preferred stock an a3.

substantial decrease from $191 mil.

'Ihese are the highest ratings lion in 1983 and a peak of $306 mil-hkxxly's has ever given to PGE lion in 1982. Completion of Colstrip securities.

Unit 3, a schedule delayin Unit 4 A second upgrading from and the nothballing of Supply Sys-Standard & Poor's to an A rating for tem Unit 3 were principal factors in PGE's first mortgage bonds and reducing these expenditures.

an A. for its preferred stock came one month later.

A dramatic rise in the market price of PGE's common stock was another important sign of the Com-pany'simproving condition.The stock closed at 16% per share on December 31,1984, having achieml a high of 17H some two weeks car.

lier. PGE common stock had closed 1983 at 13% per share.

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kw plant.

when it and the Supply System allegal they could not finance con.

tinued work on the project. WNP-3 was about 75 percent complete at the time. PGE has a 10 percent share of the 1.2 million kw unit. As of December 1984, the Company had invested $236 million in WNP3.

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NEW DIRECTIONS 5

E Electric utilities today face The program has been well Oregon's Economy Grows

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competition unlike any experienced recched. Plans and work are under.

Economic development r

since the binh of theindustry in the way for severallarge GaxiCents effons were successful at home and L

late 1800s.

apanment and condominium proj-abroad. Oregon now ranks third i-Deregulation of the natural gas ects. Our 1985 goalis to have 8 per-nationallyin attracting high-E industry, the oil glut and new tech-cent of the new homes and condo-technology companies. Most of

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nologies to produce energy or use miniums built to meet these this growth is taking placein PGE's it more efficiently, all challenge an reqairements.

senice area.

electric utility's historical market

" Repair Don't Replace"is the Company participanon m n

share and competitive position.

theme of another new marketing trade missions toJapan and China i

PGE recognizes the new real-effort. Customers who have a prob-and Oregon's repealof the unitary ities of its business environment and lem with their electric water heater income tax on business were instru-y is adapting and gr wing to meet the can simply call a toll-free PGE mentalin the decisions of several challenge.

number for advice on how to fix it high technology companies to build R

Renewed efforts in marketing, themselves or how to have the or expand in Oregon.

new business development, an active repairs done for them. In the last Locally, PGEis working to g-role in Oregon's economic develop-eight months of 1984 we had help its commercial-industrial cus-ment and the enhancement ofits more than 2,500 customers call for tomers become more competitive.

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financial strengths and human assistance.

Through its business retention and

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resources are the keys to the Com-Flexibility iIelps Business development program the Company pany's approach.

Special attention is being paid serves as aliaison between business Marketing Programs Increase to the Company's 50 largest com-and government.The program 1984 saw PGE return to an mercial and industrial customers.

identifies barriers to development active role in marketing electricity to An excellent exampleis a new then helps find ways to remove 5

its residential, commercial and power supply contract for a large them.

6 industrial customers.

steel fabricating plant. By learning As part ofits economic devel-E

% rough PGE's GaxiCents about its operation, PGE was able opment efforts, PGE is also study-program,home builders and buyers to develop a new rate schedule that ing the feasibility of establishing g

can achieve maximum energy effi-allcws the fabricator to operate a World Trade Centerin Portland.

E ciency and enjoy the benefits of more efficiently and become more If developed, the center will support clean, safe electricity.

competitive, while we retain its trade and relations among regional

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Goal Cents homes and apart-business.

andinternationalgovernmental ments draw from to energy saving Wholesale marketing of agencies and businesses.

measures to keep home heating firm power and offering an owner-WorldTrade Centers are part requirements at one-half those ship sharein two power plantsis of aninternationalnetwork provid-achieved in other homes.

another aggressive new direction for ing consolidated banking, legal, PGE supports Gaxi Cents the Company.

research and travelsenices,and 5

builders with a computer analysis to PGE is offering to sellas much space for exhibits and trade fairs, to select the right energy efficient as 200,000 kilowatts capacity in its businesses and organizations. Le equipment and features. Company thennal power plants along with an centers serve as focal points and cat-representatives folku upwith equivalent share of the Pacific alysts for an area's international inspections to ensure proper Northwest high-vohageIntenic trade.

installation and final certification.

with California. In addition, the Builders also receive advenising and Companyis making available for sales support, sale an additionallong-term, firm supply of as much as 100,000 kilo-watts from its system.

When completed, these steps willbetter utilize our resources without affecting our ability to meet customer needs.

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g-mCJ As thepoiver supply imreased, PGE resumed marketing electriary m l'>s4 icith the introJuction of the GooJ Cents home anJ llot W'aterpn> grams. This home ivill benefitfrom the latest in energr-ef6aent amstructicm techniques. clectric heating and aw> ling systems, and appliances.

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Business Development Achievement of operating Expands objectives through teamwork also is Electric utility operationswill the purpose of a new corporatewide remain the core of PGE's business goals program. Objectives range for years to come. But the Company from enhancing emplayee safety recognizesit must look to other and health to meeting standards of areas to sustain long term growth.

excellence at power plants. All Providing businesses,indus-employees willreceive financial tries andinstitutionswith away to awardsif the designated objective cut operating costs through effective levels are met.

energy management is the role of In addition,PGE continues to PGE's first new subsidiaries-emphasize employee training and WesternEnerTech andWestern development, and the cross training EnerTech Financial. They analyze of employees in different areas. Ulti-energy management needs, then mately the Company's success can arrange for system design, equip-only be attained through the work, mentinstallation and financing.

experience and expertise ofits Columbia-WdlametteDevel-employees.

opment Co. is another new PGE subsidiary. Its purpose is to develop NEWSWEEK saysitlikeitis:

PGE's nonutility properties and Otvrthepast tuu years, Oregon has become the hottest high-tech growth look for otherland development area in the nation. It has done so on its opportunities.

own terms, hoasting the nation's tough-Synektron, a Portland area est land-use and entironmentallaws-manufacturerof computer disk and only modestfnancialincentiirs. In drive motors, and Montgomery ahe last eight months alone it has lured Venturcs 1I, a California-based ven.

intestments unrth halfa billion dollars and 10,ooojobsfrom a dom, major ture capital firm, are two of PGE's frms.

add..ntnonalinvestments.

Says start-up attorney Stere Wynne.

Corporate Goals Established

" People aren't so much driten as they Internally,allofficers and many are exated " The start-up infrastructure senior managers are working under that has eroltedis more like a support systern. Offa-supplyfnns lend equip-a new incentive-based pay program.

ment to budding a>mpanies, auditors It ns tsed to the achievement of and attorneys offer reducedfees, banks specific objectives for their areas seldom require executiirs to sign per-and attainment of PGE's strategic sonalnotes. "Ifyou uant to go into directions.

business."says Wynne, "you can callon people who arein theforefront ofthe feldandtbey'llhelp" Oregon's "Siliam Forest" may be sprouting a new tision ofhigh-tech adture.

-excerptsfrom Newsweck February 25,1985 14

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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION Results of Operations Nuclear project abandonments and construction delays could Net income increased 39% in 1984, when compared with 1983, affect the Company's future financial performance. Le Company while earnings per share increased 50%. Le 1984 improvement is cannot at this time estimate what effect, if any, the uncertainties primarily attributed to timely rate action and increased sales of Surrounding its remaining imestment in Supply System Unit 3, or L. igation related to imestments in abandoned nuclear projects, t

electricity. %e 1984 period includes a net charge to income of approximately $47 million as a result of an adjustment to the will have on the financial condition of the Company. See Note 8, Company's imestment in the Washington Public Power Supply Imestment in Supply System Unit 3 and Note 10, Lu, igation.

System (Supply System) Unit 3. See Note 8, Imtstment in Suppi/

Operating Revenues System Unit 3. Also,1984 includes a net gain of approximately $4 Rate Actions In February 1984, the Public Utility C,ommis-million from the sale of a portion of the Company's transmission Si ".cr f Oregon (Commissioner) granted the Company a $68

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and distribution properties to the Columbia River People's Ut;.'.ty m11: n annual rate inaease to gffsd the Company s 20% share of District (CRPUD), and includes reduced income tax expense of c sts f Colstnp Unit 3 (Colstnp 3). This coaldired unit was approximately $42 million due to the accelerated amortization of P'C#d'""C"'"

I "I'""Y.0,19843e Gnnissione also I

certain unamortized investment tax credits.

granted a rate increase, effective May 1,1984, for the recurry of a In 1983, net income and eamings per share decreased 8% and portion (approximately $36 million, net ofincome taxes) of the 21% compared to 1982. %is was primarily due to an extraordi-Company's imrstment in the abandoned Skagit project over a fiw-nary loss of approximately $49 million ($1.14 per share) resulting year period. In other actions, rate increases were granted to offset from the termination of the Skagit/llanford nuclear project reduced ratepayer benefits resulting from changes in the provi-(Skagit) and a decrease in sales of electricity to large industrial sions of the Regional Power Act and increased costs resulting from customers and other utilities. Also, in 1983, preferred dividend a Bonneville Power Administration (BPA) transmission rate requirements increased about $8 million. The 1982 period increase and other increased operating expenses. As a result of the included the write-off of the Company's investment in the Pebble above rate actions, the average price per kilowatt hour sold to Springs nuclear project of approximately $80 million ($1.96 per ultimate customers increased 20% as compared to 1983.

share) and an extraordinary gain of approximately $54 million

($1.32 per share) which restdted from debt / equity exchanges. See Sales of Energy Kilowatt hour sales of energy to ultimate cus-Note 3, Abandonment of Nuclear Projects and Note 4, Gain on tomers increased 6% in 1984 oser 1983 due to comparatively Debt / Equity Exchanges.

cokler weather and improved economic conditions in the region.

Willions ofDollars)

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$600 3

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Eamings Per Average Common Share &

Operating Revenues & Net Income Dividends Declared Per Share E Operating Revenues B Earnings per Share M Dividends per Share E Net Income 16

In addition, kilowatt hour sales of energy to other utilities with 21%,0% and 3% in 1983. The abundance of surplus hydro-increased 22% in 1984 owr 1983 due to the availability of surplus power in the region enabled the Company to keep Trojan and energy and a favorable market for sales to Califomia utilities.

Boardman off-line for an extended period of time during 1983, Regional Power Act Operating revenues and purchased power thereby sharply decreasing the Company's production expenses.

costs were reduced by approximately $93 million, $55 million, and

'lhe following is a summary of related statistics for the Company's

$77 million in 1984,1983 and 1982, respectively, as a direct result principal generating plants. (dollar amounts in thousands):

1984 1983 1982 of the power exchange provisions of the Pacific Nonhwest Electric Trojan-Nuclear:

Power Planning and Conservation Act (Regk nal Power Act). The P

son Regional Power Act allows the Company to exchange power with the BPA and pass the benefit of this lower-cost power to its resi-g,g, dential and small farm customers. In September 1984, the Federal gene ated.

3,252,568 2,783,703 3,265,985 Energy Regulatory Commission approved BPA's changes to the methodology used to calculate benefits under the Regional Power Colstrip 3-Coal:

Act. These changes substantially reduce the benefits received by Production these customers. Effective November 30,1984, the Company was expense.

$ 8,940 granted a $26 million rate increase and anticipates filing for MWil's another rate increase in mid 1985 to offset the reduced benefits.

generated.

716,6N Although these rate increases should have no direct effect on Boardman-Coal:

earnings, they may haw an adverse effect on the Company's com-Production petitive position and growth potential-expense.

$21,003

$16,661

$18,640 Operating Expenses MWH's Production Expenses Production expenses increased 32% in generated.

620,384 433,366 593,1N 1984 mer 1983 primarily due to Colstrip 3 becoming operational During 1984, Trojan was off-line from late April until October for inJanuary 1984 and to increased operation of the Trojan nuclear its annual refueling and maintenance. This outage was longer than plant (Trojan) and Boardman coal plant (Boardman). During anticipated due to replacement of damaged control rod support 1984, Trojan, Colstrip 3 and Boardman generated 23%,5% and pins and repairs and modifications to a coolant pump and cenain 4% of the Company's net system load requirements, compared backup safety systems. The Company plans to operate Trojan

$25

$20

$15

$ 10 2

$5 y

Book Value & Market Value Sources of Electric Energy (Per Common Share)

(TotalSystem)

I a Book Value a Market Value a PGEliydro 19% 5 Firm Purchases 29%

E Nuclear 70%

tt Non-Firm Purchases 23%

5 Coal 9%

17

through April 1985, the next scheduled annual refueling and strip 3 being placed in service and the elimination of AIDC maintenance outage. Colstrip 3 added 140 megawatts of capacity previously capitalized on Supply System Unit 3 during the con-to the Company's resource base and has generated power since struction delay.

becoming operational. Boardman is currently in an economy shut-Other-Net ofIncome Taxes %e increasein expensein 1984 down due to the availability of kywer-cost hydropower. Trojan, reflects a charge for preservation costs incurred on Supply System Colstrip 3 and Boardman, collectively, are expected to provide Unit 3 during the construction delay. In addition, the Company about 40% of the Company's 1985 net system load requirements.

recorded a net gain of approximately $4 million from the sale of a Transmission and Distribution Expenses Transmission and dis-small portion of its transmission and distribution system to the tribution expenses increased 72% in 1984 owr 1983 primarily due CRPUD.

to increased transmission rates implemented by the BPA in March inflation ne Company is particularly sensitiw to inflation 1984 and Colstrip 3 transmission expenses.

because current ratemaking practices allow for the recovery Maintenance and Repairs The increase in maintenance and through revenues of the original cost, instead of the replacement repair expenses in 1984 over 1983 was primarily due to the work cost, of plant and equipment. For information on the effects of performed at Trojan during the extended refueling and mainte-inflation, see Supplementary Information to Disck>se the Effects of nance penod.

Changing Prices.

Depreciation and Amortization Expense Depreciation and amonization expense increased 34% in 1984 over 1983 primarily due to Colstrip 3 being placed in senice and the amortization of Capital Resources and Liquidity the Company's recoverable investment in Skagit.

He 1985 capital expenditure program is estimated at $150 mil-IncomeTax Expense Income tax expense was reduced approx-lion, including AFDC. The 1986-87 program is estimated in the imately $42 million in 1984 and $26 million in 1983 as a result of range of $200 million to $250 million, including AFDC. Approx-the Commissioner authorizing the Company to accelerate the imately 25% of these estimated expenditures are for generating amortization of certain unamortized investment tax credits. See plant facilities,25% for transmission, distribution, and general Note 1, Summary of Significant Accounting Policies.

facilities, and 50% for nuclear fuel and other expenditures. Cost estimates are based on the Company's present plans for joint Other Items ownership of certain future generating facilities and present con-Allowance for Funds Used During Construction (AFDC) Le struction schedules and are subject to further revision as a result of decrease in AFDC in 1984 from 1983 was primarily due to Col-changes in such plans. Le Company's estimates of capital expen-3.75 60 %

3.00

[

50 %

7 if 6

p; M

40 %

9 n

2.25 m

f h

i y

1.50

-h 30 %

) I B, ! $

l !

M 75

, -g -@

20 %

Cash Flow Dividend Coverage Ratio Long-Term Debt as a Percentage (Times) of Capitalization 18

ditures include the completion of Colstrip Unit 4, currently sched-in late 1985. In addition, the Company entered into two $25 l

uled for commercial operation in the spring of 1986, and reflect million interest rate exchange agreements whereby the Company the construction delay of Supply System Unit 3. %e Company pays a fixed interest rate and receives a variable interest rate based currently has sufficient generating capacity and projects under on the three-month Iondon-Interbank offered rate. As a result, construction to meet its projected customer demand until the late the level of the Company's floating rate debt as a percentage of 1990s. The Company presently does not have plans to construct total capitalization was reduced to 8%. %e Company also issued any additional major generating facility.

1.3 million shares of common stock under its existing stock pur-l' The Company expects its 1985 capital requirements to be met chase plans for net proceeds of $18 million.

through internal fund gen-ration. With the exception ofits exist-Le issuance of additional preferred stock and first mortgage ing stock purchase plans, the Company does not anticipate selling bonds requires the Company to meet earnings coverage provisions any additional equity securities in 1985. The Company plans to set forth in the Articles of Incorporan,on and the Indenture secur-sell fixed income securities to refund maturing obligations and if ing its first mortgage bonds. Presently, the Company estimates that market conditions are favorable, may sell fixed income securities under the most restnctive of these provisions, at an assumed rate to reduce its cost of capital.

of 13%, it could issue approximately $260 million of additional As the result ofimproved internal fund generation and a reduction preferred stock and approximatelv $490 million of additional first in construction activity, the 1984 cash capital requirements were mortgage bonds. In early 1985, two major rating agencies funded 100% internally as compared to 67% in 1983 and 50% in upgraded the Company's credit rating for its first mortgage bonds 1982. %cse conditions allowed the Company to limit its external and preferred stock. These improved credit ratings could help the financings during 1984. The Company entered into an arrange-Company obtain future financings at lower costs.

ment with the City of Forsyth, Montana to issue $8.6 million of the City of Forsyth's Variable Rate Demand Pollution Control Cash the from current operations is the Company's primary inter-Revenue Bonds due August 1,2014. This agreement is similar to nal source ofliquidity. At December 31,1984, the Company had one entered into inJune 1983 for $89.2 million. In November approximately $38 million of temporary cash investments to assist 1984, the Company issued $75 million of first mortgage bonds, in meeting future cash requirements. External borrowings from due in 1999. Le proceeds from this financing were used to banks are used as a normal part of day-to-day operations to meet reduce the level of floating rate debt. In early 1985, the Trojan trust interim cash needs. %e Company has $195 million of short-term agreement was paid down. The Company presently plans no fur-commitments and arrangements available from various domestic ther borrowings thereunder and plans to terminate the agreement and foreign banks.

3 75 100 %

3.00 80 %

2.25 60'Yo 1.50

)

40 %

1 l

75 20 %

l Intemally Generated Funds as a Percentage Pre-TaxInterestCoverage Ratios ofCapital Requirements (Times)

E Interest Coverage 5 CashInterestCoverage (Includes AFDC)

(Excludes AFDC) 19

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board ofDirectors andStockholders of Portland GeneralElectricCompany:

We have examined the mnsolidated balance sheets and statements ofcapitalization ofPortland General Electric Company (an Oregon wrporation) andsubsidiaries as ofDecember 31,1984 and 1983, and the related mnsolidated statements ofinxme, retained earnings and changes infinancialpositionfor each ofthe three years in the period ended December 31,

{

1984. Our examinations were made in aavrdance with generally accepted auditing standards and, accordingly, included such tests ofthe accounting records and such other auditing procedures as we mnsidered necessary in the circumstances.

As discussedin Notes 3 and 10, the Company terminatedits partia' ation in the Skagit/Hanford nuclearproject p

(Skagit) during 1983. The Public Utility Commissioner of Oregon (Commissioner) allowed the Company to reawer in rates

$36,263,000 (net ofrelated income tax reductions) over afue yearperiod. The Commissioner disallowed the remaining net investment of$48,598,000, which the Company rewrded as an extraordinary loss in 1983. In a suitfledin February 1984, the Company challenged the Commissioner's determination that a portion ofits investment is not remverable. A suit has also been fled to block the Company's remuery ofthe portion allowed by the Commissioner. While management believes its charge to inmmefor the disallowedportion is mnservativeforSnancial reporting purposes, it is not possible to predict the outmme ofthe litigation surrounding the Commissioner's action.

As discussedin Notes 8 and 10, construction on the Washington Public PowerSupply System Unit 3, in which the Company has a 10% interest, has been suspended. This suspension and relatedlitigation create sigm/ cant uncertainties regarding the ultimate mst of Unit 3 and whether it willbe mmpleted andplaced in sen ice. If Unit 3 is terminati d, remvery of the Company's investment ($236,430,000 at December 31,1984) and any termination mst is subject to the Company receiving adequate rate treatment. The Company avuldattempt to remverits entire irwestment andany termination mst in rates.

However, as discussed in the preceding paragraph and in Note 10, the Commissioner has disallowed remvery ofcosts inairred subsequent to passage ofBallot Measure 9 in the case ofSkagit, an action which is being challenged in the murts. Substantially allofthe mmpany's investment in Unit 3 was incurredsubsequent to passage ofBallot Measure 9. As a result ofthe above uncertainties, the remverability ofthe Company's investment in Unit 3 presently cannot be determined.

In our opinion, subject to the effect on the 1984,1983 and 1982 wnsolidatedSnancialstatements (Skagit) and the 1984 and 1983 mnsolidatedSnancialstatements (Unit 3) ofsuch adjustments, ifany, as might have been required had the outmme ofthe uncertainties referred to in the sewnd and thirdparagraphs been known, theSnancialstatements referred to in thefrst

. paragraph presentfairly theSnancialposition ofPortland General Electric Company and subsidiaries as ofDecember 31,1984 and 1983, and the results oftheir operations and the changes in theirjnancialpositionfor each ofthe three years in the period ended December 31,1984, in mnformity with generally acceptedacmunting principles applied on a mnsistent basis.

Portland, Oregon, February 8,1985 ARTHUR ANDERSEN & CO.

20

.. ~ -

Ibitled Gerrral IJectric Gmpany auJ Suhaharies CONSOLIDATED STATEMENTS OFINCOME ru d-mn rahi thunher si num,xhd ah 19M 1983 1982

$722,068

$586,4N

$572,193 Operating Revenues.

Operating Expenses Purchased power 22,671 31,375 12,225 Production.......

%,057 73,032 81,094 Transmission and distribution 32,509 18,876 14,883 Administrativeand other 89,755 84,469 65,335 Maintenance and repairs 34,039 24,111 27,514 i

Depreciation and amortization (Note 1) 80,355 59,755 57,694 Taxesotherthanincometaxes 41,308 34,190 31,644 Income taxes (Notes 1 and 2).

54,057 51,131 77,707 450,751 376,939 368.096 Operating Income......

271,317 209,465 204.097 i

OtherIncome and Deductions (Note 8)

Allowance for equity funds used during construction.

3,389 39,579 35,235 Other-net ofincome taxes (8,389)

(646) 105 (5,000) 38,933 35,340 Interest Charges Interest on long term debt and other.

107,437 112,674 115,137

)

Interest on short-term borrowings....

3,005 2,3%

5,806 Allowance for borrowed funds used during construction (Note 8).

(2,489)

(29,414)

(31,668) 107,953 85,656 89.275 Income Before ExtraordinaryItems 158,364 162,742 150,162 Extraordinary Items Unrecoverable costs of abandoned nuclear projects, less income taxes of $9,756 and $47,079 (Note 3).

(48,598)

(79,773) 53,617 Gain on debt / equity exchanges (Note 4).

158,364 114,144 124,006 Net Income.......

Preferred Dividend Requirement 34,472 34,810 26,956 Income Available for Common Stock

$123,892

$ 79,334

$ 97,050 Common Stock 44,221,525 42,512,999 40,737,617 Averageshares outstanding.

Earnings per average share

$2.80

$3.01

$3.02 Beforeextraordinaryitems..

Extraordinary items Unrecoverable costs of abandoned nuclear projects, less income taxes (Note 3)

(1.14)

(l.96)

Gain on debt / equity exchanges (Note 4).

1.32

$2.80

$1.87

$2.38 Dividends declared per share.

$1.81 '

$1.77

$1.74 i

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

=

ror de mo rahl ne<ernher si amurali d nu 1984 1983 1982 Balance at Beginning of Year

$147,248

$143,223

$117,124 i

Net Income 158,364 114.144 124,006 305,612 257,367 241,130 Dividends Declared Common stock 80,095 75,309 70,951 Preferred stock 34,472 34,810 26,956 114,567 110,119 97,907 Balance at End of Year..

$191,045

$147,248

$143.223

%e acctwnpning rwxes are an integral part d these starenxnts.

2I

i nami cmra um cmpany mi sm 1

CONSOLIDATED BALANCE SHEETS

___ __._ _ __ _ _ _ _ _.._ _.~_____,_ _

Ai nxenac u nbusmad oh 19M 1983 ASSETS Electrie Utility Plant-Original Cost Plantinservice.

$2,052,873

$1,794,690 (461,275)

(397,304)

Accumulateddepreciation..

(M,783)

(47,229)

Accumulated deferred incometaxes.....

Accumulated deferred investment tax credits (Note 1).

(2,420) 1,524,395 1J50,157 371,910 608,870 Construction work in progress (Note 8)

Nuclear fuel,less amortization of $97,460 and $83,071 66,632 59,600 1,962,937 2.018,627 Other Property and Investments Conservationprograms 35,553 37,250 Other 22,N7 20,123 57,600 57373 Current Assets Cash and temporary cash investments (Note 1).

57,N7 3,394 Receivables Customer accounts-net.

65,973 47,398 Other accounts and notes.

24,258 17,139 Estimated unbilled revenues.

46,916 38,687 Fuelstock-averagecost.

18,937 22,054 Materialsandsupplies-averagecost..

24,934 21,848 Prepayments and property taxes applicable to subsequent periods 25J57 24,215 263,422 174,735 DeferredCharges Abandoned nuclear project, less amortization of $5,313 in 1984 (Notes 1 and 3).

30,950 36,263 Incometaxes.

15,823 13,511 Other 43,111 47,610 89,884 97,384

$2,373,843

$2348,119 CAPITALIZATIONANDLIABILITIES Capitalization (see accompanying statements)

Common stock equity....

$ 851,555

$ 789,027 Cumulative preferred stock Subject to mandatory redemption.

32,093 35,393 Not subject to mandatory redemption.

230,000 230,000 long-term debt 948,568 961,398 2,062,216 2,015,818 Nuclear FuelStorage Liability.

42,505 36,913 Current Liabilities long term debt duewithin oneyear.

46,160 88,605 Current sinking fund-preferred stock 2,611 2,287 Short-termborrowings...

11,500 15,000 Accounts payable and other accruals.

107,080 86,702 Accruedinterest.

24,590 26,359 Dividendspayable.

28,939 27,943 Accruedtaxes.

15,107 15,874 Deferredincome taxes.

17,025 16,505 253,012 279,275 Deferredtaxbenefits 8,988 9,442 Miscellaneous.

7,122 6,671 16,110 16,113

$2J73,843

$2348,119 l

ne amnpanying n=s = an inya pan ofilxse stacments.

22

nmtma cmai nemiaw sm CONSOLIDATED STATEMENTS OF CAPITM 37ATION AtDimih n a h u t e 1984 1983 Common Stock Equity (Note 5)

Common stock, $3.75 par value per share,100,000,000 shares authorized 44,703,853 and 43,401,572 shares outstanding S 167,M0

$ 162,756 Other paid-in capital..

502,477 488,687 (9,607)

(96M)

Capitalstockexpense.

Retainedearnings 191,045 147,248 851,555 41.3 %

789,027 39.1 %

Cumulative Preferred Stock (Note 5)

Subject to mandatory redemption

$100 par value per share,2,500,000 shares authorized 11.50% Series,113,037 and 124,797 shares outstanding.

I1,304 12,480 (811)

(487)

Current sinking fund...

8.875% Series,234,000 and 252,000 shares outstanding.

23,400 25,200 Currentsinkingfund.

(I,800)

(1,800) 32,093 1.6 35.393 1.8 Not subject to mandatory redemption 9.76% Series,100,000 shares outstanding 10,000 10,000 7.95% Series,300,000 shares outstanding 30,000 30,000 7.88% Series,200,000 shares outstanding 20,000 20,000 8.20% Series,200,000 shares outstanding......

20,000 20,000

$25 par value per share,6,000,000 shares authorized

$2.60 Series,1,000,000 shares outstanding..

25,000 25,000

$4.40 Series,3,000,000 shares outstanding.

75,000 75,000

$4.32 Series,2,000,000 shares outstanding.

50,000 50.000 230,000 11.1 230,000 11.4 Long. Term Debt (Note 7)

First mortgage bonds Maturing 1984 through 1987 3%% Series due November 1,1984.

6,426 9%% Series dueJune 1,1985 27,000 27,000 4%% Series due September 1,1986.

8,960 9,280 4%% Series dueJune 1,1987 4,436 4,636 Maturing 1990 through 1995-4%%5%%.

50,626 51,889 Maturing 1996 through 2000-5%%-13%%

242,678 173,245 Maturing 2001 through 2005-7% 11%%

133,399 133,399 Maturing 2006 through 2012-8%%-13%%.

232,078 232,078 Pollution control bonds Port of Morrow, Oregon,8%% to 12%,

serially due 1984 to 2011....

25,250 25,450 City of Forsyth, Montana, variable rate, due June 1,2013, and August 1,2014 97,800 89,200 Amount held by trustee.

(10,764)

(18,158) 10% notes due March 1,1984 50,000 16L% bank loan due November 13, 1986.

25,000 25,000 14%% notes due May 1,1987 46,642 46,M2 11,610 95,515 Trojan trust agreement.

llank credit agreement 100,000 100,000 13 (1,599)

Other.

994,728 1,050,003 Iong-term debt due within one year (46,160)

(88,605) 948,568 46.0

%1,398 47.7

$2,062,216 100.0 %

$2,015,818 100.0 %

Total capitalization

%e acwmpannng noics are an inig:ral pan of due semements.

23

nami comi ruuic conpany mi m CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION Fen the Yem Ended Decender 31 (Numands of Dollm) 1984 1983 1982 Source of Funds Funds providedintemally Income before extraordinary items..

$158,364

$162,742

$150,162 Non-cash charges (credits) to income Depreciation and amoniation....

95,306 74,549 72.381 1

Deferred income taxes-net.......

13,691 38,881 27,215 Allowance for equity funds used during construction O,389)

(39,579)

(35,235)

Adjustment to Supply System Unit 3-net 42,324 Nuclear fuelstorage 5,592 5,964 11,102 Other-net.

5,108 3,041 6,879 Funds from current operations....

316,996 245.598 232,504 Funds from extraordinaryitems Unrecoverable costs of abandoned nuclear projects.

(48,598)

(79,773)

Gain on debt /equityexchanges 5),617 Non-cash charge to income Unrecoverable costs of abandoned nuclear projects..

58,354 121,003 Funds from extraordinaryitems.

9,756 94,847 Dividends declared............

(114,567)

(110,119)

(97,907)

Funds providedinternally.

202,429 145,235 229,444 Funds from external financing long-term debt.

141,120 91,763 181,529 Common stock 18,706 29,410 18,412 Preferredstock.

137,500 Short-term borrowings-net.................

0,500) 10,000 (13,750)

Retirement oflong-term debt and preferred stock.

(200,509)

(86,597)

(279,419)

Funds from externalfinancing (44,183) 44,576 44,272 Saleofproperties.....

5,615

$163,861

$189,811

$273,716 Appbcation ofFunds Gross utility construction...........

$128,957

$191,131

$305,768 Allowance for equity funds used during construction O,389) 0 9,579) 0 5,235)

Adjustment to Supply System Unit 3-AFDC equity...

(26,597) 98,971 151,552 270,533 Miscellaneous-net (4,439) 9,548 7,057 Increase (decrease) in working capital excluding current maturities, sinking funds and short-term borrowings Cash and temporarycash investments.

53,653 2,087 119 Receivables......

25,694 (1,259) 891 Estimated unbilled revenues.

8,229 1,845 4,760 Inventories..............

(31)

(5,431) 11,743 Accounts payable and accruals..

(19,358) 21,983 (18,220)

Other-net.

1,142 9,486 0,167)

$163,861

$189,811

$273,716 The acuxnpanying notes are an integral pan of these stmements.

24

hiand General seoric ccwany and subahanes NOTES TO FINANCIAL STATEMENTS Notel.

The Company's acmunting policies mnform m generally accepted acmunting principles for regulated public "tiliti"5 Th* P licic5 "'* i" "c' 'd*"'* *ith 'h* *c' ""'i"8 9"i'ements and the ratemaking practices of the Spg 0f -

regulatory authorities having jurisdiction.

Sign 6 cant Consolidation Principles-The financial statements include the accounts of the Company and certain ofits ACCO*b8 wholly owned subsidiaries. Intercompany balances and transactions have been eliminated. The Company's Polia.es investments in its unconsolidated subsidiaries are accounted for under the equity method.

Revenues-%e Company accrues estimated unbilled revenues for services provided to month-end.

Purchased Power-%e Company credits purchased power costs for the net amount of benefits received through a power purchase and sale contract with the Bonneville Power Administration (BPA). Reductions in J

purchased power costs that result from this exchange are passed directly to the Company's residential and small farm customers in the form oflower rates.

Allowance for Funds Used During Construction ( AFDC)- AFDC represents the pretax cost of borrowed funds used for construction purposes and a reasonable rate for equity funds. AFDC is capitalized as part of the cost of utility plant and is credited to income but does not represent current cash earnings. Le maximum AFDC rates used are determined by a formula established by the Federal Energy Regtdatory Commission.

%e maximum AFDC rates were 12.24%,1320%, and 13.82% for the years 1984,1983, and 1982.

Depreciation-Depreciation is computed on the straight-line method based upon the estimated average senice lives of the various classes of plant in senice. Depreciation expense as a percent of the related average depreciable plant in senice approximated 3.6% in 1984, and 3.4% in 1983 and 1982.

j Depreciation of the Trojan nuclear plant (Trojan) includes provisions for decommissioning costs. %ese costs i

are estimated to be $117,000,000. The sinking fund method is used to determine the current decommission-

)

ing provision that is included in rates charged to customers.

The costs of renewals and replacement of property units are charged to plant, and repairs and maintenance 1

are charged to expense. %e cost of property units retired, other than land, is charged to accumulated j

depreciation.

Nuclear Fuel-Amortization of the cost of nuclear fuel is based on the quantity of heat produced for the generation of electric energy. Under the Nuclear Waste Disposal Act of 1982, the federal government is to provide a repository for spent nuclear fuel by 1998 for which the Company will pay a fee. Disposal costs, based on energy generated after April 6,1983, are being paid quarterly. In addition, the Company has recorded a liability for disposal costs prior to the above date. The Public Utility Commissioner of Oregon (Commissioner) has allowed increased revenues to provide for the estimated cost of permanent disposal.

Retirement Benefits-%e Company has a noncontributory pension plan cowring substantially all ofits employees. The total pension expense for 1984,1983, and 1982 was $6,685,000, $6,106,000, and $5,850,000, including amortization of prior senice costs over not more than 30 years. ne Company makes annual contributions to the plan equal to the amounts accrued for pension expense. A comparison of the actuarial present value of accumulated plan benefits, using an assumed interest rate of 9%, and net assets available for benefits is presented below.

January 1 January 1 1984 1981 OhousandsofDoDars)

ActuarialPresent Value Vested....

550,276

$45,578 Nanwsted.

3,601 2.806

$53,877

$48.384 Net Assets,

$82,825

$67.462 The present value of accumulated plan benefits and net assets a. ilable for benefits has not changed materially as of December 31,1984.

In addition to providing pension benefits, the Company provides certain health care and life insurance benefits for retired employees. Company employees become eligible for these benefits if they reach normal retirement age while working for the Company. %ese benefits are provided through the operation of a qualified plan under the Intemal Revenue Code. The Company records expenses equal to its contributions to the plan, which totaled $1,520,000 in 1984.

Power Cost Adjustment Tariff (PCA)-%e PCA, which is adjusted quarterly by the Commissioner, permits 80% recovery of variable power costs in excess of those used for setting existing general tariffs. nese power costs include those of Company-owned generation and purchased power. The PCA also provides for refunds of 80% of underruns in power costs from those used in setting existing general tariffs. Allowed costs are collected or refunded through an adjustment to customers' bills and costs greater or less than the total monthly adjustment are deferred.

25

Income Taxes-Deferred income taxes are provided for timing differences between financial and income tax reponing to the extent permitted by the Commissioner for raremaking purposes. To comply with the prmisions of the 1981 Economic Recovery Tax Act (ERTA), the Company is prmiding deferred income taxes on timing differences associated with property depreciated under the Accelerated Cost Recovery System of ERTA. For propeny placed in service prior to ERI'A, deferred taxes are not provided for a portion of accelerated depreciation. This has the effect of passing some income tax reductions on to the Company's ratepayers. At December 31,1984, the cumulative net amount of all timing differences for which deferral taxes have not been recorded was approximately $500,000,000. h tax effect of this amount (approximately

$250,000,000) represents future income tax increases, which the Company anticipates to recmer through rates. Deferred income taxes associated with property are reflected as a reduction to electric utility plant.

Portions of the deferred income taxes are classified as current to the extent the related assets are current. The net proceeds from the sale of tax benefits under the provisions of ERI'A are deferred and are being amonized to income over the estimated lives of the related propenies.

Tax reductions resulting from imestment tax credits are deferred and amonized to income mer periods not to exceed 25 years, the approximate lives of the related propenies. Deferred investment tax credits are reflected as a reduction to electric utility plant. & Company estimates it has approximately $55,000,000 of investment tax credit cartyforwards available for application against any future federal income tax payments.

h Company received approval from the Commissioner to amonize to income cenain unamonized imest-ment tax credits over a 5. year penod. Such credits were previously being amortized to income mer a 30-year penod. The effect of this action was to reduce income tax expense by approximately $42,000,000 in 1984 and

$26,000,000 in 1983.

Cash and Temporary Cash Investments-h December 31,1984 balance includes $18,150,000 deposited in an escrow account for payment of rent obligations.

Abandoned Nuclear Project-h net amount in abandoned nuclear project represents the recoverable ponion of the Company's investment in the Skagit/Ilanford nudear project (Skagit). In May 1984, the Company began amortizing, on a straight.line basis, its deferred investment owr a five-year period. h unamonized balance is excluded from the Company's rate base.

Note 2.

m folkwing table shows the detail of taxes on income and the items used in computing the differences

.g between the statutory federal income tax rate and the Company's effectiw tax rate.

YearsEndtd December 31 g

1984 -

1983 1982 N

(lhousandsofDollars)

Inconw Tax Expense Currendy payable (receivable).

$16,091

$ 1,108

$ (652)

Deferred income taxes Abandoned nuclear pniett......

(2,238) 31,773 Adjustment toSupplySntem Unit 3 (10,580)

Capitalizedinterest 368 12,820 19,541 Accelerated depreciation.

18,023 12.361 8,480 Propertytaxes..

I,006 2,369 4,892 Unbilled revenue.

519 (24) 3.365 Nudear fud storage.

(3,461) 7,102 (6,121)

Rent accrual......

(4,918)

(1,449)

(762)

Capitalized payrolltaxes andother employeebenefits.

1,437 1,773 2,950 o

Other.

5,837 2,091 (2,675) 22,198 (29.959) 910 Inwstment tax credit adjustments

$44,282

$39.%5

$29,928 UtiEty.

354,057

$51,131

$77,707 (9,775)

(1,410)

(700)

NanusiEty.......

EJ

, leenns.

(9,756)

(47,079)

$44,282

$39,%5

$29.928 E5ecoveTax Rase Computed tax based on stzutory federal income tax rzes applied toincome before income taxes.......

$93,217

$70,890

$70,810

!.ess reduction resulting fmm Aceclerated deprecision.............

I,478 4,217 5,881 Alkwance for equity funds used during consuucuan.

I,559 18,205 16,155 Stae andlocat taxes...

(289)

(5,175)

(1,955)

Investment tax credas.

49,051 29,959 8,360 Abandoned nudearprojects-AFDCequity.

(17,8W)

(14.982)

Tax-freedebt/equitycxchanges 24.663 Other....

(2,864) 1.613 2,760

$44,282

$39.%5

$29.928 Effectiw tax rate.

21.9 %

25.9 %

19.4 %

26

Note 3.

Skagitnianr.1 Abandonment In 1983, Puget Sound Pbwer & Light Company terminated Skagit in which the Company had a 30% interest.

ofNuclear Uncertainties related to construction costs, future energy demands, and the regulatory and political environ.

ment were cited as reasons for termination. ne Company was granted a rate increase to recover a portion Pmjects

($36,263.000, net of related income tax reductions of $31,773,000) ofits investment in Skagit over a five. year period. Le write-off of the unrecoverable portion resulted in an extraordinary loss of $48,598,000, net of related income tax reductions of $9,756,000, or $1.14 per share. See Note 10, Litigation.

Pebble Springs During 1982, the Company abandoned the Pebble Springs nuclear project (Pebble Springs). %e Company was sponsor of and had a 47.1% interest in Pebble Springs. The decision to abandon the project was based on licensing difficulties, the enactment of restrictive legislation, and in response to specific orders of the Commis-sioner. The Company's write-off ofits entire investment in Pebble Springs, including termination and cancel-lation charges, resulted in an extraordinary kus of $79,773,000, net of related income tax reductions of

$47,079,000, or $1.96 per share. See Note 10, Litigation.

Note 4.

During 1982, the Company issued 5,000,000 shares of $25 par value, cumulative preferred stock at

$27.50 per share. %e Company entered into agreements to reacquire $111,212,000 principal amount of the G

on Company's first mortgage bonds and to discharge $46,735,000 principal amount of pollution control financ-Debt / Equity ing obligations in exchange for 3,877,836 shares of such cumulative preferred stock. These transactions were Exchanges recorded in accordance with Financial Accounting Standards Board Statement No. 4 and were approved by the Commissioner. Tax-free gains totaling $53,617,000, or $1.32 per share were recorded as extraordinary items. See Note 10, Litigation.

Note 5.

ne following changes occurred in the mmmon stock, cumulative preferred stock and other paid-in capital Common accounts (dollar amounts in thousands).

SDd Cumulnise Prefttred Suxt PICfC Subitrt to Not Subittiu>

Mand.nory Mantlaary Stock c - Suxu Reaempim m am n

Number

$3.75 Number $100 Number

$25 Odst d

N d

Par d

N Pailin Shares Value Shares Value Shares Value Capital Outstandmg IAttmber 31,1981.

39,930,291 $149,739 419,934 $41,993 1,000,ax) $ 25,0tt)

$441277 Sales d sunk......

1,417,360 5,314 5,0tU,0tX) 125.0 0 2",598 Redempimdstak.

(15.177) 11,517) 88 Dtrember 31,1982.

41,347,651 155,053 4N,757 40,476 6,000,000 150,000 466,% 3 Sales dstatt......

2,053,921 7,703 21,708 Redempimdsaxt.

(27,960)

(2.7W; 16 Dtsember 31,1983.

43,401,572 162,756 376,797 37,680 6,0tm,000 150,0tU 488,687 Sales dsaxi......

1,302281 4,884 13,822 Redempim dstock.

129,760)

(2,976) 02)

December 31,1984.

44.703.853 $167.M0 347.037 $34,7N 6.000.000 $150.000

$502.477 Common Stock At December 31,1984, the Company had reserved 2,181,731, 67,700, and 1,500,000 authorized but unissued shares of common stock for issuance under its common stock investment plan, employee stock purchase plan, and stock ownership program.

Cumulative Prefermi Stock Subject to Mandatory Re< lema *6n Mandatory sinking fund requirements on the 11.50% Series and 8.875% Series preferred stock are

$3,300,000 per year through 1992. The Company is required to redeem annually the following number of shares of each Series at $100 per share: 11.50% Series-15,000 shares; 8.875% Series-18,000 shares. At its option, the Company may redeem, through the sinking fund, additional shares each year. The sinking fund for the 11.50% Series may be satisfied in whole or in part by purchasing shares in the open market. No dividends may be paid on common stock or any class of stock over which the preferred stock has priority unless all amounts required to be paid for dividends and sinking fund payrnents have been paid or set aside.

. Cumulative preferred stock subject to mandatory redemption is redeemable at the optk>n of the Company at the following prices: 11.50% Series at $104 per share toJanuary 15,1990; 8.875% Series at $106 per share to April 30,1985. Each Series is redeemable at reduced amounts after such respective dates.

No ParCumulative Preferred Stock

%e Company has 30,000,000 shares of no par, cumulative preferred stock authorized. No shares have been issued.

27

At December 31,1984 the Company had $145,000,000 in bank credit commitments consisting of a Note 6.

5 d *ti' " hi"8 di' *8*'"' *"d " 54'>

"'Ivi"8 'dit "8'"**"* "ith a Sh TUE group of foreign banks. In addition, the Company has arrangements to borrow up to $50,000,000 from four hTOWingS local banks. Borrowings are available at a variety of options ba<ed on certificate of deposit rate, Iondon Interbank-offered rate, prime commercial rate, or other ratenhar are generally below the prime commercial rate. Most of the Company's short-term borrowings in 1984 were at rates below the prime commercial rate. An option in the $100,000,000 credit agreement presides for a two-year extension of the 1985 expiration date.

Le bank credit agreements currently require commitment fees ranging from % to % of one percent, but they do not require compensating cash balances.

Shon-term borrowings and related interest rates were as follows (dollar amounts in thousands):

Ikcember 31 19M 1%)

1982 Asd the cnd dtheperiml; Agregme short tenn &bt outstand ng.

$ 11,500

$ 15,000

$ 5,000 Weighteslawrageintercst rae on sluxt-tenn debt outstanding.

8.9%

10.3 %

9.8%

Unused axnminnents.

$145,000

$170,mo

$145,WO For the year en&d Average daily anumntsdshort-term debt outstanding.

$ 26,M7

$ 22.811

$ 41226 Teighted daily awrage interest rate...

II.t%

102 %

13.9 %

Maximum anxmnt dshort-term debt outstandmg dunng the peritxl......

$ 63,000

$ 52,500

$ 94200 Interest raes exclude the effect dcrxnmitment fees.

ne Indenture securing the Company's first mortgage bonds constitutes a direct first mortgage lien on Note 7 substantially all utility property and franchises, other than expressly excepted property.

Nuclear fuel for Trojan has been financed under a $100,000,000 agreement with a trust. In addition, the trust gt can provide funds to the Company on its promissory note issued to the trust. The fuel notes are repaid as the fuel is consumed. At December 31,1984, the weighted average interest rate on the outstanding notes was 9.1% The Company presently plans no further borrowings thereunder and plans to terminate the agreement in late 1985. The notes outstanding are included in the long-term debt maturing within one year.

The Company has a bank credit agreement for a maximum $100,000,000 oflong-term financing. Under the agreement, the banks proside support for commercial paper sales or make loans directly to the Company.

The agreement, which expires on August 31,1988, can be extended annually for an additional year with the consent of all the panies thereto. At December 31,1984, borrowings are represented by commercial paper sales at a weighted averne interest rate of 8.95 Ac Company entered into arrangements with the City of Forsyth, Montana during 1983 and 1984 to issue a total of $97,800,000 of City of Forsyth variable rate pollution control revenue bonds. Interest is presently computed on a variable rate basis using an interest index based on selected similar tax-exempt securities.

Proceeds were used to finance pollution control facilities for the Colstrip project.

The following principal amounts oflong-term debt become due for redemption through sinking funds and maturities during the years 1985 through 1989.

long-TermIkht Sinking Funds Mauritis (IhousandsofIMlas) 1985.

$10,551

$ 38,810 1986.

I1,813 33,840 1987.

1028t 50,878 1988.

11,031 100200 1989.

11,031 200

'Ihe sinking funds include $3201,000 in 1985, $3,951,000 in both 1986 and 1987 and $4,701,000 in lxxh 1988 and 1989 which,in accordance with the terms d the Indenture, the Gxnpany anticipses saisfying by pledging available allitions equal to 166%% of the sinking fund rcquirements.

Note 8.

Thmugh December 31,1984, the Company had invested approximately $305 million for its 10% ownership int rest in the Washington Public Power Supply System (Supply System) Unit 3 nuclear project. Construction Investment work, approximately 75% complete, was suspended in May 1983 because of the Supply System's alleged InSupply inability to issue bonds to pay for its 70% portion of the project. The suspension was anticipated to be for a S ' stem period of two yean. A funher delay was proposed in November 1984, which would extend the suspension period to late 1987. Numerous lawsuits and related negotiations, initiated by the Company and others, have to nit 3 date been unsuccessful in causing the resumption of construction. Houwer, inJanuary 1985, the Company and the other three investor-owned utilities in the project agreed to a proposed settlement framework with BPA. A final settlement, if adopted, would resolve the litigation relating to the suspension of construction and 28

==

provide the Company a supply of energy from BPA in exchange for the Company's share of any future output from Unit 3. See Note 10, Litigation. Le Company opposed the suspension of construction on Unit 3 citing i

increased costs and the risk of termination as reasons therefor.

Because of the extended delay and the resulting likelihood of a significant increase in the project's ultimate i

cost, the Company has determined that its costs incurred during the suspension period should not be capitalized. Lerefore, beginningJanuary 1,1985, the Company will cease capitalizing allowance for funds 3

used during construction ( AFDC) and expense preservation costs related to Unit 3. Similarly, costs, primarily AFDC, which were capitalized subsequent to the May 1983 suspension date have been charged to income resulting in a $69 million reduction of the Company's imestment in Unit 3 during December 1984. The income effects of such action were a reduction of AFDC of approximately $47 million ($20 million borrowed; r

$27 million equity) combined with an increase in other deductions of approximately $22 million which generated rehted income tax reductions of approximately $22 million. The Company's remaining imestment in Unit 3 at December 31,1984 totaled $236 million, including $57 million of AFDC.

31 Because of the delay in construction and the related litigation discussed herein, management cannot presently determine the ultimate cost of Unit 3 and if or when it will be completed. If the project were ultimately terminated, the Company would attempt to recover its entire imestment in rates. Ilowever, Oregon law prohibits utilities from including in rate base the cost of new plants until placed in service. In a pnor regulatory action, costs incurred subsequent to the passage of this law were disallowed Le interpretation of f*

the law is currently being addressed in the courts. See Note 10, Litigation. Because a substantial portion of the Company's costs in Unit 3 were incurred subsequent to the passage of the law, management cannot presently

=

determine what amount, if any, of its imestment would be recoverable.

Note 9.

C=structim and other Purchase commitments outstanding, relating principally to construction, totaled approximately

_=

gg g

$56,000,000 at December 31,1984. Cancellation of these purchase agreements could result in cancellation and charges.

COnlingenCICS Commitments have been made under long-term agreements to provide fuel for the Company's thermal generating plants. Such agreements may be terminated and would require payment of termination charges.

i The Company is a member of Nuclear Electric Insurance Limited (NEIL) which was established to provide

+

insurance coverage for replacement power costs resulting from an accidental outage at a member's nuclear site and for excess property damage and decontamination liability. Under the replacement power and excess propeny damage coverages, the Company could be subject to a maximum assessment of $11,600,000 in the event of a loss to any NEIL insured nuclear plant, including Trojan.

In addition, the Nuclear Regulatory Commission's indemnity for public liability cwerage under the Price-Anderson Act is supported by a mandatory industry-wide program. Under the program, owners of nuclear generating facilities could be assessed in the twent of nuclear incidents. The Company could be subject to a retrospective assessment of $3,000,000 in the event of an incident, limited to a maximum of $7,000,000 in any calendaryear.

PurchasedPower The Company has entered into long-ternipower purchase contracts with certain public utility districts in the State of Washington and with the City of Portland, Oregon. Annual costs to the Company are based on its proportionate share of the operating and debt senice costs of each hydroelectric project whether or not operable. Significant statistics invoking these purchase commitments follow (dollar amounts in thousands).

=

lhky Priest Ibrtin!

Rexh Rapids Tarupum Tells 1[alra Rmnur florals Amount sollto fuunce prtietts.

$113,100

$166,000

$197,000

$207,600

$55,000 Outsinhng at Deember 31,19M.

$189,404

$ 78,WO

$111.685

$179,600

$54,070

=

Company's curnnt share of output, capa@, and cost 1

Itrcentageofoutput.

12.0 %

11.9 %

18.7 %

24.4%*

100 %

Net capabihty in nrgawatts.

154 125 170 200 36 Annual cost, including debt service 1984

$2,800

$2,100

$3,000

$4,500

$5,500 1983

$2,800

$2,200

$2,900

$4,400

$5,700 1982...

$2,700

$2,200

$2,900

$4,300

$2,800 Compktion dae......

1971 1%1 19M 1969 1982 Contractexpirationdate.

2011 2005 2009 2018 2017

lhe Company's perantage of output of Tells will be reduced to 21.9% by 1989.

i he Company's share of debt senice costs, excluding interest, under the above contracts for the years 1985 through 1989 are $2,687,000, $2,813,000, $2,950,000, $3,095,000, and $3,114,000. Minimum payments through the remainder of the contracts are estimated to total $133,300,000.

l a

29

Leases

%e Company has leasing arrangements for its headquarters complex, combustion turbines and its share of the coal. handling facilities at Boardman. ne Company's aggregate s ental payments charged to expense amounted to $27,850,000 in 1984, $19,325,000 in 1983, and $20,491,000 in 1982. As of December 31,1984, I

future minimum lease payments (net of sublease rentals) are approximately $22,000,000 per year for the years 1985 through 1989 and approximately $321,000,000 for the remainder of the lease terms, which includes approximately $190,000,000 for the Company's headquarter complex.

%e combustion turbines and certain computer equipment leases meet the criteria for classification as capital leases. Such leases are presently accoumed for as operating leases. The capitalization of such leases would not have a material effect on the balance sheet or net income.

I Note 10.

Pebble Springs q

gItigallon In October 1982, the Coalition for Safe Power and Forelaws on Board filed suit seeking to set aside the rate order issued by the Commissioner on September 23,1982, granting the Company an 8.6% rate increase.

Certain large industrial customers of BPA intervened as plaintiffs, but have since withdrawn. The suit challenges the Commissioner's findings of fact regarding the abandonment and write.cffof Pebble Springs, and the accounting treatment afforded certain financing transactions that resulted in gains to the Company.

See Note 3, Abandonment of Nuclear Projects and Note 4, Gain on Debt / Equity Exchanges. The suit seeks to modify the order to require the gains from the debr/ equity exchanges to be accounted for in such a manner as to directly benefit the Company's ratepayers. The Company has intervened in this suit. The trial for this case was held in October 1984. In March 1985, the judge indicated that he intends to remand the proceedings to the Commissioner. Le procedure, scope and duration of the remanded proceedings is not yet known. Le Company expects to receive a written order from the judge in early April.

In May 1983, the Coalition far Safe Power and two individuals filed a class action lawsuit against the Company, the Commissioner, and another imrstor. owned utility. The suit alleges that the Company, through debt / equity exchanges entered imo during 1982, has indirectly included in its rate base a substantial portion of the costs of Pebble Springs, which the Company abandoned and wrote offin 1982. He suit also alleges that the Company retained certain revenues from the sale of power to other utilities in dolation of the Company's tariffs. In addition, the suit alleges that the Commissioner has unlawfully allowed the Company to issue securities to finance obligations arising from terminated nuclear power projects and failed to enforce the laws. The suit, filed as a class action on behalf of all ratepayers of the Company, seeks treble damages. This suit has been dismissed and this action has been appealed by the Coalition for Safe Power.

While the outcome of the above matters cannot be predicted with certainty, in the Company's opinion, they havelittle merit.

Supply System Unit 3 In July 1983, the Supply System extended the construction delay of Supply System Unit 3 until it could obtain an assured source of funding for continued construction of the Unit but it did not adopt the BPA proposal that construction of Unit 3 be suspended for approximately two years. See Note 8, Imtstment in Supply System Unit 3. In response, the Company and two of the other three investor-owned utilities in the project filed a motion with the United States District Court asking for an injunction requiring the Supply System to prepare a budget for immediate resumption of construction of Unit 3 and to require the BPA to pay for its share of such construction. In October 1983, a United States district court judge denied this motion and ordered that a special arbitration board be set up to determine whether BPA's proposal for a two-year suspension of construction was a prudent utility practice. InJanuary 1984, the arbitrators rendered their decision holding the proposed two-year suspension was not a prudent utility practice if funds were available and a prudent utility practice if funds were not available.

In late November 1984, the judge issued an order finding the Supply System's construction costs for Unit 3 should have been net billed to BPA once the Supply System alleged it was unable to obtain other financing. In that regard, the judge also made clear that the October 1983 special arbitration board decision was limited to the finding that the construction suspension on Unit 3 was not a prudent utility practice, as the findings of the special board relating to the Supply System's ability to finance were beyond the Board's authority and could not be considered. The judge then determined that fimds were available to the Supply System through the net billing procedure with BPA. The judge ruled that the ownership agreement between the imrstor-owned utilities and the Supply System was breached by the construction suspension. Also, the judge found the BPA to be in breach of the Project Agreement and Net Billing Agreement. Le issue of the materiality of the Supply System's breach was reserved for a subsequent trial. Materiality of the breach goes to the issue of the remedies available to the imrstor-owned utilities.

30

i h judge ordered the parties to contmue discovery on the question of materiality of the breach until March 29,1985, at which time a trial date could be set. & question of materiality must be resohed in order to duermine the effect of the breach. In addition, the imestor. owned utilities have been instructed that they

. must decide whether to proceed on the theory that Unit 3 should be completed, or on the theory that it effectively has been terminated and that construction should not be restarted.h theory chosen could affect the remedy and amount ofdamages.

In order to meet possible procedural requirements and ensure the ability to make possible future claims, the Company filed an administrative claim for damages against BPA for $490 million in the ewnt Supply System

- Unit 3 is terminated and for $527 million in the event construction is resumed.

OnJanuary 18,1985, the Company and the other three imestor-owned utilities in the project agreed to a proposed settlement framework with BPA. A final settlement, if adopted, would resolve the litigation relating to the suspension of construction of Unit 3. Under this proposal BPA would make available to the Company, beginning in 1987, an amount of energy the Company would have received based on its current share in i.

Supply System Unit 3. Energy would be provided if the project is or is not completed. In exchange, the Company would give BPA its share of any future output from Supply System Unit 3. Preservation costs incurred by the Company, afterJanuary 1,1985, would be reimbursed by BPA. In addition, the proposed

].

wttlement framework would put BPA in control of any future decision regarding completion of Unit 3. This proposal is subject to future negotiation, public reviews, and regulatory approvals. If final agreement cannot be reached, the parties will continue the litigation.

& Company cannot predict the outcome of the above matters.

Skagit In December 1983, the Coalition for Safe Power and an individual filed suit in the Circuit Court for 4

Multnomah County, Oregon, seeking to set aside the rate order issued by the Commissioner on December 27, 1983, allowing the Company to recover a portion ofits investment in Skagit. See Note 3, Abandonment of Nuclear Projects. & suit challenges the Commissioner's determination that Oregon Ballot Measure 9 does

~ not preclude recovery of costs incurred for Skagit prior to the passage of the measure. Ballot Measure 9 i.

l prohibits utilities from including in rate base the costs for new plants until placed in service. & Company i.

has intervened in this suit.

In February 1984, the Company filed suit in the Circuit Court for Muhnomah County, Oregon, challenging that portion of the Commissioner's order that denied recovery of the amount ofits investment in Skagit

+

incurred after the passage of Ballot Measure 9. h Company believes that Ballot Measure 9 is not applicable to its investment in Skagit and that it should be alkwed recovery ofits entire investment. h Company is also 4

challenging the Commissioner's statement in the order that he has authority to deny recovery of post Ballot Measure 9 imestment even if the Ballot Measure does not prohibit recmery.

hse two suits were consolidated for trial. In February 1985, the Office of the Attomey General of the State i -

' of Oregon, which represents the Commissioner, took the position, contrary to the Commissioner's position in the order, that Ballot Measure 9 precludes all rate recovery of Skagit. & Company cannot predict the outcome of this suit.

1-i.

I f

i.

I.

31

iwrtia courameconpany miSussa,m QUARTERLY COMPARISON FOR 1984 AND 1983 (Unaudited)

March 31

. June 30 September 30 December 31 Okusands dIMlaro 1984 Operatingrevenues.

$190,977

$153,363

$156,029

$221,699 Operatingincome.

$ 69,621

$ 47,707

$ 40,318

$113,6712 Net income......

$ 54,174

$ 31,258

$ 29,799

$ 43,13P Income available for common stock

$ 45,514

$ 22,646

$ 21,197

$ 34,535 Common stock Averageshares outstanding.

43,719,340 44,066,393 44,399,408 44,701,021 Earnings per average share

$1.M

$.51

$.48

$.77 1983 Operatingrevenues.

$140,759

$136,149

$130,846

$178,650 Operatingincome.

$ 52,286

$ 40,168

$ 36,297

$ 80,7142 Income beforeextraordinaryitem.

$ 40,451

$ 28,456

$ 22,657

$ 71,178 Extraordinaryitem

$ (48,598)4 Net income

$ 40,451

$ 28,456

$ 22,657

$ 22,580 Income available for common stock

$ 31,710

$ 19,750

$ 13,966

$ 13,908 Common stock Average sharesoutstanding.

41,736,594 42,218,753 42,771,4M 43,324,M3 Earnings per average sharet Beforeextraordinaryitem.

$.76

$.47

$.33

$1.44 Extraordinaryitem (1.12)4 Afterextraordinaryitem.

$.76 5.47

$.33

$.32

'As a result of dduta effect d shares issued during the perixl. quarterly canungs per share canrx4 be addal to arriw a annual camings per share numbot 21cdudes the reduction ofincome tax expense of approximmely $42 nubn in im and $26 nullam in Im resuking from an order issued by the Ibblic UtiLty Comnussioner of Oregon authorizing the accelermed amortization of certain unamortizalinwstment tax crests.

%Iudes a net charge to incorne d $47 rnillxm resulting from an adjustment to the Company's inwstment in Supply Sptem Unit 3.

dExtraordnary loss from the terminaion of the Skagit/llanford nuclear prtiett SUPPLEMENTARY INFORMATION TO DISCLOSE THE EFFECTS OF CHANGING PRICES (Unaudited)

Financial statements presented in accordance with generally accepted accounting principles report historical costs which do not reflect the changing value of the dollar which occurs during periods of rapidly changing prices. Accordingly, such statements do not adequately measure the impact ofinflation on business enterprises.

In recognizing the need to assist readers of financial statements in assessing that impact, selected information on the effects of changing prices is presented.

The table below provides data reflecting the effects of changes in specific prices (current costs) by indexing the existing plant using the Ilandy. Whitman Index of Public Utility Construction Costs. This measure reflects the current cost of replacing existing plant, rather that the historical cost.

Depreciation expense is the only item of the historical income statement which has been adjusted in arriving at current cost amounts of income. Depreciation is determined by applying the Company's actual depreciation rates to the corresponding current cost plant amounts. Other amounts are considered to reflect the average price levels for the year, and accordingly have not been adjusted.

Pursuant to regulations, with the exception of decommissioning costs, only the depreciation of historical cost of plant is recoverable in revenues. See Note 1 of the Notes to Financial Statements.

32

'Ihe following information should be viewed as an approximation rather than as a precise mcasure of changing prices.

Statement ofIncome Flum Operations Adjusted for Changing Prices For the Year Ended December 31,1984 Conventional Current Dollar Historical Cost in Average Cost 1984 Dollars (thousands of Dollus) -

Operating revenues.

$722,068 5 722,068 Purchased power and production 118,728 118,728 Otheroperatingandmaintenanceexpenses..

197,611 197,611 Depreciation and amortization expense..

80,355 175,988 Income tax expense.

54,057 54,057 Interest expense.........

110,442 110,442 Allowance for funds used during construction (5,878)

(5,878)

Other expense.

8.389 8,389 563,704 659,337 Income (excluding adjustment to net recoverable cost).

$158,364

$ 62,731 increase in specific prices (current cost) of plant held during the year *

$ 43,000 Adjustment to net recoverable cost...

168,000 Effect of increase in general price level.

(230,000)

Excess ofincrease in general prices overincrease in specific pricelevel fafter adjustment to net recoverable cost)...

(19,000)

Gain from decline in the dollar's purchasing power on net amounts owed..

47,000 Net

$ 28,000

• At December 31,1984, current cost of electric utility plant, net of accumulated depreciation and nuclear fuel storage liability, was $3,999,790,000 while historical cost (net cost recoverable) was $1,987,635,000.

Selected Financial Data Adjusted for Changing Prices For the Years Ended December 31 1984 1983 1982 1981 1980 (Thousands of Average 1984 Dollars)

Operating revenues.

$722,068

$611,362

$615,736

$ 679,291

$ 617,961 IIistoricalCost Information Adjusted for Changes in Specific Prices (Current Cost Information)

Income from operations.....

$ 62,731

$ 77,092

$ 69,103

$ 42,636

$ 34,508 income per common share after preferred dividend requirements.

.M

.96

.98

.70

.48 Excess ofincrease in general priceleveloverincrease in specific prices (after adjustment to net recoverable cost)

$(19,000)

$ 13,000

$ 9,000

$(103,000) $(184,000)

Net assets at year-end

$840,000

$809,000

$804.000

$ 778,000

$ 755,000 GeneralInformation Gain from decline in the dollar's purchasing power on net amounts owed..'.....

$ 47,000

$ 50,000

$ 55,000

$ 127,000

$ 175,000 Cash dividends declared per common share.

1.81 1.85 1.87 1.95 2.14 Market price per common share at year-end..........

$ 16.15

$ 13.58

$ 16.23

$ 13.81

$ 14.00 Average Consumer Priceindex.

311.1 298.4 289.1 272.4 246.8 33

Ponlu::1GeneralElectric Cenpany MARKET AND DIVIDEND INFORMATION Common Stock he Company's common stock is principally traded on the New York Stock Exchange. %e following table shows the high, low and closing sales prices of the common stock on the composite tape (as reported by The WallStreet Journal) during the respective periods.

1984 1983 Quarter ist 2nd 3rd 4th 1st 2nd 3rd 4th fligh 14 %

14 % 15 % 17 %

16% 16 %

15 %

14 %

im 13 %

13 13 % 15 %

14 % 13 %

13 %

13 %

Closing price..

13 %

14 % 15 % 16 %

15 13 %

14 %

13 %

Cash duidends declared (cents).

44 %

45 % 45 % 45%

43 % 44 %

44 %

44 %

%e approximate number of stockholders of record as of December 31,1984 is 88,297.

Preferred Stock

%e $2.60, $4.40, $4.32 and 11.50% Series of preferred stock are listed on the New York Stock Exchange. The following table shows the high and low sales prices of these four series on the composite tape (as reported by The WallStreet Journal) for the respective periods. He remaining five series are traded infrequently over the counter and disclosure of quarterly price ranges is not meaningful.

1984 1983 Quarter 15:

2nd 3rd 4th 1st 2nd 3rd 4th

$2.60 lligh.

20 %

19 % 19 % 21%

22 % 21%

20 20%

19 17 % 18 % 18 %

19 % 18 %

18 % 18 %

low

$4.40 lligh.

32 %

31% 32 33 %

35 34 %

34 % 33 %

low 29 %

28 % 29 30 32 28%

29 % 29 %

$4.321[igh..

32 %

30 % 31% 32 %

34 % 34 32 % 32 %

low 29 %

28 % 28 % 29 %

31 27 %

29 % 28%

11.50% Iligh.

94 93 % %%

95 % 98 % 100 99 %

91 %

90 90 % 91 90 93 95 % 90%

Im.

Quarterly cash dividends were paid on each class of the Company's preferred stock at its stated rate during 1984 and 1983.

NEW YORK STOCK EXCHANGE OR PACIFICSTOCK EXCHANGE TRADING SYMBOL:

IXIN 34

STOCKHOLDERINFORMATION

=

Investor Seivices Open Market Stock Form 10-K All communications that Purchase Arrangement PGE's annual report to the involve dividends, stock certifi-If you are a current PGE Securities and Exchange Com-cates, dividend reinvestment state-common stockholder of record mission (Form 10-K) is available ments, address changes, stock (with PGE common stock regis-upon written request to James N.

transfer, and other administrative tered in your name) or if you Woodcock, Vice President, Trea-matters should be directed to our participate in the Company's surer and Controller, at the home Transfer Agent, U.S. National Common Stock Investment Plan office address.

Bank of Oregon. Be sure to men-(CSIP), you may purchase com-Home Office tion in all communications mon stock through the Open Mar-Ponland General Electric with the Agent that you are a ket Stock Purchase Arrangement Company stockholder of PGE. If possible, (Arrangement), rather than directly 121 S.W. Salmon Street include your account number as from a stockbroker.

Portland, Oregon 97204 well. The mading address is:

Additional details are given (503) 226-8333 U.S. National Bank of in the Prospectus describing the If you would like more infor-Oregon CSIP and Arrangement which you marion about being a stockholder Stock Transfer Department may request from the Agent, in Portland General Electric Com-P.O. Box 3850 U.S. National Bank of Oregon.

pany, please contact us directly:

Portland, OR 97208 Stock Exchange Listings Ponland General Electric Phone: (503) 225-6474.

The common stock of the Company Hand delivery of certificates Company is listed on the New Investor Relations for transfer may be made to:

York and Pacific Stock Exchanges Department U.S. National Bank of and is quoted in the daily stock 121 S.W. Salmon Street Oregon tables carried by most newspapers Portland, OR 97204 Stock Transfer Depanment under the notation PortGE.

Phone: (503) 226-8599 225 S.W. Broadway, The 11.50%, $2.60, $4.40 Fifth Floor and $4.32 Series Cumulative Pre-Notice of Annual Meeting Ponland, OR 97205 ferred Stock issues are publicly The 1985 annual meeting of Common Stock Investment Plan traded and listed on the New York Ponland General Electric Com-Common stockholders of Stock Exchange. Those news-pany stockholders will be held at record, as well as customers of papers which list these stocks use 2:00 p.m. on Wednesday, May 22, PGE, are eligible to panicipate in the notations PoG for the 11.50%

1985 at the Company's Westem the Company's Common Stock and PorG for the $2.60, $4.40 and Division Center,14655 S.W. Old Itwestment Plan (CSIP). New

$4.32 Series.

Scholls Ferry Road, Beaverton, common stockholders of record Dividend Payment Dates Oregon. Common stockholders of (not " street name" holders) auto-Le Company's Board of record at the close of business on matically receive Plan information Directors has traditionally declared April 4,1985 will be entitled to and an Authorization Form when quarterly common and preferred vote. All stockholders are welcome they become stockholders. These stock dividends payable on the fif-to attend.

documents are available to all teenth of the months ofJanuary, f, 3,, g,,,,a y,3,,4 g p,,,3,,a c.,,,,a common stockholders of record at April, July and October. The mne conpany ro pese qualemg,ymene any time from U.S. National Bank record dates for these dividends in "rF"'*"* ' dildertranu j, ong,y,yene. Fur-tM. et a Gimpany polay to admmister h,rmg, of Oregon, the Agent for the Plan.

1985 are planned to be March 25,

,, sam,u. and ennlege, g,mploy,neni. am,pe,,-

The Plan allows reinvestment June 25, September 25, and 5""". "am"5 arx'ad=5 r"""*" "d*5/".

and term,natent ye,,,ployment to all emph,yes of dividends toward the purchase December 27.

wywa J,,,,,,,,,,,, o, 3,,,,u,,,,,, a,u,, y of PGE common shares at the Investor Publications raa, retr #nt. ads. aemnal-gin. exe, sex.

prevailing market price without a Copies of PGE's stockholder

,",I',",'" 'j$%"j' "'",',"""U" "*'

service fee.

reports, the Company's Fact Book Stockholders shouki read the and the Stockholder Guide may Prospectus describing the CSIP be obtained by written request to for more detailed information.

the Investor Relations Department at the home office address.

35

c l

lbriland General Dectric Company omi Subaharies SELECTED FINANCIAL DATA AND STATISITCS 1984 1983 l

Financia]

Key Results (thousands)

Operating income....

$271)l78

$209,4651 Comparisons Income Before Extraordinary hems.

$158,364

$162,742 Extraordinary hems

$(48,598)2 Net income

$158J64

$114,144 Earnings ltr Share Before Extraordinary hems.

$2.80

$3.01 Extraordinary hems Ihr Share.

(1.14)2 1

Earnings Per Share After Extraordinary hems..........................

$2.80

$1.87 Dividends Declared Per Share........................................

$1.81

$1.77 Total Assets

$2,373,843

$2,348,119 Salesand KHowart Hes Sold (miHimu)

I Residential...

5,768 5,434 l

Customers Commerciai 4,209 3,925 Industrial 3,071 3,002 Miscellaneous.

99 Sales for resale 2,240 1,842 Total 15J84 14,302 Operating Revenues (thousands)

Residentia!..

$257,996

$212,590 Commercial 227,860 173,401 Industrial 140,034 109,133 Miscellaneous.

29,073 36,524 Sales for resale 67,105 54,756 Total.

$722,068

$586,404 Average price per kwh (sales to uhimate customers).

4.84c 4.(Ne Customers (at year-end)

Residential..

454,732 454,950 Commercial 60,575 59,551 Industrial 185 190 Miscellaneous.

631 633 Sales for resale 6

4 Total 516,179 515J28 Residential Service (average per customer)

Annual use (kilowatt. hours).

12,R, 12,027 Annual revenue.....

$565 61

$470.51 Price per kilowatt. hour.

4.47c 3.91c Electric Kilowart Hour Output (miDions)

Generated (net)-hydro..

2,995 2,841 Operations Generarca rnet)_ihermai.

4,744 3,352 Purchased-primarily hydro.

8,451 8,988 16,190 15,181 Losses and company use 806 879 Total 15J84 14,302 Itak load KW-Winter (thousands) 2,862 3,166 Utili Plant Gross Additions himuunds)

$128,957

$191,131 Gross Plant hhousands).

$2,588,875

$2,546,231 Stockholders' Common Stock Equiry (thousands).

$851,555

$789,027 Book value per share.

$19.05

$18.18 Equityand Diviaenas para pcr share.

$i.80

$i.76 ll)ng-TermDebt Average shares outstanding....

44,221,525 42,512,999

( b ber g Preferred Stock Equity (thousands).

$262,093

$265J93 Dividend requirement..

$34,472

$34,810 Embedded cost........

13.0 %

13.0 %

Long. Term Debt (thousands).

$948,568

$%I,398 Interest...

$107,437

$112,674 Embedded cost 11.0 %

10.3 %

EmployeeData Number of Employees (December 31).

3,124 3,2 12 Operating PayroH (thousands)...........

$79,771

$75,640 Construction and Other Payrou (thousands).

$27,011

$27,827

1. Includes the miuction dincome tax expense of approximmely $42 million in 1984 and $26 nullion in 1983 resulting from an order by the Ibblic Utility Gunmissamer of Oregon authorizing the accelermed amomzmim of certain unamomzed umstment tax credas.

2. Indudes the etIcct of an extraonhnary loss (nwn the terminaion of the Skagit/l lanford nudear project.

1982 1981 1980 1979 1978 1977 1976 1975 1974

$204,097

$184,479

$132,193

$65,289

$83,239

$73,127

$82,677

$62,162

$46,263

$150,162

$112,341

$86200

$46,122

$48,784

$36,988

$52,021

$46,003

$32,918

$(26,156)5

$7,845

$124,006

$112J41

$86200

$46,122

$56,629

$36,988

$52,021

$46,003

$32,918

$3.02

$2.54

$2.03

$ 1.06

$1.40

$1.09

$2.27

$232

$2.17

(.M)5 32

$238

$2.54

$2.03

$1.06

$1.72

$1.09

$227

$232

$2.17

$1.74

$1.71

$1.70

$1.70

$1.70

$1.70

$1.M

$138

$132

$2,322,972

$2221,373

$2,050244

$1,808,054

$1,573,547

$1,361,058

$1,190,733

$1,036,373

$339,527 5,663 5,349 5,526 5,731 5J65 5,120 5,024 4,982 4,700 3,925 3,844 3,717 3,711 3,403 3,175 3,045 3,169 2,632 3,227 3,695 3,479 3,585 3251 3,486 3,439 2,699 3,364 93 107 110 112 113 109 107 IN 1%

1,999 2,312 1,042 513 1,173 44 394 530 600 14,07 15,307 13,874 13,652 13J05 11,934 12,009 11,484 11,402

$203,405

$212,463

$201,192

$159,135

$143,829

$130,052

$109,571

$88,351

$73,124 169,932 149,507 127,165

%,462 77,000 M,695 56,027 53,628 41,881 118,270 116 295 94,482 72,839 52,662 47,721 39,654 24,504 20,888 (4,829) 17,888 21,431 9,414 12,107 6,996 7,073 8,898 6,970 C5,415 98.636 45,% 7 12,131 18.080 3.609 5,462 4,561 3,138

$372,193

$594,789

$490237

$349,981

$303,678

$253,073

$217,787

$179,942

$146,001 3.87c 3.73e 334e 234e 230e 2.08e 1.80e 1.55e 129e 448,863 44),414 433,527 423,389 407,056 389,700 371,315 358,438 347,671 57,914 56,698 55,279 54,029 52,107 49,883 47,071 45,547 44,143 191 197 193 184 187 192 192 187 199 629 1,397 1,373 IJ67 1,347 1,444 1,367 1,370 IJ97 3

4 3

2 1

2 3

3 1

507,600 501,710 490J75 478,971 460,698 441,221 419,948 405,545 393,411 12,691 12,181 12,910 13,814 13,459 13,455 13,787 14,139 13,733

$455.86

$483.82

$470.01

$38334

$360.81

$341.76

$300.68

$250.74

$213.67 3.59e 3.97c 3.Mc 2.78e 2.68e 2.54e 2.18e 1.77e 1.56e 2,644 2,205 2,271 2285 2J13 2,114 2.537 2,693 2,753 4,003 5,888 4,941 4,523 1,307 4,675 1,147 170 152 9,002 8,1%

7,779 7,754 10,819 5,936 9,214 9,613 9,465 15,649 16289 14,991 14,562 14,439 12,725 12,898 12,476 12,370 742 982 1,117 910 1,134 791 889 992 968 14,907 15307 13,874 13,652 13,305 11,934 12,009 11,484 11,402 2,764 2,687 3,NI 2,954 2,776 2,519 2,310 2,225 2J21

$305,768

$294,651

$292,833

$254289

$278265

$201,8%

$191,475

$182,513

$153,580

$2,518,698

$2,376282

$2,134280

$1,891,845

$1,672237

$1,405,031

$1213,N3

$1,050,373

$883268

$755,526

$70),990

$627,069

$551,612

$478,759

$410,323

$361,070

$283,938

$241,%5

$1827

$17.63

$1739

$1735

$18.42

$18.45

$18.94

$1832

$17.92

$1.74

$1.70

$1.70

$1.70

$1.70

$1.685

$1.625

$1.565

$1.51 0,737,617 39,024,435 35,788,621 30,403,911 24,709,977 21,414,344 17,687,431 14J33,333 12,125,000

$268,676

$146,993

$148,500

$150,000

$151,500

$154,500

$130,500

$108,500

$80,000

$26,956

$13J73

$13,607

$13,830

$14,175

$13,657

$11,812

$9,818

$6,577 12.9 %

9.0%

9.1%

9.1%

9.2%

9.2%

93 %

9.1%

8.2%

$1,016,401

$1,068,841

$1,054,185

$754,441

$735,119

$656,724

$533,450

$444,991

$335,344

$115,137

$124J65

$95,630

$71,356

$59,389

$49,374

$41,610

$28,866

$21,116 10.4 %

10.5 %

11 5 %

93 %

93 %

8.3%

8.0%

8.1%

63 %

3240 3,244 3,1%

2,789 2,579 2,441 2311 2,116 2,008

$63,564

$57,809

$46,590

$37,105

$31,631

$27.808

$22,798

$18,498

$15,703

$33,071

$33,134

$32,701

$25,183

$21293

$19,647

$18,564

$18,033

$14,493

3. Indeles the cffat of an extrardinny kws (nwn the abandonal 1%ble Spnngs nudear pniett is79,773,mo or $1.% per sharel, and an extravdmary gain frum debvequny exdunges (153.617,000 or $1.32 per share).

37

SENIOR OFFICERS BOARD OF DIRECTORS Directod Robert IL Short Gunneth E. Gamble Booth Sinc $

Chairman of the Board and Anchor-Producer at KOAP, Ponland-Oregon Public Broadcasting 198d Chic { Executiw Officer Warren W. Braley*

Willsm J. Undblad Partner, Braley & Graham Co., Ponland-Buick and Isuzu automobile dealer 195)

President p,,,,,_ g,,,

Joseph L Williams

• Chairman, Knappton Corporation, Ponland-marine transportation 198q Vice Chairman of the Board Robert G. Cameron *

• James W. Durham Executive Vice President, Lloyd Corporation Ltd., Portland-real estate Senior Vice President, management and development 1987 General Counsel and Secretary Dr. Jerry E. Hudson * *

• Ken L liarrison President, Willamette University, Salem 19K Senior Vice President and Chief Financial Officer WasmJ. Lindblad President, Portland General Electric Company, Portland-electric utility 192$

Charles L Ileinrich r id t, Afortgage Bancorporation, Salem-real estate loans and ect c per-n investments throughout Oregon 1963 Glen E. Bredemeier**

g,,g,,, g_ g,,,,,

Vice President, Power Operations President and Chief Executive Officer, Nicolai Company, Portland-le>Chaffn manufacturer of wood doors and specialty veneers 1983 Vice, President and General Robert W. Roth Dimon Atanager Retired President and Chief Executive Officer,Jantzen Inc., Portland-Charles Goodwin, Jr.

manufacturer of sportswear and swimwear 1972 Vice President, 'Ihermal Operations John L Schwabe Douglas E. fleider***

Panner, Schwabe, Williamson, Wyatt, hioore and Roberts-Portland attorneys 1977 Vice President, Public Affairs Robert H.Short CD flobbs Chairman of the Board and Chief Executiw Officer, Vice President, Corporate Planning and Ponland General Electric Company, Portland-electric utility 1971 Dewlopmem g,,7 y,,,7,,3 leslie E. Elodel President and Chief Executive Officer, Tektronix, Inc., Beaverton-Vice President, Power Systems manufacturer of electronic equipment 1973 Wayne A. Huddleston Frank Al. Warren Vice President, Operating Services Fetired Chairman of the Board and Chief Executive Officer, Ponland General Electric Company, Ponland-electric utility 19 @

yg Vice President, Public Affairs William W. Wessinger Retired Chairman of the Board, Blitz-Weinhard Company, Portland-brewery 1968 Hillman Lueddemann, Jr.

Vice President and Assistant to the RobertJ. Wilhelm Chairman of the Board President, Rudie Wilhelm Warehouse Co., dba Wilhelm Trucking Co., PordanA -

l trucking and warehousing 1973 l

Don R. Afiller*

l Vice President, Operating Services Joseph L Williams * * *

• Vice Chairman of the Board, Portland General Electric Company, Ponland-electric utility 1980 i

E. Kay Stepp l

Vice President, hianagement Resources Ralph E. Williams President, Williams Investment Co., Ponland-personal inwstments 1963; E D. Wieden Vice President, Public Relations wmlMah 1,im Bart D. Withers

.. 4Fhted Mmh 1,1985 Recently appointed g y sted M a hy,lgsa

,,,g,,,,, pag,,

Vice President, Nuclear

""Ikimi Mah 1,19M g7j gjpj7,cfg7, James N. Wooda>ck are DrJerry E y

Vice President, Treasurer and Controller jfjy[

f"

'RetmJ Afanh I.19M wrsity in Salem, and "Retmd Grohs 31.19M Robert G. Cameron,

• • %rniihrmhv 31,19M wfg.e Vice Pres-identofthe Uoyd V

Corp., realestate management and i

development com-

)

38 panyin Portland.

l

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h4

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Young and old alike take pleasure in riding one New clatwnic remrding devices are helping

\\

ofthe nation's oldest carousels housedin an PGE's meter readers in thefeld. Use of the

\\

[

open area.st Wdlamette Center, PGE's corpo.

hand-held mmputers eliminates the needfor rate headquarters. Localenthusiasts restored the stacks ofmmputer carJs andimproves acniracy carouselanJ the Company Jonated the space.

as trellas turnaround time in billingfor senice.

A carouselmuseum is also on theproperty.

)

m s-l j

l 3

nr Oregonians hke the outdoors and the chance to The Trojan Nuclear Plant, PGE's largest single enby the beauty oftheir state. last year more resource, supplied nearly 25 percent ofthe elec-than 500,000 people visited one ofthe nine triary usedby the Company's 516,000 aistom-campgrounds and picnic areas PGE operates at ers. In Afarch 1985, itpassedmore than 138 days its byJm projats anJ the Trojan Nuclear Plant.

ofmntinuous operation, breaking its previous remrJ.

E

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's.

~_\\

n

f.

I Recitalnatirm ofPortland's soutbreest scater-front seas spurred by PGE's mnstruction ofa m,e wrporate headquarters in the mid-1970s.

Note the area hastles teith new offa mmplexes and unique sen,ias tike the Yamhillhfarket-place schere shoppers have their choice offresb produ eandotherfoodsfromaroundOregon and the unrld.

m m Ponland General Electric Company BULK RKE g,21 4}.

U.S. POSTAGE I

o rat M

I

,n y

PAID Ponland, OR Ihrmit No. IM

.___________ - __