ML19309C365: Difference between revisions
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She told us, "I was a g/ | She told us, "I was a g/ | ||
t beauty operator for 39 g, years, and I don't know '' | t beauty operator for 39 g, years, and I don't know '' | ||
onything about big | onything about big | ||
'.* ' N. gs business." but she wanted "h , Nl to know why her dividend / ?~ ' ' * | '.* ' N. gs business." but she wanted "h , Nl to know why her dividend / ?~ ' ' * | ||
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pollution control notes in 51,763 sts50 k . | pollution control notes in 51,763 sts50 k . | ||
December. A S7 milhon | December. A S7 milhon l | ||
5 si .567 s t.615 g, | |||
si .567 s t.615 g, | |||
f c issue was made through , | f c issue was made through , | ||
the Ohio Air Quohty P | the Ohio Air Quohty P | ||
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' for various environmental b 6 i control pro;ects in Ohio, i and $19 milhon worth of I j pollution control notes j it | ' for various environmental b 6 i control pro;ects in Ohio, i and $19 milhon worth of I j pollution control notes j it | ||
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Beaver County Industrial i | Beaver County Industrial i | ||
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!cwer osh CCntent hos states. If EPA guidelines reflect actual fuel costs te$s Ct on erCoing effect regarding clean oir without having to go to o compliance will permit us on boder tubes-a to make o portial shift to C ry cause Cf low sulfur cool (oway from ger*erchng un;t Outoges high sulfur Ohio cool), | !cwer osh CCntent hos states. If EPA guidelines reflect actual fuel costs te$s Ct on erCoing effect regarding clean oir without having to go to o compliance will permit us on boder tubes-a to make o portial shift to C ry cause Cf low sulfur cool (oway from ger*erchng un;t Outoges high sulfur Ohio cool), | ||
then we will buy that low-sulfur cool from nearby states, not from the west. | then we will buy that low-sulfur cool from nearby states, not from the west. | ||
$$$$C | $$$$C((5E[.T['* Secondly, odding scrubbers to our plants | ||
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"7;;,,*yf;*f*,o, Ctg *m power is sote and economical. the L. | "7;;,,*yf;*f*,o, Ctg *m power is sote and economical. the L. | ||
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* portiC:pation in racio and te'evision | * portiC:pation in racio and te'evision | ||
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Robert J. McWhorter Russell J. Spetrino Frank E. Derry Senior Vice Presioent Vice Presioent and General Vice President Counsel di 22 | Robert J. McWhorter Russell J. Spetrino Frank E. Derry Senior Vice Presioent Vice Presioent and General Vice President Counsel di 22 | ||
| Line 1,103: | Line 1,045: | ||
Secretary | Secretary | ||
*- ' 't b....e (! W. G. Fouch f Assistant Comptroller | *- ' 't b....e (! W. G. Fouch f Assistant Comptroller | ||
..g G. F. LaFlame Assistant Treasurer | ..g G. F. LaFlame Assistant Treasurer C. N. Glasgow l r T Assistant Secretary Joanne Martin Assistant Secretary | ||
C. N. Glasgow l r T Assistant Secretary Joanne Martin Assistant Secretary | |||
:L - | :L - | ||
Lynn Firestone R. G. Zimmerman Senior Vice President Senior Vice President DMSION MANAGERS I] [ H. W. Miller Akron Division | Lynn Firestone R. G. Zimmerman Senior Vice President Senior Vice President DMSION MANAGERS I] [ H. W. Miller Akron Division | ||
| Line 1,159: | Line 1,099: | ||
7 ;, | 7 ;, | ||
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7 . | 7 . | ||
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| Line 1,383: | Line 1,315: | ||
ac | ac | ||
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e Summary of Operations 1979 1 1978 1977 1976 1975 1974 i Thousands of Dollars 2 Operating Revenues. S 994,585 $ 862.956 $ 796.289 $ 644.852 5 593.324 5 498.355 Operating Expenses . 699,721 j 668.224 561,687 459,905 428.217 371.711 Taxes-General . .. , 89,122 I 76.804 65,046 54,084 51,046 44.463 Federal and State income- I provision (credit) . ... 41,996 ! (6.017) 23.048 8,646 24.398 11.086 Total Operating Expenses j and Taxes , , 830,841 ? 739.011 649.781 522.635 503.661 427.260 Operating income . 163,744 ! 123.945 146.508 122.217 89.663 71.095 Other income and Deductions-net 56g l 47.413 36.992 63.726 64.652 43.439 Net Interest and Other Charges- ' | e Summary of Operations 1979 1 1978 1977 1976 1975 1974 i Thousands of Dollars 2 Operating Revenues. S 994,585 $ 862.956 $ 796.289 $ 644.852 5 593.324 5 498.355 Operating Expenses . 699,721 j 668.224 561,687 459,905 428.217 371.711 Taxes-General . .. , 89,122 I 76.804 65,046 54,084 51,046 44.463 Federal and State income- I provision (credit) . ... 41,996 ! (6.017) 23.048 8,646 24.398 11.086 Total Operating Expenses j and Taxes , , 830,841 ? 739.011 649.781 522.635 503.661 427.260 Operating income . 163,744 ! 123.945 146.508 122.217 89.663 71.095 Other income and Deductions-net 56g l 47.413 36.992 63.726 64.652 43.439 Net Interest and Other Charges- ' | ||
| Line 1,819: | Line 1,750: | ||
e,, | e,, | ||
. ,,N,%.N,. ' N. , ' N,,,-%,.a(N * . w . . gs'N . ,- , '.L.. MARION w .; _,_ t.- M., :.- | . ,,N,%.N,. ' N. , ' N,,,-%,.a(N * . w . . gs'N . ,- , '.L.. MARION w .; _,_ t.- M., :.- | ||
-- & 3_. def,/ | -- & 3_. def,/ | ||
+ | + | ||
| Line 1,937: | Line 1,867: | ||
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f'- _~ . | f'- _~ . | ||
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| Line 1,973: | Line 1,902: | ||
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| Line 1,997: | Line 1,924: | ||
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. - w | . - w | ||
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| Line 2,025: | Line 1,948: | ||
- g- | - g- | ||
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g-- ! , . | g-- ! , . | ||
| Line 2,035: | Line 1,957: | ||
b g- - - | b g- - - | ||
*. 4 ' | *. 4 ' | ||
M | M h, , ' ' | ||
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l | l | ||
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g 'c ' | g 'c ' | ||
.s | .s | ||
Latest revision as of 06:51, 16 March 2020
| ML19309C365 | |
| Person / Time | |
|---|---|
| Site: | Beaver Valley |
| Issue date: | 03/19/1980 |
| From: | OHIO EDISON CO. |
| To: | |
| Shared Package | |
| ML19309C361 | List: |
| References | |
| NUDOCS 8004080502 | |
| Download: ML19309C365 (48) | |
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Ohio Edison Company, That price must be with headquarters at sufficient to meet our TABLE OF CONTENTS Page Akron, Ohio, provides costs, to provide fair Ohio Edison Company and Subsidiary .2 compensation to our electric service to about 828,000 customers in on employees, and to make Financial Highlights . . .3 oreo of approximately reasonablo dividend 7.500 square miles in payments to our President's Letter . , . .4.5 central and northeastern stockholders. Chio. The Company's As consumers of Definitions to Assist You . .. . . . .6 whollyowned subsidiary, electricity ourselves, and Pennsylvonto Power E!ectric Scies and Revenues .7 as neighbors and friends Company, with of other consumers, we headquarters at New Rotes . . . .8 understand that we must Castle. Pennsylvanio, continue to find the most income Earnings,andDividends . .8 provides electric service economical and efficient to about 122.000 methods for providing Financing . . .10.11 customers in an area of electricity. We work to approximately 1,500 increase productivity, to System Operations . . . . .12 square miles in western budget wisely, and to Pennsylvania. plan responsibly for the FuelSupplies . . .. . . 15 Chio Edison also electric needs of future Power Supply Planning .. .. .. . 17,18 provides steam heating generations, service in the downtown By working with our Envircnmento!!ssues . . ... .18 oreas of Akron. employees, customers, Youngstown, and and stockholders, we are People Serving People. . .21 Springfield. confident that our efforts will keep electricity a President andVice Presidents. ... . . .22.23 People Serving good value. Other Officers, Division Managers .. 23 People While computers, We are companies machinery, and Board of Directors .. . .. , ... . 24' made up of people who technology are live in the communities instrumental in Consolidated Financiallnformation . . .25-46 where we work, manufacturing and delivering electricity to Service Territory Map . . . . .. .47 We are concerned that the rising costs of energy our customers, it is place o burden on ultimately because of many, a hordrhip on people serving people some. We are sensitive to that we con make our the neecs of the poor, of product available. Th,s i the elderly on fixed year's annual report incomes, and of young ocknowledges that people raising families, tradition of mutual . We support those respect and programs that cooperchon. realistically assist the needy in coping with higher energy costs.
~ We are committed to providing customers with reliable electric service of a reasonable price.
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, =o8 d- y 3 e l wg _ l l l To My Fellow reliability of our large D ' j Stockholders: generating units of the i in 1979, Ohio Edison Sommis Plant in Stratton. - and its subsidiary, Ohio.We recognized, in ; l l Pennsylvania Power 1977 that we wanted o E ! Company, showed comprehensive, hard- ' , improvement over 1978's hitting assault upon the disappointing financial difficulties that we-and results. Total revenues utilities across the country : omounted to S994 6 -faced with ! million, up 15.3 percent breakoowns in large l over 1978 Earnings per generating units. We ; shore of Common stock hired a Consulting firm to l increased to Si.80 from work with us in creating 7; % < Si.19 in 1978. a detailed plan of action ,_ for improving re!iobility at 1% ! Some of the events that Sommis, and we have contributed to irrproved earnings included the ca@g mt M ; S86.2 mil! ion e:nergency ' ' ' agg sv rr nner. For rote increase granted in example, we have May.1979, which served intensified the training componies in the Centrol megawatts their i CS Un od o e agodst wrg g. programs for plant Area Power Coordination ownership in each of the l l ion Group (CAPCO) made in pement rate cperators, and we are two units at the Perry
- working on costly and January,1980. will plication (On nuary Nuclear Plant. Ownership complex engineering significantly reduce our by The Cleveland modifications that will financing burden ond Electric illuminating ms C of continue to improve the will have o positive effect i rg Company will increase million of the oermanent ance of Me mNMcW Wm W o carespodng units. In addition, cool during the next few amount.
supplias hme years. CAPCO, which We made these pero n su s nd a responded to our imludes Ohio Edison decisions despite the 2.9 percent increase in ' pressure for improvement and Pennsylvania Power, e!ectric safes, despite the fact that we continue to in the quality of cool. As famimted four nuclear believe in the safety and mild weather and the a res@ of wr Mats, we mds and delayed, from general slowdown in economic advantages have secured high one to three years, three of nuclear power. industnot activity also quality cool that has CAPCO nuclear units Unfortunately, the ! offected earnings. In addition,1978's two- lessened, in a very mw mder construction country's regulatory and rneosurable way, erosion (descnbed in detail in emotional climate, month strike on the part of Edison employees n b ils tubes- the Pows Supply aggravated by the representeo by the Utility histmically one of the Planning, seget of this occident at Three Mile ecoing causes fa repath The mds mt to Island Nuclear Plant, has Workers Union of generating und outages. be buin wwld hme cost made it highly advisoble Americo and the We firmN expect to 111 day cool miners. mae than S7.3 billion. for us to reduce the level cintain steady progress and imiuded Unds i and of our financial com-sinke-both of which i i proving reliability. 2 of the Erie NucM depressed earnings in mitment to this energy Although they did not t h e source. The CAPCO 1978-were not c repeated in 1979. offect earnings in 1979, ##""" Ohio Edison. In another Another crea of decisions that the five CAPCO decision. Ohio improving performance Edison and Pennsylvanio l in 1979 was our success Power reduced by 80 l in increasing the j i 4
termination of these units increases extremely Owoc will conhnue to involves some risk frustrating because - serve as chief financial because these many regulations are officer. Vice President . feductions in generating overly sinngent. orbitrary, R. J. McWhorter was capacity could offect and, most important from - elected senior vice the reliability of electric a societal standpoint, do president in charge of service to our customers not provide results production and system in the 1990's. Our commensurate with the operations. System decision regarding enormous costs. Operations Department nuclear expenditures is The federal Environ- Manager C. W. based en sound mental Protection Frederickson was - planning, and is one we Agency (EPA) will require elected vice president in have made in the the e!ectric utility industry charge of engineering interests of our customers to spend, by the EPA's and engineering and of our investors. own estimate, more than planning. . . Even though earnings $103.2 biHion between On December 31,1979, increased in 1979, and 1977 and 1986 to meet John R. White retired we obtained federal air and water otter 26 years with the poHution control ?
- improvements in the Company. During his lost reliobility of our large regulations. At the Bruce f ve years here, he Mansfield Plant alone, generating units, we still served as President. We face heavy financial Ohio Edison and are grateful to have had burdens. Inflation and Pennsylvania Power have the benefit of his skillful-spent more than S213.7 leadership, and we wish government regulation are realities that require million for environmental him good health and a huge expenditures on equipment. Between happy rehrement.
our part. Construction now and 1986, to meet a r and water quahty I am very pleased to be costs are skyrockeh,ng. continuing my 22 years regulations at our other o d e ns ni e u ne P S e power p ont has ' om confident we will
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- Companies will have to continue our successes parcent. ea f re expend on estimated S540 miHion of new ond resolve our responding to soaring difficulties because I operating costs with capitol-know' what kino of tough budget admin._ Finding solutions to the dedicchen our is?rotion and thorough, expensive problems of employees possess. They cost effect ve planning. regulation and inflation have demonstrated their in addition to infiction, creates o challenge that copobilities by meeting '
reguation has requires skillful the challenges that dramoticoHy offected managemet, in faced them in the post,- December, the Board of and I am certain they will cur finances. We respond to directives Directors further conhnue and improve
.from more than 100: strengthened our that effort in the future.
locol, state. Ono fecerol mmagemers structura They are quite o team,
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9 s e enio ice esi nts regulations sharply D. W. Tschcppat and - L increase our workload - V. A. Owoc to be execu- & ' ond ccsts. We hnd these tive vice presioents. Mr. U Tschappat was also elected a director and
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will serve os chiet Akron, Ohio J. T. Rogers, Jr. cperating officer; Mr. - March 19,1980 : President l [- . Ohio Edison Company ' S u
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Cnio Ed. son and Penn. November,1979, to LOOd syt<ania Power customers close two steel mdis in Management used approorrately 23 1980. wdl resu!t in a total Our food management bution knowatt hours of loss of 5.000 steelworking prog om encourages electric.r/ in 1979. on ;cbs and on estimated customers. through cost-increase of 2 9 percent S5 million reduction in saving incentives in our over 1978 Gevenues annual revenues for us. electric rates, to shift or 49 years. While our frCrn e!9CinC sa:es were in the post, we have spread out their daily use ectnings improved this S968 7 mahon in 1979. a faceo simdor prcblems in of electricity. This helps yect, we are not 16 0 r.ercent increase Al,ron when the rutter us reouco our dody peak, increasing the dividend over 1978 industry announced cut- load generating amount at this time. One Wowa't hour so!es to backs (30.000 lost rubber requirements, which of the reasons we are not resident +ol custcmers jcbs during the post thirty 'n lessens the burden Cf , hat i ece were up 2 3 percent. years) In Akron, we par- financing additional ticipated with community replace some of the so'es to comrrercial generating capacity. money we took from our custorrers increased 5 0 groups to develop diver' Our ten-year icod retained earnings in 1978. rercent, and so!es to in- sified employment op- management goal to Retained earnings are costno! customers rose portunities. and we are reduce peak demand what remains from sales 2 4 percert working to accomplish by 300.000 kilowo'ts from each year offer we pay We had crojected, of the the some in Ywngstown what it would otherwise oH mr expenses, Although rne increase in C d d " beg:nning of 1979. o 3 8 be by 1988 represents es]cy e ts 'nd percent increase in total electnc so'es was more than $360 million taxes. We use these e!ectnc sues. but such mocest. revenues from (current dollars) in costs if retained comings to factors os mod weatner electric so!es for 1979 we were to add enhance our and the slowdown in cereosed 16 0 percent generating units to meet stockholders' equity, to home construction in over 1978. from S835.4 that demand. Our protect future dividends, 1979 reduced so!es mdkon in 1978 to S968.7 reduction of 19.500 and to help reduce the Electnc soies for Chio m@on in 1979 This kilowatts in peak need to issue additional
'ncrease occurred demand in 1979 is securities for construction Ed. son were a so of oe "
- fected by :ncustr:ot shut. mainly because of the equivoient to a so'ang.i S86 2 mdhon emergency of more than $23 mdlion e ed couns. specificotly s' eel. conditions that offected plant c!csings in the rote increase. on on (current dollars) in comings in 1978 required Youngstown oreo Jones annual basis, that The generating requirements- us to use some of out and Loughhn's decision Public Utikties retained earnings that in 1977 to c!cte its Commission of Chio year to make dividend Comcbou Works cco. granted. effechve payments. In 1979, we f nued to attect us in May 2,1979 umM NM,M to MRS. MADGE SHY 1979 The r Cicstng in o former beauticion now "0*
Cecemter.1979. cf a confined to a wheelchair, seccno mdl, ccmbined wrote to us in 1979 with Uni* ed S'ates Steefs explaining that her shores ' cec:sion. announced in o oE s e nt e e h p
- her uncle, have been in .
her family for many yects. 'N f. She told us, "I was a g/ t beauty operator for 39 g, years, and I don't know onything about big
'.* ' N. gs business." but she wanted "h , Nl to know why her dividend / ?~ ' ' *
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O y hos not increased. We respond- r %
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Ohio Edison has pold " dividends every yect for '%, (~ R '% .. y ,. n%%*
Rate Requeds $116.0 million permanent The improvement in inflation, the high cost of rate increase in early operating revenues for borrowing monev. and May,1980. the year, otter regulatory log (the Dunng 1979, the ded ons tG Ppmes length of time for the Company began and other costs, resulted regulatory process). negotiations with the m o M scome of made it necessary for vanous communities and b I # 0
- 0" Chio Edison to seek rate townships that we serve compsed to N rehef in 1979 An for on increase of m on in W78. Me opolication for a S128 4 opproximately 33 provisions for preferred million permanent rote percent in street light:ng and preference stock increase, on on annual rates-the first such dividends, net income basis. was fded with The general increase in street for common stock for the Public Utdities Commis- lighting rates. All but a year was $ 105.1 million, sion of Ohio (PUCO)on few of the communities compared to $61.3 ALVIN LINDSEY Apnl 2,1979. On May 2. and townships approved million in 1978. Earnings has been a meter reader 1979, the PUCO granted per shore of common foremon with Ohio Edison the increase by contract' for the post seven and one us on S86 2 million For those remaining, the stock rose to $1.80 in half years, and he is emergency rote in- Company applied to the o gg g7g.
Involved with restructuring crease, which offected PUCO to fix the rates. The The overage number of mster readers' routes. "It's o!! industrial. Com- rotes were fixed in the common stock shores a real challenge," says merClol. and residential order issued by the odstandhg Med Lindsey,"because of the customers in urban and during 1979 to 58.3 tremendous growth we've PUCO on January 30, rural areas served at 1980 The new street mlhon from 51.6 million , had in the Loke Erle retori by the Company shores in 1978. Olvision. , lighting rates are This emergency increase, expected to increase the Ouorterly dividends of 44 Outside of office hours, granted on a temporary Lindsey is Minister of Company's onnual cents per shore on basis, represented on revenues by about $2 Music for the Glorious common stock of Ohio advance against our million' Edison were declared by o urch i Elyric permanent request
, 9 the Company's Board of a week with the Apostolic On January 30.1980. the Fuel Adjustment Directors in eacn quarter Ensemble, and the group Commission granted us Charge of 1979-travels to other states on Siti.o miliion of our On October 10,1979, wtekends giving church requested permanent musical presentations. the PUCO announced Lindsey is also Director of rate increase. or 87 that its in-depth review of pef tent Cf the total our fuel adjustment ao I stoHe omcunt requested. The proctices revealed we Commission also followed sound fuel ordered the Comcony to purchasing revise its rate structure to practices. and the create uniform rates for application of fuel 3- g je residential customers in charges to customers' t
, urbon and rural areas. bills has been " fair, just
] ; Because inflation and and reasonable."
,, (* increasing regulatory
,; ",e exCenses Cont:nue to
,g - - , otteC! us, we fded a letter 44.+ of intent on Feoruary 7
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' l 1980. with the communities we serve t... m ac,..uom m.
y/ ' and won tne PuCO. r,;* g a aa m * * ** indicating that we will fae ( ; on accocaten for a g.geygg.g D U">%%a"? Y#U"' '"=! ' 3 . VMDML
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I l l l l l l l 1 e Utility Plant and Capitalization Deve!coment Aufnonty. ;
$3.012 mmons os ooiim) for financing the l 52.839 poHuton Control foC!hties {
52.718 E ' * "tsfify Plant s2.600 of Pennsylvanic Power's l a si.e.e.on s2.417 s2.404 s Cool. fired New Castle '
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52.116 y l Chio Ed son again issued
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pollution control notes in 51,763 sts50 k . December. A S7 milhon l 5 si .567 s t.615 g, f c issue was made through , the Ohio Air Quohty P 1 tN Development Authority '
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' for various environmental b 6 i control pro;ects in Ohio, i and $19 milhon worth of I j pollution control notes j it
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Beaver County Industrial i h g Development Authonty
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L for the Mansfield Plant. i 74 Both are 30-year ! 75 76 77 78 79 issues with on overage l life of 28 years i First Mortgoge
- Ohio Edison ona Common Stock notes, which corres- gonds {
PennsWyon:o Power Cn February 22, Chio ponded to o hke amount in June. Pennsylvania I raiseo opercximate!y Edisen sold six miition of bonds issued by S334 mdhon in new Pennsylvania's Beaver Power privately placed I shores of common stock $20 m@on in a 10 5 ! capito! onc obtaired Courty Industnot
; with a rechzaten to the percent senes of first commitments trem Company of S15.97 per Development Authority-institutional nsestors for The proceeds were used mortgage bonds. which shore. or S95.8 mdlion.
the purchase af $132 to hnonce o ponen of are due in June.1999. In l During the year, we o!so December, Ohio Edison mdhon in rew secunt.es the pollution centrol { in 1979. Poising cocital raisec $21.6 mdlion frcm completed arrange-the issuance cf 1.5 focdmes at the cool @ed ments for private place- l
'n this age of Bruce Mansfe!c Ront "excensive" mcrey mi!! ion stores of ment of S100 mdlion of I common stock inrcugn and to refund a S26 5 first mortgage bonds at a requires sound financial m@on poHuten coneol planning Because wo cur Dividend Reinvest. rate of 12.75 percent Cf ment and Stock Pur. note preWouW issued for recuire huge, cont.nu:ra the proceeds frcm tnis Chose Plan e ans%d facMes.
investment in tociht:es. issue. S16 milhon were In addition, Pennsy!vonic made ovadable in pe are o coch On Februar/ 4 1980 Power p rticipateo in this Cnio Ec: son ctE ered 6.5 February.1980. and $84
'ntensive incusW f:noncing by issuing cn sho es of mi;licn will be mooe Tne creceeds from our common stock. resumng ocprox mate!y S3 milion availocle dunng scricus so'es of stocks in proceeos cf m pcMon cce ces May.1Q80 and bonos we's used. ocproximateiy S84 3 (Eeover County) for the Pennsylvania Power
!argely, to reduce snon. md::en Mansfield project and arranged. in 1979. for
*erm loans for occut S3 m@cn in
$22 mdiicn of 10 90 construction. ona for Pollution Control conuten cone I notes. percent First Mortgage l
ocaussitien cr cet+e ment Notes thr u9h the L wrence Bonos. which will be cf facihtes CounN !ndustnol closed in 1980. Cn Acn! 10. Cho E0' son issued $27 miikcn in 25 year conut'en centret j 1k[ f 3D ku1L s, so N a
1 . 1 i 1 l Preference Stock Long-Term Loans inflation Accounting ELEANOR FRANCIS, in July. Chio Ecison in May. Chio Edison As inflotion continues to stockholder, says she negotiated the private comple'ed offect us, we are wanted to own Ohio placement of $27 million arrangements for $30 reporting in this year's Edison stock even when she was a little girl. "I in two series of million in long-term loans financial section tre preference stock. One in the form of two Si5 estimated financial $c plpe$ hops b settes of the stock, million. three year effects of inflation. Usual it was a local company." tctoihrg S9 milhon and matunty, bank-term accounting methods do " 9.000 shores. has a loons. The interest rote not reflect the fact that *$k o e s o o. civicend rate of 9.5 for these loans fluctuates one dollar of post costs is "The company had percent and on overage with the prime lending not recovered by a performed well,liike the hfe of eight years. The rate of the two financial dollar of current management, and it's a otner senes. of $18 institutions. In December, revenues. In traditional more secure stock," said million and 18.000 we borrowed $50 million accounting systems, Mrs. Francis, who works as shores, corries a 10.25 pursuant to a seven-year financial results and on executive secretary at i percent divicend rote bank term loan. The taxation are presented a mental hecith clinic for and on overage life of as though the value of children. "So we bought interest rate is fixed at some. id5 years. 11.5 percent for the first today's money were the two years of the loon some os that of Individuals-of-record held "V yesteracy's. Inflation o c nc n Cc er and floots with the pnme pftc n lending rate thereoffer. occounting estimates the shares of common stock
- 10. the cubhc oftenng of real dects of Mahon two mil: ion snares of outstanding on December upon eamgs. 3q, 3979. Women repre-another senes of preference stock. sent 38.3 percent of our Individual stockholders, convertible. cumulative, men,29.4 percent, and ono w:thout por value, to j nt ownership,32.3 be desi9noted S 1.80 percent. According to a Preference Stock These survey completed in 1979, new shores were offered 47.8 percent of our to the poche at $15.425 individuct stockholders per shore The re retired,51.1 percent Consolidated Capitalization si 411 expect the stock to preference stock was convert:b e o'ter January
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$1.343 provide o reliable income 1.1080, into commen source, and 61.2 percent purchased their first stock. ecuoi to ore stock in the Company share cf common stock "* * " 7 3
- fer each share of S1.80 Preference Stock. The 5970 3 Comcony received a .
s851 ret of $29 9 mdion from 4 so e of the stock g. Preferred Stock %
!n A co!. 1 80. k li 4 Pennsvivando Power will $458 $?
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Generating Unit December,1979, the Availability Company signed a letter As we reported to you of intent with a group of in 1978, one of the private investors Company's major interested in purchasing objectives is to improve the Youngstown steam the performonCe and system. Eventually, they avoi! ability of the large may replace this plant generating units of the with a refuse-burning Sommis Plant in Stratton, plant. Ohio. In Akron, the Company In 1978, we created the agreed h M to seu ds executive-level Re!! ability steam plant and Committee to direct a cistribution system to the comprehensive program city. The city has built on DR. MIRfAM BROWN We respond: to improve the overoll energy recycling plant, is a stockholder who Even though Ohio Edison's reliability ond and following the plant's holds o Doctorate in Inter- prime energy source is performance of those certification, the City will notional Law. she hos cool, we continue to units. The Availability Task assume respons!bility for liv d for 18 years in West explore alternative supplysg steam to Akron B rlin, Germany, os the Force organized of the energy sources that we steam customers. wif0 of a member of the con use for producing epmd monogss, For:Ign Service. electricity. We keep in level, works closely with D:portment of state, mind, of all times, that our plant manages to select New hea "En rgyindependence primary objective is to strategies for improving DISpotching Office off: cts our foreign provide customers with reliability and then A new Akron creo policy," sold Dr. Brown, reliable electric service of reports its conclusions to dispotChing cffice was "in f:rms of how a reasonable price. the Reliobility Committee. ploCed in service in 1979 compeittive we con Wu are now studying the r:mcin in a world where We are pleased that our feasibility of constructing cntrgy sources are hydroelectric plants on strate 9les resulted in
. equipment at 23 major b coming more and the Ohio River. In improvements in substations in the Akron mora of on issue. What is addition, we have reliability in 1979. We creo. A computer-Ohio Edison doing to financially supported the know that to Complete secure future energy directed system now Clinch River Breeder our rehobdity program, scans the entire sources?" Reccior Project of Ook we will need to spend Ridge, Tennessee. transmission and large sums of money distribution system every The electric industry, as o and, therefore, our goal two seconds and con whole,is actively wdl take several years immediately pinpoint involved, through the to CChieve- any circuits or subsfotions t t te,in energy Phasing Out involved in on outage.
projects, including wind Steam BUSINESS We are planning to eneroflon, solar power. Facing continuing loss of begin construction in fuel cells, cool [% n gosificotton, and other custcmers cperating 1980 of a new system-losses, and huge wide dispatching office
#r research. expenditures for C! eon to increase further the
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# . Most important, we air equipment. we e'ficiency of our system , constantly encourogo ou petitioned the PUCO in cispatching operation.
employees, consumers, ' i 4
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' ' their government cermission to ena steam representatives to service in Sonngfie!d and [ g,o^",, L*' '74*7,'f.,'"4
'\ h. I- develop a clear energy Youngstown. We have ****' vo8*v vad t
- ,Is.( f program that will lead this been locking fcr cuyers too moa, Aooro=owv v26 <aa.i oe r 7 )%, Q- country to energy for our steam piants in CL7"!, *,, 7,*#.'n'%*., ,o j q s independence. these two cities. In gg"=aad oa'a 'a a c*a"a' w- ,' h. p -
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r I ! COOL Supplies The Componies' Cool-f reo power c'onts burned mCre than 9 7 mdhCn tons of Coolin - 1979 The mo;Crity of Chio Eo;sion's Coci curchases are made , inrough long-term contracts, with those THEODORE W. ROEHLIG 11 would not sove, in any full-scale, lengthy, and l Cool suCohes Coming is a soclot worker and on significont number, Ohio costly rote hearing each l from soLineastern Chio income molntenance mining jobs. According to time the cost of fuel and western supervisor for o county the Ohio Electric Utility changes. (Fuel costs now Pennsylvania The welfare department's Aid institute, statistics represent our largest , remolnoer is purchased to Dependent Children provided by the Ohio operating expense, and, program. Mr. Roehlig, on Department of Energy in 1979, amounted to Cn the CDen market from Ohio Edison customer, show that Ohio's cool more than $316 million.) 50 o wrote to us and asked the exports declined by 11 The fuel adjustment following: million tons between 1970 clouse permits us to pass rennsylvania Power buys and 1978. Nearly six
If Ohio cool con be increases or decreases in its Cool from Centro! and burned safely with the use million tons of that cool fuel costs directly to the western Pennsylvanic of scrubbers (albeit more would have been customer by adjusting the i expensively), how long exported to Michigan fuel chorge. The fact that i COOL QuOli4 con we continue to between 1973 and 1978, ,, ,, coy , only 90 Improvement purenose western cool in but has not been percent of our fuel costs PrOgrOm view of the high cost of because of the federal through the fuel l transporting that cool EPA s stringent cir-quality odjustment clouse l Our aggressive progrom Cf Coto:ning higher east? ' " "
u fu cool- Incentive to purchase the auchty Cool frCm "If there is a means to l SuCciiers Cont;nued in eliminate the fuel With the imposition of most economical cool l possible. 1979 and resa!!ed in a odjustment clause AND stringent cir-quality I nit; Con + improvement save Ohio jobs AND show standards, Ohio's high- And, finally,if the fuel I sig'the cucktv Ct Cool we concern for the sulfur cool has become adjustment charge were rn environment, then we most unattractive. This is eliminated, we believe, received at our power must pursue that course." hardly the doing of Ohio's os do many rote experts clonts-Coo! that is We oppreciate Mr. utilities, in the industry, that the higher in heat value and Roehlig's seeking Ohio's electric utilities substitution of a longer ICwer in Osh Content. Information from us, and continue to provide o and more complicated l That orog'om hos o!so we respond: good market for Ohio regulatory review process , enabled us to reduce cool, despite the many would be costly and 1 First, regarding your point would increose our sutstant;olly the amount about western cool, We cost and environmental customers, bills. of Coo! ash that must be have traditionally bought obstacles. CrCCessed through Cur on important share of our Third, the fuel adjustment waste 0,Sposci system in cool from nearby stoles clouse exists so inct we 000 tiCn CCol with o and never from western con adjust our billings to
!cwer osh CCntent hos states. If EPA guidelines reflect actual fuel costs te$s Ct on erCoing effect regarding clean oir without having to go to o compliance will permit us on boder tubes-a to make o portial shift to C ry cause Cf low sulfur cool (oway from ger*erchng un;t Outoges high sulfur Ohio cool),
then we will buy that low-sulfur cool from nearby states, not from the west.
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Nuclear Plants one year for the Perry terminate those nuclear customer demono for The five companies in Nuclear Plant Unit 1, from units not yet under e!ectricity dunng the the Centrol Area Power Moy.1983, to May,1984: construction in oroer to 1980's is four percent, er Coordinction Group two years for the Beaver reduce the future less, each year. In light of Vo!!ey Power Station Unit financial risks to our tne decision mode by (CAPCO) terminated in 2. from May,1984, to the CAPCO companies January.1980, plans to customers and build four additional May,1986, and three shoreowners. to terminate plans for nuclear units that were in years for Perry Nucteor However, this belief that construction of four the design stage. Plant Unit 2. from May. nuclear power is a sofe. CAPCO includes Ohio 1985, to May,1988. economical. and en- WAYNE COLE. Edison. Pennsylvanio CAPCO also made vironmentally superior Morton Division Manager. Power, The Cleveland changes offecting the method of generating served as President of the Electric liluminating ownership of Perry electncity resulted in Residential Home Company. Duquesne Nucieor Plant Units 1 and CAPCO's decision to Assoclotion of Morlon Light Company, and The 2. Ohio Edison and complete the three units from 1974 through 1979. Toledo Edison Company. Pennsylvania Power o! ready well along in The Association is a non- , reduced by 80 construction. The new p Their combined service , ]ro{pdhc p ; works creas include approxt- megawatts their Completion dotes reflect retarded citizens a family motely 2.5 million ownership in each unit. a more realistic time otmosphere, so that they customers in northern Ownership by The frame for the construc- con develop skills for and centrol Ohio and Cleveland Electric tion and licensing of independent living. The western Pennsylvanio. Illuminating Company nuclear plants. Association is involved wHl increase by with tw homes and on The four terminated units corresponding amount. Cool-Fired Plants oportment. Mr. Cole here were Units 2 and 3 of the Ohio Edison and The cool-fired Bruce is talking with a resident movis-Beste Nuclear Pennsylvania Power will Monsfield P! ant Unit 3. of the Home for Men. Power Station near Port now have o combined which is being built and Mr. Cole joined Clinton, Ohio, and Units i ownership in these units w:ll be operated by Pennsylvanlo Power in and 2 of the Erie Nuclear of 35.3 percent. Ohio Pennsylvania Power on 1950, and he come to Plant near Berlin Heights. Edison kept its ownership beho!f of CAPCO ,is Ohio Edison in 1966. He Ohio. The est: mated cost nearing completion. We has held various (361 megawatts)in engineering posts, to build those four units Beaver Valley Unit 2' spect tne 825-mega. was S7.3 bilhon. watt unit to be in including a previous stint The decision to terminate commercial operation in in Madon as The CAPCO companies these units stemmed, in superintendent of th foil f 1980 Oh " " large part, from political Ed son and Pennsyl onic shuc on w sr in finue. under on extend- * * ' *" fr) cert t es offecting In 1979, the Morlon Newsl ed scheoule, on two 9
- US @ Life newspoper selected nuclear units near North the future Construction of p rCent) of the'9 unit. Mr. Cole os " Mon of the nuclear plants-uncer-Perry, Ohio. and another Year"in recognition of his
^i S AdequoCy of Power many community of Shippingport. Penn-svivonio. The reschedul-
[io n c t at Supply activities-Three Mile Islano Nuclear ing of the three units The revtsed. prcjected Plant. Because of unoer construct:on in- regulatory uncertainties rate cf growth for , ciuoes time celays of and delays and x because of inflation. the construction of nuclear power in the future k$
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nuclear units and to designed to meet strict Regulatory Chio Edison is contruing reschedule three other air pollution standards DeVGlopments to work toward nuclear units, and if the for coal burning power Ohio Edison faces con, agreement with the U.S. customer-growth- plants Unlike flue gas EPA. In admon, on demand projections tinuing uncertainties os desulfurization to the sulfur dioxide and Novembe 5.1979. we should be exceeded. or (scrubbers) processes, porticulate (fly osh) announced that we will if unscheduled outoges the by products of gas oCCdso$ wr of our units exceed emission limitations at our cleaning are generally plants. The U.S. compliance program. current enpoetations, we usable and will require We will put into effect at are concerned about Environmental Protection minimal disposol- Agency (EPA) and the o4 wr pimts a program the reliability of electric At this point. on that is consistent with our Ohio EPA disagree over serwCe for our customers engineering firm is understanding of sulfur the method for moni-in the mid 1980's ond. reviewing the design for toring our compliance dioxide and porticulate ' esDecially, the ectly the demonstration plant. emission hmitatims. with sulfur dioxide 1990's. We wdl continue The plant is not yet fully However, our com-to seek methods to emissions. We favor the funded, and Allis- method proposed by the phonce program does resolve these concerns Chalmers is seeking Ohio EPA, which would not am we ore not sM os we monitor growth in additional financial subject to claims for civil allow us to burn opproxi. customer demand and support from other motely 1.3 million more and cominal penalties compare that growth to groups A final decision associated with the our capacity tons of Ohio high sulfur about the feasibihty of cool per year than does Cleon Air Act. In our judgment, our building the plant the U.S. EPA method. r eighbcnng systems probobly will not be face the some serious The U.S. EPA onnounced made until the middle of bm y 1980. that it obstacles to the timely 1980. Those companies shut down c'ertain" comoietion of new that contnbute to the WIN D'OPOS8 0 ** SUI "I genecting units which cooocity additions Thus, plant project will have dioxide enforcemmt have o combined net the amount of power prionty for using the ChMnm. This Cntenm- generating Copability of that vanous efectnc whm it is proposed. WHI 60 megawatts of three technology. be subject to public corrponies will be able of our smaller cool fired to provide to one Hydroelectric commet and possible power plants. More than another dunng future Studies implement ti n by the s27 million would have entical load capacity stam of Ohio. Until that been required to equip On November 5. we fded shortages is uncertain, opolications with the these old units with mnwnced. Oh;o Edism necessary environmental Feoeral Energy Future Power Reguiotory Commission 'S S'bi*C" '" *"m equipment. fecerot enforcement Sources (FERC) for preliminary poi cy that is slightly The closed units .'nClude Cool Gasification Si'd7 Pe""Sf ' P SSibl? hy pl of six more sinngent inon the the East Poleshne Power in cooperot,on with current Ohio-proposed Plant. the Norwalk Power Cerps of Engineers locks Plant, and Unit i at the several other utikties, ono dams along the Pi # Ohio Edison is partic Mad River Plant. Chao River. These Until rne issues of sulfur poting in a coo! permits. if granted, dioxide comptionce and gosification projecf* would provice us the type of cool we are initiated by the Allis-exclusive rights for three to burn are resolved. '*f,, ^,q,"', "Jl,*g,,*,f4"ll*gg,0*o Chalmers Company, to proconng fuel onc years to conduct maa'mo. m.now oeta. w ou but!d a demonstration detoded feasibility designing related o!r *NJUoE[o7,""3..Ilgo*.". n plant in Wcod River- '**'** studies to determine pollution control lilinois This cool whether we wish to equipment are extremely to.. t.* rn. io,s.ie .o,m oaa gos;tication process proceed with difficult to oo. Despite [**,*." s*C"fo7'g.;"o*,*.*,*,".*;",.o involves the use of a construction' this uncertainty of 'a"* * **** *9' **" ** *aa**d retot:ng. cylindncol k!!n reguiotory requirements, to produce gas from to.., egne a p.,, m. ,co o Ccol, whiCn then is used l'7(*,",$,*,$$*, ,*1,,3 ,,,, os o fuel. This process is gc co, me-s y po.c no,. ic.ne im r moon so va, 18
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Employees to our hinno practices releases to a targe te'ephones or wntes. regarding minonties, number of newspapers. which he!Ps in reduc:ng Providing the kind ct females. the distribution of costs to the Company.
' ' *'" n ndic poed. nd edu tionai brochures
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?!cn and improves the involvement with More than 300 highly is committed to the performance of the teachers and school trained employees wcrk Company's coerot;ons is develcoment of add.ficnot programs administrators; and we with customers who want our continuing goal. To which will provide on keep in touch, mqularly, information These provide this opportunity, increasing number of with pecpte in the l'ews employees include we asked consulfonts to equal employment media to helo them prcfessional engineers Conduct a Company- ocportunit;es for femotes provide the public wi!h who work with large wide employee ottitude and minorities. Occurate information industrial occounts:
ney We are evoluoting about the Company. Consumers' represent-tre results of this survey so Salaries and Wages atives who work with we con respond in the creo of solaries We have o!so created groups on such issues os appropnotely and wages, we are in advertising programs understanding the use of compliance with the that are designed to energy in the home; In add; tion to seeking increase public employees' coinions President's guidel,nes for representatives with wage-price controis. understanding of factors agriculture backgrounds about tneir work that drive up the cost of envircnment. the - who work with agri-Comcony offers training COmmunlCQtions electricity. At the some business customers, and A good communications ime. these progroms people who respond to onc educational {llustrate the vo!ue thattelephone co!!s frcm i prog oms to increase link with customers. employees. investors. electncdy mpresents in residential customers employees' expertise these inflationary times. and involvement in the and the community-of- Concerning their electric Company's operations. large is vital. considering Our using advertising this service. These employees the Complexity of issues way helps to control the implement programs to Affirmative Action tnot o"ect how the cost of communicoting assist and inform cus-in Octeter. the Office of Company performs in with customers For tomers on how to use Federal Contract beholt of each of these example. it costs about electncity more efficiently. Ccmpsonce Prog oms- grouos We conduct Si.69 to respond to o Ceportment of Labor. regular customer opinion sing:e five-minute phone rondomly setected Ohio surveys so we con better call from o customer $cemon, co'rrected a to' son t'ecocuarters for understand and toilcr cuestioning the cost of breaker problem for Mr. uott;ng. We received O our communications electricity For the some and Mrs. Amend otter etter from the efflCe programs to their $169. we Con oisCuss their lights had been out ind;Coting that. Subject spec;fic needs. the cost ouestion in the for obout 20 minutes. Mrs. to several revsions, our mass medic with Amend thanked Mr. Aff.rmative Action Y S coproximately a Brandon with a botch of Program in our General o eg m s as homemode sweets and for the ComConY and thousand viewers or wrote o *,thank you' letter , C" ce. is acceptable ijsteners. our advertising I under current federal we are Continua!!v to the Company. rk m I reguiotions win respect yaysinQnlcng;[f gr'ofe",7eysjoTer" ggn,gecyw;g o keep emp'os ees you should tell him so," inf rmed of issues sne said. ,
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s,".',*o%*,%,OR*/ly;;a Company. . fg1 ; We commun; cote with T to.se ten A warni Goo. semooi cut Customers through [' - i MO: o* our Speakers Bureou: gef" *[fg'o*"* g N.L**Q**"C
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g. Justin T. Rogers. Jr. Victor A. Owoc D. W. Tschappat President of this Company and Executive Vice President Executive Vice President
, Chairmon of the Board ct its I
suosidiary, Pennsylvania Power Company
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Robert J. McWhorter Russell J. Spetrino Frank E. Derry Senior Vice Presioent Vice Presioent and General Vice President Counsel di 22
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- W. B. Marvin !
h.hd..)} , hsf ; Comptrotter
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.. iWf H. Peter Burg !
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, D. D. Vowles ;
Secretary
*- ' 't b....e (! W. G. Fouch f Assistant Comptroller
..g G. F. LaFlame Assistant Treasurer C. N. Glasgow l r T Assistant Secretary Joanne Martin Assistant Secretary
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Lynn Firestone R. G. Zimmerman Senior Vice President Senior Vice President DMSION MANAGERS I] [ H. W. Miller Akron Division
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23
BOARD OF DIRECTORS W. A. Derrick 'R. L Loughhead W. H. Sommis R. G. Zimmerman incependent Electrical President of Copperweld Retired-formerly President Senior Vice President of and Mechanical Steel Company. Warren, of this Company and of this Company. Engineering Consultant. Ohio manufacturer of its subsidiary, otso President of Leisure carbon and o!!oy Pennsylvania Power Fred H. Zuck Industries. Inc., Sandusky, blooms, billets, and bars. Company. Member. E V
# C e Board
[o*nd res de tio D. Bruce Mansfield of Sondusky Foundry & Retired-formerly President build.ng. Member, So!ary W. R. Toppon Machine Company, Commdtee. of this Company and Retired formerly Sondusky, Ohio. Chairman of the Board Chairman of the Board manufacturer of John L Feudner, Jr. of its subsidiary, of The Tocpon Com- centrifugal costings. Executive Director of Pennsylvania Power pony, Mansfield. Ohio, Akron Community Trusts. Company. Member, .Mr Loughhead was elected manufacturer of a o,,ector ey ,n, score er Akron. Chio. Chairman, Audit Committee. microwave ovens. Directors on Decerneer 19 Audit Committee, oppiionces, kitchen 1978. and by the V. A. Owoc cabinets, and bathroom st ekh iders in the Annual Dr. Lucille G. Ford i e Vice President g' Dean of Business ompany vanities. Chairman, 'i3,Ic C $ , U 7*, Solary Committee. ooon receict et authenzotion Administration. by the Federo! Energy Economics, and the Gill J. T. Rogers, Presioent of thi Jr's D. W. Tschoppat , peguiotory Commissm Center for Business and C Executive Vice President uncer provisiens or section Economic Education. Ca on f the Board of Ws hpon% Ashland Couege, fc for h r t o y
, of its subsidiary. Frank C. Watson APDhc cn for sucn Ashland. Ohio. Pennsylvania Power Whcreo%n was prompHy President of The Company. moce but is stai penoing.
J. Rcbert Groff Youngstown Welding Accorcingly. Mr touannead Consultant to The James and Engineering has not yet served as Leffel & Co., Scringfield. Company. Youngstown. D' rector Ohio. manufacturer of Ohio. fabricator of non-hydraulic turblnes and ferrous alloys. Member, steam generating Audit Committee. equipment. STOCK TRANSFER AGENTS AND REGISTRARS FOR The Company's annual report COMMON STOCK on Form 10-x. as filed witn the AND ALL SERIES OF Securities and Exchange Com-PREFERRED AND mission. svilt be availabie tc Sh feh I Ofs. If you wish o PREFERENCE STOCKS- copy, please write to D. D. Continenfol Stock Transfer & Vowles. Secretary. Ohio Edison Trust Company ' Company. 76 South Main 19 Rector Street Street, Akron, Ohio 44308. New Ycrk, New York 1C006 Transfer Agent and Registrar Ohio Ecison is on equal - Transfer Clerks of Ohio Edison opportunity employer. C:mpany Akron. Ohio 44308 Transfer Agent Bancohio National Bank, Akron oreo.. Akron. Ohio 44308 eguya y em g sg. Registrar 24
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e Summary of Operations 1979 1 1978 1977 1976 1975 1974 i Thousands of Dollars 2 Operating Revenues. S 994,585 $ 862.956 $ 796.289 $ 644.852 5 593.324 5 498.355 Operating Expenses . 699,721 j 668.224 561,687 459,905 428.217 371.711 Taxes-General . .. , 89,122 I 76.804 65,046 54,084 51,046 44.463 Federal and State income- I provision (credit) . ... 41,996 ! (6.017) 23.048 8,646 24.398 11.086 Total Operating Expenses j and Taxes , , 830,841 ? 739.011 649.781 522.635 503.661 427.260 Operating income . 163,744 ! 123.945 146.508 122.217 89.663 71.095 Other income and Deductions-net 56g l 47.413 36.992 63.726 64.652 43.439 Net Interest and Other Charges- ' interest Expense. .. 126,824 103.104 88,557 79.141 67,859 52.879 Allowance for Borrowed Funds Used During Construction . (48,280) (22,436) (20.504) - - - Subsidiary's Preferred Stock . Olvidend Requirements . 4,660 4.660 3.873 3.626 3.035 2,120 Net Interest and Other i Charges , 85,204 I 85.328 71.926 82.767 70.894 54.999 income before cumulative effect of a change in accounting method. 134,807 86,030 111.574 103.176 83,421 59,535 Cumulative effect to Dec. 31,1973. of recording metered but unbilled revenues . . . .
- I - - - -
2.587 Net income . . .. .. . 134,807 j 86,030 111,574 103,176 83,421 62.122 Preferred and Preference Stock } Dividend Requirements . 29,687 1 24.771 23.711 20.399 15,780 11.087 Net income for Common Stock . . S 105.120 45 61.259 $ 87.863 $ 82.777 $ 67,641 $ 51,035 Average number of shares of j Common Stock outstanding . (Thousands). . . 58.290 ! 51.620 44.682 38,751 34.695 30.445 Earnings per share of Common t Stock (i). $ 1.80 I $ 1.19 $ 1.97 5 2.14 5 1.95 $ 1.68 Dividends declared per share of j Common Stock . $ 1.76 t
$ 1.76 $ 1.71 % $ 1.67 $ 1.66 $ 1.64%
Utility Plant and Capitalization i Utslity Plant . . . . 33,757,493 5
$3,S95.926 $3.014,903 $2,664.723 $2.354,569 $2,081,460 Accumulated Depreciation . . 745,296 i 678.106 611.093 548.925 504.079 466.195 53,012.197 . $2.717.820 $2.403.810 $2.115.798 $1.850.490 $1.615.265 Capitalization- i Long-Term Debt. ... . $1,410,782 l $1,343,195 $1.189.821 $1.087,755 $ 920,932 5 868,509 Redeemable Preferred Stock. . 93,600 ; 98.000 98,000 88,000 88,000 -
Non Redeemable Preferred j Stock . ..... . ..... 307,472 j 307,472 262,472 262.472 214,472 214,472 Redeemable Preference Stock . . 57,250 1 Common Stochholders' Equity . 969,543 ( 851.119 866.725 634.707 545.704 484.146 Total. 32,838,647 ~ $2.599,786 $2.417.018 $2.072.934 $1.769.108 $1.567.127 Capitalization Ratios-Long Term Debt. ... - 49.7% 51.7 % 49.2 % 52.5 % 52.1 % 55.4 % Redeemable Preferred Stock. ., 3.3 i 3.8 4.0 4.2 5.0 - Non Redeemable Preferred ; Stock. ... . , . . ,, 10.8 11.8 10.9 12.7 12.1 13.7 Redeemable Preference Stock ., 2.0 t - - - - - Common Stockholders' Equity . 34.2 i 32.7 35.9 30.6 30.8 30.9 Total.. ..., , . 100.0 % - 100 0 % 100.0 % 100.0 % 100.0*A 100.0 % p) Based on average numoer of shares outstanding during the year. 26 e
OHIO EDISON COMPANY AND SUBSIDIARY COMPANY The following is management's discussion and analysis of certain signifiCont factors which have offected the Companies' earnings during the post two years. Stated increases or decreases for 1979 and 1978 are denved from o componson with 1978 and 1977. respectively. A summary of the changes in the principal items offecting earnings is shown below: Increase or (Decrease) 1979 vs.1978 1978 vs.1977 Amount i Percent Amount Percent I Dollars in Thousands Operating revenues ... . . .. .... $131,629 l 15.3 % $66,667 8.4% Cost of fuel . .. . .. . . .. 39,966! 14.5 61,508 28.6 Purchased and interchanged power, net . . .. .. (31,196); (34.1) 3.919 4.5 Otheroperation expenses . .... .. .. .... 4,1172 3.1 26,956 25.0 Maintenance . . . . . . . . . . . ... . . . ... ~ 15,198 f 17.3 5.651 6.9 Provision for depreciation . .. . . . . .. :3,412, 4.4 8.503 12.3 General taxes . . . . . .. .. . ..... .. 12,318 16.0 11,758 18.1 Provision for income taxes . . . ... .... .. .. ' . 51,469 , - (30,144) (184.1) Allowance for funds used during construction . . . 38 520 8 66.0 10,209 21.2 Interest and other charges (excluding allowance for borrowed funds used during construction) . . 23,720 . 22.0 15,334 16.6 Preferred and preference stock dividend l requirements . . . . . . . . 19.8 1,060 4.5 4,916 j Operating Revenues The $86.200.000 emergency rate increase effective in increase may be possed through directly and there is May 1979, in addition to lesser increases which were opproximately a 1 1/2 month log between the incur. effective in September and December 1978. Subston. ring of the cost by the utility and its recovery from tiolly increased operating revenues in 1979. Adding to customers. this were increased kilowatt hour so!es in 1979 of 2.9% A major portion of the increase in 1978 resulted Cost of Fuel from fuel adjustment clause revenues. Such revenues The increase in total fuel costs in 1979 and 1978 increased by 21% and 7% during 1978 ond 1979, resulted from the combination of changing prices, respectively. Ohio fuel adjustment clause regulations change in fuel mix and the effect of Penn Power's operate to the detnment of earnings in a period of ris. deferred energy costs. The following analysis details ing cool prices in that not more than 90% of a fuel cost these effects individually for cool, oil and nuclear fuel. _ .7.~ ., Coal Oil Nuclear Total } Thousands of Dollars 1979 I increased costs due to changing fuel prices . . . $30.915 $ 7,204 $- $38,119 j increased (decreased) costs due to change in quantity consumed . . . ...... ...... .. . . 13.850 (12.828) (2.038) ~(1.016) j
$44.765 $ (5.624) $(2.038) $37,103 }
- -i Ef fect of Penn Power's deferral . .. . .. .. ... .. ....... ... .. ..... . . ..... 2.863 1!
Totalincrease ln cost of fuel . ... ... .. .... .... ...... . . . . . . ... .,
$39,966 ]
1978 increased costs due to changing fuel prices . . . . . . . $40.428 $ 659 $ 754 $41,841 Increased (decreased) costs due to change in quantity consumed . . ... . . .... .. . . 13,050 8.074 (463) 20.661
$53.478 $ 8.733 $ 291 $62,502 Ef fect ot Penn Power's deferral . . . ...... .. .. .... . .. .. ......... . . ...... . . (994) - Totalincrease ln cost of fuel .. . ......... . . . .. ............... . ... . . . . . . . . . $61.508 -
27
Purchased and interchanged Power, Net tive year, combined with increased property taxes assessed on increased utMty plant in service. Payment The substantial decrease for 1979 in purchased and of a one-time Pennsylvania property surtox in 1979 fur-interchanged power, net, resulted from improved ther increased property taxes for the year. The 1979 in-generating unit performance and the obsence of crease was partia!!y offset by the reversal of approx-unusual factors which increased dependence on imotely $1,136.000 applicable to prior years for the power supplied from other utilities in 1978. In on ot- Chio Cool Consumption Tox, which was declared un-tempt to conserve the Companies' supplies of cool constitutional ~ during the strike by the United Mine Workers of Americo, large amounts of power were purchased The changes in the provision (credit) for income taxes during the first quarter of 1978. The strike by the Utility are set forth in Note 1 of Notes to Consolidated Finon-Workers Union of America (UWUA) against the Com- cial Statements. pony adversely offected efficient operation of several of the Company s generating units in the third quarter Allowance for Funds Used During of 1978, thus cousing greater reliance upon power supplied by other utilities. Construction (AFUDC) The increases in AFUDC resulted principally from in-Other Operation Expenses creases in the amounts of construction work in prog-es ccM W cWeg @ Ms d chch Normally escolatin9 costs of solaries and wo9es' activity. The commencement of commercial opero-materials and supplies, and other adm.inis . trative and tion of Bruce Mansfield Unit No. 2 in 1978 held down general expenses contributed to increases in other the increase in that year. Also contnbuting to the 1979 operation expenses during 1979 and 1978. The strike increase was on increase in the rate used by the Com-by the UWUA further increased such costs in 1978. pony for calculating AFUDC on a gross basis, before provision for deferred income taxes on the allowance McWenance for borrowed funds used during construction (see Note Approximately 99% of the increase in maintenance i of Notes to Consolidated Financial Statements). costs in 1979 related to work performed on the Com-ponles' cool-fired generating units. Such Interest and Other Charges maintenance has increased the availability of the Interest and other charges (excluding the credit for units. os mentioned above. The 1978 increase resulted allowance for borrowed funds used during construc-principally from increased maintenance performed tion) increased during 1979 and 1978 due to increased on the Componles' distnbution line facilities and long-term and short-term debt outstoriding during maintenance at W. H. Sommis Unit No. 7 and Beaver both years, coupled with significantly increased in-Valley Unit No. i, despite reduced maintenance at terest rates on the debt. Details of the Companies' debt several of the Company's generating units during the f noncings and redemptions during 1979 and 1978 ore UWUA stnka shown on the Statements of Consolidated Sources of Funds for Gross Property Additions on page 33. Provision for Depreciation Continued growth in depreciable utility plant in ser. Preferred and Preference Stock vice effected the increases in depreciation expense Dividend Requirements for 1979 and 1978. Increased preferred and preference stock dividends resulted from the Company's sole of 9,000 shores of Taxes $95.00 Preference Stock,18,000 shares of $102.50 General tax increases in 1979 and 1978 resulted Preference Stock and 2.000.000 shares of $1.80 pnmarily from increased gross receipts taxes op- Preference Stock in 1979 and 450.000 shares of 9.12% p!!ccole to the increased revenues for each respec- Preferred Stock in 1978. 28
OHIO EDISON COMPANY AND SUBSIDIARY COMPANY For the Years Ended December 31 1979 1978 Thousands of Dollars OPERATING REVENUES. j Electric (Note 1) .. . ... . . ........ . ... . .. .
$989,217j $857,545 Heating . .. . . ... . . .. .. .... ... . 5,368 f 5.411 Total operating revenues . . ... . .. . .
994,585I 862.956 OPERATING EXPENSES AND TAXES: Operation-Cost of fuel (Note 1) .. .. . . . .... 316,536; 276.570 Purchased and interchanged power, net . . . . .. ... . 60,313! 91,509 Other operation expenses . . .. .. . . . . 138,712' 134.595 Total operation . .. . .. .. . .. . . . . 515,561, 502,674 Maintenance . . . .. . .. .. . . . . 102,936 - 87,738 Provision for depreciation (Note l) . . .. . . .. . _ 81,224' 77,812 General taxes . . . . . . ... .. . . .. . . . .... . .. 89,122, 76,804 Income taxes-provision (credit)(Note 1) . .. .. . .. ... . .. . 41,998; (6.017) Total operating expenses and taxes . .. .. .. . .... .. .. 830,841l 739.011 OPERATING INCOME .. .. . .. . . .. .. .. . . . 163,7441 123.945 OTHER INCOME AND DEDUCTIONS: Allowance for equity funds used during construction (Note 1) .. . 50,571 35,895 Miscellaneous, net . . . .. ... ..... .. . . .. . . .. 1,399) 3,767 Income taxes-credit (Note 1) . . . ... . .. .... .. ... . 4,297 j 7.751 Total other income and deductions-net . . . . ... ... 56,267I 47,413 TOTAllNCOME . . . .... . . . .. .... .. . 220,011 j 171.358 NET INTEREST AND OTHER CHARGES: Interest on iong term debt . . . .. .... . , . .. .... 98.100 108,401; Allowance for borrowed funds used during a construction (Note 1) .. . . . ... .. . . . . ... (46,280) (22,436) Other interest expense . . . . . . . . . . . .. .. . . . . 5,004 Subsidiary's preferred stock dividend requirements . . . 18,423 4,660 l'
. . . . .. . 4.660 Net interest and other charges . . .. ... . .. . .. 85,204 l 85.328 NET INCOME .. .. ... .. ... . ... .. . .......... 134,807 86.030 PREFERRED AND PREFERENCE STOCK DIVIDEND REQUIREMENTS . . 29,687 24.771 NET INCOME FOR COMMON STOCK . . . . .... . . . ..... . . . . $105,120 $ 61.259 AVERAGE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING (THOUSANDS) . . . . .. . . . . . . .. .... 58,290, 51.620 EARNINGS PER SHARE OF COMMON STOCK (based on average number of shares outstanding -{
during the year) . . ... . . . .. .. . . . .. . ... .. .. $ 1.801 $ 1.19 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. 29
At December 31 1979 j 1978 Thousands of Dollars _ .-., - m i UTILITY PLANT (Note 1): in service, at original cost . . . . . ..... . .... ... . .......... . $2,653,481 $2,581,022 Less- Accumulated provision for depreciation . . . . . . . . . . . . . . . . .. .. 745.296 678.106 1,908,185 1,902.916 Construction work in progress. . . . . . . . . . . . . . . . . . . . . . .... 1,091,708 l 803,732 Nuclear fuelin process . . . . . . . ..... .... ... . ... . . . 12,304 ) 11,172 3,012,197 ' 2.717.820 OTHER PROPERTY AND INVESTMENTS: Construction funds held in escrow, including accrued interest . . . . . . . . .. 27,396 l 23.851 3 Common stock of Ohio Valley Electric Corporation, at cost (Note 2) . . . ... .. . .. ....... ..... . ... .. . 1,650 1,650 Other, at cost . . . ... . . ..... ... ........ ..... .. .. 3,614 3.468 32,660 28.%9 CURRENT ASSETS: Cash ........ . .. . .. . . ... ... .. . .. .... ... .... 11,208 ' 7,880 Receivables- 4 Customers (less accumulated provision of $1,094,000 and ,
$1,048.000, respectively, for uncollectible accounts) . . .. . .. ... . 85,937 1 74.349 Other. .. .... . . .. .... .. .. . ... ...... . ... ... . 19,453 17,806 Materials and supplies, at average cost- .
Fael . . ... .. .. ... . ...... .. ... . . . ... .... . '64,649 55,498 Other.. .. .... . . .... ..... ..... . .. . . .... 29,762 : 26.838 Prepayments and other .. ... ........ ....... .. ............ 12,286 ; 11.510 223,295 . 193.881 DEFERRED DEBITS: Deferred energy costs (Note 1). . .. ... .. .... . . .... .. 3,030 ' 4,717 Property taxes applicable to subsequent year . . ..... . . . ... ...... 37,742 ; 36,059 Deferred costs of terminated construction projects (Note 3) . .... .... ..... 100,172 - Other.. .... .. . ... ........ . . .. .. ... . .. .. ... 37,358 29.468 178,302 : 70.244
$3,446,454 j $3.010.914 30
OHIO EDISON COMPANY AND SUBSIDIARY COMPANY At December 31 1979 j 1978 Thousands of Dollars
~~
CAPITAllZATION AND LIABILITIES CAPITALIZATION (See Statements of Consolidated Capitalization): Common stockholders' equity . .. . ... . .... .... ... ..... $ 960,543 $ 851,119 Non-redeemable preferred stock . . . . .. ... .. . .... .... . . .. 265,525; 265.525 Redeemable preferred stock . . . , . . .... .. .. .. . .... 76,000 80,000 Redeemable preference stock . .. . .. ... .... . .. . ..... . .. . 57,250 - Non-redeemable preferred stock of consolidated subsidiary . . . .. ... 41,947 41,947 Redeemable preferred stock of consolidated subsidiary . . . . .. .. 17,600 18,000 Long term debt . .. .. . . ... . . . . . . . 1,410,782 ' 1.343.195 2,838.647 2.599.786 CURRENT LIABILITIES: Current maturities of long term debt and preferred stock . . ....... .. . ... 63,411 ; - Notes payable to banks (Note 6) . . ... . .. . . .. . . . 191,999 96,604 Accounts payable. . . . . . .. .. .. .. . .. 102,051 I 95.551 Accrued taxes . , . ... ..... .. . .... . . ....... . . 60,345; 46.611 Accrued interest . . . .. . .. .. .. ... . . .. . . . . 28,975 ' 27,157 Dividends declared on preferred and preference stock . .... . 4,159 ' 2,527 Miscellaneous . . .. ... . . . ... . .. . .. 12,382 ; 15.733 463,322 : 284.183 1
'r DEFERRED CREDITS:
Accumulated deferred income taxes (Note 1) . . . . . . . . ... ..... .. ........ 39,784 , 37,755 Accumulated deferred investment tax credits (Note 1) . . .. . ....... .... 55,044 ] 42,129 Property taxes applicable to subsequent year . . .. .. . . . ... ... 37,742 1 36,059 Other. . .. . . . ... . . . . . ..... . ... ... .. 11.015 j 11.002 144,485 1 126.945
}
COMMITMENTS, GUARANTEES AND CONTINGENCIES (Notes 2. 4 and 7). ... .......... . . . ... .... . ....... . . . .
$3,446,454 j $3.010.914 The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets.
31
At December 31 1979 l 1978 Thousands of Dottars COMMON STOCKHOLDERS' EOUlTY; '~ ~ Common stock. $9 par value. authorized 75.000.000 shares-outstandmg 59 622.369 and 52.120.230 shares.respectivelf (Note 5a) S 538.002t S 469.082 Other paid m capital (Note Sa). . 282.300 232,422 Retained earnings (Note 5b) . . 190.662 ' 149.615 Total common stockholders
- equity . 900.543 ' 851.119 Optional Redemption Pnce Number of Shares Aggregate Outstandmo gin PIEFERRED STOCK (Note Sc);
Cumulative. $100 par value- - Authonred 4.000.0L.O shares NON REDEEMA8LE-390% -724% . 1,000,000 1.000.000 $103 375-108.000 $105.468 100.000 ' t00.000 7.36 % - 8 20 % . 800.000 800.000 106 520 107.400 85.612 80.000 : 80.000 864% -912% . 850.000 850.000 108 640 109 120 92.560 86,000 ! 85.000 Premium. - - - - 525 - 525 Total non-redeemable preferred stock . Lg50.000 2.650.000 12SRQ 206.525; 265 525 REDEEMABLE (Note 5d): 10 48 % - 10.76 % , 780.000, , _800 000 $110.480111.870 j_86 R 74.000 80.000 Redeemable withm one year . (2.000b - Total redeemable oreferreo atock . . 75.000 : 80.000 PAEFERENCE STOCK: Cumulative, no par value-Authonied 4 000.000 snares : REDEEMA6LE iNote Sel: 1
$95 00-$102.50 Senes . 27.000 -
$1.095 000-1.102.500 $ 29.700 27.000 i -
$180 Senes . 2.000.000 _- $16.925 33 850 -30250 3
Total redeemaele pref erence stock . 2.027.000 1 , S 63.55!) - PREFERRED STOCK OF CONSOLIDATED 57.250 l}i SUBSIDI ARY (Note 5ct: .J Cumulative. $100 par value-Aatnorized 740.u00 shares NON. REDEEM A BLE. 4 24% -916. .- 419,049 4193*9 $102.980109.160 $ 44.538 41.947 l 41.947
?
REDEEM ABLE (Note 5d): 8 24 % - 11.00 % . 1M000 180.00Q $108.240-112.110 $ 19.793 17A00 i
}1 18.000 LONG. TERM DEBT (Note 5ft:
First mortgage bonds. fg Ohio Ed. son Company- ; 2 7/8% Senes due 1980 - . 58.000 10% Senes due 1981 ........... 150.000 I 150.000 3- 1/4 % Senes due 1984 and 1985 . . . . . . . . . . . . 50.401 ! 50.491 4114% -4 3s4% Senee due 1988 through 1991. 100.000 i 100.000 7 1/2 % 114 % Ser es due 1995 tnrougn 2003. 325.000 ! 325.000 8 3/8 % 1/2% Serios due 2006 tMrougn 2008. 315.000 315.000 998,491 Pennsylvania Power Comcany- 940.481 l 2 3.4% $01/2% Senes due 1980 through 2008. 177.806
- 160.805 Total first mortgage bonds 1.118.298 1.159.296 Secured notes and obligations. )
3 Ohio Edison Company- 1
?ollution Control- '
1973 Senes A. average mterest rato 5 62%. due 1984 through 2008 . 35.000 i 35.000 1974 8 % - 8 3.8 % Senes A and B.due 1990 through 2004. 30.463 1 30.453 1976 7 7/8 % Senes D. due 1992 through 2006 . . . . . . 40.000 ; 40.000 1977 4-3/4 % Senes E. due 1979 trefinanced m 1979) . 1978 7.30% 00h atson. due 1988 through 2003. . . . . . . . . . . . . . .
. - j 8.188 ,
26.500 8.186 1979 7.Si8% -9 0% Senes A. F and G.due 1995 theough 2009. . . 53.000 ! - 106.630 140,139 Pennsyivania Power Company-1973- 1979 4 3/4% -848% Senes due 1979 through 2007 . . . 47.981 ! 45.461 Total secured notos and obligations . . . . . . 214.000 185.600 Unsecured notes of Onio Edison Corr *pany due 1982 through 1986(Note Sg). 80.000 ' - Not unamortized premturn (discount) on debt . . (2.114) : 11.701) Totallong-term debt . . . . . , . 1.410.782 1.343.195 TOTAL CAPITALIZATION (Note 7) . .. . . g, $2399 786 The accompanymg Notes to Cct'solidated Financial Statemorris are an mtegral part of these statements. 32
OHIO EDISON COMPANY AND SUBSIDIARY COMPANY 197I For the Years Ended December 31 1979 } Thousands of Dollars BALANCE AT BEGINNING OF YEAR . . . . . . . . .. . .. ...... "$149,615] $180.530 NET INCOME FOR COMMON STOCK . .. ... ... . .. 105,120; 61.259 254,735 j 241.789 DEDUCT: Dividends on common stock. $1.76 per share (Note 5b) . . . . . . . . . ... . . 103,356 90,790 Dividends declared on preferred and preference stock in excess of j current year's requirements . . . .... .. . . . ... ... ... -2631 174 Capital stock issuance expense .. .. .. . .. .... .. . . .. .. 564{ 1.210 104,183' 92.174 BALANCE AT END OF YEAR-(See Note 5b for dividend $149,615 restriction) . . . . . . . . ... .. .. ..... .. ... .. ... . .. 2 3150,552 h i For the Years Ended December 31 1979 4 1978 Thousands of Dollars SOURCES OF FUNDS: . 1 Net income . . . . . . . . . . . .. .... .. .. ......... . .... . ... - $134,8071 $ 86.030 Less- Dividends on common stock . . . ... .... .. .. ... . . 103,356 i 90.790 Dividends on preferred and preference stock . . . . .... .. ... ..... 29,9501 24,945 1,501 (29,705) Principal non-cash items-Depreciation and amortization-Charged to provision for depreclation . . . . . . . . . . ... ... . .. . 81,224 j 77,812 Charged to other accounts .. .. .. ........... .. .. ...... . .J 1,596 s 1,857 Deferred income taxes-net . . . . . ....... . ...... ... ..... 19,802l 1,042 Investment tax credits-net ...... . . ... .... . . .. .. 13,815: (13.893) Allowance for equity funds used during construction . ..... ... ...... . (35.895) Deferred energy costs, net of deferred income taxes . . . . . . . . ...... .
' - (50,571){.
806 (624) Total funds from operations. .. .... .. ...... .. .. . 68,1731 594 Proceeds from issuance of- 117,406 l-Common stock, including premium . 15.309 Preferred stock . . . . . . . ... . .... . . ... . ... ... i 45,000 Preference stock. . . . .... .. . . . ... ......... .. . 57,250: - First mortgage bonds . . . . . . . ... . .. .. ... . . . 20,000 j 145,000 Secured notes and obligations . . . .. .. ..... .... .... . .. . . 59,000 s 8,500 80,000 ' Unsecured long term notes . . . . . . . . . . . . ... .. ... ...... Increase in notes payable to banks . , . ....... ... . .. .... .. 95,395l 84.621 429,0531 298.430 Payment at maturity of long term debt and preferred stock . . .... . . . . (32,000)l (13.00(" Construction funds held in escrow, including accrued interest . ... . . . (3,545)' 11.461 Net change in current assets and current liabilities excluding j notes payable to banks and current maturities of long-term debt and preferred stock-Temporary cash investments . . . .. . ... . .. .... . .....
' - 38,000 Receivables . . . . . . . . . . .... . . .. ... ., .. ... ... .... (13,235) (15.412)
Matenals and supplies . . . . . . . . . . . . . . . .. .. . .. .. . (12,075) (267) Accounts payable. . . .... ... . .. ..... ........ ......... 6,500 l 41,740 Accrued taxes . . . . .. . .. ....... .. . . . .. 13,734 ! 2,548 Other, net . .... ... ... . .. .. .. . . . .. .. . .. ... (4,005)_ 989 (9,081) 67.598 Other, net (i) . . . ..... .. ....... .. . . .... . ... .... ... ... 24,146 j 30.079 GROSS PROPERTY ADDITIONS (i) . .. .. . .. .......... ... S476,746 i $395.162 () Denotes negathe amount. ti) includes ailowance for equity funds used dunng construction (Note 1). The &cCompanying Notes to Consoildated Financial Statements are an integral part of these statements. 33
Notes to Consolidated Utility Plant, Depreciation ond Moinnonc* Financial Statements Utility P! ant is stated of the origino! cost of construction i Summary of Accounting Policies: which includes payroll and related costs such as The Consolidated finanClol statements include the oC. taxes, pensions and cther funge benefits, general orid counts of Ohio Edison Company (Company) and its administrative costs o,d on orlowance for func's used wholly-owned subsidiary, Pennsylvania Power Com. during construction (see Allowance for Funds Used pony (Penn Power). All significant intercompany trans. During Construction). octions have been e!iminated. The Company and The Companies provide for the depreciation of Penn Power (Companies) follow the accounting depreciable plant in ser vice on a straight-line basis at policies and proctices prescribed by The Public Utilities Commission of Chio (PUCO), the Pennsylvania vanous rates over the es'imoted lives of the property. Public Utility Commission (PPUC) and the Federal in the opinion of management, the amounts provided have been adequate and the methods used to deter-Energy Regulatory Commission (FERC). The more significant policies are summarized below. mine the amounts meet the requirements of the regulatory commissions. The effectrve composite rote for electric plant for 1979 and 1978 was 3.3% Revenues The Companies' residential and commere al Est;moted deccmmissioning costs for the Company's only nuclect generating unti in service are currently customers are metered on a cycle basis. The Com- being provided through depreciation rates. Penn ponies' policies are to include in revenue residential Power was granted on oilowance for its shore of and commercial service revenues relating to meters estimated decommissioning costs, for radioactive read through the end of ine month, components only, in its lost rate order and begon pro-Deferred Energy Costs se costs b R The Company records the cost of fuel used for Property additions, renewols and replacements are generation during the period the fuel is consumed. charged to utility p! ant accounts. Property considered to be retirement units, retired or otherwise disposed of Penn Power defers certain increased energy costs it in' in the normal course of business, together with cost of curs and estimates to be billable to customers in suc- removal, less salvage, is charged to the occumulated coed:ng periods, in accordance with its energy provision for depreclotion. No gain or loss is recog-clouse. Effective July 1,1978, the PPUC odopted on nized in the income accounts. Repairs of property are energy clause that replaced the fuel adjustment charged to maintenance. Clouse The energy clause provides for the recovery or refund, over o six month period beginning two colem dor months o'ter incurrence, of energy costs which dif-Common Ownership of Generating Facilities fer from estabhshed base energy costs. It also pro-vides for on adjustment for any over or under collec- The Componies and other Centrol Areaoower Coor-tion resulting from the operation of this Clause. dination Group (CAPCO) companies own, as tenants in Common, various power generating foCilities. Each Monogement expects that the PPUC will o!!ow Penn of the companies is obligated to pay a shore of the Power full recovery of any deferred costs, including costs of any such jointly owned facilities in the some those relating to changes in the log period, or any proportion as its ownership interest. The amounts other changes in occcroonce with the objectives of reflected in the occompanying Consolidated the energy clouse provisions included in its coproved Bolonce Sheet under utility plant include such costs at fontfs December 31,1979 as follows: CAPCO Units in Service f a) CAPCO Units Under Construction
- Bruce Bruce Perry W. H. Mansfield Beaver Mansfield Beaver #1 and Sammis #7 #1 and #2 vatley at #3 Valley #2 #2 Total Thousands of Dollars Utility plant in service . $ 94.427 $431.091 (b) $322.216 ab) $ - $ - $ - $847.734 Accumulated provision fer depreciation , $ 19.785 $ 32.723 $ - $ $ - $ 92.007
$ 39 49_9 -
Construction work in progress . $ 4 266 $ 9.642 5 28 556 $185.756 $279.149 $461.266 $968.635 Nuclear fuelin process (c) . $ 12.304 Companies' ownership interest in unit cacacity 68 80 % 55 15 % $2.50% 41 88 % 41.88'Md) 41 88 % _ (as The Companies' portions of operating expenses associated with the common ownership or generating facilities are included in the corresponcing operating expenses m the accompanying Statements of Consolidated income. (b) Includes common facilities. l (cl unsegregated among the CAPCo nuclear units. l (c) Wul ultimately be reauced to 35 27% 34 l
Allowance for Funds Used During pense related to~ investments in properties other than C:nstruction (AFUDC) utility plant in service (primonly construction work in AFUDC, o non-cosh item which is charged to construc. progress) to income taxes-credit included under other tion work in progress during the period of construction, income and deductions in the accompanying represents the net cost of borrowed funds and equity Statements of Consolidated locome. funds used for construction purposes. The amount of Deferred tax expense results from timing differences in AFUDC hos varied as a result of changes in the level of the recognition of revenues and expenses for tax and construction work in progress and in the cost of accounting purposes. The sources of these differ-capital. Effective January 1.1979. the Company ences and tax effect of each are os indicated below: Changed its method of Calculating AFUDC from o gross rate to o net of tax rate consistent with the rote treatment -" granted in a rote order. The nei of tax rate used by the m- G78 Company dunng 1979 was 8.75% and the gross rate Thousands of Dollars Debt component of used dunng 1978 was 9.5%. Penn Power comouted AFUDC dunng both years utilizing a net of tax rate of 8%, allowance for funds used w"] consistent with the rate treatment granted by the PPUC. during construction ; which is credited I income Toxes to plant . . . . .... .... ' 818,892: $1,292 The provision (cred:t) for income taxes consists of the Excess of tax depreciation following: allowed pursuant to the - ],
" 1'9797 1978 Class Life ADR g ..
depreciation system, net . ,' 5,345 1,768 Thousands of Dollars Currently payable- Accelerated amortization of Federal . .... ... . . $ 3,731' $ (1,528) the cost of certain State. . .... .. 1,234 59 facilities covered by Necessity Certificates . ' 1(1,382)j (1,382) Total currently payable 4,965 (1.469) ' Amortization of previously Deferred, net-deferred income taxes 1 Federal . 17,984 1,117 resulting from liberalized ' l State. . . ..... 937{ 477 depreciation . . . . . . . . . . ' (1,176) (1,442) Total deferred, not j Property taxes applicable to (see below) . . . 18,921; 1.594 subsequent year, net . .. J123 706 investment tax credits, net i 4 1,042 13,815 -19,802 j of amortization (i) . . .. (13.893) Penn Power's deferred , =, Total provision (credit) energy costs, net . . . .. : (881)' 552 for income taxes . g, $(13.768) Total deferred tax ~j expense, net . . . ... $18,921 i $1.594 () Denotes negative amount. (i) Amount for 1978 reflects the reversal of previously ( ) Denotes negative amount. recorded investment tax credits, now being carried forward due to the carryback of net operating For income tax purposes, the Companies have losses. claimed liberalized depreciation (double-declining
- e. g es o@he Qss W Nystem Such provision (creditI is included in the accomponY' provision methods) ond, consistent with the account-ing Statements of Consolidated locome os follows: ing and rate making policies of the applicable 1878 1 1978 regulatory authorities, the Companies have followed Thousands of Dollars " flow.through" occounting except as indicated Operating expenses . . . . . 7 $41,9961 $ (6.017) above. Rote orders received by the Company during Other income . , . . .. . (4,297); (7.751) May and December 1978 have provided on Total provision (credit) .i allowance for deferred taxes on excess tax deprecio-for income taxes .. * $37,701 ! $(13.768) tion allowed pursuant to the Class life ADR System for additions in 1977 and subsequent years. Such rate The Company has been allowed a provision for orders cover opproximately 75% of the Company's deferred taxes on the allowance for borrowed funds revenues and deferred taxes are currently being pro-used during construction in rate orders opplicable to vided for such portion. The amount of such deferred opproximately 75% of the Company's revenues. taxes provided during 1979 and 1978 omcunted to Accordingly effective January 1.1979, deferred taxes $4.036.000 and S169.000. respectively. Penn Power were providad on the coplicable portion of such has deferred the excess tax depreciation o!! owed pur-allowance for bctrowed funds. Pean Power has pro- suont to the Class Life ADR System during both years to viced deterred taxes on the entire allowance for bor- conform with the rote treatment granted by the PPUC.
towed funds in 1979 and 1978. During 1979 and 1978 - the Company o!!ocored 25% and 100%. respectively, of the income tax credit crising from the interest ex-35
Notes to Consolidated Financial Statements (Cont.) The Companies follow deferral accounting with Nuclear Fuel respect to investment tax credits and amortize such The cost of nuclear fuel in service is charged to fuel cred:ts to income over the estimated life of the related expense based on the rate of consumotion, ossuming property. At December 31, 1979, coproximately a zero net salvage value. The manner of disposition of
$26.000,000 of unused investment tax credits were spent nuclear fuel may not be determined for many available to offset future Federal income taxes years, therefore necessitating storage of such fuel for payable, of which S10.000.000 expires at the end of on indefinite period. In its January 1980 rote order, the 1984, S9.000.000 expires at the end of 1985 and PUCO authorized the Company to begin recovering $7.000,000 expires at the end of 1986.
these costs from its customers. Penn Power will seek The tctal provision (credit) for income taxes shown in [egulatory coproval for recovery of the costs through the accompanying Statements of Consolidated In- ds rate case procMgs. Come is less than the amount which would be com-puted by applying the statutory Federal income tax Pensions rate to income before income taxes. The following The Companies have trusteed, noncontnbutory pen-table summarizes the major reasons for these dif- sion plans that cover almost all full-time employees. ferences: Upon retirement, employees receive a monthly pen-
, sion based on length of service and Compensation.
i '1979 1 1978 Pension costs for 1979 and 1978 were S13.731,000 Thousands of Dollars and S12.008,000, respectively. Of those amounts. Bock income before 7-- 39,163.000 and S8.058.000.respectively were charged provision for income 5 to operating expenses. The balances were charged taxes. . . .. * $172,508 : $72.262 primarily to construction. Such costs include the Amount of Federalincome amortization of past service costs on on actuarial tax expense at . basis over 30 years. The Companies fund pension statutory rate $ 79,354 $34.686 costs accrued. The estimated unfunded post service Reductions in taxes liability of the plans at June 30,1979 (the date of the resulting from:(i) latest actuarial report) was S55.689,000. The market Allowance for funds used value cf the pension funds at December 31,1979 ex-during construction ceeded the actuarially computed value of vested which does not benefits at June 30.1979. constitute taxable income (ii) . . (26,745) 2 Ohio Valley Electric Corporation (OVEC): Excess of tax over book (28,036)f The Companies are participating with 13 other depreciation . , (9,918)) (18,423) investor owned electric utility companies and with Capitalized pension costs , 1 OVEC in arrangements with the Department of Energy and taxes expensed 1 (DOE) to supply the power requirements of the DOE currently for tax < plant near Portsmouth. Ohio. The sponsors are entitled purposes (1,765) to receive from OVEC, and are obligated to pay for Other, net . (2,674)I
- (1,025)i (1,521) the right to receive, any available power in excess of Total provision (credit) the DOE contract demand. The proceeds from OVEC's forincome taxes . S 37,701 $(13.768) sale cf power are to be sufficient to meet oil of its costs, including omortization of debt capital over a
( ) Denotes negative amount. period ending December 31,1981, and also to pro-(i) Under the established rate makino practices of the e for o rew on common sd M DecemM M, regulatory commissions to whicl5 the Companies 1979. OVEC had debt capital of approximately are subject, it is expected that the deferred taxes $24.000.000 remaining to be amortized. The par-not provided for currently will be collected in ticipation of the Companies in the power or-customers' rates when such taxes become payable. 9* 8 # (ii) Represents the tax effects of (a) the equity portion The Compon; and certain others have also agreed and 25% of the debt portion of the allowance for (the Company's participation being 16.5%) to supply the Company and the equity portion of the OVEC certain capital requirements if needed, in-allowance for Penn Power in 1979 and (b) the total c!uding $10.000.000 for additional common stock. allowance for the Company and the equity portion OVEC has deferred the need for additional common of the allowance for Penn Power in 1978. stock by issuing interim cebt to banks. The Companies do not expect that the cash outtoy for The Securities and Exchange Commission, acting income foxes with respect to any of the succeeding under the Public Utility Holding Company Act of 1935, three yeo. s will materia!!y exceed income tax expense reserved jurisdiction for future determination of for such years. whether or not OVEC's secunties could be retained by 36
the Company or by other companies subject to the Common Stock by automatico!!y reinvesting their Act. Hearings have been he!d but no decision has Common Stock dividends and by making optional been rendered. cash payments. Purchases mode with reinvested dMoends re m de t price equal to 95% of the 3 Terminated Construction Projects.
- overage of the high and low market prices on the in-In January 1980, the Componies and oil other CAPCO vestment dates. Pnor to July 1,1979, purchases made componies terminated plans to construct the follow- with optional cash payments were made of a price ing four nuclear generating units-Davis-Besse No. 2 equal to 100% of such overage. Purchases made with and No. 3. and Erie No.1 ond No. 2. The Companies' optional cash payments subsecuent to June 30,1979, share of construction costs incurred as of December are made at a price equal to 97% of such overage. At 31, 1979 applicable to these units amounted to December 31, 1979 the Company had 1,202.850
$ 100.172,000. The Companies intend to seek op- shores reserved for issuance under th.3 plan. There provat from the PUCO, the PPUC and the FERC to were also 2.000,000 shores of Common Stock reserved amortize these amounts p'us contractors' concellation for possible conversion of the S1.80 Preference Stock charges, if any, over severot years and to recover the at December 31,1979. In February 1980 the Company costs from customers to the extent that they are not sold 6.500,000 shores of additiono! Common Stock otherwise recoverable. The Componies believe that to underwriters with proceeds amounting to S12.97 such costs were prudently incurred and have no per shore.
reason to believe that the regulatory authorities in- b) Retained Eomings volved will not react favorably to their requests and Under the Company's indenture, the Company's con-therefore believe that any loss of investment and soldated retained earnings unrestricted for payment concellotson charges, if any, will be recoverobie from of cash dividends on the Company's Common Stock their customers. Until orders are received from the were S67.127,000 of December 31,1979. PUCO. the PPUC and the FERC, none of the charges will be reflected in earnings. c) Preferred Stock The Company has 4.000.000 outhorized and unissued - 41.OOSOS: shares of cumu!ative S25 por value Class A Preferred The Companies rent or lease nuclear fuel, certain Stock. transmission facilities, computer equipment, office space and other incidental equipment and property The preferred stock is redeemoble in whole, or in port, under conceloble and nonconcelable leases. The unless otherwise noted, of the option of the Com-total rental expenses included in the accompanying ponies and upon any time not less than 30 nor more Statements of Consolidoted Income for 1979 and than 60 days notice. 1978 ore $10.356.000 and $12,125.000, respectively. Redemption of preferred stock (excluding the The future rninimum rental commitments as of 3.90W4.56% Series of the Company and the December 31,1979 for all nonconceloble leoses are 4 24% 4.64% Series of Penn Power)is subject to certain as fo!!ows: restrictions regarding refunding operations for five 1980. . . .. . . . $ 11.749,000 years from date of issue. The optional redemption 1981 . . . . .. 16.241,000 prices shown will decline to eventual minimums per 1982 .. . . ... 16.216,000 shore in accordance with the Charter provisions that 1983 .. .. . . .. 16,018.000 establish each series. 1984.. ... . ... . . .. 12,458,000 d) Redeemable Preferred Stock Years thereaf ter . . . . ... ... 313,221.000 The 10.48% Series and the 10.76% Series of the Com-If all noncapitalized financing leases had been pony each include provisions for o mandatory sinking capito!ized, the effect on total assets, total liabilities fund sufficient to retire o minimum of 20.000 shores on and expenses would not be material. December i and January 1, respectively, in each year beginning in 1980 at $100 per shore plus ac-5 Capitalization. crued dividends. In November 1979, the Compcny purchased and retired 20.000 shares of its 10.76% ng 1 79 o d 1978. the Company issued 7,502.139 Preferred Stock, resulting in a gain of S79.000 which and 913.565 shares of $9 por value Common Stock for w s WM b h p e com me M Se@s S117,408.000 and $15.309,000, respectively. The ex- of Penn Power includes a provision for a mandatory s&g W s@cient to rewe o mWnwm of 4.000 cess of the croceeds over the por value (S49,888,000 and S7.087.000. respectively) was credited to other
"** *i #NWNU"#
poid in capitol. All of the shares issued in 1978 and 1 per shore plus accrued dividenos. The 8.24% feries f Penn Power includes a provision for a man-1,502.139 of the shores issued in 1979 were issued . through the Dividend Reinvestment and Stock Pur-datory sMg Md sdce to re&e o Mmum of chose Plan. Under the plan. ho:cers of Common Stock 5,000 shares at S100 per share plus accrued con acquire occitional new shores of the Company's enas on DecemW i n ed year Weg n 37
4 Notes to Contolidated Financial Statements (Cont.) The sinking fund requirements for the next five years Based on the omount of bonds authenticated by the will amount to: Trustees through Decernber 31.1979, the annual sink-1980. S2.400.000 ing and improvement fund requirements amount to 1981. . 4.400.000 $ 17,177.000. The Company presently contemplates 1982. . 4.900.000 that funds to be deposited in 1980 will be withdrawn 1983. . 4.900.000 upon the surrender for concellation of a like principal 1984. 4.900.000 omount of bonds specifically authenticated for such purposes against unfunded property additions. This e) Redeemoble Preference Stock method of withdrawal of sinking and improvement The preference stock is redeemoble in whole, or in fund deposits will result in minor increases in the port, unless otherwise noted. of the option of the Com- omomt ome amot shg fmd mdemes. % pony and upon any time not less than 30 nor more Power presently contemplores that its requirements than 60 days notice. will be satisfied in 1980 by permanently waiving its Pedemption of preference stock is subject to certain right to issue bonds against S2.019.000 of the restrictions regarding refunding operations for five S2.798.000 of retired bonds that are presently years from dote of issue. The optional redemption available for that purpose. Alternatively, Penn Power prices shown will decline to eventual minimums per could fulfill the requirements in the some manner os shore in accordonce with the Charter provisions that previously outlined for the Company. estabiish each series. As of December 31,1979 the sinking and improve-The change in redeemoble preference stock out. ment fund requirements and maturities of first mort-standing during 1979 was as follows: gage bonds. secured notes and unsecured long term notes for each of the next five years will amount to: Number of Liquidation 1980. . . . S 78.177.000 Shares Value 1981. . 172.177.000 Balance. January 1,1979. . . - 1982. . 52.982.000 Saleof 595.00 Series ... 9,000 9,000,000 1983. 17.177.000 Sale of $102.50 Series . 18.000 18.000,000 1984. . 44.003.000 Sale of $1.80 Series . . 2,000.000 30.250.000 Balance. December 31,1979 2.027.000 $57.250.000 g) Unsecured Notes Of the unsecured notes outstanding, S50,000.000 carry an interest rate of 11%% and S30.000.000 have The S iO2.50 Series and the S95.00 Series include provi-fluctuating interest rates which approximate the prev iling prime interest rate, sions for a mandatory sinking fund sufficient to retire a minimum of 900 and 1,800 shores. respectively, on July 6 Notes Payable to Banks and 1 in each year beginning in 1984 and 1985. respec-tively, at $ 1.000 per share plus accrued dividends. The 1.ines of Credit *- S 180 Senes includes a provision for a mandatory sink. The Componies have lines of credit that provide for ing fund sufficient to retire a minimum of 100.000 bonowings of up to $235.000.000 at rates that vary shores on October 1 in each year beginning in 1985. from prime up to 108% of the prevailing prime interest at $15.125 per shore plus occrued dividends. rates. Short-term borrowings may be made under these lines of credit on the Companies' unsecured The sinking fund requirements will begin in 1984 and notes. All of the current lines expire December 31 will amount to $900.000 fcr the year ended December 1980; however, all unused lines are conceloble at the 31,1984. option of tne banks. The Si.80 Series is convertible into Common Stock on The Companies maintain cash bolonces on deposit or offer January 1.1980 at any time. unless previously with banks to provide operating funds and to assure redeemed. at a conversion price of $15.125 per shore ovallobility of S149,500.000 of the above-mentioned (equoi to one shore of Common Stock for each shore lines of credit. Such compensating balances, net of of Si.80 Preference Stock). subject to oojustment "floot." are expected fo be maintained at on under certain conditions. overage of opproximately $7,859.000. These balances are not subject to any contractual restriction f) long Term Debt against withdrowo!. The mortgages and supplements thereto which secure all f!rst mortgage bonds of the respective Companies serve os o direct first mortgage lien on substantially all property and franchises. Other than specifico!!y ex-copted property; owned by such company, 38
1 .
'O a
The Company has trust demand note arrangements ferred stock. preference stock and common stock. with a borrowing limit of $22.000.000. Amounts bor- The issuance of odditional first mortgage bonds and rowed ($19.499.000 and S20.104.000 at December preferred stock is subject to the bmitation requirements 39,1979 and 1978, respectively) are collable on de- of tne Companies' mortgage indentures and Charters. mand. The Company holds available o portion of its previously mentioned bank lines to cover any co!! for The Companies. together with the other CAPCO com-payment. The interest rote on these borrowings is ponies, have mode long term cool supply or-based on rates for certain directly placed, high rangements with Quarto Mining Company (Quarto). quality commercial paper. There are no compen- The CAPCO componies have severoily, and not joint-soting balance requirements associated with this ly. agreed to guarantee their proportionate shares of credit arrangement. Quarto's debt and lease obligations incurred in con-nection with developing and equ:pping the mines Adoitional information with respect to these notes whem or not me W con WM Muse d em payable is as follows: vironmental considerations. As of December 31,1979, the Companies' shore of the guarantee was 9979 mI 1978
$215.025.000 (S81.378.000-Iong-term indebtedness.
S81.809.000-lease obligations and S51.838.000-Weighted average interest 'I short-term bank cred:t). which is ultimately expected rate ory outstanding ' to increase to S250.000.000 based on presently g e consMon costs d M.M.M t e ernber ** 15.27 % 11.75 % Because of significant difficulties experienced during Weighted average interest the development period. the Companies are review-rate on outstanding - ing the various citernatives available to reduce Unit trust demand note ' production costs, which are presently in excess of the borrowings at .. _. . current spot market price of cool. Management December 31. . ....
- 13.87 %, 10.55 % believes that the costs incurred in connection with this Maximum amount drawn project will be recovered through the operation of the d Company's fuel adjustment clause and Penn Power's down during the year . $214,992,000. $96.604,000 energy clause or through base rates.
Average borrowings during the year . . . $133,810, $32.089.000 The Companies are subject to regulation with regard Weighted average interest to air and water Quality and otner environmental mot-rate during the year ters by various Federal. state and local authorities. To (based on the daily comply, the Companies estimate that ouditional amounts outstanding) . 12.87 % 8.91 % capital expenditures of approximately S821.000.000 moy be required. Of this amount, approximately
$ 283.000,000 was spent prior to 1980 and 7 COMMITMENTS, GUARANTEES s465.000.000 is included in the estimated construction AND CONTINGENCIES: costs for the 1980-1984 period referred to above. lf the The currently estimated cost of property additions and use of low sulfur non-Ohio cool is not permitted for improvements that the Componies expect to incur compliance with Federal sulfur dioxide emission during the period 1980-1984, inclusive. is approx- limitotions, estimated capital expenditures would in-imately S2.300.000.000. of which approximately crease by approximately S300.000.000 and annual
$510.000.000 is applicable to the year 1980. The major operating costs would increase substantially. Similarly.
portion of the Companies' construction activities dur- if a flue gas desulfurization device must be installed at ing the 19801984 period relates to the CAPCO com- Penn Power's New Castle Plant to comply with such ponies' program for the joint develcpment of power emission limitotions it is estimated that the capital ex-generation ond transmission facilities. In connection penditures would increase by S85.000.000 and on-with the future commercial operation of nuclear gen- nual operating expenses would increase by approx-eroting units, the CAPCC companies have entered into imotely S 15.000.000. If the Componies are required to commitments witn rescect to the supply of nuclear install additional off stream cooling in connection with fuel. The Companies' shore of the cost associated with the operation of the New Castle and Sommis plants, such Commitments is estimated to be Si.236.0CO.000. additional substantiot.. but presently undeterminable. costs would be incurred. Although . 3 Componies are
- The Componies present:y contemplate a financin9 unable to predict the ultimate results of various legal .
program during the 1980-1984 period which will in- proceedings pending in Ohio Ond Pennsylvanic clude the so'e or issuance from time to time of op-relating to compliance with environmentai regulations propnote occitional amounts of first mortgage bonds, or any cad:tional capitol and operating expenditures secured pollution control and environmental notes that may be necessory os a result thereof, they expect and obligations, unsecured long term notes. pre- that the impact of any such costs would eventually be retiected in their rate schedules: 39
m Notes to Consolidated Financial Statements (Cont.) . In some of these proceedings, criminal fines or civil desulfurization system at Mansfield and the threat of penalties ultimately.could be imposed under the radioactive emissions at Beaver Volley. In addition, Cleon Air Act Amenoments of 1977 and the Federal numerous individual plaintiffs have filed actions seek-Water Pollution Control Act as amended by the Clean ing monetary relief in on unspecified amount for Water Act of 1977 or the Companies could be forced domoges claimed to be o result of the some alleged to shut down significant amounts of cool fired capaci- operationc! malfunctions. Although unable to predict ty. The Federal government has begun legal pro- the ultimate outcome of this matter, the Company ceedings against the Componies, under the Clean Air believes that its ultimate disposition will not result in Act, asking the courts to ossess civil penalties for any material adverse effect on the Company's con-alleged continuing violations of porticulate emission solidated financial position and results of operations. regulations at the W. H. Sommis Plant and sulfur diox-ide emission regulations of Penn Power's New Castle In 1977, the Boroughs of Ellwood City and Grove City,. Plant. Region V of the l'edero: Environmental Protec. Pennsylvania, filed a complaint against Penn Power, fion Agency (EPA) has advised the Company that it in. a;leging that Penn Power, individually and in con-tends to issue o delayed compliance order, the effect spiracy with the Company and other CAPCO com-of which would be to extend into 1980 the dates as of ponies, has violated Sections 4 and 16 of the Clayton whlch enforcement proceedings may be brought Act to restrain and monopolize trade and commerce against the Company for failure to comply with sulfur in alleged markets for electric power. Domoges of dioxide standorcs at the Sommis Edgewater and $7,000,000 (to be trebled) and injunctions against the NUes Plants. The Clean Air Act amendments which unlawful acts are sought. On January 4,1979, the become effective in August,1977, permit the imposi. Court granted summary judgement in favor of Penn tion of civil penoities of up to $25.000 per day of violo. Power as to certain allegations of the complaint. tion. The penotties, if any, that may be imposed by the Managegnt is unable to predict the ultimate out-come of this action, courts for o!!eged post violations are not now deter. minable, but such penalties could be substantial. The On April 10, 1979, Kerr-McGee Nuclear Corporation Companies expect to comply with any final orders of fled a complaint against the CAPCO companies the courts and, in tne meantime, to conduct operation alleging a breach of a 1973 uranium supply contract, of the plants so os to minimize the opplicable emis-sions to the greatest extent that they deem to be proc-thus allegedly entitling Kerr-McGee to treat the con-ticable. Therefore, the litigation described above tract as having been terminated. Kerr McGee also seeks unspecified domoges, costs and such further should not result in the imposition of any substantial relief as the Court deems just and proper, If the 4 civil penalties for future conduct uranium is not delivered by Kerr-McGee, the CAPCO The EPA had tentatively indicated on intention to seek companies will have to make other arrangements, to enforce noncompliance penotties beginning which may result in additional, but presently undeter-August 7,1979 for failure to comply with applicable minable, costs to CAPCO members. emission hmits, as required under the Clean Air Act; however, final regulations have not been issued. Even The PPUC instituted on investigation into on outage of if schedules which have been submitted by the Com- Beaver Volley Unit No.1 during the period March-pony to bring the units of its system into compliance by August 1979, which outoge had been ordered by the 1984 ore accepted, substantial noncompliance Nuclear Regulatory Commission to analyze possible penalties may result, until final regulations seismic deficiencies of safety-related piping and pipe the date from which penolfles will beg, orethe supports issued, in the Unit. This investigation is to determine 4 in and whether, as a result of this outage, the Unit should be et of calculating such penalties will not be eliminated from, or adjustments should be made in, Penn Power's rote base and whether expenditures by in addition. the following summarizes certain other Penn Power for purchased replacement power should outstanding legal actions and complaints against the be disallowed for purposes of Penn Power's energy Companies- clause. In a separate investigation, the PPUC is con-sidering whether additional construction costs in 1977, the Borough of Shippingport, Pennsylvania, resulting from deferrol of construction projects should filed octions against the CAPCO companies seeking to be excluded from rate base in subsequent rate pro-enjoin the operation of the Bruce Mansfield and ceedings. Beaver Vo!!ey plants and to obtain domoges resulting from oHeged operational mo: functions of the flue gas 40
8
SUMMARY
OF QUARTERLY FINANCIAL DATA: The following data summarize certain consolidated cperating results for the four quarters of 1979 and 1978. Three Months Ended 1N9 9 79 9 1 8 978 7 3 1 Thousanos of Dollars operating Revenues . T $250,433 ~ S236,$00~ S254,989 " $252,603 $218.876 $197,991 5219.478 $226.611 operating Expenses and Taxes 214.883 198,715 207,472 209,771 186 225 165.428 188.394 198.964 operating income , 35,550 37,845 47,517 42,832 1 32.651 32,563 31,084 27,647 Other income and Decctions-net . '11,820 - 13,122 ' 14,210 . 17,115 j 9,717 11,333 12,010 14.353 Nat interest and Other Charges . - 20,432 20.696 " 21,778- 22.298 4 19,176 20.924 22.357 22.871 nit income , , 'S 26.938 5 30.271 S 39.949 3 37,649 3 $ 23.192 5 22.972 S 20.737 $ 19.129 Ntt income for Common Stock $ 19,984 5 23,318 5 32,515 5 29,303 ! 5 17.264 5 17.045 $ 14,775 5 12.175 Average Number of Shares of .9 Common Stock ' f outstanding (Thousands) . ' 56.264 58.562 58.945 59,390 1 51.301 51.499 51,707 51.972 Earnings per share of Common Stock - S .36 S .40 $ .55 5 .49 1 5 .34 5 .33 5 .29 $ .23 Auditors' Report ARTHUR ANDERSEN & CO. 1345 Avenue of the Americos New York, N. Y.10019 To the Stockholders and Board of Directors of Ohio Edison Company: We have examined the consolidated balance sheets In our opinion, the financial statements referred to and statements of consolidated capitalization of Ohio above present fairly the financial position of Ohio Edison Company (on Ohio corporation) and its sub- Edison Company and its subsidiary company as of sidiary company, Pennsylvania Power Company, os of December 31,1979, and 1978. and the results of their December 31,1979, and 1978, and the related operations and the sources of funds for gross property statements of consolidated income, retained earnings additions for the years then ended, in conformity with and sources of funds for gross property additions for the generally accepted accounting principles applied on years then ended. Our examinations were made in oc- a consistent basis. cordonce with generally accepted auditing standards and, according!y. included such tests of the account-ing records and such other auditing procedures as we y (- considered necessary in the circumstances. February 8,1980 9
Statement of Financial Accounting Standards No. 33. " Financial Reporting and Changing Prices" (SFAS No. 33), provides for the preparation of supplementary financio! information to disclose the estimated effects of inflation and changes in prices on prcp-erty, plant and equ pment. This dato is presented in accor-dance with SFAS No 33, however. it is not intended as a substitute for earnings reported on a historical cost basis. Adjusted for the Effects of Changing Prices For the Year Ended December 31,1979 (in Thousands) As Reported Historical in the Cost Adjusted for Primary Adjusted for Change in Consolidated General Specific Prices Statements inflation (Current Cost) (Average 1979 Dollars) Operating Revenues ..... . ...... . ... $994,585 $ 994,585 5 994,585 Operating Expenses and Taxes: Operation and maintenance . . . . .. .... ... ... 618,497 618,497 618,497 Provision for depreciation . . .. . .. . . 81,224 144,517 172,189 General taxes . . .. .................... .... .. 89,122 89,122 89,122 Income taxes . . . .. . . ... ... .... ... .... 41.998 41,998 41,998 Total operating expenses and taxes. . . . . . .. .... 830.841 894,134 921,806 Operating Income . .. . . . .. . . ......... . 163.744 100,451 72,779 Other income and Deductions, net . .. .. .... .... .. 56.267 56,267 56,267 Net Interest and Other Charges . . . . . ....... .... ... 85,204 85,204 85,204 Preferred and Preference Stock Dividend Requirements . ..... 29.687 29,687 29.687 income from Continuing Operations (excluding reduction to net recoverable cost) . . . ..... .. . ... ........ .. $105.120 $ 41,827(a) $ 14,155 increase in specific prices (current cost) of property, plant and equipment held during the year (b) . .... ...... . ..... .. $ 555,648 Reduction to net recoverable cost . .. . . .. . . $(295,138) (183,514) Effect of increase in the general price level on property, plant and equipment . .... . . (639.600) Excess of increase in the general price level over increase in specific prices of property, plant and equipment after reduction to net recoverable cost . ... .. .. (267,466) Advantage resulting from the decrease in purchasing power of net monetary liabilities . . ... ...... . ... ... ... .. .. . 247.269 247,269 Net . . . ...... . .. .. ... ...... .. ... ... 5 (47.869) $ (20.197) (allncluding the reduction to net recoverable cost, the income (loss) from continuing coerations adjusted for general inflation would have been $QS3.311.000). (b) At December 31,1979. property, plant and equipment, net of accumulated depreciation. all adjusted for changes in specific prices (current cost) was $5.513.999.000, while historical cost (net cost recoverable) was 53.015,686.000. See Notes to Supplementary Financial Data on page 44. 1 42
OHIO EDISON COMPANY-AND SUBSIDIARY COMPANY Adjusted for the Effects of Changing Prices For the Years Ended December 31 1979 1978 1977 1976 1975 OPERATING REVENUES (in Thousands) As reported in the primary consolidated statements . . . . . . . . . . . . . . . .... . $ 994,585 $862.956 $796.289 $644,852 $593.324 Adjusted to average 1979 dollars . . . . ... . $ 994,585 $960,116 $953,792 $822.234 $800,178 HISTORICAL COST INFORMATION ADJUSTED FOR GENERAL INFLATION (In Average 1979 Dollars) Income from continuing operations (excluding reduction to net recoverable cost) (In thousands) . .... . ....... . .. ... $ 41,827 income from continuing operations per common share (excluding reduction to net recoverable cost) . . ... .. . ...... ... .. $ .72 CURRENT COST INFORMATION (in Average 1979 Dollars) Income from continuing operations (excluding reduction to net recoverable cost) (In thousands) . . . . . . . .... ...... . . . . . . . . $ 14,155 income from continuing operations per common share (excluding reduction to net recoverable cost) . . . . ...................... $ .24 Excess of increase in the general price level over increase in specific prices of property, plant and equipment af ter reduction to net recoverable cost (in thousands). . . . . . ... .. . . . . . $(267,466) OTHER INFORMATION Common stockholders' equity at December 31 at net recoverable cost (in thousands of Average 1979 0ollars) . . . . . . . . . .. ...... ... .. . $ 919,205 Advantage resulting from the decrease in purchasing power of net monetary liabilities (In thousands of Average 1979 Dollars) . . . . . . . . . $ 247,269 Cash dividends declared per common share-As reported . . . . . . . . . . . . . . . . . ........ .... $1.76 $1.76 $1.715 $1.67 $1.66 Adjusted to average 1979 dollars . . . . . . . . . . . . . . . $1.75 $1.94 $2.04 $2.12 $2.22 Market price per c;mmon share at December 31-As reported . . . ... . .......... .... ..... $13.375 $14.875 $19.50 $20.875 $16.75 Adjusted to average 1979 dolf ars . . . . . . . .... $12.65 $15.94 $22.78 $26.04 $21.90 Average consumer price index . . . .... . . ... 217.4 195.4 181.5 170.5 161.2 See Notes to Supplementary Financial Data on page 44. 43
Notes to the Supplementary Financial cumuioted provisions for cepreciation were esti-Data Adjusted for the Effects of moted for each functional class of property, plant and equipment by applying the Handy-Whitman Index to Changing Prices o vintaged theoreticci reserve for depreciation. The Consumer Price Index for All Urban Consumers income taxes included in income from continuing (CPI-U) was used for converting historical amounts for operations adjusted for general inflation and for property, plant and equipment into overage 1979 changing prices is the some os the provision reported dollars, thus giving on indication of the effect of gen- in the primary consolidated financial statements, in eralinflation on the principal assets of the Companies. conformity with SFAS No. 33. Current cost of property, plant and equipment other During inflationary periods, the investment necessary than land was calculated by applying the Handy- to replace property, plant and equipment will be Whitman Index of Public Utility Construction Costs for more than their original cost. Because the Companies the North Centrol Division and the Bureau of Labor are permitted to recover in revenues, through a and Statistics engineering indices to functional ac- depreciOticn allowance, only the historical costs of counts by vintage years, except for large construct;on such assets, the additionc! cost of plant as adjusted projects which were trended based on the year that for changing prices is indicated as o " Reduction to costs were incurred. The current cost of land was col- net recoverable cost." culated by applying the CPI-U to the octual costs in the respective years of acquisition. The current cost Net monetary liabilities of the Companies consist data approximately reflects the current cost of acquir- primarily of long-term debt and preferred stock. Dur-ing property, plant and equipment identical to assets jng inflat,onary i penods, the Companies will be repoy-currently owned. ing these net monetary liabilities with dollars having less purchasing pcwer than dollars had when the Depreciation expense adjusted for general inflation liability was originally incurred. The difference is in-and for changing prices was determined using the dicated by the " Advantage resulting from the some rates and methods used in calculating the pro- decrease in purchasing power of net monetary vision in the primary financial statements. The oc- liabilities."
~
. OHIO EDISON COMPANY AND SUBSIDIARY COMPANY 1979. 1978 1977 1976 1975 1974 OPERATING REVENUE /, (THOUSANDS) C Residential Sales . .. .... -8380,273; $314,867 $284.512 $232,433 $221.230 $179.300 Commercial Sales ..... . . . t, 240,488' 205,901 191,381 155.572 149.268 122,009 industrial Sales , . . . . .... , ' 318,186 258.767 236,434 195,311 180,086 159,585 Other Sales . . . . . . . .. 82,792, 55.817 39.569 37,762 33.560 26.929 Total Electric Sales . 6 - 988,700! 835,352 751,896 621,078 584,144 487,823 Other Electric Revenue . .. , i 20,500 22,193 39,281 19,542 4,797 6,449 Steam Heating . .. . 5,388' 5.411 5.112 4.232 4.383 4.083 Total. . . . .. . .. 8984,588- $862,956 $796.289 $644.852 $593.324 $498.355'
--===
ELECTRIC SALES IN KILOWATT. I. - I - HOURS (MILLIONS) Residential . .. .. . . F 8,8604 6,501 6,334 6.024 5,809 5,610 Commercial. . . . .. . .. . . 1 4,883 l 4,470 4,549 4,358 4,169 4,023 Industrial . ... .. . .. I 8,830 9,600 9,671 9.262 8,514 9.630 AllOther . .. . .. i ' > 1,787 1,738 1.675 1.558 1,489 1.419 Total. . . .. .. .. I 22,000 22.309 22.229 21.202 19.981 20.682* h- . CUSTOMERS SERVE 0 AT b-END OF YEAR i Residential . . . .. .. I 881,188 848.268 836,500 824,851 813,308 800,612 Commercial . . . . .. ... .. [ 87,425 86,410 85,002 85,512 83,710 83,111 industrial . .. .. . . ... [ 1,181 - 1,160 1,147 1,111 1,132 1,109 AllOther . . . ... 883 689 682 681 676 586 Total.. . ... . ., , 950,475 936.527 923.331 912.155 898.826 885.418 RESIDENTIAL CUSTOMER DATA Average annual use- ._ kilowatt hours . . . . . . .. .... ! 7,780 7,724 7,637 7,361 7,204 7,070 Average price per [ kilowatt hour . . . . ... . 8.42s l 4.84c 4.49c 3.86c 3.81c 3.20e f-STEAM ' N Sales in millions of pounds . . . . . . . [ < 787i 860 876 992 980 1,164 Customers served at end of year. . t 383 392 417 456 479 522
- Exclusive of the cumulative effect to December 31,1973 of recording metered but unbilled sales and revenues of 188,553,000 kilowatt-hours and $5,028,000, respectively.
45
OHIO EDISON COMPANY AND SUBSIDIARY COMPANY Price Range of Common Stock , 1979 1978 1977 1976 1975 First Quarter High. Low 16%: 14% 19% 17% 21 18% 19% 16% 16% 12% Second Ouarter High Low 316%.14L 18% 17 20% 19 18% 16% 16% 13%- Third Quarter High. Low 16% ; 14%- 19 17% 21% 19% 19% 17% 16% 15 Fourth Quarter High. Low '15% ~ 13%i 17% 14% 20% 18% 21 18% 17% 15% Yearly High. low JJQ 19% 14% 21% 18% 21 16% 17% 12% Prices are as quoted on the New York Stock Exchange prior to January 23,1976, and on the NYSE Composite Transactions thereafter. Book Value Per Share 1979 1978 1977 1976 1975
,Y At December 31 816.26 $16.33 $16.93 $15.93 $15.29 Quarterly Dividends Paid Per Share );1979- 1978 1977 1976 1975 i: _.
First Quarter [ - S '.44 $ .44 $ .42% $ .41 % $ .41 % Second Quarter '
.44 .44 42 % 41 % .41 %
Third Quarter -
.44 .44 .42% .41 % .41 %
Fourth Quarter
~
.44 '
.44 .44 .42 % .41 %
Total for Year +
$1.76 1 $1.76 $1.71 % $1.67 $1.66 This Company's common. preferred and preference stocks are listed on the New York Stock Exchange and the Midwest Stock Exchange and are traded on other registered exchanges.
Holders Shares Held Number % Number % Individuals . . .. . . . . 152.840 88.1 33.449,967 56.1 Fiduciaries ... . 15,524 8.9 2,998.283 5.0 Brokers . . .. . . . .. . . . .. 65 - 491.888 0.8 Nominees . . . . ,. . .. ... . 1,381 0.8 19.975.583 33.5 Banks & FinancialInstitutions . . . .. .. . 66 - 159,114 0.3 Insurance Companies & Other Corporations. . .... . .. . 1,669 1.0 1,437,132 2.4 Charitable. Religious & EducationalInstitutions . ... . 627 0.4 465.233 0.8 Pensions, Profit Sharing i Other Investment Trusts . .. .. .. 1.310 0.8 645.164 1.1 TOTAL . .. . . .. . . ... . 173.482 100.0 59.622.369 100.0 m ore coonno iown ar. .ae.,% wtwn wa to a
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