ML19343B083

Annual Financial Rept 1974

ML19343B083
Person / Time
Site:	Arkansas Nuclear
Issue date:	12/31/1974
From:	ARKANSAS POWER & LIGHT CO.
To:
References
NUDOCS 8012020734
Download: ML19343B083 (28)

Text

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AMessagefromthe President

-} The year 1974 was a most unusual one for the energy-related industries of America. We, at AP&L, were no exception. As the year began, we found our-selves feeling the effects of the Arab oil embargo; locked in a vicious infla-pt p ,

tionary economy; facing a deteriorating financial situation; and subjected to increasing scrutiny by federal and state regulatory . id control agencies, b's

L environmental groups and consumer activists.

As a result, it appeared to us that our challenges for 1974 would be: (1) to secure sufficient firm supplies of fuel oil to burn in our steam electric sta-

~ tions since oil was at times our sole available fuel; (2) to continut to take steps toward a more flexible fuel base by completing the initial unu of our first nuclear-fueled station and beginning construction on our first coal-fueled station; (3) to maintain financial soundness, thereby, justifying the investing publics' confidence; and (4) to streamline internal organization to better meet the current needs of the Company.

Although we continued all practical belt-tightening, our earnings picture early in 1974 dictated that we seek retail rate relief to complement the wholesale rate relief which was initiated in 1973 and placed into effect, subject to refund, January 1,1974. On March 18, we filed new retail rate schedules designed to produce additional revenues. projected to yield 538.6 million annually. These new rates were placed into effect, subject to refund, plus interest, on all electric bills rendered on and after September 1,1074.

During the year, the sale of 5135 million in stocks and bonds was necessary in meeting the capital requirements to finance our construction program. As a part of our plan to secure construction funds, we concluded arrangements to sell and lease back the nuclear fuel for our first unit of Arkansas Nuclear One. Mora than 531 million was provided by this arrangement.

Also, during the year significant progress was made in reducing dependence on fuel oil and natural gas as a boiler fuel. Firs., we completed and placed into commercial operation our first nuclear-fueled generating unit. Second, we received approval to build two units of a proposed four-unit, coal-fueled

! generating station.

In order to gain the fuel flexibility required to serve our customers, the Company is turning to the options of nuclear energy and coal. Unfortunately, the new units will reflect a sharp increase in

the capitalinvestment required per kilowatt of capacity as compared to the units built in the past for l natural gas generation. However, this increase in cost will be offset to some degree by a lower fuel cost l per kilowatt-hour generated when compared to the record high cost that the Company is now having to pay for fuel oil. (See Cost of Service charts on inside front cover.)

l Another important step in 1974 was a significant reorganization of Company management and responsibility assignments designed to provide more efficient operations and to be more responsive to customer needs.

When 1974 became history, the record showed that our Company's earnings for the year were 557 l

million. This level of earnings, while acceptable, resulted largely from benefits which are non-recurring l in nature. The principal contributing factors were the adjustments associated with tne six-month delay incurred in completing our nuclear-fueled generating unit and the unexpected benefits rend from the short-term availability of purchased energy at costs less than such energy could have wn-erated by the Company. Another important item adding to earnings was revenue collected u; _r in-creased wholesale and retail rate schedules which were placed into effect during the year.

It is essential that all publics clearly understand the quality of these earnings and the need to continually increase earnings to support the ever-increasing capital investment vital to finance the expanding facilities of the Company. During 1974,525 million, or 44 percent, of net income came from allowance for funds used during construction (AFDC). This AFDC, which is a bookkeeping entry, is l 1

based on the Company's construction activities rather than its basic operation of selhng electric energy and is subject to considerable fluctuation. Unlike operating revenues. AFDC is a non-cash source of earnings and does not provide any current funds for u+ in the busmess.

In essence, while our earnmgs ture for 107.; nas brighter than anticipated as the year began, the maior factors causing this will net t'e present m 1075. Hence, we f ace a new year with many of the chaMenges of last > car and the need s seek additional solutions. We propose to continue maum:nn;-

cost control, miniminnn capital e .r. ,ditures, improving our " load" factor and seeking adt cuate com-pensation for the use of our invest /cs' money. We are confident that through the dedicated, profes-siona! team effort of each of oar more than 3,000 employees, the understanding of our cu,tomers and regulators and the contmued confidence of our investors, we will be successf ul in 1075.

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". . . secure sufficient firm ". . . maintain financial soundness. . ."

supplies of fuel oil . . ." Although total revenues continued to increase, The Arab oil embargo intensified pressure on as 1 74 began the Company was f aced with a de-AP&L in light of the increasing scarcity and cost of teriorating financial situation, because expenses and pther costs of doing business were escalating at a

' fuel oil and the necessity to use this boiler fuel be.

cause of natural gas curtailments to generating tar greater rate than revenues. This meant that units. The Company worked throughout the year earnings for paying the investing public for the use i

to secure adequate oil supplies through System of its money and for reinvestment in the Company's Fuels,Inc., a jointly-owned, non-profit corporation construction program began to decline. In tact, at organized by AP&L, Louisiana Power & Light, the end of the first quarter of 1074, the earnings for Mississippi Power & Light and New Orleans Public eight of the preceding ten months were lower than Service, those for the same months in the previous year.

Working together, SFI and AP&L were able to A direct impact of this wa3 the reduced borrowing obtain the necessary fuel oil without an- major capability of the Company due to the marginal detrimental effects on ge erating capability. How. coverage ratio for selling bonds.

ever, the long-term effects of the oil embargo re- In 1074, the challenge of fiscal stability in an in-main. The cost of fuel oil has increased bv four to creasingly inflationary economy required that man-five times over pre-embargo levels and'this has agement place priority atention on maintaining sharply increased AP&L's operational expenditures. the Company's long-standing reputation as a finan-cially-sound electric utility.

This challenge was to be met with the only re-maining long-term financial alternative: rate rehet.

". . . take steps toward a more flexible fuel base . . ."

Al,&L managemer.. believes that nuclear fuel

". . . streamline internal and coal provide the best long and short-range organization to better meet the solutions to the fuel shortage situation. With these current needs of the Company. . ."

goals in mind, the Company worked in 1974 to As energy problems moved to the forefront of broaden its fuel base to allow AP&L to lessen its national attention, AP&L was confronted with an dependence on fuels which are in short supply. atmosphere of intense scrutiny and questioning bv (See " Generation by Fuel Source" chart on inside numerous governmental and public factions. Thil front coverd climate was primarily produced bv economic ques-The commercial operation of Unit 1 of Arkan~ tions raised by the filing of the retail rate increase sas Nuclear One brought the Company and the and by environmental questions raised by the Com-Southwest into the " Nuclear Age,"with more nu- pany's construction programs.

I clear-fueled capability scheduled to be on line by Irilight of these developments-and in an effort the end of 1977, to improve customer and public relations-Com-In addition, the Company received regulatory pany management carefully reviewed its organiza-approval to build two coal-fueled units with a total tional and operational procedures to determine the net generating capability of 1.4 million kilowatts. best way of being responsive to the needs of the Planning continued on two additional coal-fueled public.

units for completion in the early 1980's.

Planning and building ahead to take advantage of the most practical and reliable fuel options are challenges that will continue as energy resources i dwindle and demand for electric energy increases.

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. . . filed new retail rate schedules designed

! to produce additional revenues projected

to yield S38.6 million annually . . ."

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AP&L received approval for its last retail rate increase in 1o57. Since that time, i rate decreases were placed into effect in 1962 and 19c'5. Due to the current need for additional revenues, the Company filed new rate schedules with the Arkansas Public

Service Commission in March,197a, seeking rate relief that would produce 538.6

million annually.

In April, the APSC suspended the effective date of the new rates for a period of six months. In September, the Company began collecting the new rates subject to possible refund, plus interest, pending final determination of their reasonableness.

i Public hearings on the filing were begun in October and concluded in January with finai briefs being filed in February,1075.

In addition to the retail rate increase, the Company continued to pursue final determination on the wholesale rate application filed with the Federal Power i

Commission in June,1973.

On January 1,1974, AP&L placed the new wholesale rates, designed to yield approximately 52.4 million annually, into effect subject to possible refund, plus

interest, pending final determination of their reasonableness. The FPC hearings are continuing in this case and a decision is expected sometime in 1975.

Approval of both the retail and wholesale rate scheduleswould significantly aid the Company in maintaining its financial soundness so that needed money for I construction programs can be attracted from investors. New generating facilities are needed to keep pace with the growing customer demand for electric energy. (See

" Customer Demand and System Capability" chart on inside front cover.)

In 1974, the Company experienced a record customer demand of 3,049,000 kilowatts at a time when Company-owned generating facilities had a capability of 2,172,000 kilowatts. AP&L was able to meet this demand through its own facilities supplemented by interchange agreements and contracted reserves of firm power.

Historically, the Company has been a net importer of electric energy, but in 1078 AP&L expects to have on line enough generating capability to meet customer demand with its own generation system.

4 However, if the new rate schedules are not approved and do not provide the needed additional revenues, the Company could be in a position of being unable to meet its customer demand for electric energy in the years to come.

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"*3.M -2**'mK-5~~.;'; ?Q As a part H Al% Ifs wmmitment to sater,uard the environment, st a ntists trom the Unners:tv of Arkansas at latile Rock and Arkansas Polytechnic Cohere wntmua!!y monitor the etolon of the DardaneHe Rewrvoir m the area around Arkansa, Nuc! car One.

". . . placed into commercial operation our first nuclear-fueled generating unit . . ."

Located on the Dardanelle Reservoir near Russellville, Arkansas Nuclear One is Al%l 's first commitment to nuclear-fueled electric generation.

The first unit of the two-unit generating station began commercial operation on December 10 after being under construction for over 7 years. Iluilt at a cost of 535 million, Unit 1 has a net generating capability of 831,000 kilowatts.

At year-end, construction on the 912,000-kilowatt Unit 2 was about 38 percent complete and is now scheduled to be on line in late 1077. The turbine generator, reactor vessel, pressurizer and steam generators have been installed and all other major equipment is on site. Unit 2 is presently estimated to cost 5341 million, lloth units will be used for baseload requirements.

". . . the sale of $135 million in stocks and bonds was necessary in meeting capital requirements to finance our construction program . . ."

In order to keep pace with growing electric energy demands of the customers, AP&L construction expenditures reached the s181-million mark in 1974-bighest ever in Company history. Financing of those expenditures and the redemption of maturing long-term securities of 534 million were primarily provided through the sale of a

! record 5135 million in stocks and bonds.

Sale of new securities included purchase of common stock by hiiddle South Utilities, Inc., totaling 533 million-520 million in N1ay and 515 million in November.

In June, 540 million in first mortgage bonds were sold at an interest rate of 105 percent. An issue of 500 million of bonds was sold in November at an interest rate of 9% percent. The June issue had a traditional maturity of 30 years while market conditions in November dictated that the bonds carry a 7-year maturity date.

Rising interest rates on borrowed capital have pushed the average interest rate on outstanding long-term debt from 3.7 percent in 20 05 to 7.1 percent at year-end 1974. (See chart on inside front cover.)

". . . concluded arrangements to sell and lease back the nuclear fuel . . ."

Another step toward continuing financial stability was taken last June when AP&L arranged to se!! the nuclear fuel for Unit 1 of Arkansas Nuclear One, the Company's first nuclear-fueled generating unit, to Southwest Fuel Company (SFC).

AP&L then leased this fuel from SFC, making more than 531 mil' ion in funds available for other capital requirements.

. . . received approval to build two units of a proposed four-unit, coal-fueled generating station . . ."

In October, the Company was granted approval by the Arkansas Public Service Commission ( APSC) to build two coal-fueled generating units, each unit having net capacity of 700,000 kilowatts, at a site on the Arkansas River near Redfield, between Little Rock and Pine Bluff. Construction began in late fall. Total project cost for the two-unit station is now estimated at s440 million, and the units are scheduled to be in commercial operation in 197S and 1079.

Called White Bluff Steam Electric Station, the plant was originally proposed as a four-unit generating project. However, after lengthy hearings, the APSC allowed only two of the units. The Commission indicated that AP&L could submit another application for two morr units at another site, if the Company cons!dered such a step necessary. The selection. process for a site for the two additional coal-fueled units is continuing with a decision on the site expected in late spring or early summer.

A 20-year supply of low sulfur Wyoming coal has been contracted for Units One and Two of the White Bluff Station. An option to extend deliveries for an additional 10 years has been also arranged. Litigation concerning compliance with environmental requirements for mining of Wyoming coal has been instituted in the courts. The Company has intervened in this suit. Legislation regulating strip mining is also pending in Congress.

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". . . a significant rG: organization of Company management . . ."

In Apri!. AP&L implemented a reorganization plan focusing emphasis on two major department to aid m customer .crvices and tinancial planning.

The new Customer Services Department was established to make AP&L more responsive to the customer J needs with a closely coordmated group to provide more efficient service. With all functions dealing with the customer under one authority, the Department has been given the responsibility for the geographic d visions, customer accounting, distribution plant and marketing.

One of the principal reasons for the tormation of the Financial Services Department was the need for more comprehensive planning in preparation for construction financing. Included in this new group are the functions of corporate planning, treasury and accounting, and internal auditing. Under this system, better planning coordination will be achieved for the areas of finance, construction and operations.

". . . our Company'S OarningS . . ."

On the surface, the casual observer would quickly jump to the conclusion that AP&L had an outstanding earnings year with net income climbing to 557 million.

However, the complexity and uniqueness of the Company's fiscal performance require an in-depth review before the results can be fully understood.

In actuahty, the level of earnings in 1074, which included substantial nonrecurring income items, was generally consistent with the rate of return requested in the rate proceedmg bef ore the Arkansas Public Service Commission. This requested rate of return is the minimum that the Company must earn in order to stay financially sound and to attract necessary capital Even at these levels, coverage ratios and internally generated funds, while somewhat stabilized during the year, remain undesirably low. Both of these financial indicators have significant impact on the Company's ability to finance large-scale construction of new facilities and replacement of older facilities.

Before additional bonds and preferred stock can be issued to finance constructit .

programs, cer;ain earnings tests specified in the Company's mortgage and charter must be met. Earnings of at least two times interest requirements on outstanding bonds, including the new issue, is the requirement under the mortgage for issuing additional bonds. The charter requires that earnings must be at least one-and-a-half times interest and dividend requirements on outstanding issues, including the new issue, before additional preferred stock can be issued.

The most restrictive of the tests has been the rsio under the mortgage, which has declined from 6.14 times at the end of 1965, to 2.44 times at the end of 1974. (See

" Borrowing Ability" chart on page 2.) Favorable rulings from regulatory authorities on rate increase applications are essential in improving earnings to meet these requirements so that expansion of facilities to meet customer electric energy needs will not be curtailed.

A steady decline has also been experienced in internally generated funds available for reinvestment in the construction program required to meet customer needs. In the 10-year period,1965 through 1974, internally generated funds as a percent of plant additions (excluding allowance for funds used during construction) have dropped from a high of 40 percent in 196S, to 10 percent in 1974. (See " Percent of Construction Expenditures Financed with Internally Generated Funds" chart on page 2.)

". . . principal contributing factors . . ."

Almost the entire portion of the increase in net income over the lo73 level can be crtdited to three maior factors, two of which were unanticipated and nonrecurring and will not be reflected an future earnings.

First, the customer and the Company benefited from the purchase of large quantities of energy from neighboring utilities. These non-firm purchases were made e

on an "if and when available" basis at costs substantially lower than such e,ergy could have been generated by the Company. The principal reason for this cost differential was the fact that most of this purchased energy was generated on lower cost natural gas. This energy was available due primarily to more moderate weather than normal, thus reducing the energy demands of the selling utilities. If sut h purchases had not been available, the Company would have been required to generate the energy with high cost fuel oil due te the curtailment of its own natural gas supply by its major supplier.

Second, since Unit I of Arkansas Nuclear One was placed in commercial operation on December 10,1o74, less than one month's book depreciation was charged against earnings, but income tax regulations permitted the Company to claim a full six months' tax depreciation on the unit in computing its income taxes for 1074. Ilad the unit been placed in service in early July, as was expected at the beginning of 1074, book depreciation expense for the year would have been significantly higher, while tax depreciation benefits would have remained the same. This unique situation will not occur again, since this unit will be in service for the full year 1975, and thereafter.

The third maior factor which increased earnings in 1074 was the collection of additional revenues by the Company as the result of rate increases to wholesale and retail customers. In both cases, these revenues are subject to refund. plus interest, if the increased rates are not approved.

". . . the quality of these earnings . . ."

Another dimension in understanding the 1o74 earnings involves the quality of these earnings in terms of actual financial gain.

During the past few years, AP&L has experienced a rapid growth in allowance for funds used during construction as a percentage of the Company's net income. This allowance, which is based on, but is less than the net cost of funds (interest on borrowed funds and a reasonable rate on other fundA used for construction purposes, is capitalized during the period of construction. This accounting entry, authorized by regulatory authorities, has the effect of increasing earnings, but not increasing cash funds. In addition, earnings from this source provide only limited support for additional bond financing. For these reasons, these earnings are almost universally recognized to be of lower quality than earnings derived from revenues.

In 1974, the allowance for funds accounted for 44 percent of net income; in 1965, it accounted for only 6 percent.

Excluding the allowance for funds used during construction, net income as a l percentage of total revenues has declined over the past ten years from 10.4 percent in i 1965 to 10.6 percent at year-end 1974. This downward trend can be stabilized if the new rate schedules for retail and wholesale customers are approved and if customer

! energy usage continues on its upward climb. (See " Earnings (excluding allowance for funds used during constructioni as Percent of Total Revenues" Chart on page 2.)

l Allowance for Funds Used During Construction as Percentage of Net income 50 --

l 40 Q.~

. hi d 5 30 j 9 j@Q 1

• uQW iMMm 5&g io s- ~ MM9MQk

M ifl J u 3G & M S % 55y fdMtMFMSMidBEnNR/;

g 1965 1968 1971 1974 9

I l

r j

s TheYearAhead-1975 i

". . . we face a new year with. . .the need to seek additional solutions . . ." ,

I In 1075, AP&L is confronted with many of the same problems of the past-an inflationary economy, the need to broaden the fuel base, the high cost of construction programs and the necessity to maintain an adequate earnings level.

One of the foremost challenges in 1075 and future years is raising enough capital l

to meet our moral and legal obligation to construct facilitie3 needed to provide our customers with a dependable supply of electric energy. We estimate that, in order to have generating f acilities to provide for our customers' requirements in the next several years, AP&L must have a construction budget of 520c,000,000 (estimate as of February 28,1075) during 1075, increasing to over 5300,000,000 in l'70, and remaining at a high level throughout the '70's. The electric utility industry is ve y capital j intensive in nature as indicated by the fact that more than s22 of investment in total utility plant is required to earn 51 of annual net income. In view of this, it becomes i evident that net incomt will have to continue to increase significantly in the coming months and years if the necessary facilities are to be financed.

, For 1975, four maior objectiz'es hat'e been estaMished:

(1) Maximize Cost Control-In addition to continuing efforts to assure that a dollar of value is received for every dollar spent, special attention will be devoted to developing better and more effective standards and methods for measuring productivity.

Expanded internal auditing procedures are also being implemented which will provide management with an improved information and control tool. I (2) Minimize CapitalInvestment- Additional and more effective control l I

m(chanisms for construction budgeting are being implemented in order to improve the process of evaluating the need for and desirability of all new construction protects  :

before any commitments are made or work is begun. Increased emphasis is also being i placed on cost variance repor"ng after the project is in progress.

(3) Implementation of Load Factor Improvement Programs- AP&L is committed l to a concentrated effort to improve its load factor, in the area of marketing, efforts I will be directed to the promotion and sale of heat pumps, a year-round, highly efficient,

! total electric, climate control system. AP&L personnel will be working with industrial and commercial customers seeking to increase efficiencies and economies of operations. .

l Working in concert with the Arkansas Public Service Commission, the Company will l expand its load research activities to determine more precisely customer usage patterns )

and their contribution to AP&L peak loads. Hopefully, this research will aid customers and the Company in developing plans for off-peak usage. Arkansas Power & Light Company has also started an experimental program on shifting the peak air condition- ,

I

' ing loads of selec ted residential customers through involuntary short-period curtailments by remote control.

(4) Maintain Adequate EarningsI evel-Because a significant amount of the earnings experienced in 1974 was of a nonrecurring nature, earnings during 1975 will be monitored very closely to assure the Company's continued ability to raise the l

necessary money to finance its construction program. This fact, coupled with the prospect that inflationary trends in the economy will continue, may require the Company to seek additional rate relief during 1975.

~l he management of AP&L will continue to seek solid solutions to the perplexing problems facing the consuming public here in Arkansas. Unquestionably, the era of cheap energy is over. But AP&L's responsibilities remain the same: to provide adequate service to its customers at the lowest cost consistent with sound business principles and to maintain its financial integrity so that this service can be continued.

10 l

1974 ArkansasPower&LightCompany FinancialReview Summary of Significant Accounting Policies A. Systemof Accounts The accounts of the Company are maintained in accordance with the system of accounts prescribed by the Federal Power Commission.

B. Revenues The Company records revenues as billed to its customers on a cycle billing basis Revenue is not accrued for energy delivered but not billed at the end of the fiscal period Substantially all of the rate schedules of 'he Company include fuel adjustment clauses under which fossil fuel costs above or below the levels allowed in the various rate schedules are permitted to be billed or required to be credited to customers (See Note 4 for information on application for revised adjustment clauses )

C. Utility Plant and Depreciation U:ility plant is stated at original cost. The costs of additions to unlity plant include contracted work. direct labor and materials, allocable overheads, and an allowance for the composite cost of funds used during con-struction. The cost of units of property retired. replaced. or renewed. are removed from utility plant and such costs plus removal costs, less salvage are charged to accumulated depreciation. Maintenance and repairs of property and replacement and renewal of items determined to be less than units of property are charged to operating expenses.

Depreciation is computed on the straight-line basis at rates based on the estimated service lives of the various classes of property. Depreciation provided in 1974 and 1973 amounted to approximately 3.2% and 3.0L respectively, on average depreciabt property. (See Note 8 for revision in depreciation rates.)

D. Pension Plan The Company has a pension plan covering substantially all of its employees. Pension costs in 1974 and 1973 amou.ited to $4,183.000 and 52.790.000, respectively, including amortization of unfunded prior service costs over a period of 12 years. The policy of the Company is to fund pension costs accrued.

On June 1,1974, an amendment to the plan became effective which increased retirement benefits Giving effect to such amendment as of December 31,1973, the actuarially computed value of vested benefits as of that date exceeded the nc! assets of tr'e fund by approxir 3tely $7,000.000.

The Company is stucying the Employee Retirement income Security Act of 1974 ard preliminary studies indicate it will have no significant effect on the pension plan and its related costs.

E. IncomeTaxes The Company joins its parent in filing a consolidated Federal income tax return. and income taxes are allocated to the Company in proportion to its contribution to the consolidated tax liability.

Deferred income taxes are provided for differences between book and taxable income to the extent per-mitted by the regulatory bodies for rate-making purposes.

Investment tax credits utilized are deferred and amortized over the average usef ul life of the related property.

F. Allowance for Funds Used During Construction in accordance with the regulatory system of accounts, the Company capitalizes an allowance for funds used during construction representing the net cost of funds (interest on borrowed funds and a reasonable rate on other funds) used to finance construction. with a corresponding credit to non-operating income. This practice recognizes these amounts as an appropriate cost of utility plant which. in accordance with established regulatory practices. are recovered through future billings to customers. A composite accrual rate of 7h% per annum was used in 1974 and 1973 in accruing the allowance for funds used during construction.

G. Reserves it is the policy of the Company to provide reserves for uninsured property risks and for claims for injuries and damages through charges to operating expense on an accrual basis. These reserves are established on the basis of historicalloss experience of the Company.

11

Arkansas Power & Light Company Assets 1974 1973 in Thousands Utility Plant:

At original cost:

Electric plant (including construction work in progress of $215,795.000 in 1974 and 5330.585.000 in 1973) . . S1.267.042 S1.092,904

Nuclear fuel (Note 3).

. 5,229 29J_53 Total . .

1.272,271 1.122.857 Less accumulated depreciation .

_ 2_11m456 193.400 Utihty plant-net . . 1.060.815 929 457 Other Property and Investments:

Investments in associated companies, at equity (Note 6) . 18.152 9.438 Other, at cost (less accumulated depreciation) . 1.464 1,157 Total other property and investments. .. . . 19.616 10.595 Current Assets:

Cash. . 9.923 4.730 Special deposits. . . . 238 183 Temporary investments, at cost wnich approximates market. . . ... .. 36.822 Notes receivable (less allowance for doubtful notes-543.000). . . .. . ..

1,524 1.727 Accounts receivable:

Customer and other (less allowance for doubtful accounts-5290.000 in 1974 and S175,000 in 1973). 18.658 11.993 Associated companies. . .. . . . 125 97 Materials and supplies, at average cost. . .. . 6.746 4.746 i Prepayments. . . . . . 439 263

Other. .. . . ... 1.689 737 Total current assets. .. .. . . 39,342 61.298 Deferred Debits. . . . .. .. . .. . 5,736 1.543 Total . .. . .. . . . . ... . 51.125.509 S1,00_2.893 See Notes to Finanoat Statements.

12

Balance Sheet, December 31,1974 and 1973 Liabilities 1974 1973 in Thousands Capitalization:

Proprietary capital:

Preferred stock and premium, per page 16. $ 101,657 $ 101,657 Common stock. $12.50 par value; authorized, 50,000,000 shares; issued and outstanding.

23,390,000 shares in 1974 and 20,590,000 shares in 1973 292,375 257,375 Retained earnings (Note 7). 43.71_1 _ _36,827 Total proprietary capital . 437,743 395,859 Lonuterm debt and premium, per page 16. ___5.46,284 _ __480,_8_29 Total capitalization. __98.4 027 .

876,688 Current Liabilities:

Notes payable (Note 2):

Banks. 10,000 Commercial paper. 3,000 Accounts payable:

Associated companies. 5,940 3,901 Other. 9,741 28.223 Customer deposits. 5,442 5,080 Taxes accrued. 14.288 18,905 Ir,terest accrued. 10,170 8,495 Dividends declared. 1,650 1,354 i

C@er. 1,922 1,494 Total current liabilities. 62,153 67,452 Deferred Credits:

Accumulated deferred income taxes (Note 1). 55,833 46,309 Accumulated deferred investment tax credits. 19.093 10,196 Other, __ _ _ _3,54_0 ____ 1,3_5.4_

Total deferred credits. 78A66 57,8_5_9 Reserves . . 863 894 i Commitments and Contingencies (Note 6).

Total . 51,1_2_5,509 51 0_02,8_.9_3

...-.1- -..-._

See Notes to Financial Statements.

13

Statements of income and Retained Earnings 1974 1973 in_Thopsands

_Sta_ternent_of Inco_me.

Operating Revenues (Note 4). . 5300.517 .. S2_09 327 Operating Expenses:

Operation:

Fuel. 33,840 46.605 Power purchased. 55.936 28.737 Other. 32.528 27.132 Maintenance. 11.072 9.931 Depreciation . 23.885 21.373 Taxes other than income taxes. 13.973 12.557 income taxes (credit)(Note 1). (4.187) 8.346 Deferred income taxes-net (Note 1). . 8.192 3.680 investment tax credit adjustments-net (Note 1). 8,897 1.183 Total . . . 234.136 159.544 Operating Income . 6618.1 49,783 Other income and Deductions:

Allowance for funds used during construction . 25.486 18.676 Miscellaneous-net. .

113_52 _572 Total . .

. _26438 19.248 Interest Charges:

Interest on long-term debt . 32.554 25.528 Other interest. etc. .

3.261 1.557 Total . .

. . 35.815 27.085

.S_57.404 5 41,946

• Net income. .

• Income from revenues. S 31.918 5 23.270 Non-cash income from allowance for f unds . _ 25,486 18J7_6 Total Net income . . S 57.404 5 41.946 Statement of Retain _ed Earnings Balance, January 1. . . S 36.827 5 34.714 57.404 41,946 Add-Net income. . . .

Total . .

9A231 7_6460 Deduct-Cash dividends:

Preferred stock-at prescribed rates of each series. .. 6.682 5.488 43.838 34.345 Common stock * . . . . .. .

Total. . . 50,5_20 39.833 Balance, December 31 (Note 7). . . _S_ 43,711 __S_3_6.827

• Spec al dradencs of 515.000 OCO in 1974 and 510 000 000 in 1973 were ca:d to the cuent croany wMn were Core Currenti;' remves'04 in the Company 5 Common S!OCk.

See Notes to Financal Statements 14

Statement of Source of Funds for Utility Plant Additions 1S74 1973

_In_ Thousands Source of Funds:

From operations:

Net income. . S_5.72 404 _$_41,9_4.6 Less dividends declared:

Preferred stock. 6,682 5,488 Common stock * . 43,838 _ _ 3_4,3.4 5 Total . 50,520 39,833 Remainder. 6.884 2,113 Add (deduct) non-cash items:

Depreciation. 23,885 21,373 Deferred income taxes and investment tax credit adjustments-net. . 17,089 4,863 Allowance for funds used during construction. . _(2.5,486) __(_1_8,676)

Total from operations. .

22,372 9,673 From (increase) decrease in working capital (excluding short-term notes). 3,657 (8,667)

Miscellaneous-net. (9,797) (5,5_8_2)

Total from internal sources. 16,232 [4 576)

From sale (redemption) of securities:

Common stock (2,800,000 shares in 1974 and 4,400,000 shares in 1973)* .

35,000 55,000 Preferred stock. 15,000 l

First mortgage bonds. 100,000 80,000 Debentures and bonds redeemed. (34,475)

(

Short-term notes. 13,00_Q (3,250)

Total from sale of securities. . 113,525 14615_Q From sale of nuclear fuel. . 31,1_86 Total funds expended for utility plant additions (exclusive of allowance for funds used during construction). . . S1.6.0,943 $ 142,17_4 (Increase) decrease in working capital (excluding short-term notes):

Cash and temporary investments. S 31,629 S(34,837) l Accounts receivable. . . (6,693) (2,254)

Materials and supplies. . (2,000) (447)

Accounts payable. . . . (16,443) 22,984 Accrued taxes. . (4,617) 4,315 Other-net. . . 1,781 L 5_7_2 TOTAL. . $ _3,657 $_(8,667)

"Special dividends of $ 15.000.000 in 1974 and $ 10.000,000 in 1973 were paid to the parent company which were con-currently reinvested in the Company's common stock.

See Notes to Financial Statements.

15 l

Schedule of Preferred Stock and Long-Term Debt Current Shares Shares Call Price Preferred _ Stock Authorized Outstanding Per Share CUMULATIVE,5100 PAR VALUE:

4.32% series. 70.000 70.000 $103.647 4.72% series. 93,500 93,500 107.00 4 56% series. 75,000 75,000 102.83 4.56%-1965 se. des. 75,000 75.000 104.00 6.08% series. 100,000 100.000 104.33 7.32% series. 100.000 100,000 104.67 7.80% series. 150,000 150.000 109.10 7.40% series. 200,000 200,000 108.35 7.88% series. 150,000 150,000 108.91 Other series. 1,486.500 None TOTAL. 2,5_00,000

~~ '

1,01.3.,5_00

. ~

In Thousands~

STATED AT $ 100 A SHAR E . . . . . . . . . T101,350 PREMlUM ON PREFERRED STOCK. 307 TOTAL. $_101,657 Long-Term Debt 1974 1973 FIRST MORTGAGE BONDS: In_ Thousands 3-1/8% series due October 1,1974. S 30.000 2-7/8% series due 1977. $ 11,000 11,000 3-1/8% series due 1978. 7,500 7,500 2-7/8% series due 1979. 8,700 8,700

, 2-7/8% series due 1980. 6,000 6,000 3-5/8% series due 1981. . 8,000 8.000 3-1/2% series due 1982. 15,000 15.000 3-1/4% series due 1984. 7,500 7,500 3-3/8k series due 1985. 18,000 18,000 4-7/8% series due 1991. 12,000 12,000 4-3/8% series due 1993. 15,000 15,000 4-5/8% series due 1995. 25,000 25,000 5-3/4% series due 1996. .

25,000 25.000 5-7/8% series due 1997. 30,000 30,000 7-3/8% series due 1998. .

15,000 15,000 9-1/4% series due 1999. .

25,000 25,000 9-5/8% series due 2000. 25,000 25.000 7-5/8% series due 2001. 30,000 30,000 8% series due 2001. 30,000 30,000 7-3/4% series due 2002. .

35,000 35,000 7-1/2% series due 2002. 15.000 15,000 8% series due 2003. 40,000 40,000 8-1/8% series due 2003. 40,000 40,000 10-1/2% series due 2004. . .

40,000 9-1/4% series due 1981. . _ 60,000 Total first mortgage bonds

• 543,700 473,700 3-3/8% SINKING FUN D DEBENTURES DUE May 1.1974 4,475 TOTAL PRINCIPAL AMOUNT OUTSTANDING . .. 543,700 478,175 UNAMORTIZEP 'REMlUM ON LONG-TERM UEBT(Note 5) _ 2,584 _ _2_,6.54 TOTAL. ,

$ 546_.28.4 $480,829

• Annual sinking f und requirements. which may be met by certification of property addittons at the rate of 167?, of such requirements amount to $4.537.000 in 1975.

Principally all of the Company s utihty plant is subject to the hen of the First Mortgage Bond indenture.

See Notes to Financial Sta:ements.

16 h

Notes to Fincncial Stattment:t

1. IncomeTaxes income tax expense (including amounts attributable to Other income and Deductions-Misce:laneous.

51.443.000 in 1974 cnd $542,000 in 1973) consists of the following

1974 1973 Current:

Federal . 5(3.692.000) $ 7.592.000 State. 948.000 1.296.000 Total . (2.744 000) 8 888.000 Deferred-net:

Federal . 7,163.000 3.182.000 State. 1.029.000 498.000 Total . 8.192.000 3.680.000 investment tax credit adjustments-net. 8 897.000 1.183.000 Total . $ 14.345.000 $13,751.000 The provision for current income tax expense reflects net reductions resulting from:

(a) the utilization. for income tax purposes. of liberalized depreciation (including the class' life method provided by the Imernal Revenue Code) and accelerated amortization. The net provision for deferred income tax expense pnncipally represents an amount equivalent to the tax on the excess of such liberalized tax depreciation and amortization over the straight-line tax depreciation and amortization, less (beginning in 1974) an amount equivalent to the tax associated with certain revenues recognized for income tax purposes in advance of their being recognized for financial reporting purposes. Such revenues relate solely to meters read before the close of an accounting period for which billings are made to customers in the next succeed-ing accounting period.

(b) the exclusion from taxable income of the allowance for funds used during construction.

(c) the effects of currently deducting certain overhead costs. which for book purposes are capitalized as part of the cost of utility plant.

(d) the deduction. currently. of the cost of removal of utility plant retired which for book purposes is charged to accumulated depreciation, and (e) the utilization of investment tax credits which for book purposes are deferred.

. The effective income tax rates for 1974 and 1973 were 20 0% and 24.7%, respectively.

The Company received refunds of Federalincome taxes in 1974 and 1973 applicable to the years 1965-1966 and 1961-1964. respectively. Such refunds. including total interest earned through the settlement date less i related income taxes amounted to 5479.000 in 1974 and $742.000 in 1973 and have been included in the reruits of operations for the respective years.

, The Federal income tax returns for the years 1967 and 1968 have been examined and assessments have been proposed by the Internal Revenue Service which are under protest; also, the years 1969-1974 remain open Management is of the opinion that adequate provisions have been made for any taxes that may ultimately be assessed-

2. Lines of Credit and Short-Term Borrowings The Company has arrangements with various banks and commercial paper dealers Providing for short-term borrowings of up to $85.000.000. Accounts are maintained with certain lending Arkansas banks and although immaterial balances in some of these accounts may be deemed to be compensating balances, most of these accounts are working accounts and fluctuations in their balances do not reflect or depend upon fluctuations in

, the amounts of bank loans outstanding. In support of the arrangements with non-Arkansas banks. the Company maintains compensating balances of 2W% to 10% of the lines of credit with these banks ($4.157.000 at December 31.1974) which are not restricted as to withdrawal Borrowings under these arsangements require additional compensating balances of 10% to 20% of the average annual amount of outstanding loans from these banks. The aggregate amount of the unused lines of credit as of December 31,1974 was $72.000.000.

The notes payable to banks and holders of commercial paper are unsecured short-term loans with various 17

matunty dates not in excess of nine months The average interest rates on the bank notes and commercial paper outstanding at December 31.1974 are 10.75% and 10.70%. respectively. The interest rates on bank loans are the prime rates in effect from time to time of the lending banks. Dunng 1974. the maximum aggregate amount of short-term borrowings outstanding at the end of any month was $36.850.000 The average amount of short-term borrowings outstanding during 1974 (based on the average of the sum of daily outstanding poncipal balances 1 approximated $10.147.000 of bank loans and 57.367.000 of commercial paper The approximate average inter-est rate (determined by dividing the actual interest expense on short-term borrowings dunng the year by the average short-term borrowings) was 10 07% f or bank loans and 11.89% for commercial paper.

3. Leases Rental expense under leases currently in eff ect, excluding the nuclear f uel lease, is not material On June 25.1974. the Company sold to Southwest Fuel Company (an unaffiliated company) the initial core of nuclear fuel for Unit No 1 of Arkansas Nuclear One for $31.185.701. representing book value. On the same date acting pursuant to a Memorandum Opinion and Order issued by the Secunties and Exchange Commission, the Company entered into a $40.000.000 f uel lease with Southwest Fuel Company under which Southwest Fuel Company leased the said nuclear f uel to the Company and agreed to lease additional fuel in the future for said Unit No 1. Lease payments are based upon nuclear fuel use The nuclear plant was placed into commercial operation on December 19.1974. and $466.000 of nuclear fuel expense was charged to op( 3tions in 1974.

Annual payments. based on normal generation and an initial investment of approximately $31.000.000. will be approximately $14.000.000 and will be treated as cost of f uel The lease. unless sooner terminated by one of the parties. will continue through December 31. 2013.

4. Rateincreases On January 1.1974. the Company put into effect, subject to refund with interest. wholesale rate schedules designed 'o yield approximately $2.400.000 in additional annual revenues. The new schedules contain adjust-ment clauses to reflect changes in the Company's cost of fossi! and nuclear fuel. and changes in the embedded cost of its debt.

On Septe.nber 1.1974. the Company put into effect, subject to refund with interest. new retail rate schedules designed *o yield approximately 538 600.000 in additional annual revenues. The new rate schedules provide for an adiuument of cost of power to reflect changes in the Company's cost of fossil fuel, nuclear fuel and purchased power. and in the embedded cost of debt.

For the year 1974. operating revenues include approximately $8.370.000 f rom these increased rates.

5. Reclassifications In accordance with crders of the Federal Power Commission which became effective January 1.1974. the balance in Contributions in Aid of Construction as of December 31.1973, was credited to electric plant and to accumulated depreciation as applicable. Similarly the balance of Unamortized Premium on Long-term Debt was reclassified to long-term debt.

The 1973 amounts relating to these items have been reclassified to conform with the current classifications.

6. Commitments and Contingencies The Company's construction program contemplates expenditures of approximat31y $212.137,000 in 1975.

The Company has a 35% interest in System Fuels. Inc. (SFIL a jointly-owned subsidiary of four of the prin-cipal operating subsidiaries of Middle South Utilities. loc. (SFl stockholdersl SFl operates on a non-profit basis in planning and implementing programs for the procurement of fuel supplies for the generating units of these operating companies; its costs are recovered through charges f or f uel delivered.

The Company has made loans to SFI to further its fuel supply business under certain loan agreements which provide for SFl to borrow from ite c JNJers up to $30.000.000 through December 31,1973 and up to an additional $90.000.000 through December 31.1975. As of December 31.1974 the Company had loaned

$17.980.000 to SFI pursuant to the loan agreements. and the Company's share of the unused loan commitment is $22.797.000 Loans mature in 10 years from the date of borrowing under the initial agreement and in 25 years from the date of borrowing under the second agreement.

In connection with certain bank borrowings by SFl. totaling 542.812.000 at December 31.1974 the Com-pany and the other SFl stockholders have covenanted and agreed severally in accordance with their respective shares of ownership of SFI s common stock. that they will take any and all action necessary to keep SFl in a sound financial condition and to place SFI in a position to discharge. and to cause SFl to discharge its obligations to the lending banks 18

Ten Years of Progress / Financial 1974 Operating Revenues and Expenses MLUCNS OF DOLLARS

- , m  ! i o o m,a,nq s enues Capitalization:

en opere ~; r ,a ~ s First mortgage bonds (1) S 546.28

l

, Other long-term debt -

250 i ,

i  : Preferred Mack. 101.35 Premium on capital stock . 30 l  ; { I l M

• {i -

l

[. .

Common stock.

Retained earnings.

292.37 43.71 l l l l l#- [

' ' Total capitalization . S 984.02 i ,

I

,go !  !  !

~'

-.- M # '

Utility Plant so k 51.051.24

- Utility plant completed (2) .

215.N Qsem work M pgmss.

19es se e7 ee e9 70 71 72 73 id74 Nuclear fuel . 5.22 Total utility plant . 51.272.27 Accumulated provisions for

^

Total Capitalintion depreciation ard amortization (2). S 211.45 tAucNscFDC,W63 Accumulated deferred income taxes S 54.50 3000 _

000 d O Comr on Evtv h ,

i E P%A. rred {~  ;

8U1"B" -

I-F Income Statement:

Operating revenues. S 300.51 7m -

Operating expenses:

sm - Fuel and power purchased 139.77

-3 Other operation and maintenance 43.6C 23.8E 3N

]~ Depreciation Taxes 26.87 234.12 20e - Total Operating income . 66.3E ea-Other income and deductions-net 19e5 ee er ea 69 70 71 72 73 1974 (excluding allowance for funds I

used during construction) _ 1,35 Interest and other charges:

Utility Plant Interest on long-term debt . 32.5E PALUONS OF DOLLARS Other interest . 3.32 taso -

Amortization of debt premium I  ;- I '

! I and expense-net . (7

'* ~

O G'c'S5 Rd"t } Total . 35.81 m te nan: l  ;

, gg _ 1 t i i I i /' Income from revenues. 31.91 9m

[

,  ! IY '

25.4E

! I ff% Non-cash income from AFDC*

57,4C l

"T #QR7'V p # m m

^

y g4 +

! Total net income S_

4s0 ) 3 ' '

'~ (l' includes unamormed p entum on leng-term debt beginning in 19 73 300 4 2,1973 ad;usted to include ba!ances f rom conteibunons in a.d of construction g,, ,, , y 4 ,

Aiionance for runds used during construct >on 1so

. o pm m . - -

1965 e6 67 68 69 70 71 72 73 1974 2e r Odde@!diiGeh

C)f eg 1974 SR en e e:m:0 a cce: a:' ein ECCt L : ECOL a rc.n-a" a e: c:ccanj :: ver.ase :..

• a twenty ,ta cenoc v: :: 53 CCC ta- e:s re caf c' N: 6 ' .& < :: te re' re n a retre , *: te ::e.s"Dr:

by ECCL m Leus-a .a Ce'. . ems cf me re'. red c4' to SR a e scroca.e:::: xe ere n 1977 Tre cces o:: :n cf :~e re' re y is :o te f.name: m ca : ty a .rce caf-ents f u cc ef SA agg e;r g 567 5 C CCC TN5e tsnes we te s, ce e :: SR ty : e Cccccf an: me ::re SR six rc;:e s as verare-is *y f ave ce .-

enes cf c . The Cce:an, s s a e cf 're veca, e :s rs 5 2-3 625 CCC c' 4*. :n $ 2 723 CCG *a: +en a .r&:

in cugn r 're-te 31.1974 Tne peca, e- s ;z s ne<es::ve3- a e :: te reca e :~r v;n f.,6 ce ce .. es mrcegn.e e-m =e'ar ,ea-

7. Retained Earrungs Tre mcentur e re:atng :: :ne Cccce, s i g-te*m cett nr.ces ?? res. cices cc 're ta, e c' c4 -

cc.cends en cceema sixs As cf Ce:e te 31 t974 532 9N CCG cf reta r+ ea n gs a e fre 1 :- s cn restn:*ces S Revis2on of DeprNiatron Rates Ef*e::c.e um Se; erre '973 **e Cce:an, Ann: Pe acce:va: fO tre 4kr<.as P_t:c Se . ce Cce. 4s.cc re. se: 're tee, ce;<ecatcc rates for va rus ciasses c' is u! t if cr:ce**, Tre re sed ra*es mcrease:'

ceveo35 c an: ccces:cmag', cecease:-e rccre ty 54e tCCC r.1973 Ma :~e re.m es t+e^ m ("e::

f:< ire 'au iea- 1973 ceve ;2:ce eense ur0 ha.e m:rease: a c r+: oxr w c+2easen t f ary:r-as .

51520 CCO 9 Accounung Poicies Tre samma , c' s-gr.f cant ace:vn eg D::c es ce rage 11 rs a- r'eg a ra-* c' trese n:'es : f-ran .a' 3: ate ents Accountants' Opinion HASCNS & SELLS Te' S carnap Cet .e f Pa:M. Acccuniants Sar: Lcv s_ U:ssxt E.3102 kunsas Pcwe & Lign: Ccecany

e

.. P.a.e esa m :he ta' axe s~eet cf kva.msas Peac< & L:;n: Ccccany as c' Me-ce 31.1974 am 1973 and tre related state nen 3 cf irccee re!amec ea n ngs and secrre Of fats f7 :. .?tt oan acons f y t*e yea s men enced Ctr exa .matcc was rate m axydance ne* ge ea?y axected aA :39 sta 'ca Os and acccongly ircixec sxh tests c' the 3 ccc rmg a recer0s an: sxn cire a c&g p 'xecu es as we ccc-sdered necessa y m tre or:n siaTes As c:scussed m Ncte 4 : fma ca sta erents tre Cctr any Pas ;'a:ej m:0 e"ec: in 1974 eie ! r: rate in:reases wn:n are sut:ect :o reta c .u:h mie es:

In ccr ccinco, sutie:: as to 1974 :o the e"N:. ri any. cf tre fma' se5e-en cf ine rate ra"e- re'e rec ::

abo'.e sucn f:nanc:a: state-ecis cresent f a rty me f ranc;al posid:n of :Pe Cccry a: Cecemte 31.1974 an 1973 and me resu!!s of cs coeraSecs an: es sev*ce c' futs f;< c!cy cla-: ao: Docs fs tre years men emed in eccforr:ty .um gene <atry axe; ed a ccentog rrLTD:es arct+0 cc a Occs: stent tas:s Janca y 31.1975 ;sJ HASMNS & SELLS 9

_ = _ - _ , ._ _ . - -

1973 1972 1971 1970 1969 1968 1967 1966 1965 S 476,354 $393,700 $343,700 5283,700 $258,700 5233,700 $218,700 $188,700 S163,700 4,475 4,475 4,700 4,925 5,150 5,375 5,600 5,825 6.050 101,350 86,350 51.350 51,350 51,350 41,350 41,350 41,350 31,350 307 265 179 179 179 137 137 137 133 257,375 202,375 172,375 137,375 121,375 111,375 102,750 99,750 86,750 3_6,827 3_4,714 311043 25,982 26,5.82_.__23 9_54 _ __27,736 1 24 4_27 u 21,890

$ 876,6_88_$721,879_ $60.3,3_47 $_5.03 511_S463,336_.S_41_5,_891_S39_6,273 1 S_36_0,189_ $309,873

$ 762,319 $727,558 S684,668 $658,853 5587,608 5563,176 $540,917 $451,002 $424,003 330,585 216,055 151,797 49,595 56,557 28.808 7,690 49,015 14,193 291953 2_6,722 9,148

$1,122,85_7_ $970A35 $845 613 1 57_0_8_,448 $_644,165 S59_1_,9.84_ $548,607 $500,017 $438,196

$ 193,4_0.0_S175144 1 S1601 665 $145,712 S131J26_S12.0,06.0_S108.114_S_98,796 5 90,129 '

S 46,309 5 42,630 S 391991 $ _36,01_4_s 331_63_$_3.0_,5_48_ 1 _

S 27,815 S 25,5_79 $_2_3,941

$ _2.09,3_27 S184,810 $166,063 5149,317 51361 044 $118.94.3_ $10.5,516 5 97,058 5 93,676 75,342 61,982 46,856 36,716 34,324 26.239 25.302 21,133 21,073 t

37,063 32,5N 30,462 28,341 25,504 23,251 20,545 20.029 19,428 21,373 19,609 18,742 17,400 16.059 15.060 12,970 12,212 11,256 25,766 25,2_88 30.2.3_5 31,110 29,37_.5 26&85 21,955 21.470 2_0,447, 159,544 139,409 1262 295 113,5_67_

1051 262 91,235 80,772 74,844 72,204 491783 45A01 39 768 35J5_0 3_0,782 2.7,708 24,744 22 12_14 21,_4_72 1

572 45 75 (127] (149) (179) (66) (87) (53) 25,528 21,843 17,750 13,594 10.543 9,888 8,976 7,343 5,852 1,628 1,064 647 752 1,210 670 398 447 189 L71) (62) (55)_ (_51) (46) (35) 41 46 5_0 2L.08_5 2_2,845 18,342 14,295 111 707 10,52_3 9,415 7,836 6.091_

23,270 22,601 21,501 21,328 18,926 17,006 15,263 14,291 15,328 182 676 14,170 7,4_07 3d29 2,878 1,405 3,039 1,425 911

$ 41946 t

$ 36,771 $ 28,908 $ 24,757 $ 21,_804 5 18,411 S 18,302 $ 15,7_16 $ 16.239 21

Average Annu# %WH Use Ten Years of Progress / Operating 1974

~~ ~~ ^^

Residential Customers Electric Operating Revenues:

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- A Res:dentral . S 87 32

=4 Commercia! 53 97 MP:gF- .,

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. Industrial -

Government are municicai ES 66 6 12 M "

Total frcm umrate cus: cme s Pubhc ut:ht.es 236 09 61.16

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Miscenaneous revenues . 3. e_e

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' ,} Tc:al e ec:ric coerating revenues 5320 51 24

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Electric Sales (Millions of KWH):

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7: r3 13 4 Commerc:a!

Industria! 5.61 Government and municical 26 Total sa'es to ui:imate customers 1066 Total KWH Sales to Ultimate Customers Pubhc utihties _ __3_64 s .. : .s :: c+

Total energy sold . _ 14_50 Number of customers-end of year.

kk.(_ i! Re sidential . 364.95 44.95

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- Puthc unknes j @ l1 M t l ); d j c total cus cmers --- - -42 L2.

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' p y Ji j u d H Electric Energy-l s.L LL LL k LL bL LL Scurce and disocs;;;on (Millions of KWH) ms ee e9  : -

3 94 Generated-net sianon cutout Hycro 23 Steam. 7.11 Nuclear. 17 Payroil ____ _1

. t_.: ,s :: c,;e; s O:ner 4: Total cenerate 7.52 Purchased 7.67

'-y E. if p Net mierchance 32 f' '~

To:a 153E 23 5- 5 u- Comoany use. losses and un;ccounted for 87 1

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1973 1972 1971 1970 1969 1968 1967 1966 1965 5 68,098 $ 57,976 $ 49,718 $ 45,230 $ 41,045 $ 36,998 5 33,656 $ 31,552 5 30,187 43,448 38,092 33,989 31,214 28,697 26,575 24,631 22,731 21,831 61,223 51,183 44,273 40,264 39,393 37,230 33,987 29,845 28,799 4,737 4,248 3,836 3,594 3,424 3,139 2.,952 2,7_8_9 2J23 177,506 151,499 131,816 120,302 112.559 103,942 95,226 86,917 83,540 28,942 30,392 32,209 27,067 21,934 13,894 9.172 9.338 9,578 2,879 2,919 2,038 1,948 1,551 1,107 _1 1118 80_3 558

$209.327 $184,810 $166,063 $149,317 5136,044 $118,943 $105,516 S 97,058 $ 93,676 3.103 2,770 2.393 2,182 1,917 1,644 1,401 1,300 1,179 1,903 1,753 1,614 1,503 1,373 1.247 1,116 1,025 945 5,514 5,271 4,966 4,804 4,744 4,533 4,264 3,989 3,707 290 285 276 265 262 242 229 233 218 10,810 10,079 9,249 8.754 8,296 7,666 7,010 6,547 6,049 2,899 3,382 4,594 4,906 4,123 2,470 1,297 1,259 1,206 13,709 13,461 13,849 13,660 12,419 10,136 8,307 7,806 7,255 355,673 343,468 330,566 318,732 311,815 306,950 301,335 296.211 289,248 44,073 43,188 46,785 45,606 44,771 44,195 43,747 42,930 42,257 9,509 9.176 4,734 4,639 4.533 4,429 4.260 4,077 3,965 1,317 1,282 1,235 1,188 1,131 1,085 1,043 1,002 972 410,572 397,114 383,320 370,165 362,250 356,659 350,385 344,220 336,442 25 24 71 75 75 78 73 77 108 410,597 397,138 383,391 370,240 362,325 356.737 350,458 344,297 336,550 321 125 92 133 139 208 97 112 97 7,988 8,391 9,110 10,057 7,563 6,498 4,021 5,600 5,880 20 25 16 1 8,329 8,541 9,218 10,191 7,702 6,706 4,118 5,712 5,977 5,890 5,944 5,474 4,268 5,467 4,078 4,874 2,743 1,895 361 10 17 36 41 88 (62) (43) (32) 14,580 14,495 14,709 14,495 13,210 10,872 8,930 8,412 7,840 871 1,034 866 835 791 736 623 606 585 13,7_09 13,4_61 13,843 13,6_60 12,419 10,136 8,307 7,8_06 7,255 2,744 2,607 2,312 2,176 1,927 1,710 1,692 1,524 2J65 23

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T ioy d 1. I ewis William C. Nolan Jr. J. D. l'hiilips Robert 1). I' ugh I'r rs 72203 Neg ~trar tur lheterred Stock-The First National Bank in Litt!c Rock, l Thud and im,iana Streets, Littlc Rock, ArLmsa,72203 Certit:ed l'uola At countants-1laskins & Sells, Ten Broadwau, Saint Louis,51issowi v3102 1%et utive Ottn e-Nmth and Louisiana Streets, Littic Rock, ArLansas 72203, Uhone i50ii 3~1-4000 I?ngincetlng Ott ne -S 1 tIl bi'CnHt' ann O nt StrCCis, finC Ohdf, b YN Usas ~lC0l, l' hone t501i 334-1330 Annlial .\$rrting-[o!D th [IHusday of blayJ l , . , , - c ,;a,,s ,,,.r,.r..to,,,:anc,,:of m ,,ey h a ,,,c,,:, x c,, a,:s c n,,,,::c.c o cs ecm,:s it ,

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Couch , , . , MIDDLE SOUTH I l

-=. h iv m a*.ai UTILITIES SYSTEM 1

i E Arkansas Power & Light Company Service Area

' Arkansas Power & Light Company owns electric facilities in 62 of Arkansas'75 counties. At December 31,1974, the Company furnished l retail electric energy in 250 incorporated municipalities. AP&L also furnished power at wholesale to eight municipalities, three rural electric cooperatives, one association of rural electric cooperatives, and one l small investor-owned system. AP&L's system is interconnected with and operated as a part of the Middle South Utilities System, which supplies the power requirements of more than 1.3 million customers in a 92,000-square-mile area of Arkansas, Louisiana, Mississippi and Southeast Missouri.

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