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13.AffiliatedCoal-MiningOperationsTheCompanypurchasedapproximately$196millionofcoalfromitsaffiliatedminingcompaniesin1986atpricesequaltothecostofmining.Thecostofcoalpurchasedisincludedintheenergycostscollectedfromcustomers.Thecostofaffiliatedcoal(particularlycoalfromtheGreenwichmine)hasgenerallybeenhigherthanthecostofcoalpurchasedfromothersources.AllthecoalminedattheGreenwichmineisdeliveredtotheCompany'sMontourgeneratingstationandaccountsforaboutone-halfofthecoalburnedatMontour.ThePUChasadoptedastandardagainstwhichthecostofallcoaldeliveredtoMontourwillbemeasuredoveratwo-yeartrialperiodwhichbeganApri11,1986.ThestandardisdeterminedmonthlybasedonthecostofcoalpurchasedbyotherPennsylvaniaelectricutilities.Attheendofthetrialperiod,thenetamountofanycostsinexcessof,orlessthan,thestandardwillbedetermined.Unlessthestandardiscontinuedbeyondthetrialperiod,thenetamountofanycostsinexcessofthestandardwillbereturnedtoPUCcustomersthroughtheCompany's1989-1990energycostrate.DataastothestandardisavailablefortheperiodApril1,1986throughSeptember30,1986.Forthisperiod,thecostofcoaldeliveredtoMontourhasbeenlessthanthestandard.Planshavebeenadoptedwhichwillresultinphasingoutminingoperationsofaffiliatedcompaniesbythemid-1990s.TheCompanyexpectsthatoverthisperiodinvestmentsincoalandfacilitieswillberecoveredandthatcoalwillbeproducedatpricesthatwillberecoveredinelectricrates.However,theCompanycannotpredictwhatfutureactionmaybetakenbythePUCorwhetherfutureeventsorcircumstancescouldsubstantiallyalterthecurrentminingplans.AdverseactionbythePUCoradversechangesintheminingplanscouldresultinmaterialchargesagainsttheCompany'searnings.AtDecember31,1986,thecapitalinvestmentbyaffiliatedcompaniesincoal-miningoperationsamountedtoabout$93million.14.UtilityPlantCarryingChargesInDecember1986,theCompanyreclassifiedfromutilityplanttodeferreddebits$28.6millionofnetcarryingchargeaccrualsrecordedoncertainfacilitiesforSusquehannaandMartinsCreekgeneratingstations.Thedeferredamountwillbeamortizedtoexpenseovertheremaininglifeofthestations.Thisresolvesacontestedaccountingandreportingmatterwhichresultedfromanexamina-tionoftheCompany'sbooksbytheFERC.15.AccountingStatementsTheFASBissuedanaccountingstatementinDecember1986thatestablishedaccountingrulestobeusedbyrate-regulatedutilitiesinaccountingforplantabandonmentsanddisallowedplantcosts.TheCompanybelievesithasnosituationscoveredbythestatement,includingtheSusquehannaUnit2disallowance,referredtoinNote2.TheFASHpreviouslyhadproposedaccountingforphase-inplansbutthismatterwasdeferredforfurtherconsideration.InSeptember1986,theFASHissuedaproposedaccountingstatementthatwouldchangethemannerinwhichincometaxexpenseisdeterminedforaccountingpurposes.Currentaccountingrulesutilizeadeferredmethodwhilethenewaccountingproposalutilizesaliabilitymethodunderwhichdeferredtaxliabilitieswouldberecordedandadjusted,whenrequired,fortheeffectofachangeintaxlaworrates.BecausetheTaxActwilllowerthetopcorporatetaxratefrom469oto34/,mostentitieswouldberequiredtoadjusttheirdeferredincometaxreservestoreflectthelowertaxrateiftheFASHproposalbecomeseffective.However,theTaxActessentiallyprohibitsutilitiesfromadjusting,tothe34%taxrate,deferredtaxreservesrelatedtotheAcceleratedCostRecoverySystemofdepreci-ation.Asaresult,theCompanydoesnotexpectanysubstantialreductioninitscurrentdeferredincometaxreservesintheeventthattheFASBproposalbecomeseffective.InDecember1986,theFASHissuedaproposedaccountingstatementthatwouldrequiretheCompanytoprepareconsolidatedfinancialstatementsthatincludemajority-ownedsubsidiaries.Iftheproposalisadoptedinitscurrentform,themostsignificanteffectontheCompany'sfinancialstatementswouldbetheadditionofabout$275millionofassetsandliabilitiesonthebalancesheet.AsubstantialportionoftheliabilitieswouldrepresentobligationsofsubsidiariescurrentlyguaranteedbytheCompany.Withregardtotheprecedingproposedaccountingstatements,theCompanycannotpredictwhatfinalaccountingrulestheFASHmayadopt,ortheultimateeffect,ifany,thatsuchaccountingmayhaveontheCompany'snetincomeorfinancialposition.SeeNote10forinformationonaFASHstatementrelativetopensioncosts.36 16.CommitmentsandContingentLiabilitiesTheCompany'sconstructionexpendituresareestimatedtoaggregate$283millionin1987,$296millionin1988and$292millionin1989,includingtheallowanceforfundsusedduringconstruc-tion.SeethesectionentitledCapitalExpenditureRequirementsonpage20foradditionalinformation.TheCompanyisamemberofcertaininsuranceprogramswhichprovidecoverageforpropertydamagetomembers'ucleargeneratingplants.FacilitiesattheSusquehannaplantareinsuredagainstpropertydamagelossesupto$1.2billionundertheseprograms.TheCompanyisalsoamemberofaninsuranceprogramwhichprovidesinsurancecoverageforthecostofreplacementpowerduringprolongedoutagesofnuclearunitscausedbycertainspecifiedconditions.Underthepropertyandreplacementpowerinsuranceprograms,theCompanycouldbeassessedretrospectivepremiumsintheeventtheinsurers'ossesexceedtheirreserves.ThemaximumamounttheCompanycouldbeassessedduringthecurrentpolicyyearisabout$16million.TheCompany'spublicliabilityforclaimsresultingfromanuclearincidentislimitedcurrentlyto$700millionunderprovisionsofthePrice-AndersonAct.TheCompanyisprotectedagainstthispotentialliabilitybyacombinationofcommercialinsuranceandanindustryassessmentprogram.IntheeventofanuclearincidentatanyofthefacilitiesownedbyothersandcoveredbythePrice-AndersonAct,theCompanycouldbeassessedupto$10millionperincident,butnotmorethan$20millioninacalendaryearintheeventmorethanoneincidentisexperienced.CongressisconsideringseveralproposalstoamendthePrice-AndersonActwhichexpiresinAugust1987.Theproposedamendmentsgenerallyincludeprovisionswhichwouldincreasethepublicliabilitylimitofutilitiesintheeventofanuclearincident.TheCompanyisunabletopredictwhatactionCongressmightultimatelytakeregardingthePrice-AndersonActandwhateffectsuchactionorexpirationofthePrice-AndersonActmighthaveontheCompany'spotentialliability.InDecember1986,theCompanyredeemedat$100pershare$87.7millionofPreferredStockrepresentingalloutstandingsharesofthe10.75%,11.00%,11.25%and14.00%SeriesPreferredStock.SeveralcomplaintshavebeenfiledintheUnitedStatesDistrictCourtbyholdersofsharesofthe10.75%,11.00%and14.00%SeriesrequestingadeclaratoryjudgmentthattheCompany'sredemp-tionofthosethreeseriesbreachedtheCompany'scontractualobligationstotheplaintiffsandthat(a)theCompanyisliabletopayplaintiffsamountsequaltotheredemptionpremiumsof$3.59persharewithrespecttothe10.75%Series,$25persharewithrespecttothe11.00%Seriesand$20persharewithrespecttothe14.00%Series,and(b)inthealternativetheredemptionberescindedandplaintiffsbeawardeddamagesinamountstobeascertained.TheCompanybelievesthatitwasentitledtocallthePreferredStockforredemptionatapriceof$100persharebutcannotpredicttheoutcomeofthecourtproceedings.SeeNote12forinformationabouttheCompany'sguaranteeofaffiliatedcompanies'bligations.17.QuarterlyFinancial,CommonStockPriceandDividendData(Unaudited)FortheC}uartersEnded:March31June30Sept.30Dec.31(ThousandsofDollars,ExceptPerShareAmounts)Operatingrevenues$596,087$518,514$528,650$545,674Operatingincome167,334131,499143,201147,291Netincome.95,15160,52167,53176,905Earningsapplicabletocommonstock............74,83043,57551,26061,386Earningspercommonshare(a).................1.000.580.690.82Dividendsdeclaredpercommonshare(b)........0.64O.G40.650.65High/lowpricepercommonshare(c)............33/J27/s34/31/s43/s/33/s40/4/361985Operatingrevenues$486,495$479,762$483,782$526,463Operatingincome.122,122122,003136,733145,630Netincome104,55158,94960,57366,540Earningsapplicabletocommonstock............81,22135,94038,04244,124Earningspercommonshare(a).................1.090.480.510.59Dividendsdeclaredpercommonshare(b)........O.G40.640.640.64High/lowpricepercommonshare(c)............27/s/24/s27/J23/s27/s/23/s29/23/4(a)Thequarterlyamountsdonotequalannualearningspershareduetorounding.(b)TheCompanyhaspaidquarterlycashdividendsonitscommonstockineveryyearsince1946.Thedividendspaidpersharein198Gand1985were$2.57and$2.54,respectively.ThemostrecentregularquarterlydividendpaidbytheCompanywas65centspershare(equivalentto$2.60perannum)paidJanuary1,1987.Futuredividendswillbedependentuponfutureearnings,financialrequirementsandotherfactors.(c)TheCompany'scommonstockislistedontheNewYorkandPhiladelphiaStockExchanges.37 SelectedFinancialandOperatingData19861985198419831982IncomeItems-thousandsOperatingrevenuesOperatingincome.Allowanceforfundsusedduringconstruction...Netincome.Earningsapplicabletocommonstock...~~..BalanceSheetItems-thousands(a)Netutilityplantinservice.Constructionworkinprogress.............TotalassetsLong-termdebt.PreferredandpreferencestockWithsinkingfundrequirements..........Withoutsinkingfundrequirements.......Commonequity.Short-termdebtTotalcapitalprovidedbyinvestors....~...~.FinancialRatiosReturnonaveragecommonequity-%.......Embeddedcostrates(a)Long-termdebt-%Preferredandpreferencestock-%........Timesinterestearnedbeforeincometaxes..~Ratioofearningstofixedcharges-totalenterprisebasis(b)Depreciationas%ofaveragedepreciableproperty.CommonStockDataNumberofsharesoutstanding-thousandsYear-end.Average.Earningspershare.Dividendsdeclaredpershare..............Taxabilityofdividendincome-%(c)........Bookvaluepershare(a).Marketpricepershare(a).................Dividendpayoutrate-%Dividendyield-%(c)(d)Priceearningsratio(d).FuelCostDataCostperkwhgenerated-centsCoal-firedsteamstations................Nuclearsteamstation(e)................Oil-firedsteamstationCombustionturbinesanddiesels(oil)......Average.CostoffossilfuelreceivedatsteamstationsCoal-perton.Residualoil-perbbl.Employees(a)$2,188,925589,32511,352300,108231,051$1,976,502526,488(29,301)290,613199,327$1,562,782406,958168,938318,903226,758$1,248,397289,930251,548296,011210,173$1,219,548223,083246,423278,886210,572475,239231,3751,915,649112,0005,513,054691,010231,3751,905,70095,5005,528,521738,027231,3751,896,987104,8005,575,695714,830231,3751,767,949190,0005,291,403621,634231,3751,643,695160,5454,980,56712.1110.548.332.802.592.210.4211.2410.022.372.192.212.3011.129.942.352.062.512.2910.989.662.292.042.713.6010.819.412.051.813.374,51374,513$3.10$2.58100.00$25.71$36M837.3011.3974,51374,513$2.68$2.56100.00$25.58$283/4969.819.7674,51372,767$3.12$2.4863.29$25.46$25~/s8011.007.2470,33568,642$3.06$2.400$25.12$205/87910.487.4866,46162,809$3.35$2.320$24.71$217011.955.791.670.582.967.811.57$40.17$16.838,3391.780.615.029.311.81$42.00$28.428,4331.750.545.319.821.98$42.75$31.328,3861.680.665.23=10.212.15$39.37$29.798,1601.775.6210.742.20$42.32$30.948,208$5,815,838$5,776,687$3,860,960$3,847,301$2,112,169224,426161,6842,020,8391,730,2282,923,8417,139,0726,965,6396,910,7836,418,5095,829,1382,778,7912,604,9362,604,5062,387,2492,323,318(a)Year-end.(b)Fixedchargesconsistofinterestonshort-andlong-termdebt,otherinterestcharges,interestoncapitalleaseobligationsandtheestimatedinterestcomponentofotherrentals.(c)Basedonholdingoneshareofcommonstockfortheentireyear.(d)Basedonaverageofmonth-endmarketprices.(e)TheCompany'sfirstnuclearunitwasplacedincommercialoperationonJune8,1983andthesecondunitonFebruary12,1985.(f)Thewinterpeaksshownwerereachedearlyinthesubsequentyear.
13.AffiliatedCoal-MiningOperationsTheCompanypurchasedapproximately$196millionofcoalfromitsaffiliatedminingcompaniesin1986atpricesequaltothecostofmining.Thecostofcoalpurchasedisincludedintheenergycostscollectedfromcustomers.Thecostofaffiliatedcoal(particularlycoalfromtheGreenwichmine)hasgenerallybeenhigherthanthecostofcoalpurchasedfromothersources.AllthecoalminedattheGreenwichmineisdeliveredtotheCompany'sMontourgeneratingstationandaccountsforaboutone-halfofthecoalburnedatMontour.ThePUChasadoptedastandardagainstwhichthecostofallcoaldeliveredtoMontourwillbemeasuredoveratwo-yeartrialperiodwhichbeganApri11,1986.ThestandardisdeterminedmonthlybasedonthecostofcoalpurchasedbyotherPennsylvaniaelectricutilities.Attheendofthetrialperiod,thenetamountofanycostsinexcessof,orlessthan,thestandardwillbedetermined.Unlessthestandardiscontinuedbeyondthetrialperiod,thenetamountofanycostsinexcessofthestandardwillbereturnedtoPUCcustomersthroughtheCompany's1989-1990energycostrate.DataastothestandardisavailablefortheperiodApril1,1986throughSeptember30,1986.Forthisperiod,thecostofcoaldeliveredtoMontourhasbeenlessthanthestandard.Planshavebeenadoptedwhichwillresultinphasingoutminingoperationsofaffiliatedcompaniesbythemid-1990s.TheCompanyexpectsthatoverthisperiodinvestmentsincoalandfacilitieswillberecoveredandthatcoalwillbeproducedatpricesthatwillberecoveredinelectricrates.However,theCompanycannotpredictwhatfutureactionmaybetakenbythePUCorwhetherfutureeventsorcircumstancescouldsubstantiallyalterthecurrentminingplans.AdverseactionbythePUCoradversechangesintheminingplanscouldresultinmaterialchargesagainsttheCompany'searnings.AtDecember31,1986,thecapitalinvestmentbyaffiliatedcompaniesincoal-miningoperationsamountedtoabout$93million.14.UtilityPlantCarryingChargesInDecember1986,theCompanyreclassifiedfromutilityplanttodeferreddebits$28.6millionofnetcarryingchargeaccrualsrecordedoncertainfacilitiesforSusquehannaandMartinsCreekgeneratingstations.Thedeferredamountwillbeamortizedtoexpenseovertheremaininglifeofthestations.Thisresolvesacontestedaccountingandreportingmatterwhichresultedfromanexamina-tionoftheCompany'sbooksbytheFERC.15.AccountingStatementsTheFASBissuedanaccountingstatementinDecember1986thatestablishedaccountingrulestobeusedbyrate-regulatedutilitiesinaccountingforplantabandonmentsanddisallowedplantcosts.TheCompanybelievesithasnosituationscoveredbythestatement,includingtheSusquehannaUnit2disallowance,referredtoinNote2.TheFASHpreviouslyhadproposedaccountingforphase-inplansbutthismatterwasdeferredforfurtherconsideration.InSeptember1986,theFASHissuedaproposedaccountingstatementthatwouldchangethemannerinwhichincometaxexpenseisdeterminedforaccountingpurposes.Currentaccountingrulesutilizeadeferredmethodwhilethenewaccountingproposalutilizesaliabilitymethodunderwhichdeferredtaxliabilitieswouldberecordedandadjusted,whenrequired,fortheeffectofachangeintaxlaworrates.BecausetheTaxActwilllowerthetopcorporatetaxratefrom469oto34/,mostentitieswouldberequiredtoadjusttheirdeferredincometaxreservestoreflectthelowertaxrateiftheFASHproposalbecomeseffective.However,theTaxActessentiallyprohibitsutilitiesfromadjusting,tothe34%taxrate,deferredtaxreservesrelatedtotheAcceleratedCostRecoverySystemofdepreci-ation.Asaresult,theCompanydoesnotexpectanysubstantialreductioninitscurrentdeferredincometaxreservesintheeventthattheFASBproposalbecomeseffective.InDecember1986,theFASHissuedaproposedaccountingstatementthatwouldrequiretheCompanytoprepareconsolidatedfinancialstatementsthatincludemajority-ownedsubsidiaries.Iftheproposalisadoptedinitscurrentform,themostsignificanteffectontheCompany'sfinancialstatementswouldbetheadditionofabout$275millionofassetsandliabilitiesonthebalancesheet.AsubstantialportionoftheliabilitieswouldrepresentobligationsofsubsidiariescurrentlyguaranteedbytheCompany.Withregardtotheprecedingproposedaccountingstatements,theCompanycannotpredictwhatfinalaccountingrulestheFASHmayadopt,ortheultimateeffect,ifany,thatsuchaccountingmayhaveontheCompany'snetincomeorfinancialposition.SeeNote10forinformationonaFASHstatementrelativetopensioncosts.36 16.CommitmentsandContingentLiabilitiesTheCompany'sconstructionexpendituresareestimatedtoaggregate$283millionin1987,$296millionin1988and$292millionin1989,includingtheallowanceforfundsusedduringconstruc-tion.SeethesectionentitledCapitalExpenditureRequirementsonpage20foradditionalinformation.TheCompanyisamemberofcertaininsuranceprogramswhichprovidecoverageforpropertydamagetomembers'ucleargeneratingplants.FacilitiesattheSusquehannaplantareinsuredagainstpropertydamagelossesupto$1.2billionundertheseprograms.TheCompanyisalsoamemberofaninsuranceprogramwhichprovidesinsurancecoverageforthecostofreplacementpowerduringprolongedoutagesofnuclearunitscausedbycertainspecifiedconditions.Underthepropertyandreplacementpowerinsuranceprograms,theCompanycouldbeassessedretrospectivepremiumsintheeventtheinsurers'ossesexceedtheirreserves.ThemaximumamounttheCompanycouldbeassessedduringthecurrentpolicyyearisabout$16million.TheCompany'spublicliabilityforclaimsresultingfromanuclearincidentislimitedcurrentlyto$700millionunderprovisionsofthePrice-AndersonAct.TheCompanyisprotectedagainstthispotentialliabilitybyacombinationofcommercialinsuranceandanindustryassessmentprogram.IntheeventofanuclearincidentatanyofthefacilitiesownedbyothersandcoveredbythePrice-AndersonAct,theCompanycouldbeassessedupto$10millionperincident,butnotmorethan$20millioninacalendaryearintheeventmorethanoneincidentisexperienced.CongressisconsideringseveralproposalstoamendthePrice-AndersonActwhichexpiresinAugust1987.Theproposedamendmentsgenerallyincludeprovisionswhichwouldincreasethepublicliabilitylimitofutilitiesintheeventofanuclearincident.TheCompanyisunabletopredictwhatactionCongressmightultimatelytakeregardingthePrice-AndersonActandwhateffectsuchactionorexpirationofthePrice-AndersonActmighthaveontheCompany'spotentialliability.InDecember1986,theCompanyredeemedat$100pershare$87.7millionofPreferredStockrepresentingalloutstandingsharesofthe10.75%,11.00%,11.25%and14.00%SeriesPreferredStock.SeveralcomplaintshavebeenfiledintheUnitedStatesDistrictCourtbyholdersofsharesofthe10.75%,11.00%and14.00%SeriesrequestingadeclaratoryjudgmentthattheCompany'sredemp-tionofthosethreeseriesbreachedtheCompany'scontractualobligationstotheplaintiffsandthat(a)theCompanyisliabletopayplaintiffsamountsequaltotheredemptionpremiumsof$3.59persharewithrespecttothe10.75%Series,$25persharewithrespecttothe11.00%Seriesand$20persharewithrespecttothe14.00%Series,and(b)inthealternativetheredemptionberescindedandplaintiffsbeawardeddamagesinamountstobeascertained.TheCompanybelievesthatitwasentitledtocallthePreferredStockforredemptionatapriceof$100persharebutcannotpredicttheoutcomeofthecourtproceedings.SeeNote12forinformationabouttheCompany'sguaranteeofaffiliatedcompanies'bligations.17.QuarterlyFinancial,CommonStockPriceandDividendData(Unaudited)FortheC}uartersEnded:March31June30Sept.30Dec.31(ThousandsofDollars,ExceptPerShareAmounts)Operatingrevenues$596,087$518,514$528,650$545,674Operatingincome167,334131,499143,201147,291Netincome.95,15160,52167,53176,905Earningsapplicabletocommonstock............74,83043,57551,26061,386Earningspercommonshare(a).................1.000.580.690.82Dividendsdeclaredpercommonshare(b)........0.64O.G40.650.65High/lowpricepercommonshare(c)............33/J27/s34/31/s43/s/33/s40/4/361985Operatingrevenues$486,495$479,762$483,782$526,463Operatingincome.122,122122,003136,733145,630Netincome104,55158,94960,57366,540Earningsapplicabletocommonstock............81,22135,94038,04244,124Earningspercommonshare(a).................1.090.480.510.59Dividendsdeclaredpercommonshare(b)........O.G40.640.640.64High/lowpricepercommonshare(c)............27/s/24/s27/J23/s27/s/23/s29/23/4(a)Thequarterlyamountsdonotequalannualearningspershareduetorounding.(b)TheCompanyhaspaidquarterlycashdividendsonitscommonstockineveryyearsince1946.Thedividendspaidpersharein198Gand1985were$2.57and$2.54,respectively.ThemostrecentregularquarterlydividendpaidbytheCompanywas65centspershare(equivalentto$2.60perannum)paidJanuary1,1987.Futuredividendswillbedependentuponfutureearnings,financialrequirementsandotherfactors.(c)TheCompany'scommonstockislistedontheNewYorkandPhiladelphiaStockExchanges.37 SelectedFinancialandOperatingData19861985198419831982IncomeItems-thousandsOperatingrevenuesOperatingincome.Allowanceforfundsusedduringconstruction...Netincome.Earningsapplicabletocommonstock...~~..BalanceSheetItems-thousands(a)Netutilityplantinservice.Constructionworkinprogress.............TotalassetsLong-termdebt.PreferredandpreferencestockWithsinkingfundrequirements..........Withoutsinkingfundrequirements.......Commonequity.Short-termdebtTotalcapitalprovidedbyinvestors....~...~.FinancialRatiosReturnonaveragecommonequity-%.......Embeddedcostrates(a)Long-termdebt-%Preferredandpreferencestock-%........Timesinterestearnedbeforeincometaxes..~Ratioofearningstofixedcharges-totalenterprisebasis(b)Depreciationas%ofaveragedepreciableproperty.CommonStockDataNumberofsharesoutstanding-thousandsYear-end.Average.Earningspershare.Dividendsdeclaredpershare..............Taxabilityofdividendincome-%(c)........Bookvaluepershare(a).Marketpricepershare(a).................Dividendpayoutrate-%Dividendyield-%(c)(d)Priceearningsratio(d).FuelCostDataCostperkwhgenerated-centsCoal-firedsteamstations................Nuclearsteamstation(e)................Oil-firedsteamstationCombustionturbinesanddiesels(oil)......Average.CostoffossilfuelreceivedatsteamstationsCoal-perton.Residualoil-perbbl.Employees(a)$2,188,925589,32511,352300,108231,051$1,976,502526,488(29,301)290,613199,327$1,562,782406,958168,938318,903226,758$1,248,397289,930251,548296,011210,173$1,219,548223,083246,423278,886210,572475,239231,3751,915,649112,0005,513,054691,010231,3751,905,70095,5005,528,521738,027231,3751,896,987104,8005,575,695714,830231,3751,767,949190,0005,291,403621,634231,3751,643,695160,5454,980,56712.1110.548.332.802.592.210.4211.2410.022.372.192.212.3011.129.942.352.062.512.2910.989.662.292.042.713.6010.819.412.051.813.374,51374,513$3.10$2.58100.00$25.71$36M837.3011.3974,51374,513$2.68$2.56100.00$25.58$283/4969.819.7674,51372,767$3.12$2.4863.29$25.46$25~/s8011.007.2470,33568,642$3.06$2.400$25.12$205/87910.487.4866,46162,809$3.35$2.320$24.71$217011.955.791.670.582.967.811.57$40.17$16.838,3391.780.615.029.311.81$42.00$28.428,4331.750.545.319.821.98$42.75$31.328,3861.680.665.23=10.212.15$39.37$29.798,1601.775.6210.742.20$42.32$30.948,208$5,815,838$5,776,687$3,860,960$3,847,301$2,112,169224,426161,6842,020,8391,730,2282,923,8417,139,0726,965,6396,910,7836,418,5095,829,1382,778,7912,604,9362,604,5062,387,2492,323,318(a)Year-end.(b)Fixedchargesconsistofinterestonshort-andlong-termdebt,otherinterestcharges,interestoncapitalleaseobligationsandtheestimatedinterestcomponentofotherrentals.(c)Basedonholdingoneshareofcommonstockfortheentireyear.(d)Basedonaverageofmonth-endmarketprices.(e)TheCompany'sfirstnuclearunitwasplacedincommercialoperationonJune8,1983andthesecondunitonFebruary12,1985.(f)Thewinterpeaksshownwerereachedearlyinthesubsequentyear.
SalesDataElectriccustomers(a).Averageannualresidentialkwhuse........Electricenergysalesbilled-millionsofkwhResidential.CommercialIndustrial.OtherSystemsales.Contractualsalestootherutilities........Totalelectricenergysalesbilled.......Sourcesofenergysold-millionsofkwhGeneratedCoal-firedsteamstations..............Nuclearsteamstation(e).............Oil-firedsteamstation................Combustionturbinesanddiesels(oil)...Hydroelectricstations................19861,073,1469,3448,7717,1597,9861,17025,0865,33930,42525,15110,1515,4531773919851,055,5469,0348,3546,7287,9071,08224,0714.04828,11926,23711,5344,3161861219841,039,3819,2828,4546,5278,1171,04324,14135724,49826,6956,2954,1213274719831,026,1449,0518,1386,1197,62396822,84820923,05726,8854,5095,5814570019821,013,6239,0398,0455,9467,32498222,29722,29725,4772933,18613612PowerpurchasesInterchangepowersales......~~....Companyuse,linelossesandother...Totalelectricenergysalesbilled...ElectricRevenueDataByclassofservice-thousandsResidentialCommercialIndustrial.Otherenergysales.SystemsalesContractualsalestootherutilities....Totalfromenergysalesbilled...~.Unbilledrevenues,net........,.....Otheroperatingrevenues.....,....~.Totalelectricoperatingrevenues.Averagepriceperkwhbilled-centsResidential.CommercialIndustrial.Totalforultimatecustomers......Totalforallcustomers.....~......Totalforsystemsales........~...41,5112,032(11,281)(1,837)30,425$714,753557,216473,48874,0471,819,504292,0442,111,54852,34425,033$2,188,9258.157.785.937.346.947.2542,7173,716(16,235)(2,079)28,119$634,669492,686438,42764,2231,630,005232,5981,862,60378,54530,059$1,971,2077.607.325.556.856.626.7737,8903,765(15,377)(1,780)24,49837,7203,880(16,405)(2,138)23,05729,5811,414(6,900)(1,798)22,297$591,922441,651411,53359,5261,504,63231,809$529,911386,617367,95047,2751,331,75318,494$503,557363,233347,72647,7311,262,247$1,556,676$1,243,680$1,213,3037.006.775.076.306.276.236.516.324.835.915.865.836.266.114.755.745.665.661,536,4411,350,2471,262,247(9,725)(119,539)(61,652)29,96012,97212,708GenerationDataGeneratingcapability-thousandsofkw(a)..Winterpeakdemand-thousandsofkw(f)..Generationbyfuelsource-%CoalNuclear(e).Oil.HydroelectricSteamstationavailability-%Coal-fired.Nuclear(e).Oil-firedSteamstationutilization-%Coal-fired.Nuclear(e).Oil-fired7,5195,15460.624.413.21.878.861.784.769.361.338.07,5134,98161.427.010.21.478.670.787.272.370.530.07,4845,51970.416.611.02.075.266.768.073.365.728.67,4944,86971.311.914.91.978.867.775.874.067.538.86,5464,48986.11.010.82.179.180.470.222.239 OfficersDirectorsaROBERTK.CAMPBELL,PresidentandChiefExecutiveOfficerMERLINF.HERTZOG,ExecutiveVicePresident-CorporateServicesJOHNT.KAUFFMAN,ExecutituVicePresident-OperationsCHARLESE.RUSSOLI,ExecutiveVicePresident-FinancialBRUCED.KENYON,SeniorVicePresident-I<luctearLEONL.NONEMAKER,SeniorVicePresident-DivisionOperationsJOHNR.BIGGAR,VicePresident-FinanceGENNAROD.CALIENDO,VicePresidentandGeneralCounselJOHNM.CHAPPELEAR,VicePresident-Intv'.stmentsandPensionsTHOMASM.CRIMMINSJR.,VicePresident-Pou:erProductionROBERTS.GOMBOS,VicePresident-HumanResource<i'cDevelopmentCHARLESJ.GREEN,VicePresident-HarrisburgDcvisionWILLIAMF<.HE<CHT,VicePresident-SystemPouterHAROLDW.KEISER,VicePresident-I<luctearOperationsJOHNP.KIERZKOWSKI,VicePresidentandTreasurerCARLR.MAIO,VicePresident-LehighDivisionGRAYSONE.McNAIR,VicePresident-<'tfarketing&CustomerServicesEDWARDM.NAGEL,VicePresidentandSecretaryHERBERTD.NASHJR.,VicePresident-CentralDivisionCLAIRW.NOLL,VicePresident-ProcurementZComputerScrviccsJOHNE.ROTH,VicePresident-NorthernDivisionJOHNH.SAEGER,VicePresident-SusquehannaDivisionEDWINH.SEIDLER,VicePresident-Engineering<f;Constrccction-SystencPower<f;EnginccringBRENTS.SHUNK,VicePresident-i.ancasterDivisionJEANA.SMOLICK,AssistantSecretaryGEORGEF.VANDERSLICE,VicePresidentandComptrollerPAULINEL.VETOVITZ,AssistantSecretaryHELENJ.WOLF'ER,AssistantSecretaryandAssistantTreasurerCorporateilfanagementCommittee:RobertK.Campbell,chairman;MerlinF.Hertzog,JohnT.Kauffman,CharlesE.Russoli,BruceD.Kenyon,LeonL.Nonemaker,andEdwardl'.Reis,Director-CorporatePlanning,servingasthecommittee'sexecutivesecretary.CLIFFORDL.ALEXANDERJR.,Washington,S.C."'President,Alexander&AssociatesInc.Consultantstobusiness,governmentandindustryROSWELLBRAYTONSR.,WoolrichChairmanoftheBoardandChiefExecutiveOfficer,'lVoolrichlVoolenMillsInc.MantcfacturerofgarmentsforouldooractivitiesJEFFREYJ.BURDGE,CampHillChairmanofticeBoardandClciefExecutiveOfficer,HarscoCorporation.ManufacturerofprocessedandfabricatedmetalsROBERTK.CAMPBELL,AllentownPresidentandChiefExecutiveOfficerEDGARL.DESSEN,HazletonPhysician-RadiologistEDWARDDONLEY,AllentownChaimnan,ExecutiveCommitlee,AirProductsandChemicalsInc.llfanufacturerofindustrialandcommercialgasesandchemicalsREV.DANIELG.GAMBET,O.S.F.S.,CenterValleyPresident,Al(entotvnCollegeofS4FrancisdeSalesMERLINF.HERTZOG,AllentownExecutiveVicePresident-CorporateServicesFRANCESR.HL<SSELBE<IN,NewYorkCityNationalExecutiveDirector,GirlScoutsoftheU.S.A.HARRYA.JENSEN,LancasterDirectorandformerChiefExecutiveOfficn;ArmstronglVorldIndustriesI>>c.ManufacturerofinteriorfurnislcingsandspecialtyproductsJOHNT.KAUFFMAN,AllentownExecutiveVicePresident-OperationsHAROLDS.MOHLER,HersheyFormerChairmanoftheBoard,HersheyFoodsCorporation.DiversifiedmanufaclureroffoodproductsRALPHW.RICHARDSONJR.,StateCollegeConsullant,agriculturalandenvironmentalsciencesNORMANROBERTSON,PittsburghSeniorVicePresidentandChiefEconomist,MellonBank,l<I.A.CHARLESE.RUSSOLI,AllentownExecutiveVicePresident-FinancialDAVIDL.TRESSLER,ScrantonChairmanoftheBoardandChiefExecutiveOfficer,NortheasternBankofPennsylvaniaExecutiveCommittee:RobertK.Campbell,chairman;EdgarL.Dessen,HarryA.JensenandNormanRobertson.AuditCommittee:DavidL.Tressler,chairman;CliffordL.AlexanderJr.,RoswellBraytonSr.,Rev.DanielG.Gambet,ilaroldS.MehlerandRalphW.RichardsonJr.CorporateResponsibilityCommittee:FrancesR.Hesselbein,chairman;JeffreyJ.Burdtte,EdgarL.Dessen,Rev.DanielG.Gambet,HaroldS.MohlerandDavulL.Tressler.ManagementDevelopmentandCompensationCommittee:RoswellBraytonSr..chairman;CliffordL.AlexanderJr.,EdgarL.Dessen,EdwardDonleyandNormanRobertson.NominatingCommittee:RalphW.RichardsonJr..chairman;JeffreyJ.Burdge,EdwardDonley,FrancesR.HesselbeinandHarryA.Jensen.Form10-KandPP&LPROFILEThecompany'sannualreportfiledwithtltcSecuritiesandExchangeCommissiononForm10-Kwillbcavailablemid-March.EachyearthecompanypublishesthePP&LProfile,a10-yearstatisticalreview,containingin.depthinformationaboutthecompany.The1976-198GProfilewillbeavailableinMay.Ashareownermayobtainacopyofthesepublications,atnocost,bywritingtoPennsylvaniaPower&LightCompany,TwoNorthNinthStreet,Allentown,PA18101,Attention:Mr.GcorgcI.Klinc,Manager-InvestorServices.40 BoardofDirectors$$t<tIAlexanderBraytonurdgeDessen,<./!,!.'fr,'iyDonleyGambetHesselbeinJensen~I,vlMohlerRichardsonRobertsonTresslerCorporateManagementCommittee4a4NlNi)I4NonemakerHertzogCampbellKauffmanRussoliKenyon  
SalesDataElectriccustomers(a).Averageannualresidentialkwhuse........Electricenergysalesbilled-millionsofkwhResidential.CommercialIndustrial.OtherSystemsales.Contractualsalestootherutilities........Totalelectricenergysalesbilled.......Sourcesofenergysold-millionsofkwhGeneratedCoal-firedsteamstations..............Nuclearsteamstation(e).............Oil-firedsteamstation................Combustionturbinesanddiesels(oil)...Hydroelectricstations................19861,073,1469,3448,7717,1597,9861,17025,0865,33930,42525,15110,1515,4531773919851,055,5469,0348,3546,7287,9071,08224,0714.04828,11926,23711,5344,3161861219841,039,3819,2828,4546,5278,1171,04324,14135724,49826,6956,2954,1213274719831,026,1449,0518,1386,1197,62396822,84820923,05726,8854,5095,5814570019821,013,6239,0398,0455,9467,32498222,29722,29725,4772933,18613612PowerpurchasesInterchangepowersales......~~....Companyuse,linelossesandother...Totalelectricenergysalesbilled...ElectricRevenueDataByclassofservice-thousandsResidentialCommercialIndustrial.Otherenergysales.SystemsalesContractualsalestootherutilities....Totalfromenergysalesbilled...~.Unbilledrevenues,net........,.....Otheroperatingrevenues.....,....~.Totalelectricoperatingrevenues.Averagepriceperkwhbilled-centsResidential.CommercialIndustrial.Totalforultimatecustomers......Totalforallcustomers.....~......Totalforsystemsales........~...41,5112,032(11,281)(1,837)30,425$714,753557,216473,48874,0471,819,504292,0442,111,54852,34425,033$2,188,9258.157.785.937.346.947.2542,7173,716(16,235)(2,079)28,119$634,669492,686438,42764,2231,630,005232,5981,862,60378,54530,059$1,971,2077.607.325.556.856.626.7737,8903,765(15,377)(1,780)24,49837,7203,880(16,405)(2,138)23,05729,5811,414(6,900)(1,798)22,297$591,922441,651411,53359,5261,504,63231,809$529,911386,617367,95047,2751,331,75318,494$503,557363,233347,72647,7311,262,247$1,556,676$1,243,680$1,213,3037.006.775.076.306.276.236.516.324.835.915.865.836.266.114.755.745.665.661,536,4411,350,2471,262,247(9,725)(119,539)(61,652)29,96012,97212,708GenerationDataGeneratingcapability-thousandsofkw(a)..Winterpeakdemand-thousandsofkw(f)..Generationbyfuelsource-%CoalNuclear(e).Oil.HydroelectricSteamstationavailability-%Coal-fired.Nuclear(e).Oil-firedSteamstationutilization-%Coal-fired.Nuclear(e).Oil-fired7,5195,15460.624.413.21.878.861.784.769.361.338.07,5134,98161.427.010.21.478.670.787.272.370.530.07,4845,51970.416.611.02.075.266.768.073.365.728.67,4944,86971.311.914.91.978.867.775.874.067.538.86,5464,48986.11.010.82.179.180.470.222.239 OfficersDirectorsaROBERTK.CAMPBELL,PresidentandChiefExecutiveOfficerMERLINF.HERTZOG,ExecutiveVicePresident-CorporateServicesJOHNT.KAUFFMAN,ExecutituVicePresident-OperationsCHARLESE.RUSSOLI,ExecutiveVicePresident-FinancialBRUCED.KENYON,SeniorVicePresident-I<luctearLEONL.NONEMAKER,SeniorVicePresident-DivisionOperationsJOHNR.BIGGAR,VicePresident-FinanceGENNAROD.CALIENDO,VicePresidentandGeneralCounselJOHNM.CHAPPELEAR,VicePresident-Intv'.stmentsandPensionsTHOMASM.CRIMMINSJR.,VicePresident-Pou:erProductionROBERTS.GOMBOS,VicePresident-HumanResource<i'cDevelopmentCHARLESJ.GREEN,VicePresident-HarrisburgDcvisionWILLIAMF<.HE<CHT,VicePresident-SystemPouterHAROLDW.KEISER,VicePresident-I<luctearOperationsJOHNP.KIERZKOWSKI,VicePresidentandTreasurerCARLR.MAIO,VicePresident-LehighDivisionGRAYSONE.McNAIR,VicePresident-<'tfarketing&CustomerServicesEDWARDM.NAGEL,VicePresidentandSecretaryHERBERTD.NASHJR.,VicePresident-CentralDivisionCLAIRW.NOLL,VicePresident-ProcurementZComputerScrviccsJOHNE.ROTH,VicePresident-NorthernDivisionJOHNH.SAEGER,VicePresident-SusquehannaDivisionEDWINH.SEIDLER,VicePresident-Engineering<f;Constrccction-SystencPower<f;EnginccringBRENTS.SHUNK,VicePresident-i.ancasterDivisionJEANA.SMOLICK,AssistantSecretaryGEORGEF.VANDERSLICE,VicePresidentandComptrollerPAULINEL.VETOVITZ,AssistantSecretaryHELENJ.WOLF'ER,AssistantSecretaryandAssistantTreasurerCorporateilfanagementCommittee:RobertK.Campbell,chairman;MerlinF.Hertzog,JohnT.Kauffman,CharlesE.Russoli,BruceD.Kenyon,LeonL.Nonemaker,andEdwardl'.Reis,Director-CorporatePlanning,servingasthecommittee'sexecutivesecretary.CLIFFORDL.ALEXANDERJR.,Washington,S.C."'President,Alexander&AssociatesInc.Consultantstobusiness,governmentandindustryROSWELLBRAYTONSR.,WoolrichChairmanoftheBoardandChiefExecutiveOfficer,'lVoolrichlVoolenMillsInc.MantcfacturerofgarmentsforouldooractivitiesJEFFREYJ.BURDGE,CampHillChairmanofticeBoardandClciefExecutiveOfficer,HarscoCorporation.ManufacturerofprocessedandfabricatedmetalsROBERTK.CAMPBELL,AllentownPresidentandChiefExecutiveOfficerEDGARL.DESSEN,HazletonPhysician-RadiologistEDWARDDONLEY,AllentownChaimnan,ExecutiveCommitlee,AirProductsandChemicalsInc.llfanufacturerofindustrialandcommercialgasesandchemicalsREV.DANIELG.GAMBET,O.S.F.S.,CenterValleyPresident,Al(entotvnCollegeofS4FrancisdeSalesMERLINF.HERTZOG,AllentownExecutiveVicePresident-CorporateServicesFRANCESR.HL<SSELBE<IN,NewYorkCityNationalExecutiveDirector,GirlScoutsoftheU.S.A.HARRYA.JENSEN,LancasterDirectorandformerChiefExecutiveOfficn;ArmstronglVorldIndustriesI>>c.ManufacturerofinteriorfurnislcingsandspecialtyproductsJOHNT.KAUFFMAN,AllentownExecutiveVicePresident-OperationsHAROLDS.MOHLER,HersheyFormerChairmanoftheBoard,HersheyFoodsCorporation.DiversifiedmanufaclureroffoodproductsRALPHW.RICHARDSONJR.,StateCollegeConsullant,agriculturalandenvironmentalsciencesNORMANROBERTSON,PittsburghSeniorVicePresidentandChiefEconomist,MellonBank,l<I.A.CHARLESE.RUSSOLI,AllentownExecutiveVicePresident-FinancialDAVIDL.TRESSLER,ScrantonChairmanoftheBoardandChiefExecutiveOfficer,NortheasternBankofPennsylvaniaExecutiveCommittee:RobertK.Campbell,chairman;EdgarL.Dessen,HarryA.JensenandNormanRobertson.AuditCommittee:DavidL.Tressler,chairman;CliffordL.AlexanderJr.,RoswellBraytonSr.,Rev.DanielG.Gambet,ilaroldS.MehlerandRalphW.RichardsonJr.CorporateResponsibilityCommittee:FrancesR.Hesselbein,chairman;JeffreyJ.Burdtte,EdgarL.Dessen,Rev.DanielG.Gambet,HaroldS.MohlerandDavulL.Tressler.ManagementDevelopmentandCompensationCommittee:RoswellBraytonSr..chairman;CliffordL.AlexanderJr.,EdgarL.Dessen,EdwardDonleyandNormanRobertson.NominatingCommittee:RalphW.RichardsonJr..chairman;JeffreyJ.Burdge,EdwardDonley,FrancesR.HesselbeinandHarryA.Jensen.Form10-KandPP&LPROFILEThecompany'sannualreportfiledwithtltcSecuritiesandExchangeCommissiononForm10-Kwillbcavailablemid-March.EachyearthecompanypublishesthePP&LProfile,a10-yearstatisticalreview,containingin.depthinformationaboutthecompany.The1976-198GProfilewillbeavailableinMay.Ashareownermayobtainacopyofthesepublications,atnocost,bywritingtoPennsylvaniaPower&LightCompany,TwoNorthNinthStreet,Allentown,PA18101,Attention:Mr.GcorgcI.Klinc,Manager-InvestorServices.40 BoardofDirectors$$t<tIAlexanderBraytonurdgeDessen,<./!,!.'fr,'iyDonleyGambetHesselbeinJensen~I,vlMohlerRichardsonRobertsonTresslerCorporateManagementCommittee4a4NlNi)I4NonemakerHertzogCampbellKauffmanRussoliKenyon  
~ggQgPennsylvaniaPower&LightCompanyTwoNorthNinthStreet~Allentown,PA18101~215I770-5151BULKRAgEU.S.POStAGEPAIDAllentown.Pa.PermitNo.104FiscalAgentsSecuritiesListedOnExchangesTRANSFERAGENTSFORPREFERRED,PREFERENCEANDCOMMONSTOCKMorganShareholderServicesTrustCompany30WestBroadwayNewYork,NewYork10007-2192PennsylvaniaPower&LightCompanyManager-InvestorServicesTwoNorthNinthStreetAllentown,Pennsylvania18101'EGISTRARSFORPREFERRED,PREFERENCEANDCOMMONSTOCKMorganShareholderServicesTrustCompany30WestBroadwayNewYork,NewYork10007-2192PennsylvaniaPower&,LightCompanyManager-InvestorServicesTwoNorthNinthStreetAllentown,Pennsylvania18101DIVIDENDDISBURSINGOFFICEANDDIVIDENDREINVESTMENTPLANAGENTPennsylvaniaPower&LightCompanyVicePresidentandTreasurerTwoNorthNinthStreetAllentown,Pennsylvania18101NEWYORKSTOCKEXCHANGE4tvaa%PreferredStock(Code:PPLPRB)4.40%SeriesPreferredStockCode:PPLPRA)8.60%SeriesPreferredStockCode:PPLPRG)9.24%SeriesPreferredStockCode:PPLPRM)PreferenceStock,$8.00SeriesCode:PPLPRJ)PreferenceStock,$8.40SeriesCode:PPLPRH),PreferenceSto'ck,$8.70SeriesCode:PPLPRI)-'Prefer'enceStock.$11.00Series(Code:PPLPRL)Comm'onStock(Code:PPL)PHILADELPHIASTOCKEXCHANGE4'%referredStock3.35%SeriesPreferredStock4.40%SeriesPreferredStock4.60%SeriesPreferredStock8.60%SeriesPreferredStock9%SeriesPreferredStock9.24%SeriesPreferredStockPreferenceStock,$8.00SeriesPreferenceStock,$8.40SeriesPreferenceStock,$8.70SeriesPreferenceStock,$11.00SeriesCommonStock  
~ggQgPennsylvaniaPower&LightCompanyTwoNorthNinthStreet~Allentown,PA18101~215I770-5151BULKRAgEU.S.POStAGEPAIDAllentown.Pa.PermitNo.104FiscalAgentsSecuritiesListedOnExchangesTRANSFERAGENTSFORPREFERRED,P
 
==REFERENCE==
ANDCOMMONSTOCKMorganShareholderServicesTrustCompany30WestBroadwayNewYork,NewYork10007-2192PennsylvaniaPower&LightCompanyManager-InvestorServicesTwoNorthNinthStreetAllentown,Pennsylvania18101'EGISTRARSFORPREFERRED,P
 
==REFERENCE==
ANDCOMMONSTOCKMorganShareholderServicesTrustCompany30WestBroadwayNewYork,NewYork10007-2192PennsylvaniaPower&,LightCompanyManager-InvestorServicesTwoNorthNinthStreetAllentown,Pennsylvania18101DIVIDENDDISBURSINGOFFICEANDDIVIDENDREINVESTMENTPLANAGENTPennsylvaniaPower&LightCompanyVicePresidentandTreasurerTwoNorthNinthStreetAllentown,Pennsylvania18101NEWYORKSTOCKEXCHANGE4tvaa%PreferredStock(Code:PPLPRB)4.40%SeriesPreferredStockCode:PPLPRA)8.60%SeriesPreferredStockCode:PPLPRG)9.24%SeriesPreferredStockCode:PPLPRM)PreferenceStock,$8.00SeriesCode:PPLPRJ)PreferenceStock,$8.40SeriesCode:PPLPRH),PreferenceSto'ck,$8.70SeriesCode:PPLPRI)-'Prefer'enceStock.$11.00Series(Code:PPLPRL)Comm'onStock(Code:PPL)PHILADELPHIASTOCKEXCHANGE4'%referredStock3.35%SeriesPreferredStock4.40%SeriesPreferredStock4.60%SeriesPreferredStock8.60%SeriesPreferredStock9%SeriesPreferredStock9.24%SeriesPreferredStockPreferenceStock,$8.00SeriesPreferenceStock,$8.40SeriesPreferenceStock,$8.70SeriesPreferenceStock,$11.00SeriesCommonStock  
}}
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Revision as of 22:23, 30 April 2018

Pennsylvania Power & Light Co,1986 Annual Rept. W/870319 Ltr
ML18040B178
Person / Time
Site: Susquehanna  Talen Energy icon.png
Issue date: 12/31/1986
From: CAMPBELL R K, KEISER H W
PENNSYLVANIA POWER & LIGHT CO.
To: DENTON H
Office of Nuclear Reactor Regulation
References
PLA-2820, NUDOCS 8703240134
Download: ML18040B178 (45)
v • d • e


Text

ePennsylvaniaPower8LightCompanyTwoNorthNinthStreet~Allentown,PA18101~215l770-5151HaroldW.KeiserVicePresident-NuclearOperations215/770-7502MAR191987Mr.HaroldDenton,DirectorOfficeofNuclearReactorRegulationU.S.NuclearRegulatoryCommissionWashington,D.C.20555SUSQUEHANNASTEAMELECTRICSTATIONANNUALFINANCIALREPORTPLA-2820FILER41-2ADocketNos.50-38750-388

DearMr.Denton:

Inaccordancewith10CFR50.71(b),'enclosedisthe1986annualreportforPennsylvaniaPower6LightCo.TheannualreportforAlleghenyElectricCooperative,Inc.,willbeforwardedlater.Verytrulyyours,~~.W.KeiserVicePresident-NuclearOperationsAttachmentcc:NRCDocumentControlDesk(original)NRCRegionIMr.L.R.Plisco-NRCResidentInspectorMr.M.C.Thadani-NRCProjectManager IIIrlii/~~0~~~~~~~~~~I~~'~~~~I~~~~~~IW~rr+i?wrr4~~i~~'~Ir~~~~~~~~~~~~I" COVERCONTENTS1,tt,.tt'llkes-Barre,Pennsylvania,itsPublicSquareaglowinlight,boastsoneofthemostencouragingstoriesofeconomicresurgencelnPP&L's10,000-square-mileservicearea.Thecitygainednationwideattentionin1972asoneofthehardest-hitvictimsofseverefloodingthataccom-paniedTropicalStormAgnes.TheindomitablespiritofthepeopleoftheWyomingValleyprevailedandtheareaisnowmorevibrantthanever.AgleamingbrassandglassfacadehighlightsthenewF.M.KlrbyCenterforthePerformingArts,arefurbished1,850-seattheaterwithrootsgoingbacknearly50yearstoaneraoflavishandornatemoviepalaces.ThetheaterisfastbecomingaculturalcenterinNortheastPennsylvania,andwillbethesiteofPP&L'scorporateannualmeetinginApril1988.Show-ingnosignsthatitssquarewasundereightfeetofwaterIn1972,thecenteroftheseatofgovernmentfor200-year-oldLuzerneCountyIsan-otherCentralEasternPennsylvaniacommunitythatPP&Lproudlyserves.HighlightsPresident'sLetterYearinReviewFinancialReviewFinancialStatementsNotestoFinancialStatementsSelectedFinancialandOperatingDataOfficersandDirectors1241823313840CUSTOMERSERVICEPP&L'smissionstatementsaysitall:"Tomeetourcustomers'ngoingneedsforeconomicalandreliableelectricserviceinwaysthatmeritthetrustandconfidenceofthepublic."TheservicePP&Lprovidesvitallyaffectsthedallylivesof2.5millionpeopleInCentralEasternPennsyl-vania.ThisiswhyPP&Lhasagreatresponsibilitytothosepeopletobearesponsive,sensitivecompany.Butsensitivitycanonlybeconveyedbypeople-peoplewhotaketheirJobsandtheirindividualresponsibilitiesseriously.Inwordsandpictures,onpages4through17,isthestoryofsomeofthepeoplewhoperpetuatePP&L'sreputationforexcellentcustomerservice.TheirdedicationtoexcellencekeepsPP&L'sperform-anceamongthebest.NoticeofAnnualMeetingThe1987annualmeetingofshare-ownerswillbeheldat1:30p.m.onWednesday,April22,1987,atthePennHarrisInnandConventionCenter,Routes11and15,CampHillBypass,CampHill,Pa.FormalnoticeofthemeetingandareservationcardformeetingattendanceareIncludedwithshareowners'roxymaterial.SERVICEAREAPennsylvaniaPower&LightCo.,basedinAllentown,Pa.,provideselectricservicetomorethanamillionhomesandbusinessesthroughouta10,000-square-mileareain29countiesofCentralEasternPennsylvania.PrincipalcitiesInthePP&LserviceareaareAllentown,Bethlehem,Harrisburg,Hazleton,Lancaster,Scranton,Wllkes-BarreandWilliamsport.lhhehtlOtDltltlhnCohttolDfVILohlehDltltlohAllentown HIGHLIGHTS.Customers(a)CommonShareowners(a)..............ElectricEnergySales,Kilowatt-hours..InterchangePowerSales,Kilowatt-hoursElectricityGenerated,Kilowatt-hoursOperatingRevenuesCapitalProvidedbyInvestors(a)......UtilityPlant(a)NetPlantinServiceConstructionWorkinProgress.........CommonStockData198619851,073,1461,055,546147,611151,02580.4Billion28.1Billion11.8Billion16.2Billion41.5Billion42.7Billion$2.2Billion$2.0Billion$5.5Billion$5.5Billion$5.8Billion$5.8Billion$0.2Billion$0.2BillionReturnonAverageCommonEquity..EarningsPerShare.DividendsDeclaredPerShare.......MarketPricePerShare(a).........BookValuePerShare(a)...........TimesInterestEarnedBeforeIncomeTaxes.(a)Atyear-end.12.11%$8.10$2.58$86N$25.712.8010.42%$2.68$2.56$28s/4$25.582.87WherethePP&LIncomeDollarWentin1986NetCostofEnergyTaxesInterestEmployeesMaterials,Services,Rents,etc.DividendsDepreciationEarningsReinvested20020014413412012%7C20-Incomeincludesrevenues,otlierincomeandtheallowanceforfundsusedduringconstruction.

PRESIDENT'SLETTERTheverypositiveoperatingandfinancialresultsachievedbythecompanyin1986clearlyshowthat,withbothSusquehannageneratingunitsincommercialoperation,we.nowhaveasolidfoundationinplaceformeetingourlong-termcommitmentstocustomersandshareowners.Tosucceedintoday'sincreas-inglycompetitiveenergymarketsrequiresmaintainingtopperfor-manceinallphasesofouropera-tions.Thismeansthatwemustcontinuetoprovideelectricpoweratcompetitivepricesandwithsuperiorcustomerservice.Fortu-nately,becauseofPP&L'sexcep-tionallystrongcapacityposition,basedonanefficientmixofcoalandnucleargeneration,thecom-panyhasneverbeeninabetterpositiontomeettheseobjectives.'rovidingeconomicalandrelia-bleelectricservicegoeshand-in-handwithenhancingthecom-pany'sfinancialstrength.Andbecausebotharerelatedtosuc-ceedinginthemarketplace,PP&L'smarketingandeconomicdevelop-mentprogramsareaimedatattractingandholdingjob-pro-ducingbusinessesforourserviceareabypromotingthecompany'sstrongpositionasasupplierofre-liableandcompetitivelypricedelectricenergy.SalesandEarningsContributingtoourimprovedfinancialperformancein1986,kilowatt-hoursalestoservice-areacustomersincreased4.2percentandtotalelectricsalesincreased8.2percent,comparedto1985.Theservice-areasalesgrowthwasledbymajorgainsinourelectricallyheatedhomemarketandbyin-creasedsalestocommercialcus-tomers.Althoughindustrialsalesincreasedbyonly1percent,ourindustrialsectorcontinuestogrowandbecomemorediversified,withnetgainsthroughplantexpansionsandnewindustriesmorethanoffsettingreducedusageforsteelmanufacturing.Thecompany'stotal1986salesin-creaseof8.2percentreflectedthebenefitofthefirstfullyearofsell-ingelectricpowerunderourlong-termcontractwithJerseyCentralPower&LightCo.Thiscontractfor945,000kilowattsofPP&L'stotalgeneratingsystem,andourcontractwithAtlanticCityElect-ricCo.forelectricenergyfromSusquehanna,providerevenuesthathavehelpedtooffsetregula-torydisallowancesbasedonrul-ingsthatthecompanypresentlyhastoomuchgeneratingcapacity.Themarketingofelectricpowertootherutilitieswillcontinuetoprovidethecompanywithimpor-tantsourcesoffuturerevenue.ThesesalesaremadepossiblebyPP&L'sfavorablemixoflow-costcoalanduraniumfuels-andbytheoutstandingperformanceofourgeneratingunits.Thecompany's1986earningsof$3.10persharewereup42cents,or15.7percent,from1985.Thissignificantimprovementisthere-sultofourcontinuedemphasisoncostcontainment,includingourveryeffectiverefinancingpro-gram,andincreasedelectricenergysales.Aspartofourongoingcostcon-tainmentprogramin1986,weinitiatedavoluntaryearlyretire-mentprogram,delayedbuildingrenovationsandundertookanaggressiveprogramtorefinancehighercostsecuritiesatlowercosttoimproveearningsandtohelpkeepPP&L'spriceforelectricser-viceaslowaspossible.Lookingahead,wewillworkhardtoholddowncosts,includingcontinuationofourrefinancingprogramthatprovedtobepar-ticularlysignificantinreducingcostsandimprovingearningsin1986.Thecompany'sstrengthenedfinancialpositionalsoisreflectedbythehighqualityofour1986earnings.Onlyabout5percentoftheseearningsweretheresultofrecordinganon-cashallowanceforfundsusedduringconstruction,comparedtoanindustryaverageofabout35percent.Withouttheneedtoconstructmajornewgeneratingcapacityforatleastthebalanceofthiscentury,thisfavorableliquiditypositionshouldcontinuetobeafinancialstrengthfortheforeseeablefuture.Mark,etingandEconomicDevelopmentOuraggressivemarketingandeconomicdevelopmentprogramscontinuedlastyeartomakeimpor-tantcontributionstotheeconomicprosperityofthecommunitiesweserve.Theseprogramsalsoaredesignedtoachieveannualin-creasesinkilowatt-hoursalestosupportthefinancialhealthofthecompanywhilemitigatingtheneedforfuturerateincreases.Toachieveoureconomicdevelop-mentandkilowatt-hoursalesgrowthobjectivesintoday'scom-petitiveenergymarket,it'sessen-tialthatwekeepthepriceforourelectricserviceaslowaspossible.Forthatreason,weannouncedatlastyear'sannualmeetingourob-jectiveofnotraisingbaseratesforatleastthebalanceofthisdecade.Althoughourmarketingandeconomicdevelopmentprograms continuetoproduceimpressivere-sults,wewillbeexpandingtheseef-fortswithnewinitiativesthisyear.Forexample,weplantobroadenourpresentrateincentiveprogrambyintroducingnewflexiblepric-ingoptionsdesignedtoencourageexistingbusinesscustomerstoexpandtheiroperationsandtoattractnewindustriestoourser-vicearea.Andwewillbesteppingupoureffortstofindnewenergy-efficientelectricalusesthatwillprovidebenefitsforresidential,commercialandindustrialcustomers.Customerserviceisthekeyele-mentinthesuccessofPP&L'smarketingandeconomicdevelop-mentprograms.Forexample,hav-ingmorethan80percentofallnewresidentialcustomerschooseelectricspaceheatingresultsfromdedicatedPP&Lpeoplewhohaveearnedtheconfidenceofcusto-mers.Thiscommitmenttosuper-iorcustomerservicealsowasrec-ognizedinarecentPennsylvaniaPublicUtilityCommissionreportwhichconcludedthatPP&LhasthelowestcustomercomplaintrateamongPennsylvaniaelectricutilities.AtPP&L,concernforcustomersgoesbeyondbeingareliableelec-tricitysupplier.Itextendstobeinganeighborwhorespondsintimeofneedandfinancialhardship.That'thepurposeofourcustomerassis-tanceprogramssuchasOperationHELPandCARES.That'swhatismeantwhenwesaythatPP&L'smarketingprogramsarebasedonatraditionofrespondingtoourcustomers'eeds.plantsdemonstratedtheenormouslong-termbenefitofthecompany'sgeneratingcapacity.Ascompeti-tioncontinuestoincrease,thead-vantageofhavingsufficientgeneratingcapacitytomeetcur-rentandfuturerequirementsbecomesclearlyevident.Thisadvantageisparticularlydecisivewhenthatgeneratingcapacityisoperatedefficientlyandconsistsofagoodmixoflow-costcoalanduraniumfuels.BothSusquehannanuclearunitsoperatedverywellin1986,contin-uingtheexcellentrecordofper-formancethatthesetwo1,050,000-kilowattgeneratingunitshaveachievedsincegoingintocommer-cialoperation.Amongallboilingwaterreactorsinthenation,Sus-quehannaUnit2rankedfirstintotalgenerationoverthepasttwoyearsandUnit1rankedsecond.Eventhoughbothunitsunderwentrefuelingoutagesin1986,theyproduced11.3billionkilowatt-hourslastyearandreceivedanear-perfectratingintheNuclearRegulatoryCommission'sSystem-aticAssessmentofLicenseePer-formancereport.Thecontinuedexcellentperfor-manceofallofPP&L'sgeneratingplantsenabledthecompanytosell11.3billionkilowatt-hoursofmost-lycoal-andoil-firedelectricpowertoneighboringutilitieslastyear,resultinginbenefitstoourcus-tomersofabout$35million.Becauselow-costelectricgenera-tionisessentialinmeetingourcorporateobjectives,wehavesetagoaltokeepPP&L'sperformanceatthelevelofthebestintheindus-try.Inadditiontoallocatingre-sourcestoachieveevenhigherplantavailability,weplantospendabout$140millionoverthenextfiveyearsaspartofourprogramtoextendtheusefullivesofournon-nuclearpowerplantsaslongaspossible.TheseinitiativesaredesignedtoassurethatPP&Liswell-posi-tionedtoprosperinamorecom-petitivebusinessenvironment.Whilemanychallengeslieahead,webelievethatwehavebuiltasolidfoundationforthecompany'scontinuedsuccess.OurconfidenceisbasedonthetalentsofdedicatedPP&Lpeopleandthecontinuedsupportfromyou,ourshareowners.Intheyearsahead,wewillcontinuetodoallwecantoassureaprosperousfutureforourserviceareaandforyourcompany.Respectfullysubmitted,GenerationAgainlastyear,theoutstandingperformanceofPP&L'spowerRobertK.CampbellFebruary27,1987 YEARINREVIEWOperationsEmployeesafety-andmorespecifically,afatality-freeworkenvironment-continuestobethecompany'snumberoneoperatingpriority.In1986,thecompanyachieveditssixthstraightcalendaryearwithoutanemployeefatality.Whilethecompanyprovidesthetools,equipmentandtrainingneededtohelpemployeesachieveasafeworkingenvironment,itremainsforeveryemployeetomakeaconcertedefforttomakesafeworkhabitsapartofeverythingtheydo-bothonandoffthejob.Thirteenworkgroupsinthecompanyachievedmorethanamillionwork-hourswithoutalost-timeaccident.Thecompany'ssafetyrecordwasagainamongthebestofthestate'ssevenmajorelectricutilities-PP&Lhadthesecond-bestlost-timeaccidentrecordamongitsPennsylvaniapeers.EarningsandDividendsEarningsfor1986were$3.10pershareofcommonstockcomparedto$2.68for1985.Theimprovementinearningsresultedfromacombinationofincreasedkilowatt-hoursales,cost-containmentmeasures,andanaggressiveprogramtorefinancehigh-costsecuritiesatalowercost.Thisreturnsearningstoaboutthesamelevelachievedin1984,whentheywere$3.12pershare.PP&L'squarterlydividendoncommonstockwasincreasedonecentpershareto65cents,beginningwiththeOct.1,1986,dividend.Ithadbeen64centspersharesinceApril1,1985.SalesandRevenuesRevenuesfor1986were$2.19billion,up$212millionoverthepreviousyear.Theincreasecamefromhighersalesandfromthefull12months'ffectofthe$121'illionrateincreasethecompanywasgrantedinApril1985.Astrongnew-home-buildingmarket-andarecord84percentofthosenewhomesusingelectricheat-helpedtoboostsalestoresidentialcustomersby5percentfortheyear.Commercialsaleswereup6.4percent,reflectingcontinuedstrengthamongretailandwholesalecustomersandothersinthesmall-businesssectorinCentralEasternPennsylvania.Aslightreboundinindustrialsalesbeganatmidyearasthedeclineinsteelmanufacturingwasoffsetbygrowthinotherindustries.Useofelectricitybythesteelindustrywasdown11.7percentin1986,whilesalestootherindustrialcustomersroseby2.9percent,foracompositeincreaseofabout1percentovertheprioryear.Overall,kilowatt-hoursalesincreased8.2percentover1985.Slightlyoverhalfofthe2.3billionkilowatt-hourincreaseresultedfromhighersalestootherutilities-primarilyunderlong-termcontracts.SecuritySalesandEarlyRedemptionsTheobjectiveofPP&Lfinancingactivitiesduring1986wastotakeadvantageofthelowerinterestanddividendratesthatwereprevalentinthecapitalmarketsthroughouttheyear.Thecompanywasthusabletoretirehigh-costsecurities,therebyreducingitsoverallcapitalcostsandimprovingitsfinancialhealth.The$600millionof1986securitysalesconsistedoffour$125millionofferingsoffirstmortgagebonds,withinterestratesvaryingfrom9percentto10.875percent,and$100millionof7percentseriespreferredstock.CustomerRepresentatives"IwassurprisedathowfastthePP&Ltelephonerepresentativewasabletoarrangeforelectricservicetoournewhome.Wewereonatightschedule,butwewerehookedupontime.Ifeltthecompanyreallycaredaboutme."LynneRothwetterResidentialCustomerQuarryvitle,Pa.

LouathaParham(left,foreground),andSandraShelrlch(below),CustomerRepresentativesInPP&L'sLancasterDivisionServiceCenter.\CU4yh4rX,The79customerrepresentativesacrossPP&i'sserviceareaansweredmorethan1.2milliontelephoneinquirieslastyear.About70percentofthecallsareroutine-requestsfornewservice,discon-nections,servicetransfersandpaymentarrangements.Theother30percentcouldrangefrom"nolight"calls,tochildren'stoystangledincompanylines,tolargebillinquiriesorstormemergencycalls.PP8Lcustomerrepresentativesarenotjustvoicesattheendoftelephonelines.Theyarepeoplewhogenuinelycareaboutthecustomerswhocontactthem.Foreverycall,customersatisfactionisthegoal.

DistributionTechnicianEdwardSmith(right),andSteno/ClerkElaineJones(below),Inthecompany'sLancasterDivisionServiceCenter.//D4"4//Irr.~~~i~Althoughtheyaremorebehind-the-scenes,DistributionEngineeringemployeesdeterminewhat'sneededtoserveacustomer.Itmaybeapolenearanewbuildingandashortspanofwire,orathree-milesectionoflinetobebuilttoreachanothercustomer'sproperty.Foreachinstallation,distributiontechniciansdecidewhatmaterialsareneededandthe"route"alinewilltake.EachjobisdesignedwithPP&L'sstandardsandspecificationsinmind,toprovidethesafestandmostreliableservicetofillacustomer'sneeds.

YEARINREVIEWDistributionTechniciansDuring1986,thecompanyretiredatotalof$475.2millionofsecuritiesthroughearlyredemptionprovisions:~$225millionoffirstmortgagebondsintwoserieswithinterestratesof14percentand15.625percent.~$162.5millionofpreferencestockinfourserieswithdividendratesrangingfrom13percentto15percent.~$87.7millionofpreferredstockinfourserieswithdividendratesrangingfrom10.75percentto14percent."MyprofitmarginisaffectedbywhatPPBL'stechnicianstellmeis,andisnot,feasibleinrunningelectricservicetooneofmynewhomes.ldependontheiradvice-andthey'eneverletmedown.Theyknowtheirbusiness."ConstructionExpendituresConstructionexpendituresof$579millionareplannedduringthetwoyears1987and1988,eventhoughnonewgenerationfacilitiesareunderconstruc-tion,orcontemplated.About$227millionhasbeenallocatedfornewconstructionandupgradingofthecompany'stransmissionanddistributionsysteminthenexttwoyears.Anotherlargeportion-$204million-isbudgetedforreplacingwornandobsoleteequipment,life-extensionprojects,andprogramstoimprovetheperformanceofourfossil-fueledandhydroelectricgeneratingunits.Additionally,$95millionisbudgetedforongoingimprovementsandmodificationsattheSusquehannanuclearplantduring1987and1988.PowerPoolReachesNewPeakBecauseofmoderateweatherconditions,nonewwinterorsummerpeakpowerdemandswererecordedbyPP&Lin1986.PP&L'sannualpeakdemandoccursduringthewinterbecauseofitscustomers'ighelectricheatload.However,sultryJulyweathertothesouthofPP&L'sserviceterritory,andtheresultingairconditioningload,pushedthepeakdemandonthePennsylvania-NewJersey-MarylandInterconnectiontoanewhighof37.5millionkilowattsonJuly7,upfrom37millioninAugust1985.RobertWennerPresIdentWennerConstructionCorp.WyomlsstngHills,Pa.HoltwoodUnitGetsLife-ExtensionOverhaulStudiesconductedbyPP&Lhaveshownthatitismoreeconomicaltoupgradeandcontinuetooperatethecompany'sexistinggeneratingunitsratherthanreplacethemwithnew,morecostlyunits.Aftermorethanthreedecadesofreliableservice,the73,000-kilowattcoal-burningunitatthecompany'sHoltwoodplant,locatedalongtheSusquehannaRiverinLancasterCounty,wasshutdowninMayforamajoroverhaulaimedatextendingitsusefullife.Duringthesix-monthoverhaulthe32-year-oldunit,whichburnsamixtureofanthraciteandpetroleumcoke,underwent$13millionofrenovations,includingmajorrepairstoitsboiler.Thisworkisexpectedtoextendtheunit'slifeby15to20years.BrunnerIslandUnitis8GYearsOLdUnit1atPP&L'sBrunnerIslandgeneratingplantlocatedalongthewestbankoftheSusquehannaRiver,15milesbelowHarrisburg,marked25yearsofcommercialoperationonJune22,1986.The334,000-kilowattbituminous-coal-burningunitwasthefirstofagenerationoflarge,moreefficient,unitsbuiltbyPP&Lduringthe1960sand1970stomeetincreasingelectricaldemandduringaperiodofrapideconomicgrowthinthecompany'sserviceterritory.

YEARINREVIEWPPd'cLHadLowestComplaintRateAreportpreparedbythePennsylvaniaPublicUtilityCommissioninJune1986showedPP&Lhadthelowestcustomercomplaintrateofanyelectricutilityinthestateduring1985.Accordingtothereport,thenumberofconsumercomplaintsagainstPP&Ldropped22percentfrom1984to1985,leadingtothelowestinformalcomplaintrateinthestate.Additionally,PP&L'smediationcases-instancesinwhichthePUCiscalledonbyacustomertointervene-droppedby51percent,givingPP&Lthesecond-bestmediationrateinthestate.Right-of-WayAgentsMarketingandEconomicDevelopmentMarketingPP&L's"product,"reliableelectricservice,inwaysthatemphasizeitsvaluetothecustomer,willenablethecompanytomakeeffectiveuseofitsgeneratingcapability.Marketingisanaturaloutgrowthofthefundamentalpremisethatabundant,reliableandrelativelyinexpensiveelectricenergywillhelpsparkrenewedeconomicprosperityinCentralEasternPennsylvania.Theobjectivesofthecompany'smarketingeffortsinclude:~Increasingkilowatt-hoursalestoservice-areacustomerstoachievethelowestpracticalcostperkilowatt-hourtocustomersforelectricenergy.~EnhancingeconomicprosperityofPP&L'sserviceareabyprovidingoptionsandchoicesforcustomerstobestmeettheirindividualneedsforelectricservice."IhavealotofideasabouthowI'dliketoseemylanddeveloped.lalwayscountonathoroughdiscussionwithmyPP&Lright-of-wayagent,though,toprovidemewithpractical,opera-tionalconsiderations.He'sagooda//y."Thecompany'smarketingstrategyisdesignedtocapitalizeontheuniquepropertiesofelectricity.Itisapreciselymeasurable,extremelyversatileandcontrollableformofenergywhosevaluefarexceedsitscost.Thevaluetothecustomerliesintheabilityofelectricenergytoimproveproductivityinbusinessorindustry,toprovideamorehealthfulandsafeworkingenviron-ment,toreduceoverallenergycosts,andtoenhancelivingstandardswhencomparedtoalternativeformsofenergy.ToPP&L,marketingmeansenhancingtheeconomicprosperityofitsserviceterritory-byattractingandholdingjob-producingbusinessesandindustries.ApplicationsofelectricenergythatmakethebestuseofPP&Lcoalandnuclearpowerplants-througharound-the-clockoperation-canbefoundinbusinessandindustry.Thethrustofthecompany'smarketingstrategyistoseekoutthoseapplicationsandtodemonstratetoexistingandprospectivecustomershowelectricenergycanimprovetheirproductivityandbettertheircompetitiveposture.Thecompanyisworkingthroughpartnershipswiththestate,regionaleconomicdevelopmentgroups,andmunicipalitiestoachieveeconomicimprovement.CharlesKelterRealEstateDeveloperDanvllle,Pa.JobGoalExceededThe1986corporategoalofhelpingPP&L'sserviceterritoryachieveanetincreaseof5,000newjobswasagainexceededas165neworexpandingfirmsprovidedanetincreaseofmorethan6,500jobs.PP&L'seconomicdevelopmentactivitieshelpedproducemorethan17,500newjobsinCentralEasternPennsylvaniaduringthepast36months.

Right-of-WayAgentErnieRamirez(tanJacket),BfoomsburgServiceCenter,withDanvlllepropertyowner.'/l0'~mi'./~a.,s~.CMQ*f.4PP&Lcannotjustbringinitsequipmentandplaceitsfacilitieswhereveritwouldlike.Wheneverajobcallsforcrewaccesstoprivateproperty,right-of-wayrepresentativesmustnegotiatefortherighttoenterorbuildonacustomer'sland.Whetherit'sapolelineortrenchalongapropertyline,orlandonwhichtobuildnewtransmissionfacilities,right-of-wayagentsarecalledontousetheirnegotiatingskillsanddiplomacytoreachareasonableconsensusbetweenPP&L'sandaproperty-owner'sinterests.

DistributionHandymanRussellBennett(right),HarrisburgDivisionDistributionDepartment,andLehlghDivisionConstructionMechanicsRobertLawler(below,onplatform),andNellSchaffer(below,right),inAllentown.~3e.,I~It'stheworkersinthetrenchesandthelinemaninthebuckettrucksthatareprobablythemostvisibleofPPBL'semployees.Theorangeandgraytrucks,andtheircrews,seemtobeeverywhere.InPP8L's67-yearhistory,though,therehasnotbeenmuchchangeintheassignment-getelectricservicetothecustomer.Qualityfacilitiesmustbebuilt,orrepaired,inatimelymanner,withpriorityconsiderationgiventodoingitsafely,andwiththeleastinconveniencetothepublic.NobodydoesitbetterthanPP8Lemployees.

YEARINREVIEWDistributionCrews188tr'esultsThecompany'seconomicdevelopmenteffortsin1986alsoboostedelectricenergysalesmorethan164millionkilowatt-hours.Marketingeffortswithindustrialandcommercialcustomersaddedmorethan104millionkilowatt;hours,andresidentialmarketingprogramsaddedanother28millionkilowatt-hours.Overall,296millionkilowatt-hoursofincreasedsalesresultedfromthecompany'seconomicdevelopmentandmarketingprograms.Thisfigureexceededsalesgoalsby22percent."Successinourbusinessisbasedonhighproduc-tion.PP&Lisequippedandreadytogetthejobdone.IfoundIcouldcountonqualityandreliabilityfromtheHarrisburgcrews.Theygavetheirword,andtheyperformed."~,'.fj!StevenShenenbergerGeneralSuperintendentE.B.AbelConstructionCo.Mountvllle,Pa.RatesandRegulatoryMattersEarlyin1986,PP&Lannounceditsobjectiveofimprovingearningsperformancewithoutincreasingretailbaseratesfortheremainderofthedecade.Thecompanyismeetingthisobjectivelargelythroughongoingcost-containmentmeasures,refinancinghigh-costsecuritiesatlowercost,andthroughincreasedsales.ManagementAuditResultsInApril,thePUCreleasedareportontheauditofPP&L'smanagementandoperations.TheauditwasconductedbyErnst&Whinney,aWash-ington,D.C.,publicaccountingandmanagementconsultingfirm.ManagementstudiesofallmajorPennsylvaniaelectricutilitiesareperiodicallyarrangedbythePUC.Theaudit,whichbeganinmid-1984,examinedmostofthefunctionsofthecompanyandareasofspecialconcerntothePUC-suchasstaffingandcompensation.ThereportdidnotprovideanoverallconclusionaboutPP&L'sperformance.Instead,thereportrankedkeytaskareas-suchascorporatemanagement,financialmanagementandcustomerservice-inoneoffivecategories:optimum,aboveaverage,average,belowaverageandunsatisfactory.Thirtyofthe34rankingswereaverageorabove,withnoneintheunsatis-factorycategory.Alongwiththerankings,theauditorsalsosuggestedimprovements,mostofwhichthecompanyagreedtoimplementoralreadyhadunderway.RateCaseAppealDeniedInOctober,Pennsylvania'sCommonwealthCourt,bya6-to-1vote,deniedanappealPP&Lfiledin1985afterthePUCruledthatthecompanywasentitledtoonlyabout$121millionofits1984requestfor$330millioninhigherrates.ThecompanyhadsoughttherateincreasemainlytoreflecttheoperatingcostsofSusquehannaUnit2.ThePUCcuttherequestafterrulingthatUnit2givesthecompanytoomuchgeneratingcapacityatthistime.Inmid-NovemberthecompanyannouncedthatitwouldnotaskthePennsylvaniaSupremeCourttoreviewthedecisionofthelowercourt.RatesDecreasedby$88MillionOnJan.1,1987,thecompanydecreasedratesby$32milliontoreflectareductioninfederalincometaxesfor1987,andtoadjustforotherchangesinPP&L'scostofservingcustomers.ThedecreaseincorporatedtheeffectoflowerfederaltaxratesbeginninginJanuary,aswellasadecreaseinthestatetaxsurchargeandanincreasein YEARINREVIEWthecompany'senergycostrate-thelattertwoofwhichwouldnormallyhavebecomeeffectiveinApril.RatherthanloweringratesinJanuary,thenadjustingthemagaininApril,thecompanyaskedthePUCtopermitallofthechangestobecomeeffectiveatthebeginningof1987-withtheneteffectoftheadjustmentsbeinganaverage1.8percentdecreaseinrates.Thecompanybelievestheone-timeadjustmentcontributestoamorestableeconomicatmosphereinCentralEasternPennsylvaniaandreinforcesPP&L'sindustrialdevelopmentandmarketingefforts.CustomerContactRepresentativesSusquehannaNuclearPlantAnumberofsignificanteventswererecordedforthecompany'sSusquehannanuclearplantnearBerwick,Pa.Thetwin1,050,000-kilowattboilingwaterreactorsgeneratedmorethan11billionkilowatt-hoursofelectricityduring1986.Bothunitsattheplantranextremelywell.Fromearly1985,whenitwentintocommercialoperation,throughtheendof1986,Unit2ledallboilingwaterreactorsinthenationintotalelectricityproduced.InsecondplaceonthatlistwasUnit1.SecondRefueLingOutageforUnit1Unit1wasshutdownFeb.15,1986,tobeginitssecondrefuelingoutagesinceitbegancommercialoperationinJune1983.Duringtheshutdown,296ofthereactor's764nuclearfuelassemblieswerereplacedwithnewones.Plantcrewsalsoperformedmorethan300requiredinspectionteststhatcanbeperformedonlywhiletheunitisnotgeneratingelectricity.Inall,morethan2,000individualtasks,includingmaintenanceandmodifications,werecompleted.TheunitreturnedtoserviceApril23-morethantwoweeksearlierthanoriginallyscheduled."I'dneverhadoccasiontoseetheinsideofawaterheater,butPP8L'srepre-sentativepointedouthowwecouldlowerenergycostsbysettingourhotwatertemperaturebackafewdegrees.It'sattentiontodetailthatsetsPPSLapart."FirstRefueLingForUnit8Endingoneofthemostsuccessfulinitialoperatingcyclesinthehistoryofthenation'snuclearpowerprogram,Unit2atSusquehannawasshutdownAug.9tobeginitsfirstrefueling.Morethan300ofits764fuelbundleswerereplaced,andmorethan2,800tests,maintenanceandmodificationtaskswereperformedduringtheshutdown.TheunitwasreturnedtoserviceonOct.29,twodaysunderthetimeallotted.EmergencyDriLLSuccessfuLPP&LemployeesagainsuccessfullydemonstratedtotheNuclearRegulatoryCommissionthattheyarecapableofprotectingthepublicintheeventofanaccidentattheSusquehannaplant.NRCobserversmadethatdeterminationafteraday-longdrillheldinApril1986totesttheemergencypreparednessskillsofPP&Lpersonnel.Full-scale,NRC-observeddrillsareheldannuallyatSusquehanna.In1986therewasonlylimitedparticipationbythePennsylvaniaEmergencyManagementAgencyandLuzerneCountyandColumbiaCountyemergencyorganizations.Stateagencies,municipalitiesandschooldistricts-whicharerequiredbylawtoparticipateeverytwoyears-willjointhe1987drill.Duringthedrill,PP&Lpersonnel,and30representativesoftheNRCrespondedtoaspeciallypreparedscenarioforwhichdetailswerenotdisclosedMargaretFureyResidentialCustomerClarksGreen,Pa.12 CustomerContactRepresentativeFrankSmith(left),NorthernDivisionServiceCenter,Scranton,andServicemanJackAelchert(below),CentralDivisionServiceCenter,Hazfeton.ServicemenTherearenotypicaldaysforPP&Lservicemen.Onedaytheymayworkonoverduebillcollec-tion,anothertheymaybechang-ingmetersorlocatingunder-groundelectriccableforexcavators.Servicemenhavemanyopportunitiestopromotegoodcustomerrelations-tomanycustomerstheyarePP8L.~I)i'henacustomerhasaquestionorproblemthatcan'tberesolvedoverthephone,customercontactrepresentativescallinpersontotrytoprovidesatisfaction.Acallmaybeassimpleasshowingacustomerhowsettingthethermostatbackonawaterheatercouldlowerenergycosts,orascomplicatedasresolvinglargebillcomplaints,correctingbackbillingproblemsorcoordinatingfacilityrelocationsorserviceinterruptions.Customercontactsaremultifaceted-butrepresenta-tivesstaywithacaseuntilthecustomerissatisfiedoraproblemiscaredfor.

MeterReaderPaulCondefer(right),NorthernDivisionServiceCenter,Scranton,andCARESRepresentativeTushannaHamilton(below),SusquehannaDivisionServiceCenter,Montoursvllle.CARESRepresentativesPP&L'sCustomerAssistanceandReferralEvaluationService(CARES)beganasapilotventurein1980andwasimplementedsystemwidein1982.CARESrepre-sentativesprovideguidanceandassistancetocustomerswho,becauseoflegitimatehardships,can'tpaythefullamountoftheirelectricservicebills.r',~draaPI]Becauseoftheirconsistentonce-a-monthappearanceinanyneighborhood,PP&Lmeterreadershavemanyopportunitiestopromotegoodcustomerrelations.Althoughtheirprimaryobjectiveistoreadmeters,theyarealsogoodwillambassadorsandoftenprovidecurrentinformationaboutcompanypoliciesoreventsthathaveanimpactonthepublic.Becausetheymustroutinelycoveramillionmetersover10,000squaremileseverymonth,PP&Lmeterreadersmustberesourceful,findingwaystoovercomeobstacles-includingunfriendlydogsandunfriendlyweather-incarryingouttheirassignments.

YEARINREVIEWtoparticipantsuntilthesimulatedincidentsoccurred.Drillactivitiestookplaceattheplant,atPP&L'scorporateofficesinAllentown,andataMediaOperationsCenterattheBerwickYMCA.MeterReaders"I'ebeenimpressedbythefriendlinessofPP8L'smeterreaders.Oneem-ployeetookthetimetoexplainhowhishand-held,computerizedrecorderworked.Hetoldmehowusingthedeviceimprovedproductivityandhelpedkeepdownservicecosts.llikedthat."TrainingCenterIsFirstTrainingAcademyMemberTheTrainingCenterattheSusquehannaplantinJuly1986becametheinitialmemberoftheNationalAcademyforNuclearTraining.PP&L'spro-gramatSusquehannawasthefirstinthenationtobefullyaccreditedinwhatwilleventuallybeanetworkofcampusesatallthenation'snuclearutilities.TheNationalAcademywasestablishedbytheInstituteofNuclearPowerOperationstofocusandunifytrainingeffortsatU.S.nuclearpowerplants.INPOisanassociationformedin1979byutilitiesowningnuclearfacilitiestopromoteimprovementsinnuclearplantsafetyandreliability.Tobecomeamemberoftheacademy,autilitymusthaveitstrainingprogramsaccreditedbyanINPO-appointedindependentpanel.TheNRChasformallyendorsedtheacademyconcept.EmployeesJoinNationalSafetyEliteThe725NuclearDepartmentemployeesattheSusquehannaplantwererecognizedinApri11986forbeingamongthestrongestsafetyachieversinthecountrywhentheyaccumulated4millionconsecutiveemployee-hourswithoutalost-timeaccident.TheachievementbreaksacompanyrecordandcreatesanewPP&Lsafetystandardforpowerplants.NeverbeforehadaPP&Lplantgonethatlongwithoutalost-timeaccident.TheNationalSafetyCouncilliststheSusquehannarecordamongthebestofanyAmericanpowerplant,includingnuclear,fossil-fueledorhydroelectric.Atthebeginningof1987,plantemployeesreachedthe5millionwork-hourmarkwithoutalost-timeaccident.DebraDICindloResidentialCustomerDunmore,Pa.WaterSupplyAgreementReachedAwatersupplyagreementfinalizedinJuly1986betweentheSusquehannaRiverBasinCommissionandtheU.S.ArmyCorpsofEngineerswillrelievethecompanyfrombuildinganexpensivereservoirtomakeupforcoolingwaterlossesattheSusquehannaplantduringperiodsoflowriverflow.UnderSRBCregulations,electricgeneratingstationsthatusecoolingtowerswhichevaporatewatercouldberequiredtoshutdowninperiodsoflowriverflowunlesstheyhaveasupplyofreplacementwater.Undertheagreement,PP&LwillpayaportionofthecostofraisingthelevelofCowanesqueLakeinTiogaCountyby85feet.Themodificationwillallowsufficientwaterstoragetoreplace-duringlow-river-flowconditions-waterfromtheSusquehannaRiverevaporatedbytheplant'scoolingsystem.SusquehannaReportsAreHighlyFavorableTwoindependentreportsonSusquehannain1986reflectedfavorablyonthemanagementandoperationofthenuclearplant.Thecompanyreceivednear-perfectgradesintheNRC'sSystematicAssessmentofLicenseePerformance.Inthatreport,Susquehannareceivedthehighestrankingpossibleinnineof10categoriesexaminedandthesecond-highestrankingintheremainingcategory.ThegradesgiveSusquehannaahighercurrentaverageSALPratingthananyothernuclearplantinthenation.

YEARINREVIEWInanotherreport,citingmanagementeffectivenessandstrongprofessionaldevelopmentprograms,INPOconcludedthatahighlevelofprofessionalismisevidentatSusquehanna.Thereportalsonotedtheimpressiveconditionandcleanlinessoftheplant,andcitedgoodpracticesatthefacility.Italsoofferedsuggestionsinthoseareaswhereoperationscouldbeenhanced.TroublemenManagementChangesJohnM.Chappelear,director-PensionFunds,wasappointedvicepresident-InvestmentsandPensionsonJune1,1986.ChappelearjoinedPP&Lin1978asmanager-PensionFundInvestments.Hewasnamedmanager-F<inancialDepartmentAdministrationin1981,andthatsameyearbecamedirector-PensionFunds.CharlesF<.Russoli,seniorvicepresident-F<inancial,wasnamedexecutivevicepresident-F<inancialeffectiveNov.1,1986.RussolibecameexecutivevicepresidentaftermorethanthreedecadeswithPP&L.Hejoinedthecompanyin1955asagraduatetrainee.AfterservingtwoyearsintheU.S.Army,hereturnedtoPP&Landheldvariousdataprocessingpositionsuntilhispromotiontofinancialanalystin1965.Hewasnamedmanager-Budgetsin1969,manager-FinancialPlanningandReportingin1971,vicepresident-Financein1979,andvicepresidentandtreasurerin1981.Hebecameseniorvicepresident-Financialandchieffinancialofficerin1984.WilliamR.White,vicepresident-PowerProductionretiredonJan.1,1987,afternearly37yearsofcompanyservice.Whitebeganhiselectricutilitycareerin1950asaresultsengineeratthecompany'sformerStantonplant.Headvancedthroughseveralpositionstherebeforebeingnamedassistantsuperintendentoftheplantin1963.Hewasnamedsupervisorofoperationsatthecompany'sBrunnerIslandplantin1969andplantsuperintendentin1970.Hewasnamedmanager-PowerProductionin1973andvicepresidentin1984.SucceedingWhite,ThomasM.CrimminsJr.becamevicepresident-PowerProductiononJan.1,1987.CrimminsjoinedPP&Lin1981asmanager-NuclearPlantL<ngineeringafter10yearswiththeGeneralPublicUtilitiesorganizationinNewJersey.HislastpositionwithGPUwasmanager-EngineeringProjectswithGPUNuclearCo.HehadpreviouslyservedfiveyearsintheNavynuclearsubmarineprogram.CrimminsservedassuperintendentoftheSusquehannanuclearplantfromJuly1,1985,untilhisnewappointment."IcalledPP&Ltoreportapoweroutage.ThepersonItalkedtoaskedifl'dheardaloudcrack-thesoundofafuseblowing-whichIdid.Fifteenminuteslater,aPP8Lemployeeappearedinmyyardandreplacedthefuse.AIIveryefficient!"BoardofDirectorsTheVeryRev.DanielG.Gambet,OSFS,presidentofAllentownCollegeofSt.FrancisdeSales,waselectedadirector,effectiveNov.1,1986.FatherGambetjoinedAllentownCollegeasacademicdeanin1964afterservinginvariousteachingandadministrativepositionsatthehighschoolandcollegelevelsforsevenyears.HebecamevicepresidentandacademicdeanatAllentownCollegein1970,andservedasprovincialoftheEasternProvinceoftheOblatesofSt.FrancisdeSalesfrom1972-1978inadditiontohisdutiesasvicepresidentofthecollege.HewasnamedAllentownCollegepresidentin1978.CharlesE.Russoliwaselectedadirectorofthecompany,effectiveNov.1,1986,inanactionconcurrentwithhisappointmentasexecutivevicepresident.ClaudeButlerRestdentlatCustomerEmmaus,Pa.

TroubtemanJohnFilo(left),andServiceDispatcherRandySchelrer(below),LehlghDivisionServiceCenter,Allentown.ServiceDispatchersDuringnon-businesshours,allcallstoPP&Lcustomerservicenumbersareansweredbyservicedispatchers.Theyaretheoneswhocustomersreachwhenthereistroubleafter5p.m.Dispatchersalertforemen,crewsandservice-menwhenstormscauseserviceinterruptions.Blowntransformerfusesareprobablythemostcommoncausesofiso-latedcustomerserviceinterruptions.Itcouldbeasquirrelorbirds,abranchoralightningstroke,thatshortsoutthelineandblowsthefuse,protectingthecustomer'sserviceentrance.Troublemenareondutyaround-the-clocktorespondtocustomerproblems.It'susuallythetroubleman,orthecrewsenttorestoreserviceafterastorm,thatpro-videsthebestexamplethatPP8Lisalwaysonthejob.

FINANCIALREVIEWReviewoftheCompany'sFinancialConditionandResultsofOperationsThisreviewprovidesadiscussionoftheContpany'8financialconditionandresultsofoperations.Additionalinformationonthesemattersissetforthinthefinancialstatements,schedulesandnotesonpages8S-S7andtheselectedfinancialandoperatingdataonpages88and89.84.00EARNINGSANDDIVIDENDSPERSHAREBatlaraPerSharcResultsofOperationsEarningspershareofcommonstockwere$3.10in1986,$2.68in1985and$3.12in1984.The1985dipinearningsprincipallywastheresultofaratedecisionbythePennsylvaniaPublicUtilityCommission(PUC)inApril1985.TheCompanyhadaskedthePUCforarateincreaseof$330milliontosupporttheadditionalcostsassociatedwithoperatingSusquehannaUnit2,whichwasplacedinserviceearlyin1985,andotherincreasedcostsofdoingbusiness.However,thePUCallowedonly$121millionoftherequestedincrease.TheCompanyappealedthedecisiontotheCommonwealthCourtofPennsyl-vania(Court).InOctober1986,theCourtdeniedtheCompany'sappealandaffirmedthePUC'sApril1985decision.NeithertheCompany,noranyoftheotherpartiestotheappealsoughtareviewbythePennsylvaniaSupremeCourt.Toimprovefinancialhealth,theCompanyimplementedthefollowingprogramswhichresultedinearningsreturningtoaboutthelevelachievedin1984:~Increaseinitiativestocontainoperatingcostsinareaswherethequalityofservicetocustomerswouldnotbeaffected~Refinancehigh-costsecuritiesatalowercost~EnhancemarketingeffortstoincreasesalesTheCompanyisseekingtomaintainbaseratestabilitybyavoidingretailbaserateincreasesfortheremainderofthe1980s.Costcontainmentandanaggressivemarketingprogramarekeyelementsinachievingthisobjectiveandmaintainingfinancialstrength.EnergySalesandOperatingRevenuesTotalelectricenergysaleswere2.3billionkwh,or8.2%,higherin1986thanin1985,reflectingincreasedsalestocustomersandincreasedcontractualsalestootherutilities.ContractualsalestootherutilitiesrepresenttheenergysoldtoAtlanticCityElectricCompanyfromtheSusquehannaunitsandtheenergysoldtoJerseyCentralPower&LightCompany(JCP&L)fromalloftheCom-pany'sgeneratingunits.Thesesaleswere1.3billionkwh,or31.9%,higherin1986thanin1985,reflectingprimarilyafullyear'ssalestoJCP&L.SalestoJCP&LbeganonApril17,1985.Electricenergysales(excludingcontractualsalestootherutilities)were1.0billionkwh,or4.2%,higherin1986thanin1985.Salestoresidentialcus-tomersincreased417millionkwh,or5.0%,reflectingincreasednewhomebuildingwithhighacceptanceofelectricheat.Continuedeconomicgrowthwasexperiencedinthecommercialsectorwithsalestothisclassofcustomersincreasing431millionkwh,or6.4%.Salestoindustrialcustomersincreased79millionkwh,or1.0%.Adeclineinsalestothesteelindustryof121millionkwh,or11.7%,wasmorethanoffsetbyanincreaseinsalestootherindustrialcustomersof200millionkwh,or2.9%.TariffssubjecttoPUCjurisdictionaccountedforapproximately84%oftheCompany'srevenuesin1986.Theremaining16%ofrevenuesareregulatedbytheFederalEnergyRegulatoryCommission(FERG).TheFERCalsoregu-latesinterchangepowersaleswhichareclassifiedasacredittooperatingexpenses.BillingstocustomersunderPUCjurisdictionincludebaseratechargesalongwithsupplementalchargesforenergycostsandstatetaxesoverthelevels3.002.001.008283848586~Earnings~DividendsdeclaredCOMMONSTOCKBOOKVALUEVS.MARKETPRICE(YearEnd)840DollarsPcrSharc3020108283848586~Bookvaluepershare~Marketpricepcrshare includedinbaserates.StartingonJanuary1,1987,anewIncomeTaxAdjust-ment(ITA)passesthroughtothesecustomerstheeffectoflowerincometaxesresultingfromtheTaxReformActof1986(TaxAct).BillingstoFERCcustomers(excludingcontractualsalestootherutilities)includebaseratechargesandasupplementalchargeforfuelcostsoverthelevelincludedinbaserates.Detailsofthechangesfromtheprioryearinoperatingrevenuesareshownbelow.HaserateincreasesforcustomersunderthejurisdictionofthePUCwentintoeffectAugust1983andApril1985.InDecember1985,theCompanysolditssteamheatplantandassociateddistributionsystemintheCityofHarrisburg.Inprioryears,revenuesfromsteamheatoperationswerelessthan1%oftheCompany'sannualtotaloperatingrevenues.SOURCESOFENERGY50BillionsofKuh4030ChangesinOperatingRevenues198619851984(lifiLlionsofDollars)20ElectricBaserateincreases.Recoveryoffuelandenergycosts..Changeincustomerusage.........Contractualsalestootherutilities..Other(principallytaxsurcharge)..TotalelectricSteamheatTotal.$80.449.638.359.5(10.1)217.7(5.3)$212.4$138.250.313.1200.812.1414.5(0.8)$413.7$257.5(17.0)31.113.328.1313.01.4$314.410828384858G~Hydroandpurchasedpower~Oil.firedgeneration~Nucleargeneration~CoalfiredgenerationNetCostofEnergyIn1986,theoutputfromtheCompany'sgeneratingunitswas41.5billionkwh,adecreaseof1.2billionkwhfrom1985.ThedeclinereflectsgenerationlostduringrefuelingoutagesforbothoftheSusquehannanuclearunits.TheCompany'sshareofthenuclearunits'utputwas10.2billionkwhin1986.Coal-firedunitsgeneratedabout25.2billionkwhandthebalanceoftotalgenerationcamefromoil-firedandhydrounits.Fuelexpensein1986was15.1%lowerthanin1985dueprincipallytothelowercostofcoalandoil.Theaveragecostoffuelperkwhgeneratedbycoal-firedstationswas6.2%lowerin1986thanin1985,whilethefuelcostperkwhofoil-firedgenerationdeclined41.0%.Theamountreceivedforinterchangepowersalesin1986was$298.2millionlessthanin1985duetothelowerquantityofenergysoldandareductioninthesellingprice.Interchangesalesin1986were11.3billionkwh,adecreaseof5.0billionkwh,or30.5%,from1985.Thedecreasewasprimarilyattributabletothereduceddemand,byinterconnectedutilities,forenergyfromtheCompany.Theaveragepricereceivedforinterchangesaleswas2.57centsperkwhin1986and3.62centsperkwhin1985.Thedeclineprimarilyreflectstheimpactoflower-costoilonthepricingofinterchangesales.W'agesanfjBenefits,OtherOperatingCostsandDepreciationWagesandemployeebenefitsandotheroperatingcostsincreasedovertheprioryearinboth1986and1985reflectinginparthigherpricesandthecostsassociatedwithoperatingSusquehannaUnit2.Higherdepreciationin1986reflectsthenormalannualincreaseassociatedwiththeuseofamodifiedstraight-linemethodofdepreciatingtheSusquehannanuclearplantalongwiththedepreciationofnewfacilities.DISPOSITIONOFENERGY60BillionsofKuh40302010828384868G~Companyuse,linelossesandother~Interchangepowersales~Contractualsalestootherutilities~Systemsalestocustomers IncomeTaxesTotalincometaxexpensewas$113millionhigherin1986thanin1985.Taxesfor1985werereducedbytheutilizationoftaxlosscarryforwardsofapproxi-mately$100millionforbothfederalandstateincometaxpurposes.Taxableincomein1986includedafullyear'seffectofhigherratespermittedbythePUCinApril1985andafullyear'seffectofcontractualsalestoJCPErL.TheTaxActrepealstheinvestmenttaxcreditandreducestheamountofunusedinvestmenttaxcreditsthatcanbeusedtooffsetfuturefederalincometaxliabilities.AftergivingeffecttotheTaxActandgenerationoftaxcreditsin1987ontransitionalproperty,theCompanyestimatesthatapproximately$146millionofunusedi'nvestmentandpayroll-basedcreditswillbeavailabletoreducefederalincometaxliabilitiesin1987andfutureyears.Foradditionalinformationconcerningincometaxes,seetheScheduleofTaxesonpage27andNotes5and15toFinancialStatements.CayitaLExpenditureRequirementsTheschedulebelowshowsactualconstructionandnuclearfuelexpendituresfortheyears1984-1986andcurrentprojectionsfortheyears1987-1989.Constructionexpendituresduringthethreeyears1984-1986totaled$898millionandareexpectedtobeabout$871millionduringthethreeyears1987-1989.812001,000800600400200CAPITALREQUIREMENTSMiltie<<<<ofDollarsConstructionandNuclearFuelExpenditures-Actual--Projected-198419851986198719881989(MillionsofDollars)848586878889-Art<<al--Proj<rtrd-C3Other~Securityretirements~ConstructionandnuclearfuelConstructionexpenditures(a)Generatingfacilities(b).....Transmissionanddistributionfacilities......Environmental.OtherNuclearfuel(c).Total8493975691117204222002761037465$525$274$341104123131232412321518283296292353463$318$330$355$322$84$150$124$134$131SOURCESOFCAPITAL81200tt'l'ft)<pit<<rs1,000(a)Constructionplansarerevisedfromtimetotimetoreflectchangesinconditions.Actualconstructioncostsmayvaryfromthoseprojectedbecauseofchangesinplans,costfluctuations,environmentalregulationsandotherfactors.ConstructionexpendituresincludeAFUDCwhichisexpectedtobelessthan$25millionineachoftheyears1987-1989.(b)Includesamountsspentin1984and1985tocompletetheSusquehannaunitsandamountsspentformodificationsandimprovementstoallgeneratingfacilities.(c)Includesbothownedandleasednuclearfuel.800600400ALLozoanceforFundsUsedDuringConstruction(AFUDC)TheSusquehannaunitsaccountedforabout)166millionofthetotal$169mil-lionofAFUDCrecordedduring1984.ThetotalamountofAFUDCrecordedin1985wasnegativeduetoanadjustmentoftheincometaxcomponentofAFUDCattributabletotheutilizationoftaxlosscarryforwards.Withnonewgeneratingfacilitiesunderconstruction,theamountofAFUDCfor1986totaledabout$11millionandisnotexpectedtobematerialintheforeseeablefuture.SeeNote6toFinancialStatementsforadditionalinformationconcerningAFUDC.200848586878889-Art<<<<t--f'rojrrtr<t-~Capitalleaseobligations~Outsidefinancing(salesofdebtandequitysecurities)Internalsources(principallyfromoperationsplusAFVDClessdividends)20 FinancingDuringthethreeyears1984-1986,theCompanysoldabout$1.2billionofsecuritiesandalsoincurred$241millionofobligationsundercapitalleases(primarilynuclearfuel).TheCompany's1986financingprograminvolvedthesaleof$600millionofsecuritiesundertakenprimarilytotakeadvantageofimprovedconditionsinthecapitalmarkets.About$475millionofhighcostsecuritieswereredeemedwithlowercostsecuritiestherebyreducingtheCompany'soverallcostoffinancing.Detailsoftheamountofsecuritiessoldandredeemedandotherinformationonsourcesandusesoffundsduring1984-1986aresetforthintheStatementofChangesinFinancialPositiononpage26.TheCompanypresentlyestimatesthatoutsidefinancingduringthethreeyears1987-1989willbeabout$600million,oraboutone-halfoftheamountrequiredduringthepriorthreeyears.F<undsfromsecuritiessalesandfrominternalsourceswillbeusedtofinanceconstructionexpenditures,repay$97millionofmaturinglong-termdebtobligations,meet$133millionofpreferredandpreferencestocksinkingfundrequirementsandfortheearlyretirementof$684millionofcertainhigh-costissuesofpreferencestockandlong-termdebt.TheCompanyintendstoissueabout$170millionofsecuritiesin1987.Theexactamount,natureandtimingofsalesofsecuritiesin1987andsubsequentyearswillbedeterminedinthelightofmarketconditionsandotherfactors.Fundsgeneratedfrominternalsourcesareexpectedtoprovideabout61%oftotalfundsrequiredduringthethreeyears1987-1989comparedwith44'Foduringthethreeyears1984-1986.TIMESINTERESTCHARGESEARNED(12MonthsEndedEachQuarter)3TimrsEar<<rd(PreToz)8283848588FinancialConditionTheCompany'soverallfinancialconditioncontinuestoimprove.Earningspershareofcommonstock,at$3.10,havereturnedtoaboutthelevelexperi-encedin1984.Certainkeyfinancialratios,whichareindicatorsofliquidity,alsoshowedgains.TheratiooftheCompany'spre-taxincometointerestchargesincreasedto2.8timesfortheyear1986.Thisisthehighestlevelforthisratiosince1979.ThecashflowcoverageoftheCompany'scommonstockdividendswas2.8timesfortheyear1986.Thisisthehighestlevelforthisratiosince1977.CertainprovisionsoftheTaxActandapplicationoftheCompany'sITAriderareexpectedtohaveanadverseeffectontheCompany'spre-taxinterestcoverageandinternalcashgeneration.Theloweroveralltaxexpenseantici-patedduetothedeclineinthefederalincometaxratewillbepassedthroughtocustomersintheITA.Therepealoftheinvestmenttaxcredit,capitalizationofcertaincostspreviouslydeductiblewhenincurredandotherprovisionsoftheTaxActwilladverselyaffectcashflow.Futurefinancialconditionandearningsperformancewilldependonmanyfactorsincludingunanticipatedincreasesinfuturecapitalrequirements,thelevelofeconomicactivityintheCompany'sservicearea,futureactionbyrate-regulatoryagencies,possibleadverseeffectsofproposedaccountingchangesbytheFinancialAccountingStandardsBoard(FASB)andpossiblecostsincurredinconnectionwiththeCompany'sprogramofphasingoutaffiliatedcoal-miningoperations.CASHFLOWCOVERAGEOFCOMMONSTOCKDIVIDENDS(1211onthsEndedEachQuarter)3TimesDiridrn<i<<CorrredImpactsofInflationInprioryears,theCompanyincludedcertainsupplementaryinformationonchangingpricesinanunauditednotetotheFinancialStatements.TheF<ASBrecentlydecidedthatpresentationoftheinformationwasoptional,andtheCompanyelectednottoincludeitinthisyear'sannualreportbecauseexperi-encehasshownthattheinformationgenerallywasnotused.TheprincipaleffectsofpricechangesontheCompany'soperationsarediscussedinothersectionsofthisreview.8283848586 Management'sReportontheFinancialStatementsThemanagementofPennsylvaniaPower&,LightCompanyisresponsibleforthepreparation,integrityandobjectivityofthefinancialstatementsandallothersectionsofthisannualreport.ThefinancialstatementshavebeenpreparedinconformitywithgenerallyacceptedaccountingprinciplesandtheUniformSystemofAccountsprescribedbytheFederalEnergyRegulatoryCommission.Inpreparingthefinancialstatements,managementmakesinformedestimatesandjudgmentsoftheexpectedeffectsofeventsandtransactionsbaseduponcurrentlyavailablefactsandcircumstances.TheCompanymaintainsasystemofinternalaccountingcontrolsdesignedtoprovidereasonable,butnotabsolute,assurancethatassetsaresafeguardedandthattransactionsandeventsareexecutedinaccordancewithmanagement'sauthorizationandarerecordedproperlytopermitpreparationoffinancialstatementsinaccordancewithgenerallyacceptedaccountingprinciples.Theconceptofreasonableassurancerecognizesthatthecostofasystemofinternalaccountingcontrolsshouldnotexceedthebenefitsderivedandthatthereareinherentlimitationsintheeffectivenessofanysystemofinternalaccountingcontrols.Fundamentaltothecontrolsystemistheselectionandtrainingofqualifiedpersonnel,anorganizationalstructurethatprovidesappropriatesegregationofdutiesandtheutilizationofwrittenpoliciesandprocedures.Inaddition,theCompanymaintainsaninternalauditingprogramtoevaluatetheCompany'sinternalaccountingcontrols,policiesandproceduresastoadequacy,applicationandcompliance.DeloitteHaskins&Sells,independentcertifiedpublicaccountants,havebeenengagedtoexaminetheCompany'sfinancialstatementsandtorenderanopinionastowhethersuchfinancialstatements,consideredintheirentirety,presentfairlytheCompany'sfinancialposition,operatingresultsandchangesinfinancialposition,inconformitywithgenerallyacceptedaccountingprinciples.Theirexaminationisconductedinaccordancewithgenerallyacceptedauditingstandardsandincludessuchproceduresbelievedbythemtobesufficienttoprovidereasonableassurancethatthefinancialstatementsarenotmateriallymisleadinganddonotcontainmaterialerrors.TheBoardofDirectors,actingthroughitsAuditCommittee,overseesmanagement'sresponsibilitiesinthepreparationofthefinancialstatements.Inperformingthisfunction,theAuditCommittee,whichiscomposedofdirectorswhoarenotemployeesoftheCompany,meetsperiodicallywithmanagement,theinternalauditorsandtheindependentcertifiedpublicaccountantstoreviewtheworkofeach.DeloitteHaskins&SellsandtheinternalauditorshavefreeaccesstotheAuditCommitteeandtotheBoardofDirectors,withoutmanagementpresent,todiscussinternalaccountingcontrol,auditingandfinancialreportingmatters.Auditors'pinionDeloitteHaskins+SellsCertifiedPublicAccountantsOneWorldTradeCenterNewYork,NewYork10048TotheShareownersandBoardofDirectorsofPennsylvaniaPower&LightCompany:WehaveexaminedthebalancesheetsofPennsylvaniaPower&LightCompanyasofDecember31,1986and1985andtherelatedstatementsofincome,earningsreinvested,andchangesinfinancialpositionforeachofthethreeyearsintheperiodendedDecember31,1986.Ourexaminationsweremadeinaccordancewithgenerallyacceptedauditingstandardsand,accordingly,includedsuchtestsoftheaccountingrecordsandsuchotherauditingproceduresasweconsiderednecessaryinthecircumstances.Inouropinion,suchfinancialstatementspresentfairlythefinancialpositionoftheCompanyatDecember31,1986and1985andtheresultsofitsoperationsandthechangesinitsfinancialpositionforeachofthethreeyearsintheperiodendedDecember31,1986,inconformitywithgenerallyacceptedaccountingprinciplesappliedonaconsistentbasis.February4,198722 StatementofIncome19861985(ThousandsofDollars)1984OperatingRevenues(Note2)$2,188,925$1,976,502$1,562,782OperatingExpensesNetcostofenergyFuel.Powerpurchases.........Interchangepowersales.WagesandemployeebenefitsOtheroperatingcosts.Depreciation.Incometaxes(Note5)Taxes,otherthanincomeDeferredSusquehannaenergysavingsnetofoperatingexpenses(Note3).OperatingIncome641,74090,879~289,422)442,697280,986277,286155,073282,712160,8961,599,600589,825756,295164,963~587,613333,645259,670272,147141,912243,160170,40529,0751,450,014526,488720,670171,953~(647,186245,437232,632219,002118,763185,784154,2061,155,824406,958OtherIncomeand(Deductions)Allowanceforequityfundsusedduringconstruction(Note6).DeferredSusquehannacapitalcosts(Note3)..Incometaxcredits(Note5).Other-net.................................IncomeBeforeInterestCharges(1,443)6,959~2,709)2,807592,182(51,490)31,74280,764~7,67053,346579,83464,743(718)62,623~4,830)121,818528,776InterestChargesLong-termdebtShort-termdebtandotherAllowanceforborrowedfundsusedduringconstruction(Note6)290,78814,03612,795284,53826,872280,32833,740(22,189)(104,195)NetIncomeDividendsonPreferredandPreferenceStock...EarningsApplicabletoCommonStock......209,873318,90892,145292,024289,221290,61391,286300,10869,057281,051$199,327$226,758EarningsPerShareofCommonStock(a)..$3.10$268$312AverageNumberofSharesOutstanding(thousands)..74,51874,51372,767DividendsDeclaredPerShareofCommonStock...(a)Basedonaveragenumberofsharesoutstanding.$2.58$2.56$2.48SeeaccompanyingSchedulesandNotestoFinancialStatements.

BalanceSheetatDecember31Assets19861985(ThousandsofDollars)UtilityPlantPlantinservice-atoriginalcostLessaccumulateddepreciationConstructionworkinprogress-atcost.Nuclearfuelownedandleased-netofamortization(Note8)..Otherleasedproperty-netofamortization(Note8)..........$7,072,1421,256,3045,815,838224,426378,43278,4336,497,129$6,916,7331,140,0465,776,687161,684372,44679,3186,390,135InvestmentsAssociatedcompanies-atequityReceivablefromlitigationsettlement.Nonutilitypropertyandother-atcostorless22,5389,70017,06549,30318,09919,20013,02350,322CurrentAssetsCashSpecialdepositforpurchaseofnuclearfuel.Accountsreceivable(lessreserve:1986,$7,262;1985,$6,223)Customers.Interchangepowersales.OtherUnbilledrevenuesFuel(coalandoil)-ataveragecostMaterialsandsupplies-ataveragecost.Commonstockheldfordividendreinvestmentplan-atcost(Note7)Other.4,0498,550165,84429,5019,40790,484139,67428,64710,81619,189506,1614,615152,48346,0867,23168,840154,57223,60911,87825,121494,435Deferred,DebitsUtilityplantcarryingcharges(Note14).Unamortizeddebtexpenseandreacquireddebtcosts..Other.28,60523,34634,52886,4794,58526,16230,747$7,139,072$6,965,63924SeeaccompanyingSchedulesandNotestoFinancialStatements.

LiaNLitotes19861985(ThousandsofDollars)CapitalizationCommonequityCommonstockCapitalstockexpense.Earningsreinvested$1,807,267(14,155)622,5871,915,649$1,807,267(16,669)615,1021,905,700PreferredandpreferencestockWithsinkingfundrequirements.Withoutsinkingfundrequirements.Long-termdebt475,289281,8752,732,2235,854,486691,010231,3752,507,2135,335,298CurrentLiabilitiesCommercialpaper.........Long-termdebtduewithinoneyearCapitalleaseobligationsduewithinoneyear(Note8)..AccountspayableTaxesaccrued.InterestaccruedDividendspayableDeferredincometaxesEnergyrevenuestoberefundedOther112,00046,56874,360101,20565,60678,42561,06880,92571,044686,19695,50097,72370,420114,45057,50669,71470,10433,43736,67251,416696,942DeferredCreditsandOtherNoncurrentLiabilitiesDeferredinvestmenttaxcreditsDeferredincometaxesCapitalleaseobligations(Note8)Other190,797570,986829,48857,1691,148,890120,482432,806826,11054,001933,899CommitmentsandContingentLiabilities(Note16)..$7,189,072$6,965,639SeeaccompanyingSchedulesandNotestoFinancialStatements.

19851984(ThousandsofDollars)SourceofFundsFromoperationsNetincomeCharges(credits)toincomenotinvolvingworkingcapitalDepreciation.Amortizationofpropertyundercapitalleases...Noncurrentdeferredincometaxesandinvestmenttaxcredits-netAllowanceforfundsusedduringconstruction...Other.$318,903$290,613300,108118,76338,649141,91277,850155,07371,380133,10329,301~5,406207,575(11,352)~922)125,038(168,938)3,220StatementofChangesinFinancialPosition1986OutsidefinancingCommonstock.PreferredandpreferencestockFirstmortgagebondsShort-termdebt-netincrease(decrease).....Capitalleaseobligations721,862100,000500,00016,500616,50081,595$1,419,957667,373180,000~9,300170,70079,533$917,606435,63584,20350,000403,250~35,200452,25379,894$967,782ApplicationofFundsConstructionexpenditures.Additionstonuclearfuel-ownedandleased...Allowanceforfundsusedduringconstruction..SecuritiesretiredPreferredandpreferencestockFirstmortgagebondsSecuredtermnotesReductionincapitalleaseobligations...........Dividendsonpreferred,preferenceandcommonstockPremiumonredemptionofpreferencestock.....Premiumonretirementoflong-termdebt.......Workingcapital-increase(excludingdebtandcapitalleaseobligations)(a).Other-net.$275,76165,281~11,352)329,690315,771323,470639,24174,327261,29827,28317,54041,75728,821$1,419,957$199,85274,34529,301303,49847,01776,534100,000223,55184,530282,03614,3449,647$917,606$421,697103,518(168,938)356,27726,80380,154100,000206,95747,695273,23666,02917,588$967,782(a)Changesincomponentsofworkingcapital(excludingdebtandcapitalleaseobligations)Cash~Accountsreceivable.Unbilledandrefundablerevenues,netofdeferredtaxes.Fuel(coalandoil).Accountspayableandaccruedtaxes..................Other-net.Netincrease.$,(566)(1,048)60,828(14,898)5,145(7,704)$41,757$(1,839)48,23470,594(43,289)(20,053)(39,303)$14,344$(299)1,917(7,438)70,771(32,277)33,355$66,02926SeeaccompanyingSchedulesandNotestoFinancialStatements.

ScheduleofTaxes19861985(ThousandsofDollars)1984IncomeTaxExpense(Note5)IncludedinoperatingexpensesProvision-Federal.StateDeferred-Federal.StateInvestmenttaxcredit,net-Federal..IncludedinotherincomeanddeductionsProvision(credit)-F(ederalState.Totalincometaxexpense-F(ederalStateDetailofdeferredtaxesinoperatingexpensesTaxdepreciationReacquireddebtcosts.DeferredSusquehannaenergysavingsnetofope'ratingexpensesStateutilityrealtytaxOther$37,71827,72865,441130,5765,092185,66881,608282,712(5,818)~1,646)(6,959)244,57931,174$275,758$129,8889,557(3,088)~694)$135,668$78,64828,458102,106107,954~2,898105,64635,408243,160(67,005)(13,759)(80,764)155,0057,391$162,396$130,287(15,811)(13,291)4,511$105,646$51,79011,24363,033128,8442,815126,659(3,908)185,784(51,370)~(11,258(62,628)120,3562,805$128,161$120,23214,888~(8,461$126,659ReconciliationofIncomeTaxExpenseIndicatedfederalincometaxonpre-taxincomeatstatutorytaxrate(46%).Increase(decrease)dueto:AFUDC(Note6)Stateincometaxes.TaxandpensioncostDeferredSusquehannacapitalcosts......Depreciationdifferencesnotnormalized..Utilizationoflosscarryforward..........Other.Totalincometaxexpense.Effectiveincometaxrate$264,896(5,222)19,078(5,762)8,987~6,224)10,857$275,75847.9%$208,38413,478(1,566)(5,245)(14,601)12,290(52,604)2,260(45,988)$162,39635.8%$203,350(77,656)1,960(5,719)8811,439544(80,189)$123,16127.9%Taxes,OtherThanIncomeStategrossreceipts.Statecapitalstock.Stateutilityrealty.Socialsecurityandother...$79,20922,78941,46717,481$160,896$73,54923,55756,40716,892$170,405$66,71123,04448,31616,135$154,206Seeaccompanying¹testoFinancialStatements.

SCheduleOfCapitalStOCkatDecember31Outstanding19861985(T/iousandsofDollars)SharesOutstandingShares1986AuthorizedPreferredStock-$100par,cumulative(a)41/Series$58,019415,446$468,46553,019530,189629,936451,0464,154,45610,000,000$504,065PreferenceStock-nopar,cumulative(a)...CommonStock-nopar(a).DetailsofPreferredandPreferenceStock(b)$288,149$418,3202,381,4925,000,000$1,807,267$1,307,26774,512,79785,000,000Outstanding19861985(ThousandsofDollars)nts$100,00027,20024,00040,0006,00080,00054,00055,890$28,80036,00042,5008,00040,00057,00058,89026,50015,00026,00015,00034,00015,00051,00037,84950,00014,97150,00050,00050,00040,80082,84950,000$475,239$691,010WithSinkingFundRequiremeSeriesPreferred7.00%(d)................7.40%7.75%8.00%8.00%,Second...........8.25%8.75%(d)................9.24%(d)............,...10.75o/o11.00$,Adjustable(e)(f)..11.00%11.25%14.00%Preference$8.625(f)................$11.00(d)...............$11.60(d)(g)..~.........$13.00$13.00,Second..........$13.68$15.001,000,000272,000240,000400,00060,000800,000540,000558,900$107.00103.55100.87112.00101.78101.84110.00103.00150,000125.00408,000323,492500,000None104.95114.00OptionalRedemptionSharesPricePerOutstandingShare19861986200,00016,000120,00025,00020,000100,00030,00030,00080,0001993-19971987-20081987-19881987-20021987-19891987-19891987-20041987-20051989-1998102,00025,00025,0001987-19901987-20001989-2008SinkingFundProvisions(c)SharestobeRedeemedRedemptionAnnuallyPeriodWithoutSinkingFund4~/>%Preferred.....SeriesPreferred3.35%4.40o/o4.60%8.60%9.00%Preference$8.00$8.40$8.70Requirements58,0194,17822,8786,300222377,76385,00040,00040,0004,17822,8786,30022,2377,76885,00040,00040,00041,788228,77363,000222,37077,630350,000400,000400,000103.50102.00103.00104.00104.00103.00101.00101.00$53,019530,189$110.00$281,875$231,37528SeeaccompanyingNotestoFinancialStatements.

Increases(Decreases)inCapitalStock(ThousandsofDollars)1986SharesAmount1985SharesAmount1984SharesAmount(16,000)(1,600)(120,000)(12,000)(25,000)(2,500)CommonStock-issuedunderdividendreinvestmentplan(h)..4,177,927$84,874SeriesPreferredStock7.00%.1,000,000$100,0007.40%............(16,000)(1,600)(16,000$(1,6007.50%.....................(150,000(15,0007.75%..................(120,000(12,000(120,000(12,0008.00%...................(25,000(2,500(25,000(2,5008.00%,Second.................(20,000(2,000(20,000(2,0008.25%....................(100,000(10,000(100,000(10,0008.75%................(30,000(3,000(30,000(3,0009.24%......................(30,000(3,000(650(65(58,660)(5,866)10.75%...............265,00026,50011.00/0...............260,00026,00011.25%................150,00015,00014.00%..................340,00034,000PreferenceStock$8.625....(102,000(10,200$13.00...........149,70514,9714,31743217,8751,787$13.00,Second................500,00050,000$13.68............500,00050,000500,00050,000$15.00..............500,000(50,000DecreasesinPreferredandPreferenceStocksrepresent:(i)theredemptionofstockpursuanttosinkingfundrequirements,(ii)sharesredeemedpursuanttooptionalredemptionprovisions,or(iii)sharesreacquiredthroughmarketpurchasesandsubsequentlycancelled(usedtomeetsinkingfundrequirements).(a)Eachshareofpreferred,preferenceandcommonstockentitlestheholdertoonevoteonanyquestionpresentedtoanyshareowners'eeting.(b)Theinvoluntaryliquidationpriceofthepreferredandpreferencestockis$100pershare,andtheoptionalvoluntaryliquidationpriceistheoptionalredemptionpricepershareineffect,exceptforthe4~/%Preferredandthe$8.625SeriesPreferenceStockswhichare$100pershare(plusineachcaseanyunpaiddividends).Liquidationpaymentsonpreferredstockhaveprioritytosuchpaymentsonthepreferencestock.(c)Theaggregateamountofsinkingfundredemptionrequirementsthrough1991are(thousandsofdollars):1987,$45,539;1988,$46,800;1989,$40,300;1990,$28,300;1991,$18,100.(d)Oncertainsinkingfundredemptiondates,additionalsharesmayberedeemeduptothenumberofsharesrequiredtoberedeemedannually.(e)EffectiveApril1,1988,thedividendrateissubjecttoaone-timeadjustmentpursuanttoaformulabasedonthethencurrentprimerate.(f)Intheeventcertainfederalincometaxbenefitsarelosttocorporateholdersofthesestocks,theCompanymayberequiredtomakeindemnitypaymentssufficienttoprovidetheholderswithanagreeduponeffectiveyieldafterfederalincometaxes.AtDecember31,1986,theCompanyestimatesthatfutureindemnitypaymentswouldnotexceed$4.8million,mostofwhichwouldbepayableonlyaftertheholderssellorredeemthestock.(g)Ownershipofthe$11.60PreferenceStockisevidencedbyDepositaryPreferenceShares,eachrepresenting~/<shareofPreferenceStock.TheCompanyintendstoredeemalloftheoutstandingStockonFebruary18,1987attheoptionalredemptionpriceof$115.52pershare($28.88perdepositaryshare)whichincludes$1.52pershare($0.38perdepositaryshare)representinganamountequaltotheaccrueddividendsfromJanuary1,1987.(h)Since1985,sharesforthedividendreinvestmentplanhavebeenacquiredintheopenmarket.SeeaccompanyingNotestoFinancialStatements.

FirstMortgageBonds(a)15%.16/2%14s/4%16y2%16y2%16y%16y%12ys%16y2%16y2%12ye%16y2%16y2%14%(c).12y,%16y2%4/s%45/s%to16ys%6s/4%to9%.7y2%to93/4%Sy2%to15'/s%(c)9%to13y4%FirstMortgagePollutionControlBonds(a)5/s%SeriesA...............................7/s%to8ys%SeriesC.lly4%tolly2%SeriesD10~/8%SeriesE105/8%SeriesF.93/>%SeriesG.$16,67030,90050,00036,00010,40010,10010,40010,0007,00010,40010,0008,50010,400125,00010,00010,40030,000305,000220,000610,000200,000475,000$86,00010,40010,10010,40010,0007,00010,40010,0008,50010,40010,00010,40080,000480,000220,000610,000100,000850,00020,90020,00070,00087,750115,50055,00021,80020,00070,00037,750115,50055,000SCheduleOfLOng-TermDebtatDecember31Outstanding19861985(ThousandsofDollars)Maturity(b)February1,1986August1,1986December12,1986August1,1987September1,1987August1,1988September1,1988February1,1989August1,1989September1,1989February1,1990August1,1990September1,1990December1,1990February1,1991September1,1991December1,19911992-19961997-20012002-20062007-20112012-2016(d)(d)(d)March1,2014September1,2014July1,2015OtherLong-TermDebtSecuredtermnotes(a)(e)MiscellaneouspromissorynotesUnamortized(discount)andpremium-net..Lessamountduewithinoneyear..2,702,750100,0006682,808,418(24,622)2,778,79146,5682,526,220100,0004682,626,688(21,752)2,604,98697,728March31,19911987-1995$2,782,228$2,507,213(a)SubstantiallyallutilityplantissubjecttothelienoftheCompany'sfirstmortgage.Certainutilityplantisalsosubjecttothelienofasecondmortgageissuedassecurityfortermnotes.(b)Aggregatelong-termdebtmaturitiesthrough1991are(thousandsofdollars):1987,$46,568;1988,$21,550;1989,$28,414;1990,$29,839;1991,$151,339.Maximumsinkingfundrequirementsaggregate$33.7millionthrough1991andmaybemetwithpropertyadditionsorretirementofbonds.(c)InMarch1986,theCompanyredeemed$125millionprincipalamountofFirstMortgageBonds,14%Seriesdue1990and$100millionprincipalamountofFirstMortgageBonds,15~/8%Seriesdue2010.(d)Bondsmatureannuallyasfollows(thousandsofdollars):(i)SeriesAonMay1,1988-2002,$900;2003,$7,400(ii)Series0onAprilI,2000,$4,000;2006-2009,$2,000;2010,$8,000(iii)SeriesDonNovember1,2002,$15,000;2012,$55,000.(e)Variableinterestrate.30SeeaccompanyingNotestoFinancialStatements.

StatementofEarningsReinvestedBalance,January1AddNetIncomeDeductCashdividendsdeclaredPreferredstock-atrequiredannualrates..Preferencestock-atrequiredannualrates.Commonstock-pershare:1986,$2.58;1985,$2.56;1984,$2.48Costsassociatedwiththeredemptionofpreferredandpreferencestock.198441,47027,587192,24181,37544,53746,749190,75047,43744,708181,09119861985(ThousandsofDollars)$615,102$606,525$560,858300,108290,613318,908915,210897,138879,761Balance,December31292,678$622,537282,036$615,102273,236$606,525NotestoFinancialStatements1.SummaryofSignificantAccountingPoliciesAccountingRecordsAccountingrecordsaremaintainedinaccordancewiththeUniformSystemofAccountsprescribedbytheFederalEnergyRegulatoryCommission(FERC)andadoptedbythePennsylvaniaPublicUtilityCommission(PUC).AffiliatedCompaniesInvestmentsinunconsolidatedsubsidiaries(allwhollyowned)andinSafeHarborWaterPowerCorporation(ofwhichtheCompanyownsone-thirdoftheoutstandingcapitalstockrepresentingone-halfofthevotingsecurities)arerecordedusingtheequitymethodofaccounting.UnconsolidatedsubsidiariesoperateintheUnitedStatesandareengagedincoalmining,holdingcoalreserves,oilpipelineoperationsandrealestateinvestment.Allunconsolidatedsubsidiariesconsideredintheaggregatewouldnotconstitutea"significantsubsidiary"asthattermisdefinedbytheSecuritiesandExchangeCommission.UtilityPlantandDepreciationAdditionstoutilityplantandreplacementofunitsofpropertyarecapitalizedatcost.Thecostofunitsofpropertyretiredorreplacedisremovedfromutilityplantaccountsandchargedtoaccumulateddepreciation.Expendituresformaintenanceandrepairsofpropertyandthecostofreplacingitemsdeterminedtobelessthanunitsofpropertyarechargedtooperatingexpense.Forfinancialstatementpurposes,depreciationisbeingprovidedovertheestimatedusefullivesofpropertyandiscomputedusingamodifiedstraight-linemethodfortheSusquehannanuclearplantandthestraight-linemethodforallotherproperty.Thesemethodsarealsousedforrate-makingpurposes.Themodifiedstraight-linemethodprovidesforanincreasingamountofannualdepreciationforthenuclearplantuntiltheyear2000,atwhichtimetheplant'snetundepreciatedcostwillbedepreciatedinequalannualamountsovertheplant'sremaininglife.Provisionsfordepreciation,asapercentofaveragedepreciableproperty,approximated2.2%in1986and1985and2.5%in1984.NuclearDecommissioningandF~uelDisposalAnannualprovisionfordecommissioningcostsoftheSusquehannanuclearplant,equaltotheamountallowedforrate-makingpurposes,ischargedtooperatingexpense.Suchamounts,netofincometaxes,areinvestedinsecuritieskeptinasegregatedinvestmentaccountwhichcanbeusedonlyforfuturedecommissioningcosts.TheU.S.DepartmentofEnergy(DOE)isresponsibleforthepermanentstorageanddisposalofspentnuclearfuelremovedfromnuclearreactors.TheCompanycurrentlypaysDOEafeeforfuturedisposalservicesandrecoverssuchcostsincustomerrates.PremiumonReacquiredSecuritiesAsprovidedintheUniformSystemofAccounts,thepremiumspaidandexpensesincurredintherefundingoflong-termdebtaredeferredandamortizedoverthelifeofthenewdebtissueandpremiumspaidtoretirepreferredandpreferencestockarechargedtoretainedearnings.

AllowanceforfundsUsedDuingConstructionAsprovidedintheUniformSystemofAccounts,thecostoffundsusedtofinanceconstructioniscapitalizedaspartofconstructioncost.ThecomponentsofAllowanceforFundsUsedDuringConstruction(AFUDC)shownontheStatementofIncomeunderotherincomeanddeductionsandinterestchargesarenon-cashitemsequaltothecostoffundscapitalizedduringtheperiod.Theequityfundscomponentisreducedbytheincometaxsavingsrealizedduetothetaxdeductibilityofconstruction-relatedinterest.UndertheTaxReformActof1986(TaxAct),mostconstructioninterestwillnolongerbedeductible.Accordingly,effectiveJanuary1,1987,AFUDCwillnotbereducedbytaxsavings.AFUDCservestooffsetontheStatementofIncometheinterestchargesondebtanddividendsonpreferredandpreferencestockincurredtofinanceconstruction.Inaddition,areturnoncommonequityusedtofinanceconstructionisimputed.(SeeNote6).CapitalLeasesCapitalleasedpropertyisrecordedatthepresentvalueoffutureleasepaymentsandisamortizedsothatthetotalofinterestontheleaseobligationandamortizationoftheleasedpropertyequalstherentalexpenseallowedforrate-makingpurposes.(SeeNote8).RevenuesRevenuesarerecordedbasedontheamountsofelectricitydeliveredtocustomerstotheendofeachaccountingperiod.Thisincludesamountscustomerswillbebilledforelectricitydeliveredfromthetimemeterswerelastreadtotheendoftherespectiveaccountingperiod.TheCompany'sPUCtariffscontainanenergycostrateunderwhichcustomersarebilledanestimatedamountforfuelandotherenergycosts.Anydifferencebetweentheactualandestimatedamountforsuchcostsiscollectedfromorrefundedtocustomersinasubsequentperiod.Revenuesapplicabletoenergycostratebillingsarerecordedatthelevelofactualenergycostsandthedifferenceisrecordedaspayabletoorreceivablefromcustomers.EffectiveJanuary1,1987,theCompanybegantoapplyanIncomeTaxAdjustment(ITA)credittoPUCcustomers'illstoreflecttheexpectedreductioninincometaxexpenseduetotheTaxAct.IncomeTaxesTheCompanyanditssubsidiariesfileaconsolidatedfederalincometaxreturn.Incometaxesareallocatedtotheindividualcompaniesbasedontheirrespectivetaxableincomeorlossandinvestmentandpayroll-basedtaxcredits.IncometaxesapplicabletotheCompanyareallocatedtooperatingexpensesandotherincomeanddeductionsontheStatementofIncome.Under.otherincomeanddeductions,theincometaxcreditsrelateprincipallytothetaxreductionsassociatedwiththeinterestexpensethatisoffsetbytheborrowedfundscomponentofAFUDC.Deferredincometaxesarerecordedfortimingdifferencesbetweenbookandtaxableincometotheextenttheyarepermittedinratedeterminationsbyregulatoryagencies.Thetwoprincipalitemsforwhichdeferredtaxesarenotcurrentlyrecordedare(i)certainpensioncostsandemployee-relatedtaxescapitalizedforbookpurposesbutdeductedcurrentlyforincometaxesand(ii)aportionoftaxdepreciationinexcessofbookdepreciationrelatedtopropertyplacedinservicepriorto1980.Investmentandpayroll-basedtaxcreditsresultinareductionoffederalincometaxespayable.Suchtaxcredits,otherthancreditsresultingfromcontributionstotheemployeestockownershipplan,aredeferredwhenutilizedandamortizedovertheaveragelivesoftherelatedproperty.(SeeNote5).PensionPlanTheCompanyhasanoncontributorypensionplancoveringsubstantiallyallemployees.Companycontributionstotheplanincludecurrentservicecostsandallamountsrequiredtoamortizeunfundedpriorservicecostsoverperiodsofnotmorethan20years.EffectiveJanuary1,1987,theCompanyadoptedtheproceduresrequiredbyStatementofFinancialAccountingStandardsNo.87-EmployersAccountingforPensions.ThisstatementprescribesprocedurestodetermineperiodicpensioncostwhichdifferfromthosepreviouslyusedbytheCompany.(SeeNote10).ReclassificationCertainamountsfromprioryearfinancialstatementshavebeenreclassifiedtoconformtothecurrentyearpresentation.32 2.RateMattersInApril1985,thePUCgranted$121millionofthe$330millionnetrateincreaserequestedbytheCompanytoreflecttheoperationofUnit2attheSusquehannanuclear-fueledstationandotherincreasedcostsofdoingbusiness.AreturnonthecommonequityinvestmentinSusquehannaUnit2wasdeniedbasedonthePUC'sconclusionthattheCompanytemporarilyhadtoomuchgeneratingcapacity.Thisadjustmentreducedrequestedrevenuesbyabout$161million.ThePUCorderindicatedthattheequitydisallowancewouldcontinueuntiltheCompanycanshowthatUnit2'sneteconomicbenefitsexceeditsnetcost,orthatitscapacityisnecessaryforsystemreliability.Theothermajoradjustmentdisallowedrecoveryofabout$37millionofthecostofelectricitypurchasedfromAlleghenyElectricCooperative,Inc.'s(Allegheny)10%undividedinterestintheSusquehannaunits.TheagreementwithAlleghenyprovidesthattheCompanywillpurchasedecliningamountsofelectricityfromAlleghenythroughearly1991.TheCompanyappealedtotheCommonwealthCourtofPennsylvania(Court)thePUCdecisionsregardingexcesscapacityandthepurchasesfromAllegheny.InOctober1986,theCourtaffirmedthePUC'sdecision.NeithertheCompanynoranyoftheotherpartiestotheappealsoughtareviewbythePennsylvaniaSupremeCourt.ThePUChasapprovedtheCompany'srequesttoreduceitsretailratesbyapproximately$32millioneffectiveJanuary1,1987.Thisnetreductionreflects:(1)a$47milliondecreaseduetothelowerincometaxexpenseanticipatedasaresultoftheTaxAct;(2)a$26milliondecreasebecauseofchangesinthestatetaxsurcharge;and(3)a$41millionincreaseincoststoberecoveredthroughtheenergycostrate.TheFERCpermittedannualincreasesinratesforwholesalecustomersof$4.2millioneffectiveMarch1984and$5.7millioneffectiveJanuary1986.3.DeferralofSusquehannaOperatingandCarryingCostsInaccordancewithordersofthePUC,theCompanydeferredcertainoperatingandcapitalcosts,netofenergysavings,associatedwithSusquehannaUnits1and2.Thecostsdeferredwereincurredfromthedatetheunitswereplacedincommercialoperationuntiltheeffectivedatesoftherateincreasesreflectingoperationoftheunits.Thedeferredcostsplusrelateddeferredincometaxestotaled$39.2millionatDecember31,1986.TheCompanyexpectstoultimatelyrecoverthisamountinrateschargedtocustomers.SuchrecoverywillbesubjecttoPUCreviewandapproval.Noreturnisbeingaccruedonthedeferredcosts.4.SalesofGeneratingCapacityandEnergyTheCompanyprovidesAtlanticCityElectricCompany(Atlantic)with125,000kilowattsofcapacityandenergyfromtheSusquehannaunitsandJerseyCentralPowerandLightCompany(JCP&L)with945,000kilowattsoftheCompany'stotalgeneratingcapacityandenergy.ThesalesaremadeatapriceequaltotheCompany'scostofprovidingservice,whichincludesareturnontheCompany'sinvestmentingeneratingcapacity.SalestoAtlanticbeganin1983andexpirein1991,whenanotheragreementprovidesAtlanticwith125,000kilowattsofcapacityandenergyfromtheCompany'scoal-firedstationsuntiltheyear2000.SalestoJCP&Lbeganin1985andcontinuethrough1995,withtheamountthendeclininguniformlyeachyearuntiltheendoftheagreementin1999.5.IncomeTaxesTaxableincomefor1985wassufficientfortheCompanytoutilizeitslosscarryforwardsofapproxi-mately$100millionsothatthecurrentprovisionforincometaxexpensein1985wasreducedbyapproximately$58milliontoreflecttheutilizationofsuchcarryforwards.ThereductioninthecurrentprovisionforincometaxeswasoffsetontheStatementofIncomebyanequaldecreaseintheallowanceforfundsusedduringconstruction.(SeeNote6).TheTaxActcontainsnumerousprovisionsthatwillaffecttheCompany.Someofthemajorprovisionsincludeareductioninthecorporateincometaxrate,repealoftheinvestmentandpayroll-basedtaxcreditsandareductionoftheamountofinvestmenttaxcreditswhichcanbecarriedforwardtoreducefederaltaxespayable.TheCompanywillalsoberequiredtocapitalizefortaxpurposescertainitemssuchasinterest,pensioncostandpayrolltaxeswhichformerlyweredeductiblewhenincurred.TheexpectedreductionintaxexpenseduetotheTaxActwillbepassedthroughtocustomersbyapplicationoftheITA.33 TheTaxActrequiresthatanyunusedinvestmenttaxcreditsatDecember31,1986bereducedby17.5%andthatanysuchunusedcreditsatDecember31,1987bereducedbyanadditional17.5%.TheCompanyestimatesthat,aftergivingeffecttotheTaxActandthegenerationofinvestmenttaxcreditsin1987,approximately$146millionofinvestmentandpayroll-basedtaxcreditswillbeavailabletoreducefederalincometaxliabilitiesin1987andfutureyears.ThecarryforwardperiodfortheunusedcreditsatDecember31,1986expiresintheyears1996to2001.TheCompanyhasnotrecordeddeferredincometaxesforcertaintimingdifferencesinaccordancewithPUCratetreatment.Thecumulativenetamountofsuchtimingdifferencesforwhichdeferredincometaxeshavenotbeenrecordedapproximated$661millionatDecember31,1986.TheCompanywouldexpecttorecoverthroughelectricrevenuesthetaxeswhendueinfutureyears.SeeNote15forinformationconcerningaproposedaccountingstatementforincometaxes.6.AllowanceforFundsUsedDuringConstructionThrough1986,AFUDCwasrecordedonanafter-taxbasiswiththeequitycomponentreducedbytheincometaxsavingsrealizedduetothetaxdeductibilityofconstruction-relatedinterest.TheCompanyhadtaxlossesduringtheperiod1982-1984dueinparttothelargeamountofconstructioninterestincurred.Asaresult,theincometaxreductionreflectedinAF<UDCinthoseyearswaslimitedtothetaxapplicabletoconstructioninterestdeterminedtobeusableasataxdeduction.Taxableincomefor1985wassufficienttopermittheCompanytoutilizeallofitslosscarryforwardsthatexistedattheendof1984.Accordingly,AF<UDCfor1985wasreducedbyabout$58millionrepresentingthetaxeffectofprioryearconstructioninterestincludedinthelosscarryforwards.7.StockHeldforDividendReinvestmentPlanAtDecember31,1986,theCompanytemporarilyheld284,730sharesofCommonStockwhichwereacquiredintheopenmarketfordistributiontoparticipantsintheDividendReinvestmentPlan.8.LeasesPropertyundercapitalleasesconsistsofthefollowing(thousandsofdollars):Nuclearfuel,nctofaccumulatedamortization-1986,$106,030;1985,$137,974Vehicles,oilstoragetanksandotherproperty,nctofaccumulatedamortization-1986,$52,119;1985,$44,259.Nctpropertyundercapitalleases.December3119861985$325,365$317,21278,43379,318$403,798$396,530Nuclearfuelleasepayments,whicharechargedtoexpenseasthefuelisusedforthegenerationofelectricity,were$68.0millionin1986and$78.5millionin1985.F<uturenuclearfuelleasepaymentswillbebasedonthequantityofelectricityproducedbytheSusquehannaunits.Themaximumamountofunamortizednuclearfuelleasableundercurrentarrangementsis$350million.FutureminimumleasepaymentsundercapitalleasesineffectatDecember31,1986(excludingnuclearfuel)wouldaggregate$104.1million,including$25.6millionofimputedinterest.Duringthefiveyearsending1991,suchpaymentswoulddecreasefrom$20.3millionperyearto$10.2millionperyear.InterestoncapitalleaseobligationswasrecordedasoperatingexpensesontheStatementofIncomeinthefollowingamounts(thousandsofdollars):1986,$15,889;1985,$18,256and1984,$13,836.Generally,capitalleasescontainrenewaloptionsandobligatetheCompanytopaymaintenance,insuranceandotherrelatedcosts.TheCompanyalsohasenteredintovariousoperatingleaseswhicharenotmaterialwithrespecttotheCompany'sfinancialposition.9.CreditArrangementsTheCompanyissuescommercialpaperand,fromtimetotime,borrowsfrombankstoprovideshort-termfundsrequiredforgeneralcorporatepurposes.Revolvingcreditarrangementsaremaintainedwithagroupofbanksprincipallyasaback-upfortheCompany'scommercialpaper.ThebankshavecommittedtolendtheCompanyupto$200milliononarevolvingbasisinreturnforthepaymentofcommitmentfees.AnyloansmadeunderthesecreditarrangementswouldmatureonJune30,1990and,attheoptionoftheCompany,interestrateswouldbebaseduponcertificateofdepositrates,Eurodollardepositratesortheprimerate.TheCompanyalsomaintainslinesofcreditaggregating$35millionwithvariousbanksinreturn~34 sforthemaintenanceofcompensatingbalancesorthepaymentofcommitmentfees.Bankborrowingsgenerallybearinterestatratesnegotiatedatthetimeoftheborrowing.Therewerenoborrowingsoutstandingattheendof1986underthesecreditarrangements.Commitmentfeesincurredwere(millionsofdollars):1986,$0.5;1985,$1.6and1984,$2.6.10.PensionPlanandOtherPostemploymentBenefitsPensioncostswere(millionsofdollars):1986,$29.1;1985,$27.3and1984,$29.0.Oftheseamounts,$18.7millionin1986,$18.9millionin1985and$18.0millionin1984werechargedtooperatingexpenses,andthebalancewaschargedtoconstructionandotheraccounts.Theactuarialpresentvalueofaccumulatedpensionplanbenefitsandnetassetsattheendoftheplan'srecentfiscalyearswereasfollows(thousandsofdollars):June3019861985Actuarialpresentvalueofaccumulatedplanbenefits:(a)VestedNonvested.$229,760$203,46613,15212,584$242,912$216,050Netassetsavailableforbenefits.$487,691$369,371(a)Excludesaccumulatedplanbenefitswhicharetheobligationoffourinsurancecompaniesunderinsurancecontracts.Theassumedrateofreturnusedindeterminingtheactuarialpresentvalueofaccumulatedplanbenefitswas6.5%forboththeJune30,1986andtheJune30,1985valuations.TheFinancialAccountingStandardsBoard(FtASB)hasissuedanaccountingstatementwhichestablishesnewprocedurestodeterminepensioncostandincreasesrelateddisclosurerequirements.TheCompanyadoptedtheproceduresrequiredbythisstatementeffectiveJanuary1,1987andexpectsthatpensioncostwilldeclinetoabout$16millionin1987.SubstantiallyalloftheCompany'semployeeswillbecomeeligibleforcertainhealthcareandlifeinsurancebenefitsuponretirement.Thecostofthesebenefitsforretiredemployeesisgenerallyrecognizedasexpensewhenpremiumsarepaid.Suchcostswereapproximately(millionsofdollars):1986,$3.5;1985,$2.0and1984,$2.3.ll.JointlyOwnedFacilitiesAtDecember31,1986,theCompanyownedundividedinterestsinthefollowingjointlyownedfacilities(millionsofdollars):OwnershipInterest............UtilityPlantinService.AccumulatedDepreciationConstructionWorkinProgress.GeneratingStations-SusquehannaKeystoneConemaugh90.00%,12.34%11.39%$3,712$40$3793151411313MerrillCreekReservoir8.37%$8Eachparticipantinthesefacilitiesprovidesitsownfinancing.TheCompanyreceivesaportionofthetotaloutputofthegeneratingstationsequaltoitspercentageownership.TheCompany'sshareoffuelandotheroperatingcostsassociatedwiththestationsisreflectedontheStatementofIncome.TheMerrillCreekReservoirisunderconstructionandwillprovidewaterduringperiodsoflowriverflowtoreplacewaterfromtheDelawareRiverusedbytheownersintheproductionofelectricity.12.AffiliatedCompanyTransactionsTheprincipaltransactionswithaffiliatedcompaniesinvolvethepurchaseofelectricityfromSafeHarborWaterPowerCorporation,thepurchaseofcoal,thepaymentofinterestandothercostsrelatedtocoalreservesandthepaymentofchargesfortransportationofoilbypipeline.Costsrelatedtothesetransactionswithaffiliatesaggregated(millionsofdollars):1986,$218.5;1985,$271.0and1984,$291.9.Underequityaccounting,theoperationsofaffiliatedcompaniesresultedinafter-taxchargesagainsttheCompany'snetincomeof(millionsofdollars):1986,$0.8;1985,$2.6and1984,$4.1.AtDecember31,1986,theCompanyhadguaranteed$236.4millionoftheobligationsofaffiliatedcompanies.

13.AffiliatedCoal-MiningOperationsTheCompanypurchasedapproximately$196millionofcoalfromitsaffiliatedminingcompaniesin1986atpricesequaltothecostofmining.Thecostofcoalpurchasedisincludedintheenergycostscollectedfromcustomers.Thecostofaffiliatedcoal(particularlycoalfromtheGreenwichmine)hasgenerallybeenhigherthanthecostofcoalpurchasedfromothersources.AllthecoalminedattheGreenwichmineisdeliveredtotheCompany'sMontourgeneratingstationandaccountsforaboutone-halfofthecoalburnedatMontour.ThePUChasadoptedastandardagainstwhichthecostofallcoaldeliveredtoMontourwillbemeasuredoveratwo-yeartrialperiodwhichbeganApri11,1986.ThestandardisdeterminedmonthlybasedonthecostofcoalpurchasedbyotherPennsylvaniaelectricutilities.Attheendofthetrialperiod,thenetamountofanycostsinexcessof,orlessthan,thestandardwillbedetermined.Unlessthestandardiscontinuedbeyondthetrialperiod,thenetamountofanycostsinexcessofthestandardwillbereturnedtoPUCcustomersthroughtheCompany's1989-1990energycostrate.DataastothestandardisavailablefortheperiodApril1,1986throughSeptember30,1986.Forthisperiod,thecostofcoaldeliveredtoMontourhasbeenlessthanthestandard.Planshavebeenadoptedwhichwillresultinphasingoutminingoperationsofaffiliatedcompaniesbythemid-1990s.TheCompanyexpectsthatoverthisperiodinvestmentsincoalandfacilitieswillberecoveredandthatcoalwillbeproducedatpricesthatwillberecoveredinelectricrates.However,theCompanycannotpredictwhatfutureactionmaybetakenbythePUCorwhetherfutureeventsorcircumstancescouldsubstantiallyalterthecurrentminingplans.AdverseactionbythePUCoradversechangesintheminingplanscouldresultinmaterialchargesagainsttheCompany'searnings.AtDecember31,1986,thecapitalinvestmentbyaffiliatedcompaniesincoal-miningoperationsamountedtoabout$93million.14.UtilityPlantCarryingChargesInDecember1986,theCompanyreclassifiedfromutilityplanttodeferreddebits$28.6millionofnetcarryingchargeaccrualsrecordedoncertainfacilitiesforSusquehannaandMartinsCreekgeneratingstations.Thedeferredamountwillbeamortizedtoexpenseovertheremaininglifeofthestations.Thisresolvesacontestedaccountingandreportingmatterwhichresultedfromanexamina-tionoftheCompany'sbooksbytheFERC.15.AccountingStatementsTheFASBissuedanaccountingstatementinDecember1986thatestablishedaccountingrulestobeusedbyrate-regulatedutilitiesinaccountingforplantabandonmentsanddisallowedplantcosts.TheCompanybelievesithasnosituationscoveredbythestatement,includingtheSusquehannaUnit2disallowance,referredtoinNote2.TheFASHpreviouslyhadproposedaccountingforphase-inplansbutthismatterwasdeferredforfurtherconsideration.InSeptember1986,theFASHissuedaproposedaccountingstatementthatwouldchangethemannerinwhichincometaxexpenseisdeterminedforaccountingpurposes.Currentaccountingrulesutilizeadeferredmethodwhilethenewaccountingproposalutilizesaliabilitymethodunderwhichdeferredtaxliabilitieswouldberecordedandadjusted,whenrequired,fortheeffectofachangeintaxlaworrates.BecausetheTaxActwilllowerthetopcorporatetaxratefrom469oto34/,mostentitieswouldberequiredtoadjusttheirdeferredincometaxreservestoreflectthelowertaxrateiftheFASHproposalbecomeseffective.However,theTaxActessentiallyprohibitsutilitiesfromadjusting,tothe34%taxrate,deferredtaxreservesrelatedtotheAcceleratedCostRecoverySystemofdepreci-ation.Asaresult,theCompanydoesnotexpectanysubstantialreductioninitscurrentdeferredincometaxreservesintheeventthattheFASBproposalbecomeseffective.InDecember1986,theFASHissuedaproposedaccountingstatementthatwouldrequiretheCompanytoprepareconsolidatedfinancialstatementsthatincludemajority-ownedsubsidiaries.Iftheproposalisadoptedinitscurrentform,themostsignificanteffectontheCompany'sfinancialstatementswouldbetheadditionofabout$275millionofassetsandliabilitiesonthebalancesheet.AsubstantialportionoftheliabilitieswouldrepresentobligationsofsubsidiariescurrentlyguaranteedbytheCompany.Withregardtotheprecedingproposedaccountingstatements,theCompanycannotpredictwhatfinalaccountingrulestheFASHmayadopt,ortheultimateeffect,ifany,thatsuchaccountingmayhaveontheCompany'snetincomeorfinancialposition.SeeNote10forinformationonaFASHstatementrelativetopensioncosts.36 16.CommitmentsandContingentLiabilitiesTheCompany'sconstructionexpendituresareestimatedtoaggregate$283millionin1987,$296millionin1988and$292millionin1989,includingtheallowanceforfundsusedduringconstruc-tion.SeethesectionentitledCapitalExpenditureRequirementsonpage20foradditionalinformation.TheCompanyisamemberofcertaininsuranceprogramswhichprovidecoverageforpropertydamagetomembers'ucleargeneratingplants.FacilitiesattheSusquehannaplantareinsuredagainstpropertydamagelossesupto$1.2billionundertheseprograms.TheCompanyisalsoamemberofaninsuranceprogramwhichprovidesinsurancecoverageforthecostofreplacementpowerduringprolongedoutagesofnuclearunitscausedbycertainspecifiedconditions.Underthepropertyandreplacementpowerinsuranceprograms,theCompanycouldbeassessedretrospectivepremiumsintheeventtheinsurers'ossesexceedtheirreserves.ThemaximumamounttheCompanycouldbeassessedduringthecurrentpolicyyearisabout$16million.TheCompany'spublicliabilityforclaimsresultingfromanuclearincidentislimitedcurrentlyto$700millionunderprovisionsofthePrice-AndersonAct.TheCompanyisprotectedagainstthispotentialliabilitybyacombinationofcommercialinsuranceandanindustryassessmentprogram.IntheeventofanuclearincidentatanyofthefacilitiesownedbyothersandcoveredbythePrice-AndersonAct,theCompanycouldbeassessedupto$10millionperincident,butnotmorethan$20millioninacalendaryearintheeventmorethanoneincidentisexperienced.CongressisconsideringseveralproposalstoamendthePrice-AndersonActwhichexpiresinAugust1987.Theproposedamendmentsgenerallyincludeprovisionswhichwouldincreasethepublicliabilitylimitofutilitiesintheeventofanuclearincident.TheCompanyisunabletopredictwhatactionCongressmightultimatelytakeregardingthePrice-AndersonActandwhateffectsuchactionorexpirationofthePrice-AndersonActmighthaveontheCompany'spotentialliability.InDecember1986,theCompanyredeemedat$100pershare$87.7millionofPreferredStockrepresentingalloutstandingsharesofthe10.75%,11.00%,11.25%and14.00%SeriesPreferredStock.SeveralcomplaintshavebeenfiledintheUnitedStatesDistrictCourtbyholdersofsharesofthe10.75%,11.00%and14.00%SeriesrequestingadeclaratoryjudgmentthattheCompany'sredemp-tionofthosethreeseriesbreachedtheCompany'scontractualobligationstotheplaintiffsandthat(a)theCompanyisliabletopayplaintiffsamountsequaltotheredemptionpremiumsof$3.59persharewithrespecttothe10.75%Series,$25persharewithrespecttothe11.00%Seriesand$20persharewithrespecttothe14.00%Series,and(b)inthealternativetheredemptionberescindedandplaintiffsbeawardeddamagesinamountstobeascertained.TheCompanybelievesthatitwasentitledtocallthePreferredStockforredemptionatapriceof$100persharebutcannotpredicttheoutcomeofthecourtproceedings.SeeNote12forinformationabouttheCompany'sguaranteeofaffiliatedcompanies'bligations.17.QuarterlyFinancial,CommonStockPriceandDividendData(Unaudited)FortheC}uartersEnded:March31June30Sept.30Dec.31(ThousandsofDollars,ExceptPerShareAmounts)Operatingrevenues$596,087$518,514$528,650$545,674Operatingincome167,334131,499143,201147,291Netincome.95,15160,52167,53176,905Earningsapplicabletocommonstock............74,83043,57551,26061,386Earningspercommonshare(a).................1.000.580.690.82Dividendsdeclaredpercommonshare(b)........0.64O.G40.650.65High/lowpricepercommonshare(c)............33/J27/s34/31/s43/s/33/s40/4/361985Operatingrevenues$486,495$479,762$483,782$526,463Operatingincome.122,122122,003136,733145,630Netincome104,55158,94960,57366,540Earningsapplicabletocommonstock............81,22135,94038,04244,124Earningspercommonshare(a).................1.090.480.510.59Dividendsdeclaredpercommonshare(b)........O.G40.640.640.64High/lowpricepercommonshare(c)............27/s/24/s27/J23/s27/s/23/s29/23/4(a)Thequarterlyamountsdonotequalannualearningspershareduetorounding.(b)TheCompanyhaspaidquarterlycashdividendsonitscommonstockineveryyearsince1946.Thedividendspaidpersharein198Gand1985were$2.57and$2.54,respectively.ThemostrecentregularquarterlydividendpaidbytheCompanywas65centspershare(equivalentto$2.60perannum)paidJanuary1,1987.Futuredividendswillbedependentuponfutureearnings,financialrequirementsandotherfactors.(c)TheCompany'scommonstockislistedontheNewYorkandPhiladelphiaStockExchanges.37 SelectedFinancialandOperatingData19861985198419831982IncomeItems-thousandsOperatingrevenuesOperatingincome.Allowanceforfundsusedduringconstruction...Netincome.Earningsapplicabletocommonstock...~~..BalanceSheetItems-thousands(a)Netutilityplantinservice.Constructionworkinprogress.............TotalassetsLong-termdebt.PreferredandpreferencestockWithsinkingfundrequirements..........Withoutsinkingfundrequirements.......Commonequity.Short-termdebtTotalcapitalprovidedbyinvestors....~...~.FinancialRatiosReturnonaveragecommonequity-%.......Embeddedcostrates(a)Long-termdebt-%Preferredandpreferencestock-%........Timesinterestearnedbeforeincometaxes..~Ratioofearningstofixedcharges-totalenterprisebasis(b)Depreciationas%ofaveragedepreciableproperty.CommonStockDataNumberofsharesoutstanding-thousandsYear-end.Average.Earningspershare.Dividendsdeclaredpershare..............Taxabilityofdividendincome-%(c)........Bookvaluepershare(a).Marketpricepershare(a).................Dividendpayoutrate-%Dividendyield-%(c)(d)Priceearningsratio(d).FuelCostDataCostperkwhgenerated-centsCoal-firedsteamstations................Nuclearsteamstation(e)................Oil-firedsteamstationCombustionturbinesanddiesels(oil)......Average.CostoffossilfuelreceivedatsteamstationsCoal-perton.Residualoil-perbbl.Employees(a)$2,188,925589,32511,352300,108231,051$1,976,502526,488(29,301)290,613199,327$1,562,782406,958168,938318,903226,758$1,248,397289,930251,548296,011210,173$1,219,548223,083246,423278,886210,572475,239231,3751,915,649112,0005,513,054691,010231,3751,905,70095,5005,528,521738,027231,3751,896,987104,8005,575,695714,830231,3751,767,949190,0005,291,403621,634231,3751,643,695160,5454,980,56712.1110.548.332.802.592.210.4211.2410.022.372.192.212.3011.129.942.352.062.512.2910.989.662.292.042.713.6010.819.412.051.813.374,51374,513$3.10$2.58100.00$25.71$36M837.3011.3974,51374,513$2.68$2.56100.00$25.58$283/4969.819.7674,51372,767$3.12$2.4863.29$25.46$25~/s8011.007.2470,33568,642$3.06$2.400$25.12$205/87910.487.4866,46162,809$3.35$2.320$24.71$217011.955.791.670.582.967.811.57$40.17$16.838,3391.780.615.029.311.81$42.00$28.428,4331.750.545.319.821.98$42.75$31.328,3861.680.665.23=10.212.15$39.37$29.798,1601.775.6210.742.20$42.32$30.948,208$5,815,838$5,776,687$3,860,960$3,847,301$2,112,169224,426161,6842,020,8391,730,2282,923,8417,139,0726,965,6396,910,7836,418,5095,829,1382,778,7912,604,9362,604,5062,387,2492,323,318(a)Year-end.(b)Fixedchargesconsistofinterestonshort-andlong-termdebt,otherinterestcharges,interestoncapitalleaseobligationsandtheestimatedinterestcomponentofotherrentals.(c)Basedonholdingoneshareofcommonstockfortheentireyear.(d)Basedonaverageofmonth-endmarketprices.(e)TheCompany'sfirstnuclearunitwasplacedincommercialoperationonJune8,1983andthesecondunitonFebruary12,1985.(f)Thewinterpeaksshownwerereachedearlyinthesubsequentyear.

SalesDataElectriccustomers(a).Averageannualresidentialkwhuse........Electricenergysalesbilled-millionsofkwhResidential.CommercialIndustrial.OtherSystemsales.Contractualsalestootherutilities........Totalelectricenergysalesbilled.......Sourcesofenergysold-millionsofkwhGeneratedCoal-firedsteamstations..............Nuclearsteamstation(e).............Oil-firedsteamstation................Combustionturbinesanddiesels(oil)...Hydroelectricstations................19861,073,1469,3448,7717,1597,9861,17025,0865,33930,42525,15110,1515,4531773919851,055,5469,0348,3546,7287,9071,08224,0714.04828,11926,23711,5344,3161861219841,039,3819,2828,4546,5278,1171,04324,14135724,49826,6956,2954,1213274719831,026,1449,0518,1386,1197,62396822,84820923,05726,8854,5095,5814570019821,013,6239,0398,0455,9467,32498222,29722,29725,4772933,18613612PowerpurchasesInterchangepowersales......~~....Companyuse,linelossesandother...Totalelectricenergysalesbilled...ElectricRevenueDataByclassofservice-thousandsResidentialCommercialIndustrial.Otherenergysales.SystemsalesContractualsalestootherutilities....Totalfromenergysalesbilled...~.Unbilledrevenues,net........,.....Otheroperatingrevenues.....,....~.Totalelectricoperatingrevenues.Averagepriceperkwhbilled-centsResidential.CommercialIndustrial.Totalforultimatecustomers......Totalforallcustomers.....~......Totalforsystemsales........~...41,5112,032(11,281)(1,837)30,425$714,753557,216473,48874,0471,819,504292,0442,111,54852,34425,033$2,188,9258.157.785.937.346.947.2542,7173,716(16,235)(2,079)28,119$634,669492,686438,42764,2231,630,005232,5981,862,60378,54530,059$1,971,2077.607.325.556.856.626.7737,8903,765(15,377)(1,780)24,49837,7203,880(16,405)(2,138)23,05729,5811,414(6,900)(1,798)22,297$591,922441,651411,53359,5261,504,63231,809$529,911386,617367,95047,2751,331,75318,494$503,557363,233347,72647,7311,262,247$1,556,676$1,243,680$1,213,3037.006.775.076.306.276.236.516.324.835.915.865.836.266.114.755.745.665.661,536,4411,350,2471,262,247(9,725)(119,539)(61,652)29,96012,97212,708GenerationDataGeneratingcapability-thousandsofkw(a)..Winterpeakdemand-thousandsofkw(f)..Generationbyfuelsource-%CoalNuclear(e).Oil.HydroelectricSteamstationavailability-%Coal-fired.Nuclear(e).Oil-firedSteamstationutilization-%Coal-fired.Nuclear(e).Oil-fired7,5195,15460.624.413.21.878.861.784.769.361.338.07,5134,98161.427.010.21.478.670.787.272.370.530.07,4845,51970.416.611.02.075.266.768.073.365.728.67,4944,86971.311.914.91.978.867.775.874.067.538.86,5464,48986.11.010.82.179.180.470.222.239 OfficersDirectorsaROBERTK.CAMPBELL,PresidentandChiefExecutiveOfficerMERLINF.HERTZOG,ExecutiveVicePresident-CorporateServicesJOHNT.KAUFFMAN,ExecutituVicePresident-OperationsCHARLESE.RUSSOLI,ExecutiveVicePresident-FinancialBRUCED.KENYON,SeniorVicePresident-I<luctearLEONL.NONEMAKER,SeniorVicePresident-DivisionOperationsJOHNR.BIGGAR,VicePresident-FinanceGENNAROD.CALIENDO,VicePresidentandGeneralCounselJOHNM.CHAPPELEAR,VicePresident-Intv'.stmentsandPensionsTHOMASM.CRIMMINSJR.,VicePresident-Pou:erProductionROBERTS.GOMBOS,VicePresident-HumanResource<i'cDevelopmentCHARLESJ.GREEN,VicePresident-HarrisburgDcvisionWILLIAMF<.HE<CHT,VicePresident-SystemPouterHAROLDW.KEISER,VicePresident-I<luctearOperationsJOHNP.KIERZKOWSKI,VicePresidentandTreasurerCARLR.MAIO,VicePresident-LehighDivisionGRAYSONE.McNAIR,VicePresident-<'tfarketing&CustomerServicesEDWARDM.NAGEL,VicePresidentandSecretaryHERBERTD.NASHJR.,VicePresident-CentralDivisionCLAIRW.NOLL,VicePresident-ProcurementZComputerScrviccsJOHNE.ROTH,VicePresident-NorthernDivisionJOHNH.SAEGER,VicePresident-SusquehannaDivisionEDWINH.SEIDLER,VicePresident-Engineering<f;Constrccction-SystencPower<f;EnginccringBRENTS.SHUNK,VicePresident-i.ancasterDivisionJEANA.SMOLICK,AssistantSecretaryGEORGEF.VANDERSLICE,VicePresidentandComptrollerPAULINEL.VETOVITZ,AssistantSecretaryHELENJ.WOLF'ER,AssistantSecretaryandAssistantTreasurerCorporateilfanagementCommittee:RobertK.Campbell,chairman;MerlinF.Hertzog,JohnT.Kauffman,CharlesE.Russoli,BruceD.Kenyon,LeonL.Nonemaker,andEdwardl'.Reis,Director-CorporatePlanning,servingasthecommittee'sexecutivesecretary.CLIFFORDL.ALEXANDERJR.,Washington,S.C."'President,Alexander&AssociatesInc.Consultantstobusiness,governmentandindustryROSWELLBRAYTONSR.,WoolrichChairmanoftheBoardandChiefExecutiveOfficer,'lVoolrichlVoolenMillsInc.MantcfacturerofgarmentsforouldooractivitiesJEFFREYJ.BURDGE,CampHillChairmanofticeBoardandClciefExecutiveOfficer,HarscoCorporation.ManufacturerofprocessedandfabricatedmetalsROBERTK.CAMPBELL,AllentownPresidentandChiefExecutiveOfficerEDGARL.DESSEN,HazletonPhysician-RadiologistEDWARDDONLEY,AllentownChaimnan,ExecutiveCommitlee,AirProductsandChemicalsInc.llfanufacturerofindustrialandcommercialgasesandchemicalsREV.DANIELG.GAMBET,O.S.F.S.,CenterValleyPresident,Al(entotvnCollegeofS4FrancisdeSalesMERLINF.HERTZOG,AllentownExecutiveVicePresident-CorporateServicesFRANCESR.HL<SSELBE<IN,NewYorkCityNationalExecutiveDirector,GirlScoutsoftheU.S.A.HARRYA.JENSEN,LancasterDirectorandformerChiefExecutiveOfficn;ArmstronglVorldIndustriesI>>c.ManufacturerofinteriorfurnislcingsandspecialtyproductsJOHNT.KAUFFMAN,AllentownExecutiveVicePresident-OperationsHAROLDS.MOHLER,HersheyFormerChairmanoftheBoard,HersheyFoodsCorporation.DiversifiedmanufaclureroffoodproductsRALPHW.RICHARDSONJR.,StateCollegeConsullant,agriculturalandenvironmentalsciencesNORMANROBERTSON,PittsburghSeniorVicePresidentandChiefEconomist,MellonBank,l<I.A.CHARLESE.RUSSOLI,AllentownExecutiveVicePresident-FinancialDAVIDL.TRESSLER,ScrantonChairmanoftheBoardandChiefExecutiveOfficer,NortheasternBankofPennsylvaniaExecutiveCommittee:RobertK.Campbell,chairman;EdgarL.Dessen,HarryA.JensenandNormanRobertson.AuditCommittee:DavidL.Tressler,chairman;CliffordL.AlexanderJr.,RoswellBraytonSr.,Rev.DanielG.Gambet,ilaroldS.MehlerandRalphW.RichardsonJr.CorporateResponsibilityCommittee:FrancesR.Hesselbein,chairman;JeffreyJ.Burdtte,EdgarL.Dessen,Rev.DanielG.Gambet,HaroldS.MohlerandDavulL.Tressler.ManagementDevelopmentandCompensationCommittee:RoswellBraytonSr..chairman;CliffordL.AlexanderJr.,EdgarL.Dessen,EdwardDonleyandNormanRobertson.NominatingCommittee:RalphW.RichardsonJr..chairman;JeffreyJ.Burdge,EdwardDonley,FrancesR.HesselbeinandHarryA.Jensen.Form10-KandPP&LPROFILEThecompany'sannualreportfiledwithtltcSecuritiesandExchangeCommissiononForm10-Kwillbcavailablemid-March.EachyearthecompanypublishesthePP&LProfile,a10-yearstatisticalreview,containingin.depthinformationaboutthecompany.The1976-198GProfilewillbeavailableinMay.Ashareownermayobtainacopyofthesepublications,atnocost,bywritingtoPennsylvaniaPower&LightCompany,TwoNorthNinthStreet,Allentown,PA18101,Attention:Mr.GcorgcI.Klinc,Manager-InvestorServices.40 BoardofDirectors$$t<tIAlexanderBraytonurdgeDessen,<./!,!.'fr,'iyDonleyGambetHesselbeinJensen~I,vlMohlerRichardsonRobertsonTresslerCorporateManagementCommittee4a4NlNi)I4NonemakerHertzogCampbellKauffmanRussoliKenyon

~ggQgPennsylvaniaPower&LightCompanyTwoNorthNinthStreet~Allentown,PA18101~215I770-5151BULKRAgEU.S.POStAGEPAIDAllentown.Pa.PermitNo.104FiscalAgentsSecuritiesListedOnExchangesTRANSFERAGENTSFORPREFERRED,P

REFERENCE

ANDCOMMONSTOCKMorganShareholderServicesTrustCompany30WestBroadwayNewYork,NewYork10007-2192PennsylvaniaPower&LightCompanyManager-InvestorServicesTwoNorthNinthStreetAllentown,Pennsylvania18101'EGISTRARSFORPREFERRED,P

REFERENCE

ANDCOMMONSTOCKMorganShareholderServicesTrustCompany30WestBroadwayNewYork,NewYork10007-2192PennsylvaniaPower&,LightCompanyManager-InvestorServicesTwoNorthNinthStreetAllentown,Pennsylvania18101DIVIDENDDISBURSINGOFFICEANDDIVIDENDREINVESTMENTPLANAGENTPennsylvaniaPower&LightCompanyVicePresidentandTreasurerTwoNorthNinthStreetAllentown,Pennsylvania18101NEWYORKSTOCKEXCHANGE4tvaa%PreferredStock(Code:PPLPRB)4.40%SeriesPreferredStockCode:PPLPRA)8.60%SeriesPreferredStockCode:PPLPRG)9.24%SeriesPreferredStockCode:PPLPRM)PreferenceStock,$8.00SeriesCode:PPLPRJ)PreferenceStock,$8.40SeriesCode:PPLPRH),PreferenceSto'ck,$8.70SeriesCode:PPLPRI)-'Prefer'enceStock.$11.00Series(Code:PPLPRL)Comm'onStock(Code:PPL)PHILADELPHIASTOCKEXCHANGE4'%referredStock3.35%SeriesPreferredStock4.40%SeriesPreferredStock4.60%SeriesPreferredStock8.60%SeriesPreferredStock9%SeriesPreferredStock9.24%SeriesPreferredStockPreferenceStock,$8.00SeriesPreferenceStock,$8.40SeriesPreferenceStock,$8.70SeriesPreferenceStock,$11.00SeriesCommonStock

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