ML19282A037

Annual Financial Rept 1978

ML19282A037
Person / Time
Site:	Black Fox
Issue date:	05/09/1979
From:	CENTRAL & SOUTH WEST SERVICES, INC.
To:
References
NUDOCS 7905090357
Download: ML19282A037 (40)

Text

..

1978 Annual Report Central and South West Corporation

-.. INyy$ph(ucn*1 Q $p). $44

[

n v,-

Y,~fn,;.; j : *ll;;

=1 :.:h k p.g, ', '.

?

,c

. f g- _3

,~.

g

_gg.

'.. :_ f.  ? ' _ ;';.$,:~ ',

- a:. ' ^

.r

.,.. gp _ _-,,.

r f.,;,,

.- h : 2. '.. '. ;

'. ' 'l: 4 r

_j '.= - p' ',. - r. :.

'f 2-==a=p

-.+

y r_+1g.=, -..

g, A ;,7 ;. s%g ;Qr '.

,., ger,

L.,

. _,. 5-K

.~

. +. :. -

g.

' +:

v t.

.s.

.,.Q...

s-. ' f

- +1 ~ 5 e;f -

'L

.. :5,

,P

~

F*

i v N~

g

~~v

,. - - - - ~

c 4

i s

~

.gc L;d

,~e,s-ag g nv 4

x y; :=c ;, -

Y%E>i O=-SeWT

.v %.:.:.;;unr) sgpyg-c.3. w.e

-- us v :*

y,, Nhr-r d

g y$ W L

^gne

"~

12

( 'Ga_ _?

=

h cL M

3 9

- w..).

n 3.xx s;.

. - E L3 THIS DOCUMENT CONTAINS

^'

m.

'ff i

~

POOR QUAUTY PAGES n --

L 6.

'PWT &

g h:=r:f r.wwg'%e E40-e--

m-s

.g-r*-ar.e;[3g y

-x..a

- =

' ?.* 5 :.:**lTu,'JO K y ([,5;*L'Y,*4) f

&m

s.w

-s2 r'.2;t* *v 1a.w;G.kr.;wnw

_f x W-Sernng Electricity to the Soutnwest 7 90 5 09 0 5f7 '

Central and South West System

+ e l

/fL NORT EAd N

OK L Allo AIA

.,tig, y....,,m, F LJN CAEEK Tt

"'"*?

AR K A NSA S I

WELEETK A..

N g.,,ge g

L sverom, f.

g GL MANCHE h

1. p PAU L3 h t J'

., K3 9=....

WELSH f lNT CAEEK LO LIE BE s uaN l

' ' wr h5Sh.'eveport FORT PHA OM

^

. ~....

a R'iENAL HIL L Abilege KNOX LEE I

OAKlC

EK

' San ANoEto NCH TEXAS LOUISIA NA

["*~.

~

-}

't

..' l '

x 4

vlC une.

OO TH TEXAS PROJECT COLETO C AEEK*ME S JOSLIN AIEXICO Orpus Christi LQN C Hil, NUECES BAY LAREDC BARNEY Davis GULF OF AIEXICO

3A

.A.A

,L..,,.

s Operating Company Headquarters e

Principal Generating Stations O

UNCEA CCNSTPUCTICN O Central Power and Light Ccmpany D Puctic Service Company of OHancma O Scutnwestern E!ectric Power Company O West Texas Utit.es Comoany Poncipal Transmission System:

- 138.000 :c 345.000 vcits

- 69.000 to 138.000 vc!:s

--- Leased from ctrers

- Pnnc: pal interconnect.crs

Central and South West Corporation and Subsidiary CornpanieS 1

Highlights Summary of Consolidated Financial and Operating Statistics Percent Financial Statistics (000) 1978 1977 increase Operating Revenues

$1,338,758

$1.167 434 14.7 Fuel 697,813 594.824 17 3 Wages and Employee Benefit Plans 98,092 85.380 14 9 Other Operating Expenses and Taxes 236,348 215.351 98 Federal Income Taxes 114,994 102.999 11.6 Operating income 191,511 168.880 13.4 Net income for Common Stock 143,520 115.760 24.0 Operating Statistics Kdowatt-hour Sales (000) 42,601,000 39.687.000 7.3 System Coincident Peak Load (kilowatts) 8,01 <,200 7.735.700 3.6 Estimated System Capabihty at Time of Peak (kilowatts)(a) 9,809,000 9.669.000 1.4 Operating Empicyees (year-end) 6,396 5.942 76 Electnc Cusicmers (year-end) 1,259,400 1.217.200 3.5 Average Kdowatt-hcur Sales per Residential Customer 9,828 9.427 4.3 Average Residential Rate per Kdowatt-hour 4.04C 391c 33 Common Stock Data Net income Per Share

$2.25

$2.00 12.5 Dividends Paid Per Share S1.34

$1.26 63 Ccmmen Shares Outstanding (average) 63,924,000 57.782.000 10 6 Market Pnce Range High

$17%

$17%

Low 14 %

14 %

End of Year 15%

16 Scck Value Per Share. end of year

$15.83

$14.93 (a)inc:uces net purcnasea pcher cf 167.000 Wcwatts and 188 CCO hcsatts rescect:veiy Contents Profile 1 Highhgnts Central and South West Ccrporat:cn a (wholly-cwned by Central and Scum nest 2 Letter to Stcckhciders pubhc utihty hoicing company. cwns a ! of Corocrat:cn) cerforms at ccst var:cus ac-e common smck OHow cceaMg so ccWmg tam tegal engmesmg and 4 Rev4ew of 1978 sldianes. whicn crovice electnc service to Other seroces 'cr the Ccrocratcn and the 16 Interstate Cperat cn Proceecings a pcpuration of accroximately 3W mdhon cperat:ng ccmpanies 17 F nanc.at Sect:cn cecote in a wide!y-cn,ers.f ed area cover-Central and Scuin West Fue's. nc.

mg 152.000 sware mdes Centra! Pcwer (wncdy-owned ty t"e ccerat.ng ccm.

18 Consohdated Financ:al Statements and Ltght Comcany ocerates in scuth panies) ccnducts al'Le! programs. ex-28 Notes to Conscadated F:nanc:a!

Texas. and West Texas Utiht.es Ccmcany cect pet cieum. for Te c :erating ccm.

Statements in centra anc western Texas. Scutnwest.

canies Trese prcgrams 'rc uce enc lcra-31 Aud1tcrs' Report ern E'ecmc Pcwer Ccmpany ccerates :n ten ceve'ccrrent and cceration ct 0 0 -

2 northwestem Lows.ana. ncreastern ects re:amg Z ccah bgne ano saw 32 Management's Comments on Fse_

Texas and western Arkansas arc Pucic Year Summary cf Ccnschcatec Ccerat:cns Se'vice Comcany cf Ok'ancma 'n eastem Cover Photos and scutnwestern Cx:ancma Tre w cescread and caers hec ser-33 Fn,e year Summary of Conse;. dated pnnc cat cees sersec cy the System wce area of *ne Cert at ana Scutn West Operat.cns and Pnce Pange cf Ccm-

ctroanies are Ccrcus Chnsti. Acoene.

System 's ccrirayed cy rac;c!y grounc men Stcck and Cividencs Pa c Per Larecc. San Ange o Longview and c:t.es as Tusa Cklarcma. cv me rec ei-bhare VC!cna :n Texas: TLfsa and L3 Aten in

!.cn and !cunsm of Arkansas' Ozark 34 Comca eve Statst cai and F nanc:al CK:a cma: Fayettevole ;n Arkansas:

Mountams anc Paare Island's Nat cnal Reccrd Shreveport and Boss:er Ccy in Lcuis:ana. Seashcre of tre 'exas Gu f. and cy tre 36 0;tec!crs and Officers and Texarkana.n Arkansas and Texas.

vast ene gy rescurces ct West "exas Centra: anc Scut-Aest Semces :nc

2 Letter to Stockholders Earnings for common stock in 1978 high of $471 million The most and financial condition However, rose 24% to $143.520.000 from noteworthy prc;ect Completed dunng larger Cap:tal expend:tures and the:r

$115.760,000 in 1977 Tha was the the year was a large coal-fired e!ectnc related financing requ rements. as second consecutive year that good generating plant in ncrthwestern weil as the continued inflationary ef-earnings gains have been repcrted Arkansas. Four other coal-burning fects on the cost of providing eiectric for the Central and South West Sys-generating units are undct construc-service, are expected to require rate tem Earnings per share rose to $2.25 tion These coa! un:ts are major ccm-fihngs by three of the System's operat-cn 64 milhon average number of ponents of the System's plans to ing companies in 1979.

shares as Compared with $2.00 in become fess rehant on natural gas Proceed,ngs continued in the Cor-1977 on 58 milhon shares.

and oil for boi'er fuel.

pcration's efforts for interstate opera-It is important to mention several New financing by the System dur-tions of all of its operating companies.

factors that contnbuted s:gnificantly to ing 1978 included $104 milhon of the The legal pnnciples in the varicus the good earnings progress in 1978 - Corporation's common stock and preceedings involving this issue c.re a Substantial sales of System energy

$246 million of debt of the operating very complex but the goal of in-were made to other utihty com-companies This financing of $350 mil-terstate cperation will be pursue.' with panies that were short of fuel dur-bon was by far the largest ever under-continued vigor dunng 1979.

ing the nation-wide coal sinke early taken by the System.

in the year.

The Corporation's common stcck S.B. Philhos. Jr.

m Extremely hot summer weather dividend was increased for the 3((C ef ecut ve Ctf:cer in much of the System's service twenty-seventh consecutive year in area bocsted energy sales for air January 1979 when the Board of Di.

B.J. Harris escent and met Owatng Mcer cond:t;oning.

rectors raised the quarterly dividend a Additional revenues were collected rate to 35hc from the 33bc quarterly John E. Tau! bee E ecut e e Pre ent as the resuit of rate rehef.

rate paid during 1978.

Expenditures for new plant and The Central and South West System eouipment in 1978 totaled a record is entenng 1979 in a strong operat.ng March 1,1979 South Texas is noted forits large a: Ire-iV

~~ ' &,

finenes andpetrochemcalcompanies, but a diversity of smallfactones includes

T1,*T A,~

)

f>\\'

l-Indianapolis Glove Company at Alce.

l y

~

Texas.

l

\\

l Shnmp boats are a common sightin the

~ y r'Q4 Texas Gulf.

'" g f'

G Grain, shown being harvested, is a maior 9

)w.

., q )Q contntutor to the economy of South s

Texas.

- p;

- d$11544gega r -M T_^^i p5+ @2nk

. [A,3 h 1

'd

~f g[.

g1 -

3

~'

w

'tT % Q :

h}b

\\ s, :.CCVg pd,e TE

O O

MutmanggRgE w a w a q>,fk s 9 3 = a m

-~&

w

.c.

1"h, 0-

..,Q M.a *$'Y

rc.r r;=

w.w m m + M.5:n G

MJ s

-=

~

g is:?

N:

7 3

c

,,;x L., mp. '

-r-

. f;

.w u -- -

Er 4

jn

=,y,;

' I*

.(

H n

i

_ h, 9A,:.

l l

/19 *y;*

r 1

r F

'?

p y

WEEnhaar ARfA m

o l'

w

'**7,'.

T 'Q i

$ ' ? C W: $,.

- ~ :;..c

', ', j*

,., q V1 v--

k k M N $;-, # a a {r.n,w s_ :

5L

_a f tn n s.

&p isy;b;... 3_;s-khunA}M;

-g.:

' : Q.l_.:j'

. e-

-.a i

~

,~., >

4 Review of 1978 Netincome and Dividends Ofvidends pa:d by the Corocraton Earnings and Div'dends Consondated net inccme for dunng 1978 amountec to $134 per c.g common stock cf Central and South share. Payments cf 33hc were made w we aa

"' S" West Corpcration and Subscary on February 28. May 31. August 31 Companies in 1978 increased 24% to and Ncvemcer 30. The reccrd date fcr 1973 52 25 s' 9

$143.520.000 from $115.760,000 in each dividend was the last business GP 22 3

1977. Earnings per share were $2.25 day of the montn preceding the y

l((

l[j on 63,924,000 average numcer of payment date.

1974 1 76 c

shares outstanding dunng the year, as All dividends pa:d by the Ccrpcra-1973

, 7; i ce compared with $2.00 cn 57,782.000 tien dunng 1978 represent taxabte 1972 1 63 1 c4 shares in 1977. The improved inccme to sicckholders for Federal 9 71 1 50 1Z earnings resulted from rate rehef and inccme tax purposes excect as to any

']

from increased energy sales to a!!

exclusicn that a s:cckhcider may be ggg

,s c 55 classes of cusicmers.

personally entitled.

y,g,c,= g g A, E!ectnc revenues collected by three The new dividend rate of 35WC was ac e :r u ::. e >

of the cperating ccmpanies dunng paid on February 28 to stockhc'cers 1978, as a result cf rate orders issued of record on January 31.

Electric Energy Sales approx: mate!y $10.000.000.

Electric Energy Sales j'y" m c ' :' "

• in 1977 and early 1978, totaled y,

wu to 403 9 653 7m Vancus f acters contnbut.ng to E!ectric energy sales cf the Central C

e a,

higher energy sa!es wdl be discussed and South West System in 1978 rose in more detad in the fcilowing section 7.3% to 42.6 bdhen knowatt-hours. as Cre-1 148 1085 53 cf this report. Noteworthy among compared with 39.7 bdhon in 1977.

these f actors was the record volume The improved cerformance vaned 33 es,c, pes,,

,g gg, g ggg 13,

of kdowatt-hcurs sold to non-affdrated considerably by custcmer h

42 6W 39637 73%

e!ectnc systems. A considerable c!assification. As shown in the port!cn of these sa!es was made to accompanying table. sales to pcwer-short utdity systems dunng the res:dentral customers increased 7.7%,

coal stoke in the early months of 1978. commerc:al 6 4%. and industnal Electric Energy Sales Energy sales dunng 1978 a:so 3.5% Sa!es for resale were up 13 4%.

tenefited frcm unusual weatner-The System's serece area cold weather early in the year and hct excenenced sery het Aeather dunng L4'

'!%1 ' "

?."'.

i weather dunng the summer months.

the summer mcnths. As measu'ed by W.

1 The weather factor affecting enerpy the numcer cf ccchng-degree days 5*'.

y demands for heating and air during the cencd May througn

.?

~~

cond:t:cning contnbuted imocrtant'y Octcber. the summer cf 1978 was 16%. 3 I

to the year's earning results.

warmer than ncrmat and 5% warmer At the Januar/ 1978 meeong cf the than the summer cf 1977. Hot weather

?

Corocrat'cn's Scard cf Directors, tne of this magnitude increases the

[

quarterly div.dend rate paid on the demand for e:ectnc energy fcr a:r

/ ( [,

y

~ '

ccmmon stock was.rcreased to concitico.ng and contnbuted

~

3340 from 31WC. At the most recent matenaily to 1978 earnings resutts.

7""

. ? '; J s

meeting of the Scard, held in January Moreover. the early months of 1978 1979, the cuarterly dividend paymert were colder than normal. caus:ng was.ncreased to 35W0. an end.cated

ncreased energy cemands for annual rate cf $1.42. This new heating Inese sales also ccntr buted ev

dend rate marks tre twenty-s;gnit: cart!y to earnings.

seventn ccnsecutive year that the Average energy use cer resicentia:

Corporation's cividend nas ceen custorner rose 4 3% to 9 828

ncreased.

k'lcwatt-hcurs from 9.427 in 1977 Tms increase large:y ref:ects tne a'crement:cned unusual weather dunng 1978. Energy use cy the System's res:dential custcmers.

hcwever. has grown at a 'ess racid

5 Operating Revenues rate 'n recent years. accarent y assumed its can l cad respons:cuty

{ refieCtng tre h gner Cost of efectr'c:ty cn July 1.1978 Exc!uding this !cac

.g g

in 1978. tre System s average from the 1977 peax. tre increase in I

$ f((

[33 ][

res:dential cusicmer ca:d an annua l the 1978 ceak demand would hase e:ectric tdl cf $396 78, cr 7.7to more teen 5.7 o m..a.

358 096 329 ca] 88 cv v 313 3a 1sa :4o than in 1977 and accrcximately two Total cacatikty cf 9.809.000 times tre S190.75 pa d n 1972-tne kJcwatts. !ncluding 167.000 kdowatts

'n nem s11:0556 510 0 6t4 tags sa.es.c, year te'cre the Arac cd erncargo cf net corchased cower. provided a Nue 29 n:

5c aco n :

Tne largest s.ng:e. tem rescens,t:e 22 4% reserve margin As has teen lo st 3ieTsi snsT4ET4R for the higher.pnced efectnc energy the Case in recent years, the $) stem s paid by the System's customers has annualIcad f actor of 56 6% showed teen the escatat:cn in tre cost of fuel htt'e change.

Operating Revenues and Fuel Costs used for generat:cn Fuel costs wdl te n v osi e,scussed in a sucsequent secten cf Operating Revenues and this Recert.

Service Area Growth

- E As a further indicaten cf the rugner Operatnq revenues in 1978 tcta'ec cost of energy to the System's

$1.338.758 000, or 14.7% more than in residential cusicmers. the aserage 1977. By custcmer class. revenue

. ~

- 'O pnce per WwaMour dwg 1978 ga ns were R2*o for reside @ah m was 4 04 0. or 3.3% mcre inan in 1977. for comrrercial, and 8 8% for 1

M - -

industna!. Revenues from retad III I.I Thisincrease.rcwever,wasthe smal!est since 1972. Tnis large:y cusicmers increasea 10.9% and sa!es reflects mcre statle fuel onces cunng for resaie rose 391%

1978.

As in recent years, revenues Energy saies to industnal ccl!ected under provis:cns of c

customers rose oniy 3.5%. This automate fuel adjustment Clauses re!atvely smail gain *as due mcsty to accounted for a cons;derable portion reduced coeraticns by several !arge cf the revenue gain. This source custcmers in scuth Texas and accountact for accrox; mate!y 54% of compares wth tre large increase of the $110.000.000 increase in 18 8% excenenced in 1977. wren a revenues from retad customers Rate large energy-intensive chemicai pl ant increases authenzed in 1977 and began cceratens. Industr:es trat 1978 contntuted acorcximately sncwed the test ga:ns in energy use 510.0C0.000. or 9% cf tre total dunng 1978 were tumter 9%

revenue ga;n. The rema:ning portion.

macninery ecuicment 9% cacer 8%

cr accrcximate!y $41.000.000.

and chemicat 7%

resu'ted from greater sales cer Energy sa!es to ncn-aff. hated custcmer and from a 34% increase.n e!ectnc ccmcarnes cunng 1978 the numcer cf cusicmers increased 13 4% to 10.1 Onon Tne service area of the Centrai anc knowatt-hcurs. Dunng tne f rst cuarter South West System cent:nues to cffer i

cf 1978. these sa'es were partcutany attraccons fcr locating new 'ndustry.

large tecause ci the Naticnal coa.

Cne of the rnost s:gn;ficant :s str.ke Tne System s two :nterstate acuncant ere<gy escurces. inciucing ccmcan:es had surf tc.ent fuet

• ne adequacy of e ectnc ccwer crmaray natural gas. wnicn enat'ed Purtne-cre..no:v:dua s anc them to succiy er ergency pczer to casiresses are teccm.ng utd.t.es decencent ucen coa!.

'ncreas:ngiy attractec to tne tangitfe.

The het weather cunng tre summer as we I as tre :ntargic:e aavantages cf 1978 contntutea to a new System recreserte; cy ine Sun Se t cf the peak demand cf 8.014 000 kdcwatts Unitec States.

set cn July 13. This record was 3 6 o cver tre 1977 maomum cemanc cf 7.736 0C0 kdcwatts A marr custcr"er

6 Review of1978 continued These advantages are reflected by industnal ic3d added dur:ng 1978 Fuel Costs

" ' ~ ' " '

low unemployment rates, by the ccmcares witn tne average of ever-increas:ng cemands fc goods 272.000 knowatts during the five and servtces of new and growing years.1973 tnrough 1977.

' - /

. J,' l

~f r.

industnes in the area. and by high

.. f res dential and commercial Operating Expenses and Taxes

! }.;

ccnstruction activity At the end of Ref!ecting general inf!at:enary

~.3 0 '.

1978 the unempicyment rates in the trends preva!ent in the tCtal econcmy I k' largest cit'es served by the System dunng 1978, the Cost of providing

~ ' ~ -

?

were 5 2% in Corpus Chnsti. 3 0% in e!ectnc service was once again 5

Tulsa. 5.3% in Shreveport-Bossier City substantially higher.

' }.

and 3 3% in Abdene. For companson.

Fuel expense cont:nued to account

,.' l,g-l the national unemcloyment rate at the for more than half of the System s t_

. y ;.

i

'~

end of 1978 was 5.9%.

coerat:rg expenses as the unit cost of 4/

Accrox: mate!y 20.900 s:ngfe-famdy fuel rose 8% to $1.53 from $1.42 per homes and 7.300 apartment units m?icn BTU in 1977. Pcv e' purchased were built in the service area dunng for resale dechned 12.8% to the year. or 9% and 4%. respectively.

$19.382.000 due mostly to the more than were buut in 1977. It is addit en of new generattng capabd,ty estimated that44% of the cunng the year. Cther ccerating and s ngte-f amdy units and 78% of maintenance expenses totated apartment units were either total

$160.491.000 and were 15.2% more electnc or inc!uded e!ectnc heat.

than the $139.298.000 in the previous New industnal plants budt dunng year. These excenses represent the year added 105.000 kdowatts of controllable costs, with wages and demand to the System's e!ectnc employee benefits accounting for a generating f ac.ht.es, and expansion of significant 61%. The number of existing industnal o! ants resuited in a ocerating emolcyees increased by further demand of 180.000 kdowatts.

454 to 6.396 at the end cf the year.

The total 285.000 knowatts of Certain aspects of the cceration of Phillcs Oil Company's new In!crmanor Center in Bart:esville. Gklahoma utilizes

~~~

many energy-et'c:ent apolcations.

WE%yr,,Y5 ONC Cement Comcany. a dms:on of CKL

~

Corp. in Chcuteau. Oklahoma. is an im-

\\MM

% wh f f %

Q W%

'~ xj portant customer of Pubic Servce Com-n pany of Cklancma.

m' m j g?. w. 4 t%

mJ%.

"y, Ford G! ass Corrpany's plantin Tutsa.

~

lJ 4.]G51

'$p v.,

Oklancma cont:nces to excana and Edd qgg i fy.

s'gnifc3ntly to the area s economy 4

.,19g y Q

R.

+

{ ' pig L k.'4 %, e pm IM= 4 A k W J M.,&

gm t ;

. =.

,. y.,.

qt,,4 p

y

~

Ef3 0.

$?N Eb5

?

$h 4

.;;;. 3t + L

• A m s-. m 4-~ - [I ud s_

,4de M*s uJ-'OE g

r

m..,

Q2;' : ~ ~.

.n,f_,,gy

~

uw

. w w

. T:

- f. lG as

's W

w 4

47 iIwi:. $a&

m t

?

h$Y 4 :.. j}',l gyg

'w

' ~ ~

r, 5%e ns;G k

..(A ni..;kp% h i

%3%4'*

(.p?tp~gyig y

p

. pfgy yygi lr,Q~,(y[

h.c. -

y

igq c-yg

3 v

N j

ew

=

7 1

~

y.

g.jp

,*.,T yry.R l

...7, V},* l

.r w

v

.c gg N

l M_MO.jl$

l

.s w zt s

• J' UA h:"g;h, W. 4 s ihn $$$ff

,. n $.

5 mm-_

.,..-..M

<W d ypwaxty9 8

i g

?

ny.tVngjiFTaP j

'?

1-

{0 4-y

-y gm

-1 g.s1g'..__~'/'t N'

g pc=-%,,:..

s 9 Mm.m

~-

t-hiv>

m ge

+

1 j aanm QMP

\\famp kg 4

e

. ~ J

.N las a m m amm

^

q

.?

q$J fl Td-4 4 4 E

>M8 d

' -2

_.~~

r 1

=.

.m..

y I

I Y

NM

.y g --

4 u.

m M. ;, __,m l

-u u_-

,,,^' ^

^

a i,

wa s 1

3 K- '- ~__L q

p

= ' rm s

^ ' '

~

q q

W 4%

- -Q-l f

~

h /

y h[e meinudah'm-- A E H '<3' J

__w h

---

_3,_

r,

~l

'[

@=4; er -

su;w,.,.--

g,

\\V g n,M A h.&

A,5

~

e w

.ir g

w.8%_C

.3

'M-A ss m

w a n, x_

n

,gf W~

'v m

8 Review of 1978 continued Sources of Funds for Net e!ectnc ut;hty companies are recert years, revenue-re!ated taxes Additions to Electric Utility Plant

~ ' " ' " ' '

becoming increasing!y compfex. This showed a substant;al nse, or 131% in is escecia!!y true for utihties such as 1978. because of greater revenues the Central and South West System.

collected througn fuel adjustment which are in transitten frem an c!auses cceration fue:ed crimanly by natural The System fcdows sound gas to cne beccming mere account:ng practices, and this is decendent upon coal and nucl ear evidenced by normahz:ng the inccrne t

,z generaticn The System's ada;ticn of tax consequences resulting frcm coal-burning generation has already essentraily all timing differences g

.i.

recuired mcre ccerating empicyees, terween book and tax deductions.

~

and even more Mit be reautred as the This pchcy maintains the quahty of E

transit:cn toward coal cent nues and reported earnings and improves the

~

Ine advent of nuclear generat:cn cash flow ficm ccerations.

accroaches.

As a result of these pract:ces. the Decreciation excense dunng 1978 conschdated effective Federal tcta!ed $87.755.000, or 9 2% more income tax rate in 1978 was 43% and tnan the 580 350.000 in 1977. The tre difference between this rate and larger depreciation expense results the statutcry rate cf 48% is due frcm more clant in service dur:ng pnnc:paily to the exclus;on from 1978. as well as an increase in the taxable income of a3cwance for System s annual composite equity funds used dunng construction.

deprec:aticn rate to 3 5% from 3 4%

Federal income tax exoense rose Financing 116% to $114.9N.000 due most:y to investors in new secunt:es issued higher net income reported fCr 1978.

by Central and South West Cor-as comoared with 1977. State and porat en and its subsic:ary ccm-local taxes increased 13.5% to cantes dunng 1978 crovided funds

$66,812.0C0. As has been tre case in totahng 5358 456.000. These Univers:t:es and colleges are a vrtalpart o

cf the System s servce area. The campus 9

l

'g k:

scene shcwn is at the Uniiersity of j.}

}&

Arkansas.

f

• ),

Texas Eastman Co., a division of f,

']

~

h Eastman r<ocak Ccmcany, manufactures

• p Te xas.

L)

} ' pt h'.

"'%~~ $

• O arcustnal chemcals at its plant in East

.h h 'lyl]k Daisy Manufactunrg Comcanyproduces T

.T airnt:es atitsplantin Rogers. Arkansas.

h

'\\

,Q,

fg

~m

'l

?'~

E' e

,A

=~l$

gn m

se

.s

'V k%. *, ' \\j'. L *R ~~

,.:i:t

,4 py,..

m,

' ~i

. ;r O j' Q o

y.,c. yr. s =,

t:

x j > p,,,

t

,, c.

t e '

~'

7 4

a.

,i.

J (

j L

1.

o

.g g

s'?

'V l

,, x 2

'~

.7

,9, p}? ' *

?.:..

<- s

':) t r

h

,n '.

e w

- ~...--

s 1

. y ;.

..,.y..

4 s

e., :,,.....

,. y,. g, e,

..., 7g l,

^,V l.'

.".~ [ 4

• • ^~

I Q

= ~

y*.y s

v;

~..

Y' W _

l-j_

• 4

$kY '

l

~ -- 3

.Uma e,

3 4

i: I t.

Q ss. -

y,

8. 4 8

-S_ ^

=.. -.

~

~

t,t - e e n s e :

a e sw w.

w t u t..t. 1 4. e. w. - w.

th em x w.1 e....n s;

, =s'.?-

'h, -- '

k J,4%,,y m4wy

+,,, ?l, e

.g x

g;

?e:,

.e..y w ~.

.3,

w a..*pr

~

~y?

yw w

~

W"'% *2epf'5'Q3 x F T'A g**

Aa **llp%p,

• f, n;.

fi II

~

10 Review of1978 continued funds along uth internady-generated secured dect due Decemter 20.

companies-Central Power and Lignt funds of $201.396.000 proviaed 1979 ana $16.700.000 cf 8 %%

Ccmpany $30.000.000. Pubhc capital for the System's Cash sucCrd:nated Secured debt due Seroce Comoany cf Oklancma construction recuirements of January 25,1981. Pubhc Serv'ce

$60.000 C00 and South Aestern 5470.509.000 and for other needs Company of CMahcma aiso scid Electnc Power Compary $15.000.C'00.

including the retrrement of both S34.700.000 of 5 90 6 pc;Iut en The Ccrporation has rece:ved

!cng-term and short-term debt control bcnds due December 1. 2007. approval from the Secunties and The largest s.ngte source of tre Scuthwestem E'ectnc Pcwer Exchange Commiss on to1ssue a System's eiternany-raised funcs was Ccmoany en August 8 scld to max: mum of $200.000.000 of the sale of seven milhon shares of underanters at competitive tidding commercial paper or bank loans. The commen stock by the Corporaticn to

$50.000.000 of 30-year 8M% first Corporatton's commercial paper m underAnters at ccmpet!tas bidd:ng mortgage bcnds at an interest cost of assigned the hignest rating by on March 7.1978 at a once of $14 86 8 83% The tends were rec"e ed to Standard and Pcor's Corocrat:co per share. Total prCCeeds to the the puchc at 5100 to y' eld 8 75% to

( A-1) and by Mocdy's Investors Corporation were $104.027.000 The matur:ty This CCmpany 3:50 scid Service, Inc. (Pnme-1). Bank knes of underwr.ters recffered the stock to tre 516.200.000 cf 6% po!!ution centrol credit avadable to the Corporation outhc at $15 25 cer share. Addit!onal conds due January 1. 2008.

and its fcur coerat:ng ccmpanies total common ecuity cf $8.695.000 was Central Power and Ltght Comoany accroximately $150.C'00.000. At the provided by the Automatic Dividend cn September 7 scid to underAnters end of 1978. outstarc:ng short-term Retnvestment and Stock Purchase at competitive Ordding 575.000 000 cf bcrrcwings consisted of $11.100.000 Pf an. the Emp!cyees' Thnf t Plan and 8 % % first mortgage bonds. due 2008. of the Corocration's commercial the Employees' Stock Ownership P'an at a cost of mcney to the Company of paper and $1.387.000 cf of tne Corporat:cn.

8.91% The bcnds were recffered to Southwestern E!ectoc Power Three cf the operating ccrreanies the pubhc at $100.26 to yte d 8.85% to Company's notes payable to banks sold debt secunt:es totakng matunty Censolidated caodalizaticn on

$245.900.000 dunng the year. Pubhc Dunng the year, the Corporation December 31,1978 cons:sted of Serv ce Company of Oklahcma scid made the fol!ow'ng Cacital

!cng-term debt 48% preferred stock

$53.300.000 of 8%% subordinated contnbutions to the coerat;ng 8% and common stock equity 44%.

The Mcdonald Observatory atoo 6.800 ft.

Y

%.Wff&r%$$ifiO$.%blQ &h& fl.)9& &

Mt. Locke in West Texas is a unique elec-j.

%.dy(ky tnc custcmer of West Texas Utihties Com-g+G pQ fkf gp)~Q c

'$$.Y,~ ;

pany The 107-inch reflector telesccpe rs Nh.4

. &,, &.pf-the fourth largestin the workt 9.

px.

%y West Texas is pictably test known forits &p -

f4 Q

f&[ky @& 7 yh.

by ranches. Cattle continues to be an im. QY f

~.

portantfxtor to the economy of Texas Lf Q

Q'Onc%,'T Q

R h4 Cotton is being loaded for trantportation to N %h.(

hlbfR % h ;QV^

l _ g'<jj?} GMfb hl055.h?Jf Wf Y

the gin. Cotton ginning provides a s:gnifi-y MN LL 1 @GW X% :W{W%.f Min cant elecinc load for West Texas Utihties

%9:4

&QQ

/

s

'l &&g&yff V~R Company

' "v-

'5Q j~9 i1*#

l g

e

n, wm..gy::mq

.a.g; ;y c:.

+

+ '

Ag, ay J. -(yp

, :;,, p. a.-

', J :: ;.% $ bj,,_'

+

^

, ; W Y {;,,

y' ew s

e b

S n.

y

1. - [

i 7 1~

1 n >-

>, $s, 1

t 'a l~% *\\

.g.

4 C.

- i p f,. x-4

,.Jg

,'z;

.x 9..,

c

,s 4

~

.. _. ~

\\,

1. 2' N Wcp,ys.

/

h_.,n,-

h. ~.-gl f

~.

.,,.a a ?,T p+ q_,f.

• _' '.W-

%,1 g.

i, w [Ih,,,, &,. y- 'k m[4r\\.a..~I' I-r

^,: -

q'4 x

4 w

y, in

-6 an-

,g

.VMd 4'

-m b

1

_g

'~

, f..,.

.. -. +..

- - -. - + - - - - -

~$

m. ~

i t' N

y

~

..7'

.... M.... % %.,% ) ws i f..l

- ~ 4,.'

w, e.

a..,..

=

12 Review of 1978 continued These rattcs exclude !cng-term debt Construction Expenditures Generating Capability Additions due wtthin tweive montns The Cash outlays for new clant and imbedded interest cost cf !cng-term equipment by the System's fcur cett outstanding at the end of 1978 cperating ccmpan<es tctated

[

,[;h was 7.11% as compared with 6 90%

970.509.000 as comoared with T~

at the end of 1977 935 643.0C0 in 1977 Requ'rements m;

93 m Puthc financ;ng by the coerating fcr 1979 are est. mated at m

r5r ccmcanies cunng 1979 is excected to accroximately $570.000.000. and e,

3, ma rnclude first mcrtgage tonds and during the five years 1979 througn preferred stcck. Additiona!Iy it is 1983, are ant:cipated to exceed excected that the Ccrporaticn wdl

$3 bdhen make an offenng cf common stcck in The only new generat.ng cacaciy the second ha f of the year.

placed in service during 1978 was Management s foremost financial Southwestern Electnc Power cbjectives are providing a f atr return Company's ccal-fired Fhnt Creek plant to the Corpcrat'cn's stockhotders.

in northwestern Arkansas Arkansas preseneng tre double N rating on E:ectnc Coc cerative Cc roc ratic n ca n s the first mCrtgage bonds of the Cne-ha:f cf this 528.000 kilowatt unit.

coerating companies and maintatnrng Generat:ng capacity under the highest cred,t rat;ng on the construction includes Central Po Aer Corporat!cn's commercial paper.

and L'ght Corrpany's 550.000 knowatt In order to achieve trese f.nancial coa!-burning Cc!eto Creek unit cbjectives. the fonowing easic scheduled for service in 1980 and tre financial pol c:es have been Company's 25 2% sna'e. cr 315 000 formulated-kilowatts. in each of tre South Texas Maintarn a strong capital structure of Project's two 1.250.000 knowatts of approx: mate!y 50% debt.10%

nuc: ear capacity schedu'ed fcr preferred stock and 40% common service in 1982 and 1983. rescectively equity Pubhc Seroce Company cf Seek rate rehet necessary for Oklanoma has under construct:cn two adecuate coverage cf fixed charges coal fired generat;ng units of 450.000 and for a f air rate of return on in sested kdowatts eacn at its Northeastern cacital Stat:on. One is schedu!ed for

• Continue a dividend pchey to commercial operation in June 1979 ccrrtensate stockholders for the use and the Cther accroximateiy a year of their funds. The Corocrat.cn has later Tney are the first coal-firec units increased Jts annual dividend fCr to be budt by Pubhc Serace Comcany twenty-seven consecutse years.

cf Ok!ahoma.

Fcllcw sound acccunting practices in addition. Puthc Serece that maintain tre cuahty of reported Company has a hmited work eamings.

autncnzation for the constructen cf 'ts nuc! ear prc;ect. Black Fox Stat <cn Blacx Fox ccnsists of two generat;ng units cf 1.150.000 knowatts eacn. in which Pubhc Service Ccmcany cans 700.000 kdewatts each. Cne is present!y scneduled for seroce in 1984 and the other in 1986.

Scuthwestern Etectnc Power Ccmcany has uncer constructton rao adcitiona ccat f: red units at ts Weisn plant in east Texas. The f:rst unit at that s te was tuot !n 1977. The seccnd

13 is sChedu!ed for serYCe in 1980. and C!Ld!ng the sa e fCr resa e Cf e'ecthC-acceUate jur sdtCtCn Che' rates set cy the third is exceCted to be ComDieted ity 'n interstate Ccmmerce the 'nCCrcCrated murtC Caut eC in 1982. M units are 523.000 knowatts Tne retad rates of the ccerat'ng Ncre of tre cperat og ccmoantes in size.

ccm,Jantes are suc;ect to regulatacn mace rate fMngs w'th tne state regu-cy the utity ccmmiss,cns in tre states atcry autncnt:es cunng 1978. cut t s n which tn y ccerate These state excocted that tnree cf trem will do so Regulation and Rates e

The Corccrat.cn and the ccerating ccmmiss.cns may af sc have junsd:c-dur;ng 1979 ccmcanies are subject to the junsd c-t.cn over such matters as acccunt ng

!:cn of tre Secunties and Exchange cract:ces. standards cf se".tce.

Central Power and Light Company Comm:ssicn under tre Puthe Ut.!:ty issuance of secunties and d'visten of As reccried :n last year s annual re-HC; ding ComCany Act cf 1935 Sucn serwce territor es-ocrt to stccknorders. tre rate increase junsd,ctcn inc!udes issuance and in Texas. ine incorccrated of $23 A00 CCO cf annual revenues au-saie of secunt es, accuis, tron cf mun c: cant es nave cng nal,unsd.c.

tronzed cy tre Putoc Ut6ty Ccmmis-assets and accconting practices.

tien over tre retad rates cf the ccerat.

s:c:n of Texas in January 1977 became The cceratng ccmcanies are ing ccmcan:es serving there. Out may suctect tc three court acceats def;ned as pu0ilc utit:es under the cede sucn autncnty to the Putitc UtJ-Dunng 1978. Iwo of the ccurt ao-Federal Power Act, and the Federai

<ty Commiss.cn cf Texas This CCm-Ceats were rescNcd wnen tFe Texas Energy Pegu:atcry Ccmmission has rmssion has in:tial junsd:ct:en over tne Suoreme Court ne!d tnat the Comm:s-junsc+ct:cn cver certatn of the:r e'ec-reta,l rates of custcmers in tne enin-sicn was within its tegal ;unsdiction tc inc utmty facd,t'es and ccerat:cos. in-ccrCcrated areas in Texas and has set temporary rans and that.I was nct Record of Retail Rate increases Annua 19esentes Pec;ested ANOwec AJCWec Cetu r.

r Ocerat ng Cerca y Date et Date cf A*cu t Amourt co n

and Jur sc cnco Fmag Pa'e Orcer im acns) Inc ease M cnsi

.rc ease Commen Ecu tv Ce-trai Pcaer and L gnt Augus:

Acril Comcan y (e tas) 1972 1973

$92 60%

$30 59%

0)

Aest 7e os Umt es Decemter Va<ch Ccmc any (Te xas) 1972 1973

$25 50%

$25 c0%

(1)

Puc; c 3erwce Campany Dece-ter Acto cf C A a cma 'Ck'a cma) 1974 1975

$20 2

'25%

$15 6 97%

13 0%i2)

Sco!" western E ecr'c wy August Pceer Comca*y Fe as) 1976

'976 3 98 16 7 %

$ 99

'67%

0)

Ceat ai Pe*er anc Lgnt Octccer Janua f r

Comcaay rexas) 1976 i977

$36 6 11 5 %

$23 4 74%

i4 0%(2)

Sceweste*n E ecir c Nos emce-Ncse+ter oc aer Comcans iLeu;sianal 1976 1977

$10 3 16 2 %

0 10 5 5 %

A;chc Serece Ccmcary Cec emter Secterce-et Cwerna iCra c-at 1976 1977

$1' 5 87%

$ 64 32%

?4 c%2) r traaq Scu naestern E ece c Dece~cer e

pcaer Cemcany r Arkan sas) 1976

'973

$79G 25 1 %

$53

• a 4%

~3 6%2) p) Pate e :e' aas ccta nec enor:c tre es a snment of :re P.cLe ut. tv Com sron cf eas Cevn :n c:mmen ece, w as mt ce:em rec (2) Cn ero-cf-ce cd commen ecm 131 Cccectec sut,ect io re urc teg namg V3 s t977 Tre recrua'y 1978 ra'e crcer *ecu ec "e Comca,'c evd $15 m~ cn

14 Review of 1978 continued required to determine a separate rate the statutory requirements for the Fuel Supply base and cost of service for each two-year rate review.

Natural gas cont:nued to be the municipahty served by the Company.

Late in 1978. Pubhc Service Com-pnnc: pal fuel for electnc generation The third acceal :nvolved a group pany negotiated a sett'ement agree-by the Central and South West System of rural rate payers who chatlenged ment with its whciesale customers in dur:ng 1978. Generation by coal burn-the propnety of Central Power and the amount of $1.406.000 cf additional ing, however, increased as a second Light Company's collection of in-annual revenues. The new rates be-coal-fired clant commenced ccera-creased rates pnor to rewew by the came effective January 1979, subject t:cn pncr to the 1978 summer peak.

Texas Ccmmission. Central Power to refund, whde waiting final approval The capacity availab!e from this piant and Light Comoany had commenced of the Federal Energy Regulatory was 264.000 kdowatts, or one-ha!f cf a collection of higher rates before the Commission. The increase is appbca-528,000 kdowatt unit owned jointly Texas Commission assumed junsdic-ble to e'gnt rriunic: panties and two with the Arkansas E!ectnc Coopera-tion over electnc rates on September e!ectnc transmiss:cn cocceratives. It tive Corporaticn. The first coa!-fired 1,1976. This acceal was dec:ded in is hoped that the negotiat;on between plant coerated by a System Company the Company's f avor by a State Dis-Pubhc Serv'ce Company and its went into service in 1977.

tnct Court in January 1979.

whciesa!e customers will forego During 1979,450.000 kdowatts cf lengthy heanngs before the Federal coal-burning capabihty will be added.

Public Service Company of Oklahoma Energy Regulatory Ccmmissicn.

and in 1980 three units totaling In comphance with state !egislation 1,528.000 kilowatts are scheduled fcr enacted in 1977, Public Service Com-Southwestern Electnc Power service. It is estimated that approxi-pany cf Oklahoma submitted its Company mately one-fourtn of System genera-method cf applying its fuel CCst ad-On January 26.1979, testimony was tion in 1980 will be fue!ed by coal and justment to the Oklanoma Corporaticn presented by Southwestern E!ectnc the balance by natural gas and M By Commission in June 1978. The state Power Company in the State distnct 1988, coal. ! ignite and nuclear are an-law requires that fuel adjustment court in Baten Rouge requesting the ticroated to provide approximately clauses of eiectnc utthties in Okla-court to overturn the rate order issued two-thirds of the System's fuel hcma be rev:ewed by the Commission by the Louisiana Puche Service requirements every six months. The most recent re-Commission in November 1977. The A System fuel subsidiary. Central view was made >n January 1979. In Louisiana Commission's dects:co had and South West Fue!s. Inc., was es-both instances. Puolic Service Com-den:ed the entire $10.300.000 of rate tathshed after authonzation Dy the pany's methcd of acolying the fuel ad-relief sought by Scutnwestern E!ectric Secuntles and Exchange Commis-justment clause was accroved.

Power Company sion. The purpose of the fuel sub-The 1977 state law also requ:res in a separate action. the Louisiana s: diary is to conduct coal, hgnite and erectnc utdities in Oklahoma to Commission has asked Scutnwestern uranium exoloraticn and deve!coment undergo a full-scale rate investigat:cn E!actnc Power Company and other programs of the fcur cperat:ng every two years. Tne Company's last e!ec.nc utrht:es in the State to file new companies.

rate order was in Sectember 1977.

rate schedules that would prcmete Public Service Comoany, hcwever, conservation cf energy and provide Natural Gas excects to fde a rate apohcat:cn with stacihty in the cost cf e!ectnc service.

Natural gas consumed by the four the Comm:ss!cn prceably after the in February 1978, the Arkansas ccerat:ng companies tota:ed 385 bil-middle cf the year which wou!d fulf Il Pubhc Service Ccmmissicn au-licn cubic feet which represented incnzed Southwestern E!ectnc Power 88% of tne System's fuel reeds.

Comoany to increase ets rates in Pnnc: pal succhers of natural gas Arkansas cy $5.780.000 annua 4y cr were Transck P:ce L:ne Company, a 73% of the 57.885 0C0 recuested oy subsidiary of Puchc Service Ccmoany the Comcany in December 1976. The of Oklahcma. which providec 38% cf Cemcany hac teen cct!ect:ng the futi the gas used by the System anc 100%

amcunt suciect to refund s:nce May of the gas used by Puchc Serv:ce 1977. The authonzed 'ates were cut in Ccmpany of Oklancma. and Lo-Vaca effect on June 2.1978. The c:fference Gathenng Comoany (20% cf System in the rates collected and those a*-

!cwec was refunced to custcmers.

plus accrued interest.

15 gas consumotion and 70% of the gas budt The f;rst unit is screduled for The partners in the Scuth Texas consumed by Central Power and service in 1979 and the second Project and Westinghcuse E!ectnc Light Company). Exxon Company in 1980.

Corporation have agreed to an cut-orovided 13% of the System total and Southwestern E:ectnc Power Com-cf-court settlement of Westinghcuse's 59% of Southwestern Electnc Power pany's contract with AMAX Ccrocra-resconsibilities for the uranium sucoly Company's consumption. Lone Star t,on prevides for dehvery of 175 mdhcn for the South Texas Project. The set-Gas Ccmpany. Houston Pipehne tons cf coat over a 25-year pened to t ement assures an uranium supply 'cr Company and Deihi Gas Pipenne four 528.000 kdowatt units. The Com-both units for five years and approxi-Company each provided between 3% pany cut the first unit of its Welsh mately one-half ct tre Project's fuel and 9% cf System use Small Power Plant in service in Marcn 1977.

recuirements for an add'tional ten suppl.ers and System-owned produc-and tne seccnd and third units at that years. The setttement also provides tion provided the remaining certion.

location are scneduted for 1980 and for processing neecs inclucing con-Natural gas curtadments cccurred 1982. The Fknt Creek power plant.n version and fatncation. for ten years cnly dunng extremely cold weather.

Arkansas ccmmenced coeraticn in of operations for Octh units.

mcstly in January. when fuel require-1978.

Separateiy, the partners in the ments for System generatico are suo-South Texas Project have negotiated stantially te!cw the maximum de-Oil with Chevron Corporation a supply of mands required dunng the summer.

Early in the 1970's the ccerating uranium concentrate sufficient to co-ccmcanies began mod.fying exist.ng erate bcth units for five years.

Coal and Lignite gas generat;ng units to burn od con-Puthc Serece Company of Okta-The System. through three of its 1:nucusly cr for tnef periods wnen gas hcma's contract for uranium with operaung companies. has negotiated was not avanacle, This program con-Mobd Od Corporatten provides for a contracts for 255 mil lion tons of coal.

t:nued dunng 1978 when Pubhc Ser-five-year succly for the first Black Fcx Tnis amount is sufficient to support vice Company of Oktahoma modified unit and 40% of the supply needed for 3h muhen kdowatts of generat:ng 470,000 kilowatts to permit con-the first three years of cceraten of the capacity for pencds ranging from 16 tinucus cil burning.

second unit.

to 25 years In addition, leases have At the end of the year,2.102.000 been acquired on 160.000 acres in kdc Aatts cf System cacacity were ca-New Board Member east Texas and northwestern pable of burning od continuously and Jcnn H. Wdliams, former~ chairman Louisiana with hgnite reserves esti-anctner 4.444.000 knowatts for srcrt of :ne tcard and cnief executme of-mated at 500 mdhon tens These re-penods ficer of The Wuhams Compan;es.

serves are sufficient to sucport Tulsa. was e'ected to the Corocra-anctner three mdhon ki!cwatts cf Nuclear

cn's Board cf Directcrs at its generating capac;ty fcr a 30-year Nucl ear pcwer generation is Novemcer rneebng. His aCCition to pencd Lignite is a grade cf coal with planned for the 1980's by Central the board,ncreased tre number of di-a relatively !cw heat value.

Power and Lignt Comcany and Puchc rectors to fcurteen.

Following is a enef review of the Senace Comoany cf Oklahcma.

coal contracts which the coerat:ng Central Power and Light Ccmcany Management Change companies nave with sucphers.

is a participant in the South Texas At the July meetng cf the tearc.

Central Power and Light Company Prc]ect !ccated abcut midway te-Winiam F Ma!ec was named treasurer has a 25-year Contract with Cc'cwyo tween Corpus Chnsti and Hcustcn.

of the Corcoraticn. He was a:so Coal Company. a subsidia y of W R The Company's snare is 25 2%. cr e!ected vice cresident and treasurer Grace & Co and Hanna Mining Com-315.000 kdcwatts each, in the Proi-cf Central and South West Sereces, cany The contract Orcvices fcr thirty ect's two 1.250.000 Wcwatt un'ts.

inc. Mr. Ma.ec orevicusly haa served m ihon tens for tre Comoany's Puchc Serwce Comcany cf Ckla-as v ce cresident-treasurer of Gu:f 550 0QO Mcwatt Ccieto Creek piant hcma's nuciear or; ject ccnsists cf two States Utiht es Ccmcany schecu:ed +cr service :n 1980.

un,ts of 1 150.C00 kacw ans eacr -

Puchc Serv:ce Company of Ck:a-kncan as me E!ack Fcx Stat:cn. Puc-herna's centract with Kerr-McGee

!ic Serece Ccmcany's share in eacn Ccrocrat en provides fcr the denvery un.t is 700.C00 kdcwatts. The crc;ect of 50 mshcn tons of coal over a 16-is !ccated accroximate!y 20 rNes east year een This succiy wd! te avad-cf Tesa.

atie to ne Ncteastem Stat:cn ee e twc 450.000 kUcar units are te ng

16 Interstate Operation Proceedings The Corporation and its restnctions placed by other electnc Texas-based subsidianes were pend-subsidianes continued to pursue the utihties in Texas on interstate opera-ing at year end in both state and Fed-vancus legal proceed ngs pending in tien. On January 30,1979, the Court eral courts.

ccnnection with the System's plans for issued a memorandum cpinicn ruimg in December 1978, the Attorney future cperation on an entirely against the plaintiffs and enjoining Generalof New Mexicoindependent!y interstate basis.

Central Power and Light Company fded an onginal action in the U S. Su-On Feoruary 9.1979, the Corpora-from cperating interstate unless the preme Court also attacking the Texas tion's operating subsidianes fded with terms of its participation in the South Commission orders for their orchibi-the Federal Energy Regulatcry Com-Texas Project nuclear plant are tion cf interconnections between mission an apphcation under pro-modified. The Court purported to utihties coerating entirely in Texas and visions of the Public Utikty Regu!atory make findings of fact and conclusions those serving other states.

Ponctes Act of 1978, adcoted fast fall, cf law adverse to the Corporation's The Federal Court of Acpeals for that the Corporation teheves are hkeiy posit:cn in cther proceedings. but the Distnct of Columbia remanded a to be central to the accomphshment of inese findings and conclusions wn!

1976 FPC order which nad refused to its interstate plans. These provisicns nct necessanly be cinding on Cther consider the System's claims that in-confer on the FERC new junsdiction to forums. The Corporation, of course, trastate cperation was anticompeti-crder intrastate electnc utikties to in-d:sagrees strcngiy with the Cpinicn tive. The Court directed the FPC's terconnect in interstate commerce.

and was disappointed by the Court's successor, the Federal Energy Regu-wneel cower and furnish other neces-action. It expects to appeal the final latory Commissicn. to explain further sary services, provided specified coinion, although the determina!!cn of the 1976 decision or hcid heanngs on cntena as to rehabihty. economies, what action to take wdl be made by the System's claims.

conservation of energy and reim-the Board of Directors of the Corpora-The legal principles in all of these bursement for costs incurred are met. tien when it next meets.

proceedings are complex, involving The application fded by the cperating Heanngs at the Secunties and Ex-constitutional, antitrust and utihty law subsidianes recuests interconnection change Commission in January 1979 questions that are difficult to resolve.

ana wheehng and re!!ef from the 1977 Drought to a c:ose the Corporation's Decisions for either side in any par-orders of the Public Utihty Ccmmis-presentation demonstrating savings ticular case are a!most certain to te sicn of Texas which had directed Cen-to Customers and other advantages of appealed. It is regrettable that the tral Power and Light Company and interstate operation. However. me electnc utikties in Texas have been West Texas Utikt es Company to record remains cpen to receive further unab!e to reach a reascnable ac-refrain from interstate operation.

evidence.

commodation of their rescective Dunng Octccer and Ncvemter. tnal Dunng 1979. heanngs are expected interests in the matter. Tne System is tcck p! ace :n the Federal Court anti-to occur tefore the U S. Nuc! ear convinced of the econcmic. eng:neer-trust suit :n Dadas. brought by the two Regulatory Ccmmission on whether ing and legal ments of its case and

ntrastate System companies to se-intrastate utihties may condit:cn par-intends to pursue the goal cf interstate cure a cetermination of the legahty of ticipation :n the:r nuc! ear power cceration with cont:nued vigor plants on intrastate cperat:cn.

in 1979.

Acceals from earlier cec:sicos cy the Federa! Power Commissicn and the Pubhc Utility Commission cf Texas, in which tre System's pcs;t:en had essentially not been ucne!d.

movec fcrward during the year. Tre acceals from tre Texas Ccmmissicn's 1977 crcers fcreidding the System s

Central and South West Corporation and Subsidiary Companies 17 Financial Section entra Ucon reauest add.ticnai cccies of this Notice of Annual Meeting C.w.l and South West Corpo. ration i e a. - :. m Recort anc tre 1978 Annual Peccris of tre The annua; meet.ng ct stccknc!cers Adl Cine Main P: ace fcur ocerating sucsic: anes wW te sent to be he:c at 10 45 a m. Thursday. Acnl19, Danas Texas 75250 stccxrcicers or other 'rterested part:es.

1979 at La Pcsaca Mctor Hotel 100 Nortn Also avalat e utncut charge are cop;es Ma.n Street. McAFen. Texas A fermai Central and South West Serwces. Inc cf tre Corcorat on s Financial Statements nct.ce cf tnis meeting. togetrer uth a One M3:n P' ace for the year 1978 a Ten-Year F,nanc:a! dnc crcxy statement anc 'crm of Orcy MI be Da las Texas 75250 Statist cal Rewew cf the ccerat;cns cf :ne maJec to eacn stcckho:cer en er accut Centra! anc Scotn West System and Form Ma'cn 12 1979 P' ease vcte your snares Central and Scutn West Fue:s. Inc-10-K for tne year 1978. as fued by :ne Cor-ty sioning and returnmg your proxy as PO Box 10773 pcratico anc ty eacn of the cperatng socn'as cess tie.

Goiden. Co'crado SO401 corncan:es uth the Secunt.es and The 65 481096 shares of Certra! and Excnarge Ccmmiss'en.

Soutn West Ccrporat1cn commer, s:ccx operarmg Subsidianes cu:starc,ng at tre end of the year are Centrai Power anc Lgnt Comcany Automatic Dividend Reinvestment ownec ty accrctmatey 63.000 stcen-Corpus Chnsti. Texas and Stock Purchase Plan no.cers aving >n eacn cf the f:f:y states anc The Corporaton 's oftenng to tre no;cers in many tore gn ccuntr es.

Putac Serwce Corncany of Ok!ancma cf its commen sicck the cccettunity to hel sucscay -

purenase acc ticnal snares tnrcugh an Transfer Agent of Common Stock Transcs P pe L;ne Company Automatc Dmcenc Peinvestment anc MercanNe Naticna! Sann at Dallas iu'sa. Ck!anoma Stcck Purchase P!an. The Plan prov:ces S!cc< Transfer Depanment Southwestern E'ectnc Power Company that hcicers may automat cally re'nvest PO Box 225415 Shreveccrt. Loutstana their cash cmcenas ;n new issue shares Da:!as. Tewas 75265 of ccmmcn s:ccs of:ne Ccrporation if West Texas Ut ht es Company stocknoicers e'ect to re'nvest tneir casn Registrar of Common Stock

,Wem Taas cmcends. they may also make cpticnal Mercant;le Nat cna! Bant 2t DaSas cash payments to curcnase adc.t cnal shares No serace 'ees cr trokerage Listing of Common Stock commiss;cns wm te cnarged for pur-The commen s:cck of Centrai anc Soutn chases in the P!an For further information. West Corporat!cn is hstec on :ne New York s:ccknclcers may wnte to Mercantle Stock Exchange it;cker symcc!-CSR) and Nat:onal Bank at Dalas. Stcck Transfer en the M;cwest Stock Excnange.

Cecar: ment. PO Box 225415. Dadas.

Texas 75265.

Responsibilities for Preparation of Financial Statements Management is rescens t.e fcr :re orccuce anc tre Comcantes' marage-t an cf tre f ranctal statements anc ts re-creara: cn.ntegrty anc ccjectv !f cf ment straes to ma'nta'n this ca'ance.

sconte ' fcr ergag>ng. sut;ect to s:cck-tre fcccwng ' narc:a' statements and ac.

Artnur Ance sen & Co.,ncecence-t nc:cer at roval me :ncecence-t au-ccmcany rg nctes cf Centra: arc Scutn accountants and aucticrs. a e engagec to a tors TN Committee rev ews utn :ne West Cerccrat cn arc Sutsic:ary Ccm-exam,ne tre finarc:ai statements cf Cen-ancecendent auc tors the sccce cf tre r can es Tre sta:ements have teen pre-tral and Sou:n West Corecrat:cn anc Sub-auc: s anc tre account:rg cr:nc;ctes to carec n ccnferm.ty utn generany ac-s:c.ary Ccmcan,es anc :ssue econs te accued m fmanc:a! reportrg Tne cettec acccurtrg pr nc:c es anc..n therecn. The:r examinat cn is ccncocted Auc:t Ccmmatee meets regaany Octn scme cases. re'lect amoJrts basec en

n acccrcance we generany accectec secarately, anc ;cmt!y adn ncecencent est,ma:es arc judg "erts cf managemert. auc t ng stancards Such standarcs.n-audacrs recresentabes ci management gmng cue ccns:ceratcn to matenahty c'uce a res ew cf m:erna! con:rcis a test of and ne :nte na, aucacrs a revew act#

Tre Cemean es mactain a system cf trarsactons anc c:rer crccecures sut'-

t es.n ccrrecten w.tn financ:a; recceng irtemai cort c;s ces gnec !c te o gue c entic Orcece easonat;e assura~ce T e indecercent aucdc s have 'uu anc reascnac'e assurance trat tre tccn cocr years are credited to :ncome when tcck enmanly to exc:us:cn from taxaole 'ncome cf aucwance +cr deductons of these costs exceed tne re!ated tax ceductons.

equity funds usec dunng construction.

Provisions for doferred inves* ment tax crecits are The provisicn fcr deferred Federal income taxes resu,ts recorded ter tre reduction in Federal :nccme taxes cr:nc:Caay frcm ne tax deducDcns under acce!erated payable ans,ng f rom the investment tax credit and are methods of decreciation and cther wr,te-ctfs cf orccerty incluced :n ;nccme oser the hves of the re!ated orccertes.

29

3. Allowance for Funds Used During Construction

$150.000 000 at Decemcer 31.1978 have been cbtamed The at!cwance 'cr funds used dunng CCnstruC!!Cn (AFC) for short-term borrowings. Any sucn torrowings made are is the result of an accounting procecure whereby amcunts, generaily arranged en a cemand basis at tne cr:me rate based upcn the level cf ccnstrucDon work in progress, tren in effect. The majonty cf the hres cf crecit recuire recresenting the enterest Charges Cn borrowed funcs and a maintenance of Ccmcensating balances expressed in return en equity capital used to fmance constructron. are bank conected ba:ances. These balances may be reflected as credits on the statements of income and witndrawn on a cay-to-cay basis without restr:ction: how-Cnarged to Construction Work in Progress (CWIP) AFC ever. Ine Corrpantes are excected to maintain average does not represent a current source of casn funas. Uncer bank balances rneasured cn an annual bas:s generaly estachshed regulatory practices. the sutsidia y totahng 10% of the acphcable knes. These recuirements companies are permitted to earn a fair rate of retum on were satisfied substantraly by ocerating ba!ances in 1978 such costs and recover them in rates charged for utthty Aporeximatefy $7 500.000 of the avadacle knes of cred:t services. The suostdiary ccmpan,es exc!uce frcm the are sucocrted cy fees.

calculaticn cf AFC that pcrtion of CWIP inciuded for The Corocratten also has a master note arrangement rate-making purpcses in the:r rate bases.

enachng it to ocrrow. cn a demana basis at the cct cn cf The sutsidiary companies fcucw the Federal Energy tre tender. up to $10.000.000. Tnere were no sucn Regu'atory Commissicn's prescnbed formuta whicn borrowmgs cutstancing at Decemter 31.1978.

comcutes separately the maximum amounts of AFC apohcable to bctrowed funds and to ecuity funds. The

6. Pension Plan composite rates so determ;ned and used in 1978 were The Companies have a contncutcry pens;cn & dn 9.2% for CPL. 8 9% for PSO. 9 3% for SWEPCo. and 8.2%

cosenng sucstantiauy a!I their emoioyees. Pension cost for WTU. Concurrently with the apphcat:cn of these rates. ' accruals were aoproximately 57.602.000 in 1978 and the Compan;es have recorded the deferred tax effect 56.749.000 in 1977 :ncluomg accroximate!y $1.602.000 acphcab!e to the debt component as a charge to ceferred and $1.349.000 charged to construction in 1978 and 1977 tax expense.

respectiveiy The Compan:es' pohcy is to accrue normal cost plus amcrtizatico of oncr senoce cost over forty years.

4. Construction Fund for Pollution Control Facilities The Comoan.es' general pohcy is to fund pension ecst Indentures secunng poilution control revenue bcnds annuaHy as it is accrued. The actuanaHy comoutec va!ue

!ssued to finance certain poHutton contrcl facihties cf the cf sested benef,ts at January 1.1978. tre cate of the latest subsidiary companies estabhsh construct:cn funds in actuanal repcrt, did nct exceed the tcta! cens.cn fund.

which bcna proceeds are he!d by a trustee.

Tne plan was amended in Octccer.1978 to provice Disbursements are mace from such funds to reimburse the acciticna! benefits which win result in increased annual suostd:ary ccmpanies as construct:cn costs for such cens:cn cost accrua!s of accrcximately 30% :n future facd ties are incurred. At December 31.1978. 57.961.000 cf per.cds. Had these changes been in effect at January 1 Such funcs had been excenced to f. nance polluticn 1978 the actuanally Computed va!ue Cf vested benefits ccrtrol fac:ht es. The unexcendec ba!ances of wou!d have exceeded the tctal cens.cn fund ty

$35 843.000 and $31.875 000 at Decemcer 31.1978 and approximatety 57.000.000 at that date.

1977. rescectne!y. represent amcunts he!c ey trustees uncer the revenue bcnd indentures.

7. Limitations of Dividends on Common Stock of Subsidiaries

5. Short-Term Borrowings and Lines of Credit At Decemcer 31.1978. uncer tne terms cf their The Corpcrat.cn may issue shcrt-term nctes to banks and commercial pacer :n connect:cn w;th toaning funcs mcrtgage indentures. $170.941.000 cf tre suosiciary to. cr msestirg :n.ts subscaries. The subsid,ary ccr car!es reta!nec eam:ngs were nct avanat!e for tre

~

ccmcan es a:sc may issue sncrt-term nctes to canks. The cayment cf casn div:cends.

max: mum amount of s crt-term corrcw:rgs outstand ng r

at any month-end cunng 1978 and 1977 amcunted ic

8. Litigation

$106.675.000 ard $88 297 CCO. rescect:ve y. The trierstate Ocerat:cn As more fuay exclamec uncer tre accrcx; mate aserage outstand'ng ta!ance amcunted to cact;en irte state Ccerat:cn Prcceecings'on cage 16.

$45 493.000 and $30.132.0C'0 dunng 1978 and 1977 Central and South West CoracraDcn and.ts sots.c:ary rescectiveiy The accrommate weignied a.erage.nteresi ccmcan es are inscNec.n certa.n reau,atory anc :ega, rates cunng 1978 and 1977 were 7L% arc 5.7%.

prcceec;ngs These prcceeamgs relate to the rescectne:y. fcr commerc:a! cacer anc 8.6% and 7 6%.n Corccraticn s satisfact.cn ct recu:rements for e ectnca!

1978 and 1977 resoectneiy. for nctes cayao;e to canxs.

.rtegrat:cn cf 15 sucs:c: anes under the Puchc UMty Banx knes of crec t aggregat'ng accrox. mate!y Hcong Ccr cany Act cf 1935 and ts clans fcr regu'ar

30 Notes to Consolidated Financial Statements (continued) operation of all System facihties coordi. lated on a used to repay outstanding sncrt-term borrowings and for synchronous interstate basis. The outcome of the htigation additional investment in the operating companies.

and regulatory proceedings is uncertain, but in management's opinion. based uoon econcmic.

11. Joint Plant Ownership engineenng ana legal ments, the Companies shculd CPL. PSO, and SWEPCo are parties to vancus joint prevail ;n these proceedings cr. if not successful, the cwnership agreements with cther nonaffiliated utiht es.

cutcome wou!d not have a significant adverse effect on the Such agreements provide for the construct:cn and financial statements included herein.

operat:cn of generating stations and related facihtles whereDy eacn participant must provide financing for its

9. Rental and Lease Commitments share of the construction project. At December 31,1978.

The Companies have entered into vanous financ:ng those Companies had an undivided interest in three such arrangements. pnmanly with respect to coal transportation generating stations and related facihties, which are e:ther and related equipment, which are treated as operating in serace or under construction as shown below:

leases for rate-making and financial reporting purposes.

Pso stack Tctal rental charges to operating expenses were CPL Scuin 7ewas Fox Stat:cn SWEPCo

$8.058.000 in 1978 and $7.014.C00 in 1977. In addition.

Prciect Nuc ear Nuc! ear Units Fi.nt Creen rentals cf $1.355.000 in 1978 and $859.000 in 1977 were Umts No 1 and 2 Ne 1 and 2 Coat Umt No 1 inc!uded in fuel inventory accounts at year-end. The future utuy P: ant chcusands) minimum rental commitments of the Companies as of

.n Semce*

$72105 Decemter 31,1978 for all non-cancelable leases are as

^C]0][cfafen

$ 1.485 g

fol!cws:

Utmty P: ant Urcer Ncn-Cacitahzed Ctrer Construct cn

$205 6e6

$52 945

$ 412 (thousancs)

F nanc:ng Leases Leases Tctal P' ant Cacacity -

1979

$ 4.743

$ 2.972 5 7.715 MW 2.500 2.300 523 1980 4.514 3 C98 7.612 percentage cf 1981 4.153 3 576 7.729 Pa t.c:caven 25 2 %

60 9%

50 C%

1982 4 C61 3443 7.504 Sha e of 1983 3.741 3.389 7.130 Cacacity - MW 630 1.400 264 1984-88 17 G72 13.137 30.209

• Tre conscocated state ent cf income re9ects tne pert;cn of a;i 1989-93 16.CO3 11.900 27.903 cce at.ng costs asscc!ated Ch the utaty p! ant in seroce 1994-98 10 919 7.153 18 072 Substantialy all ! eases recuire the Ccmpanies to pay

12. Commitments and Contingent Liabilities taxes and ccerating and maintenance expenses. If the It is est: mated that the subsidiary ccmpanies will spend Companies were requ: red to capitalize the leases referred approximately $570.000.000 for construction purposes in to above. tne impact on the Calance sheet and recorded 1979 Sutstantial Commitments have teen made by the expenses wcuid nct De matenal ncr would the impact cf subsid;ary companies in connection with the program.

sucn cacitalizatico on future revenues of the Ccmpanies te matenal.

13. Quarterly Information (Unaudited)

The foilcwing unaud;ted quarterly information inc!udes.

10. Common Stock in the Corporaticn's opinicn. all adjustments (ccnsisting The Corporation's Employees' Thnft Plan. Employees' cnly of ncrmal recurnng adjustments) necessary for a fair Stcck Ownershio Plan and Automatic D:vidend presentat:cn of such amcunts:

Reinvestment and Stock Purchase Plan perm:t purchases Net cf common stock directly frcm the Corporation. Dunng E ect':c income ter Ea nings 1978 the Ccrporat!cn scid and issued 541,175 shares cf

[] CC*;3(9 "[C" lr C*

g C

ccmmen stcck to these clans as fol:cws.

Cuar*er E-cea

tncusands)

Etcck S ares Poceecs 1978 nncusancs)

Ma ch 31 5307026

$42 397

$29 339 549 E c'c>ees-Stcc* Cwrersn c P'an 415 C59

$6 724

.une 30 291 806 3: 218 19 52' 3C Cmcend Peir.est ent P an 117 252 1.831 Secte"ter 30 425018 71 971 59 565 92 In' ft P'an 8564

-40 Dece ter T 314 843 45325 35045 9

541 175

$8695 1977 va cn 31

$250 0C9

$3* 570

$19115 5 33 The Ccrpcrat cn also said and issued 7.000.000 shares e 30 29 339 30 ea3 1722e 30 cf :ts ccmmen stcck :n Marcn.1978. for $103.861.000 net Secte-cer30 3e6 7c1 61ee2 47381 83 cf cffenng excenses. The proceeds frcm these sa'es were Dece-cer 31 2e6.3e5 a4 J39 31 336 9

31 Information for quarterly penods is affected by sold. Also this,nfctmation shcuid nct be interpreted to seasonal vanations in sales, timing of fuel expense incicate that the Companies actualy have present plans recovery, rate increases and other factors.

to replace their assets or that actual replacement would take place in the fccm and manner assumed in deve:Co:ng

14. Replacement Cost Data (Unaudited) these estimates. Rather, replacement of the procuctive In compliance with rules of the Secuntfes and capac:ty will take place over many years and tre actual Exchange Commission, the follcwing tabulation replacement Costs will be affected by, among ciner compares engtnal cost with the estimated current factors. changes in tecnnc!cgy the rate of :nflaticn.

replacement cost of the Compan:es' productive capacity environmental requirements. and nat;cna! energy pchcy at Decemter 31,1978 and 1977. The tabulaticn also in additicn. this informaticn is not intended to recresent ccmpares accumulated depreciation and the provis cn amounts which might be apohcable to the regulatory for depreciation based upon enginal ccst and rate-making process. Furthermore, as the cata is kmited replacement cost.

to productive capac:ty. !!is not meant to crowce a cas:s 1978 1977 for Comcuttng the inflationary effects on the overa'l ong nal Peotacement Cng.na: Peciacement coerations and financial ocs; tion of the Companies.

(thousancs)

Ccst Ccst Ccst Ccs:

~

P'ocuctwe Auditors

• Report g

rec.acement To the Stockhciders and the Board of D; rectors of Central ces comou-tanon

$2.734.177 55 669 til $2 552.273 $5.302.944 and South West CorporatlCn:

Non-deprecr-We have examtned the Conschdated balance sheets able clant-and statements of preferred stocks and Icng-term cabt of cr ginaf Central and SCuth West Corporat:cn (a Delaware corpora-cost 845.889 845 889 538 491 538 491 t!cn) and subsidiary companies, as of December 31,1978 TctT

$3 580 C66 $6.515 000 $3 090 764 $5.841.435 and 1977. and the related Consohcated statements of in-Less Accurnutated come. funds prov:ded for gross additions to e'ectnc utthty cecrec:asen 778 465 1 612.146 7C2 967 1 457 945 plant and CcmmCn stCCk equity for the years then enced Net pro-Our examinat: ens were made in accordance with generaily a c ty 32 801 601 $4 902 854 $2 3S7 797 $4 383 490 such tests Cf the aCCcuntng records and sucn other 3ud;t-g ing prCCedures as we Cons:dered necessary in the cecrec anen

$ 95 564 $ 196 6C6 5 89 507 $ 181 69, circumstances.

The reciacement cost of produchve capacity was in our reocrt dated February 10.1978. our corn:cn cn computed by acclying certain.ncices to the engrnal ccst the 1977 financial stater-ents was cualified as be:ng sub-cf decreciable e;ectnc ut:hty plant ;n serice cn a ject to the effect of any ac!ustments that migrt resu't frcm functcnal basis. Tne Handy-Whitman index cf Puche final d:socs.tico of iegal orcceedings :nvciv:rg increases Utikty Constructon Costs for the Scutn Central Divis:cn in efectr:c ccerat:ng revenues. These iegal proceec:ngs was used to trend steam producten trarsmissicn.

were rescised in a manner requinng no acjustrrent and distobuten and genera' purpose but d:ngs. and the GNP cur coinicn cuahfication en this matter is therefcre i

imclic;t Pnce Def!ator Index was used for all other plant.

removed Tre accumu'ated depreciat:cn on a reciacer ent ccst in cur coinion. tre financ:a! statements referred to above basis was determmec by caiculating tre ratio cf the present fa>rly tre financial pcs. tion of Central arc Scuth accumulatec decrec.aven per tccks to the actuai re!ated West Ccrocraten ard subs; diary ccmoanies as cf Ce-cr:g:na: ccs: and apoging this rat.o to the estmated cember 31.1978 anc 1977. arc the resuits cf their ccera-reciacement ccst of crecucme capac:ty for eacn tens and furcs orevced for grcss acc ticns to e ectrc sucs:ciary ccmcany utQty ctart'cr re years !nen encec. n contcrroty w.th Prov:s;cn 'cr cecrec:at:cn based en eclacement ccst generacy accected acccunting ornc:cles cons;stertty was ceterronec by acclymg the annua! bccx ccmccs.te accaed dunng the ce~cas.

rate cf cecreciat en to the aserage estmatec reciacement ccs: Of procuct.ve cacac:ty 'cr tne pence for eacn sucs:ciary ccmcany.

ARTHUR ANDERSEN & CO The Ccrocratico cautions that tris cata aces not curocrt to recresent the cur'ent vatues cf these assets cr Housicn. Texas tne amounts wnicn cculd te reahzed :f such assets were Fecruary 11.1979 1

32 Management's Comments on Five-Year Summary of Consolidated Operations A five-year summary of the Central Electric Operating Revenues Taxes Other Than Feceral income.

and South West System's consoh-Increases in electnc operat:ng increases in these taxes resu!!ed dated cperations is presented on the revenues resulted pnmanly from ap-pnmanly from higher revenues and acjcining page. Related statistical and plication cf fuel acjustment clauses to adcitions to prcoerty.

f:nancial data are shown on pages 34 recover higrer costs of fuel consumed Federalincome Tax Expense. Fed-and 35. Detaded comments and infor-and frcm increases :n aggregate eral income taxes are genera!!y related mat:cn regarding the System's ocera-ki!cwatt-hour sales. Add tionaily. at var-to cnanges in taxable income. The in-tions for the year 1978 are presented ious times cunng the cenods. rate in-crease in provisicn for ceferred Fed-e!se#ere in this Annual Report.

creases were placed into effect which eral income taxes resu!!ed pnmanly contnbuted accitional revenues of $5 from hberalized depreciation for tax mdhon in 1974. $12 mdhon in 1975. 510 purpcses cn property additions dunng mdhen in 1976. 523 mdkon in 1977 and the penods. Changes in the amcunt of

$10 muhen in 1978. The increase in deferred investr"ent tax cred:ts are 1978 kilowatt-hcur sales was attricuta-due concipahy to the amcunt of prop-ole in significant part to sales to non-erty acc.ticns and the increase :n in-affdiated e!ectnc companies and to ve stment cred:t rate from 4 % to 10%

warmer summer weatner.

under the Tax Reduction Act of 1975.

See Note 2 cf Notes to Consolidated Expenses Financial Statements.

Fuel. Increases in fuel expense re-Interest Charges and Preferred su:tec onnc:pa!Iy frcm higher unit Stock Dividends. The nse in interest costs and increased e!ectnc genera-charges and preferred stock divi-tion. Substantially a!I cf the increase in cends resuits from the issuance cf unit fuel costs is recovered from cus-additional secunt:es in connect:cn with tcmers through the applicatten of fuel larger construct;cn programs and. in adjustment clauses.

the case of interest Charges, the re-Other Operating and Maintenance.

funding of !cwer interest rate dect is-The increases in other ccerat,ng and sues at matunty.

maintenance expenses ref:ect the Allowance for Funds Used During larger amount cf clant in service. the Construction. The amount of a!!cw-greater number of customers served ance for funds used dunng construc-and tne nsing costs of ecuipment.

tien is related to the amount of con-suCChes and wages.

structicn work in crogress and the rate Power Purchased for Resale.

apched dunng the pencd. See Note 3 Changes in purchased CCwer ex-of Nctes to Conschdated F:nancial cense are attnbuted to tne number Statements.

anc unit cost cf ki!cwatt-hcurs cur-Chased. The number cf kdcwatt-hours purcnased is determined by avadacie system cacacity amcunt of economy energy availabte fcr purchase and tre

'evel of wheehng transac!!cns. The cost cer k:lowatt-hcur purchased is cetermired by the succly avadaLe and the generating ccsts cf re.gnccr-ing uttht:es.

Central and South West Corporation and Subsidiary Cornpanies 33 Five-Year Summary of Consolidated Operations (Thcusands) 1978 1977 1976 1975 1974 Electric Operating Revenues

$1,338,758 51.167.434

$926.126 5740.153

$595.(M9 Expenses:

Fuel S 697,813 $ 594.824 5443.852 5289.875 5186.466 Other operating 116,071 104.689 92.481 85.459 80 041 Power purchased for resale 19,381 22.226 19.400 17.229 14.718 Maintenance 44,420 34.609 31.700 30.541 26,949 Depreciation 87,755 80.350 69.152 62.762 56.298 Taxes, other tnan Federal inccme 66,812 58.857 51.180 46.562 39.192 Federal income tax excense 114,995 102.999 76.076 74.315 68.478 Interest and preferred stock dividends 94,693 74.486 67.039 58.204 50.811 Allowance for funds used during construction (44,306)

(19.811)

(14.133)

(10.584)

(8.712)

Other (net)

(2,396~;

(1.555)

(831)

(1.798)

(2.04 6)

$1,195,238 $1.051.674

$835 916

$652.565 5512.195 Income for Common Stock Before Cumulative Effect of Accounting Change

$ 143,520 S 115.760

$ 90.210

$ 87.588 5 82.854 Cumulative Effect cf Accounting Change 1.299 Net income for Common Stock

$ 143,520 $ 115.760

$ 90.210

$ 87.588 5 84.153 Earnings per Share Before Cumulative Effect of Accounting Change

$2.25

$2.00

$1.75

$1.72

$1.76 Cumulative Effect of Accounting Change

.03 Earnings per Share of Common Stock

$2.25

$2.00

$1.75 S1.72

$1.79 Average Common Shares Outstanding (000) 63,924 57,782 51.568 51.060 47.118 Central and South West Corporation Common Stock, S3.50 Par Value Pnce Range and Dividends Paid Per Share 1978 1977

_\\ia'ket Pr;Ce CmCends ame! P"Ce h Cends High Low Paid K g'1 Low P a.C F:rst cuarter

$164 $14's 33%:

$17% $15%

31 2 :

Second qua"er 16 %

15%

33"2 16h 14 %

31 %

7h rc cuarter 17h 154 33 9 17 %

15 %

3'S Fourth cua'ter 16 4 14 %

33 %

16 %

15 31"2 P~ces are as cuctea cn the %ew tc u Stccx Eccnarge rcc.~ccs.te : ace een accocacte>

Note: The Cc co'at:co s scar:ct 3 rec:crs actec an.rcre e n t~e qua'te'y a scena rate to 35 M ce' state. c ey scie ecruary 28 1973 to siccurcice's cf reccra.;anua'y 3 7.19 73 r

34 Central and South West Corporation and Subsidiary Companies Comparative Statistical and Financial Record 1978 1977 1976 1975 Sales-Kilowatt Hours (millions):

Res;dential 10,403 9.658 8 556 8.4 94 Commercial 7,936 7.461 6.8 9 6.557 Industnal 13,023 12.588 10.600 9.626 E!ectnc utdities 10,091 8.895 8.837 7.328 Other 1,148 1.085 996 941 Total 42,601 39.687 35.883 32.M6 Electric Operating Revenues (000):

Residential S 419,981

$ 377.539

$305.113

$266.034 Commercial 295,166 265.874 221.638 185.010 Industnal 358,096 329.043 245,108 181.844 Electnc utmties 218,202 156.820 125.962 83,083 Other 47,313 38.158 28.305 24.182 Total

$1,338,758

$1,167.434

$926.126

$740.153 Average Number of Customers:

Residential 1,058,485 1.024.425 995.374 968.443 Commercial 147,406 140.921 137.939 133.786 Induatnal 20,984 20.412 19.791 19.338 Other 10,038 9.690 9.408 9.013 Total 1,236,913 1.195.448 1.162.512 1.130.580 Residantial Sales Averages:

K:Icwatt-hours per customer 9,828 9.427 8.596 8.771 Revenue per customer

$396.78

$368.54

$306.53

$274.70 Revenue per kilowatt-hour 4.04C 391 C 3.57C 3.130 Total Revenue Per Kilowatt-Hour 3.14C 2.9 C 2.58C 2 25C Total Generating Capacity - Kilowatts 9,642,000 9.481.000 8,742.000 7.905.000 Fuel Data:

Average Stu cer net kwn 10,190 10 227 10.229 10.243 Cost per mil l:cn Stu

$1.533

$1.416

$1.181

$841 Cost per kwh generated (md!s) 15.62 14.48 12 05 8.61 Condensed Balance Sheet Data Total Utility Plant (000):

Onginal ccst

$3,580.066 53.090.764

$2.665.416

$2.389.957 Annual constructed additicns 514,814 455 451 294,443 240.N3 Accumulated prov sicn for depreciat:en 778,465 702.967 633.218 569.277 Capitalization (000):

Lcng-term deot

$1,137,747

$ 951.513

$ 862.438

$ 816.570 Preferred stock and premium 185,919 185.919 155.874 130.787 Ccmmon sicck equity 1,036,462 865 246 818.681 688.942

35 1974 1973 1972 1971 1970 1969 1968 7.832 7,655 7.256 6.321 5.795 5.367 4.53 7 6.025 5.878 5.517 4.951 4.518 4.230 3.830 10.490 10,188 9.513 8.612 8.105 7.793 7.110 7.550 5.985 7.705 6.450 6,408 3.627 2.575 903 870 836 781 712 674 601 32.800 30.576 30.827 27.115 25.538 21.691 18.653

$213.547

$187.637

$170.325

$149.964

$138.834

$130.002

$113.594 143.674 123 211 110.365 99.262 91.486 86.597 79.848 146.922 109.988 N.653 84.194 79.812 76.773 71.560 70.258 43.688 45.780 37.185 33.999 20.561 16.385 20.648 19.070 17.331 15.717 14.271 13.148 12.003

$595.049

$483.5 N

$138.444 5386.322 S358.402

$327.081

$293.390 944.391 920.246 892,929 865.812 841.743 823.535 802.111 131.257 128.886 126.991 123.716 121.665 120.722 119.4N 18.954 18.438 18,070 17.777 17.506 17,178 16,724 8.418 8.146 7.850 7.661 7.414 7.126 6.892 1.103.020 1.075.716 1.045.840 1.014.966 988.328 968.561 945.221 8.293 8.318 8.127 7.301 6.885 6.517 5.656 5226.12

$203.90 S190.75 5173.21 S164 94

$157 86

$141.62 2.73C 2.45C 2.35c 2.37c 240C 2.42C 2.50C 1.81 c 1.58C 1.420 1.42C 1.400 1.51 C 1.57c 7.704.000 6.378.000 6.409.000 5.757,0C0 5.383.000 4.423.000 4,119.0C0 10.340 10.464 10.462 10.544 10.715 10.833 10 711 S.537 5318 5.251 5.226 3.2C'6

$198

$.197 5 54 3.32 2.62 2.38 2.21 2.14 2.11

$2.166.304

$1.944.101 51.742.167

$1,595.161 51.476.396

$1.354.277 51.248.220 235,041 219.426 161.266 133.264 135.376 120.522 98.651 515.326 464.528 418.543 381.576 349.102 319.510 293.981 5 715.443 5 643.485

$ 616.314 5 572.220 S 502.334 5 480.695 5 422.741 130.787 85.719 59.688 59.688 59.688 59.688 59.658 5N,304 562.923 479 898 A 53.706 431.438 373.845 354 970

36 Directors and Officers Central and South West Corocration Directors TJ Banow A o Newman ahn E Tastee Cra man and Chet E =ecutue Ctt cer Pres. cent Pmonc Se'wce Company E=ecstne V:ce P es dect and Che' F ranc a:

Ancerscn C:av'on & Co HCuston cf cwa ^cma hsa C" ce' Cenfra and scu!n West Corccra! cn Durwooo Cha mer F*ecencs W Page Samvet W Wh'te. Jr P es. dent Aest Te os utat es Cor cacy t atec Pv're J & A se g ran & Cc V ce Presidert a..ere New Yor= C te ressten Cercerat.cn sesstcr 4arsas c

Joe H Foy S B Phohes Jr Jcnn H W%ams P es. cert and Chet Coerat rg C" cer Cha'rman and C%e' E=ecutwe C",cer Fet rec Cha ' man et tre Boa c anc "custcn Natarai Gas Carecrat.cn. Heusten Central anc Scuin West Corocrat:cn CNet E =ecut we C" ce*

e A4ams Cmanes Usa R W Haraf Arthur E Aasmussen Cha rman arc Che' E.=ecstae C" cer Ferrner Craman et me Bearc and Kencnck R WHson.Jr Cent'ai Power anc Let Comcary Cn;et E=ecutwe C"'cer Former Cha eman c' tre Sca d and Cnrous Cre sti Houseacia Marce Ccrocraticn Cmcago Cr e' E ecut+e C" cer. Awcc Corecrat cn Greeews Ccmxat B J Ha ns J Lamar Stal P es cent and Chret Oce at ng C" Ce' P es cert. sout**este'n E ectr c Pcwer Centra; anc Scun Aest Co cc at en Correary, Snrevecert Officers S B Phu cs Jr John E. Tautee WCham F Ma'ec n

Cna.rman and Ch e' Ewecut.ve C't.ce-E=ecutive Vice P es. cent and Treasmrer B J Harris P3m F Deuty J.

Dresrcent and CNet Cce*at ng C"'ce' P% hoi McConnel Assista-t

• easo e-r V.ce Pres cent. Gere'al Counse< and Secreta 9 Ahce Joy CLrch Actert L. Range Ass stant secretarf oce 3 es; cert aac Conecier Central and South West Services. Inc.

Officers S B Phnhos Jr W mam F. Ma ec Ma coim M Law'er Cna rmaa ano Cmet E =ecame C-" ce' v.ce P es cent aad Lease e*

V ce P es. dent. Wester Re'at ens B J Hams Edward J PavJcn Curt:s L. BcAn P etcent and Chel Cceratrg C" Cer V Ce P es ce*t Ia*

Ass. start V-Ce P es cert. Y Jenn E Ta2cee Jack C Weits Lecn E Wesner E=ecut se v ce P es cent a-a s ce P es cent. E g neer rg arc Cces: act cn Ass.stant v ce P es.cer.t P sa vd Bere ts Cr e' F ranc a! C" cer Pichard H Ccry Juha t. Hancock Pm"oI McCarnel v:ce P-es. cent Gese ertv Aarrs Ass start 7easure-

/ ce P es: cert. Gene r Course' ard sec etsf C Wayre St:ce Yvtha A Varock Pccert L. Aange bce P es deat E-c:ciee Pe at ces ass sta-t Sec etry ece P*es.ce-t and Ceruci er

=dward L. GasSneau bce P es cent Ocerarcos Ara ys s Committees of the Board cf Directors comcCsec envrely C/ nCn-emc/Cyee DireC Crs The Audit Committee is respons.b e for The Compensation and Organization Membersh=o of these comm;ttees s ccm-se ect ng and engag:ng. suCiect to stock. Committee rev:ews benett crcgrams.

ocsed cf the for.w:rg Crectors hoicer accreval the incecenr:ent ce -

managemert succession pregrams and 73 ganc, ti ed puonc acccuntants. The Auc.t cetermines compensaticn cf executa,e f

Ce H rov Committee reviews win the auchc ac-off'cers.

Cra-an core Nomnat g Cc-ee countants anc the Corporaticn s :nternal The Nominating Committee rev ews the F"acer:cx W Pr"e aud.tcrs the sccce of extemat anc Internal auc:ts and the adecuacy cf and the ccm-ccmcosmen of me Scard cf gectors 2nrur E Pasmussen arc recommencs cand: dates.cr Cra r-an cmesuarCc ' ee caance we tre Ccrocrat:cn s system of membershio'

.ntemal acccunt:ng contro:s.

aamue' W whde. er JCrn H. WOams KencrCM R WesCn or.

Cra rmar ct Pe Cc-cersat er aac C'gamcrcn Ccr-m tee

Board of Directors

' ; 7 ' s, ;,,, F..,.. ; ig o :)#, - - :

[g

g. g,.. -

pl

..4

~

,.Q..

eg 7

Qw#

m..c

4. g.~n r

y -

f u.

a;

..t

. A.Q h__ f

['

^

j

. c

,o

,r.

r.

1

>n h;'

• )

2

( lh l

~

l ? ;_

t

.t t

lf},-

4{J:f:J

.\\

r i

y,lg

%((

m

..=;.

k c

J, ;.

.. +

ll [

k lyQ s'

.JQ

.(4 f

tts

'_g * - l '.

W L.

k-Q,'eSX'.iyt}'k;.

f w.N N

i.1 k -

f Curwcod Cha ker and 8 J. Harris S. B Phdhes Jr.. T J Sartcw and A W Harcy l:fk 3.,_" ' -

a-y.)M

~. p,

.c

!.,hT h

M q,. a c0; j

..t

[

S- '

i gt.:

Q-

1. . rh t

I '

9.o

(*. l ' '-g

^<

~]

,e'4g..

h (g,1,4 g

P'

[}MI,%

[

a<

Y.

I s

g} 4 WfSVl^Nf.' !.

W l ' ~-l 7 4.]:.

?

., y l ' * ? g::M-l.,

.g p

k.

s x.

'...f..

.y -.. T:..,.-

'uk -p W

p' l J -

' L

-j 2JQ?Mit&[M

%fk M % id

.. :y "

-} _g y,;p 3

'; ! j

]

artnur E. Ras ussen..:onn E. Tautee anc v rar ck R. Wdson. Jr.

F 0 Newman and SamLel W Wnite. Jr e

Y: [* '

. Shs.i

- - ~

.,, h?

.N;,)

• f

" ' * $ <' 7 $ t[ ::; y ' 'n... '( a. :

s *- *

,

• c' s..

~,,,..-;.,*

n. < n.

. k', i p. '

I,.

}

[p, -

4't* -..

~.(

'. S (Y,]-

,,1g

/

'7 -j.

r'..,

f v.

. e *', *?

.'h I.

f.'

${^

_ b '.Y

' '.,l A '- '

I'

Yj i Q,

~b:$.;j~gl [ e/(

N

^4 y

1

. c7-

-w.:

. p j.y.

%d4 yQ :

f Y,l. - ; k * x l Y ^_p'

.' j, L V ' ).

l..,.-',

.Vt* ' ' < ' --

' 2

<. s

.u

^

.~

y'

\\, ( :.

' E '.l

%~'

5 l... A g,l{

jg h 4

'h

}

'Q

(

,, % c 9,.

.'

• y :;! < ~ {y

.c,j

, g3 c gg, <;_

Nl?.._;..

.)-

f ;,',.Y.,'

'e

m r,.

j. -,,

.,s. y.

)

h Yf]y

h

?

,p_

N

' +

" [ugft

,;f ;

' '- j-

[

.7

. $l.a x

. w, w

. m..

+.

3.,<

.;-vv

$.N,

,i%.J ( ;LT L. '...l[ n :- ' l-L,..'h.

& '% ;L : f ' ! b..

s.

e je* Cs W Page 390 J L393r Sta l JCe M PCv

,,can - A ' an

Central and Southwest Corporation One Main Place

• Dattas. Texas M2%