ML18040B098

Annual Rept 1984. W/850321 Ltr

ML18040B098
Person / Time
Site:	Susquehanna
Issue date:	12/31/1984
From:	CAMPBELL R K, CURTIS N W PENNSYLVANIA POWER & LIGHT CO.
To:	DENTON H R Office of Nuclear Reactor Regulation
References
PLA-2437, NUDOCS 8503250232
Download: ML18040B098 (56)

Text

REGULATOINFORMATIONDISTRIBUTIONSTEH(RIDS)ACCESSIONNBRs8503250232DOC~DATE80/12/31NOTARIZED~NODOCKET'FACIL:50387SusquehannaSteamElectricStationsUn)t1EPennsylva0500038750-388SusquehannaSteamElectricStationiUnit2<Pennsylva05000388AUTH,NAMEAUTHORAFFILIATIONCAHPBELLiROK,PennsylvaniaPowerLLightCo.CURTISiN,I<sPennsyluaniaPowerLLightCo~'RECIP~NAMERECIPIENTAFFILIATIONDENTONEH~REOfficeofNuc1earReactorRegulationiDirectorSUBJECT"AnnualRept'984'/850321ltdDISTRIBUTIONCODE:MOORSCOPIESRECEIVED:,LTRENCI-SIZE:/(TITLE'.AnnualFinancialReportsNOTES:1cyNHSS/FCAF/PH~LPDR2cysTranscripts.OLe07/17/821cyNMSS/FCAF/PM,LPDR2cysTranscripts'sOL:03/23/84'gn~~lKP~>>0500038705000388RECIPIENTIDCODE/NAME.NRRLB2BCPERCHRCOPIESLTTRENCI100RECIPIENTIDCODE/NAMENRRLB2LA01COPIESLTTRENCL"11INTERN:REGFILEXTERNAL:LPDRNOTES!040311223SPNRCPDR02j,].11TOTALNUMBEROFCOPIESREQUIRED:LTTR11ENCL9 gg@PennsylvaniaPower&LightCompanyTwoNorthNinthStreet~Allentown,PA18101~215/770.5151NormanW.CurtisVicePresident-Engineering&Construction-Nuclear215/770-7501MARsy~gsgMr.HaroldDenton,DirectorOfficeofNuclearReactorRegulationU.S.NuclearRegulatoryCommissionWashington,D.C.20555FILE841SUSQUEHANNASTEAMELECTRICSTATIONANNUALFINANCIALREPORTER100450PLA-2437DocketNos.50-38750-388

DearMr.Denton:

Inaccordancewith10CFR50.71(b),attachedaretencopiesofthe1984annualreportforPennsylvaniaPower&LightCo.TheannualreportforAlleghenyElectricCooperative,Inc.,willbeforwardedwhenitisissuedlaterthisyear.Verytrulyyours,N.W.CurtisVicePresident-Engineering&Construction-NuclearAttachmentscc:Mr.R.H.Jacobs-USNRCMs.M.J.Campagnone-USNRC

-NOTICE-THEATTACHEDFILESAREOFFICIALRECORDSOFTHEDIVISIONOFDOCUMENTCONTROL.THEYHAVEBEENCHARGEDTOYOUFORALIMITEDTIMEPERIODANDMUSTBERETURNEDTOTHERECORDSFACILITYBRANCH016.PLEASEDONOTSENDDOCUMENTSCHARGEDOUTTHROUGHTHEMAIL.REMOVALOFANYPAGE(S)FROMDOCUMENTFORREPRODUCTIONMUSTBEREFERREDTOFILEPERSONNEL.DEADLINERETURNDATEII~WSaaBbaaagIkLLLLLRECORDSFACILITYBRANCHP'QoSANFl5/28,PDOO'O'CiN%ANN@FRiMNMI"'3"!~I't,~ppg850325023284i231PDRADQCK05000387IPDR 43COVERPP&L'sIlluminated23-storycorporateheadquartersstandsasavisiblesymbolofPP8L'soptimismandcommitmenttoCentralEasternPennsylvania'sbrightfuture.Exceptforaperi-odduringWorldWarII,thebuildingwascontinuouslyillu-minatedfrom1929tothemid-1970swhenthelightswereturnedoutandremovedinre-sponsetotheenergycrisis.Withthecompany'sSusque-hannanuclearunitsnowonline,therelightingofthecom-pany'sGeneralOfficebuildingdemonstratesPP&L'sabilitytoservecustomerswithadequategeneratingcapacitynowandinthefuture.Thesymbolicges-turealsoprovidesanexcellentexampleoftheefficientuseofelectricity.Thehigh-pressuresodiumandmetalhalidelight-ing,whichreplacedtheearlierquartzlights,usesaboutone-fifththeelectricityoftheoldsystem.Otherphotosinthisreportshowadditionalapplica-tionsofelectricitythattouchthelivesofeveryone.CONTENTS'ighlightsPresident'sLetterYearinReviewFinancialReviewFinancialStatementsNotestoFinancialStatementsSelectedFinancialandOperatingDataCommonStockandDividendDataOfficersandDirectors4'2284446I48SERVICEAREAPennsylvaniaPower&LightCo.,basedInAllentown,Pa.,pro-videselectricservicetomorethanamillionhomesandbusi-nessesthroughouta10,000-square-mlleareain29countiesofCentralEasternPennsylvania.PrincipalcitiesinthePP8Lser-viceareaareAllentown,Bethlehem,Harrisburg,Hazleton,Lan-caster,Scranton,WilllamsportandWilkes-Barre.Withanabun-dantsupplyofreliable,economicalelectricenergy,PP&L'sser-viceareaispoisedatthecoreofanindustrialandcommercialmarketareawhere70millionpeoplelivewithina300-mlleradi-us.PleasecontactJosephR.Lesko,managerofEconomicDevelopment,toll.freeat(800)523-9854totalkaboutplantloca-tionopportunitiesintheheartlandofthisgreatNortheastmarketingarea.TOLEOOTORONTOALBANYBUFFALO1coBOSTONPITTSBURGHWASHINGTON,D.C.NEWYORKCITYI~PHILADELPHIA/ATLANTICCITYCHARLESTONRICHMOND 19841983Customers(a)CommonShareowners(a)ElectricEnergySales,Kilowatt-hours..InterchangePowerSales,Kilowatt-hours.ElectricityGenerated,Kilowatt-hours..1,039,3811,026,144162,903169,14224.5Billion23.1Billion15.4Billion16.4Billion37.9Billion37.7BillionOperatingRevenues.CapitalProvidedbyInvestors(a)..UtilityPlant(a)$1.6Billion$5.6Billion$1.2Billion$5.3BillionNetPlantinService$3.9BillionConstructionWorkinProgress...~.....$2.0BillionCommonStockData$3.8Billion$1.7BillionReturnonAverageCommonEquityEarningsPerShareDividendsDeclaredPerShareMarketPricePerShare(a)........~BookValuePerShare(a)..........TimesInterestEarnedBeforeIncomeTaxes12.309o$3.12$2.48.....$25'/s.....$25.462.3512.29Fo$3.06$2.40$20'/e$25.122.29(b)(a)Atyear.end.(b)Restatedtoreflectchangeinaccountingforcapitalleases.WherethePALIncomeDollarWentln19B43cEarningsRelnvested14cNetCostofEnergy16cDividends16cTaxes18cInterestV13cEmployees7cDepreciation13cMaterials,Services,Rents,etc.IncomoIncludesrevenues,otherIncomeandthoallowanceforfundsusedduringconstruction.

WhenSusquehannaUnit2wasputintocommercialoperationinFebruaryof1985,itmarkedthesuccess-fulcompletionofthelargestconstructionprojectinthecompany'shistory.Italsomarkedanotherout-standingyearofprogressinmeetingthelong-termneedsofourcustomersforreliableandeconomicalelectricservice.Inaddition,byconcludingthelargestfinancingprograminthecompany'shistory,itmarkedasignificantstepforwardinoureffortstoearnafairreturnforourshareowners.WithbothSusquehannanuclearunitsnowincom-mercialoperation,thecompanyhasmetitsconstruc-tionneedsformajornewgeneratingcapacityforatleastthebalanceofthiscentury.Thisexceptionallystrongcapacityposition,basedonanefficientmixofcoalandnucleargeneration,opensupimportantop-portunitiestobroadenthescopeofenergyservicesofferedtoourcustomersandtostrengthenthefinan-cialpositionofthecompany.ThecombinationofPP&L'scompetitivelypricedelectricpowerandrelativelysmallfutureconstruc-tionprogramprovidesanenormouslong-termadvantageformeetingthegrowthandeconomicde-velopmentobjectivesofthecommunitiesweserve.Recognizingthatthefinancialhealthofthecompanyislinkedtotheprosperityofourserviceareaeconomy,promotingeconomicdevelopmentinCentralEasternPennsylvaniacontinuestobethefocusofPP&L'smarketingprograms.Reliableandcompetitivelypricedelectricpowerisavitaleconomicdevelopmentresource.Asnationaltrendsclearlyshow,energyefficiencyandimprovedproductivityareincreasinglybeingachievedinhomes,businessesandindustriesthroughtheuseofelectricitybecauseofitsversatilityandhighend-useefficiency.ThestrengthofPP&L'sgeneratingcapacityandourrelativelysmallfutureconstructionprogramalsoarefactorswhichsetPP&Lapartfrommostofthenation'selectricutilities.Intheyearsahead,wewillemphasizetheimportanceofthisstrongcompetitivepositionasasupplierofelectricpowertoattractandholdjob-producingbusinessesinthecommunitiesweserve.Sales,EarningsandFinancingAidedprincipallybytherecenteconomicrecovery,kilowatt-hoursalesincreasedby6.3percentin1984over1983.Thisannualsalesgrowth,PP&L'slargestineightyears,wasledbysignificantgainsinourelectricallyheatedhomemarketandbyincreasedsalestocommercialandindustrialcustomers.Thecompany'stotalsalesincreasealsoreflectedthebenefitofthefirstfullyearofsellingelectricenergyfromSusquehannaunderourlong-termcontractwiththeAtlanticCityElectricCo.Thecompanyalsohasacontractnowawaitingap-provalbytheNewJerseyBoardofPublicUtilitiestosell945,000kilowattsofelectricpowertotheJerseyCentralPower&LightCo.fromaproportionateshareofPP&L'stotalgeneratingsystem.ThisagreementwillsubstantiallyincreasethelevelofPP&L'scon-tractualpowersalestootherutilitycompaniesoverthefourteen-yearlifeoftheagreement.Thecompany'scontracttosellpowertoJerseyCentralisconsistentwiththePennsylvaniaPublicUtilityCommission(PUC)rulinginour1983rateincreaserequest.Itwasdecidedinthatcasethat945,000kilowattsofPP&L'stotalgeneratingsystemwassurpluscapacity.SellingtheelectricoutputfromthisportionofourtotalgeneratingsystemtoJerseyCentralwillenablethecompanytorecoverthereturnoninvestmentdisallowedinthe1983ratecase.ItalsopermittedustoreducetheraterequestnowpendingbeforethePUC.Therateincreasereceivedin1983helpedimprovethecompany'sfinancialconditionmostlybyreplac-ingaportionofthenon-cashallowanceforfundsusedduringconstructiononSusquehannaUnit1withcustomerrevenues.ThisincreaseinliquidityisreflectedinPP&L'simprovedinterestcoveragewhichisimportantindeterminingthecompany'screditstanding.Thecompany's1984earningsof$3.12persharewereup6centsfrom1983.Thisearningsimprove-mentwaslargelytheresultofincreasedelectricener-gysalesreflectingtheeconomicrecoveryinourserviceareaandcolder-than-normalweather.Al-thoughthecompany'searningscontinuedatareason-ablelevellastyear,the1985earningsoutlookislargelydependentoncontinuingtoachievesalesgrowthandontheoutcomeoftherateincreasere-questweexpectwillbedecidedinAprilof1985.WiththeconstructionofSusquehannanowcom-plete,PP&L'sneedsforoutsidefinancinghavebeensignificantlyreducedfromthehighlevelsreachedinrecentyears.Andsincethecompany'srelativelysmallfutureconstructionprogramshouldbemetlargelybyinternalcashgeneration,wedonotexpecttobeissuingadditionalsharesofcommonstockfortheforeseeablefuture.OperatingPerformanceThededicatedandtalentedPP&Lpeoplewhooper-atethecompany'selectricsystem,fromfuelsupplytocustomerservice,achievedoutstandingresultsagainin1984.Thefollowingsummarizestheoperatingac-complishmentsofspecialsignificanceatthistimeforPP&L'scustomersandshareowners.~SusquehannaNuclearUnitsSinceJuneof1983,whenSusquehannaUnit1wasplacedincommercialoperationuntilitwasshutdownforitsfirstrefuelingoutageinFebruaryof1985,Unit1generated9.3billionkilowatt-hours,about21.5percentoftheelectricityPP&Lcustomersusedduringthat20-monthperiod.Inspiteofaone-timeoutagetoconnectplantsystemscommontobothnuclearunits,SusquehannaUnit1operatedatanaverageof65.7percentofitscapacityduring1984.Thisisanexcellentrecord,particularlyforanuclearplantoperatinginitsfirstfuelcycle.

Theverysuccessfulstart-uptestingprogramwhichbroughtSusquehannaUnit2on-line,whileUnit1alsowasinitsfirstyear-and-a-halfofcom-mercialoperation,againdemonstratesthe'commit-mentofPP&Lpeopletosuperiorperformanceinallaspectsofournuclearoperations.WithbothSus-.quehannanuclearunitsnowincommercialopera-tion,itisourgoalin1985toachieve,throughsafeandefficientoperation,anaveragecapacityfactorof80percentforUnit1,excludingitsrefuelingoutage,andanaveragecapacityfactorof70percentforUnit2.~TotalPP&LGenerationAgainlastyear,PP&L'spowerplantsmaintainedamongthelowesttotaloutagerateswithinthe11-memberPennsylvania-NewJersey-Marylandpowerpool.Thefactthattheseveryefficientgener-atingunitscouldonlybereplacedatseveraltimesoriginalcosts,emphasizestheimportanceofthecompany'saggressiveprogramtoextendthelifeofourexistingpowerplants.TheoutstandingperformancebyallofPP&L'sgen-eratingunitsistheprincipalreasonthatthecom-pany'sratesforelectricservicecontinuedtobebelowtheaveragechargedbothregionallyandnationally.HavingSusquehannaUnit1incommercialoperationpthroughout1984enabledthecompanytosellmorecoal-firedgenerationtoneighboringutilitieswhileusinglower-costnuclearfuelforPP&L'sserviceareai,customers.Lastyear,thisdirectadvantageofourstrongcapacitypositionandfavorablefuelmixresultedinenergysavingsofabout$171millionforPP&L'scustomers.Theessentialconditionswhichmakethisanap-propriatemarketingstrategyforPP&Larethecom-pany'sexceptionallystrongcoalandnucleargeneratingcapacityandourcompetitivelypricedratesforelectricservice.SusquehannaUnit2RateFilingAbouttwo-thirdsofthe$330millionraterequestnowpendingbeforethePUCrelatestothenetcostofbringingthesecondSusquehannaunitintocom-mercialoperation.Tomoderatetheimpactoncus-tomers,thecompanyhasrequestedthatthisrateincreasebephasedinoveraperiodofseveralyears.WithbothSusquehannaunitsincommercialopera-tion,andwithnomajornewconstructiononthehorizon,weanticipatethatweareenteringaperiodofrelativelystableratesforelectricservice.Thiswillhelpustoachieveourkilowatt-hoursalesgrowthob-jectivesandmoreeffectivelypromotetheeconomicdevelopmentofCentralEasternPennsylvania.Aswesuccessfullyconcludethemostchallengingconstructionperiodinthecompany'shistory,werecognizethatthededicationofouremployeesandthesupportofourinvestorsiswhatmadethissig-nificantachievementpossible.Itisthiswinningcombinationthatcontinuestogiveusconfidencethatwewillsuccessfullymeetthechallengesahead.Li--<<<<JP<<'<<<<Wv<<MarketingandEconomicDevelopmentCustomerserviceistheunifyingpurposelinkingallofPP&L'smarketingandeconomicdevelop-mentprograms-becausetheoveralleffectoftheseinitiativesistoprovideopportunitiestoserveourcustomersatalowercostthanotherwisewouldbepossible.Theobjectiveofthecompany'smark-etingandeconomicdevelopmentprogramsistofacilitatethemosteffectiveoperationofthePP&Lsystembyachievingoptimallevelsofkilowatt-hoursalesgrowthwhilemanagingrelativelylowergrowthinfuturepeakloads.Overthelongterm,limitinggrowthinpeakloadsbenefitscustomersbyminimizingfutureinvestmentrequirements.Likewise,promotingelectricityusagetoachieverevenuesthroughincreasedsaleswillbenefitcustomersbyreducingfutureneedsforhigherrates.Byoffsettingtheneedforrateincreases,revenuesderivedfromsalesenhancethecompany'smarketingpositionaswellasitsfinancialstrength.AchievingourmarketingobjectivesalsoprovidesthehigherPevelofsalesrevenueswhicharenecessarytopermitustomeetourlong-termobjectiveofholdingincreasesinthepriceofPP&Lelectricserviceatorbelowthegeneralrateofinflation.'II<<h<<IWW4fRespectfullysubmitted,RobertK.CampbellMarch1,1985 FDZCD0'00C7Q'E'0Q'87OperationsPP&L'snumberoneoperatingpriorityistoprovideitsemployeeswiththetools,equipmentandtrainingnecessarytoachieveafatality-freeandsafeworkenvironment.Withtheendof1984,PP&L's8,000-plusemployeeshadworkedfourconsecutiveyearswithoutanon-the-jobfatality.Inthecompany's64-yearhistory,therewereonlyfiveotherfatality-freeyears-noneofthemconsecutive.Additionally,theincidenceoflost-timeaccidentswasthelowestinthehistoryofthecompany,andwasareductionof27percentfrom1983.Consideringthatmanyjobsinelectricutilities,bytheirnature,involvehazardousconditions,theseareparticularlygratifyingachievementsforthecompanyandthosewhomakeitwork.ElectricinductionfurnacesmeltscrapsteelatKoppersCo.'sSprout-WaldronDiv.foundryinMuncy.There-sultingmoltenmetalIsshownatrightbeingpouredintoaladlebeforeitstransferintomoldstoformIn-dustrialmachineryparts.Electricenergyalsopowersoneoftheworld'smostmodernandlargeststructuralsteelrollingmills(A)atBethlehemSteelCorp.'sBeth-lehemplant.Thefacilitycanturnoutstructuralshapesin250-footlengthsattherateofoneamin-ute.AtAlumaxAluminumCorp.'sLancasterplant,aluminumiscold-rolledfrom15,000-poundingotsin-torolledsheets(B)afractionofaninchthickinanelectric-Intensiveprocesscomputer-controlledfromtheconsoleshownatthebottomofthepage(C).EarningsEarningsfor1984were$3.12pershareofcommonstock,comparedto$3.06for1983.Theslightearningsimprovementcanbeessentiallyattributedtoincreasedelectricsales,whichwererelatedtoweatherandimprovedeconomicconditions.DividendIncreasesThequarterlydividendonPP&L'scommonstockwasincreased2centspershareto62centsbeginningwiththeApril1,1984dividend.Thedividendhadbeen60centssinceApril1,1983.RevenuesandSalesOperatingrevenuesincreased$314millionto$1.56billionfor1984.Theincreasecamefromhighersales,whichreflectedanimprovedeconomyovertheseveralpreviousdepressedyears,aswellasafullyear'seffectofthe$203millionincreaseinratesapprovedinAugust1983.PP&L'sresidentialcustomersused3.9percentmoreelectricityin1984thaninthepreviousyear.Commercialandindustrialusageincreasedby6.7percent,and6.5percentrespectively.Overallenergysaleswereup6.3percent.Evenafteradjustingtheresidentialandcommercialcustomergainsforthecolder-than-normaltemperaturesinearly1984,asubstantialgaininusageisevident.Alloftheindustrialincrease,andaboutthree-quartersofthecommer-cialincrease,isunrelatedtotheweatherandprovidesanindicationofbettereconomictimesinCentralEasternPennsylvania.DemandReachesNewPeakAnearly-seasonhotspellledtoanewsummertimepeakdemandbybothPP&LcustomersandcustomersofthePennsylvania-NewJersey-Maryland(PJM)Interconnection-thepowerpoolinwhichthecompanyoperates.ThenewsummerpeakforPP&Lwas4.19millionkilowattsrecordedonJune11,1984.Thisbrokethepreviousrecordof4.03mil-lionkilowattssetinSeptember1983.ThePJMpeakdemandof35.3millionkilowattswasrecordedonJune13,1984.Theprevioushighwas34.7mil-lionkilowatts,registeredinSeptember1983.C eay4Ll'4417r9 r>gy01TfV~'0i',I1lti)fr,,U"(,UI,Jll~~g~Opgh9gQ~';4.,m<<<+I PP&L'sserviceareaboastsanumberofhigh-technol-ogycompanies.ThetechnicianatA.Johnson&Co.ofMorgantown(left),makesanadjustmenttocon-trolsfora2,000-kilowattelectron-beamfurnaceusedtomeltscraptitaniumintoingotsforreuse.Titaniumisastrong,lightweightmetalwidelyusedinthede-fenseandaerospaceindustries.Atechniciantestsequipment(A),atAccu-SortSystemsInc.ofTelford,thatutilizeslaser-beamtechnologytoreaduniversalbarcodesforcommercialinventoryandparcelroutingcontrol.Componentsforcomputerdiskdrives(B)areassembledataXebecInc.plantnearAllentown.XebeclocatedintheLehighValleylargelyduetoser-vicesprovidedbytheBenFranklinNorthEastTierAdvancedTechnologyCenter(seepage16).Puresili-concrystalsare"grown"inahigh.temperatureelec-tric-intensiveprocess(C)atAT&T'sAllentownworks.Thecrystalsareslicedintothinwaferstobecomememorychipsforthesemiconductorindustry.UnlikemostPJMcompanies,PP&Lisawinter-peakingutilitybecauseofitslargepercentageofelectric-heatcus-tomers.ThepreviousPP&Lwinterpeakuserecordof5.21millionkilowatts,setinJanuary1982,wasshatteredduringarecord-breakingcoldspellinearly1985.Thenewwinterpeakis5.52millionkilowattsrecordedonJan.21,1985,whentemper-aturesacrossPP&L'sserviceterritorydippedbelowzero.PoorerSaleNegotiatedInAugust1983,aspartoftheratedecisionthatrecog-nizedSusquehannaUnit1inPP&L'sratebase,thePennsyl-vaniaPublicUtilityCommission(PUC)ruledthatPP&Lhad945,000kilowattsofsurplusgeneratingcapacity,andwouldnotbeallowedtoearnareturnon$287millionofitsnetinvestmentingeneratingfacilitiesrepresentingthatsurplus.Afterseveralmonthsofdiscussions,PP&LsignedanagreementinMarch1984whichmakes945,000kilowattsofthecompany'sgeneratingcapacityandrelatedoutputavail-abletoJerseyCentralPower&,LightCo.(JCP&L),aNewJerseyutility.Thisamountiscoveredbythecontractthroughtheendof1995,anddecreasesannuallythereafteruntiltheexpirationofthecontractin1999.Undertheagreement,thecapacityandenergywouldnotcomefromanyoneplant,butinsteadrepresentsaproportion-ateshareofeachgeneratingunitonthePP&Lsystem.JCP&LwillpaythecostoftheportionofPP&Lgenerationbeingmadeavailable-includinganappropriatereturnoninvestmentinthatgeneratingcapacity.TheFederalEnergyRegulatoryCommission(FERC)ac-ceptedtheagreementinMay1984.AsofearlyFebruary1985,thecontractwasstillpendingreviewbytheNewJerseyBoardofPublicUtilities.~~CogenerationAgreementPennsylvania'sfirstlarge-scalecoal-cogenerationagree-mentwassignedinMay1984betweenPP&LandtheLockHaven,Pa.,millofHammermillPaperCo.Cogenerationisthesimultaneousgenerationofbothelectricityandheatenergybyautilitycustomer.Theagreementwasthefirstinthestateimplementedunderthe1978PublicUtilityRegulatoryPoliciesAct,whichrequiresutilitiestobuyelectricpowerfromprivateenergydevelopers.TheHammermillfacilitywascompletedneartheendof1984.Itburnsbituminouscoaltoproducesteamandelectricenergy.UndertheagreementPP&LwillbuyanyelectricenergyHammermillproducesbeyonditsownneeds.TheelectricityispurchasedunderPP&L'sSharedBenefitRateprogramestablishedin1982toencouragecogeneration.Overthetermoftheagreement,thepricePP&Lpaysforthisener-gyisexpectedtobebelowtheincrementalcostofenergyavailableelsewhereinthepowerpool.ThisprovidesacostbenefitwhichcanreducetheoverallcostofenergytoPP&Lcustomers.ConstructionExpendituresReflectingthewrap-upofconstructionatPP&L'sSus-quehannanuclearplant,constructionbudgetfiguresfor 1985and1986aredownsignificantlyto$272millionand$274million,respectively.Expendituresforthefollowingseveralyearsareexpectedtostabilizeatabout$275millionayear.Whileongoingmodificationsduring1985and1986atSusquehannawillrequireabout$105million,thebiggestportion-about$126million-willbespentonthecom-pany'sexistingnon-nucleargeneratingplants.Muchofthismoneywillbeusedforprojectswhicharepartofanextendedlifeprogram.Thisprogram,whichisakeycorporategoal,includeseffortstoextendgeneratingplantlifeandtomaintainandimprovetheperformanceofexistingpowerplants.Theaimistoextendasfaraspossibleintothenextcentury,thetimewhenexpensivenewgeneratingunitswillberequired.RateActivitiesThecompanyhadpetitionedtheFERCinNovember1983forabouta20percentaverageincreaseinratesfor15boroughsandoneinvestor-ownedutilitywhichbuypowerfromPP&Landresellittotheirowncustomers.TheincreasewastohavebeeneffectiveinJanuary1984.TheresalecustomersagreednottocontesttheincreaseandPP&LagreedtodelayimplementationuntilMarch1984.TheFERCacceptedthesettlementasnegotiated,whichwillincreasePP&L'sannualrevenuesbyabout$4million.Electricitytouchespeople'slivesinmanywaysthataretakenforgranted.Oxygenformedicalpurposes,aswellasotherindustrialandcommercialgasesforweldingandamyriadofotherpurposesareproducedbyseparatingtheatmosphereatanAirProductsandChemicals,Inc.plantinLancaster.Theelectric-inten-sivecryogenicdistillationprocessrequirestempera-tures300OFandmorebelowzero.Inthephotototherighttheliquefiedgasesarepumpedfromstoragetanksintoinsulatedtanktrucks.Thesimplepushlpullvalvesondetergents(A)aremolded,countedandpackedbytheheat,motionandprecisecontrolin-strumentationofelectricityattheMackWayneClosuresDiv.oftheWestCo.InWilllamsport.Hard-woodboardsdestinedforfurnitureandothercon-sumerproductsatMeiserLumberCo.inMillerstown(B&C)werealignedbylaserbeamsforprecisioncuttingandmilledbyconstant-speedsawscontrolledbytheprecisionofelectricity.LikeanumberofothersawmillsInPP&L'sterritory,MelserLumberrecentlyswitchedfromdieselpowertoall-electricoperationforeconomyanddependability.InterruptihieRatesInApril1984,PP&Lproposedaninterruptibleserviceplanforlarge-powercustomerstohelpattractnewindustriestothecompany'sservicearea,andtohelpmakesomelargeindustrialcustomersmorecompetitivewiththoseinotherstatesandcountries.Theproposalwasdesignedtolowerenergycostsand,atthesametime,limitpeakloadgrowthonPP&L'ssystem.Slowingtherateofgrowthinpeakdemand-thetimeofhighestoverallenergyconsumptionbyPP&Lcustomers-canhelpthecompanydeferconstruction,andthecostsofnewgeneratingplants,intothe21stcentury.Theinterruptiblerates,whichwereapprovedbythePUCandimplementedonJuly1,1984,areavailabletolargeindustrialcustomerswhoagreetotheinterruptionoftheirelectricuseundercertainspecifiedconditions.Thisallowsthecompanytoutilizeitsgeneratingcapaci-tyforresidentialcustomersandotherswhohaveafirmcommitmentforpower.Itcanalsopermitagreatervolumeofsalestothepowerpoolwhenthepowerismostcriticallyneeded,andwhenthecompanycanrealizeahigherpriceforthesesales.Theamountreceivedfrompowerpoolsales,abovethecostofpowerproduction,ispassedontoPP&Lcustomersintheformoflowerenergycharges,thuslower-ingtheoverallcostofserviceinthecompany'sservicearea.ARateIncreaseRequestedThecompany,onJuly27,1984,askedthePUCtoallowanannualincreaseinratesof$330million,orabout23percent,tobephasedinoverseveralyears.Abouttwo-thirds AnnualMeetingTheannualmeetingofshareownerswillbeholdattheWilliamsportScottishRiteAuditorium,348MarketSt.,Williamsport,PA17701,onWednesday,April24,1985.Formalnoticeofthemeeting,togetherwithareservationcardformeetingattendance,willbemailedtoshareownersofrecordMarch8,1985,onoraboutMarch19,1985.PP8t;LProfileEachyearthecompanypublishesthePP&LProfilecontainingmorein-depthinformationaboutthecompanythanisavailableintheannualreport.TheProfileincludesa10-yearstatisticalreviewanddiscussionofsomeofthecriticalissuesfacingPPALnowandintheyearsahead.Ifyouwouldliketoreceivethe1974-1984Profile,fillout,detachandmailthecardonthisflap.

I(i gJgr~II(Y(.I'IjIIfIjIIf<<f,fI<<ik>>h<<f<<II'b~cJg/,<<II gIlftj.fffL-.;Njlt~~lIff/fldfi/1r.I1+rfIt(1jtIIIIIILJtI'cILI'I/,'II~EIt.C;r<<gt'tQjjFl,fIIItIjf1'IF.Itt"iftr10 Electricityaffectsthequalityoflife.AnAllentownrealestatedeveloperofhistoricpropertiesenjoysanat-homemoviewithavideocassetterecorder-oneofthemostpopularitemsintoday'sconsumerelec-tronicsmarket.AMlllersvilleUniversityprofessorandhisfamily(A)enjoytheirjacuzzilgreenhouseareainthehometheydesignedandbuilt.Inadditiontoitsrecreationalandtherapeuticbenefits,theJacuzziIspartofthewater-sourceheatpumpwhichwarmsthehomeinwinterandcoolsitInthesummer.Thegreen-houseprovidespassive-solargainduringthewinterheatingseasonaspartofitsenergy-efficientdesign.ASelinsgrovearchitect/developerandhiswife(8)en-Joylate-nightrefreshmentsIntheirall-electrichome,whichwasdesignedaroundtheversatilityofelectric-ItyInlighting,heating,cooling,cookinganddozensofotherapplicationswhichenhancetheirlifestyle.oftheincreasewouldrecognizeinbaseratesthecompany'sinvestmentin,andcostofoperating,SusquehannaUnit2.TheremainingthirdwouldrepresentrecoveryofotherhighercostsofdoingbusinesssincetheAugust1983increase.Tomoderatetheeffectsoftheincrease,thecompanyproposedthatthefullamountnotbecollectedimmediately,butratherbephasedinoverseveralyears.Onlyhalfoftherequest,or$165million,wouldbecollectedintheyearstartingonApril26,1985.Thatamountrepresentsaboutan11.5percentincrease.Thesecond$165millionincrementwouldgointoeffectthefollowingyear,beginningApril26,1986.The$165millionthatwasnotcollectedinthefirstyearwouldbedeferredwithoutinterestandrecoveredinseveralsubsequentyears.IftheplanisapprovedbythePUC,PP&LwouldbecomethefirstutilityinPennsylvaniatovoluntarilyprovidearatephase-in.Aswithitspreviousrateincreaserequest,PP&Lfileda"net"request.The$330millionfigureisthenetof,ordifferencebetween,thecompany'stotalrevenueneedsof$466millionandenergycostsavingsof$136millionexpectedfromtheoperationofSusquehannaUnit2.ThebottomlineforPP&Lcustomerswouldbethe$330millionincreaseinbaserates,plusaproportionateincreaseinthePennsylvaniataxsurcharge,amountingtoapproximately$18million.AHearingsHeldAsexpected,thePUCorderedfullpublichearingsontherequestedrateincrease.Atotalof19technicalevidentiaryhearingswereheldinHarrisburg,beginninginlateOctober1984andcontinuingthroughDecember1984.Inaddition,publicinputhearingswerescheduledbythePUC,andheldineachofthecompany'ssixoperatingdivisionstogivecustomersanotheropportunitytoexpresstheirviews.ThePUCisexpectedtoreachadecisionontherateincreaserequestbyApril26,1985.WeatherizationProgramInearlyDecember1984,inresponsetoaPUCorder,thecompanyaskedthecommissiontoapproveaproposalfora$2millionweatherizationprogramaimedatassistinglow-incomecustomersincuttingenergylossesfromtheirhomes.CalledWRAP(WinterReliefAssistanceProgram),theplanisdirectedatlow-incomePP&Lcustomerswhouseelectricityforspaceheatingorwaterheating.Includedintheprogram'sfirst-yeargoalsare:theweatherizationandcaulkingof2,000ormorehomesoflow-incomecustomerswithelectricspaceheating;andaloanprogramforimprovementstoabout2,000multi-familyrentalunitsoccupiedbylow-incomepeople.WRAPgrewoutofaPUCinvestigationintohowthecompany'sratestructureaffectslow-incomecustomers.AfterconcludingtheinvestigationinAugust,thecommissionaskedthecompanytobroadenitsexistingweatherizationprogramtoincludethosecustomers.ThePUClatersetaspendinglevelof$2millionayear,andthecompanyaskedthecommissiontoallowamonthly20centchargeperresidentialcustomertofundtheprogram.

Theprogram,withmodifications,wasapprovedonJan.17,1985andwastobeputintoeffectMarch1,1985.Theoverallamountthatcustomerswillpayfortheprogram,aswellasthemethodofcollection,willbepartoftheoverallrateincreasedecisioninApril1985.SecuritySalesThecompanyraised$538millioninthecapitalmarketsduring1984.Thesaleof$125millionoffirstmortgagebondsinAprilandanothersaleforthesameamountinNovemberraised$250millionforthecompany.Interestratesforthetwoofferingswere13.50percentand12.75percent,respectively.TheLehighCounty(Pa.)IndustrialDevelopmentAuthori-tyissued$153millionofitstaxexempt10.625percentrevenuebondsin1984tofinancepollutioncontrolandsolidwastedisposalequipmentatthecompany'sSusquehannaplant.TheauthoritybondsarebackedbyPP&Lfirstmortgagebondsissuedwithtermsidenticaltotherevenuebonds.InApril,$50millionofdepositarypreferencesharesweresoldinapublicoffering.E~achdepositarypreferencesharerepresentsone-quartershareofthecompany's$13.68prefer-encestock.Another$85millionwasraisedduring1984throughthedirectissueofcommonstockunderthecompany'sdividendreinvestmentplan.WiththecompletionofSusquehannaandthedownturninfinancingrequirements,thecompanywillnolongerhavetoissuenewcommonstock.Asaresult,beginningwiththeJan.1,1985dividend,theplanwasamendedtoprovideforsharesofcommonstocktobeacquiredintheopenmarketwithnodiscountinthepurchaseprice.Becausethecommonstockisbeingacquiredintheopenmarket,dividendswhicharereinvestedduring1985willnotqualifyforthe$750($1,500onajointreturn)exclusionprovidedbyfederaltaxlaws.Electricityprovidesmanyoptionstokeeppeoplecomfortable.AyoungHazletonfamilychoseasupple-mentalelectricstoragesystemfortheirnewhome(right).TheirSESSfeaturesamodifiedheatpumpthatutilizesaninsulated120-gallonwaterstoragetankthatisheatedor"charged"duringoff-peakhourstoserveasasourceofstoredheatduringon-peakperiods.Specialoff-peakratesmakethisanat-tractiveresidentialloadmanagementoption.Acou-plestayingattheLackawannaHiltonHotel(A)inScrantonenjoystheconvenienceofanindividuallycontrolledheatpumpunitIntheirroom.Theroomunitshavetheversatilitywhichallowsheatingroomsinsomepartsofthebuilding,whilecoolingothersonthesunnysideofthehotel-anadvantagefordaysofin-betweenweatherwhereall-heatingorall-coolingsystemswouldleavesomeroomsuncomfort-able.AretiredwomanInthenewlycompletedNot-tlnghamVillageRetirementCenter(B)cancontrolherowncomfortlevel.Eachapartmenthasitsownunitallowingallresidentstosettheheatinglcoollngtemperaturethatsuitstheirindividualneeds.SusquehannaProject1984wasanotheryearofmilestonesforthecompany'sSusquehannanuclearplantnearBerwick,Pa.TheseactivitieswerecappedwhenUnit2wasplacedincommercialoperationonFeb.12,1985.~TheyearbeganonahighnoteforthecompanywhenanevaluationbytheInstituteofNuclearPowerOperations(INPO),releasedinearlyFtebruary,providedconfirmationthattheplantisbeingoperatedinasafemannerbyqualifiedpersonnel.INPO,anindustry-sponsoredorgani-zation,conductsevaluationsofalloperatingcommercialnuclearplantsintheUnitedStates.TheINPOteamvisitedPP&LinSeptember1983andexaminedtheSusque-hannaplantorganizationandadministration,technicaladequacyofthefacilityoperations,maintenance,techni-calsupport,personneltrainingandqualification,radio-logicalprotection,andchemistrymonitoring.~MechanicalandelectricalconnectionsbetweenUnit1andUnit2werecompletedinFtebruaryallowingUnit1tobeplacedbackinserviceafteranll-weekoutage,andclearingthewayforUnit2tobegintestoperation.B'4ii

~.pga1lj,pipHpl~@gll~g~~JfQt~Q7QJfli/i4<gCP-;Bi'gg"'I1~/VJi,~<3I-l/'<)'ly,W~';-.~,rp-/~It~el, rr~ciaII'.6,'/n~P;~.Jq't.a1'1.'&i'~~e~~ltv~j@PIEtV14 Electriclightingservesmanypurposes.UsingPP&L'sinnovativenewoff-peakgreenhouserate,J.L.DillonInc.,awholesalefloristinDanville,canusesupple-mentalhigh-Intensitylighting(left)tostretchthegrowthperiodofItscropto24hoursaday.Thecom-mercialrosegrowerthuscanproducemoreflowersthanIfonlydaylightwereused.Thelightsalsohelpheatthegreenhouse.Electriclightingaidscom-merce,byprovidingasaferandcheeriernighttimeenvironment(A)fordowntownshopperspatronizingstoresalongAllentown'sHamiltonMall.InadditiontoallthelifestyleandcomfortamenitiesthatelectricitypowersInsideanall-electricHazletonhome(B),Italsoprovidessecurityandaccentlightingoutside.~TheNuclearRegulatoryCommission(NRC)grantedanoperatinglicenseforUnit2onMarch23,andthefirstof764fuelassemblieswasloadedintothereactorfivedayslater.FuelloadwentextremelywellandwascompletedApril13,eightdaysaheadofschedule.~AnNRC-observeddrill,conductedinearlyApriltotestthecompany'semergencypreparednessandresponsecapabili-ties,earnedthecompanyhighmarksfromthatregulatorybody.~InMaythecompanycompletednegotiationstopurchasenuclearfueloriginallyintendedforuseinanOhionuclearplantthatwascancelled.Thepurchasewillresultinasavingsofatleast$10millioncomparedtobuyingsimilarquantitiesofnuclearfuelontheopenmarket.~AlsoinMay,thecompanyreceivedareportonanNRCreviewofSusquehannaplantoperations,conductedbeforetheUnit2licensewasissued.Thereportcommendedthewaythecompanyismanagingandoperatingthefacility.~AlicensegrantingthecompanypermissiontograduallytakeUnit2uptofull-poweroperationwasissuedbytheNRConJune27,andonJuly3theunitproduceditsfirstkilowatt-hoursofelectricalenergy.~Afteraseriesofmeticulouschecksandteststoassuretheintegrityofalltheplant'ssafetyandoperatingsystems,theunitreached100percentpoweronSept.28.~The1,230peopleofthecompany'sNuclearDepartmentalsopassedamilestoneinmid-December-anunprece-dentedcompanysafetyrecord'of3millionemployee-hourswithoutalost-timeaccident.CoalSupplyInmid-December1984,aftermorethan20yearsofpro-ducingbituminouscoalforPP&Lpowerplants,LadyJaneCollieriesceasedundergroundminingoperationsafterallre-coverablecoalreservesweredepleted.LadyJaneisaPP&Lsubsidiaryandhadprovidedthecompanywithabout250,000tonsofbituminouscoalannually-ormorethan5milliontonsthroughoutitsoperation.Thecoal-cleaningplantandrelatedloadingfacilitiesattheLadyJanesitewillcontinuetobeusedtoprocesspurchasedcoalforPP&Lpowerplants.UnitTrainSystemThe5,000thunittraindeliveryofbituminouscoaltothecompany'sBrunnerIslandpowerplantnearHarrisburg,Pa.tookplaceinMay1984.PP&Lunittrains-whicheachtripcarry10,000to13,000tonsofcoalinmorethan100cars-havebeenoperatingfor20yearsandhavedeliveredover100milliontonsofcoalin10,000tripstoPP&LpowerplantsSiltFeesPaidAfterseverallegalappeals,PP&LinlateDecemberpaidtheOfficeofSurfaceMiningintheDepartmentoftheInteriormorethan$2millionincontestedcoallandreclamationfeesandinterest.

Atissuewaswhetherthe1977FederalSurfaceMiningControlandReclamationActappliestotheremovalofwastepilescontaininganthracitesilt.Thecompany'spositionwasthatremovalofthesiltisnotsurfaceminingofcoalandshouldnotbesubjecttothefee.Thefeesarepassedthroughtothecompanybysiltsup-pliers,andareacostoffuelwhichPP&Lcustomersmusteventuallybearonelectricbills.Anthracitesilt-afinewasteproductthatresultsfromwashinganthracite-isanapproximatelyequalmixtureofanthraciteandnon-coalwastematerial.Lowinsulfur,butalsolowinenergycontent,siltcanbeburnedonlywhenenrichedwithhigherqualitycoalorpetroleumcoke.Thelow-costsiltisusedaspartofthefuelmixtureforgeneratingunitsatthecompany'sSunburyandHoltwoodpowerplants.Aretiredguestrelaxesinthesunroom(right)attheall-electric,energy-efficientNottinghamVillageRetire-mentCenter.NottlnghamVillageisanexampleofanewconceptinretirementcommunities.Builtadjacenttoamodernnursingandconvalescentfacility,thecenterprovidesindividualapartmentsforitsguestswhocanalsousecommonliving,recreationanddin-ingareas,whichprovideasenseofcommunity.Shouldtheybeneeded,doctors,nursesandadvancedhealthcareequipmentareonlymomentsawayatthenursingfacility.Electricityalsopowersmodern,high-techhealthcareequipmentatSt.Joseph'sHospitalinHazleton.Atechnicianpreparesapatient(A)fordiagnosisusingacomputedtomography(CT)scanner,whichcanxcayaverythinsliceofanatomy,providingathree-dimensionalimageclearthroughthebody.Marketing/EconomicDevelopmentThecompany'sstrategyforthe'80sistomarketitsstrongcapacitysituation,anditsabundantsupplyofelectricenergy,inwaysthatwillprovideeconomicbenefitsforCentralEasternPennsylvania.In1984,PP&Laggressivelysteppedupitsmarketingactivitiesinanefforttopromotenewjobsandincreasedproductionamongindustrialandcommercialfirmsinthecompany'sservicearea.Agoalofdevelopinganetincreaseof5,000newjobsfortheareawasmetandexceededas124neworexpandingfirmsprovidedanetincreaseof5,316jobsinPP&L'sserviceterritoryin1984.InFebruary1984,thePUCendorsedeconomicdevelop-mentinitiatives,includingratescheduleandtariffrulechanges,thatprovideincentivesforexistingcustomerstore-maininPP&L'sserviceterritoryandincreaseproduction,andfornewcustomerstolocatewithinthestate.Therateschedulechangescouldaffectnearly900industri-alandcommercialcustomerswhousetime-of-daymeteringandbilling.Customerswhotakeadvantageofthisoptionpaylowerelectricratesduringoff-peakhours,whenoverallelectricuseisless.Thefirstcustomertotakeadvantageoftheinterruptiblerateincentivediscussedearlier,wasanenergy-intensiveairseparationplantinLancaster,Pa.Thisrateisparticularlyattractivetocertaincustomerswhichhaveaveryhighenergyuseintheirproductionfacilities.Aninnovativerateputintoeffectinlate1983helpedtomakethegreenhouseindustryinCentralEasternPennsylva-niamorecompetitiveduring1984.Therateprovidesanoff-peakincentiveforgreenhouseoperatorswhousesupplementallightingintheircrops'row-ingprocess.Theincentiveratewasofferedwiththeunder-standingthatthecompanywouldbeabletointerruptthelightingloadwithonehour'snotice,iftheelectricitywasneededelsewhereduringperiodsofpeakuse.AIjfWBenFranklinPartnershipAdvancedtechnologyhasthepotentialtomakeapositivecontributiontoPennsylvania'seconomicfuture.Thedevelop-mentandattractionofhigh-technologyindustries,coupledwiththerevitalizationoftraditionalindustries,canmean aIIIIIII('IU0IUU~Icr~I0-~IU~'-==--Iglf-,~,--~~cia~~ll%',.~'1~'~Olin~ClllS~'anln~ty~~~Mll~~~KlllR&l1[1I~~'ERIK~>IIINKS<<i,I>I~UUIY1 reg5I'""<',5i<'.-5~','Sphr5'5t5l5r5g55j,5,5f505i;i5455'rr555455I5l5518(j,5 Electricityhelpspeoplehavefun.Besidesprovidinghigh-intensitylightingtoenableskierstopursuetheirsportafterdark,electricityalsopowersthe1,500horsepowercompressorsnecessaryforthesnowmakingequipmentatTanglwoodSkiAreanearLakeWallenpaupack.WithPPBL'soff-peakratein-centives,Tanglwoodisoneofanumberofskiareasthatfounditeconomicaltoswitchtoall-electricoper-ationfromdiesel-poweredcompressors.Youngandoldalikeenjoyoneofthethrill-rides(A)atDorneyParknearAllentown.Theattractionsinthe100-year-oldparkarepoweredbyelectricmotorswithacom-binedtotalofnearly900horsepower.Overheadlight-ingprovides24-hour-a-dayrecreationopportunitiesattheAllentownRacquetballClub(B).Electricityalsomakespossiblethetherapeuticbenefitsofsteamrooms,saunasandJacuzziwhlrlpoolsattheclub.A'$P'~Q,v'r~<f)emoreandbetterjobsforPennsylvanians.Amajorsteptobringabouttheseimprovementswastakenin1982whentheCommonwealthofPennsylvaniainstitutedtheBenFranklinPartnershipChallengeGrantProgramforTechnologicalInnovation.ThisledtotheestablishmentoffourlocallysupportedconsortiumsandadvancedtechnologycentersacrossPennsyl-vania.PP&LisasupportingmemberoftheNorthEastTierAdvancedTechnologyCenteratLehighUniversity,Bethle-hem,Pa.Theconsortium,madeupofrepresentativesfrombusinessandindustry,education,organizedlabor,economicdevelop-mentgroupsandfinancialinstitutions,hasestablishedthreeprimaryobjectives:~Tohelpestablishedindustriesimplementnewtechnolo-giestoimproveproductivityandprofitability.~Todiversifytheeconomicstructureoftheregionbyattractingbothlargeandsmalladvancedtechnologyfirms.~Toassiststartupfirms,or"incubatorcompanies,"throughitsvariedresources.TheNorthEastTierAdvancedTechnologyCenterhaschosenfourareasofconcentration:~CAD/CAM(computeraideddesign/computeraidedmanufacturing).~Researchprogramsinthepolymersciences,compositematerials,andman-madesourcesoffiber,rubberandplasticsasviablealternativesforuseinautomobiles,air-planesandfurniture.~Microelectronics,orsolid-statetechnologyusingthesili-conchipasthebasisfordevicesincontrolsystems,com-puters,appliancesandcommunicationproducts.~Biotechnology,whichexplorestheuseofmicroorganisms,plantandanimalcells,andenzymecatalysts,todevelopnewtechnologiestoconverttheserawmaterialsintonewproducts.TheBenFranklinPartnershipisalreadymakinganotice-ableimpactinPP&L'sservicearea,andasitsmomentumgrowsisexpectedtoprovidenewjobopportunitiesthatdidnotexistjustafewyearsago.nfl~~~PQ>jManagementChangesRobertR.F<ortuneendedaPP&Lcareero'fnearly36yearswhenheretiredJuly1,1984,asexecutivevicepresident-F<inancial.F<ortunejoinedPP&Lin1948,afterstartinghisfinancialcareerasanaccountantwiththepublicaccountingfirmofHaskinsandSellsin1940.Hebecameassistanttreasurerin1952andcomptrollerin1954.Hewasnamedvicepresident-Financialin1966,andin1975hebecameexecutivevicepresidentandadirectorofthecompany.Inanticipationofhisretirement,hedidnotstandforre-electionasadirectorattheAprilmeetingofshareowners.SucceedingFortunewasCharlesE.Russoliwhobecameseniorvicepresident-F<inancialandamemberofthecom-pany'sCorporateManagementCommitteeeffectiveMarch1,1984.HebecamechieffinancialofficeruponF<ortune'sretirement.

RussolijoinedPP&Lin1955asagraduatetrainee.AfterservingfortwoyearsintheU.S.ArmyhereturnedtoPP&Landheldvariousdataprocessingpositionsuntilhispromotiontofinancialanalystin1965.Hebecamemanager-Budgetsin1969,manager-FinancialPlanningandReportingin1971,vicepresident-Financein1979,andvicepresidentandtreasurerin1981.JohnP.KierzkowskiwasappointedvicepresidentandtreasurereffectiveMarch1,1984.KierzkowskijoinedPP&Lin1971asmanager-F<inancialResearchandwasnamedassistanttreasurerin1981.JohnR.Biggarwasnamedvicepresident-FinanceonMarch1,1984.HejoinedPP&Lin1969asanattorneyintheLegalDepartment.Hebecamemanager-FinancingServicesin1975andmanager-Financein1979.Hehadbeenanassistanttreasurersince1981.MerlinF.HertzogbecameanexecutivevicepresidentonMarch1,1984,toheadthecompany'snewlycreatedCorporateServicesDepartment.Healsowaselectedadirectorofthecompanyattheboard'sFebruary1984meeting.Hertzogbecameexecutivevicepresident-CorporateSer-vicesafternearly26yearswiththecompany.HejoinedPP&Lin1958asamathematicianspecializinginengineeringandscientificprogrammingintheF<inancialDepartment.Heheldvariousdataprocessingpositionsuntilhewasnamedmanager-Methodsin1968.In1973,hewasnameddirector-Systems&ComputerServices,andin1978,hebecamevicepresident-Consumer&CommunityServices.HertzogwasnamedtoheadtheHumanResource&DevelopmentDepartmentin1980andbecameseniorvicepresident-HR&Din1981.RobertS.Gomboswasnamedvicepresident-HumanRe-source&DevelopmentintheCorporateServicesDepartmenteffectiveMarch1,1984.GombosjoinedPP&Lin1965andwasahome-heatingrepresentativeuntil1967whenhemovedtoAllentownasastaffassistantinE<mployeeRelations.Afterfouryearsinsystemsanalysis,hebecamealaborrelationsanalystin1972,thenlaboragreementadministrator.Hewasnamedassistantdirector-UnionRelationsin1974andassistanttotheexecutivevicepresident-Financialin1977.Hebecamespecialassistanttothepresident-SusquehannacommunityrepresentativeinBerwickin1979andseniordirector-IndustrialRelationsin1981.ClairW.Nollwasnamedvicepresident-Procurement&ComputerServicesintheCorporateServicesDepartmenteffectiveMarch1,1984.NolljoinedPP&Lin1960asamethodsaccountant.In1962headvancedtoassistantsupervisor-ComputerCenterandlaterservedasseniorproceduresanalyst.Hewasnamedsupervisor-BusinessComputerSystemsin1969andfouryearslaterhebecamemanager-Systems&Programming.Hewaspromotedtodirector-Systems&ComputerServicesin1978.WilliamR.Whitewasappointedvicepresident-PowerProductioneffectiveMarch1,1984.WhitejoinedPP&Lin1950asaresultsengineeratthecompany'sformerStantonpowerplant,whereheadvancedthroughseveralpositionstoassis-tantsuperintendent.HewastransferredtoPP&L'sBrunnerIslandpowerplantassupervisqrofoperationin1969.Ayearlaterhewaspromotedtoplantsuperintendent.In1973hewastransferredtoAllentownasmanager-PowerProduction.OneoftheapplicationsofelectricitythatIsperhapsmosttakenforgrantedlsrefrigeration(right).Injustafewgenerations,peoplehavegonefromiceboxesandeverydaytripstothegrocerorbutcher,toreli-able,virtuallytrouble-freeelectricrefrigeratorswhichcanstorefreshfoodfordaysorweeks,andfrozenfoodformonths.Refrigerationhasliterallychangedthewayoursocietyfunctions.Frozenconveniencefoods,suchasthechickenrondeletsbeingpackaged(A)atVictorF.Weaver,Inc.InNewHolland,oftenplayabigpartlnmealplanningforbusy,on-the-gofamilieswithoutthetimeforfrom-scratchmealprep-aration.Conversely,electricitypowerstheefficienc-iessandwork-savingappliancesthatallowfrom-scratchinstitutionalfoodpreparation(8)atMillers-villeUniversityinMlllersville.Theuniversityiscon-vertingtoall-electricoperationtotakeadvantageoftheeconomiesandreliabilityofPP&Lelectricservice.k20 re~J'v<-jjrfhij19i'I.Z%g'L.I"'qr~,bl1/>iphji.I'L21II.hy ReviewoftheCompany'sFinancialConditionandResultsofOperationsThisreviewprovidesadiscussionoftheCompany'sfinancialconditionandresultsofoperations.Ad-ditionalinformationonthesemattersissetforthinthefinancialstatements,schedulesandnotesonpages28-43andtheselectedfinancialandoperatingdataonpages44and45.ResultsofOperationsEarningspershareofcommonstockwere$3.12in1984,$3.06in1983and$3.35in1982.Theslightearningsimprovementin1984wasprimarilyattribut.abletoa6.3'ncreaseinelectricenergysalesduringtheyear.Theincreasedrevenuesassociatedwiththehighersalessomewhatoffsettheeffectsofaninade-quaterateincreaseallowedbythePennsylvaniaPublicUtilityCommission(PUC)initsAugust1983ratedecision.Thedeclineinearningspersharein1983comparedwith1982reflectedapartialyear'seffectofthein-adequaterateincreaseandalsotheeffectsoftheeco-nomicrecessionearlyin1983.1983RateDecisionInAugust1983,thePUCissuedafinalorderontheCompany'srequesttoincreaseratestoreflecttheeffectofplacingSusquehannaUnit1incommercialoperationandtherecoveryofotherincreasedcosts.ThePUCgrantedtheCompanyanincreaseinbaseraterevenuesofapproximately$203million-some$90millionlessthantheamountrequested.ThereturnallowedontheSusquehannaUnit1plantinvestmentincludedinratebasereplacedthepreviouslyrecordednon-cashallowanceforfundsusedduringconstruction.Costssuchasemployeewages,materialsandsuppliesandoutsideskilledlaborincurredtooperateandmaintaintheunitwereincludedinelectricratesestablishedbythePUC.Theratedecision,however,didnotpermittheCompanytoearnareturnon$287millionofitsnetinvestmentintotalgeneratingfacilities.ThePUCdecidedthat945,000kilowattsoftheCompany'stotalgeneratingcapacitywasexcessandthisreducedannualrevenuesbyabout$59million.Thisdisallow-ancehasadverselyaffectedearningsavailableforcommonshareowners.However,theCompanyex-pectstorecoverthereturnoninvestmentdisallowedbythePUCwhenthesaleofcapacityandenergytoJerseyCentralPower&,LightCompany(JCP&L)commences.Seepage23foradiscussionoftheJCP&Lagreement.1984RateFilingInJuly1984,theCompanyfiledwiththePUCforanoverallincreaseinelectricratesofapproximately$330million.Theincreasereflects$466millionrelatedtotheinvestmentandoperatingcostsofSusquehannaUnit2plusotherincreasedcostsofdoingbusinesslessanestimatedreductionofabout$136millioninannualenergycostsassociatedwiththeoperationofSusque-hannaUnit2.Tomoderatetheimpactoftheincrease,theCompanyhasproposedtobillcustomersonlyone-halfoftheamountrequested($165million)inthefirst$3.60EarningsPerShare12MonthsEndedEachQuarterDollarsPerShareTimesInterestChargesEarned12MonthsEndedEachQuarterTimesEarned(PreTax)3.403.203.002.802.608081828384808182838422 yearthatnewratesareeffective.Thefullamountoftherateincreasewouldbebilledinthesecondyearandrecovery,withoutinterest,oftheamountnotcollectedfromcustomersinthefirstyearwouldbegininthethirdyear.Theissueofexcessgeneratingcapacityhasagainbeenraisedbycertainpartiesinthecurrentrateproceeding.However,theCompanyisunabletopre-dictwhatactionthePUCmaytakewithrespecttothatissueortheCompany'sproposedratephase-inplan.AdecisionbythePUContherateincreaserequestisexpectedbyApril26,1985.SaleofCapacityandEnergytoJCPdLLTheCompanyhasenteredintoanagreementtoprovideJCP&Lcapacityandenergyfrom945,000kilowattsoftheCompany'sgeneratingfacilities.JCP&LwillpayanamountequaltotheCompany'scostofservice,includingareturnoninvestmentinthegeneratingfacilities.TheagreementwillnotbecomeeffectiveuntiltheNewJerseyBoardofPublicUtilitiesmakesadeterminationthattheagreementisinthepublicinterest.Whentheagreementbecomeseffective,theCom-panywouldexpecttorecoverfromJCP&LthereturnoninvestmentingeneratingfacilitiesdisallowedbythePUCinits1983rateorder.However,iftheagreementdoesnotbecomeeffectivebeforethePUCreachesadecisionontheCompany'scurrentrateincreaserequest,theCompany'searningswouldbeadverselyaffectedbecausedepreciationandthecoststooperateandmaintainthefacilitiesincludedintheJCP&Lagreementwouldnolongerberecoveredinrateschargedcustomers.198419831982ElectricBaserateincreases....Recoveryoffuelandenergycosts........Changeincustomerusage..............SalestoAtlanticCityElectricCompany...Other(principallytaxsurcharge)......Totalelectric....$257.5$141.1$81.6(17.0)(153.9)1.731.115.2(3.6)13.318.528.1313.09.530.47.587.2Steamheat...Total.1.4$314.4(1.6)$28.8(0.9)$86.3ElectricSalesandOperatingRevenuesElectricenergysaleswere6.3%%uohigherin1984than1983and3.4%higherin1983than1982.Theincreasedsalesresultfromimprovedeconomicconditionsandextremelycoldweatherduringthe1983-1984winterseason.Ifnormalweatherconditionshadprevailedinboth1984and1983,energysalesin1984wouldhaveincreased5.1%over1983.Whencomparedwith1983,residentialsalesfor1984wereup316millionkwhor3.9%%uo,commercialsalesincreased408millionkwhor6.7%andindustrialsalesincreased494millionkwhor6.5%%uo.TheCompanyalsosold148millionkwhmoreenergytoAtlanticCityElectricCompany(Atlantic)in1984pursuanttoanagreementwherebyAtlanticpurchasesabout6%ofthecapacityandenergyoftheSusquehannaunits.Thechangesfromtheprioryearintotaloperatingrevenueswereattributabletothefollowing(millionsofdollars):SourcesofEnergyIDispositionoiEnergy50BillionsoiKwh50BillionsofKwh4040302010108081828384OHydroandpurchasedpowerONucleargenerationOOilfiredgenerationOCoal.firedgeneration08081828384OCompanyuse,linelossesandotherOInterchangepowersales8Electricenergysalestocustomers23 Baserateincreasesforcustomersunderthejurisdic-tionofthePUCwentintoeffectJanuary1982andAugust1983.Alargeincreaseinsalesofenergytootherutilitiesduring1983resultedinlowerenergycosts.Thiscausedasubstantialreductioninrevenuesapplicabletorecoveryofsuchcostsinthatyear.Salestoultimatecustomersaccountedforapproxi-mately96%oftheCompany'srevenuesfromelectricsalesoverthepastthreeyears.SuchrevenuesareunderthejurisdictionofthePUC.Theremaining4%ofrevenuesrelatetosalestoothersforresalewhichareregulatedbytheFederalEnergyRegulatoryCom-mission(FERC)asareinterchangepowersales,whichareclassifiedasacredittooperatingexpenses.NetCostofEnergyIntotal,thecostoffuelburnedin1984was6.2%lessthanin1983.ThedecreaseinfuelcostsreflectsprincipallylessoilconsumedbytheCompany'stwooil-firedgeneratingunitswhere1.5billionlesskwhwereproduced.Thiswaspartiallyoffsetbyhighercostsforcoalandnuclearfuel.Theenergyproducedbycoal-firedstationswasaboutthesamein1984asintheprioryear,butthecostofcoalconsumedwassomewhathigher.Atcoal-firedstationstheaveragecostoffuelperkwhgeneratedincreasedby4.8%.SusquehannaUnit1producedelectricitythroughoutmostof1984whereasitoperatedonacommercialbasisforonlyapartof1983.Theincreaseinnuclearfuelcostsin1984reflectstheincreasedoutputfromtheunit.In1984,thequantityofinterchangepowersoldtootherutilitieswas1.0billionkwhlowerthantheall-timehighof16.4billionkwhachievedin1983.SalestotheCompany'sowncustomersincreased1.4billionkwh,resultinginlessenergybeingavailablefor~interchangesales.SusquehannaUnit1wasoutofserviceforabouttwomonthsinearly1984topermitatie-inofcommonfacilitieswithUnit2andforcertainrepairs.Asaresult,outputfromotherunitswasrequiredtomeetcustomers'nergyneedsinsteadofbeingavailableforsalestootherutilities.Inaddition,outputfromtheCompany'soil-firedsteamstationwasdownfrom1983.Thisdecreasewasdueinparttoequipmentproblemsandalsotolessneedforenergyfromtheseunitsbyotherutilities.WagesandBenefits,OtherOperatingCostsandDepreciationWagesandemployeebenefitsandotheroperatingcostsincreasedinboth1984and1983duetoinflationandcostsrelatedtooperatingSusquehannaUnit1.Increasesindepreciationreflectadditionstoplantinservice,includingSusquehannaUnit1in1983.Theprovisionfordepreciation,asapercentofaveragedepreciableproperty,declinedfromapproximately3.3%in1982to2.7%in1983andto2.5%in1984primarilyduetotheuseofamodifiedsinkingfundmethodofdepreciationfortheSusquehannaplantinaccordancewithrate-makingtreatment.IncomeTaxesIn1982,1983and1984,theCompanyhadlossesforincometaxpurposes.ThelargeamountofinterestexpenseincurredtofinanceconstructionexpendituresandthedepreciationforincometaxpurposesofSusquehannaUnit1andUnit2weremajorfactors$1,500CapitalRequirementsMillionsofDolls$1,500SourcesofCapitalMillionsofDolfis1,2001,200900900600300300828384"858687Aclual~Procreated~WSusquehannaconstructionClOtherconstructionandnuclearfuelDOther(principallyretirementofsecurities)828384858687iActual-f-Projected~C3CapitalleaseobligationsOOutsidefinancing(salesofdebtand/orequitysecurities)RInternalsources(principallyfromopera.tlonsplusAFUDClessdividends)24 causingthetaxlosses.AtDecember31,1984,theCompanyhadtaxlosscarryforwardsofapproxi-mately$100millionforbothfederalandstateincometaxpurposes.TheCompany'sconstructionexpenditureshaveenabledittoqualifyforsubstantialinvestmenttaxcredits.Attheendof1984,anestimated$273millionofunusedinvestmentandpayroll-basedtaxcreditswereavailabletoreducefederalincometaxliabilitiesinfutureyears.Foradditionalinformationconcerningincometaxes,seetheScheduleofTaxesonpage35andNote6toFinancialStatements.CapitalExpenditureRequirementsWhenSusquehannaUnit2wasplacedincommer-cialoperationonFebruary12,1985,itmarkedtheendofanextensiveperiodofgeneratingplantconstruc-tionbytheCompany.Inthepast20years,theCompanyhasplacedintoserviceeightlargegenerat-ingunits(fourcoal,twooilandtwonuclear).Inaddition,theCompanyparticipatedintheconstruct-ionoffourjointlyownedcoal-firedunitsduringtheperiod.Completionofthetwonuclear-fueledgenerat-ingunitsattheSusquehannaplanthasdominatedtheCompany'sconstructionprogramforthepastseveralyears.ThecostoftheCompany's90%shareofthetwoSusquehannaunitsisexpectedtobeabout$3.7billion.Constructionexpendituresforthenextseveralyearsareexpectedtodecreasesubstantiallyfromthelevelsrecentlyexperiencedsincenonewgeneratingunitswillbeunderconstruction.Theschedulebelowshowsactualconstructionandnuclearfuelexpendituresfortheyears1982-1984andcurrentprojectionsfortheyears1985-1987.Construc-tionexpendituresduringthethreeyears1982-1984totaled$1.8billionandareexpectedtobeabout$0.8billionduringthethreeyears1985-1987,adeclineofapproximately$1.0billionfromthepriorthreeyears.AllotoanceforFundsUsedDuringConstruction(AFUDC)TheamountofAFUDCrecordedin1984waslessthanin1983,thefirstdecreasefollowingadecadeofsteadyincreaseswhichwereduetothegreaterlevelofconstructionworkinprogressrelatedtothetwoSusquehannaunits.TheSusquehannaunitsac-countedforabout$652millionofthetotal$667millionofAFUDCrecordedduringthethreeyears1982-1984.AFUDCwilldecreasesubstantiallyin1985followingcompletionofSusquehannaUnit2.SeeNote7toFinancialStatementsforadditionalinformationcon-cerningAFUDC.FinancingInordertofinanceitsconstructionprogram,theCompanyhashadfrequentsalesofdebtandequitysecuritiesoverthepastseveralyears.Outsidefinancingtotaled$1.8billionduringthethreeyears1982-1984.Inadditiontosecuritiessales,theCompanyincurred$441millionofobligationsundercapitalleases(primarilynuclearfuel)duringthethreeyears1982-1984.Detailsoftheamountofsecuritiessoldandotherinformationonsourcesandusesoffundsduring1982-1984aresetforthintheStatementofChangesinFinancialPositiononpage29.ConstructionandNuclearFuelExpenditures(MillionsofDollars)----Actual----198219831984----Projected---198519861987Constructionexpenditures(a)Susquehannaplant...........Transmissionanddistributionfacilities.Environmental.Other$25(b)$638$540$246$103$1151613155,1412742696755$341$32497914127265$3376284454387649422100103$749$52569193275874$832Nuclearfuel(c)Total.Allowanceforfundsusedduringconstruction(whichisincludedintheaboveamounts)..............$246$252$169$(33)(b)$9$10(a)Constructionplansarerevisedfromtimetotimetoreflectchangesinconditions.Actualconstructioncostsmayvaryfromthoseprojectedbecauseofchangesinplans,costfluctuations,environmentalregulationsandotherfactors.(b)TheSusquehannastationconstructionexpendituresareestimatedtobe$83millionin1985.ThoseexpendituresandAFUDChavebeenreducedbytheestimatedtaxreductionapplicabletoconstructioninterestincludedinthetaxlosscarryforwardsexpectedtobeusedin1985.(c)Includesbothownedandleasednuclearfuel.

TheCompanypresentlyestimatesthatoutsidefi-nancingduringthethreeyears1985-1987willbeabout$300million,or$1.5billionlessthantheamountrequiredduringthepriorthreeyears.Fundsfromsecuritiessalesandfrominternalsourceswillbeusedtofinanceconstructionexpenditures,repay$521mil-lionoflong-termdebtobligationsandmeet$172millionofpreferredandpreferencestocksinkingfundrequirements.Fundsgeneratedfrominternalsourcesareexpectedtoprovideabout80%oftotalfundsrequiredduringthethreeyears1985-1987comparedwith26%duringthethreeyears1982-1984.TentativePlansforSecuritiesSalesTheCompanyintendstoissue$192millionofsecuritiesin1985,allintheformoflong-termdebt.Theexactamount,natureandtimingofsalesofsecuritiesin1985andsubsequentyearswillbedeter-minedinthelightofmarketconditionsandotherfactors,includingthegrantingoftimelyandadequateraterelief.ImprovedPinancialConditionTheCompany'soverallfinancialconditionim-provedduring1984.Earningspershareofcommonstockincreased.Thetimesinterestchargesearnedratio(pre-tax)continuedtheupwardtrendwhichbeganin1983.Thisratioincreasedfrom2.05timesin1982to2.29timesin1983andwas2.35timesin1984.Attheendof1984,themarketpriceofthe'Company'scommonstockwas98.7%ofbookvalue.Thisisthehighestmarket-to-bookratioexperiencedbytheCom-panyinmanyyears.Fundsfromoperationsalsocontinuedafavorabletrend.Asdetailedonpage29,fundsfromoperationsin1984were$185millionhigherthanin1983.Financingflexibilityalsoimproved.Currently,therearenosignificantlimitationsundertheCom-pany'smortgageindentureorcharterontheamountofadditionaldebtsecuritiesthatcanbeissued.Lessthantwoyearsago,theearningscoveragetestofthemortgageindentureseverelylimitedtheamountofadditionalbondstheCompanycouldissue.During1984,a$100millionrevolvingcreditagree-mentwithagroupofforeignbankswasterminated.TheCompanypresentlyhasbanklinesofcredittotaling$720millionandisassessingtheappropriateleveloftheselinesinlightofthelowerfinancingrequirementsexpectedduringthenextseveralyears.TheCompany'sfinancialconditioninthenearfuturewilldependtoalargedegreeonthereceiptofadequateratereliefinthecurrentproceedingbeforethePUCandthetimelyapprovalbytheNewJerseyBoardofPublicUtilitiesoftheagieementtoprovideJCP&LcapacityandenergyfromtheCompany'sgeneratingfacilities.ImpactsofInflationCertaineffectsofinflationontheoperationsoftheCompanyhavebeenestimatedonthebasisprescribedbytheFinancialAccountingStandardsBoardandaresetforthinNote16toFinancialStatements.$6ConstructionWorkinProgressvs.NetPlantinServiceBillionsolDollars$30;BookValuePerShare<vs.MarketPricePerShare-YearEndDollarsPerShare25151082838485'6Actual~prclecred-uQi3ConstructionworkInprogressONetplantInservice*AfterSusquehannaUnit2inservice8081828384OBookvaluepershareOMarketpricepershare26 toevaluatetheCompany'sinternalaccountingcon-trols,policiesandproceduresastoadequacy,applica-tionandcompliance.DeloitteHaskins&Sells,independentcertifiedpublicaccountants,havebeenengagedtoexaminetheCompany'sfinancialstatementsandtorenderanopinionastowhethersuchfinancialstatements,consideredintheirentirety,presentfairlytheCom-pany'sfinancialposition,operatingresultsandchangesinfinancialposition,inconformitywithgenerallyacceptedaccountingprinciples.Theirex-aminationisconductedinaccordancewithgenerallyacceptedauditingstandardsandincludessuchproce-duresbelievedbythemtobesufficienttoprovidereasonableassurancethatthefinancialstatementsarenotmateriallymisleadinganddonotcontainmaterialerrors.TheCompanymaintainsasystemofinternalaccountingcontrolsdesignedtoprovidereasonable,butnotabsolute,assurancethatassetsaresafe-guardedandthattransactionsandeventsareex-ecutedinaccordancewithmanagement'sauthoriza-tionandarerecordedproperlytopermitpreparationoffinancialstatementsinaccordancewithgenerallyacceptedaccountingprinciples.Theconceptofreason-ableassurancerecognizesthatthecostofasystemofinternalaccountingcontrolsshouldnotexceedthebenefitsderivedandthatthereareinherentlimita-tionsintheeffectivenessofanysystemofinternalaccountingcontrols.Fundamentaltothecontrolsystemistheselectionandtrainingofqualifiedpersonnel,anorganizationalstructurethatprovidesappropriatesegregationofdutiesandtheutilizationofwrittenpoliciesandprocedures.Inaddition,theCompanymaintainsaninternalauditingprogramTheBoardofDirectors,actingthroughitsAuditCommittee,overseesmanagement'sresponsibilitiesinthepreparationofthefinancialstatements.Inperformingthisfunction,theAuditCommittee,whichiscomposedofdirectorswhoarenotemployeesoftheCompany,meetsperiodicallywithmanagement,theinternalauditorsandtheindependentcertifiedpublicaccountantstoreviewtheworkofeach.DeloitteHaskins&SellsandtheinternalauditorshavefreeaccesstotheAuditCommitteeandtotheBoardofDirectors,withoutmanagementpresent,todiscussinternalaccountingcontrol,auditingandfinancialreportingmatters.IPt}Management'sReportontheFinancialStatementsThemanagementofPennsylvaniaPower&LightCompanyisresponsibleforthepreparation,integri-tyandobjectivityofthefinancialstatementsandothersectionsofthisannualreport.ThefinancialstatementshavebeenpreparedinconformitywithgenerallyacceptedaccountingprinciplesandtheUniformSystemofAccountsprescribedbytheFederalEnergyRegulatoryCommission.Inprepar-ingthefinancialstatements,managementmakesinformedestimatesandjudgmentsoftheexpectedeffectsofeventsandtransactionsbaseduponcurrent-lyavailablefactsandcircumstances.Auditors'pinionOeloitteHaskias+SellsCertifiedPublicAccountantsOneWorldTradeCenterNewYork,NewYork10048TotheShareownersandBoardofDirectorsofPennsylvaniaPower&LightCompany:WehaveexaminedthebalancesheetsofPennsylvaniaPower&LightCompanyasofDecember31,1984and1983andtherelatedstatementsofincome,earningsreinvested,andchangesinfinancialpositionforeachofthethreeyearsintheperiodendedDecember31,1984.Ourexaminationsweremadeinaccordancewithgenerallyacceptedauditingstandardsand,accordingly,includedsuchtestsoftheaccountingrecordsandsuchotherauditingproceduresasweconsiderednecessaryinthecircumstances.Inouropinion,suchfinancialstatementspresentfairlythefinancial,positionoftheCompanyatDecember31,1984and1983andtheresultsofitsoperationsandthechangesinitsfinancialpositionforeachofthethreeyearsintheperiodendedDecember31,1984,inconformitywithgenerallyacceptedaccountingprinciplesappliedonaconsistentbasis,afterrestatementforthechange,withwhichweconcur,inthemethodofaccountingforleasesasdescribedinNote2ofthefinancialstatements.February4,198527 StatementOfInCOme(ThousandsofDollars)198419831982OperatingRevenues(Note3)OperatingExpensesNetcostofenergyFuelPowerpurchases.Interchangepowersales720,670171,953(647,186)768,583186,955(740,964)633,69459,571(302,149)$1,562,782$1,248,397$1,219,548EVagesandemployeebenefitsOtheroperatingcostsDepreciation.Incometaxes(Note6)Taxes,otherthanincomeDeferredSusquehannaenergysavingsnetofoperatingexpenses(Note4)OperatingIncomeOtherIncomeand(Deductions)Allowanceforequityfundsusedduringconstruction(Note7)DeferredSusquehannacapitalcosts(Note4).Incometaxcredits(Note6)Other-net..............................IncomeBeforeInterestChargesInterestChargesLong.termdebt...................ShorttermdebtandotherAllowanceforborrowedfundsusedduringconstruction245,437232,632219,002118,763185,784154,2061,155,824406,95864,743(718)62,623(4,830)121,818528,776280,32833,740(104,195)209,873214,574211,752166,839107,885112,055125,47019,892958,467289,930131,36229,93521,976(9,518)173,755463,685258,62929,231(120,186)167,674391,116171,182142,78892,22287,489111,668996,465223,08390,29577,744(588)167,451390,534239,76928,007(156,128)111,648NetIncome-BeforeDividendsonPreferredandPreferenceStock.DividendsonPreferredandPreferenceStock.....EarningsApplicabletoCommonStock.......EarningsPerShareofCommonStock(a)...AverageNumberofSharesOutstanding(thousands)318,90392,145$226,758$3.1272,767296,01185,838$210,173278,88668,314$210,57268,64262,809$3.06$3.35DividendsDeclaredPerShareofCommonStock....$248$2.40$2.32(a)Basedonaveragenumberofsharesoutstanding.28SccaccompanyingSchedulesandNotestoFinancialStatements.

StatementofChangesinFinancialPosition(ThousandsofDollars)'SourceofFundsFundsfromoperationsNetincomeCharges(credits)toincomenotinvolvingworkingcapitalDepreciationAmortizationofpropertyundercapitalleases..Noncurrentdeferredincometaxesandinvestmenttaxcredits-net................DeferredSusquehannacosts-net............Allowanceforfundsusedduringconstruction..OtherOutsidefinancingCommonstock.Preferredandpreferencestock.Firstmortgagebonds.Securedtermnotes.Nuclearfueltrustnotes-netincrease...Short-termdebt-netincrease(decrease).Noncurrentcapitalleaseobligations..........Workingcapital(excludingdebt)-decrease(a).1984$318,903118,76338,649125,038718(168,938)2,502435,63584,20350,000403,250(85,200)452,25353,424$941,3121983$296,011107,88529,66978,178(10,043)(251,548)694250,84681,415106,000175,00029,455391,870104,644176,767$924,1271982278,88692,2227,44220,404(246,423)1,208153,739147,47584,000365,674300,00050,000(14,944)932,205220,42284,751$1,391,117ApplicationofFun'dsConstructionexpendituresAdditionstonuclearfuel-ownedandleased..Allowanceforfundsusedduringconstruction.SecuritiesretiredPreferredandpreferencestockFirstmortgagebonds.Securedtermnotes.Long-termbankloans-netdecrease..Nuclearfueltrustnotes-netdecrease.Reductioninnoncurrentcapitalleaseobligations..Dividendsonpreferred,preferenceandcommonstockWorkingcapital(excludingdebt)-increase(a)....Other-net.$421,697103,518(168,938)356,27726,80380,154100,000206,95747,492273,23639,76217,588$941,312$648,661100,157(251,548)497,27012,80459,84250,000122,64639,515251,18213,514$924,127$757,87874,203~(246,423585,6586,597178,000375,000559,59711,675216,6011756631,321,117(a)Changesincomponentsofworkingcapital(excludingdebt)CashAccountsreceivable.Unbilledandrefundablerevenues,netofdeferredtaxes...Fuel(coalandoil)Accountspayableandaccruedtaxes.................Capitalleaseobligationsduewithinoneyear...........Other-net.Increase(Decrease)$(299)1,917(4,680)70,771(32,277)(26,267)30,597$39,762$1917,889(130,805)(29,992)(7,377)(5,999)(10,674)$(176,767)$82760,894(63,869)(6,746)(20,636)(29,889)(25,432)$(84761)SeeaccompanyingSchedulesandNotestoFinancialStatements.29 BalanCeSheetatDecember31(ThousandsofDollars)AssetsUtilityPlantPlantinservice-atoriginalcostElectricSteamheatLessaccumulateddepreciationConstructionworkinprogress-atcostNuclearfuelinprocess-atcost.Leasedproperty-netofamortization(Note2)1984$4,876,1638,6614,884,8241023,8643,860,9602,020,83947,475401,5276,330,8011983$4,761,1518,7044,769,855922,5543,847,3011,730,22810,609369,3285,957,466InvestmentsAssociatedcompanies-atequityReceivablefromlitigationsettlementNonutilitypropertyandother-atcostorless...17,71427,50011,41356,62716,61428,5008,41053,524CurrentAssetsCash.Accountsreceivable(lessreserve:1984,$5,486;1983,$5,020)CustomersInterchangepowersales.OtherUnbilledrevenuesFuel(coalandoil)-ataveragecost.Materialsandsupplies-ataveragecost....................Commonstockheldfordividendreinvestmentprogram(Note8).Other6,454105,85746,4685,24152,064197,86121,22212,82050,718498,7056,753109,93439,5106,20556,744127,09021,40015,743383,379DeferredDebits24,650$6,910,78324,140$6,418,50930SeeaccompanyingSchedulesand¹testoFinancialStatements.

CapitalizationCommonequityCommonstockCapitalstockexpenseEarningsreinvested.Liabilities1984$1,307,267(16,805)606,5251,896,9871983$1,223,064(15,973)560,8581,767,949PreferredandpreferencestockWithsinkingfundrequirementsWithoutsinkingfundrequirements.Long-termdebt738,027231,3752,528,5315,394,920714,830231,3752,307,0735,021,227CurrentLiabilitiesCommercialpaperandothernotesLong-termdebtduewithinoneyearCapitalleaseobligationsduewithinoneyear(Note2)........Accountspayable.Taxesaccrued.InterestaccruedDividendspayableDeferredincometaxes.EnergyrevenuestoberefundedOther.104,80075,97570,653117,05434,84969,50069,54625,48698,44137,037703,341190,00080,17644,38692,56327,06364,57864,4282777393,39632,815717,178DeferredCreditsandOtherNoncurrentLiabilitiesDeferredinvestmenttaxcredits.Deferredincometaxes.Capitalleaseobligations(Note2)Other.107,130336,617330,87437,901812,522111,038205,916324,94238,208680,104CommitmentsandContingentLiabilities(Note14)86,910,783$6,418,509SeeaccompanyingSchedulesandNotestoFinancialStatements.

ScheduleofCapitalStockatDecember31PreferredStock-$100par,cumulative(a)4'/s%%uoSeries.................................PreferenceStock-nopar,cumulative(a).....CommonStock-nopar(a).Dividendreinvestmentinstallmentsreceived.SharesAuthorized629,93610,000,0005,000,00085,000,000SharesOutstanding1984530,1894,972,1064,191,72474,512,797OutstandingThousandsofDollars19841983$53,019497,211$53,019519,176$1,307,267$1,222,393671$1,307,267$1,223,064$550,230$572,195$419,172$374,010SinkingFundProvisions(c)SharestobeRedeemedRedemptionAnnuallyPeriodWithSinkingFundRequirementsSeriesPreferred7.40%7.50%7.75%8.00%8.00%,Second.............8.25%8.75%9.24%10.75%(e).................11.00%,Adjustable(e)(f)....11.00%(e).................11.25%(e).................14.00%%uo(e).................Preference$8.625(e).................$11.00$11.60(i).$13.00$13.00,Second(i)..........$13.68(i).$15.00(i).1985-200319851985-19881985-20021985-19891985-19891985-20041985-20051986-19901989-199319881989-1998(g)16,000150,000120,00025,00020,000100,00030,000(d)30,000(d)53,000(d)30,000260,00015,000(g)1986-19901985-20001989-20081985-19981989-20081990-20091988-2007102,00025,000(d)25,000(d)12,500(d)25,000(d)25,000(d)25,000(d)DetailsofPreferredandPreferenceStock(b)OptionalRedemptionPricePerSharc1984$104.14103.33102.59112.00103.56103.68110.00115.00115.00125.00125.00125.00123.00None106.05(h)114.00106.50114.00114.00120.00SharesOutstanding1984304,000150,000480,000450,000100,000500,000600,000589,550265,000150,000260,000150,000340,000510,000377,702500,000154,022500,000500,000500,000$30,40015,00048,00045,00010,00050,00060,00058,95526,50015,00026,00015,00034,00051,00037,77050,00015,40250,00050,00050,000$738,027$32,00015,00060,00047,50010,00050,00060,00064,82126,50015,00026,00015,00034,00051,00040,82050,00017,18950,00050,000$714,830OutstandingThousandsofDollars19841983WithoutSinkingF<undRequirements4'/BoPreferred...............SeriesPreferred3.35%4.40%4.60%8.60%9.00%%uoPreference$8.00.$8.40.$8.70.110.00103.50102.00103.00107.00107.00103.00104.00101.00530,18941,783228,77363,000222,37077,630350,000400,000400,000$53,0194,17822,8786,30022,2377,76335,00040,00040,000$231,375$53,0194,17822,8786,30022,2377,76335,00040,00040,000$231,37532Seeaccompanying¹tcstoFinancialStatetnents.

Increases(Decreases)inCapitalStock(sharesandamountinthousands)19841983SharesAmountSharesAmount1982SharesAmountCommonStockPublicoffering.Dividendreinvestmentplan......Employeestockownershipplan...-SeriesPreferredStock(j)7.40%.7.75%.8.00%.9.24%.11.00%%uo,Adjustable..............11.00%.11.25%14.00%PreferenceStock(j)$11.00$11.60$13.00$13.00,Second$13.684,178$84,875(16)(1,600)(120)(12,000)(25)(2,500)(59)(5,866)(30)(3,050)(18)(1,787)50050,0003,874$81,843(16)(1,600)(25)(2,500)(29)(2,935)15015,00026026,00015015,000(33)(3,268)50050,000(25)(2,500)4,000$77,1243,97169,93043702(16)(1,600)(17)(1,667)34034,000(18)(1,771)(16)(1,559)50050,000(a)Eachshareofpreferred,preferenceandcommonstockentitlestheholdertoonevoteonanyquestionpresentedtoanysharcowners'eeting.(b)Liquidationpricespcrshareofpreferredstock(payableinpreferenceoverthepreferencestock)andpreferencestockareasfollows(plusineachcaseanyunpaiddividends):InvoluntaryVoluntaryClassLiquidationLiquidation49'%referred$100$100SeriesPreferred$100Redemptionpriceineffect.Preference$100Redemptionpriceineffect,exceptforthe$8.625Serieswhichis$100.(c)Theaggregateamountofsinkingfundredemptionrequire-mentsthrough1989are(thousandsofdollars):1985,$48,897;1986,$61,850;1987,$61,850;1988,$86,950;1989,$58,450.(d)Oncertainsinkingfundredemptiondates,theCompanymayredeemadditionalsharesuptothenumberofsharesoftheseseriesrequiredtoberedeemedannually.(e)Intheeventthereisalossofcertainfederalincometaxbenefitstocorporateholdersofthesestocks,theCompanywouldberequiredtomakeindemnitypaymentstotheownersuponthesaleorredemptionofthestockstoprovideanagreeduponeffectiveyieldafterfederalincometaxes.TheCompanyestimatesthatasofDecember31,1984itcouldberequiredtomakesuchindemnitypaymentsinthefuturenotinexcessof$5.1million.(f)EffectiveAprilI,1988,thedividendrateissubjecttoaone-timeadjustmentpursuanttoaformulabasedonthethencurrentprimerate.(g)The14.00%PreferredStockhasasinkingfundprovisionwhichrequiresredemptionofthefollowingnumberofsharesannuallyat$100pershare:October1,1986.1987,85,000;1988.1989,51,000;1990,68,000.(h)The$11.00PreferenceStockmaynotberefundedthroughcertainrefundingoperationspriortoJuly1,1985.(i)Ownershipofthe$11.60,$13.00,SecondSeries,$13.68and$15.00PreferenceStocksisevidencedbyDepositaryPrefer.enceShares,eachrepresenting'/4shareofPreferenceStock.(j)DecreasesinPreferredandPreferenceStocksrepresent:(i)theredemptionofstockpursuanttosinkingfundrequirements,or(ii)sharesreacquiredthroughmarketpurchasesandsubse-quentlycancelled.Thereacquiredandcancelledsharesareusedtomeetsinkingfundrequirements.SecaccompanyingNotestoFinancialStateinents.33 SCheduleOfLOng-TermDebtatDecember31FirstMortgageBonds(a)15/o9~/s%%uo1ls/4%%uo.15%97/s%%uo3'Ys%%uo15%16'/s%.14'/4'%%uo.16'/s%%uo.16'/s%.16'/s%.16'/s%.12'/s%%uo.16'ls'%%uo.16'/s%4/s%to16'/2%5s/s%to8'/s%7'!4%to9'/4%%uo.8'/4%to9s/4%.12s/4%to15'/s%%uoPollutioncontrol5s/s%SeriesA.77/s%to8'/s%SeriesC.11'/4%to11'/s%SeriesD10s/s%%uoSeriesE.10'eriesF.MaturityDate(b)February1,1984June1,1984December15,1984February1,1985June1,1985August1,1985February1,1986August1,1986December12,1986August1,1987September1,1987August1,1988September1,1988February1,1989August1,1989September1,19891990.19941995-19992000-20042005-20092010.2014(c)(c)(c)March1,2014September1,20141984$16,66533,32925,00016,67030,90050,00036,00010,40010,10010,40010,0007,00010,400479,300140,000345,000475,000450,00023,34020,00070,00037,750115,5001983$16,66533,32930,00016,66533,32925,00016,67030,90050,00036,00010,40010,10010,40010,0007,00010,400354,300140,000345,000475,000325,00023,50020,00070,000OutstandingThousandsofDollarsOtherLong-TermDebtSecuredtermnotes(a)(d).MiscellaneouspromissorynotesUnamortized(discount)andpremium-net.LessamountduewithinoneyearMarch31,19911985-19892,422,754200,0008092,623,563(19,057)2,604,50675,975$2,528,5312,099,658300,0007962,400,454(13,205)2,387,24980,176$2,307,073(a)SubstantiallyallutilityplantissubjecttothelienoftheCompany'sfirstmortgageandcertainutilityplantisalsosubjecttothelienofasecondmortgage.(b)Aggregatelong.termdebtmaturitiesthrough1989are(thousandsofdollars):1985,$75,975;1986,$98,623;1987,$47,429;1988,$21,511;1989,$28,375.Maximumsinkingfundrequirementsaggregate$33.7millionthrough1989andmaybemetwithpropertyadditionsorretirementofbonds.(c)Pollutioncontrolbondsmatureannuallynsfollows(thou.sandsofdollnrs):(i)SeriesAonMay1,1985,$640;1986.2002,$900;2003,$7,400(ii)SeriesConApril1,2000,$4,000;2006-2009,$2,000;2010,$8,000(iii)SeriesDonNovember1,2002,$15,000;2012,$55,000.(d)Variableinterestrate.Seeaccompanying¹testoFinancialStatements.

5ScheduleOfTaxeS(ThousandsofDollars)IncomeTaxExpense(Note6)IncludedinoperatingexpensesProvision-FederalStateDeferred-FederalStateInvestmenttaxcredit,net-Federal...IncludedinotherincomeanddeductionsProvision(credit)-FederalStateTotalincometaxexpense-FederalStateDetailofdeferredtaxesinoperatingexpensesTaxdepreciation.Testoperationofgeneratingunit..........DeferredSusquehannaenergysavingsnetofoperatingexpenses..............Unbilledrevenues.Stateutilityrealtytax.....Other.1984$51,79011,24363,033123,8442,815126,659(3,908)$185,784$(51,370)(11,253)$(62,623)$120,3562805$123,161$120,232(2,780)(2,287)14,888(3,894)$126,6591983$15,8236,78722,61094,689(938)98,751(4,306)$112,055$(15,216)(6,760)$(21,976)$90,990~911$90,079$101,728(10,856)(11,411)11,2663,024$93,7511982$55,1099,76264,87155,351(591)54,760(32,142)$87,489$(67,981)(9,768)$(77,744)$10,337~592$9,745$58,024(3,373)2,213(2,104)$54,760ReconciliationofFederalIncomeTaxExpenseIndicatedfederalincometaxonpre.taxincomeatstatutorytaxrate(46%)Reductiondueto:AFUDC,lessunusedconstructioninterestdeduction..Taxandpensioncost.DeferredSusquehannacapitalcosts...............Other.TotalincometaxexpenseEffectiveincometaxrate$203,35077,6565,719(331)(2,855)80.189$123,16127.9%$177,60165,0886,31413,7702,35087,522$90,07923.3%$132,770110,8276,8385,365123,025$9,7453.4%Taxes,OtherThanIncomeStategrossreceipts.StatecapitalstockStateutilityrealtySocialsecurityandother$66,71123,04448,31616,135$154,206$60,11220,07431,80313,481$125,470$56,51518,24326,59110,319$111,668SeeaccompanyingNotestoFinancialStatements.35 StatementOfEarningSReinVeSted(ThousandsofDollars)198419831982Balance,January1AddNetIncomeDeductCashdividendsdeclaredPreferredstock-atrequiredannualrates..........Preferencestock-atrequiredannualrates.........Commonstock-pershare:1984,$2.48;1983,$2.40;1982,$232Issuancecostofretiredpreferredandpreferencestock.....Balance,December31$560,858318,903879,76147,43744,708181,091273,236$606,525$516,162296,011812,17347,26838,570165,344133251,315$560,858$453,885278,886732,77138,73029,584148,2878216,609$516,162NotestoFinancialStatements1.SummaryofAccountingPoliciesV"significantsubsidiary"asthattermisdefinedbytheSecuritiesandExchangeCommission.36AccountingRecordsAccountingrecordsaremaintainedinaccordancewiththeUniformSystemofAccountsprescribedbytheFederalEnergyRegulatoryCommission(F<ERC)andadoptedbythePennsylvaniaPublicUtilityCommission(PUC).AssociatedCompaniesInvestmentsinunconsolidatedsubsidiaries(allwhollyowned)andinSafeHarborWaterPowerCorporation(ofwhichtheCompanyownsone-thirdoftheoutstandingcapitalstockrepresentingone-halfofSafeHarbor'svotingsecurities)arerecordedusingtheequitymethodofaccounting.Unconsoli-datedsubsidiariesoperateintheUnitedStatesandareengagedincoalmining,holdingcoalreserves,oilpipelineoperationsandrealestateinvestment.TheCompanybelievesthatitsfinancialpositionandresultsofoperationsarebestreflectedwithoutconsolidationofthesesubsidiariessincetheyarenotengagedinthebusinessofgeneratingordistributingelectricity.Allunconsolidatedsubsidiariescon-sideredintheaggregatewouldnotconstituteaUtilityPlantandDepreciationAdditionstoutilityplantandreplacementofunitsofpropertyarecapitalizedatcost.Thecostofunitsofpropertyretiredorreplacedisremovedfromutilityplantaccountsandchargedtoaccumulatedde-preciation.Expendituresformaintenanceandre-pairsofpropertyandthecostofreplacementofitemsdeterminedtobelessthanunitsofpropertyarechargedtooperatingexpenses.Forfinancialreportingpurposes,depreciationiscomputedonastraight-linemethodusingratesbasedontheestimatedusefullivesofproperty,withtheexceptionoftheSusquehannanuclearplantwhichisdepreciatedonamodifiedsinkingfundmethod,whichmethodisalsousedforrate-makingpurposes.Provisionsfordepreciation,asapercentofaveragedepreciableproperty,approximated2.5%%uoin1984,2.7'n1983and3.3%%uoin1982.CostofDecommissioningNuclearPlantAnannualprovisionfordecommissioningcostsoftheSusquehannanuclearplantequaltotheamount allowedforrate-makingpurposesischargedtooper-'tingexpense.Suchamounts,netofincometaxes,areinvestedinsecuritieskeptinasegregatedac-countwhichcanbeusedonlyforfuturedecommis-sioningcosts.AllowanceforFundsUsedDuringConstruction(AFUDCJAsprovidedintheUniformSystemofAccounts,thecostoffundsusedtofinanceconstructionprojectsiscapitalizedaspartofconstructioncost.Thecom-ponentsofAFUDCshownontheStatementofIncomeunderotherincomeanddeductionsandinterestchargesarenon-cashitemsequaltothecostoffundscapitalizedduringtheperiod.Theequityfundscomponentisreducedbytheincometaxsavingsrealizedduetothetaxdeductibilityofconstruction-relatedinterest.AFUDCservestooff-setontheStatementofIncometheinterestchargesondebtanddividendsonpreferredandpreferencestockincurredtofinanceconstruction.Inaddition,areturnoncommonequityusedtofinanceconstruc-tionisimputed.SeeNote7toFinancialStatementsforinforma-tionconcerningalimitationofthetaxreductionreflectedinAFUDCduetotheCompany'staxlosses.catedtotheindividualcompaniesbasedontheirrespectivetaxableincomeorlossandinvestmenttaxcredits.IncometaxesapplicabletotheCompanyareallo-catedtooperatingexpensesandotherincomeanddeductionsontheStatementofIncome.Underotherincomeanddeductions,theincometaxcreditsrelateprincipallytothetaxreductionsassociatedwiththeinterestexpensewhichisoffsetbytheborrowedfundscomponentoftheallowanceforfundsusedduringconstruction.Deferredincometaxesarerecordedfortimingdifferencesbetweenbookandtaxableincometotheextenttheyarepermittedinratedeterminationsbyregulatoryagencies.Thetwoprincipalitemsforwhichdeferredtaxesarenotcurrentlyrecordedare(i)certainpensioncostsandemployee-relatedtaxescapitalizedforbookpurposesbutdeductedcurrentlyforincometaxesand(ii)aportionoftaxdepreciationinexcessofbookdepreciationrelatedtopropertyplacedinservicepriorto1980.Investmentandpayroll-basedtaxcreditsresultinareductionoffederalincometaxespayable.Suchtaxcredits,otherthancreditsresultingfromcontribu-tionstotheemployeestockownershipplan,arede-ferredwhenutilizedandamortizedovertheaveragelivesoftherelatedproperty.SeeNote6toF<inancialStatementsforadditionalinformationconcerningincometaxes.CapitalizationofLeasesEffectiveasofJanuary1,1984,certaincapitalleasedpropertyandrelatedobligationswerere-corded.Leasedpropertyisrecordedatthepresentvalueoffutureleasepaymentsandisamortizedinamannersuchthatthetotalofinterestontheleaseobligationandamortizationoftheleasedpropertyequaltherentalexpenseallowedforrate-makingpurposes.SeeNote2toFinancialStatementsforadditionalinformationconcerningthisaccountingchange.NuclearFuelTherentalcostofnuclearfuelischargedtoexpenseasthefuelisusedforelectricgeneration.UndertheNuclearWastePolicyActof1982,theU.S.DepartmentofEnergy(DOE)isresponsibleforthepermanentstorageanddisposalofspentnuclearfuelremovedfromnuclearreactors.TheCompanycur-rentlypaysDOE<afeeforfuturedisposalservicesandrecoverssuchcostsincustomerrates.RevenuesRevenuesarerecordedbasedontheamountofelectricitydeliveredtocustomerstotheendofeachaccountingperiod.Thisincludesunbilledrevenuesrepresentingtheamountcustomerswillbebilledforelectricitydeliveredfromthetimemeterswerelastreadtotheendoftherespectiveaccountingperiod.TheCompany'sPUCtariffscontainanenergycostrateunderwhichcustomersarebilledanestimatedamountforfuelandotherenergycosts.Anydiffer-encebetweentheactualandestimatedamountforsuchcostsiscollectedfromorrefundedtocustomersinasubsequentperiod.Revenuesapplicabletoener-gycostratebillingsarerecordedatthelevelofactualenergycostsandthedifferenceisrecordedaspayabletoorreceivablefromcustomers.IncomeTaxesTheCompanyanditssubsidiariesfileconsolidatedfederalincometaxreturns.Incometaxesareallo-RetirementPlanTheCompanyhasanoncontributoryretirementplancoveringsubstantiallyallemployees.Companycontributionstotheplanincludecurrentservicecostsandallamountsrequiredtoamortizeunfundedpriorservicecostsoverperiodsofnotmorethan20years.2.LeaseAccountingChangeIn1984,inaccordancewithStatementofFinancialAccountingStandardsNo.71"AccountingfortheEffectsofCertainTypesofRegulation,"theCom-panycapitalizedcertainleasedpropertyandobliga-tionswhichhadnotpreviouslybeenrecognizedinthefinancialstatements.TheBalanceSheetandStatementofChangesinFinancialPositionforperiodspriorto1984havebeenrestatedtoreflectretroactiveapplicationofthischange.Thechangehadnoeffectonoperatingrevenues,netincomeorretainedearnings.Detailsofpropertyundercapitalleasesareasfollows(thousandsofdollars):

Nuclearfuel.Vehiclesandmiscellaneousequipment..............Oilstoragetanks..........Otherproperty............December3119841983$396,071$330,39969,05825,0231716362,83025,02322671507,315440,923Lessaccumulatedamortization....105,78871,595Propertyundercapitalleases...$401,527$369,328FutureminimumleasepaymentsforcapitalleasesatDecember31,1984(excludingnuclearfuel)wouldaggregate$104.6million,including$32.7millionofimputedinterest.Duringthefiveyearsending1989,suchpaymentswoulddecreasefrom$18.5millionperyearto$8.2millionperyear.FuturenuclearfuelleasepaymentswillbebasedonthequantityofheatproducedbytheSusquehannaunits.Asleasednu-clearfuelisamortized,theCompanynormallysellsandleasesbackadditionalfuel,therebymaintainingtheunamortizedbalanceofleasednuclearfuelatalevelslightlybelowthe$350millionmaximumamountleasableundercurrentarrangements.TheunamortizedbalanceofnuclearfuelunderleaseatDecember31,1984was$329.6million.InterestoncapitalleaseobligationswhichwasrecordedasoperatingexpensesontheStatementofIncomewasasfollows(thousandsofdollars):1984,$13,836;1983,$10,914;and1982,$7,266.Generally,capitalleasescontainrenewaloptionsandobligatetheCompanytopaymaintenance,insuranceandotherrelatedcosts.TheCompanyalsohasenteredintovariousoperatingleaseswhicharenotmaterialwithrespecttotheCompany'sfinancialposition.3.RateMattersInaccordancewithrateordersissuedbythePUC,electricbaseratesforultimatecustomerswerein-creasedbyapproximately$73millionannuallyinJanuary1982and$203millionannuallyinAugust1983.TheAugust1983increaseresultedfromtheCom-pany'sfilingwhichreflected,amongothercosts,theeffectofplacingSusquehannaUnit1inservice.ThePUC'sorderdidnotpermittheCompanytoearnareturnon$287millionofitsnetinvestmentinallgeneratingfacilities.Thisadjustment,whichre-ducedrequestedrevenuesbyabout$59million,resultedfromadecisionbythePUCthat945,000kilowattsoftheCompany'sgeneratingcapacitywasexcess.TheCompanywaspermittedtorecoveralldepreciation,operation,maintenanceandfuelcostsassociatedwithitsgeneratingfacilities.SeeNote5forinformationconcerninganagreementtosell945,000kilowattsofcapacitytoJerseyCentralPower&LightCompany.InJuly1984,theCompanyfiledwiththePUCforanoverallincreaseinelectricratesofapproximately$330million.Theincreasereflects:(i)$466millionrelatedtotheinvestmentandoperatingcostsassoci-atedwithplacingSusquehannaUnit2inserviceplusotherincreasedcostsofprovidingelectricity;less(ii)anestimatedreductioninannualenergycostsofabout$136millionassociatedwiththeoperationofSusquehannaUnit2.Tomoderatetheimpactoftheincrease,theCompanyhasproposedtobillcustomersonlyone-halfoftheamountrequested($165million)inthefirstyearthatthenewratesareeffective.Thefullamountoftheincreasegrantedwouldbebilledinthesecondyear.Theportionoftheincreasenotcollectedfromcustomersinthefirstyearwouldbebilled,withoutinterest,overaperiodofaboutthreeyearsstartinginthethirdyear.ThePUCsuspendedtheCompany'srateincreaserequestandhasheldpublichearingsonthematter.TheCompanyexpectsthatthePUCwillreachadecisionontheraterequestbyApril26,1985.IfthePUCdoesnotadoptafinalrateorderbythatdate,theratesfiledbytheCompanywouldgointoeffect,subjecttorefund.TheFE'RCpermittedannualincreasesinratesforwholesalecustomersof$2millioneffectiveAugust1981,$3millioneffectiveJuly1982and$4millioneffectiveMarch1984.4.DeferralofCostsRelatedtoSusquehannaGeneratingUnitsInaccordancewithanorderofthePUCtheCompanydeferredcertaincosts,netofenergysav-ings,associatedwithSusquehannaUnit1.Suchdeferreditems,whichaggregate$20.7million,wereincurredoveratwoandone-halfmonthperiodextendingfromthedateofcommercialoperationoftheunituntiltherateincreasereflectingtheunitwaseffective(August22,1983).TheCompanyexpectstoseekrecoveryofthedeferredcostsafterthePUCrendersitsdecisionontheCompany'scurrentraterequest.ThePUChasissuedanordersimilartothatissuedpreviouslyforSusquehannaUnitlwhich(i)author-izesthedeferralofSusquehannaUnit2relatedcostsintheeventtheunitgoesintocommercialoperationbeforetheendofthefuturetestyearand(ii)providesthatintheeventUnit2goesintocommercialopera-tionaftertheendofthefuturetestyear,theportionofthenewratesreflectingtheUnit2costswouldgointoeffectshortlyaftertheunitbeginscommercialoperation.5.CapacitySalesAgreementTheCompanyandJerseyCentralPower&LightCompany(JCP&L)haveenteredintoalong-termagreementunderwhichcapacityandenergywillbeprovidedJCP&L.Underthetermsoftheagreement,JCP&Lwillbeentitledto945,000kilowattsoftheCompany'sgeneratingcapabilityandrelatedenergythrough1995withtheamountthendeclininguni-formlyeachyearuntiltheexpirationofthecontractattheendof1999.JCP&LwillpayanamountequaltotheCompany'scostofservice,whichincludesa38 lreturnontheCompany'sinvestmentingenerating~facilities.TheagreementalsopermitsJCP&Ltodefercertainpayments.Atsuchtimeastheagree-mentbecomeseffective,theCompanywouldexpecttorecoverfromJCP&Lthe$59millionayearinreturnoninvestmentdisallowedbythePUCinitsAugust1983rateorder.TheagreementwillnotbecomeeffectiveuntiltheNewJerseyBoardofPublicUtilitiesmakesadeterminationthattheagreementisinthepublicinterest.ThenewratesrequestedintheCompany'scurrentproceedingbeforethePUCdonotprovideforrecov-eryofthecostsofoperating,depreciation,orareturnontheinvestmentinthefacilitiescoveredbytheagreementwithJCP&L.IftheagreementdoesnotbecomeeffectivebeforethePUCreachesadecisionontherateincreaserequest,theCompany'searningswillbeadverselyaffectedtotheextentsuchamountsarenotrecovered.AdecisionbythePUConthecurrentrateproceedingisexpectedbyApril26,1985.6.IncomeTaxesTheInternalRevenueService(IRS)hascompleteditsexaminationoftheCompany'sfederalincometaxreturnsfortheyears1977to1980.Basedonadjust-mentsproposedbytheIRS,theCompanydoesnotexpectanymaterialchangeinitsincometaxliabilityfortheseyears.TheCompanyhastaxlosscarryforwardsatDe-cember31,1984ofapproximately$100millionforbothfederalandstateincometaxpurposes.Thestatetaxlosscarryforwardexpiresintheyears1986and1987,andthefederalincometaxlosscarryforwardexpiresintheyears1997to1999.TheCompanyhasunusedinvestmentandpayroll-basedtaxcreditsaggregatingapproximately$273million($35millionapplicabletotheemployeestockownershipplan)atDecember31,1984whichmaybeusedtoreducefuturefederalincometaxliabilities.Thecarryforwardperiodforthesecreditsexpiresintheyears1993to1999.TheCompanyhasnotrecordeddeferredincometaxesforcertaintimingdifferencesinaccordancewithPUCratetreatment.Thecumulativenetamountofsuchtimingdifferencesforwhichdeferredin-cometaxeshavenotbeenrecordedapproximated$659millionatDecember31,1984.TheCompanywouldexpecttorecoverthroughelectricratesthetaxesduewhensuchtimingdifferencesreverse.constructioninterestthatcouldnotbeusedasadeductionwas$0.8millionfor1984,$53.8millionfor1983and$6.7millionfor1982.TotheextenttheCompany'staxlossesareusedtooffsettaxableincomeinfutureyears,AF<UDCwillbereducedbyanamountequaltothetaxreductionapplicabletotheconstructioninterestincludedinthecarryforwardsutilized.8.StockHeldforDividendReinvestmentProgramAtDecember31,1984,511,054sharesofCommonStockoftheCompanywereheldtemporarilyfordistributiontoparticipantsundertheCompany'sDividendReinvestmentProgram.Thestockwaspurchasedontheopenmarketandiscarriedatcost.9.CreditArrangementsTheCompanymaintainslinesofcreditaggregat.ing$120millionwithvariousdomesticbanks.Thearrangementsrequirethemaintenanceofcompen-satingbalances(notmaterialinamount)orthepaymentofcommitmentfees.Borrowingsundertheselinesofcreditaregenerallyforoneyearattheprimeinterestrateandmaybeprepaidatanytimewithoutpenalty.TheCompanyhasaloanagreementwithagroupofdomesticbankspursuanttowhichthebankscommittolendtheCompanyupto$600milliononarevolvingbasiswithloanstomatureonFebruary27,1987.AttheoptionoftheCompany,theinterestrateonborrowingswouldbebasedontheprimerate,ratesapplicabletocertificatesofdepositorratesapplicabletoE<urodollardeposits.AtthetimeanyborrowingmaturesonFebruary27,1987,theagree-mentpermitstheCompanytoborrowupto$600million,theprincipalamountofwhichwouldbere-payableinsemi-annualinstallmentsoverthefollow-ingthreeyears.Theloanagreementismaintainedbythepaymentofcommitmentfees.During1984,theCompanyborrowedandrepaid$222millionundertermsoftheloanagreementwithdomesticbanks.AtDecember31,1984,therewerenoborrowingsoutstandingunderanyoftheCompany'screditarrangements.CommitmentfeesincurredtomaintaintheCom-pany'screditarrangementsaggregated$2.6millionin1984,$2.6millionin1983and$2.9millionin1982.7.AllowanceforFundsUsedDuringConstruction(AFUDC)AF<UDCisrecordedonanafter-taxbasiswiththeequitycomponentreducedbytheincometaxsavingsrealizedduetothetaxdeductibilityofconstruction-relatedinterest.Since1982,theCompanyhashadtaxlossesdue,inpart,tothelargeamountofconstructioninterestincurred.Asaresult,thein-~cometaxreductionreflectedinAFUDChasbeenlimitedtothetaxapplicabletoconstructioninterestdeterminedtobeusableasataxdeduction.Thecombinedfederalandstateincometaxeffectofthe10.RetirementPlanandOtherPostretirementBenefitsPensioncostsfor1984,1983and1982were$29.0million,$27.7millionand$23.8million,respectively.Oftheseamounts,$18.0millionin1984,$16.0millionin1983and$12.4millionin1982werechargedtooperatingexpenses,andthebalancewaschargedtoconstructionandotheraccounts.Theactuarialpresentvalueofaccumulatedretire-mentplanbenefitsandnetassetsattheendoftheplan'srecentfiscalyearsareasfollows(thousandsofdollars):39 Actuarialpresentvalueofaccumulatedplanbenefits:(a)Vested.Nonvested...............Netassetsavailableforbenefits.June3019841983$191,28410,185$189,31310,501$201,469$199,814$272,323$257,315Underequityaccounting,theoperationsofassoci-atedcompaniesresultedinafter-taxchargesagainsttheCompany'snetincomeof$4.1millionin1984,$4.2millionin1983and$0.3millionin1982.SeeNote14toFinancialStatementsforinforma-tionconcerningtheCompany'sguaranteeofcertainobligationsofassociatedcompanies.(a)Excludesaccumulatedplanbenefitswhicharetheobligationoffourinsurancecompaniesunderinsurancecontracts.Theassumedratesofreturnusedindeterminingtheactuarialpresentvalueofaccumulatedplanbenefitswere6.59ofortheJune30,1984valuationand6%%uofortheJune30,1983valuation.Thechangeintheassumedrateofreturnto6.5%%uodecreasedtheactuarialpresentvalueofaccumulatedplanbenefitsatJune30,1984by$13.5million.TheCompanyalsoprovidescertainhealthcareandlifeinsurancebenefitsforretiredemployees.SubstantiallyalloftheCompany'semployeesmaybecomeeligibleforthesebenefitsuponretirement,andthecostisgenerallyrecognizedasexpensewhenpremiumsarepaid.Suchcostsforretiredemployeesfor1984,1983and1982wereapproximately$2.3million,$2.2millionand$1.4million,respectively.ll.JointOwnershipofGeneratingPlantsAtDecember31,1984,theCompanyownedundivi-dedinterestsinthreegeneratingstationsasfollows(millionsofdollars):GeneratingStationSusquehanna.........Keystone........Conemaugh..........PlantInvestmentOwnership$3,73390.00%3812.343511.39TheCompanyreceivesaportionofthetotalstationoutputequaltoitspercentageownership.TheState-mentofIncomereflectstheCompany'sshareoffuelandotheroperatingcostsassociatedwiththesta-tions.Eachparticipantprovidesitsownfinancing.12.AssociatedCompanyTransactionsTheprincipaltransactionswithassociatedcom-paniesinvolvepurchasesofbituminouscoalandthetransportationofoilbypipelineforuseattheCompany'sgeneratingstations.Purchasesofbitumi-nouscoalfromassociatedcompanies,whichareatapricegenerallyequaltotheentireoperatingcostsofthosecompanies,were(millionsofdollars):1984,$270.5;1983,$263.8;and1982,$255.1.Oiltransporta-tioncharges,whicharebasedonaPUCapprovedtariff,were(millionsofdollars):1984,$8.6;1983,$15.1;and1982,$8.2.13.ProposedSaleofSteamHeatPlantTheCompanyhassignedamemorandumofunder-standingrelatedtothesaleofitssteamheatplantandassociateddistributionsysteminthecityofHarrisburg.Revenuesfromsteamheatoperationsaccountedforlessthan1%ooftheCompany'soperat-ingrevenuesin1984andtheinvestmentinsteamheatplant,netofaccumulateddepreciation,was$4.3millionatDecember31,1984.ThesaleisnotexpectedtomateriallyaffecttheCompany'snetincome.AnyagreementsinvolvingthesaleofthesteampropertyrequirefurthernegotiationandwouldbesubjecttotheapprovalofthePUC.14.CommitmentsandContingentLiabilitiesTheCompany'sconstructionexpendituresareesti-matedtoaggregate$272millionin1985,$274millionin1986and$269millionin1987,includingtheallowanceforfundsusedduringconstruction.Seethesectionentitled"CapitalExpenditureRequire-ments"onpage25foradditionalinformationcon-cerningtheCompany'splannedconstructionexpenditures.TheCompanyisamemberofcertaininsuranceprogramswhichprovidecoverageforpropertydam'-agetomembers'ucleargeneratingplants.FacilitiesattheSusquehannaplantareinsuredagainstproper-tydamagelossesupto$1.1billionundertheseprograms.TheCompanyisalsoamemberofaninsuranceprogramwhichprovidesinsurancecover-ageforthecostofreplacementpowerduringpro-longedoutagesofnuclearunitscausedbycertainspecifiedconditions.Underthepropertyandreplace-mentpowerinsuranceprograms,theCompanycouldbeassessedretrospectivepremiumsintheeventtheinsurers'ossesexceedtheirreserves.ThemaximumamounttheCompanycouldbeassessedduringthecurrentpolicyyearisabout$21million.TheCompany'spublicliabilityforclaimsresultingfromanuclearincidentiscurrentlylimitedto$620millionunderprovisionsofthePrice-AndersonAct(Act).TheCompanyisprotectedagainstthispo-tentialliabilitybyacombinationofcommercialinsuranceandanindustryretrospectiveassessmentprogram.IntheeventofanuclearincidentatanyofthefacilitiesownedbyothersandcoveredbytheAct,theCompanycouldbeassessedupto$10millionperincident,butnotmorethan$20millioninacalendaryearintheeventmorethanoneincidentisexperienced.AtDecember31,1984,theCompanyhadguaran-teedobligationsofothercompanies(principallysubsidiarycoalcompaniesandasubsidiarypipelinecompany)totaling$270.0million.40 15.'QuarterlyFinancialData(Unaudited)QuarterEndedOperatingRevenuesOperatingNetIncomeIncomeThousandsofDollarsEarningsApplicabletoCommonStockEarningsPerShareofCommonStock(a)1984March.JuneSeptemberDecember$479,484351,310349,994381,994$119,96493,05599,13294,807$98,24466,00376,50978,147$76,05942,85153,04954,799$1.070.590.720.741983March.JuneSeptemberDecember$305,088270,909285,151387,249$62,64355,9567337397,958$79,82369,33268,90277,954$60,05547,86846,52355,727$0.890.700.670.80(a)Basedontheaveragenumberofsharesoutstandingduringthequarter.16.SupplementaryInformationonChangingPrices(Unaudited)ThefollowingsupplementaryinformationontheeffectsofchangingpricesispresentedinaccordancewiththerequirementsoftheFinancialAccountingStandardsBoard(FASB),anorganizationthates-tablishesrulesforaccountingandfinancialreport-ing.Customaryfinancialreportinggenerallyhasnotattemptedtospecificallyreflectinflation.TheFASBrequiresthatcertainaspectsofinflationbecomputedinaccordancewithprescribedtechniquesandreportedonanexperimentalbasis.TheFASBrecognizes,andtheCompanycautionsusersofthisinformation,thatthereisnoconsensusonthegeneralpracticalusefulnessofthissupple-mentaryinformation.Therearealsounresolvedimple-mentationproblemsandconceptualdifferencesregard-ingthemannerinwhichtheeffectsofchangingpricesshouldbemeasured.For1984,theFASBrequiresdisclosureoftheeffectsofchangingpricesbyuseofcurrentcostinformation.Inaperiodofinflation,pricesofmostgoodsandservicesincreasebutnotnecessarilyallatthesametime.Thecurrentcostmethodshowstheimpactofinflationonacompanybymeasuringtheestimatedchangeinpricesofthespecificgoodsandservicesusedbythatcompany.TheCompanyhaselectedtopresentthe"Supple-mentaryStatementofIncome"data(shownonpage42)inaccordancewiththepartialrestatementprovi-sionoftheFASBrequirements.Underthisprovision,utilityplant,netofaccumulateddepreciation,nu-clearfuelexpenseanddepreciationexpensearetheonlyitemsrestatedtoreflectspecificpricechanges(currentcost).Fossilfuelinventoriesandthecostofsuchfuelhavenotbeenrestatedfromtheirhistoricalcostbecausetheyarestatedclosetocurrentcostandtheexpenseisgenerallyrecoveredwithinarelativelyshorttimethroughadjustmentclauses.Revenues,incometaxesandexpensesotherthannuclearfuelanddepreciationarepresentedattheamountsre-portedinthebasicfinancialstatements.Setforthunder"OtherImpactsofChangingPrices"arethefollowing:1.Gainfromdeclineinpurchasingpowerofnetamountsowed.Inflationalsoaffectsmonetaryassets,suchascashandreceivables,whichlosepurchasingpowerduringinflationaryperiodssincetheseassetswillintimepurchasefewergoodsorservices.Conversely,holdersofmonetaryliabili-tiesbenefitduringsuchperiodsbecauselesspurchasingpowerwillberequiredtosatisfytheseobligations.Monetaryliabilitiesincludepreferredandpreferencestockissueswithsink-ingfundrequirements,long-termdebt,currentliabilities,capitalleaseobligations,deferredtaxesandtaxcreditsandotherdeferredcredits.TheCompanyisinanetmonetaryliabilityposition.2.Increaseinnetutilityplantduringtheyearduetopricechanges.Theincreaseinnetutilityplantisshownasaresultofbothspecificpricechanges(currentcost)andchangesinthegeneralpricelevelasmeas-uredbytheU.S.GovernmentConsumerPriceIndexforAllUrbanConsumers(CPI-U).

3.Adjustmentofnetutilityplanttonetrecoverableamount.Undertheratemakingprescribedbyregula-torycommissions,onlythehistoricalcostofutilityplantisrecoverableinrevenueasdepreci-ation.Therefore,anyexcessbetweentheamountofutilityplantstatedintermsofcurrentcostF(afterdeductingtheeffectsofgeneralinflation)andhistoricalcostmustbereducedtonetrecover-ableamount.Theamountofsuchexcessthataccruedasaresultofpricechangesinthecurrentyearisshownasanadjustmentofnetutilityplanttonetrecoverableamount.SupplementaryStatementofIncomefor1984(ThousandsofDollars)AsReportedinFinancialStatements(HistoricalCost)AdjustedontheBasisofPriceChangesExperienced(CurrentCost)(a)Operatingrevenues.OperatingexpensesFuelDepreciation(b)Other.Interestexpense.Otherincomeanddeductions-netDividendsonpreferredandpreferencestockEarningsapplicabletocommonstockOtherImpactsofChangingPricesGainfromdeclineinpurchasingpowerofnetamountsowed.....IncreaseinnetutilityplantduringtheyearduetopricechangesAsaresultofspecificpricechangesexperienced(c).AsaresultofchangesingeneralpricelevelExcessofincreaseinspecificpricesoverincreaseingeneralpricelevel.Adjustmentofnetutilityplanttonetrecoverableamount-(reduction)$1,562,782720,670118,763316,3911,155,824209,873(121,818)92,1451,336,024$226,758$1,562,782728,309274,867316,3911,319,567209,873(121,818)92,1451,499,767$63,015$158,217$472,388(393,076)$79,312$(155,285)(a)Statedinaverage1984dollars.(b)ThecurrentcostofutilityplantwasdeterminedbyapplyingconstructioncostindicesmaintainedbytheCompanytothehistoricalcost.Theadjustedprovisionfordepreciationwasdeterminedbyapplyingthefunctionalclassdepreciationaccrualratestotherespectiveaverageyear.endbalancesofdepreciableplantadjustedforspecificpricechanges.(c)AtDecember31,1984,thecurrentcostofactutilityplantwas$10.69billion,whilethehistoricalcostornetamountrecover-ablethroughdepreciationwas$6.26billion.

Thefollowingschedulepresentsasummaryofreportedinfinancialstatementsorotherstatisticalselecteddatacomparingitemsastheyarenormallysummariestoitemsadjustedforchangingprices.SupplementaryComparisonofSelectedData(ThousandsofDollars,ExceptPerShareAmounts)19841983198219811980$1,133,2781,294,283$1,219,5481,312,3538885,4511,116,142$1,248,3971,301,529$1,562,7821,562,782226,75863,015170,80177,684120,38435,202210,17381,125210,57294,7573.063.353.172.641.181.511.440.773.120.87415,154(79,312)(115,272)(287,657)(69,108)(180,424)(345,237)(352,924)4,154(155,285)256,283331,989131,019121,3271,666,8121,842,0791,482,0921,784,3612,128,3622,098,6801,999,3242,049,3891,875,0701,994,9872.242.582.322.492.402.512.482.482.122.6717.1215.6218.9318.81272.4246.821.0022.34289.120.6221.14298.425.1224.77311.1(c)Nctassets(sharcowncrs'quity)forpurposesofthissupple-mentarydisclosureincludescommonequityandthcpreferredandpreferencestockswithoutsinkingfundrequirements.Thepreferredandprcfcrcncestockswithsinkingfundrequire-mentshavebeenexcludedsincetheyweretreatedasmonetaryitems.OperatingrevenuesAsreported.Average1984dollars(a)Earningsapplicabletocommonstock(b)Asreported.Currentcostinaverage1984dollars........Earningspershareofcommonstock(b)Asreported.Currentcostinaverage1984dollars........Amountbywhichtheincreaseingeneralpricelevelofnetutilityplantisgreaterthanor(lessthan)theincreaseinspecificpricesofnetutilityplantAdjustmentofnetutilityplanttonetrecoverableamount-write.up(reduction)atcurrentcostinaverage1984dollars........Gainfromdeclineinpurchasingpowerofnetamountsowed158,217Netassetsatyear-end(c)Asreported.Currentcostinaverage1984dollars........CashdividendsdeclaredpercommonshareAsreported.Average1984dollars(a)Marketpricepercommonshareatyear-endAsreportedAverage1984dollars(a)Averageconsumerpriceindex(CPI-U)........C(a)Adjustedtoaverage1984dollarsbyapplyingtheCPI-Uindextoitemsasnormallyreported.(b)1981excludesanonrecurringcreditrelatedtoanaccountingchange.43 SelectedFinancialandOperatingData)(c)operty..IncomeItems-thousandsOperatingrevenues.OperatingincomeAllowanceforfundsusedduringconstruction.Netincome(a)Earningsapplicabletocommonstock(a).....BalanceSheetItems-thousands(b)NetutilityplantinserviceConstructionworkinprogressTotalassets(c)Long-termdebt...........................PreferredandpreferencestockWithsinkingfundrequirements...........Withoutsinkingfundrequirements........CommonequityShort-termdebtTotalcapitalprovidedbyinvestors..........FinancialRatiosReturnonaveragecommonequity-/o(a)....Embeddedcostrates(b)Long-termdebt-%.Preferredandpreferencestock-9o.........Timesinterestearnedbeforeincometaxes(aRatioofearningstofixedcharges-totalenterprisebasis(a)(d).Depreciationas%ofaveragedepreciableprCommonStockDataNumberofsharesoutstanding-thousandsYear-endAverage.Earningspershare(a)Dividendsdeclaredpershare.Taxabilityofdividendincome-9o(e)........Bookvaluepershare(b).Marketpricepershare(b).Dividendpayoutrate-%(a)Dividendyield-9o(e)(I)Priceearningsratio(a)(I).FuelCostDataCostperkwhgenerated-centsCoal-firedsteamstationsNuclearsteamstation(h).Oil-firedsteamstationCombustionturbinesanddiesels(oil)......Average.CostoffossilfuelreceivedatsteamstationsCoal-pertonResidualoil-perbbl.Employees(b).1984$1,562,782406,958168,938318,903226,758$3,860,9602,020,8396,910,7832,604,506738,027231,3751,896,987104,8005,575,69512.3011.129.942.352.062.574,51372,767$3.12$2.4863.29$25.46$25'/s8011.007.241.760.545.319.821.98$42.75$31.288,3861983$1,248,397289,930251,548296,011210,173$3,847,3011,730,2286,418,5092,387,249714,830231,3751,767,949190,0005,291,40312.2910.989.662.292.042.770,33568,642$3.06$2.400$25.12$20'/s7910.487.481.680.665.2310.212.15$39.37$29.798,1601982$1,219,548223,083246,423278,886210,572$2,112,1692,923,8415,829,1382,323,318621,634231,3751,643,695160,5454,980,56713.6010.819.412.051.813.366,46162,809$3.35$2.320$24.71$217011.955.791.775.6210.742.20$42.32$30.948,2081981$1,133,278211,050193,861244,077183,182$2,054,0392,312,2925,097,5502,165,381544,231231,3751,435,437175,4894,551,91312.7410.808.931.911.783.258,44753,912$3.17$2.240$24.52$17'/s7213.345.301.645.7510.512.30$39.59$33.477,9991980$885,451168,659141,241179,759120,384$1,954,7621,874,3974,359,2571,811,692510,800231,3751,250,71756,3243,860,90810.3810.608.492.061.903.250,62745,598$2.64$2.120$24.68$15/s8212.016.681.404.557.891.96$33.78$26.447,702(a)1981netincomeandearningsapplicabletocommonstockincludeanonrecurringcreditrelatedtoanaccountingchange,whileindicatedfinancialratiosandcommonstockdataforthatyeararecomputedexcludingthenonrecurringcreditfromearnings.(b)Year.end.(c)1980.1983restatedtoreflectchangeinaccountingforcapitalleases.(d)Fixedchargesconsistofinterestonshort-andlong.termdebt,otherinterestcharges,interestoncapitalleaseobligationsandtheestimatedinterestcomponentofotherrentals.(e)Basedonholdingoneshareofcommonstockfortheentireyear.(f)Basedonaverageofmonth.endmarketprices.(g)Thewinterpeaksshownwerereachedearlyinthesubsequentyear.(h)TheCompany'sfirstnuclearunitwasplacedincommercialoperationonJunc8,1983andthesecondunitonFebruary12,1985.44 SalesDataElectriccustomers(b)..Averageannualresidentialkwhuse............Electricenergysalesbilled-millionsofkwhResidentialCommercialIndustrialOtherSystemsales..............................AtlanticCityElectric(SusquehannaUnit1)..Totalelectricenergysalesbilled...........Sourcesofenergysold-millionsofkwhGeneratedCoal-firedsteamstations.Nuclearsteamstation(h).Oil-firedsteamstationCombustionturbinesanddiesels(oil)..HydroelectricstationsPowerpurchasesInterchangepowersalesCompanyuse,linelossesandother..Totalelectricenergysalesbilled.19841,039,3819,2828,4546,5278,117104324,14135724,49826,6956,2954,1213274737,8903,765(15,377)(1,780)24,49819831,026,1449,0518,1386,1197,62396822,84820923,05726,8854,5095,5814570037,7203,880(16,405)(2,138)23,05719821,013,6239,0398,0455,9467,32498222,29722,29725,4772933,1861361229,5811,414(6,900)(1,798)22,29719811,006,5709,1578,0885,8937,968I00522,95422,95424,8414,7053262230,200744(6,274)(1,716)22,9541980999,5259,2058,0565,7437,91078422,49322,49326,5965,6923353332,8541,415(9,798)(1,978)22,493ElectricRevenueDataByclassofservice-thousandsResidentialCommercialIndustrialOtherenergysales.Systemsales.AtlanticCityElectric(SusquehannaUnit1)..Totalfromenergysalesbilled............Unbilledrevenues,netOtheroperatingrevenuesTotalelectricoperatingrevenues.........Averagepriceperkwhbilled-centsResidentialCommercialIndustrialTotalforultimatecustomersTotalforallcustomers$591,922441,651411,53359,526$529,911386,617367,95047,275$503,557363,233347,72647,731$411,668292,984295,00639,484$349,714246,024245,51328,4801,504,63231,8091,331,75318,4941,262,2471,039,142869,7311,536,441(9,725)29,9601,350,247(119,539)12,9721,262,247(61,652)12,7081,039,14276,88410,142869,73110,5957.006.775.076.306.276.516.324.835.915.866.266.114.755.745.665.094.973;704.594.534.344.283.103.903.87$1,556,676$1,243,680$1,213,303$1,126,168$880,326GenerationDataGeneratingcapability-thousandsofkw(b).Winterpeakdemand-thousandsofkw(g)..Generationbyfuelsource-%%uoCoalNuclear(h)Oil.HydroelectricSteamstationavailability-%Coal-firedNuclear(h)Oil-fired.Steamstationutilization-%Coal-firedNuclear(h)Oil.fired.7,4845,51970.416.611.02.075.266.768.073.365.728.67,4944,86971.311.914.91.978.867.775.874.067.538.86,5464,48986.11.010.82.179.180.470.222.26,5465,20782.215.72.174.773.468.432.86,5464,94581.017.41.678.779.673.039.545 CommonStockPriceandDividendDataQuarterEnded1984MarchJuneSeptember.December.HighLow$22/s$19'/422s/s19~/s23~/s2125'/s23TheprincipaltradingmarketfortheCompany'scommonstockistheNewYorkStockExchange.ThestockisalsolistedonthePhiladelphiaStockEx-change.Thenumberofrecordholdersofcommonstockwas162,903asofDecember10,1984.ThehighandlowsalespricesoftheCompany'scommonstockontheCompositeTapeforthepasttwoyearsasreportedbyTheWallStreetJournalwereasfollows:TheCompanyhaspaidquarterlycashdividendsonitscommonstockineveryyearsince1946.Thedividendspaidpersharein1984and1983were$2.46and$2.38,respectively.ThemostrecentregularquarterlydividenddeclaredbytheCompanywas62centspershare(equivalentto$2.48perannum)paidJanuary1,1985.Futuredividendswillbedependentuponfutureearnings,financialrequirementsandotherfactors.TheCompanyhasestimatedthat36.71%%uoofits1984dividendspaidoncommonstockwillnotbetaxableforfederalincometaxpurposesasdividendincome,butwillconstituteareturnofcapitalwhichreducesthetaxcostbasisofthesharesonwhichthedividendswerepaid.1983MarchJuneSeptember.December.$24'/z$207/s24'/s20'/~23'/s20'/s24'/s20 4VFiscalAgentsTRANSFERAGENTSFORPREFERRED,PREFERENCEANDCOMMONSTOCKMorganGuarantyTrustCompanyofNewYork30WestBroadwayNewYork,NewYork10015PennsylvaniaPower&LightCompanyTwoNorthNinthStreetAllentown,Pennsylvania18101REGISTRARSFORPREFERRED,PREFERENCEANDCOMMONSTOCKTheFirstNationalBankofAllentownHamiltonMallatSeventhAllentown,Pennsylvania18101MorganGuarantyTrustCompanyofNewYork30WestBroadwayNewYork,NewYork10015DEPOSITARYFORDEPOSITARYPREFERENCESHARESMorganGuarantyTrustCompanyofNewYork30WestBroadwayNewYork,NewYork10015DIVIDENDDISBURSINGOFFICEANDDIVIDENDREINVESTMENTPLANAGENTVicePresidentandTreasurerPennsylvaniaPower&LightCompanyTwoNorthNinthStreetAllentown,Pennsylvania18101-SecuritiesListedOnExchangesNEWYORKSTOCKEXCHANGE4'/2%PreferredStock(Code:PPLPRB)4.409oSeriesPreferredStock(Code:PPLPRA)8.609oSeriesPreferredStock(Code:PPLPRG)9.24%SeriesPreferredStock(Code:PPLPRM)PreferenceStock,$8.00Series(Code:PPLPRJ)PreferenceStock,$8.40Series(Code:PPLPRH)PreferenceStock,$8.70Series(Code:PPLPRI)PreferenceStock,$11.00Series(Code:PPLPRL)PreferenceStock,$13.00Series(Code:PPLPRK)DepositaryPreferenceShares,$2.90Series(Code:PPLPRP)DepositaryPreferenceShares,$3.25Series(Code:PPLPRO)DepositaryPreferenceShares,$3.42Series(Code:PPLPRR)DepositaryPreferenceShares,$3.75Series(Code:PPLPRN)CommonStock(Code:PPL)PHILADELPHIASTOCKEXCHANGE4'/i9oPreferredStock3.3590SeriesPreferredStock4.4090SeriesPreferredStock4.60%SeriesPreferredStock8.60%SeriesPreferredStock990SeriesPreferredStock9.24%SeriesPreferredStockPreferenceStock,$8.00SeriesPreferenceStock,$840SeriesPreferenceStock,$8.70SeriesPreferenceStock,$11.00SeriesPreferenceStock,$13.00SeriesDepositaryPreferenceShares,$2.90SeriesDepositaryPreferenceShares,$3.25SeriesDepositaryPreferenceShares,$3.42SeriesDepositaryPreferenceShares,$3.75SeriesCommonStock OfficersDirectorsROBERTK.CAMPBELL,PresidentandChiefExecutiveOfficerMERLINF<.HERTZOG,ExecutiueVicePresident.CorporateServicesJOHNT.KAUFFMAN,ExecutiveVicePresident-OperationsJACKR.CALHOUN,SeniorVicePresident-NuclearLEONL.NONEMAKER,SeniorVicePresident.DiuisionOperationsCHARLESE.RUSSOLI,SeniorVicePresident.FinancialJOHNR.BIGGAR,VicePresident-FinanceGENNAROD.CALIENDO,VicePresidentandChiefCounsel.RegulatoryAffairsNORMANW.CURTIS,VicePrcsident-Engineering&Construction-NuclearROBERTS.GOMBOS,VicePresident-HumanResource&DevelopmentCHARLESJ.GREEN,VicePresident-HarrisburgDiuisionWILLIAMF<.HE'CHT,VicePresident.SystemPowerBRUCED.KENYON,VicePresident-NuclearOperationsJOHNP.KIERZKOWSKI,VicePresidentandTreasurerCARLR.MAIO,VicePresidentLehighDiuisionGRAYSONE<.McNAIR,VicePresident-Marketing&CustomerSeruicesEDWARDM.NAGEL,VicePresident,GeneralCounselandSecretaryHERBERTD.NASHJR.,VicePresident-CentralDiuisionCLAIRW.NOLL,VicePresident-Procuremcnt&ComputerServicesJOHNE.ROTH,VicePresident.NorthernDivisionJOHNH.SAEGER,VicePresident.SusquehannaDiuisionEDWINH.SEIDLER,VicePresident-Engineering&ConstructionSystemPower&EngineeringBRENTS.SHUNK,VicePresident-LancasterDiuisionJEANA.SMOLICK,AssistantSecretaryGEORGEF.VANDERSLICE,VicePresidentandComptrollerPAULINEL.VETOVITZ,AssistantSecretaryWILLIAMR.WHITE,VicePresident-PowerProductionHELENJ.WOLFER,AssistantSecretaryandAssistantTreasurerCorporateManagcmcntCommittee:RobertK.Campbell,chairman;MerlinF.Hertzolt,JohnT.Kauffman,JackR.Calhoun,LeonL.None-maker,Charlesh.Russoli,andEdwardF.Rois,Director.CorporatePlan-ning,servingasthecommittee'sexecutivesecretary.CLIF<FORDL.ALEXANDERJR.,Washington,D.C.President,Alexander&AssociatesInc.Consultantstobusiness,government&industryELIZABETHE.BAILEY,PittsburghDean,GraduateSchoolofIndustrialAdmii)istration,Carnegie.MellonUniversityROSWELLBRAYTONSR.,WoolrichPresidentandChiefExecutiueOfficer,1Voolrich1VoolenMillsInc.ManufacturerofgarmentsforoutdooractivitiesJEFFREYJ.BURDGE,CampHillChairmanoftheBoardandChiefExecutiueOfficer,HarscoCorporation.ManufacturerofprocessedandfabricatedmetalsROBERTK.CAMPBELL,AllentownPresidentandChiefExecutiveOfficerEDGARL.DESSEN,HazletonPhysician.RadiologistEDWARDDONLEY,AllentownChairmanoftheBoardandChiefExecutiueOfficer,AirProductsandChemicalsInc.ManufacturerofindustrialandcommercialgasesandchemicalsMERLINF.HERTZOG,AllentownExccutiueVicePresidentCorporateServicesFRANCESR.HESSELBEIN,NewYorkCityNationalExecutiveDirector,GirlScoutsoftheU.S.A.HARRYA.JENSEN,LancasterDirectorandformerChiefExecutiveOfficer,Armstrong1VorldIndustriesInc.Manufacturerofinteriorfurnishingsand.specialtyproductsJOHNT.KAUFFMAN,AllentownExccutiueVicePresident-OperationsW.DEMINGLEWIS,BethlehemPresidentEmeritus,LehighUniuersityHAROLDS.MOHLER,HersheyFormerChairmanoftheBoard,HersheyFoodsCorporation.DiversifiedmanufactureroffoodproductsRALPHW.RICHARDSONJR.,StateCollegeConsultant,agriculturalandenuironmentalsciencesNORMANROBERTSON,PittsburghSeniorVicePresidentandChiefEconomist,MellonBank,N.A.DAVIDL.TRESSLER,ScrantonChairmanoftheBoardandChiefExecutiveOfficer,NortheasternBankofPennsyluaniaExecutiveCommittee:RobertK.Campbell,chairman;EdgarLDesscn,HarryA.Jensen,1V.DemingLewisandNormanRobertson.AuditCommittee:DavidLTrcssler,chairman;CliffordIAlexanderJr.ElizabethE.Bailey,RoswellBraytonSr.,iiaroldS.Mohler,andRalphN<.RichardsonJr.CorporateResponsibilityCommittee:EdgarLDessen,chairman;JeffreyJ.Burdge,FrancesR.Hesselbein,HaroldS.MohlerandDavidLTresslcr.ManagementDevclopmcntandCompensationComrnittce:RoswellBraytonSr.chairman;CliffordLAlexanderJr.~ElizabethE.Bailey,EdwardDonfey,1V.DemingLewisandNormanRobertson.NominatingCommittee:Ralph1V.RichardsonJr.,chairman;JeffroyJ.Burdge,EdwardDonley,FrancesR.HesselbcinandHarryA.Jensen.TheCompany'sannualreportfiledwiththeSecuritiesandExchangeCommissiononForm10-Kwillbeavailablemid-March.Ashareownermayobtainncopy,ntnocost,bywritingtoPennsylvaniaPower&LightCompany,TwoNorthNinthStreet,Allentown,Pn.18101,attention:Mr.GeorgeI.Kline,Manager-InvestorServices.

~.('-'Boa'rdo'fDirectorsAlexanderBaileyBraytonl.Burdge=,IRLSCQDessenDonleyHesselbeinJensen,'.'~YA>)Pz.mLewisMohlerRichardsonRobertson(,(I,I)'/,(((((((Y,)'((j((74irTresslerCorporateManagementCommitteeReisNonemakerHertzogCampbellKauffmanCalhounRussoli

~g~PennsylvaniaPower&LightCompanyTwoNorthNinthStreet~Allentown,PA18101~21517705151AeBULKRATEU.S.POSTAGEPAIDAllentown.Pa.PermitNo.104l86<<<<<<a<<<<<<atBI<<<<gjgPlglQogggggOOg<<iElevenyearsandthreemonthsaftergroundwasbrokenatthesiteofPP&L'sSusquehan-nanuclearplantnearBerwick,Pa.,thesec-ondunitwasputintocommercialoperationFeb.12,1985.Theachievementcappedape-riodduringwhichthousandsofpeoplegavemillionsofhoursofdedicatedworktosuc-cessfullycompletethelargestconstructionprojectInthecompany'shistory.Withtheout-putfromSusquehanna,andfromPP&L'sothergeneratingplants,thecompanywillbeabletoprovideanabundantsupplyofreliable,economicalelectricpowerforCentralEasternPennsylvaniawellintothenextcentury.<<)))<<)).LithoInU.