ML19312D213
| ML19312D213 | |
| Person / Time | |
|---|---|
| Site: | Marble Hill |
| Issue date: | 01/25/1980 |
| From: | PSI ENERGY, INC. A/K/A PUBLIC SERVICE CO. OF INDIANA |
| To: | |
| Shared Package | |
| ML19312D212 | List: |
| References | |
| NUDOCS 8003210514 | |
| Download: ML19312D213 (54) | |
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ne!ptul-hove O sing le purpose: IO provide deCendObie e!ectric service to more thOn O hOlf-mLi:Cn Customers in nOmes, businesses, tOrms Ond fCCtories CCross muCh of the HOoster srOte. Never On eosv rOsk. tCcOy tne ;Ob demonas sui
- greOter sknis, more SCpn!stiCOted tecnno!Ogy, inCreOsed putiiC understOnOin9. And peCple with O will to get the job done.
Public Service IndionO hOs thOt kind of Ceop!e. Those feOtured in this report represent O!i A300 l I i. m yv ,w z . k; [.
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4 Summary of Operations 1979 1978 1977 1976 1975
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Operating Revenues $628 538 S538 423 S470 911 S397 742 S305 898 Operating Expenses Fuel 263 000 205 919 163 043 122 518 82 997 Purchased power (80 381) (17 070) (22 950) (26 390) (5 135) Taxes income 86 502. 62 708 69 141 65 578 39 874 State, local and other 33 155 27 898 24 436 22 636 18 iii Other operation and maintenance 117 410 99 308 86 871 73 350 62 193 Depreciation 64 765 53 028 45 744 42 465 34 745 484 451 431 791 366 285 300 157 232 785 Operating income 144 087 106 632 104 626 97 585 73 113 Allowance For Equity Fsnds Used During Const'oction 25 913 21 637 19 186 9 ('34 9 107 Other income-Net 2 489 2 021 1 369 .93 3 943 Interest Charges (65 585) (56 013) (47 292) (38 775) (34 627) Allowance For Debt Funds Used During Construction 16 086 13 431 10 606 6 397 2 967 Net income 122 990 87 708 88 495 75 034 54 503 Dividends on Preferred Stock 16 896 14 075 10 870 8 654 5 810 l
- Common Stock i income Available $106 094 S 73 633 S 77 625 S 66 380 S 48 693 Average Shores Outstanding 27 962 25 211 23 690 22 054 20 921 Earnings Per Shore $3.79 S2.92 S3.28 S3.01 S2.33 Dividends Pold Per Share $ 2.28 S2.13 S2.01' $1.89% Si.73%
For Management's Analysis of Summary of Operations, see page 30.
-rote of retum on year'end net plant
- In service and Inventories (original cost)'
1-1975 1970 1977 , 1978 i 2 1979 cti 7'4 S*& 9% 10*6 I l
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t to the shareholders 1978 mandated by the cool miners' strike of 1977-78. Domestic so!es, despite Shock waves from the events of the Three ~ on increose of 7,800 customers, showed Mile Island nuc! ear plant in Pennsylvania little change, while sales for rescle early in 1979 rippled through the entire' increased slightly over 3%. E electric ut fity industry. Pubfic Service e Revenues for the year climbed 16.7% Indiano, which suspended safety related cheod of the prior year to o record work at its own nuclear project in August, .
$628.5 million.
did not escopo their impact, e Common stock dividend payments were increased from 54c to 580 per shore The achievements of the year-and they effective June 1,1979. It was the 19th were significont-tended to be consecutive annual increase in
-overshadowed by public attention focused dividends paid.
on nuclect matters both local and e Our coo' ' ired Gibson Station in notional. sout . astern indiano become one of the largest electric energy generating Two significant steps were taken on Marble' facilities in the notion when the fourth Hill-the substonhol restructuring of our own 650.000 kilowatt unit was placed in project management organization and the - service in March 1979. Construction of a
- retention of a strong and experienced fifth unit of like size is on schedule for nuclear management team to spearhead completion in late 198.?
critical phases of the Marble Hill project. O Construction outicys for the yect were We believe these steps, along with other S364 million: nuclear fuet additions measures, will enable the Company to totaled S22 million. In addition to utilizing resume safety related work in the near S55.5 million in construction funds future. corried over from 1978, new cogital raised during the year fotoled $162 Here's a brief review of the year 1979. million. e Earnings per common shore increosed from S2.92 to $3.79 and largely reflected The construction program for 1980 is increased retail rotes placed in effect in estimated at $488 million; odditional late September 1978 and higher nuclear fuel outicys will total $25 million. wholesale rotes effective in January New money requirements to meet these 1979. .. planned expenditures will aggregote $320
. e The rate of return earned on the original million, cost of not utility plant in service and inventories at year end improved from And now to Marble Hill. Problems, and 7.63% to 9.11%. Despite this increase, it mistakes, occur on most construction jcbs.
was still below the return levels allowed Because Marble Hill is a nuclear facility, by state and federal regulatory - however, and its problems come in the 4 - authorities in .the Company's most recent woke of the Three Mile Island accident, it rote cases. As shown on the chart on received on exceptional amount of
. page 3, the Company's rote of return ' attention within the state, hos fluctuated in recent years due to the effects of bringing new generating units Our confidence that this facility will be o on line, the timing of rate actions and : safe and economic source of dependable inflation. .
electric povier remains intact. Our key goal e Kilowatt-hour soles rose 4.9% in 1979 to . In 1980 is to restore public confidence in on all time high of 18.2 billiori kwh.
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the project by demonstrating our
- Commercloi and Industrial kwh sales commitment and ability to achieve all increased 7.8% in 1979, reflecting in required levels of safety now and in the
'orge port the recovery from cutbacks in ' future.
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The completion schedule and total project i.
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r ~. - cost of the Marble Hill units, originally f .
- ~- ' scheduled for 1982 and 1984 of a cost of i 1 S1.856 billion', are under intensive study by i on independent nuclear consulting firm.
.A While the detailed studies will take several months to complete. the Company ;
( believes that completion schedules will be ) significantly extended and final project <
. costs will be significantly increased, But, in
- l. these respects. Marble Hill is not unique.
p Virtually all other nuclear projects in the early phases of construction face schedule stretch-outs and cost increases i
,4 Despite these temporary setbacks at
- l. Marble Hill, the Company reaffirms its faith In nuclear energy as on obsolute necessity
[ , to meet future energy needs. We would not be performing responsibly if we avoided those decisions necessary to assure adequate and cost-effective energy for our in retrospect the Company service territory in the years cheod. While underestimated the number and depth of conservation efforts and solar and other experience of nuclear construction new energy technologies may one day management personnel needed for the . reduce reliance on cool and nuclear, they Marble Hill project. Our successful con-cannot solve the energy needs of the next struction management of 21 cool-fired units
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few decades. over three decades simply was not suffi-cient to meet the stringent demands of to- The dedication of our 4,300 employees day's nuclear construction. deserves recognition as we review the challenges and progress of 1979 and
. To correct this deficiency, and to satisfy a a w eoh nine-point set of requirements issued by the Nuclear Regulatory Commission (NRC) which must be met before safety-related work con be resumed, outside construction personnel, with broad _ nuclear experience,'-
have been retoined by the Company. - By order of the Board of Directors Quality assurance and quality control pro-cedures are also being substantially
. strengthened. .
- Non-sofety-related work by more than Hugh A. Barker 1,000 construction workers and site support President and Chief Executive Officer personnel continued. Partial resumption of safety-related work is expected to begin, January 25,1980
- subject to NRC approval, as early as the end of the first quarter of 1980.
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'Our preventive maintenance program means fess breakdowns tron ever tetore But wnen o piece of equipment dces foil, for whatever reason, it's our Job to get it bock in service os soon as l possib'e. Prov; ding dependob!e service is what it's oil about "
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N 'CV CW revenues increase, net income _up ! Reflecting the full effect of the September 1978 retail rate increase, increased kwh sales and recovery of moderate fuel cost increases durinO the year, revenues rose to $628.5 million, up S90.1 million over 1978. An increase in wholesale rates, which was effective in January 1979, also contributed to revenue growth. Net income rose to $123.0 million in 1979 compared to S87.7 million for 1978; earnings per shorc ;ncreased to S3.79, up from the 1978 level of $2.92. Dividends paid ser shore of common stock increased 15c in 1979 to S2.28 Ilsctric heating compared with $2.13 the previous year. This marks the nineteenth consecutive
- ustomers year in which dividend payments have increased.
sercent of tetoi
,* The Company continues to believe that the cornerstones of a successful financial policy are adequate earnings and periodic increases in common stock dividends. Such cornerstones will help to assure the attraction of new capital at favorable rates.
energy use
.. s Kilowatt-hour sales increased 4.9% in 1979 topping the 18 billion mark for the first time. Wise use of energy combined with milder weather, slockening of
-economic activity in the latter port of the year and on increasing awareness of higher energy prices contributed to the moderate growth rate in kwh sales.
-While many legislative leaders believe that new laws are necessary to force conservation and the wise use of energy, the Company be'ieves that the i _
American consumer con better make these decisions based on price levels established without additional governmental regulation.
. While domestic energy use increased only slightly over the previous year, commercial and industrial kwh sales increased 7.0% and 8.2%, respectively, reflecting in large port recovery from cutbacks in 1978 mondoted during the cool miners' strike in 1977 78. Kwh soles to wholesale customers were up 3.3%
5- - in 1979. Average annual domestic usage declined slightly from 10.478 kwh in 1978 to 10,349 in 1979, Total customers served increased 1.7%, or 8,600, in 1979. Electric heating
- customers at year end rose to 86.900 from 1978's 77,700. Over 16% of all customers served utilize electric heating compared with 9% five years ago. ., ' Although the availability of supplies of.certain home heating fuels appears to u - n cn -_ ys n .n~ have increased, the Company expects to retain a substantial portion of the new home heating market in the years cheod.
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v- . ,. New system peaks were set during the winter and summer seasons. A new
. winter peak of 3,718.megowott, was established January 15,1979, on increase of 1.1% over the previous year. Since 1974, winter peaks have grown at on overage rate of 7.7% per year, reflecting in large port, the growth in electric
-heating food. On August 9,1979 a new summer peak of 3,598 megawatts was set, toppi.ng the previous summer peak by'6.4%. Summer peaks have grown at on overage rate of 5.9% per year since 1974.
The. Company's long-range food forecast was revised in.1979 and projects on on nual winter peak lood growth rate of 6% per year for the period 1979-1990; the summer peak load growth rate during the some period is estimated at 4%.
' Although future load growth rates are projected at levels below historical rates,
.the new forecast is not expected to have any impact on the need for generating capacity presently under construction; lower growth rates, however,
--would moderate capacity increases in the late 1980s.
1979 Industrial power use Industry KWH % increase (thousands) (Decrease) Chemicals & Drugs 878 223 12.6 Steel & tron 728 372 7.8 Motor Vehicles & Equipment 490 627 (6.0) Cool 358 294 34.7 Engines & Machinery 353 999 6.6 Cement -326 852 4.5 Paper Products 319 579 3.9
. Aluminum 319 152 .15.3 Fabricated Metal Products 230 571 7.0 -
Plastic Products 194 321 11.9 Stone & Clay Products 190 944 29.7 Electric Equipment & Machinery 159 988 8.0 Bakery & Beverage
- Products - 106 096 5.1 Glass Products 101 592- 1.3 Household Appliances 97 686 4.3 Natural Gas & Petroleum 92 627 (4.0) .
Conned & Frozen Food '83 354 2.3 - Rubber Products 78 767 5.8 Gypsum, Stone, Sand & ~
-Grovel .
77 917 9.0 -
. Radio & Telewsion _ 73 991 (3.2)
Furniture & Fixtures .61 978 15.0-L ' Printing & Publishing ' 38 990 (20.2)
' Other Diversified industries 926 867 8.1
.6 290 787- 8.2
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operoflon expenses climb Fuel costs increased $57 million due to increased kwh sales and sales of power to neighboring utihties. The completion of the fourth Gibson unit in late March substantialty increased the Company's power pool commitment for the year beginning April 1. In addition, short term copocity sales, made possible in part by reduced retail and wholesale demand, exceeded expectations. The unit cost of fuel - over 98% cool - increased nominally in 1979. Unit fuel costs in 1978 were higher than expected beCouse of more expensive spot cool purchases and increased oil consumption during the miners' strike in early 1978. Over the longer run, cool costs are expected to continue upward. Other operation and maintenance expenses increased 18% ref!ecting the addition of the fourth Gibson gerserating unit, increased numcer of customers served and the effects of inflation on all cperating expenses. Higher wage levels and necessary employee additions also contributed to increased expenses for the year, Depreclotion expense rose 22% to S64.8 million in 1979 and reflects initial depreciation on the newest Gibson generating unit. In addition, annual depreciation rates were odjusted upward in late 1978 to more adequately
- reflect service lives.
cok loads megono*ts p* Construction work in progress totaled $664 million at year end compared with
$496 million at December 31,1978. With fra increasing investment in Gibson xe- Unit 5 and the two Marble Hill units, the allowance for equity and debt funds used for construction during the year increased $6.9 million to $42.0 million.
Total tax expense rose S29.1 million to S119.7 million in 1979, up 32% from the
- previous year and due largely to the higher level of pre tox income. With the reduction of the statutory federal income fox rote to 46% effective January 1, 1979, annual savings of $6.4 million were possed on to retail customers
' beginning with January 1979 bills; wholesafe rates were also reduced opproximately S.8 million in the some month. Prcperty, Indiano gross income -
xo ~ and social security taxes increased 21% over the previous year. Total tax expense per dollar of operating revenue in 1979 was 19.0c compared with 16.8c in the prior year.
-coristruction program :
Total expenditures in 1979 for new plant and equipment were $364 million, exceeding 1978's level of S298 million. While initial 1979 estimates toto!ed $421 m
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million, octual expenditures were reduced due to the suspension of safety-related construction at Morbte Hill.
. Total production plant expenditures in 1979 were $292 million, including S215 million at Marble Hill and $75 million of Gibson. Other expenditures during the 'E - - - - -
year included substotion additions totaling $18 million, transmission lines $14 million, distribution facilities $34 million and general property $6 million. Construction expenditures for 1980 are estimated at $488 million and include _q_
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'S265 million for Marble Hill and $117 million for the 1982 Gibson unit. Over the n-n _ _ _n:m _ _ .:next7 :three years, construction expenditures will foto! $1.5 billion.
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i ' Present load estimates indicate the need for additional generating capacity in
- the !cte'1980s; this capacity is exper:ted to be coal fired In order to meet teod
~ times for environmentalimpact studies, siting reviews and other considerations, initici commitments will probably be required in 1980 Expenditures for nuclear fuel in the 1980-1982 period are currently estimated at S220 million; 1980 expenditures will be $25 million. Nuclear fuel procurement
. schedules will also be reviewed in connection with the study of Morble Hill in-service dates.
' financing External financing for 1979 totaled S162 million and included the sole of odditionc! common and preferred stock and first mortgage bonds /
' Construction funds of S55.5 million corried over from 1978 were also applied to the Company's 1979 construction program. Because of the slowdown in Marble Hill expenditures, a planned bond sole.was deferred.
A S35 million. issue of 8.96% cumulative preferred stock ($100 por) was marketed in April. Two bond issues were sold in 1979 totaling $55 million. In March,~ S5 million of 6 5/8%,25-year pollution control first mortgage bonds were sold, followed in May by $50 million of 91/2%,6-year first mortgage bonds. The substantial increase in interest rates over the lost 30 years is demonstrated by
'the refunding of the S12 million,3%, Series H first mortgage bonds which matured on January 1,1979.
In August, two million additional shores of common stock were sold successfully, 1 realizing $50.5 million. In addition to this public sole, 570,000 common shares, raising S14.3 million, were issued under the Company's automatic dividend ' reinvestment and stock purchase plan; on additional 265,000 common shares, aggregoting S6.9 million, were issued to employees through investment tax credit and stock purchase plans. At. year ~end; more than 10% of o!! common shareholders, representing 21% of
' the outstanding shores, were participating in the automatic dividend reinvestment program placing it among the leaders in the industry. Preferred c.
. shareholder participation in this program hos also exceeded expectations.
' New long term capital financing requirements for 1980 are estimated at S320 million. On January 25,1980, the Ccmpany so!d 500.000 shores of 9.60% -
cumulative preferred stock (por value S100 per share). A sole of up to $100 million of first mortgage bonds is tentatively scheduled for March 1980. The amounts and timing of remaining security sales in 1980 have not been
. finotized, but such sales will include both common stock and debt offerings
- which will maintain th' s Company's goal of a bolonced debt-equity
' capitalization ratio.
iWith the year end expiration of the Company's short-term bcrrowing
' authorization of S100 million,; and to recognize increasing constructica spending in 1980-81, the Public Service Commission. of Indiano has approved o ishort term borrowing authorization of S175 million for the two-year period ending December 31,1981. Existing bank credit lines will be increased to -
provide greater financing flexibliity. / 1'
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l ini!Oi;On CMSCIS evervone i cougnt a new murt;er rcr my Car i reCent;y-ine ,Cr:Ce naa 1nCreased 20s over wnoi ;t wCS iwo years 090 E.ui intnk the inCreCSe WOS jusfir;OO:e Tne Some in:ng nocCens wi!n CeCp'e and their e!ecir:C Od-iney jus! lCCk Ct tre COST OnO pCn!C. They OOn't eOuate Ine voiue wiin ine COST. ROymOnO 2 ?OCn. Chern:Cai tecnn,C:an o001 ? IR
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~ , s Imorble hill status LAs shareholders have been previously advised, the Company hos experienced
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- construction problems at the Marble Hill Nuclear Station and as a result suspended oli safety related work on August 7,1979 sHowever, non-sofety-
- related work is continuing, The major construction problems involved improper
~
' pouring of concrete walls and foundations by o major: contractor and inadequate detection, documentation and repair of concrete defects by such
_ f contractor and the Company, in addition, the Company had not yet obtained
.o certificate from the American Society of Mechanical Engineers (ASME)
~
> permitting the Company to design. purchase, receive,. issue and have insto!!ed materiots to be used in the nuclear piping systems of the plant.
On August 15,1979, the Nuclear Regulatory Commission (NRC) issued a confirmatory order suspending safety-related work until the Company increases-- project personnel experienced in nuclear plant. construction and institutes
. Substantial. improvements in its quality control and quality assurance programs and in methods to' insure proper construction,' inspection and reporting procedures.
In late August 1979, the Company engaged a nuclear consulting firm to make
-on independent evoluotion of the Company's construction management and its quality control and quality assurance organization and programs. The study
- concluded that the major difficulties at Marble Hill resulted from insufficient L
stoffing of personnel with commercial nuclear construction experience; in addition, the report concluded that the Company's anticipated completion dates and cost estimates were too optimistic. As a result of this study, and to ensure compliance with the requirements of the NRC's confirmatory orders the Company has restructured its project management and quality control and~ quality assurance staffs and is adding o substantial number of personnel wit.h extensive commercio! nuclear experience to direct or assist in the critical areas of the proje.ct. Most Company employees
- involved in project management and quality assurance have been relocated '
to the construction site; senior management of the Company has increased its . involvement in and surveillance of the project. A training program for supervisory personnel of the major concrete contractor has been instituted and all prime contractors have been informed that they will be expected to adhere
' s rictly to oil NRC safety o_nd quality standards and to their contracts with the Company. in addition, the Company hos' established closer liaison with the 7monagement of the Byron (Illinois) nuclear plant of Commonwealth Edison Company, offer which the Marble _ Hill plant is potterned.
The Un.ited States Army Corps of Engineers has conducted on evoluotion of the concrete testing equipment and methods'at Marble' Hill and found no major
.' deficiencies which would compromise the structurol. soundness of the ' concrete :
la place. The Portland Cement Association has tested the concreter and based -
.upon the Association's report, the orchitect, Sorgent & Lundy Engineers has
.-informed the Company that the Concrete in place exceeds specifiCotions and -
lis sound. As soon as safety-related work is resumed; oil concrete work that had 4 been improperly patched will be removed and re-repo! red.
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'The people I Work'with ore Conscientious. Our efforts are aimed at
- keeping Costs down. So even though I don't have ony direct customer Contact, my job and responsibi!ities still offect the Customer "
- ~ Moroaret F Butler, senior accounting oss!stant I
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V : The. Company.has applied for on ASME certificate to permit it to handle. c nuclear piping systems material; on ASME inspection team has recommended T L that the Company be given on interim certificate under which it con cperate
! until'a permanent cerbficate is issued. The Company expects to receive the
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,; - ASME interim certificate in the near future.-
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The Compony believes'that the steps it is taking will meet the requirements
; established by the NRC to resume safety-related work; a report of such actions will be submitted to the NRC in February. If the NRC octs foverably and promptiy on the Company's submission, it is believed that o partial resumption
,7 iof safety-related work c^uld occur os early as the end of the first quarter of a 1980.
In November 1979, the Subcommitteo an Environment, Energy and National Resources of the Committee on Government Operation of the United States
. House of_ Representatives held hearings on the construction problems of Morble
.y . Hill. President Hugh A: Barker and two company employees, two NRC
, ; employees and a former employee of the concrete contractor testified on the
.various problems with concrete work which have occurred at Morble Hill.- To date. no report hos been issued by the Subcommittee.
Allegations have been made by seven former employees of the Company's concrete contractor that supervisory employees of the contractor and the Company had taken actions to conceal concrete ceficienciesc The Company and its contractor have denied these cliegations. The NRC has investigated
' these cl!egotions and has forwarded its findings to the United States Department of Justice to determine if'ony federal laws have been violated and if further action is appropriate. The findings of the NRC have not been given to
^ the Company.
. As a result of the Three Mile Island occident, the Company established on internal task force to review the design, administrative controls and operating procedures for the two units at the Marble Hill Nuclear Station, although the Unit
; of Three Mile Island was of a different design and manufacturer than the Marble Hill. units. This review is continuing but no major problem creas have been identified.
On October 30.1979lthe President's Commission investigating the occident at
- Three Mile Island issued its report which was sharply critical of nuclear power
" plant operations and regulation in general and recommended a restructuring-
~ ~
= of the NRC. On December 7,1979, the President ordered action. to implement L
- certain of the recommendations of the Commission.
Despite the reluctance of national policymakers to endorse and support the
, : need for nuclear power, the Company remains committed to its objective to build a safe and reliable nuclear plant. Nuclear copocity is vitally needed to .
[ossure on adequate and cost-effective eriergy supply'in'the years ahead. s. F .
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" Cur employees have more dedicotion than you normo!!y find in a company. I think it's due to'our responsi'cilities When the service you ~
provide is a necessity of life for the custon'ers you-serve, you just
.noturoHy deve!cp a greater dedication toward providing that service."
. Wiluom F Brown; vice president, cersonnel reiotions
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4 < environmental affairs- _ While new notional environmental legislation was substantic!!y reduced from prior years, monitoring and compliance activities to meet previously-adopted J!egislative mandates continued throughout the year. The United States Environmental Protection ' Agency (EPA) has informed the Company inct all generating units of the Company are in compliance with the provisions of the
- Cleon Air Act with the possible exception of the six-unit Wobosh River Station; the Company believes that the units at that station are in compliance with the opplicable low.
A new Vigo County implementation plan was submitted by the State of Indiano to the EPA in June-1979. The plan, which must be approved by EPA, designates Vigo County, in which the Company's 889 megawatt Wobosh River Station is located, os a "non-attainment" area not meeting sulfur dicxide and particulate air quality standorosc As a part of the new plan, the Company has agreed to construct a taller stock, estimated to cost about $20 million, at the Wobosh' River Station and operate the station at a reduced food of approximately 800 megawatts. On January 14,1980, the EPA informed the Company that it would
-conditionally approve the new plan pending further modeling studies to be conducted by a group of Vigo County industries, including the Company, under the direction of Rose-Hu! mon Institute of Technology. This plan would result in significant cost savings to energy users by eliminating the need for installation of sulfur dioxide temoval equipment.-
An initial 1978 decision.by the EPA Region V Administrator that thermal discharges from the Company's Wobosh River and Cayugo Stations did not
- have on adverse effect on the aquatic life of the Wobosh River was remonded in November 1979 by the EPA and ' directed the Regional Administrator to
' consider footors not odequately considered in the prior decision. An adverse
- decision could require the installation of additional cooling facilities or other methods to reduce the thermal impact of operation of these two stations on the river; Previous estimates had indicated that such facilities would cost '
opproximately $42 million. Since the authority to issue thermal discharge permits has now been delegated to the State of Indiano, flie Company has requested EPA to reconsider its action.
, ~
The Company has been informed that the State of Kentucky has requested the
. EPA to investigate whether.the Gallagher Station is contributing to pollution; problems occurring in Louisville. As a result of this request, the Company :
expects EPA to order a hearing to resolve this issue. While modeling dato of the
- Company do not indicate that the Gallagher Station is making on adverse
; contribution to air quality in the Louisville creo, some additional pollution -
control measures or changes in oporation of the plant would be necessary if 3
- the Kentucky position is sustained
'During the year, on agreement was reached with the Indiano Department of -
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. Natural Resources to stock the Gibson. Station 3,000-acre cool.ing loke with
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suitable fish and for the state to administer,and enforce appropriate fishing
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fond safety laws on the lake. More than 25.000 persons used this new facility L
'during the year
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Any tme fm Oscano utn Cus!Crners i try to treat :he'n Pe way , zCuld e$sCT TO Ce irecrea And ! mOke e.very ettOrr to CrCt.ae re m:, pq,vun g,h A.iv rrnn,rr ; iv sI s is nnd 6,.~v,; es 1 i e ' .n,c,eyv rope rr.<s%. c, +i. c.r vv ^ s".t ,"wg"cn + .
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- _ The Compo'ny'is' encouraged by' trie apparent growing awareness by the L public that unnecessory or orbitrary environmental standards have costs for in excess of benefits. The Company will continue to copose those environmental
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- u. Jtegulations which increase unnecessarily the cost of e!ectric service to .
w - consumersa
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energy R&D Research and development for the electric utility industry continues to be
- coordinated largely by the Electric Power Research Institute (EPRI). During 1979,
' the Company provided Si,8 million to EPRI's planned 1979 expenditures of. S240
- million for a wide range of research programs. Further commitment to this
--industry-wide research effort is demonstrated by the assignment of four
- Company; employees to serve on EPRI task forces.
. Following the Three Mile Island (TMI) occ! dent, the electric utility industry moved cuickly to establish the Nuclear Safety Analysis Center at EPRI facilities in Polo Alto, California. Initial objectives of the Center were to develop the best possible understanding of the TMI accident, its contributing factors, the implications of generic safety issues and solutions, in parallel actions, the Institute of Nuclear Power Operations was established to encourage excellence s in oil aspects of nuclear power plant operations, training, management and energy preparedness. A work force of some ISO professionals and a budget of
$18.5 million financed by utility contributions will be devoted to these efforts in 1980.
The Company and sixteen other utilities continued their support of a KILnGAS cool gosification project of Allis-Cholmers Corporation. This project will utilize a rotary kiln to convert cool into low BTU gas for use in the production of
. electricity. A decision will be made in 1980 as to the construction of a full-scole
. demonstration unit at Illinois Power Company's Wood River Generating Station.
. Total energy research activities of the Company in 1979 totaled $2.5 million
. compared with S2.2 million in 1978, s
' human resources -
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' A new two-year labor agreement,' effective May 1,1979, was ratified by
. borgoining unit employees represented by the International Brotherhood of ' I
- Electrical Worke'rs The contract, covering some 2,000 employees, includes on
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I 3m L8.5% wage scale increase in 1979 while the second year's increase will be )
- based upon'the net change in the Consumer Price index for the contract !
- period May.1,1979-1980. Other irnprovements in fringe benefits were also
' included. The Company believes that its 1979 solary or.d wage programs,
' including the new two-year labor agreement, are in compliance with the. ;
(gu'delines i of the Council on Woge and Price' Stability; ; sTotal solaries ond wages increased $9,0 million to o total of $76.7 million for the
; year. Emp!0yos benefits, inciuolng retirement; life insurance, disability ano -
c < f thealth protection plans, totaled $14.1 million, up'S3.0 million from the prior
$ "'jn .o j year, in November 1979; pensions of. employees who had retired prior to January 1/1979 were incroosed 12% to offset in port the impact of inflation on ' /
~ their retirement benefits:' Pension.cdjustments for retired employees were also c
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l-like working with Customers and helping them solve their' _ ~ prob! ems. Just offering to help sometimes Con make o big difference in our relationship with the Customer " Jane A.LNickles.-c!erk p
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r y ... . y [As the pictor161 theme of this report indicates, people are our most important y- _- asset-regardless of age, <cce, creed or sex. With the ever increasing L complexity of operations, additional regulatory. requirements and the need to c-minimize costs adversely offected b ' inflation, numerous emptcyee training programs have been intensified. Increased emphasis is otso being placed on operational planning and budgeting of o!! monogement levels to assure efficiency of operations and the achievement of effective managerial training and development, management changes - Shelton M. Hannig, president and chairmor' of the board, Marsh, Inc., (design and construction) of Terre Houte,indio,no was elected a member of the
, Company's board of directors on April 2,1979. Mr..Hannig succeeded Josepn
~R. Cloutier; president of Hulman and Company, Terre Houte and the Indianapolis Motor Speedway Corporation, who reached mandatory retirement age offer serving on the board :ince 1972. His helpful cnd experienced
- counsel has been invaluable to the Company.
Russell W. R' ink, vice president purchasing, retired in February 1979 offer 19 years of distinguished service. At the annua!_ meeting of the board of directors on April 2, Seth.W. Shields was named to the new post of vice president-electric system and James H. Pennington * ; the new position of vice president-financial operations. Remi C. Pottyn, senior vice president, was oppointed to the
- s- addiMonal post of assistant to the president, and Uoyd A. Crews and Gerald Hofmockel were named vice president-construction and vice president:
- engineering, respectively.~ Donald W. Schlehuser was elected comptroller and
.. - M. Stephen Harkness and James L Koenig were named assistant comptrollers.
- regulatory review National energy legislation enacted in 1978 included the Public Utility
; Regulatory Policies Act (PURPA). This legislation requires state. regulatory -
f agencies to hold public hearings within two ~ years concerning utility rate f structures such 'os time-of; day rates, seasonal and interruptible rates, automatic rate adjustment clauses and appropriate l cost of service methodology. 1The Public Sbrvice Commission of Indiano has determined that it will implement : this legislation on on individual utility basis: initial hearings applicable to the
'_ Company begon in January 1980.
Loccounting for inflation
. The effects of infiction on o'ur economy E of increasing concern due to the
. , continued erosion in_ the purchasing power.'of the dollar Inflot on also has on'-
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! 'I'm C.rcud of the COniributiCCS i rnCke in rry JCb. If IT WOsn't C QCCd l CornCCny, i don't fnink I'd hCve Ceen here fCr 13 yeOrs Tne. peCde? I in;nk iney'!i 90 Cui Cf ineir WOy iC he:C yCU wnen iney con." Lorry E. 3'OCkerby, Senior eng reering ass;stant
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6 Nuclear power. The energy technology for our time. Proven. Reliable. Low risk. Contributing H% of all electricity used by Americans. A maior weapon lin our fight for energy independence. ;& .. .. The irony: Nuclear poiver today I'so~n the rcpes. Its future is uncertain. At.d
. many of its critics gleefully.'akait the death knell.
Nuclear power's. enemies are fear and ignorance. The battleground for nuclear power is in the minds of Americans. The fight must be' won in the arena of'public opinion. But it must be won. There is no alternative..For without inuch freer use of both coal and uranium
~ . .:in the~ production di eleciricity,:the' U.bjust may not mak'e it through the c fdb_riergy crisiid j ;&yd)) MQw2Q
; :lJ jnQhis rep. ort offers;brigfre}pon~&5.L.'l& ses to c;ominori"concernsDeople.y have about
- Qnucliar p6wei toda y. W6 hope it will help dispel unfounded fears, mispercep-tions and half-truths told over and over. The truth about nuclear power is not frightening. y. '
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N Ue. LEAR , v .o iverr nuc% .1. . , lear crili s concede' that'a nublear poser plant cannot nolode n3LANTS CAN:T: ' ' ;like~an atomic bomb. Yet this fear is still widely held by the genera' sublic.
;it s .impossiste for a bomb like explosion to occur in a nuclear power EXPLODE ; plant simply;because the nuclear fuel is too dilute. in order to make a
- ' bomb, the uranium fuel must be highly " enriched" to over 90W But the uranium fuel used to make electricity in a commercial nuclear power plant
..is enriched oniy about 3W Such a low concentration of enriched uranium
./
' makes it impossible for the fuel to explode under any conditions.
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~AS O LD AL.a mW: sources of mradiation.? . "m b""d'""
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>%bRadiation exposnt[is ^ easured in tinits called millirems The' average %
2.THE SUN %. Wi: 3personnedeives'abotit
. 130 millirems' of radiatidn 'a f year from natural' W-b.
d~ M^ W & sources :from the sun, the air, the earth and in foodand water. Man-ma i
. :: .-+ nra'diation from; dental and medical x-rays add, on average, another 20 &
l=,J '
' 4 , %?millitems per person annually.' Simply by living at higher alt ltudes (where T
.g. L :2 4 ,. . /.<.Q theie is a thinner ktmosph6 tic sun screen), residents of Denver get more
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- - discernible health'eflects.. ' i ; .
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. l' s';iA passenger on a'round' trip ist flight from New York to San francisco . - :
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R/h'l Rpicks up an additional 5 millirems of radiation'for the'same reason l Airline ' '
- s .L uctews'thus receive inlYch greater than normal radiation doses kvithout il! el-m - ..~..,. r. [geegg,: ,
;y -
. ^}l h Anyons livitig within a 50-mile radius of a nuclear' station wo
, .;. .:h-Nf. ari asytage exposure:of much less than one millitem a year. ^
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. d, g 0h SOLUTIONS EXIST - ribesafenandlingandstorageof ^
commercialnuclearwastes is clearlythe FOR HANDLING b '"" ' ' ' " i"' " ' ' 'P' " h' "' " b *" ' " " ' ' " * '"'" ' h * ""^
' military nuclear wastes are almost twenty times greater. But in reality, safe NUCLEAR WASTE storage is not a problem as far as technical know-how is concerned.
~ ~
. . Studies have already demonstrated several ways for safely handling and
' storing nuclear wastes that would pose no appreciable risk to the public or to future generations. Some of these methods are already being used safely in Europe. .
. s . Disposal is a problem in'a political sens&, since the federal government,-
YJhich controls'allnuclear waste produc'bd in thiscount.rk has not yet madei
+
., ' ^ ?.:Mup^its mind on which method to use and ivhere to'put it: What is lacking at L . .. ~
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y
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painfis ;., decisive
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action. ; y. by;y,;,.sz thi federal <: -.government;.:
~.
! NUCLEhR POWER In 1978, more than s00 million barrels ot' ail were used in the united
' "' """""'Y"' * " " ' ' ' b"' ' % h'"'"" "
CAN SHORTEN . demand for oil. Or,. more graphically; enough oil to produce enough - LINES hT THE. : - sakline to run abwt 20 mi!Iiw cars for a year.' .
%If the use of oil to~make electricity could be switched to coaland n.uclear G' AS PU'MPS - power, it s easv to;see' how this can help ease thi nation s demand for . .
, & - 1 petroleum ~an'd free up additional supplies;for making gasoline. Just one .
1,000-megawatt nuclear power plant can save about 10 million barrels of oil ,
- Vl . .
each year. With 72 plants operating in the U.S. and a total capacity of over
- ~ -
. ~S2.000 megawatts, we already have the capab'ility of saving over a half-o - : i billion barrels of oil each year.
^
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i URAN lUM FUEL:- ' irden domeitic reserves of uranium are adenuate to support the opera. - l &2 tion of aQeast;M large nuclear plants' over their lifetimes. -These reserves [ : , t
'gl((, yg . w~ QN .wwill'take us into:the neit centurf. Adding in the^ probable and possible * ; *
~
1 -
' R U N ' O UT1 XN frbserves still to be tourid.in.the u.S., se re likesy to have an ample supply 6 ;
w several decades, .y
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4,g. : . m:sfor m , y - t."*:But uranium-just like coal and'oilL.'is a finite resource that will run out_-
. : y -r~~
s^ , e{ -QN,lsome da'y.. * " l 3 j,y.
- Q,: L ' lll . '
- - . .%~P b w That's why thi development of *nucl ear breeder eactors' is essential.l.
. Breederieactors generate more fuel than they use and make use of 60% of 3
,l ' 3:i l }f. s. q?W '" ~l'about 1%) The breeder would extend the life of our domestic u
~ . ~ ~ ' ' '
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- ? ? . . plies for hundreds of years and greatly reduce fuel c'osts. -
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*J* s NUCLEAR POWER. we can t have a risk. free society. Nothing irom taking an airplane ricle to; k lSN'T RlSK-FREE * "'""*""Y'" "'^"'""'*h""*"'h"""
minimize risk so that the benefits outweigh the potential for harm.
"' W
.BUT THEN so it is with nuclear power plants. From the very beginning, we have;;.m.
realized the potential risk involved with the use of nuclear power. That's WHAT IS? why risk has been minimized by the design or nuclear plants and why even after a maior accident like Three Mile Island, the safety record of the: nuclear industry remains unequalled. No known deaths or injuries to the public have resulted from. the operation of commercial nuclear power :L plants in the United States. .:n
. AII methods of producing and using energy present risks. Even something L as seemingly harmless as solar energy presents some significant risks to .
public health and safety. Several studies around the world have concluded: that the risk associated with nuclear power is minimal and weII within'a ~ . range readily accepted by society.
]LQ::
P 7. k _ ~ 4 lSN'T ANYONE
~
Juany are for nuclear power. Their ranks inelude the scientists most likely ?.
' ""*'"^^b"'"""'1"^""h"""'^"d FOR NUCLEAR'
- technicalgroups that have endorsed nuclearpower: Health Physics Society, POWER 1
~
American Institute of Chemical ; Engineers, : society' of : Professional -
- Engineers.' A statement signed by 32 eminent scientists ' '_includingM
- Nobel Prize winners - calls for greater use of coaland uranium to produce electricity. It's no surprise that Rep. Mike McCormack (D. - Washington), . ~
one of the few scientists in Congress, is an active supporter of nuclear
; ' power. q'l
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. ;. . l. F. c
.- y c4. "'.L WlLL MARBLE
~
, ves. Emphatically. uarble Hill and any plant built and' operated:aftei?:
~b HlLL BE'SAFEl'; - op'"
e ration have been reviewed'and additional safety measures ins . .
- 3 The ' concrete ' work already in place at the Marble Hill nuclear project has' '
-~ ~ ^^ -Cbeen thoroughly examinedandis sound. Deticiencies that existed in project '
, ' manageinent and experienced personnel are being corrected. L , f ,-
.s Finding and correcting the' problems at'a relatively early stage of ~ con : 7
- ;struction will help to avoid major problems in the future. That's not'to sa'y 2 - '
~
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. ' <theie won't be any more problems. Minor difficulties ivill most likely crow X Vup in' the future as they do on every maior construction project. J: : - :,
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- The thing to keep in mind is that Public 5e' rvice Indiana has no intereit -
whatever in building an unsafe plant:It makes no sense for'any company to; , -
? ,
'~ spend dollars on a project that can't be operated. And no nhclear plant can
^
' be run if it's not safe.~We are totally committed to building a safe, reliable . '
- and economic facility. That means meeting or exceeding all* regulation's.
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1980s to meet customer demands and to give us a badly needed alter. r= D# REALLY NEEDED'1 ';mid:.N, nate. source o' f fuel.
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L Our projectioni show that without additional generating capacity in this '*t
; u ? l time'p'eriod.to' meet increasing demands for electricity and to replace older,
'less efficient generating units, our customers woult) face a serious energy
, ; shortage. Since it now takes so long to license and build a poser plant, we must be at work now to insure that the power will be there wben it's need-eg, , .w , .+
. ,, ;Public Service Indiana is heavily deperadent on' coal to produce electrici.
- ty. And for good reason. Coalis plentiful and a relatively inenpensive way i to make electricity. But the Marble flill plant will not only produce cIcc-tricity cheaper and cleaner than a comparable coal fired power plant;it will {
help to insure that any,luture coal supply cutolls that may occur won't - have a devastating effect.C a. ;~
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, %;e awe'ceitainly.cannot< afford t'o be'without Marbic fliffs' poser..hIt's' IhFFORD _+Yn&tN'Qleaiant divide p plant was d'tSat' nuclear electricity coal-bred.clects city lln'1978, the industry-wide average cost to produce a- ,
kilowatt.hout from a'naclear t.sc. For coal. it was 2.3c. For oil, it ~ n's wa m MAR B LE. HlLL1 I '. po,s 4.06.'It is' nuclear' power's low operating costs th
~ W . '., %*? Q involved .w In' building,4 nuclear plant. We estimate that electricity from Mar-? G s
. p-:r +. G s ; '
.. .:. t x ble Ilill will s'.
still.c.o.s.t less ..rp2 than *- if it came ,; from a coalplant
- x. built in g th y y . e :w ~ ttrne frame %.. r:p tp,fi- .,-t0
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,WHY,lS. NUCLEAR : irea anda lack o't ut,derstai, ding}w.wp :n ,, x'or noctuair:.g
, ae stymied the growth i
~
POWER SWWS'5^lan'H**5" Mstates p p Y ' "" ' """ * "' 'Nd" l - l FUTURE?, .f'gNMQ dQ.%Vnuclear.qrz:ts:fot:thWprodactionLof.needed No utility Inih6' patron wl!! make a commitment to nee R U N C E RTA l N 1. %%hile massive p'olitical and regulatory uncertainties remain. -
.,2 '3 p.-R W '.
TM%gggg; y z.nk.. %,&rdust but:th'rougfibbrebucra' tic; red tapeivhile Irisuring the l s 6 petition of nuctedt facilities. federal regulations'goverriing the nuclear in~*
- 3. ;qi y fdustr[ip*most cbseslare farlmoie strict'than it?a.ny country;in the w
% .' q y , . %j That's %hy itis now tak{ng at least.12' years to build a nuclear plant. * . 2, W
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' For the first time."the Financiol'AccountinO Standards Poord (the notionally ..
' recognized body.for development and opp!ication of genero:iy accepted 5
.oCCounting principles) require? that major Corporations present Certain
. inflation-cdjusted data with their 1979 financial statements. Reporting is made rs under two'different measurement approaches - constant dollar
;-occounting, which deals with general inflation (i.e., changes in the purchasing power of the dollor) and c_urrent cost accounting, which restotes the original y' ; cost of company assets to current reproduction cost. This dato appears immediciely following the financial stoiements.
annual report survey lost year's annual report contained a readership survey cord to which more than 1,500 shareholders responoed Over 86% described the report as "very informative" while 12% said it was " moderately informative " Most liked features cf the 1978 report were the special report on energy, the year 1978 section i and the president's letter to shareholders. Because of the many shareholders who requested more information on the subject of nuclear energy, a special
" Nuclear Energy Report" has been included in this year's report.
A few shareholders expressed concern as to the costs of printing the annual
~
reoort. The unit cost of the 1978 annual report was 65c compared with 70c for the 1973 report and 58c for on annual report printed 10 years ago. If price increases experienced by consumers had been held to the some level, the nation's inflation problems would be substantially reduced. The response of each shareholder is oppreciated. You* comments or suggestions help the Company to identify key creas in which to keep the shareholders better informed.
.. company ownership
, At year end, the Company's 29.8 million shores of outstonding common stock
= were held by 38,259 shareholders and represents on increase of over 3,000
.new shoreholders during the year. Preferred stock was owned by'4,654 shareholders. Residents of Indiono and adjoining states represented 48% of all
--shareholdeis while 91% are individuals and family groups The largest single
' shareholder held less than 5% of the total shores outstanding.
L information offerL Additional information obout the e6 .iric util ity industry or the
~
Company-including the annual 10-K Report to the Securities & Exchange
~
- Commission-is available without charge to any shareholder upon request.
^ Write: Shoreholder Relations, Public Service Indiano.1000 East Main Streeti
? Plainfield, Indiano 46168.-
s 25
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. s' . . ,.N j "The environmental cuohty today comoored with that of the '60s and eoriy '70s nos improved significantlyc' ecause of :ncreased polutton ContrCl measures. ! don't th nk W9 SnOuid expeCf a Zero-risk environment-there's no sucn in:ng :n any venture-but we're SM l
CC.mmii'e3 to protect:no putne heoitn dv centrcano our po::ution in venoteVer way v e con.~ Dr. Sy A. Ait manager env:rcnmento! crograms D""]D k o Ju o Ju.1 }.frut a
*]D'9' IM
responsibility for financial statements The financial statements of Public Service indiano are representations of the monogement of the Company; occordingly, the integrity, occuracy and objectivity of presentaticn is assumed by Company management. Financial statement preparation is in conformity with generally accepted accounting
; principles and follows accounting policies and principles prescribed by the Public Service Commission of Indiano and the Federal Energy Regulatory Commission."
Management also maintains, controls and utilizes on internal auditing program to evoluote the odequacy and coplication of financial and operating controls, compliance with Company policies and procedures and the accountability and safeguarding of Company assets. The Company also seeks to assure the
-objectivity and integrity of its accounts by careful selection of its managers. by division of responsibilities and by communication programs for the entire croonization to assure that policies and standords are understood.
Management believes that the Company's accounting controis provide reasonable assurance that errors or irregularities that could be material to the financlol statements are prevented or would be detected within a timely period by employees in the normal course of performing their assigned functions. The Board of Direcurs, through its Audit Committee composed of Directors other than Company employees, pursues its responsibilities for these financial statemerits by meeting periodicolly with management, internal auditing and the independent auditors to assure that each is carrying out their responsibilities. The Audit Committee has full and free access to the internal and independent auditors and meets with them, with or without management being present, to discuss auditing and financial reporting matters. Robert A. Gallogher June 22,1896 - August 7,1979 )p j President. 1938 1958 g ja l Chairman, 1958 - 1962 p/
\ / !
",j'[]
Public Service Indiano wou'Id not exist today in its , present form had it not been for his efforts. The foundation built under his leadership was a sound one on which to grow and succeed. / t
PUBUC SERVICE INDIANA - - - - officers' boord of directors Hugh AI Barker Presacent and Cheet Executive Cfticer
- Charles W. Compbell Sertor Vice President and General Counsel Q
- Remi C. Pattyn 9
' Senior Vice President and Assistant to the President Vernley R. Rehnstrom ,
Senior Vice President-Finance William F. Brown Vice President-Personnel Relations uoyd A. Crews l vice President-Censtruction . i- W. E. George l Vce President-Power . ec _ -T Borton G. Grobow !, j
^
- Vice President-Ftblic Relations p ,
Uoyd M. Griffin '
- j
;,Qy4 .- p j $ 1g f~g_ .
Gerold Hofmockel Vice President-Customer Services ( ";
,4 2.- '/
Vice President-EngineerinO f4
~
James H. Pennington / I ..j- , Vice President-Financial Operations e Q .3/3 sg Seth W. Shields N Vice President-Electric Systern dib;E h , a i Richard P. Stein sonnig Brockiidge Vice Pres; dent-Public Affairs j - William M. Cook Vice President-Northern Division Willard Twyman l, Vice President-Southern Division Charles E. Uhl
.Vice President-Western Division W. J. Hebble -
Treasurer Joe E. Rogers Secretory G. W. Roberts l Assistant Treasurer ono . ssistont Secretary - Donald 'W. Schlehuser Corr otroner
- M. S. Horkness ^' D Assistant Comptrciler, .
7% '
'Jomes L Koenig .
(. .,.. Ih- )[" . Ass:sfont Comptro!!er '1. -/i i g ic i m rp g
$ s. T .sg Greg K. Kimberlin Asistant Generof Counsel y N[
?
"~ ~
28 9 9 W 'r + r - +y- - -ww-w - w + , - _ _ _ _ _ _ _ -_ - _ _ . _ _ _ _ . _ _ _ - _
l (
- Hugh A. Barker 7 -
PressceM ono Cn:ef Executiv er f,, cfina pony j D g- i Carroll H Blonchor
,A
, Cno rmon of me Board wy .
y of tne Comcony
- V rr Joseph A. Binford
\ "
^
Cho;rman of me Board. Hoes er Porel Company. Ptywood Products. New Albony Richard H. Blocklidge 9etired Pubbster. S* eze, Barker The <ckomo Triture Kckomo , Charles W. Campbell Senior Vice President and Genero! Counsel of the Company Shelton M. Hannig Pres; cent and Choirrnon of the Bocrd Marsh. Inc . Cesegn and Construct:on. Terre Hou*e Walter J. Matthews Retired President of fne Company Richard B. Stoner
- me-
.y;
~~-7 ] Vice Cherirman of the Board Cummins Eng.ne Comoony. :nc.
)
fe
.- .% ' ; Diesel Eng;ne Monutocturing. Columbus gy; ' ,.
I b } fj Burr S. SweZey Jr. I
;;19 E % ..s -
j Chairman of tne Beo'd I g C-" ' Lofoyet's Nationo Bank. Lofoye'te- I
. ;, '/ [, y , '
y Chairman of *he Board [
~ '
g.
*g Union Bonk and Trust Company.
CefpN
& h, oudit committee
?! . . Joseph A. Binford, chairman Bionchor stoner Mannews Richard H. B!acklidge !
Shelton M. Hannig Hugh A. Barker, ex officio l. compensation and
\ h nominating committee Richoro B. Stoner, chairman g Burr S. Swezey Jr.
Walter J. Matthews 9 - Carroll H.' Blanchor. ex officio 9 1 2 1 _,g ,,,,.,_,,,_.g g , ,7_g_,,,y ,
1
~
~ PUBliC SERVICE INDIANA . , , . .,
m'onagement's analysis
! -E of summary of operations.
6 T'otal kwh sales increased 4.9% in 1979 serve KIP requirementsi for the year 2 compared with 1.3% in 1978, reflecting beginning April 1,1979 wit decliring
.both continued growth in the number of amounts for the two succeeding years, customers ond o return to more normal Short. term power sales, due in large part to operations offer the curtoilment of usoge temporary capacity shortages of other during the 1977 78 cool miners'sinke. This ~ electric utilities, have had a favorable moderate increase was due forgely to impact on operating results.
L ' continued energy conservation, relatively mild weather during the summer and fall income tax expense and its components and o slowdown in industrial activity'due to varied due to fluctuations in pre tax economic conditions in late 1979. Income and increases in fox depreciation
. and invesiment tax credits resulting Domestic kwh safes increased .7% .
primarily from increased levels of
~ compared with 3.6% in 1978.~ Commerclol construction.
sales increased 7.0% wnile industrial sales (increased 8.2% compared with 1978's .Other operation expenses have increased
' decline of 5.2% in commercial sales and due to the inflationary pressures on wages on increase of 1.8% in incustrict safes. .
and materials, customer growth, the Sales for resole growth remained stable at odoition of the fourth Gibson unit and 3.3% compared with 3.8% for 1978. additions to the Company's transmission and distribution systems. Increased Kwh growth, increased retoll and maintenance expenses reflect the some
' wholesale rates which become effective in ' factors.
;: September 1978 and January 1979, respectively, and the recovery of fue! costs increased depreciation expense in 1979 through the fuel cost charge have reflects new facilities installed to serve contributed to increased revenues os growing customer needs. In addition, t.h e followst composite depreclotion rate was Increased from 3.2% to 3.5%, effective
~
1979 1978 October 1978, in connection wit _h the Kwh growth . 4.9% 1.6% Company's September 1978 retail rate Rote increases. . order. and fuel cost charges 11.8 12.7 TD% T43% The increase in the combined debt and equity portions of allowance for funds used Fuel expense increases were due primarily during construction reflects the greater to increased kwh generation. Fuel costs - level of construellon work in progress of the
- per million BTU increased from 106.ic in Marble Hill Nuclear Station.-
1978 to 107.2c in 1979. This moderate increo:e reflects the return to more normal increases in interest chorges and preferred market conditions following the 1978 cool - dividends reflect the sole of additional
- rdners' strike which had realted in spot securities to finance the Company's purchases ~of higher priced cool and - ongoing construction program. The increased use of oil fired generation. increase in earnings per common shore wc= '1ue primarily to the additional
'The Company changed from a buyer to.a. .r9enues generated by the rote increases,.
seller in the Kentucky-indiono Pool (KIP)- : and offset in part by the above mentioned
- effective April 1,1978. With the addition of = Increased costs of operation and the' ~
a . 1the fourth 650 megawatt cool-fired unit of . increase in the number of common shores the Gibson Station in late March 1979,423 : outstanding. g :4 megawatts of this unit.were committed to. ..
~
y . For Summary of Operations, see page 3. l d
e-
~
, ... - a. PUBUC SERVICE'INDIANAl
- statements of income 1979 1978 y
Electric Operating Revenues . . . . $628 538 S538 423 Operating Expenses .
~ Fuel . . . , 263 000 205 919 Purchased power . . . . (80 381) (17 070) 182 619 188 849 Taxes (page 36)'. . 119 657 90 606
~ Other operation . , . . . . 71 910 58 280 Maintenance . . 45 500 41 028 Depreciation . .. . . , 64 765 53 028 484 451- 431 791 Operating income . . . . 144 087 106 632 Other income-Net -
. Allowance for equity funds used dunng construction '
25 913 21 637 Other - . . 2 489 2 021 28 402 23 656 Iricome Bef' ore Interest Charges' 172 489 130 290
- Interest Charges . .. 65 585 56 013 Less allowance for debt funds used during construction . 16 086 13 431 49 499 42 582 NetIncome . .. . . .122 990 87 708 Dividends on Preferred Stock . 16 896 14 075 Common Stock Income Avalloble. ... .. . $106 094 S 73 633 Average Shores Outstanding 27 962 25 211 Earnings Per Shore . . . . $3.79 S2.92 statements of eamings invested in tne business l 1979 1978 I nnsc 1 Bolonce January 1. . . .. . . $161300 S143 683 Netincome . .. ., . . . 122 990 -87 708 284 290 231 391 l
Deduct ~
' Cash dividends -
Preferred stock . . . . . 16 634 13 761
' Common stock (1979-S2.28; 1978-$2.13 per share) 63 363 53 715
- Capitol stock issuance expenses . . . , 2 728 2 615 82 725 70 091
~ Bolonce December 31 .. .. . . . . . . . $201565 S161 3001
, :The accom' ponying notes are on integral part of these financial statements.
/
% a S
w v n- a-
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' FUBUC SERVICE INDIANd - , ,. ,
a Ibalance sheets assets December 31 1979 1978 (ro mnm) Electric' Utility Plant-original cost in Service Production . . . .. . .. . . . . $1082 456 S 917 673 Transmission' .. . .. . .,. .. . 337 306 347 408 Distnbution . . . , ,. . . .. ... 452 665 399 262 General ...... . . ... .. 59 169 57 339 1 931 596 1 721 682 _ . _ _ _ _ . Accumulated depreciation . . . . . . 462 010 405 513 1 469 586 1 316 169 Construction work in progress Gibson Unit 4 . .. ... . .. . . 148 798 Gibson Unit 5 ._. . . . . . . . 84 813 23 905 Marble Hill. Unit i . . .. . . 302 633 170 556 Marble Hill Unit 2. . . . . .. . . 139 141 56 629 Other . . . . . . . . . .. ... . .. . . 65 804 47 436 592 391 447 324
- Nuclect fuel . . . . . .. 71 122 48 648 2 133 099 1 812 141 Current Assets
- Cosh. . . ...... .. .... .. . .. . .. . 6 473 6 307 Temporary cash investments. . . . . .. 55 500
-Accounts receivable . . . .. ...... ... -54 396 58 480
- Federalincome tax refunds ... . . .. .. 4 400 11 223 Reimbursable nuclear project expenditures .. . . 11 055 3 989
- Fossil fuel-at overage cost . . . .... . . .. 91 274 62 308 Materials and supplies-at overage cost. .. . ... 20 889 18 356
- Other .. ..... .. . . .. .. . .. . . 7 388 6 988-195 875 223 151 Other i . ... .... .. .... . .. .. ,. 13 114 9 114
.. $2 342 088 S2 044 406
' The accompanying notes are an integral part of these financial statements.
A 32' y s--, r V
+
a .. s'horeh'olders' equity ond ilabilities December 31 1979 1978
'm ;c m)
~
~Shoreholders' Equity .
/ Common stock-without por value -
L.outhorized 60.000.000 shores-
- outstanding 29,794.493 shores in 1979
- and 26.957.705 shares in 1978 ... . . .. $ 535 075 S 463 407 Earningsinvested iri the business . .- 201 565 161 300 Total common stock equity . .. . 736 640 624 707 Cumulative preferred stock (page 35) . . 235 000 200 000 Toto 1 shareholders
- equity. . . . 971 640 824 707 Long Term Debt (page 35) . . . 830 816 775 896 Totalcapitalization . . . . .. . 1 802 456 1 600 603 Current Llobilities Long term debt due within one year . . 12 000 Trust demand notes . . . . . . . . . 23 919 24 742 Commercial poper . . . . 6 000 Accounts payable. . . . . 126 280 95 416
' Accrued to'x es . . . . . 32 234 30 033 Accrued interest . . .. . . . . 23 963 23 255 Customers' deposits . . . . .. . 1496 2 190 213 892 187 636 Other .
Deferred income taxes . . . ... 194 251 160 908
; Unamortized investment tax credits . . . . . . '123 779 85 480 Miscellaneous . . . . .. . . 7 710 9 779 325 740 256 167
$2 342 088' S2 044 406 w
k
\
s
?PUBUC SERVICE INDIANA . .. .
statements of sources of fu'nds used for utility plant additions. 1979 1978 (*G 5713l. Funds Generated Internally Reinvested earnings Net income . . .. . .. ... . .. $122 990 S 87 708 Less cash dividends . . . . .. . .. ,. ... . 79 997 67 476 42 993 20 232
~ Depreciation , ... . .. .... . . . . 64 7L. 53 028 Deferred income taxes-net . . ... .. . . .. 29 053 33 328 investment tax credit-net. . . ... . 42 297 34 140 Allowance for equity funds used during construction (25 913)- (21 637) 153 195 119 091
- Funds from Financing and Other Sources
~ Common stock Public offering , . .. .. ..... ... 49 140 51 460 Automatic dividend reinvestment and stock purchase plan 13 637 6 086 Employee stock purchase plan . . .. . 2 130 1 124 Preferred stock. . . . .. . .. . . 35 000 45 000 First mortgage bonds .. .. .. ... . . 55 000 100 000 Retirement of first mortgage bonds . . . . . .
(12 000)- Net change in working capital and other items Temporary cashinvestments . . . . . . 55 500 (31 700) . Accounts receivable . . .. ... .. . .... , ' 4 084 (23 247) Federalincome tax refunds'. . . .
. . .... . 6 823 (11 223)
Reimbursable nuclect project expenditures . . (7 066) 16 795 Fueland materials and supplies . . . .. . . (31 499) (15 534) Notes pa,able,less repayments . . 5177 (108) Accounts payable . . . . . . . . . . . . . ... . 29 490 28 262 Other items-net . . . . .. . . 2 146 2 990 207 562 169 905 Allowance for equity funds used during construction . . 25 913 21 637
$386 670 - $310 633 Utility Plant Additions Construction . . . . . . . . . . . .... . .... $364196 *297 880 Nuclear fuel . . .... .. ... .. . . .. .. 22 474 -12 753
, $386 670 S310 633 The accompanying notes are on integral port of these financial statements.
31
~
I
- cumulative preferred stock December 31 1979 1978-w ya >
Por vo!ue 5.100 per shore-outhorized 5.000.000
- snares-outstanding -
_150,000 shores. 31/2% Series . . . . . . .. . $ 15 000 S 15 000 f 300.000 shores,' 7.15% Series . . . . ... . . 30 000 30 000 350.000 shores,9.44% Series. .. .- . 35 000 35 000
. 400,000 shores. 8.52% Series .
~
. 40 000 40 000 45 000- '45 000
~
' 450.000 shores. 8.38% Series. . .. . .
350.000 shores. 8.96% Series. . . . 35 000 Por value S25 per shore-outhorizea 5.000.000 shores-outstancing 800.000 shores. 4.32% Series . , .. . 20 000 20 000
-600.000 shores, 4.16% Series . . . 15 000 15 000 Total.... .. . . . . . . . $235 000 S200 000 long term debt December 31 1979 1978
('ncusanas) First Mortgage Bonds , Series J, 3 3/8% dueJuly 1.1982 . . .. . . $ 25 000 S 25 000
- Series K. 3 3/8% dueJanuary 1,1984. ... . . ... 25 000 25 000
- Series L, 4 7/8% due October 1,1987- . . ... 35 000 '35 000 Series M, 4 3/85 due February 1,1989 . . . . 25 000- -25 000 Series N, . 4 3/4% due August 1.1990. . . . 30 000 30 000 Series P, ;71/8% due January 1.1999. . . . . 40 000 40 000
- Series R.- 7 5/8% dueJanuary 1.2001. . . . -50 000 50 000
- Series S, 7% dueJanuary 1,2002. . 50 000 50 000 Series T, .
.8% due February 1,2004 . . . . ... . . . 50 000 50 000 Series U. 9 5/8% due August 1;1981. . . . ... .. . 75 000 75 000 Series W, 9.60%i due August 1,2005. . . . . . . . . . . 80 000 80 000 Series Y, 7 5/8% due J. nuary 1. 2007. . . .. , . . 85 000 85 000 Series Z,' 81/8% . due October 1,2007 . . . . 85 000 85 000-1 Series AA.-'8 7/85 dueOctober 1.2008 . . . . . . 100 000 100 000 l
^
- Series 88, 6 5/8%'due March 1,2004(Pollution Control) 5 000 ~ j c Series CC; 91/2% due May 1,1985. .. .. . . 50 000 ;
_ Total first mortgage bonds . . . .. . . . .. .... 810 000' 755 000 l Pollution Control Note,5 3/4%'. due December 15,1989 to 2003 - 22 000 22 000 l
- Unamortized premium and discount-net . . . . . .. .... .. (1 184f '(1 104) i Total < , . . . . . , . .),.. . .. . ... . .. . . . . $830 816 $775 896
~
> .i 51 [,1
*e n. 2, .^ i . . mm
- w . .
. _ . .~ PUBUC SERVICE INDIANA- . .. .
taxes charged to o'perating expenses 1979 1978-Drc.a^as] Federal and' State' income
. Currently payable ~ . . . . . . . . . . . $19 552- S 6 463 Refunds-investment tax credit carryback (Note i(c)) . . (4 400) (i1 223)
. Deferred-net . . . . . . . . . . . . . . . . . . . . 29 053 33 328
, Investment tax credit-net . . .
. . . . . . . . . . . . . . . . . 42 297- 34 140 86 502 62 708
$ tote. Local and Other -
, Real estate and personal property . . . . . . . 18 197 15 405
!ndiano grossincome . . . . . . . . . . . 16 296 8 418 Social security . . . . . . . . A241 3 288 Other' . . . , . . . . . . . . . . . 421 787 33 155 27 898 i
Total taxes charged to operating expenses . . $119 657 S90 606 Taxes per dollor of operating revenue . . . . . . 19.0c 16.8c j-l I h .'
% s 36 k
r ' notes to finOnCICI SIQternentS-. . occumulated bolonce over the useful OnnUQl repOff 1979 ilves of the property which gave rise to such credits. The Company claimed on
- 1. Summary of Significant Accounting additional 1%% investment tax credit
-Policies: for the investment Tax Credit Employee Stock Ownership Plan for the years 1979
'(a) Depreciation and Maintenance 'and 1978.
- The, ' Company's provision for Investment tax credits generated in depreciation is ' determined by using excess of the investment tax credit uthe straight line method applied to the limitations esloblished by low have cost of deprecioble plant in service. been recorded as refunds of prior
, . The composite depreciation' rate was years' taxes.
' increased from opproximately 3.2% to 3.5%, effective .Octcber 1978, in (d) Unomortized Debt Discount, connection with the Company's Premium and Expense September 1978 retail rate order.
Debt discount, premium and expense Mointenance and repairs of property on outstanding long term debt is being units'and renewols of minor items of amortized over the lives of the property are charged to maintenance respective issues. expense accounts except repolrs of on insignificant amount charged to (e) Operating Revenues and Fuel clearing accounts. The costs of Costs renewals and betterments of units of property are charged to utility plant The~ Company records revenues as accounts and the original cost of billed to its customers on a cycle billing deprecioble units retired and cost of basis. Revenue is not recorded for removal, less salvage recovered, are energy delivered and unbilled at the charged to . accumulated deprecio- end of each fiscal period. tion. The Company has been authorized by (b) : Allowance for Funds Used During the Public Service Commission of Construction (AFUDC) Indiano to base retail fuel cost charges on current estimated costs of fuel; os The Company's AFUDC rate for 1979 octual costs of fuel are determined, cnd 1978 was '9%%; the related any adjustments are deferred and income tax effects applicable to the- billed in subsequent months. capitolized interest component is recorded _as ' deferred income tax 2. Rates. In September 1975, the expense. Company filed with the Federal Energy Regulatory Commission (FERC) for
'(c) Federal and State income increased rates applicable to its sole Taxes! for resale customers. Interim rates, subject to refund, under this filing were
' Income' tax timing differences, due -in effect for the period March 31,1976 orimarily . to accelerated i tox _ through January 27,1979. In June 1979, depreclotion and deduction of certain the FERC issued on order opplicable to utility plant costs capito!! zed per books, . this tote filing authorizing a $6.1 receive . comprehensive income tax - million increase on on annual basis.
ollocation treatment in determining the Revised rotes were filed in September
'. provision for taxes. 1979 in compliance with such order, but no action hos been token by the LThe Company is' deferring investment FERC..
tax credits and ~omortizing the 3/
P'UBUC SERVICE INDIANA . .. . L ~ notes to finOnClOl Statements- $100 per share). Net proceeds of S49.5 Continued . million will be applied to the repayment of outstanding commercial paper and In July 1978,Lthe Comoony made o to the payment of construction
. further filing for addihonc! increased expenditures.
rates applicable to its sole for resale-customers. Interim rates, subject to 4. Long Term Debt. The Company refund, under this filing were effective expects to file a registration statement January 28,1979..On October 3,1979, with the Securities and Exchange the Company and its sole for resale Commission for the sole of $100 million customers agreed to a settlement of principal amount of first mortgage this rate filing. The proposed settlement, bonds in March 1980. which is ' subject to approval by the FERC, will opproximate o S7.5 million' The Company expects _to meet 1980 increase on on annual basis. - sinking fund. requirements of $6.8 million for first mortgage bonds by Under the above rate filings, the pledging bondable property. The Company has collected $36.7 million Company has met and expects to (net of refunds ordered by the FERC) continue to meet future sinking fund during , the opplicable periods, of requirements by certifying bondable which $28.9 million has been included property additions. in operating revenues; the balance,
- representing estimated amounts to be 5. Pension Plan. The Company s non-refunded, has been deferred and contributory pension plan covers all excluded from operating revenu3s and employees meeting certain minimum the income tax effects applicable age and service requirements. The thereto have been reflected in the unfunded octuarial liability of the respective periods. pension plan amounted to $ 10.2 million at January 1,1979 and is being
- 3. Capital Stock.- As of December 31, funded over a period of twenty-five 1979, 1,464,911 shores of common years. The Company's policy is to fund stock are reserved for issuance under pension costs accrued, which the Automatic Dividend Reinvestment amounted to S4.6 million in 1979 and and Stock Purchase Plon (ADR). $3.9 million in 1978. At January 1,1979, Employee Stock Purchase Plan (ESPP) pension plan assets exceeded the
' and Investment Tax Credit Employee octuarictly computed vested benefits.
Stock Ownership Plan (ESOP).
- 6. ShortTerm Borrowings and The changes in common stock for 1979 Compensating Bolonces. At and 1978 ore os follows: December 31,1979, the Comoony had lines of credit with eight commercial Shores- banks in the total amount of S75 lesued Amount million. Interest on bank loans is at the M791978 1979 1978 prime commercial rate of such banks Ungns) in effect from time to time.
Arrangements have also been made - Public Offering 2.0 2.0, S50.5 $53.0 for the sole of commercial paper which ADR _
.6 ' .3 14.3 6.4 'is supported by a portion of these lines ESPP ond ESOP . .2 .1 6.9 3.8 . of credit. -Such lines of credit are H 73 $71.7 56T2 6 subject to concellation' by either party upon notice. In connection with these On January 25,'1980,. the Company credit lines, the Company has informal sold 500,000 shores of ' 9.60% orrangements Twith respect to t ? Cumulative Preferred Stock (por value maintaining overage compensating g bank bolonces which range from 10%
q] b
n y notes to finanClOl Sictements- $ 15.5 miliion, respectively; the balance
. Continued - results primarily from the timing of the deductions for tax purposes of certain cf the line of crecit to 10% of the line of utility plant costs cocitalized for book credit .plus 110% of the amount purposes.
; borrowed. Compensating bonk
' balonces of $7.5 million were met with Total income tax expense. which 4
funds on deposit in such banksL includes applicable amounts in other income-rset. oggregated S88.6 million
; The Company' otso has lines of credit and $64.7 million for the years 1979 with various banks within its service' and 1978. The reconciliation between creo aggregating opproximately Sii- the effective rates and combined million. Interest on such bank loans will statutory federal and state ;ncome tax
. be of. the prime commercial rate in rates is as follows:
effect from time to time, Compensating . balances;.are' not requireo in 1979 1978
' connection with these fines of c. edit.
Effective income At De'c ember 31, 1979, the Company tax rates 41.88 % 42.46% had. trust demand note arrangements Equity compcnent with :two commercial banks in the
~
of AFUDC, amount of $25. million. Amounts which does not borrowed are collable on demand enter into the and the interest rate on borrowings is. determination
-the current rate for certain directly of taxable placed, high quality, commerclol income 5.83 7.04 paper. There is no compensating Other items-net . (.09) .06
-botonce requirement associated with Statutory federal these. credit- crrongements. The ond state income Company holds o portion of its tax rates . . 47.62 % 49.56 %
previously mentioned bank . tines of credit available to cover any call for 8. Construction and Nuclear Fuel paymenic Commitments. The Comprny estimates that .$1.5 billion will be
' For the years '1979 and .1978, the expended for construction purposes Company had trust demand notes and and S220 million for nuclear fuel for the
= commercial paper outstanding of period 1980 1982.. Substantial
? various times with maximum borrowings commitments have been mode by the at any' month end aggregating $29.9 Company in connection with this million and $51.8 million, respectively.. program.
For' the years 1979 and 1978, such i . borrowings overaged $24.8 million and . The Company owns and will be entitled
. $27 4 ~ million, ' respectively, ; with a 1 to 83% of the output of the two Marble
. weighted overage interest- rate of' Hill Nuclear Station units; the remaining 10.8% and 8.1% (actual interest paid - 17% is owned by Wobosh Volley Power-
. divided 'oy overage notes payable). .- Assoclotion, -Inc. The ownership agreement between the Company 7,;; income Tax Expense. Deferred income . and Wobosh Valley Power Association, 1 taxes (net) are due to timing differences Inc. provides that each party shall be.
. .between .i book ~ .and 5 income ' tax responsible for the financing of. Its
' M 'deductionsi For" the . years 1979 and . ownership shore of project costs. The -
19787 deferred income tax expense - Company's shore of project costs to f crising - from ?loccelerated ; tax - date is $513. million. Northern Indiano F '
- depreciation,wos $17.5 million and Public Service Company will purchase 10% of the copocity of Unit i from the ;
x - ' 1-g m m . 2 1.
r,
~
- PUBUC SERVICE INDIANA . .. .
notes to financial statements-concluded s Company _ from the dote of commercial operation through September 30.1987.
.The Company has experienced
~
construction ~ problems at the Marble Hill Nuclear Station and has suspended safety related work. The - Company believes that a partic! resumption of safety-reioted work could occur as
' early as' the end of the first quarter of 1980. The completion schedule of the Marble Hill units. originally schedu!ed
. fcr 1982 and 1984, and cost estimates of $1.856 billion ($1.540 billion for the Company's 83% share)are under study by a nuclear consulting firm. .The Company cannot predict what changes may be made in estimated in-service - dates and costs until completion of the study, but in service dotes are expected to be significantly extended and costs are expected to be significantly increased.
- 9. Supplementory Information. Lease
. rentots are less than one percent of electric operating revenues. The effect on the financial statements. If . cll financing leases had been capitalized, is not material.
10.1979 and '1978 Quarterly. Financial Data (Uncudited). Operating Operating Net . ' Earnings Quarter Ended Revenues
- Income
- Income
- PerShore 1979-March 31. . . . . . . $174.4 $ 38.0 $133.1 $1.09 June 30 . . . . . . . . 150.4 34.3 28.4 . 89 September 30 . . -152.7 36.2 30.1 . 91 December 31. . . 151.0 .35.6 31.4 . 90 Total- $628.5 $144.1 $ 123.0 $ 3.79 1978' March 31' . .-,.. S133.6 $ 26.4 ' S 23.6- S .83
- June 30 . . . . . . . . i15.0 23.8 17.9 . 58 September 30. . . ~ 142.5 ~ ~ 24.5 - 19.4 .64 December 31. . . ~ 147.3 .31.9 26.8. . 87
- Toto!- ' $538.4 SiO6.6 S 87.7 $2.92 n
D ' millions 14 p g -Y
rn
,ye . *,J f,.
. Supplementary Data on Changing Prices (Uncudited). The following supplementary dato are sup-
- plied in occordance with the requirements of the Financial Accounting Standards Board (FASB) State-ment No.'33, Financial Reporting and Changing Prices, for the purpose of providing certain informo-
~ fion os to the effects of changing prices on the Company's cperoflons. The Company's financial
; statements are prepared based on historical prices in effect when transactions occurred; the new FASB statement requires the statement of income and certain other information to be prepared on two
~ odditional bases: the constant dollar basis and the current cost basis.
.The constant dellor basis represents the restatement of historical costs to current-day price levels, utiliz-
-ing the Consumer Price index for All Urban Consumers (CPI).
.The current cost basis-represents the restatement of historical costs of net utility plant to current rcproduction cost utilizing the Handy Whitman Index of Public Utility Construction Costs.
~
Differences between the constant dollar basis and the current cost basis may crise to the extent that specific prices used in determining current reproduction costs may have increased more or less rapidly than changes in the cpl.
' - As shown in the following statements, the application of constant dollar and current cost accounting to the Company's 1979 operations results in higher depreciation expense and a reduction in earnings per share of common stock. Cash dividends paid and the market price per common shore at year end for the five years ended December 31,1979 are shown on on actual historical basis and os ad-
! justed for changes in the cpl.
' In ' addition, changing pr' ices impact common and preferred shareholders' equity in two ways. First, Lunder rotemoking procedures prescribed by the regulatory commissions to which the Company is subject, only the original cost of utility plant is recoverable in revenues os depreclotion. The cost of utility plant, determined on the constant dollar and/or current cost basis, in excess of original cost, is nct presently recoverable in rates as depreclotion, nor os a deduction for income tax purposes, and is defined as a reduction to net recoverable cost.
.Second, " monetary assets", such as cash and c' aims to cash, lose purchasing power during inflo-
- tionary periods because monetary assets buy fewer goods and services as the generos price leval in-creases. Conversely, " monetary liabilities", such as long term debt, gain because the liabilities will be rcpoid by dollars having less purchasing powercThe net change in monetary assets and liabilities
- (which excludes utility plant, unomortized investment tax credits and shareholders' equity)is reflected
. as a gain (or loss) in purchasing power.
(Operating revenues and other operating expenses (exclusive of depreciation) in the 1979 statement of income hove not been restated since such amounts would not be materially different if determined
!on a constant dollar or current cost basis. The cost of fuel used in generation is not restated due to the L ; current recovery of octual fuel costs through fuel cost charge factors or adjustments in basic rote
? schedules.: Depreclotion expense has been restated by applying current Company depreciation rates to the indexed utility plant amounts.
- : The dato presented in the following statements should be viewed as on estimate _of the effect of Tchonging pricos, rather than as a precise measure, in the Company's opinion, the data, and the L methods used in its compilation, comply with FASB reporting requirements.
g.- , 5 J
PUBUC' SERVICE INDIANA . . l
. statements of income For the Year Ended December 31,1979 Current Cost Basis Historical Constant Dollar Basis (Based on Current l Basis (Based on CPI Index) Reproduction Cost) p e :.>g e : 1; s x y ;;
( ,' , cr g Operating Revenues S628.5 S 628.5 S 628.5 Operating Expenses Fuel 263.0 263.0 263.0 Purchased power - (80.4) (80.4) (80.4) Taxes. 119.6 - 119.6 119.6 Other operation and maintenance 117.4 117.4 117.4 Depreciation 64.8 115.3 130.6 484.4 534.9 550.2 Operating income 144.1 93.6 78.3 Interest Chorges (net of attowance for funds used during construction and other income - net) 21.1 21.1 21.1 Net income 123.0 72.5 57.2 i Dividends on Preferred Stock 16.9 16.9 16.9 l
-Income Avollable for Common Stock S106.1 S 55.6 S 40.3 Earnings per common shore $3.79 S1.99 S i.44 purchasing power gain (loss) -
assets and liabilities (Not reflected in not income) Increase la Currant Reproduction Coa.t of Net .
' Utility Plant S 235.0 l
Less increase in Net Utility Plant Based on CPI Index 346.5 Increase in CPI over Current Reproduction Cost (111.5) Excess;of Restated Utility Plant Costs over Original Cost Not Recoverable Through Rates (reduction to not recoverable cost) S( 11.5) _ (64.7) . Goin From Decline in Purchasing Power of Net Amounts Owed - '8.7 118.7 . Not . S (72.8) S (57.5) .
- The'following' summary is a five-year comparison of selected supplementary financlot dato (historical) wnich have been rgstoted in overage 1979 dollars (except actual data where indicated):
Years Ended December 31,
.1979 1978 1977 1976 1975 J *: c r.5;
-. Operating revenues -S628.5 $598.8 -S563.8 S506.9 $412.3
.. Constant dollor'Information (Based on CPIIndex)
- Ne_t income S 72.5 Earnings per common snore S 1.99 Net assets (shoreholders' equity) of year end at net recoverable cost . S920.4 L Current cost information (Based on current reproduction cost)
Net income S 57.2
. Earnings per common share S 1.44 increase in CPI over Current Reproduction Cost-Net Utility Plant. $ 111.5
' Net assets (shareholders' equity) at year end at net
-recoverable cost S920.4 L
- General information
' Goin from decline in purchasing power of net amounts owed $ 118.7 Cash dividends declared per common share Actual S2.28 S2.13 S2.01 S1.89% S1.73%
. As adjusted by CPIIndex S2.28 S2.37 S2.41 S2.41 S2.34
- Market price per common shore at year end
. Actual . S23.38 S24.63 S28.25 S31.63 S26.33 ~
As adjusted by CPI Index S23.38 S27.39 433.82 S40.31 S35.49
' Average cpi lndex. 217.3' 195.4 181.5 170.5 161.2
' j] At December 31,1979, the constant dollar and current cost bases of utility plant, net of occumulated depreclotion, were $2.940.9 million and $3,082.7 miillon, respectively, compared with net original cost of l utility plant of $2.133.1 million.
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- PU'8UC SERVICE INDIANA .-
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Louditors'Irepo' rt .
'To the Board of Directors of
. Public Service Company of inciano, inca
-' - We have examined the balance sheets of Public Service Company of In-
. diano,'inc. (on'indiano corporation) os of December 31,1979 and 1978,
' and the .related statements of income, earnings invested in the' business, C and sources ~of funds used for utility plant odditions for the years then end-4
. ed. Our examinations were rnode in accordonce with genercily accepted .
. Ouditing stondords,'ond accordingly included such tests of the accoun.
' ting records and such- otheriouditing procedures'es we~ considered .
.necessary in the' Circumstances.
In our opinion, the financial statements referred to obove present fairly the
' financial . position of Pubile Service Company of Indiano, Inc. as of-December Si,Li979 and 1978, and the results of its operations and the sources of its funds used for utility plant additions for the years then ended, i- ' in conformity with generally accepted accounting principles applied on a consistent basis.-
~
Arthur Andersen & Co.
-Indionopolls, Indiano, January 25,1980.'
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- - security markets and prices The principal organized markets in which the Company's common stock is traded are:
The New York Stock Exchange - The Midwest Stock Exchange The Pacific Stock Exchange in addition the. Company's common stock has unlisted trading privileges on the Cincinnati, Detroit cond Philadelphlo exchanges. All cumulative preferred stock is listed on the New York Stock Ex-chcnge and the 31/2%. 4.16% and 4.32% Series are also listed on the Midwest Stock Exchange.
' Company bonds issued since 1969 have been listed for trading on the New York Stock Exchange.
zQuarterly market price ranges and common stock dividends per shore were: First Second' Third Fourth High Low High Low High low High Low 1979
- Common Stock 26 5/8 24 1/2-' 27 24 1/8 26 3/8 24 25 1/4 22
- Cash Dividends .54 .58 .58 .58 Preferred Stock'
'31/2% Series 39 36 1/2 38 35 1/8 38 1/2 34 5/8 35 30
' 4.16% Series - '11 7/8 10 3/4 12 10 12 1/8' 10 1/2 11 9 1/2 4.32% Series 12 1/4 -10 3/4 '12 3/4 10 3/4 13 11 1/4 11 3/4 9 3/8
. 7.15% Series 79 1/2 74 78'1/2 .77 79 3/8 76 1/2 78 64 3/4 9.44%~ Series . 103 3/4 -101 1/2 104 1/2 100 1/8 105 100 100 87
' 8:52% Series. .96 91 3/4 96 3/4 89 98 1/2 90 90 75 3/4 8.38% Series. .95 1/2 92 1/2 94 5/8 90 1/2 97.3/8 90 82 74 1/2
, 0 8.96% Series 101 3/4 97 3/8 103 1/2 95 1/2 94 1/2 81 1978
! Common Stock 28 3/8 25 28 1/4 25 3/8 -25 5/8 26 5/8 24 Cosh Dividends .51. .54 .54 .54
- P;eferred Stock *
; 1
._31/2% Seriesi -43 1/4' ~40 42 1/4 39 40 1/4 -39 39 1/2 37
' 4.16% Series - 13 1/8 ,12 3/8_ _13' 11 .13 1/2 11 1/8 13 11 4.32% Series 14 1/4 12 1/2 13- 11 7/8 -13 1/2 11 7/8 13 11
' 7.15% Series' '90 1/2 ~ 84- 84 5/8- 84 85 5/8 84 3/8 82 1/2. 77 ild 9.44% Series' . 110 1/2 '105' '107 1/2 103 109 1/4 103 1/8 107 1/2 101
. . 8.52% Series- 105 5/8. 1100' -102 95 5/8 : 103 7/8- .96 102 1/4 '97 8.38% Series 101 1/2 94 1/4 103 1/2 : 95 1/4 .101 1/2 94 1/2
?
. Quorterly. dividends paio of opplicob!e rotes.-
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e l ' PUBUC SERVICE INDIANA 10 years of progress
- s. 1979 1' KILOWAfi4400R$ $0LD (mates)
Domest c . 4 I03 d' . ' Comercc! . . I' O inousvo . - 2.,. MMCs 2.288 Mune po's 1.502 is AnOtrer . 84 fctol . 18.223 W OPERAflNG REVENU65 (tnousoncs)
%3,4 , 1209,152 $164 3
Corrwerco! . '31 ?" 176.334 - Uh g3,,,, 145., 64.078 52 MVCs 3 y,gno,, 35.620 31 -. An Othe, 11.555 10.
$628,538
. SALES AND . Totof . $ 538.;
CU$f0MERS Average Prce per KJowort nour 3m 3-CU$f0M6R$ (onnuot overoges) Domestc . g
~ Comrrecol . 6 6.
Indsstrict . - ' TJEYCs (cekvery corits servec) . H6 MuntCfCols 034 ' AllOmer .. fotot. 525.638 516.t 82,552 72. .' m Cu'orre's(nciuoe3 occve1 DOME $ tic $tRVICE (overoge per customer) 10.349 10,, Annuo1 Use(bdowott-hours) AnnualRevenue . 3 Pnce per Wowott-hour 4 3 3' KILOWATT.MOUR OUTPui(mdhons) Generatec (net) , 23,690 19.. Purchosed. (4,011) ( Totot . . 19,679 18e Losses endComoony Use 1.454 1. TctolSoles . 18,223 17. t EttCTRIC $Y$itM GENERAilNG CAPA81tifY (megawatts) 5.472 5. > OPIRAtlONS Owned . Power Pool (423) . ( Purenosed. 5.255 4. Totot . MAXIMUM $Y$ttM D6 MAND (megowot's) 3.598 3. Summer . Winter , 3,718 3. FutLCO$f-permdhon B'Usconsumed . 107.2c 10e
$ 364,194 $297.
UilufY PLANT l CON $fRUCifD ADDitlONS' thousands) .
.$734.640 So24 COMMON $10CK EQUITY (thousoncs)*
Divicends per Shore . , , 2.28 : Averoge snores Outstoncing . . , - 27,962 25 3.79 $ ; 5MAttMOLDit$' ' forn.ngs pe Shore . , . 8 s235,000 $200 IQUITY AND PREFERRED STOCK EQUITY (thousonds) . Diveends . f 5.634 13 LONG-itRM DEST 1 , , AverogeDnodendfeo'e . 7.54 % 7:
,(December 31) . ,
$789,
$832.000
.LONG-TERMD687(thousanos) ~
inte'est on Deot , .
' 61,622 . 52.
Ave'oge Inte'est Qate - 7.64% . 7..
' 4.351 4 t' EMPLOYtt - NUM86R OF EMPLOYtt$ (ot Decemcer 3 t1 '
5ALAttt$, WAGES AND 8ENEFITS (thousoncs) . , 's 90.764 $ 76 DATA ~ ,
'Refects 3 for.2 stock scht in Apni 1976.
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' .103.700M ' L 90.03 4 < 72.628 - . 60.687 ' 59.083 , '52.239' 44 531i 41.334 38 0t t
% ~ t26 469 305.077J f 77,tt5 ; 70. t70 ~ 67.190 ' 58.860 .49.336 46.451 45.282
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. tt '2.485. . ' ; 2.461 . 12 451 ' 2.438 - 2.437 - - 2.M0 2.424 2.4 C - .2S9
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's of.8 t2 ' ! 53 164 2 ~ ' >46491.222 doO - 39.70% J2.837 27.813 23.726 20.535 17.790
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, 7.395 6.007
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~ $ 21717 5 199 69 : . 8 182 20 $ 176 00 $ .129
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f $ $20.012. 14.570 ~ ' 14.977 14 051, 12.425 tt $64 1t039 s itt5041i ~ (1.840) , s(350) - 492 . (347) (229): - 526 825 792
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s to.858 -. -15.652 : . 15.071: to 630 , 13 822 12,389
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' :.N.'31323:? S 4 2.922 ; : 2.924 .
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2J53 '. ) k ' 2.514 s 2.3 72 - ~2.167 J ~ 2.083 i 3.384 Q ' 3 3.136 t l 2.845 ' .. 2.567' , : 2.430 : 2.326 2.167.- .2.173_ .t972 "
- W2*: c o s S oc " 521* F " E38 6*; - 30 0c 1 _ 25 8c - ' 25 5e 236cz 221c ;
jo7528U ' " ? $209.392-
< t s t48.974;. ~$160.661; C st34Jto-.. .. S 91.o81 18 70.003 - ' s 78.402 - 's s 76.871 W.938 e 5462.4271
.# 2 1795.22S ? , , 5343.157 r t c S326.559 '
- $274.054 5234.879 ' $230.399 -
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i9.D 23,690$ "i 22.054 5 20.921i i19.084 v ' i 17.834 = ; J .16J84 / M 384' 16.384 ' . L t6.384
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W $6 0001,A 3155.000 4 , ( 1915.000 c ' t l . 8G000J ' ' $ 50.000 ) - S 50.000 '
. / 5.397 s . ;$ 80.0C3K - $ 50.000 4 - l 5 50.000 . '
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- 45534.000; 1 $534.0001 .SI$502 000 ? ; $395.000 T. C $305.000 ! * ' $345.000 -
%" Edd 49i MW37.068 " D ' M26.226 ;.
' , $295.000. $255.000 133.1ot ' i20704 : ' ut1.519 . t 7,992 ' ~ t3,566 H0.917f p [7.25(d po94%f
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' , [ o 15%? M - 5 49% , ? 7.5 49% $ ~ 5 28% ~ J 4 889 J4 35% ; - -
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TPUBUC SERVICE INDIANA ^ 2 Stock T' ransfer Agents VCommon and Preferred Stocks ,
, ' Cceremo. m.nos No:cno.:Eam ano itt st Cerrcca, c' Cn:ogo
?]trf^ LoSo e S:ree Oncoo? c0$3
$roo'c'g'Trg,idOrr,co^,
- 2 E ooaivan New Ycr< 1C004 Common Stock .
f Vycronts-Nonen3 3cra 3 Trur Cor cony si .nconocols -
'OneJ,ie cronts P: ora. no:oroccas - 46204 LRegisNors of Stock
- Common and Preferred Stocks Me Cro<e Mo+. anon 309 N A
' Coe '@w York Oczo; Ne,v?icre 10084 Tre Fi rs' Noncoof BorJe dt Onicago ..
Cre Erst No' enolP;oro. Cn:cogo 6C670 Common Stock 1 .
. Arrer. con :e'cre No cc:o SON ora Trus' Comconf 101 Monument Orc:e. :noonoccus . 46277 Dividend Disbursing Office Shoreholder Relations
- Public Service Indiano
- 1000 East Main Street Plainfle!d,Indiano 46168 The annual meeting of shareholders will be held in Plainfield, Indiano, on
' April 7,1980. Shoreholders of record of the close of business on February 19 1980 will be entitled to vote at the meeting, Forrnal notice, proxy state-
- ment and proxy form will be mailed about March' 3.
iThis onnual report and the financial statements contained herein are submitted for the generalinformation of the shareholders of Public Service
.' Company of Indiano, Inc., and are not Intended for use in connection with
. 'ony.so!s;or' purchase of, or any offer or solicitaticc of offers to buy or sell,
- : any securities of the Company,:
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I~ i L service crea l General Headquarters Plainfield
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- p9d,y Kokomo sm rfr
( . 3 Western Division Headquarters
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Terre Haute
, 'i./.' f ? .: , ; 1 Southern Division Headquarters n.T -a ye el Columbus
,, 1 c
' ]*IN rd k j 4 Power Generating Facilities:
1eeKokomos *- % P - O Gibson Station y , 2.600.000 kiiowatts T O ca d e (650.000 kilowatts g g- under construction)
. O Plainfields a
- g O Cayuga Station aTerre Houte 1.036.000 kilowatts mColumbus
** @ Wabash River Station
- 889,000 kilowatts
- 0-
'g O Gallagher Station 637.000 kilowatts ,
.T9 O Edwardspori Station
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- 165,000 kilowatts JYk Q Noblesville Station 106.000 kilowahs
. O Miami Wobash~ Pecking Station 104.000 kilowatts O Connersville Pecking Station 98.000 kilowatts Q Markland Hydroelectric Station 81.000 kilowatts ; ,. @ Marble Hill Nuclear Station (2.260.000 kilowatts under construction) einterconnection points with PUBUC SERVICE INDIANA neighboring power systems for two-1000 East Main Street way flow of -energy -to increase .
Plaintield,Indiano 46168
. reliability and efficiency 3.17 839-9611
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. ' FI!!ANCI AL STATEMENTS
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^ - AS OP ' DECEMBER 11,- 1979 AND 1978 ' '
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t ' INDIANAPOMS, INDIANA s ;?,. .n
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- g :'4-S To 2the Boardsof/ Directors or -
e ;Wabash Valley? Power Association lLInc. : DWelhavefexamined.the.. balance' sheets-of WABASH' VALLEY. 4
/ POWER.dS30CIATION, INC.E(an' Indiana-not-for'-profit corporation).
.as'or' December:231,11979 nan'd'1978k and-the related statements of.
- revenues Land l expenses, Tpatronage ' capital and. changes ;in financial-
- position: for the year endedzDecember. 31,;1979 andethe eight imonths; ended D'ecember 31,_1978. - our; examinations'were made in'. -
= accordance7with.generallysaccepted auditing. standards _z and,. accord-
- ;ingly rincluded such tests of~the' accounting' records and such
~
other auditin'g procedures-a's1we considered.necessary.in the' circumstances. [In our op' inion, the financial statements referred-to. above present fairly:the:financialcposition of'Wabash: Valley-
?' ,
- PowerSAssociation,cInc. as of DecemberE31, 1979 and'1978,'and
~
thefresults-of 1tsroperations'.and:the changes'.in its_! financial
, ; position'for-thelyeariended. December 31',-s1979'and the eight
_ Lmonths'endediDecember 31,~1978, in 1 conformity withl generally
.acceptedTacc'ounting principles appliedion a' consistent. basis.
~- .
February =;.1, .1980. -
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- A48 S EET S. ,
1979 1978-
+ s
'( . * , <
e - N'i,' '
~
- j .
tUTILITY?ITANTJ(Notes 2'and13): . y_ ' { I'niservicep at originali costi '$. . 120 ;$ 120
, 3ess-OAccumul'ated sdepreciatj ~1,274,477 239,609-o n g . ,
s ,
- N '
2n' age.~ capital 1l,274,597 239',729 .
- ConstructionLworkEin:progrei.
W ._ Marble H111'Nuc1' ear : Static M 2 Nucle ar.' fuel i . - . .. '& _ - ;0ther; 1100,123,00.0- .57,956, 00 101,397,597. 58,195,729-v- ____________ ___________ m ._
. . _ $URRENT' ASSETS:
%p~ - . Cash -
m , . Temporary 1 cash, investments-37.; ' W' . EA ccounts receivable-F 6,952,472 5,763,5264 9 Power: ,132,242 104,699 A - Others er refund. - 209A87 - Z~~,' ' OUnbilled(fuet costs 8,003,0813 :1,008,733 "
' c. - '
!Prepaymehts.
. 230,101. 28,161-
- , 1 _
jotal" current ass'ets 15,527,383- 6,905;119
? DEFERRED. CHARGES'AND-OTHER-
~ *
.$116,924;980 - $65,100,848:
m s
....========= ===========.
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', y - ,
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$ STATEMENTS OF REVENUES-AND~ EXPENSES (b
M
' Year Ended.
Eight. Months Ended
~ '
~
f - : December 31, December 31,- 1979 1978
- (No te .1) .
idPERdTINO" REVENUES (Note 5)
~
$76,2.86,222- $38,339,690 t0PERATING' EXPENSES:. .
EPurchased power (Note: 5) 74,439,930: .3r,977,273 0, . JA'dministrative;and general 908,666E 494,459-- F IDepreciation:(Note'2)- ' 8,234 3.899
? ,
Total .. operating : expenses .. 75,356,830 38;475,631 ELECTRIC? OPERATING.MARGINL(LOSS) _ 929,392 (135,941) INTEREST: EX' PENSE : 9 . JInterestion long-t'erm' debt. 6,715,272 2,586,179.
; Interest charged to construction -
~
credit' (6,715,272)- '(2,586,179), Other: -
-793
- . Total' inte res t'. ex pens e '
793 NET OPERATING: MARGIN-(LOSS) 929,392' (136 ',7 3 4 ).. N NONOPERATING~ MARGINS,-Linterest 1ricome -104,526 16,441 PATRONA'E1CAPITALIALLOCATIONS .950 O 652
-$ 1,034,868 $c (119,6.41) 5 NET MARGIN ((LOSS)'
~ . - ........... ...........
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%. . a, , .,r . s ,, - . . . m .
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+
-[ 2 S Mx ,i f NetJmaiSinl(los.sh 1,034,868- :(119.i641)
~ .- . . - . , . . . . .
, gi 7 CBALANCE wend / of fyear$(Note W ?$1',274,477 ~$239,609 8~ : y -enyzo- a 4
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~$ ANA' BASH VALLEY J PONER~ SSOCIATION,-INC.
?
+
{ STATEMENTS'0FJCHANGEsl IN FINANCIAL POSITION-
.i Eight Month's 4 '
Year-Ended Ended
'
- December.31, December 31,
~
1979 1978-L
}" ,
(Note 1)
'SOURCEl'F 0 FUNDS:
- Ne t jnargin - (los s) ' .$ 1,034,868 $ ..(119,641)
? Item not7 requiring the outlay iof ~ funds : cu rrently-
. JDepreciation 8>,'234' 3,899 1
- , _ Funds:provided from"(used .
, in)Loperations- 1,043,~102 (115,742)
. 23,128,000-
~
L'ong-term debt-- ~42',167,000
$43,210',102 $23,012,258-
,> f;USE10F FUNDS:
-Additionsto utilitycplant and LconstructionLworkrin progress -$49,494,641 .$24,026,311 s Increase in def2rred: charges. {
1
. and/other: '
._566,190 5,534 s .
Decrease r in working: capital (6,850,729) (1,019,587).
,1 ^
$43,210,'102. $23,012,258
=========== ===========
~'a w DECREASE IN; WORKING CAPITAL
' ~ REPRESENTEDDBY:
'I -
~ ;. '
Increase 1(decrease) in currentIassets-
- Cash- $' -(29,551)!$ . (36,467)
' lTemporaryfcashiinvestments- 398,000 '(101,000)-
. Accounts' receivable 1,368,162 -625,971 A ~' Unbilled/ fuel _ cost. 33,538 7,819
- Prepayments: 1,3P5 (3,128)
- m 11,771,535 493,195
~
f(Incr' ease)fdecrease in current _.
'p' - liabilities- - _. .
iAccounts7 payable (1,425f,976) [ '.Unbilled Econs truction :cos ts
-( 6 21,4 4 0 )-.
1 jpayable- ,-(6,994,348) f(1,0'08'733E ,
~~
_201;9_40) ~ jl17,391-
-Accrued liabilities- (
i- _
', [_
~
(8,622,264) -(1l512,782). [gg f _. [ DECREASE-IN 50RKING'CAPITALi ~ . :: $ ( 6 ,8.50',7 29 )4 $(1,019,587) e
=
=========== ===========
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/> $The accompanying notesbarevan; integral. parti -
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N w1 l A-"- i= . .. ,
, :n Oq, SWABASH VALLEY 7 POWER'1 ASSOCIATION, INC.
s% ,
, s .
y= -
. NOTES TO' FINANCIAL: STATEMENTS
,TF- '
fDECEMBERT31, 1979 AND'1978 L x
.:;(
10 NdTURETOP OPERATIONS 2 4 [Wabash. Valley! Power.. Association, Inc. is-anLassociation. f of124)membler ' Rural- Electric: Membership Cooperatives.
~
- --s ,
In ~anuary
, "1978 oth~e. Association 0receivedEa certificate'of convenience and necessityifrom tne Public Service 7Commi'ssion of- Indiana authoriz.-
Ting'it,samong' other:Jthings,J to beithelpower stipplier and to _ . conduct 1related activities =for its members. Effective with the ? period - ended: December 31,_1978 the
~
- [ Association ' changed fits - year end from April 3'O to December 31. .
~
1Thus,J.the accompanying financial statements include statements of .
;revenuesland' expenses,-patronage capital and changes in financial (position' for theLeight months ended December: 31~, 1978.:
~
,- 2l.;. :
SUMMARY
LOF SIGNIFICANT JACCOUNTING POLICIES
- : a' . - Utility. Plant-Construction costs 4 include allocations for payroll 3related costo and general-and administrative expenses as.well' aslinterest on'= borrowed funds used~during1 construction.(based on actual construction.1nterest. incurred).
" ~
- b. :Depreciatiion -
The Association;provides' depreciation;on utility ~ ipropeetylon1a1 straight--line basisf over the estimated service .
'liveslof[Uthe depreciablefproperty._ Depreciation rates'are'10%'
1ror. office'furnitutesandiequipment and 20% forJautomobiles. I 'c.-: Federal-Inco.ne Taxes The L Association: is - exempt from . Federal and- state inconie jtaxes1pursuantito the. provisions of_Section 501(c)(12) of thei T
- c . Internal-Revenue" Code.
a; .d. . :: Pension: Plani
~
. Chr,tain(employeesfofLthe' Association,arexmembers of
~
- andicontribute.xtola? pension: plan administered.byJIndiana Statewide i . iRural'ElectriciCooperative,;Inc.; Employer 7pensioniexpense was
.> c_$6,293tforethelyearEendedLDec~ ember 31',L1979.and $3,667;focithe
- >eight rmonths: ended? December 31,91978. '
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i ll b 2 2 af f3. fCONSTRUCTION?COMMITMENTJ g/ 3 -
, s t q- ,
- n. 1T$e[Associati~on;.haefa:175:ownershipiinterest in the 4
' Marble)HillTNuclear Station,~iwhich is being jointly constructed 7
- j ithiPublicTService! Company.of.1 Indiana,rInc.E(PSI).
N0 ring;1979,l construction: problems.were experienced and.
+ -
_ic Efety<related workfwasl suspended. : PSI; believes-that:a partial
._ iresumption;of. safety-related? work.couldjo'ccur as-earlysas~theLends (ciff thof firstfquarter .of? 1980. .
/ v
^
. The: completion schedule of-the Marble Hill units,
~
b
.3 originally scheduled,for;1982;and41984,'and cost estimates'of
( s - 13356,'000,0001(for theJAssociation's" portion :or. construction
. costs),'are2under study byxa nuclear: consulting firm.
s The
~f cAssociationJeannot predicttwhat changes' may-be made'in. estimated T~ jin-aervice dates andecosts:untillthe completion of the atudy,-but- .
4 <in-service dates.-are;expectedLto_be:significantly extended and _ 2thescosts(arecexpected to be:significantly increased. t
+. . ,
, < 4. . 'LONG- TERM DEBT.
Long-term. debt consists of 8.418.- 10 598% mortgage-
' ~ '
notes payablefto:the Federal 1 Financing Bank and.are secured-by '
<2 :allTproperty orcthe'Associationdincluding its'17% interest in s
< ; Marble' Hill Nuclear' Station'. .The:notesLare-due, commencing.in December 2012L and? interest is paid quarterly.- Under theiterms.of
- the-loanLagreement,Junadvancedcloan funds-of $260,561',000-'are
' availabler to the Association ;to < co.ver future expenditures .on the N , , :MarblejHill Nuclear. Station ; project. The Association believes
.that"the. original commitment can be increased to finance'their-fportion of -the : additional--construction cos ts -discussed in Note 3.
!The: Rural Electrification Administration (REA) of the U.S.
Department of Agriculture:has guaranteed payment of the loan. JUnderlterms;ofIthe mortgage'agrsement, therAssociation-p .. L g: , s fisjrastricted from making distributions of patronage' capital so U " lor .es;thefAssociation.'anequity.is lessLthan 40%tof total' p
.;aisats.cEAs' of'DecemberJ31, 1979, equity'was'less2thani2% of
_. Etotalbassets.
- 'v
- c , ;5 7 LRATESL JThefAssociation is presentlyjbeing charged rates by.
It ' s twoToriits power suppliers'.which arefaubject tofretroactive
>decreaselbasedson?finalldisposition orypending'ratelincrease.
- requestshby:;the1Fede cali Energy (Regulatory .Commissioni(FERC) .-
H ~
? Based llon ; tentative; agreements oreached Ewith Jone Tsupplier.j (subject
; W O toiFERClapproval)cthe: Association willEreceiveirefunda approxi--
W matingn$2,000,000fplusfaccrued interest. .Nosagreement has-t
; ;:]
"~
' 9 .beenireached1regarding thefother pendin's ince. ease'butimanagement-q q 3 believes [itDishprobablefthat? refunds willlbe/r.eceived'during.
y9 .-, n j [ calendar [yeare1981):
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_ . . ed [In : eachiofdtihese: matters ,w refunds',5when ' received, will - . [tiefpassed}:Lon itoithei memberd REMC 'sJand willmbe" reflected: in the -
~
i si ff : , ffinancial';-(statements?-asf reductions cini revenues and ' purchas'ed.
-@. fpower.OThese7 refunds 7willpnot impactLthe--Association's' operating
~ ' '
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-The
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- Tn2theiamounth:-Association or2$12,0_00,000, whichimay h"asra~short be1used'for~term lineTorceredit:a general.-corpo'-
-; rate purposes;?as? determined 1by therBoard.of" Directors.- .Borrowings EbearDinterestE a,t9theNrate::oc -144( above th~e . prevailing ba'nk.' prime' J -
commercialcrate. . < There care . no outstanding _ borrowings)under ~ this g
. .j line d
; :;7[(LESE-COMNITMENTS1 s M
llFuturefrentalscommitmentsiunder. existing leases are not Tsignifibant.-- Total rental: expense.wes 421,372_- for.the hear. ended'
. " December 31,61979 andi$6,240ifor:the.eight months ended _ December 31, ' ~ '
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