ML19031A126
| ML19031A126 | |
| Person / Time | |
|---|---|
| Site: | Salem  |
| Issue date: | 07/28/1976 |
| From: | Delmarva Power & Light Co |
| To: | Office of Nuclear Reactor Regulation |
| References | |
| Download: ML19031A126 (32) | |
Text
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RECORDS FACILITY BRANCH
ANNUAL MEETING Third Tuesday in April at 12:30 p.m ., in the Company's General Offices 800 King Street Wilmington, Delaware FIRST MORTGAGE AND COLLATERAL TRUST BONDS - Trustee, Chemical Bank, New York, N. Y.
PREFERRED STOCK - Transfer Agent, Wilmington Trust Company, Wilmington , Del.
Registrar - Delaware Trust Company, Wilmington , Del.
COMMON ST0CK - Stock Symbol , DEW, Listed on the New York and PBW Stock Exchanges.
Transfer Agents - Wilmington Trust Company, Wilmington, Del., and INing Trust Company, New York, N. Y.
Registrars - Delaware Trust Company, Wilmington , Del. and Bankers Trust Company, New York, N. Y.
DIVIDEND REINVESTMENT AND COMMON SHARE PURCHASE PLAN - The response to the Company's Dividend Reinvestment and Common Share Purchase Plan has been most gratifying since its inception in November 197 4.
As of January 31 , 1976 approximately 6,000 or 11 % of shareholders , were participating in the plan. Their investments represented more than 200,000 shares of the Company's common stock.
The plan provides common stockholders the opportunity to reinvest cash dividends and/or invest additional cash to purchase additional shares of common stock without paying any brokerage or service charges . If you are not already participating and wish to do so, please write Delmarva Power, Stockholder Relations , 800 King Street, Wilmington ,
Delaware 19899.
Delmarva Dn111Ar
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FINANCIAL HIGHLIGHTS Percent 1975 1974 Increase (Decrease)
Revenues $278.5 million $261.9 million 6.4 Net Income $32.8 million $32.9 million (0.3)
Earnings per share $1.45 $1.73 (16 .2)
Dividends Declared $1.20 $1 .20 Common Stock Outstanding (Average Shares) 17,579,509 14,862,401 18.3 Construction Requirements $80.5 million $85.7 million (6.1)
Electric Sales 6.4 billion kwh 6.6 billion kwh (3 .0)
Gas Sales 12.9 million mcf 14.9 million mcf (13 .2)
Electric Customers 250,593 244,040 2.7 Gas Customers 73,827 74,098 (0.4)
CONTENTS President's Letter/2 Review of Operations/4 Earnings and Dividends/6 Revenues and Expenses/6 Construction and Financing/6 Electric Rate lncreases/6 Gas Rate lncreases/8 Load Management/8 Electric Consumption /8 Gas Supply/ 1O Gas Exploration Project/1O Fuel Supply/ 1O Summit Project Terminated / 12 Generation Planning /12 Environmental Matters/ 12 FEA Conversion Order/12 Research and Development/14 River Crossing Line/14 Higher Distribution Voltages/14 Organizational Changes/14 Communications/14 Employees/14 Officers and Directors/16 Service Area Map/17 Financial Section/18 Consolidated Statistics/28 1
15%. We believe that this return is necessary to maintain the Company in a sound financial position and restore earnings to an adequate level. We will continue to seek rate relief to meet this objective.
In the area of rate making, the Company is considering changes to its rate structure which will permit customers to derive benefits from using electricity during off-peak periods . Such rates must be based as closely as possible on the cost of providing service.
Summit Project Cancelled A major change in our construc-tion program occurred in October when the Summit Nuclear Power Station project was cancelled as a result of discussions with General Atomic Company, the reactor sup-plier. The contract for the reactors was terminated because of sub-stantial cost increases and prob-lems of General Atomic in connec-tion with the commercialization of the high temperature, gas-cooled reactor systems . In agreeing toter-minate the contract, the Company obtained a settlement of $125 mil-lion . This amount provides for the recovery of all expenditures and To The Shareholders: compensation for part of the cost of providing replacement generating Earnings of $1.45 per share for expense and a significant portion of capacity for the Summit units. We 1975 are very disappointing. The our customers' bills. believe that the settlement was a fair earnings reflect an increase in the one and in the best interests of the average shares of common stock Rate Increases Company's stockholders and cus-outstanding, higher interest Increased electric and gas rates tomers.
charges and a substantial in Delaware, and increased electric As a result of the Summit can-decrease in industrial electric sales rates for municipals and cooper- cellation, we are now studying in the northern part of the system as atives were in effect during 1975 possible alternatives for providing the result of adverse economic subject to refund . additional generation to meet conditions . An increase in electric rates in projected demands in 1981 and The cost of fuel stabilized Maryland was approved by the 1984, the years when the Summit somewhat during the year and the Maryland Commission, effective units were scheduled for operation.
commercial operation of the Peach January 17, 1976. Fossil-fired and nuclear generation Bottom nuclear units contributed On January 30, 1976 we filed with are being considered and the favorably toward our cost of electric the Federal Power Commission for Summit site south of Wilmington is a generation . We strengthened our an additional increase in electric viable one. The study will take into fuel buying capability, leased 77 rates for municipals and cooper- consideration government energy coal cars to improve reliability of atives . On February 18, 1976 we put policy, fuel availability and up-delivery to the Indian River Power into effect, subject to refund, the dated load growth forecasts.
Station and we can now receive oil second step of a requested As a result of the contract settle-for the Edge Moor Power Station in increase in retail electric rates in ment no external financing is large tankers. We will continue to Delaware. The first step was put into planned for 1976. We will require make every effort to lower fuel effect in September 1975. external financing after 1976 to costs, but they will remain the The electric rate requests seek a meet construction program Company's largest operating return on common equity of about requirements.
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FEA Conversion Order The Federal Energy Admin-istration ruled in 1975 that four generating units at the Edge Moor Power Station should be converted from oil to coal. These units were originally coal-fired. A substantial capital investment will be required in order that the units meet environmental standards. If low-sulfur coal can be obtained , it will be necessary to install only dust collecting equipment - without sulfur dioxide scrubbers - and a change to coal could be justified economically for two of the units.
However, if scrubbers are required, it is doubtful that the conversion could be justified . We have proposed that no changes be made to the other two units, which are more than 20 years old , and that they be allowed to burn oil for peaking purposes.
Natural Gas Situation Natural gas sales in New Castle County, Delaware , continue to be reduced due to the curtailment of supply from Transcontinental Gas Pipeline Corporation , our sole supplier. For several years we have searched for supplemental sources of gas . After careful study, the use Austin T. Gardner Robert D. Weimer of Synthetic Natural Gas was ruled Chairman of the Board President out because of its high end cost and the inefficient use of scarce petroleum products. The Company engineering personnel from the that kilowatt-hour sales will increase is participating in a gas exploration parent and subsidiary companies about 5% over 1975. Improvement project to the extent of about to conduct research on rate in the Company's financial con-
$250,000 a year for 3 years , which is structure, metering , off-peak loads dition will be dependent upon about 1% of gas revenues . A new and improvement of load factor. the outcome of rate decisions wh ich wholly-owned subsidiary Our aim is to direct the growth of our are pending before regulatory Company, " Delmarva Energy load rather than having it develop commissions.
Company", will handle the without any control. Your confidence in the Company exploration project through a In order to operate the Company is greatly apprec iated .
partnership involving other utility as efficiently as possible, changes companies. The actual exploration in organization have been made is being conducted by Enterprise and are continuing to be made. A Resources, Inc., a subsidiary of group reporting directly to me Stone & Webster Corporation . We monitors the performance of Com-are hopeful that our participation pany operations and recommends will result in additional natural gas to R. D. Weimer changes which result in reduced supplement our pipeline supply. President and personnel requirements , better Chief Executive Officer customer services and other im-Other Matters provements in efficiency. February 19, 1976 Delmarva has formed a Load With the upturn of the economy, Management Committee consisting which has begun and is expected to of key rate making, marketing and continue during 1976, we believe 3
MANAGEMENT REVIEW OF OPERATIONS Consolidated Summary of Earnings (Thousands of Dollars) 1975 1974 1973 1972 1971 1970 Operating Revenue ........ . .... . .... $278,548 $261 ,916 $188 ,359 $158,844 $129,505 $110,861 Operating Expenses Operation .. . ........ .. ........ . . 165, 165 153,494 99 ,323 80,517 66,982 54,950 Maintenance . .... . ....... . .... . . 17,769 16,289 13,715 12,960 10,536 10,425 Depreciation .... . .... . . . . . ...... 24,579 21 ,656 18,278 16,329 13,961 12,858 Taxes .... . .... . . ....... . ... . .. . 17,963 18,898 15,545 14,609 9,479 8,977 Total operating expenses . . . .. 225,476 210,337 146,861 124,415 100,958 87,210 Operating Income . . .... . . . .... . . . .. . . 53,072 51 ,579 41,498 34,429 28,547 23,651 Other Income Allowance for funds used d uring construction . . ... ... ... . 8,354 8,527 10,251 9,770 8,037 3,698 Other, net of taxes .. . ..... *~ ...... 605 190 54 156 92 277 Income Before Interest Charges .. .. .. . 62,031 60,296 51 ,803 44 ,355 36,676 27 ,626 Interest Charges .. . .. . . . .. . ... . .... .. 29,244 27,355 21 , 141 16,848 13,368 10,330 Net Income . .... . ... .... . . ..... . . ... 32,787 32,941 30,662 27,507 23,308 17,296 Dividends on Preferred Stock .. . .... . . 7,250 7,250 6,360 6,050 4,637 2,702 Earnings Applicable to Common Stock . 25,537 25,691 24,302 21 ,457 18,671 14,594 Dividends on Common Stock . . . . ... . . . 21,107 17,995 15,851 13,940 12,233 11 ,046 Addition to Retained Earnings ...... . .. $ 4,430 $ 7,696 $ 8,451 $ 7,517 $ 6,438 $ 3,548 Common Stock Average shares outstanding (thousands) .. ... . . . .. .. . .... .. 17,580 14,862 13,547 12,128 10,921 9,861 Earnings per share . . ........ . . . . $1.45 $1.73 $1 .79 $1 .77 $1 .71 $1.48 Dividends per share ..... .. . .. ... $1.20 $1 .20 $1 .17 $1 .13 $1 .12 $1 .12 economic slowdown . Sales of electrical energy during Operating Revenue the twelve months ended December 31, 1975 Total operating revenue for the year ended compared to the period ended December 31 , 1974 December 31 , 1975 increased $16.6 million or 6.4% decreased only slightly (3 .0%) . Industrial sales over 1974. The increase was due principally to rate decreased approximately 319,000,000KWHor13.0%
increases placed into effect, additional fuel adjustment compared to last year. Gas sales decreased 13.2% .
charges and gas production cost adjustments partly Total operating revenue for 1974 increased $73 .6 offset by the repeal of the 5% Delaware Utility Tax to million over 1973 or 39 .1%. The increase was due residential customers , the termination of a facilities mainly to a $60.2 million increase in fuel adjustment agreement between the Company and a neighboring charges and $8 .6 million in rate increases placed into utility, and reduced industrial sales as a result of the effect.
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Operating, Fuel and Maintenance 16% over 1973. These increases reflect the Company's need for large amounts of capital for its construction Expenses program. During the year 1975, the Company issued Total fuel expense for the year indicates only a slight First Mortgage and Collateral Trust Bonds in the increase over 1974. This increase reflects higher amount of $30 million in January and $30 million in July previously deferred fuel costs, offset by a decrease in at 9%% and 11 %, respectively.
fuel cost per million BTU combined with lower Interest charges on short-term debt for the year 1975 generation during the year (see Note 1-Fuel Costs). decreased 68.3% below 1974 as a result of the Nuclear energy was 11 % of system generation in 1975 repayment of short-term debt with the proceeds of the and 4% of system generation in 1974. Fuel expense per securities sold and the Company's share of funds from million BTU at the Company's generating stations is the cancellation of the Summit Nuclear Power shown in the following table: Station contract (see Note 8 to Financial Statements) .
1975 1974 1973 Preferred dividends for the year 1974 increased over 1973 due to the issuance of 150,000 shares in late Oil $2.12 $2.18 $.89 1973.
Coal 1.09 .90 .55 Refinery By-Product 2.03 1. 71 .53 Earnings Per Share Nuclear .26 .26 Decreases in earnings per share in 1975 and 1974 Overall Cost $1 .53 $1 .70 $.74 were due largely to an increase in the average number of shares of common stock outstanding and the factors Fuel expenses for 1975 and 1974 were offset partially referred to previously . In July the Company issued 2 by the sale of energy to the Pennsylvania-New million additional shares of common stock. In Jersey-Maryland interconnection. Energy interchange November, 1974 the Company had issued 1.5 million sales decreased in 1975 due to extensive maintenance shares of common stock.
performed on one of the Company's larger generators.
Other operation expenses increased 13% over 1974 due primarily to an increase in the cost of gas Dividends and Price Range purchased , escalated labor costs and general of Common Stock inflationary pressures. The cost of gas purchased The initial public distribution of the Common Stock of increased from $.66 per MCF in December, 1974 to the Company was made in May 1944, and quarterly
$1.06 per MCF in December, 1975. dividends have been paid continuously since July 1944. A quarterly dividend of 30¢ per share has been Taxes declared for the fourth quarter of 1975 payable January Taxes on income increased only slightly for the year 31 , 1976 to shareholders of record January 9, 1976.
ended December 31 , 1975. The decrease of $658,000 Dividends on common stock increased $3 .1 million between 1974 and 1973 was due to increased over 1974 and 1974 dividends increased $2.1 million operating expenses and the effect of book-tax over 1973. These increases were due to an increase in differences, Taxes other than income decreased $1.1 the number of shares outstanding . Dividends paid million from 1974 due largely to the repeal of the during 1975 averaged 83.0% of earnings applicable to residential Delaware Public Utility Tax and 1974 common stock compared to 70.0% in 1974 and 65.0%
increased $4 million or 32.5% over 1973 due principally in 1973. Future dividends will be dependent upon to an increase in the Delaware Public Utility Tax. These future earnings, the financial condition of the Company taxes eventually were recovered in customer billings. and other factors (see Note 9 to Financial Statements) .
The following tabulation shows the price range and Allowance for Funds Used dividends per share of the Common Stock of the During Construction Company on the New York Stock Exchange during the periods indicated:
The allowance for funds used during construction for the year ended December 31, 1975 decreased 1975 1974
$172,000 from 1974. The allowance during 1974 High Low Div. High Low Div.
decreased $1. 7 million from 1973 due primarily to the transfer of Edge Moor Unit No. 5 and Peach Bottom Unit 1st Quarter 113/s 9 $0.30 15Vs 133,1,i $0.30 No. 2 from construction work in progress to plant in 2nd Quarter 133/s 10V4 0.30 14 83/4 0.30 service . 3rd Quarter 135/s 10V2 0.30 95/s ?Va 0.30 4th Quarter 13 103/4 0.30 10 ?'l's 0.30 Interest Charges, Dividends on Preferred Stock Total interest charges on long-term debt for the year 1975 increased 27.2% over 1974, and 1974 increased 5
Earnings and Dividends Operating expenses for 1975 totaled $225 .5 million ,
an increase of $15.1 million or 7.2% over 1974. The Earnings on common stock for 1975 were $25 .5 increase primarily reflects inflationary conditions in the million , a decrease of $0.2 million or 0.6% from 1974.
economy that continue to increase costs of materials, On a per share basis , earnings were $1.45 for 1975, labor and services .
compared to $1 .73 for 1974.
There were 17,579,509 average common shares outstanding in 1975, an inc rease of 2,717 ,108 shares Construction and over the prior year. At year's end , there were 54,426 Financing Program shareholders of common stock. Quarterly dividends of Construction requirements for 1975 were 30¢ per share were paid on common stock, totaling approximately $80 .5 million, consisting of
$1.20 per share for the year. approximately $34 .3 million for electric production The Company has determined that 100% of 1975 facilities , $26 .2 million for electric transmission common stock dividends are taxable for federal facilities , $17.4 million for electric distribution facilities, income tax purposes . $1 million for gas distribution facilities and $1 .6 million for general facilities.
Earnings & Dividends per Share To finance the 1975 construction program , retire
- Earnings unsecured short-term debt in the amount of $53.1
- Dividends $1.77 $1.79 million and for other corporate purposes, approximately $50.2 million was obtained from internally generated funds . In addition , a total of $85 .2 million was obtained from the sale of $30 million First
$1.48 Mortgage bonds in January, an additional $30 million in July, the sale of 2 million shares of common stock also
$1 .20 $1 .20 in July and 165,000 additional shares through the
$1 .13 $1 .17 I I
$1 .12 I
$1 .12 I
I Dividend Reinvestment and Common Share Purchase Plan.
Construction requirements for 1976 are estimated at 1970 '71 '72 '73 '74 '75 approximately $102 .5 million . Because of the funds available from the settlement of the nuclear power plant Revenues and Expenses construction contract with General Atomic, the Revenues for 1975 totaled $278.5 million , a 6.4% Company does not anticipate a need for any external increase over 1974 revenues. The increase is due financing in order to meet the 1976 construction primarily to additional rate increases . program .
Electric revenues increased 5. 7% to $241.9 million and accounted for 86.9% of total revenues. Gas and refinery service revenues increased 11 .1% to $36 .7 million.
Electric Rate Increases Increases and decreases in revenue over 1974 by Delaware customer class were as follows :
In July, the Company filed with the Public Service Electric Gas Commission (PSC) of Delaware for an overall increase Residential ... . .. . 12.1% 7.5% in retail electric revenues of 13.5% or $20.4 million . In Commercial . . . .. . 13.6% 11.3% September, the Company put approximately 50% of Industrial .. . ... . . . (3.4%) 16.6% the increase into effect under bond and subject to Resale . ..... . . .. . 14.5% refund as permitted by Delaware law. This amount, had it been collected during the entire year, would have brought the Company's earnings only up to the level (Millions of Dollars) authorized by the Delaware PSC in its 197 4 electric rate
- Revenues decision . The hearings began in October and the
- Expenses Commission's Order is anticipated in early 1976. In October, the Company filed an amendment to the rate application requesting a revision in the fuel adjustment clause. The revision would allow a mo(e current method of collecting fuel costs and would create a temporary surcharge of 1/20 of one cent per kilowatt-hour of sales in order to collect such costs not previously recovered in billings to customers and to reduce and eventually eliminate deferred fuel expenses in excess of two 1970 '71 '72 '73 '74 '75 months' accruals from the Company's balance sheet.
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7 Maryland 4W7'o increase to be effective from June 1, 1973 through March 8, 1974 and agreed to reexamine the In July, the Maryland subsidiary applied to the Public subsequent period until June 1, 1975 in connection with Service Commission (PSC) of Maryland for an overall the present application for increased gas rates.
increase in retail electric revenues of 8.9% or $4.1 The decision is being appealed because the million . In January 1976, the Maryland Commission Company believes that the Commission's decision on approved an increase of 5.2% , effective January 17, remand was not responsive to the opinion of the Court.
1976, which represents $2.4 mi llion in additional During the appeal , the Company will continue to collect revenues annually.
the 12% increase subject to refund .
The PSC of Maryland is reviewing methods which utility companies subject to its jurisdiction have used Load Management to calculate amounts billed to their customers for the changing costs of fuel used in generating stations . As a A load management comm ittee has been result of one aspect of th is proceeding , the PSC of established to investigate load management practices Maryland concluded that the Maryland subsidiary and techniques with a long-range goal of reducing the should revise its previous calculation method to avoid need for generating and transmission facilities in the overcollection. The Commission's auditors concluded future by shifting load from peak periods to off-peak that the Company's method of calculation resulted in periods . The committee's objective is to identify the collection of $400,000 more during 1974 than the conditions which will produce optimum economic proposed method . The Commission directed the util ization of plant, formulate a program which will Company to file a plan to refund such amount to its produce the desired results , implement the program customers in Maryland or show cause why such and monitor the results.
refunds should not be made. A hearing was held in Projects are underway in the areas of metering, rate August and rebuttal testimony has been filed on the structure and customer's end-use equipment. The case. The Company is unable to predict what the Company is developing a method of metering suitable decision will be. on this matter. for peak load pricing using standard components and plans are being formulated to test automatic meter Virginia reading equipment on residential customers . Peak load pricing is being considered for implementation on an In August 1974, the Virginia subsidiary filed with the optional basis during 1976. The committee is State Corporation Commission of Virginia for an annual investigating solar energy, electric veh icles and increase in retail electric revenues of 14.6% or devices which store energy for heating and cool ing .
$770,000. In March 1975, the Virginia Commission approved an increase of 14.0% , effective May 1, 1975, Electric Consumption which represents an increase in revenue of approximately $740,000. Total electric sales in 1975 were 6.4 billion kilowatt-hours, or 3% less than 1974. This decrease Municipals and Cooperatives was due to major industrial customers operating at reduced levels of production because of prevailing A decision is expected in 1976 on the Company's economic conditions. During the last quarter of the application before the Federal Power Commission for year, industrial customers were beginning to increase an increase in electric rates of 17.1% to all resale their output as the economy started its recovery.
customers . The increase has been in effect, subject to Total residential sales increased 74.7 million refund , since October 1974. If approved , revenues kilowatt-hours, or 4.7% above 1974 and commercial would be increased by approximately $3.7 mill ion sales were 56.6 million kilowatt-hours , or 4.3% over last annually. year. Total kilowatt-hours sales for resale customers decreased 1.2% below last year because of an Gas Rate Increases In March , the Company filed an application with the Electric Sales
(% Change from 1974)
Delaware Public Service Commission for an increase in revenue from natural gas rates of approximately $2.7 million, or 11.4%. The Company put the new rates into effect on June 1 under bond and subject to refund .
Hearings have begun on this request and a decision is Industrial expected early in 1976. -13%
In August, the Company appealed to the courts , for the second time, the decision of the Delaware Public Service Commission concerning a 1973 request for a 12% increase in gas rates . The Commission granted an increase of about4V2% in April 1974. On remand by the Court, the Commission reaffirmed in August 1975 the 8
interconnection agreement with Dover, Delaware, Gas Exploration Project which became operative September 1, 1975. Electric sales were reduced to the City of Dover due to this In September 1975, a new wholly-owned subsidiary agreement and the operation of a new generating unit Company, Delmarva Energy Company, along with in that municipality. Electric sales to other seven gas distributors, formed a limited partnership municipalities recorded substantial increases during with Enterprise Resources, Inc ., a subsidiary of Stone 1975. and Webster Corporation . The partnership is to explore The peak demand for the system was 1,463, 100 for and develop on-shore gas fields in Texas, kilowatts on August 26, 1975 at 5:00 P.M . This peak Louisiana, Mississippi, Alabama and other areas.
was 3% less than the all-time peak of 1,508,000 Delmarva Energy Company's portion of the partnership kilowatts in 1973. The 1975 peak was affected by is $750,000 or 7.5% . Any significant volumes of gas general economic conditions and the slow-down in which might be discovered will be transported by the operations of major industries. Transcontinental Gas Pipe Line Corporation to the During the year, the number of residential electric members of the partnership . The Company is unable to customers increased by 6,264. The electric heating determine the effect such exploration activities will classification gained 3,870 of these customers, have on the overall gas supply problem . The project is indicating a continuing trend for this type of heating part of the Company's continuing effort to secure more system. The commercial classification gained 213 new natural gas.
customers during the year, and 153 of these also utilized electric heating. In general , new home Fuel Supply construction was down during 1975 as a result of The availability of nuclear generation from Peach economic cond itions and high interest rates . Bottom Atomic Power Station, in which the Company is a part owner, together with a more abundant fossil fuel Gas Supply supply, resulted in reduced fuel costs per million BTU The supply of natural gas which the Company during 1975 (See Management Review of Operations) .
receives from the Transcontinental Gas Pipe Line These savings were passed on to our customers Corporation (Transco) continues to be curtailed . The through applicable fuel adjustment charges.
average daily curtailment for 1975 was 31.8% of our Fossil fuel costs continued to decline in the last daily contractual volume of 54,800,000 cubic feet. quarter of 1975. However, expectations are that they Under an interim curtailment plan approved by the will begin to rise somewhat in 1976. Dramatic increases Federal Power Commission, the Company's gas similar to those experienced in late 1973 and early 1974 volume will be reduced 24.9% for the winter season as a result of the oil embargo are not anticipated.
ending April 15, 1976, and 45% for the summer season The Company is endeavoring to upgrade its ending October 31, 1976. reliability of fuel supply by becoming more involved in In order to avoid the curtailment of gas to our firm the mode of delivery. Fuel oil deliveries by ocean-going customers, the Company has aggressively pursued tankers for the Edge Moor Power Station have been efforts to increase the supply of gas. The Company was instituted to obtain reduced transportation rates. In able to purchase two blocks of 60-day emergency gas addition, the Company took delivery in 1975 of 77 totaling 502,000,000 cubic feet for the 1975-76 winter leased, 100-ton railroad coal hopper cars for service period . Thus far no firm customers have been curtailed. between central Pennsylvania and the Company's
. Service to residential and small commercial Indian River Power Station in Southern Delaware. These customers is not expected to be affected . However, all cars will alleviate some of the problems resulting from customers are asked to conserve gas wherever the inability of the railroad to provide adequate possible. No new gas customers of any classification equipment.
are being added . Although the price of nuclear fuel at Peach Bottom did not increase significantly during the year, station Gas Supply Available to Company production was curtailed by 50% in mid-year as a result
(%of Contract Volume) of instrument vibrations in the reactor. Correction of this 100% difficulty in Unit 2 was completed in November 1975, after which similar repairs were initiated for Unit 3.
During 1975, the Company received about 11 % of its generation from the Peach Bottom units, which represents a savings of fossil fuel - coal and oil -
equivalent to 1,250,000 barrels of fuel oil.
The resulting increase in available nuclear capacity from Peach Bottom plus generation expected from the Salem Nuclear Generating Station in the last quarter of 1976 should significantly benefit system fuel costs in 1970 '71 '72 '73 '74 '75 1976.
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11 assure compliance with the environmental quality Fuel Costs standards adopted by various regulatory agencies. In (Cents per Million BTU) this endeavor, the Company strives to balance the
- oi1 costs for such expenditures against the requirement to
- coal provide reliable electric service at the lowest possible
- Nuclear cost.
The cost of low sulfur fuel at the Edge Moor Power Station prompted the Company to apply to the 71¢ 67 Delaware environmental agency for permission to burn 1% sulfur oil instead of 0.5% sulfur oil. The Company I demonstrated that the use of the higher sulfur oil would 50¢ 26¢ 26¢ not adversely affect air quality in the Wilmington area 30¢ and would provide annual fuel savings estimated at $2 1970 '71 '72 '73 '74 '75 million to $3 million. Permission was granted by the State to burn 1% sulfur fuel.
Summit Project Terminated In Maryland the Company requested and received On October 27, 1975, the Company and General permission to burn 2% sulfur oil at the Vienna Power Atomic Company terminated contractual Station instead of the 1% sulfur oil previously required.
arrangements for construction of two 770,000 kilowatt The Company has entered into a consent agreement High Temperature Gas-cooled Reactor Units and their with the State of Delaware and the Environmental related fuel supply. The units were scheduled for Protection Agency (EPA) concerning the upgrading of operation in 1981 and 1984. In terminating these particulate emission control equipment at the Indian arrangements, General Atomic Company agreed to River Power Station. The Company conducted studies pay $125 million to the Company for expenditures on which indicated that particulate emissions were in the project to date, for anticipated additional excess of standards and subsequently proposed a expenditures to terminate the project and for schedule by which new electrostatic precipitators will anticipated additional capital expenditures to provide be installed on Units 1 and 2 and the existing substitute generating capacity. electrostatic precipitator on Unit No. 3 will be The decision to terminate the project was primarily upgraded. The improvements are estimated to cost influenced by cost escalation and problems about $7.5 million.
confronting General Atomic in the commercialization of An agreement has been reached between the State the reactor systems . of Delaware, Getty Oil Company and the Company concerning the sulfur content of fuel burned at the Generation Planning Delaware City Power Station. The agreement will allow Getty Oil to supply the Company with 3.5% sulfur fuel Capacity added to the Delmarva System during 1975 until May 30, 1980, at which time the facility must be in consisted of 200,000 kilowatts in May at the Edge Moor compliance with a 1% sulfur limitation. In the meantime, Power Station, which previously was contractually Getty Oil is required to investigate and implement some committed to Philadelphia Electric Company. The means of satisfying the 1% sulfur limitation. The State is Company anticipates commercial operation of the presently seeking to have the agreement approved by Salem Nuclear Generating Station Unit #1 in the last the EPA as a part of the State's Air Quality quarter of 1976 and Salem Unit #2 in 1979. The Implementation Plan .
Company owns 7.4% (163,000 kilowatts) of these facilities , which are being constructed by Public FEA Conversion Order Service Electric and Gas Company, New Jersey.
The Company is also committed to the construction On June 30, 1975, the Federal Energy Administration of a 400,000 kilowatt addition at the Indian River Power (FEA) issued an order to prohibit the burning of oil or Station , scheduled for completion in the first half of gas as the primary fuel in Units 1 through 4 at the Edge 1979. This unit will use low sulfur coal. Moor Power Station. The effect of the order will require a The Company is currently studying the feasibility of conversion to coal in these units, which were coal-fired various types of generation alternatives to replace the prior to 1971 .
Summit Power Station . New generation may take the The Company questions the advisability of form of purchased or leased capacity or converting all units because three of the units have Company-owned fossil or nuclear generation. The remaining useful lives of from 7 to 9 years and the Company expects to make a decision on this matter in availability of an adequate supply of low sulfur coal is 1976. questionable. The Company has filed with the EPA a plan for converting two of the four units to 1% sulfur coal with an upgrading of particulate control equipment.
Environmental Matters Under our proposal the remaining units would remain The Company is engaged in a continuing program to oil-fired.
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The FEA and EPA are performing site specific strengthened during the year in order to more closely environmental studies to determine if the plant can burn monitor and control these aspects of Company coal and meet various air and water quality criteria. A operations.
time table for accomplishing the conversion must be agreed upon by both agencies .
Communications The opinions and attitudes of our many "publics" Research and Development toward our operations is an important consideration in We believe that an expanded and accelerated the conduct of our business. Our on-going research and development effort is crucial to finding communications program is designed to inform solutions to the energy problems facing our industry customers about a wide range of energy issues and and nation. During 1975, the Company provided conservation techniques.
approximately $744,000 in support of a wide range of During the year, Company representatives were electric and gas research projects. invited to appear before several hundred organizations Our contributions to electric research are throughout our service area to present energy administered primarily by the Electric Power Research programs.
Institute through the Edison Electric Institute. Company Company communications received recognition in support of natural gas research is in cooperation with 1975 by the Public Utility Advertising Association, the American Gas Association and the Institute of Gas which presented awards to the Company for Technology. excellence in newspaper and television advertising.
As part of our research commitment, $25,000 was provided to the University of Delaware's Institute of Energy Conversion for the continued study of solar Monopoly energy. Since 1972, the Company has contributed is not a
$92,500 towards solar research at the University.
four-letter River Crossing Line word During the year, the Company actively pursued the issuance of permits for the construction of a 500,000 volt transmission line across the Delaware River. The line will provide an important link in a regional high voltage transmission system and enable the Company to receive its share of power from the Salem Nuclear The word* monopo1y*' isooeo1 today'smos!ll'll$Unotl<Slood a separat* netWOf\< ol POW8f ~nes through your neoghbo<-
W01ds This t11et was~ted1ousnotlongagowhefl llOCXl.andpaylorthecostsolcompletetyseparatelaci!rtoes Generating Station, located in New Jersey. ooeolourreprfiefltatr1tt aSl<&dagrovpolgracie$ChOOlcnll-dtl!<l what they 1hought it meant There -
- a Wl(le vane1y ot andmenagem1tnt. You can unaginewhat1hatwoukld01o the COi5l DI S&MCe The dup!oca1ion would be ul'lbelievllbly defor.i.ona inckldir.g several chiklre-n wl\Q thought lhe word e*p&O$M!I. and to1ally impf8CllC.ill Which company would be In order to expedite construction of the project and wasoneol1t-.e"dittyWOfds"l1Bllhey~ *1psrronec11ai..
Untor1unatety, ltlele are many adults who don't 1.mder-pe<mt1edtoHitefconnectwithadf0<01ngsta1estomakesura 1t1&1e w85 an adeQuale rese<V9 wpply? Would eve<y new standthemearnngollhewordmonopolymuclibe"er1han tamdymavingintoaoeoghbo<hoodbeapprO&Chedbysales*
be responsive to the concerns of some citizen groups, tr.ose childreo, or how imponan1mooopoliesare10 us all.
Whal don monopoly mean?
men !rom - a l powe< eompeflleS compe11ng tor tneor busi*
ntss? These are just a 1ew d lhll l'uno:t"ec!S ol P<Qtllems whd1 The word monopoly sompty me.ns "without eompebtoon.. WOUid result trom suci'1 8ll arrangement the Company is seeking permits for crossing the river at Some peoJlle t>elieve m.t e lack ot compebbon it a Vf!fy bad
!hong A!1er 1111. ~ 111ere*s no c:ompe!r!oon what keeps a com-How *bout c:ontrolt?
Con1ro1 owr c:°""'1al"OM such as ou<S rs extremely keen. A pany llone$!? What keep$ therr pnces lair? What onc:entMI spec.al comrrnsion hn tleell created by the leglSla!ure.
an alternate location. It is expected that necessary ::~.::-~~~:;::i;::egoodq.ies- 1:,~~=::!,~m;'~'::;:i:
permits will be obtained to begin construction in 1976. :',;*,:;~:::o~.suchasl~.gas. S1~t~~:~=~~=~~
wa1er.el<<:tnc:,istoprovldebasocseMCMI01thepublicgood olitseus\OfTlefS
- n::r.enotsys~em~~~~o!.,~ 1or~=-:1:rn:"or~=~
Higher Distribution Voltages loallwrioreqvestlt Wh1 not MV<<al power c:ompenlH?
Fi<S1 1et"s !lllPPOM that - a l power companteS wert In c:ompe!o!ion IOI )'OU* bltliness Eac:f\ of thOM c:ompenits ASyoucansee.amonopolywh>Choperatesunderstrlcl reg<J\a!lons. 1or the good or lhe people. is really something to t>t 1htll'lk1ul for SO. ntxt time someone 1rlts to tell )'OU th.al .. monopoly"" IS. bad word, Wf hope )'OU"N takt lime to woul<l~tobuildandmaln1a>ns.&peraleeQIJ'pmerll .1un r;ethlmstraight During the year, the Company began using 34,500 volt distribution lines in one of its faster growth areas. Delmarva ft41111lo.11141111lo. ..
~~~~;
The purpose of going to this higher distribution voltage is to realize economies in the construction and Employees operation of the distribution system. At present, 34,500 volt is the highest distribution voltage being utilized in A total of 2,355 men and women were employed the United States. throughout our service area at the end of the year, a decrease from the number employed in 1974. Wages Organizational Changes and salaries amounted to $35.6 million in 1975.
James A. Clark, Jr., was named vice president, About 1,668 employees are represented by the electric operations in July. He succeeded George J. International Brotherhood of Electrical Workers . In Pinto who was named vice president, administrative 1975, the labor contracts covering union-represented services. Mr. Clark has 26 years' experience in the employees included general wage increases Company's engineering and electric operations amounting to $2.6 million annually.
departments and previously has served as assistant to The Company is committed to an Affirmative Action the president. Mr. Pinto has 27 years' experience with program for the employment and promotion of the Company. minorities and females . Seminars on employment laws Financial planning and analysis, productivity and anti-discrimination rulings are conducted for development, fuel procurement and internal auditing supervisory employees on a continuing basis to are four areas of management which were effectively administer the Company's commitment.
14
Dependable service is the result of indi-vidual efforts of many employees through-out the system . Their contributions are vital to our continued success .
15
Officers Board of Directors ROBERT D. WEIMER AUSTIN T. GARDNER
- President and Chief Executive Officer of the Company Chairman of the Board 28 Years' Service 32 Years' Service THOMAS C. ROE ROBERT D. WEIMER
- Vice President of the Company and President of President and Chief Executive Officer of the Company Delmarva Power & Light Company of Maryland and 28 Years ' Service Delmarva Power & Light Company of Virginia 40 Years' Service WERNER C. BROWN **
President and Director of Hercules , Inc .
CHARLES G. MINICH, JR. (chemical manufacturer) Wilmington, Delaware Vice President (Gas Operations) of the Company and President of Delmarva Energy Company OSCAR L. CAREY 42 Years ' Service President and Director of Larmar Corporation (general real estate and home builders)
JAMES L. HAMMOND Salisbury, Maryland Vice President, Finance & Accounting 17 Years' Service IRENEE du PONT, JR.
- Senior Vice President and Director of JAMES A. CLARK, JR . E. I. duPont de Nemours & Company (chemical Vice President, Electric Operations manufacturer) Wilmington, Delaware 26 Years ' Service DR. EARL C. JACKSON , SR.
GEORGE J. PINTO Retired Superintendent of the Wilmington Public Schools Vice President, Administrative Services Wilmington, Delaware 27 Years' Service THOMAS C. ROE WILLIAM G. PRICE Vice President of the Company and President of Vice President, Generation Delmarva Power & Light Company of Maryland and 5 Years' Service Delmarva Power & Light Company of Virginia 40 Years' Service EDWARD F. SPEAR Vice President, Market Services & Public Relations CHARLES G. MINICH, JR.
29 Years ' Service Vice President of the Company and President of Delmarva Energy Company J. KENNETH WILEY 42 Years' Service Vice President, Engineering 1 Year Service DR. E. ARTHUR TRABANT President of the University of Delaware Newark, Delaware ALFRED C. THAWLEY, JR.
Secretary and Treasurer 20 Years' Service JAMES M. TUNNELL, JR.
- Partner of Morris, Nichols, Arsht & Tunnell , attorneys WILLIAM E. ROSSELL, SR. Wilmington, Delaware Comptroller 27 Years' Service FRANK R. GRIER Director of Dentsply International, Inc.
JAMES W. PORTER (manufacturer and distributor of dental and Assistant Comptroller optical supplies) and retired Vice President, 19 Years ' Service the L. D. Caulk Division of Dentsply, Milford, Delaware PAUL A. MODESTO Assistant Secretary and Assistant Treasurer 5 Years' Service
- Member of Executive Committee RUTH V. LOKEY ** Chairman of Executive Committee Assistant Secretary and Assistant Treasurer 38 Years ' Service RALPH H. SMITH Assistant Secretary and Assistant Treasurer 15 Years ' Service 16
I I Dover.
1 I
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- Cities
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- Power Stations Proximity to major cities from Wilmington (In Miles) 31 Philadelphia 98 NewYork 335 Boston 68 Baltimore 106 Washington 736 Atlanta 204 Chesapeake Bay Bridge -Tunnel 17
CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31 (Thousands of Dollars) 1975 1974 OPERATING REVENUES Electric .... .. .. .... . . ... ........... ...... ... .. .... ..... . . .. . $241,an $228,895 Gas .. . . .. .. . . . .. ... .. .. ....... . . . .. ... .. ..... . ... . . ... . .. . . 25,673 23,879 Steam and electric (refinery servic.e) .. ..... ... . ..... . . . . ...... . 10,998 9,142 278,548 261,916 OPERATING EXPENSES Fuel .. . ..... . . .. ... .. ... . .. . .. .. . . ......... .. ....... . ...... . 122,020 119,485 Energy interchange, net .. .... . ..... . .... . . .. . . .............. . (13,190) (15 ,843)
Other operation ....... . .... ............................. . .. . . 56,335 49,852 Maintenance . ... . .... .. ........... . .. ......... .. .... .... . .. . 17,769 16,289 Depreciation . . ........ . . . .. . .. . ............................. . 24,579 21 ,656 Taxes on income . . . . ... . .. ... ..... . .. .. .. .... . .. ... . ........ . 2,689 2,568 Taxes other than income . .. . . . .. . ................... . . . ...... . 15,274 16,330 225,476 210,337 OPERATING INCOME .. . . .... . . . . . . .... ...... . .. . . . ...... . .... . 53,072 51 ,579 OTHER INCOME Allowance for funds used during construction .. .. ... . .. ... . . .. . . 8,354 8,527 Other, net of taxes .... . ....... . .. . ..... . . . .. . .. . . ... . . . ..... . 605 190 8,959 8,717 INCOME BEFORE INTEREST CHARGES 62,031 60,296 INTEREST CHARGES Long-term debt ................ . .......... . .... . . . . . .... .... . 27,217 21 ,359 Short-term debt and other . . . ... . . . .. . .. .. . . . .. . .............. . 2,027 5,996 29,244 27 ,355 NET INCOME 32,787 32,941 DIVIDENDS ON PREFERRED STOCK .. .. ... .. . .... . .. .. . . . . ... . 7,250 7,250 EARNINGS APPLICABLE TO COMMON STOCK $ 25,537 $ 25,691 COMMON STOCK Average shares outstanding (thousands) .............. . . . . . ... . 17,580 14,862 Earnings per share .. .. . . ..... . . . . .. . . .. . .. . ...... . ... . ...... . $1.45 $1 .73 Dividends per share . .. . .. ...................... . .... . . ... . .. . $1.20 $1 .20 The Notes to Financial Statements are an integral part of the above statements.
DELMARVA POWER & LIGHT COMPANY and Subsid iary Comp~n i es 18
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION FOR THE YEARS ENDED DECEMBER 31 (Thousands of Dollars) 1975 1974 SOURCE OF FUNDS Net income .. .. ... . .. .. ........ .. ...... . . ... . ......... . ... .. . $ 32,787 $ 32,941 Items not requiring (providing) funds :
Depreciation ... . ... .. ...... . ...... . ............. ... .... .. . . 24,579 21,656 Allowance for funds used during construction . ... . .. .. . .. .... . (8,354) (8,527)
Investment tax credit adjustments , net .... .... . ..... . . ... . . .. . 2,962 (781)
Deferred income taxes, net . . .......... . .. . . .... . .. .. . ..... . (1,764) 4,027 Funds provided from operations ..... . . . . . . .. .... .... . . ... . 50,210 49,316 Net proceeds from sale of:
Long -term debt . . . ... ..... . ....... ... .. .. . . . .. ... . . ... .. .. . 59,339 34,619 Common stock ... . ...... ... . . ... . . . . . .. ... . . . .......... . . . 25,823 32,503 Increase in short-term debt .. . .. . . ... ... .. .. . . .. .. .. . ... . . .... . 11 ,600 Proceeds from sale of contracts for nuclear plant ... .. ...... .... . 106,250 Other . ........... . ........... .. . . ...... ... . . ... .. . . ... . .... . 1,585 1,582
$243,207 $129,620 USE OF FUNDS Construction expenditures (excluding allowance for funds used during construction) . ... ... .... .. . .... ........ .. ... ........ . $ 72,100 $ 77, 145 Dividends on common and preferred stock .. ..... . ... ..... ... . . 28,357 25,245 Decrease in short-term debt . .... .. . ..... ... . .... .......... .. . . 53,050 Estimated termination expenditures for nuclear plant .... . . .. .... . 13,600 Increase in working capital * ..... . .... .. . ....... ..... .... . ... . . 76,100 27,230
$243,207 $129 ,620
- CHANGES IN COMPONENTS OF WORKING CAPITAL (excluding items reflected in source and use of funds)
Cash and temporary cash investments .. .. ..... . .. ....... . .. . $ 16,654 $ 3,388 Receivables from sale of contracts for nuclear plant . ..... . ... . 90,000 Accounts receivable . .. . ...... .. .................. ... . . .. . . . (1,477) 10,615 Deferred fuel expense ... .. ... . ... .. ...... . .. .. . .......... . . (2,916) 9,391 Materials and supplies . .... . .. .... . . ... ...... ... ..... .. .. . . . 4,338 14,079 Accounts payable ....... . . .... . .... . ...... ..... .. ......... . (23,062) (6,446)
Taxes accrued .. ..... . . . . . . . ........ .. . . ..... .. .. . ..... ... . (1,350) (544)
Interest accrued . ....... .. . . .. .. .. .. .. . .. . . ... .. . .... . .. . . . (2,928) (323)
Other, net .. ... .. . .. . . . .. . ............ ... .... ..... . . . . .... . (3, 159) (2,930)
$ 76,100 $ 27,230 The Notes to Financial Statements are an integral part of the above statements.
DELMARVA POWER & LIGHT COMPANY and Subsidiary Companies 19
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31 (Thousands of Dollars)
ASSETS 1975 1974 UTILITY PLANT, at orig inal cost Electric . . ........... . . . ..... .... .. .. . ... .... . . . .. . .. .. . .... . $702,393 $662,321 Gas ....... .. . . .. . . . . . ... .. ........... . . . . . . .. . .. ..... . . . .. . 54,268 53 ,653 Steam and electric (re fi nery service) .. ... . .. .. . . .. .. ..... . .... . 22,216 22 ,216 Common ... .... . ....... . .. . . . . .. ... . . . ..... . .. . . . .. .. ... .. . . 17,766 17,267 796,643 755,457 Construction work in prog ress ... . . .. . .. . . .. .. . .. . . . . .. . . .. . . . . 131,228 130,603 927,871 886 ,060 Less : Accumulated depreciation .... . . .............. . . . . .. . . . . . 198,965 177 ,762 728,906 708,298 NONUTILITY PROPERTY AND OTHER INVESTMENTS . .. ... .. .. . 2,200 1,813 CURRENT ASSETS Cash . .. . .. ... . ...... . . . . . . .. ..... .. ... ... ....... . . . .... . . . . 15,559 11,404 Temporary cash investments ... . .. . . . . . .. . . . . . . ... . . . . ...... . . 12,499 Receivab le from sale of contracts for nuclear plant ... . .... .. .. . . 90,000 Accounts receivable . . . . . . . .. . . . . . . . .. . .. . . ... .. . .. . .. ... . . . . . 25,813 27 ,290 Deferred fue l expense .... .. . . ..... .. . . ... . .. . . . . . . . ... . . . . . . . 7,980 10,896 Materials and supplies , at average cost:
Fuel . ........ . ...... . .... . . . ... . ... .... ... . . .... . ... . ... . . 22,556 20,257 Operation and construction ... .. ..... . . . . . . ... .. ... . ... .. .. . 17,263 15,224 Prepayments . ....... . ... . . . . .. . . . .. . .. . . . ... .. .. . . . . ..... . . . 2,691 2,899 194,361 87 ,970 DEFERRED DEBITS . . .. .. .... . . ... .. .. . .... .. . .... . .......... . 9,257 3,865 TOTAL .. .. ........ . ..... . . . .. . .... . . . . . .. . .. . . ......... .. . . . . $934,724 $801 ,946 The Notes to Financi al StatemJ DELMARVA POWER & UC 20
Delmarva Dn111or
~ ~~~~
LIABILITIES 1975 1974 CAPITALIZATION Stockholders' equity:
Preferred stock, cumulative, par value $100, authorized 1,800,000 shares :
Outstanding 1,050,000 shares . ... ... . ... . ... ..... . . .. . . . $105,000 $105,000 Premium on preferred stock . . .. . .. .. ... . .... . ...... . . . . ... . . 226 226 Common stock, par value $3.375, authorized 25,000,000 shares :
Outstanding 18,652, 779 and 16,487,340 shares ... . ...... . 62,953 55 ,645 Premium on common stock ... .. . . ...... .. .......... .. ..... . 119,562 101 ,047 Retained earnings ... .. ....... . ... ... . ... ........... .. .. . .. . 94,545 90,115 382,286 352,033 Long-term debt ......... ... .. .. .................. . ......... . . 407,348 347 ,839 789,634 699 ,872 CURRENT LIABILITIES Short-term debt:
Banks . . .. .. . .. . . .. ... .. . ...... . ................... . ..... . 29 ,600 Commercial paper ... .. .... . ......... . ... . . ..... ... . . . .... . 23,450 Accounts payable ......... . ... . . .. . . . .. ..................... . 38,641 15,579 Taxes :
Accrued . .. .. . .... . ........ . .. .. ....... . ..... .. . .. ... . . .. . 3,411 2,061 Deferred . . . . . ...... .. . .. .. .. ... . .. ... .. .. ..... . ... . ...... . 4,003 5,556 Interest accrued ........ . ... .. ..... ... ... ... .... .. ... . . ... .. . 8,717 5,789 Dividends declared ... .. ... .. .. .. ....... ...... . . ...... . ..... . 7,501 6,835 Other . ........................... . .. . ... .. ............. .... . 4,570 2,285 66,843 91 ,155 DEFERRED CREDITS Net credit arising from sale of contracts for nuclear plant . ..... ... . ....... . . . ..... . .... . . . . . . . .. .. . . 64,878 Accumulated deferred income taxes ... .. . ... ... . .. . .......... . 4, 111 4,322 Accumulated deferred investment tax credits . . . . ..... ... . . .... . 8,171 5,209 Other ........ .... ........... . .. . ............. ... ...... . .... . 1,087 1,388 78,247 10,919 TOTAL ... . ........ . . . . . ........... . .... . .... . ........ . . .. .... . $934,724 $801 ,946 an integral part of the above statements.
MPANY and Subsidiary Companies 21
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS FOR THE YEARS ENDED DECEMBER 31 (Thousands of Dollars) 1975 1974 BALANCE, JANUARY 1 $ 90,115 $ 82,419 NET INCOME ........ . ..... . ........ . ..... . .......... . ... .. .. . 32,787 32,941 122,902 115,360 CASH DIVIDENDS DECLARED Preferred Stock .................. ... . .. . .. .. .. .. . ... . ... .. .. . 7,250 7,250 Common Stock . ............. .. . .. .. ..... . . ..... . .. .. . .... .. . 21 ,107 17,995 28,357 25,245 BALANCE, DECEMBER 31 ... . .. . . .... . ... . ..... . . .. . . . .. .... . . $ 94,545 $ 90,115 The Notes to Financial Statements are an integral part of the above statements.
DELMARVA POWER & LIGHT COMPANY and Subsidiary Companies NOTES TO FINANCIAL STATEMENTS
- 1. Significant Accounting Policies:
Financial Statements:
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary companies. The accounts are maintained in accordance with the uniform systems of accounts prescribed by the regulatory commissions having jurisdiction with respect to accounting matters .
Revenue:
Revenues are billed to customers on a monthly cycle basis which includes rate increases permitted to be billed under law, subject to refund pending final approval. At the end of each month, there is an amount of unbilled electric and gas service which has been rendered from the last meter reading to the month-end.
Fuel Costs:
Fuel costs are deferred and charged to operations on the basis of the fuel cost per kilowatt hour included in customer billings. This method of accounting for fue l costs was adopted by the Company in 1973 to more properly match costs with revenue . The effect of this method was to decrease earnings applicable to common stock (net of taxes) for 1975 by $1 ,363 ,000 ($.08 per share) and to increase earnings applicable to common stock (net of taxes) for 1974 by $4 ,635,000 ($.31 per share) . For tax purposes fuel costs are expensed as incurred .
The Company believes, but has no assurance, that the appropriate regulatory authorities will permit the recovery from customers of unbilled fuel costs which may exist at the time of any modifications of the fuel adjustment clauses .
The Company's share of nuclear fuel costs relating to the Peach Bottom nuclear generating station has been charged to fuel expense on a unit of production basis.
Depreciation :
The annual provisions for depreciation are computed by the use of composite rates applied on the straight-line method for financial accounting purposes and principally on accelerated methods and use of shorter lives for income tax purposes. The cost of removing retired depreciable property, charged to accumulated depreciation for financial accounting purposes , is deducted as an expense for income tax purposes.
22
The effect of these differences in recording depreciation for financial accounting and income tax purposes is a reduction in income taxes, the benefits of which, prior to 1975, we re not deferred. Effective January 1, 1975, the Company deferred the tax benefits of such differences (normalized) with respect to additions to utility plant in 1975, for credit to subsequent years when financial accounting expense exceeds tax expense . In 1975 the amount of such deferral was $544 ,000. The previous deferral of such reductions in income taxes was discontinued in 1962, and the deferments accumulated to that date ($4,611,000 in the aggregate), are being restored to income over a 10-year period beginning in 1967. Accumulated tax deferments relating to amortization of completed construction costs under necessity certificates are being restored to income ($295,000 and $268 ,000 in 1975 and 1974, respectively) as straight-line depreciation charges exceed the amounts deductible for income tax purposes.
Investment Tax Credit:
Investment tax credits utilized ($4,605,000 in 1975 and $828,000 in 1974) to reduce federal income taxes are deferred for financial accounting purposes by equivalent charges to income and are credited to income over subsequent five-year periods .
Allowance for Funds Used During Construction:
Allowance for funds used during construction is defined in regulatory systems of accounts as the net cost, during the period of construction , of borrowed funds used for construction purposes and a reasonable rate for other funds so used . The allowance is considered a cost of utility plant and an item of other income in the consolidated statements of income; for income tax purposes, the allowance is excluded from taxable income . The rate used in determining the amount of the allowance was 7V2% in 1975 and 1974.
The estimated portion of the allowance for funds used during construction attributable to the common equity component of total capitalization was 11 .0% and 16.3% of earnings appl icable to common stock for the years 1975 and 1974, respectively .
Maintenance and Repairs:
The cost of maintenance and repairs, including renewals of minor items of property, is charged to operating expenses. The cost of replacements of depreciable property units is charged to the utility plant account and the recorded cost of the depreciable property units retired , net of the related salvage and removal costs, is charged to accumulated depreciation .
Pension Plan:
The Company and Subsidiaries have a trusteed non-contributory pension plan covering all of their regular employees. Pension contributions, charged principally to operating expenses (aggregating $4,454,000 for 1975 and $3, 761,000 for 1974) provide for normal cost and amortization of prior service costs over a period of approximately twenty years . At December 31, 1975, the prior service costs exceeded the market value of the assets in the retirement fund by approximately $13,300,000. As of the same date, the market value of the fund assets exceeded the actuarially computed value of vested benefits.
Plan amendments required by the Employee Retirement Income Security Act and certain changes in actuarial methods and assumptions adopted effective January 1, 1976, are not expected to have a significant effect upon pension expense and funding in future years.
Capital Stock Expenses:
The premiums on preferred and common stock are stated net of the expenses related to the issuance of such stocks.
- 2. Revenue Subject to Refund:
Operating revenues for the years 1975 and 1974 include $9,821,000 and $1,807,000, respectively , of amounts billed but subject to refund , pending final determination of requested electric and gas rate increases by regulatory and judicial authorities. In addition, the Public Service Commission of the State of Delaware, in an order dated January 15, 1976 prescribing the accounting for normalization of income tax benefits related to accelerated depreciation , determined that the Company shall refund to customers certain revenues collected during 1974.
Although the amount will be the subject of a subsequent order, the Company is of the opinion that such an amount would not have a material effect on previously reported earnings for 1974. If all of the amounts billed but subject to refund or any portion thereof is ultimately refunded in a subsequent accounting period, and the amount of such refund is material to that period , the revenue and related income tax accounts for the accounting periods in which such revenue was originally billed would be restated for the refund . See " Electric Rate Increases" and "Gas Rate Increases" in the accompanying text for additional information concerning rate proceedings.
23
- 3. Taxes on Income:
1975 ($000) 1974 Operations:
Federal income ...... .. ...... . ... . . ... ....... . $ 789 $ (808)
State income . ....... . ... . . . ... . . .. ... . ... . .. . 702 130 Deferred income , net ...... . . .. .... . . ... . . . . . . . (1 ,764) 4,027 Investment tax credit adjustments , net . .... . . .. . 2,962 (781) 2,689 2,568 Other income: 545 73
$3 ,234 $2,641 The Company's effective income tax rates for financial reporting purposes were substantially less than the federal statutory (ate of 48% . The reasons for these differences are as follows:
1975 ($000) 1974 Amount Rate Amount Rate Statutory income tax expense ... . . . .. . .... ... .. . . .. . . $17 .290 48% $17 .079 48%
Reduction in taxes resulting from :
Excess of tax depreciation over book depreciation not normalized .. ........ .. ...... .... ... . ... . ... . (7,111) (20) (7 ,543) (21)
Exclusion of the allowance for funds used during construction for income tax purposes .......... . . . (4,010) (11) (4,093) (12)
Investment tax credits amortized to income .... . . . . (1 ,643) (5) (1,609) (5)
Other, net . .... .. ... . ............... . .......... . (1 ,292) _m_ (1,193) (3)
Income tax expense ..... .. . .. ..... . ..... . . . .. . . .. . . . $ 3,234 9% $ 2,641 7%
- 4. Taxes Other Than Income:
1975 ($000) 1974 Delaware utility . . .. .. ..... . ..... . . . . . . . .... . . . . . . . $ 7,164 $ 8,874 Property ................ . .. ...... . ... . ........ . . . 4,309 4,205 Franchise and gross receipts ..... . ...... ... .. . ... . 1,981 1,580 Social security ......... .. . .. . .... . .. . . . .. . . . ... .. . 1,359 1,278 Other . .. . ...... . .. . . . .. . .. . . . . . . . . . ... . . . . . ..... . 461 393
$15,274 $16,330
- 5. Capital Stock:
Preferred stock outstanding at December 31 , 1975, redeemable at the option of the Company, was as follows:
Redemption Prices per Share at Par Value Series Shares 12/31/75 ($000) 3.70% - 5% . . . .. . . ... . . .. . .... . .. .. . . . 320,000 $103 - $105 $ 32 ,000 7.52% - 7.88% . ...... . ........... . .. . . 450,000 107 - 110 45,000 8% - 8.96% ...... . ... . ...... . ........ . 280,000 108 - 109 28,000 1,050,000 $105,000 24
Changes in capital stock and related accounts for the period January 1 , 1974 to December 31 , 1975 were as follows:
Aggregate Par Value Premium Shares ($000) ($000)
Common Preferred Common Preferred Common Preferred Balance, January 1, 1974 ... . ..... 13,548,446 1,050,000 $45 ,726 $105,000 $ 78,463 $226 Sale of common stock ..... . . .. ... 2,900,000 9,788 22,242 Issuance of common stock for acquisition of certain utility plant . .. 25,714 87 269 Issuance of common stock for Dividend Reinvestment and Common Share Purchase Plan ..... 13,180 44 73 Balance , December 31 , 1974 .. . .. 16,487,340 1,050,000 55,645 105,000 101,047 226 Sale of common stock ......... . .. 2,000,000 6,750 17,277 Issuance of common stock for Dividend Reinvestment and Common Share Purchase Plan .... 165,439 558 1,238 Balance , December 31 , 1975 . .. .. 18,652,779 1,050,000 $62,953 $105,000 $119,562 $226 At December 31 , 1975 there were 281 ,708 shares of common stock reserved for issuance under the Dividend Reinvestment and Common Share Purchase Plan.
- 6. Long-Term Debt:
Long-term debt outstand ing at December 31 , 1975 was as follows :
Principal Amount
($000)
First Mortgage and Collateral Trust Bonds:
3Va% Series , due 1977 . . . . . .. .. .. . . .. . . ... . ..... . ..... .... . .. . . . $ 10,000 2:Va% Series , due 1979 .. . .. . .... .. .. . . .............. . .......... . 10,000 23/4% Series , due 1980 ..... . . . .............. . . ... ....... . ..... . . 12,000 93/ao/o Series , due 1983 ............ . .............. . .. ... ........ . 30,000 3Va% - 3:Va% Series , due 1984 - 1988 .... . . . .. . ....... . ... . .. . . . . 45,000 4%% - 7% Series, due 1994 - 1998 ..... ... . .... . ..... . ... . ..... . 75 ,000 7W7'o - 8314% Series, due 2000 - 2002 .. . . . ..................... , . 125,000 8% - 11 % Series, due 2003 - 2005 .. . . ..... . .. ..... . ... . ........ . 90,000 Pollution Control Notes, 5.8% 397 ,000 effective rate, due 1983 - 1998 .. . . . .. .... .. .... .. . ... . . . .. . .... . 8,000 405,000 Unamortized premium and discount on debt, net . .. . ... ...... .. .. . .. . . 2,348
$407,348 The annual interest requirements on the above indebtedness at December 31 , 1975 are $29,185,000.
Substantially all utility plant of the Company now or hereafter owned and all securities issued by its subsidiaries are subject to the lien of the related Mortgage and Deed of Trust.
25
- 7. Short-Term Debt:
Information with respect to short-term borrowings is as follows :
1975 ($000) 1974 Commercial Commercial Banks Paper Banks Paper Average outstanding balance (calculated using month-end balances) . .. ... ... . . $ 4,667 $16,554 $ 8,217 $46,029 Average interest rate . .. .... .................. .. .... . 12.6% 7.7% 11 .3% 10.7%
Maximum outstanding month-end balance:
Month . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . June March December March Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $26,000 $35,050 $29,600 $64,450 Outstanding balance at December 31 . . . . . . . . . . . . . . . . . $29,600 $23,450 Average interest rate on balances at December 31 . . . . . 10.4% 9.7%
Established bank lines of credit as of December 31 , 1975 amounted to $75, 190,000 all of which bear interest at the prime rate. The Company is required to maintain a 10% compensating balance on these lines when not in use and an additional 10% balance when in use.
- 8. Sale of Contracts Relating to Nuclear Plant:
On October 27, 1975, the Company and General Atomic Company terminated contractual arrangements for a nuclear steam supply system and the related fuel supply . Concurrently the Company sold the contracts to General Atomic Company for $125 million, which was paid in amounts of $35 million and $90 million on November 3, 1975 and January 2, 1976, respectively. The Company received interest at the rate of 8% on the latter amount which is included in other income. The proceeds of this sale are in consideration of expenditures on the project ,
additional estimated termination expenditures and to partially provide funds for alternative projects. Philadelphia Electric Company received 15% of the aforementioned sales price and interest in satisfaction of its participation as a joint owner.
The sales proceeds received by the Company, net of plant expenditures which are considered of no future value to the Company, are class ified as a credit of $64,878 ,000 in the balance sheet at December 31 , 1975. It is the intention of the Company to reduce the cost of subsequent plant expenditures by the amount remaining in this account after all expenditures related to th is terminated plant have been charged thereto. The Company, under advice of Counsel , is not treating the sale of these contracts as taxable for Federal and State income tax purposes.
If taxes are ultimately considered payable they could approximate between $24 million and $35 million and would be applied to the aforementioned credit balance.
- 9. Dividend Restriction on Common Stock:
The Fiftieth Supplemental Indenture restricts the amount of retained earnings available for cash dividend payments on common stock to $29,600,000 plus accumulations after June 30, 1975. The unrestricted consolidated retained earnings amounted to approximately $32,200,000 at December 31, 1975.
- 10. Contingencies and Commitments:
As required in an order issued by the Securities and Exchange Commission in 1972, hearings have been held to determine if the electric and gas properties of the Company constitute a single integrated public utility system .
The Company cannot predict the outcome of these proceedings but believes, in the event of an order requiring disposition of its gas properties, the Commission would permit adoption of a plan for disposing of such property wh ich would permit full realization of its intrinsic value .
See Note 2 for information relating to possible refunds of amounts billed to customers.
The Company intends to construct a fossil fuel unit estimated to cost approximately $189,000,000. At December 31, 1975, construction commitments for the aforementioned plant and other facilities aggregated approximately $100,000,000 .
26
Minimum rental commitments as of December 31 , 1975 under all non -cancelable agreements are as follows :
1976 .. ....... ....... .. .. ......... .. ... ... ... . . . $ 5,641 ,000 1977 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,391 ,000 1978 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,019,000 1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,728 ,000 1980 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,657,000 1981-1985 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,680,000 1986-1990 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,155,000 1991-1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,486,000 Remainder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,990,000 Total .... . ........ .. . . . . .............. . .. .. . $50,747,000 The total minimum rental commitments are applicable to the following types of property: Company's share of Peach Bottom nuclear fuel $9,119,000 (estimated to be charged to operations over a four-year period); fuel storage and pipeline facilities $36,505 ,000; railroad coal cars $4 ,330,000; other, principally computer equipment
$793,000. Rentals charged to operating expenses aggregated $5,901 ,000 in 1975, including $2,204,000 for nuclear fuel. Rentals were not significant in 1974.
AU DITO RS' REPORT COOPERS & LYBRAND Certified Publ ic Accountants To the Board of Directors Delmarva Power & Light Company Wilmington , Delaware We have examined the consolidated balance sheet of Delmarva Power & Light Company and subsidiary companies as of December 31 , 1975, and the related consolidated statements of income, retained earnings and changes in financial position for the year then ended . Our examination was made in accordance with generally accepted auditing standards and , accord ingly , included such tests of the accounting records and such other auditing procedures as we considered necessary in the c ircumstances .
We previously examined and reported upon the consolidated financ ial statements of the companies for the year 1974.
As explained in Note 2 to the financial statements, operating revenues include amounts subject to refund pending final determ ination of requested electric and gas rate increases .
In our opinion , subject to the effect upon operating revenues for the year 1975 of the final determination of requested electric and gas rate increases referred to in the preceding paragraph , the aforementioned financial statements present fairly the consolidated financ ial position of Delmarva Power & Light Company and subsidiary companies at December 31 , 1975 and 1974 , and the consol idated resu lts of their operations and the changes in their financial position for the years then ended , in conformity with generally accepted accounting principles applied on a consistent basis .
COOPERS & LYBRAND 1900 Three Girard Plaza Ph iladelphia, Pennsylvan ia February 6, 1976 27
CONSOLIDATED STATISTICS 10 YEARS OF PROGRESS ... 1965 - 1975 1975 1974 1973 1972 1971 ELECTRIC REVENUES (thousands) : Residential .. . ... . .. . . .. . $ 77,069 $ 68,730 $ 51 ,799 $ 43,878 $ 36,19*
Commercial .. . .. .. ...... 58,169 51 ,192 37,888 31 ,810 25,46, Industrial . . . . . . . . . . . . . . . 64,141 66,381 41 ,284 35,962 28,90 Other utilities, etc. ....... 38,128 33 ,397 21 ,518 16,833 12,9q Miscellaneous revenues .. 4,370 9,194 5,287 2,857 1,20 Total electric revenues . $241 ,877 $228,894 $157,776 $131 ,340 $104 ,74 ELECTRIC SALES (1 ,000 kilowatt-hours): Residential ..... .. ..... . . 1,672, 180 1,597,472 1,629,641 1,463,821 1,380,76 Commercial ..... ........ 1,359,673 1,303,053 1,360,216 1,227 ,230 1,099,89 Industrial .... . .... . .. ... 2,142,151 2,461 ,303 2,512,877 2,412,239 2,252 ,21 Other utilities, etc . ....... 1,218,785 1,230,528 1,252,977 1,137,272 1,014,97.
Total electric sales ..... 6,392,789 6,592,356 6,755,711 6,240,562 5,747 ,85 ELECTRIC CUSTOMERS (end of period): Residential ....... .. . .... 221,780 215,516 208,073 200,595 193,28 Commercial . ... . ........ 27,345 27 ,132 26,708 25,856 25,13 Industrial ......... ...... 923 891 867 869 81 Other utilities, etc. ....... 545 501 506 496 46 Total electric customers 250,593 244,040 236,154 227 ,816 219 ,69 GAS REVENUES (thousands) : Residential . . . . .. ... ..... $15,365 $14,298 $13,018 $12,944 $11 ,94 Commercial ............. 4,676 4,201 3,715 3,532 3, 12 Industrial . . .. . .. . . .. . ... 4,343 3,726 3,505 3,265 2,99 Interruptible ........... . . 1,211 1,532 1,363 1,035 1' 1El Other util ities, etc . . ... . . . 33 26 30 25 1 Miscellaneous revenues . . 45 96 22 18 ~
Total gas revenues . ... $25,673 $23,879 $21 ,653 $20 ,819 $19, 28 GAS SALES (million cubic feet) : Residential ...... . . . . ... . 6,540 6,863 7,134 7,737 7,58 Commercial .. . . ... . . .. . . 2,429 2,526 2,614 2,696 2,5:::
Industrial .......... ..... 2,849 3,215 3,653 3,875 3,7S Interruptible . . .... . .. .... 1,073 2,257 2,346 2,134 2,7(
Other utilities , etc . . . ..... 18 16 23 20 1 Total gas sales ..... .. . 12,909 14,877 15,770 16,462 16,6:::
GAS CUSTOMERS (end of period) : Residential .. .. .. . . .. .. .. 69,418 69 ,525 69,833 69,891 69 , 6~
Commercial ... .... ... .. . 4,189 4,356 4,418 4,407 4,4~
Industrial ....... . ....... 198 195 197 195 2(
Interruptible ... . .. . .. . .. . r 21 21 21 21 t:
Other utilities, etc . . . . . . . . 1 1 1 1 Total gas customers . .. 73,827 74,098 74,470 74,515 J 74 , 2~
REFINERY SERVICE Electricity delivered ...... 297,282 350,021 341 ,700 295,236 272 ,6L (1,000 kilowatt-hours)
Steam del ivered ......... 5,517,000 5,921 ,000 5,926,000 7,261 ,000 7,564,0C (1,000 pounds) 28
Delmarva Dn111Ar
= ~~~~
Average Annual Compound%
1970 1969 1968 1967 1966 1965 Rate of Growth ELECTRIC REVENUES
)30,992 $27 ,857 $25,487 $22,900 $21,406 $19,546 14.71 Residential
,21,430 19,333 17,754 16,377 15,256 14,094 15.23 Commercial
.24,069 22,483 20,120 16,471 15,187 13,272 17.06 Industrial 110,175 8,936 7,962 7,099 6,594 6,148 20.02 Other utilities , etc .
530 513 504 497 490 456 25.36 Miscellaneous revenues
)87,196 $79, 122 $71,827 $63,344 $58,933 $53 ,516 16.28 Total electric revenues ELECTRIC SALES
!80,420 1,151 ,108 1,037 ,223 910,548 838,548 748,050 8.38 Residential
)09,488 923,064 856,258 774 ,382 719,001 643 ,677 7.77 Commercial
~64,084 2,217 ,655 2,048,776 1,633,827 1,509,966 1,228,524 5.72 Industrial 185,720 792,1 51 708 ,899 629,643 570,961 530,1 79 8.68 Other utilities, etc.
~39 , 712 5,083 ,978 4,651,156 3,948,400 3,638,476 3, 150,430 7.33 Total electric sales ELECTRIC CUSTOMERS 87,683 183,458 178,948 174,039 169,906 165,007 3.00 Residential 24,383 24,058 23,474 22,966 22,644 22,401 2.01 Commercial 834 815 806 760 769 780 1.70 Industrial 375 283 281 281 274 275 7.08 Other utilities , etc .
!13,275 208,614 203 ,509 198,046 193,593 188,463 2.89 Total electric customers GAS REVENUES I
i11 ,283 $10,708 $10,290 $10,041 $ 9,333 $ 8,767 5.77 Residential 2,861 2,555 2,207 1,980 1,693 1,463 12.32 Commercial 2,618 2,641 2,536 2,032 1,668 1,584 10.61 Industrial 1,222 1,155 1,293 1,197 1, 102 0.95 Interruptible r 1.340 10 7 8 8 8 8 15.22 Other utilities , etc .
172 (12.55) Miscellaneous revenues
~ 225 251 215 204 186 Total gas revenues
\
18,337 $17,384 $16,411 $15,558 $14,085 $13,096 6.96 GAS SALES 7,406 6,942 6,601 6,432 5,851 5,390 1.95 Residential 2,384 2,097 1,770 1,564 1,305 1,104 8.21 Commercial
' 3,549 3,700 3,455 2,659 2,125 1,999 3.61 Industrial 3,423 3,263 3,089 3,447 3,152 2,885 (9.42) Interruptible 8 6 6 7 6 6 11.61 Other utilities, etc .
116,770 16,008 14,921 14,109 12,439 11 ,384 1.27 Total gas sales GAS CUSTOMERS 168,614 68 ,074 67,270 66,079 65,097 63 ,820 0.84 Residential 4,444 4,423 4,341 4,225 4, 117 4,014 0.43 Commercial 206 103 93 95 91 82 9.22 Industrial 21 19 19 16 15 13 4.91 Interruptible 1 1 1 1 1 1 Other utilities, etc .
73,286 72,620 71,724 70,416 69,321 67 ,930 0.84 Total gas customers REFINERY SERVICE 44 ,614 281 ,120 265,824 276,598 288,431 267 ,930 1.05 Electricity delivered (1 ,000 kilowatt-hours) 79,000 7,536,000 7,296 ,000 7,390,000 7,300,000 7,067,000 (2.45) Steam delivered (1 ,000 pounds) 29
DELMARVA POWER & LIGHT COMPANY U.S. POSTAGE 800 KING STREET, WILMINGTON, DE. 19899 PAID Wilmington, De.
Permit No. 68 Zip Code 19899