ML19322E937
| ML19322E937 | |
| Person / Time | |
|---|---|
| Site: | Zimmer |
| Issue date: | 02/06/1980 |
| From: | COLUMBUS & SOUTHERN OHIO ELECTRIC CO. |
| To: | |
| Shared Package | |
| ML19322E930 | List: |
| References | |
| NUDOCS 8004040355 | |
| Download: ML19322E937 (36) | |
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- . 1979 Highlights COLUMBUS AND SOUTHERN OHIO ELECTRIC COMPAN
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6 O EARNINGS RECOVER FROM 1978 O INTERIM AND PERMANENT RATE INCREASES OBTAINED O ENERGY SALES TO NEIGHBORING UTILITIES HELP EARNINGS IMPROVE
. O AEP ACQUISITION MOVES FORWARD O DIVIDEND RATE UNCHANGED, BUT PAYMENT DATES REVISED O $60 MILLION OF FIRST MORTGAGE BONDS SOLD
' 1979 1978 Change EARNINGS ON COMMON SHARES (000) $46,087 $27,806 65.7 %
EARNINGS PER COMMON SHARE (ON AVERAGE SHARES) $2.84 $1.73 64.2 ANNUAL COMMON DIVIDEND RATE $2.32 $2.32 - COMMON SHARES OUTSTANDING (YEAR-END) 16,345.951 16,147,976 1.2 COMMON EQUITY PER SHARE
$26.36 $25.69 2.6 KILOWATT HOUR SALES (000) 9,033,667 8,626,123 4.7 f} TOTAL REVENUES (000) $416,770 $366.171 13.8 CONSTRUCTION EXPENDITURES (000) $114,921 $125,809 l - 8.7 3..
GROSS UTILITY PLANT (000) $1,582,543
. ,; $1,476,436 7.2 INSTALLED GENERATING CAPACITY (MW AT YEAR END) 2,732 2,732 -
PEAK LOAD (MW) 1,852 1,907 - 2.9 CUSTOMERS 457,288 447,911 2.1 COMMON SHAREHOLDERS 53,807 b . . 55,272 - 2.7 6 EMPLOYEES 2,981 2,925 1.9 l
Transfer Agents Common Shares and Cumulative Preferred Shares, 4.65% Series, 7.52% Series, 8.52% Series 9.50% Series,10% Series,10.52% Series and $2.42 Series. The Hunt'ngton National Bank i Columbus, Ohio i Citibank, N. A. > New York, N.Y. Cumulative Preferred Shares,4%% Series , The Huntington National Bank . Columbus, Ohio Auditors Arthur Andersen & Co. l Columbus, Ohio : i Registrors i Common Shares and Cumulative Preferred Shares, i 4.65% Series, 7.52% Series, 8.52% Series, 9.50% i' Series,10% Series,10.52% Series and $2.42 Series BancOhio National Bank ; Columbus, Ohio ; Manufacturers Hanover Trust Company New York, N.Y. Cumulative Preferred Shares,4%% Series l BancOhio National Bank l Columbus, Ohio i Trustees j First Mortgage Bonds, All Series Citibank, N. A. - New York, N.Y. ; Debentures Irving Trust Company New York, N.Y. l
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l t General Counsel ' Porter, Wright, Morris & Arthur Columbus, Ohio Statistical Report and Form 10-K Copies of the Company's Statistical Report for Financial Analysts and the SEC Form 10-K are avail-able upon request to John M. Emery, Vice President l and Treasurer. l This report and the financial statements contained herein are submitted for the generalinformation of the . - Shareholders of the Company and are not intended to induce, or to be used in connection with any sale or purchase of securities.
l l i Contents ,
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1979 Highlights ! Inside Front Cover G Letter to Our Shareholders ij 1 Our Service Area . . A Great Place to Live $,j 2 Acquisition Status + E 8 1979 Operations 9 , 1979 Finance and Five Year Summary ! of Operations } 15 Financial Statements and Notes 18 i Auditors' Report { 27 Inflation and Changing Prices 28 i Five Year Summary of Statistical Information 30 Directors and Officers Inside Back Cover Fourth Quarter Financial Statements Insert ' i t
; Annual Meeting i.
lt L I ! The Annual Meeting of owners of Common Shares will be held in Columbus, Ohio on April 29, I 1980. A notice of the meeting, proxy statement and l proxy will be mailed in March. i
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i i The Cover i ji The cover depicts the entryway to a house in the German Village section of south Columbus. This re-stored area of 150 year old homes has gained a national i reputation and is a source of pride for all of us. In ! addition to German Village, central and southern Ohio has much to offer its residents and visitors. Throughout this report we have highlighted a few of the many interests to show why our customers and employees find our service area A GREAT PLACE TO LIVE. We , are glad to be a part of it. l of bus uthern Ohio Electric Company 215 North Front St. Columbus, Ohio 43215 (614) 464-7700
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eBe COLUMBUS AND SOUTHERN OHIO ELECTRIC COMPANY 215 NORTH FRONT STREET COLUMBUS. OHIO 43215 , e Columbu/ lovthern
4 l DIRECTORS l R. J. Grucser (E) A. G. Green (A) (E) B. T. Ray (C) (E) l Chairrran of the Board of Directors - Retired Chairman of the Board and President and Chief Executive Officer l J. E. A.thur. M.D. (C) Chief Executive Officer of the of the Company j Oto'aryngologist. Columbus, Ohio Company R. E. Waldo (A) ! W. A. Carille. Jr. (A) (C) J. F. Kurtz (A) (C) (E) President of Columtius Mutual Life D rector of Huntington Bancshares. Faculty of Accounting. Ohio State Insurance Company, Director of ( j bc.. The Huntington National Bank University and Director of Midland BancOhio National Bank and I and Midland Mutual Life Insurance Mutual Life Insurance Company SCOA Industries Inc. Company (A) blember of the Audt Commaree I (C) blember of the Compensat2on Communee ! l (E) blember of the Executive Committee OFFICERS R. J. Grueser J. M. Emery E. D. Meyers Chairman of the Board of Directors Vice President and Treasurer Vice President - Administrative B. T. Ray R. A. Heimann Services President and Chief Executive Vice President and Controller R. E. Sisinger Officer J. H. Inskeep Vice President - Rates and J. P. Fenstermaker Vice President - Purchasing Corporate Affairs Senior Vice President - Operations W. R. Kelley S. P. Tomesek F. V. Stine Vice President - Electric Operations Vice President - Corporate Senior Vice President - Customer M. E. McCain Pbnning Service Corporate Secretary and Assistant W. C. Welch E. E. Williams Treasurer Vice 1 resident - land Senior Vice President - R. M. McMorrow Management Admimstration Vice President - Law and Q. E. Bowers J. P. Apel Risk Management Assistant Controller and Assistant Vice President - Environmental P. R. McNaughton Secretary R. A. Burgert Vice President - Employee W. L Pidock Vice President - Distribution and Relations Assistant Treasurer Service We are committed to provide electric service in response to our customers' needs consistent with sound technology and economic conditions. l
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- . . STAT 9WENTS
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CONSOLIDATED STATEMENT OF SOURCES OF FUNDS FOR PROPERTY ADDITIONS i. For the Three For the Twelve jl I Morths ended Months Ended ' December 31, December 31, 1979 1978 1979 1979 i (000 omitted) (000 omitted) funds Provided from Internal Sources Earnings net of dividends ..__ _ _ ____ ______.. $ 3,804 $ (3,209) $ 11,481 $ (9,528) i Nontash items I Deprecia tion . . _ _ _ _ _. . . . . . _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ . . . 9.794 9,889 39,843 35,754 : (592) 58 5.768 (6,253) l
. Investment Tax Credits ..____ __ _.. ._ _ ____ _ _
Allowance for funds used during construction __ (5,009) (3,941) (18,901) (20,326) i
- Othe r . _ _ _ _ _ . . . . _ _ _ _ ... _____.___________. 2,044 2,139 (7,687) 7,164 6,787 (6,255)
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Other internal-net __ _ .___..__ __,.___..___ (5.902) (6.729) l Total internal _ _ _ _ _ _ _ .. . . . . _ _ _ _ _ _ _ _ _ _ _ . . 4,139 (2,751) 38,626 _ 179 l l Funds Provided from External Sources 59,775 44,831 First mortgage bonds
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l Pre fe rred shares
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39.520 Common sha re s * . . _ _ _ _ _ _ _ _ . . . _ _ _ _ _. . _ _ _ _ _ _ _ 1,608 958 4,528 3,522 i Notes payable-net _ _ __ ___.__...___ ____... 13,739 24,352 (2,769) 20,588 l Te rm note and other _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ___ _ _ _ _ _ _ - - 20,000 8,105 i Retirement of long-term debt ...____. . .__.. _ (714) (557) (22,532) (9.685) l Total external . . .. _ _ _ . _ _ _ _ _ _ .. _ _ _ _ 14,633 24,753 59,002 106,881 ! l Total Funds Used for Electric Plant and Other Property Additions . .. $ 18,772 $22,002 $ 97.628 $107,060 l
- Net proceeds to Company, certain reciassifications have ten made to previously reported amounts to conform to 1979 presentations.
ELECTRIC SALES STATISTICS Sales - KWH (000 omitted) Residential _ _ .. . .. ..___ ________ 766,735 739,545 3,222,252 3,154,723 , Commercial ._ _.... . .__ _.. ..___ ______ 658,181 640,269 2,741,795 2,583,709 '. t l Y" Indus trial _ _ . _ _ _ _ _ _ . . . . _ _ _ _ _ _ _ _. .._. . . _ _ _ _ _ 524,538 538,722 2,130,367 2,041,832 l Other __ ... ....____ ..______._ -._________ __ 228,191 228,102 939,253 845,859 T Total ____._________..______..__..____.___ fT77,645 2,146,638 9,033,667 8,626.123 j i Revenue (000 omitted) Residential _ _ _ _ . .._ _ .. ._. _ ...____.. $ 41,758 $ 35,535 $171,952 $155,342 Commercial . ._ __ .. .. __...._. ....._.. 31.605 26,976 131,773 111,717 Industrial __ __ ____....______________________ 19.120 17.238 80,057 69,802 Other __ _________. __.._______. .._________ 8,615 7.670 32,988 29,310 Total . .__.___..._. ._.______...... .__ $101,098 $ 87.419 $416,770 $366,171 Residential Customers (end of period) .........._..__. 412,016 403,523
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i I I To Our Shoreholders: ) 1979 results were encouraging even though Another action which resulted in much i not entirely satisfactory. Problems such as the communication with shareholders was the l coal miners' strike and the blizzard which plagued change in the dividend payment dates. Many ap- i the Company in the past two years were not parently believed that the dividend payment in j encountered and we were able to accomplish our December constituted a dividend increase. Actu- ! goal of improving on grossly inadequate 1978 ally the annual dividend rate was not changed, earnings. The 1979 earnings were $2.84 per only the payment dates. Payment dates in the , common share which more than covered the div- future will be quarterly beginning with a March l idend. However, the 10.9% rate of retum on 10,1980 payment. This is discussed in more ! common shareholders' investment is not detail beginning on Page 15. ! adequate. We will continue our efforts to provide The activities and results of operation cap- j an improved and a fair retum on common equity. tured in this report are the culmination of efforts ! The annual dividend rate of $2.32 is about by our entire organization. We have also attempt- l 82% of eamings per common share. Our objec- ed to show a little about the area where our ! tive is to achieve camings sufficient to permit employees and customers live. We believe as you l dividend growth with a dividend ratio of about read this report you will agree with us that 1979 1 70% to 75% of eamings. was a busy and successful year and that central :' The factors which helped to bring about the and southem Ohio is a great place to live and do improvement in 1979 are discussed more fully business. , elsewhere in this report but we can generally attri- February 7,1980 i bute the improvement to higher rates to custom-ers, large sales to other electric ut;lities and a . l resumption of growth in sales to regular custom- ; ers. We expect sales growth in the foreseeable future to be well below the historical levels. Much g* . i, of the future growth will come from adding cus- E a [ j omers rather than from increased customer us- 7 age. O ;
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Many steps taken during the year have l brought the proposed acquisition by American Electric Power Company, Inc. closer to reality. l Management has supported the acquisition dur- 1 l ing the 12 years since it was initially proposed. A !' summary of the 12 years and the current status is shown on Page 8 which we suggest you carefully 4 Ben T. Ray l An encouraging prospect for the next few President and ! years is the relatively low level of construction Chief Executive Officer l expenditures. The program for 1980 through ' 1982 is well below the peak years of the mid 1970's but is up somewhat from last year's esti-f e's mates because of additional requirements at the Zimmer Nuclear Station. Continuation of the brutally high inflation rate of 1979 however, _.- - could dampen our expectation of fewer dollars dedicated to construction. f_'=,? I / We have received many questions from 9 - shareholders and others concerning the status of the Zimmer Station. Delays in the regulatory hear- I ings for an operating license and additional con-struction required by the Nuclear Regulatory l Commission have increased the cost and moved the planned start-up date beyond 1980. Our in- ' vestment in nuclear including the camjing cost is substantial. However, Zimmer will account for no R J. Grueser more than 8% of capacity as we are committed Chairman of the primarily to generation from Ohio coal. Board of Directors 7 D'
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Our Service Areo . . . l ;
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I Columbus and Southern's service distribution systems, serve over 457,000 terville, Jackson and Glouster. . area map does not reveal the many in- customers in a 6200 square mile area. Our service area is more than wires teresting places and exciting activities Including the metropolitan Columbus or customers or a shaded area on a map. l available to our customers and region from which approximately 80% The following pages will provide more l employees. It does, however, show the of our electric operating revenues are insight by showing that our service arca is ! location of our generating stations and derived, service is provided to all or por- people, places and activities interacting l 345 KV transmission network. This gen- tions of 25 Ohio counties. Wholesale to create A GREAT PLACE TO LIVE. l eration and transmission network, along service is provided to municipally owTied with the lower voltage transmission and distribution systems in Columbus, Wes-f l, l Power Generating Facilities 1 Beckjord Station - MICHIGAN S4 Megawatts
- l LAKE ERIE 2 w. H. Zimmer Station i
, (Nuclear) !
226 Megawatts * ! TOLEDO Under Construction e CLEVELAND 3 J. M. Stuart Station (Includes Peaking Unit) l
< 607 Megawatts
- I eAKRON E 4 Picway Station I (includes Peaking Unit) e CANTON h g 132 Megawatts l;
> 5 Walnut Station Peaking Units !
< y 202 Megawatts l Z Z 6 Pedro Peaking Unit <
g 11 Megawatts C E COLUMB
' --'----- ,- 9 7 Addison Peaking Unit 14 Megawatts 8 Poston Station l
DAYTON , (includes Peaking Unit) )
- 212 Megawatts !
l~'/-~~-' /, 9 Conesville Station <
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s / s; y (includes Peaking Unit) 1,500 Megawatts *
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CINCIfNA'T! MC"E'*",""cg"" J i;".C I e i, s i, ion %= .nd be c-np.nv
','s, i WEST VIRGINIA 1 ' q, 2
KENTUCKY I 2 Service Area ; 345 KV Transmiselon Network ------ 1
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. . . A Great Place To Live l
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Ohio State Buckeyes. pumpkinburgers
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big name rock group. or perhaps enjoy Pumpons abound at the annuai Pumpktn Show in Circievme Thousands of visitors come fron- the excitement of one of our many well-moes amuna to emov this unique extravaganza known community fesuvals' I i 1 l p"} # ' ' ~ ~ <?,'Q;K ~ ':Q. A' g_, .'4^,.Ih)
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'-.......~..............s: . . . . . ...'-.%. . . . . . i cheer the B icks l Here comes the winner at the 34th running of the Little Brown Jug held * '~' l
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outdoors every s mmer in the Sugarloaf Mountain Am- ' 4 phitheater in Chilhcothe --A' - - - * "r-l _ m , 1 l l
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i l professional shows of all types. induding p f p' .4-' " l . .,%. , Broadway shows. at various entertain i# ,
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_ p, ;_. . l ' _ , OSU s athletic program includes 11 intercollegiate women s sports in addition to field hockey and is widely recognized for Championship teams and individual aCComphshments in addition to mamma bear and Sub-Zero (baby bean the Columbus Zoo offers an ex. tensive variety of animals for area residents to enioy including four generations of gorillas
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-- ' - , e * ,. . cal schools abound in central and south
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University. one of the nation s largest. to j.
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v'R y ~ Adena mainta,ned D, the Ohto Historical Society in ChilhCothe was the estate of Thomas Wor tN ngt on who helped lead the movement to make Oh 0 a state and later beCame gobernor The view f rom the 1807 mansion inspired the design f or the Ohio state seal y -, -- . . - ;1 .
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_ ,l The Columbus Symphony Orchestra is as diversified as the people it enter- The Columbus Chppers enjoy a brief respite f rom tains it provides everything f rom Opera and the Classics to lollipop Concerts their AAA International League schedule by taking On their parent Club the New York Yankees The for pre-schoolers pennant winning Clippers now beginning their fourth year. have Consistently led the league in l attendance u u{ u, m i. d n m 6
I i i i the smaller colleges such as Rio Grande, :- :. and offer a wide variety of degree pro- "'f - grams, career development, as well as -
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educational programs purely for per-sonal enrichment. Our vocational schools offered at the high school level , by all the bcal school districts have also proven to be a major feature in the over-all education picture. So whether it is theater or sports, hiking in the hills of southern Ohio or just ! listening to the Columbus Symphony on ! the Statehouse lawn, or one of the many l other things mentioned above, it's at our # 9 fingertips. From Columbus - Ohio's largest city - to the smallest village in
- southern Ohio, our service area is i.
A GREAT PLACE TO LIVE!
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' If you don't like the view from the ground, enjoy it from the air in a hot air balloon. The central Ohio area includes an en-thusiastic group of hot air balloonists.
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(J:' .";,l f . ?; 1 D 1, . ' . ,(. . . 7 [ ,... . The contrasts of city and rurallife can be seen Founded in 1804, Ohio University in Athens was the first institution of higher on the Ohio State University campus. Located learning in the old Northwest Territory. OU's Cutler Hall, completed in 1818 is north of downtown Columbus, the campus almost as old as the University itself. includes farm facilities used for OSU's ag-ricultural research programs, among the best in the nation. p a w fu o Am!do 7
Acquisition Status The next action toward consumma- and American Municipal Power-Ohio Company is unable to redeem for cash tion of the acquisition of the Company (Amp-Ohio), an organization of munici- all the preferred stock now outstanding. by American Electric Power Company, pal systems. This agreement, filed with if the acquisition is approved the Com-Inc. (AEP) must come from the Secur- the SEC in June 1979, is intended to pany will offer preferred shareholders, ities and Exchange Commission (SEC). facilitate the municipal systems obtaining excluding holders of the 9.50% series, in early 1968 AEP proposed, and the adequate capacity. It includes the possi- two options to exchange their preferred Company agreed to support, the acquisi- ble sale to Amp-Ohio of one or both of shares. One option is an exchange of tion which would involve the exchange the Company's two Poston generating preferred shares for cash at the redemp-of one Company common share for 1.3 units presently under construction. tion price. This is limited to a maximum AEP common shares. After ten years of Alsoin June the Company and AEP of $80 million of redemption value and various events, as outlined below, the reviewed and reaffirmed the fairness of subject to proration if the total redemp-SEC approved the acquisition "in prin- the common stock exchange ratio of 1.3 tion value tendered exceeds that ciple" on July 21,1978. At that time the AEP shares for one Company share. amount. A second option is an exchange SEC requested supplemental informa- AEP filed the supporting data with the of preferred shares at the redemption tion relative to a settlement for the ulti- SEC in July 1979. price for shares of a new series of mate furnishing of generating capacity The 1968 agreement between the cumulative preference stock. for Ohio municipal systems and addi- Company and AEP provided for re-tional support for the 1.3 common stock deeming all outstanding preferred shares exchange ratio. of the Company. Because of changed On May 31,1979 an agreement financial circumstances during the twelve was signed between the Company, AEP years since that original agreement, the PROPOSED ACQUISITION OF C&SOE BY AEP Chronology of Events February 23,1968 Plan of Reorganization and Agreement signed. April-November,1968 SEC hearings held. January 29,1969 SEC Division of Corporate Regulation filed notice of opposition. June 12,1969 Anti-Trust Division of the Department of Justice intervened. July,1969-April,1972 Hearings resumed. July 20,1973 Acquisition denied by SEC administrative law judge. September 27,1973 SEC allowed petition to review decision. October 8,1974 Oral testimony on appeal heard. August,1975 Updated information requested by SEC. July 21,1978 Acquisition approved "in principle" pending additional information concerning the 1.3 exchange ratio and the availability of power to various municipalities. June 4,1979 Agreement with American Municipal Power (Amp-Ohio) filed with SEC. June 29,1979 Amended Plan of Reorganization and Agreement signed. July 5,1979 Data regarding 1.3 exchange ratio filed with SEC. September 15,1979 Case taken under advisement by the SEC. 8
l 1 1979 Operations Ebetric Soles years to come. Kilowatt hour sales increased al. Industrial sales improved about 4% jfgySNCAT ON most 5% in 1979, a tumaround from the in 1979. Despite problems in the 4 decline experienced last year. February economy nationwide, the business cli- (KWH IN BILuoNs) and March sales were up about 10% as a mate in our area, which is not primarily industrially oriented, remained favora. AES.DE M A result of a third successive severe winter. 3 February 1979 was the coldest February ble. Over half of our major industrial cus- _ i in weather bureau history. Much of the tomers expanded their facilities to some - extent during the year. cou l growth in the early part of the year was ' Total sales growth during the next 2 offset by lower sales during the cool and _ wet summer months. several years is not expected to be much iNousrn:AL i Residential sales increased 2% dur. greater than 4% annually. Sales growth i ing the year, only slightly bettec than the could fluctuate substantially from year to 5 l 1978 growth. Conservation and mild year, however, depending upon weather j summer temperatures were an influence and economic conditions. This conserva- ; on customer usage as the average usage tive sales projection does not include o of 7,896 kilowatt hours was approxi. sales to other utilities which are discussed 70 n nnn 75 7e n 7e n mately the same as 1978. However, the below. j addition of about 9,000 customers did Sales To Other Utilities Generating Copodry I contribute to our sales growth. When not required to meet cus- The system peak load of 1,852 l Commercial sales grew 6% in con- tomer loads the Company was able to megawatts was reached on August 8. j trast to a 4% decline in 1978. While con- utilize its generating facilities to provide This peak was below the levels reached i servation has been apparent for some power to other electric utilities. Sales to in both 1978 and 1977. Heavy summer i time in this customer group, substantial these utilities amounted to over $19 mil- rainstorms on August 8 and several other development in Columbus. particularly lion during 1979. Purchases from other days abruptly reversed the rise in tem-downtown, has and will continue to re- utilities for economy purposes or to meet peratures. As the temperatures declined sult in sales growth. Major development our loads amounted to only about $1 so did the system load. On only one day is taking place in two downtown areas million. These large sales of power, in during the summer did the temperature i with a convention center and a major contrast to substantial purchases during reach 90 degrees. l hotel, among other things, scheduled for the coal strike in early 1978, contributed Total installed capacity of our i operation before the end of 1980. We significantly to the 1979 earnings. We generating system is 2,732 megawatts, I believe the Columbus skyline, pictured will endeavor to sell power to other unchanged from 1978. Capacity addi- l below, will continue to expand for many utilities whenever a surplus is available. tions presently under construction l l g g' t '11E ,* g -MK 4 7 ]] gg ' + 7 ga g -['g-Q Es M y k V- Q J *:'p Lr .
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include 226 megawatts from our 28.5% unit could not be completed by the pre- for projects which can be deferred or share of the 792 megawatt Zimmer nu- viously planned target of January 1980. slowed down without adversely affecting , clear unit now planned for service in in addition to the slowdown of the reliability. 1981. This unit is owned jointly with The licensing process by the NRC, a Over one-third of the 1979 expen- ! Cincinnati Gas & Electric Company and moratorium on the issuance of new ditures were applicable to the Zimmer The Dayton Power and Light Company. licenses was placed into effect until the nuclear unit. Other major components ! Its status is discussed more fully below. spring of 1980. If an operating license include Poston Units 5 and 6 even Units 5 and 6 at our Poston Station, each can be obtained at that time and substan- though work on these units will not move with 375 megawatts of capacity, are tial additional changes are not required, at an accelerated pace until 1984. Con- i under construction and planned for ser- we are hopeful that the current target of struction of a high-security facility to vice in 1987 and 1990, respectively. Al- commercial operation in early 1981 can house the Company's data processing though the peak load has dropped in the be met. equipment and, ultimately, the Energy r last two years, growth is anticipated over The delay in the in-service date, Management System, was completed the next several years. To meet these along with the additional engineering during the year. However, this facility anticipated higher peaks, oil or gas bum- and retrofitting, has increased the total was sold prior to occupancy and leased , ing peaker units with a total capacity of project cost from $664 million to $850 back as explained below relative to the l 260 megawatts are being considered for million. Any further changes which may Company's 1979 financing program. as early as 1984. be required or delays in start-up will in- Construction expenditures for , A new Energy Management System crease the project cost even more. 1980,1981 and 1982 are projected to ' will be placed in operation in early 1981 be $125,061,000, $117,156.000 and Construction Activities $134,471,M, respectively, for a total of instead of 1980 as originally planned. Capital expenditures for plant $376,686,000. This is approximately This computerized system for managing f cilities m 1979 were $114,921,000. E the generation and delivery of electricity $56 mQon over estimates for this three the lowest since 1973. The expenditures to customers is expected to produce sub- ear period made at the beginning of by type of plant were: 1979. This increase is primanly due to stantial savings in fuel costs. 1979 additional expenditures required for the Zimmer Nuclear Unit The Zimmer nuclear unit is pres. i Generat on $ 79,729,000 Zimmer nuclear unit. ently scheduled for commercial opera. Transmission 5,251,000 Financing tion in 1981. Hearings were begun in Distribution 29,676,000 The ability of a company to carry June relative to obtaining an operating General 265,000 out its construction program depends , license and have been recess ' and re- $114,921,000 upon its ability to generate funds, both sumed various times during tne year. intemally and from external sources. In They have not yet been completed. This During 1979, as in 1978, our actual 1979 we arranged for approximately I extension of hearings, along with the ad- expenditures for construction were less $64 million of permanent new financing, j ditional engineering and retrofitting re- than anticipated at the beginning of the considerably less than the $88 million : quired by the Nuclear Regulatory Com- year. This is a result of our constant required in 1978. 1 mission (NRC), made it apparent that the monitoring of the construction program During 1979 approximately l 198,000 new common shares were sold t for over $4.5 million through the Di- ! CONSTRUCTION EXPENDITURES vidend Reinvestment Service and the l ON uw Ns> (INCLUDING AFUDC) Employee Thrift Plan.
$200 In September 1979 the Company
'"[n$n"llng sold $60 million of first mortgage bonds, 7
10%% Series due 1999. The bonds l 150 - ------' were sold through a private placement ! and net proceeds used to reduce short term debt outstanding. Beginning in ' 1984 the bonds are subject to a manda- < ioo . tory sinking fund of $3 million annually ; and the Company, at its option, may retire up to an additional $3 million an-50 - - - nually. A $20 million term loan, with an interest rate of 103% of the floating ' g n n n u prime rate and maturing in seven years. n n so si MCTUAL) (ESTIMATED) was negotiated to refund a like amount of first mortgage bonds,7% Series due 10 ,
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1 1 June 1.1979 The pnncipal amount of Lines of credit for snort term bcm Rates the loan is payable in semiannual in rowmgs were reduced in the fourth quar- An emergency rate increase de-stallments beginnmg in 1981 and a $5 ter from $148 milhon to approximately signed to provide additional revenues of milhon remainmg balance is due on $133 milhon at year-end in addition to approximatelv $39 milhon annually was l matunty bank loans. consisting of 90-day notes placed nto effect in March 1979 This i The pnme rate for short term bank and vanable investment notes. the knes increase was necessary to improve the loans was 1144% at the beginning of the of credit and short term borrowing in- Company's hnancial position to permit year and after reaching a high of 154% clude a $20 milhon credit agreement the is3uance of long term debt secunties dechned to 15% by December 31 The with a major ; easing company This and improve earnings from the de-record high levels for the pnme rate sig agreement. secured by the Company's pressed level of 1978 The emergency mficantly affected our overallinterest ex- coal and oilinventories. was renewed for increase was granted subiect to refund it pense interest on both the term loans a second year in September is believed that any refund will not be and short term notes payable vary with Early in the fourth quarter the Cen- significant the pnme Ako the level of short term tral Operations Center facihty for hous. A permanent rate increase of $72 borrowmg dunng the year reached a ing our computers and Energy Manage- million annually to replace the high of $116 milhon in July and was $51 ment System was sold and a 30 year emergency surcharge was granted by the milhon at year end lease with renewal and purchase options Public Utihties Commission of Ohio negotiated The facihty was sold at cost (PUCO) to be effective in December which was approximately $7 milhon 1979 However, implementation of the INTEREST CHARGES in August 19 /9 arrangernents were rates to customers within the City of Co-
% e Ns' sg , made for the lease of approximately $4 5 lumbus was delayed until mid January milhon of computer equipment for a four by legal action relating to a City ordi-year penod nance The City contends that the rates The followmg table shows the should not become effective until April Company's capital structure for the last 1980. Although this issue still may not be four years completely resolved. the Company 197n 147- 197- 1979 began bilhng Columbus customers in s29 2 mid Januarv Loy N f n f d in dete'rmining the amount of per-manent increase. the PUCO allowed a EI Tm 14 77% return on common equity. in-39 g Da so - 4- 4 48 so 4 ciudmg a 0 5% attrition allowance. and a QDe 17 29 44 3q 10 79% overall return on rate base One-half of the cost of the Zimmer nu-
, ,,, ,,,, t oo o '- loo om ion om 100 o. clear unit presently under construction was allowed in the rate base.
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! $8,889,000 for construction of en- and sulfur to dispose of and somewhat Fuel vironmental protection facilities bringing lower operating and maintenance costs.
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' the total since 1972 up to $143,922,000. Until final regulations have been mately 99% of its electricity with coal in Annual costs to operate and niaintain the prepared by the USEPA. we cannot de-1979. The remaining 1% was generated equipment in 1979 were $13,130,000, termine the effect on operations of the from natural gas and oil-buming peaker an increase of 38% over the previous Resource Recovery Act of l977. This Act i units. When the Zimmer nuclear unit covers solid waste disposal, specifically j goes into commercial operation it is ex- year.
j pected to provide approximately 8% of The Company and the United scrubber sludge and fly ash. States Environmental Protection Agency the annual generation. Legislation (USEPA) have reached tentative agree-I Coal consumed by Company- in November 1978 President Carter I operated generating stations is generally ments which will allow us to use Ohio c al at Conesville and Poston Generat. signed into law the Public Utility Reg-obtained through long term contracts ulatory Policies Act (PURPA) as one of ing Stations for older units not equipped with operators of Ohio mines and from five pieces oflegislation which comprised with the costly flue gas scrubbers. Under the Company's mining interests. How, the National Energy Act. PURPA re-ever, in 1979 almost 5% was acquired an agreement in principle, the Company w uld utilize coal washing to meet sulfur quires that each state utility regulatory from spot markets, such purchases being agency review and consider certain gas l made when lower prices were available dioxide emission standards for Cones-ville Units Nos. I through 4. The Com- and electric rate and regulation stan-i in the spot markets. dards which are intended to encourage pany is awaiting final approval of its ap-Simco inc. is a subsidiary company conservation of energy, efficient use of plication for revision of the sulfur dioxide which owns coal minir.g equipment and emission standards at the Poston Sta- utility resources and equitable rates to
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p,'[C Pd al C y m units will not require the use of washed Several of these standards have al-Company-owned coal fields near the c al r the installation of scrubbers. Flue Conesville Station. During 1979 the joint ready been acted upon or are under gas scrubbers will be installed for the tw study. The PUCO has approved stan-venture sold 866,000 tons to the Com-new units being constructed at Poston. dards for termination of service and has I pany. Simco's net income for the year With the planned removal of the small, was $1,368,000. reviewed the Company's rate standards older units in the near future, the Picway as they relate to pricing policy and rate Environmental Concerns Station is in compliance. structure. However, this is just the tip of Coal washing facilities will increase i Considerable progress was made in the iceber9' j 1979 toward resolving issues on en- the price of coal by an estimated 25% to vironmental protection regulation. 35%. Aportionof thisrepresentsthecost The PUCO has already sent However, the cost to comply will con- of the washing process and the remain- thousands of pages of data to the agency tinue to be a matter of growing signifi- der is for volume lost in the process. administering PURPA as the first of cance in the economics of electric Some of this higher cost, however, will many filings to be required over the next utilities. During the year we expended be offset by reduced quantities of ash three years. The Company must provide _a '
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Bicentennial Park in downtown Columbus offers workers a scenic lunch Downtown Columbusincludes the new Centrum, a product of the City's l continuing development efforts. Here residents can ice skate, have a time retreat on the banks of the Scioto River. i bite of lunch or just enjoy viewing the sculptures and water cascades. l 12 D**g c w Ju
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g *' the rrountain of paperwork to compiv .. with this law are staggenng Whether the 4 g -.y 'f ~: f' end justihes the means will not be k,own ..
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w [t-l.egislatu in currently pending be 3-m , -.. fore the Ohio General Assembly inc.udes . c bills relating to the f uel adiustment met harnsm Cunentiv f uel costs are L
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parently prohibit t hanging f uel costs bemy hilled until af ter semiannual re Richard M McMorrow Margaret E McCain views Another bill under considera ion Doord Of Directors And Monogement non of Corporate Secretarv since ioining w< >uhi imp < >se a tax on coal burned by Chonges the Company in 1976 Miss Margaret E utilities in Ohio The tax rate being c,n Mr W G Porter. Jr a director McCain was elected to succeed Mr sidered is Nic per ton The monev (ol smte 1969 resigned from the Com McMorrow as Corporate Secretary Miss lected from the tax would be used for pany's Board of Directors ef f ec tive McCain has been Assistant Secretary rescan h and develi>pment in areas re Januarv 1.19m M hmam hmm mm IC %ss lated to the clean and efhcient generation Mr Richard M McMorrow was McCain will connnue as Assistant Treas of energv FLud on our 1979 coal con elected to the new posinon of Vice Pres urer Both appointments were effechve sumption. this tax would have cost well ident.1.aw and Risk Management Mr November 1.1979 I over $2 milhon in 1979 McMorrow had previously held the posi l l l
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Library. bOth at Ohio State University provide Quiet backgrounds tof academic study
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1979 Finance COLUMBUS AND SOUTHERN OHlo ELECTRIC COMPANY Five Year Summary of Operations Year Ended December 31, 1979 1978 1977 1976 1975 (Thousands of Dollars) Operating Revenues $416,770 $366,171 $320,551 $280,285 $259,078 Operating Expenses Operation and maintenance 226,342 230,110 177,159 157,537 143,502 Depreciation and amortization 39,843 35,754 30,720 24,280 22,735 Taxes other than income taxes 38,193 32,764 29,451 24,301 21,041 Federal income taxes 22,320 1,161 7,195 7,194 10.994 Total operating expenses 326,698 299,789 244,525 213.312 198,272 Operating income 90,072 66,382 76,026 66,973 60,806 Other income and Deductions
- 20,963 15,338 11,154 27,697 16,950 Income Before Interest Charges 111,035 81,720 87,180 94,670 77,756 Interest Charc.s
- 51,058 41,893 32,846 40,368 35,334 Net income 59,977 39,827 54,334 54,302 42,422 Dividends on prefened shares 13,890 12,021 10.090 7,925 6,419 Eamings on Common Shares $ 46,087 $ 27,806 $ 44,244 $ 46,377 $ 36,003 Earnings per Common Share $2.84 $1.73 $3.05 $3.71 $3.60 (based on average shares outstanding)
Average Number of Shares 16,251 16,089 14,502 12,500 10,000 (in thousands) Dividends per Common Share - declared $2.13 $2.32 $2.26 $2.12 $2.00
- 1979,1978 and 1977 Interest Charges have been reduced by the borrowed funds component of allowance for funds used during construction. In prior years the total allowance for funds was included in Other Income and Deductions.
The following is an analysis of the DMdends on Common amounted to $2.71 per share, the annual principal factors affecting the Company's and Preferred Shores dividend rate remains at $2.32. The financial results. Quarterly dividends of 58C per higher paymentin 1979 came about as a The sections on dividends and earn- share were paid to holders of common result of changing dividend payment ings concentrate on the year 1979, while shares in January, April, July and Oc- dates. These new payment dates, now the discussions of revenues and other tober and a 39C dividend, representing March, June, September and De-major categories ofincome and expense two months' payments of the quarterly ccmber, coincide with those of the provide a comparison of 1979 with 1978 amount, was paid in December. Al- American Electric Power Company. Inc. as well as 1978 with 1977. though the total actually paid in 1979 (AEP) and will protect common share-l 15
holders from dividend inequities in the Rate increases were a primary rea- In 1979, sales of power to other event the Company is acquired by AEP. son for the 13.8% increase in revenues in utilities were substantia!!y higher than in The new dates will also eliminate the 1979. Revenues include not only a full 1978, while purchases in 1979 were in-confusion which has occurred occasion- year of the May 1978 rate increase but significant. A factor in the higher sales ally in past years when dividends de- also include approximately $30.4 million was the additional capacity provided by clared differed from the amount paid. collected, subject to refend, since March Conesville Unit No. 6 placed in service in The Company estimates that 1979 through the application of the mid 1978. In 1978 the need to conserve 39.8% of the 1979 common dividends emergency surcharge. A 5% increase in limited coal supplies during the coal paid constitute a retum of capital for overall energy sales also contributed to strike forced the Company to purchase Federal income tax purposes and are the revenue growth in 1979. approximately $21 million of emergency therefore currently nontaxable, subject The increase in revenues in 1978 energy. to final determination by the Intemal over 1977 was also the result of the 1978 Other operation and maintenance Revenue Service. Dividends paid in rate increase as well as the recovery of expenses were up 7.6% in 1979 com-1979 on preferred shares are fully in- higher fuel costs charged to customers pared with a 1978 increase of 26.8% ciudable for Federal income tax pur- through fuel adjustment clauses. Over over 1977. The significantly higher per-poses. $14 million of the revenues collected for centage increase in 1978 reflects the ex-Annual dividend requirements on higher fuel costs were attributable to traordinary strike-related expenses in-the 16,345,951 common shares out- power purchased from other utilities dur- curred during that year as well as the standing at December 31,1979 at the ing the first quarter as a result of the coal unusual repairs made to stomi damaged current rate of $2.32 are $37.9 million. strike and severe winter weather. equipment.1979 expenses were af-fected by savings from various cost re-Earnings on Common Shores duction programs, including cutbacks in Eamings on common shares were Operating Expenses tree trimming activities initiated in 1978.
$46,087,000 in 1979, compared to Change from Also, operating conditions were more $27,806,000 in 1978. Earnings per Prior Year favorable in 1979.
share increased to $2.84 from $1.73 in 1979 1978 Despite the lower growth in 1979 1978. This marked improvement in fi- m n. a Dohro expenses, the total dollar amount con-nancial performance resulted primarily tinues to increase each year due to Fuel $14.5 $20 4 from the additional revenues collected greater investment in electric plant as since March 1979 through the applica. Purchased and well as spiraling price levels. interchanged Operation and maintenance costs tion of a 15.09% emergency surcharge Power (25.8) 11.5 as well as a permanent rate increase for environmental equipment also in-which became effective in May 1978. Other operation creased significantly in 1979 and 1978. and maintenance 7.6 21.1 These increases are due to higher prices Growth in sales volume and substantial sales of power to other utilities also con- Depreciation and and a greater amount of such equip-tributed to the higher 1979 eamings. amortization 4.1 5.0 ment. The increase in camings also re- Taxes other than Depreciation expense climbed in flects the significant difference in operat- income taxes 5.4 3.3 both 1978 and 1979 due to the Com-ing conditions compared to 1978 when Federalincor e pany's expanded utility plant invest-various extraordinary events, including taxes 21.1 (6.0) ment. Taxes, other than income taxes, the prolonged United Mine Workers' $26.9 $55.3 also escalated in both years as a result of strike, adversely affected the Company's growth in utility plant and increased rev-financial results. enues, which are subject to a gross re-Fuelco es continued to climb during ceipts tax. Operating Revenues 1978 and ? 379, with 1979 increasing Fluctuations in Federal income approximably 11.8% over the previous taxes are generally related to changes in Change from year. This bcrease is primarily the result revenues and deductible expenses. Prior Year 1979 1978 of greater consumption due to higher However, Federal income taxes have also been affected since mid 1978 by the g,y sales to both customers and other utilities. The price of coal in 1979 in- practice of providing for deferred Federal Fuel adjustment $(4.2) $25.7 creased approximately 6.4%. Although income taxes resulting from the use of Rate increases 38.2 22.9 generation dropped approximately libera!' zed tax depreciation for property Kdowatt hour sales 16.5 (3.7) 2.5% in 1978, the use of costly oil-fired placed in service after January 1,1977. peaking units during the coal strike and a A change in the recording of certain tax Change in other benefits has also had an impact on taxes electric revenues .1 .7 19% jump in the average price of coal c nsumed caused fuel costs to increase and is described in the discussion of
$50.6- $45.6 over 1977. other income.
16 l
OPERATING REVENUES AND EARNINGS AND DIVIDENDS RETURN ON AVERAGE OPERATING EXPENSES PER SHARE COMMON EQUITY
$450 54.50 18 %
(IN MILuoNS) REVENUE AND SA.ES To E 4PN NGs 94 UTillT'E S EXPENSES 10
/
DIVIDENOS (ANNUAL RATE) 6 0 0 0 7s 76 77 M M 75 M 77 78 79 7s M M 78 79 Other income and Deductions net of tax rate and a generally lower level Dividends on preferred shares in-Change from of construction expenditures. creased due to the issuance in June 1978 Pnor Year f $40 million of additional preferred in mid 1978, the Company began 1979 1978 stock recording tax benefits associated with (Maons of Douan) borrowed funds used for construction in The Company's annualinterest and ther income rather than as a reduction preferred dividend requirements on its Coat operations in Federal income taxes. This practice long term debt and preferred shares out-before interest has substantially increased other income standing at December 31,1979 are ap-charges $ 1.7 $ .4 proximately $55.9 and $13.9 million. re-during both 1978 and 1979. Allowance for equity spectively. funds used Interest Charges and dunng Dividends on Preferred Shores The total interest and dividends re-construccon (1.5) .4 quirements for securities outstanding at Change from December 31,1979, including the pres-income tax credit 4.8 2.8 Prior Year ent common dividend rate,is $107.7 mil-
.6 1979 1978 Other .6 lion. This amount is wellin excess of the
$5.6 $4 2 (MA= a oonan) $90 million of 1979 operating income.
Interest Charges income from coal operations in- Long-term debt $ 3.6 $ 5.8 COMMON SHARES creased substantially in 1979 and to a Notes payable lesser degree in 1978. The increases are and other 5.6 .8 a result of higher coal prices and changes 1978 M wance f r in the mining operations, such as the 1st Q 2nd 0 3rd 0 4th 0 borrowed funds discontinuance of costly underground High 27 26 4 used during 26 % 27 % mining in the latter half of 1978. Some e nstrucnon - (2.5) Low 24 % 23 23 % 20u gains were also realized in 1979 from selling the underground mining equip- Dwidends on Close 25 23 % 25% 21 ment. preferred shares 1.9 1.9 1979 The total Allowance for Funds Used Interest charges were up substan- 1st 0 2nd 0 3rd o 4th a During Construction ( AFUDC) including tially each year.1979 interest expense High 24 % 25 26 % 24 the portion applicable to borrowed funds was particularly high as a result of the Low 20 % 21 22 % 20 % which is recorded as a reduction to inter- sale of additional first mortgage bonds close 22 4 24 4 22 % 21 % est charges, declined slightly in both and the issuance of term loans and high cm n *"
'[[ u w 7og $c*k E c years. Reasons for the decline include levels of short term notes at record high , S ge u e?t the completion of Conesville Unit No. 6, interest rates. Proceeds from the term symt>os. coc.
a 1978 change in the rate used to accrue loans were used to redeem bonds which AFUDC from an 8h% gross to a 7%% matured in June 1978 and 1979. 17
COLUMBUS AF,D *suCTHERN OHIO ELECTRIC COMPANY Consolidated Results of Operations Year Ended December 31, 1979 1978 (Thousands of Dollars) Operating Revenues (Note 1) $416,770 $366.171 Operating Expenses 137,078 122,584 Fuel (Note 1) Purchased and interchanged power (net) (17,856) 8.004 69,345 65.854 Other operation (Notes 4 and 11) . 33,668 Maintenanc > (Note 1) . . 37,775 Depreciation and amortization (Notes 1 and 11) 39,843 35.754 38,193 32,764 Taxes other than income taxes (Note 11) 1,161 Federal income taxes (Note 1) . 22.320 326,698 299,789 Total operating expenses 90,072 66.382 Operating income Other income and Deductions 2,700 985 Coat operations before interest charges 428 38 Other subsidiary operations . Allowance for equity funds used during 9.825 11,270 construction (Note 1) 2,842 Income tax credit (Note 1) 7,627 383 203 Other Total other income and deductions 20,963 15.338 Income Before Interest Charges 111.035 81,720 Interest Charges 51,068 47,092 Long-term debt 9.066 3,857 Notes payable and other Allowance for borrowed funds used during (9.076) (9,056) construction (Note 1) 51,058 41,893 Interest charges (net) . . 59,977 39,827 Net income . 12,021 Dividends on preferred shares . 13,890
$ 46,087 $ 27,806 Earnings on Common Shares . ..
Earnings per Common Share (based on average shares outstanding) . . $2.84 $1.73 16.251 16,089 Average Number of Shares (in thousands) (Note 6) . . Dividends per Common Share - declared . . $2.13 * $2.32 Dividends per Common Share - paid . . . $2.71* $2.32
- Dividends declared and paid in 1979 were based on the same $2.32 dividend rate as in 1978 but reflect a change in declaration and payment dates.
The accompanying notes are an integral part of the above statement. 18 t 1
COLUMBUS AND SOUTHERN oHlo ELECTRIC COMPANY Consolidoted Statement of Sources of Funds for Property Additions Year Ended December 31, 1979 1978 (Thousands of Dollars) Funds Provided from Intemal Sources Eamings on common shares $ 46,087 $ 27,806 Dividends on common shares . .,. (34.606) (37,334) Eamings retained in the business , 11.481 (9,528) Amounts charged to income not requinng cash Electric Depreciation and amortization 39,843 35,754 Investment tax credits 5,768 (6,253) Allowance for funds used during construction (18.901) (20,326) Miscellaneous - net , 5,340 4,559 Other operations 1.824 2,228 Other intemal - net * (6.729) (6,255) 38,626 179 Funds Provided from Extemal Sources First mongage bonds + 59,775 44,831 Prefened shares + - 39,520 Common shares + 4,528 3,522 Notes payable - net (2,769) 20,588 Term note and other 20,000 8,105 Retirement of long-term debt (22.532) (9,685) 59.002 106,881 Total Funds Used for Dectric Plant and Other Property Additions S 97.628 $107,06_0
- The changes in "Other intemal- net" include amounts classified as current assets and cunent liabilities and other accounts which are not material in relation to changes in financial position.
+ Net proceeds to Company.
Certain reclassiBcations have been made to previously reported amounts to conform to 1979 presentations. he accompanying notes are an integral part of the above statement. 19
COLUMBUS AND SOUTHERN oHlo EIICTRIC COMPANY Consolidated Dolonce Sheet December 31, 1979 1978 A55ET5 (Thousands of Dollars) Electric Utility Plant (Notes 1,2,3,4 and 9) $1,232,856 Plant in service, at original cost $1,287,168 294,349 263,936 Less - Accumulated provision for depreciation . 992.819 968,920 Net original cost . Construction work in progress 220,704 179,155
- nuclear .
64.425
- other 74.671 1,288,194 1.,212,500 Other Property and Investments, at cost 25,724 24,268 Coal property and related assets (net) (Note 9) 5,066 5,692 Real estate property (net) 744 Investments including OVEC 698 30,658 31,534 Current Assets 4,584 Cash in banks (Note 5) 5.636 5.611 5,261 Special deposits and funds .
Accounts receivable, less $635,000 and $685,000, 34,299 33,830 respectively, for doubtful accounts .. . . 13,128 15,820 Materials and supplies, at average cost . 27,631 31,145 Coal and oilin storage, at average cost (Note 5) 4,722 6,550 Prepayments and other . . .. . 99,061 89,156 Deferred Charges 21,648 21,980 Property taxes, applicable to future period . .. . . 5,988 8,773 Other ... .. .. . . . . . .. . 30,753 27,636
$1,448,666 $1,360,826 The accompanying notes are an integral part of the above statement.
20
COLUMBUS AND SOUTHERN oHlo ELECTRIC COMPANY December 31, CAPITAUZATION AND UABluTIES 1979 1978 (Thousands of Dollars) Capitalization Common shareholders' equity (Common Shares - without par value; authorized 24,000,000 shares; outstanding 16,345,951 and 16,147,976 shares, respectively) (Note 6) .. . $ 430,865 $ 414,866 Cumulative preferred shares ($100 par value; authorized 1,500,000 shares; outstanding 1,333,541 shares; $25 par value; authorized 5,000,000 shares; outstanding 1,000,000 shares) . No mandatory redemption (Note 7) 98,354 98,354 Mandatory redemption (Note 8) 60,000 60,000 Cumulative preference shares (without par value; authorized 2,000,000 shares) - - Long-term debt (Note 9) 589.774 570,079 1,178,993 1,143,299 Current Liabilities Debt maturing in less than one year Notes payable (Note 5) To banks 9,000 17,500 To banks as agents (payable on demand) 21,663 20,932 Other . . 20,000 15,000 Current maturities of long-term debt (Note 9) 60,054 22,242 110,717 75,674 Accounts payable 28.025 25,401 Accrued taxes . 50,477 39,993 Accrued interest 14,064 11,858 Common dividends payable .. .
- 9,366 Other .
11,168 9,907 214,451 172,199 Deferred Credits and Reserves investment tax credits (Note 1) . 26,466 20,698 Accumulated deferred income taxes (Note 1) l Emergency facilities . . . 2,950 3,181 l Accelerated depreciation . . . . 12,322 7,570 Other .. . . .. 10,518 10,810 Operating reserves and other . . . .. 2,966 3,069 55,222 45,328 ! Commitments (Notes 2,4 and 10)
$1,448,666 $1,360,826 The accompanying notes are an integral part of the above statement.
21
COLUMBU$ AND SOUTHERN OHIO ELECTRIC COMPANY Consolidated Statement of Retoined Earnings Year Ended December 31, 1979 1978 (Thousands of Dollars) Balance at beginning of year $129,370 $138,898 Add - Net income , 59,977 39,827 189,347 178,725 Deduct - Cash dividends accrued or declared Common Shares - $2.13 per share and
$2.32 per share, respectively .
34,606 37,334 Cumulative Preferred Shares (Notes 7 and 8)
$100 par value (at specified annual rates) 11,470 9,601
$25 par value
$2.42 Series 2,420 2,420 48,496 49,355 Balance at end of year (Note 6) $140,851 $129,370 The accompanying notes are an integral part of the above statement.
Notes to Consolidated FinonClo! Statements (1)
SUMMARY
OF SIGNIFICANT ACCOUNTING POUCIES financial emergency would be required to be refunded. The PUCO, in its December rate order, indicated that the Com-System of Accounts -The accounting records of the pany may be ordered to refund a portion of the $30,402,000 Company are maintained in accordance with the Uniform emergency revenues after additional financial information is System of Accounts prescribed by the Federal Energy Reg- reviewed. The Company believes that any refunds which ulatory Commission (FERC). may be required will not have a significant impact on the Principles of Consolidation - The Company and Company's results of operations. its subsidiaries, Simco Inc. and Colomet, Inc., are included in The Company charges to expense the cost of fuel as it is the consolidated financial statements. Appropriate intercom- consumed. Substantially all of the Company's tariffs include pany items have been eliminated. fuel adjustment clauses under which changes in fuel expense l Revenues and Fuel - Revenues are recorded as are reflected in customer bills in the second month following billed to customers on a monthly cycle basis. In December such changes. Ohio law and regulations require refunds of 1979, the Public Utilities Commission of Ohio (PUCO) au- amounts collected through the fuel clause mechanism found thorized a permanent rate increase designed to produce addi- by the PUCO, after audit and hearing, not to be Justified. tional annual revenues of approximately $72,000,000. In Hearings to date have not required any significant refunds. determining the rate increase, the PUCO allowed in rate base cpproximately 50% of the expenditures associated with Utility Plant - The cost of property additions, includ-Zimmer Nuclear Unit No.1, which is currently under con- ing replacements of units of property, are capitalized. Such struction. The rate increase includes amounts collected since costs include material, labor and applicable indirect costs March 1979 through the application of an emergency sur- such as payroll taxes, pensions, administrative and general charge. In authorizing the emergency rate increase, the expenses and the allowance for funds used during the con-PUCO provided that any excess over the amount of operat- struction period. When property is retired, the original cost, ing income deemed necessary to a!!eviate the Company's together with the net costs of removalless salvage,is charged 22
COLUMBUS AND SOUTHERN oH10 ELECTRIC COMPANY to the accumulated provision for depreciation. Expenditures Federal income tax expense consis+s of the following: for additions and replacements of items which are not consid- Year Ended December 31. ered units of property as well as routine repairs and mainte- T979 1978 nance are charged to operating expenses as incurred- (Thousands of Dollars) Depreciation - For financial reporting purposes, de. FederalIncome Taxes preciation is calculated on a straight-line basis using the esti- fn*cy,ye (decrease) from: mated useful lives of depreciable property. Provisions for Deferred investment tax depreciation, stated as a percentage of the average balance of credits net 5,768 (6.253) related electric properties, approximated 3.28% and 3.30% Deferred taxes - dunng 1979 and 1978, respectively. Acgro';deon 4,752 2.438 Allowance for Funds Used During Construction g,f'- sub'idianes s ( ) (AFUDC) - The Company capitalizes, as a construction ' ' cost, an allowance which is defined in the applicable regula- n r t tory systems of accounts as the net cost of borrowed funds expense 15.066 (2.141) used for construction purposes and a reasonable rate on Cred:ted to other income and deduct ons 7.254 3.302 other funds when so used. The components of AFUDC shown on the Consolidated Results of Operations under Charged to operatng expemes s22.320 $ 1.161 Other Income and Deductions and Interest Charges are non-cash items equal to the cost of funds capitalized during the period. Effective May 12,1978 the rate used to accrue Federal income tax was AFUDC was changed from an 8%% gross rate to a 7%% computed as follows: net-of-tax rate to reflect the tax allocation method authorized Tax computed at statutory rate s34.519 518.089 by the PUCO in its 1978 retail rate order. Since January 1, d '* 1977 AFUDC has been compounded on a semi-annual I"'[,*Ip,','c[*3oj
- basis. in excess of book (9.524) (10.374)
Income Taxes - For Federat income tax purposes, the $* nYc nst >n (s.694) (9.756) Company claims deductions for accelerated depreciation F.emoval costs (1,042) (701) under various provisions of the tax laws, including the Asset Pension costs capita!ued (1,279) (1.132) Depreciation Range System while using the straight-line method for financial reporting purposes. In addition, AFUDC ^*ja*",,'*.
, , d ts v
(730) (580) and certain other items are excluded from taxable income for subsidianes (40s) (102) Federalincome tax purposes. The PUCO rate order, effective Other items - net 2,224 2.415 May 12,1978, authorized the Company to begm providing Total Federal deferred taxes on the additional depreciation resulting from income tax the difference between straight-line and accelerated tax de. expense $15.066 5(2.141) preciation for property placed in service after January 1, 1977. This resulted in a provision for deferred Federal in- Pension Plan -The Company has a non-contributory come taxes of $4.960,000 in 1979 and $2,607,000 in 1978. retirement income plan which covers substantially all of its Coincident with the PUCO rate order and the adoption of a employees. Total Company contributions to the plan for the net-of-tax AFUDC rate, the Company also began recording years 1979 and 1978 were $10,879,000 and $9,285,000, the tax benefits associated with borrowed funds used t respectively, including amortization of unfunded priar service finance construction in Other income rather than as a reduc ~ costs. Increases in pension costs for 1979 resulted from nor-tion in Federalincome taxes. mal growth and experience as well as changes in actuarial For operations regulated by the FERC, deferred income assumptions, primarily with respect to salary increases. At taxes have been provided since 1975 to the extent permitted January 1,1979, the date of the most recent actuarial report, for wholesale rate-making purposes. the amount of the assets of the funds was approximately Investment tax credits are deferred and amortized over $57,066,000, using market value for marketable securities. the lives of the related property. For Federal income tax The actuarially computed value for vested benefits at January purposes, the Company reported a net operating loss for 1,1979, was $57,853,000 and the liability for unfunded prior 1978 which was used to reduce the tax liability for the year service costs, which is being amonized over various periods 1975. The carryback of this loss reduced the investment tax not to exceed 40 years, was $47,141,000. credits realized in 1975 and previously deferred investment in September 1979, the pension plan was amended to tan credits were reversed in 1978. The total unrealized in- include the effects of a supplementary early retirement pro-vestment tax credits as of December 31,1979 aggregated gram which was offered to eligible employees in 1978 and
$43,000,000 and will be recorded when realized. 1979 and which will continue to be offered during the next l 23 l
COLUMBUS AND SOUTHERN Ohio ELECTRIC COMPANY five years. The adoption of the amendment will cause Com- The preceding table summarizes the Company's owner-pany contributions to the plan to increase beginning in ship in jointly-owned facilities. The Company, The Cincinnati January 1980. Gas & Electric Company and The Dayton Power and Light Company have constructed or have made commitments for (2) CONSTRUCTION PROGRAM, COMMITMENTS AND the construction of electric generatmg umts and related FINANCING transmission lines under joint ownership agreements. Under The Company estimates that its construction program these agreements, each participating company has an undi-will require expenditures of approximately $125,061,000 in vided interest in the facilities and each participant is responsi-1980 and an additional $251,627,000 through 1982. The ble for financing its share of the costs during the construction construction program is under periodic review and actual period. The Company's proportionate share of the operating construction expenditures may vary from these estimates due costs associated with such facilities are included in the Con-to many factors such as business and financial conditions, solidated Results of Operations. legislation and regulation. Substantial commitments have been made in connection with these programs including commitments for commonly owned nuclear generation and (4) LEASES transmission facilities The Company has entered into certain lease agreements The Companybacilities are subject to federal, state and which meet the criteria for capitalization of leased property local air, water and other environmental control regulations. according to accounting standards issued by the Financial Rigid application of proposed and existing environmental Accounting Standards Board. The Company has not cap-regulations and compliance timetables may adversely impact the Company's fuel procurement policies, and place limita. italized such leases since the PUCO has treated these lease agreements as operating leases rather than recognizing tions on using coal mined from Company-owned coal prop. leased properties as assets for rate-making purposes. If the erty. Regulations could also require extensive modification Company had capitalized the leased properties at the incep-(or even curtail the use) of existing coal-fired generating tion of each of the leases, the additional amount of assets and facilities, as well as affect expansion plans for coal-fired generating facilities. The capital and operating costs of com-related liabilities which would have been disclosed on the Company's balance sheet are as follows: pliance with environmental regulations have become, and are expected to continue to be, substantial December 31. 1979 1978 The Company presently anticipates a financing program through 1982 which willinclude the sale or issuance of addi- (Thousands of Douars) tional debt and equity securities, subject to the interest and Amte dividend coverage requirements in the long-term debt inde- l",ased
, pr perry under capital ntures and Artic!cs of Incorporation. t.ess - Accumulated provision for depreciation 8,227 6.368 s21,739 $22.004 (3) JOINTLY-OWNED FACILITIES Company's Share at December 31,1979 gg Percent Utihty Construccon Noncurrent obligations under W ork capital leases $21.065 $21,782 of Plant Ownership in Service in Progress- Current obhganons under (Thousands of Dollars) capital leases S 2,239 $ 1.848 Produccon W C. Becksord The charges to the results of operations for amortization
" and interest expense related to such capitalizable leases "S[N U 6 12.5 $ 9 486 $ 4 would not have been significantly different from rental ex-Conesvine Generanng pense actually recorded.
Stanon (Unit No 4) 43.5 58,006 72 Rental payments principally charged to operations amounted to $6,342,000 for 1979 and $4,977,000 for 1978, 26.0 119,968 2,602 Stenon including rental payments on capitalizable leases of Wm H Zimmer Nuclear $4,309,000 and $3,763,000, respectively. Power Stanon 28.5 220,705' (Unit No.11 The minimum rental commitments under noncancella-
$187,460 $223.383 ble leases are $3,523,000 for 1980, $3,819,000, vanous $ 52.893 $ 1,507 $3,886,000, $4,234,000, and $4,234,000. respectively, for Transmission the years 1981 through 1984, $19,381,000 for the five year
.Indudes $16,060,000 br Zimmer Unit No. I nuclear fuel period 1985-1989, $17,507,000 for the five year period At December 31,1979, the accumulated provision for deprecianon with re- 1990-1994, $8358,000 for the five year period 1995-1999 spect to the Company's share of jointly-owned facihties amounted to and $7,232,00( for the remaining years.
$43,631,000.
24
COLUMBUS AND SOUTHERN OHlo ELECTRIC COMPANY (5) COMPENSATING DALANCES AND SHORT TERM Year Ended December 31. DORROWING 1979 1978 The Company borrows from banks (under lines of Notes Payable - other cr:dit) and banks acting as agents by issuing short term notes Maximum amount payable. Substantially all bank balances are maintained by ["g',d'"vnd s20.000.000 $15.000.000 the Company to compensate the banks for banking services Average daily baiance end for lines of credit. As of December 31,1979, the Com- borrowed $ 17.986.000 $12.540.984 pany had bank lines of credit of $113,066,000 of which Average interest rate
$104,066,000 was unused. The Company also has a based on daily b n $20,000,000 line of credit agreement with a major leasing g,egr ge nterest rate on company. The agreement expires in September 1980, unless balance at end of both parties agree to renew. There are no compensating period 15.35% 11.73 %
balance requirements but the short-term notes payable under this line are secured by the Company's coal and oilinven-tories. As of December 31,1979, the entire $20,000,000line (6) COMMON SHAREHOLDERS' EQUITY December 31. was in use. in9 tw8 Of the total banklines of credit $20,000,000 is subject to m usands f Douars) average compensating balances of 10"o of the line of credit C *" " plus 10% of the average amount borrowed and $20,000,000 Com on N*"rfs $hout r is subject to fees in lieu of maintaining compensating bal- value _ s 40,865 $ 40.370 ances. Under the remaining lines the Company has agreed to Premium, net of expense, on 2 2 maintain average balances in relationship to the line and ggj'E,harn c 9, usage of the line: however, no specific amounts of balances 0.u5 866 have ever been designated and no restrictions exist concem-ing withdrawalof the funds by the Company under any of the lines. Borrowings from banks as agents are payable on de. The Company issued 197,975 shares of common stock mand, are limited by the Company and no balances are in 1979 and 139,388 shares in 1978 through its dividend maintained to compensate the banks for such credit. reinvestment plan and employee stock purchase plan for net Details of loan balances and interest rates are sum, proceeds of $4,528,000 in 1979 and $3,522,000 in 1978. The Premium, net of expense, on capital shares from such marized below. ~ sales amounted to $4,033,400 and $3,173,500, respec-tively, in 1979 and 1978. Year Ended December 31- At December 31,1979,269,299 shares of authorized 1979 1978 but unissued common stock were reserved for issuance Notes Payable Under under the dividend reinvestment plan and 401,217 shares Lines of credit. were reserved for issuance under the Company's employee Maximum amount stock purchase plan. borrowed at any month-end $70.196.000 $33.635.000 The Indentures under which the Company's Deben-Average dady balance tures and First Mortgage Bonds were issued contain provi-bonowed $34,154.000 $17.092.603 sions which, under certain conditions, restrict the payment of
^"b2Eo"n Eay cash dividends to common shareholders. As of December 31, balances 11.85% 8.87 % 1979, under the most restrictive of these provisions, approx-Average interest rate on imately $58,500,000 of retained eamings is not available for balance at end of dividends on Common Shares.
penod 15.42 % 11.43 % Notes Payable to Banks as Agents. (7) CUMULATIVE PREFERRED SHARES - Maximum amount NO MANDATORY REDEMPTION borrowed at any month d s22.443,000 $22,423.000 The Company at its option may redeem all or any part of borrowed $21,810,000 $21.635,282 the following series of Cumulative Preferred Shares outstand-Average interest rate ing at December 31,1979 at the prices per share shown based on daay below, plus accrued dividends, except the shares of the $2.42 Series are not redeemable prior to November 2,1981 unless Av ag terest rate on balance , t end og all outstanding Cumulative Preferred Shares are redeemed l penud 12.48 % 10.25 % concurrently. 25
COLUMBUS AND SOUTHERN OHlo ELECTRIC COMPANY December 31. The shares of the 10.52% Series are redeemable at any 1979 1978 time, however, prior to August 2,1985 no such redemption (Thousands of Dollars) may be made (other than by operation of the applicable Cumulatwe Preferred Shares sinking fund) through refunding operations at an effective a1ue cost to the Company of less than 10.52% per annum unless
$1(Par , 9_ all shares of all series are redeemed concurrently.
4 25% Senes 103.591 shares (caHable at $110) $10.359 $10,359 Beginning in 1981,10,000 shares of the 10.52% Series 4 65% Sena 89,950 must be redeemed annually through the operation of a sink-ing fund and an additional 10,000 shares may be redeemed f10$ . s 995 8.995 annually at the option of the Company. The shares of the 10% Senes 180.000 shares (callable through 9.50% Series are also subject to a sinking fund, beginning in May 1,1980 at $109 50. 1934, under which 16,000 shares must be redeemed annu-
"gh ally and an additional 16,000 shares may be redeemed an-
*Ykl$'75 19 ,
nually at the Company s option. Annual requirements for and at reduced amounts thereafter) 18,000 18.000 such redemptions will be $1,000,000 for the years 1981 7.52% Senes 160.000........ through 1983 and $2,600,000 for 1984. shares (callable through Differences between redemption prices (including February 1,1982 at
$108 and at reduced commissions and reacquisition expenses) and the stated amounts thereafter) 16.000 16.000 value plus any premium and less any discount or expenses 8.52% Senes 200,000 applicable to the shares as they are retired will be accounted
" '^ "" for in the following manner as prescribed by the FERC. Gains
$b a 984 a on reacquisition will be recorded as an increase in proprietary
$108 and at reduced amounts thereafter) 20.000 20.000 capital and losses will be a reduction of previous reacquisition
*' " gains with any excess being charged to retained eamings.
tstand ng - $2 42 Senes 1,000,000 shares (callable (9) LONG TERM DEDT through November,1981 Long-term debt outstanding (excluding current at $31.07 and at reduced amounts thereafter) 25,000 25,000 maturities) consisted of the following:
$98,354 December 31,
$98,354 1979 1978 (Thousands of Douars)
(8) CUMULATIVE PREFERRED SHARES - MANDATORY REDEMPTION R'$g91 g , _ g g 7%% Senes due 1980 - 50.000 Cumulative Preferred Shares subject to mandatory re-3%% Series due 1981 9.000 9.110 demption provisions consist of the following: 9%% Senes due 1982 50,000 50.000 December 31. 11% Senes due 1983 30.000 30.000 3%% Series due 1983 7,665 7,775 1979 1978 3%% Series due 1984 7,698 7,763 Cumulative Preferred Shares (Thousands of Dollars) 60.000 60,000 9%% Series due 1984
$100 Par Value 7%% Senes due 1985 45.000 45,000 Outstandmg - 3%% Senes due 1986 9,480 9.480 10 52% Senes 200.000 15,789 15,789 4%% Senes due 1987 shares (ca!!able through 4%% Senes due 1988 13,860 13.860 August 1,1980 at $115 4%% Senes due 1992 15,827 15,827 from August 2,1980 through 9.45% Senes due 1996 40.000 40,000 August 1,1985 at $107.25 6%% Series due 1997 14.640 14,640 and at reduced amounts 7% Series due 1998 . 24,750 24.750 thereafter) .... ... $20,000 $20,000 45,000 45.000 9.20% Series due 1998 9 50% Senes 400,000 9% Series due 1999 . 20,000 20.000 shares (callable through 10%% Senes due 1999 60.000 -
May 1,1983 at $120 9.90% Series due 20M 35,000 35.000 and at reduced amounts 8%% Senes due 2006 ... 35,000 35.000 40.000 40,000 thereafter) . Unamortized premium and
$60,000 $60,000 dscount - net 228 189 538,937 536.683 in 1978, the Company sold 400,000 shares of 9.50% Debentures:
7%% Senes due 1999 20.866 20.871 Series $100 par value Cumulative Preferred Shares, and Other Long-Term Debt-received net proceeds of $39,350,000. $40,000,000 was * ' credited to Cumulative Preferred Shares and $650,000 was ["h r a ng Simco.ine. note recorded as capital stock expense. $589.774 $570.079 26
COLUMBU$ AND SOUTHERN oHlo ELICTRIC COMPANY The aggregate amount of scheduled maturities an J sink- (11) SUPPLEMENTARY EXPENSE INFORMATION ing fund requirements for alllong-term debt outstanding at Taxes other than income taxes charged to operations: December 31,1979 is $61,564,000 for 1980, $16,790,000 War Ended December 31 for 1981, $59,088,000 for 1982, $46,207,000 for 1983 and 1979 1978
$81,314.000 for 1984. The portions of the sinking fund (Thousands of Do!!arsi requirements which may be satisfied by bonding property additions are $1,510,000 for 1980 and $1,860,000 for each h,t$cis, on gros, ,,c,, pts $,323 of the years 1981 through 1984. Redemption premiums on payroit 2.764 2.377 sinking fund requirements aggregate $90,197 from De- Other 452 379 cember 31,1979 through 1984, including $72,465 that can s38,193 $32,764 be satisfied by bonding property additions.
Substantially all property owned by the Company is Research and development costs charged principally to subject to the lien of the mortgage under which the First income were approximately $1,633,000 for 1979 and Mortgage Bonds were issued. $2,064,000 for 1978. In 1976, Simco inc. (Simco) borrowed $10,000,000 In addition to the depreciation expense set forth in the fzom a bank. The Company has guaranteed this note which is Consolidated Results of Operations, the accounts under payable by Simco in twenty-four consecutive quarterly in. Other Income and Deductions include depreciation and de-stallments. At December 31,1979, the balance of the note pletion applicable to coal and other properties of $2,081,000 outstanding was $3,750,000. Interest on this note, which is for 1979 and $2,733,000 for 1978. bcsed on the bank's prime rate plus 1%%, is included under (12) QUARTERLY FINANCIAL
SUMMARY
(Unaudited) Interest Charges m the Consolidated Results of Operations. Three Months Ended Mar. 31 June 30 Sept 30 Dec. 31 (Thousands of Dollars except per share data) 1979 Operating Revenues $102.116 $99,802 $113.754 $101,098 Operatng Income 19,895 19,644 29,073 21,459 (10) COAL MINING OPERATIONS Net income 12.371 12.242 21,724 13,640 Simco Inc. owns two thirds interest in a joint venture Eamings on which mines coal from Company-owned coallands. Thejoint Common Shares 8,899 8,770 18.251 10,167 venture has experienced various regulatory and operational Eamings per Common Share * $0.55 $0.54 $1.12 $0.62 problems in the reclamation of such coal lands which has resulted in a reclama' ion reserve dehciency for Simco inc. at ating Revenues 5 84,083 $86.993 $107,676 $ 87,419 December 31, 1979 in the range of $1.500,000 to operanns Income 12.021 13.532 23,890 16,940 $2,500,000. The Company implemented a plan in 1979 Net Income 5,756 7,454 16,988 9,630 designed to prospectively increase the reserve to an adequate lev 21 through the price charged for coal mined in the future. It Ea1"mm' C Shares 3,234 4,900 13,515 6.157 Eamings per is the Company's opinion that such amounts will be ulti- Common Share * $0.20 $0.30 $0.84 $0.38 raately recoverable through the fuel adjustment clause.
- Based on average shares outstanding To the Shareholders and Board of Directors of Columbus and Southern Ohio Electric Company:
We have examined the consolidated balance sheet of COLUMBUS AND SOUTHERN OHIO ELECTRIC COMPANY (an Ohio corporation) and subsidiary companies as of December 31,1979, and 1978, and the related consolidated statements of results of operations, retained earnings and sources of funds for property additions for the years then ended. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the financial statements referred to above present fairly the financial position of Columbus and Southern Ohio Electric Company and subsidiary companies as of December 31,1979 and 1978, and the results of their operations and their sources of funds for property additions for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis. ARTHUR ANDERSEN & CO. Columbus, Ohio, 27 January 31,1980.
Supplementory Information On inflation And Chonging Prices The supplementary information in sumers Price Index for All Urban Con- utility operations. Current cost amounts the statements below is presented in sumers (CPI-U). were determined primarily by applying compliance with the requirements of Current cost amounts reflect the appropriate indexes from the Handy-Statement No. 331ssued by the Financial changes in specific prices of property, Whitman Index of Public Utility Con-Accounting Standards Board (FASB). plant and equipment from the date such struction Costs. assets were acquired to the present, and The Company is subject to regula-The information is intended to disclose differ from constant dollar amounts to tions under which only the actual cost of the effects of both general inflation and the extent that specific prices have risen fuel used for generation is recoverable in changing prices, however, the amounts should be considered approximations of at a different rate than the generalinfla- future revenues. Because of such recov-such effects rather than precise measures tion rate as measured by the CPI-U. The ery limitations, fuel inventories are effec-since a number of subjective judgments current cost of property, plant and tively monetary assets and accordingly equipment represents the approximate neither fuelinventories nor fuel expense and estimating techniques were em-ployed in developing the information. cost of replacing such resources and in- have been restated from their historical Constant dollar amounts represent cludes utility plant in service, construc- costs. tion work in progress, land, land rights. Depreciation expense applicable to historical costs stated in terms of dollars of equal purchasing power, as measured property held for future use as well as constant dollar and current cost amounts property and equipment not related to was determined by applying the same by the average level of the 1979 Con-Staternent Of incorne From Continuing Operations Adjusted For Chonging Prices For the Year Ended December 31,1979 (Thousands of Dollars) Conventional Constant Dollar Current Cost Historical Average Average Cost 1979 Dollars 1979 Dollars S 416,770 $ 416,770 $ 416,770 Operating revenues 137,078 137,078 137,078 Fuel (17,856) (17,856) Purchased and interchanged power (net) (17,856) 107,120 107,120 107.120 Other operation and maintenance 80,285 39,843 71.111 Depreciation 38,193 38,193 38,193 Taxes other than income taxes 22,320 22,320 22.320 Federal income taxes (19,925) (19,892) (20,963) Other income and deductions 51,058 51,058 51,058 Interest charges
$ 356,793 $ 389,099 $ 398,306 income from continuing operations (excluding reduction to $ 18,464
$ 59,977 $ 27,671*
net recoverable cost) Increase in specific prices (current cost) of property, plant, $ 237,658 and equipment held during the year + $(127,541) (68,526) Reduction to net recoverable cost (295,124) Effect of increase in general price level Excess of increase in general price level over increase in (125,992) specific prices after reduction a net recoverable cost 106,350 106,350 Gain from dedine in purchasing power of net amounts owed
$ (21,191) $ (19,642)
Net l
- Including the reduction to net recoverable cost, the income (loss) from continuing operations on a constant dollar b been $(99,870) for 1979.
+ At December 31,1979, current cost of property, plant and equipment, net of accumulated depreciation, was $2.466.105 historical cost or net cost recoverable through depreciation was $1,312,109.
28
straight-line rates used for historical pur- ditional cost of plant, as determined perience a gain since payment in the fu-poses to the indexed plant amounts. De- under the constant dollar and current ture will be made with dollars having less preciation expense shown in the sup- cost methods, in excess of historical cost purchasing power. The gain from the de-plementary income statement relates to is not recoverable and is reflected as a cline in purchasing power of net amounts utihty-related assets whereas adjust- reduction to net recoverable cost. owed is primarily attributable to the sub-ments to other income and deductions To properly reflect the economics of stantial amount of debt which the Com-reflect the additional depreciation and rate regulation, the reduction of net pany has used to finance property, plant depletion associated with property and property, plant and equipment should and equipment. However, because regu-equipment not related to the Company's be offset by the gain from the decline in lation limits the recovery of plant to orig-utihty operations. purchasing power of net amounts owed. inal cost, the Company does not have As prescribed by the FASB, taxes Gains or losses associated with holding the opportunity to realize a holding gain have not been restated from historical monetary items are based on the theory on debt and is limited to recovery only of amounts. that, during periods of inflation, holders the embedded cost of debt capital. Because the Company is subject to of monetary assets suffer a loss of general rate regulation which permits only the purchasing power because these items historical cost of utihty plant to be recov- purchase less at a future date whereas cred in reven ues as depreciation, the ad- those who incur monetary liabilities ex-Five-Year Cornparison Of Selected Supplementory Financial Data Adjusted For Effects Of Chonging Prices (In Thousands of Average 1979 Dollars) l Years Ended December 31. I 1979 1978 1977 1976 1975 Operating revenues $416,770 $407,585 $334,131 $357,548 $349,562 Hi:torical cost information adjusted for g:neral inflation income from continuing operations (excluding reduction to net recoverable cost) $ 27,671 Income per common share (after dividend requirements on preferred stock and excluding reduction to net recoverable cost) $ .85 Net assets at year-end at net recoverable cost $406.918 Current cost information income from continuing operatioris (excluding reduction to net recoverable cost) $ 18,464 Income per common share (after dividend requirements on preferred stock) $ .28 Excess of increase in general price level over increase in specific prices after reduction to net recoverable cost $125,992 Net assets at year-end at net recoverable cost $406.918 G;neral information Gain from decline in purchasing power of net amounts owed $106,350 Cash dividends declared per common share $ 2.13 $ 2.58 $ 2.71 $ 2.70 $ 2.70 Market price per common share at year-end $ 21.13 $ 23.38 $ 32.06 $ 34.44 $ 31.03 Average consumer price index , , 217.5 195.4 181.5 170.5 161.2 29
Five Year Summary of Statistical Information COLUMBUS AND SOUTHERN OHIO E11CTRIC COMPANY 1978 1977 1976 1975 1979 Energy Supplied - KWH (000 omitted) 8,646,860 7,978,044 10,495,400 9,427,146 9,669,799 Generated (net) .. . (255,783) 221,703 505,447 Purchased and interchanged (net) .. (761,855) (60,913) 9.733,545 9,366,233 9,414,016 8,868,563 8,483,491 Net energy supplied . . . 735,195 632,162 699,878 740,110 686,632 Losses and Company use 9,033,607 8,626.123 8,727,384 8,133,368 7,851,329 Energy sold . . Sales - KWH (000 omitted) 2,859,023 2,818,852 3,222.252 3,154,723 3,109,167 Residential . 2,527,377 2,436,973 2,741,795 2,583,709 2,684,415 Commercial .. 1,965,071 1,896,435 2,130,367 2,041,832 2,045,037 Industrial 308,688 274,183 352,441 307,162 312,819 Govemmental authorities . 424,886 586.812 538,697 575,946 473.209 Sales for resale 9,033,667 S 626,123 8,727,384 8,13? 7,851.329 Tota! _ Operating Revenues (000 omitted)
$171,952 $155,342 $136,271 $11c $112,124 Residential 131,773 111,717 100,226 87. 80,378 Commercial 48,753 80,057 69,802 60,018 53, Industrial 12.088 10,016 9,130 8,54 7,749 Governmental authorities .
16,514 15,596 11,912 9,58') 7,741 Sales for resale 2,333 3,786 3.698 2,994 2,123 Other , .
$416.770 $366,171 $320.551 $280,285 4259,078 Total Customers at End of Period 412.016 403,523 398,000 392,472 384,626 Residential .
45,272 44,388 43,717 43,018 42,326 Other . . 457,288 447,911 441,717 435,490 426,952 Total . . Fuel Costs Per net kwh generated (c) 1.31 1.30 1.% 0.98 0.99 121.7 120.6 98.0 95.2 92.3 Per million BTU (c) . Average cost of coal per ton consumed $25.45 $24.59 $20.44 $19.85 $18.96 Generating Capability, including OVEC Net kilowatts at time of peak . 2,732,000 2,735,000 2,480,000 2,111,000 2,141,000 One-hour System Peak Demand 1,852,000 1,907,000 1,932,000 1,776,000 1,749,000 Net kilowatts - summer . . .
- winter . ... .
1,775.000 1,736,000 1,683,000 1,514,000 1,501,000 Average Annual KWH Use 7,896 7,876 7,883 7,362 7,390 Per residential customer . . Average Residential Revenue Per kwh (g) .. ... . . .. 5.34 4.92 4.38 4.17 3.98 30 L}}