ML19031A127
| ML19031A127 | |
| Person / Time | |
|---|---|
| Site: | Salem  |
| Issue date: | 07/28/1976 |
| From: | Atlantic City Electric Co |
| To: | Office of Nuclear Reactor Regulation |
| References | |
| Download: ML19031A127 (28) | |
Text
NOTICE -
THE ATTACHED FILES ARE OFFICIAL RECORDS OF THE DIVISION OF DOCUMENT CONTROL. THEY HAVE BEEN CHARGED TO YOU FOR A LIMITED TIME PERIOD AND MUST BE RETURNED TO THE RECORDS FACILITY Atlantic BRANCH 016. PLEASE DO NOT SEND DOCUMENTS CHARGED OUT THROUGH THE MAIL. REMOVAL OF ANY PAGE(S) FROM DOCUMENT FOR REPRODUCTION MUST Electric BE REFERRED TO FILE PERSONNEL.
SERVING SOUTHERN NEW J ERSEY ~ u\atory DEADLINE RETURN DATE 1-"**x.
311 RECORDS FACILITY BRANCH ANNUAL REPORT 1.975
CONTENTS Le tt er to S h are h olders 1 The Company 3 Earnings & Dividends 4 Rate Increases 5 Construction Program 6 Dividend Reinvestment Program 6 Financing 7 Fue l 8 Operations 9 Environment 10 Employees 11 Financial Statements 12-19 1975-1965 Statistical Profile and Summary of Operations 20-21 Manageme n l's D iscussion and Ana lys is of The Summary of Operntions 22 Price Range and Dividends Paid on Stock 23 Transfer Agents 24 Directors and Officers 24 ATLANTIC CITY ELECTRIC COMP ANY COVER Nuclear Energy is Now!
Cover photo shows fuel rods being placed in a storage chamber at a nuclear station. Uniforms are worn to protect the fuel rods from contam-inntion. During 1975, nuclear energy accounted for about 17 % of the Company 's kilowatt-hours and is expected to account for 28 "io in 1977.
Accelerated use of the domestic fuels uranium and coal in generating stations will help reduce the nation's dependence on foreign oil and con-tinue to help stabilize the pr ice of one of o u r great-est neccssi ties - electric energy!
ADVANCE NOTICE The 19 76 Annual Meeting of Sharehold e rs will be held Tuesday , April 1:!,
1976, at the Company's Data Processing Center.
Black Horse Pike and Fire Road. near Pleasantville, New jersey. A Notice of Meeting will be mailed in March to those share-holders entitled to vote .
To Our Shareholders:
1975 was not a banner year for Atlantic Electric in that earnings per share declined from $2.54 in 1974 to $2.41 in 1975, the first such decline since 1947. Nevertheless, several favorable developments have occurred which should pave the way for renewed progress and improved earnings in 1976.
The nationwide recession had its impact on business in Southern New Jersey and as a result industrial kilowatt-hour sales were down 8.8% in 1975. Howeve r, this decline was offset by an increase of 3% in residential kilowatt-hour sales and 3.6% in commercial kilowatt-hour sales. While total kilowatt-hour sales were essentially flat, future KWH sales will be enhanced by the addition of 5,350 new customers in 1975 and an increase of 2 ,880 in the number of electrically heated homes. Growth in industrial sales should return as the economy rebounds.
JOHN D. FEEH AN Stringent controls over expenditures continued in force through-P resid e nt out the year as further emphasis was placed upon productivity, economy and efficiency. These efforts were fruitful in the areas where management could exert control. However, in areas less subject to management control (taxes , depreciation, financing costs, etc.) results w ere not as rewarding an d substantial increases in such items had a major adverse effect on earnings for 1975.
Recognition of th e need for more timely rate relief by the New Jersey Board of Public Utility Commissioners must be highlighted as a significant favorab le development. A 4.7 % increase in revenues was approved by Order dated January 29, 1976, less than six months after the Company filed its request ... the 6 % increase which became effective July 3, 1975 was the result of the request filed ten months earlier. The new rates are designed to increase operating revenues by $9.3 million annually and are intended to produce a r eturn on common equity of 13 % and a rate of return on rate base of 8.65 % .
Reduction in the fuel clause adjustment reflected in our customers' bills in rec ent months also is a source of satisfaction. Most notably, the January 1976 fuel clause adjustment was 1.3616¢ per KWH compared with 1.8045 ¢ per KWH in January 1975 . The impact of this reduction on a customer's bill is significant and has resulted in lower electric bills for many customers even after applying the 6%
general rate increase which became effective last July. Moderation in the fuel adjustment clause should continue since it is anticipated that 19 % of our 1976 KWH will be produced from nuclear fuel and 44 % from coal.
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The financial and fuel supply dominance by electricity. Certainly greater use of the nation's the oil producing nations is still of national most abundant domestic fuels, coal and uranium, concern; the threat of another oil embargo is together with reduced oil imports, will put further ever present; yet, an effective national energy pressure on oil prices and reduce the power program which will help reduce America's of OPEC on the inlernational monetary scene.
dependence on foreign oil had not been adopted There is a growing public awareness that at year-end 1975. Hopefully our nation's leaders the growth and prosperity of the American will resolve this most critical matter in 1976.
economy depend upon a strong electric utility A glimmer of progress in the program to develop industry. In this, our Country 's Bicentennial domestic energy resources became evident in Year, you may be assured that we at Atlantic December when, in preparation for natural gas Electric will do our share to keep the lights and oil exploration off the Atlantic Coast, a of freedom proudly burning so that our way of drilling platform was placed in position about life may continue to prosper for the common 73 miles east of Atlantic City. Test drillings are good of all mankind.
expected to be completed by May 1976.
The year 1976 finds the Company in a For the Board of Directors, relatively strong financial position with a staff ...
of competent and loyal personnel who are dedicated to seeking out the opportunities which
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W.W. White the challenges of the future will hold. Although Chairman of the Board conservation and the slowdown in the economy
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during the past two years has enabled us to defer near-term capital expenditures, we continue to anticipate a resumption of growth in demand for electricity as Southern New Jersey develops in an orderly but sustained fashion. President Construction expenditures, as warranted over the next few years, will be made to assure the availability of an adequate energy supply for Southern New Jersey's future. Hopefully, the rate of inflation will be contained thereby enabling greater stability in the price of 1975 REVENUE DOLLAR SOURCES OF REVENUE DISPO SITIO N OF REVENUE RESIDENTIAL 46¢ 36¢ FUEL 16¢ CO ST O F INVE STED FUNDS COMMERCIAL 32¢ 16¢ TAX ES INDUSTRIAL 11 ¢ MATERIAL S & SUPPL IES OTHER REVENUE - 9¢ CO ST OF REPLACIN G EQUIP MENT!
TOTAL $1 .00 - 8¢ LAB OR
- 4¢ RE IN VE STED FU NDS
$1.00 TOTAL 2
HISTORY OF THE COMPANY Atlantic Electric is an investor-owned electric utility serving the southern one-third of the State of New Jersey. The Company was incorporated in 1886 and reorganized under the laws of New Jersey on April 28, 1924 through the merger and consolidation of several utility companies. From a small company, formed just four years after Thomas Edison built the first central generating station in the United States, the Company has grown to a modern, integrated power system serving over 336,000 customers in eight counties.
The service area of Atlantic Electric encompasses approximately 2,700 square miles and has a year-round population of 915 ,000. In addition to numerous summer resorts, the region has excellent agri cultural capabilities and boasts a variety of industries as well. Because of its economic diversity and its proximity to large cities, such as New York and Philadelphia, the southern New Jersey area possesses a unique potential for growth.
At year-end 1975 there were 39,400 holders of the Company's Common Stock and 2,020 holders of Preferred Stock. Approximately one-third of Atlantic Electric's holders of Common Stock are also customers of the Company and own 34% of the 9,470,073 shares outstanding.
A Company line crew working on the Lewis-Motts Farm 69,000 volt line spanning the Mullica River.
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Earnings and Dividends Earnings for Common Stock amounted to
$2.41 per share outstanding in 1975 compared to $2.54 per average share outstanding in 1974.
Earnings for Common Stock in 1975 were affected by (1) a change in depreciation rates and increased depreciation due to the completion of major plant additions, mainly Peach Bottom Units #2 and # 3 and B. L. England Unit #3; (2) a decrease in Allowance for Funds Used During Construction attributed to our reduced construc-tion program; (3) increased Gross Receipts and Serving Franchise Taxes and (4) increased interest One-third of charges and Preferred Stock dividends. Also, the sale of 600,000 shares of Common Stock in the State of October, 1974 increased the total number of New Jersey shares outstanding to 9,470,073 shares of Common Stock compared to 8,973,400 average shares outstanding in 1974.
However, we feel the major factor affecting 1975 earnings was the fact that rate relief granted the Company during the year not only was inadequate but came too late to offset those factors which caused the decrease in earnings.
Nonetheless, the Company is confident that earnings will improve in 1976 as a result of the expeditious rate relief which was authorized 4
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January 29, 1976 (see "Rate Increases" section). increase as a result of a request filed on August Cash dividends of $1.51 per share of Common 30, 1974. Unfortunately, the increase granted by the New Jersey Public Utility Commission (PUC)
Stock were paid in 1975 compared to $1.50 was only one-third ($10.7 million) of the $30.8 per share in 1974. On August 27, 1975 the Board million increase requested by the Company.
of Directors increased the quarterly dividend On January 29, 1976 the PUC granted the rate from 371/2 cents per share to 381/2 cents per Company a 4.7% general rate increase as a result share. The quarterly rate of 381/z cents per of a request for a $28 million increase filed share was maintained for the January 15, 1976 August 15, 1975. The increase is expected to dividend payment and is equivalent to $1.54 raise operating revenues by $9.3 million per share on an annual basis. annually. The Public Utility Commissioners did The Company has paid dividends on Common not concur with our strong belief (as well as the Stock for fifty-eight consecutive years and the recommendation of their Hearing Examiners in both cases) that the Company must be given the amount of the annual dividend per share was opportunity to earn a higher return on equity increased in each year since 1952, an accom-than in the past. However, one positive aspect plishment of which we are extremely proud. of the increase was its timeliness-it was granted less than six months after we filed the request.
Rate Increases The Company will determine the probable Effective July 3, 1975 , Atlantic Electric was effects of these increases on its operations, and permitted to implement a 6 % general rate will determine what revisions may be required in its construction program and other planned programs. Timely and adequate rate relief is essential to the continued financial health of the Company, especially in an inflationary period such as we have been experiencing.
To supplement electric revenue dollars, mil-lions of dollars must be obtained from investors COST OF FUELS who, primarily because of inflation, will require (Cents per Gallon or Equ iva lent) 30
- Coal II Oil Nu c lear 20 10--~
0 1970 1971 1972 1973 1974 1975 5
a high er r e turn on th eir in vestments. Atlanti c Electric must b e permitted to earn an acc eptabl e Dividend Reinvestment Plan return if it is to attra ct th e inv estment capital n ecessary to continue to provide adequate, safe (Participants) and reliable elec tri c servi ce to its custom ers as well as to provide exis tin g sh areholders with a fair re turn on th eir investment in th e Compa ny.
Construction Program Expenditures by th e Company for additions to generating capacity , transmission and distribution fa cilities and other capital impro ve-ments amounted to $39 .5 million in 1975 compared to $60.7 million in 1974. In addition ,
allowance for fun ds us ed during construction (AFDC] amounted to $7.2 million in 1975 a nd
$10.5 million in 1974. It is estimated that construction exp enditures for 1976 (excluding 2ooo~~i...-~i...-......r.~......r.~......r.~......~......~-'--
AFDC] will total $54 million. Apri1 Ju ly Oc t Jan A pri l J uly Oct Jan 1974 1974 1974 1975 1975 1975 1975 1976 During 1975 th e Company received elec tri c energy from its 157,000 kilowatt share of two nuclear generating units located at Peach Bottom, Pennsylvania. By the summer of 1984, In Nove mber, th e Company announced th e the Company expects to be re ceiving energy ava ilabili ty of a new Dividend Reinvestm ent and from an additional 378,000 kilowatts of nucle ar Stock Purchase Plan to replace th e Divid end Reinves tmen t Program which had been in effec t since April 19 74. The new plan enables hold ers of record of Common Stock to h ave cash dividends paid on their shares of Common Stock auto matica ll y reinvested in additional n ew shares of Common Stock of th e Company.
Alternative ly, shareholders ma y con tinu e lo rece ive cash divid ends on shares regis tered in th eir names and inv est in Company Common Stock by m aking option al ca sh payments of up to $3 ,000 per qu arter ; or th ey may invest both th eir divid ends and optional cas h paym ents .
Because shares are purch ased direc tly from th e Company and not on the open marke t, th ere are n o brokerage fees or co mmiss ions. All se rvi ce charges an d cos ts of admin istration are paid by the Company. Reinvestment of dividends under th e new plan bega n wi th th e January 15 , 19 76 dividend and we are plea sed with shareholder r es ponse . For th e January 15, 1976 dividend payment, 4 ,6 20, or abo u t 12 % of the share -
ho lders, participated in the Dividend Reinv es t-ment and Sto ck Purchas e Plan , resulting in th e issua n ce of 18,984 shares of Common Sto ck .
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power. Of that amount, 164,000 kilowatts will various capital securities during 1975. $10 come as a result of the Company's 7.4% million of 9.90 % Notes due 1977 were issued in ownership of two nuclear units, having a January 1975. [This was part of a negotiated combined capacity of 2,205,000 kilowatts, sale totaling $15 million of 9.90 % Notes due currently und er construction at th e Salem 1977, the first $5 million of which were issued Nuclear Generating Station , Lower Alloways in December 1974.) Also in January 1975, the Creek, New Jersey. These units are being Company issued $6.5 million principal amount of constructed by Public Service Electric and Gas First Mortgage Bonds, 75/s % Pollution Control Company; the first unit is scheduled for service Series due 2005. $15 ,000 ,000 of First Mortgage in 1976 and the second in 1979. Bonds, 8 % % Series, were redeemed at maturity The Company also has an ownership interest on April 1, 1975.
of 213,400 kilowatts in two nuclear units which The net proceeds from the sale in May 1975 will have a combined capacity of 2,134,000 of $35 million of First Mortgage Bonds, 9% %
kilowatts, to be constructed by Public Service at Series due May 1, 1983, were also applied toward the Hope Creek Generating Station located the cost of the Company's continuing construc-adjacent to the Salem Nuclear Station. The first tion program and toward the repayment of unit is schedul ed for completion during 1982 $31 .7 million of outstanding Notes Payable to and the second in 1984. banks. Short-term borrowings from banks and commercial paper borrowings totaled $13.7 Financing million at year-end.
To help finance the Company's continuing Cash generated within the Company consisting construction program, it was necessary to issue of r etained earnings, depreciation accruals and Total Interest Charges and Dividends
$45 (M illi ons of Dolla rs) 40 35 30 25 20 15 10
- COMMON DIVIDENDS 5 PREFERRED DIVIDENDS
- INTEREST 0 CHARGES 1970 1971 1972 1973 1974 1975 7
similar items provided approximately 66% of Fuel construction requirements in 1975 compared 1975 marked the first full year in which with 19% in 1974. It is the Company's goal to Atlantic Electric's customers were the recipients continue that trend which is so important to its of electric power generated by nuclear units.
continued financial health. Approximately 17% of the kilowatt-hours We estimate that 51 % of the amount needed to produced by the Company in 1975 was from the meet 1976 construction requirements will be Company's share of the Peach Bottom nuclear provided from internal sources and the remaining units. This nuclear energy replaced what would 49% from external sources . Also, $10 million hav e been generated by oil-fired units at a price of 81/z % Debentures will mature on September of 31.8 cents per gallon of oil versus only 3.7 1, 1976. The sale of common stock through cents for the equivalent nuclear fuel. During the Dividend Reinvestment and Stock Purchase 1976, nuclear energy is expected to account for Plan will provide a portion of the external 19% of the Company's kilowatt-hours.
funds. We expect to temporarily finance the Coal continued as the primary fuel for Units balance through short-term bank loans and the #1 and #2 at B. L. England Station. The consent issuance of commercial paper. Ultimately of order from the New Jersey Department of course, it will be necessary to issue long-term Environmental Protection permitting this coal debt or equity securities to repay short-term burning was renewed and now expires in July borrowings. We do presently expect to sell 1976. In the interim, the N.J.D.E.P. is conducting some type of equity security before the end of a regional air quality study to determine the 1976-the timing, amount and form will depend potential for relaxing its emissions limitations.
upon market conditions. Approximately 47% of the kilowatt-hours Net Investment in Utility Plant (Year End) and Operating Revenues (Excluding Fu el Adju s tm ent Revenu e]
(Millions of Dollars) 300 200 100
- INVESTMENT REVENUES 1970 1971 1972 1973 1974 1975 8
produced by the Company in 1975 was from improve earnings and provide service to our coal-fired un its. cus tomers at the lowes t practical cost.
Oil produced 36 % of the Company's total A number of me thods were utilized during kilowatt-hours in 1975, compared with 70% 1975 to hold the line on labor and other costs.
before th e oil embargo . Utilization of coal These include a reduction of the work force and nuclear power has redu ce d our dependence made possible by limited replacement of retirees on foreig n oil and has helped to reduce the and other persons who terminated employment, overall cost of fuel to th e Compa ny. Fuel costs reduction of ov ertim e and limited use of in 1975 were 2 % below those in 1974. contract personnel.
Also, the Company's comprehensive cost Operations control program included elimination, reduction Continued efficient operation of an electric or deferment of a numb er of programs and/ or utility company is accomp lish ed through new expenditures originally planned for 1975. Many technology and improved procedures imple- cost-cutting measures w ere required as a result mented by a highly skilled, imaginative an d hard of inadequate rate relief and many were made working management and employee staff. possible as a result of reductions in the 1975-1976 Atlantic Electric is indeed fort unate to have construction programs attributable to downward such a staff. revisions in anti cipated future load growth.
Each department w ithin the Company Management is ever mindful of its responsibility contin ued to make all-out efforts in 1975 to to provide adequate, reliable electric service r educe the Company's financial requirements, to its cus tomers.
Th e use of mo re than 917, 000 tons of coa l to ge nera te elec tricity in 1975 has r educ ed our d ep ende nce on foreig n o il and has h elped to red uce th e overa ll cos t of fue l to the Comp an y.
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Environment Atlantic Electric has been a continuous supporter of long-range objectives aimed at improving and protecting the quality of the environment. The Company has invested, and will continue to invest, in numerous environ-mental protection facilities and studies connected with its generating stations. These range from fish sampling and air monitoring studies to the construction and installation of cooling towers, containment dikes and waste water treatment facilities.
The Company is subject to regulation with respect to air and water quality and other environmental matters by various Federal, state and local authorities. Stringent New Jersey Department of Environmental Protection standards often exceed the requ irements set forth by the Environmental Protection Agency at th e national level.
It is the Company's belief that there must be a realistic balance between environmental controls and future energy requirements.
Everyone is aware of the danger and the potential costs involved in allowing the environment to Stack samp ling is part of the Company 's continuing program to reduce fl yas h emissions from its coal-fired facilities .
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deteriorate. However, protection of the additional $5.5 million. A general increase, environment is also costly. Overly restrictive effective December 1975, will add $2.5 million environmental regulations only serve to increase to 1976 payroll costs. Employees numbered the cost of electricity (a cost which has already 1 ,741 at year-end 1975, a reduction of 70 from risen dramatically due to increased fuel costs, the 1,811 employees on the payroll at year-end inflation and various other factors) while 1974.
providing only marginal benefit to environmental The Company is not insensitive or unrespon-quality. sive to the effect of rate increases on its customers. Employees in their day-to-day contact with customers, friends and family, Employees must be prepared to fairly present facts about Employees were put to the test in 1975. While increased electric rates, nuclear station siting implementing a most stringent cost-cutting and other matters . A program designed to further program, employees were asked to respond to educate employees about increasing fuel and a great number of customer inquiries both on and material costs, taxes paid, and the need to pay a off the job, and asked to combat the same fair return to our shareholders, was presented to inflation that they are faced with in their personal all employees again in 1975 . Designed and lives. They performed magnificently. presented by Officers of the Company, the Salaries and wages paid to employees program provided employees with data to enable amounted to $28.8 million in 1975. The th em to better respond to inquiries from the Company's cost of employee benefits totaled an public.
Mee tings are h eld periodi cally to keep employee s informed of th e lates t developments in Comp any opera ti ons and to pro vid e them with da ta so they can better com-muni cate with the public. Pictured is Mr. R. M. Wilson, Senior Vi ce Pres ide nt, ad dressing empl oyees.
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Income and Retained Earnings Year Ended De cemb er 31 1975 1974 OPERATING REVENUES-ELECTRIC (Note 9) . . .............. . $199,079,150 $176,611 ,265 OPERATING EXPENSES:
Fuel ..... .... .. . . . . .. . ....... . . ... ... . ... . .. . .... . . ..... . . 71,644 ,673 73,167,066 Other Operation .. . ... . . . ....... . .............. . . .. . ... . ... . 28,886 ,894 29 ,086,792 Maintenance ............... . .... ....... .. . . . . ... ... ... .... . 8,866,990 9,865,228 Depreciation (Note 1) .................... .. . ..... .... ... . .. . 16,846 ,03 8 12,946,590 Taxes Other Than Federal Income Taxes . .... ................. . 23,394 ,142 17,83 2,852 Federal Income Taxes (Notes 1 and 6) .. . . ........... . ......... . 1,035,029 (1,601,412)
Federal IncCJme Taxes Deferred:
Lib eralized Depreciation (Note 1) .. ........ .. .. . ........... . 2,342,355 690,000 Accelerated Amortization ................................ . (110,507) (115,746)
Investment Tax Credit Adjustments- Net [Note 1) .............. . 5,422,214 (602,731)
Total Operating Expenses . . . .. . .. . .. . .... .. ....... . .. . 158,3 27,828 141,268,639 OPERA TING INCOME . . ........... .. ............. .... ...... . 40 ,751 ,322 35,342,626 OTHER INCOME:
Allowance for Funds Used During Construction (Note 1) ... ... .. . 7,229 ,745 10,567,696 Miscellaneous Non-Operating Income Less Income Deductions ... . 516,755 187,428 Net Other Income .. . ....... .. . .. .................... . 7,746 ,500 10,755,124 INCOME BEFORE INTEREST CHARGES . ... . ..... ...... . . ... . . 48,497 ,822 46 ,097,750 INTEREST CHARGES :
Interest on Long-Term Debt ........ . . .. . . .. . . . . ............ . 18,403 ,404 15,288,146 Amortization of Debt Expense and Premium- Net . .. ..... . . .. . 25 ,335 (8,237)
Interes t on Short-Term Debt .... . .. .. ....... . ..... . ........ . . 1,694,322 3,746 ,663 Other Interest Expense . . .. .. ... ... . ........ . . ... . .. .... . ... . 95,026 61,159 Total Interest Charges .... . ......... . . ........ . .. .. . . . 20,218,087 19,087,731 NET INCOME ......... . . .. .. .... . ........ .... . ............. . 28 ,279 ,735 27,010,019 RETAINED EARNINGS AT BEGINNING OF YEAR . ..... ....... . 65 ,764,596 56,756,492 94,044,331 83,766,511 DIVID ENDS DECLARED:
Dividends on Cumulative Preferred Stock .... . . . . ...... . .. . . .. . 5,483,936 4,471,602 Dividends on Common Stock (per share 1975- $1.52 , 1974- $1.50) 14,3 94 ,717 13,530,313 Total Dividen ds Declared . . . . . . . . . .... .. ........ ... . .. . 19,878,653 18,001,915 RETAINED EARNINGS AT END OF YEAR ... .. . . . . ... ........ . $ 74 ,165 ,678 $ 65 ,764,596 AVERAGE NUMBER OF COMMON SHARES OUTSTANDING .. .. 9,470,073 8,973,400 EARNINGS PER SHARE OF COMMON STOCK (Note 4):
Base d on average sh ares outstanding .. .. . .. . .. ... . . . .. . .. .... . $2 .41 $2.54 Based on average shares- fully diluted ... .. ..... ...... ....... . $2 .38 $2.51 The accompanying Notes to Financial Statements are an integral part of this statement.
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Statement of Changes in Financial Position Year En ded December 31 SOURCE OF FUNDS 1975 1974 Funds from Operations:
Net Income ............................................... . $ 28,279 ,735 $ 27,010,019 Principal Non-Cash Charges (Credits) to Income:
- Depreciation ............. . .............................. . 16,846,038 12,946,590 Allowance for Funds Used During Construction .............. . (7, 229, 745) (10,567,696)
Federal Income Taxes-Deferred [Net) ..................... . 2,231,848 574,254 Investment Tax Credit Adjustments (Net) .. .. ..... .. ... ..... . 5,422,214 (602,731 )
Other [Net) . .. ... ...... .... . ..... . .. ........... .. .. .. .. . . 471,723 (59,950)
Total Funds from Operations ... . . ... . . ... . ....... .. . .. . 46,021 ,813 29,300,486 Funds from Outside Sources:
Long-Term Debt .. .. . . . . ............................. . ..... . 51,500,000 5,000,000 Sale of Common Stock ... . .. . .. ... . .... . ... .. ........... .. . . 7,595,804 Sale of Preferred Stock ..................................... . 29,826,200 Increase in Short-Term Debt ........... . .. ... . .. . .... . .. .... . 24,800,000 Total Funds from Outside Sources ...... . .............. . 51 ,500,000 67,222,004 Debentures Maturing in 1976 . ... .... ..... . .. ........ .......... . 10,000,000 Other Sources (Net) . . .. . . .. ........ ... . . . . .................. . (793,301) 1,206,182 Total Source of Fun ds ................. ...... ..... . . . . $106,728 ,512 $ 97,728,6 72 APPLICATION OF FUNDS Gross Additions to Utility Plant . . ................ . . . .... . ..... . $ 46,744,820 $ 71,219,796 Allowance for Funds Used During Construction ............. . . . .. . (7,229 ,745) (10,567,696)
Net .. . ..... . ...... .. .... . ............ ........ ...... . 39,515,075 60,652,1 00 Dividends on Pref erred Stock ..... . ........ ..... ......... . .... . 5,483,936 4,471,602 Dividends on Common Stock ....... . ... ...... ..... . ...... .... . 14,394,717 13,530,313 Retirement and Maturity of Long-Term Debt. . ... . ..... . . . ... .. . . 15,125,000 255,000 Debentures Maturing in 1976 .. ..... .......... ................. . 10,000,000 Decrease in Short-Term Debt ... . . .. .. . ....... . .............. . . 23 ,650,000 Investments in Subsidiary Companies .. ... . ........... . ... ..... . 894,446 478,761 Increase (Decrease) in Working Capital (excluding short-term debt)
(see below) ..... ..... ....... . ................ . ............ . (2 ,334 ,662) 18,340,896 Total Application of Funds ..... . ..... ......... .. ...... . $106,728, 512 $ 97,728,672 NET INCREASE (DECREASE) IN COMPONENTS OF WORKING CAPITAL [EXCLUDING SHORT-TERM DEBT)
Current Asse ts:
Cash and Cash I terns . ..... ......... . . . .......... . .......... . $ (2 ,812 ,009) $ 4,780,609 Accounts Receivable .... . . . . ................ . .. . . ... ... . ... . 15 7,868 3,815,287 Fuel .... .. ... . .. . . . ......... . .. . . . ...... . .............. . . . 2,391 ,684 6,294,209 Materials and Supplies ............... . ................ . . . .. . (70,487) 1,311,103 Prepayments . .. ................................ . .... . .. . . . . 207,626 313,270 Other Current Assets ...... . .. . . . .......... . .. . .. . ......... . (2,106,348) 2,106,3 48 Total . . . .. . .. ..... .. . .............................. . (2 ,231 ,666) 18,620,826 Current Liabilities:
Accounts Payable . .... . ................................... . (1, 63 3,447) (2,727,265)
Taxes Accrued . .. . . ... ...... ... . ....... . ....... .. ....... . . . 296 ,281 438,683 Interest Accrued .... .. ... ...... .... ...... .. .. . ..... . . .. ... . (32 ,377) 373,440 O ther . . ..... . . . . . . . . . . ..... . ..... . .. .. ... . ... .. ..... . .. . . . 1,472,539 2,195, 072 Total ...... . ............. . . . . ...... . .. . .. . ... . ..... . 102,996 279,930 Net Increase [Decrease) in Working Capital. ............. . . . .... . $ (2,334,662) $ 18,340,896 The accompanying Notes to Financial Statements are an integral part of this statement.
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Balance Sheet - December 31, 1975-1974 Assets 1975 December 31 1974 ELECTRIC UTILITY PLANT (Note 1):
In Service:
Production . . .. ............ . ... .. . .. .. .... . .. .......... . . $252,255,291 $254, 760,072 Transmission . . . . . . .... . .... ... ... .... . ... . ... . ..... ... . . 95,672,272 88,003,720 Distribution .... . . . .. . ... ... . . . .. ..... . ....... . . ... . ... . . 185 ,854,216 177,150,588 General .......... . ..... . .... . .... . .. . .. . . .. ..... ..... .. . 15,806,598 14,900 ,972 Construction Work in Progress . .. .. . . ......... . .. . .......... . 119,478,320 97,820,024 Nuclear Fuel (Note 8) .... . ..... . . . .... . ... .. .. ... . ... .. .... . 6,549,957 4,614,794 Total Electric Utility Plant . .. .... ...... . .. . .... . .......... . 675,616,654 637,250,170 Less Accumulated Provision for Depreciation ..... . .. . .. .. . 122,988,944 113,745,335 Electric Utility Plant-Net . . ............ .. .. . . . . . .. . . . . 552 ,627,710 523,504,835 INVESTMENTS:
Investment in Subsidiary Companies, at Equity (Note 2) 4,621,320 3,780,045 Land Purchase Contracts . .... . .... .............. . .. ........ . 635,231 551,689 Other Investments . .. . . . . . . ... .. ........ . . .. .. .. ...... . .. . . . 494,078 412,823 Total Investments 5,750,629 4,744,557 CURRENT ASSETS:
Cash (Note 5) .... . ...... . . . .. . . ... . .. ... . .. . . .. . . .... . . . .. . 4,786,613 7,996,540 Temporary Cash Investments . ... . . . . ... . . . .. . .. . .. . . . . ..... . 1,800,000 1,400,000 Special Deposits and Working Funds . . ....... . . .. .... . ....... . 182,718 184,800 Accounts Receivable:
Utility Services .. . . . ....... . ................. . ..... . .... . 12,870,557 13,032,711 Subsidiary Companies . .. .... . .... . . .. . ... . . . .. .......... . 39,077 34,188 Miscellaneous ..... . ... .. .... . .. . ... .. ... .... ... ... . ... . . . 2,372,419 1,907,286 Allowance for Doubtful Accounts ... . .. . . .. . . . . .... . . .. . .. . (430,000) (280,000)
Fuel (at average cost) .... ...... . .. ..... . .. . . . ... . ... ... .. . . . 16,964,948 14,573,264 Materials and Supplies (at average cost) ...... .. ....... ... ... . . 7,198,353 7,268,840 Prepayments . .. . . . . . ... ... ... ... ....... . ... . . . . . ... . . .... . . 1,572,498 1,364,872 Other Current Assets . .. ..... .. . . . . . ..... .. ... . .. . . . . .. . . . . . 2,106,348 Total Current Assets . .. .. . . ... .. .. . ... ... . . . . . . .. . .. . . 47,357,183 49,588,849 DEFERRED DEBITS:
Unamortized Debt Expense (Note 1) . ... . ....... . . . .. .. .. . .... . 2,289,175 1,646,771 Other Work in Progress . . . . ... . .... .. .. .. . . .. . ............ . . 724,506 831,556 Other Deferred Debits ... . . .. ... ... ..... . ........... .. ..... . . 622,051 312,115 Total Deferred Debits . . . .. .. . . . . .... . .. ........ ... ... . 3,635,732 2,790,442 Total ....... . .. . .... .. ... . . . ... . ...... . . .. ..... . $609,371,254 $580,628,683 Th e acco mp anying No tes to Fin ancial Sta tements are an integ ral part of this stat ement.
14
Liabilities 1975 December 31 1974 LONG-TERM DEBT (see page 19) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $288 ,864,954 $262,632,846 SHAREHOLDERS' EQUITY (Note 3):
Cumulative Preferred Stock .......... . . . . .... ..... . ......... . 80,091,045 80 ,091, 045 Common Stock, Par Value $3:
Authorized Shares, 14,000,000 in 1975 and 11,000,000 in 1974 Outstanding Shares 9,470,073 ........ . .................... . 28 ,410,219 28,410,219 Premium on Common Stock . . . . ........................... . 81 ,9 55,984 81 ,955,984 Total Common Stock ..... ......... ....... ...... ..... . 110,366,203 110,366,203 Capital Stock Expense (not being amortized) . . ........ . ....... . (1,511,187) (1,470,954)
Retained Earnings ........ .. ... . ........................... . 74,165,678 65,764,596 Total Shareholders ' Equity ................ .. ...... . ... . 263 ,111,739 254, 750,890 CURRENT LIABILITIES:
Current Portion of Long-Term Debt .. ..... ...... .. . . ......... . 10,000,000 Notes Payable to Banks (Note 5) ....... . ... ... ..... ... .. .... . . 7,150,000 37,300,000 Commercial Paper (Note 5) .. ..... . ....... . ..... ....... ..... . 6,500,000 Accounts Payable . . . .... .... ... ...... . . .... .. ... .......... . 1,517,747 3,167,700 Accounts Payable-Subsidiary Companies .... .. .. .. .... ...... . 196,133 179,627 Customer Deposits .......... . .. .. ...... ......... .......... . 1,648,070 1,234,593 Taxes Accrued .. .... ... ...... . . .. ........ ..... ... . ..... .. . . 2,061,578 1,765,297 Interest Accrued .. . ........ . .. . ...... . .................... . 3,819,993 3,852,370 Dividends Declared ...... . .. . .. . . .. . ......... ... ........... . 5,016,960 4,922,259 Other Current Liabilities . . ....... ... ... ... ........ .. ....... . 5,952,493 4,988,132 Total Current Liabilities .. . ................. ... . ... .. . . 43 ,862,974 57,409,978 DEFERRED CREDITS:
Customer Advances for Construction ...... ...... ....... ... ... . 541,977 576,257 Accumulated Deferred Investment Tax Credits (Note 1) ...... . .. . 7,638,388 2,216,174 Accumulated Deferred Income Taxes:
Liberalized Depreciation (Note 1) .......................... . 3,032,355 690,000 Accelerated Amortization .. .. .... ... ........ . .... . .... . .. . 979 ,413 1,089,920 Other Def erred Credits . .... ... . ........ . . .................. . 175,602 491,983 Reserve for Storm Damage . .... ..... ..... . .. .. .. .. . ......... . 558,852 315,635 Other Reserves .... .. .......... .... ..... .. ...... ...... ..... . 605,000 455,000 Total Deferred Credits ...... . .......... ....... .... . .. . 13 ,531,587 5,834,969 COMMITMENTS AND CONTINGENT LIABILITIES (Note 8)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $609 ,371,254 $580,62 8,683 The accompanying Notes to Financial Statements are an integral part of this statement.
15
Notes to Financial Statements NOTE 1: SIGNIFICANT ACCOUNTING POLICIES: PENSION PLAN-The Company and Deepwater, referred to in Note 2, have in effect a noncontributory insured retirement annuity plan REGULATION-The accounting and rates of the Company are sub- covering all regular employees. The cost of the plan determined ject in certain respects to the requirements of the Board of under th e aggregate cost actuarial method for the years 1975 and Public Utility Commissioners of the State of New Jersey (PUC) 1974 respectively, *amounted to $2,164,000 and $2,069,000 for the and in certain respects to the Federal Power Commission. Company (including $510,000 and $518,000 charged to construc-tion) and $362,000 and $392,000 for Deepwater. Based on an ELECTRIC UTILITY PLANT-Property is stated at original cost actuarial study as of December 31 , 1974, the vested benefits (cost to the person first devoting the plant to public service).
computed under the plan were in excess of pension fund assets Generally the plant is subject to first mortgage liens. The cost by approximately $215,000. The effects, if any, of conforming the of property additions, including replacements of units of property plan to the requirements of the Employee Retirement Income and betterments, is capitalized. Included in such additions is an Security Act of 1974 are not determinable at this tim e.
Allowance for Funds Used During Construction which is defined in the applicable regulatory systems of accounts as the net cost, NOTE 2: INVESTMENT IN SUBSIDIARY COMPANIES:
during the period of construction, of borrowed funds used for construction purposes and a reasonable rate on other funds when The Company has an investment of $1,856,000 at December 31, so used. The rate used for such allowance was 8% in 1975 and 1975 and $1,631,000 at December 31, 1974 in Deepwater Oper-1974. ating Company (Deepwater), a wholly-owned subsidiary which op-erates generating and process steam units owned by the Com-DEPRECIATION AND MAINTENANCE-The Company provides for pany. The assets of Deepwater consist almost wholly of working depreciation on the basis of the estimated service lives of de- capital in which the equity of the Company is fairly represented preciable property on a straight-line basis. The over-all composite by its investment in Deepwater. The net production costs of rate of depreciation was approximately 3.2% and 3% for the Deepwater (after deducting charges to E. I. duPont deNemours &
years 1975 and 1974, respectively. In 1975, changes in deprecia- Company) are charged to the Company. These costs are included tion rates had the effect of increasing depreciation expense by in th e Company's income account, classified as to maintenance, approximately $990,000. In addition to the provision for de- taxes, etc. Also, the Company has an investment in Overland preciation, income is charged with the cost of labor, material , Realty, Inc. (Overland), a wholly-owned subsidiary which acquired, supervision and other expenses incurred in making repairs and prior to 197 4, land to be used as sites for the location of future minor replacements and in maintaining the properties in efficient generating stations or industrial and residential developments.
condition. The accumulated provision for depreciation is charged The Company's investment in Overland amounted to $2, 765,220 with the cost of depreciable property units retired, together with at December 31, 1975 and $2,148,945 at December 31 , 1974. At removal costs less salvage. December 31, 1975, Overland had $10,865,217 invested in mort-gages and land of which $1,784,332 is invested in a future gen-DEBT EXPENSE AND PREMIUM- Debt issuance expense and pre- erating station and industrial site which is subject to a mortgage mium are being amortized over the lives of the issu2s to which of which the Company is liable for the payment of $900,000 princi-they pertain. pal amount and interest under a suretyship agreement. At Decem-ber 31, 1975 Overland had outstanding $4,182,593 in short-term INCOME TAXES-Tax reductions resulting from the use of ac- mortgage notes payable to banks and $2,740,081 of advances celerated depreciation including Class Life (ADR) System for de- from the Company (included in the Company's investment referred preciable property added prior to 1974 are reflected in income to above) which are subordinated to the mortgage notes. The tax expense currently in accordance with the prescribed rate- mortgage note agreement requires the Company to advance to making policy of the PUC. Deferred income ta xes are provided Overland any amounts necessary to maintain the real estate cov-in amounts equal to the tax effect of the difference between tax ered by the agreement. Carrying costs of land held for resale depreciation computed on depreciable property added after 1973 (principally interest and property taxes) are being capitalized by using accelerated methods under the ADR System and th e straight the subsidiary and net carrying costs capitalized in 1975 were line method using asset guideline periods. approximately $812,000. The combined assets of the subsidiaries Investment tax credits are being deferred in a balance sheet were approximately 2% of the Company's assets at December account and are being restored to income over the life of the 31, 1975 and December 31, 1974 and their net income is not related property. significant.
16
NOTE 3: PREFERRED AND COMMON STOCKS:
CUMULATIVE PREFERRED STOCK, Par Value $100 (authorized 1,200,000 shares in 1975 and 1,000,000 shares in 1974) Current Refunding Decemb er 31 Redemption Restricted 1975 1974 Price Per Share Prior to (A)
Issued and Outstanding Series:
4% Series- 77,000 Shares $ 7,700,000 $ 7,700,000 $105.50 4.10% Series- 72,000 Shares 7,200,000 7,200,000 101.00 4.35% Series-15,000 Shares 1,500,000 1,500,000 101.00 4.35 % 2nd Series- 36,000 Shares 3,600,000 3,600,000 101.00 4.75 % Series- 50,000 Shares 5,000,000 5,000,000 101.00 5% Series- 50,000 Shares 5,000,000 5,000,000 100.00 5Vs% Convertible Series- 99,979 Shares (B) 9,997,900 9,997,900 104.50 7.52 % Series-100,000 Shares 10,000,000 10,000,000 108.65 April 1, 1977 8.40 % Series- 100,000 Shares (C) 10,000,000 10,000,000 115.00 Feb. 1, 1979 9.96 % Series- 200,000 Shares (D) 20,000,000 20,000,000 109.61 Aug. 1, 1984 79,997,900 79,997,900 Premium on Preferred Stock 93,145 93,145 Total Cumulative Preferred Stock $80,091,045 $80,091,045 (A) Prior to the date specified, no shares may be redeemed through certain refunding operations.
(B) The 5Vs% Convertible Series is convertible (subject to adjustment of certain events) into Common Stock at the ra te of 3.5 shares of Common Stock for each share of the Preferred (349,927 shares of authorized Common Stock are reserved for th e conversion of the Series).
(C) On February 1, 1985, and annually thereafter, 4,000 shares must be red eemed through the operation of a sinking fund at a redemption price of $100.00 per share, plu s, at the option of the Company, an additional 4,000 shares may be redeemed on any sinking fund date, without premium, up to 32,000 shares in the aggregate .
(D) On August 1, 1979, and annually thereafter, 8,000 shares of the 9.96% Series must be redeem ed through the operation of a si nking fund at a redemption price of $100.00 per share, plus, at the option of the Company, an additional 8,000 shares may be redeemed on any sinking fund date, without premium, up to 40,000 shares in the aggregate.
COMMON STOCK- Issues of capital stock include the sale of 600,000 shares of Common Stock in October, 1974. Premium on Com -
mon Stock was credited in 1974 with the amount of $5,892,000 representing the excess of proceeds over the par value of shares of Common Stock issued and sold. The Company has reserved 200,000 shares of Common Stock under its Dividend Reinvestment and Stock Purchase Plan which became effective in 1976. In January, 1976, 18,984 shares were issued under the Plan.
NOTE 4: EARNINGS PER SHARE: 1975 1974 Earnings per share of Common Stock has been computed by di- Maximum amount of short-term viding net income net of applicable preferred stock dividend re- borrowings outstanding at any quirements ($5,483,936 in 1975 and $4,233,384 in 1974) by the month end during the year $41 ,200,000 $55,000,000 average common shares outstanding during the year. Average daily amount outstanding Earnings per share assuming full dilution reflects the net reduc- during the year $18,500,000 $33,000,000 tion in earnings per share which would have been realized if the 5Vs % Series preferred stock had been converted in full at the Average daily interest rate beginning of each year. on above 8.8% 11.1%
Weighted average interest rate on NOTE 5: SHORT-TERM BORROWINGS AND short-term borrowings outstanding COMPENSATING BALANCES: at year end:
Notes Payable to Banks 7.9% 11.6%
Th e Company had arrangements for short-term borrowings as --
Commercial Paper 5.6%
follows:
17
Notes to Financial Statements The unused lines of credit available at December 31 , 1975 and cipally noncapitalized financing lea ses) as of December 31, 1975 December 31, 1974 were $43,000,000 and $33,000,000, respec- are approximately as follows :
tively. Demand deposits are maintained with lending banks cer-tain of which are deemed to constitute compensating balance s 1976-$2,550,000 1981-1985-$10,584,000 which are not legally restricted. Based on lines of credit and 1977- 2,446,000 1986-1990- 8,444,000 loans outstanding at December 31 , 1975 and December 31, 1974, 1978- 2,342,000 1991-1995- 7,020,000 1979- 2,281,000 After 1995- 3,929,000 respectively, such compensating balances approximated $3,300,000 and $5,000,000.
1980- 2,237,000 The total minimum rental commitments as of December 31, 1975 are applicable to combustion turbine generating units (65 %),
NOTE 6: FEDERAL INCOME TAXES:
fuel transportation and storage facilities (17 %), real estate (12 %),
Federal income tax returns, except for certain claims for refund, and other (6%).
have been settled through 1971. The U. S. Department of Justice The present value of future noncancelable lease commitments has recommended to the Joint Committee on Internal Revenue at December 31, 1975 and Dec ember 31, 1974 is less than 5% of Taxation a settlement of claims for the years 1962 and 1963 in capitalization in each case. If all noncapitalized financing leases the amount of $338,902 plus interest of $262,853. Such amounts were capitalized, the impact on net income for 1975 and 1974 were credited to income in 1975. would be less than 3% of the average net income for the most Federal income tax expense applicable to current operations is recent three years.
less than the income tax that would have resulted by applying the statutory rate because of the following:
NOTE 8: COMMITMENTS AND CONTINGENT LIABILITIES:
Year ended Year ended Construction expenditures, excluding production plant, are esti-December 31, December 31 , mated at $30,000,000 for 1976. Commitments for the construction 1975 1974 of production plant amount to approximately $270,000,000 of which Federal income tax expense at 48% it is estimated that $32,000,000 will be expended in 1976.
of pre-tax income .. . .... .. ... . $17,784,703 $12,198,115 In connection with a long-term agreement for the purchase of Decrease resulting from : fuel oil the Company has a commitment for use of terminal facili-Excess of tax depreciation over ties for a fifteen -year period from May 27, 1971 at a minimum book depreciation . ... . .... .. (6,188,621 ) (7,135,455) annual amount of approximately $1,300,000, with the right to Exclusion of allowance for funds cancel the commitment five years thereafter upon payment of used during construction from an estimated $4,200,000. The amounts paid under the above taxable income ..... ....... . (3,470,278) (5,072,494) agreement are a part of the cost of fuel and are recoverable under the fuel clause surcharge in the Company's tariff schedules.
Capitalized overheads deducted for Nuclear fuel requirements for Peach Bottom Units No. 2 and tax purposes .... . .... .. . .. . (744,889) (654,060) 3 are being provided by the operating company for Peach Bottom Investment tax credit .. ... . .. . (5,874,512) 458,738 through a fuel purchase contract. The Company is responsible for Other .......... .... . .. .... ... (388,734) (1 ,363,645) payment of its proportionate interest (7.51 %) of the cost of the Federal income tax expense fuel burned and of certain operating costs and interest expense (credit) included in State- during the term of the contract.
ment of Income ......... $ 1,117,669 $ (1,568,801)
Charged (credite d) to: NOTE 9: RATE INCREASES:
Operating Expe nse .......... . .. $ 1,035,029 $ (1,601,412) Effective July 18, 1974 the PUC granted the Company an increase Other Incom e . ...... .. . ...... 82,640 32,611 in rates which would have the effect of increasing the annual Total ........ . .......... . $ 1,117,669 $ (1,568,801) revenues of the Company . by about $12.2 million, or 9.5%, when applied to the billing determinants for 1973, the test year.
At December 31, 1975, investment tax credit of approximately Effective July 3, 1975 the PUC granted the Company an increase
$250,000 is available for carryforward to subsequent years. in rates which would have the effect of increasing the annual revenues of the Company by about $10.7 million, or 6%, when applied to the billing determinants for 1974, the test year.
NOTE 7: LEASES: On January 29, 1976 the PUC granted the Company an increase Rentals incurred in 1975 and 1974 were approximately $2,552,000 in rates which would have the effect of increasing the annual and $1,606,000, respectively. revenues of the Company by about $9.3 million, or 4.7 %, when Minimum rental commitments under noncancelable leases (prin* applied to the billing determinants for 1975, the test year.
18
- 1 Long-Term Debt December 31 First Mortgage Bonds: 1975 1974 8% % Series due (April 1) 1975 ...... .... ... ....... ......... ...... . $ $ 15,000,000 2% % Series due (June 1) 1979 ... ........... .. ............ ....... . 3,000,000 3,000,000 2% % Series due (July 1) 1980 .. . .. . ....... ............ ...... ..... . 4,600,000 4,600,000 2% % Series A due (Nov. 1) 1980 ...... ...... . .............. . .... . . 18,400,000 18,400,000 3% % Series due (March 1) 1982 .............................. .... . 4,620,000 4,620,000 3% % Series due (Jan. 1) 1983 ... . ........ .. ... .. ................. . 4,050,000 4,050,000 9% % Series due (May 1) 1983 ................................... . 35,000,000 3% Series due (March 1) 1984 ..... .. ............................ . 5,000,000 5,000,000 3% % Series due (March 1) 1985 ............. ... ............. . ... . 10,000,000 10,000,000 41/z % Series due (Jan. 1) 1987 .. .... . ..... . ................ .. .. ... . 10,000,000 10,000,000 3% % Series due (April 1) 1988 .. . .... . ........................... . 10,000,000 10,000,000 41/z % Series due (April 1) 1989 . . . ..... ... ... ... .. . . ... .......... . . 5,000,000 5,000,000 41/z % Series due (March 1) 1991 ................................. . 10,000,000 10,000,000 41/z % Series due (July 1) 1992 ... . ... .. .. .... .. ....... .. ....... . . . . 15,000,000 15,000,000 43/s % Series due (March 1) 1993 .................................. . 15,000,000 15,000,000 51/a % Series due (Feb. 1) 1996 ... ...... ...... ... ....... ... . .. .... . 10,000,000 10,000,000 8% % Series due (Sept. 1) 2000 ............ . ... .... ............... . 20,000,000 20,000,000 8% Series due (May 1) 2001 ........................ . ........ ... . . 27,000,000 27,000,000 71/z % Series due (April 1) 2002 . .. .................. .. ..... .. .... . . 20,000,000 20,000,000 7% % Series due (June 1) 2003 ................................... . 30,000 ,000 30,000,000 75/a % Pollution Control Series due (Jan. 1) 2005 ..................... . 6,500,000 Debentures: 263,170,000 236,670,000 81/z % Debentures due (Sept. 1) 1976 .............................. . 10,000,000 5% % Sinking Fund Debentures due (Feb. 1) 1996 ... .. . ... ......... . . 4,299,000 4,399,000 7% % Sinking Fund Debentures due (May 1) 1998 ................... . 4,555,000 4,580,000 Notes:
9.90% Notes due (Dec. 15) 1977 ... .. .... .. ... . ...... . ......... . .. . 15,000,000 5,000,000 287,024,000 260,649,000 Add: Unamortized Premium (Note 1) ....... .. .... ... . .. . ...... ... .. . 1,840,954 1,983,846
$288,864,954 $262,632,846 Deposits in sinking funds for retirement of debentur es are amount of the 71/. % debentures toward its requirements for required on February 1 of each year, from 1976 through 1995 1976 and subsequent periods.
for the 51/. % debentures, and on May 1 of each year from 1976 to 1997 for the 71/. % debentures , in amounts in each Sinking fund requirements of $1,246,700 required in case sufficient to redeem $100,000 principal amount plus, at connection with certain first mortgage bonds outstanding, the election of the Company, up to an additional $100,000 are being satisfied by certification of property additions as principal amount in each year. Prior to December 31, 1975 provided for in the related mortgage indentures.
the Company had reacquired and cancelled $201,000 prin- Principal amount of 8 1/z % debentures due September 1, cipal amount of the 51/. % debentures and $145 ,000 principal 1976 is included in current liabilities at December 31, 1975.
Accountants' Opinion Haskins & Sells Certified Public Accountants Two Broadway New York, New York 10004 Atlantic City Electric Company:
We have examined the balance sheet of Atlantic City Electric Company as of December 31, 1975 and 1974 and the related statements of income and retained earnings and changes in financial position for the years then ended. Our examination was 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 accompanying financial statements present fairly the financial position of the Company at December 31, 1975 and 1974 and the results of its operations and the changes in its financial position for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis.
January 30, 1976 19
1975-1965 Statistical Profile and Summary of Operations 1975 1974 1973 Facilities for Service Total Utility Plant [Thousands) ................. .
Gross Additions to Utility Plant [Thousands) ..... .
$ 6 75,617
$ 46,745
$ 637,250
$ 71,220
$ 572,5E
$ 67,8E '
Pole Miles of Transmission and Distribution Lines 6,645 6,580 6,5(
Generating Capacity [Kilowatts)(a) ...... . ... . ... . 1 ,334,700 1 ,278 ,7 00 1,013,5(
Maximum Utility System Demand-Kw ..... . ..... . 1,069,400 1,004,400 1,051,4(
Source of Energy [Thousan ds of Kwh)
Net Generation .... . ................ . .... . .. .. . 4,715 ,357 4 ,651,334 4,236,0f Purch ased and Interch anged-Net ......... . .... . 190,852 229,197 665,5E Total ...... . ... .. ....... .. . .... . . . . .. . . . 4 ,906 ,209 4 ,880,531 4,901,64 Electric Sales [Th ousand s of Kw h)
Residential ... .. .. . ....... . .......... . .. ... . .. . 1,938 ,724 1,882,560 1,899,12' Commercial ......... . .. . .......... . .. . .. . . .. . . 1,346,216 1,298,858 1,351,91 Indus trial . . .. .. .. ... ...... . .... ...... . . ... ... . 1,036,755 1,136,935 1,119,4 '.i All Others ... . .. . .. . ... . ....... . ...... .. ... . . . 56,465 57,477 58,1:;
Total ...................... . ........... . 4 ,378,160 4 ,375,830 4,428,7(
Gross Revenue [Thousands of Dollars)
Energy Sales Residential . .... . .................... . ... . . . . $ 90 ,956 $ 78,512 $ 59,8E Commercial .. ...... . ... . . . ..... . .......... . . 63,544 55,713 42,8C Industrial .... ... .. .. . .. .. ......... . .... . ... . 34,974 33,565 22,0C All Others ...... . .. . ... . ....... .. ...... . ... . 4,881 4,207 3,8E Total ................... .. . ......... .. . . 194,355 171,997 128,5::
Other Electric Revenu e ... . ............. . ...... . 4,724 4,614 4,3 f Total ... . .......... . ... ... .... ... ... . .. . $ 199,079 $ 176,611 $ 132,m Residen tial Electric Service [Average per Customer)
Amount of Electricity us ed during th e ye ar (Kw h) . . 7,018 6,982 7,3 ~
Amount paid for a year's service . . . . .... . ..... . . $ 329.25 $ 291.21 $ 230.1 Price paid per Kilowatt-h our [cents) . .. .. . .. . .... . 4.69 ¢ 4 .17 ¢ 3.1 Cus tomer Service Loca ti ons -Electric [Year-End) [bJ .. 336,105 330,758 320,8~
Population Served .. . . . ....... . .. . .. . .... . ... . . 915,000 894,000 865, 0C
- Summary of Operations [Thousands of Dollars)
Operating Revenu es-Electric . . . ....... .. ... . . . . $ 199,079 $ 1 76,611 $ 132, 8J Operating Expens es Fuel ...... . ...... . .. . .... . ...... . .... . ..... . 71 ,645 73,167 37,1L Other Operatio n and Ma inten ance Expenses ... . 37,754 38,952 38, 0E Depreciation . ......... . .... . ..... . ...... . .. . 16,846 1 2,946 11,7L Taxes .............. . ............ .. . . ..... . . 32 ,083 16,203 16 ,61 Total Opera ting Expenses ..... . .......... . 158,328 141,268 1 0 3,5~
Operating Incom e . .......... .. ..... . . . . 40 ,751 35,343 29,3 (
Other Income and Deductions-Net . . . . . ... .. .. . . 7,747 10,755 8,7~
Income before interest charges ....... . . . 48 ,498 46,098 38, 0 ~
Interest Ch arges ...... .. ..... . ...... . ......... . 20,218 19, 088 15 , 1~
Ne t Income ... .. ..... .. .. . .......... . . 28 ,280 27,010 22,91 Dividen ds Paid or Accrue d on Preferr ed Stock ... . 5,484 4,233 2,6~
Earnings for Common Stock .. .. .... . . . . $ 22 ,796 $ 22,777 $ 20,2~
Average Shares of Comm on Stock Ou ts tanding ..... . 9,470,073 8 ,973,400 8 ,4 5 3, 4E Earnings Per Share of Co mmon Stock (cl ....... . .. . . $2.41 $2 .54 $2. 40 '
Dividends Declared Per Share of Common Stock .. .. . $1.52 $1.50 $1.4 76 Dividends Paid on Co mmon Stock (Cash) .......... . $1.51 $1.50 $1.461 (a) Excludes capacity a llocated to a large ind us trial cus tomer.
[b) Re stated.
[c) See Income and Retained Earnings statement for earni n gs per share of common stock assuming conv ersion of convertible preferred.
20 *See page 22 for Management's Discussion.
1972 1971 1970 1969 1968 1967 1966 1965 511,274 $ 455,956 $ 404,364 $ 357,863 $ 324,561 $ 300,435 $ 284,957 $ 270,838 58 ,434 $ 54 ,151 $ 48 ,200 $ 35,306 $ 25,406 $ 17,063 $ 15,841 $ 10,901 6,408 6,333 6,252 6,187 6,109 6,038 5,945 5,932 965,900 897,600 821,400 757,800 700,800 678,500 636,500 636,500 920,400 829,300 755,500 721,800 671,600 563,900 542,000 489 ,500 1,071,225 4,262,062 4,294,352 4,227,315 3,929,222 3,598,431 3,323,888 3,016,998 458,050 -74,395 -358,203 - 566,932 -615,766 -574 ,707 -475 ,760 - 450,345 1,529 ,2 75 4,187,667 3,936,149 3,660,383 3,313,456 3,023,724 2,848,128 2,566,653 l ,741,895 1 ,6 24 ,793 1,520 ,939 1,375,546 1,253,772 1,140,797 1,038,428 948,299 i,183,668 1,059,498 977,210 879,916 821,538 742,486 689,245 625,895 l ,061 ,932 990,363 954 ,111 911,138 801,664 755,624 746,996 661,875 64,531 88,963 101,703 116,021 91,467 81,966 73,616 68,984 1,052,026 3,763,617 3,553,963 3,282,621 2,968,441 2,720,873 2,548,285 2,305,053 51,544 $ 42,623 $ 36,979 $ 32,672 $ 29,850 $ 27,673 $ 25,709 $ 23,963 35,868 28,648 23,933 20,584 18,912 17,345 16,335 15,100 19,350 16,529 13,036 11,303 9,738 9,225 9,011 8,133 3,763 3,919 3,795 3,753 3,302 3,054 2,848 2,666 110,525 91,719 77 ,743 68,312 61,802 57,297 53,903 49,862 4, 128 3,687 3,648 3,731 3,688 3,737 3,694 3,680 114,653 $ 95 ,406 $ 81 ,391 $ 72,043 $ 65,490 $ 61,034 $ 57,597 $ 53,542 7,008 6,793 6,542 6 ,072 5,685 5 ,313 4,959 4,662 207.37 $ 178.19 $ 159.06 $ 144.22 $ 135.34 $ 128.88 $ 122.78 $ 117.80 I 2.96¢ 2.62¢ 2.43¢ 2.38¢ 2.38¢ 2.43¢ 2.48 ¢ 2.53¢
~ 309,393 297,437 288,538 282,274 279,976 274 ,360 268,739 261,665 828,000 796,000 773,000 753 ,000 733,000 714 ,000 697,000 679,000 11 4,653 $ 95,406 $ 81,391 $ 72,043 $ 65,490 $ 61,034 $ 57,597 $ 53,542 29,944 28,705 22 ,457 15 ,691 13 ,057 11 ,928 10,297 8,895 31,427 23,333 17,862 16,103 13,964 12,735 12,727 12,721 11,190 10,355 9,632 9,043 7,892 7,479 7,129 6,475 15 ,359 10,603 11 ,129 12,292 12,748 11,935 11,300 10,231
' 87,920 72,996 61 ,080 53,129 47,661 44 ,077 41,453 38,322
' 26,733 22,410 20 ,311 18,914 17,829 16,957 16 ,144 15,220 6,647 5,164 3,520 1,773 1,097 450 306 101 33,380 27 ,5 74 23,831 20,687 18,926 17,407 16,450 15,321 13,297 11,641 9,276 6,302 6,226 5,700 5,129 4,744 20,083 15,933 14,555 14,385 12,700 11,707 11,321 10,577 2,456 1,900 1,900 1,900 1,672 1,313 1,313 1,313 17,627 $ 14,033 $ 12,655 $ 12,485 $ 11,028 $ 10,394 $ 10,008 $ 9,264
,810,073 7,436,740 6,920,073 6,817,083 6,270 ,000 6,270 ,000 6,270,000 6,270,000
$2.26 $1.89 $1 .83 $1.83 $1.76 $1.66 $1.60 $1.48
$1.4316 $1.37 $1.345 $1 .31 $1.27 $1.23 $1 .16 $1.095
$1.4144 $1.36 $1.34 $1.30 $1.26 $1.22 $1.14 $1.08 This Annual Report has been prepared for the purpose of providing general and statistical information concerning the Company and not in connection with any sale, offer for sale or solicitation of an offer to buy any securities.
21 Printed in U.S.A .
Managements Discussion and Analysis of The Summary of Operations The Summary of Operations reflects the results of leveling of customer usage and management's com-past operations and is not intended as any representa- prehensive cost control program. In 1975 the leveling tion as to results of operations for any future period. of customer usage, the availability of energy from the Future operations will necessarily be affected by interchange at a lower net cost, and management's various and diverse factors and developments includ- comprehensive cost control program offset increases ing possible changes in electric rates, business activity, caused by inflationary pressures and the increase in taxes, labor contracts, fuel costs, environmental customers served.
expenditures, the effects of various electricity conser-vation programs, and other matters, the nature and Depreciation: Depreciation increased by 10% in effect of which cannot now be determined. 1974 vs. 1973, and increased by 30% in 1975 vs. 1974.
The following discussion relates to the Summary of These increases are primarily due to increase in plant.
Operations for the years 1973, 1974 and 1975. The increase for 1975 is primarily the result of the addition of three major generating units during the second half of 1974 and an increase in the depreciation Operating Revenues: Operating revenues increased rates effective as of January 1, 1975.
by the following percentages over the preceding year:
1974, 33%, 1975, 13%. These changes reflect increases Taxes: Taxes other than Federal Income Taxes resulting from fuel cost adjustments and rate increases increased by 16% in 1974 vs. 1973 and increased by in 1974 and 1975, increased kilowatt-hour sales in 31 % in 1975 vs. 1974. These expenses [principally 1973, and a leveling in customer usage in 1974 and New Jersey tax on gross receipts) have increased as a 1975 due to national concern over fuel supplies, direct result of increases in Operating Revenues.
conservation efforts and milder weather conditions.
During the period 1970-1973 the Company experienced 1974 Federal Income Taxes declined as a result of annual increases in the number of kilowatt-hours increased operating and interest expenses and the use delivered to ultimate customers averaging 7.8%. of accelera Led deprecia Lion. The increase in Federal During 1974 the Company experienced a decrease in Income Taxes for 1975 is primarily due to the fact the kilowatt-hours delivered to ultimate customers of that since mid 1974 the Company has been normalizing approximately 1.2%, as compared with 1973, and the benefits of accelerated depreciation by vintage during 1975 the Company experienced no significant years of plant add itions and as a result of rate change as compared to 1974. increases granted in July, 1974 and July, 1975. [See Notes 1 and 6 of Notes to Financial Statements).
Fuel: Fuel costs increased by 97% in 1974 vs. 1973, Other Income and Deductions - Net: Other Income and decreased by 2% in 1975 vs. 1974. The increase and Deductions (principally Allowance for Funds in 1974 was primarily due to higher fuel prices and an Used During Construction) increased by 23% in 1974 increase of approximately 10% in energy generated vs. 1973 primarily as a result of increases in construc-by the Company. The decrease in fuel costs in 1975 tion expenditures, and decreased by 28% in 1975 vs.
vs. 1974 was made possible by greater use of nuclear 1974 primarily as a result of a decrease in construction fuel and a moderation of increases in the cost of coal expenditures.
and oil. [See charts on pages 4 and 5).
Total Interest Charges; Preferred Stock Dividend Other Operation and Maintenance Expenses: These Requirements: These charges and requirements expenses increased by only 2.3% in 1974 vs. 1973, and increased 33% in 1974 vs. 1973 and increased 9% in decreased by 3.1 % in 1975 vs. 1974. The increase in 1975 vs. 1974. Interest charges on long-term debt and 1974 was a result of inflationary pressures (including short-term debt and dividends on Preferred Stock higher costs of materials and supplies and of wages), have increased because of higher costs of money an increase in the net cost of purchased and inter- during certain periods and the sale of additional changed energy, and an increase in customers served, series of debt and preferred stock to help finance the offset in part by decreases in expenses as a result of Company's construction program.
22
Price Range of Stock and Dividends Paid on Stock Common Stock The Common Stock of the Company is traded on the New York Stock Exchange (principal market] and the 1 PBW Stock Exchange. The repor ted hi gh and low sale prices of the Common Stock on the New York Stock Exchange for each quarterly period during 1974 and 1975 are listed below.
High Low 1974 1975 1974 1975 First Quarter . . ...... . . . .. . . . . . $20.375 $17.75 $16.75 $12.625 Second Quarter .......... . .... . 18.75 19.50 14.00 15.00 Third Quarter .... . . .. .. ... .... . 17.25 19.00 12.50 15.75 Fourth Quarter ..... . ........ .. . 14.50 18.50 12.00 16.25 Cumulative Preferred Stock The 5% % Cumulative Convertible Prefer red Stock [par value $100) of the Company is traded on the New York Stock Exchange. The reported high and low sale prices of such Preferred Stock for each quarterly period during 1974 and 1975 are listed below. No other series of Cumulative Preferred Stock is listed on a Stock Exchange .
High Low 1974 1975 1974 1975 First Quarter .... .. ........... . $78.00 $62.00 $72.00 $58.25 Seco nd Quarter ..... ...... ... . . 75.00 70.00 61.50 64.50 Third Quarter ............... . . . 61.00 69.50 50.00 62.00 Fourth Quarter .............. .. . 59.00 69.00 50.00 60.50 Common Stock The Company has paid cash dividends on its Common Stock in each year since 1919. The quarterly cash divid end paid per share was' 371/2 ¢ in 1974, 371/2 ¢ for th e first three quarters of 1975 and 381/2 ¢ for the r fourth quarter of 1975.
Cumulative Preferred Stock During 1974 and 1975 the Company paid quarterly cash dividends on each series of Cumulative Preferred Stock as listed below:
1974 1975 Series Quarterly Rate Quarterly Rate 4% $1 .00 $1.00 4.10 % 1.025 1.025 4.35 % 1.0875 1.0875 4.75% 1.1875 1.1875 5% 1.25 1.25 57/s % 1.46875 1.46875 7.52% 1.88 1.88 8.40 % 2.10 1 2.10 9.96 % 2.49~ 2.49 1
Series issued in February 1974.
~series issued in August 1974.
23
John D. Feehan Edwin L. Gerber President and Director Vice President -
Personnel and Public Relations William S. Cowart, Jr.
Frederick Lange Senior Vice President Vice Pres ident -
Officers Richard M. Wilson Control Senior Vice President John F. Born Assistant Vice President -
Charles F. Morgan Electric Operations Vice President, Secretary and Treasurer Ernest D. Huggard Assistant Vice President -
David V. Boney Production Vice President - Martin R. Meyer Customer and Community Services Assistant Secretary and Assistant Treasurer Frank J. Ficadenti Vice President - Jerrold L. Jacobs Engineering, Research and Deve lopment Assistan t Treasurer TRANSFER AGENTS REGISTRARS For Common Stock For Common Stock Irving Trust Company Morgan Guaranty Trust Company of New York 1 Wall Street New York, N.Y. 10015 New York, N.Y. 10015 Guaran te e Bank First National Bank of South Jers ey Atlantic City , N.J. 08404 Atlantic City, N.J. 08404 For Cumulative Preferred Stock For Cumulative Preferred Stock Irving Trust Company Chemical Bank New York, N.Y. 10015 20 Pine Street New York, N.Y. 10015 For Cumulative Convertible Preferred Stock Morgan Guaranty Trus t Company of New York For Cumulative Convertible Preferred Stock New York, N.Y. 10015 I Irving Trust Company I New York , N.Y. 10015 SHARE LISTINGS Common Stock of the Company is listed on the New York Stock Exchange and th e PE W Stock Exchange, Inc. The 5 'l's% Cumulativ e Convertible Preferred Stock of th e Company is lis ted on the New York Stock Exchange.
24
Directors Karl R. Bopp Retired. Former President of Federal Reserve Bank of Philadelphia.
Eleanor S. Daniel Self employed. Former Assistant Vic e President of the Mutual Life Insurance Company of New York (Senior Economic Adviser) .
Richard M. Dicke Counselor at Law. Senior Partner of the law firm of Simpson Thacher
& Bartlett.
John D. Feehan President and Chief Executive Officer of the Company.
James P. Hayward Retired. Former President of the Company.
Mack C. Jones President of Radette Company.
Engaged in research, and development of electronic products.
Alfred C. Linkletter Senior Vice President of The Prudential Insurance Company of America.
John M. Miner Senior Executive Vice President of The Fidelity Bank.
Frank H. Wheaton, Jr.
President of Wheaton Industries.
Manufacturer of glass and plastic containers.
( William W. White
' Chairman of the Board of Directors of the Company.
Chairman of the Board of Allied Power and Light Company.
Karl R. Bopp, who has served on the Board since 1970, will retire April 13, 1976.
Top-Left to Right Frank H. Wheaton, Jr.,
William W. White, Mack C. Jones.
Middle- Left to Right John M. Miner, Eleanor S. Daniel, John D. Feehan.
Bottom-Left to Right Richard M. Dicke, James P. Hayward, Alfred C. Linkletter.
0 ~~!!!g~R~!~wg!t~
1600 PACIFIC AVE. ,
ATLANTIC CITY, N.J. 08404 BULK RATE U.S. POSTAGE PAID BRIDGETON , N.J.
PERMIT NO. 246